Text: S.3714 — 111th Congress (2009-2010)All Information (Except Text)

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Introduced in Senate (08/05/2010)


111th CONGRESS
2d Session
S. 3714


To amend the Internal Revenue Code of 1986 to provide tax incentives for clean coal technology, and for other purposes.


IN THE SENATE OF THE UNITED STATES

August 5, 2010

Mr. Conrad (for himself and Mr. Hatch) introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to provide tax incentives for clean coal technology, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. Short title; findings.

(a) Short title.—This Act may be cited as the “Coal Energy Bridge Act of 2010”.

(b) Findings.—The Congress finds the following:

(1) Significantly reducing greenhouse gas emissions from United States coal plants must be part of a strategy to address climate change.

(2) Carbon capture and sequestration is the key to continued enjoyment of the energy security and economic benefits associated with the use of the Nation's abundant domestic coal resources for power generation.

(3) Multiple technology demonstrations that increase the efficiency of power plants and thereby reduce carbon dioxide emissions and that demonstrate carbon dioxide capture and sequestration are needed in the near-term as a bridge to a reliable and affordable power system that can achieve future greenhouse gas reduction goals.

SEC. 2. Seven-year amortization for certain systems installed on coal-fired electric generation units.

(a) In general.—Subsection (d) of section 169 of the Internal Revenue Code of 1986 (relating to amortization of pollution control facilities) is amended by adding at the end the following new paragraph:

“(6) SPECIAL RULE FOR SYSTEMS INSTALLED ON COAL-FIRED ELECTRIC GENERATION UNITS.—

“(A) IN GENERAL.—Any mechanical or electronic system—

“(i) which is installed on a coal-fired electric generation unit after the date of the enactment of this paragraph, and

“(ii) which reduces carbon dioxide emissions per net megawatt hour of electricity generation by 1 or more of the means described in subparagraph (B) or any other means,

shall be treated for purposes of this section as a new identifiable treatment facility which abates or controls atmospheric pollution or contamination by removing, altering, disposing, storing, or preventing the creation or emission of pollutants, contaminants, wastes, or heat. Paragraph (1)(C) of this subsection, and subsection (e), shall not apply to any system which is so treated.

“(B) MEANS FOR REDUCING EMISSIONS.—The means described in this subparagraph are—

“(i) optimizing combustion,

“(ii) optimizing sootblowing and heat transfer,

“(iii) upgrading steam temperature control capabilities,

“(iv) reducing exit gas temperatures (air heater modifications),

“(v) predrying low rank coals using power plant waste heat,

“(vi) modifying steam turbines or change the steam path/blading,

“(vii) replacing single speed motors with variable speed drives for fans and pumps, and

“(viii) improving operational controls, including neural networks.

“(C) SPECIAL RULE FOR MINIMUM TAX.—Section 56(a)(5) shall not apply to property to which this paragraph applies.”.

(b) Effective date.—The amendment made by this section shall apply to property placed in service after the date of the enactment of this Act.

SEC. 3. Credit for investment in carbon dioxide capture, transport, and storage equipment.

(a) In general.—Subpart E of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to rules for computing investment credit) is amended by inserting after section 48D the following new section:

“SEC. 48E. Qualifying carbon dioxide capture, transport, and storage equipment credit.

“(a) General rule.—For purposes of section 46, the qualifying carbon dioxide capture, transport, and storage equipment credit for any taxable year is an amount equal to 30 percent of the qualified investment for such taxable year.

“(b) Qualified investment.—

“(1) IN GENERAL.—For purposes of subsection (a), the qualified investment for any taxable year is the basis of eligible carbon dioxide capture, transport, and storage property placed in service by the taxpayer during such taxable year which is part of a qualifying clean coal project—

“(A)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and

“(B) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

“(2) SPECIAL RULE FOR CERTAIN SUBSIDIZED PROPERTY.—Rules similar to section 48(a)(4) shall apply for purposes of this section.

