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[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[S. 2446 Introduced in Senate (IS)]

109th CONGRESS
  2d Session
                                S. 2446

 To promote the national security and stability of the economy of the 
 United States by reducing the dependence of the United States on oil 
through the use of alternative fuels and new technology, and for other 
                               purposes.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

               March 16 (legislative day, March 15), 2006

 Mr. Obama (for himself and Mr. Lugar) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
 To promote the national security and stability of the economy of the 
 United States by reducing the dependence of the United States on oil 
through the use of alternative fuels and new technology, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``American Fuels Act of 2006''.

SEC. 2. OFFICE OF ENERGY SECURITY.

    (a) Definitions.--In this section:
            (1) Director.--The term ``Director'' means the Director of 
        Energy Security appointed under subsection (c)(1).
            (2) Office.--The term ``Office'' means the Office of Energy 
        Security established by subsection (b).
    (b) Establishment.--There is established in the Executive Office of 
the President the Office of Energy Security.
    (c) Director.--
            (1) In general.--The Office shall be headed by a Director, 
        who shall be appointed by the President, by and with the advice 
        and consent of the Senate.
            (2) Rate of pay.--The Director shall be paid at a rate of 
        pay equal to level I of the Executive Schedule under section 
        5312 of title 5, United States Code.
    (d) Responsibilities.--
            (1) In general.--The Office, acting through the Director, 
        shall be responsible for overseeing all Federal energy security 
        programs, including the coordination of efforts of Federal 
        agencies to assist the United States in achieving full energy 
        independence.
            (2) Specific responsibilities.--In carrying out paragraph 
        (1), the Director shall--
                    (A) serve as head of the energy community;
                    (B) act as the principal advisor to the President, 
                the National Security Council, the National Economic 
                Council, the Domestic Policy Council, and the Homeland 
                Security Council with respect to intelligence matters 
                relating to energy security;
                    (C) with request to budget requests and 
                appropriations for Federal programs relating to energy 
                security--
                            (i) consult with the President and the 
                        Director of the Office of Management and Budget 
                        with respect to each major Federal budgetary 
                        decision relating to energy security of the 
                        United States;
                            (ii) based on priorities established by the 
                        President, provide to the heads of departments 
                        containing agencies or organizations within the 
                        energy community, and to the heads of such 
                        agencies and organizations, guidance for use in 
                        developing the budget for Federal programs 
                        relating to energy security;
                            (iii) based on budget proposals provided to 
                        the Director by the heads of agencies and 
                        organizations described in clause (ii), develop 
                        and determine an annual consolidated budget for 
                        Federal programs relating to energy security; 
                        and
                            (iv) present the consolidated budget, 
                        together with any recommendations of the 
                        Director and any heads of agencies and 
                        organizations described in clause (ii), to the 
                        President for approval;
                    (D) establish and meet regularly with a council of 
                business and labor leaders to develop and provide to 
                the President and Congress recommendations relating to 
                the impact of energy supply and prices on economic 
                growth;
                    (E) submit to Congress an annual report that 
                describes the progress of the United States toward the 
                goal of achieving full energy independence; and
                    (F) carry out such other responsibilities as the 
                President may assign.
    (e) Staff.--
            (1) In general.--The Director may, without regard to the 
        civil service laws (including regulations), appoint and 
        terminate such personnel as are necessary to enable the 
        Director to carry out the responsibilities of the Director 
        under this section.
            (2) Compensation.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the Director may fix the compensation of personnel 
                without regard to the provisions of chapter 51 and 
                subchapter III of chapter 53 of title 5, United States 
                Code, relating to classification of positions and 
                General Schedule pay rates.
                    (B) Maximum rate of pay.--The rate of pay for the 
                personnel appointed by the Director shall not exceed 
                the rate payable for level V of the Executive Schedule 
                under section 5316 of title 5, United States Code.
    (f) Authorization of Appropriations.--There are authorized to be 
appropriated such sums as are necessary to carry out this section.

