Energy Policy Act of 2005: Summary and Analysis of Enacted Provisions
CRS Report for Congress
Energy Policy Act of 2005: Summary and Analysis
of Enacted Provisions
March 8, 2006
Mark Holt and Carol Glover, Coordinators
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress
Energy Policy Act of 2005: Summary and Analysis
of Enacted Provisions
The Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush on
August 8, 2005, was the first omnibus energy legislation enacted in more than a
decade. Spurred by rising energy prices and growing dependence on foreign oil, the
new energy law was shaped by competing concerns about energy security,
environmental quality, and economic growth. Major provisions in the bill include:
Electricity. The Federal Energy Regulatory Commission (FERC) is authorized
to certify a national electric reliability organization (ERO) to enforce mandatory
reliability standards for the bulk-power system. Federal power of eminent domain
may be used to acquire electric transmission rights-of-way in areas designated as
congested by the Secretary of Energy. The act repeals a requirement under the Public
Utility Regulatory Policies Act (PURPA) that utilities must purchase power from all
qualifying facilities and small power producers at a rate based on the utilities’
avoided cost. Also repealed is the Public Utility Holding Company Act of 1935
(PUHCA), which restricted the structure of holding companies of investor-owned
Renewable Fuels Standard. Gasoline sold in the United States must contain an
increasing amount of renewable fuel, such as ethanol or biodiesel. Motor fuels must
contain at least 4.0 billion gallons of renewables in 2006, a level that increases by
700 million gallons each year through 2011 before reaching a level of 7.5 billion
gallons in 2012.
Tax Incentives. Tax reductions of $14.5 billion over 11 years are provided to
encourage domestic energy production and energy efficiency, including about $1.3
billion for energy efficiency and conservation, about $4.5 billion for renewable
energy, a $2.6 billion package of oil and gas incentives, nearly $3.0 billion for coal,
and more than $3.0 billion in electricity incentives (which includes a new production
tax credit for nuclear power).
Energy Efficiency. Improved national energy efficiency is encouraged through
new statutory standards, requirements for federal action, and incentives for voluntary
Domestic Energy Production. The act encourages production on federal lands
through royalty reductions for marginal oil and gas wells on public lands and the
outer continental shelf. Provisions are also included to increase access to federal
lands for drilling activities and other energy projects.
Several proposals that were intensely debated during consideration of the energy
bill did not make it into the enacted legislation. The most prominent of these
defeated provisions would have allowed oil and gas production in the Arctic National
Wildlife Refuge (ANWR), increased corporate average fuel economy (CAFE)
standards, and established stronger federal efforts to reduce greenhouse gases. This
report will not be updated.
Amy AbelElectric utilities(7-7239)firstname.lastname@example.org
Anthony AndrewsDepartment of Energy(7-6843)email@example.com
ma na ge me nt
Robert BambergerEnergy security(7-7240)firstname.lastname@example.org
Carl BehrensNuclear nonproliferation(7-8303)email@example.com
Claudia CopelandFederal Water PollutionControl Act(7-7227)firstname.lastname@example.org
Bernard GelbGasoline industry(7-7738)email@example.com
Carol GloverNative American energy;general authorizations(7-7353)firstname.lastname@example.org
Mark HoltNuclear energy(7-1704)email@example.com
Marc HumphriesFederal energy leasing; coal(7-7264)firstname.lastname@example.org
Larry KuminsOil and gas(7-7250)email@example.com
Jim McCarthyClean Air Act; MTBE(7-7225)firstname.lastname@example.org
Dan Morgan Science programs(7-5849)email@example.com
Fred SissineConservation and renewableenergy(7-7039)firstname.lastname@example.org
Mary TiemannUnderground storage tanks;drinking water(7-5937)email@example.com
Brent YacobucciMotor fuels; vehicles;hydrogen(7-9662)firstname.lastname@example.org
Jeff ZinnCoastal Zone ManagementAct(7-7257)email@example.com
Key CRS Policy Staff...........................................4
In troduction ......................................................1
Renewable Fuel Standard and MTBE..........................2
Energy Efficiency and Renewable Energy.......................4
Domestic Energy Production.................................5
Hydrogen and Fuel Cells....................................5
Organization of Report.........................................5
Title I — Energy Efficiency..........................................6
Subtitle A — Federal Programs...................................6
Summary of Provisions.....................................6
Subtitle B — Energy Assistance and State Programs..................8
Summary of Provisions.....................................8
Subtitle C — Energy Efficient Products............................9
Summary of Provisions.....................................9
Subtitle D — Public Housing...................................11
Summary of Provisions....................................11
Title II — Renewable Energy.......................................12
Subtitle A — General Provisions.................................12
Summary of Provisions....................................12
Subtitle B — Geothermal Energy................................14
Summary of Provisions....................................14
Subtitle C — Hydroelectric.....................................17
Summary of Provisions....................................17
Subtitle D — Insular Energy....................................18
Summary of Provisions....................................18
Title III — Oil and Gas............................................19
Summary of Provisions....................................19
Subtitle B — Natural Gas......................................20
Summary of Provisions....................................20
Subtitle C — Production.......................................22
Summary of Provisions....................................22
Subtitle D — Naval Petroleum Reserves...........................25
Summary of Provisions....................................25
Subtitle E — Production Incentives...............................25
Summary of Provisions....................................25
Subtitle F — Access to Federal Lands.............................28
Summary of Provisions....................................28
Subtitle G — Miscellaneous....................................30
Subtitle H — Refinery Revitalization.............................33
Summary of Provisions....................................33
Title IV — Coal..................................................34
Subtitle A — Clean Coal Power Initiative..........................34
Summary of Provisions....................................34
Subtitle B — Clean Power Projects...............................35
Subtitle C — Coal and Related Programs..........................35
Subtitle D — Federal Coal Leases................................35
Summary of Provisions....................................35
Title V — Indian Energy...........................................37
Title VI — Nuclear Matters.........................................38
Subtitle A — Price-Anderson Act Amendments.....................38
Summary of Provisions....................................38
Subtitle B — General Nuclear Matters............................40
Summary of Provisions....................................40
Background and Policy Context.............................43
Subtitle C — Next Generation Nuclear Plant Project.................44
Summary of Provisions....................................44
Subtitle D — Nuclear Security..................................46
Summary of Provisions....................................46
Background and Policy Context.............................48
Subtitle A — Existing Programs.................................50
Summary of Provisions....................................50
Subtitle B — Hybrid Vehicles, Advanced Vehicles, and Fuel Cell Buses.51
Summary of Provisions....................................51
Subtitle C — Clean School Buses................................51
Summary of Provisions....................................51
Subtitle D — Miscellaneous....................................52
Subtitle E — Automobile Efficiency..............................53
Summary of Provisions....................................53
Subtitle F — Federal and State Procurement........................54
Summary of Provisions....................................54
Subtitle G — Diesel Emissions Reduction.........................55
Summary of Provisions....................................55
Title VIII — Hydrogen.............................................55
Summary of Provisions....................................55
Title IX — Research and Development................................57
Subtitle A — Energy Efficiency.................................57
Summary of Provisions....................................57
Subtitle B — Distributed Energy and Electric Energy Systems.........59
Summary of Provisions....................................59
Subtitle C — Renewable Energy.................................60
Summary of Provisions....................................60
Subtitle D — Agricultural Biomass Research and
Summary of Provisions....................................61
Subtitle E — Nuclear Energy....................................63
Summary of Provisions....................................63
Subtitle F — Fossil Energy.....................................66
Summary of Provisions....................................66
Subtitle G — Science..........................................67
Subtitle H — International Cooperation...........................68
Subtitle I — Research Administration and Operations................69
Subtitle J — Ultra-Deepwater and Unconventional Natural
Gas and Other Petroleum Resources..........................71
Title X — Department of Energy Management..........................72
Title XI — Personnel and Training...................................74
Title XII — Electricity.............................................75
Short Title (Sec. 1201).....................................75
Subtitle A — Reliability Standards...............................75
Summary of Provisions....................................75
Subtitle B — Transmission Infrastructure Modernization..............76
Siting of Interstate Electric Transmission Facilities (Sec. 1221).....76
Third-Party Finance (Sec. 1222).............................76
Advanced Transmission Technologies (Sec. 1223)...............77
Advanced Power System Technology Incentive
Program (Sec. 1224)..................................77
Subtitle C — Transmission Operation Improvements.................77
Open Nondiscriminatory Access (Sec. 1231)...................77
Federal Utility Participation in Regional Transmission
Organizations (Sec. 1232)..............................78
Native Load Service Obligation (Sec. 1233)....................78
Study on the Benefits of Economic Dispatch (Sec. 1234)..........78
Protection of Transmission Contracts in the Pacific
Northwest (Sec. 1235).................................78
Sense of Congress Regarding Locational Installed
Capacity Mechanism (Sec. 1236)........................78
Subtitle D — Transmission Rate Reform..........................79
Transmission Infrastructure Investment (Sec. 1241)..............79
Funding New Interconnection and Transmission Upgrades
Subtitle E — Amendments to PURPA............................79
Net Metering and Additional Standards (Sec. 1251)..............79
Smart Metering (Sec. 1252).................................79
Cogeneration and Small Power Production Purchase
and Sale Requirements (Sec. 1253).......................80
Interconnection (Sec. 1254).................................81
Subtitle F — Repeal of PUHCA.................................82
Short Title (Sec. 1261).....................................82
Definitions (Sec. 1262)....................................82
Repeal of the Public Utility Holding Company Act of
1935 (Sec. 1263).....................................82
Federal Access to Books and Records (Sec. 1264)...............84
State Access to Books and Records (Sec. 1265).................84
Exemption Authority (Sec. 1266)............................84
Affiliate Transactions (Sec. 1267)............................85
Applicability (Sec. 1268)...................................85
Effect on Other Regulations (Sec. 1269).......................85
Enforcement (Sec. 1270)...................................85
Savings Provisions (Sec. 1271)..............................85
Implementation (Sec. 1272).................................85
Transfer of Resources (Sec. 1273)............................85
Service Allocation (Sec. 1275)..............................86
Authorization of Appropriations (Sec. 1276)...................86
Conforming Amendments to the Federal Power Act (Sec. 1277)....86
Subtitle G — Market Transparency, Enforcement, and
Electricity Market Transparency (Sec. 1281)...................86
False Statements (Sec. 1282)................................86
Market Manipulation (Sec. 1283)............................87
Enforcement (Sec. 1284)...................................87
Refund Effective Date (Sec. 1285)...........................87
Refund Authority (Sec. 1286)...............................87
Consumer Privacy and Unfair Trade Practices (Sec. 1287).........88
Authority of Court to Prohibit Individuals from
Serving As Officers, Directors, and Energy
Traders (Sec. 1288)...................................88
Merger Review Reform (Sec. 1289)..........................88
Relief for Extraordinary Violations (Sec. 1290).................88
Subtitle H — Definitions.......................................88
Definitions (Sec. 1291)....................................88
Subtitle I — Technical and Conforming Amendments................89
Conforming Amendments (Sec. 1295)........................89
Subtitle J — Economic Dispatch.................................89
Economic Dispatch (Sec. 1298)..............................89
Title XIII — Energy Policy Tax Incentives.............................89
Subtitle A — Electricity Infrastructure............................89
Summary of Provisions....................................89
Background and Policy Context.............................93
Subtitle B — Domestic Fossil Fuel Security .......................94
Summary of Provisions....................................94
Background and Policy Context.............................97
Subtitle C — Conservation and Energy Efficiency Provisions ..........97
Summary of Provisions....................................97
Subtitle D — Alternative Motor Vehicles and Fuel Incentives.........100
Summary of Provisions...................................100
Background and Policy Context............................104
Subtitle E — Additional Energy Tax Incentives ....................106
Summary of Provisions...................................106
Subtitle F — Revenue Raising Provisions.........................107
Summary of Provisions...................................107
Title XIV — Miscellaneous........................................109
Subtitle A — In General......................................109
Subtitle B — Set America Free.................................110
Summary of Provisions...................................110
Title XV — Ethanol and Motor Fuels................................110
Subtitle A — General Provisions................................110
Summary of Provisions...................................110
Subtitle B — Underground Storage Tank Compliance...............115
Summary of Provisions...................................115
Subtitle C — Boutique Fuels...................................116
Title XVI — Climate Change......................................116
Subtitle A — National Climate Change Technology Deployment......116
Summary of Provisions...................................116
Subtitle B — Climate Change Technology Deployment
in Developing Countries..................................117
Summary of Provisions...................................117
Title XVII — Incentives for Innovative Technologies...................120
Summary of Provisions...................................120
Background and Policy Context............................120
Title XVIII — Studies............................................121
Summary of Provisions...................................121
List of Tables
Table 1. Fuel Economy Credit......................................105
Table 2. Conservation Credit.......................................105
Table 3. Authorizations in the Energy Policy Act of 2005,
Energy Policy Act of 2005: Summary and
Analysis of Enacted Provisions
The Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush August
Major provisions include tax incentives for domestic energy production and energy
efficiency, a mandate to double the nation’s use of biofuels, repeal of restrictions on
interstate utility holding companies, faster procedures for energy production on
federal lands, and authorization of numerous federal energy research and
Spurred by rising energy prices and growing dependence on foreign oil, the new
energy law was shaped by competing concerns about energy security, environmental
quality, and economic growth. For example, efforts to enhance energy security by
allowing oil and gas production in the Arctic National Wildlife Refuge (ANWR)
were blocked by environmental concerns. Conversely, efforts to address
environmental quality by restricting carbon dioxide and other greenhouse gases were
stymied largely because of their potential effect on the U.S. economy, as were
proposals to increase automobile fuel economy standards.
Soon after the Energy Policy Act was enacted, disruption from Hurricanes
Katrina and Rita contributed to a surge in U.S. gasoline prices, prompting widespread
criticism that the new law did not adequately address the nation’s gasoline supply.1
As with most energy legislation since the 1970s, the new energy law has few
provisions aimed at near-term problems in the energy market, being focused
primarily on the mid- to long term.
Electricity Regulation. Title XII authorizes the Federal Energy Regulatory
Commission (FERC) to certify a national electric reliability organization (ERO) to
enforce mandatory reliability standards for the bulk-power system. All ERO
standards must be approved by FERC. The ERO can impose penalties on a user,
owner, or operator of the bulk-power system for violations of any FERC-approved
The Secretary of Energy is required to conduct a study of electric transmission
congestion every three years and may designate a geographic area as being congested.
1 The House subsequently passed legislation to encourage the expansion of U.S. oil refinery
capacity (H.R. 3893, passed October 7, 2005).
Under certain conditions, FERC is authorized to issue construction permits in
congested areas. Permit holders may petition in U.S. District Court to acquire rights-
of-way through eminent domain. An applicant for federal authorization to site
transmission facilities on federal lands could request that the Department of Energy
be the lead agency to coordinate environmental review and other federal
authorization. If a federal agency has denied an authorization required by a
transmission or distribution facility, the denial could be appealed by the applicant or
relevant state to the President.
Section 210 of the Public Utility Regulatory Policies Act (PURPA, P.L. 95-617)
had required utilities to purchase power from all qualifying facilities and small power
producers at a rate based on the utilities’ avoided cost. The Energy Policy Act
repeals the PURPA mandatory purchase requirement for new contracts if FERC finds
that a competitive electricity market exists and a qualifying facility has adequate
access to wholesale markets.
Also repealed is the Public Utility Holding Company Act of 1935 (PUHCA, 15
U.S.C. 79 et seq.), which restricted the structure of holding companies of investor-
owned utilities, and provided for Securities and Exchange Commission (SEC)
regulation of mergers and diversification proposals. FERC and state regulatory
bodies must be given access to utility books and records.
FERC is directed to facilitate price transparency in wholesale electric markets,
relying on existing price publishers and providers of trade processing services to the
maximum extent possible. However, FERC may establish an electronic information
system if it determines that existing price information is not adequate. FERC is
given approval authority over the acquisition of securities and the merger, sale, lease,
or disposition of facilities under FERC’s jurisdiction with a value in excess of $10
(For additional discussion on these issues, see CRS Report RL32728, Electric
Utility Regulatory Reform: Issues for the 109th Congress, by Amy Abel ; and CRS
Report RL32133, Federal Merger Review Authority, by Aaron M. Flynn, Janice E.
Rubin, and Michael V. Seitzinger.)
Renewable Fuel Standard and MTBE. Title XV contains several
provisions addressing the gasoline additives methyl tertiary butyl ether (MTBE) and
Under the Clean Air Act Amendments of 1990, reformulated gasoline (RFG)
sold in many areas of the country with poor air quality was required to contain an
oxygenate (MTBE, ethanol, or other substances containing oxygen) to improve
combustion and reduce emissions of ozone-forming compounds and carbon
monoxide. Title XV repeals the Clean Air Act requirement to use oxygenates in
RFG, eliminating a key incentive for refiners to use MTBE. In place of the oxygen
requirement, the energy law establishes a new requirement that gasoline contain an
increasing amount of renewable fuel such as ethanol or biodiesel. The law requires
that motor fuels contain at least 4.0 billion gallons of renewables in 2006, and
requires an increase of 700 million gallons each year through 2011, before reaching
a level of 7.5 billion gallons in 2012. (In 2004, about 3.4 billion gallons of ethanol
were used in motor fuels.) The law also authorizes funds to clean up MTBE
contamination in groundwater.
The enacted law also contains “anti-backsliding” provisions, to preserve the
reductions in emissions of toxic substances achieved by the RFG program. The
baseline emissions are set as the quantity emitted in 2001 and 2002.
The most controversial of the MTBE provisions was dropped in conference: a
“safe harbor” that the House version would have provided for fuels containing
renewable fuel or MTBE. The safe harbor from liability would have meant that such
fuels could not be deemed defective in design or manufacture by virtue of the fact
that they contained MTBE or renewable fuel. The effect of this provision would have
been to protect anyone in the product chain, from manufacturers to retailers, from
liability for cleanup of contamination or for personal injury or property damage based
on the nature of the product.
(For additional information, see CRS Report RL32865, Renewable Fuels and
MTBE: A Comparison of Selected Legislative Initiatives, by Brent D. Yacobucci,
Mary Tiemann, James E. McCarthy, and Aaron M. Flynn; CRS Report RL30369,
Fuel Ethanol: Background and Public Policy Issues, by Brent D. Yacobucci and
Jasper Womach; and CRS Report RL32787, MTBE in Gasoline: Clean Air and
Drinking Water Issues, by James E. McCarthy and Mary Tiemann.)
Energy Taxes. Title XIII provides about $14.5 billion in tax reductions over
11 years to encourage domestic energy production and energy efficiency. Tax
incentives of about $1.3 billion are provided for energy efficiency and conservation,
including a deduction for energy-efficient commercial property, fuel cells, and
micro-turbines. About $4.5 billion is provided in renewable energy incentives,
including a two-year extension of the §45 renewable electricity tax credit, renewable
energy bonds, and business credits for solar. A $2.6 billion package of oil and gas
incentives includes seven-year depreciation for natural gas gathering lines, a refinery
expensing (one-year writeoff) provision, and a small refiner provision.
A nearly $3.0 billion coal package would provide 84-month amortization for
pollution control facilities and treatment of the §29 production tax credit as a general
business credit. More than $3.0 billion in electricity incentives include provisions
providing 15-year depreciation for transmission property, nuclear decommissioning
provisions, and a nuclear electricity production tax credit. It also provides for the
five-year carry-back of net operating losses of certain electric utility companies.
(For more background, see CRS Issue Brief IB10054, Energy Tax Policy, by
Nuclear Energy. Strong incentives for building new commercial nuclear
power plants are included in Title VI, including tax credits, loan guarantees, and
regulatory delay compensation. The law also reauthorizes the Price-Anderson Act
nuclear liability system for 20 years and authorizes the Department of Energy (DOE)
to build an advanced reactor in Idaho.
The strongest nuclear incentive is a 1.8-cents/kilowatt-hour tax credit for
electricity produced by nuclear reactors. The credit is available for up to 6,000
megawatts of new capacity — the equivalent of about five or six new reactors — for
the first eight years of operation. The nuclear production tax credit also had been
included in the energy bill conference report in the 108th Congress, and the Energy
Information Administration concluded then that the credit would provide sufficient
incentives for new commercial reactors to be built.2
The Secretary of Energy is authorized to help pay the cost of regulatory delays
at up to six new commercial nuclear reactors. Up to $500 million is authorized for
each of the first two reactors that begin construction, plus up to $250 million for each
of the next four. Delays caused by the failure of a reactor owner to comply with laws
or regulations would not be covered.
Reauthorization of the Price-Anderson Act was generally considered to be a
prerequisite for new reactors. Under Price-Anderson, commercial reactor accident
damages are paid through a combination of private-sector insurance and a nuclear
industry self-insurance system. Liability is capped at the maximum coverage
available under the system, currently about $10.7 billion. Title VI provides a 20-year
extension of Price-Anderson, to the end of 2025.
The law also addresses concerns about nuclear power plant security. The
Nuclear Regulatory Commission (NRC) within 18 months is required to revise the
“design basis threat” (DBT) that nuclear plant security forces must be able to
overcome, each nuclear plant must undergo a force-on-force security evaluation at
least every three years, and each NRC region must have a federal security
(For more information, see CRS Issue Brief IB88090, Nuclear Energy Policy,
by Mark Holt.)
Energy Efficiency and Renewable Energy. Improved national energy
efficiency is encouraged through new statutory standards, requirements for federal
action, and incentives for voluntary improvements. The law’s energy conservation
provisions (Title I) deal almost entirely with energy consumption by buildings,
industrial processes, appliances and commercial equipment, and other stationary
activities. Highly controversial efficiency standards for motor vehicles are excluded
from the act.
New efficiency standards for appliances and commercial equipment may have
the most certain impact, with the effectiveness of many of the title’s other provisions
depending largely on appropriations and implementation. The law addresses energy
efficiency standards, water-use standards, and labeling rules for a variety of products.
Some efficiency standards are explicitly set in the law, while others are to be
determined by DOE. Measures aimed at the federal government’s own energy
efficiency and water consumption range from the treatment of energy costs in the
2 U.S. Department of Energy. Energy Information Administration. Analysis of Five Selected
Tax Provision of the Conference Energy Bill of 2003. SR/OIAF/2004-01. February 2004.
federal budget and procurement processes to specific requirements for upgrading
equipment in congressional office buildings.
Renewable energy provisions in Title II are intended to increase production and
use, advance technology development, and promote commercial development.
Potentially the largest impact could come from a broadening of the renewable energy
production incentive (REPI) payment for electricity generated by renewable energy
facilities, although funding is subject to appropriations. Other provisions establish
resource assessments, federal purchases of equipment and electricity, federal land
leasing, and grants, all of which are also subject to appropriations.
(For additional information, see CRS Issue Brief IB10020, Energy Efficiency:
Budget, Oil Conservation and Electricity Conservation Issues, by Fred Sissine, and
CRS Issue Brief IB10041, Renewable Energy: Tax Credit, Budget, and Electricity
Production Issues, by Fred Sissine.)
Domestic Energy Production. The Department of the Interior (DOI) has
estimated that roughly a quarter of oil resources and less than one-fifth of gas
resources on Indian lands have been developed. The Energy Policy Act encourages
production on federal lands through royalty reductions for marginal oil and gas wells
on public lands and the outer continental shelf. Provisions are also included to
increase access to federal lands by energy projects — such as drilling activities,
electric transmission lines, and gas pipelines. In addition, the law prevents the
Environmental Protection Agency (EPA) from regulating hydraulic fracturing to
protect drinking water sources.
(For additional information, see CRS Report RL32873, Key Environmental
Issues in the Energy Policy Act of 2005, coordinated by Brent D. Yacobucci, and
CRS Report RL32262, Selected Legal and Policy Issues Related to Coalbed Methane
Development, by Aaron M. Flynn.)
Hydrogen and Fuel Cells. Title VIII establishes a hydrogen and fuel cell
program with a goal of producing commercial fuel cell vehicles and developing
hydrogen infrastructure by 2020. Critics of the Administration suggest that the
hydrogen program is intended to forestall any attempts to significantly raise vehicle
Corporate Average Fuel Economy (CAFE) standards, and that it relieves the
automotive industry of assuming more initiative in pursuing technological
innovations. On the other hand, some contend that it is appropriate for government
to become involved in the development of technologies that could address national
environmental and energy goals but are too risky to draw private-sector investment.
(For additional information, see CRS Report RS21442, Hydrogen and Fuel Cell
R&D: FreedomCAR and the President’s Hydrogen Fuel Initiative, by Brent D.
Yacobucci, and CRS Report RL32196, A Hydrogen Economy and Fuel Cells: An
Overview, by Brent D. Yacobucci and Aimee E. Curtright.)
Organization of Report
The remainder of this report provides a section-by-section summary of the
provisions of the Energy Policy Act of 2005. Discussions of legislative background
and policy implications are provided for bill titles and subtitles that address unified
programs or policy areas. Some of the most controversial sections are discussed in
greater detail. Funding authorizations are shown in Table 3 at the end of the report.
Title I — Energy Efficiency
Improved national energy efficiency is encouraged through new statutory
standards, requirements for federal action, and incentives for voluntary
improvements. This title deals almost entirely with energy used by buildings,
industrial processes, appliances and commercial equipment, and other stationary
activities. Highly controversial efficiency standards for motor vehicles are excluded
from the act. New efficiency standards for appliances and commercial equipment in
Subtitle C may have the most certain impact, with the effectiveness of many of the
title’s other provisions depending largely on appropriations and implementation.
Subtitle A — Federal Programs
Summary of Provisions. Measures aimed at the federal government’s own
energy efficiency and water consumption range from the treatment of energy costs
in the federal budget and procurement processes to specific requirements for
upgrading equipment in congressional office buildings.
Energy and Water Saving Measures in Congressional Buildings
(Sec. 101). The Architect of the Capitol is required to plan and implement an
energy and water conservation strategy for congressional buildings that is consistent
with that required of other federal buildings. An annual report is required.
Energy Management Requirements (Sec. 102). The baseline for federal
energy savings is updated from FY1985 to FY2003, and a new 20% reduction goal
is set for FY2015. By the end of 2014, DOE is to assess progress and set a new goal
for FY2016 through FY2025. Standards for exclusion are set, which empower DOE
to exempt, under certain conditions, buildings that serve a national security function
or for which achieving the target would be impracticable. Further, agencies are
allowed to retain appropriations for energy expenses that are saved by the energy
efficiency measures. A report to Congress is required.
Energy Use Measurement and Accountability (Sec. 103). Federal
buildings are required to be metered or sub-metered by October 1, 2012, to help
reduce energy costs and promote energy savings. Further, the Secretary of Energy
is required to prepare guidelines for agency energy managers to facilitate
implementation of metering. After guidelines are established, each agency is
required to submit an implementation plan to DOE.
Procurement of Energy Efficient Products (Sec. 104). Federal
agencies are required to purchase products certified as energy-efficient under the
Energy Star program or energy-efficient products designated by the Federal Energy
Management Program (FEMP), provided that the products are found to be
“cost-effective” and “reasonably available.”
Energy Savings Performance Contracts (Sec. 105). The authority to
enter into energy savings performance contracts — in which private-sector
contractors install energy conservation measures in federal buildings in exchange for
a specified share of any resulting energy cost savings — is extended from 2006 to
and before the date of enactment of this act, is considered as extended by this section.
Voluntary Commitments to Reduce Industrial Energy Intensity (Sec.
106). DOE is authorized to form voluntary agreements with industry sectors or
companies to reduce energy use per unit of production by 2.5% annually from 2007
through 2016. Participants are eligible for technical assistance and grants. A report
to Congress with an evaluation of energy-savings impacts is required by June 30,
Advanced Building Efficiency Testbed (Sec. 107). DOE is required to
create a program to develop, test, and demonstrate advanced federal and private
building efficiency technologies. Appropriations of $6.0 million per year for FY2006
through FY2008 are authorized.
Increased Use of Recovered Mineral Component in Federally
Funded Projects Involving Procurement of Cement or Concrete (Sec.
108). DOT and other agencies that regularly procure or provide federal funds to
procure material for cement or concrete projects are directed to fully implement all
procurement requirements and incentives that provide for incorporating recovered
mineral components, such as blast furnace slag and coal combustion fly ash. A
report to Congress on the energy savings and environmental benefits is required 30
months after enactment.
Federal Building Performance Standards (Sec. 109). DOE is directed
to set revised energy efficiency standards for new federal buildings at a level 30%
stricter than industry or international standards — provided the standards would be
“life-cycle cost-effective.” Each agency’s annual budget request is required to list
all new federal buildings and whether each one meets these standards.
Daylight Savings (Sec. 110). Starting in 2007, daylight saving time will
begin three or four weeks earlier (the second Sunday in March) and end one week
later (the first Sunday in November). This is expected to reduce energy used for
night-time electric lighting. A report to Congress on energy savings is required nine
months after implementation begins.
Enhancing Energy Efficiency in Management of Federal Lands
(Sec. 111). National parks, forests, and wildlife refuges are required to employ
energy efficiency measures in buildings and energy-efficient vehicles (including
biodiesel and hybrid engines) “to the extent practicable.”
Background. These provisions were motivated by a desire to save energy
costs and to set a good example, given the requirements imposed on the private
sector. The provisions of this subtitle are intended to overcome institutional barriers.
Some measures will not require large financial commitments up front, but the success
of others will depend on the amount appropriated for energy-saving equipment in
future budget cycles. Some measures may have an impact outside the government,
such as through the influence of federal procurement on manufacturers, and in setting
an example for the private sector to reduce energy consumption.
Policy Context. The provision for extending daylight saving time and the
extension of goals for energy savings in federal executive branch agencies are
noteworthy provisions in this subtitle. Also, the requirement for energy efficiency
measures in congressional facilities is a significant expansion of the requirements for
the federal government in its effort to “lead by example.”
Subtitle B — Energy Assistance and State Programs
Summary of Provisions. Several existing programs to help state and local
governments improve energy efficiency are strengthened, and additional funding is
authorized. Energy savings may be modest, however.
Low Income Home Energy Assistance Program (Sec. 121). Funding
at $5.1 billion per year is authorized for the LIHEAP grant program for FY2005
through FY2007. (Department of Health and Human Services funding for LIHEAP
had been authorized through FY2003.) Also, states and their designees are allowed
to use renewable fuels (including biomass) to carry out the purposes of this section.
DOE is required to report to Congress on the use of renewable fuels under LIHEAP.
Weatherization Assistance (Sec. 122). Funding is authorized for the
DOE weatherization grant program in the amounts of $500 million for FY2006, $600
million for FY2007, and $700 million for FY2008. Also, eligibility for assistance is
raised from 125% to 150% of the poverty level.
State Energy Programs (Sec. 123). New requirements are set for state
energy conservation goals and plans, including a 25% energy efficiency improvement
in 2012 over 1990. Also, funding for the DOE state energy grant program is
authorized at $100 million for FY2006, $100 million for FY2007, and $125 million
Energy Efficient Appliance Rebate Program (Sec. 124). DOE is
authorized to fund rebate programs in eligible states to support residential end-user
purchases of Energy Star products. Funding of $50 million per year is authorized for
FY2006 through FY2010.
Energy Efficient Public Buildings (Sec. 125). A grant program is created
for energy-efficient renovation and construction of local government buildings.
Grants may be used for construction of new buildings that use 30% less energy than
comparable public buildings that meet existing conservation standards and for
renovations that reduce energy consumption by 30% over the pre-renovation
baseline. DOE funding of $30 million per year is authorized for FY2006 through
Low Income Community Energy Efficiency Pilot Program (Sec.
126). A pilot energy efficiency and renewable energy grant program is created for
local governments, private companies, community development corporations, and
Native American economic development entities. Funding at $20 million per year
is authorized for FY2006 through FY2008.
State Technologies Advancement Collaborative (Sec. 127). A
cooperative program is created that links DOE with the states. It is focused on
research, development, demonstration, and deployment of technologies in which
there is a common federal and state energy efficiency, renewable energy, and fossil
energy interest. Such sums as necessary are authorized for FY2006 through FY2010.
State Building Energy Efficiency Codes Incentives (Sec. 128). A
grant program is created for states that DOE determines have achieved a least a 90%
rate of compliance with the most recent model building energy codes. Funds may be
used to implement building energy codes and practices that exceed efficiency
requirements of the most recent model building codes. Funding at $25 million per
year is authorized for FY2006 through FY2010 and such sums as necessary for
FY2011 and each fiscal year thereafter.
Background. The weatherization portion of LIHEAP, the DOE
weatherization program, and DOE state energy programs are the major programs in
this subtitle and have been in place for nearly 30 years. Modest energy savings are
expected from these measures, depending largely on available funding. The other
grant programs are new, relatively limited in scope, and will depend on funding to
have any significant effect.
Policy Context. The weatherization grant programs (under both LIHEAP and
DOE) are the primary energy conservation programs for low-income households.
Funding for them has been relatively steady, and is not usually the subject of major
debate. The state energy program grants are key to the operation of state energy
offices, especially in smaller states.
Subtitle C — Energy Efficient Products
Summary of Provisions. This subtitle deals with energy efficiency
standards, water-use standards, and labeling rules for a variety of products. Some
efficiency standards in sections 135 and 136 are explicitly set in the law, while others
are to be determined by DOE.
Energy Star Program (Sec. 131). DOE and EPA are given statutory
authority to carry out the Energy Star program, which identifies and promotes energy
efficient products and buildings. Also, DOE is directed to establish new qualifying
energy efficiency levels for clothes washers and dishwashers.
HVAC Maintenance Consumer Education Program (Sec. 132). DOE
is required to implement a public education program for homeowners and small
businesses that explains the energy-saving benefits of improved maintenance of
heating, ventilating, and air conditioning equipment. Also, the Small Business
Administration is directed to assist small businesses in becoming more
energy-efficient. Such sums as necessary are authorized.
Public Energy Education Program (Sec. 133). DOE is required to
convene a conference with representatives from industry, education, professional
societies, trade associations, and government agencies to design and establish an
ongoing national public education program focused on energy efficiency and other
topics. DOE is directed to provide guidance and technical assistance. Such sums as
necessary are authorized.
Energy Efficiency Public Information Initiative (Sec. 134). DOE is
required to conduct an advertising and public outreach program about the need to
reduce energy use, the consumer benefits of reduced use, the relationship to jobs and
economic growth, and cost-effective consumer measures to reduce energy use.
Funding at $90 million per year is authorized for FY2006 through FY2010.
Energy Conservation Standards for Additional Products (Sec. 135).
Energy efficiency standards, test procedures, and labeling requirements are set by
statute for exit signs, traffic signals, pedestrian crossing signals, compact fluorescent
lamps (CFLs), torchieres (floor lamps), fluorescent lamp ballasts, mercury vapor
lamp ballasts, residential ceiling fans, residential dehumidifiers, building
transformers (electric utility equipment), commercial unit heaters (fan-type heaters,
usually portable), and commercial pre-rinse spray valves (used in restaurants).
Further, DOE is directed to issue a rule that prescribes efficiency standards and
labeling requirements for external power supplies, battery chargers, and refrigerated
Energy Conservation Standards for Commercial Equipment (Sec.
136). Energy efficiency standards, test procedures, and labeling requirements are set
by statute for commercial refrigerators, freezers, and refrigerator-freezers; large
commercial air conditioners and heaters; commercial (automated) ice-makers; and
commercial clothes washers.
Energy Labeling (Sec. 137). The Federal Trade Commission (FTC) is
required to consider improvements in the effectiveness of energy labels for consumer
products. Also, DOE or FTC is directed to consider prescribing labeling
requirements for many of the products listed in section 135. However, certain types
of dehumidifiers are exempted from labeling requirements.
Intermittent Escalator Study (Sec. 138). The Administrator of the
General Services Administration (GSA) is required to conduct a study on the
advantages and disadvantages, including energy cost savings, of using intermittent
(on-demand) escalators in the United States. A report to Congress is required within
one year of enactment.
Energy Efficient Electric and Natural Gas Utilities Studies (Sec.
139). DOE is required to conduct a study of state and regional policies that promote
cost-effective programs to reduce energy use (including energy efficiency programs)
that are operated by utilities subject to state regulation and by non-regulated utilities.
A report to Congress is required within one year of enactment.
Energy Efficiency Pilot Program (Sec. 140). DOE is required to
establish a pilot program that provides financial assistance to at least three, but not
more than seven, states to encourage energy efficiency and energy use reductions.
Funding at $5 million per year is authorized for FY2006 through FY2010.
Report on Failure to Comply with Deadlines for New or Revised
Energy Conservation Standards (Sec. 141). DOE is required to report
regularly (within six months of enactment and every six months thereafter) to
Congress when efficiency standard rulemakings (including those following from
Sections 135 and 136) are behind schedule, including steps being taken to get back
Background. Under previous authority, DOE established minimum energy
efficiency standards for several consumer and commercial products, including
household appliances such as clothes washers and refrigerators. Sections 135 and
136 of the new energy law set a variety of energy efficiency standards for consumer
appliances and commercial equipment. Most of the standards are statutory, but some
are at the discretion of a DOE rulemaking. The American Council for an Energy-
Efficient Economy (ACEEE) estimates that these new standards will save more
energy than any other efficiency provisions in the bill. Further, §141 requires that
DOE report regularly to Congress when efficiency standard rulemakings are behind
schedule, including steps being taken to get back on schedule. Other provisions for
Energy Star, public education and outreach, and labeling are designed to help support
consumer use of more efficient equipment.
Policy Context. DOE is several years behind previous target dates to
implement higher energy efficiency standards for certain consumer products and
equipment. In 2001, the incoming Bush Administration sought to roll back
efficiency standards for central air conditioners and heat pumps (from SEER 13 to
SEER 12) that DOE had issued late in the Clinton Administration. In response to
litigation by several states (including California and New York) and environmental
groups, the U.S. Second Circuit Court of Appeals upheld the higher standards.3
Standards set in the past for several other types of equipment, such as refrigerators,
are widely considered to have been successful at increasing average efficiency.
Subtitle D — Public Housing
Summary of Provisions. Parallel to the policies set forth above for federal
agencies, this subtitle aims to make similar improvements in energy efficiency for
federally supported public housing. The provisions cover appliances and equipment,
building codes, a financial mechanism, and a requirement to create an energy
Public Housing Capital Fund (Sec. 151). The Public Housing Capital
Fund at the Department of Housing and Urban Development (HUD) is modified to
include coverage of certain energy- and water-use efficiency improvements.
3 U.S. Court of Appeals for the Second Circuit. Natural Resources Defense Council et al
v. U.S. Department of Energy et al. (Docket Nos. 01-4102, 01-4103, 02-4160, 02-4189,
Energy-Efficient Appliances (Sec. 152). Public housing agencies are
required to purchase cost-effective Energy Star and FEMP-designated appliances and
Energy Efficiency Standards (Sec. 153). The energy efficiency standards
and codes that the federal government encourages states to use are changed from the
codes set by the Council of American Building Officials (CABO) to the 2003
International Energy Conservation Code (IECC).
Energy Strategy for HUD (Sec. 154). The Secretary of Housing and Urban
Development is required to implement an energy conservation strategy to reduce
utility expenses through cost-effective energy efficient design and construction of
public and assisted housing. A report to Congress is required within one year of
Background. The previous Energy Policy Act of 1992 (P.L. 102-486)
contained mortgage-related provisions for energy efficiency in housing. This subtitle
extends some similar energy efficiency measures to public housing.
Policy Context. Four additional provisions for public housing were proposed
in the House version of the bill, but were dropped in conference. The provisions
covered capacity building, use of Community Development Block Grants, grants for
assisted housing, and Federal Housing Authority mortgage insurance.
Title II — Renewable Energy
Subtitle A — General Provisions
Summary of Provisions. The major purposes of this title are to increase
production and use, advance technology development, and promote commercial
development of renewable energy. Potentially significant effects could come from
a broadening of the renewable energy production incentive (REPI) payment for
electricity generated by renewable energy facilities, depending on the amount of
future appropriations. Other provisions establish resource assessments, federal
purchases of equipment and electricity, federal land leasing, and grants, all of which
are also subject to appropriations.
Assessment of Renewable Energy Resources (Sec. 201). DOE is
required to report annually on the resource development potential of solar, wind,
biomass, ocean (tidal, wave, current, and thermal), geothermal, and hydroelectric
energy resources. Further, DOE is required to review available assessments and
undertake new assessments as necessary, accounting for changes in market
conditions, available technologies, and other relevant factors. Funding at $10 million
per year is authorized for FY2006 through FY2010.
Renewable Energy Production Incentive (Sec. 202). Eligibility for the
existing incentive is extended through 2026 and expanded to include electric
cooperatives and tribal governments. Qualifying resources are expanded to include
landfill gas, livestock methane, and ocean (tidal, wave, current, and thermal) energy.
The provision authorizes such sums as are necessary for each fiscal year from
FY2006 through FY2026.
Federal Purchase Requirement (Sec. 203). Federal agencies are
required, to the extent “economically feasible and technically practicable,” to
purchase power produced from renewable sources. The requirement for federal
renewables use, as a share of total federal electric energy use, starts at 3.0% in
FY2007, rises to 5.0% in FY2010, and then reaches 7.5% in 2013 and all subsequent
years. Renewable energy produced at a federal site, on federal lands, or on Indian
lands is eligible for double credit toward the purchase requirement. A report to
Congress is required every two years.
Use of Photovoltaic Energy in Public Buildings (Sec. 204). The
General Services Administration (GSA) is authorized to encourage the use of solar
photovoltaic energy systems in new and existing federal buildings. For FY2006
through FY2010, funding at $50 million per year is authorized for commercialization
and $10 million per year is authorized for systems evaluation.
Biobased Products (Sec. 205). This provision amends the previously
existing requirement that federal agencies give procurement preference to items
composed of the highest percentage of biobased products practicable by adding “or
such items that comply with the regulations issued under section 103 of Public Law
Renewable Energy Security (Sec. 206). For the DOE weatherization
grant program, this section increases the limit on support for renewable energy
equipment from $2,500 to $3,000 per dwelling unit. Also, it creates a consumer
rebate for renewable energy equipment installed in a dwelling or small business. The
maximum rebate is the lesser of 25% of equipment cost or $3,000. Funding is
authorized at $150 million for FY2006 and FY2007, $200 million for FY2008, and
$250 million for FY2009 and FY2010.
Installation of Photovoltaic System (Sec. 207). This provision
authorizes $20 million in FY2006 for the Administrator of GSA to proceed with the
Sun Wall Design Project, the winning entry in a national design competition
sponsored jointly by DOE and the National Renewable Energy Laboratory, to install
a photovoltaic solar electric system on the headquarters building of DOE.
