WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/USA/56 
2 October 2012 
 (12-5332) 
Committee on Subsidies and  
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions posed by TURKEY1 regarding the New and  
Full Notification of the UNITED STATES2 
  
 The following communication, dated 25 September 2012, is being circulated at the request of 
the Delegation of the United States. 
 
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Titles:  "Energy Supply - Renewable Energy Resources", "Energy Conservation Programs - 
Transportation Sector", "Energy Conservat ion Programs - Building Technologies" and 
"Energy Conservation - Industry Sector"  
Question 1   Under Subtitle 4 of the aforementioned programs, the United States stated that the form 
of the support can consist of " other forms of collaboration a ccomplished through consortium-
based activities between government laboratories and private industry ".  Could the United States 
make clarification on what are the types of other forms of collaboration and whether there is a 
requirement for a threshold level for public or pri vate contribution within the related activities.  
 
Reply 
  The forms of collaboration can vary significantly.  By way of example, in 2009 the U.S. Department of Energy issued a Funding Opport unity Announcement (FOA) entitled, "Recovery Act: 
Wind Energy Consortia between Institutions of Highe r Learning and Industry."  Under this initiative, 
DOE budgeted $24 million for the development of c onsortia between universities and industry to 
focus on critical wind energy challenges.  The budgeted funds were inte nded to fund consortia 
between institutions of higher l earning and industry that will pe rform focused research on critical 
wind energy challenges. At the time of announcement,  DOE intended to award two or three grants.  
The maximum range of a DOE award was intended to be between $8-12 million.  Applicants were 
required to provide at least a ten per cent cost share of total project costs, including at least 20 per cent 
for R&D costs. 
 Two other examples of collaboration accomplis hed through consortium-based activities were 
announced in 2010: one led by the University of Mi chigan to advance clean vehicles; and one led by 
the West Virginia University to study carbon captu re.  These two consortia will receive a total of $25 
million over the five years under the U.S.-China Clean Energy Research Center (CERC). The funding 
will be matched by the grantees for a total of $50 m illion in U.S. funding.  China will provide another 
                                                      
1 G/SCM/Q2/USA/53. 
2 G/SCM/N/220/USA.   G/SCM/Q2/USA/56 
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  $50 million. The money will fund joint research and de velopment of clean energy technologies by the 
United States and China. 
  As noted, the University of Michigan is l eading the consortium that will focus on vehicle 
electrification. It includes Ohio State University, the Massachusetts  Institute of Technology, DOE's 
Sandia and Oak Ridge National Laboratories.  It also  includes the Joint BioEnergy Institute, which is 
led by DOE's Lawrence Berkeley National Laborat ory, General Motors, Ford, Toyota, Chrysler, 
Cummins, Fraunhofer, MAGNET, A123 Systems, Amer ican Electric Power, FirstEnergy, and the 
Transportation Research Center.  West Virginia  University's team will develop and test new 
technologies for carbon capture and sequestration.  
 
Question 2 
 
 According to Subtitle 5 of the aforemention ed programs, "Participation in the program 
is determined through various competitive proce dures, which are open to all eligible private 
parties".  Within this framework, could the United States explain the various competitive 
procedures in detail?  What are the eligib ility requirements for participation and actual 
beneficiaries under these programs?  Could foreign entities eligible for receiving subsidies 
under these programs?  
Reply 
 
 As noted previously in answering questions on prior U.S. subsidy notifications, as a general 
matter, the competitive procedures used to determin e participation are set forth in Department of 
Energy Regulations at Title 10, Code of Federal Regulations, Part 600.  Under these regulations, DOE 
is required to solicit applications for financial as sistance in a manner which provides for the maximum 
amount of competition feasible (10 CFR 600.6). 
  
 If DOE restricts eligibility, an explanation of wh y the restriction of eligibility is considered 
necessary shall be included in the solicitation, program rule, or published notice.  Except when 
authorized by statute or program rule, if the aggregate amount of DOE funds available for award 
under a solicitation or published noti ce is $1,000,000 or more, such r estriction of eligibility must be 
supported by a written determination initiated by the program office and approved by an official no 
less than two levels above the initiating program offi cial and concurred in by the Contracting Officer 
and legal counsel.  Where the amount of DOE fund s is less than $1,000,000, the DOE Head of 
Contracting Activity and the Contracting Offer ma y approve the determination. (10 CFR 600.6) 
DOE may award a grant or cooperative agreement on a non-competitive basis only if the application 
satisfies one or more of the specific selection criteria set forth in the regulation.  These criteria include 
cases where the applicant has excl usive domestic capability to perfor m the activity successfully, based 
upon unique equipment, proprietary data, technical expertise, or ot her such unique qualifications as 
well as cases where the award implements an agreem ent between the United States Government and a 
foreign government to fund a foreign applicant (10 CFR 600.6). 
 
 In order for DOE to make an award to any for-profit entity, DOE must determine that the 
applicant's participation will be in the economic intere st of the United States.  If the applicant is not a 
U.S. owned company, DOE must determine that th e parent company is incorporated in a foreign 
country that affords to companies owned by U.S. persons:  (1) national treatment with regard to 
access to government-supported joint ventures in en ergy research and development;  (2) national 
treatment with regard to general investment opportu nities;  and (3) protection to intellectual property 
rights owned by such companies (10 CFR 600.500).  To assist DOE in making these determinations, 
the applicant must provide the relevant information to DOE. 
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   It should be noted as well, as described in the U.S. notification, the DOE programs at issue 
generally focus on particular areas, such as: th e transportation sector, building technologies, industry 
(including sub-programs for "industries of the future "), fossil fuels, etc.  As such, the range of 
recipients interested in a particular program may be limited (eg, a construction company may not be 
interested or able to compete effectively for fu nds under the transportation program).       
 