SEC. 3. CREDIT FOR PRODUCTION OF QUALIFIED FLEXIBLE FUEL MOTOR 
              VEHICLES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 45N. PRODUCTION OF QUALIFIED FLEXIBLE FUEL MOTOR VEHICLES.

    ``(a) Allowance of Credit.--For purposes of section 38, the 
qualified flexible fuel motor vehicle production credit determined 
under this section for any taxable year is an amount equal to $100 for 
each qualified flexible fuel motor vehicle produced in the United 
States by the manufacturer during the taxable year.
    ``(b) Qualified Flexible Fuel Motor Vehicle.--For purposes of this 
section, the term `qualified flexible fuel motor vehicle' means a 
flexible fuel motor vehicle--
            ``(1) the production of which is not required for the 
        manufacturer to meet--
                    ``(A) the maximum credit allowable for vehicles 
                described in paragraph (2) in determining the fleet 
                average fuel economy requirements (as determined under 
                section 32904 of title 49, United States Code) of the 
                manufacturer for the model year ending in the taxable 
                year, or
                    ``(B) the requirements of any other provision of 
                Federal law, and
            ``(2) which is designed so that the vehicle is propelled by 
        an engine which can use as a fuel a gasoline mixture of which 
        85 percent (or another percentage of not less than 70 percent, 
        as the Secretary may determine, by rule, to provide for 
        requirements relating to cold start, safety, or vehicle 
        functions) of the volume of consists of ethanol.
    ``(c) Other Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Motor vehicle.--The term `motor vehicle' has the 
        meaning given such term by section 30(c)(2).
            ``(2) Manufacturer.--The term `manufacturer' has the 
        meaning given such term in regulations prescribed by the 
        Administrator of the Environmental Protection Agency for 
        purposes of the administration of title II of the Clean Air Act 
        (42 U.S.C. 7521 et seq.).
            ``(3) Reduction in basis.--For purposes of this subtitle, 
        if a credit is allowed under this section for any expenditure 
        with respect to any property, the increase in the basis of such 
        property which would (but for this paragraph) result from such 
        expenditure shall be reduced by the amount of the credit so 
        allowed.
            ``(4) No double benefit.--The amount of any deduction or 
        credit allowable under this chapter (other than the credits 
        allowable under this section and section 30B) shall be reduced 
        by the amount of credit allowed under subsection (a) for such 
        vehicle for the taxable year.
            ``(5) Election not to take credit.--No credit shall be 
        allowed under subsection (a) for any vehicle if the taxpayer 
        elects to not have this section apply to such vehicle.
            ``(6) Termination.--This section shall not apply to any 
        vehicle produced after December 31, 2010.
            ``(7) Cross reference.--For an election to claim certain 
        minimum tax credits in lieu of the credit determined under this 
        section, see section 53(e).''.
    (b) Credit Allowed Against the Alternative Minimum Tax.--Section 
38(c)(4)(B) of the Internal Revenue Code of 1986 (defining specified 
credits) is amended by striking the period at the end of clause 
(ii)(II) and inserting ``, and'', and by adding at the end the 
following new clause:
                            ``(iii) the credit determined under section 
                        45N.''.
    (c) Election to Use Additional AMT Credit.--Section 53 of the 
Internal Revenue Code of 1986 (relating to credit for prior year 
minimum tax liability) is amended by adding at the end the following 
new subsection:
    ``(e) Additional Credit in Lieu of Flexible Fuel Motor Vehicle 
Credit.--
            ``(1) In general.--In the case of a taxpayer making an 
        election under this subsection for a taxable year, the amount 
        otherwise determined under subsection (c) shall be increased by 
        any amount of the credit determined under section 45N for such 
        taxable year which the taxpayer elects not to claim pursuant to 
        such election.
            ``(2) Election.--A taxpayer may make an election for any 
        taxable year not to claim any amount of the credit allowable 
        under section 45N with respect to property produced by the 
        taxpayer during such taxable year. An election under this 
        subsection may only be revoked with the consent of the 
        Secretary.
            ``(3) Credit refundable.--The aggregate increase in the 
        credit allowed by this section for any taxable year by reason 
        of this subsection shall for purposes of this title (other than 
        subsection (b)(2) of this section) be treated as a credit 
        allowed to the taxpayer under subpart C.''.
    (d) Conforming Amendments.--Section 38(b) of the Internal Revenue 
Code of 1986 is amended by striking ``and'' at the end of paragraph 
(29), by striking the period at the end of paragraph (30) and inserting 
a comma, and by adding at the end the following new paragraph:
            ``(31) the qualified flexible fuel motor vehicle production 
        credit determined under section 45N, plus''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new item:

