SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Alternative Diesel Standard Act of 
2006''.

SEC. 2. ALTERNATIVE DIESEL FUEL CONTENT OF DIESEL.

    (a) Findings.--Congress finds that--
            (1) section 211(o) of the Clean Air Act (42 U.S.C. 7535(o)) 
        (as amended by section 1501 of the Energy Policy Act of 2005 
        (Public Law 109-58)) established a renewable fuel program under 
        which entities in the petroleum sector are required to blend 
        renewable fuels into motor vehicle fuel based on the gasoline 
        motor pool;
            (2) the need for energy diversification is greater as of 
        the date of enactment of this Act than it was only months 
        before the date of enactment of the Energy Policy Act (Public 
        Law 109-58; 119 Stat. 594); and
            (3)(A) the renewable fuel program under section 211(o) of 
        the Clean Air Act requires a small percentage of the gasoline 
        motor pool, totaling nearly 140,000,000,000 gallons, to contain 
        a renewable fuel; and
            (B) the small percentage requirement described in 
        subparagraph (A) does not include the 40,000,000,000-gallon 
        diesel motor pool.
    (b) Alternative Diesel Fuel Program for Diesel Motor Pool.--Section 
211 of the Clean Air Act (42 U.S.C. 7545) is amended by inserting after 
subsection (o) the following:
    ``(p) Alternative Diesel Fuel Program for Diesel Motor Pool.--
            ``(1) Definition of alternative diesel fuel.--
                    ``(A) In general.--In this subsection, the term 
                `alternative diesel fuel' means biodiesel (as defined 
                in section 312(f) of the Energy Policy Act of 1992 (42 
                U.S.C. 13220(f))) and any blending components derived 
                from alternative fuel (provided that only the 
                alternative fuel portion of any such blending component 
                shall be considered to be part of the applicable volume 
                under the alternative diesel fuel program established 
                by this subsection).
                    ``(B) Inclusions.--The term `alternative diesel 
                fuel' includes a diesel fuel substitute produced from--
                            ``(i) animal fat;
                            ``(ii) plant oil;
                            ``(iii) recycled yellow grease;
                            ``(iv) single-cell or microbial oil;
                            ``(v) thermal depolymerization;
                            ``(vi) thermochemical conversion;
                            ``(vii) a coal-to-liquid process (including 
                        the Fischer-Tropsch process) that provides for 
                        the sequestration of carbon emissions; or
                            ``(viii) a diesel-ethanol blend of not less 
                        than 7 percent ethanol.
            ``(2) Alternative diesel fuel program.--
                    ``(A) Regulations.--
                            ``(i) In general.--Not later than 1 year 
                        after the date of enactment of this subsection, 
                        the Administrator shall promulgate regulations 
                        to ensure that diesel sold or introduced into 
                        commerce in the United States (except in 
                        noncontiguous States or territories), on an 
                        annual average basis, contains the applicable 
                        volume of alternative diesel fuel determined in 
                        accordance with subparagraph (B).
                            ``(ii) Provisions of regulations.--
                        Regardless of the date of promulgation, the 
                        regulations promulgated under clause (i)--
                                    ``(I) shall contain compliance 
                                provisions applicable to refineries, 
                                blenders, distributors, and importers, 
                                as appropriate, to ensure that the 
                                requirements of this paragraph are met; 
                                but
                                    ``(II) shall not--
                                            ``(aa) restrict geographic 
                                        areas in which alternative 
                                        diesel fuel may be used; or
                                            ``(bb) impose any per-
                                        gallon obligation for the use 
                                        of alternative diesel fuel.
                            ``(iii) Requirement in case of failure to 
                        promulgate regulations.--If the Administrator 
                        fails to promulgate regulations under clause 
                        (i), the percentage of alternative diesel fuel 
                        in the diesel motor pool sold or dispensed to 
                        consumers in the United States, on a volume 
                        basis, shall be 0.6 percent for calendar year 
                        2008.
                    ``(B) Applicable volume.--
                            ``(i) Calendar years 2008 through 2015.--
                        For the purpose of subparagraph (A), the 
                        applicable volume for any of calendar years 
                        2008 through 2015 shall be determined in 
                        accordance with the following table:

``Applicable volume of Alternative 
        diesel fuel in diesel motor 
        pool (in millions of                             Calendar year:
        gallons):
  