 
OTHER ENERGY AND FUELS 
 
Title:  "Expensing of Exploration and Develo pment (E&D) Costs for Oil, Gas and other Fuels" 
 Question 3 
 
 The Subtitle 5 of the program mentions that, "Fuel mineral producers are permitted 
accelerated deductions from taxable income" .  Could the United States make clarification 
regarding the deduction scale of the taxable in come.  What are the specific requirements for 
fuel mineral producers in order to increase this  deduction level?  Are there any production 
requisites for qualification to the program?   
 
Reply 
 
 In the case of successful investments in domestic  oil and gas wells, intangible drilling costs, 
such as wages, the costs of using machinery for gr ading and drilling and the costs of unsalvageable 
materials used in constructing we lls, may be expensed for tax purpo ses rather than amortized over the 
productive life of the property.  Integrated oil co mpanies may currently deduct only 70 per cent of 
such costs and amortize the remaining 30 per cent ove r five years.  The same rule applies to the 
exploration and development costs of surface strippi ng and the construction of shafts and tunnels for 
other fuel minerals.  The expensing provision is authorized under sections 263(c), 291, 616-617, 
57(a)(2), and 1254 of the Internal Revenue Code of  1986 (Code).  There are no production requisites 
for qualification for these provisions. 
 
Title: "Alternative Fuel Production Credit"  
 
Question 4  
Within the context of the program the United States defined that the program is 
available for "qualified facilities"  in the United States which pro duce coke and coke gas.  Could 
the United States provide detailed inform ation on the qualification process for the 
aforementioned facilities?  What is the reason for the exception regarding petroleum-based coke 
or coke gas production?  Can all other production facilities other than aforementioned exception benefit from the program?  
 
Reply 
  A qualified facility includes a facility located in the United States or a U.S. possession that 
was placed in service before 1 January 1993, or af ter 30 June 1998, and befo re 1 January 2010.  The 
facility may not produce coke and coke  gas from petroleum based products.   
  Only those facilities described above can receive  the alternative fuel production tax credit for 
coke and coke gas.  This provision is authorized under section 45K of the In ternal Revenue code and 
was only intended to cover coke and coke gas. 
 G/SCM/Q2/USA/56 
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  Question 5 
 
As an eligibility criterion, it is stated that "qualifying production"  is required.  Could the 
United States explain the term of "qualifyi ng production" and how this "qualifying 
production" is measured and determined by the competent authority?    Reply 
 
 Qualifying fuel must be sold during the peri od beginning on the later of 1 January 2006, or 
the date the facility is placed in service and ending fo ur years after the date the period began and must 
be produced at a qualifying facility.  
 Title:  "Credits for Investment in Advanced  Coal Facilities and Advanced Gasification 
Facilities" 
 
Question 6   It is stated that the program provides a credit reduction for taxpayers investing in 
qualified facilities.  Could the United States pr ovide detailed information on the qualification 
process for these facilities?  
 The tax credit is administered by the Intern al Revenue Service (IRS), a bureau within the 
Department of the Treasury. The IRS only considers a project if the U.S. Department of Energy 
(DOE) provides a recommendation and ranking for the project after a rigorous merit review process 
using the criteria set forth in section 48A and 48B of the Code.   
 
 In determining which qualifying advanced co al projects to certify under section 48A of the 
Code, the Secretary must allocate power generation capacity in relatively equal amounts to projects that use bituminous coal, sub-bituminous coal, and lignite as primary feedstock.  In addition, the 
Secretary must give high priority to proj ects which include greenhouse gas capture capability, 
increased by-product utilization, and other benefits.  
 A second round of allocations under section 48A  of the Code was adopted as part of the 
Emergency Stabilization Act of 2008.  Under th e second round of credit allocations, qualifying 
projects must include equipment which separates and sequesters at least 65 per cent of the project's 
total carbon dioxide emissions. 
  IRS Notice 2009-23 updates the procedures for the allocation of credits for the qualifying 
gasification project program of section 48B of the Code and announces the beginning of an allocation 
round of credits for qualifying gasification projects.  
 IRS Notice 2009-24 updates the procedures for the allocation of credits for the qualifying 
advanced coal project program under section 48A of the Code.   
 
 Both of these notices can be found at the following IRS website:  http://www.irs.gov/irb/2009-16_irb/ar01.html  
 
 IRS Notice 2012-51 establishes a third phase of the qualifying advanced coal project program:  http://www.irs.gov/pub/irs-drop/n-12-51.pdf  
 
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  OTHER 
 
Title:  "Empowerment Zones and Renewal Communities" 
 
Question 7  
 Under "Duration" Subtitle of the program, the United States mentioned that 
"Empowerment Zone and DC Zone tax benef its are generally scheduled to expire on 
31 December 2011".  Could the United States clarify whether the program for Empowerment 
Zone and DC Zone has been expired at the end of 2011?  Is there an exception for extension of 
the tax benefits for some sectors in these zones?   
 Reply 
 
 The DC Zone and all Empowerment Zone desi gnations expired on 31 December 2011.  No 
sector received an exception to this expiration date.  
 
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