“(3) CERTAIN QUALIFIED PROGRESS EXPENDITURES RULES MADE APPLICABLE.—Rules similar to the rules of subsections (c)(4) and (d) of section 46 (as in effect on the day before the enactment of the Revenue Reconciliation Act of 1990) shall apply for purposes of this section.

“(c) Definitions.—For purposes of this section—

“(1) QUALIFYING CLEAN COAL PROJECT.—

“(A) IN GENERAL.—The term ‘qualifying clean coal project’ means any project if such project—

“(i) uses—

“(I) gasification technology (as defined in section 48B(c)(2)), or

“(II) the combustion of coal, biomass, or both

to produce electricity, qualified transportation fuels, or synthetic natural gas, and

“(ii)(I) is a new project which is designed to meet the requirements of subparagraphs (B), (C), and (D), as applicable, or

“(II) consists of retrofits to existing equipment such that the project meets the requirements of subparagraphs (B), (C), and (D), as applicable.

“(B) REQUIREMENTS FOR ELECTRICITY PRODUCTION.—

“(i) IN GENERAL.—In the case of a qualifying clean coal project which is used to produce electricity, the project shall meet the emission requirement of clause (ii) and the carbon capture requirement of clause (iii).

“(ii) EMISSION REQUIREMENT.—The requirement of this clause is met if the project is designed—

“(I) to emit carbon dioxide at an average annual rate of less than 1,100 pounds per net megawatt hour of electrical generation, or

“(II) such that the carbon dioxide emissions of such project are no greater than half of the average carbon dioxide emissions for facilities producing electricity during 2005 from the same coal rank as such project, as determined under regulations prescribed by the Secretary in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency.

“(iii) CARBON CAPTURE REQUIREMENT.—The requirement of this clause is met—

“(I) if such unit is among the first 1,000 megawatts of electric generation units certified by the Secretary under subsection (e), to capture and sequester not less than 500,000 metric tons per year of carbon dioxide,

“(II) if such unit is among the next 3,000 megawatts of electric generation units certified by the Secretary under subsection (e), to capture and sequester not less than 1,000,000 metric tons per year of carbon dioxide, and

“(III) for any other unit, to capture and sequester not less than 2,000,000 metric tons per year of carbon dioxide.

“(C) REQUIREMENTS FOR TRANSPORTATION FUELS.—

“(i) IN GENERAL.—In the case of any qualifying clean coal project which is used to produce qualified transportation fuels, such project shall be designed such that the cycle-wide carbon dioxide emissions for such fuels are no greater than half of the average cycle-wide carbon dioxide emissions for comparable products during 2005, as determined under regulations prescribed by the Secretary in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency.

“(ii) CYCLE-WIDE CARBON DIOXIDE EMISSIONS.—For purposes of this subparagraph, the term ‘cycle-wide carbon dioxide emissions’ means the total emissions of carbon dioxide in production and consumption of a product.

“(iii) COMPARABLE PRODUCTS.—For purposes of this subparagraph, the term ‘comparable product’ means any transportation fuel derived from crude oil or coal.

“(D) REQUIREMENTS FOR SYNTHETIC NATURAL GAS.—In the case of any qualifying clean coal project which is used to produce synthetic natural gas, such project shall be designed such that the cycle-wide carbon dioxide emissions for such gas is no greater than half of the average cycle-wide carbon dioxide emissions for such gas during 2005, as determined under regulations prescribed by the Secretary in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency. For purposes of this subparagraph, the term ‘cycle-wide carbon dioxide emissions’ means the total emissions of carbon dioxide in production and consumption of a product.

“(2) ELIGIBLE CARBON DIOXIDE CAPTURE, TRANSPORT, AND STORAGE PROPERTY.—The term ‘eligible carbon dioxide capture, transport, and storage property’ means any property—

“(A) which is used to capture, transport, or store carbon dioxide emitted at a qualifying clean coal project, including equipment used to separate and pressurize carbon dioxide for transport (including equipment to operate such equipment),

“(B)(i) the construction, reconstruction, or erection of which is completed by the taxpayer, or

“(ii) which is acquired by the taxpayer if the original use of such property commences with the taxpayer, and

“(C) with respect to which depreciation (or amortization in lieu of depreciation) is allowable.

