SECTION 1. SHORT TITLE.

    This Act may be cited as the ``National Transitional Fuel Security 
Act of 2006''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that, as of the date of enactment of 
this Act--
            (1) fossil fuels provide more than 85 percent of all energy 
        consumed in the United States, with energy consumption 
        projected to increase for at least the next 2 decades;
            (2) United States oil production is at a 50-year low and 
        continues to decline;
            (3) there has not been a new oil refinery built in the 
        United States since 1976;
            (4) oil has reached prices of over $70 per barrel and is 
        likely to remain high;
            (5) the United States relies on foreign sources of oil for 
        approximately 60 percent of oil consumed in the United States;
            (6) recent world events and natural disasters have shown 
        the vulnerability of the energy supply chain in the United 
        States;
            (7) the Fischer-Tropsch technology can produce synthetic 
        fuels that burn cleaner than traditionally-produced fuels, by 
        using abundant domestic coal resources;
            (8) the coal reserves of the United States are estimated to 
        be capable of producing more than 800,000,000,000 barrels of 
        oil;
            (9) the demand of the United States military for fuel 
        products makes up 2 percent of total consumption in the United 
        States;
            (10) increases in oil costs disproportionately impact the 
        military;
            (11) as a matter of national security, agencies of the 
        Federal Government are eager to form partnerships with the 
        energy industry and academia to create more sources of domestic 
        energy and lessen the dependence of the United States on 
        foreign sources of oil;
            (12) private industry is ready to commercialize the 
        Fischer-Tropsch coal-to-fuel process, but is unable to generate 
        necessary initial capital investment; and
            (13) it is in the best public interest of the United States 
        that industry in the United States begin transformation from 
        largely foreign petroleum-based energy resources to domestic 
        coal-based resources, which are abundant.
    (b) Purposes.--The purposes of this Act are--
            (1) to establish a Federal pilot program that will 
        encourage private investment and a commitment by businesses in 
        the United States to begin the transition to a coal-to-fuel 
        based industry relying upon Fischer-Tropsch technology; and
            (2) at the conclusion of the pilot program, to achieve the 
        transition in a manner that is cost-neutral to the Treasury.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Byproduct.--The term ``byproduct'' means any residual 
        product or secondary product of the Fischer-Tropsch process 
        that may have a commercial value, including carbon dioxide, 
        fertilizer, hydrogen, and electricity.
            (2) Coal-to-fuel.--The term ``coal-to-fuel'' means--
                    (A) with respect to a process or technology, the 
                use of a feedstock, the majority of which is derived 
                from the coal resources of the United States, using the 
                class of chemical reactions known as Fischer-Tropsch, 
                to produce synthetic fuel; and
                    (B) with respect to a facility, the portion of a 
                facility that supplies inputs for the Fischer-Tropsch 
                process, Fischer-Tropsch finished fuel production, or 
                the capture, transportation, or sequestration of 
                byproducts of the use of coal at the facility, 
                including carbon emissions.
            (3) Facility.--The term ``facility'' means a coal-to-fuel 
        demonstration facility constructed under the Plan.
            (4) Investor.--The term ``investor'' means a 
        nongovernmental entity that, in accordance with a contractual 
        arrangement with the Secretary--
                    (A) invests in and holds a minority non-controlling 
                interest in 1 or more facilities; and
                    (B) shares in the revenues of the facilities.
            (5) Plan.--The term ``Plan'' means the plan developed by 
        the Secretary and submitted to Congress under section 4.
            (6) Reserve.--The term ``Reserve'' means the Strategic 
        Petroleum Reserve established under section 154 of the Energy 
        Policy and Conservation Act (42 U.S.C. 6234).
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
            (8) Synthetic fuel.--The term ``synthetic fuel'' means--
                    (A) synthetic petroleum; or
                    (B) synthetic refined fuel products (including jet 
                fuel, gasoline, diesel, and motor oil) suitable for 
                transportation that are produced through a coal-to-fuel 
                process.

SEC. 4. CONSTRUCTION OF COAL-TO-FUEL DEMONSTRATION FACILITIES.