Sugar Cane Ethanol Program (Sec. 208). A program is established at the
Environmental Protection Agency to study the production of ethanol from cane sugar,
sugarcane, and sugarcane byproducts. The program is restricted to projects in
Florida, Louisiana, Texas, and Hawaii. A total of $36 million is authorized.
Rural and Remote Community Electrification Grants (Sec. 209). A
grant program is established at DOE for “increasing energy efficiency, siting or
upgrading transmission and distribution lines serving rural areas; or providing or
modernizing electric generation facilities that serve rural areas.” Grant applications
for development of renewable energy sources will be extended “preference.”
Funding at $20 million annually is provided for FY2006 through FY2012.
Grants to Improve the Commercial Value of Forest Biomass for
Electric Energy, Useful Heat, Transportation Fuels, and Other
Commercial Purposes (Sec. 210). This provision creates a grant program at the
Department of Agriculture to subsidize biomass purchases for use in an energy
production facility. The purpose is to encourage the removal of slash, brush,
pre-commercial thinning material, and other non-merchantable forest biomass from
federal lands and Indian reservations for biomass energy production. Grants are
limited to $500,000. Funding is authorized at $50 million per year for FY2006
through FY2016. By the end of FY2010, a report to Congress is required that
describes the types of biomass, transport distances, and economic impacts.
Sense of Congress Regarding Generation Capacity of Electricity
From Renewable Energy Resources on Public Lands (Sec. 211). For the
Secretary of the Interior, this provision sets a goal of having 10,000 megawatts of
non-hydropower renewable energy generation capacity installed on public lands
within 10 years from the date of enactment.
Background. Since the early 1980s, the main policies promoting commercial
development of renewables have been the power purchase requirement in Section
210 of the Public Utility Regulatory Policies Act (PURPA, P.L. 98-617) and tax
credits. Under certain conditions, Section 1253 of the Energy Policy Act of 2005
terminates PURPA Section 210. A generous investment tax credit expired in 1985.
A few years later, a renewable energy production tax credit (PTC) was created and
renewed several times. The renewable energy industry says the PTC is an
appropriate credit, but its effectiveness has been limited by its short-term durations,
and subsequent lapses, when it sunsets before Congress has passed extensions. In the
past few years, several states (currently about 20) have enacted a Renewable Portfolio
Standard (RPS) to work with the PTC in providing a strong base of encouragement
Policy Context. The Senate version of H.R. 6 (the bill that became the
Energy Policy Act of 2005) included a Renewable Energy Portfolio Standard (RPS),
which would have required retail electricity suppliers to provide 10% of their
electricity (attained by direct generation, power purchases, or purchases of tradable
credits) from renewable sources by 2020. Proponents noted that there were a
growing number of states with an RPS and that Energy Information Administration
reports showed an RPS could reduce electricity bills. Opponents raised concerns
about the exclusion of existing hydropower facilities and resource limits for the
southeastern United States. There was no RPS provision in the House version of
H.R. 6. During the conference, there were discussions about compromising by
including nuclear and hydropower facilities. Nevertheless, RPS was dropped in
Subtitle B — Geothermal Energy
Summary of Provisions. Much of the nation’s geothermal energy potential
is located on federal lands. Reducing delays in the federal geothermal leasing
process and reducing royalties could increase geothermal energy production although
the environmental impact of greater geothermal development is also at issue.
Short Title (Sec. 221). This subtitle may be cited as the “John Rishel
Geothermal Steam Act Amendments of 2005.”
Competitive Lease Sale Requirements (Sec. 222). The amendments
to the Geothermal Steam Act change the lease procedures for competitive and non-
competitive lease sales. Competitive lease sales will be held every two years. If there
were no competitive bids, then lands would be made available for two years under
a non-competitive process.
Direct Use (Sec. 223). A fee schedule in lieu of any royalty or rental
payments shall be established for lessees of geothermal resources that are not sold or
Royalties and Near-term Production Incentives (Sec. 224). Royalties
on electricity produced from geothermal resources are not less than 1% and not more
than 2.5% of the gross proceeds from geothermal electricity sales in the first 10 years
of production and not less than 2% and more than 5% of the gross proceeds from
geothermal electricity sales each year after the 10-year period. A state shall receive
50% of the mineral revenue generated within its borders and the county will receive
Coordination of Geothermal Leasing and Permitting on Federal
Lands (Sec. 225). A memorandum of understanding (MOU) between the
Secretaries of the Interior and Agriculture should include provisions that would
identify known geothermal areas on public lands within the National Forest system
and establish an administrative procedure that would include time frames for
processing lease applications. This section also establishes a five-year program for
leasing geothermal energy in the National Forest and a program for reducing the
backlog of geothermal lease applications.
Assessment of Geothermal Energy Potential (Sec. 226). The U.S.
Geological Survey (USGS) shall provide Congress with an assessment of current
geothermal resources within three years of enactment of the Energy Policy Act of
Cooperative or Unit Plans (Sec. 227). Cooperative or unit plans for
geothermal development shall be promoted.
Royalty on Byproducts (Sec. 228). Leasable minerals produced as a
byproduct of a geothermal lease are subject to royalties under the Mineral Leasing
Act (30 U.S.C. 181).
Authorities of Secretary to Readjust Terms, Conditions, Rentals,
and Royalties (Sec. 229). Sections 8(a) and (b) of the Geothermal Steam Act are
repealed, eliminating the Secretary’s authority to readjust geothermal rental and
royalty rates at “not less than 20 year intervals beginning 35 years after the date
geothermal steam is produced.”
Crediting of Rental Towards Royalty (Sec. 230). Annual rentals are
credited towards the royalty of the same lease.
Lease Duration and Work Commitment Requirements (Sec. 231).
The primary lease term is 10 years and can be extended for two additional five-year
terms if work commitments are met.
Advanced Royalties Required for Cessation of Production (Sec.
232). If production from a geothermal lease were suspended during a period in
which a royalty was required, royalties would be paid in advance until production
Annual Rental (Sec. 233). The act establishes rental rates for competitive
and non-competitive lease sales.
Deposit and Use of Geothermal Lease Revenues for 5 Fiscal Years
(Sec. 234). For the first five years after the enactment of this act, a separate account
shall be established for revenue receipts from leases under the Geothermal Steam Act
of 1970, excluding money necessary for payments to states and county governments.
Funds may be transferred to the Forest Service.
Acreage Limitations (Sec. 235). Section 7 of the Geothermal Steam Act
on acreage limitations is repealed (30 U.S.C. 1006).
Technical Amendments (Sec. 236). About two dozen technical
amendments are included.
Intermountain West Geothermal Consortium (Sec. 237). The
Intermountain West Geothermal Consortium shall be established to focus on
expanded use of geothermal energy. The consortium would involve the participation
of the Secretary of Energy, universities in the region, and state agencies.
Background. Competitive geothermal lease sales are based on whether lands
are within a known geothermal resource area (Geothermal Steam Act of 1970, 30
U.S.C. 1003). Geothermal production on federal lands is charged a royalty of 10%-
15% under section 5 of the Geothermal Steam Act. The royalty is imposed on the
amount or value of steam or other form of heat derived from production under a
The Secretary of the Interior can withdraw public lands from leasing or other
public use and modify, extend, or revoke withdrawals under provisions in the Federal
Land Policy and Management Act of 1976 (FLPMA, 43 U.S.C. 1714). At certain
intervals the Secretary may readjust terms and conditions of a geothermal lease,
including rental and royalty rates. Annual rental fees of not less than $1 per acre on
geothermal leases are paid in advance. The primary lease term is 10 years and shall
continue as long as geothermal steam is produced or used in commercial quantities.
Rents are $1 per acre or fraction thereof for each year of a geothermal lease.
Policy Context. Much of the nation’s geothermal energy potential is located
on federal lands. Reducing delays in the federal geothermal leasing process and
reducing royalties could increase geothermal energy production, although the
environmental impact of greater geothermal production is an issue. This section also
prohibits the Secretary from making future adjustments to the initial lease.
Subtitle C — Hydroelectric
Summary of Provisions. This subtitle encourages hydroelectric production
at non-federal dams. It makes it more difficult for a federal agency to establish a
fisheries requirement as part of the hydropower licensing process, if it would
decrease hydroelectric production. Furthermore, the subtitle establishes a process
through which the State of Alaska may decline to adopt federal agencies’ fish and
wildlife recommendations for the dams it regulates. The subtitle also authorizes $20
million to increase energy efficiency and expand hydroelectric production at existing
Alternative Conditions and Fishways (Sec. 241). This provision gives
applicants for hydroelectric licenses increased flexibility in complying with
conditions imposed by federal agencies. Currently, the Federal Power Act (16 U.S.C.
791 et al.) gives certain federal agencies (conditioning agencies) the authority to
attach conditions to Federal Energy Regulatory Commission (FERC) licenses. For
example, federal agencies may require applicants to build passageways through
which fish can travel around a dam, schedule periodic water releases for recreation,
release minimum flows of water for fish migration, control water release rates to
reduce erosion, or limit reservoir fluctuations to protect a reservoir’s shoreline
habitat. Once an agency issues such conditions, FERC must include them in its
license. While these conditions often generate environmental or recreational benefits,
they may also require construction expenditures and may increase power generation
costs by reducing operational flexibility.
This provision allows entities to propose alternative license conditions and
requires federal agencies to consider the alternatives proposed by license applicants
and other parties to the license proceeding. An agency shall accept a proposed
alternative, if it finds that the alternative (1) provides for the adequate protection and
utilization of the federal reservation, or is no less protective of the fish resource than
the fishway initially prescribed, and (2) costs significantly less to implement than the
original condition, and/or will improve operation of the project for electricity
production. Agencies that are issuing conditions must provide FERC with a written
statement demonstrating that the relevant Secretary gave “equal consideration” to the
effects of the conditions on factors such as energy supply, flood control, navigation,
water supply, and air quality. It remains to be seen how this equal consideration
clause will affect agencies’ resources and whether it will alter their responsibilities
to fish and wildlife.
Hydroelectric Production Incentives (Sec. 242). The Secretary of
Energy shall make incentive payments to non-federal owners or operators of
hydroelectric facilities for power that is first produced within 10 years of the date of
enactment by generating equipment added to existing facilities. Payments of 1.8
cents per kilowatt-hour (kWh), up to a total of $750,000/year, may be made for up
to 10 years from the first year after the facility begins operating. Authorizes $10
million per year from FY2006 through FY2015.
Hydroelectric Efficiency Improvement (Sec. 243). The Secretary of
Energy shall make incentive payments to the owners or operators of hydroelectric
facilities who make capital improvements on existing facilities that improve
efficiency by at least 3%. Payments are not to exceed 10% of the improvement cost
and may not exceed $750,000 at any single facility. Appropriations of $10 million
per year for FY2006 through FY2015 are authorized.
Alaska State Jurisdiction Over Small Hydroelectric Projects (Sec.
244). This provision amends the requirement under which the State of Alaska may
regulate its small hydroelectric dams. Under this provision, the State of Alaska may
decide against issuing a recommended condition on a hydroelectric project if it finds
that the recommendation is inconsistent with protection of the public interest as
described in a November 2000 amendment to the Federal Power Act (16 U.S.C.
Flint Creek Hydroelectric Project (Sec. 245). This provision allows the
Federal Energy Regulatory Commission to extend, by three years, a preliminary
licensing permit for the Flint Creek Hydroelectric Project in Montana.
Small Hydroelectric Projects (Sec. 246). This provision amends the
Public Utility Regulatory Policies Act of 1978 (16 U.S.C. 2708), to change the date
on or before which a dam must be constructed to qualify as an existing dam, from
April 20, 1977, to July 22, 2005.
Subtitle D — Insular Energy
Summary of Provisions. This subtitle seeks to improve the reliability of
insular area energy systems and to update plans put forth in the 1982 Territorial
Energy Assessment. Also, grants are provided to help with feasibility studies for
demonstration projects. In general, the aims are to improve energy efficiency and to
increase use of indigenous energy resources.
Insular Areas Energy Security (Sec. 251). This section includes
congressional findings that electric power transmission and distribution lines in
insular areas are not adequate to withstand hurricane and typhoon damage, and that
an assessment is needed of energy production, consumption, infrastructure, reliance
on imported energy, and indigenous sources of energy in insular areas. Further, it
requires the Secretary of the Interior, in consultation with the Secretary of Energy and
the head of government of each insular area, to update insular area energy plans
within one year of enactment to reflect these findings, with the goals of reducing
energy imports by 2012, increasing energy conservation and energy efficiency, and
maximizing the use of indigenous resources. Funding at $6 million per year is
authorized that would, in part, be used for matching grants (federal share maximum
is 75%) for projects designed to protect electric power transmission distribution lines
in one or more of the territories of the United States from damage caused by
hurricanes and typhoons.
Projects Enhancing Insular Energy Independence (Sec. 252). The
Secretary of Energy, in consultation with the Secretary of the Interior, is required to
assess and report to Congress on projects with the greatest potential for reducing
dependence on fossil fuels used to generate electricity, and to promote distributed
energy, in the insular areas. DOE would be authorized to provide technical and
financial assistance, on a matching basis with local utilities, for feasibility studies and
for implementation of projects the Secretary of Energy determines are feasible and
appropriate. Funding is authorized at $500,000 per year for feasibility studies and
$44 million per year for project implementation. No local match is required for
Background. In general, insular areas face much higher energy costs than the
continental United States, because most fuels must be imported. This is especially
true for oil, which often costs twice as much as it does on the mainland. Also, such
areas rely mainly on diesel generators for power production and relatively often
experience brown-outs and black-outs. The 1982 Territorial Energy Assessment
sought to lay out a strategy that emphasized greater energy efficiency and increased
reliance on indigenous energy sources, particularly solar, wind, and biomass.
Policy Context. The insular areas provide strategic locations for U.S. military
installations in the Pacific Ocean and Caribbean Sea.
Title III — Oil and Gas
Subtitle A — Petroleum Reserve and Home Heating Oil
Summary of Provisions. This subtitle permanently authorizes the Strategic
Petroleum Reserve (SPR) and Northeast Heating Oil Reserve (NHOR), thereby
avoiding awkward periods such as occurred in 2000 when there was a period of
several months when the authorities were not in force. Storage sites are to be
identified for expansion of the SPR to one billion barrels, and conditions are set out
for adding oil to the SPR during periods when oil supply is tight and prices elevated,
or when acquiring oil will spur or exacerbate those conditions. Other provisions are
intended to provide guidelines for acquiring oil for the SPR in the future in a manner
that minimizes any consequences on oil prices and markets.
Permanent Authority to Operate the Strategic Petroleum Reserve
and Other Energy Programs (Sec. 301). Authority for the SPR program is
made permanent, as are authorities that permit U.S. oil companies to participate,
without risk of anti-trust violations, in the International Energy Agency (IEA) oil-
National Oilheat Research Alliance (Sec. 302). The law extends the
authorization for NORA until nine years (2010) after the date on which the Alliance
Site Selection (Sec. 303). The Secretary of Energy is required, within one
year of enactment, to select sites — giving preference to sites that have been
previously studied — for expansion of the SPR to its fully authorized volume of one
Background. Congress authorized the Strategic Petroleum Reserve (SPR) in
the Energy Policy and Conservation Act (EPCA, P.L. 94-163) to help prevent a
repetition of the economic dislocation caused by the 1973-74 Arab oil embargo.
Physically, the SPR comprises five underground storage facilities, hollowed out from
naturally occurring salt domes, located in Texas and Louisiana. In 2000, Congress
also authorized establishment of a Northeast Heating Oil Reserve (NHOR) where
two million barrels of home heating oil is kept in leased, above-ground storage, to be
released if the price of heating oil exceeds a calculated historic average. The
authorities governing the SPR and NHOR are included in the Energy Policy and
Conservation Act (EPCA, P.L. 94-163) and are currently authorized through FY2008
by the Consolidated Appropriations Resolution for FY2003 (P.L. 108-7). These
authorities also provide for U.S. participation in emergency activities of the
International Energy Agency (IEA) without risking violation of antitrust law and
The National Oilheat Research Alliance (NORA) was established by the Energy
Policy Act of 2000 (P.L. 106-460), and assesses a fee of $.002 per gallon on home
heating oil sold by retail distributors. The proceeds, among other purposes, are
dedicated to research on improving the efficiency of furnaces and boilers, and
providing education and training resources to professionals in the industry.
Producers of offshore leases in the Gulf of Mexico pay a royalty to the U.S.
Treasury based upon production at their sites. Since 1999 and until August 2005,
most new fill of the SPR was achieved by the acceptance of royalty-in-kind (RIK) oil
from these producers in lieu of cash paid to the Treasury. Some have objected to RIK
deliveries, arguing that diverting any oil from the markets was contributing to rising
crude prices. The Administration argued that the volumes involved, never more than
200,000 b/d and often less, was not large enough to have the effect on prices that
Policy Context. There have been occasions in the past when the authorities
expired for the SPR program and antitrust protection for U.S. participation in the
international oil-sharing agreement of the International Energy Agency (IEA). The
Energy Policy Act of 2005 eliminates the possibility of this occurring in the future.
The provisions in the energy act will probably preclude any new acquisitions for the
SPR until petroleum product stocks recover from the effects of Hurricanes Rita and
Katrina, and oil and energy markets calm considerably.
Subtitle B — Natural Gas
Summary of Provisions. Streamlined permitting processes and NEPA
reviews4 are provided for the siting of liquefied natural gas (LNG) facilities and
conventional natural gas storage facilities. Expedited judicial review is also provided
by designating exclusive jurisdiction for civil action to the U.S. Court of Appeals for
the circuit in which the facility would be located. Other provisions relate to
improvements in the performance of natural gas markets, prohibiting of market
manipulation, and ensuring that prices are determined in a clear-cut way with full
disclosure of all relevant information.
4 Environmental impact reviews required by the National Environmental Policy Act (NEPA,
Exportation or Importation of Natural Gas (Sec. 311). The Natural Gas
Act (NGA, 15 U.S.C. 717) is amended to unequivocally establish exclusive FERC
jurisdiction over siting LNG terminals for exportation and importation of natural gas.
The language specifies that the rights of states are not changed under the Coastal
Zone Management Act (CZMA, 16 U.S.C. 1451 et seq.), the Clean Air Act (42
U.S.C. 7401 et seq.), and the Federal Water Pollution Control Act (33 U.S.C. 1251
et seq.). Before January 1, 2015, FERC shall not deny approval solely for the reason
that the applicant would use the gas himself, wholly or in part. Approval shall not be
conditioned on a requirement to offer service to others, a directive to file rates or
tariffs with FERC, or any other regulation of rates and service. These provisions shall
cease to exist after January 1, 2030.
FERC shall obtain the concurrence of the Secretary of Defense before
authorizing an LNG facility impacting a military installation. The governor of a state
with a proposed LNG site will designate the appropriate state agency to consult with
FERC on safety issues, including the nature of the facility, population characteristics,
and physical characteristics. The state agency shall issue an advisory report to FERC
on safety issues. Any authorization of an LNG facility shall require the operator, in
consultation with the designated state agency and the U.S. Coast Guard, to develop
an Emergency Preparedness Plan to be approved by FERC.
New Natural Gas Storage Facilities (Sec. 312). Section 4 of the NGA
is amended to allow FERC to permit new natural gas storage facilities to charge
market based prices, if it determines that they are in the public interest and reasonable
consumer protections exist. FERC shall review these rates periodically.
Process Coordination; Hearings; Rules of Procedure (Sec. 313).
This section defines a “federal authorization” as the complete package of permits and
regulatory rulings needed to obtain an authorization or a certificate of convenience
and necessity. FERC is designated the lead agency in the federal authorization
process, setting the schedule for other state and federal agencies to ensure expeditious
completion of necessary proceedings and comply with applicable schedules
established by federal law. FERC is tasked with keeping the consolidated record of
all decisions made and actions taken by all parties, which shall also be the record for
CZMA and judicial review.
Judicial review of an order from any federal (other than FERC) or state agency
shall be in the U.S. Court of Appeals for the circuit in which the project would be
constructed. The U.S. Court of Appeals for the District of Columbia is to hear cases
involving failure to act by an agency or denial of permit under federal law. These
cases shall be heard on an expedited schedule.
Penalties (Sec. 314). This section raises the penalties for violating FERC
orders. It raises the maximum prison term from two to five years and the maximum
fine from $500 per violation to $50,000 for each day the violation took place.
Violations of emergency orders are subject to fines of up to $1 million per day. Civil
penalties are also raised to a maximum of $1 million per day.
Market Manipulation (Sec. 315). This section prohibits anyone from using
any manipulative or deceptive contrivance (as defined by the Securities and
Exchange Commission) in connection with the purchase or sale of natural gas or
related transport services, in contravention of FERC rules. Essentially, it bars false
reporting of terms and condition of natural gas trades.
Natural Gas Market Transparency Rules (Sec. 316). This creates a new
section in the NGA (Sec. 23), calling on FERC to prescribe such rules as necessary
to provide for the timely dissemination of information about price and supply of gas
sold at wholesale. FERC may obtain this information from any market participant,
or rely on private parties to make this information available. FERC shall seek to
assure that consumers are protected from the adverse effects of anti-competitive
behavior on the part of market participants. Within 180 days of enactment, FERC
shall conclude a memorandum of understanding with the Commodity Futures
Trading Commission regarding data sharing, ensuring that duplicative information
requests are minimized. Market participants having de minimus transactions are
exempted from any reporting requirements that might originate under this act.
Federal-State Liquified Natural Gas Forums (Sec. 317). Within one
year of enactment, the Secretary of Energy is directed to convene at least three
forums on LNG in areas where facilities are under consideration. These are to be
undertaken with the participation of the Secretaries of Transportation, Homeland
Security, and coastal state governors. Their goal would be to create dialogue among
stakeholders regarding such issues as safety and environmental risks, and siting and
permitting, and general education. Their purpose would be to identify and develop
best practices for dealing with LNG issues. Funds are authorized to be appropriated
Prohibition of Trading and Serving By Certain Individuals (Sec.
318). This amends §20 of NGA to allow a court to prohibit a person convicted of
violating FERC rules from acting as an officer of a natural gas company or from
trading natural gas or transportation services.
Subtitle C — Production
Summary of Provisions. This subtitle facilitates the storage of imported
liquefied natural gas at offshore terminals and excludes injection of hydraulic
fracturing fluids, except diesel fuel, from regulation under the Safe Drinking Water
Act (42 U.S.C. 300f et seq.). The legislation also gives a permanent exemption from
Clean Water Act stormwater runoff rules for the construction of exploration and
production facilities by oil and gas companies and the roads that service those sites.
Outer Continental Shelf Provisions (Sec. 321). This section allows
subsurface storage on the outer continental shelf of oil and natural gas (including
natural gas liquids, liquefied petroleum gas, and natural gas condensate) from any
source. A key effect of this provision would be to facilitate the storage and
processing of imported liquefied natural gas at offshore terminals.
Hydraulic Fracturing (Sec. 322). This section amends the Safe Drinking
Water Act (SDWA), Section 1421(d), to specify that the definition of “underground
injection” excludes the injection of fluids or propping agents (other than diesel fuel)
used in hydraulic fracturing operations related to oil, gas, or geothermal production
activities. This provision removes EPA’s current authority to regulate the
underground injection of fluids (other than diesel fuel) used in hydraulic fracturing,
as needed to protect drinking water.
Before 1997, EPA had not considered regulating hydraulic fracturing for oil and
gas development, because it did not view this well-production process as an activity
subject to regulation under SDWA’s underground injection control (UIC) program.
In 1997, the 11th Circuit Court of Appeals ruled that the injection of fluids for the
purpose of hydraulic fracturing constituted underground injection, that all
underground injection must be regulated, and that hydraulic fracturing of coalbed
methane (CBM) wells in Alabama must be regulated under the state’s UIC program
(LEAF v. EPA, 118 F. 3d 1467).
Hydraulic fracturing involves the high-pressure injection of fluids into coal beds
to enhance the recovery of oil and natural gas from underground formations. Water-
based fluids are typically used as fracturing fluids; however, diesel fuel often is used
instead of water, and various chemicals are added to fracturing fluids.5 While
hydraulic fracturing has been used in the recovery of conventional oil and gas since
the 1950s, this practice has been used for CBM recovery mainly since the 1990s.
A growing concern is that, in many CBM-producing regions, the target coal
beds occur within underground sources of drinking water, and the fracturing process
injects fluids directly into the drinking water sources; EPA has determined that the
use of diesel fuel as a fracturing fluid introduces benzene and other toxic substances
directly into underground sources of drinking water.6 Also, because the process
fractures rock, fracturing can create new pathways for natural gas (primarily
methane) to enter drinking water aquifers. As the number of coalbed methane (CBM)
wells and the use of hydraulic fracturing have increased rapidly in recent years, so has
concern over the potential impact on water resources, particularly in the water-scarce
West. Very few studies have been done to evaluate these impacts.
A study by the National Academy of Sciences is required under §1811 on the
effect of coalbed natural gas production on surface and ground water resources,
including drinking water, in Montana, Wyoming, Colorado, New Mexico, North
Dakota, and Utah.
Oil and Gas Exploration and Production Defined (Sec. 323). The
definitions provision of the Clean Water Act (CWA, §502) is amended to give a
permanent exemption from CWA stormwater runoff rules for the construction of
5 Environmental Protection Agency, Evaluation of Impacts to Underground Sources of
Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs, Washington,
D.C., June 2004, pp. 4-3 - 4-4.
6 Ibid., pp. 1-6. According to EPA, hydraulic fracturing of oil and gas found in conventional
geologic traps is well established; however, hydraulic fracturing of coal beds is relatively
new. Conventional sites are usually very deep and involve saline groundwater that is
unsuitable for drinking water. In contrast, formations that contain coal bed methane can be
near the surface where groundwater may be used as a source of drinking water supplies. pp.
exploration and production facilities by oil and gas companies and the roads that
service those sites.
Background. Previously under the CWA (33 U.S.C. 1251 et seq.), the
operation of facilities involved in oil and gas exploration, production, processing,
transmission, or treatment generally was exempt from stormwater runoff regulations
(so long as the runoff was uncontaminated by pollutants), but the construction of
these facilities and associated roads was not. Section 323 modifies CWA to
specifically include construction activities in the types of oil and gas facilities that are
covered by the act’s statutory exemption from stormwater rules.
The issue arises from CWA stormwater permitting rules for small construction
sites and municipal separate storm sewer systems that were issued by the
Environmental Protection Agency (EPA) in 1999 and became effective March 10,
2003. Those rules, known as Phase II of the CWA stormwater program, require most
small construction sites disturbing one to five acres and municipal separate storm
sewer systems serving populations of up to 100,000 people to have a CWA discharge
permit. The permits require pollution-prevention plans describing practices for
curbing sediment and other pollutants from being washed by stormwater runoff into
local water bodies. Phase I of the stormwater program required construction sites
larger than five acres (including oil and gas facilities) and larger municipal separate
storm sewer systems to obtain discharge permits beginning in 1991.
EPA had initially assumed that most oil and gas facilities would be smaller than
one acre in size and thus excluded from the Phase II rules, but newer data indicate
that up to 30,000 new sites per year would be of sizes subject to the rule. As the
March 2003 compliance deadline approached, EPA authorized a two-year extension
of the Phase II rules for small oil and gas construction sites to allow the agency to
assess the economic impact of the rule on that industry. In March 2005, EPA
extended the exemption until June 2006 and said it would propose a specific rule for
small oil and gas construction sites by September 12, 2005, and issue a final rule in
Policy Context. Section 323 makes EPA’s regulatory delay permanent and
makes it applicable to construction activities at all oil and gas development and
production sites, regardless of size, including those previously covered by Phase I
rules. Industry had argued that the stormwater rule creates time-consuming
permitting requirements, even though the short construction period for drilling sites
carries little potential for stormwater runoff pollution. Supporters said the
amendment was intended to clarify existing CWA language. Opponents argued that
there is no evidence that construction at oil and gas sites causes less pollution than
other construction activities, which are regulated under EPA’s stormwater program.
As a result of the amendment, which is intended to exempt from the CWA all
uncontaminated stormwater discharges that occur while setting up drilling operations,
EPA proposed in December 2005 a new rule for discharges of stormwater from oil
and gas operations, making construction activities at all oil and gas sites eligible for
the exemption. EPA still intends to issue a final rule by June 2006.
Subtitle D — Naval Petroleum Reserves
Summary of Provisions. This subtitle continues a process of divesting or
transferring responsibility for management of Naval Petroleum Reserve oil fields
outside of the Department of Energy.
Transfer of Administrative Jurisdiction and Environmental
Remediation (Sec. 331-334). Administration of public domain lands within the
Naval Petroleum Reserve No. 2 (NPR-2), located in Kern County, CA, will be
transferred to the Secretary of the Interior. The Secretary is instructed to manage oil
production from these tracts in a manner consistent with maximizing production over
the lifetime of the field. Surface rights, title and interest in a roughly 220 acre parcel
of Naval Petroleum Reserve No. 2 is transferred to the city of Taft, CA. The federal
government will retain rights to all fossil fuel and mineral resources for itself or its
lessees, but yields all surface rights and responsibilities for care of the surface. The
Executive Order of December 13, 1912, establishing NPR-2 is revoked.
Background. The National Defense Authorization Act for FY1996 (P.L. 104-
106) authorized sale of the federal interest in the oil field at Elk Hills, CA (Naval
Petroleum Reserve-1 (NPR-1)). Transfers of other NPR sites have followed in
subsequent years. This has left in the Naval Petroleum Reserves program two small
oil fields in California and Wyoming, which will generate estimated revenue to the
government of roughly $7.2 million during FY2005. The Kern County site (NPR-2)
comprises a “checkerboard” pattern of governmentally and privately owned tracts
adjacent to the Elk Hills field. Of the 50 tracts owned by the government, nearly 90%
are leased by private oil companies with royalty payments deposited in the U.S.
Subtitle E — Production Incentives
Summary of Provisions. Royalty relief provisions are provided to
encourage further offshore oil and gas development. An inventory of offshore
resources is included. The royalty in-kind program is codified, along with a program
for royalty relief for marginal oil and gas properties and a program to remediate
orphaned and abandoned wells.
Definition of Secretary (Sec. 341). In this subtitle, “Secretary” means
Secretary of the Interior.
Program on Oil and Gas Royalties In-Kind (Sec. 342). The federal
government is authorized to continue to receive physical quantities of oil and gas as
royalty-in-kind payments if it can receive market value for the product and revenues
greater than or equal to the revenues it would have received under a comparable cash-
payment royalty. The royalty product would have to be placed in marketable
condition (as defined in the law) at no cost to the United States. Small refineries
would receive preferential treatment if supplies on the market were insufficient. A
report to Congress in each year from FY2006-FY2015 must explain, among other
things, how the Secretary determined whether the amount received was at least the
amount that would have been taken in cash and how a lease was evaluated as to
whether royalty in kind were taken.
Marginal property production incentives (Sec. 343). The Secretary of
the Interior has the authority to reduce or terminate royalties for independent
producers under certain conditions. The Secretary is authorized to prescribe different
standards for marginal properties in lieu of those in this section.
Incentives for Natural Gas Production from Deep Wells in the
Shallow Waters of the Gulf of Mexico (Sec. 344). Royalty reductions are
provided for shallow water production at certain depths not later than180 days after
enactment. An “ultra-deep” well and “sidetrack” well are defined in this section.
Royalty Relief for Deep Water Production (Sec. 345). Royalty
reductions are provided for deepwater areas at fixed production levels at certain
Alaska Offshore Royalty Suspension (Sec. 346). Planning areas in
offshore Alaska are included under section 8(a)(3)(B) of the Outer Continental Shelf
Lands Act (OCSLA, 43 U.S.C. 1337(a)(3)(B)). At the Secretary’s discretion, leases
in this area are eligible for royalty relief in an effort to promote development and
Oil and Gas Leasing in the National Petroleum Reserve in Alaska
(Sec. 347). These provisions direct the Department of the Interior (DOI) to begin
“an expeditious program” for competitive leasing in the National Petroleum Reserve-
Alaska (NPR-A). Leases will be initially for 10 years; leases will be lost if, after 30
years, there has been no oil or gas production on the lease site.
North Slope Science Initiative (Sec. 348). The Secretary of the Interior
shall establish a long-term initiative to coordinate collection of ecosystem data on
Alaska’s North Slope. A technical advisory panel shall the established, and the
Secretary shall publish annual reports on the initiative beginning three years after
Orphaned, Abandoned, or Idled Wells on Federal Land (Sec. 349).
Within a year after enactment, the Secretary shall establish a technical assistance
program to help states remediate and close abandoned or idled wells. Technical and
financial assistance will be made available over a 10-year period to quantify and
mitigate environmental dangers. A program will be established for reimbursing the
private sector with credits against federal royalties for reclaiming, remediating, and
closing orphaned wells.
Combined Hydrocarbon Leasing (Sec. 350). The Mineral Leasing Act
(30 U.S.C. 181 et seq.) is amended to allow separate leases for tar sands and for oil
and gas in the same area. Tar sands will be leased under the same system as for oil
and gas and require a minimum acceptable bid of $2 per acre.
Preservation of Geological and Geophysical Data (Sec. 351). The
Secretary of the Interior shall establish a program to preserve and archive geologic,
geophysical, and engineering data, including maps, well logs, and samples. Financial
assistance is authorized for up to 50% of the costs incurred by state agencies that
provide archiving facilities and conduct studies under this program.
Oil and Gas Lease Acreage Limitations (Sec. 352). Lease acreage
limits are altered so that additional federal lands would not fall under the Mineral
Leasing Act’s single-state ownership limitations.
Gas Hydrate Production Incentive (Sec. 353). Royalties are suspended
for the first 30 billion cubic feet of natural gas produced from gas hydrate resources
per lease, in addition to any other applicable royalty relief.
Enhanced Oil and Natural Gas Production Through Carbon Dioxide
Injection (Sec. 354). Royalty relief will be available for the purposes of enhancing
oil and natural gas recovery from specified leases. DOE shall establish a carbon
dioxide sequestration demonstration program that injects carbon dioxide to enhance
recovery of oil and gas.
Assessment of Dependence of State of Hawaii on Oil (Sec. 355).
The Secretary of Energy shall study the economic implications of Hawaii’s
dependence on oil and submit a report to Congress within 300 days of enactment.
The study must evaluate the vulnerability of Hawaii to oil disruptions, and assess,
island-by-island, the technical and economic feasibility of displacing oil consumption
with other sources of energy, including renewables, liquefied natural gas, and
Denali Commission (Sec. 356). Funding is authorized for the Denali
Commission to carry out energy programs in Alaska, including development of
alternative energy, construction of electricity transmission infrastructure, replacement
and cleanup of fuel tanks, and coal gasification.
Comprehensive Inventory of OCS Oil and Natural Gas Resources
(Sec. 357). The Secretary shall conduct an inventory and analysis including 3-D
seismic technology but not drilling of oil and natural gas beneath all water of the
United States outer continental shelf (OCS). Also, the Secretary must issue a report
to Congress within six months of enactment that includes a discussion of restrictions,
impediments, and recommendations.
Background. OCSLA currently provides a mechanism for the Secretary of
the Interior to reduce or eliminate royalty or net profit share established in leases for
oil and gas production in Gulf of Mexico planning areas. According to the Minerals
Management Service (MMS), the Deep Water Royalty Relief Act of 1995 has led to
a significant increase of leases in the deepwater Gulf of Mexico.
Policy Context. There is strong interest among the major oil firms in this
region because of the resource potential and the improvement of deepwater
technology. U.S. offshore oil and gas production has become a larger component of
U.S. domestic supply as production from onshore federal leases has declined 19%
over the past 10 years. Opponents of continued royalty relief contend that deepwater
technology has advanced enough to ensure the economic viability of deepwater
reserves, thus there is no need for further royalty relief. Continued royalty relief has
also faced criticism during a period of record high oil prices and oil industry profits.
The comprehensive inventory of the OCS is designed to provide an updated and
accurate assessment of oil and gas resources, with particular interest in highlighting
resources in areas now off-limits to exploration and development. Some opponents
have argued that the inventory is a first step in a larger effort to open more of the
OCS for exploration and development.
Subtitle F — Access to Federal Lands
Summary of Provisions. These provisions address concerns over delays in
the permitting process for oil and gas development on federal lands after leases are
granted. Some lease stipulations are considered by the Administration to be
impediments to domestic oil and gas development. However, concerns have also
been raised that faster permitting could bypass important environmental protections.
Federal Onshore Oil and Gas Leasing and Permitting Practices
(Sec. 361). The Department of the Interior along with the Forest Service shall
review current onshore oil and gas leasing and permitting practices and report on
actions taken to improve the program.
Management of Federal Oil and Gas Leasing Programs (Sec. 362).
The Secretaries of Agriculture and of the Interior are required to ensure expeditious
compliance with applicable environmental and cultural resource laws. “Best
management practices” to ensure timely action on oil and gas leases and drilling
permits must be implemented. Funds would be authorized for FY2006-FY2010.
Consultation Regarding Oil and Gas Leasing on Public Land (Sec.
363). The Secretary of the Interior and the Secretary of Agriculture will enter into
a memorandum of understanding to ensure timely processing of oil and gas lease
applications, elimination of duplication of effort, and establishment of joint data
retrieval and mapping systems.
Estimates of Oil and Gas Resources Underlying Onshore Federal
Land (Sec. 364). The U.S. Geological Survey is required to estimate onshore oil
and gas resources and identify impediments and restrictions that might delay permits.
The Department of Energy is required to make regular assessments of economic
Pilot Project to Improve Federal Permit Coordination (Sec. 365). A
federal permit streamlining pilot project will be established to demonstrate energy
development on federal land in accordance with the multiple-use mandate; Wyoming,
Montana, Colorado, Utah, and New Mexico may be asked to participate. A Bureau
of Land Management Permit Processing Improvement Fund is established. Half of
rental revenue will be deposited into the Fund and made available to the pilot project
for FY2006-FY2015 without further appropriation.
Deadline for Consideration for Applications for Permits (Sec. 366).
The Secretary of the Interior will have 10 days after receiving an application for a
permit to drill (APD) to notify the applicant whether the APD was complete. The
Secretary will have 30 days after a complete APD was submitted to issue or defer a
permit with correcting measures. If deferred, the applicant would have a two-year
window to complete the application, as specified by the Secretary. If the applicant
met the requirements within that period, then the Secretary must issue a permit within
10 days. The Secretary shall deny the permit if the criteria were not met within the
Fair Market Value Determinations for Linear Rights-of-way Across
Public Lands and National Forests (Sec. 367). The Secretaries of the Interior
and Agriculture will annually revise and update rental fees for land encumbered by
linear rights-of-way to reflect fair market value.
Energy Right-of-Way Corridors on Federal Land (Sec. 368). Not later
than two years after enactment, the Secretaries of the Interior and Agriculture, in
consultation with the Secretaries of Defense, Commerce, and Energy and FERC, will
submit to Congress a report addressing the location of existing rights-of-way on
federal land for oil and gas pipelines and electric transmission and distribution
Oil Shale, Tar Sands, and Other Strategic Unconventional Fuels
(Sec. 369). The Secretary of the Interior will develop an oil shale and tar sands
leasing program as soon as practicable and publish a final regulation to implement
the program by December 31, 2006. A task force is set up to coordinate and
accelerate commercial development of strategic unconventional fuels. An Office of
Petroleum Reserves will be established to coordinate federal development of strategic
fuels. The Secretary shall carry out an assessment of U.S. oil shale and oil sands. The
Department of Defense is authorized to procure unconventional fuels to meet its fuel
needs. The leasing program will be for conducting research and development
activities related to the production of oil shale and oil sands. A programmatic
environmental impact statement will be prepared.
Finger Lakes Withdrawal (Sec. 370). All federal land within the boundary
of Finger Lakes National Forest, New York, is withdrawn from potential energy
development under the public land laws.
Reinstatement of Leases (Sec. 371). This section establishes conditions
for reinstating an oil and gas lease if it was terminated for nonpayment of rental fees
between September 1, 2001, and June 30, 2004.
Consultation Regarding Energy Rights-of-Way on Public Land (Sec.
372). Within six months after enactment, the Secretaries of the Interior and of
Agriculture will be required to enter into an MOU to coordinate environmental
compliance and processing of rights-of-way applications.
Sense of Congress Regarding Development of Minerals Under
Padre Island National Seashore (Sec. 373). In recognition of the split estate
on Padre Island National Seashore, it is the sense of Congress that the federal
government owns the surface rights while the mineral rights are held privately and
also by the state of Texas.
Livingston Parish Mineral Rights Transfer (Sec. 374). Section 102 of
P.L. 102-562 is amended by striking the “Conveyance of Lands” provision, which
maintains the reservation of mineral rights held by the United States in specific areas
of Livingston Parish, Louisiana.
Background. The federal oil and gas leasing program is governed by the
Mineral Leasing Act of 1920, as amended (30 U.S.C. 181 et. Seq.). Bureau of Land
Management (BLM) procedures for an application for a permit to drill (APD) are
contained in 43 CFR 3162.3-1. The Bush Administration has taken some action to
reduce the time needed to consider APDs, including processing and conducting
environmental analyses on multiple permit applications with similar characteristics,
implementing geographic area development planning for oil and gas fields or areas
within a field, and allowing for block surveys of cultural resources.
Subtitle G — Miscellaneous
Deadline for Decision on Appeals of Consistency Determination
Under the Coastal Zone Management Act of 1972 (Sec. 381). These
provisions establish three deadlines for the appeals process by amending section 319
of the Coastal Zone Management Act (CZMA). They will limit the overall length of
this appeals process to a total of 270 days from the date when an appeal is filed (with
options that can extend the process for up to an additional 75 days). The first
deadline is for the Secretary of Commerce to publish an initial notice of an appeal in
the Federal Register within 30 days of when it is filed. The second deadline is that
the administrative record is closed after 160 days from the date of that publication.
During that time period, the Secretary can receive filings related to the appeal. The
Secretary has the discretion to extend this period for up to 60 days under certain
circumstances. The final deadline gives the Secretary up to 60 days to issue a
decision after the administrative record had been closed, and gives the Secretary the
option of extending that time span for up to 15 additional days. There are no
grandfather provisions for determinations that are currently in the appeals process.
Background. The consistency provisions in Section 307 of the CZMA allow
a state to object to any proposed federal activity that it determines to be incompatible
with its federally approved and state-administered coastal zone management plan.
Since the first state plan was approved in the mid-1970s, there has been considerable
friction between states and federal agencies over the reach of the consistency
provisions. States have sought broader application to have a stronger role in
decisions about the largest possible array of proposed federal activities, while the
federal government has sought narrower interpretations, especially relating to
offshore energy development. Determining an exact boundary separating actions on
which the state is to have a primary role from actions on which the state does not
have such powers has been a subject of federal litigation, including decisions by the
U.S. Supreme Court (notably Secretary of the Interior v. California, 464 U.S. 312
(1984)), in which the court determined that the sale of oil and gas leases on the outer
continental shelf (OCS) was not an act affecting the coastal zone.