“(3) QUALIFIED TRANSPORTATION FUEL.—The term ‘qualified transportation fuel’ means any liquid fuel derived from the co-processing of coal and renewable biomass (as defined in section 9001(12) of the Food, Conservation, and Energy Act of 2008).

“(4) COAL.—The term ‘coal’ means bituminous coal, subbituminous coal, and lignite.

“(d) Aggregate credits.—

“(1) IN GENERAL.—No credit shall be allowed under this section with respect to any qualifying clean coal project unless such project is certified by the Secretary under subsection (e).

“(2) LIMITATION ON PROJECTS CERTIFIED.—The Secretary may certify under subsection (e) no more than—

“(A) 20 projects described in subsection (c)(1)(A)(ii)(I), and

“(B) 20 projects described in subsection (c)(1)(A)(ii)(II).

“(e) Certification.—

“(1) CERTIFICATION PROCESS.—The Secretary, in consultation with the Secretary of Energy and the Administrator of the Environmental Protection Agency, shall establish a certification process to determine if a project meets all criteria and other requirements to be recognized as a qualifying clean coal project.

“(2) FEEDSTOCK REQUIREMENTS.—After the date of publication by the Secretary of the final certification process referred to in paragraph (1), the Secretary shall allocate the limitation in subsection (d)(2) in equal amounts among—

“(A) projects using bituminous coal as a primary feedstock,

“(B) projects using subbituminous coal as a primary feedstock, and

“(C) projects using lignite as a primary feedstock.

“(3) REDISTRIBUTION.—The Secretary may reallocate credits if the Secretary determines that there is an insufficient quantity of qualifying applications for certification, pending at the time of review, to comply with the feedstock requirements of paragraph (2). The Secretary may conduct an additional program for applications for certification and reallocate available credits without regard to the feedstock requirement which was not satisfied as a result of insufficient applications for certification.

“(4) REQUIREMENTS FOR APPLICATIONS FOR CERTIFICATION.—An application for certification shall contain such information as the Secretary may require in order to make a determination to accept or reject the application and establish applicable credit entitlement. Any information contained in the application shall be protected as provided in section 552(b)(4) of title 5, United States Code.

“(f) Denial of double benefit.—No credit shall be allowed under this section for any property for which credit is allowed under sections 48A, 48B, or 48C.”.

(b) Conforming amendments.—

(1) Section 46 of such Code (relating to amount of credit) is amended by striking “and” at the end of paragraph (5), by striking the period at the end of paragraph (6) and inserting “, and”, and by adding at the end the following new paragraph:

“(7) the qualifying carbon dioxide capture, transport, and storage equipment credit.”.

(2) Subparagraph (C) of section 49(a)(1) of such Code is amended by striking “and” at the end of clause (v), by striking the period at the end of clause (vi) and inserting “, and”, and by adding after clause (vi) the following new clause:

“(vii) the basis of any qualifying carbon dioxide capture, transport, and storage equipment under section 48E.”.

(3) The table of sections for subpart E of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 48D the following new item:


“Sec. 48E. Qualifying carbon dioxide capture, transport, and storage equipment credit.”.

(c) Effective date.—The amendments made by this section shall apply to periods after the date of the enactment of this Act under rules similar to the rules of section 48(m) of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of the Revenue Reconciliation Act of 1990).

SEC. 4. Modifications to credit for carbon dioxide sequestration.

(a) Credit allowed for uses other than tertiary injectants.—

(1) IN GENERAL.—Paragraph (2) of section 45Q(a) of the Internal Revenue Code of 1986 is amended to read as follows:

“(2) $10 per metric ton of qualified carbon dioxide which is—

“(A) captured by the taxpayer at a qualified facility, and

“(B) either—

“(i) used as a tertiary injectant in a qualified enhanced oil or natural gas recovery project and disposed of in secure geological storage, or

“(ii) converted to a stable form in which such carbon dioxide is securely and permanently sequestered and used for a beneficial economic purpose.”.

