SECTION 1. NEXT GENERATION BIOFUEL.

    (a) Definitions.--Section 211(o)(1) of the Clean Air Act (42 U.S.C. 
7545(o)(1)) is amended--
            (1) by redesignating subparagraphs (E), (F), (G), and (H) 
        as subparagraphs (H), (E), (F), (G), respectively, and moving 
        subparagraph (H) (as so redesignated) to appear before 
        subparagraph (I); and
            (2) in subparagraph (H) (as redesignated by paragraph (1)), 
        by striking ``Cellulosic biofuel.--'' and all that follows 
        through ``biomass'' and inserting ``Next generation biofuel.--
        The term `next generation biofuel' means renewable fuel that is 
        derived from any cellulose, hemicellulose, lignin, or algae 
        that is derived from renewable biomass or nonethanol renewable 
        fuel that is derived from renewable biomass''.
    (b) Standard.--Section 211(o) of the Clean Air Act (42 U.S.C. 
7545(o)) is amended--
            (1) in paragraph (2)--
                    (A) in subparagraph (A)(i), in the second sentence, 
                by striking ``cellulosic'' and inserting ``next 
                generation''; and
                    (B) in subparagraph (B)--
                            (i) in clause (i)(III)--
                                    (I) in the subclause heading, by 
                                striking ``Cellulosic'' and inserting 
                                ``Next generation'';
                                    (II) by striking ``cellulosic'' and 
                                inserting ``next generation''; and
                                    (III) in the heading of the right 
                                column, by striking ``cellulosic'' and 
                                inserting ``next generation'';
                            (ii) in clause (ii)(III), by striking 
                        ``cellulosic'' and inserting ``next 
                        generation''; and
                            (iii) in clause (iv)--
                                    (I) in the clause heading, by 
                                striking ``cellulosic'' and inserting 
                                ``next generation''; and
                                    (II) by striking ``cellulosic'' and 
                                inserting ``next generation'';
            (2) in paragraphs (3)(A), (4)(A), and (4)(B), by striking 
        ``cellulosic'' each place it appears and inserting ``next 
        generation''; and
            (3) in paragraph (7)(D)--
                    (A) in the subparagraph heading, by striking 
                ``Cellulosic'' and inserting ``next generation''; and
                    (B) by striking ``cellulosic'' each place it 
                appears and inserting ``next generation''.

SEC. 2. STATE OPTION OF NON-PARTICIPATION IN RENEWABLE FUEL STANDARD.

    Section 211(o)(2)(B) of the Clean Air Act (42 U.S.C. 7545(o)(2)(B)) 
is amended by adding at the end the following:
                            ``(vi) Election of non-participation by 
                        state government.--
                                    ``(I) In general.--For purposes of 
                                subparagraph (A), the applicable volume 
                                of renewable fuel as determined under 
                                this subparagraph shall be adjusted in 
                                accordance with this clause.
                                    ``(II) Requirements.--On passage by 
                                a State legislature and signature by 
                                the Governor of the State of a law that 
                                elects to not participate in the 
                                applicable volume of renewable fuel in 
                                accordance with this clause, the 
                                Administrator shall allow a State to 
                                not participate in the applicable 
                                volume of renewable fuel determined 
                                under subclause (I) of clause (i), 
                                other than the applicable volumes of 
                                renewable fuel required under 
                                subclauses (II), (III), and (IV) of 
                                that clause.
                                    ``(III) Reduction.--On the election 
                                of a State under subclause (II), the 
                                Administrator shall reduce the 
                                applicable volume of renewable fuel 
                                determined under clause (i)(I) by the 
                                percentage that reflects the national 
                                gasoline consumption of the non-
                                participating State that is 
                                attributable to that State.
                                    ``(IV) Credits to hold fuel sales 
                                harmless.--On the election of a State 
                                under subclause (II), the Administrator 
                                shall provide for the generation of 
                                credits for all gasoline (regardless of 
                                whether the gasoline is blended) 
                                provided through a fuel terminal in the 
                                State to be calculated as though the 
                                gasoline were blended with the maximum 
                                allowable ethanol content of gasoline 
                                allowed in that State to apply toward 
                                the applicable volume of renewable fuel 
                                determined under clause (i)(I).''.
Amends the Clean Air Act to revise the renewable fuel program by: (1) requiring the Administrator of the Environmental Protection Agency (EPA) to ensure that transportation fuel sold or introduced into commerce in the United States, on an annual average basis, contains at least the applicable volume of "next generation biofuel" (currently "cellulosic biofuel"); and (2) replacing the term "cellulosic biofuel" with "next generation biofuel." Defines "next generation biofuel" to mean: (1) renewable fuel that is derived from any cellulose, hemicellulose, lignin, or algae that is derived from renewable biomass; or (2) nonethanol renewable fuel that is derived from renewable biomass.

Directs the Administrator to allow states that enact a law that elects to not participate in the applicable volume of renewable to not so participate, other than the applicable volumes of renewable fuel required for advanced biofuel, next generation biofuel, and biomass-based diesel.
A bill to amend the Clean Air Act to define next generation biofuel, and to allow States the option of not participating in the corn ethanol portions of the renewable fuel standard due to conflicts with agricultural, economic, energy, and environmental goals.