        ``Sec. 45N. Production of qualified flexible fuel motor 
                            vehicles.''.
    (f) Effective Date.--The amendments made by this section shall 
apply to motor vehicles produced in model years ending after the date 
of the enactment of this Act.

SEC. 4. INCENTIVES FOR THE RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR 
              VEHICLE FUEL.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business related 
credits) is amended by inserting after section 40A the following new 
section:

``SEC. 40B. CREDIT FOR RETAIL SALE OF ALTERNATIVE FUELS AS MOTOR 
              VEHICLE FUEL.

    ``(a) General Rule.--The alternative fuel retail sales credit for 
any taxable year is the applicable amount for each gallon of 
alternative fuel sold at retail by the taxpayer during such year.
    ``(b) Applicable Amount.--For purposes of this section, the 
applicable amount shall be determined in accordance with the following 
table:

``In the case of                                  The applicable amount
  any sale:                                        for each gallon is: 
    Before 2009...................................            35 cents 
    During 2009 or 2010...........................            20 cents 
    During 2011...................................            10 cents.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Alternative fuel.--The term `alternative fuel' means 
        any fuel at least 85 percent (or another percentage of not less 
        than 70 percent, as the Secretary may determine, by rule, to 
        provide for requirements relating to cold start, safety, or 
        vehicle functions) of the volume of which consists of ethanol.
            ``(2) Sold at retail.--
                    ``(A) In general.--The term `sold at retail' means 
                the sale, for a purpose other than resale, after 
                manufacture, production, or importation.
                    ``(B) Use treated as sale.--If any person uses 
                alternative fuel (including any use after importation) 
                as a fuel to propel any qualified alternative fuel 
                motor vehicle (as defined in this section) before such 
                fuel is sold at retail, then such use shall be treated 
                in the same manner as if such fuel were sold at retail 
                as a fuel to propel such a vehicle by such person.
            ``(3) Qualified alternative fuel motor vehicle.--The term 
        `new qualified alternative fuel motor vehicle' means any motor 
        vehicle--
                    ``(A) which is capable of operating on an 
                alternative fuel,
                    ``(B) the original use of which commences with the 
                taxpayer,
                    ``(C) which is acquired by the taxpayer for use or 
                lease, but not for resale, and
                    ``(D) which is made by a manufacturer.
    ``(d) Election To Pass Credit.--A person which sells alternative 
fuel at retail may elect to pass the credit allowable under this 
section to the purchaser of such fuel or, in the event the purchaser is 
a tax-exempt entity or otherwise declines to accept such credit, to the 
person which supplied such fuel, under rules established by the 
Secretary.
    ``(e) Pass-Thru in the Case of Estates and Trusts.--Under 
regulations prescribed by the Secretary, rules similar to the rules of 
subsection (d) of section 52 shall apply.
    ``(f) Termination.--This section shall not apply to any fuel sold 
at retail after December 31, 2011.''.
    (b) Credit Treated as Business Credit.--Section 38(b) of the 
Internal Revenue Code of 1986 (relating to current year business 
credit) (as amended by section 3(d)) is amended by adding at the end 
the following new paragraph:
            ``(32) the alternative fuel retail sales credit determined 
        under section 40B(a).''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 40A the 
following new item:

        ``Sec. 40B. Credit for retail sale of alternative fuels as 
                            motor vehicle fuel.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to fuel sold at retail after the date of enactment of this Act, 
in taxable years ending after such date.

