I 

110TH CONGRESS 

1ST SESSION H. R. 2038 

To promote biogas production, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 25, 2007 

Mr. KIND (for himself and Mr. NUNES) introduced the following bill; which 

was referred to the Committee on Ways and Means, and in addition to 

the Committee on Agriculture, for a period to be subsequently determined 

by the Speaker, in each case for consideration of such provisions as fall 

within the jurisdiction of the committee concerned 

A BILL 

To promote biogas production, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Biogas Production In5 centive Act of 2007’’. 

6 SEC. 2. CREDIT FOR PRODUCTION OF BIOGAS FROM CER7 TAIN RENEWABLE FEEDSTOCKS. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 is amended by inserting after section 40A the fol2 lowing new section: 

3 ‘‘SEC. 40B. BIOGAS PRODUCED FROM CERTAIN RENEWABLE 

4 FEEDSTOCKS. 

5 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

6 the qualified biogas production credit for any taxable year 

7 is an amount equal to the product of— 

8 ‘‘(1) $4.27, and 

9 ‘‘(2) each million British thermal units 

10 (mmBtu) of biogas— 

11 ‘‘(A) produced by the taxpayer— 

12 ‘‘(i) from qualified energy feedstock, 

13 and 

14 ‘‘(ii) at a qualified facility during the 

15 7-year period beginning on the date the fa16 cility was originally placed in service, and 

17 ‘‘(B) either— 

18 ‘‘(i) sold by the taxpayer to an unre19 lated person during the taxable year, or 

20 ‘‘(ii) used by the taxpayer during the 

21 taxable year. 

22 ‘‘(b) DEFINITIONS.— 

23 ‘‘(1) BIOGAS.—The term ‘biogas’ means a gas 

24 that— 


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1 ‘‘(A) is derived by processing qualified en2 ergy feedstock in an anaerobic digester, and 

3 ‘‘(B) contains— 

4 ‘‘(i) at least 60 percent methane, and 

5 ‘‘(ii) carbon dioxide and trace gases. 

6 ‘‘(2) QUALIFIED ENERGY FEEDSTOCK.— 

7 ‘‘(A) IN GENERAL.—The term ‘qualified 

8 energy feedstock’ means— 

9 ‘‘(i) manure of agricultural livestock, 

10 including litter, wood shavings, straw, rice 

11 hulls, bedding material, and other mate12 rials incidentally collected with the ma13 nure, 

14 ‘‘(ii) any nonhazardous, cellulosic, or 

15 other organic agricultural or food industry 

16 byproduct or waste material that is derived 

17 from— 

18 ‘‘(I) harvesting residues, 

19 ‘‘(II) wastes or byproducts from 

20 fermentation processes, ethanol pro21 duction, biodiesel production, slaugh22 ter of agricultural livestock, food pro23 duction, food processing, or food serv24 ice, or 


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1 ‘‘(III) other organic wastes, by2 products, or sources, or 

3 ‘‘(iii) solid wood waste materials, in4 cluding waste pallets, crates, dunnage, 

5 manufacturing and construction wood 

6 wastes, and landscape or right-of-way tree 

7 trimmings. 

8 ‘‘(B) EXCLUSIONS.—The term ‘qualified 

9 energy feedstock’ does not include— 

10 ‘‘(i) pressure-treated, chemically-treat11 ed, or painted wood wastes, 

12 ‘‘(ii) municipal solid waste, 

13 ‘‘(iii) landfills, or 

14 ‘‘(iv) paper that is commonly recycled. 

15 ‘‘(C) AGRICULTURAL LIVESTOCK.—The 

16 term ‘agricultural livestock’ means poultry, cat17 tle, sheep, swine, goats, horses, mules, and 

18 other equines. 

19 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali20 fied facility’ means a facility that— 

21 ‘‘(A) uses anaerobic digesters to process 

22 qualified energy feedstock into biogas, 

23 ‘‘(B) is owned by the taxpayer, 

24 ‘‘(C) is located in the United States, 


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1 ‘‘(D) is originally placed in service before 

2 January 1, 2018, and 

3 ‘‘(E) the biogas output of which is— 

4 ‘‘(i) marketed through interconnection 

5 with a gas distribution or transmission 

6 pipeline, or 

7 ‘‘(ii) used on-site or off-site in a quan8 tity that is sufficient to offset the con9 sumption of at least 6,570 mmBtu annu10 ally of commercially–marketed fuel derived 

11 from coal, crude oil, natural gas, propane, 

12 or other fossil fuel. 