When a state and a federal agency cannot reach an agreement on a consistency
determination, the law and regulations lay out an elaborate process for resolving that
disagreement. Most disagreements are resolved through this process, but if no
agreement can be reached, the final step is an appeal to the Secretary of Commerce
to make a decision. Appeals to the Secretary have not been common. According to
citations of appeals posted on the website of the Office of Ocean and Coastal
Resource Management in the National Oceanic and Atmospheric Administration
(NOAA) (viewed May 12, 2005), 38 consistency determinations were appealed to the
Secretary between 1984 and 1999, and 19 of them involved proposed activities by oil
companies. The appeals process, like all other aspects of consistency, is currently
covered under a final rule issued by NOAA in the December 8, 2000, Federal
Register. While a proposal to modify the appeals time line with deadlines very
similar to this legislation was included in a proposed rule on federal consistency
published in the June 11, 2003, Federal Register, no final rule was issued.
Section 319 in previous law had less detail than the newly amended version. It
stated that the Secretary would either issue a final decision on the appeal or publish
a notice in the Federal Register stating why a decision could not be reached within
90 days after the record had closed. If the Secretary published a notice that a decision
had not been made, that decision had to be issued within 45 days of the date of
publication of that notice.
Policy Context. Consistency appeals have been contentious and, in some
instances, the appeals process has dragged on for long time periods. The 1996
amendments in Section 319 were meant to address those delays by establishing some
time limits. This proved unsatisfactory to some, who sought additional statutory
language to remove decisions about deadlines from the unpredictable rulemaking
process by defining the length of component steps in law, and therefore the overall
process, after an appeal to the Secretary has been filed.
The consistency provision creates an unusual relationship where states have
been granted the authority to halt most federal actions that are incompatible with state
interests. When enacted, the consistency requirement was viewed as a main incentive
for states to develop and implement coastal plans since the other incentive to
participate, federal financial grants, always has been modest. This view appears to
have some validity, as 34 of the 35 eligible states and territories are now
administering federally approved coastal management programs.
Appeals Relating to Offshore Mineral Development (Sec. 382).
Appeals of decisions under section 319 of the Coastal Zone Management Act (16
U.S.C. 1465) on natural gas pipelines and offshore energy projects will be based
exclusively on the record compiled by FERC or the relevant permitting agency.
Royalty Payments under Leases under the Outer Continental Shelf
Lands Act (Sec. 383). The lessee of a “covered lease tract” off the coast of
Louisiana will be allowed to withhold royalties due to the United States if it pays the
state of Louisiana 44 cents for every dollar of the federal royalty withheld. This
royalty relief will end when certain drainage claims are satisfied.
Coastal Impact Assistance Program (Sec. 384). This section amends
Section 31 of the OCSLA (43 U.S.C. 1356a). The Secretary shall disburse to
producing states and political subdivisions $250 million annually during FY2007-
FY2010. Allocations for each producing state and political subdivision as well as
authorized uses will be established.
Background. This is the most recent of repeated efforts to allocate a portion
of federal offshore oil and gas revenues to coastal states to assist them in addressing
the impacts of these activities. Recent Congresses, starting with the 105th, considered
numerous similar legislative proposals. These proposals came to be known as
CARA, or the Conservation and Reinvestment Act. In the 106th Congress, the House
passed a version of CARA on May 11, 2000 (H.R. 701). Some of these proposals
were also reflected in the Clinton Administration’s Lands Legacy Initiative proposal
in 2000, and also in a one-time $150 million appropriation provided in the FY2001
Commerce appropriations legislation (P.L. 106-553) for coastal impact assistance.
Support for the CARA proposals, which would also have funded many related
federal natural resource protection programs, grew as the deficit of the early and mid-
1990s was replaced by forecasts of a surplus, as protecting natural resources came to
be viewed as part of the effort to address sprawl, and as efforts and support to secure
federal funding for coastal resource protection and restoration efforts grew. With the
replacement of the surplus forecast with deficit forecasts and changing national
priorities since the 9/11 terrorist attacks, broad support for wide-ranging legislation
like CARA has declined, but interest has remained in returning a portion of the
money currently paid to the federal government by private companies leasing
offshore areas to those locations most affected by the offshore activity.
Policy Context. Proponents of these proposals look to the rates at which funds
are given to jurisdictions where energy development occurs within those jurisdictions
on federal lands, and seek revenues that will help coastal states respond to adverse
onshore effects of offshore energy development. Coastal destruction has received
particular attention in Louisiana, where many square miles of wetlands are being lost
to the ocean each year.
Study of Availability of Skilled Workers (Sec. 385). The National
Academy of Sciences (NAS) shall study the availability of skilled workers to meet
U.S. energy and mineral security requirements.
Great Lakes Oil and Gas Drilling Ban (Sec. 386). No federal or state
permit or lease shall be issued for new oil and gas slant, directional, or offshore
drilling in or under one or more of the Great Lakes.
Federal Coalbed Methane Regulation (Sec. 387). States on the list of
“affected states” under section 1339(b) of the Energy Policy Act of 1992 (42 U.S.C.
13368(b)) will be removed if they took specified actions within three years after
enactment of the Energy Policy Act of 2005 or had previously taken such action. The
“affected states” are West Virginia, Pennsylvania, Kentucky, Ohio, Tennessee,
Indiana, and Illinois. These states are on the list as a result of coalbed methane
(CBM) ownership disputes, impediments to development, lack of a regulatory
framework to encourage CBM development in the state, and lack of extensive
development of CBM. A state may be removed from the list through a petitioning
process initiated by the governor of that state.
Alternate Energy-Related Uses of the Outer Continental Shelf (Sec.
388). The Secretary of the Interior is authorized to grant rights-of-way or easements
on the OCS for energy-related activity on a competitive or noncompetitive basis and
to charge fees for such access. A surety bond or other financial guarantee is required.
Further, this provision amends the Outer Continental Shelf Lands Act to provide
authority to the Secretary of the Interior to grant leases, easements, or rights-of-way
for energy and related purposes on the OCS. This provision does not allow the grant
of easements or rights-of-way for activities that support the exploration,
development, or production of oil and natural gas in areas where oil and gas
preleasing, leasing, and related activities are prohibited by a congressional
moratorium or a withdrawal pursuant to section 12 of the Outer Continental Shelf
Lands Act. The authority does not apply to any area within the exterior boundaries
of any unit of the National Park System, National Wildlife Refuge System, National
Marine Sanctuary System, or any National Monument. The provision requires the
Secretary to undertake a coordinated OCS mapping initiative to assist in
decisionmaking relating to the siting of facilities under this provision.
Oil Spill Recovery Institute (Sec. 389). The authorization for the Oil Spill
Recovery Institute is extended from 2012 to one year after oil exploration and
production ceases in Alaska.
NEPA Review (Sec. 390). Drilling on a previously used well site and certain
other activities are not subject to National Environmental Policy Act (NEPA) review
if the activities are conducted for oil and gas exploration or development under the
Mineral Leasing Act.
Subtitle H — Refinery Revitalization
Summary of Provisions. Congress finds that U.S. capacity to refine
gasoline and other fuels falls short of the nation’s demand for petroleum products,
and that the shortfall of refining capability is growing, leading to greater dependence
on supplies from foreign refineries. As a remedy to potential obstacles to expanding
refinery capacity, federal-state regulatory coordination is required, and EPA is to
provide states with technical and financial assistance on issuing permits under the
Clean Air Act.
Findings and Definitions (Sec. 391). It is found that, in addition to a
current shortfall in the capacity of domestic refineries to meet the demand for fuels
and petrochemical feedstocks, new demands will be placed on these facilities to
produce cleaner fuels. The current need for expanded capacity at existing refineries,
as well as future needs for more capacity and additional, new facilities, would be
facilitated by better coordination of state and federal environmental reviews.
Federal-State Regulatory Coordination and Assistance (Sec. 392).
At the request of the governor of any state, EPA may enter into a cooperative refinery
permitting agreement, identifying the steps needed for expeditiously obtaining
required federal and state environmental permits. In doing so, EPA is authorized to
accept consolidated applications for all EPA permits. EPA is further authorized to
enter into a memorandum of agreement with other federal and state agencies to
coordinate the application process, such that the various components are considered
In addition, EPA is authorized to provide financial assistance to state
governments for the hiring of technical staff having the expertise needed to deal with
processing the permits. EPA is authorized to use its own staff to provide technical
assistance in dealing with refinery permit applications.
Title IV — Coal
Subtitle A — Clean Coal Power Initiative
Summary of Provisions. The Clean Coal Power Initiative (CCPI) is in its
fourth year of funding under a 10-year, $2 billion program outlined by the Bush
Administration. The program supports cost-shared projects with the private sector
to demonstrate new technologies that could boost the efficiency and reduce emissions
from coal-fired power plants.
Authorizations of Appropriations (Sec. 401). Funding for CCPI is
authorized for $200 million for each year from FY2006-FY2014.
Project Criteria (Sec. 402). Technical criteria are established for coal-based
gasification and other projects. 70% of all funding shall be for coal-based gasification
technologies. The federal share of financing for each clean coal project will not
Report (Sec. 403). A report on the projects’ status and technical milestones
will be submitted after the first year and every two years, through 2014, by the
Secretary of Energy to various congressional committees.
Clean Coal Centers of Excellence (Sec. 404). The program includes
grants to universities to establish Centers of Excellence for energy systems of the
Background. CCPI does not currently have a specific authorization, although
it has been funded through the annual Interior and Related Agencies Appropriations
bill and, since FY2006, the Energy and Water Development Appropriations bill. The
program supersedes the Clean Coal Technology Program, which has completed most
of its projects and has been subject to rescissions and deferrals since the mid-1990s.
Policy Context. A key ingredient of President Bush’s May 2001 National
Energy Policy is to bolster U.S. energy supply. One of its goals is to use coal more
efficiently, as coal is an abundant national resource. The Administration contends
that new technologies could cost-effectively reduce emissions from coal-fired power
plants and overcome barriers to expanded coal use.
Subtitle B — Clean Power Projects
Integrated Coal/Renewable Energy System (Sec. 411). The Secretary
of Energy shall provide loan guarantees for an integrated gasification combined cycle
(IGCC) facility located in the Upper Great Plains, of at least 200 MW, that would be
combined with renewable energy sources, sequester carbon dioxide emissions, and
be a source of hydrogen for near-site fuel cell demonstrations. The federal share will
not exceed 50%.
Loan to Place Alaska Clean Coal Technology Facility in Service
(Sec. 412). The Secretary of Energy is authorized to provide a loan not greater than
$80 million to an experimental clean coal power plant in Healy, Alaska.
Western Integrated Coal Gasification Demonstration Project (Sec.
413). The Secretary of Energy shall demonstrate the use of western coal to fuel an
IGCC plant located in a western state at an altitude of more than 4,000 feet above sea
Coal Gasification (Sec. 414). Loan guarantees are authorized for an IGCC
power plant of at least 400MW in a deregulated market and receiving no ratepayer
Petroleum Coke Gasification (Sec. 415). Loan guarantees will be
available for at least five petro-coke gasification polygeneration projects, involving
co-production of electricity and fuels.
Electron Scrubbing Demonstration (Sec. 416). The Secretary of Energy
is directed to use $5 million of appropriated funds to begin a project managed by the
DOE Chicago Operations Office to demonstrate high-energy electron scrubbing
technology for high-sulfur coal emissions.
Department of Energy Transportation Fuels from Illinois Basin Coal
(Sec. 417). A program shall be established to evaluate the commercial and
technical viability of producing Fischer-Tropsch transportation fuels from Illinois
basin coal. A gasification test center shall be constructed, and $85 million is
authorized for years FY2006-FY2010.
Subtitle C — Coal and Related Programs
Amendment of the Energy Policy Act of 1992 (Sec. 421). The
Secretary of Energy shall carry out a Clean Air Coal Program to provide financial
assistance to coal-based power plants that would be less polluting or more efficient
than existing plants.
Subtitle D — Federal Coal Leases
Summary of Provisions. This subtitle modifies federal coal leasing
procedures to encourage greater coal production on federal lands. Issues raised by
these provisions include their impact on regional competition and returns to the U.S.
Short Title (Sec. 431). This subtitle may be cited as the “Coal Leasing
Amendments Act of 2005.”
Repeal of the 160 Acre Limitation for Coal Leases (Sec. 432). This
section repeals the 160 acre limitation on coal lease modifications. The total area
added to an existing coal lease through a modification shall not exceed 960 acres or
add acreage larger than the original lease.
Approval of Logical Mining Units (Sec. 433). Criteria are established for
extending the mine-out period of a coal lease beyond 40 years.
Payment of Advanced Royalties under Coal Leases (Sec. 434). The
Secretary of the Interior may, upon payment of an advance royalty, suspend a coal
lessee’s requirement for continuous operation. Advance royalties will be based on the
average price of coal sold on the spot market from the same region, and the aggregate
number of years advance royalties can be accepted in lieu of production will not
Elimination of Deadline for Submission of Coal Lease Operation
and Reclamation Plan (Sec. 435). The previous three-year deadline for
submission of a coal lease operation and reclamation plan is eliminated.
Amendment Relating to Financial Assurances with Respect to
Bonus Bids (Sec. 436). Financial surety bonds or other financial guarantees for
bonus bids will no longer be required.
Inventory Requirement (Sec. 437). The Secretary of the Interior, in
consultation with the Secretaries of Agriculture and Energy, will be required to assess
coal on public lands, including low-sulfur coal and various impediments to
developing such resources.
Application of Amendments (Sec. 438). Amendments made under this
provision will apply to any coal lease issued before, on, or after the date of
Policy Context. Companies could stop producing coal for 20 years instead
of 10 under the previous law, possibly reducing revenues for the federal treasury.
According to some who opposed this provision, it could lead to greater speculation
among firms that can hold properties for longer periods of time without development.
The National Mining Association and the industry contended that coal production on
federal lands is structured in an inefficient way and the section will allow production
to become more efficient. This may occur by allowing coal producers to put together
more contiguous tracts.
Title V — Indian Energy
Short Title (Sec. 501). “Indian Tribal Energy Development and Self-
Determination Act of 2005.”
Office of Indian Energy Policy and Programs (Sec. 502). This amends
Title II of the Department of Energy Organization Act (42 U.S.C. 7131 et seq.) to
create the Office of Indian Energy Policy and Programs at the Department of Energy.
Indian Energy (Sec. 503). Title 26 the Energy Policy Act of 1992 (25
U.S.C. 3501) is replaced by the following new sections, which outline procedures
whereby Indian tribes would be able to develop and manage the energy resources
located on, and rights-of-way through, tribal land.
Sec. 2602. Assistance for tribal energy resource development is to be provided
through the Department of the Interior by grants and low-interest loans (such sums
as necessary authorized for FY2006-FY2016), and through DOE by grants ($20
million authorized for each of FY2006-FY2016) and loan guarantees. Federal
agencies may give preference to Indian energy when purchasing energy products and
byproducts at fair market prices.
Sec. 2603. DOI grants may be provided to tribes for the regulation,
development, and management of energy resources on Indian land. Funds may be
used for the following purposes: for the inventory and development of energy
resources, development and enforcement of tribal laws and regulations, development
of a technical infrastructure to protect the environment, and employee training for the
previous activities. No funding amount is specified for this section.
Sec. 2604. Under their own tribal energy resource agreements as approved by
DOI, Indian tribes may, without prior approval of the Secretary of the Interior, enter
into leases or business agreements for energy development and grant rights-of-way
over tribal land for pipelines or electric lines. Such sums as are necessary are
authorized for FY2006-FY2016.
Sec. 2605. The Bonneville Power Administration and Western Area Power
Administration may provide technical assistance to tribes seeking to use the high-
voltage transmission system for delivery of electric power. A lump sum of $750,000
is authorized for this section.
Sec. 2606. DOE, DOI, and the Army Corps of Engineers shall conduct a study
of the cost and feasibility of developing a demonstration project that uses wind
energy generated on tribal land and hydropower generated by the Corps on the
Missouri river to supply firming power to the Western Area Power Administration.
A lump sum of $1 million is authorized for this section.
Consultation with Indian Tribes (Sec. 504). The Secretaries of Energy
and of the Interior must involve and consult with Indian tribes in carrying out this
Four Corners Transmission Line Project and Electrification (Sec.
505). The Dine Power Authority, an enterprise of the Navajo nation, shall be
eligible to receive grants and other assistance to develop a transmission line from the
Four Corners Area to southern Nevada, including related generation facilities.
Energy Efficiency in Federally Assisted Housing (Sec. 506). This
provision amends the Native American Housing and Self-Determination Act of 1996
(25 U.S.C. 4132) to include “greater energy efficiency” as a goal.
Title VI — Nuclear Matters
Subtitle A — Price-Anderson Act Amendments
Summary of Provisions. The Price-Anderson Act, which addresses liability
for damages to the general public from nuclear incidents, is extended through 2025
for new nuclear power plants and new DOE nuclear contracts.7 The extension makes
relatively few changes in the longstanding Price-Anderson system, except that the
maximum annual accident assessment on each reactor is raised from $10 million to
$15 million and subjected for the first time to an inflation adjustment. Special
treatment is also provided for modular reactors. Renewal of Price-Anderson is
widely considered to be a prerequisite for building the new nuclear power plants that
are encouraged elsewhere in the act.
Short Title (Sec. 601). This subtitle may be cited as the “Price-Anderson
Amendments Act of 2005.”
Extension of Indemnification Authority (Sec. 602). Price-Anderson
liability coverage for new commercial reactors, DOE nuclear contracts, and non-
profit educational institutions is extended through December 31, 2025.
Maximum Assessment (Sec. 603). The total retrospective premium for
each reactor is set at the current level of $95.8 million, and the limit on per-reactor
annual payments is raised from $10 million to $15 million. The total and annual
limits are to be adjusted for inflation every five-year period after August 20, 2003.
Department of Energy Liability Limit (Sec. 604). The liability limit for
DOE contractors is set at $10 billion per incident, to be adjusted for inflation every
five years under §607. The DOE contractor liability limit previously was linked to
the total liability limit for commercial reactor accidents.
Incidents Outside the United States (Sec. 605). The liability limit and
maximum indemnification for DOE contractors for nuclear incidents outside the
United States is raised from $100 million to $500 million.
7 The Price-Anderson Act refers primarily to §170 of the Atomic Energy Act of 1954 (42
Reports (Sec. 606). The Nuclear Regulatory Commission (NRC) and DOE
must report to Congress by the end of 2021 on the need for further Price-Anderson
extensions and modifications.
Inflation Adjustment (Sec. 607). The liability limit for DOE nuclear
contractors must be adjusted for inflation every five years after July 1, 2003.
Treatment of Modular Reactors (Sec. 608). For the purpose of applying
the limits on retrospective premiums after a nuclear incident, a nuclear plant
consisting of multiple small reactors (100-300 megawatts per reactor, up to a total of
1,300 megawatts at the plant site) shall be considered a single reactor. Thus, a
modular plant consisting of four 300-megawatt reactors would have a total liability
limit of $95.8 million per accident rather than four times that amount ($382.3
Applicability (Sec. 609). None of the increased liability limits apply to
nuclear incidents taking place before the amendments were enacted.
Civil Penalties (Sec. 610). For DOE nuclear contracts signed after
enactment, this section eliminates the civil penalty exemption for nuclear safety
violations by the seven non-profit contractors listed in previous law. DOE’s
authority to automatically remit penalties imposed on all non-profit educational
institutions serving as contractors is also repealed. However, this section limits the
civil penalties against a non-profit contractor to the amount of management fees
received under that contract within a one-year period as determined by the Secretary
Background. Under Price-Anderson, the owners of commercial reactors must
assume all liability for nuclear damages awarded to the public by the court system,
and they must waive most of their legal defenses following a severe radioactive
release (“extraordinary nuclear occurrence”). To pay any such damages, each
licensed reactor must carry financial protection in the amount of the maximum
liability insurance available, which was increased by the insurance industry from
$200 million to $300 million on January 1, 2003. Any damages exceeding that
amount are to be assessed equally against all covered commercial reactors, up to
$95.8 million per reactor (most recently adjusted for inflation on August 20, 2003).
Those assessments — called “retrospective premiums” — would now be paid at an
annual rate of no more than $15 million per reactor (to be adjusted for inflation every
five years), to limit the potential financial burden on reactor owners following a
major accident. According to the Nuclear Regulatory Commission (NRC), 103
commercial reactors are currently covered by the Price-Anderson retrospective
Funding for public compensation following a major nuclear incident, therefore,
would include the $300 million in insurance coverage carried by the reactor that
suffered the incident, plus the $95.8 million in retrospective premiums from each of
the 103 currently covered reactors, totaling $10.2 billion. On top of those payments,
a 5% surcharge may also be imposed, raising the total per-reactor retrospective
premium to $100.6 million and the total potential compensation for each incident to
about $10.7 billion. Under Price-Anderson, the nuclear industry’s liability for an
incident is capped at that amount, which varies depending on the number of covered
reactors, the amount of available insurance, and an inflation adjustment that is made
every five years. Payment of any damages above that liability limit would require
congressional approval under special procedures in the act.
The Price-Anderson Act also covers contractors who operate hazardous DOE
nuclear facilities. The liability limit for DOE contractors is set by the new law at $10
billion. Price-Anderson authorizes DOE to indemnify its contractors for the entire
amount, so any damage payments for nuclear incidents at DOE facilities would
ultimately come from the U.S. Treasury. However, the law also allows DOE to fine
its contractors for safety violations, and contractor employees and directors can face
criminal penalties for “knowingly and willfully” violating nuclear safety rules.
Previously, Section 234A of the Atomic Energy Act specifically exempted seven
non-profit DOE contractors and their subcontractors and allowed DOE to
automatically remit any civil penalties imposed on non-profit educational institutions
serving as DOE contractors. The new law repeals those provisions but imposes
limits on penalties imposed on non-profit entities.
Policy Context. The Price-Anderson Act’s limits on liability were crucial in
establishing the commercial nuclear power industry in the 1950s. Supporters of the
Price-Anderson system contend that it has worked well since that time in ensuring
that nuclear accident victims would have a secure source of compensation, at little
cost to the taxpayer. However, opponents contend that Price-Anderson subsidizes
the nuclear power industry by protecting it from some or most of the financial
consequences of the worst conceivable accidents.
Although Price-Anderson coverage for new reactors lapsed at the end of 2003,
there was no immediate effect on the industry, because previously licensed reactors
continued to be covered and no new U.S. reactors are currently planned. However,
the Energy Policy Act of 2005 contains numerous incentives for construction of new
commercial nuclear power plants, and it is unlikely that any such projects would
move forward without Price-Anderson coverage. A lapse in Price-Anderson also
would have affected all subsequently signed DOE nuclear facility contracts, which
would have had to fall back on alternate indemnification authority.
Subtitle B — General Nuclear Matters
Summary of Provisions. To encourage construction of new nuclear power
plants, this subtitle authorizes payments for reactor licensing delays, clarifies when
the 40-year period for reactor operating licenses takes effect, and eliminates antitrust
reviews of reactor license applications. Exports of weapons-usable highly enriched
uranium for medical isotope production are exempted from restrictions designed to
speed conversion to low-enriched uranium. Ensuring adequate staffing at NRC is
addressed with incentives for both students and retirees to work at the agency, and
user fees that fund 90% of NRC’s costs are extended permanently.
Licenses (Sec. 621). The initial 40-year period for a commercial nuclear
reactor license would begin when NRC authorized the reactor to commence operation
after construction had been completed, rather than when the license was issued before
Nuclear Regulatory Commission Scholarship and Fellowship
Program (Sec. 622). NRC may offer scholarships and fellowships to develop
critical nuclear safety regulatory skills. To receive the assistance, a student must
agree to work at NRC after graduation for a period of between one and three times
as long as the time that the scholarship or fellowship was provided.
Cost Recovery From Government Agencies (Sec. 623). NRC is
authorized to charge cost-based fees for all services rendered to other federal
Elimination of Pension Offset for Certain Rehired Federal Retirees
(Sec. 624). When NRC has a critical need for the skills of a retired employee, NRC
may hire the retiree as a contractor and exempt him or her from the annuity
reductions that would otherwise apply.
Antitrust Review (Sec. 625). NRC no longer must submit nuclear reactor
license applications to the Attorney General for antitrust review, as previously
required by Atomic Energy Act Section 105 c.
Decommissioning (Sec. 626). NRC is explicitly authorized to issue
regulations ensuring that funds collected to decommission nuclear power plants
cannot be used for other purposes.
Limitation on Legal Fee Reimbursement (Sec. 627). Except as required
by pre-existing contracts, DOE may not reimburse its contractors for legal expenses
incurred in defending against “whistleblower” complaints that are ultimately upheld.
Decommissioning Pilot Program (Sec. 628). DOE must establish a
program to decommission and decontaminate the site of the Southwest Experimental
Fast Oxide Reactor (SEFOR) in Arkansas. Funding of $16 million is authorized.
Whistleblower Protection (Sec. 629). Previously existing whistleblower
protections for employees of nuclear power plants and other NRC licensees and
employees of DOE contractors are extended to NRC employees, employees of NRC
contractors and subcontractors, and DOE employees. An employee whose
whistleblower retaliation complaint does not receive a final decision by the Secretary
of Labor within one year can take the case to federal court.
Medical Isotope Production (Sec. 630). Highly enriched uranium (HEU)
can be exported to Canada, Belgium, France, Germany, and the Netherlands for
production of medical isotopes in nuclear reactors. Those countries are exempt from
requirements (under Section 134 of the Atomic Energy Act) that they agree to switch
to low-enriched uranium (LEU) as soon as possible and that LEU fuel for their
reactors be under active development. Instead, those countries must agree to convert
to suitable LEU fuel when it becomes available. NRC must review existing security
requirements for HEU used for medical isotope production and impose additional
requirements if necessary. The National Academy of Sciences (NAS) is to study the
potential availability and cost of medical isotopes produced without HEU. If the
Secretary of Energy certifies that U.S. medical isotope demand can be reliably and
economically met with production facilities that do not use HEU, NRC may no
longer grant the export exemptions.
Safe Disposal of Greater-Than-Class C Radioactive Waste (Sec.
631). DOE must designate an office with responsibility for providing a facility for
permanent disposal of all low-level radioactive waste with concentrations of
radionuclides that exceed the limits established by the NRC for Class C radioactive
waste. Within 180 days after enactment, DOE must give Congress a plan for
continued recovery and storage of Greater-Than-Class C radioactive sealed sources
that pose a security threat.
Prohibition on Nuclear Exports to Countries That Sponsor
Terrorism (Sec. 632). Exports of nuclear materials, equipment, and sensitive
technology are prohibited to any country identified by the Secretary of State as a
sponsor of terrorism. The prohibition does not apply to radiation monitoring
technologies and related surveillance equipment. The President can waive the export
restriction under certain conditions. The prohibition applies to exports already
approved if they have not yet taken place by the date of enactment.
Employee Benefits (Sec. 633). Subject to the availability of funds, workers
at DOE’s uranium enrichment plants at Portsmouth, Ohio, and Paducah, Kentucky,
who were eligible for certain pension and health care benefits on April 1, 2005, shall
continue such eligibility.
Demonstration Hydrogen Production at Existing Nuclear Power
Plants (Sec. 634). $100 million is authorized for two projects to demonstrate
hydrogen production at existing nuclear power plants. Before making awards for the
projects, the Secretary of Energy must determine whether such hydrogen production
would be cost-effective.
Prohibition of Assumption by United States Government of Liability
for Certain Foreign Incidents (Sec. 635). The U.S. Government may not
provide indemnification for contracts related to nuclear facilities or activities in
countries found to sponsor terrorism. The prohibition would not apply to missions
necessary for nuclear safety or nonproliferation.
Authorization of Appropriations (Sec. 636). Such sums as necessary to
carry out this subtitle are authorized to be appropriated.
Nuclear Regulatory Commission User Fees and Annual Charges
(Sec. 637). A statutory requirement that NRC recover 90% of its costs through
licensee fees — which was to expire September 20, 2005 — is made permanent.
NRC’s costs of licensing a national nuclear waste repository and activities
reimbursed by direct service fees continue to be excluded from the 90% fee recovery
requirement. This section also excludes NRC’s costs of regulating residual defense
radioactive waste (as required by 50 U.S.C. 2601 note) and most homeland security
Standby Support for Certain Nuclear Power Plant Delays (Sec. 638).
The Secretary of Energy is authorized to help pay the cost of regulatory delays at up
to six new commercial nuclear reactors, subject to funding availability. For the first
two reactors that begin construction, the DOE payments could cover all the eligible
delay-related costs, such as additional interest, up to $500 million each. For the next
four reactors, half of the eligible costs could be paid by DOE, with a payment cap of
$250 million per reactor. Delays caused by the failure of a reactor owner to comply
with laws or regulations would not be covered.
Conflicts of Interest Relating to Contracts and Other Arrangements
(Sec. 639). NRC may enter into contracts with DOE or operators of DOE facilities
despite any conflict of interest, as long as NRC determines that the conflict cannot
be mitigated and that there is adequate justification to proceed without mitigation.
Background and Policy Context. One of the Energy Policy Act’s
potentially most significant incentives for building new nuclear power plants is the
“regulatory risk insurance” in Section 638. The Administration had proposed such
risk insurance for the first four new reactors as a substitute for loan guarantees and
tax credits, contending that the risk insurance and various regulatory measures would
provide sufficient encouragement for new reactors. The enacted law includes
regulatory risk compensation for up to six new reactors, plus loan guarantees and a
production tax credit.
Concern about regulatory risk stems from the experience of some earlier nuclear
plants whose operation was held up by licensing problems after they were built. All
of today’s operating reactors were approved under a two-step licensing system in
which they were first issued a construction permit and then, after construction was
completed, an operating license was sought. Some reactors — notably the Shoreham
plant in New York and Seabrook in New Hampshire — experienced years of
litigation over their operating licenses while billions of dollars in interest costs piled
The Energy Policy Act of 1992 (P.L. 102-486) created a “one step” reactor
licensing process, in which a combined construction permit and operating license
(COL) could be issued by NRC. With a COL in hand, a utility or other electric
generating company could build a reactor and then operate the completed plant
without further licensing proceedings. However, NRC would still have to ensure that
the plant was built to its specifications. The process for making that final
determination remains uncertain, since it has never been used. Nuclear power critics
want to make sure they can raise construction issues with NRC before a plant begins
operation, but the nuclear industry wants to prevent NRC’s final approval of a
completed reactor from becoming as litigious as the old, two-step licensing system.
Uncertainty about how long it would take for a completed reactor with a COL
to be approved for operation has been seen as a potential obstacle to obtaining
financing for new nuclear plants. By “insuring” the first six reactors against
regulatory delays, the provision in the new energy act is intended to provide more
confidence to potential investors. However, the stipulation that the federal payments
will not cover the failure of a reactor owner “to take any action required by law or
regulation” could undermine that confidence, since many reactor delays in the past
resulted from disagreements over whether laws and regulations had been properly
adhered to during construction.
Section 621 addresses another area of uncertainty about the one-step licensing
process. Under the process as established in 1992 (Atomic Energy Act Section 185
b.), a reactor’s 40-year initial license period may begin when a COL is issued before
construction starts — several years before the reactor is to begin operating. Before
Section 185 was added, reactor operating licenses had been issued only after
construction was complete, at which point the 40-year license period would begin.
Section 621 of the new energy act specifies that the 40-year period begins after NRC
authorizes a reactor to operate, rather than when the COL is issued.
Substantial controversy was generated by the partial exemption in Section 630
for exports of highly enriched uranium for medical isotope production. The HEU
restrictions are intended to spur foreign cooperation with U.S. efforts to convert all
HEU reactors to LEU, but supporters of the exemption contended that the restrictions
could disrupt U.S. supplies of medical isotopes produced in foreign HEU reactors.
Nuclear nonproliferation efforts are intended to be strengthened by the export
restrictions in Section 632. This provision is intended to block implementation of a
1994 agreement under which North Korea was to receive a U.S.-designed nuclear
power plant in return for abandoning its nuclear weapons program. The agreement
has been suspended in light of North Korea’s continuing weapons activities.
Subtitle C — Next Generation Nuclear Plant Project
Summary of Provisions. DOE is authorized to build and operate a
prototype “Next Generation Nuclear Power Plant” (NGNP) at Idaho National
Laboratory. The prototype — which must produce electricity, hydrogen, or both —
is to use one of the advanced reactor concepts being developed by DOE’s ongoing
Generation IV Nuclear Energy Systems Initiative. DOE had been undecided on
proceeding with the NGNP project, but this Subtitle establishes a timetable leading
to operation of the new reactor by the end of FY2021.
Project Establishment (Sec. 641). The Secretary of Energy is required to
carry out research, development, design, construction, and operation of NGNP, based
on the Generation IV program authorized in section 942(d). NGNP must produce
electricity, hydrogen, or both.
Project Management (Sec. 642). NGNP shall be managed by DOE’s
Office of Nuclear Energy, Science, and Technology, and may be combined with the
Generation IV program. The reactor must be located at Idaho National Laboratory
(INL), which is to be the lead laboratory for the project. INL must organize an
industrial consortium to share the project’s costs in accordance with section 988.
Project Organization (Sec. 643). The project must include research,
development, and other activities and program elements leading to NGNP
construction and operation, and may draw on a wide range of U.S. and international
expertise. DOE’s Nuclear Energy Research Advisory Committee (NERAC) is to
regularly review all NGNP program plans, and all NERAC reports must be submitted
Nuclear Regulatory Commission (Sec. 644). NGNP will be subject to
NRC licensing and regulation, under a “licensing strategy” developed jointly by NRC
Project Timelines and Authorization of Appropriations (Sec. 645).
By the end of FY2011, the Secretary of Energy must select a technology for high-
temperature hydrogen production and establish the NGNP’s design parameters. DOE
is to fund a reactor design competition among as many as four teams for not more
than two years. Operation of the facility is to begin by the end of FY2021. The
Secretary can establish alternative deadlines. Appropriations of $1.25 billion are
authorized from FY2006-FY2015, and such sums as necessary from FY2016-
Background. NGNP is currently funded under DOE’s Generation IV Nuclear
Energy Systems Initiative, which is closely related to the Nuclear Hydrogen Initiative
and the Advanced Fuel Cycle Initiative. “Generation IV” refers to advanced nuclear
energy concepts, such as high-temperature reactors cooled by gas or liquid metal, that
could eventually replace today’s “Generation III” commercially available advanced
water-cooled reactors. Generation IV reactors could potentially operate more safely
and economically, and their high heat output could be harnessed to economically
separate hydrogen from water, according to proponents.
DOE had planned to award one or more contracts for a pre-conceptual design
of the NGNP prototype in FY2004, but instead has moved much more slowly on the
project, according to the Department’s FY2006 budget justification. For FY2006,
DOE proposes to conduct “further investigation of technical and economic
challenges and risks” that would “help inform a decision on whether to proceed with
a demonstration of the Next Generation Nuclear Plant.”8
The Senate Appropriations Committee has criticized the pace of the NGNP
program, contending that it “lacks sufficient focus and doesn’t support a specific
schedule to facilitate the construction of a next generation reactor at the Idaho
National Lab” (S.Rept. 109-84). The authorization language in Subtitle C is
evidently intended to address those concerns.
Policy Context. Construction of a prototype “next generation” reactor would
be a major step for DOE’s nuclear R&D program, which has been limited primarily
to conceptual and laboratory-scale research since the end of the breeder reactor
program in 1983. Even that work was mostly eliminated by the late 1990s under the
Clinton Administration. Under the George W. Bush Administration, however, the
budget and scope of the DOE nuclear energy program has expanded sharply, and the
newly consolidated and renamed Idaho National Laboratory has become the lead
laboratory for the DOE Office of Nuclear Energy, Science, and Technology.
DOE has not built a prototype reactor since the Fast Flux Test Facility in 1980,
which cost $640 million to construct and nearly $90 million per year to operate when
8 Department of Energy FY 2006 Congressional Budget Request. DOE/ME-0048, Volume
it was shut down in 1992.9 The cost of the NGNP project could be expected to be in
that magnitude, adjusted for inflation. As described above, this subtitle authorizes
$1.25 billion for research and construction through FY2015 and such sums as
necessary from then until FY2012, subject to the non-federal matching requirements
in section 988.
Supporters of Generation IV nuclear technology contend that a government-
supported prototype — the NGNP project — will be crucial for future
commercialization. After 2010, according to NERAC, “given sufficient private and
public funding commitment, a prototype plant would be ready to be constructed to
prepare the Generation IV plant design for broad market application.”10
Opponents of the Generation IV program contend that it is focusing on
economically non-viable technologies that involve separation of weapons-usable
plutonium. “This research effort will likely expand the availability of weapon-usable
materials in other countries in the near-term, result in the training and employment
of new cadres of scientist and engineers with expertise in actinide (including
plutonium) chemistry and metallurgy, but not result in the deployment of new
commercially viable nuclear power technologies,” said a dissenting member of
Subtitle D — Nuclear Security
Summary of Provisions. This subtitle includes a variety of provisions
intended to improve the security of nuclear plants and nuclear materials. The Nuclear
Regulatory Commission (NRC) is required within 18 months of enactment to revise
the “design basis threat” (DBT) that nuclear plant security forces must be able to
overcome, each nuclear plant must undergo force-on-force security evaluations at
least every three years, and there must be a federal security coordinator for each NRC
region. Other provisions require tracking of radiation sources, authorize use of
firearms by nuclear plant security forces, and require NRC consultation with the
Department of Homeland Security on the locations of proposed nuclear facilities.
NRC strongly opposed the DBT revision as redundant with actions the agency had
already carried out, but it had long sought some of the other provisions, such as the
Security Evaluations; Design Basis Threat Rulemaking (Sec.
651(a)). NRC must conduct security evaluations that include force-on-force
exercises at each nuclear plant at least once every three years. The exercises must
simulate attacks in accordance with the design basis threat (DBT), and NRC must
9 Not adjusted for inflation. U.S. Department of Energy. Project Book. DOE/CR-0100.
January 1980. p. 45. U.S. General Accounting Office. Nuclear Science: Fast Flux Test
Facility on Standby, Awaiting DOE Decision on Future Missions. GAO/RCED-92-121FS.
April 1992. p. 1.
10 Nuclear Energy Research Advisory Committee, Subcommittee on Long-Term Planning
for Nuclear Energy Research. Long-Term Nuclear Technology Research and Development
Plan Summary. June 2000
11 Cochran, Thomas B. Memorandum to the Chairman of NERAC. October 16, 2002.
mitigate any potential conflicts of interest among exercise participants, such as the
simulated adversary force. NRC within 18 months must complete a rulemaking to
revise the DBT that takes into account a wide variety of potential modes of attack
(physical, chemical, biological, etc.), the potential for large attacks by multiple teams,
potential assistance by several employees inside a facility, the effects of large
explosives and other modern weaponry, and other specific factors. NRC must assign
a federal security coordinator to each NRC region.
Backup Power for Certain Emergency Notification Systems (Sec.
651(b)). For nuclear power plants where 15 million people live within a 50-mile
radius, NRC must require backup power systems for sirens and other emergency
Higher Education and Other Provisions (Sec. 651(c)). NRC is
authorized to provide grants to institutions of higher education and enter into
partnerships to support activities related to NRC’s regulatory mission. NRC may
purchase inexpensive promotional materials for recruiting potential employees and
may pay expenses of college students who work as NRC staff assistants.
Radiation Source Protection (Sec. 651(d)). NRC must issue regulations
prohibiting the export or import of radiation sources (generally sealed radioactive
material for industrial or other uses), unless the sources will be handled securely.
Within one year after enactment, NRC must issue regulations establishing a
mandatory tracking system for radiation sources in the United States. NRC must
arrange for a National Academy of Sciences study of potential alternatives to
radiation sources, and a multi-agency task force is established to recommend
additional controls on radiation sources.
Treatment of Accelerator-Produced Material (Sec. 651(e)). The
definition of “byproduct material” under Section 11 e. of the Atomic Energy Act is
expanded to include material made radioactive by particle accelerators (in addition
to nuclear reactors), and to include discrete sources of radium 226 and similar
sources using naturally occurring radioactive material. Disposal of byproduct
material must take place in facilities licensed by NRC or states with NRC
agreements, or in other facilities permitted by environmental laws. Byproduct
material is not included in the management and disposal system for low-level
Fingerprinting and Criminal History Record Checks (Sec. 652). The
previous requirement that individuals be fingerprinted for criminal background
checks before receiving unescorted access to nuclear power plants (Atomic Energy
Act, Section 149) would be extended to individuals with unescorted access to any
radioactive material or property that could pose a health or security threat. Other
biometric methods could be used instead of fingerprinting.
Use of Firearms by Security Personnel (Sec. 653). NRC may authorize
the use of firearms by security personnel at nuclear power plants and other facilities
it licenses or regulates. Federal law previously authorized NRC employees and
contractors to use firearms, but not employees or contractors of nuclear licensees
(Atomic Energy Act, Section 161 k.). This provision counters some state laws that
preclude private guard forces from utilizing some weapons.
Unauthorized Introduction of Dangerous Weapons (Sec. 654).
Controls on the entry of dangerous weapons or materials into NRC facilities under
previous law (Atomic Energy Act, Section 229a) are extended to commercial nuclear
power plants and other NRC-regulated facilities.
Sabotage of Nuclear Facilities, Fuel, or Designated Material (Sec.
655). Previous penalties for sabotage of licensed nuclear facilities or materials
(Atomic Energy Act, Section 236 a.) would be extended to cover facilities under
construction, as well as those that are “certified” by NRC (rather than “licensed”),
emergency warning centers, and other radioactive materials and property designated
Secure Transfer of Nuclear Materials (Sec. 656). Radioactive materials
transferred or received in the United States pursuant to an import or export license
must be accompanied by a shipping manifest, and each person receiving such
materials must undergo a security background check.
Department of Homeland Security Consultation (Sec. 657). Before
licensing a nuclear reactor, NRC must consult with the Department of Homeland
Security about the vulnerability of the reactor’s proposed location to terrorist attack.
Background and Policy Context. Most of the provisions in this subtitle
have been the subject of considerable discussion since the terrorist attacks of
September 11, 2001. Particularly contentious has been the debate over the design
basis threat, which prescribes the severity of attacks that nuclear security forces must
be prepared to defeat. After a “top-to-bottom” review of its security requirements
following 9/11, NRC issued a regulatory order in April 2003 strengthening the DBT
to “represent the largest reasonable threat against which a regulated private guard
force should be expected to defend under existing law,” according to NRC’s
announcement. The details of the revised DBT, which took effect October 29, 2004,
were not released to the public.
