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48–111 2009

MEMBER PROPOSALS ON 

ENERGY TAX INCENTIVES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

APRIL 24, 2007 

Serial No. 110–32 

Printed for the use of the Committee on Ways and Means 

( 

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ii 

COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

RICHARD E. NEAL, Massachusetts, Chairman 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

ALLYSON Y. SCHWARTZ, Pennsylvania 

JIM MCDERMOTT, Washington 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

PHIL ENGLISH, Pennsylvania 

THOMAS M. REYNOLDS, New York 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

PAUL RYAN, Wisconsin 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 

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iii 

C O N T E N T S 

Page 

Advisory of April 24, 2007 announcing the hearing ............................................. 2 

WITNESSES 

The Honorable Jim McDermott, a Representative in Congress from the State 

of Washington ....................................................................................................... 4 

The Honorable Dave Weldon, M.D., a Representative in Congress from the 

State of Florida ..................................................................................................... 11 

The Honorable Earl Pomeroy, a Representative in Congress from the State 

of North Dakota ................................................................................................... 11 

The Honorable Earl Blumenauer, a Representative in Congress from the 

State of Oregon ..................................................................................................... 15 

The Honorable Shelley Berkley, a Representative in Congress from the State 

of Nevada .............................................................................................................. 18 

The Honorable Devin Nunes, a Representative in Congress from the State 

of California .......................................................................................................... 21 

The Honorable William J. Jefferson, a Representative in Congress from the 

State of Louisiana ................................................................................................ 24 

The Honorable Mike Doyle, a Representative in Congress from the State 

of Pennsylvania .................................................................................................... 27 

The Honorable Collin C. Peterson, a Representative in Congress from the 

State of Minnesota ............................................................................................... 32 

The Honorable James P. McGovern, a Representative in Congress from the 

State of Massachusetts ........................................................................................ 34 

The Honorable Lee Terry, a Representative in Congress from the State of 

Nebraska ............................................................................................................... 36 

The Honorable Brian Baird, a Representative in Congress from the State 

of Washington ....................................................................................................... 38 

The Honorable Mike Ferguson, a Representative in Congress from the State 

of New Jersey ....................................................................................................... 47 

The Honorable John Shimkus, a Representative in Congress from the State 

of Illinois ............................................................................................................... 49 

The Honorable Rau ́l M. Grijalva, a Representative in Congress from the 

State of Arizona .................................................................................................... 51 

The Honorable Geoff Davis, a Representative in Congress from the State 

of Kentucky ........................................................................................................... 53 

The Honorable Tim Murphy, a Representative in Congress from the State 

of Pennsylvania .................................................................................................... 56 

The Honorable Jay Inslee, a Representative in Congress from the State 

of Washington ....................................................................................................... 61 

SUBMISSIONS FOR THE RECORD 

The Honorable Jerry Weller, a Representative in Congress from the State 

of Illinois ............................................................................................................... 64 

The Honorable Pete Hoekstra, a Representative in Congress from the State 

of Michigan ........................................................................................................... 65 

AARP, statement ..................................................................................................... 65 

David B. Goldstein, statement ................................................................................ 68 

Enterprise Rent-A-Car, statement ......................................................................... 73 

Methanol Institute, statement ................................................................................ 74 

Wayne F. Krouse, statement .................................................................................. 75 

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(1) 

MEMBER PROPOSALS ON 

ENERGY TAX INCENTIVES 

TUESDAY, APRIL 24, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON SELECT REVENUE MEASURES, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 3:14 p.m., in Room 

1100, Longworth House Office Building, Hon. Richard E. Neal 

(Chairman of the Subcommittee), presiding. 

[The advisory announcing the hearing follows:] 

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2 

ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON SELECT REVENUE MEASURES 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–5522 

April 24, 2007 

SRM–4 

Neal Announces Hearing on 

Member Proposals on Energy Tax Incentives 

House Ways and Means Select Revenue Measures Subcommittee Chairman Richard E. Neal (D–MA) announced today that the Subcommittee on Select Revenue 

Measures will hold a hearing on specific Member proposals on tax incentives for alternative energy sources that have been introduced in the 109th and 110th Congress. The hearing will take place on Tuesday, April 24, 2007, in the main 

Committee hearing room, 1100 Longworth House Office Building, beginning at 2:00 p.m. 