13 ‘‘(c) SPECIAL RULES.—For purposes of this sec14 tion— 

15 ‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX16 PAYER.—In the case of a facility in which more than 

17 1 person has an ownership interest, except to the ex18 tent provided in regulations prescribed by the Sec19 retary, production from the qualified facility shall be 

20 allocated among such persons in proportion to their 

21 respective ownership interests in the gross sales 

22 from such qualified facility. 

23 ‘‘(2) RELATED PERSONS.—Persons shall be 

24 treated as related to each other if such persons 

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1 ulations prescribed under section 52(b). In the case 

2 of a corporation which is a member of an affiliated 

3 group of corporations filing a consolidated return, 

4 such corporation shall be treated as selling biogas to 

5 an unrelated person if such biogas is sold to such a 

6 person by another member of such group. 

7 ‘‘(3) PASS-THRU IN THE CASE OF ESTATES AND

8 TRUSTS.—Under regulations prescribed by the Sec9 retary, rules similar to the rules of subsection (d) of 

10 section 52 shall apply. 

11 ‘‘(4) COORDINATION WITH CREDIT FROM PRO12 DUCING FUEL FROM A NONCONVENTIONAL

13 SOURCE.—The amount of biogas produced and sold 

14 or used by the taxpayer during any taxable year 

15 which is taken into account under this section shall 

16 be reduced by the amount of biogas produced and 

17 sold by the taxpayer in such taxable year which is 

18 taken into account under section 45K. 

19 ‘‘(5) CREDIT ELIGIBILITY IN THE CASE OF GOV20 ERNMENT-OWNED FACILITIES USING POULTRY

21 WASTE.—In the case of a facility using poultry 

22 waste to produce biogas and owned by a govern23 mental unit, subparagraph (B) of subsection (b)(3) 

24 shall be applied by substituting ‘is leased or operated 

25 by the taxpayer’ for ‘is owned by the taxpayer’. 


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1 ‘‘(d) TRANSFERABILITY OF CREDIT.— 

2 ‘‘(1) IN GENERAL.—A taxpayer may transfer 

3 the credit under this section through an assignment 

4 to any person. Such transfer may be revoked only 

5 with the consent of the Secretary. 

6 ‘‘(2) REGULATIONS.—The Secretary shall pre7 scribe such regulations as necessary to ensure that 

8 any credit transferred under paragraph (1) is 

9 claimed once and not reassigned by such other per10 son. 

11 ‘‘(e) ADJUSTMENT BASED ON INFLATION.— 

12 ‘‘(1) IN GENERAL.—The $4.27 amount under 

13 subsection (b)(1) shall be adjusted by multiplying 

14 such amount by the inflation adjustment factor for 

15 the calendar year in which the sale occurs. If any 

16 amount as increased under the preceding sentence is 

17 not a multiple of 0.1 cent, such amount shall be 

18 rounded to the nearest multiple of 0.1 cent. 

19 ‘‘(2) COMPUTATION OF INFLATION ADJUST20 MENT FACTOR.— 

21 ‘‘(A) IN GENERAL.—The Secretary shall, 

22 not later than April 1 of each calendar year, de23 termine and publish in the Federal Register the 

24 inflation adjustment factor in accordance with 

25 this paragraph. 


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1 ‘‘(B) INFLATION ADJUSTMENT FACTOR.— 

2 The term ‘inflation adjustment factor’ means, 

3 with respect to a calendar year, a fraction the 

4 numerator of which is the GDP implicit price 

5 deflator for the preceding calendar year and the 

6 denominator of which is the GDP implicit price 

7 deflator for calendar year 2007. The term 

8 ‘GDP implicit price deflator’ means the most 

9 recent revision of the implicit price deflator for 

10 the gross domestic product as computed and 

11 published by the Department of Commerce be12 fore March 15 of the calendar year.’’. 