Critics contend that the revised DBT remains inadequate in light of the separate,
coordinated terrorist attacks that were demonstrated on 9/11. Criticism of the DBT
is reflected in the factors that Section 651 requires NRC to consider in making
further revisions — such as potential attacks by multiple teams and suicide attacks.
Since late 2004, NRC has required each nuclear power plant to conduct
monitored force-on-force exercises once every three years. NRC required the nuclear
industry to develop and train a “composite adversary force,” comprising security
officers from many plants, to simulate terrorist attacks in the force-on-force
exercises. However, in September 2004 testimony, the Government Accountability
Office (GAO) criticized the industry’s selection of a security company that guards
about half of U.S. nuclear plants, Wackenhut, to also provide the adversary force.
In addition to raising “questions about the force’s independence,” GAO noted that
Wackenhut had been accused of cheating on previous force-on-force exercises by the
Department of Energy.12
Section 651 imposes a statutory requirement that each nuclear plant undergo
force-on-force exercises at least once every three years (as NRC previously required),
that the exercises simulate the threats in the DBT, and — reflecting the Wackenhut
issue — that NRC “mitigate any potential conflict of interest that could influence the
results of a force-on-force exercise, as the Commission determines to be necessary
NRC strongly opposed the act’s requirements for DBT revisions and force-on-
force exercises on the grounds that NRC’s security reviews following 9/11 had
already produced the necessary improvements. Shortly before the act was passed,
NRC contended that the legislation “could raise the question whether studies and
evaluations that the NRC has already completed will have to be repeated, wasting
scarce resources that would be used better elsewhere,” and that the statutory
provisions “do not promise greater security than the NRC is already achieving
through its activities.”13 NRC also called unnecessary the new requirements for
transferring nuclear materials (Section 656) and the requirement for consultation with
the Department of Homeland Security about nuclear plant siting (Section 657).
However, NRC supported a number of the act’s provisions. Adding accelerator-
produced radioactive material and radium 225 sources to the definition of “byproduct
material” (Section 651(e)) brings them under NRC regulation, eliminating situations
in which an isotope would be regulated by NRC if it was produced in a reactor but
not if it was produced in a particle accelerator. NRC has long requested the
provisions on use of firearms (Section 652) and sabotage (Section 655), among
others. “These provisions will make an industry that is already well protected even
safer from the threats of terrorism and radiological sabotage,” said NRC Chairman
Nils J. Diaz after the bill was signed.14
The act’s requirements for protecting radioactive sources (Section 651(d))
address concerns about the potential for such sources to be used in “dirty bombs,”
which would disperse radioactivity with conventional explosives. The tracking
system required by Section 651(d) appears similar to a tracking proposal announced
by NRC July 20, 2005.15
12 Government Accountability Office. Nuclear Regulatory Commission: Preliminary
Observations on Efforts to Improve Security at Nuclear Power Plants. Statement of Jim
Wells, Director, Natural Resources and Environment, Government Accountability Office,
to the Subcommittee on National Security, Emerging Threats, and International Relations,
House Committee on Government Reform. September 14, 2004. p. 14.
13 NRC Comments on H.R. 6 as Passed by the Senate and the House of Representatives.
Enclosure to letter from NRC Chairman Nils J. Diaz to multiple congressional committees.
July 13, 2005
14 “Energy Bill Provides for Enhanced Security at Commercial Nuclear Facilities.” NRC
News Release No. 05-109. August 8, 2005.
15 “NRC Proposes National Tracking System for Certain Radioactive Materials.” NRC News
Title VII — Vehicles and Fuels
Subtitle A — Existing Programs
Summary of Provisions. The sections of this subtitle refer to alternative
fuel and vehicle purchase requirements under the Energy Policy and Conservation
Act (EPCA) (P.L. 94-163) and the Energy Policy Act of 1992 (EPAct, P.L. 102-486).
Various requirements apply to federal vehicle fleets, as well as state fleets and fleets
operated by alternative fuel providers.
Use of Alternative Fuels by Dual Fueled Vehicles (Sec. 701). Section
400AA of EPCA is amended to require that all federal agencies operate dual-fueled
vehicles on alternative fuels or petition the Secretary of Energy for a waiver from the
requirement. Under previous law, agencies were not required to file a petition to be
exempted from the requirement.
Incremental Cost Allocation (Sec. 702). Previously, section 303(c) of
EPAct allowed federal agencies to allocate the incremental cost of required
alternative fuel vehicles across the whole vehicle fleet. The new law requires
agencies to do so.
Alternative Compliance and Flexibility (Sec. 703). This section requires
the Secretary of Energy to allocate vehicle purchase credits for: the acquisition of
hybrid vehicles; the installation of alternative fuel refueling infrastructure; or other
actions that will reduce petroleum consumption.
Review of Energy Policy Act of 1992 Programs (Sec. 704). The
Secretary of Energy is required to conduct a study on the effectiveness of the
alternative fuel vehicle programs under EPAct. Specifically, the Secretary is required
to assess the effects on vehicle technology, availability, and cost.
Report Concerning Compliance with Alternative Fuel Vehicle
Purchasing Requirements (Sec. 705). Under previous law, each federal
agency was required to report annually (through 2012) to Congress on its compliance
with EPAct vehicle purchase requirements. The new law extends the requirement
Joint Flexible Fuel/Hybrid Vehicle Commercialization Initiative (Sec.
706). The Secretary of Energy is required to establish a grant program for applied
research on flexible fuel hybrid vehicles. A total of $40 million is authorized
between FY2006 and FY2009.
Emergency Exemption (Sec. 707). Section 301 of EPAct is amended to
add vehicles used for the emergency repair of electricity infrastructure to the
Release No. 05-103. July 20, 2005.
definition of “emergency vehicles.” Emergency vehicles are exempted from EPAct
alternative fuel vehicle purchase requirements.
Subtitle B — Hybrid Vehicles, Advanced Vehicles,
and Fuel Cell Buses
Summary of Provisions. Various programs are established to promote the
development of hybrid and advanced technology vehicles, including transit buses.
Hybrid Vehicles (Sec. 711). The Secretary of Energy is required to
accelerate research on technologies for hybrid vehicles. No new funds are
Efficient Hybrid and Advanced Diesel Vehicles (Sec. 712). The EPA
Administrator is required to establish a program to encourage the domestic
production and sales of efficient hybrid and advanced diesel vehicles. The program
must include grants to domestic vehicle manufacturers to encourage production and
provide consumer purchase incentives. Such sums as necessary are authorized
between FY2006 and FY2015.
Advanced Vehicles (Secs. 721-723). The Secretary of Energy is required
to provide grants to state governments, local governments, and metropolitan transit
authorities for the purchase of alternative fuel, hybrid, and fuel cell vehicles, and the
infrastructure to support them. The program will be administered through the Clean
Cities Program. Grants are capped at $15 million per applicant (Sec. 721). The
Secretary is required to submit reports to Congress identifying grant recipients and
evaluating the program’s effectiveness (Sec. 722). $200 million total is authorized
for the grant program (Sec. 723).
Fuel Cell Transit Bus Demonstration (Sec. 731). The Secretary of
Energy is required to establish a program to demonstrate up to 25 fuel cell transit
buses in various localities. $10 million annually is authorized for FY2006 through
Subtitle C — Clean School Buses
Summary of Provisions. New programs are established to provide grants
for the deployment of alternative fuel and advanced diesel engines for school buses
and commercial vehicles, as well as retrofit technologies for existing vehicles.
Clean School Bus Program (Sec. 741). A pilot program administered by
the Environmental Protection Agency is established to provide grants to local
governments and contractors that provide school bus service for public school
systems. Grants are provided to aid in the purchase of alternative fuel and advanced
diesel buses, diesel engine retrofits, and the infrastructure necessary to support them.
$55 million is authorized in each of FY2006 and FY2007, and such sums as are
necessary in FY2008 through FY2010.
Diesel Truck Retrofit and Fleet Modernization Program (Sec. 742).
The EPA Administrator is required to establish a program to provide grants
(administered by state or local governments) to modernize cargo truck operations.
Grants will be used to retrofit pre-1999 vehicles with advanced emissions control
devices. A total of $100 million is authorized between FY2006 and FY2008, and
such sums as are necessary in FY2009 and FY2010.
Fuel Cell School Buses (Sec. 743). A pilot program is to be established
to provide grants for the development and demonstration of fuel cell school buses.
A total of $25 million is authorized for FY2006 through FY2009.
Subtitle D — Miscellaneous
Railroad Efficiency (Sec. 751). A public-private research partnership is
established for the development and demonstration of locomotive engines that
increase fuel economy, reduce emissions, and lower costs. A total of $65 million is
authorized for FY2006 through FY2008.
Mobile Emission Reductions Trading and Crediting (Sec. 752). The
EPA Administrator must submit a report to Congress within 180 days of enactment
about the use of emissions reduction credits received from mobile sources to provide
the necessary emissions offsets for new stationary sources. The study would cover
the volumes, sources, cost, and legal basis for such emissions credit trading.
Aviation Fuel Conservation and Emissions (Sec. 753). The Federal
Aviation Administration and EPA within 60 days of enactment must initiate a joint
study of the impact of aircraft emissions on air quality in Clean Air Act
nonattainment areas, ways to promote fuel conservation measures and reduce
emissions, and opportunities to reduce air traffic inefficiencies that increase fuel burn
and emissions, and report the results to Congress within one year of initiating the
Diesel Fueled Vehicles (Sec. 754). The Secretary of Energy is required
to accelerate research on emissions control technologies for diesel motor vehicles.
The objective of the research is to enable diesel technology to meet Tier 2 emission
standards not later than 2010. (These standards will apply to cars and light trucks
after the 2003 model year.) No new funding is authorized.
Conserve by Bicycling Program (Sec. 755). The Department of
Transportation (DOT) is directed to conduct up to 10 pilot bicycling projects to
conserve energy. A minimum of 20% of each project’s costs would have to be
provided by non-federal sources. Also, DOT must engage the National Academy of
Sciences to conduct a research study on the feasibility of converting motor vehicle
trips to bicycle trips.
Reduction of Engine Idling (Sec. 756). EPA is required to study whether
existing models of air emissions accurately reflect emissions from idling vehicles.
Further, EPA is required to establish a program to support the deployment of
idle-reduction technologies. A total of $95 million is authorized for FY2006 through
FY2008 for the deployment of heavy truck technologies. A total of $35 million is
authorized for FY2006 through FY2008 for the deployment of locomotive
Biodiesel Engine Testing Program (Sec. 757). The Secretary of Energy
is required to study the effects of biodiesel and biodiesel blends on current and future
emissions control technologies. $5 million is authorized annually for FY2006
Ultra-Efficient Engine Technology for Aircraft (Sec. 758). The
Secretary of Energy, in cooperation with the National Aeronautics and Space
Administration, is required to develop new engine technology for aircraft with a goal
of a 10% increase in fuel efficiency and a 70% decrease in nitrogen oxide emissions
during takeoff and landing. $50 million is authorized annually for FY2006 through
Fuel Economy Incentive Requirements (Sec. 759). To receive federal
fuel economy incentives, dual-fueled vehicles must have a label on the fuel
compartment stating that the vehicle can be operated on both conventional and
alternative fuels. This requirement is effective for vehicles manufactured on or after
September 1, 2006.
Subtitle E — Automobile Efficiency
Summary of Provisions. This subtitle authorizes appropriations to the
National Highway Traffic Safety Administration (NHTSA) to conduct fuel economy
analysis and rulemaking through FY2010. It also retains the corporate average fuel
economy (CAFÉ) credit for dual-fueled vehicles, requires study of the feasibility and
consequences of achieving a significant reduction in vehicle fuel consumption, and
requires a revision to the adjustment applied against tested fuel economy ratings so
that in-use fuel economy estimates posted to new cars will more closely approximate
Authorization of Appropriations for Implementation and
Enforcement of Fuel Economy Standards (Sec. 771). The bill authorizes
$3.5 million annually during FY2006-FY2010 for the National Highway Traffic
Safety Administration (NHTSA) to carry out fuel economy rulemakings.
Extension of Maximum Fuel Economy Increase for Alternative
Fueled Vehicles (Sec. 772). The legislation extends corporate average fuel
economy (CAFE) credits that accrue to manufacturers of dual-fueled vehicles. The
cap to the credit of 1.2 miles per gallon (mpg) earned by any individual manufacturer
is extended to model year (MY) 2010. It was otherwise scheduled to drop to a cap
of 0.9 mpg beginning in MY2005. The bill postpones institution of the 0.9 cap until
MY2011 and authorizes it through MY2014.
Study of Feasibility and Effects of Reducing Use of Fuel for
Automobiles (Sec. 773). NHTSA must study the feasibility and effects of
reducing automobile fuel consumption “a significant percentage” by MY2014.
Update Testing Procedures (Sec. 774). The legislation requires a
revision to the adjustment made to as-tested fuel economy levels so that the in-use
fuel economy estimates posted to new vehicles will be more in conformance with the
fuel economy that purchasers of new vehicles experience in actual use. Differences
between the test cycle from characteristic use of automobiles with respect to use of
air conditioning, currently higher speed limits, and faster acceleration rates are
directed to be elements in developing a more substantial adjustment factor.
Background. The corporate average fuel economy standards (CAFE) were
established in the Energy policy and Conservation Act (P.L. 94-163).
Policy Context. Language in the FY1996-FY2000 Department of
Transportation (DOT) Appropriations Acts prohibited expenditures for rulemaking
that would have made any adjustment to the CAFE standards. However, sustained
higher prices for oil and gasoline since 2002 have again focused attention on gasoline
consumption by cars and light trucks. While there have been legislative proposals
to boost CAFE, the energy law essentially encourages and leaves NHTSA free to
conduct rulemakings as provided in statute. A notice of proposed rulemaking issued
in August 2005 that would establish CAFE standards for light duty trucks based upon
vehicle size is under review.
Subtitle F — Federal and State Procurement
Summary of Provisions. Federal agencies are required to purchase fuel cell
vehicles, hydrogen energy systems, and other fuel cell systems. The Secretary of
Energy is required to defray the additional costs of such systems. The Secretary of
Energy is also permitted to promote the procurement of such systems by state
Definitions (Sec. 781). Various terms are defined, including “fuel cell,”
“stationary,” and “portable.”
Federal and State Procurement of Fuel Cell Vehicles and Hydrogen
Energy Systems (Sec. 782). In order to meet fuel savings goals established in
various executive orders, all federal agencies that use light- or heavy-duty vehicles
are required to lease or purchase fuel cell vehicles and hydrogen energy systems. The
Secretary of Energy is required to pay federal agencies the incremental cost of the
new systems. The Secretary of Energy is permitted to establish a cooperative
program with state agencies to encourage the purchase of fuel cell vehicles. A total
of $105 million is authorized between FY2006 and FY2008.
Federal Procurement of Stationary, Portable, and Micro Fuel Cells
(Sec. 783). All federal agencies that use electrical power from stationary, portable,
or microportable devices are required to lease or purchase stationary, portable, or
micro fuel cells. The Secretary of Energy is required to pay federal agencies the
incremental cost of the new systems. A total of $345 million is authorized between
FY2006 and FY2010.
Subtitle G — Diesel Emissions Reduction
Summary of Provisions. A program is established within the
Environmental Protection Agency (EPA) to provide grants and loans to retrofit
vehicles with diesel engines with new emission reduction technology. Eligible
vehicles include heavy-duty trucks, locomotives, and boats.
Definitions (Sec. 791). This defines various terms, including “certified
engine configuration,” “emerging technology,” and “verified technology.”
National Grant and Loan Programs (Sec. 792). EPA is to provide grants
and loans for retrofits of various types of engines, including buses, heavy-duty trucks,
locomotives, and marine engines.
State Grant and Loan Programs (Sec. 793). EPA must support grant and
loan programs administered by the states.
Evaluation and Report (Sec. 794). The EPA Administrator must report
to Congress evaluating the implementation of the programs.
Outreach and Incentives (Sec. 795). The EPA Administrator is required
to conduct public outreach on the benefits of eligible technologies, and develop
nonfinancial incentives for the deployment of eligible technologies.
Effect of Subtitle (Sec. 796). Nothing in the subtitle affects authorities
under the Clean Air Act.
Authorization of Appropriations (Sec. 797). $200 million is authorized
annually for FY2007 through FY2011.
Title VIII — Hydrogen
Summary of Provisions. Title VIII promotes research and development of
hydrogen and fuel cells for transportation, stationary, and micro applications. The
title authorizes $3.3 billion for FY2006-2010 for hydrogen and fuel cell R&D.
Hydrogen and Fuel Cell Program (Sec. 801). This title may be cited as
the “Spark M. Matsunaga Hydrogen Act of 2005.” The Spark M. Matsunaga
Hydrogen Research, Development, and Demonstration Act of 1990 (42 U.S.C. 12401
et seq.) authorized hydrogen and fuel cell research at the Department of Energy.
Funding levels under the earlier act were authorized through FY2001, although
research is ongoing.
Purposes (Sec. 802). Purposes for Title VIII include enabling and
promoting “comprehensive development, demonstration, and commercialization of
hydrogen and fuel cell technology in partnership with industry.”
Definitions (Sec. 803). Various definitions include “fuel cell,”
“infrastructure,” “stationary,” and “portable.”
Plan (Sec. 804). Within six months of enactment, the Secretary of Energy
must transmit to Congress a plan for R&D on hydrogen fuel and fuel cells. The plan
must include a five-year research agenda, five-year program milestones, and the most
significant technical and non-technical barriers to achieving goals set in §805.
Programs (Sec. 805). The Secretary of Energy, in consultation with other
federal agencies, is directed to conduct a program of competitive R&D grants for
research on hydrogen and fuel cells for transportation, utility, industrial, commercial,
and residential applications. Program goals include the development of hydrogen-
fueled vehicles acceptable to consumers by 2020; the development of hydrogen
infrastructure by 2020; and the development of safe, economical, and
environmentally sound fuel cells. A total of $1,060 million is authorized for FY2006
through FY2010 for R&D on hydrogen supply. A total of $860 million is authorized
for fuel cell technology over the same time frame.
Hydrogen and Fuel Cell Technical Task Force (Sec. 806). This
section establishes an Interagency Task Force to (among other duties) assess various
energy technologies, to foster information exchange among interested parties, and
promote the introduction of hydrogen infrastructure.
Technical Advisory Committee (Sec. 807). A Hydrogen Technical and
Fuel Cell Advisory Committee is established to advise the Secretary and review the
plan developed in §804.
Demonstration (Sec. 808). The Secretary of Energy is required to fund
demonstration projects on hydrogen and fuel cell technologies for transportation and
for portable and stationary applications. A total of $1.3 billion is authorized for
FY2006 through FY2010 to carry out the demonstrations.
Codes and Standards (Sec. 809). The Secretary of Energy, in cooperation
with the Task Force, is required to provide grants or enter into contracts for the
development of safety codes and standards for hydrogen and fuel cells. A total of
$38 million is authorized for FY2006 through FY2010.
Disclosure (Sec. 810). The Secretary of Energy shall protect against the
dissemination of proprietary information related to R&D under Title VIII.
Reports (Sec. 811). The Secretary of Energy is required to report to
Congress. Required elements of the report include Department of Energy activities
related to Title VIII; changes in strategy resulting from demonstration projects;
progress toward deploying 100,000 hydrogen-fueled vehicles by 2010 and 2.5 million
hydrogen-fueled vehicles by 2020; and problems associated with Title VIII programs.
$1.5 million annually is authorized for FY2006 through FY2020.
Solar and Wind Technologies (Sec. 812). A program of five pilot
projects is created to demonstrate the use of solar energy to produce hydrogen.
Further, a program of five pilot projects is created to demonstrate the use of wind
energy to produce hydrogen. Also, DOE is directed to support research programs at
universities that study the use of solar and wind energy technologies to produce
hydrogen. Such sums as necessary are authorized for FY2006 through FY2020.
Technology Transfer (Sec. 813). The Secretary of Energy is required to
carry out programs to transfer hydrogen and fuel cell technologies to the private
sector, accelerate application of those technologies, promote the exchange of
nonproprietary information, and assess the viability of hydrogen and fuel cell
Miscellaneous Provisions (Sec. 814). The Secretary of Energy is
authorized to represent U.S. interests on hydrogen and fuel cells before governments
and nongovernmental organizations.
Cost Sharing (Sec. 815). Projects under Title VIII are subject to the cost-
sharing provisions in §988.
Savings Clause (Sec. 816). Specified authorities of the Secretary of
Transportation would not be affected.
Background. Hydrogen fuel and fuel cell vehicles have been the focus of
increased attention, especially with the announcement of the Hydrogen Fuel Initiative
during the January 2003 State of the Union Address. Over five years, the
Administration is seeking a total funding increase of $720 million. This initiative
would fund research on hydrogen fuel and fuel cells for transportation and stationary
applications, and would complement the existing FreedomCAR initiative, which
focuses research on the development of advanced technologies for passenger
vehicles. The authorizations in the energy act, if appropriated, would represent a
significant funding increase above the Administration’s request.
Title IX — Research and Development
Short Title, Goals, and Definitions (Secs. 901-903). This title may be
cited as the “Energy Research, Development, Demonstration, and Commercial
Application Act of 2005.” Goals for the RDD&C program include increasing energy
efficiency and diversifying energy supply.
Subtitle A — Energy Efficiency
Summary of Provisions. Authorizations are provided for DOE research and
development programs to improve energy efficiency. Existing R&D programs for
vehicles, buildings, and industry are authorized, as well as new programs for
advanced lighting, building standards, electric vehicle batteries, and technology
transfer centers. For these programs, the law authorizes $2.8 billion.
Energy Efficiency (Sec. 911). This provision directs DOE to conduct an
RDD&C program to increase the energy efficiency of vehicles, buildings, and
industrial processes. The goals are to reduce energy imports and cut costs while
enhancing the economy, energy security, and the environment. Funding is authorized
at $783 million for FY2007, $865 million for FY2008, and $952 million for FY2009.
To carry out the requirements of Section 912, an additional authorization of $50
million per year is established for FY2010 through 2013.
Next Generation Lighting Initiative (Sec. 912). A DOE program is
created that aims to develop advanced white light-emitting diodes (LEDs) for high
efficiency lighting. These LEDs are expected to be more efficient than incandescent
and fluorescent lights. Also, DOE is directed to arrange for the National Academy
of Sciences to conduct periodic reviews of the initiative.
National Building Performance Initiative (Sec. 913). The Department
of Commerce, in coordination with DOE, is directed to establish an interagency task
group that would create a plan to integrate work among federal, state, and voluntary
organizations to improve the energy efficiency performance of buildings. Within one
year of enactment, a report to Congress is required on the findings of the plan.
Building Standards (Sec. 914). DOE is directed to work with the National
Institute of Building Sciences to prepare a report that assesses the effectiveness of
voluntary building energy performance standards. After receiving the report, DOE
is required to establish a program of technical assistance and grants to support
revisions of existing standards. Further, the technical assistance and grants program
is required to comply with the National Technology Transfer and Advancement Act
of 1995 and amendments thereto (15 U.S.C. 272 note).
Secondary Electric Vehicle Battery Use Program (Sec. 915). A
program is established at DOE for RDD&C on applications for worn out electric
vehicle batteries for utility and commercial power storage and power quality. A 50%
cost share by the project proposer (e.g. state or local government, manufacturer) is
required. Further, project proposers would be required to satisfy a 20% cost share set
by Section 988, which also allows the Secretary of Energy to waive the requirement
under certain conditions.
Energy Efficiency Science Initiative (Sec. 916). DOE is directed to
establish an energy efficiency research program, with grants to be competitively
awarded and subject to peer review. A report to Congress is required, which is to be
submitted along with the President’s annual budget request, that describes the process
used to award funds.
Advanced Energy Efficiency Technology Transfer Centers (Sec.
917). DOE is directed to create a grant program to support state and local
governments, universities, and nonprofit organizations to create a network of
Advanced Energy Technology Transfer Centers. A periodic report to Congress is
required. Grant recipients would be required to satisfy a 20% cost share set by
Section 988. The provision authorizes such sums as are necessary.
Background. In the past, appropriations for the DOE Energy Efficiency R&D
program have often been the subject of debate, especially about the relative emphasis
on long-term basic R&D versus applied R&D that is focused on demonstration and
Policy Context. This section broadens the Energy Efficiency R&D program
by creating a focus on new lighting technology and vehicle battery recycling, a new
administrative mechanism for improving building energy performance, and a grant
program for technology transfer. However, the impact will depend greatly on the
level of appropriations for this program, which has had a growing share of its funding
earmarked for congressionally designated projects.
Subtitle B — Distributed Energy and Electric Energy Systems
Summary of Provisions. Authorizations are provided for DOE research and
development programs for distributed energy and electric energy systems. Existing
R&D programs are authorized as well as special programs for high power density
industries and micro-cogeneration technology. For these programs, the law
authorizes $768 million.
Distributed Energy and Electric Energy Systems (Sec. 921). DOE
is authorized to conduct an RDD&C program for a variety of technologies that
include the integration of advanced energy technologies with grid connectivity.
Funding is authorized in the amounts of $240 million in FY2007, $255 million in
FY2008, and $273 million in FY2009.
High Power Density Industry Program (Sec. 922). This provision
directs DOE to establish an RDD&C program to improve the energy efficiency of
data centers, computer server farms, and telecommunications facilities.
Micro-Cogeneration Energy Technology (Sec. 923). DOE is directed
to establish competitive, merit-based grants to consortia to develop micro-
cogeneration technology, including systems that could be used for residential heating.
Micro-cogeneration is not defined but is generally considered to be production of
electrical and useful thermal energy in a facility that is less than one megawatt in
capacity. From amounts authorized in Section 921, $20 million per year is
authorized for FY2007 and FY2008.
Distributed Energy Technology Demonstration Program (Sec. 924).
DOE is required to provide financial assistance to consortia for demonstrations to
accelerate the use of distributed energy technologies (such as fuel cells and
Electric Transmission and Distribution Programs (Sec. 925). DOE
is authorized to conduct an RDD&C program addressing energy efficiency,
reliability, and security of the nation’s electric transmission and distribution system.
A technology development program will focus on delivery and storage, grid
reliability, load reduction, high temperature superconductivity, and other aspects.
DOE is directed to award a grant to a university research program to work with the
Tennessee Valley Authority in improving power flow through high voltage
transmission lines. Further, DOE must devise a five-year plan and consider using a
consortium with industry, university, and national laboratory members to implement
the program. A report to Congress is required that describes progress and identifies
needs for additional resources. Also, the provision establishes a Power Delivery
Research Initiative focused on superconductivity and a Transmission and Distribution
Grid Planning Initiative focused on software tools to expand transmission and
distribution in a competitive market setting.
Background. The electric transmission and distribution programs are
managed by the Office of Electricity Delivery and Energy Reliability (EDER). For
more than two decades, the programs under this office were managed by DOE’s
Office of Energy Efficiency and Renewable Energy (EERE). After the electric power
blackout in the summer of 2003, these programs were given heightened attention and
the management structure was reestablished in 2005 as EDER, independent of EERE.
Policy Context. After the terrorist attacks in 2001, there was heightened
concern about the vulnerability of electric powerplants, electricity grid networks, oil
pipelines, and natural gas pipelines. The possible disruption of these energy system
components has increased interest in distributed energy resources (DER) that can be
installed in smaller, more efficient units closer to energy demands and often can use
renewable energy or alternative fuels.
Subtitle C — Renewable Energy
Summary of Provisions. Authorizations are provided for DOE research and
development programs for renewable energy. Existing R&D programs for solar,
wind, geothermal, hydropower, ocean, and bioenergy are authorized, as well as new
programs for integrated systems, low-cost renewable hydrogen, kinetic hydro
turbines, and renewable energy in public buildings. For these programs, the law
authorizes $2.23 billion: $632 million for FY2007, $743 million for FY2008, and
$852 million for FY2009.
Renewable Energy (Sec. 931). DOE is directed to conduct a renewable
energy RDD&C program with goals that include improving energy security, reducing
costs, decreasing environmental impacts, and increasing equipment exports. Further,
DOE must analyze the economic potential of renewable energy technologies and the
performance of the RDD&C program.
Bioenergy Program (Sec. 932). DOE is directed to conduct programs on
cellulosic biomass, biofuels, bio-based products, and integrated biorefineries, as well
as biodiesel fuel for electric power generation at institutions of higher education.
Also, grants are established to support these programs at historically black colleges
and universities, tribal colleges, and Hispanic-serving institutions.
Low-Cost Renewable Hydrogen and Infrastructure for Vehicle
Propulsion (Sec. 933). This provision directs the Secretary of Energy to establish
an RDD&C program to determine the feasibility of using hydrogen propulsion in
light-weight vehicles. Further, within two years of enactment, a vehicle is to be
tested that operates solely on hydrogen produced from solar energy.
Concentrating Solar Power Research Program (Sec. 934). DOE is
authorized to conduct a research program on “concentrating solar power” to establish
the technology and economics of both electricity and hydrogen production. A report
to Congress is required, recommending future research.
Renewable Energy in Public Buildings (Sec. 935). This provision
directs DOE to conduct an RDD&C program to improve the energy efficiency and
environmental performance of commercial, industrial, institutional, and residential
buildings. This program is to include advanced controls, building envelope, building
components (e.g. lighting, appliances), and on-site renewable energy use. Also, a
pilot grant program would be created to help businesses and organizations
demonstrate energy efficiency technologies for buildings. It would provide up to
Background. In the past, appropriations for the DOE Renewable Energy
R&D program have often been the subject of debate, especially about the relative
emphasis on long-term basic R&D versus applied R&D that is focused on
demonstration and commercialization.
Policy Context. This subtitle broadens the Renewable Energy R&D program
slightly, by creating a focus on renewable hydrogen and establishing a pilot grant
program for demonstrating new technologies for buildings. However, as with the
energy efficiency program, the impact of the programs under this subtitle will depend
greatly on the level of appropriations and the amount earmarked for congressionally
Subtitle D — Agricultural Biomass Research and
Summary of Provisions. This subtitle encompasses programs focused on
R&D and the acquisition, deployment, and commercialization of biofuels and
biobased products. In addition to updating programs under the Biomass R&D Act
of 2000, this subtitle repeals the sunset provision in the Biomass R&D Act, directs
DOE to create a production incentive for cellulosic biofuels, adds the Capitol
Complex to the list of federal entities required to purchase biofuels, and establishes
several grant programs at USDA.
Amendments to the Biomass Research and Development Act of
2000 (Sec. 941). This provision amends the Biomass Research and Development
Act (P.L. 106-224) by broadening its scope to include fuels in addition to other
biobased products. For the purposes of energy security, economic development, and
environmental improvement, the objectives of the Biomass R&D Initiative are
defined as developing technologies and processes needed for commercial production
of biobased fuels at prices that will enable them to serve as substitutes for petroleum-
based feedstocks and products. The Department of Agriculture (USDA), DOE, and
EPA are directed to focus R&D on feedstock production through advanced and
dedicated crops and to assess the potential of federal lands as feedstock resources.
For demonstration projects, a minimum match of 20% is required from project
sponsors. For commercial applications, a minimum match of 50% is required.
Further, USDA and DOE are directed to update the “Vision and Roadmap
documents” for biomass R&D. The sunset provision of P.L. 106-224 is repealed.
Funding of $200 million per year is authorized for FY2006 through FY2015.
Production Incentives for Cellulosic Biofuels (Sec. 942). This
provision sets goals to accelerate deployment and commercialization of biofuels,
produce the first one billion gallons of cellulosic biofuels by 2015, and ensure that
biofuels become cost competitive by 2015. The primary strategy is for DOE to
conduct a “reverse auction,” wherein bidders submit a desired level of incentive and
estimated annual production and then DOE makes awards to the entities submitting
the lowest level of production incentive. No single project can receive more than
Procurement of Biobased Products (Sec. 943). The Farm Security Act
of 2002 (P.L. 107-171) is amended to add the Capitol Complex to the list of federal
entities required to purchase biobased products.
Small Business Bioproduct Marketing and Certification Grants
(Sec. 944). The Secretary of Agriculture is directed to provide competitive grants
to support certification and marketing of biobased products by small firms. Each
grant requires a 50% match and cannot exceed $100,000.
Regional Bioeconomy Development Grants (Sec. 945). The Secretary
of Agriculture is required to provide competitive grants to a regional bioeconomy
development association, agricultural or energy trade association, or Land Grant
institution to support coordination, education, and/or outreach to promote
development of a regional bioeconomy for biobased products. The grants require a
Preprocessing and Harvesting Demonstration Grants (Sec. 946).
This provision directs the Secretary of Agriculture to create a competitive grant
program to support agricultural producers in demonstrating cellulosic biomass
innovations that produce ethanol, heat, electricity or other useful forms of energy.
The grants require a 20% match, and the number of demonstration projects is limited
to five per year.
Education and Outreach (Sec. 947). The Secretary of Agriculture is
directed to establish a program of education and outreach on biobased fuels and
biobased products that includes training and technical assistance for feedstock
producers and public education and outreach for consumers.
Reports (Sec. 948). The Secretary of Agriculture is directed to report to
Congress on the economic potential for widespread production of biobased products
through 2025. Further, an analysis of economic indicators of the biobased economy
Background. Concern about oil import dependence and vulnerability
stimulated long-term interest in renewable energy sources to produce liquid biofuels.
The concern has prompted action by Congress, including provisions for biofuels
development in the Energy Policy Act of 1992 (P.L. 102-486), the Biomass Research
and Development Act of 2000 (Biomass R&D Act, P.L. 106-224), and the Farm
Security Act (P.L. 107-171). Also, in 1999, Executive Order 13134 established some
biofuels programs for federal agencies. Biofuels programs have been operating at
DOE, USDA, and EPA. The authorization for programs created in the Biomass
R&D Act was set to expire on December 31, 2005.
Policy Context. Concern about oil import dependence and vulnerability has
been a major driver for biofuels programs. There have been some significant debates
in Congress over the level of funding for biofuels programs at DOE and USDA.
Subtitle E — Nuclear Energy
Summary of Provisions. Appropriations are authorized for existing DOE
nuclear energy research and development programs for FY2007-FY2009. Major
programs include “Nuclear Power 2010,” which assists with the licensing and design
of new nuclear power plants, the “Generation IV Nuclear Systems Initiative,” which
focuses on advanced reactor concepts, and the “Advanced Fuel Cycle Initiative,”
which is developing improved spent fuel reprocessing and treatment technologies.
Authorizations for the three-year period total $1.6 billion.
Nuclear Energy (Sec. 951). The Secretary of Energy shall conduct civilian
nuclear research, demonstration, and commercialization programs that enhance
nuclear power’s commercial viability, reduce the likelihood of nuclear weapons
proliferation, maintain a supply of nuclear scientists and engineers, support nuclear
research facilities, and reduce the environmental impact of nuclear activities.
Appropriations of $1.6 billion are authorized for FY2007-FY2009.
Nuclear Energy Research Programs (Sec. 952). The Secretary of
Energy shall conduct the following nuclear energy research programs: (a) Nuclear
Energy Research Initiative for general research and development, (b) Nuclear Energy
Systems Support Program for research to improve existing nuclear power plants, (c)
Nuclear Power 2010 Program, to assist licensing and design of new reactors, (d)
Generation IV Nuclear Energy Systems Initiative, to develop advanced reactor
concepts, and (e) research on large-scale production of hydrogen from high-
Advanced Fuel Cycle Initiative (Sec. 953). DOE shall conduct a program
on advanced technologies for the reprocessing of spent nuclear fuel. The technologies
should be resistant to nuclear weapons proliferation and support alternative spent fuel
disposal strategies and advanced reactor concepts.
University Nuclear Science and Engineering Support (Sec. 954).
DOE must conduct a program to support human resources and infrastructure in
nuclear science and engineering and related fields. The program must include
fellowship and faculty assistance programs and support for fundamental and
collaborative research. The program is also authorized to help convert research
reactors to low-enriched fuels, support training in reactor relicensing and upgrading,
and provide funding for research reactor improvements. DOE funding for research
projects could be used for some of the operating costs of research reactors used in
DOE Civilian Nuclear Infrastructure and Facilities (Sec. 955). DOE
must operate and maintain infrastructure and facilities for nuclear energy programs,
and develop an inventory of nuclear energy infrastructure and a priority list of needed
improvements. A comprehensive plan must be prepared for the facilities at Idaho
National Laboratory, which DOE has designated as its lead laboratory for nuclear
Security of Nuclear Facilities (Sec. 956). DOE shall conduct a research
and development program on cost-effective technologies to improve the safety and
security of nuclear facilities.
Alternatives to Industrial Radioactive Sources (Sec. 957). DOE is
required to study industrial applications of large radioactive sources and disposal
options and to establish a research program to develop alternatives. Such alternatives
must reduce the safety, environmental, and nuclear proliferation risks of industrial
Background. The nuclear energy R&D programs authorized by this subtitle
are conducted by DOE’s Office of Nuclear Energy, Science, and Technology, which
has received renewed emphasis under the Bush Administration.
The Nuclear Power 2010 Program is focused on the near-term revival of U.S.
nuclear power plant construction. The program will pay up to half the cost of gaining
regulatory approval for new reactor sites, applying for new reactor licenses, and
preparing detailed plant designs. This assistance is intended for advanced versions
of existing commercial nuclear plants that could be ordered within the next few
Three nuclear plant site approvals — in Illinois, Mississippi, and Virginia — are
currently receiving DOE assistance under the Nuclear Power 2010 Program. In
addition, three industry consortia in 2004 applied for a total of $650 million over the
next several years to design and license new nuclear power plants and conduct a
feasibility study. DOE awarded an initial $13 million to the consortia in 2004.
The nuclear license applications under the Nuclear Power 2010 program would
test the “one step” licensing process established by the Energy Policy Act of 1992
(P.L. 102-486). Even if the licenses are granted by the Nuclear Regulatory
Commission (NRC), the industry consortia funded by DOE have not committed to
building new reactors.
Advanced commercial reactor technologies that are not yet close to deployment
are the focus of the Generation IV Nuclear Energy Systems Initiative. “Generation
IV” refers to advanced nuclear energy concepts, such as high-temperature reactors
cooled by gas or liquid metal, that could eventually replace today’s “Generation III”
commercially available advanced water-cooled reactors. Generation IV reactors
could potentially operate more safely and economically, and their high heat output
could be harnessed to economically separate hydrogen from water, according to
proponents. The Generation IV program is focusing on six advanced designs that
could be commercially available around 2020-2030. Some of these reactors would
use plutonium recovered through reprocessing of spent nuclear fuel.
The development of plutonium-fueled reactors in the Generation IV program is
closely related to the Advanced Fuel Cycle Initiative, which is intended to develop
and demonstrate nuclear fuel cycles that could reduce the long-term hazard of spent
nuclear fuel and recover additional energy. Such technologies would involve
separation of plutonium, uranium, and other long-lived radioactive materials from
spent fuel for re-use in a nuclear reactor or for transmutation in a particle accelerator.
The program includes longstanding DOE work on electrometallurgical treatment of
spent fuel from the Experimental Breeder Reactor II (EBR-II) at INL.
The technologies to be developed under the Generation IV, Advanced Fuel
Cycle, and Nuclear Hydrogen programs authorized by this subtitle would be
demonstrated by the Next Generation Nuclear Plant authorized by Subtitle C of Title
VI (Secs. 641-645).
Policy Context. The Nuclear Power 2010 program is an important element
— along with production tax credits, loan guarantees, and extension of the Price-
Anderson nuclear liability system — in the energy bill’s package of incentives for
increased U.S. nuclear power production. No commercial reactor has been ordered
in the United States since 1978, and all orders since 1973 have been cancelled.
However, the incentives in the Energy Policy Act of 2005 have combined with higher
prices for natural gas — the primary competitor for new electrical generation — to
prompt several large power companies to announce interest in building new nuclear
Nuclear power opponents contend that the nuclear industry is mature enough to
grow without federal subsidies if it is truly economically viable, and that nuclear
power poses unacceptable risks from accidents, terrorist attacks, and radioactive
waste disposal. Supporters of the act’s provisions counter that nuclear power is an
important domestic energy source, and that only the first few new reactors would
have to be subsidized before construction costs dropped sufficiently to attract further
DOE’s other major nuclear R&D programs are intended to overcome long-term
constraints to the growth of nuclear power, such as uranium supply limitations and
waste disposal. If new, high-temperature reactors could economically produce
hydrogen, the Administration contends, then a major new domestic source of
transportation fuel could also become available.
Opponents contend that DOE’s programs are focusing on economically non-
viable technologies that involve separation of weapons-usable plutonium. For
instance, according to a dissenting member of DOE’s Nuclear Energy Research
Advisory Committee, “This research effort will likely expand the availability of
weapon-usable materials in other countries in the near-term, result in the training and
employment of new cadres of scientist and engineers with expertise in actinide
(including plutonium) chemistry and metallurgy, but not result in the deployment of
new commercially viable nuclear power technologies.”16
16 Cochran, Thomas B. Memorandum to the Chairman of NERAC. October 16, 2002.
Subtitle F — Fossil Energy
Summary of Provisions. This subtitle authorizes DOE’s fossil energy
research, development, demonstration, and commercial application programs,
including coal, carbon capture, oil and gas production, and methane hydrates.
Fossil Energy (Sec. 961). Fossil energy RDD&C programs are authorized
for FY2007-FY2009. At least 20% of each year’s appropriation shall be used to carry
out research at institutions of higher education.
Coal and Related Technologies Program (Sec. 962). In addition to the
programs authorized under title IV, DOE will be required to conduct a program of
technology research, development, and demonstration and commercial application
for coal and power systems. A program for mercury removal from coal produced in
the Powder River Basin is established. Fuel cell R&D is included.
Carbon Capture Research and Development Program (Sec. 963).
The Secretary of Energy shall support a 10-year R&D program aimed at developing
carbon dioxide capture technologies for pulverized coal combustion units. The
program will focus on developing add-on carbon dioxide capture technologies,
combustion technologies, and increasing the efficiency of the overall combustion
system. In addition, the Secretary will support a carbon sequestration program with
the private sector through regional partnerships. Appropriations are authorized for
Research and Development for Coal Mining Technologies (Sec.
964). A program on coal mining technologies will be established. Projects will be
based on priorities set by the Mining Industry of the Future program.
Oil and Gas Research Programs (Sec. 965). Research programs will be
focused on assisting independent domestic producers of oil and gas, the extraction
of methane hydrates, reservoir life and extension, and unconventional fuels. Also,
a national center of excellence in clean energy and power generation is to be
Low-Volume Oil and Gas Reservoir Research Program (Sec. 966).
