To encourage the use of agricultural products in producing renewable energy.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Renewable Energy from Agricultural 
Products (REAP) Act''.

SEC. 2. CREDIT FOR ELECTRICITY PRODUCED FROM BIOMASS.

    (a) Extension and Modification of Placed-In-Service Rules.--
Paragraph (3) of section 45(c) of the Internal Revenue Code of 1986 is 
amended--
            (1) by striking subparagraph (B) and inserting the 
        following new subparagraph:
                    ``(B) Closed-loop biomass facility.--In the case of 
                a facility using closed-loop biomass to produce 
                electricity, the term `qualified facility' means any 
                facility--
                            ``(i) owned by the taxpayer which is 
                        originally placed in service after December 31, 
                        1992, and before January 1, 2007, or
                            ``(ii) owned by the taxpayer which is 
                        originally placed in service on or before 
                        December 31, 1992, and modified to use closed-
                        loop biomass to co-fire with coal before 
                        January 1, 2007.'',
            (2) by striking ``2002'' in subparagraph (C) and inserting 
        ``2007'', and
            (3) by adding at the end the following new subparagraphs:
                    ``(D) Biomass facilities.--In the case of a 
                facility using biomass (other than closed-loop biomass) 
                to produce electricity, the term `qualified facility' 
                means any facility owned by the taxpayer which is 
                originally placed in service before January 1, 2007.
                    ``(E) Special rules.--In the case of a qualified 
                facility described in subparagraph (B)(ii) or (D)--
                            ``(i) the 10-year period referred to in 
                        subsection (a) shall be treated as beginning no 
                        earlier than the date of the enactment of this 
                        subparagraph,
                            ``(ii) subsection (b)(3) shall not apply to 
                        any such facility originally placed in service 
                        before January 1, 1997, and
                            ``(iii) if such a facility is leased and 
                        the operator thereof is the lessee, such lessee 
                        (and not the owner) shall be treated for 
                        purposes of this section as owning such 
                        facility.''.
    (b) Biomass Facilities.--
            (1) In general.--Section 45(c)(1) of such Act (defining 
        qualified energy resources) is amended--
                    (A) by striking ``and'' at the end of subparagraph 
                (B),
                    (B) by striking the period at the end of 
                subparagraph (C) and inserting ``, and'', and
                    (C) by adding at the end the following new 
                subparagraph:
                    ``(D) biomass (other than closed-loop biomass).''.
            (2) Biomass defined.--Section 45(c) of such Code (relating 
        to definitions) is amended by adding at the end the following 
        new paragraph:
            ``(5) Biomass.--The term `biomass' means any solid, 
        nonhazardous, cellulosic waste material which is segregated 
        from other waste materials and which is derived from--
                    ``(A) any of the following forest-related 
                resources: mill residues, precommercial thinnings, 
                slash, and brush, but not including old-growth timber,
                    ``(B) solid wood waste materials, including waste 
                pallets, crates, dunnage, manufacturing and 
                construction wood wastes (other than pressure-treated, 
                chemically treated, or painted wood wastes), and 
                landscape or right-of-way tree trimmings, but not 
                including municipal solid waste (garbage), gas derived 
                from the biodegradation of solid waste, or paper that 
                is commonly recycled, or
                    ``(C) agriculture sources, including orchard tree 
                crops, vineyard, grain, legumes, sugar, and other crop 
                by-products or residues.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to electricity sold after the date of the enactment of this Act.

SEC. 3. CREDIT FOR ELECTRICITY PRODUCED FROM AGRICULTURAL AND ANIMAL 
              WASTE.

    (a) In General.--Paragraph (1) of section 45(c) of the Internal 
Revenue Code of 1986, as amended by section 2, is amended by striking 
``and'' at the end of subparagraph (C), by striking the period at the 
end of subparagraph (D) and inserting ``, and'', and by adding at the 
end the following new subparagraph:
                    ``(E) agricultural and animal waste.''.
    (b) Agricultural and Animal Waste.--Section 45(c) of such Code 
(relating to definitions) is amended by adding at the end the following 
new paragraph:
            ``(6) Agricultural and animal waste.--The term 
        `agricultural and animal waste' means all waste heat, steam, 
        and fuels produced from the conversion of agricultural and 
        animal wastes, including byproducts, packaging, and any 
        materials associated with the processing, feeding, selling, 
        transporting, and disposal of agricultural and animal products 
        or  wastes, including wood shavings, straw, rice hulls, and 
other bedding for the disposition of manure.''.
    (c) Agricultural and Animal Waste Facilities.--Paragraph (3) of 
section 45(c) of such Code is amended by adding at the end the 
following new subparagraph:
                    ``(F) Agricultural and animal waste facilities.--In 
                the case of a facility using agricultural and animal 
                waste to produce electricity, the term `qualified 
                facility' means any facility owned by the taxpayer 
                which is originally placed in service after December 
                31, 1992, and before January 1, 2005.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to electricity sold after the date of the enactment of this Act.

