A bill to enhance and improve the energy security of the United States, expand economic development, increase agricultural income, and improve environmental quality by reauthorizing and improving the renewable energy systems and energy efficiency improvements program of the Department of Agriculture through fiscal year 2012, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rural Energy for America Act of 
2006''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) rising energy costs and uncertain long term energy 
        supplies threaten to undermine the growth of the United States 
        economy;
            (2) since 2003, fuel and fertilizer costs have nearly 
        doubled for agricultural producers;
            (3) there are continuing and increasing risks to the energy 
        security of the United States;
            (4) having an affordable, reliable, and plentiful energy 
        supply will strengthen the United States economy and improve 
        domestic energy security;
            (5) the agricultural sector can provide a significant 
        source of clean, sustainable energy for the United States that 
        can reduce the dependence of the United States on imported 
        energy and lower energy costs for all people of the United 
        States;
            (6) agriculture-based energy--
                    (A) boosts rural economic development;
                    (B) increases farm-based income;
                    (C) creates manufacturing, construction, and 
                service jobs;
                    (D) expands economic opportunity for all people; 
                and
                    (E) improves environmental quality;
            (7) it is a goal of this Act to help the agricultural 
        sector to provide at least 25 percent of the energy consumed in 
        the United States by calendar year 2025;
            (8) expanding agriculture-based renewable energy resources 
        (including wind, solar, and geothermal energy, ethanol, and 
        biodiesel) and improving energy efficiency will help to achieve 
        that goal;
            (9) section 9006 of the Farm Security and Rural Investment 
        Act of 2002 (7 U.S.C. 8106) established the renewable energy 
        systems and energy efficiency improvements program, which is 
        the first agricultural program to catalyze broad renewable 
        energy and energy efficiency measures for the agricultural and 
        rural business sectors;
            (10) since establishment, the program has been a strong 
        success, providing during the first 3 years of the program 
        nearly $64,000,000 in grants and loan guarantees for 412 
        renewable energy and energy efficiency projects in 37 States, 
        which leveraged approximately $699,000,000 in additional 
        investments in farms and rural communities;
            (11) projects assisted by the grants and loan guarantees 
        will--
                    (A) produce or save more than 17,000,000,000,000 
                British thermal units of energy each year in the form 
                of fuel, electricity, thermal energy, and energy 
                efficiency;
                    (B) produce 124,000,000 gallons of ethanol and 
                biodiesel fuel annually; and
                    (C) reduce carbon dioxide emissions by more than 
                4,000,000 tons annually; and
            (12) applications for assistance under the program--
                    (A) in 2003, nearly matched the available funding 
                for the program;
                    (B) in 2004, were nearly twice the available 
                funding for the program; and
                    (C) in 2005 and 2006, were nearly triple the 
                available funding for the program.

SEC. 3. RURAL ENERGY FOR AMERICA PROGRAM.

    Section 9006 of the Farm Security and Rural Investment Act of 2002 
(7 U.S.C. 8106) is amended--
            (1) by striking the section designation and heading and 
        inserting the following:

``SEC. 9006. RURAL ENERGY FOR AMERICA PROGRAM.'';