(2) CREDIT ALLOWED FOR OTHER SECURE STORAGE.—Subparagraph (B) of section 45Q(a)(1) of such Code is amended by inserting “or converted to a stable form in which it is securely and permanently sequestered” after “secure geological storage”.

(3) SECURELY AND PERMANENTLY SEQUESTERED.—Paragraph (2) of section 45Q(c) is amended—

(A) by striking all that precedes “in consultation with the Administrator” and inserting the following:

“(2) SECURE GEOLOGICAL STORAGE AND PERMANENT SEQUESTRATION.—

“(A) SECURE GEOLOGICAL STORAGE.—The Secretary”,

(B) by striking “(2)(C)” and inserting “(2)(B)(i)”, and

(C) by adding at the end the following new subparagraph:

“(B) SECURE PERMANENT SEQUESTRATION.—The Secretary, in consultation with the Administrator of the Environmental Protection Agency, shall establish regulations for determining adequate security measures for the permanent sequestration of carbon dioxide for uses described in paragraph (1)(B) or (2)(B)(ii) of subsection (a) such that the carbon dioxide does not escape into the atmosphere.”.

(4) CONFORMING AMENDMENT.—Subparagraph (B) of section 45Q(1) of such Code is amended by inserting “or through secure and permanent sequestration” after “secure geological storage”.

(b) Modification to definition of qualified carbon dioxide.—Subparagraph (A) of section 45Q(b)(1) of the Internal Revenue Code of 1986 is amended by striking “otherwise” and inserting “, but for the capture and sequestration or conversion to a stable form,”.

(c) Person entitled to credit.—

(1) IN GENERAL.—Paragraph (5) of section 45Q(d) of the Internal Revenue Code of 1986 is amended to read as follows:

“(5) CREDIT ATTRIBUTABLE TO TAXPAYER.—

“(A) IN GENERAL.—Except as provided in subparagraph (B), any credit under this section shall be attributable to the person that captures and physically or contractually ensures the disposal of or the use as a tertiary injectant of the qualified carbon dioxide.

“(B) TRANSFER OF CREDIT.—A taxpayer may transfer the credit under subsection (a) to the person responsible for disposing, converting, or using the qualified carbon dioxide. Such transfer shall only be effective if the taxpayer submits to the Secretary, at such time and in such manner as the Secretary prescribes, a statement concerning the transfer which contains—

“(i) the name, address, and taxpayer identification number of the taxpayer transferring the credit,

“(ii) the name, address, and taxpayer identification number of the taxpayer receiving the transfer, and

“(iii) such other information relating to such transfer as the Secretary may require.”.

(2) RULES.—Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury shall prescribe rules relating to the transfer of credits under section 45Q of the Internal Revenue Code of 1986 pursuant to subparagraph (B) section 45Q(d)(5) of such Code, as added by paragraph (1).

(d) Extension of credit.—

(1) CREDIT ALLOWED FOR 10-YEAR CREDIT PERIOD.—Paragraphs (1)(A) and (2)(A) of section 45Q(a) of the Internal Revenue Code of 1986 are each amended by inserting “during the 10-year period beginning on the date the carbon capture equipment described in subsection (c)(2) is placed in service” before the comma at the end.

(2) TERMINATION.—Paragraph (2) of section 45Q(c) of such Code is amended by inserting “by the taxpayer before January 1, 2018” before the comma at the end.

(3) CONFORMING AMENDMENT.—Section 45Q of such Code is amended by striking subsection (e).

(e) Effective date.—The amendments made by this section shall apply to carbon dioxide captured after the date of the enactment of this Act.

SEC. 5. Clean energy coal bonds.

(a) In general.—

(1) TREATMENT AS TAX CREDIT BONDS.—Subpart I of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to qualified tax credit bonds) is amended by adding at the end the following new section:

“SEC. 54G. Clean energy coal bonds.