SEC. 4. REDUCTION OF MOTOR FUEL EXCISE TAX ON BIODIESEL MIXTURES.

    (a) In General.--Section 4081 of the Internal Revenue Code of 1986 
is amended by adding at the end the following new subsection:
    ``(f) Biodiesel Mixtures.--Under regulations prescribed by the 
Secretary--
            ``(1) In general.--The rate of tax under subsection (a) 
        shall be 3 cents per gallon less than the otherwise applicable 
        rate in the case of the removal or entry of a qualified 
        biodiesel mixture.
            ``(2) Tax prior to mixing.--In the case of the removal or 
        entry of diesel fuel for use in producing at the time of such 
        removal or entry a qualified biodiesel mixture, the rate of tax 
        under subsection (a) shall be the 3.06 cents per gallon less 
        than the otherwise applicable rate.
            ``(3) Qualified biodiesel mixture.--For purposes of this 
        subsection, the term `qualified biodiesel mixture' means any 
        mixture of diesel fuel and biodiesel (as defined in section 
        312(f) of the Energy Policy Act of 1992) if at least 2 percent 
        of such mixture is biodiesel (as so defined).
            ``(5) Certain rules to apply.--Rules similar to the rules 
        of paragraphs (6) and (7) of subsection (c) shall apply for 
        purposes of this subsection.''.
    (b) Conforming Amendments.--
            (1) Section 4041 of such Code is amended by adding at the 
        end the following new subsection:
    ``(n) Biodiesel Mixtures.--Under regulations prescribed by the 
Secretary, in the case of the sale or use of a qualified biodiesel 
mixture (as defined in section 4081(f)), the rates under paragraphs (1) 
and (2) of subsection (a) shall be 3 cents per gallon less than the 
otherwise applicable rates.''.
            (2) Section 6427 of such Code is amended by redesignating 
        subsection (p) as subsection (q) and by inserting after 
        subsection (o) the following new subsection:
    ``(p) Biodiesel Mixtures.--Except as provided in subsection (k), if 
any diesel fuel on which tax was imposed by section 4081 at a rate not 
determined under section 4081(f) is used by any person in producing a 
qualified biodiesel mixture (as defined in section 4081(f)) which is 
sold or used in such person's trade or business, the Secretary shall 
pay (without interest) to such person an amount equal to 3.06 cents per 
gallon with respect to such fuel.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on January 1, 2002.
    (d) Highway Trust Fund Held Harmless.--There are hereby transferred 
(from time to time) from the funds of the Commodity Credit Corporation 
amounts equivalent to the reductions that would occur (but for this 
subsection) in the receipts of the Highway Trust Fund by reason of the 
amendments made by this section.

SEC. 5. HARVESTING OF SWITCH GRASS ON CONSERVATION RESERVE ACREAGE FOR 
              USE IN ENERGY PRODUCTION.

    Section 1232(a)(7)(A) of the Food Security Act of 1985 (16 U.S.C. 
3832(a)(7)(A)) is amended--
            (1) by striking ``and'' at the end of clause (i); and
            (2) by inserting after clause (ii) the following new 
        clause:
                            ``(iii) harvesting of switch grass on such 
                        land when the purpose of the harvesting is to 
                        provide biomass for energy production, and such 
                        commercial use of the harvested grass shall be 
                        permitted without reduction in rental payments 
                        under the contact; and''.

SEC. 6. USE OF BIODIESEL FUEL IN FEDERAL VEHICLES.

    Federal agencies shall use biodiesel fuel to operate any Federal 
vehicle that uses diesel fuel, unless the cost of doing so is 
prohibitive.

Summary: Renewable Energy from Agricultural Products (REAP) Act - Amends the Internal Revenue Code respecting the credit for electricity produced from certain renewable resources to: (1) extend the credit, (2) expand the scope of qualifying closed-loop facilities. (3) make qualifying biomass and biomass facilities eligible for the credit. And (4) include electricity produced from agricultural and animal waste within the credit. Establishes a reduced excise tax rate for qualified biodiesel mixtures. Amends the Food Security Act of 1985 to permit harvesting of switch grass on conservation reserve acreage for energy production purposes. Requires Federal diesel vehicles to use biodiesel fuel unless cost-prohibitive.