A program will be established by the Secretary to maximize the productive capacity
of marginal wells and reservoirs.
Complex Well Technology Testing Facility (Sec. 967). A Complex
Well Technology Testing Facility will be established at the Rocky Mountain Oilfield
Testing Center to increase the range of extended drilling technologies.
Methane Hydrate Research (Sec. 968). A methane hydrate research and
development program will be established. A methane hydrate advisory panel will be
set up and a study will be conducted by the National Research Council that will
assess the R&D program. Funds are authorized for FY2006-FY2010.
Background. DOE R&D programs for natural gas and petroleum
technologies are funded in the annual Energy and Water Development appropriations
bill. The Administration recommended cutting funds for methane hydrates but
Congress funded the program at $12 million for FY2006.
Subtitle G — Science
Science (Sec. 971). DOE shall conduct the existing programs of the Office
of Science. Appropriations for the office are authorized for FY2007 through
FY2009, with allocations specified for some programs. Additional appropriations
are authorized for programs on integrated bioenergy R&D.
Fusion Energy Sciences Program (Sec. 972). Research, development,
demonstration, and commercial application directed at competitiveness in fusion
energy are declared to be U.S. policy. DOE is directed to submit a plan to implement
that policy. Authority is given for the United States to participate in the international
fusion energy experiment known as the International Thermonuclear Experimental
Reactor (ITER). DOE is directed to develop a plan for ITER participation and to ask
the National Academy of Sciences to review the plan. Federal funds may not be
expended for ITER construction until the plan and two other reports are provided to
Congress. If construction and operation of ITER appear unlikely, DOE is directed
to submit a plan for a domestic burning plasma experiment.
Catalysis Research Program (Sec. 973). DOE shall support a program
of R&D in catalysis science. Within three years of enactment, DOE shall arrange for
the National Academy of Sciences to review the catalysis program.
Hydrogen (Sec. 974). The Secretary of Energy is directed to conduct
fundamental R&D in support of the hydrogen and fuel cell programs under Title VIII,
including the production of hydrogen from sources other than natural gas.
Solid State Lighting (Sec. 975). DOE shall conduct a program of
fundamental research on solid-state lighting in support of the Next Generation
Lighting Initiative (§ 912).
Advanced Scientific Computing for Energy Missions (Sec. 976).
DOE shall conduct a program of R&D in advanced scientific computing, including
applied mathematics and the activities authorized by the Department of Energy
High-End Computing Revitalization Act of 2004 (15 U.S.C. 5541 et seq.). In
addition, § 203 of the High-Performance Computing Act of 1991 (15 U.S.C. 5523)
is amended as follows: DOE’s general responsibilities as part of the interagency
National High-Performance Computing Program are modified; DOE is no longer
required, as part of that program, to establish consortia, engage in technology
transfer, or submit an annual report (but these activities are not prohibited); and the
authorization of appropriations for the program for fiscal years already completed is
replaced by a general authorization of “such sums as are necessary.”
Systems Biology Program (Sec. 977). DOE shall establish a program of
research, development, and demonstration in microbial and plant systems biology,
protein science, and computational biology. DOE shall submit a research plan for
this program to Congress within one year after enactment and contract with the
National Academy of Sciences to review the plan within an additional 18 months.
Biomedical research and research related to humans are not permitted as part of the
Fission and Fusion Energy Materials Research Program (Sec. 978).
DOE shall establish a program of R&D on materials science for advanced fission
reactors and DOE’s fusion energy program.
Energy and Water Supplies (Sec. 979). DOE, in consultation with other
agencies, shall carry out a program to study energy-related issues associated with
water supply and water-related issues related to energy supply, including arsenic
treatment and desalination.
Spallation Neutron Source (Sec. 980). DOE shall submit to Congress an
annual progress report on construction of the Spallation Neutron Source and develop
an operational plan for the facility that meets specified requirements. Appropriations
are authorized for the lifetime of the project overall and for certain related items in
FY2007 through FY2009.
Rare Isotope Accelerator (Sec. 981). Appropriations are authorized for
construction and operation of the Rare Isotope Accelerator, and DOE is directed to
commence construction no later than September 30, 2008. No more than $1.1 billion
in federal funds may be spent on associated activities prior to operation of the
Office of Scientific and Technical Information (Sec. 982). DOE shall
maintain the Office of Scientific and Technical Information, which makes the results
of DOE-supported R&D available to the public.
Science and Engineering Education Pilot Program (Sec. 983). DOE
shall award a grant to a consortium of universities to establish a regional pilot
program to enhance scientific, technological, engineering, and mathematical literacy,
creativity, and decisionmaking. The program shall involve research universities,
universities that train elementary and secondary school teachers, and DOE national
laboratories. Within two years, DOE shall report to Congress on lessons learned
from the pilot program, including (if appropriate) a plan for expanding the program
Energy Research Fellowships (Sec. 984). DOE shall establish energy
R&D fellowship programs for postdoctoral young scientists and engineers and for
senior researchers and their research groups.
Science and Technology Scholarship Program (Sec. 984A). DOE is
authorized to establish a scholarship program to help recruit and prepare students for
careers in DOE and its national laboratories. In return for receiving the scholarship,
students may be required to work for DOE or a national laboratory for a fixed period.
Subtitle H — International Cooperation
Western Hemisphere Energy Cooperation (Sec. 985). The Secretary
of Energy must carry out a program to promote cooperation on energy issues among
Western Hemisphere countries, including, to the extent practicable, universities. A
total of $39 million is authorized over the period of FY2007-FY2009.
United States-Israel Cooperation (Sec. 986). This provision requires the
Secretary of Energy to submit a report within 90 days of enactment to the relevant
House and Senate Committees on past, current, and future activities and projects that
are attributable to the previously existing U.S.-Israel energy cooperation agreement.
Background. The United States and Israel have an agreement “to establish
a framework for collaboration” between the two nations for collaboration on energy
research and development activities. The agreement, which went into effect in
February 2000, was automatically extended (pursuant to terms of the original
agreement) in February 2005 for an additional five years.
International Energy Training (Sec. 986A). This section authorizes $6.5
million during FY2007-FY2010 to provide training in several aspects of international
commercial energy markets to countries with developing and restructuring
Subtitle I — Research Administration and Operations
Availability of Funds (Sec. 987). Appropriations authorized by this act
shall remain available until expended.
Cost Sharing (Sec. 988). Cost sharing is required for newly initiated DOE
research, development, demonstration, and commercial application programs. The
minimum non-federal share is 20% for R&D programs and 50% for demonstration
and commercial application programs, but DOE can lower or waive these
requirements in certain circumstances. The requirement does not apply to
cooperative research and development agreements (CRADAs) or awards under the
Small Business Innovation Research (SBIR) and Small Business Technology
Transfer (STTR) programs.
Merit Review of Proposals (Sec. 989). Awards of funds authorized under
this act shall be made only after an impartial review of scientific and technical merit.
It is the sense of Congress that awards for R&D, demonstration, and commercial
application should be made using competitive procedures wherever practicable.
External Technical Review of Departmental Programs (Sec. 990).
DOE shall establish advisory boards (or designate existing boards) to review its
programs in energy efficiency, renewable energy, nuclear energy, and fossil energy.
It shall continue to use the existing advisory committees for the programs of the
Office of Science. DOE shall arrange with the National Academy of Sciences to
conduct periodic reviews and assessments of its programs and shall report to
Congress on the results of these reviews and assessments.
National Laboratory Designation (Sec. 991). DOE shall not designate
additional facilities as National Laboratories beyond those listed in § 2(3) of this act.
Report on Equal Employment Opportunity Practices (Sec. 992).
Within one year of enactment and every two years thereafter, DOE shall report to
Congress on equal employment opportunity practices at the National Laboratories.
Strategy and Plan for Science and Energy Facilities and
Infrastructure (Sec. 993). DOE shall develop and implement a strategy for
maintaining existing science and energy facilities and infrastructure, closing
unnecessary facilities, modifying facilities, and building new facilities. A report
describing the strategy shall be included with the FY2008 budget request.
Strategic Research Portfolio Analysis and Coordination Plan (Sec.
994). DOE shall periodically conduct a strategic review of its science and
technology activities. As part of the review, it shall develop a plan to improve
coordination and collaboration in research, development, demonstration, and
commercial application activities across DOE organizational boundaries. DOE shall
transmit the review results and coordination plan to Congress within 12 months of
enactment and every four years thereafter.
Competitive Award of Management Contracts (Sec. 995).
Management and operating contracts for DOE National Laboratories (except
Livermore, Los Alamos, Sandia, and Savannah River) must be awarded
competitively unless the Secretary of Energy grants a waiver on a case-by-case basis.
The Secretary may not delegate his waiver authority and must notify Congress at least
Western Michigan Demonstration Project (Sec. 996). The EPA, in
consultation with the State of Michigan and affected local officials, shall conduct a
demonstration project to assess the effect of transported ozone and ozone precursors
in southwestern Michigan. During the course of the demonstration project, EPA
shall not impose any requirements or sanctions that might otherwise apply under the
Clean Air Act.
Arctic Engineering Research Center (Sec. 997). DOE, in consultation
with the Secretary of Transportation and the U.S. Arctic Commission, shall provide
annual grants to establish and operate the Arctic Engineering Research Center in
Fairbanks, Alaska. The Center’s purpose shall be R&D on improving transportation
and building infrastructure in the Arctic region. Annual appropriations are
authorized for FY2006 through FY2011.
Barrow Geophysical Research Facility (Sec. 998). The Secretary of
Commerce, in consultation with the Secretaries of Energy and the Interior, the
Director of the National Science Foundation, and the Administrator of the EPA, shall
establish the Barrow Geophysical Research Facility in Barrow, Alaska.
Appropriations of $61 million are authorized.
Subtitle J — Ultra-Deepwater and Unconventional Natural
Gas and Other Petroleum Resources
Program Authority (Sec. 999A). R&D will be directed toward the
demonstration and commercial application of technology for ultra-deepwater oil and
gas production, including unconventional onshore oil and gas resources. The R&D
program will be designed to benefit “small producers” and address environmental
concerns. Complementary research will be carried out through DOE’s National
Energy Technology Laboratory.
Ultra-Deepwater and Unconventional Onshore Natural Gas and
Other Petroleum Research and Development Program (Sec. 999B). The
Secretary of Energy shall contract with a consortium to administer an ultra-deepwater
and onshore oil and gas research program and manage funding awarded under this
program. The program shall focus on advanced technologies for recovering ultra-
deepwater resources, coalbed methane, and other unconventional resources to reduce
costs and increase exploration and production efficiency to maximize the value of
natural gas and petroleum resources.
Additional Requirements for Awards (Sec. 999C). The Secretary can
reduce or eliminate the non-federal cost-share requirement for awards under this
program; 2.5% of each award will be designated for technology transfer; and various
additional award requirements are stipulated.
Advisory Committees (Sec. 999D). An Ultra-Deepwater Advisory
Committee and an Unconventional Resources Technology Advisory Committee will
Limits on Participation (Sec. 999E). Awards are limited to companies
organized in the United States or subsidiaries of foreign-based companies whose
home countries provide reciprocal access to U.S. companies.
Sunset (Sec. 999F). The authority in this part terminates at the end of
Definitions (Sec. 999G). The terms deepwater, ultra-deepwater,
unconventional oil and gas, independent producers of oil and gas, and others are
Funding (Sec. 999H). The Ultra-Deepwater and Unconventional Natural Gas
and Other Petroleum Research Fund is established. Revenues derived from federal
oil and gas leases, after all previously mandated distributions of those revenues have
been made, will be deposited in the fund, up to $50 million annually during
FY2007-FY2017. In addition, there is an authorization for appropriations of $100
million for each fiscal year FY2007-FY2016. The Secretary of Energy can obligate
money from the fund for programs in this part without an overall annual limit,
although annual percentage allocations among the programs are spelled out.
Background. DOE R&D programs for natural gas and petroleum
technologies are funded in the annual Energy and Water Development appropriations
bill. Advances in seismic surveying, improved drilling methods, and other new
technology have allowed oil and gas drilling at greater depths on the outer continental
shelf and greater production of unconventional on-shore resources.
Policy Context. While the OCS is a major source of domestic oil and gas
supply, offshore drilling proposals often generate substantial environmental
controversy. This controversy intensified when the ultra-deepwater provision was not
in the energy bill approved by the conferees but then was included in the final version
of the Energy Policy Act of 2005 approved by both the House and Senate.
Opponents of this provision argue that the technology for drilling and developing the
deepwater has been proved to be effective and the federal government’s role should
be minimized. The industry contends that the federal support is still needed as the
risks with ultra-deepwater are huge and the payoff to the government in increased
future royalties can be great.
Title X — Department of Energy Management
Improved Technology Transfer of Energy Technologies (Sec. 1001).
DOE shall appoint a Technology Transfer Coordinator to be the Secretary’s principal
advisor on technology transfer and commercialization; establish a Technology
Transfer Working Group consisting of representatives of the National Laboratories
and single-purpose research facilities; and establish an Energy Technology
Commercialization Fund, using 0.9% of the amount made available to DOE in each
fiscal year for applied energy R&D, demonstration, and commercial application, to
provide matching funds with private partners. DOE shall submit a technology
transfer execution plan to Congress within 180 days of enactment and each year
Technology Infrastructure Program (Sec. 1002). DOE shall establish
a Technology Infrastructure Program to improve the ability of National Laboratories
and single-purpose research facilities to stimulate the development of technology
clusters; benefit from commercial research, technology, products, processes, and
services; and exchange scientific and technological expertise with nonfederal entities.
A report on the program is due to Congress by July 1, 2008.
Small Business Advocacy and Assistance (Sec. 1003). Each National
Laboratory (and each single-purpose research facility, if required by the Secretary of
Energy) shall appoint a small business advocate and a small business advocacy
Outreach (Sec. 1004). DOE shall ensure that programs authorized by this
act include an outreach component to provide information to manufacturers,
consumers, engineers, and other specified groups.
Relationship to Other Laws (Sec. 1005). Except where specifically
provided otherwise, activities authorized by this act shall continue to be governed by
the Atomic Energy Act of 1954, the Federal Nonnuclear Energy R&D Act of 1974
(42 U.S.C. 5901 et seq.), the Energy Policy Act of 1992, the Stevenson-Wydler
Technology Innovation Act of 1980 (15 U.S.C. 3701 et seq.), the Bayh-Dole Act
(chapter 18 of U.S.C. title 35), and other applicable acts.
Improved Coordination and Management of Civilian Science and
Technology Programs (Sec. 1006). The position of Under Secretary for
Science is established, replacing the position of Director of the Office of Science.
An additional assistant secretary position is established, and the sense of Congress
is that leadership for DOE nuclear energy activities should be at the assistant
Other Transactions Authority (Sec. 1007). DOE is granted authority to
enter into “other transactions” (in addition to contracts, cooperative agreements, and
grants) to fund research, development, and demonstration projects. The terms and
conditions are the same as those for the Department of Defense (10 U.S.C. 2371).
DOE shall issue guidelines for the use of other transactions within 90 days of
enactment; shall publish the guidelines for comment in the Federal Register; and
may not carry out such transactions until the guidelines are final. The Comptroller
General shall report to Congress on DOE’s use of this authority within one year of
the issuance of final guidelines. The authority terminates on September 30, 2010.
Prizes for Achievement in Grand Challenges of Science and
Technology (Sec. 1008). DOE may award cash prizes for breakthrough
achievements in research, development, demonstration, and commercial application
potentially applicable to the mission of the Department. In cooperation with the
Freedom Prize Foundation, DOE shall support a prize program specifically directed
toward reducing U.S. dependence on imported oil.
Technical Corrections (Sec. 1009). The Coal Research and Development
Act of 1960 (30 U.S.C. 661 et seq.) is amended to reflect the 1974 transfer of coal
R&D from the Department of the Interior to DOE’s predecessor, the Energy Research
and Development Administration. The Nonnuclear Energy Research and
Development Act of 1974 is amended to reflect the creation of the Department of
Energy in 1977, correct the citation of other acts, conform with subsequent acts and
agency name changes, and delete provisions relating to loan guarantees for
alternative fuel demonstration facilities and financial support for municipal waste
reprocessing demonstration facilities. The Stevenson-Wydler Technology Innovation
Act of 1980 is amended to include DOE in a personnel exchange program jointly
established by the Department of Commerce and the National Science Foundation.
University Collaboration (Sec. 1010). Within two years of enactment,
DOE shall report to Congress on the feasibility of using DOE grants, contracts, and
cooperative agreements to promote collaborations between major universities and
other colleges and universities. DOE shall also consider providing incentives in its
grants, contracts, and cooperative agreements to increase the inclusion of small and
minority-serving institutions of higher learning.
Sense of Congress (Sec. 1011). It is the sense of Congress that DOE
should develop and implement more stringent procurement and inventory controls,
including controls on the purchase card program, and that the DOE Inspector General
should continue to closely review procurement and inventory practices.
Title XI — Personnel and Training
Workforce Trends and Traineeship Grants (Sec. 1101). Subsection
(b) directs DOE to monitor workforce trends for skilled personnel in energy
technology, electric power, and transmission industries and report recommendations
to meet future labor requirements for these industries. Subsection (c) allows DOE
to create programs that provide grants to enhance training (including distance
learning) for any workforce category in which a shortage is identified or predicted.
Funding of $20 million per year is authorized for FY2006 through FY2008.
Educational Programs in Science and Mathematics (Sec. 1102).
Subsection (a) directs DOE to use at least 0.3% of its research, development,
demonstration, and commercialization (RDD&C) funding to conduct certain
educational and reporting functions that are described in the following subsections.
Subsection (b) calls on DOE to support competitive student events, teacher
development programs, summer internships, and training activities at research and
development (R&D) facilities. Subsection (c) requires that DOE provide funds to
educational institutions to hire personnel to facilitate interactions between schools,
R&D facilities, corporations, and governmental entities. Subsection (d) directs DOE
to fund the National Academy of Public Administration to study educational
programs at DOE R&D facilities, and calls for the study to recommend steps to
improve coordination of educational programs, workforce development, and other
training activities. The results of the study are to be reported to Congress within two
years of enactment.
Training Guidelines for Electric Energy Industry Personnel (Sec.
1103). The Secretary of Energy, in consultation with the Secretary of Labor, along
with electric industry representatives and employee representatives, would be
required to develop model personnel training guidelines to support the reliability and
safety of the electric system.
National Center for Energy Management and Building Technologies
(Sec. 1104). DOE is directed to support ongoing activities of the National Center
for Energy Management and Building Technologies in research, education, and
training focused on energy efficiency for buildings.
Improved Access to Energy-Related Scientific and Technical
Careers (Sec. 1105). For DOE’s energy science education programs, subsection
(a) directs DOE to give priority to activities that aim to encourage students from
under-represented groups to pursue scientific and technical careers. Subsection (b)
directs DOE to require that each national laboratory increase the participation of
historically black colleges, Hispanic-serving institutions, and tribal colleges in any
activity that could increase the capacity of these institutions and colleges to train
personnel in science or engineering. Further, a report to Congress that describes
these activities is required within two years of enactment.
National Power Plant Operations Technology and Educational
Center (Sec. 1106). The Secretary of Labor is directed to support establishing a
National Power Plant Operations Technology and Education Center to train and
educate certified electric utility operators and technicians. In addition to training and
education activities at the center, Internet-based training will also be made available.
Title XII — Electricity
Short Title (Sec. 1201). This title may be cited as the “Electric Reliability
Act of 2005.”
Subtitle A — Reliability Standards
Summary of Provisions. This subtitle is intended to provide federal
jurisdiction over activities that are required to support reliability of the U.S. bulk
power system. Clarifying Federal Energy Regulatory Commission (FERC) authority
to establish and regulate an electric reliability organization (ERO) is intended to
improve reliability as restructuring of the U.S. bulk power system proceeds.
Electric Reliability Standards (Sec. 1211). This section requires FERC
to promulgate rules within 180 days of enactment to create a FERC-certified ERO.
The North American Electric Reliability Council (NERC) currently has responsibility
for reliability of the bulk power system. NERC has established reliability guidelines
but has no enforcement authority. Before enactment, the Federal Power Act gave
FERC jurisdiction over unbundled transmission and authority to regulate wholesale
rates; however, no authority was provided to regulate reliability. Under this section,
the ERO will develop and enforce reliability standards for the bulk-power system,
including cybersecurity protection. All ERO standards will be approved by FERC.
Under this title, the ERO can impose penalties on a user, owner, or operator of the
bulk-power system that violates any FERC-approved reliability standard. In addition,
FERC can order compliance with a reliability standard and can impose a penalty if
FERC finds that a user, owner, or operator of the bulk-power system has engaged in
or is about to engage in a violation of a reliability standard. This provision does not
give an ERO or FERC authorization to order construction of additional generation
or transmission capacity.
This provision also requires that FERC establish a regional advisory body if
requested by at least two-thirds of the states within a region that have more than half
of their electric load served within that region. The advisory body will be composed
of one member from each participating state in the region, appointed by the governor
of each state, and who is able to provide advice to the ERO or FERC on reliability
standards, proposed regional entities, proposed fees, and any other responsibilities
requested by FERC. The entire reliability provision does not apply to Alaska or
Hawaii. The state of New York is authorized to develop rules that would result in
greater reliability for New York, as long as those rules do not result in lower
reliability for neighboring states.
If the penalties employed by the ERO are not successful, then FERC has the
authority to enforce penalties for entities that do not comply with reliability
standards. Establishing this new relationship between FERC and the ERO could
have the potential to improve coordination between market functions and reliability
Subtitle B — Transmission Infrastructure Modernization
Siting of Interstate Electric Transmission Facilities (Sec. 1221). The
Secretary of Energy is required to conduct a study of electric transmission congestion
every three years. Based on the findings, the Secretary of Energy may designate a
geographic area as being congested. Under certain conditions, FERC is authorized
to issue construction permits. Under the new Federal Power Act (FPA) Section
216(d), affected states, federal agencies, Indian tribes, property owners, and other
interested parties will have an opportunity to present their views and
recommendations with respect to the need for, and impact of, a proposed construction
permit. However, there is no requirement for a specific comment period. New FPA
Section 216(e) will allow permit holders to petition in U.S. District Court to acquire
rights-of-way through the exercise of the right of eminent domain. Any exercise of
eminent domain authority would be considered to be takings of private property for
which just compensation is due. New FPA Section 216(g) does not state whether
property owners would be required to reimburse compensation if the rights-of-way
were transferred back to the owner.
An applicant for federal authorization to site transmission facilities on federal
lands could request that the Department of Energy be the lead agency to coordinate
environmental review and other federal authorization. Once a completed application
is submitted, all related environmental reviews are required to be completed within
one year unless another federal law makes that impossible. FPA Section 216(h)
gives the Department of Energy (DOE) new authority to prepare environmental
documents and appears to give DOE additional decision-making authority for rights-
of-way and siting on federal lands. This would appear to give DOE input into the
decision process for creating rights-of-way. Review under Section 503 of the Federal
Land Policy and Management Act could be streamlined by relying on prior analyses.
If a federal agency has denied an authorization required by a transmission or
distributions facility, the denial could be appealed by the applicant or relevant state
to the President. The President is required to issue a decision within 90 days of the
appeal’s filing. With congressional approval, states may enter into interstate
compacts for the purposes of siting transmission facilities and the Secretary of
Energy could provide technical assistance. This section does not apply to the Electric
Reliability Council of Texas (ERCOT).
Third-Party Finance (Sec. 1222). The Western Area Power Administration
(WAPA) and the Southwestern Power Administration (SWPA) are able to either
continue to design, develop, construct, operate, maintain, or own transmission
facilities within their regions or participate with other entities for the same purposes
if: the Secretary of Energy designates the area as a National Interest Electric
Transmission Corridor and the facility will reduce congestion or is needed to
accommodate projected increases in demand for transmission capacity. The project
is required to be consistent with the needs identified by the appropriate Regional
Transmission Organization or Independent System Operator. Under certain
circumstances, the Secretary of Energy, acting through WAPA and/or SWPA, may
design, develop, construct, operate, maintain, or own an electric power transmission
facility in the WAPA and SWPA region. No more than $100 million from third-
party financing may be used during fiscal years 2006 through 2015. Before
enactment, the enabling statutes for power marketing administrations could have
restricted third-party financing, construction, operation, and maintenance of
Advanced Transmission Technologies (Sec. 1223). FERC is directed
to encourage deployment of advanced transmission technologies.
Advanced Power System Technology Incentive Program (Sec.
1224). A program is established to provide incentive payments to owners or
operators of advanced power generation systems. Subject to the availability of funds,
1.8 cents per kilowatt-hour will be paid to the owner or operator of a qualifying
advanced power system technology facility. For facilities that the Secretary of
Homeland Security and Secretary of Energy determine are “qualifying security and
assured power facilities,” an additional 0.7 cents per kilowatt-hour will be paid to the
owner or operator of such a facility. Under the incentive program, the first
10,000,000 kilowatt-hours produced in any facility in a fiscal year are eligible for the
incentives. Eligible systems include advanced fuel cells, turbines, or hybrid power
systems. For FY2006 through FY2012 an annual appropriation of $10 million is
Subtitle C — Transmission Operation Improvements
Open Nondiscriminatory Access (Sec. 1231). FERC is authorized to
require, by rule or order, unregulated transmitting utilities (power marketing
administrations, state entities, and rural electric cooperatives) to charge rates
comparable to what they charge themselves and require that the terms and conditions
of the sales be comparable to those required of other utilities. Before enactment,
under the Federal Power Act (Section 201(f)), federal power marketing
administrations, state entities, and rural electric cooperatives were not subject to
FERC’s ratemaking. Under this provision, exemptions are established for utilities
selling less than 4 million megawatt-hours of electricity per year, for distribution
utilities, and for utilities that own or operate transmission facilities that are not
necessary to facilitate a nationwide interconnected transmission system. This
exemption could be revoked to maintain transmission system reliability. FERC is not
authorized to order states or municipalities to take action under this section if such
action would constitute a private use under Section 141 of the Internal Revenue Code
of 1986. FERC may remand transmission rates to an unregulated transmitting utility
if the rates do not comply with this section. FERC is not authorized to order an
unregulated transmitting utility to join a Regional Transmission Organization or other
FERC-approved independent transmission organization. (This section is often
referred to as “FERC-lite.”)
17 16 U.S.C. 460 (SWPA) and 43 U.S.C. 485 (WAPA).
Federal Utility Participation in Regional Transmission
Organizations (Sec. 1232). Federal utilities (power marketing administrations
or the Tennessee Valley Authority) are authorized to participate in regional
transmission organizations. A law allowing federal utilities to study formation and
operation of a regional transmission organization is repealed (16 U.S.C. 824n).
Native Load Service Obligation (Sec. 1233). This section amends the
Federal Power Act to clarify that a load-serving entity is entitled to use its
transmission facilities or firm transmission rights to serve its existing customers
before it is obligated to make its transmission capacity available for other uses.
FERC is not able to change any approved allocation of transmission rights by a
regional transmission organization (RTO) or independent system operator (ISO)
approved prior to January 1, 2005. A government entity that owns transmission
facilities used predominantly to support its own water pumping facilities is provided
protections for transmission service to such facilities comparable to protections
provided to load-serving entities. This section does not apply to ERCOT and does
apply to load-serving entities located within the service area of the Tennessee Valley
Authority. Within one year of enactment, FERC is required to issue a rule or order
on long-term transmission rights and organized markets.
Section 201 of the Federal Power Act gives FERC jurisdiction over “the
transmission of electric energy in interstate commerce and the sale of such energy at
wholesale in interstate commerce.” Section 205 of the Federal Power Act prohibits
utilities from granting “undue preference or advantage to any person or subject any
person to any undue prejudice or disadvantage” (16 U.S.C. 824). The new language
of this section is intended to clarify that reserving transmission for existing customers
(native load) is not considered unduly discriminatory.
Study on the Benefits of Economic Dispatch (Sec. 1234). The
Secretary of Energy, in consultation with the states, is required to issue an annual
report to Congress and the states on the current status of economic dispatch.
Economic dispatch is defined as “the operation of generation facilities to produce
energy at the lowest cost to reliably serve consumers, recognizing any operational
limits of generation and transmission facilities.”
Protection of Transmission Contracts in the Pacific Northwest (Sec.
1235). FERC does not have the authority to require electric utilities in the Pacific
Northwest to convert firm transmission rights to tradable or financial rights. The
area of the Pacific Northwest is the region defined in Section 3 of the Pacific
Northwest Electric Power Planning and Conservation Act (16 U.S.C.839a) or a
portion of a state included in the geographic area proposed for a Regional
Transmission Organization in FERC Docket No. RT01-35.
Sense of Congress Regarding Locational Installed Capacity
Mechanism (Sec. 1236). It is the sense of Congress that FERC should carefully
consider the objections of the states to a proposed locational installed capacity
mechanism in New England. The objections include that a locational installed
capacity mechanism would not provide adequate assurance that necessary electric
generation capacity or reliability will be provided and it would impose a high cost on
Subtitle D — Transmission Rate Reform
Transmission Infrastructure Investment (Sec. 1241). Within one year
of enactment, FERC is required to establish a rule to create incentive-based,
including performance-based, transmission rates. The rule is to promote reliable and
economically efficient electric transmission and generation, provide for a return on
equity that attracts new investment in transmission, encourage use of technologies
that increase the transfer capacity of existing transmission facilities, and allow for the
recovery of all prudently incurred costs that are necessary to comply with mandatory
reliability standards and those that would result from transmission siting and
construction on a National Interest Electric Transmission Corridor. FERC is directed
to implement incentive rate-making for utilities that join a Regional Transmission
Funding New Interconnection and Transmission Upgrades (Sec.
1242). FERC may approve a participant funding plan for new transmission or for
new generator interconnection if the plan results in rates that are just and reasonable,
not unduly discriminatory or preferential, and otherwise consistent with sections 205
and 206 of the Federal Power Act.
Subtitle E — Amendments to PURPA
Net Metering and Additional Standards (Sec. 1251). For states that
have not considered implementation and adoption of net metering standards, within
two years of enactment, state regulatory authorities are required to begin considering
whether to implement net metering. This process must be completed within three
years of enactment. Net metering service is defined as service to an electric
consumer under which electric energy generated by that electric consumer from an
eligible on-site generating facility (e.g., solar or small generator) and delivered to
local distribution facilities may be used to offset electric energy provided by the
electric utility to the electric consumer during the applicable billing period. During
the same time frame, states must consider whether to implement a standard to require
electric utilities to develop a plan to minimize dependence on one fuel source. In
addition, states must consider whether to implement a requirement that electric
utilities develop and implement a 10-year plan to increase the efficiency of fossil fuel
Smart Metering (Sec. 1252). For states that have not considered
implementation and adoption of a smart metering standard, state regulatory
authorities are required issue a decision within 18 months of enactment on whether
to implement a standard for time-based rate schedules for electric utility customers.
Customers using time — based rate schedules must be provided with a time-based
meter capable of allowing utility customer to receive the time-based rate. This18
section amends the Public Utility Regulatory Policies Act of 1978 (PURPA) and
requires the Secretary of Energy to provide consumer education on advanced
metering and communications technologies, to identify and address barriers to
adoption of demand response programs, and issue a report to Congress not later than
18 P.L. 95-617.
180 days after enactment that identifies and quantifies the benefits of demand
response. The Secretary of Energy must provide technical assistance to regional
organizations to identify demand response potential and to develop demand response
programs to respond to peak demand or emergency needs. FERC is directed to issue
an annual report, by region, to assess demand response resources.
Cogeneration and Small Power Production Purchase and Sale
Requirements (Sec. 1253). Section 210 of PURPA required utilities to purchase
power from qualifying facilities and small power producers at a rate based on the
utilities’ avoided cost.19 This section repeals the mandatory purchase requirement
under §210 of PURPA for new contracts if FERC finds that a competitive electricity
market exists and a qualifying facility has access to independently administered,
auction-based, day-ahead, and real-time wholesale markets and long-term wholesale
markets. Qualifying facilities also need to have access to transmission and
interconnection services provided by a FERC-approved regional transmission entity
that provides non-discriminatory treatment for all customers. Ownership limitations
under PURPA are repealed.
Background and Analysis. The oil embargoes of the 1970s created
concerns about the security of the nation’s electricity supply and led to enactment of
the Public Utility Regulatory Policies Act of 1978. For the first time, utilities were
required to purchase power from outside sources, or “qualifying facilities.” The
purchase price was set at the utilities’ “avoided cost,” the cost they would have
incurred to generate the additional power themselves, as determined by utility
regulators. PURPA was established in part to augment electric utility generation with
more efficiently produced electricity and to provide equitable rates to electric
In addition to PURPA, the Fuel Use Act of 1978 (FUA) helped qualifying
facilities (QFs) become established.20 Under FUA, utilities were not permitted to use
natural gas to fuel new generating facilities. QFs, which are by definition not
utilities, were able to take advantage of then-abundant natural gas as well as new
generating technology, such as combined-cycle plants that use hot gases from
combustion turbines to generate additional power. These technologies lowered the
financial threshold for entrance into the electricity generation business as well as
shortened the lead time for constructing new plants. FUA was repealed in 1987, but
by that time QFs and small power producers had gained a portion of the total
This influx of QF power challenged the cost-based rates that previously guided
wholesale transactions. Before implementation of PURPA, FERC approved
wholesale interstate electricity transactions based on the seller’s costs to generate and
transmit the power. Since nonutility generators typically do not have enough market
power to influence the rates they charge, FERC began approving certain wholesale
transactions whose rates were a result of a competitive bidding process. These rates
are called market-based rates.
19 16 U.S.C. 824a-3.
20 P.L. 95-620.
This first incremental change to traditional electricity regulation started a
movement toward a market-oriented approach to electricity supply. Following the
enactment of PURPA, two basic issues stimulated calls for further change: whether
to encourage nonutility generation and whether to permit utilities to diversify into
The Energy Policy Act of 1992 (EPACT) removed several regulatory barriers
for entry into electricity generation to increase competition of electricity supply.21
However, EPACT does not permit FERC to mandate that utilities transmit exempt
wholesale generator (EWG) power to retail consumers (commonly called “retail
wheeling” or “retail competition”), an activity that remains under the jurisdiction of
state public utility commissions. PURPA began to shift more regulatory
responsibilities to the federal government, and EPACT continued that shift away
from the states by creating new options for utilities and regulators to meet electricity
Proponents of PURPA repeal — primarily investor-owned utilities (IOUs)
located in the Northeast and in California — argued that their state regulators’
“misguided” implementation of PURPA in the early 1980s has forced them to pay
contractually high prices for power they do not need. They argued that, given the
current environment for cost-conscious competition, PURPA was outdated. Investor-
owned utility interests strongly supported repeal of §210 of PURPA, contending that
PURPA’s mandatory purchase obligation was anti-competitive and anti-consumer.
Opponents of mandatory purchase requirement repeal (independent power
producers, industrial power customers, most segments of the natural gas industry, the
renewable energy industry, and environmental groups) had many reasons to support
PURPA as it stood. Mainly, their argument was that PURPA introduced competition
in the electric generating sector and, at the same time, helped promote wider use of
cleaner, alternative fuels to generate electricity. Since the electric generating sector
is not yet fully competitive, they argued, repeal of PURPA would decrease
competition and impede the development of the renewable energy industry.
Additionally, opponents of PURPA repeal argued that it would result in less
competition and greater utility monopoly control over the electric industry. Some
state regulators had expressed concern that §210 repeal would prevent them from
deciding matters currently under their jurisdiction.
Interconnection (Sec. 1254). Each state regulatory authority, if it has not
already done so, and each nonregulated utility must consider establishing an
interconnection standard for on-site generating facilities that request to be connected
to the local distribution facilities. Interconnection services will be offered according
to the Institute of Electrical and Electronics Engineers (IEEE) Standard 1547 for
Interconnecting Distributed Resources with Electric Power Systems. Consideration
of the standard is to commence not later than one year after enactment and be
completed not later than two years after the date of enactment.
21 P.L. 102-486.
Subtitle F — Repeal of PUHCA
Short Title (Sec. 1261). This subtitle is to be cited as the “Public Utility
Holding Company Act of 2005.”
Definitions (Sec. 1262). This section establishes definitions for: affiliate,
associate company, commission, company, electric utility company, exempt
wholesale generator and foreign utility company, gas utility company, holding
company, holding company system, jurisdictional rates, natural gas company, person,
public utility, public-utility company, state commission, subsidiary company, and
Repeal of the Public Utility Holding Company Act of 1935 (Sec.
Background and Analysis. In general, PUHCA set forth the structure of
holding companies by prohibiting all holding companies that were more than twice
removed from the operating subsidiaries. It also federally regulated holding
companies of investor-owned utilities, and provided for Securities and Exchange
Commission (SEC) regulation of mergers and diversification proposals. Registered
holding companies of subsidiaries were required to have SEC approval prior to
issuing securities; all loans in intercompany financial transactions were regulated by
the SEC. A holding company could have been exempt from PUHCA if its business
operations and those of its subsidiaries occurred within one state or with a contiguous
Historically, electricity service was defined as a natural monopoly, meaning that
the industry has (1) an inherent tendency toward declining long-term costs, (2) high
threshold investment, and (3) technological conditions that limit the number of
potential entrants. In addition, many regulators have considered unified control of
generation, transmission, and distribution as the most efficient means of providing
service. As a result, most people (about 75%) are currently served by a vertically
integrated, investor-owned utility.
As the electric utility industry has evolved, however, there has been a growing
belief that the historic classification of electric utilities as natural monopolies has
been overtaken by events and that market forces can and should replace some of the
traditional economic regulatory structure. For example, the existence of utilities that
do not own all of their generating facilities, primarily cooperatives and publicly
owned utilities, has provided evidence that vertical integration has not been necessary
for providing efficient electric service. Moreover, recent changes in electric utility
regulation and improved technologies have allowed additional generating capacity
to be provided by independent firms rather than utilities.
The Public Utility Holding Company Act and the Federal Power Act (FPA) of
1935 (Title I and Title II of the Public Utility Act) established a regime of regulating
electric utilities that gave specific and separate powers to the states and the federal
government. A regulatory bargain was made between the government and utilities.
In exchange for an exclusive franchise service territory, utilities must provide
electricity to all users at reasonable, regulated rates.
State regulatory commissions address intrastate utility activities, including
wholesale and retail rate-making. State authority currently tends to be as broad and
as varied as the states are diverse. At the least, a state public utility commission will
have authority over retail rates, and often over investment and debt. At the other end
of the spectrum, the state regulatory body will oversee many facets of utility
operation. Despite this diversity, the essential mission of the state regulator in states
that have not restructured is the establishment of retail electric prices. This is
accomplished through an adversarial hearing process. The central issues in such
cases are the total amount of money the utility will be permitted to collect and how
the burden of the revenue requirement will be distributed among the various
customer classes (residential, commercial, and industrial).
Under the FPA, federal economic regulation addresses wholesale transactions
and rates for electric power flowing in interstate commerce. Federal regulation
followed state regulation and is premised on the need to fill the regulatory vacuum
resulting from the constitutional inability of states to regulate interstate commerce.
In this bifurcation of regulatory jurisdiction, federal regulation is limited and
conceived to supplement state regulation. FERC has the principal functions at the
federal level for the economic regulation of the electric utility industry, including
financial transactions, wholesale rate regulation, transactions involving transmission
of unbundled retail electricity, interconnection and wheeling of wholesale electricity,
and ensuring adequate and reliable service. Before Public Law 109-58, to prevent
a recurrence of the abusive practices of the 1920s (e.g., cross-subsidization,
self-dealing, pyramiding, etc.), SEC regulated utilities’ corporate structure and
business ventures under PUHCA.
The electric utility industry has been in the process of transformation. During
the past two decades, there has been a major change in direction concerning
generation. First, improved technologies have reduced the cost of generating
electricity as well as the size of generating facilities. Prior preference for large-scale
— often nuclear or coal-fired — powerplants has been supplanted by a preference
for small-scale production facilities that can be brought on line more quickly and
cheaply, with fewer regulatory impediments. Second, this has lowered the entry
barrier to electricity generation and permitted non-utility entities to build profitable
One argument for additional PUHCA change was made by electric utilities that
wanted to further diversify their assets. Under PUHCA, a holding company could
acquire securities or utility assets only if the SEC found that such a purchase would
improve the economic efficiency and service of an integrated public utility system.
It was argued that reform to allow diversification would improve the risk profile of
electric utilities in much the same way as in other businesses: The risk of any one
investment is diluted by the risk associated with all investments. Utilities also argued
that diversification would lead to better use of under-utilized resources (due to the
seasonal nature of electric demand). Utility holding companies that were exempt
from SEC regulation argued that PUHCA discouraged diversification because the
SEC could have repealed exempt status if exemption would be “detrimental to the
State regulators expressed concerns that increased diversification could lead to
abuses, including cross-subsidization: a regulated company subsidizing an
unregulated affiliate. Cross-subsidization was a major argument against the creation
of exempt wholesale generators (EWGs) and reemerged as an argument against
further PUHCA change. In the case of electric and gas companies, non-utility
ventures that are undertaken as a result of diversification may benefit from the
regulated utilities’ allowed rate of return. Moneymaking non-utility enterprises
would contribute to the overall financial health of a holding company. However,
unsuccessful ventures could harm the entire holding company, including utility
subsidiaries. In this situation, opponents feared that utilities would not be penalized
for failure in terms of reduced access to new capital, because they could increase
Several consumer and environmental public interest groups, as well as state
legislators, expressed concerns about PUHCA repeal. PUHCA repeal, such groups
argued, could only exacerbate market power abuses in what they see as a
monopolistic industry where true competition does not yet exist.
Federal Access to Books and Records (Sec. 1264). Holding
companies and their affiliates are required to make available to FERC books and
records of affiliate transactions which FERC determines are relevant to costs incurred
by a public utility or natural gas company within the holding company system to
protect ratepayers with respect to FERC jurisdictional rates. Federal officials are
required to maintain confidentiality of such books and records. Before enactment,
registered holding companies and subsidiary companies were required to preserve
accounts, cost-accounting procedures, correspondence, memoranda, papers, and
books that the SEC deemed necessary or appropriate in the public interest or for the
protection of investors and consumers.
State Access to Books and Records (Sec. 1265). A jurisdictional state
commission may make a reasonably detailed written request to a holding company
or any associate company for access to specific books and records. The states must
safeguard against unwarranted disclosure to the public of any trade secrets or
sensitive commercial information. Response to such a request is mandatory.
Compliance with this section is enforceable in U.S. District Court. This section does
not apply to an entity that is considered to be a holding company solely by reason of
ownership of one or more qualifying facilities.