“(a) Clean energy coal bond.—For purposes of this subchapter—

“(1) IN GENERAL.—The term ‘clean energy coal bond’ means any bond issued as part of an issue if—

“(A) the bond is issued by a qualified issuer pursuant to an allocation by the Secretary to such issuer of a portion of the national clean energy coal bond limitation under subsection (b)(2),

“(B) 100 percent of the available project proceeds from the sale of such issue are to be used for capital expenditures incurred by qualified borrowers for 1 or more qualified projects,

“(C) the qualified issuer designates such bond for purposes of this section and the bond is in registered form, and

“(D) in lieu of the requirements of section 54A(d)(2), the issue meets the requirements of subsection (c).

“(2) QUALIFIED PROJECT; SPECIAL USE RULES.—

“(A) IN GENERAL.—The term ‘qualified project’ means a qualified clean coal project (as defined in subsection (f)(1)) placed in service by a qualified borrower.

“(B) REFINANCING RULES.—For purposes of paragraph (1)(B), a qualified project may be refinanced with proceeds of a clean energy coal bond only if the indebtedness being refinanced (including any obligation directly or indirectly refinanced by such indebtedness) was originally incurred by a qualified borrower after the date of the enactment of this section.

“(C) REIMBURSEMENT.—For purposes of paragraph (1)(B), a clean energy coal bond may be issued to reimburse a qualified borrower for amounts paid after the date of the enactment of this section with respect to a qualified project, but only if—

“(i) prior to the payment of the original expenditure, the qualified borrower declared its intent to reimburse such expenditure with the proceeds of a clean energy coal bond,

“(ii) not later than 60 days after payment of the original expenditure, the qualified issuer adopts an official intent to reimburse the original expenditure with such proceeds, and

“(iii) reimbursement is not made later than 18 months after the date the original expenditure is paid or the date the project is placed in service or abandoned, but in no event more than 3 years after the original expenditure is paid.

“(D) TREATMENT OF CHANGES IN USE.—For purposes of paragraph (1)(B), the proceeds of an issue shall not be treated as used for a qualified project to the extent that a qualified borrower takes any action within its control which causes such proceeds not to be used for a qualified project. The Secretary shall prescribe regulations specifying remedial actions that may be taken (including conditions to taking such remedial actions) to prevent an action described in the preceding sentence from causing a bond to fail to be a clean energy coal bond.

“(b) Limitation on amount of bonds designated.—

“(1) NATIONAL LIMITATION.—There is a national clean energy coal bond limitation of $5,000,000,000.

“(2) ALLOCATION BY SECRETARY.—The Secretary shall allocate the amount described in paragraph (1) among qualified projects in such manner as the Secretary determines appropriate.

“(c) Special rules relating to expenditures.—

“(1) IN GENERAL.—An issue shall be treated as meeting the requirements of this subsection if, as of the date of issuance, the qualified issuer reasonably expects—

“(A) 100 percent or more of the available project proceeds from the sale of the issue are to be spent for 1 or more qualified projects within the 5-year period beginning on the date of issuance of the clean energy bond,

“(B) a binding commitment with a third party to spend at least 10 percent of such available project proceeds from the sale of the issue will be incurred within the 6-month period beginning on the date of issuance of the clean energy bond or, in the case of a clean energy bond the available project proceeds of which are to be loaned to 2 or more qualified borrowers, such binding commitment will be incurred within the 6-month period beginning on the date of the loan of such proceeds to a qualified borrower, and

“(C) such projects will be completed with due diligence and the available project proceeds from the sale of the issue will be spent with due diligence.

“(2) EXTENSION OF PERIOD.—Upon submission of a request prior to the expiration of the period described in paragraph (1)(A), the Secretary may extend such period if the qualified issuer establishes that the failure to satisfy the 5-year requirement is due to reasonable cause and the related projects will continue to proceed with due diligence.