Oral testimony at this hearing will be limited to Members of the House of Representatives. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and 

for inclusion in the printed record of the hearing. 

FOCUS OF THE HEARING: 

The hearing provides Members the opportunity to speak on behalf of specific tax 

proposals they have introduced in the 109th or 110th Congress that would encourage the development of alternative energy sources, or that would act to reduce carbon dioxide emissions. 

BACKGROUND: 

This hearing is the third in a series of hearings on energy policy conducted by 

the House Ways and Means Committee, and the second conducted by the Subcommittee on Select Revenue Measures exploring the nexus between energy policies 

and tax incentives. The Committee has heard testimony from scientists and policy 

experts who have urged Congress to develop legislation that would reduce carbon 

dioxide emissions, which are a primary source of global warming. These experts testified that enacting tax incentives to support alternative sources of energy is one 

way that Congress can act to reduce these emissions. Numerous proposals designed 

to utilize tax incentives that would encourage the development of alternative energy 

sources have been referred to the Committee during this Congress and the previous 

Congress. Some of these proposals would use tax incentives to increase efforts to reduce carbon dioxide emissions. This hearing will provide Members the opportunity 

to speak on these issues. 

In announcing the hearing, Chairman Neal stated, ‘‘Members of the House of 

Representatives regularly speak to the Committees of jurisdiction about 

issues of importance to their congressional district and to our nation. The 

need to explore ideas that would update and improve our existing tax incentives for alternative energy ranks high on the list of national priorities.’’ 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

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3 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, 

‘‘Committee Hearings’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). 

Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business Tuesday, May 

8, 2007. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman NEAL. Good afternoon. I want to welcome all of you 

to the second of two hearings to be held by this Subcommittee on 

alternative energy issues. 

The full Committee began this process back in February, hearing 

from scientists and experts on climate change and global warming. 

They urged Congress to act to reduce carbon dioxide emissions, 

which are a primary cause of global warming. 

Last week we heard from industry experts, who advocated for 

certain tax incentives to support or enhance alternative energy 

sources and carbon reduction. And today we will hear from Members of Congress, who will share with us their proposals for tax incentives for America and to make sure we go green. Soon after 

these hearings conclude, I expect the full Committee will mark up 

tax legislation on these very issues. 

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4 

I want to welcome each of you who will be sharing with us today 

your ideas on alternative energy and carbon reduction. I believe we 

have several bipartisan panels representing a broad range of ideas 

and geography. 

This hearing provides us the opportunity to hear from our colleagues regarding tax proposals that are important to them and 

their constituents, and I look forward to all of the testimony we are 

about to hear today. 

And I would now like to recognize my friend, Mr. English, for his 

opening statement. 

Mr. ENGLISH. Thank you, Mr. Chairman. Thank you for bringing together this array of Member expertise to testify to us. I have 

a written statement that I would like to submit for the record. But 

in the interest of moving this process forward, I would simply like 

to do that and yield back the balance of my time. 

[The prepared statement of Mr. English follows:] 

[Not available at the time of printing.] 

Chairman NEAL. Thank you. 

I don’t believe that there are any other Members of the Subcommittee who are seeking recognition for an opening statement. 

But without objection, any other Members wishing to insert statements as a part of the record may do so. And all written statements by the witnesses will be inserted in the record as well. 

Mr. McDermott, thank you for being here. 

STATEMENT OF THE HONORABLE JIM MCDERMOTT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. MCDERMOTT. Mr. Chairman, thank you for holding this 

hearing. 

We all know that reversing global warming poses one of the most 

significant challenges of the 21st century. Responding inadequately 

to this challenge is not a legacy I want to leave to my grandchildren or any others. And we also know that there is no magic 

bullet. 

The task before us really is not easy, but it can be done. But we 

have got to be honest and pragmatic and realistic. We are the number one emitter of carbon into the atmosphere, and so we should 

be the acknowledged leader in reversing global warming. We can 

make this effort one of the defining moments in the history of our 

nation. 

It is going to take a combination of innovation, Federal support, 

lifestyle adjustment, and multilateral diplomacy to make a real difference. And we have to start now in order to stave off the potentially disastrous repercussions that global warming will mean for 

America and the world. In the U.S., the single largest source of the 

carbon we emit into the atmosphere—about 40 percent—comes 

from power plants fired by coal, oil, and gas. 