Before enactment, the Federal Power Act allowed state commissions to examine
the books, accounts, memoranda, contracts, and records of a jurisdictional electric
utility company, an exempt wholesale generator that sells to such electric utility, and
an electric utility company or holding company that is an associate company or
affiliate of an exempt wholesale generator. In issuing such an order, a state
commission was not required to specify which books, accounts, memoranda,
contracts, and records it was requesting.
Exemption Authority (Sec. 1266). FERC is directed to promulgate rules
within 90 days from the effective date of this section to exempt qualifying facilities,
exempt wholesale generators, and foreign utilities from the federal access to books
and records provision (Section 1264). FERC is also required to exempt books,
accounts, memoranda, and other records that are not relevant to the jurisdictional
rates of a public utility or natural gas company. Any class of transactions that is not
relevant to the jurisdictional rates of a public utility or natural gas company is also
Affiliate Transactions (Sec. 1267). FERC retains the authority to prevent
cross-subsidization and to assure that jurisdictional rates are just and reasonable.
FERC and state commissions retain jurisdiction to determine whether associate
company activities could be recovered in rates. Before enactment of the new energy
law, the Federal Power Act required that jurisdictional rates were just and reasonable22
and prohibited cross-subsidization.
Applicability (Sec. 1268). Except as specifically noted, this subtitle does not
apply to the U.S. government, a state or any political subdivision of the state, or
foreign governmental authority operating outside the United States.
Effect on Other Regulations (Sec. 1269). FERC or state commissions are
not precluded from exercising their jurisdiction under otherwise applicable laws to
protect utility customers.
Enforcement (Sec. 1270). FERC is given the authority to enforce these
provisions under sections 306-317 of the Federal Power Act. Before enactment, the
Securities and Exchange Commission had the authority to investigate and enforce
provisions of the Public Utility Holding Company Act of 1935.
Savings Provisions (Sec. 1271). Persons are able to continue to engage
in legal activities in which they have been engaged, or are authorized to engage in,
on the effective date of this act. This subtitle would not limit the authority of FERC
under the Federal Power Act or the Natural Gas Act. Tax treatment for exchanges
of stock or securities under section 1081 of the Internal Revenue Service Code,
Nonrecognition of Gain or Loss on Exchanges or Distributions in Obedience to
Orders of the SEC, is not affected due to the repeal of PUHCA.
Implementation (Sec. 1272). Not later than four months after enactment,
FERC is required to promulgate regulations necessary to implement this subtitle
(excluding section 1265 which relates to state access to books and records) and
submit to Congress recommendations for technical or conforming amendments to
federal law necessary to carry out this subtitle.
Transfer of Resources (Sec. 1273). The Securities and Exchange
Commission is required to transfer all applicable books and records to FERC.
Effective Date (Sec. 1274). Six months after enactment, this subtitle will
take effect. This effective date does not apply to §1282 (implementation). If any
FERC rulemaking that modifies the standards of conduct governing entities that own,
operate, or control facilities for transmission of electricity in interstate commerce or
22 16 U.S.C. 791a et seq.
transportation of natural gas in interstate commerce takes effect prior to the effective
date of this section, any action taken by a public-utility company or utility holding
company to comply with the FERC requirements will not subject these companies
to any regulatory requirement under PUHCA.
Service Allocation (Sec. 1275). FERC is required to review and authorize
cost allocations for non-power goods or administrative or management services
provided by an associate company that was organized specifically for the purpose of
providing such goods or services. This section does not preclude FERC or state
commissions from exercising their jurisdiction under other applicable laws with
respect to review or authorization of any costs. FERC is required to issue rules
within four months of enactment to exempt from the section any company and
holding company system if operations are confined substantially to a single state.
Authorization of Appropriations (Sec. 1276). Necessary funds to carry
out this subtitle are authorized to be appropriated.
Conforming Amendments to the Federal Power Act (Sec. 1277). The
Federal Power Act is amended to reflect the changes to the Public Utility Holding
Company Act of 1935.
Subtitle G — Market Transparency, Enforcement, and
Electricity Market Transparency (Sec. 1281). FERC is directed to
facilitate price transparency in wholesale electric markets. FERC may prescribe rules
to provide on a timely basis information about the availability and prices of
wholesale electric energy and transmission service to FERC, state commissions,
buyers and sellers of wholesale electric energy, users of transmission services, and
the public. FERC is directed to rely on existing price publishers and providers of
trade processing services the maximum extent possible. However, FERC may
establish an electronic information system if it determines that existing price
information is not adequate. Any rules promulgated by FERC will exempt from
disclosure any information that would be detrimental to the operation of an effective
market or jeopardize system security. Within 180 days of enactment, FERC must
enter into a memo of understanding (MOU) with the Commodity Futures Trading
Commission to ensure coordination of information requests to markets.
Entities with a de minimis market presence are not required to comply with the
reporting requirements of the section. No one will be subject to civil penalties for
any violation of the reporting requirements that occur more than three years before
the date on which the person has provided notice of the proposed penalty. This
would not apply to entities that have engaged in fraudulent market manipulation
activities. The section does not apply to the area of the Electric Reliability Council
False Statements (Sec. 1282). The Federal Power Act is amended to
expressly prohibit any entity from willingly and knowingly reporting false
information to a federal agency relating to the price of electricity sold at wholesale
or the availability of transmission capacity.
Background. Existing mail fraud laws in part apply to use of the mail for the
purpose of executing, or attempting to execute, a scheme or artifice to defraud or for
obtaining money or property by false or fraudulent pretenses, representations, or
promises. Wire fraud statutes cover use of wire, radio, or television communication
in interstate or foreign commerce to transmit or to cause to be transmitted any
writings, science, signals, pictures, or sounds for the purpose of executing a scheme
or artifice to defraud or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises.
Market Manipulation (Sec. 1283). Amends the Federal Power Act to
expressly prohibit any entity, in connection with the purchase or sale of FERC
jurisdictional electric energy or transmission services, from directly or indirectly
using any manipulative or deceptive device or contrivance.
Enforcement (Sec. 1284). The Federal Power Act is amended to allow
electric utilities to file complaints with FERC and to allow complaints to be filed
against transmitting utilities. Criminal and civil penalties under the Federal Power
Act are increased. Criminal penalties may not exceed $1 million and/or five years’
imprisonment. In addition, a fine of $25,000 may be imposed. A civil penalty not
exceeding $1 million per day per violation may be assessed for violations of sections
211, 212, 213, or 214 of the Federal Power Act. Before enactment of the new energy
law, criminal penalties could not have exceeded $5,000 and/or two years’
imprisonment. An additional fine of $500 could have been imposed. A civil penalty
not exceeding $10,000 per day per violation could have been assessed for violations
of sections 211, 212, 213, or 214 of the Federal Power Act.
Refund Effective Date (Sec. 1285). Section 206(b) of the Federal Power
Act is amended to allow the effective date for refunds to begin at the time of the
filing of a complaint with FERC but not later than five months after such a filing.
If FERC does not make its decision within the time-frame provided, FERC would be
required to state its reasons for not acting in the provided time-frame for the decision.
Refund Authority (Sec. 1286). Any entity that is not a public utility
(including an entity referred to under §201(f) of the Federal Power Act) and enters
into a short-term sale of electricity is subject to the FERC refund authority. A short-
term sale includes any agreement to the sale of electric energy at wholesale that is for
a period of 31 days or less. This section does not apply to electric cooperatives, or
any entity that sells less than 8 million megawatt hours of electricity per year. FERC
is given refund authority over voluntary short-term sales of electricity by Bonneville
Power Administration if the rates charged are unjust and unreasonable. FERC is
given authority over all power marketing administrations and the Tennessee Valley
Authority to order refunds to achieve just and reasonable rates. Before enactment,
Section 201(f) of the Federal Power Act exempted government entities from FERC
Consumer Privacy and Unfair Trade Practices (Sec. 1287). The
Federal Trade Commission is authorized to issue rules to prohibit slamming and
cramming. Slamming occurs when an electric utility switches a customer’s electric
provider without the consumer’s knowledge. Cramming occurs when an electric
utility adds additional services and charges to a customer’s account without
permission of the customer. If the Federal Trade Commission determines that a
state’s regulations provide equivalent or greater protection, then the state regulations
would apply in lieu of regulations issued by the Federal Trade Commission.
Authority of Court to Prohibit Individuals from Serving As Officers,
Directors, and Energy Traders (Sec. 1288). The court is allowed to prohibit
any person who is found to have violated Section 221 of the Federal Power Act
(Prohibition on Filing False Information) from acting as an officer or director of an
electric utility or engaging in the business of purchasing or selling FERC
jurisdictional electric energy or transmission services.
Merger Review Reform (Sec. 1289). The Federal Power Act would be
amended to give FERC approval authority over the acquisition of securities and the
merger, sale, lease, or disposition of facilities under FERC’s jurisdiction with a value
in excess of $10 million. FERC is required to give state public utility commissions
and governors reasonable notice in writing. FERC must approve the proposed
change of control, acquisition, disposition, or consolidation if it finds that the
proposed transaction is consistent with the public interest and will not result in
cross-subsidization of a nonutility associate company or the pledge or encumbrance
of utility assets for the benefit of an associate company, unless it is consistent with
the public interest. If FERC does not act within 180 days of an application, the
application will be deemed granted unless FERC finds that further consideration is
required. This section takes effect six months after enactment. Before enactment,
under section 203(a) of the Federal Power Act, FERC review of asset transfers
applied to transactions valued at $50,000 or more.
Relief for Extraordinary Violations (Sec. 1290). This section applies to
contracts for wholesale electricity within the Western Interconnection prior to June
20, 2001, for which FERC has found that the wholesale power sellers manipulated
that electricity market, resulting in unjust and unreasonable rates, and for which
FERC has revoked the seller’s authority to sell at market-based rates. For these
contracts, FERC may determine whether termination payments for power not
delivered by the seller are unlawful on the grounds that the contract is unjust and
unreasonable or contrary to the public interest. This applies only to cases still
pending before FERC and not previously settled.
Subtitle H — Definitions
Definitions (Sec. 1291). The definitions for “electric utility” and
“transmitting utility” under the Federal Power Act would be amended. Definitions
for the following terms would be added to the Federal Power Act: electric
cooperative, regional transmission organization, independent system operator, and
Section 201(f) of the Federal Power Act is amended to add that in addition to
a political subdivision of a state, an electric cooperative that receives financing under
the Rural Electrification Act of 1936 or an electric cooperative that sells less than
Subtitle I — Technical and Conforming Amendments
Conforming Amendments (Sec. 1295). The Federal Power Act is
amended to conform with this section.
Subtitle J — Economic Dispatch
Economic Dispatch (Sec. 1298). FERC is directed to convene regional
boards to study “security constrained economic dispatch.” A member of FERC will
chair each regional joint board that is to be composed of a representative from each
state. Within one year of enactment, FERC is required to submit a report to Congress
on the recommendations of the joint regional boards. This section does not define
“security constrained economic dispatch,” but it generally means a dispatch system
that ensures that all normal and contingency limits of the system are simultaneously
met under a base case with one contingency (i.e., the loss of a critical network
element, N-1 security analysis).
Title XIII — Energy Policy Tax Incentives
Short Title (Sec. 1300). This title may be cited as the “Energy Tax
Incentives Act of 2005.”
Subtitle A — Electricity Infrastructure
Summary of Provisions. This section generally liberalizes existing tax
provisions to reduce taxes for the electric utility industry — businesses that supply
electricity for residential, commercial, industrial and government use. It also,
however, introduces two new energy tax subsidies for electricity: a tax credit for
investors in clean renewable energy bonds, and a tax credit for electricity produced
from nuclear energy.
The title “electricity infrastructure” implies the targeting of the industry’s capital
in all segments of electricity supply — generation, transmission, and distribution.
Included also are electricity production (generation) incentives such as an extension
of the Internal Revenue Code (IRC) §45 tax credit, and the new nuclear credit. Some
of the provisions are intended to facilitate the ongoing restructuring of the electric
utility industry. For example, the deferral of gain on the sale of transmission assets
is intended to foster a more competitive industry by facilitating the unbundling of
transmission assets held by vertically integrated utilities.
Extension and Modification of Renewable Electricity Production
Credit (Sec. 1301). This extends the availability of the §45 credit (the placed-in-
service deadline) for two years for electricity produced from renewable resources,
except for solar energy facilities described in §45(d)(4) and refined coal production
facilities described in §45(d)(8). For these two categories, the December 31, 2005,
deadline remains unchanged. In addition, P.L. 109-58 extends the credit period to
eliminating the five-year credit period to which some facilities are currently subject.
Also, the definition of qualified energy resources that qualify for the credit is
expanded to include qualified hydropower production, although a qualified
hydroelectric facility is entitled to only 50% of the usual credit. P.L. 109-58 also adds
Indian coal production facilities to the list of those facilities eligible for the credit.
The credit is available for sales of Indian coal to an unrelated party from a qualified
facility beginning January 1, 2006, and ending December 31, 2012. The credit is
$1.50 per ton during 2006-2009 and increases to $2.00 per ton in 2110-2012; the
credit amount for Indian coal is also to be adjusted for inflation in calendar years
after 2006. This is effective as of the date of enactment (August 8, 2005).
Application of Section 45 Credit to Agricultural Cooperatives (Sec.
1302). This section allows cooperatives eligible for the §45 credit to elect to pass
through any portion of the credit to their patrons. To be eligible for this election, the
cooperative must be more than 50%-owned by agricultural producers or entities
owned by agricultural producers. The election must be made on an annual basis and
is irrevocable once made. This is effective for taxable years of cooperatives ending
after the date of enactment.
Clean Renewable Energy Bonds (Sec. 1303). This section adds a new
section to the IRC, §54, providing a credit for holders of clean renewable energy
bonds. To qualify for the credit, the bonds must be issued pursuant to an allocation
by the Secretary of the Treasury, and at least 95% of the proceeds must be used for
capital expenditures on a qualified facility (determined under §45(d) without regard
to the date placed in service). The amount of the credit is the face amount of the
bond, multiplied by a credit rate to be determined by Treasury. The credit rate is to
permit the issuance of the bonds without discount or any interest cost to the issuer.
There is a national limit of $800 million for such bonds, and no more than $500
million of the bonds may be allocated to finance projects for governmental
borrowers. This is effective for bonds issued after December 31, 2005.
Treatment of Income of Certain Electrical Cooperatives (Sec.1304).
This section repeals the sunset provisions of §501(c)(12)(C) and (H), which allow a
mutual or cooperative electric company to treat income from the sale of electric
transmission services, the sale of distribution services, nuclear decommissioning
transactions, asset exchange or conversion transactions, and load loss transactions as
member income. The provision is effective as of the date of enactment.
Dispositions of Transmission Property to Implement FERC
Restructuring Policy (Sec. 1305). The special capital gains tax treatment under
IRC §451(i) of gains on the sale or disposition of certain property used in providing
electric transmission services is extended to December 31, 2007. This is effective for
transactions occurring after the date of enactment.
Credit for Production from Advanced Nuclear Power Facilities
(Sec.1306). This section adds IRC §45J, providing a §38 business credit for
electricity produced in the first eight years of operation of an advanced nuclear power
facility. The credit is equal to 1.8¢ times the kilowatt hours of electricity produced
and sold to an unrelated person, but is subject to a limitation based on the amount of
the national megawatt capacity limitation allocated to the facility. The total national
limitation is 6,000 megawatts, which is to be allocated as prescribed by the Secretary
of Energy. The credit is further limited to $125 million annually per thousand
megawatts of capacity allocated to the facility. To qualify for the credit, a facility
must be of a design first approved by the Nuclear Regulatory Commission after 1993,
and must be placed in service after the date of enactment and before 2021. This is
effective for production in taxable years beginning after date of enactment.
Credit for Investment in Clean Coal Facilities (Sec. 1307). Two new
§46 investment credits are established for advanced coal projects and qualified coal
gasification projects, as new IRC §§48A and 48B, respectively. The credits would
be 20% for coal gasification projects using integrated gasification combined cycle
(IGCC) technology, and 15% for other advanced coal-based projects. The total
credits available under §48A for qualifying advanced coal projects would be limited
to $1.3 billion, with $800 million allocated to IGCC projects and the remaining $500
million to projects using other advanced coal-based generation technologies. The
§48B credit for qualifying gasification projects would be limited to $350 million.
Both credits would be allocated based on the amount invested. These credits are
effective for periods after the date of enactment, using rules similar to those of former
IRC §48(m) before its 1990 repeal.
Electric Transmission Property Treated as 15-Year Property (Sec.
1308). Depreciable property used in the transmission of 69 or more kilovolts of
electricity for sale is classified as 15-year property under the Modified Accelerated
Cost Recovery System (MACRS) and assigned a 30-year class life for purposes of
the alternative depreciation system. Prior to this amendment such transmission
property generally had been assigned a 20-year recovery period. The new recovery
period is effective for property placed in service after April 11, 2005, except for
property that is the subject of a binding contract or is under construction (for
self-constructed property) on or before April 11, 2005.
Expansion of Amortization for Certain Atmospheric Pollution
Control Facilities in Connection with Plants First Placed in Service After
1975 (Sec.1309). Atmospheric pollution control facilities placed in service after
April 11, 2005, and used in connection with an electric generation plant or other
property which is primarily coal-fired, are eligible for an amortization period of 60
months (rather than 84 months). P.L. 109-58 eliminates the rule that to be a certified
pollution control facility (and eligible for the faster depreciation), such facility
needed to be in operation before January 1, 1976.
Modification to Special Rules for Nuclear Decommissioning Costs
(Sec.1310). This section repeals the cost of service requirement for deductible
contributions to a nuclear decommissioning fund. Thus, all taxpayers, including
unregulated taxpayers, would be allowed a deduction for amounts contributed to a
qualified fund. The section also permits tax-deductible contributions to a qualified
fund for pre-1984 decommissioning costs.
Section 1310 also repeals the limitation that a qualified fund accumulate only
an amount sufficient to pay for a nuclear power plant’s decommissioning costs
incurred during the period that the qualified fund is in existence (generally post-1984
decommissioning costs). Thus, any taxpayer is permitted to accumulate an amount
sufficient to cover the present value of 100% of a nuclear power plant’s estimated
decommissioning costs in a qualified fund.
The act does not change the requirement that contributions to a qualified fund
not be deducted more rapidly than level funding. The act permits a taxpayer to make
contributions to a qualified fund in excess of the “ruling amount” (determined by the
Secretary) in one circumstance: specifically, a taxpayer is permitted to contribute up
to the present value of total nuclear decommissioning costs with respect to a nuclear
power plant previously excluded under §468A(d)(2)(A). It is anticipated that an
amount permitted to be contributed under this special rule shall be determined using
the estimate of total decommissioning costs used for purposes of determining the
taxpayer’s most recent ruling amount. Any amount transferred to the qualified fund
under this special rule will be allowed as a deduction over the remaining useful life
of the nuclear power plant. If a qualified fund that has received amounts under this
rule is transferred to another person, the transferor is permitted a deduction for any
remaining deductible amounts at the time of transfer. The act requires that a taxpayer
apply for a new ruling amount with respect to a nuclear power plant in any tax year
in which the power plant is granted a license renewal, extending its useful life. This
is effective for taxable years beginning after December 31, 2005.
Five-Year NOL Carryback for Certain Electric Utility Companies
(Sec.1311). Certain electric utility companies are allowed to extend the Net
Operating Loss (NOL) carryback period to five years for a portion of NOLs arising
in 2003, 2004, and 2005. The election is to be made during any taxable year ending
after 2005 and before 2009 and must specify the loss to which it applies. The election
applies to 20% of the taxpayer’s qualifying investment during the prior taxable year.
Rules similar to those for specified liability losses apply, and any unused portion of
the loss year NOL remains subject to previous carryover rules. A taxpayer is limited
to one election per taxable year for no more than one taxable year beginning in the
same calendar year. For calculating interest on overpayments, any overpayment
resulting from a five-year NOL carryback election is deemed not to have been made
before the filing date for the taxable year in which the taxpayer made the election.
The statute of limitations for refund claims and assessment of deficiencies is
extended. The Treasury is to prescribe the manner to make the election, with filing
a refund claim as sufficient for making the election, provided the taxpayer attaches
a statement specifying the election year, the loss year, and the amount of qualifying
investment in electric transmission property and pollution control facilities in the
preceding taxable year.
An investment qualifies for the extended carryback if it is a capital expenditure:
(1) attributable to electric transmission property used by the taxpayer in the
transmission at 69 or more kilovolts of electricity for sale; or (2) made by an electric
utility company (as defined in the Public Utility Holding Company Act) and
attributable to a certified pollution control facility, as defined in §169(d)(1) but
without the requirement that the facility either be new or be used with a plant or other
property in operation before January 1, 1976. There is no requirement that the
qualifying investment property be placed in service in the year that the taxpayer
incurs the capital expenditures, so long as the taxpayer is committed to the
expenditures and to placing the property in service in the taxpayer’s trade or business.
The extended carryback does not cover expenditures that, at the taxpayer’s choice,
are refundable or subject to material modification that would not meet the
requirements of this provision. This is effective for elections made in taxable years
ending after December 31, 2005, and before January 1, 2009, with respect to NOLs
arising in taxable years ending in 2003, 2004, and 2005.
Background and Policy Context. Historically, the electric utility industry
has not been provided special federal tax preferences, although it has benefitted
significantly from 1) capital tax incentives (such as accelerated depreciation and
investment tax credits) due to its capital-intensive production process, and 2) from
special tax preferences for renewable electricity. While many of the new electricity
industry tax incentives in this subtitle originated with electricity industry
restructuring proposals, others were in response to specific electricity market
conditions and negative trends in those markets, particularly spiking electricity
prices, supply shortfalls, and bottlenecks.
Some energy market analysts believe that electricity supply problems are due
to insufficient distribution/transportation infrastructure — insufficient transmission
lines — to deliver the supplies to meet the demands of the market. Investment in
transmission lines (the grid) and other distribution capital has not been commensurate
with increases in the generation and bulk transfer of power. Growing spot markets
that ship power supplies over ever greater distances have crammed more electrons
onto wires built to serve utilities’ local customers. But most of the grid was built in
the 1950s and needs upgrading. The Electric Power Research Institute, a Palo Alto,
California-based industry group, has pegged building costs at $100 billion over the
decade. The electricity tax subsidies increase the incentives to invest in electricity
generation and transmission — capital incentives for utilities to construct new
transmission facilities and new additional power lines. The goals is to reduce
congestion in the nations transmission grid, which has been blamed for power
brownouts and blackouts and for electricity price spikes.
The new production tax credit for nuclear power appears to be consistent with
the Bush Administration’s support for new nuclear power plants, although the
Administration had not proposed such a subsidy. Nuclear reactors generate about
20% of U.S. electricity, but the most recent U.S. reactor order (that was not
subsequently canceled) was in 1973. Supporters of the nuclear tax credit contend
that it would provide balance with the previously established renewable electricity
production tax credit.
Subtitle B — Domestic Fossil Fuel Security
Summary of Provisions. Subtitle B includes tax incentives for the
production, transportation, and distribution of oil and gas, as well as capital
incentives for refinery production of liquid fuels. Not included are coal supply
incentives, which are subsumed in the electricity infrastructure subtitle described
above. Many of the incentives are production tax credits and other such “upstream”
production incentives, but some are also capital incentives for natural gas
infrastructure (accelerated depreciation of natural gas lines).
These tax incentives mostly involve liberalization of existing tax code
provisions. The incentives are both production incentives (i.e., tax benefits based on
quantities of oil and gas) and capital incentives (i.e., tax benefits based on the
magnitude of capital investment such as pipelines). Both unconventional, as well as
conventional, oil and gas are targeted for tax cuts.
Extension of Credit for Producing Fuel from a Nonconventional
Source for Facilities Producing Coke or Coke Gas (Sec.1321). The IRC
§29 production credit is made available for qualified facilities that produce coke or
coke gas that were placed in service before January 1, 1993, or after June 30, 1998,
and before January 1, 2010. Coke and coke gas produced and sold during the period
beginning on the latter of January 1, 2006, or the date the facility is placed in service,
and ending four years after such period begins, is eligible for the production credit.
A facility that claims a credit under §29(g) is not eligible to claim the new credit for
producing coke or coke gas. The provision also requires that the amount of
credit-eligible coke produced cannot exceed an average barrel-of-oil equivalent of
4,000 barrels per day. The $3.00 credit for coke and coke gas would be indexed for
inflation with a 2004 base year. This section also states that the IRS should consider
issuing rulings and guidance on an expedited basis to taxpayers who had pending
ruling requests at the time that the IRS implemented a moratorium.
Modification of Credit for Producing Fuel from a Nonconventional
Source (Sec.1322). The §29 credit for producing fuel from a nonconventional
source is made part of the general business credit, moving the credit from §29 to new
§45K. This modification makes the general business limitations applicable to the
§29 tax credit. Any unused credits could be carried back one year and forward 20
years, except that the credit could not be carried back to a taxable year ending before
January 1, 2006. This is effective for fuel produced and sold after December 31,
2005, in taxable years ending after such date. The redesignation of the provision is
effective for credits determined under the 1986 Code for taxable years ending after
December 31, 2005.
Temporary Expensing for Equipment Used in Refining of Liquid
Fuels (Sec.1323). Refineries are allowed to irrevocably elect to expense 50% of
the cost of qualified refinery property, with no limitation on the amount of the
deduction. The deduction will be allowed in the taxable year in which the refinery is
placed in service. The remaining 50% of the cost remains eligible for regular cost
recovery provisions. To qualify for the deduction: (1) original use of the property
must commence with the taxpayer; (2) (i) construction must be pursuant to a binding
construction contract entered into after June 14, 2005, and before January 1, 2008,
(ii) in the case of self-constructed property, construction began after June 14, 2005,
and before January 1, 2008, or (iii) the refinery is placed in service before January 1,
2008; (3) the property must be placed in service before January 1, 2012; (4) the
property must meet certain production capacity requirements if it is an addition to an
existing refinery; and (5) the property must meet all applicable environmental laws
when placed in service. Certain types of refineries, including asphalt plants, are not
eligible for the deduction, and there is a special rule for sale-leasebacks of qualifying
refineries. If the owner of the refinery is a cooperative, it may elect to allocate all or
a part of the deduction to the cooperative owners, allocated on the basis of ownership
interests. This is effective for qualifying refineries placed in service after date of
Pass Through to Owners of Deduction for Capital Costs Incurred
by Small Refiner Cooperatives in Complying with Environmental
Protection Agency Sulfur Regulations (Sec.1324). The section provides that
cooperative refineries that qualify for §179B expensing (writing off in one year) of
capital costs incurred in complying with EPA sulfur regulations can elect to allocate
all or part of the deduction to their owners, determined on the basis of their
ownership interests. The election can be made on an annual basis and is irrevocable
once made. This provision is effective as if included in §338(a) of the American Jobs
Creation Act of 2004 (P.L. 108-357).
Natural Gas Distribution Lines Treated as 15-Year Property
(Sec.1325). This section establishes a 15-year recovery period for MACRS and a
Prior to this amendment, natural gas distribution lines were assigned a 20-year
recovery period. This provision is effective for property, the original use of which
began with the taxpayer after April 11, 2005, which is placed in service after April
11, 2005, and before January 1, 2011, and does not apply to property subject to a
binding contract on or before April 11, 2005.
Natural Gas Gathering Lines Treated as Seven-Year Property
Under prior law IRC§168(e)(3) and IRS regulations, the recovery period for natural
gas gathering lines could be either 7 or 15 years, depending upon whether they were
classified as production or transportation equipment. Recent court cases reflect the
ambiguous tax treatment. Natural gas pipelines have a recovery period of 15 years,
while natural gas distribution lines had a recovery period of 20 years (which, as noted
above, has been reduced to 15 years). P.L. 109-58 assigns natural gas gathering lines
a 7-year recovery period for MACRS and a class life of 14 years for the alternative
depreciation system for natural gas gathering lines. The law also provides that no
adjustment is made to the allowable amount of depreciation for alternative minimum
taxable income purposes.
Section 1326 defines a natural gas gathering line as the pipe, equipment, and
appurtenances determined to be a gathering line by FERC or used to deliver natural
gas from the wellhead or commonpoint to the point at which the gas first reaches: (1)
a gas processing plant; (2) an interconnection with an interstate transmission line; (3)
an interconnection with an intrastate transmission pipeline; or (4) a direct connection
with a local distribution company, a gas storage facility, or an industrial consumer.
Also, the section requires that the original use of the property begin with the
taxpayer. This provision is effective for property placed in service after April 11,
2005, excluding property with respect to which the taxpayer or related party had a
binding acquisition contract on or before April 11, 2005.
Arbitrage Rules Not to Apply to Prepayments for Natural Gas (Sec.
1327). This section creates a safe harbor exception to the general rule that
tax-exempt bond-financed prepayments violate arbitrage restrictions. The term
“investment type property” would not include a prepayment under a qualified natural
gas supply contract. The section also provides that such prepayments are not treated
as private loans for purposes of the private business tests. Thus, a prepayment
financed with tax-exempt bond proceeds for the purpose of obtaining a supply of
natural gas for service area customers of a governmental utility would not be treated
as the acquisition of investment-type property. The safe harbor provisions do not
apply if the utility engages in intentional acts to render: (1) the volume of natural gas
covered by the prepayment to be in excess of that needed for retail natural gas
consumption; and (2) the amount of natural gas that is needed to fuel transportation
of the natural gas to the governmental utility. This is effective for obligations issued
after date of enactment.
Determination of Small Refiner Exception to Oil Depletion
Deduction (Sec. 1328). The percentage depletion allowance for oil and gas is
15% of revenues (gross income) and is available only to independent producers (not
vertically integrated producers) and royalty owners. Independent producers (which
may be large firms) can claim a higher depletion rate (up to 25%, rather than the
normal 15%) for up to 15 barrels per day (bpd) of oil (or the equivalent amount of
gas) from marginal wells (“stripper” oil/gas and heavy oil). For purposes of
percentage depletion, an independent oil producer had been defined as one that does
not refine more than 50,000 barrels of oil on any given day and does not have a retail
operation grossing more than $5 million/year (IRC§613A(d)). Under P.L. 109-58,
the 50,000 barrel daily limit is raised to 75,000. In addition, the section changes the
refinery limitation on claiming independent producer status from a limit based on
actual daily production to a limit based on average daily production for the taxable
year. Accordingly, the average daily refinery runs for the taxable year may not exceed
75,000 barrels. For this purpose, the taxpayer would calculate average daily refinery
runs by dividing total refinery runs for the taxable year by the total number of days
in the taxable year. This is effective for taxable years ending after the date of
Amortization of Geological and Geophysical Expenditures (Sec.
1329). Geological and geophysical expenses paid or incurred in connection with the
domestic exploration for, or development of, oil or gas can be amortized ratably
(evenly) over two years using the half-year convention (considered to be incurred at
the mid-point of the taxable year). If property to which such an expenditure relates
is retired or abandoned during the 24-month period, no deduction would be allowed
on account of the retirement or abandonment; however, the amortization deduction
under this provision would continue. This is effective for amounts paid or incurred
in taxable years beginning after the date of enactment.
Background and Policy Context. The harbinger of the fossil fuel taxth
incentives in the Energy Policy Act of 2005 was the 106 Congress’s effort in 1999
to help the ailing domestic oil and gas producing industry deal with depressed oil
prices. The Energy Policy Act of 2005 includes a plethora of spending, tax, and
deregulatory incentives to stimulate the production of conventional and
unconventional oil and gas.
While it can be argued that the above tax subsidies are not justified based on
economic theory — especially given the high oil and gas prices over much of the
policy period — they are not large when measured relative to the industry’s gross
product. The industry did benefit historically from significant tax subsidies, but most
of these have been either eliminated or pared back since the 1970s.
Subtitle C — Conservation and Energy Efficiency Provisions
Summary of Provisions. Over the years, energy tax bills have taken a three-
pronged approach to energy policy by providing incentives for 1) efforts to increase
conventional energy supplies 2) conservation of conventional energy (fossil fuels) by
enhancing energy efficiency, and 3) energy conservation through a substitution of
alternative (including renewable fuels) for conventional fossil fuels. This subtitle
includes the second type of measures.
Energy Efficient Commercial Buildings Deduction (Sec. 1331). A
new formula-based tax deduction is provided for energy-efficient commercial
building property expenditures made by the taxpayer. The property must reduce the
energy and power consumption of a commercial building by 50%. Qualifying
property includes property installed as part of interior lighting systems, heating,
cooling, ventilation and hot water systems, or the building envelope, to the extent
certified as energy efficient. The provision limits the deduction to $1.80 per square
foot and would reduce the property basis by the amount of the deduction. The
provision would allow a partial deduction for a building that does not meet the
overall building requirement of a 50% energy savings. This is effective for property
placed in service after December 31, 2005, and prior to January 1, 2008.
Credit for Construction of New Energy Efficient Homes (Sec.1332).
A $2,000 general business tax credit is provided to contractors for the construction
of a qualified new energy-efficient home if the home achieves energy savings of 50%
over a comparable unit built to the 2003 International Energy Conservation Code.
For manufactured homes, a $1,000 credit is provided for energy savings of 30%. This
is effective for homes whose construction is substantially completed after December
Credit for Certain Nonbusiness Energy Property (Sec.1333). A 10%
tax credit is provided for amounts paid or incurred for the installation of qualified
energy efficiency improvements (building envelope components) to existing homes,
plus specified credits for expenditures on residential energy property (such as
furnaces and boilers). The maximum credit for a taxpayer with respect to the same
dwelling is limited to $500 for all taxable years; no more than $200 of the credit may
be attributable to expenditures on windows. Thus, the maximum expenditure eligible
for the credit is $5,000; no more than $2,000 can be spent on qualifying windows.
The provision defines qualified energy efficiency improvements as any energy
efficient building envelope component that meets the prescriptive criteria established
by the 2000 International Energy Conservation Code and is installed in or on a U.S.
dwelling unit (including certain manufactured homes) owned and used as the
taxpayer’s principal residence, first used by the taxpayer, and reasonably expected
to remain in use for five or more years. The provision defines a building envelope
components as (1) any insulation material or system specifically and primarily
designed to reduce the heat loss or gain to a dwelling unit when installed; (2) exterior
windows (including skylights); (3) exterior doors; and (4) any metal roof that has
appropriate pigmented coatings.
The tax credits for residential energy property expenditures (as opposed to the
10% building envelope credit) are limited to the following amounts: a $50 credit for
each advanced main air circulating fan, $150 for each qualified natural gas, propane,
or oil furnace or hot water boiler, and $300 for each item of energy efficient building
property (including qualifying electric heat pump water heaters, electric heat pumps,
geothermal heat pumps, central air conditioners, and natural gas, propane or oil water
The section includes certain expenditures for labor costs as eligible
expenditures; it does not require certification of expenditures. The basis of the
property would be required to be reduced by the amount of the credit. Special
proration rules are applied for jointly owned property, condominiums, and
cooperative housing corporations, and where less than 80% of the property is used
for nonbusiness purposes. This is effective for property placed in service after
December 31, 2005, and before January 1, 2008.
Credit for Energy Efficient Appliances (Sec.1334). A new IRC section
is created that provides a credit for the eligible production (manufacture) of certain
energy-efficient dishwashers, clothes washers, and refrigerators. The credit amount
for dishwashers is $3 multiplied by the percentage by which the efficiency of the
2007 standards (not yet known) exceeds that of the 2005 standards, up to $100 per
dishwasher. The credit for clothes washers is $100 for each unit manufactured in
2006 and 2007 that meet the requirements of the Energy Star program in effect for
clothes washers in 2007. The credit for dishwashers also applies to units produced
in 2006 and 2007 that meet the Energy Star standards for 2007.
The credit for refrigerators is based on energy savings and the year of
manufacture. A refrigerator must be an automatic defrost refrigerator-freezer with an
internal volume of at least 16.5 cubic feet to qualify for the credit. The energy savings
are determined relative to the energy conservation standards promulgated by the
Department of Energy that took effect on July 1, 2001. Refrigerators that achieve a
Refrigerators that achieve a 20% to 25% energy saving receive a $125 credit if
manufactured in 2006 or 2007. Refrigerators that achieve at least a 25% energy
saving receive a $175 credit if manufactured in 2006 or 2007. Appliances eligible for
the credit include only those that exceed the average amount of production from the
three prior calendar years for each category of appliance. However, eligible
production of refrigerators is defined as production that exceeds 110% of the average
amount of production from the three prior calendar years.
The manufacturer may not claim credits in excess of $75 million for all taxable
years, and may not claim credits in excess of $20 million with respect to refrigerators
eligible for the $75 credit. The credit allowed in a taxable year for all appliances may
not exceed 2% of the average annual gross receipts of the taxpayer for the three
taxable years preceding the taxable year in which the credit is determined. The credit
is part of the general business credit and is effective for appliances produced after
December 31, 2005, and prior to January 1, 2008.
Credit for Residential Energy Efficient Property (Sec.1335). A 30%
nonrefundable personal tax credit, not to exceed $2,000, is provided for individuals
for the purchase of qualified photovoltaic property and qualified solar water heating
property used exclusively for residential purposes other than heating swimming pools
and hot tubs. At least half of the energy used by the solar water heating property must
be derived from the sun. A 30% tax credit is also provided for the purchase of
qualified fuel cell electric generators, not to exceed $1,000 for each kilowatt of
capacity. The generator must have an electricity-only generation efficiency of greater
than 30% and generate at least 0.5 kilowatts of electricity. The generator must also
be installed on or in connection with a dwelling unit located in the United States and
that is used by the taxpayer as a principal residence. The depreciable basis of the
property must be reduced by the amount of the credit. Expenditures for labor costs
are included in eligible expenditures. Certain equipment safety requirements must be
met to qualify for the credit, and special proration rules apply for jointly owned
property, condominiums, and cooperative housing corporations, and where less than
80% of the property is used for nonbusiness purposes. This is effective for property
placed in service after December 31, 2005, and before January 1, 2008.
Credit for Business Installation of Qualified Fuel Cells and
Stationary Microturbine Power Plants (Sec. 1336). A 30% business energy
tax credit is provided for the purchase of qualified fuel cell power plants for
businesses, not to exceed $1,000 for each kilowatt of capacity. The power plant must
have an electricity-only generation efficiency of greater than 30% and generate at
least 0.5 kilowatts of electricity. In addition, a 10% credit is provided for the
purchase of qualifying stationary microturbine power plants, including secondary
components located between the existing infrastructure for fuel delivery and the
existing infrastructure for power distribution. The system must have an
electricity-only generation efficiency of not less that 26% at International Standard
Organization conditions and a capacity of less than 2,000 kilowatts. The credit would
be limited to the lesser of 10% of the basis of the property or $200 for each kilowatt
of capacity. The energy credits would be part of the general business credit, and the
taxpayer’s basis in the property would be reduced by the amount of the credit
claimed. This is effective for periods after December 31, 2005, and before January
Business Solar Investment Tax Credit (Sec.1337). Section 1337 of P.L.
109-58 provides that the energy credit percentage will be 30% for equipment that
uses solar energy to generate electricity to heat or cool a structure, to illuminate the
inside of a structure using fiber-optic distributed sunlight, or to provide solar process
heat, and qualified fuel cell property. In the case of any other energy property the
percentage is 10%. Property used to generate energy to heating a swimming pool is
not eligible in any period after December 31, 2005. The increase in the credit rate —
it is currently 10% — and the provision related to fiber-optic distributed sunlight are
effective for periods after December 31, 2005, and before January 1, 2008, for
property placed in service in taxable years ending after December 31, 2005.
Background. During the energy policy shift of the 1970s away from fossil
fuels, several energy efficiency tax incentives were enacted as part of President
Carter’s National Energy Plan of 1978 — the residential and business energy tax
credits — but these generally expired at the end on 1985. The credit for nonbusiness
property under Sec.1333 is structured similarly to the residential energy credit that
was in effect from 1978-1985.
Policy Context. Despite its supply focus, P.L. 109-58 includes numerous tax
incentives for energy conservation and energy efficiency. Most are relatively small,
however, and several, such as the appliance credits, expire in two years, perhaps too
brief a time period to have a significant impact on energy demand.
Aside from energy taxes or subsidies to correct for energy production and
consumption externalities, and aside from possible user charges, economists
generally argue there is no economic justification for additional tax subsidies to
encourage greater energy conservation, or energy efficiency. This is because there
is generally no market failure in energy use or in investment in energy-using
technologies — at either the household or business level — that requires such tax
subsidies. There are some market failures in energy use, however, that may be an
economic justification for government intervention. (For more detail on these issues,
see CRS Report RL30406, Energy Tax Policy: An Economic Analysis, by Salvatore
Subtitle D — Alternative Motor Vehicles and Fuel Incentives
Summary of Provisions. Transportation is the largest U.S. energy
consuming sector, accounting for about two-thirds of the nation’s petroleum
consumption. This subtitle provides tax incentives for substituting vehicles that use
alternative fuels for vehicles that would otherwise use conventional petroleum-based
fuels (gasoline and diesel). In addition, existing subsidies for the supply of fuel
ethanol and fuel biodiesel are expanded.
Alternative Motor Vehicle Credit (Sec. 1341). This section adds a new
nonrefundable personal credit equal to the sum of a new qualified fuel cell motor
vehicle credit, a new advanced lean-burn technology motor vehicle credit, a new
qualified hybrid motor vehicle credit, and a new qualified alternative fuel motor
The amount of the new qualified fuel cell motor vehicle credit would depend on
the weight of the vehicle and range from $8,000 ($4,000 if placed in service after
2009) to $40,000. If the new qualified fuel cell motor vehicle is a passenger
automobile or light truck, the amount of the credit is increased if certain fuel
efficiencies are met based on the 2002 model year city fuel economy for specified
weight classes. A new qualified fuel cell motor vehicle would be defined as a motor
vehicle: (1) which is propelled by power derived from one or more cells which
convert chemical energy into electricity by combining oxygen and hydrogen fuel
which is stored on board the vehicle in any form; (2) which, in the case of a
passenger automobile or light truck, receives an EPA certification; (3) the original
use of which commences with the taxpayer; (4) which is acquired for use or lease by
the taxpayer and not for resale; and (5) which is made by a manufacturer.
The new advanced lean burn technology motor vehicle credit would be 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, ranging from $400
to $2,400, and a conservation credit based on the estimated lifetime fuel savings of
a qualifying vehicle compared to a comparable 2002 model year vehicle, ranging
from $250 to $1,000. A qualifying advanced lean burn technology motor vehicle
must incorporate direct injection, achieve at least 125% of the 2002 model year city
fuel economy, and, for 2004 and later models, meet or exceed certain EPA emissions
standards. A qualifying advanced lean burn technology motor vehicle must be placed
in service before January 1, 2011.