“(3) FAILURE TO SPEND REQUIRED AMOUNT OF BOND PROCEEDS WITHIN 5 YEARS.—To the extent that less than 100 percent of the available project proceeds of such issue are expended by the close of the 5-year period beginning on the date of issuance (or if an extension has been obtained under paragraph (2), by the close of the extended period), the qualified issuer shall redeem all of the nonqualified bonds within 90 days after the end of such period. For purposes of this paragraph, the amount of the nonqualified bonds required to be redeemed shall be determined in the same manner as under section 142.

“(d) Reduced credit amount.—The annual credit determined under section 54A(b) with respect to any clean coal energy bond shall be 70 percent of the amount so determined without regard to this subsection.

“(e) Cooperative electric company; qualified energy tax credit bond lender; governmental body; qualified borrower.—For purposes of this section—

“(1) COOPERATIVE ELECTRIC COMPANY.—The term ‘cooperative electric company’ means a mutual or cooperative electric company described in section 501(c)(12) or section 1381(a)(2)(C), or a not-for-profit electric utility which has received a loan or loan guarantee under the Rural Electrification Act.

“(2) CLEAN ENERGY BOND LENDER.—The term ‘clean energy bond lender’ means a lender which is a cooperative which is owned by, or has outstanding loans to, 100 or more cooperative electric companies and is in existence on February 1, 2002, and shall include any affiliated entity which is controlled by such lender.

“(3) PUBLIC POWER ENTITY.—The term ‘public power entity’ means a State utility with a service obligation, as such terms are defined in section 217 of the Federal Power Act (as in effect on the date of enactment of this paragraph).

“(4) QUALIFIED ISSUER.—The term ‘qualified issuer’ means—

“(A) a clean energy bond lender,

“(B) a cooperative electric company, or

“(C) a public power entity.

“(5) QUALIFIED BORROWER.—The term ‘qualified borrower’ means—

“(A) a mutual or cooperative electric company described in section 501(c)(12) or 1381(a)(2)(C), or

“(B) a public power entity.

“(f) Special rules relating to pool bonds.—No portion of a pooled financing bond may be allocable to any loan unless the borrower has entered into a written loan commitment for such portion prior to the issue date of such issue.

“(g) Other definitions and special rules.—For purposes of this section—

“(1) QUALIFIED CLEAN COAL PROJECT.—For purposes of this section, the term ‘qualified clean coal project’ means—

“(A) an atmospheric pollution control facility (within the meaning of section 169(d)(6)),

“(B) a qualifying clean coal project (within the meaning of section 48E(c)(1)), or

“(C) a qualified facility (within the meaning of section 45Q(c)).

“(2) POOLED FINANCING BOND.—The term ‘pooled financing bond’ shall have the meaning given such term by section 149(f)(4)(A).”.

(2) BONDS NOT SUBJECT TO MATURITY LIMITATION.—Paragraph (5) of section 54A(d) of such Code is amended by adding at the end the following new subparagraph:

“(C) SPECIAL RULE FOR CLEAN ENERGY COAL BONDS.—The requirements of this paragraph shall not apply to a clean energy coal bond under section 54G.”.

(3) CONFORMING AMENDMENTS.—

(A) Paragraph (1) of section 54A(d) of the Internal Revenue Code of 1986 is amended by striking “or” at the end of subparagraph (D), by inserting “or” at the end of subparagraph (E), and by inserting after subparagraph (E) the following new subparagraph:

“(F) a clean energy coal bond,”.

(B) The table of sections for subpart I of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:


“Sec. 54G. Clean energy coal bonds.”.

(b) Bonds treated as specified tax credit bonds.—

(1) IN GENERAL.—Section 6431(f)(3)(A) of the Internal Revenue Code of 1986 is amended by striking “or” at the end of clause (iii), by striking “and” at the end of clause (iv) and inserting “or”, and by adding at the end the following new clause:

“(v) a clean energy coal bond (as defined in section 54G), and”.

(2) SPECIAL RULE.—Paragraph (2) of section 6431(f) of such Code is amended—

(A) by striking “clause (i) or (ii)” and inserting “clause (i), (ii), or (v)”, and

(B) by striking the heading and inserting “Special rule for certain bonds”.

(c) Effective date.—The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.