In my view, there are two very obvious ways we can be combating this problem, one of which is frequently acknowledged and 

one of which is all too often overlooked. The first thing we must 

do is develop a national policy to generate power from clean and 

renewable sources. Wind, solar, hydro, biomass, and geothermal 

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5 

sources can supply power to the nation’s electrical grid while emitting dramatically less carbon into the atmosphere. 

To that end, I am pleased to hear so much discussion about passing long-term extensions, and I emphasize long-term, of the Production Tax Credit to provide clear market signals for private investors in renewable energy production. And we need to expand 

and improve the current Federal incentives for public power utilities to generate clean energy. We have not paid attention to the 

public sector in the past very much. 

The Clean Renewable Energy Bond program needs to be revamped so that large public power projects can be financed and 

brought online by public power utilities that now serve over 44 million Americans, or about 15 percent of the population. 

Federal incentives for both public and private utilities are crucial 

to making clean energy an affordable and cost-competitive alternative. Providing private and public utilities the tools and mandate 

to develop clean and renewable energy is a major step in the right 

direction. 

But let me advocate on behalf of an effective policy that is overlooked all too often: that is energy efficiency. Every kilowatt we 

save through improvements in energy efficiency is one that doesn’t 

have to be produced. We can reduce carbon emission and save 

money at the same time. It makes perfect sense, but today we are 

inadvertently rewarding the wrong approach. 

Under the current tax code, we allow businesses to deduct their 

energy costs from their taxable income. In other words, when a 

business’s activities are energy inefficient, they receive a larger 

Federal tax subsidy. We need to change that course. 

We can quickly reduce carbon emissions and put downward pressure on electricity and natural gas prices with a Federal policy that 

promotes and rewards energy efficiency. This approach is comparatively inexpensive to implement, and would provide a bigger bang 

for the buck than any other Federal incentive. The Energy Policy 

Act of 2005 included some important, temporary energy efficiency 

provisions, but there is much more that we can do. 

Mr. Weller and I introduced legislation to expand and extend the 

current Federal tax credits and deductions for residential and commercial properties that meet targeted energy savings goals. Importantly, our bill creates a new sliding scale for the credits, basing 

the credit awarded on the level of energy savings. 

This should create additional market incentives for cheaper, 

more efficient technologies for consumers to use. And because these 

technologies are typically developed in America, as the rest of the 

world responds to the global climate change, American technology 

and products will have application and appeal worldwide. 

I believe that our bill, at a relatively minimum cost, can dramatically reduce carbon emissions by comprehensively reducing the demand for power to our Nation’s homes and commercial buildings, 

which account for approximately 70 percent of the electrical load 

produced by power plants in this country. 

In conclusion, the tax code is one of the most effective tools we 

have at our disposal in this effort. With it, this Committee can 

send a clear signal to the marketplace to promote renewable energy 

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6 

generation. At the same time, the Committee should promote energy efficiency. 

The last time we had these green amendments before us, we put 

them on for a couple of years, like wind and solar and so forth, and 

then they went away. We were leading the world in wind energy 

development. Today, every generator in the world is made in Denmark because we stopped giving that support to this technology. 

So it is within our power to combat global warming. The question 

is, will we have the political will to use it and the courage to stick 

with it? For the sake of all of us, including our grandchildren, I 

hope the answer is yes. 

Thank you. 

[The prepared statement of Mr. McDermott follows:] 

Prepared Statement of The Honorable Jim McDermott, a Representative in 

Congress from the State of Washington 

Mr. Chairman, thank you. 

We know that reversing global warming poses one of the most significant challenges of the 21st century. Responding inadequately to this challenge is not a legacy 

I want to leave to my grandchildren. And we also know there is no magic bullet. 

The task before us is not easy, but it can be done. We’ve got to be honest, pragmatic 

and realistic. We’re the number one emitter of carbon into the atmosphere and so 

we should be the acknowledged leader in reversing global warming. We can make 

this effort one of the defining moments in the history of our nation. 

It is going to take a combination of innovation, Federal support, lifestyle adjustment, and multilateral diplomacy to make a real difference. And we have to start 

now in order to stave off the potentially disastrous repercussions that global warming will mean for America and the world. In the U.S. the single largest source of 

the carbon we emit into the atmosphere—about 40 percent—comes from power 

plants—fired by coal, oil and gas. 