13 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec14 tion 38(b) of the Internal Revenue Code of 1986 is amend15 ed by striking ‘‘plus’’ at the end of paragraph (30), by 

16 striking the period at the end of paragraph (31) and in17 serting ‘‘, plus’’, and by adding at the end the following 

18 new paragraph: 

19 ‘‘(32) the qualified biogas production credit 

20 under section 40B(a).’’. 

21 (c) CREDIT ALLOWED AGAINST AMT.—Section 

22 38(c)(4)(B) of the Internal Revenue Code of 1986 is 

23 amended by striking ‘‘and’’ at the end of clause (i), by 

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1 ing ‘‘, and’’, and by adding at the end the following new 

2 clause: 

3 ‘‘(iii) the credit determined under sec4 tion 40B.’’. 

5 (d) CLERICAL AMENDMENT.—The table of sections 

6 for subpart D of part IV of subchapter A of chapter 1 

7 of the Internal Revenue Code of 1986 is amended by in8 serting after the item relating to section 40A the following 

9 new item: 

‘‘Sec. 40B. Biogas produced from certain renewable feedstocks.’’. 

10 (e) EFFECTIVE DATE.—The amendments made by 

11 this section shall apply to biogas produced and sold or 

12 used in taxable years beginning after the date of the enact13 ment of this Act. 

14 SEC. 3. INCENTIVES FOR BIOGAS PRODUCTION. 

15 Title IX of the Farm Security and Rural Investment 

16 Act of 2002 (7 U.S.C. 8101 et seq.) is amended by adding 

17 at the end the following: 

18 ‘‘SEC. 9012. COUNTER-CYCLICAL PAYMENTS FOR THE PRO19 DUCTION OF BIOGAS FROM CERTAIN RENEW20 ABLE FEEDSTOCK RESOURCES. 

21 ‘‘(a) DEFINITIONS.—In this section: 

22 ‘‘(1) AGRICULTURAL LIVESTOCK.—The term 

23 ‘agricultural livestock’ means— 

24 ‘‘(A) poultry; 

25 ‘‘(B) cattle; 


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1 ‘‘(C) sheep; 

2 ‘‘(D) swine; 

3 ‘‘(E) goats; 

4 ‘‘(F) horses; 

5 ‘‘(G) mules; and 

6 ‘‘(H) other equines. 

7 ‘‘(2) BIOGAS.—The term ‘biogas’ means a gas 

8 that— 

9 ‘‘(A) is produced at a qualified facility; 

10 ‘‘(B) is derived by processing qualified en11 ergy feedstock in an anaerobic digester; and 

12 ‘‘(C) contains— 

13 ‘‘(i) at least 60 percent methane; and 

14 ‘‘(ii) carbon dioxide and trace gases. 

15 ‘‘(3) PROVIDER.—The term ‘provider’ means a 

16 provider of qualified energy feedstock, including a 

17 farmer, rancher, rural small business, agricultural 

18 cooperative, and partnership. 

19 ‘‘(4) QUALIFIED BIOGAS PRODUCER.—The term 

20 ‘qualified biogas producer’ means a person that op21 erates a qualified facility. 

22 ‘‘(5) QUALIFIED ENERGY FEEDSTOCK.— 

23 ‘‘(A) IN GENERAL.—The term ‘qualified 

24 energy feedstock’ means— 


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1 ‘‘(i) manure of agricultural livestock, 

2 including litter, wood shavings, straw, rice 

3 hulls, bedding material, and other mate4 rials incidentally collected with the ma5 nure; 

6 ‘‘(ii) any nonhazardous, cellulosic, or 

7 other organic agricultural or food industry 

8 byproduct or waste material that is derived 

9 from— 

10 ‘‘(I) harvesting residues; 

11 ‘‘(II) wastes or byproducts from 

12 fermentation processes, ethanol pro13 duction, biodiesel production, slaugh14 ter of agricultural livestock, food pro15 duction, food processing, or food serv16 ice; or 

17 ‘‘(III) other organic wastes, by18 products, or sources; or 

19 ‘‘(iii) solid wood waste materials, in20 cluding waste pallets, crates, dunnage, 

21 manufacturing and construction wood 

22 wastes, and landscape or right-of-way tree 

23 trimmings. 