        250....................................................    2008
        500....................................................    2009
        750....................................................    2010
        1,000..................................................    2011
        1,250..................................................    2012
        1,500..................................................    2013
        1,750..................................................    2014
        2,000..................................................    2015
                            ``(ii) Calendar year 2016 and thereafter.--
                        The applicable volume for calendar year 2016 
                        and each calendar year thereafter shall be 
                        determined by the Administrator, in 
                        coordination with the Secretary of Agriculture 
                        and the Secretary of Energy, based on a review 
                        of the implementation of the program during 
                        calendar years 2008 through 2015, including a 
                        review of--
                                    ``(I) the impact of the use of 
                                alternative diesel fuels on the 
                                environment, air quality, energy 
                                security, job creation, and rural 
                                economic development; and
                                    ``(II) the expected annual rate of 
                                future production of alternative diesel 
                                fuels to be used as a blend component 
                                or replacement to the diesel motor 
                                pool.
                            ``(iii) Minimum applicable volume.--For the 
                        purpose of subparagraph (A), the applicable 
                        volume for calendar year 2016 and each calendar 
                        year thereafter shall be equal to the product 
                        obtained by multiplying--
                                    ``(I) the number of gallons of 
                                diesel that the Administrator estimates 
                                will be sold or introduced into 
                                commerce during the calendar year; and
                                    ``(II) the ratio that--
                                            ``(aa) 2,000,000,000 
                                        gallons of alternative diesel 
                                        fuel; bears to
                                            ``(bb) the number of 
                                        gallons of diesel sold or 
                                        introduced into commerce during 
                                        calendar year 2015.
            ``(3) Applicable percentages.--
                    ``(A) Provision of estimate of volumes of diesel 
                sales.--Not later than October 31 of each of calendar 
                years 2007 through 2015, the Administrator of the 
                Energy Information Administration shall provide to the 
                Administrator an estimate, with respect to the 
                following calendar year, of the volumes of diesel 
                projected to be sold or introduced into commerce in the 
                United States.
                    ``(B) Determination of applicable percentages.--
                            ``(i) In general.--Not later than November 
                        30 of each of calendar years 2008 through 2015, 
                        based on the estimate provided under 
                        subparagraph (A), the Administrator shall 
                        determine and publish in the Federal Register, 
                        with respect to the following calendar year, 
                        the alternative diesel fuel obligation that 
                        ensures that the requirements of paragraph (2) 
                        are met.
                            ``(ii) Required elements.--The alternative 
                        diesel fuel obligation determined for a 
                        calendar year under clause (i) shall--
                                    ``(I) be applicable to refineries, 
                                blenders, and importers, as 
                                appropriate;
                                    ``(II) be expressed in terms of a 
                                volume percentage of diesel sold or 
                                introduced into commerce in the United 
                                States; and
                                    ``(III) subject to subparagraph 
                                (C), consist of a single applicable 
                                percentage that applies to all 
                                categories of persons described in 
                                subclause (I).
                    ``(C) Adjustments.--In determining the applicable 
                percentage for a calendar year, the Administrator shall 
                make adjustments to prevent the imposition of redundant 
                obligations on any person described in subparagraph 
                (B)(ii)(I).
            ``(4) Credit program.--
                    ``(A) In general.--The regulations promulgated 
                pursuant to paragraph (2)(A) shall provide for the 
                generation of an appropriate amount of credits by any 
                person that refines, blends, or imports diesel that 
                contains a quantity of alternative diesel fuel that is 
                greater than the quantity required under paragraph (2).
                    ``(B) Use of credits.--A person that generates a 
                credit under subparagraph (A) may use the credit, or 
                transfer all or a portion of the credit to another 
                person, for the purpose of complying with regulations 