The new qualified hybrid motor vehicle credit is based on weight. Lighter
vehicles (8,500 pounds or less) are eligible for a credit containing two components:
a fuel economy credit amount and a conservation amount. The fuel economy credit
amount ranges from $400 to $2,400, depending on the extent to which the fuel
efficiency exceeds 2002 standards. The conservation amount is based on the
estimated lifetime fuel savings of a qualifying vehicle compared to a comparable
2002 model year vehicle and ranges from $250 to $1,000. Heavy-duty hybrid
vehicles get a credit amount based on a certain percentage of the incremental cost of
the hybrid over similar gas-powered vehicles within a dollar limitation of such
incremental cost. A qualifying hybrid vehicle is a motor vehicle that draws
propulsion energy from onboard sources of stored energy that include both an
internal combustion engine or heat engine using combustible fuel and a rechargeable
energy storage system (e.g., batteries). A qualifying hybrid automobile or light truck
must have a maximum available power from the rechargeable energy storage system
of at least 4%. In addition, the vehicle must meet or exceed certain EPA emissions
The new qualified alternative fuel motor vehicle credit is equal to an applicable
percentage multiplied by the incremental cost of any new qualified alternative fuel
motor vehicle. A new qualified alternative fuel motor vehicle is defined as a motor
vehicle: (1) which is only capable of operating on an alternative fuel; (2) the original
use of which commences with the taxpayer; (3) which is acquired by the taxpayer for
use or lease, but nor for resale; and (4) which is made by a manufacturer. An
alternative fuel would be compressed natural gas, liquefied natural gas, liquefied
petroleum gas, hydrogen, and any liquid at least 85% of the volume of which consists
of methanol. A different calculation, which produces a lower credit amount, applies
to mixed-fuel vehicles.
A limit is imposed on the number of qualified hybrid motor vehicles and
advanced lean-burn technology motor vehicles sold by each manufacturer of such
vehicles that are eligible for the credit. No credit is allowed for any vehicle used
outside of the United States. A taxpayer may elect not to take the credit.
The new qualified fuel cell motor vehicle credit does not apply to such vehicles
purchased after December 31, 2014, the new advanced lean-burn technology credit
does not apply to such vehicles purchased after December 31, 2010, the new
qualified hybrid motor vehicle credit does not apply to such vehicles purchased after
December 31, 2010 (or December 31, 2009, for qualified hybrid motor vehicles
weighing more than 8,500 pounds), and the new qualified alternative fuel vehicle
credit does not apply to such vehicles purchased after December 31, 2010. The
portion of the credit attributable to vehicles of a character subject to an allowance for
depreciation is treated as a portion of the general business credit; the remainder of the
credit is allowable to the extent of the excess of the regular tax (reduced by certain
other credits) over the alternative minimum tax for the taxable year. This is effective
for property placed in service after the December 31, 2005, in taxable years ending
after such date.
Credit for Installation of Alternative Fueling Stations (Sec.1342). A
tax credit is provided equal to 30% of the cost of any qualified alternative fuel
vehicle refueling property installed to be used in a trade or business or at the
taxpayer’s principal residence. The credit is limited to $30,000 for retail clean-fuel
vehicle refueling property, and $1,000 for residential clean-fuel vehicle refueling
property. Clean fuels are those defined under §179A(d), limited to any fuel at least
liquefied natural gas, liquefied petroleum gas, and hydrogen, or any mixture of
biodiesel and diesel fuel, determined without regard to any use of kerosene and
containing at least 20% biodiesel. If the property is installed at the taxpayer’s
principal residence, §179A(d)(1) (requiring the property to be subject to an allowance
for depreciation) does not apply. The taxpayer’s basis in the property is reduced by
the amount of the credit and disallows deductions under §179A for that property, and
for property installed for or used by a tax-exempt entity, the taxpayer that installs the
property may claim the credit. No credit is available for property used outside the
United States. A taxpayer may elect not to take the credit.
Only the portion of the credit attributable to property subject to an allowance for
depreciation would be treated as a portion of the general business credit; the
remainder of the credit would be allowable to the extent of the excess of the regular
tax (reduced by certain other credits) over the alternative minimum tax for the year.
This is effective for property placed in service after December 31, 2005, and before
January 1, 2010, except for property relating to hydrogen, which must be placed in
service before January 1, 2015.
Reduced Motor Fuel Excise Tax on Certain Mixtures of Diesel Fuel
(Sec.1343). Motor fuel excise tax on certain mixtures of diesel-water fuel emulsion
which contain at least 14% water are reduced from $0.243 per gallon to $0.197 per
gallon if the emulsion additive has been registered by a U.S. manufacturer with EPA.
The section also provides for a refund based on the incentive rate for which the
producer could file quarterly if the producer can claim at least $750. If the producer
cannot claim at least $750, the amount may be carried over to the next quarter or may
be claimed as a credit on the income tax return if the producer cannot claim at least
$750 by the end of the taxable year. A tax credit for certain diesel fuel used to
produce such an emulsion is also provided. Further, the language provides that any
person who later separated taxable fuel from the diesel-water fuel emulsion would
be treated as a refiner of taxable fuel. This is effective January 1, 2006.
Extension of Excise Tax Provisions and Income Tax Credit for
Biodiesel (Sec.1344). This provision extends the existing income tax credit,
excise tax credit, and payment provisions for biodiesel (which were enacted in 2004
under the “Jobs Bill,” P.L. 108-357) through December 31, 2008. It is effective on
the date of enactment.
Small Agri-Biodiesel Producer Credit (Sec.1345). This provision adds
the “small agri-biodiesel producer credit” to the list of credits that make up the
biodiesel fuels credit. The small agri-biodiesel producer credit is 10 cents for each
gallon of “qualified agri-biodiesel production.” An eligible “small agri-biodiesel
producer” is defined as any person who, at all times during the taxable year, has a
productive capacity for agri-biodiesel not in excess of 60 million gallons. “Qualified
agri-biodiesel production” is any agri-biodiesel, not to exceed 15 million gallons, that
(1) the producer sells during the taxable year for use by the purchaser (a) in the
production of a qualified biodiesel mixture in the purchaser’s trade or business, (b)
as a fuel in a trade or business, or (c) for sale at retail to another person who places
the agri-biodiesel in that person’s fuel tank; or (2) the producer uses or sells for any
of such purposes. Aggregation rules are provided for determining the 15 million and
60 million gallon limits, rules for applying the limits to passthrough entities, and
rules for allocating productive capacity among multiple persons with interests in one
facility, and anti-abuse regulations are authorized. The section also permits IRC
§1381(a) cooperative organizations to elect to apportion the eligible small
agri-biodiesel producer credit among their patrons, and sets forth the election
procedure. The eligible small agri-biodiesel producer credit is effective for taxable
years ending after the date of enactment and sunsets after December 31, 2008.
Renewable Diesel (Sec.1346). This provision extends the income tax
credit, excise tax credit, and payment provisions for biodiesel (as discussed above)
for “renewable diesel.” However, credit amounts differ from those for biodiesel, and
there is no special credit for small producers of renewable diesel as there is for small
ethanol producers. “Renewable diesel” is defined as diesel fuel derived from biomass
(excluding petroleum, natural gas, coal, or any product thereof) using a thermal
depolymerization process that meets certain registration and testing requirements.
The section also requires that all producers of renewable diesel be registered with the
Treasury Secretary. It is effective for fuel sold or used after December 31, 2005.
Modification of Small Ethanol Producer Credit (Sec.1347). Section
1347 of P.L. 109-58 liberalizes the previously existing small ethanol producer tax
credit. It raises the maximum annual alcohol production capacity for an eligible small
ethanol producer from 30 million gallons to 60 million gallons. The provision also
modifies the election by a cooperative to allocate the credit to its patrons by
conditioning the validity of the election on the cooperative’s mailing a written notice
of the allocation to its patrons during the period beginning on the first day of the
taxable year covered by the election and ending with the fifteenth day of the ninth
month following the close of that taxable year. This is effective for taxable years
ending after the date of the enactment.
Sunset of Deduction for Certain Clean-Fuel Vehicles and Certain
Refueling Property (Sec.1348). This provision accelerates the termination date
of the IRC §179A deduction to December 31, 2005, from December 31, 2006.
Background and Policy Context. As a result of the two energy crises of
the 1970s (the 1973 oil embargo and the Iranian revolution in 1979, which
precipitated a tenfold increase in crude oil prices) there was a shift in the focus of
energy tax policy away from oil and gas toward energy conservation and toward the
development of alternative fuels and nonconventional forms of energy.
In the transportation sector, which is the single largest petroleum consuming
sector in the United States, federal energy tax policies became focused on reducing
petroleum consumption, stimulating the production and use of alternative fuels, and
reducing petroleum import dependence. Beginning in 1978, the Energy Tax Act
(P.L. 95-618), which was part of President Carter’s National Energy Plan, provided
gasohol (a blend of gasoline and 10% ethanol produced from corn and other grains
or agricultural products) a total exemption from the 4¢ per gallon gasoline tax. Such
a tax policy approach — subsidies to the supply of fuel ethanol — typically has been
the way in which federal tax policy has promoted alternative fuels.
The Energy Policy Act of 1992 (P.L. 102-486) included another policy
instrument in this area: a $2,000 tax deduction for alternative fuel vehicles and to
refueling facilities for alternative fuels, thus targeting the capital stock. This
deduction expired at the end of 2005 and has been replaced by a system of tax credits
for various types of alternative technology vehicles (ATVs), diesel, hybrid, advanced
lean-burn, or fuel cell vehicles that meets certain fuel efficiency standards.
The ATV tax credits are somewhat complicated to calculate, but they are
structured to give greater incentives for more energy efficient ATVs. For example,
the credit for hybrids starts at a base level of $400 but may be as high as $3,400
depending on fuel efficiency and estimated lifetime fuel savings. Lifetime fuel
savings are estimated for a vehicle that is assumed to travel, over its lifetime, 120,000
miles. Obviously, the potential tax benefit — the reduction in vehicle purchase price
— is much greater under the new tax credit than under the previous tax deduction.
The following table shows the structure of the hybrid vehicle tax credits.
Table 1. Fuel Economy Credit
If City Fuel Economy of the HybridVehicle is:
Creditat leastbut less than
$400125% of base fuel economy150% of base fuel
$800150% of base fuel economy175% of base fuel
$1,200175% of base fuel economy200% of base fuel
$1,600200% of base fuel economy225% of base fuel
$2,000225% of base fuel economy250% of base fuel
$2,400250% of base fuel economy
Table 2. Conservation Credit
Estimated Lifetime Fuel SavingsConservation Amount
At least 1,200 but less than 1,800 $250
At least 1,800 but less than 2,400 $500
At least 2,400 but less than 3,000 $750
At least 3,000 $1,000
Example. As an example of how the credit would be computed for passenger
cars and light trucks weighing 8,500 lbs. or less (which, incidentally, comprises the
vast majority of the vehicle stock in the United States), consider a hybrid automobile
weighing 4,000 lbs. and having a city fuel efficiency rating of 60 miles-per-gallon
(MPG). Further, assume that a comparable 2002 gasoline engine automobile has a
city fuel economy of 25 MPG. Since the fuel economy of the hybrid is 240% of the
base fuel economy (60 ÷ 25 x 100 = 240%), the purchaser of this vehicle would
qualify for a fuel economy tax credit of $2,000 (as shown in Table 1).
These tax credits are expected to increase the demand for hybrid vehicles, which
are competitively priced with conventional gasoline vehicles. However, the phase-
out of the credit that begins as soon as a manufacturer sells 60,000 vehicles might
dampen demand, particularly from established automakers such as Toyota and
Honda. Conversely it rewards those manufacturers that have recently entered the
hybrid market such as domestic auto manufacturers.
Subtitle E — Additional Energy Tax Incentives
Summary of Provisions. This brief subtitle expands the research and
development tax credit and authorizes two energy studies.
Expansion of Research Credit (Sec. 1351). Section 1351 adds a third
component to the amount of the research credit: 20% of the “qualified energy
research expenditures” (as defined under previously existing law) that a taxpayer
pays or contributes to an “energy research consortium” in carrying on a trade or
business. “Energy research consortium” is defined as under previous law, but with
the following additions: (1) the energy research consortium must be organized and
operated primarily to conduct energy research and development in the public interest;
(2) at least five unrelated persons must pay or incur amounts to the organization
within the calendar year; and (3) no one person may pay or incur more than 50% of
the total amounts that the research consortium receives during the calendar year. This
section also repeals the 65% limitation under IRC §41(b)(3) on contract research
expenses paid to a university, a federal laboratory, or an “eligible small business”
(i.e., any person with an average of no more than 500 employees during either of the
two preceding calendar years, with respect to which the taxpayer does not own 50%
or more of the stock by vote or value if the business is a corporation or 50% of the
capital and profits interests if the business is not a corporation). This section is
effective for amounts paid or incurred after the date of enactment, in taxable years
ending after that date.
National Academy of Sciences Study and Report (Sec. 1352). No
later than 60 days from the date of enactment, the Secretary of the Treasury must
enter into an agreement with the National Academy of Sciences (NAS) to conduct
a study of energy costs and benefits that are not or may not be fully incorporated into
the market price or tax structure. A report on the study is to be submitted to Congress
not later than two years after the agreement is entered into.
Recycling Study (Sec. 1353). The Secretary of the Treasury, in
consultation with the Secretary of Energy, is to conduct a study to determine and
quantify the energy savings achieved through the recycling of glass, paper, plastic,
steel, aluminum, and electronic devices, and to identify tax incentives that would
encourage recycling of such materials. The study must be submitted to Congress
within one year of the date of enactment.
Background. Prior to the enactment of P.L. 109-58 there were two tax
incentives for research and development (R&D) spending: a 20% tax credit for a
taxpayer’s qualified R&D spending above a base amount, or, alternatively, a
deduction as a current business expense for certain R&D expenditures. Energy R&D
was not excluded from qualifying for these incentives, but the new energy R&D
credit targets R&D expenditures by firms specifically in the business of doing
research on energy technology, such as the development of alternative fuels or more
fuel-efficient and environmentally friendly ATVs.
Policy Context. The credit has the effect of lowering the net cost to a firm of
conducting qualified research. Economists and policymakers agree that without tax
incentives the market economy under-invests in R&D due to the external benefit
(spillovers). Investment in R&D is also critical for innovation, which is a precursor
to economic growth. The evidence suggests that the social rate of return to R&D
investment is greater than the private rate of return. At the same time, it is unclear
whether a new tax subsidy specifically targeted to the energy sector was necessary
given that energy R&D already qualified for the preexisting tax subsidies.
Subtitle F — Revenue Raising Provisions
Summary of Provisions. P.L. 109-58 includes $2.9 billion of energy tax
increases, and $171 million of non-energy increases (both over 11 years). About $2.5
billion of the $2.9 billion of energy tax increases are from the reinstatement of the
excise tax on oil purchased and used by U.S. refineries. The remaining $400 million
is from the reauthorization of the 0.1¢/gallon excise tax on motor fuels that goes into
the Leaking Underground Storage Tank (LUST) Trust Fund.
Oil Spill Liability Trust Fund Financing Rate (Sec. 1361). In general,
a 5¢ per-barrel tax was imposed on crude oil received at a U.S. refinery and on
imported petroleum products received for consumption, use, or warehousing. The
fund’s tax applied after December 31, 1989, and before January 1, 1995, but was in
effect only if the unobligated balance in the Fund was less than $1 billion. Section
The tax is to be suspended during a calendar quarter if the Secretary estimates that,
as of the close of the preceding calendar quarter, the unobligated balance in the fund
exceeds $2.7 billion. The tax terminates after December 31, 2014.
Extension of Leaking Underground Storage Tank Trust Fund
Financing Rate (Sec. 1362). This provision extends until April 1, 2011, the 0.1¢
per-gallon Leaking Underground Storage Tank (LUST) Trust Fund tax of IRC
§4081(d)(3). The excise tax expired April 1, 2005. Exported fuels are exempt. The
LUST Fund is available only for purposes of §9003(h) of the Solid Waste Disposal
Act. This is effective in general on October 1, 2005.
Modification of Recapture Rules for Amortizable Section 197
Intangibles (Sec. 1363). This section provides that, if multiple IRC §197
intangibles are sold or otherwise disposed of in a single transaction or series of
transactions, the seller must calculate recapture as if all of the §197 intangibles were
a single asset. Thus, any gain on the sale or other disposition of the intangibles would
be recaptured as ordinary income to the extent of ordinary depreciation deductions
previously claimed on any of the §197 intangibles. An exception is provided for any
amortizable §197 intangible whose adjusted basis exceeds its fair market value. This
is effective for dispositions of property after the date of enactment.
Clarification of Tire Excise Tax (Sec. 1364). This section adds to the
existing definition of a “super single tire” (which is eligible for a special rate of tax)
a sentence clarifying that the term does not include any tire designed for steering.
This section also requires that the IRS report to the Congress on the amount of tax
collected under IRC §4071 for each class of taxable tire (e.g., bias-ply, super single,
or other) for calendar year 2006 and the number of tires in each class on which tax
is imposed during 2006.23 The IRS must submit the report to Congress by July 1,
2007. This section is effective as if included in §869 of the American Jobs Creation
Act of 2004 (sales in calendar years beginning after November 21, 2004).
Background. The Oil Spill Liability Trust Fund was created as part of the
Omnibus Budget Reconciliation Act of 1986 (P.L. 99-510) to finance the costs of
cleaning up oil spills. However, the 1.3¢ tax on refineries was not collected due to
the absence of authorizing legislation (both the Omnibus Budget Reconciliation Act
of 1986 and the 1988 Technical and Miscellaneous Revenue Act prohibited the tax
from being collected until Congress enacted authorizing legislation for the fund). The
Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239) authorized collection of
the tax, which the law also raised to 5¢/barrel, but the tax expired on January 1, 1995.
The LUST Trust Fund was established by the Comprehensive Environmental
Response, Compensation, and Liability Act (P.L. 96-510). All motor fuels for
highway, aviation, and inland waterway use are assessed this 0.1¢/gallon tax with the
exception of propane and liquefied natural gas. The tax has been amended and
reauthorized several times, although the tax rate has remained unchanged at 0.1¢.
Most recently, the LUST fund tax expired on October 1, 2005.
Policy Context. Tax increases were not originally a part of comprehensive
energy policy legislation. The first comprehensive energy policy bill to be approved
by the House (H.R. 4, 107th Congress) contained $33.5 billion in energy tax cuts and
no energy tax increases. This reflected the perceived seriousness of the country’s
energy difficulties and the relatively healthy fiscal balance (budget surpluses).
During 2001 and 2002, however, federal budget surpluses began to decline and
then turned into deficits. These budgetary constraints implied that 1) any energy tax
bill had to be smaller, and 2) there would have to be revenue offsets to minimize the
cost of the incentives.
The $2.9 billion in energy tax increases, which increase the tax burden of U.S.
refineries, offsets the $2.6 billion in tax cuts for the oil and gas industry as a whole.
In fact, focusing only on refineries, their $2.9 billion in tax increases far outweigh the
$400 million of tax cuts provided by the act (over 11 years).
23 The Conference Report statement, but not the statutory language itself, further states that
(1) the IRS is directed to revise the Form 720, Quarterly Federal Excise Tax Return, to
collect the information necessary to prepare the report; and (2) the report also must include
total tire tax collections for an equivalent one-year period preceding October 22, 2004, the
date of enactment of the American Jobs Creation Act of 2004.
Title XIV — Miscellaneous
Subtitle A — In General
Sense of Congress on Risk Assessments (Sec. 1401). The Energy
Policy Act of 1992 is amended to add the sense of Congress that federal agencies
conducting risk assessments of energy-related technologies should use sound and
objective scientific practices that consider the best available science, and describe the
weight of the scientific evidence about such risks.
Energy Production Incentives (Sec. 1402). States may provide credits
for certain coal-fired electricity generation against any state taxes or fees owed to the
state either under a state law or federal law without violating the commerce clause
of the U.S. Constitution. The provision applies to electricity generation in the state
from coal mined in the state, if such generation meets all applicable federal and state
laws and if the generating facility uses scrubbers or other forms of clean coal
Regulation of Certain Oil Used in Transformers (Sec. 1403).
Vegetable oil made from soybeans and used in electric transformers shall not be
regulated as petroleum oil under the Edible Oil Regulatory Reform Act (33 U.S.C.
Control, and Countermeasure Plan” for soy bean oil use in transformers under 40
CFR Part 112.12-15.
Petrochemical and Oil Refinery Facility Health Assessment (Sec.
1404). The Secretary of Energy is to study the health impacts of living near
petrochemical and oil refining plants. In designing the study, the Secretary must
consult with the National Cancer Institute and other governmental bodies having
expertise. The Secretary must transmit the report to Congress within six months of
National Priority Project Designation (Sec. 1405). This provision
establishes a presidential National Priority Project designation for organizations with
projects certified by the Secretary of Energy as advancing renewable energy
technology. Projects involving wind, biomass, or buildings must be at least 30
megawatts (MW) in size, while projects involving solar photovoltaics or fuel cells
can be as small as three megawatts. The provision authorizes such sums as are
Cold Cracking (Sec. 1406). The Secretary of Energy shall study the use of
radiation to increase the yield of refined petroleum products from crude oil at
standard temperature and pressure.
Oxygen-Fuel (Sec. 1407). DOE is directed to create a program for
oxygen-fuel systems, in which pure oxygen is substituted for air in high-temperature
boilers of industrial and electric utility steam generators. If feasible, the program
must include two small (10 to 50 megawatt) units, one retrofit and one new; and two
large (100 megawatts or larger) units, one retrofit and one new. Annual
appropriations of $100 million are authorized for FY2006-FY2008.
Subtitle B — Set America Free
Summary of Provisions. The legislation requires establishment of a
commission to make recommendations for the design of a coordinated North
American energy policy for the intention of achieving energy self-sufficiency by
Short Title (Sec. 1421). The subtitle is called the “Set America Free Act of
Purpose (Sec. 1422). The language of this section establishes a U.S.
commission to make recommendations for “a coordinated and comprehensive North
American energy policy that will achieve energy self-sufficiency by 2025” for not
only the United States, but Canada and Mexico as well.
United States Commission on North American Energy Freedom
(Sec. 1423). This section establishes particulars for nominating and appointing
individuals to the commission, as well as the commission’s operation. Citizens of
any of the United States, Canada, and Mexico may be among the 16 appointees to the
commission. The law authorizes $10 million over two fiscal years to carry out the
requirements of the SAFE Act.
North American Energy Freedom Policy (Sec. 1424). The President
is to submit a response or set of recommendations pursuant to the commission’s
report within 90 days of receipt of the report.
Title XV — Ethanol and Motor Fuels
Subtitle A — General Provisions
Summary of Provisions. Title XV repeals the Clean Air Act requirement
that reformulated gasoline contain at least 2% oxygen — the requirement that forces
refiners and importers to use MTBE (methyl tertiary butyl ether), ethanol, or other
oxygenates in their reformulated gasoline (RFG).24 In place of this requirement, it
provides a major new stimulus to promote the use of ethanol — a provision that the
annual production of gasoline contain at least 7.5 billion gallons of renewable fuel
24 While overall requirements for RFG formulation have significantly reduced the emissions
of ozone-forming pollutants, some research indicates that these emissions reductions have
resulted from RFG requirements other than the oxygenate standard, and that the benefits of
the oxygenate standard alone are questionable.
The law uses the term “renewable fuel” rather than ethanol, so the requirement
can be met by other fuels, including natural gas produced from landfills, sewage
treatment plants, feedlots, and other decaying organic matter. The renewable fuel
definition also encompasses biodiesel, which can be made from soy oil or other
cooking oils. However, ethanol is the only renewable motor fuel currently being
produced in significant quantities. In 2004, roughly 3.4 billion gallons of ethanol
were blended with gasoline.25 Biodiesel, the next most significant renewable motor
fuel, is currently consumed at a rate of about 50 million gallons annually, less than
The act requires that reductions in emissions of toxic substances achieved by
RFG in 2001 and 2002 be maintained; it requires the consolidation of summertime
volatility standards for RFG produced for northern and southern markets; and allows
ethanol credit trading among refiners and importers of fuels.
Renewable Content of Gasoline (Sec. 1501). A renewable fuels standard
(RFS) is established, requiring that gasoline contain 4.0 billion gallons of renewable
fuel in 2006, increasing to 7.5 billion gallons in 2012. EPA has the authority to
establish the requirement in subsequent years, but no lower than the percentage in
2012. A gallon of cellulosic ethanol counts as 2.5 gallons of renewable fuel. After
2012, a minimum of 250 million gallons of cellulosic ethanol is required in fuel
Not later than December 1, 2006, and annually thereafter, the EPA
Administrator is required to conduct a survey to determine the market shares of
conventional gasoline and RFG containing ethanol and other renewable fuels in
conventional and RFG areas in each state.
Findings (Sec. 1502). This section makes various findings on MTBE,
including that in response to the Clean Air Act Amendments of 1990, the fuel
industry made substantial investments in MTBE production capacity.
Claims Filed After Enactment (Sec. 1503). Any claim or legal action
filed after August 8, 2005, that involves possible MTBE contamination may be
removed to a federal district court where jurisdiction and venue would otherwise be
appropriate. MTBE, a gasoline additive, has been found to contaminate groundwater
in several states. This provision thus allows state-law-based claims that would
otherwise be ineligible for federal court review to be heard by federal judges. The
substantive law of the state will still be applied in federal court, although most rules
of procedure would be supplied by federal law.
25 This is roughly 2% of total U.S. gasoline demand. Renewable Fuels Association, Ethanol
Industry Outlook 2005, Washington, D.C., January 2005.
26 For additional information on ethanol and biodiesel, see CRS Report RL30758,
Alternative Transportation Fuels and Vehicles: Energy, Environment, and Development
Issues, by Brent D. Yacobucci.
Elimination of Oxygen Content Requirement for Reformulated
Gasoline (Sec. 1504). Section 211(k) of the Clean Air Act is amended to
eliminate the requirement that reformulated gasoline contain at least 2% oxygen.
This provision takes effect 270 days after enactment, except in California, where it
takes effect immediately upon enactment.
Section 211(k)(1) of the Clean Air Act is also amended to require that each
refinery or importer of gasoline maintain the average annual reductions in emissions
of toxic air pollutants achieved by the reformulated gasoline it produced or
distributed in 2001 and 2002. An exception is provided for California, which has
more stringent state requirements. This provision is intended to prevent backsliding,
since the reductions actually achieved in those years exceeded the regulatory
requirements. A credit trading program is established for emissions of toxic air
pollutants. The anti-backsliding provision applies only to the extent that the quantity
produced or imported is less than or equal to the average annual quantity produced
or imported in the two base years.
EPA is required to promulgate final regulations to control hazardous air
pollutants from motor vehicles and their fuels by July 1, 2007. If the promulgated
regulations achieve and maintain greater overall reductions in emissions of air toxics
from RFG than what would be achieved under the anti-backsliding requirements
described above, the anti-backsliding requirements shall be null and void.
Section 1504 also eliminates the less stringent requirements for volatility
applicable to reformulated gasoline sold in VOC (volatile organic compounds)
Control Region 2 (northern states) by applying the more stringent standards of VOC
Control Region 1(southern states) to both regions.
Public Health and Environmental Impacts of Fuels and Fuel
Additives (Sec. 1505). This amends §211(b) of the Clean Air Act to require
manufacturers of fuels and fuel additives to conduct tests of the products’ health and
environmental impacts (currently, these tests are at EPA’s discretion and do not
include environmental effects). It also requires EPA, within two years, to conduct
a study of the health and environmental effects of MTBE substitutes, including
Analyses of Motor Vehicle Fuel Changes (Sec. 1506). A new §211(p)
is added to the Clean Air Act. Within four years of enactment, the EPA
Administrator must publish a draft analysis of the effects of the fuels provisions in
Title XV on air pollutant emissions and air quality. Within five years of enactment,
the Administrator is required to publish a final version of the analysis.
Additional Opt-in Areas Under Reformulated Gasoline Program
(Sec. 1507). Governors of 12 northeastern states (the Ozone Transport Region)
may petition EPA to require RFG use in attainment areas in their states. The
Administrator shall do so unless he determines that there is insufficient capacity to
produce RFG, in which case the commencement date of the requirement shall be
Data Collection (Sec. 1508). The Department of Energy is required to
collect and publish monthly survey data on the production, blending, importing,
demand, and price of renewable fuels, both on a national and regional basis.
Fuel System Requirements Harmonization Study (Sec. 1509). The
EPA Administrator and the Secretary of Energy are required to conduct a study of
federal, state, and local motor fuels requirements. They are required to analyze the
effects of various federal and state fuel standards and emission control programs on
consumer prices, fuel availability, domestic suppliers, air quality, and emissions.
They must include the effects on sensitive populations. Further, they are required to
study the feasibility of developing national or regional fuel standards, and to provide
recommendations on legislative and administrative actions to improve air quality,
increase supply liquidity, and reduce costs to consumers and producers. A report
must be submitted to Congress by December June 1, 2008.
Commercial Byproducts From Municipal Solid Waste and
Cellulosic Biomass Loan Guarantee Program (Sec. 1510). The Secretary
of Energy is required to establish a loan guarantee program for the construction of
facilities to produce fuel ethanol and other commercial byproducts from municipal
solid waste and cellulosic biomass. Applicants for loan guarantees must provide
assurance of repayment (at least 20%) in the form of a performance bond, insurance
collateral, or other means. The section authorizes such sums as may be necessary for
Renewable Fuel (Sec. 1511). The Secretary of Energy is required to
establish loan guarantees for no more than four projects to demonstrate the
commercial feasibility and viability of converting cellulosic biomass or sucrose into
ethanol. Loan guarantees can cover a maximum of $250 million per project, but in
no case more than 80% of a project’s estimated cost, as well as up to 80% of project
costs in excess of the estimate. No new funding is authorized.
Annual funding of $4 million for FY2005-FY2007 is authorized for Mississippi
State University and Oklahoma State University for a resource center to further
develop bioconversion technology using low-cost biomass for the production of
Annual funding of $25 million for FY2006-FY2010 is authorized for research,
development, and implementation of renewable fuel production technologies in RFG
states with low rates of ethanol production.
The Secretary of Energy is permitted to provide grants for the construction of
facilities to produce ethanol from municipal waste or agricultural residues. A total
of $650 million is authorized to be appropriated between FY2006 and FY2007.
Conversion Assistance for Cellulosic Biomass, Waste-Derived
Ethanol, Approved Renewable Fuels (Sec. 1512). The Secretary of Energy
is permitted to provide grants for the construction of facilities to produce renewable
fuels (including ethanol) from cellulosic biomass, agricultural byproducts,
agricultural waste, and municipal solid waste. A total of $750 million is authorized
to be appropriated between FY2006 and FY2008. (This provision is similar to the
grant program in §1511(e).)
Blending of Compliant Reformulated Gasolines (Sec. 1513).
Retailers may blend batches of reformulated gasoline with and without ethanol, as
long as both batches are compliant with the Clean Air Act. In a given year, retailers
may blend batches over only two ten-day periods in the summer months.
Advanced Biofuel Technologies Program (Sec. 1514). The EPA
Administrator shall establish a program to demonstrate new technologies for the
production of biofuels. The program must fund at least four different technologies
for producing cellulosic biomass ethanol and at least five technologies for the
production of value-added biodiesel fuel co-products. Preference is given to projects
that enhance geographical diversity of alternative fuel production and to projects with
feedstocks used in 10% or less of annual ethanol and biodiesel production. Annual
funding of $110 million is authorized for FY2005 through FY2009.
Waste-Derived Ethanol and Biodiesel (Sec. 1515). The definition of
“biodiesel” under the Energy Policy Act of 1992 is amended to explicitly include
biodiesel produced from animal waste, municipal solid waste, and wastewater
Sugar Ethanol Loan Guarantee Program (Sec. 1516). The Secretary
of Energy is authorized to issue loan guarantees to demonstrate the commercial
feasibility and viability of converting sugarcane and sugarcane byproducts into
ethanol. Loan guarantees can cover a maximum amount of $50 million per project,
but in no case more than 80% of a project’s estimated cost, as well as up to 80% of
project costs in excess of the estimate. No new funding is authorized. (This program
is similar to that created by §1511(b), except that the maximum per-project funding
is lower in §1516, and §1516 applies only to ethanol produced from sugarcane.
§1511(b) applies to ethanol produce from sugarcane or cellulosic biomass.)
Background. Under the Clean Air Act Amendments of 1990, gasoline sold
in numerous areas of the country with poor air quality was required to contain
MTBE, ethanol, or other substances containing oxygen as a means of improving
combustion and reducing emissions of ozone-forming compounds and carbon
monoxide. The act had two programs that required the use of oxygenates, but the
more significant of the two was the reformulated gasoline (RFG) program, which
took effect January 1, 1995. Under the reformulated gasoline program, areas with
“severe” or “extreme” ozone pollution (124 counties with a combined population of
73.6 million) must use reformulated gasoline; areas with less severe ozone pollution
may opt into the program as well, and many have done so. In all, portions of 17
states and the District of Columbia use reformulated gasoline; a little more than 30%
of the gasoline sold in the United States is RFG.
Since the mid-1990s, the addition of MTBE to RFG and its use in conventional
gasoline has become increasingly controversial. The additive has caused numerous
incidents of water contamination across the nation. The primary source of MTBE in
groundwater and drinking water has been petroleum releases from leaking
underground storage tanks. MTBE has been detected in drinking water sources in
at least 36 states,27 and 22 states have taken steps to ban or regulate its use. The most
significant of these bans (in California and New York) took effect at the end of 2003,
leading many to suggest that Congress revisit the issue to modify the oxygenate
requirement and set more uniform national requirements regarding MTBE and its
potential replacements (principally ethanol).
Subtitle B — Underground Storage Tank Compliance
Summary of Provisions. As part of the legislative effort to address drinking
water contamination by MTBE, this subtitle amends Subtitle I of the Solid Waste
Disposal Act (SWDA) to add new leak prevention provisions to the underground
storage tank (UST) regulatory program. It also broadens the allowable uses of the
Leaking Underground Storage Tank (LUST) Trust Fund, and specifically authorizes
states and EPA to use funds appropriated from the fund to address MTBE leaks.28
Sections 1521-1533: Underground Storage Tank Compliance Act of
2005. Section 1522 directs EPA to allot at least 80% of the funds made available
from the LUST Trust Fund to the states for the LUST cleanup program. It also
requires EPA or a state, when determining the portion of cleanup costs to recover
from a tank owner or operator, to consider the owner or operator’s ability to pay for
cleanup and still maintain basic business operations. This subtitle also requires EPA
or states to conduct compliance inspections of USTs every three years (Sec. 1523);
adds operator training requirements (Sec. 1524); and authorizes EPA and states to
use LUST Trust Fund money to respond to tank leaks involving oxygenated fuel
additives (e.g., MTBE and ethanol) (Sec. 1525). Section 1526 authorizes EPA and
states to use LUST funds to conduct inspections and enforce tank release prevention
and detection requirements. The bill also prohibits fuel delivery to ineligible tanks
(Sec. 1527); clarifies and expands UST compliance requirements for federal facilities
(Sec. 1528); and requires EPA, with Indian tribes, to develop and implement a
strategy to address releases on tribal lands (Sec. 1529).
Sec. 1530 requires states to do one of the following to protect groundwater: 1)
require that new tanks are secondarily contained and monitored for leaks if the tank
is within 1,000 feet of a community water system or potable well; or 2) require that
UST manufacturers and installers maintain evidence of financial responsibility to pay
for corrective actions. It also requires that persons installing UST systems are
certified or licensed, or that their UST system installation is certified by a
professional engineer or inspected and approved by the state, or is compliant with a
27 American Water Works Research Foundation, Occurrence of MTBE and VOCs in
Drinking Water Sources of the United States, 2003.
28 The LUST Trust Fund is funded primarily through a 0.1 cent-per-gallon motor fuels tax.
Congress appropriated from the fund nearly $70 million for FY2005 for the LUST program.
EPA provides roughly 81% of the appropriated amount for states to oversee and enforce
cleanups by responsible parties, and uses the remainder for its program responsibilities and
for LUST activities on Indian lands. (Section 1572 extends this tax through March 2011.)
code of practice or other method that is no less protective of human health and the
Sec. 1531 authorizes to be appropriated from the LUST Trust Fund, for each of
FY2005 through FY2009, $200 million for cleaning up leaks from petroleum tanks
generally, and another $200 million for responding to tank leaks involving MTBE or
other oxygenated fuel additives (e.g., other ethers and ethanol). This section further
authorizes to be appropriated from the trust fund, for each of FY2005 through
FY2009, $155 million for EPA and states to carry out and enforce the UST leak
prevention and detection requirements added by this bill and the LUST cleanup
program. From general revenues, this section authorizes the appropriation of another
$50 million, for each of FY2005 through FY2009, for EPA and states to carry out the
general UST program.
Subtitle C — Boutique Fuels
Reducing the Proliferation of Boutique Fuels (Sec. 1541). The EPA
Administrator is permitted to temporarily waive fuel requirements, including state
fuel requirements and RFG standards, in the case of a natural disaster, Act of God,
pipeline or refinery equipment malfunction, or other unforeseeable event. In
addition, the Administrator may not approve a fuel standard under a State
Implementation Plan if that standard would increase the number of unique state
formulations above the number as of September 1, 2004.
Title XVI — Climate Change
Subtitle A — National Climate Change Technology
Summary of Provisions. Subtitle A amends Title XVI of the 1992 Energy
Policy Act to add a new Section 1610 establishing a new governmental structure to
develop a national response strategy to promote technologies and practices to reduce
greenhouse gas intensity, coordinate federal climate change technology activities,
identify barriers to technologies that improve carbon intensity, and recommend
technology deployment projects.
Greenhouse Gas Intensity Reducing Technology Strategies (Sec.
1601). Subtitle A amends the 1992 Energy Policy Act by adding a new Section
1610, requiring that a national strategy to promote the deployment and
commercialization of technologies and practices to reduce greenhouse gas intensity
be submitted to the President and Secretary of Energy by a new interagency
Committee on Climate Change Technology within 18 months of enactment. The
Energy Secretary shall create within the Department the Climate Change Technology
Program to assist the committee in coordinating climate change technology activities,
and conduct an inventory and evaluation of current activities. In addition, the Energy
Secretary may establish a Climate Change Technology Advisory Committee
consisting of various stakeholder groups to identify barriers to commercialization of
such technologies and recommend solutions.
Based on the work conducted above, the Committee on Climate Change
Technology shall develop recommendations for removing barriers to
commercialization, including considering the need for demonstration projects.
Subject to appropriations, the Energy Secretary shall support demonstration projects
that fulfill specific criteria in the legislation and require cost-sharing in accordance
with the provisions of §988 of this act. The Energy Secretary may also enter into
cooperative research and development agreement under §12 of the Stevenson-
Wydler Technology Innovation Act of 1980 (15 U.S.C. 3710a).
Subtitle B — Climate Change Technology Deployment in
Summary of Provisions. Subtitle B amends the Global Environmental
Protection Assistance Act of 1989 by adding a new Part C entitled “Technology
Deployment in Developing Countries.” Provisions establish a complementary
program designed to encourage U.S. exports of greenhouse gas intensity reducing
technology to developing countries and to assist demonstration of such technologies
in developing countries.
Climate Change Technology Deployment in Developing Countries
(Sec. 1611). The Global Environmental Protection Assistance Act of 1989 (P.L.
101-240) is amended by adding a new Part C (§731-§739) — Technology
Deployment in Developing Countries, with the following provisions:
Definitions (Sec. 731). This section defines carbon sequestration, greenhouse
gas, and greenhouse gas intensity as used in the new Part C.
Reduction of Greenhouse Gas Intensity (Sec. 732). Within 18 months of
enactment, the Secretary of State shall submit to Congress a report identifying the 25
developing countries that have the greatest greenhouse gas emissions, and the
potential for projects and practices that would reduce greenhouse gas intensity.
Coordinating with the U.S. Agency for International Development, the Secretary of
State shall provide assistance, either directly or through agreements with major
international institutions, to developing countries for projects that reduce greenhouse
gas intensity. Priority shall be given to the projects in the 25 countries identified in
the required report.
Technology Inventory for Developing Countries (Sec. 733). The Secretary
of Energy shall submit a report to Congress providing an inventory of appropriate
technologies for use in developing countries, a list of barriers to technology transfer
and commercialization, compilation of previous federal results in this area, and
Trade-Related Barriers to Export of Greenhouse Gas Intensity Reducing
Technologies (Sec. 734). Within one year of enactment, the U.S. Trade
Representative shall identify trade-relations barriers to U.S. export of greenhouse gas
intensity reducing technologies to foreign countries and negotiate with such countries
for their removal. An annual progress report is required.
Greenhouse Gas Intensity Reducing Technology Export Initiative (Sec.
735). This section establishes an interagency working group headed by the Secretary
of State to promote the export of greenhouse gas intensity reducing technologies by
identifying priority countries for export and barriers to adoption of such technologies.
An annual performance review of actions taken and a report to Congress is required,
including recommendations for increasing potential exports.
Technology Demonstration Projects (Sec. 736). The Secretary of State
shall facilitate the development of demonstration projects in at least 10 countries that
meet specific political and economic criteria contained in the section. Selected
projects shall focus on the opportunity for reducing greenhouse gas intensity and
generating economic growth.
Fellowship and Exchange Programs (Sec. 737). The Secretary of State
shall carry out fellowship and exchange programs to educate officials from
developing countries about best practices to reduce greenhouse gas intensity in their
Authorization of Appropriations (Sec. 738). Such sums as are necessary are
authorized to be appropriated for implementing this part.
Effective Date (Sec. 739). Unless otherwise noted, this part takes effect on
October 1, 2005.
Background. U.S. policy toward global climate change evolved from a “study
only” to a more “study and action” orientation in 1992 with ratification of the U.N.
Framework Convention on Climate Change (UNFCCC) in Rio de Janeiro. Arguing
that “the developed country Parties should take the lead” in reducing emissions, the
convention states that developed countries shall aim toward returning their
greenhouse gas emissions to their 1990 levels by the year 2000. In line with this
goal, developed countries were to adopt national plans and policy options to mitigate
climate change by reducing anthropogenic emissions and enhancing sinks. The
United States submitted such plans in 1992, 1994, 1997, and 2002. None of these
plans achieved the commitment the United States made at Rio.