SEC. 5. 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) vegetable oil;
                            ``(iii) recycled yellow grease;
                            ``(iv) thermal depolymerization;
                            ``(v) thermochemical conversion;
                            ``(vi) the coal-to-liquid process 
                        (including the Fischer-Tropsch process); or
                            ``(vii) 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                       Calendar year:
        diesel fuel in diesel motor 
        pool (in millions of 
        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''.

SEC. 6. EXCISE TAX CREDIT FOR CELLULOSIC BIOMASS ETHANOL.

    (a) In General.--Paragraph (2) of section 6426(b) of the Internal 
Revenue Code of 1986 (relating to alcohol fuel mixture credit) is 
amended by adding at the end the following new subparagraph:
                    ``(C) Cellulosic biomass ethanol.--In the case of 
                an alcohol fuel mixture consisting of cellulosic 
                biomass ethanol (as defined in section 211(o)(1)(A) of 
                the Clean Air Act), the applicable amount is equal to 
                the product of--
                            ``(i) the amount specified in subparagraph 
                        (A), times
                            ``(ii) the equivalent number of gallons of 
                        renewable fuel specified in section 211(o)(4) 
                        of such Act.''.
    (b) Conforming Amendment.--Section 6426(b)(2)(A) of such Code is 
amended by striking ``subparagraph (B)'' and inserting ``subparagraphs 
(B) and (C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fuel sold or used after the date of the enactment of this Act.

SEC. 7. INCENTIVE FOR FEDERAL AND STATE FLEETS FOR MEDIUM AND HEAVY 
              DUTY HYBRIDS.

    Section 301 of the Energy Policy Act of 1992 (42 U.S.C. 13211) is 
amended--
            (1) in paragraph (3), by striking ``or a dual fueled 
        vehicle'' and inserting ``, a dual fueled vehicle, or a medium 
        or heavy duty vehicle that is a hybrid vehicle'';
            (2) by redesignating paragraphs (11), (12), (13), and (14) 
        as paragraphs (12), (14), (15), and (16), respectively;
            (3) by inserting after paragraph (10) the following:
            ``(11) the term `hybrid vehicle' means a vehicle powered 
        both by a diesel or gasoline engine and an electric motor that 
        is recharged as the vehicle operates;''; and
            (4) by inserting after paragraph (12) (as redesignated by 
        paragraph (2)) the following:
            ``(13) the term `medium or heavy duty vehicle' means a 
        vehicle that--
                    ``(A) in the case of a medium duty vehicle, has a 
                gross vehicle weight rating of more than 8,500 pounds 
                but not more than 14,000 pounds; and
                    ``(B) in the case of a heavy duty vehicle, has a 
                gross vehicle weight rating of more than 14,000 
                pounds;''.

SEC. 8. PUBLIC ACCESS TO FEDERAL ALTERNATIVE REFUELING STATIONS.

    (a) Definitions.--In this section:
            (1) Alternative fuel refueling station.--The term 
        ``alternative fuel refueling station'' has the meaning given 
        the term ``qualified alternative fuel vehicle refueling 
        property'' in section 30C(c)(1) of the Internal Revenue Code of 
        1986.
            (2) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (b) Access to Federal Alternative Refueling Stations.--Not later 
than 18 months after the date of enactment of this Act--
            (1) except as provided in subsection (d)(1), any Federal 
        property that includes at least 1 fuel refueling station shall 
        include at least 1 alternative fuel refueling station; and
            (2) except as provided in subsection (d)(2), any 
        alternative fuel refueling station located on property owned by 
        the Federal government shall permit full public access for the 
        purpose of refueling using alternative fuel.
    (c) Duration.--The requirements described in subsection (b) shall 
remain in effect until the sooner of--
            (1) the date that is 7 years after the date of enactment of 
        this Act; or
            (2) the date on which the Secretary determines that not 
        less than 5 percent of the commercial refueling infrastructure 
        in the United States offers alternative fuels to the general 
        public.
    (d) Exceptions.--
            (1) Waiver.--Subsection (b)(1) shall not apply to any 
        Federal property under the jurisdiction of a Federal agency if 
        the Secretary determines that alternative fuel is not 
        reasonably available to retail purchasers of the fuel, as 
        certified by the head of the agency to the Secretary.
            (2) National security exemption.--Subsection (b)(2) does 
        not apply to property of the Federal government that the 
        Secretary, in consultation with the Secretary of Defense, has 
        certified must be exempt for national security reasons.
    (e) Verification of Compliance.--The Secretary shall--
            (1) monitor compliance with this section by all Federal 
        agencies; and
            (2) annually submit to Congress a report describing the 
        extent of compliance with this section.