                promulgated pursuant to paragraph (2).
                    ``(C) Duration of credits.--A credit generated 
                under this paragraph shall be valid during the 1-year 
                period beginning on the date on which the credit is 
                generated.
                    ``(D) Inability to generate or purchase sufficient 
                credits.--The regulations promulgated pursuant to 
                paragraph (2)(A) shall include provisions allowing any 
                person that is unable to generate or purchase 
                sufficient credits under subparagraph (A) to meet the 
                requirements of paragraph (2) by carrying forward a 
                credit generated during a previous year on the 
                condition that the person, during the calendar year 
                following the year in which the alternative diesel fuel 
                deficit is created--
                            ``(i) achieves compliance with the 
                        alternative diesel fuel requirement under 
                        paragraph (2); and
                            ``(ii) generates or purchases additional 
                        credits under subparagraph (A) to offset the 
                        deficit of the previous year.
            ``(5) Waivers.--
                    ``(A) In general.--The Administrator, in 
                consultation with the Secretary of Agriculture and the 
                Secretary of Energy, may waive the requirements of 
                paragraph (2) in whole or in part on receipt of a 
                petition of 1 or more States by reducing the national 
                quantity of alternative diesel fuel for the diesel 
                motor pool required under paragraph (2) based on a 
                determination by the Administrator, after public notice 
                and opportunity for comment, that--
                            ``(i) implementation of the requirement 
                        would severely harm the economy or environment 
                        of a State, a region, or the United States; or
                            ``(ii) there is an inadequate domestic 
                        supply of alternative diesel fuel.
                    ``(B) Petitions for waivers.--Not later than 90 
                days after the date on which the Administrator receives 
                a petition under subparagraph (A), the Administrator, 
                in consultation with the Secretary of Agriculture and 
                the Secretary of Energy, shall approve or disapprove 
                the petition.
                    ``(C) Termination of waivers.--
                            ``(i) In general.--Except as provided in 
                        clause (ii), a waiver under subparagraph (A) 
                        shall terminate on the date that is 1 year 
                        after the date on which the waiver is provided.
                            ``(ii) Exception.--The Administrator, in 
                        consultation with the Secretary of Agriculture 
                        and the Secretary of Energy, may extend a 
                        waiver under subparagraph (A), as the 
                        Administrator determines to be appropriate.''.
    (c) Penalties and Enforcement.--Section 211(d) of the Clean Air Act 
(42 U.S.C. 7545(d)) is amended--
            (1) in paragraph (1), by striking ``or (o)'' each place it 
        appears and inserting ``(o), or (p)''; and
            (2) in paragraph (2), by striking ``and (o)'' each place it 
        appears and inserting ``(o), and (p)''.
    (d) Technical Amendments.--Section 211 of the Clean Air Act (42 
U.S.C. 7545) is amended--
            (1) in subsection (i)(4), by striking ``section 324'' each 
        place it appears and inserting ``section 325'';
            (2) in subsection (k)(10), by indenting subparagraphs (E) 
        and (F) appropriately;
            (3) in subsection (n), by striking ``section 219(2)'' and 
        inserting ``section 216(2)'';
            (4) by redesignating the second subsection (r) and 
        subsection (s) as subsections (s) and (t), respectively; and
            (5) in subsection (t)(1) (as redesignated by paragraph 
        (4)), by striking ``this subtitle'' and inserting ``this 
        part''.
Alternative Diesel Standard Act of 2006 - Amends the Clean Air Act to direct the Administrator of the Environmental Protection Agency (EPA) to promulgate regulations to ensure that diesel sold or introduced into commerce in the United States, on an annual average basis, contains the applicable volume of alternative diesel fuel (increasing from 250 million gallons in 2008 to 2 billion gallons in 2015 and determined per a prescribed formula thereafter). Requires the regulations to: (1) contain compliance provisions applicable to refineries, blenders, distributors, and importers; (2) not restrict areas in which alternative diesel fuel may be used; and (3) not impose any per-gallon obligation for the use of alternative diesel fuel. Requires alternative diesel fuel to constitute 0.6% of diesel dispensed in 2008 if the Administrator fails to promulgate such regulations. Requires EPA to determine and publish the alternative diesel fuel obligation as a percentage of diesel each year for 2008-2015.

Requires such regulations to provide for the generation of an appropriate amount of transferable credits by any person that refines, blends, or imports diesel that contains a quantity of alternative diesel fuel greater than required. Authorizes the Administrator to waive alternative diesel fuel requirements on receipt of a state petition by reducing the quantity of alternative diesel fuel required based on a determination that: (1) implementation of the requirement would severely harm the economy or environment of a state, a region, or the United States; or (2) there is inadequate domestic supply of alternative diesel fuel.
A bill to establish an alternative diesel standard, and for other purposes.