In my view, there are two very obvious ways we should be combating this problem—one of which is frequently acknowledged and one of which is all too often overlooked. The first thing we must do is to develop a national policy to generate power 

from clean and renewable sources. Wind, solar, hydro, biomass, and geothermal 

sources can supply power to the nation’s electrical grid while emitting dramatically 

less carbon into the atmosphere. To this end, I am pleased to hear so much discussion around passing a long-term extension of the Production Tax Credit to provide 

clear market signals for private investors in renewable energy production. And we 

need to expand and improve the current Federal incentives for public power utilities 

to generate clean energy. 

The Clean Renewable Energy Bond program needs to be revamped so that large 

public power projects can be financed and brought online by the public power utilities that now serve over 44 million Americans, or about 15 percent of the population. Federal incentives for both public and private utilities are crucial to making 

clean energy an affordable and cost-competitive alternative. Providing private and 

public utilities the tools and mandate to develop clean and renewable energy is a 

major step in the right direction. 

But let me advocate on behalf of an effective policy that is overlooked all too often: 

energy efficiency. Every kilowatt we save through improvements in energy efficiency 

is one that doesn’t have to be produced; we can reduce carbon emission and save 

money at the same time. It makes perfect sense, but today we are inadvertently rewarding the wrong approach. 

Under the current tax code, we allow businesses to deduct their energy costs from 

their taxable income. In other words, when a business’s activities are energy inefficient they receive a larger Federal tax subsidy. We need to change course. 

We can quickly reduce carbon emissions and put downward pressure on electricity 

and natural gas prices with a Federal policy that promotes and rewards energy efficiency. This approach is comparatively inexpensive to implement, and would provide 

a bigger ‘‘bang for the buck’’ than other Federal incentives. The Energy Policy Act 

of 2005 included some important, temporary energy efficiency provisions, but there 

is much more we can do. 

Rep. Weller and I introduced legislation to expand and extend the current Federal 

tax credits and deductions for residential and commercial properties that meet targeted energy savings goals. Importantly, our bill creates a new sliding scale for the 

smartinez on PROD1PC64 with HEARING

7 

credits, basing the credit awarded on the level of energy savings. This should create 

additional market incentives for cheaper, more efficient technologies for consumers 

to utilize. And because these technologies are typically developed in America, as the 

rest of the world responds to global climate change, American technology and products will have application and appeal worldwide. 

I believe that our bill, at a relatively minimal cost, can dramatically reduce carbon 

emissions by comprehensively reducing the demand for power to our nation’s homes 

and commercial buildings, which account for approximately 70 percent of the electric load produced by power plants in this country. 

In conclusion, the tax code is one of the most effective tools we have at our disposal in this effort. With it, this committee can send a clear signal to the marketplace to promote renewable energy generation. At the same time, this committee 

should promote energy efficiency. 

Mr. Chairman, it is within our power to effectively combat global warming; the 

question is: Will we have the political will to use it. For the sake of my grandchildren, I hope so. 

Thank you. 

f 

Chairman NEAL. We thank the gentleman for his very instructive testimony. 

And the chair will now recognize a Member of the Subcommittee, 

Mr. Doggett. 

Mr. DOGGETT. Thank you, Mr. Chairman and Members. 

I would formally bring to the Subcommittee’s attention H.R. 

1331, the Plug-in Hybrid Electric Vehicles Tax Credit Act, which 

is cosponsored by almost a hundred of our colleagues, Democrats 

and Republicans, including a number of Members of this Subcommittee. 

This bipartisan bill that I have authored will help build a market 

for an important new emerging technology, plug-in hybrid electric 

vehicles. All of you are familiar with hybrids, but today the only 

plug-in hybrids exist as prototypes. 

Some of you may have had an opportunity to take a ride in one 

of the plug-in prototypes that were here on Capitol Hill recently. 

It is the battery and the convenient method of recharging it that 

distinguishes plug-in hybrids from the more traditional variety. 

This battery offers enough energy on board to power the vehicle 

for at least 40 miles solely on stored power. Considering that half 

the cars in America each day travel 25 miles a day or less, a plugin with this range could eliminate gasoline use in the daily commute of millions of our neighbors. 