SEC. 9. PURCHASE OF CLEAN FUEL BUSES.

    (a) In General.--Chapter 53 of title 49, United States Code, is 
amended by inserting after section 5325 the following:
``Sec. 5326. Purchase of clean fuel buses.
    ``(a) Definition of Clean Fuel Bus.--In this section, the term 
`clean fuel bus' means a vehicle that--
            ``(1) is capable of being powered by--
                    ``(A) compressed natural gas;
                    ``(B) liquefied natural gas;
                    ``(C) 1 or more batteries;
                    ``(D) a fuel that is composed of at least 85 
                percent ethanol (or another percentage of not less than 
                70 percent, as the Secretary may determine, by rule, to 
                provide for requirements relating to cold start, 
                safety, or vehicle functions);
                    ``(E) electricity (including a hybrid electric or 
                plug-in hybrid electric vehicle);
                    ``(F) a fuel cell; or
                    ``(G) ultra-low sulfur diesel; and
            ``(2) has been certified by the Administrator of the 
        Environmental Protection Agency to significantly reduce harmful 
        emissions, particularly in a nonattainment area (as defined in 
        section 171 of the Clean Air Act (42 U.S.C. 7501)).
    ``(b) Purchase of Buses.--A bus purchased using funds made 
available from the Mass Transit Account of the Highway Trust Fund shall 
be a clean fuel bus.''.
    (b) Conforming Amendment.--The analysis for chapter 53 is amended 
by inserting after the item relating to section 5325 the following:

        ``5326. Clean fuel buses.''.

SEC. 10. DOMESTIC FUELS INFRASTRUCTURE FOR THE DEPARTMENT OF DEFENSE.