24 ‘‘(B) EXCLUSIONS.—The term ‘qualified 

25 energy feedstock’ does not include— 


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1 ‘‘(i) pressure-treated, chemically-treat2 ed, or painted wood wastes; 

3 ‘‘(ii) municipal solid waste; 

4 ‘‘(iii) landfills; or 

5 ‘‘(iv) paper that is commonly recycled. 

6 ‘‘(6) QUALIFIED FACILITY.—The term ‘quali7 fied facility’ means a facility that— 

8 ‘‘(A) uses anaerobic digesters to process 

9 qualified energy feedstock into biogas; 

10 ‘‘(B) is located in the United States; and 

11 ‘‘(C) the biogas output of which is— 

12 ‘‘(i) marketed through interconnection 

13 with a gas distribution or transmission 

14 pipeline; or 

15 ‘‘(ii) used on-site or off-site in a quan16 tity that is sufficient to offset the con17 sumption of at least 50,000 mmBtu annu18 ally of commercially–marketed fuel derived 

19 from coal, crude oil, natural gas, propane, 

20 or other fossil fuel. 

21 ‘‘(b) COUNTER-CYCLICAL PAYMENTS.— 

22 ‘‘(1) IN GENERAL.—The Secretary shall use 

23 such funds of the Commodity Credit Corporation as 

24 are necessary to make counter-cyclical payments in 

25 accordance with this subsection to qualified biogas 


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1 producers for qualified facilities placed in service be2 fore December 31, 2013. 

3 ‘‘(2) PAYMENT AMOUNT.— 

4 ‘‘(A) IN GENERAL.—The amount of the 

5 payments described in paragraph (1) shall be 

6 equal to the product obtained by multiplying— 

7 ‘‘(i) the applicable amount calculated 

8 under subparagraph (B); and 

9 ‘‘(ii) the mmBtus of biogas that is 

10 produced in any year during the 10–year 

11 period beginning on the date on which the 

12 qualified facility is placed into service. 

13 ‘‘(B) APPLICABLE AMOUNT.—The applica14 ble amount under subparagraph (A)(i) is the 

15 amount equal to 1.0 cent for every 1.0 cent 

16 that the annual average of average daily prices 

17 of natural gas on the Henry Hub Natural Gas 

18 Futures Market of the New York Mercantile 

19 Exchange is below $7.50 per mmBtu, as ad20 justed for inflation by the Secretary. 

21 ‘‘(3) PAYMENT TIMING.—The Secretary shall 

22 make payments under this subsection once per cal23 endar year, on a date determined by the Secretary. 

24 ‘‘(4) USE OF PAYMENTS.—As a condition on re25 ceipt of payments under this subsection, a qualified 


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1 biogas producer shall agree to use the payments first 

2 to pay down loans and other obligations incurred by 

3 the qualified biogas producer for the physical facili4 ties designed, built, and used to produce biogas. 

5 ‘‘(c) TRANSPORTATION COSTS.— 

6 ‘‘(1) DEFINITION OF SECRETARY.—In this sub7 section, the term ‘Secretary’ means the Secretary, 

8 acting in consultation with the Secretary of Energy 

9 and the Administrator of the Environmental Protec10 tion Agency. 

11 ‘‘(2) IN GENERAL.—The Secretary shall make 

12 loans, loan guarantees, and grants to providers— 

13 ‘‘(A) for collecting qualified energy feed14 stock and transporting the feedstock to a quali15 fied facility that produces biogas using manure 

16 of agricultural livestock from multiple, smaller 

17 farming operations, as determined by the Sec18 retary; or 

19 ‘‘(B) for the purchase or construction of 

20 equipment or facilities used in connection with 

21 the collection and transportation under sub22 paragraph (A). 