The Energy Policy Act of 1992 (EPACT92) has been the principal statutory
basis for programs making up the U.S. response to the UNFCCC. Primarily crafted
as an energy policy response to the Iraqi takeover of Kuwait and the U.S.-led
response, the act’s energy conservation, renewable energy, and other titles were also
seen as having a beneficial effect on global climate change concerns being debated
at this time in international circles. In its 1992 submission to the UNFCCC, the
George H.W. Bush Administration listed 11 different titles of EPACT as extremely
important to its overall strategy for reducing greenhouse gases.29
A central component of the UNFCCC was its establishment of a conference of
parties (COP) to negotiate further agreements to counter global climate change. In
1997, the third COP completed negotiations on the Kyoto Protocol — a binding
agreement on developed countries to reduce their greenhouse gas emission by 2008-
2012. The Clinton Administration signed the Kyoto Protocol in 1998 but never
submitted it to the Senate for ratification because it did not meet the conditions of
S.Res. 98 — a 1997 Sense of the Senate resolution stating the United States should
not sign an agreement limiting developed countries’ greenhouse gas emissions unless
that agreement also included limitations on developing countries’ emissions and did
not result in serious harm to the U.S. economy.
In June 2001, the George W. Bush Administration abandoned the Kyoto
Protocol, stating it was “fatally flawed in fundamental ways.” Instead, in 2002,
President Bush proposed to shift the nation’s climate change program from a goal of
reducing emission per se to a goal of reducing greenhouse gas intensity — the
amount of greenhouse gases emitted per unit of economy productivity. Under the
proposal, the country’s greenhouse gas intensity, which has been declining for a
number of years, would decline 18% between 2002 and 2012, as opposed to a 14%
projected “business as usual” decline.
Policy Context. Title XVI attempts to provide some legislative support to the
Bush Administration’s 2002 initiative on climate change that focused on reducing the
country’s carbon intensity; that is, the ratio of greenhouse gas emissions per unit of
Gross Domestic Product (GDP). As with previous Administrations’ climate change
policies, the programs contained under Title XVI are voluntary — no mandatory
emission reductions are included.
It is difficult to assess the potential for actual emission reductions under the new
title, or their time frame. However, previous assessments of voluntary efforts versus
mandatory programs do not suggest that any dramatic changes should be expected,
at least in the near to mid-term. In its 2002 submission to UNFCCC, the Bush
Administration contended that the United States achieved 242 million metric tons
(carbon dioxide equivalent) in reductions for the year 2000 over a business as usual30
scenario. Of the 50-plus programs summarized in the 2002 report, six are described
as “regulatory.” However, this small subset of the total U.S. effort accounts for a
large share of greenhouse gas emissions reductions achieved over the past decade.
For example, EPA mandatory regulations on landfills and Significant New
Alternatives Policy Determinations (SNAP) account for 65 million tons of the total
29 U.S. Department of State, National Action Plan for Global Climate Change, 1992, p. 73.
30 U.S. Department of State, U.S. Climate Action Report, May 2002.
31 See Brent D. Yacobucci and Larry Parker, Climate Change Federal Laws and Policies
Related to Greenhouse Gas Reductions, CRS Report RL31931.
Besides uncertainty about results because of the voluntary nature of the
program, it is unclear how Title XVI will interact with other titles that encourage the
expansion of energy supply — supply that could increase greenhouse gas emissions
depending on its source. Thirteen years after the passage of EPACT92, no definitive
data on its overall impact on greenhouse gas emissions are available. Now the focus
shifts to the potential impact of the Energy Policy Act of 2005.
Title XVII — Incentives for Innovative Technologies
Summary of Provisions. This title authorizes the Secretary of Energy to
make loan guarantees for up to 80% of the cost of advanced energy projects,
including fossil fuel, renewable, nuclear, and energy efficiency technologies.
Definitions (Sec. 1701). Definitions are provided for such terms as
“commercial technology,” “eligible project,” and “guarantee.”
Terms and Conditions (Sec. 1702). The estimated federal cost of any loan
guarantee must be covered in advance by specific appropriations or payments by the
borrower. A loan guarantee may not cover more than 80% of the estimated cost of
a facility. If a borrower is unable to make payments on a guaranteed loan and is not
yet in default, the Secretary of Energy may make the payments if the borrower agrees
to future reimbursement (plus interest) on mutually acceptable terms.
Eligible Projects (Sec. 1703). Loan guarantees may be provided only to
projects that reduce man-made greenhouse gas emissions and employ new or
significantly improved technologies. Eligible categories include renewable energy,
fossil energy, fuel cells, nuclear energy, and energy efficiency. Criteria are
established for providing loan guarantees to integrated gasification combined cycle
(IGCC) projects, and emissions limits for certain air pollutants are specified.
Authorization of Appropriations (Sec. 1704). Such sums as necessary
are authorized. Funds appropriated under the Clean Coal Power Initiative may be
used for a loan guarantee for an IGCC project located in a taconite-producing region.
Background and Policy Context. Federal loan guarantees were provided
to several large projects during the late 1970s and early 1980s to create synthetic
fuels from domestic energy sources, such as coal and oil shale. Some major defaults
resulted, such as the Great Plains Coal Gasification Plant in North Dakota (although
it was a technological success and is still operating). Often the loan guarantees were
used in combination with price guarantees, providing an especially strong incentive
for private-sector participation, although also potentially increasing government
Without price guarantees, the loan guarantees authorized by Title XVII will be
attractive primarily for technologies that are already projected to be economically
competitive, unless they also receive other subsidies. For example, advanced nuclear
power plants are eligible for a production tax credit that may make them competitive
with other electricity generating technologies. But because no new nuclear plants
have been constructed in the United States in many years, such a project still would
pose significant financial risks that could be reduced by the loan guarantees.
Title XVIII — Studies
Summary of Provisions. A variety of studies are required, covering energy
measurement, energy efficiency, renewable energy, distributed generation, and
hydrogen. Subjects include resource assessments, technology analyses, and
evaluation of potential energy and employment impacts.
Study on Inventory of Petroleum and Natural Gas Storage (Sec.
1801). The Secretary of Energy is directed to study petroleum (including crude oil
and major refined products) and natural gas storage capacity to determine ultimate
capacity and operational levels, regionally as well as nationwide. The study will
determine minimum operating levels, explain why stocks drop below these levels,
and describe the industry’s ability to meet demand changes and avoid shortages.
Within one year of enactment, the Secretary shall report the study findings to
Congress, and make recommendations for preventing future supply shortages.
Study of Energy Efficiency Standards (Sec. 1802). DOE is directed to
have the National Academy of Sciences study whether the goals of energy efficiency
standards are best served by focusing measurement at the site (energy end-use) or at
the source (the full fuel cycle). This provision relates to Executive Order 13123,
which found that federal agencies should get credit toward meeting energy efficiency
goals even where “source energy use declines but site energy use increases.”
Telecommuting Study (Sec. 1803). DOE is required to study and report
on the energy conservation potential of widespread adoption of telecommuting by
federal employees. In this effort, DOE is required to consult with the Office of
Personnel Management, General Services Administration, and National
Telecommunications and Information Administration.
LIHEAP Report (Sec. 1804). The Department of Health and Human
Services (HHS) is directed to report on how the Low-Income Home Energy
Assistance Program (LIHEAP) could be used more effectively to prevent loss of life
from extreme temperatures.
Oil Bypass Filtration Technology (Sec. 1805). DOE and EPA are
required to jointly study the benefits of oil bypass filtration technology in reducing
demand for oil and protecting the environment. This study will include a
consideration of its use in federal motor vehicle fleets and an evaluation of products
Total Integrated Thermal Systems (Sec. 1806). DOE is directed to study
the potential for integrated thermal systems to reduce oil demand and to protect the
environment. Also, DOE is required to study the feasibility of using this technology
in Department of Defense and other federal motor vehicle fleets.
Report on Energy Integration with Latin America (Sec. 1807). The
Secretary of Energy shall submit an annual report to the House and Senate energy
committees about energy export development in Latin America, with particular focus
on U.S. energy coordination with Mexico.
Low-Volume Gas Reservoir Study (Sec. 1808). The Secretary of Energy
shall provide a grant to an organization of oil and gas producing states to conduct an
annual study of low-volume natural gas reservoirs. Among other goals, the study
shall produce detailed maps of low-volume reservoirs and related infrastructure and
recommend production incentives.
Investigation of gasoline prices (Sec. 1809). In the wake of crude oil
price rises, average retail gasoline prices in the country increased by about 25%
between the beginning of 2005 and late July 2005. This provision directs the Federal
Trade Commission (FTC) to investigate whether the price of gasoline is being
manipulated by reducing refinery capacity or by any other form of market
manipulation or price gouging. The National Petroleum Council (NPC) is directed
to determine whether and to what extent environmental and other regulations affect
construction of new domestic refineries or significant expansion of existing refinery
capacity. The NPC, a federally chartered and privately funded committee, represents
the views of the oil and natural gas industries in advising and making
recommendations to the Secretary of Energy about oil and gas issues.
Alaska Natural Gas Pipeline (Sec. 1810). Within 180 days after
enactment, and every 180 days thereafter, until the previously authorized Alaska
natural gas pipeline begins operation, FERC shall submit to Congress a report
describing the progress made in licensing and constructing the pipeline and any
issues impeding that progress.
Coal-bed Methane Study (Sec. 1811). The Secretary of the Interior, along
with the Administrator of EPA, is to arrange for an NAS study of the effect of coal-
bed methane (CBM) production on surface and ground water resources including
groundwater aquifers in several western states. A report to Congress is due within
six months after results of the study.
Backup Fuel Capability Study (Sec. 1812). The Secretary of Energy is
directed to conduct a study to determine the effect of obtaining and maintaining fuel
backup capability at gas-fired power generation facilities and other gas-fired
industrial facilities. Within one year of enactment, the Secretary of Energy will
submit the findings to Congress.
Indian Land Rights-of-Way (Sec. 1813). DOE and DOI will conduct a
joint study in consultation with stakeholders of issues regarding energy rights-of-way
on tribal land. Within one year of enactment they will submit a report to Congress
analyzing historic rates of compensation paid for energy rights-of-way on tribal land.
The report will recommend appropriate standards of fair compensation to tribes and
assess the tribal self-determination and sovereignty interests implicated.
Mobility of Scientific and Technical Personnel (Sec. 1814). Within
two years of enactment, DOE is required to report on any national laboratory
operating policies that create disincentives to interlaboratory exchange of scientific
and technical personnel. Further, the report is required to contain recommendations
for improving such exchange of personnel.
Interagency Review of Competition in the Wholesale and Retail
Markets for Electric Energy (Sec. 1815). An interagency task force is
established to conduct a study of competition within the wholesale and retail electric
markets. Within one year of enactment, the task force will submit its final report to
Congress. The task force consists of five members: one employee of the Department
of Justice, one employee of the Federal Energy Regulatory Commission, one
employee of that Federal Trade Commission, one employee of the USDA’s Rural
Utilities Service, and one employee of the Department of Energy.
Study of Rapid Electrical Grid Restoration (Sec. 1816). The Secretary
of Energy is directed to study the benefits of using mobile transformers and mobile
substations to rapidly restore electric service to areas subjected to blackouts. Within
one year of enactment, the Secretary of Energy will submit the findings to Congress.
Study of Distributed Generation (Sec. 1817). The Secretary of Energy
is required to study and report on hybrid distributed power systems that combine at
least one renewable electric power technology with at least one non-intermittent
electric power technology.
Natural Gas Supply Shortage Report (Sec. 1818). Not later than 180
days after enactment, the Secretary of Energy is directed to submit a report to
Congress on natural gas supply and demand. This report — to be based on a
comprehensive analysis — will develop recommendations on achieving a balance
between supply and demand in order to accommodate natural gas dependent
industries and to assure reasonable prices to residential consumers, and to achieve
clean air and carbon dioxide goals. The Secretary is called upon to consult experts
in the field, as well as state and local government and consumer organizations. He
is encouraged to hold public hearings and provide opportunities for public comment.
Hydrogen Participation Study (Sec. 1819). The Secretary of Energy is
required to report to Congress on ways to ensure broad participation, including
international participants, in setting goals for the DOE hydrogen program.
Overall Employment in a Hydrogen Economy (Sec. 1820). The
Secretary of Energy is required to study and report to Congress on the likely effects
of a transition to a hydrogen economy on national employment.
Hydrogen Participation Study (Sec. 1819). No later than one year after
enactment, the Secretary of Energy must report to Congress on the methods to
include widest participation (including international participants) in setting goals and
milestones under the hydrogen program (Title VIII).
Overall Employment in a Hydrogen Economy (Sec. 1820). The
Secretary of Energy is required to conduct a study, and report to Congress within 18
months of enactment, on the effects on overall U.S. employment of the transition to
a hydrogen economy.
Study of Best Management Practices for Energy Research and
Development Programs (Sec. 1821). The Secretary of Energy is directed to
have the National Academy of Public Administration study and report to Congress
on management practices for DOE R&D programs. This is to include practices that
could improve linkage between the Office of Science and mission-oriented offices
and practices used by the Department of Defense’s Advanced Research Projects
Effect of Electrical Contaminants on Reliability of Energy
Production Systems (Sec. 1822). Within 180 days after enactment, the
Secretary of Energy will enter into a contract with the National Academy of Sciences
under which NAS will determine the effect that electrical contaminants may have on
the reliability of energy production systems, including nuclear energy.
Alternative Fuels Reports (Sec. 1823). The Secretary of Energy is
required to report on the potential for biodiesel and hythane to be “major, sustainable,
Final Action on Refunds for Excessive Charges (Sec. 1824). FERC
is directed to complete “as soon as possible” its investigation of the “unjust and
unreasonable charges incurred by California during the 2000-2001 electricity crisis.”
A report to Congress will be submitted by December 31, 2005, that describes FERC’s
actions and establishes a timetable for further actions.
Fuel Cell and Hydrogen Technology Study (Sec. 1825). The Secretary
of Energy is required to contract with the National Academy of Sciences to study fuel
cell technologies. The study must include a roadmap for the transition from
petroleum to hydrogen in a significant number of vehicles by 2020. The roadmap is
to specify the amount of federal funding required and identify advantages and
disadvantages of such a transition.
Passive Solar Technologies (Sec. 1826). The Secretary of Energy is
directed to study and report to Congress on the levelized cost of electricity generation
that can be avoided through passive solar technologies and on the potential energy
savings if these technologies were to be eligible for incentives comparable to those
provided for electricity generation technologies.
Study of Link Between Energy Security and Increases in Vehicle
Miles Traveled (Sec. 1827). This section requires a study to be conducted by the
National Academy of Sciences to examine links between development patterns and
vehicle miles traveled (VMT), and whether VMT and the number of vehicle trips can
be reduced by better planning, design, development, and infrastructure decisions by
state and local officials. The study must be submitted to Congress within two years
Science Study on Cumulative Impacts of Multiple Offshore
Liquefied Natural Gas Facilities (Sec. 1828). The Secretary of Energy, in
consultation with other federal agencies and non-government stakeholders, is
required to study the potential marine environmental impacts of multiple offshore
liquefied natural gas (LNG) import facilities using “open-rack” vaporization in the
Gulf of Mexico.
“Open-rack” vaporization of LNG uses a continuous flow of seawater to reheat
cryogenic LNG to a gaseous state. This study is prompted by concerns among federal
and state environmental regulators, private environmental groups, and fishery-related
industries that multiple open-rack systems may kill a significant portion of
commercial and non-commercial marine species, especially non-migratory species
(e.g. redfish), in the waters near new offshore LNG terminals employing such
systems. Open-rack systems are favored by some LNG terminal developers because
they operate at lower cost than “closed-loop” systems, which are used primarily on
land, and which require the burning of natural gas to generate heat for LNG
vaporization. The open-rack process dramatically cools large quantities of seawater,
potentially killing all fish eggs, immature fish, plankton, and other living organisms
passing though the system. Depending upon the depth and configuration of
open-rack systems, they may also cause significant marine siltation by continuously
disturbing the sea floor. Open-rack vaporization is a new technology, however, so
its potential impacts on marine life are not well understood. Recent studies by
various government agencies and private stakeholders have reached widely varying
conclusions about the potential effects of open-rack systems on the marine
Energy and Water Saving Measures in Congressional Buildings
(Sec. 1829). The Architect of the Capitol is required to study ways to improve the
energy efficiency and energy security of the Capitol Complex through green building,
green roof, computer-based building management, onsite renewable energy, and
Study of Availability of Skilled Workers (Sec. 1830). The National
Academy of Sciences is to study the short- and long-term availability of skilled
energy and mineral workers in the United States. The study shall analyze the need
for such workers and recommend actions to assure future requirements. The
Secretary of Energy must submit a report on the study to Congress within two years
after the date of enactment.
Review of Energy Policy Act of 1992 Programs (Sec. 1831). The
language in §1831 is identical to §704. However, because of references to the impact
“of amendments to the Energy Policy Act of 1992 made this title,” as opposed to
specific section references, presumably the “this title” referred to in both sections is
Title VII of the Energy Policy Act of 2005.
Study on the Benefits of Economic Dispatch (Sec. 1832). The
Secretary of Energy, in consultation with the states, must study economic dispatch
and issue an annual report to Congress and the states. Economic dispatch is defined
as “the operation of generation facilities to produce energy at the lowest cost to
reliably serve consumers, recognizing any operational limits of generation and
Renewable Energy on Federal Land (Sec. 1833). The Secretary of the
Interior is directed to have the National Academy of Sciences study the potential for
wind, solar, and ocean energy resources on federal land and the outer continental
Increased Hydroelectric Generation at Existing Federal Facilities
(Sec. 1834). Within 18 months of enactment, the Secretaries of the Interior,
Energy, and the Army are required to submit a study of the potential for increasing
electric power production capability at federally owned or operated water regulation,
storage, and conveyance facilities.
Split-Estate Federal Oil and Gas Leasing and Development
Practices (Sec. 1835). The Secretary of the Interior will conduct a review of how
management practices by federal subsurface oil and gas development activities affect
privately owned surface users. The review will detail the rights and responsibilities
of surface and subsurface owners, compare consent provisions under the Surface
Mining Control and Reclamation Act of 1977 (P.L. 95-87) with provisions for oil and
gas development, and make recommendations that address surface owner concerns.
Resolution of Federal Resource Development Conflicts in the
Powder River Basin (Sec. 1836). The Secretary of the Interior will report to
Congress on plans to resolve conflicts between development of coal and coalbed
methane in the Powder River Basin (PRB).
Background. Groundwater levels and water quality are among the most
significant environmental issues facing coalbed methane producers. According to the
Wyoming Department of Environmental Quality, most water from CBM production
does not flow to surface supplies but rather seeps into underground aquifers and
formations and could result in sodium-tainted water.
The federal government owns over half the mineral rights in the PRB, while the
majority of the surface rights are held privately, resulting in split estates. However,
most of the current production of CBM is taking place on private lands. Over 80%
of the land overlying CBM wells is privately or state held in Wyoming, and some
surface owners oppose development while others contend they are not compensated
fairly for surface use.
National Security Review of International Energy Requirements
(Sec. 1837). The Secretary of Energy, in consultation with the Secretary of Defense
and Secretary of Homeland Security, shall conduct a study of the growing energy
requirements of China and the implications of such growth on the political, strategic,
economic, or national security interests of the United States. Among other
requirements, the study will assess the type, nationality, and location of energy assets
that have been sought for investment by entities located in China; assess the extent
to which investment in energy assets by entities located in China has been on
market-based terms and free from subsidies; and examine the relationship between
the United States and China in avoiding conflict over each nation’s pursuit of energy
interests. The report is required to be submitted within 120 days after enactment.
Used Oil Re-refining Study (Sec. 1838). The Secretary of Energy, in
conjunction with the EPA Administrator, shall undertake a study of the energy and
environmental benefits of re-refining used lubricating oil and report to Congress
within 90 days of enactment. The study should include recommendations on
improving collection of this oil and its beneficial re-use.
Transmission System Monitoring (Sec. 1839). Within six months after
enactment, the Secretary of Energy and FERC will study and report to Congress on
what would be involved in providing all transmission system owners and Regional
Transmission Organizations with real-time transmission line operating status.
Report Identifying and Describing the Status of Potential
Hydropower Facilities (Sec. 1840). Within 90 days of enactment, the
Department of the Interior is directed to issue a report that inventories all water
surface storage studies authorized since 1939 and, for each study, to identify the
potential to develop hydroelectric facilities and to estimate the costs and benefits of
Table 3. Authorizations in the Energy Policy Act of 2005, as Enacted
(in millions of dollars)
ble, text in italics and smaller font indicates subcategories.
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
TITLE I — ENERGY EFFICIENCY
Subtitle A — Federal Programs
g/wSec. 107Advanced Building Efficiency Testbed — $6.0$6.0$6.0 — — — — $18.0
s.orSubtitle B — Energy Assistance and State Programs
Sec. 121Low-income Home Energy Assistance Program$5,100.05,100.05,100.0 — — — — — 15,300.0
://wikiSec. 122Weatherization Assistance — 500.0600.0700.0 — — — — 1,800.0
Sec. 123State Energy Programs — 100.0100.0125.0 — — — — 325.0
Sec. 124Energy Efficient Appliance Rebate Programs — 50.050.050.0$50.0$50.0 — — 250.0
Sec. 125Energy Efficient Public Buildings — 30.030.030.030.030.0 — — 150.0
Sec. 126Low Income Community Energy Efficiency Pilot Program — 20.020.020.0 — — — — 60.0
Sec. 127State Technologies Advancement Collaborative — ssssssssss — — ss
Sec. 128State Building Energy Efficiency Codes Incentives — 25.025.025.025.025.0ssassa125.0
Subtitle C — Energy Efficient Products
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 132HVAC Maintenance Consumer Education Program — ssassssssssssssssa
Sec. 133Public Energy Education Program — ssassssssssssssssa
Sec. 134Energy Efficiency Public Information Initiative — 90.090.090.090.090.0 — — 450.0
Sec. 140Energy Efficiency Pilot Program — 5.05.05.05.05.0 — — 25.0
TITLE II — RENEWABLE ENERGY
Subtitle A — General Provisions
iki/CRS-RL33302Sec. 201Assessment of Renewable Energy Resources — 10.010.010.010.010.0 — — 50.0
g/wSec. 202Renewable Energy Production Incentive (ss for FY06 - FY26) — ssssssssssssssss
leakSec. 204Use of Photovoltaic Energy in Public Buildings
://wikiPhotovoltaic Energy Commercialization Program — 50.050.050.050.050.0 — — 250.0
httpPhotovoltaic Systems Evaluation Program — 10.010.010.010.010.0 — — 50.0
Sec. 206Renewable Energy Security — 150.0150.0200.0250.0250.0 — — 1,000.0
Sec. 207Installation of Photovoltaic System — 20.0 — — — — — — 20.0
Sec. 208Sugar Cane Ethanol Pilot Program — 36.0a — — — — — — 36.0
Sec. 209Rural and Remote Community Electrification Grants — 20.020.020.020.020.020.020.0140.0
Sec. 210Grants to Improve the Commercial Value of Forest Biomass — 50.050.050.050.050.050.0250.0550.0
Subtitle C — Hydroelectric
Sec. 242Hydroelectric Production Incentives — 10.010.010.010.010.010.040.0100.0
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 243Hydroelectric Efficiency Improvement — 10.010.010.010.010.010.040.0100.0
Subtitle D — Insular Energy
Sec. 251Insular Areas Energy Security (* $6M per year, no end date) — 6.06.06.06.06.06.030.066.0*
Sec. 252Enhancing Insular Energy Independence (* $4.5M per year, no — 188.8.131.52.54.54.522.549.5*
ITLE III — OIL AND GAS
iki/CRS-RL33302Subtitle A — Petroleum Reserve and Home Heating Oil
g/wSec. 301Permanent Authority to Operate the Strategic Petroleum — ssa ssssssssssssssa
s.orReserve and Other Energy Programs
leakSubtitle E — Production Incentives
://wikiSec. 348North Slope Science Initiative — ssassssssssssssssa
httpSec. 349Orphaned, Abandoned, or Idled Wells on Federal Land — 25.025.025.025.025.0 — — 125.0
Sec. 351Preservation of Geological & Geophysical Data — 30.030.030.030.030.0 — — 150.0
Sec. 354Enhanced Oil & Natural Gas Production through Carbon — ssassssssssssssssa
Sec. 355Assessment of Dependence of State of Hawaii on Oil — ssassssssssssssssa
Sec. 356Denali Commission — 55.055.055.055.055.055.0210.0540.0
Subtitle F — Access to Federal Land
Sec. 362Management of Federal Oil and Gas Leasing Programs (DOI) — 70.070.070.070.070.0 — — 350.0
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Bureau of Land Management — 60.060.060.060.060.0 — — 300.0
Fish & Wildlife — 5.05.05.05.05.0 — — 25.0
Forest Service (USDA) — 5.05.05.05.05.0 — — 25.0
Subtitle G — Miscellaneous
Sec. 384Coastal Impact Assistance Program d — — — — — — — — —
ITLE IV — COAL
iki/CRS-RL33302Subtitle A — Clean Coal Power Initiative
g/wSec. 401Authorization of Appropriations — 200.0200.0200.0200.0200.0200.0600.01,800.0
leakSubtitle B — Clean Power Projects
://wikiSec. 412Loan to Place Alaska Clean Coal Technology Facility ine — ssassssssssssssssa
Sec. 416Electron Scrubbing Demonstration (from Sec. 401 funds) — 5.0a — — — — — — 5.0
Sec. 417DOE Transportation Fuels from Illinois Basin Coal — 85.0* — — — — — — 85.0
(*FY06 - FY10)
Subtitle D — Coal and Related Programs
Sec. 421Clean Air Coal Program
Generation Projects (*FY2012, $400M; FY2013, $300M) — — 250.0350.0400.0400.0400.0700.0*2,500.0
Air Quality Enhancement Program — — 300.0100.040.030.030.0 — 500.0
TITLE V — INDIAN ENERGY
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 503Indian Energy
Indian Tribal Energy Resource Development, DOI program — ssssssssssssssss
DOE, Indian Energy Education, Planning, & Mgmt. Asst. Prog. — 20.020.020.020.020.020.0100.0220.0
Tribal Energy Transmission & Resource Development (FY06 - — ssssssssssssssss
Federal Power Marketing Administrations — 0.75a — — — — — — 0.75a
a — — — — — — 1.0a
iki/CRS-RL33302Wind & Hydropower Feasibility Study — 1.0
g/wI — NUCLEAR MATTERS
s.orSubtitle B — General Nuclear Matters
Sec. 628Decommissioning Pilot Program — 16.0a — — — — — — 16.0
httpSec. 634Demo Hydrogen Production at Existing Nuclear Power Plants — 100.0 — — — — — — 100.0
Sec. 636Authorization of Appropriations for Subtitle B — ssassssssssssssssa
Subtitle C — Next Generation Nuclear Plant Project
Sec. 645Authorization of Appropriations (* plus ss for FY16 - FY21) — 1,250.0 — — — — — — 1,250.0
— VEHICLES AND FUELS
Subtitle A — Existing Programs
Sec. 706Joint Flexible Fuel/Hybrid Vehicle Commercialization — 3.07.010.020.0 — — — 40.0
Subtitle B — Hybrid Vehicles, Advanced Vehicles & Fuel Cell Buses
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 712Efficient Hybrid & Advanced Diesel Vehicles (ss for FY06- — ssssssssssssssss
Sec. 723Authorization of Appropriations for Advanced Vehicles — 200.0a — — — — — — 200.0
Sec. 731Fuel Cell Transit Bus Demonstration — 10.010.010.010.010.0 — — 50.0
Subtitle C — Clean School Buses
Sec. 741Clean School Bus Program — 55.055.0ssssssssss110.0
iki/CRS-RL33302Sec. 742Diesel Truck Retrofit & Fleet Modernization Program — 20.035.045.0ssss — — 100.0
s.orSec. 743Fuel Cell School Buses (* 25M for FY06 through FY09) — 25.0* — — — — — — 25.0
leakSubtitle D — Miscellaneous
://wikiSec. 751Railroad Efficiency — 15.020.030.0 — — — — 65.0
httpSec. 755Conserve by Bicycling Program — 6.2a — — — — — — 6.2 a
Sec. 756Reduction of Engine Idling
Heavy-Duty Vehicles — 19.530.045.0 — — — — 94.5
Locomotives — 10.015.020.0 — — — — 45.0
Sec. 757Biodiesel Engine Testing Program — 5.05.05.05.05.0 — — 25.0
Sec. 758Ultra-efficient Engine Technology for Aircraft — 50.050.050.050.0 — — — 200.0
Subtitle E — Automobile Efficiency
Sec. 771Implementation & Enforcement of Fuel Economy Standards f — 184.108.40.206.53.5 — — 17.5
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Subtitle F — Federal & State Procurement
Sec. 782Fuel Cell Vehicles and Hydrogen Energy Systems — — — 15.025.065.0ssss105.0
(ss FY11- FY15)
Sec. 783Federal Procurement of Stationary, Portable, and Micro Fuel — 20.050.075.0100.0100.0ssss345.0
Cells (ss FY11- FY15)
Subtitle G — Diesel Emissions Reduction
Sec. 797Authorization of Appropriations — — 200.0200.0200.0200.0200.0 — 1,000.0
iki/CRS-RL33302 — HYDROGEN
s.orSec. 805Programs, Hydrogen Supply — 160.0200.0220.0230.0250.0ssss1,060.0
leakSec. 808Demonstration — 185.0200.0250.0300.0375.0ssssc1,310.0
://wikiSec. 809Codes & Standards — 4.07.08.010.09.0ssssc38.0
httpSec. 811Reports (* $1.5M per year for FY12 - FY20) — 220.127.116.11.51.51.513.5*22.5
Sec. 812Solar & Wind Technologies (ss for FY06 - FY20) — ssssssssssssssss
ITLE IX — RESEARCH AND DEVELOPMENT
Subtitle A — Energy Efficiency
ec. 911(b)Authorization of Appropriations — — 783.0865.0952.0 — — — 2,600.0
Total for Subtitle A except as authorized in Sec. 911(d)
Part of the total above is specifically allocated as follows in
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Vehicles (sec. 911(a)(2)(A)) — — 200.0270.0310.0 — — — 780.0
Electric Motor Control Technology (sec. 911(a)(2)(D)) — — 2.02.0 — — — — 4.0
Next Generation Lighting Initiative (sec. 912) — — 50.050.050.0 — — — 150.0
Secondary Electric Vehicle Battery Use Program (sec. 915) — — 7.07.07.0 — — — 21.0
ec. 911(d)Extended Authorization for “Next Generation Lighting — — — — — 50.050.0100.0200.0
Initiative” (sec. 912)
iki/CRS-RL33302Subtitle B — Distributed Energy and Electric Energy Systems 0.0
g/wSec.Distributed Energy and Electric Energy Systems Activities — — 240.0255.0273.0 — — — 768.0
s.or921(b)(1) Total for Subtitle B except as authorized under Sec.
://wikiPart of the total above is specifically allocated as follows initalic:
Micro-cogeneration Energy Technology (sec. 923) — — 20.0 20.0 — — — — 40.0
High Voltage Transmission Lines (sec.925(g)) — — 2.0 — — — — — 2.0
921(b)(2)Power Delivery Research Initiative (sec.925(e)) — — ssssss — — — ss
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Subtitle C — Renewable Energy
ec. 931(b)Renewable Energy — — 632.0743.0852.0 — — — 2,227.0
Total for Subtitle C
Part of the total is specifically allocated as follows in italic:
Bioenergy (sec. 932) g — — 213.0251.0274.0 — — — 738.0
(Integrated Biorefinery Demo Projects (sec. 932(d) ) ) — — 100.0125.0150.0 — — — 375.0
iki/CRS-RL33302Solar Energy (sec. 931(a)(2)(A)) — — 140.0200.0250.0 — — — 590.0
g/w (Renewable Energy in Public Buildings ( sec. 935)) — — 40.050.050.0 — — — 140.0
s.orSubtitle D — Agricultural Biomass Research & Development Programs
Sec. 941Amdnts to the Biomass Research & Development Act of 2000 — 200.0200.0200.0200.0200.0200.0800.02,000.0
httpSec. 942Production Incentives for Cellulosic Biofuels — 250.0 — — — — — — 250.0
Sec. 944Small Business Bioproduct Marketing & Certification Grants — 1.0ssssssssss1.0
Sec. 945Regional Bioeconomy Development Grants (ss FY07-15) — 1.0ssssssssssss1.0
Sec. 946Preprocessing & Harvesting Demonstration Grants — 5.05.05.05.05.0 — — 25.0
Sec. 947Education and Outreach — 1.01.01.01.01.0 — — 5.0
Subtitle E — Nuclear Energy Programs
ec. 951(b)Core Programs h — — 330.0355.0495.0 — — — 1,180.0
Part of the total is specifically allocated as follows in italic:
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Advanced Fuel Cycle Initiative (sec. 953) — — 150.0155.0275.0 — — — 580.0
University Nuclear Science & Engineering Support (sec. 954) — — 43.650.156.0 — — — 149.7
Alternatives to Industrial Radioactive Sources (sec. 957) — — 6.06.06.0 — — — 18.0
Nuclear Infrastructure & Facilities (sec. 955) — — 135.0140.0145.0 — — — 420.0
Subtitle F — Fossil Energy
ec. 961(b) Fossil Energy — — 611.0626.0641.0 — — — 1,878.0
iki/CRS-RL33302 Total for Sec. 961(b)
g/wPart of the total is specifically allocated as follows in italic:
s.orCoal & Related Technologies Program (sec. 962) — — 367.0376.0394.0 — — — 1,137.0
Carbon Dioxide Capture Research & Development (sec. 963) — 25.030.035.0 — — — — 90.0
httpResearch & Development for Coal Mining Technologies (sec.964) — — 20.025.030.0 — — — 75.0
Low-volume Oil & Gas Reservoir Research Program (sec. 966) — — 1.50.450.45 — — — 2.4
Office of Arctic Energy i — — 25.025.025.0 — — — 75.0
ec. 961(d)Extended Authorization - Office of Arctic Energy i — — — — — 25.025.025.075.0
Sec. 968Methane Hydrate Research — 15.020.030.040.050.0 — — 155.0
Subtitle G — Science Programs
Science, Authorization of Appropriations — — 4,153.04,586.05,200.0 — — — 13,939.0
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Part of the total is specifically allocated as follows in italic:
Fusion Energy Sciences (sec. 972) — — 355.0369.5384.8 — — — 1,109.3
ITER Construction (in addition to funds for sec. 972) — — ssssss — — — ss
Catalysis Research Program (sec. 973) — — 36.538.2ss — — — 74.7
Advanced Scientific Computing for Energy Missions (sec. 976) — — 270.0350.0375.0 — — — 995.0
Systems Biology Program (sec. 977) — — ssssss — — — ss
iki/CRS-RL33302Energy & Water Supplies Program (sec. 979) — — 30.030.030.0 — — — 90.0
g/wScience and Engineering Pilot Program (sec. 983) — — 4.04.08.0 — — — 16.0
leakEnergy Research Fellowship Program (sec. 984) — — 40.040.040.0 — — — 120.0
://wikiec. 971(d)Integrated Bioenergy Research and Development j49.049.049.049.049.0 — — — 245.0
httpSec.Spallation Neutron Source Project - total cost of project — 1,411.7a — — — — — — 1,411.7
Sec.Spallation Neutron Source Facility
(A)(i) SING — — 75.075.075.0 — — — 225.0
(A)(ii) SNS Power Upgrade — 160.0a — — — — — — 160.0
(B) if insufficient stockpiles of heavy water — — 12.0 — — — — — 12.0
Sec. 981Rare Isotope Accelerator k — ssassssssssssssssa
Subtitle H — International Cooperation
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 985Western Hemisphere Energy Cooperation — — 10.013.016.0 — — — 39.0
Sec. 986AInternational Energy Training — — 18.104.22.168.5 — — 6.0
Subtitle I — Research Administration and Operations
Sec. 997Arctic Engineering Research Center — 3.03.03.03.03.03.0 — 18.0
Sec. 998Barrow Geophysical Research Facility — 61.0a — — — — — — 61.0s
Subtitle JUltra-Deepwater & Unconventional Natural Gas & Other
g/wSec. 999HFunding — — 100.0100.0100.0100.0100.0500.01,000.0
s.orTITLE X — DEPARTMENT OF ENERGY MANAGEMENT
Sec. 1002Technology Infrastructure Program — 10.010.010.0 — — — — 30.0
httpSec. 1003Small Business Advocacy & Assistance — 5.05.05.0 — — — — 15.0
Sec. 1008Prizes for Achievement in Grand Challenges of Science & — 15.0a — — — — — — 15.0a
T e c hno l o gy
ITLE XI — PERSONNEL & TRAINING
Sec. 1101Workforce Trends & Traineeship Grants — 20.020.020.0 — - — - — - — 60.0
II — ELECTRICITY
Subtitle B — Transmission Infrastructure Modernization
Sec. 1224Advanced Power System Technology Incentive Program — 10.010.010.010.010.010.010.070.0
Subtitle F — Repeal of PUHCA
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Sec. 1276Authorization of Appropriations — ssassssssssssssssa
IV — MISCELLANEOUS
Subtitle A — In General
Sec. 1404Petrochemical & Oil Refinery Facility Health Assessment — ssassssssssssssssa
Sec. 1405National Priority Project Designation — ssssssssss — — ss
Sec. 1406Cold Cracking — 0.25 — — — — — — 0.3
iki/CRS-RL33302Sec. 1407Oxygen-Fuel — 100.0100.0100.0 — — — — 300.0
g/wSubtitle B — Set America Free
leakSec. 1423U.S. Commission on North American Energy Freedom (lump — 5.05.0 — — — — — 10.0
sum of $10M for FY06 & FY07)
httpITLE XV — ETHANOL AND MOTOR FUELS
Subtitle A — General Provisions
Renewable Fuel, Resource Center4.04.04.0 — — — — — 12.0
Renewable Fuel, Research & Development Grant — 25.025.025.025.0 — — — 100.0
Renewable Fuel, Cellulosic Biomass Ethanol Conversion — 250.0400.0 — — — — — 650.0
Assista nc e
Sec. 1512Conversion Assistance for Cellulosic Biomass & Waste-derived — 100.0250.0400.0 — — — — 750.0
Ethanol, Approved Renewable Fuels
Sec. 1514Advanced Biofuel Technologies Program110.0110.0110.0110.0110.0 — — — 550.0
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Subtitle B — Underground Storage Tank Compliance (UST)
Sec. 1531Authorization of Appropriations
Amends Subtitle I of the Solid Waste Disposal Act (SWDA) by
adding Sec. 9014 to the end of it.
Sec. 9014(1) for Subtitle I (from general revenues) 50.050.050.050.050.0 — — — 250.0
Generally to Administer & Enforce Current UST Program
(except for secs. 9003(h), 9005(c), 9011, 9012)
iki/CRS-RL33302Sec. 9014(2) A, B, C, & D below
g/w(from the Leaking Underground Storage Tank (LUST) Trust
leak(A) Cleanup of Leaks from Underground Fuel Tanks, General 200.0200.0200.0200.0200.0 — — — 1,000.0
://wiki(sec. 9003(h)) (except sec. 9003(h)(12))
http(B) Cleanup of Leaks Containing Oxygenated Fuels (e.g.200.0200.0200.0200.0200.0 — — — 1,000.0
MTBE, Ethanol) (sec. 9003(h)(12))
(C) State UST/LUST Program Implementation and Tank100.0100.0100.0100.0100.0 — — — 500.0
Inspections. State Compliance Reports on govt.-owned tanks in
State (sec. 9003(i)), Trust Fund Distribution (sec. 9004(f)),
Inspections (sec. 9005(c))
(D) UST Leak Prevention & Program55.055.055.055.055.0 — — — 275.0
Compliance/Enforcement. Operator Training (sec. 9010),
Enforcement (sec. 9011), Delivery Prohibition (sec. 9012),
Indian Lands Strategy (sec. 9013)
(Total amount authorized from LUST Trust Fund)555.0555.0555.0555.0555.0 — — — 2,775.0
. 109- 58Title FY2005FY2006FY2007FY2008FY2009FY2010FY2011FY2012-FY2016FY2005-FY2016
Subtitle C — Boutique Fuels
Sec. 1541Reducing the Proliferation of Boutique Fuels — 0.5a — — — — — — 0.5a
TLE XVI — CLIMATE CHANGE
Subtitle ANational Climate Change Technology Development
)Greenhouse Gas Intensity Reducing Technology Strategies, — ssassssssssssssssa
iki/CRS-RL33302Subtitle BClimate Change Technology Deployment in DevelopingCountries
g/w a a
s.orSec. 1611Climate Change Technology Deployment in Developing — ssssssssssssssss
://wikiTITLEXVIII — STUDIES
Sec. 1808Low-Volume Gas Reservoir Study — 1.50.450.450.450.45 — — 3.3
Sec. 1829Energy & Water Saving Measures in Congressional Buildings — 2.02.02.02.02.0 — — 10.0
(Architect of the Capitol)
tal Authorized Appropriations $5,868.0$12,368.9$17,092.5$12,594.5$12,216.5$2,917.5$1,395.0$3,461.0$67,913.7
Table prepared by CRS using the text of the Energy Policy Act of 2005, P.L. 109-58, as enacted on August 8, 2005.
Notes: This table shows funding that would be authorized, including loans but not loan guarantees, in P.L. 109-58. The section number in the far left column is the location
authorizing language in the bill. When an activity is described in a separate section of the bill from where it is authorized, it is indicated in parentheses after the program title
ss. Such sums as may be necessary.
* an asterisk next to an amount indicates that there is a note within that row.
a. No fiscal year(s) indicated. A single amount in a row indicates a lump sum.
b. No more than specified amount(s).
c. Such sums as may be necessary for FY2012 - FY2020
g/wd. Sec. 384. Does not need an authorization of appropriations. Receives funding from royalties paid on federal oil and gas leases.
leake. Sec. 412. Total amount of direct loan shall not exceed $80M.
://wikif. Sec. 771. Funds go to the National Highway Traffic Safety Administration in the Department of Transportation.
g. Sec. 931(b). A minimum of $5M per year is designated for Historically Black Colleges, Tribal Colleges, and Hispanic-serving Institutions.
h. Sec. 951. Funds may not be used to decommission the Fast Flux Text Facility.
i. Sec. 961(b)&(c). Office of Arctic Energy Authorized by the National Defense Authorization Act for Fiscal Year 2001 (U.S.C. 7144d).
j. Sec. 971(d). A minimum of $5M per year must go to training of minority and socially disadvantaged farmers and ranchers.
k. Sec. 981. No more than $1.1 billion in federal funds prior to operation of the accelerator.
l. Sec. 1531. The LUST Trust Fund has been funded primarily through a 0.1 cent-per-gallon motor fuels tax that commenced in 1987