    (a) Program Required.--The Secretary of Defense shall carry out a 
program to evaluate the commercial and technical viability of advanced 
technologies for the production of alternative transportation fuels 
having applications for the Department of Defense. The program shall 
include the construction and operation of testing facilities in 
accordance with subsection (d).
    (b) Alternative Transportation Fuels Defined.--For purposes of this 
section, the term ``alternative transportation fuels'' means--
            (1) denatured ethanol and other alcohols;
            (2) mixtures containing at least 85 percent (or another 
        percentage of not less than 70 percent, as the Secretary may 
        determine, by rule, to provide for requirements relating to 
        cold start, safety, or vehicle functions) by volume of 
        denatured ethanol, particularly ethanols derived from 
        cellulosic biomass;
            (3) coal-derived liquid fuels, including Fischer-Tropsch 
        fuels;
            (4) fuels (other than alcohol) derived from biological 
        materials, including fuels derived from vegetable oils, animal 
        fats, thermal depolymerization, or thermalchemical conversion; 
        and
            (5) any other fuel the Secretary determines, by rule, is 
        substantially not petroleum and would yield substantial energy 
        security benefits and substantial environmental benefits.
    (c) Coordination of Efforts.--
            (1) In general.--The Secretary of Defense shall carry out 
        the program required by this section through the Under 
        Secretary of Defense for Acquisition, Technology, and Logistics 
        and in consultation with the Director of Defense Research and 
        Engineering, the Advanced Systems and Concepts Office, the 
        Secretary of Agriculture, and the Secretary of Energy.
            (2) Role of biomass research and development technologic 
        advisory committee.--The consultations under paragraph (1) 
        shall include the participation of the Biomass Research and 
        Development Technical Advisory Committee established under 
        section 306 of the Biomass Research and Development Act of 2000 
        (title III of Public Law 106-224; 7 U.S.C. 8101 note).
    (d) Facilities for Evaluating Production of Alternative 
Transportation Fuels.--
            (1) In general.--In carrying out the program required by 
        this section, the Secretary of Defense shall provide for the 
        construction or capital modification of--
                    (A) not more than 3 facilities for the purposes of 
                evaluating the production from cellulosic biomass of 
                alternative transportation fuels having applications 
                for the Department of Defense; and
                    (B) not more than 3 facilities for the purposes of 
                evaluating the production from coal of alternative 
                transportation fuels having applications for the 
                Department of Defense, with not less than one of such 
                facilities utilizing coal resources with a ranking by 
                the American Society for Testing and Materials of high 
                volatile bituminous B and C.
            (2) Location of facilities.--The facilities constructed 
        under paragraph (1) for the purposes of cellulosic biomass 
        shall--
                    (A) afford the efficient use of a diverse range of 
                fuel sources; and
                    (B) give initial preference to existing domestic 
                facilities with current or potential capacity for 
                cellulose or coal conversion.
            (3) Capacity of facilities.--Each facility constructed 
        under paragraph (1) shall have the flexibility for producing 
        commercial volumes of alternative transportation fuels such 
        that when the facility demonstrates economic viability of the 
        process it can provide commercial production for the region in 
        which it is located.
            (4) Authority to enter into transactions for facility 
        construction.--The Secretary of Defense shall seek to construct 
        the facilities required by paragraph (1) at the lowest cost 
        practicable. The Secretary may make grants, enter into 
        agreements, and provide loans or loan guarantees to 
        corporations, cooperatives, and consortia of such entities for 
        such purposes.
            (5) Evaluations at facilities.--Not later than 5 years 
        after the date of enactment of this Act, the Secretary of 
        Defense shall begin at the facilities described in paragraph 
        (1) evaluations of the technical and commercial viability of 
        different processes of producing alternative transportation 
        fuels having Department of Defense applications from cellulosic 
        biomass or coal.
    (e) Program Milestones.--In carrying out the program required by 
this section, the Secretary of Defense shall meet the following 
milestones:
            (1) Selection of testing processes.--Not later than 180 
        days after the date of enactment of this Act, the Secretary 
        shall select processes for evaluating the technical and 
        commercial viability of producing alternative fuels from 
        cellulosic biomass or coal.
            (2) Initiation of work at existing facilities.--Not later 
        than one year after the date of enactment of this Act, the 
        Secretary shall enter into agreements to carry out testing 
        under this section at existing facilities.
            (3) Construction agreements.--Not later than one year after 
        the date of enactment of this Act, the Secretary shall enter 
        into agreements for the capital modification or construction of 
        facilities under subsection (d)(1).
            (4) Completion of engineering and design work.--Not later 
        than three years after the date of enactment of this Act, the 
        Secretary shall complete capital modifications of existing 
        facilities and the engineering and design work necessary for 
        the construction of new facilities under this section.
    (f) Report on Program.--Not later than 18 months after the date of 
enactment of this Act, and annually thereafter for the next 5 years, 
the Secretary of Defense shall, in consultation with the Under 
Secretary of Defense for Acquisition, Technology, and Logistics, submit 
a report on the implementation and results of the program required by 
this section to--
            (1) the Committees on Armed Services, Energy and Natural 
        Resources, Agriculture, and Appropriations of the Senate; and
            (2) the Committees on Armed Services, Energy and Commerce, 
        Agriculture, and Appropriations of the House of 
        Representatives.
    (g) Funding.--
            (1) In general.--Of the amounts authorized to be 
        appropriated under this section, $250,000,000 may be available 
        for the program required by this section for fiscal years 2007 
        through 2012.
            (2) Availability.--Amounts available under paragraph (1) 
        shall remain available until expended.
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