To amend the Clean Air Act to clarify that certain conversions of engines and motor vehicles from conventional fuels to clean alternative fuels will not require additional certifications, and for other purposes.

Summary: Amends the Clean Air Act to authorize the Administrator of the Environmental Protection Agency (EPA) to approve a combination of conversions to a clean alternative fuel into a single test group, which would normally not be eligible to be in a single test group, if the manufacturer of motor vehicle or engine conversions provides: (1) substantial evidence that all the conversions in the larger grouping will have similar levels of emissions; (2) evidence of equivalent component durability over the vehicle's or engine's useful life; (3) evidence that the groups will result in sufficient in-use verification program data, appropriate tracking in use, and clear liability for the EPA's recall program; and (4) a statement that all vehicles within a test group are certified to the most stringent standards applicable to any vehicle within the test group.

Establishes the Advancing Alternative Fuels Revolving Loan Fund. Directs the Administrator to use amounts in the Fund to provide loans to eligible local governments to finance purchases of authorized equipment to enable public vehicle fleets to operate on alternative fuels.

SECTION 1. CONVERSIONS TO CLEAN ALTERNATIVE FUEL.

    Section 203 of the Clean Air Act (42 U.S.C. 7522) is amended by 
adding the following new subsection at the end thereof:
    ``(c) Certification of Certain Conversions.--In the case of a 
manufacturer of motor vehicle or engine conversions to a clean 
alternative fuel (as defined in this title), the Administrator may 
approve the combination of such conversions into a single test group 
which would normally not be eligible to be in a single test group if 
the manufacturer provides--
            ``(1) substantial evidence that all the conversions in the 
        larger grouping will have the similar levels of emissions;
            ``(2) evidence of equivalent component durability over the 
        vehicle or engine's useful life;
            ``(3) evidence that the groups will result in sufficient 
        in-use verification program data, appropriate tracking in use, 
        and clear liability for the Agency's recall program; and
            ``(4) a statement that all vehicles within a test group are 
        certified to the most stringent standards applicable to any 
        vehicle within that test group.
In any such case, such conversion shall be treated as included within 
the scope of the exemption provided by the last sentence of subsection 
(a).''.

SEC. 2. ADVANCING ALTERNATIVE FUELS REVOLVING LOAN FUND.

    (a) Definitions.--In this section:
            (1) Authorized equipment.--
                    (A) In general.--The term ``authorized equipment'' 
                means any equipment necessary to enable public vehicle 
                fleets to operate on alternative fuels.
                    (B) Inclusions.--The term ``authorized equipment'' 
                includes--
                            (i) Bi-fuel vehicle property, which means 
                        property added to a motor vehicle that uses 
                        conventional gasoline or diesel as its fuel to 
                        allow the engine of such vehicle to operate on 
                        either conventional gasoline fuel or another 
                        alternative fuel.
                            (ii) Alternative fuel vehicle conversion 
                        property, which means property added to a motor 
                        vehicle that uses conventional gasoline or 
                        diesel as its fuel to allow the engine of such 
                        vehicle to operate on another alternative fuel.
            (2) Fund.--The term ``Fund'' means the Advancing 
        Alternative Fuels Revolving Loan Fund established by subsection 
        (b).
            (3) Administrator.--The term ``Administrator'' means the 
        Administrator of the Environmental Protection Agency.
    (b) Establishment of Fund.--There is established in the Treasury of 
the United States a revolving fund, to be known as the ``Advancing 
Alternative Fuels Revolving Loan Fund'', consisting of such amounts as 
are appropriated to the Fund.
    (c) Expenditures From Fund.--
            (1) In general.--Subject to paragraph (2), on request by 
        the Administrator, the Secretary of the Treasury shall transfer 
        from the Fund to the Administrator such amounts as the 
        Administrator determines are necessary to provide loans under 
        subsection (e).
            (2) Administrative expenses.--An amount not exceeding 10 
        percent of the amounts in the Fund shall be available for each 
        fiscal year to pay the administrative expenses necessary to 
        carry out this section.
    (d) Transfers of Amounts.--
            (1) In general.--The amounts required to be transferred to 
        the Fund under this section shall be transferred at least 
        monthly from the general fund of the Treasury to the Fund on 
        the basis of estimates made by the Secretary of the Treasury.
            (2) Adjustments.--Proper adjustment shall be made in 
        amounts subsequently transferred to the extent prior estimates 
        were in excess of or less than the amounts required to be 
        transferred.
    (e) Uses of Fund.--
            (1) Loans.--
                    (A) In general.--The Administrator shall use 
                amounts in the Fund to provide loans to eligible units 
                of local government to finance purchases of authorized 
                equipment to enable public vehicle fleets to operate on 
                alternative fuels.
                    (B) Maximum amount.--The maximum amount of a loan 
                that may be provided by the Administrator to an 
                eligible unit of local government under this subsection 
                shall be the lesser of--
                            (i) the amount that the eligible unit of 
                        local government has appropriated to finance 
                        purchases of authorized equipment to enable its 
                        vehicle fleet to operate on alternative fuels.
                            (ii) $500,000
                    (C) Interest rate.--The interest rate on any loan 
                made by the Administrator under this paragraph shall be 
                a rate equal to 2 percent.
                    (D) Report.--Not later than 180 days after the date 
                on which an eligible unit of local government receives 
                a loan provided by the Administrator under subparagraph 
                (A), the eligible unit of local government shall submit 
                to the Administrator a report that describes each 
                purchase made by the eligible unit of local government 
                using assistance provided through the loan.
            (2) Loan repayment schedule.--
                    (A) In general.--To be eligible to receive a loan 
                from the Administrator under paragraph (1), in 
                accordance with each requirement described in 
                subparagraph (B), an eligible unit of local government 
                shall enter into an agreement with the Administrator to 
                establish a loan repayment schedule relating to the 
                repayment of the loan.
                    (B) Requirements relating to loan repayment 
                schedule.--A loan repayment schedule established under 
                subparagraph (A) shall require the eligible unit of 
                local government--
                            (i) to repay to the Secretary of the 
                        Treasury, not later than 1 year after the date 
                        on which the eligible unit of local government 
                        receives a loan under paragraph (1), and 
                        semiannually thereafter, an amount equal to the 
                        quotient obtained by dividing--
                                    (I) the principal amount of the 
                                loan (including interest); by
                                    (II) the total quantity of payments 
                                that the eligible unit of local 
                                government is required to make during 
                                the repayment period of the loan; and
                            (ii) not later than 20 years after the date 
                        on which the eligible unit of local government 
                        receives a loan under paragraph (1), to 
                        complete repayment to the Secretary of the 
                        Treasury of the loan made under this section 
                        (including interest).