23 ‘‘(3) ELIGIBILITY.—To be eligible to receive a 

24 grant under this subsection, a provider shall— 


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1 ‘‘(A) demonstrate financial need, as deter2 mined by the Secretary; and 

3 ‘‘(B) submit to the Secretary a description 

4 of— 

5 ‘‘(i) the terms and conditions of the 

6 commitment by a qualified facility to ac7 cept the qualified energy feedstock from 

8 the provider; 

9 ‘‘(ii) the location of the qualified facil10 ity; and 

11 ‘‘(iii) a plan for environmentally-sound 

12 and economically-sustainable continued 

13 transportation of the qualified energy feed14 stock. 

15 ‘‘(4) COST SHARING.— 

16 ‘‘(A) IN GENERAL.— 

17 ‘‘(i) GRANTS.—The amount of a grant 

18 under this subsection shall not exceed 75 

19 percent of the annual cost of the activity 

20 funded under paragraph (2)(A). 

21 ‘‘(ii) MAXIMUM AMOUNT OF COM22 BINED GRANT AND LOAN.—The combined 

23 amount of a grant and loan made or guar24 anteed for purchase or construction of 

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1 port of qualified energy feedstock shall not 

2 exceed 75 percent of the cost of the activ3 ity funded under paragraph (2)(B). 

4 ‘‘(B) FACTORS.—In determining the 

5 amount of a grant or loan, the Secretary shall 

6 take into consideration, as applicable— 

7 ‘‘(i) the size, location, and biogas pro8 duction efficiency of the qualified facility; 

9 ‘‘(ii) the estimated quantity of biogas 

10 to be produced by the qualified facility; 

11 ‘‘(iii) the number of farms, ranches, 

12 or small rural businesses within a reason13 able distance of the qualified facility, as 

14 determined by the Secretary; 

15 ‘‘(iv) the expected environmental bene16 fits of producing biogas from qualified en17 ergy feedstocks by the qualified facility; 

18 and 

19 ‘‘(v) such other factors as the Sec20 retary determines to be appropriate. 

21 ‘‘(5) INTEREST RATE.— 

22 ‘‘(A) IN GENERAL.—A loan made by the 

23 Secretary under this subsection shall bear inter24 est at the rate equivalent to the rate of interest 


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1 charged on Treasury securities of comparable 

2 maturity on the date the loan is approved. 

3 ‘‘(B) DURATION.—The interest rate for 

4 each loan will remain in effect for the term of 

5 the loan. 

6 ‘‘(6) FUNDING.— 

7 ‘‘(A) IN GENERAL.—Notwithstanding any 

8 other provision of law, on October 1, 2007, and 

9 on each October 1 thereafter through October 

10 1, 2011, out of any funds in the Treasury not 

11 otherwise appropriated, the Secretary of the 

12 Treasury shall transfer to the Secretary to 

13 carry out this subsection $10,000,000, to re14 main available until expended. 

15 ‘‘(B) RECEIPT AND ACCEPTANCE.—The 

16 Secretary shall be entitled to receive, shall ac17 cept, and shall use to carry out this subsection 

18 the funds transferred under subparagraph (A), 

19 without further appropriation. 

20 ‘‘(d) IMPLEMENTATION.— 

21 ‘‘(1) IN GENERAL.—Not later than 180 days 

22 after the date of enactment of this section, the Sec23 retary shall promulgate such regulations as are nec24 essary to implement this section, including a notice 

25 describing the method by which the Secretary deterVerDate Aug 31 2005 21:17 Apr 26, 2007 Jkt 059200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H2038.IH H2038

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1 mines and adjusts the average price under sub2 section (b)(2)(B). 

3 ‘‘(2) PROCEDURE.—The promulgation of the 

4 regulations and administration of this section shall 

5 be made without regard to— 

6 ‘‘(A) the notice and comment provisions of 

7 section 553 of title 5, United States Code; 

8 ‘‘(B) the Statement of Policy of the Sec9 retary of Agriculture effective July 24, 1971 

10 (36 Fed. Reg. 13804), relating to notices of 

11 proposed rulemaking and public participation in 

12 rulemaking; and 

13 ‘‘(C) chapter 35 of title 44, United States 

14 Code (commonly known as the ‘Paperwork Re15 duction Act’).’’. 

Æ 


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