            (2) in subsection (a)--
                    (A) by inserting ``, and issue rebates,'' after 
                ``grants''; and
                    (B) by inserting ``rural school districts,'' after 
                ``ranchers,''.
            (3) by striking subsection (f);
            (4) by redesignating subsection (e) as subsection (h);
            (5) by inserting after subsection (d) the following:
    ``(e) Production-Based Incentive in Lieu of Grant.--
            ``(1) In general.--In addition to the authority under 
        subsection (a), to encourage the production of electricity from 
        renewable energy systems, the Secretary shall, on the request 
        of an eligible applicant under this section, make production-
        based payments to the applicant in lieu of a grant.
            ``(2) Contingency.--Payments under paragraph (1) shall be 
        contingent on documented energy production and sales from the 
        renewable energy system to a third party.
            ``(3) Limitation.--The total net present value of a 
        production-based incentive may not exceed the lower of--
                    ``(A) 25 percent of the eligible project costs; and
                    ``(B) any other limits that the Secretary 
                establishes by rule or guidance.
    ``(f) Feasibility Studies.--
            ``(1) In general.--The Secretary may provide assistance to 
        eligible applicants to conduct feasibility studies of projects 
        for which assistance may be provided under this section.
            ``(2) Limitation.--The Secretary shall use not more than 10 
        percent of funds made available to carry out this section to 
        provide assistance described in paragraph (1).
            ``(3) Criteria.--The Secretary shall, by regulation, 
        establish criteria for the receipt of assistance under this 
        subsection.
            ``(4) Avoidance of duplicative assistance.--An applicant 
        that receives assistance to carry out a feasibility study for a 
        project under this subsection shall not be eligible for 
        assistance to carry out a feasibility study for the project 
        under any other provision of Federal law.
            ``(5) Matching funds.--A recipient of funds under this 
        subsection shall contribute an amount of non-Federal funds that 
        is at least equal to 75 percent of the amount of Federal funds 
        received.
    ``(g) Rebate Program.--
            ``(1) In general.--The Secretary shall make competitive 
        grants to eligible entities to provide rebates for farmers, 
        ranchers, rural school districts, and rural small businesses to 
        purchase renewable energy systems and make energy efficiency 
        improvements.
            ``(2) Eligible entities.--To be eligible to receive a grant 
        under paragraph (1), an entity shall be--
                    ``(A) a State energy or agriculture office;
                    ``(B) a nonprofit State-based energy efficiency or 
                renewable energy organization that uses public funds 
                provided directly or under contract with a State 
                agency;
                    ``(C) any other nonprofit organization with a 
                demonstrated ability to administer a State-wide energy 
                efficiency or renewable energy rebate program; or
                    ``(D) a consortium of entities described in 
                subparagraphs (A) through (C).
            ``(3) Merit review.--
                    ``(A) In general.--The Secretary shall establish a 
                merit review process to review applications for grants 
                under paragraph (1) that uses the expertise of the 
                Department of Agriculture, other Federal and State 
                agencies, and non-governmental organizations.
                    ``(B) Requirements.--In reviewing the application 
                of an eligible entity to receive a grant under 
                paragraph (1), the Secretary shall consider--
                            ``(i) the experience and expertise of the 
                        entity in establishing and administering a 
                        State-wide clean energy rebate program;
                            ``(ii) the annual projected energy savings 
                        or production increases resulting from the 
                        proposed program;
                            ``(iii) the environmental benefits 
                        resulting from the proposed program; and
                            ``(iv) other appropriate factors, as 
                        determined by the Secretary.
            ``(4) Maintenance of effort.--An entity that receives a 
        grant under paragraph (1) shall provide assurances to the 
        Secretary that funds provided to the entity under this 
        subsection will be used to supplement, not to supplant, the 
        amount of Federal, State, and local funds otherwise expended 
        for rebate programs.
            ``(5) Rebate amount.--The amount of a rebate provided from 
        a grant under this subsection shall not exceed the lower of--
                    ``(A) $10,000; or
                    ``(B) 50 percent of the cost incurred to purchase a 
                renewable energy system or an energy efficiency 
                improvement.''; and
            (6) by adding at the end the following:
    ``(i) Funding.--Of the funds of the Commodity Credit Corporation, 
the Secretary shall make available to carry out this section--
            ``(1) $60,000,000 for fiscal year 2008, to remain available 
        until expended, of which not more than $12,000,000 shall be 
        used to carry out subsection (g);
            ``(2) $90,000,000 for fiscal year 2009, to remain available 
        until expended, of which not more than $18,000,000 shall be 
        used to carry out subsection (g);
            ``(3) $130,000,000 for fiscal year 2010, to remain 
        available until expended, of which not more than $26,000,000 
        shall be used to carry out subsection (g);
            ``(4) $180,000,000 for fiscal year 2011, to remain 
        available until expended, of which not more than $36,000,000 
        shall be used to carry out subsection (g); and
            ``(5) $250,000,000 for fiscal year 2012, to remain 
        available until expended, of which not more than $50,000,000 
        shall be used to carry out subsection (g).''.

SEC. 4. SENSE OF THE SENATE ON A DIRECT LOAN PROGRAM IN SECTION 9006.

    It is the sense of the Senate that--
            (1) as authorized by section 9006 of the Farm Security and 
        Rural Investment Act of 2002 (7 U.S.C. 8106), the Secretary of 
        Agriculture should implement a direct loan program to 
        complement the grants provided under that section; and
            (2) as appropriate, the Secretary should model the direct 
        loan program on the loan program established under section 503 
        of the Small Business Investment Act of 1958 (15 U.S.C. 697).

Summary: Rural Energy for America Act of 2006 - Amends the Farm Security and Rural Investment Act of 2002 to rename the renewable energy systems and energy efficiency improvements program as the rural energy for America program (REAP). Makes rural school districts eligible for REAP. Authorizes: (1) production-based incentives in lieu of grants for electricity production from renewable energy systems contingent upon third-party sales. And (2) matching assistance for feasibility studies. Directs the Secretary of Agriculture to make grants to eligible entities to provide rebates for farmers, ranchers, rural school districts, and rural small businesses to purchase renewable energy systems and make energy efficiency improvements. Defines eligible entities as: (1) a state energy or agriculture office. (2) a nonprofit state-based energy efficiency or renewable energy organization that uses public funds provided directly or under contract with a state agency. (3) any other nonprofit organization with a demonstrated ability to administer a statewide energy efficiency or renewable energy rebate program. Or (4) a consortium of such entities. Limits rebates to the lower of $10,000 or 50 of the cost to purchase a renewable energy system or an energy efficiency improvement. Extends REAP funding through FY 2012 with set-asides for the rebate program. Expresses the sense of the Senate that the Secretary should implement a direct loan program to complement REAP grants.