    (a) In General.--Not later than 180 days after the date of 
enactment of this Act, the Secretary shall submit to Congress a plan 
for the construction of not more than 5 coal-to-fuel demonstration 
facilities in accordance with this Act, including the requirements 
described in subsection (b).
    (b) Requirements.--The Secretary shall--
            (1) provide the Federal share of the cost of the 
        construction of the facilities through a 5-year phased sale of 
        petroleum products from the Reserve that corresponds to the 
        phases of construction of the facilities;
            (2) in accordance with applicable law, including section 
        603.105 of title 10, Code of Federal Regulations (or a 
        successor regulation)), offer to enter into contracts or 
        cooperative agreements with investors;
            (3) enter into 1 or more multiyear contracts with the 
        Secretary of Defense under which the Department of Defense will 
        procure substantial quantities of jet fuel and diesel produced 
        at the facilities;
            (4) enter into contracts or promulgate regulations if 
        necessary--
                    (A) to resupply the Reserve at no cost with 
                sufficient synthetic petroleum, synthetic refined fuel 
                products, or nonsynthetic crude oil purchased with 
                proceeds derived from the sale of synthetic fuel 
                (whichever is determined by the Secretary to be more 
                advantageous to the Federal Government) to compensate 
                for petroleum products sold in accordance with 
                paragraph (3); and
                    (B) as soon as practicable, if advantageous, as 
                determined by the Secretary, to require that all 
                petroleum requirements of the Reserve be met with 
                synthetic fuel;
            (5) produce and offer for public sale synthetic fuel 
        products and byproducts from the facilities;
            (6) in accordance with section 6, divest ownership of the 
        facilities through public sale to nongovernmental entities; and
            (7) ensure that after the Secretary has carried out the 
        Plan, all costs and expenditures by the Federal Government 
        under the Plan shall be fully reimbursed to the Treasury 
        through--
                    (A) net revenues generated by the sale of petroleum 
                products;
                    (B) resupply of the Reserve; and
                    (C) final divestiture and sale of all of the assets 
                of the Federal Government under the Plan to 
                nongovernmental entities.
    (c) Revenue.--
            (1) In general.--Except as provided in section 5(b), any 
        revenue raised from the activities described in subsection (b) 
        shall be used--
                    (A) to pay operating expenses; and
                    (B) to distribute profit shares to any commercial 
                investors in accordance with contractual terms.
            (2) Remaining revenue.--Remaining revenue shall be 
        deposited in the general fund of the Treasury.
    (d) Inclusions.--In submitting the Plan to Congress, the Secretary 
shall include--
            (1) a description of not more than 5 proposed locations for 
        the construction of facilities;
            (2) estimated construction costs for the facilities;
            (3) estimated production goals for each facility, which 
        shall be--
                    (A) for at least 3 of the facilities, not less than 
                30,000 barrels of synthetic fuel per day; and
                    (B) for the remaining facilities, not less than 
                5,000 barrels of synthetic fuel per day;
            (4) a sequestration plan for any carbon dioxide byproduct;
            (5) a proposed marketing plan for all byproducts;
            (6) coal procurement plans;
            (7) product contracting and coordination plans with the 
        Secretary of Defense;
            (8) a phased construction plan;
            (9) a plan for the phased withdrawal of petroleum products 
        from the Reserve to finance the phased construction and 
        operation of the facilities;
            (10) proposed management plans, including the participation 
        of investors; and
            (11) a proposed plan to divest ownership of the facilities 
        and recoup remaining expenses.

SEC. 5. NON-FEDERAL INVESTMENT.

    (a) In General.--The Federal share of the cost of construction of 
each facility under the Plan shall be not less than 51 percent.
    (b) Return on Investments.--After recoupment of the Federal share 
of the construction and operation of a facility, the Secretary shall 
distribute profits realized from the operation of the facility to 
investors in an amount that is proportional to their investment.

SEC. 6. DIVESTITURE.

    (a) In General.--The Secretary shall divest ownership of the 
facilities not earlier than the date on which the Secretary determines 
that--
            (1) the total production goal of 100,000 barrels of 
        synthetic fuel per day has been met;
            (2) an amount equal to or greater than the total Federal 
        share for the construction and operation of the facilities has 
        been deposited in the general fund of the Treasury; and
            (3) a quantity of fuel equal to the quantity of petroleum 
        products withdrawn from the Reserve under section 7(a) has been 
        deposited in the Reserve.
    (b) Management.--The Secretary shall manage each facility until the 
Secretary divests ownership of the facility.
    (c) Transfer of Contracts.--A contract described in section 4(b)(3) 
shall be transferable to a subsequent owner of a facility the synthetic 
fuel production of which is the subject of the contract.
    (d) Prohibition on Purchase to Close.--No nongovernmental entity 
shall assume ownership and control of a facility for purposes of 
removing the facility from operation.

SEC. 7. AUTHORIZATIONS.

    (a) Sale of Petroleum.--
            (1) In general.--Notwithstanding section 161 of the Energy 
        Policy and Conservation Act (42 U.S.C. 6241) and subject to 
        paragraphs (2) and (3), the Secretary may sell petroleum 
        products withdrawn from the Reserve at a public sale to finance 
        the construction of facilities.
            (2) Amount.--In carrying out paragraph (1), the Secretary 
        may sell not more than 20,000,000 barrels of petroleum products 
        withdrawn from the Reserve each year for a period of 5 years.
            (3) Limitation.--The Secretary may sell a total of not more 
        than 100,000,000 barrels of petroleum under this subsection.
    (b) Procurement of Real Estate.--
            (1) In general.--In selecting sites for the construction of 
        a facility, the Secretary shall give priority to sites on 
        Federal land.
            (2) Unavailability.--If Federal land is not available, the 
        Secretary may procure non-Federal land.
National Transitional Fuel Security Act of 2006 - Instructs the Secretary of Energy to submit to Congress a plan for the construction of coal-to-fuel demonstration facilities relying upon Fischer-Tropsch synthetic fuel-producing technology.

Prescribes requirements for: (1) construction of such facilities; (2) up to 49% non-federal investment; and (3) divestiture of federal ownership of the facilities after certain production and related goals are met.

Authorizes the Secretary to sell petroleum products withdrawn from the Strategic Petroleum Reserve at a public sale to finance the construction of the facilities.
A bill to promote a substantial commercial coal-to-fuel industry and decrease the dependence of the United States on foreign oil, and for other purposes.