The cost of an electric gallon of gas is estimated to be less than 

a dollar a gallon. By implementing this consumer tax credit, we 

will support plug-in vehicle technology that can achieve the equivalent of 150 miles per gallon of gasoline. These normally emissionfree vehicles also contain a small combustion engine for longer 

trips. H.R. 1331 also includes an incentive for combining this battery power with existing flex fuel technology. 

Plug-in hybrids are an important part of our National effort to 

combat global warming. The Environmental Protection Agency just 

within the past month estimated that a nationwide switch to electric-based fuel would decrease greenhouse gas emissions by 47 percent. 

This confirms the position taken by the American Public Power 

Association, the Electric Power Research Institute, the Energy and 

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Environment Study Institute, and the Alliance to Save Energy, 

along with many others. 

The Wall Street Journal recently did a front-page article that I 

would ask unanimous consent to make a part of our record. 

Chairman NEAL. Without objection. 

Mr. DOGGETT. And it directs or focuses its attention on the role 

that Austin Energy and the National Plug-in Partners Campaign 

have spirited on this issue. Plug-in Partners represent a network 

of many cities, states, public power utilities, investor-owned utilities, individual businesses, and environmental groups across America that are promoting plug-in electric vehicles. 

I have worked with them since their inception, and this bill is 

the only one of several plug-in alternatives that Plug-in Partners 

has endorsed. It is a targeted consumer tax credit linked directly 

to the purchased vehicle’s most important cost element, the battery, and its capacity to perform independent of foreign oil. 

While the short-term cost of this credit over the next few years 

is zero since these are not in production, and joint tax has scored 

the bill already at a 5-year cost of only $155 million, there is no 

doubt that it will cost more than that as these come on line. 

To ensure that the long-term cost is manageable, the bill establishes a per-manufacturer limitation on the number of vehicles covered similar to that that we did for hybrid, but separate from the 

hybrid tax cap. The per-manufacturer limitation used for hybrids 

has already proven to be effective as an affordable incentive. 

This is a next generation of hybrids, and I believe that decisive 

action on this technology in making it widely accessible to consumers will help us move from the fossilized ideas of our energy 

past to the renewable promise of our energy future. 

Thank you. 

[The Wall Street Journal article follows:] 

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10 

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11 

Chairman NEAL. I thank the gentleman for his testimony. 

Dr. Weldon. 

STATEMENT OF THE HONORABLE DAVE WELDON, M.D., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA 

Dr. WELDON. Thank you, Mr. Chairman, and I have submitted 

my testimony in writing. So I will very briefly summarize. 

I have introduced legislation, H.R. 3319, the Short Sea Shipping 

Act, again in this Congress, which would modify the tonnage fee 

that is applied to the harbor maintenance tax. What this bill does 

in essence is to try to promote moving goods by barge or ship along 

our coasts and our rivers rather than the current paradigm, which 

is big freighters come in and everything goes off in trucks. 

The goal here is to get more of our freight moving by our waterways as opposed to by trucks. Our highways are overloaded. It is 

very costly to expand our highways. And the important thing, and 

the relevance to your Committee and this hearing, and I commend 

you for conducting this hearing, is it is green. 

The Europeans are ahead of us on this issue. They are moving 

toward a blue water highway kind of system in Europe, moving 

goods more around by canal and rivers. And of course, we have our 

oceans that we can use. They studied this issue, and they said you 

save a third in their research on the fuel consumption per ton moving freight from point A to point B. 

I will point out that your Ranking Member was on this bill last 

year, along with some of the people sitting here with me. And additionally, I will point out to you this is a bipartisan issue. Representative Tubbs-Jones and Representative Cummings have introduced very similar pieces of legislation that deal with the Great 

Lakes. 

This is a win/win all around, Mr. Chairman, and I would highly 

encourage you to seriously take a look at it. I know your Ranking 

Member is on this issue. It is something I think Republicans and 

Democrats can both embrace, good for the environment, good for 

our roads and highways, and it allows our economy to keep churning. 

And I yield back. Thank you very much. 

[The prepared statement of Dr. Weldon follows:] 

[Not available at the time of printing.] 

Chairman NEAL. Thank you. I believe Mr. Abercrombie has spoken to me as well about this issue, Doctor. 

The chair would recognize the gentleman from North Dakota, 

Mr. Pomeroy. 

STATEMENT OF THE HONORABLE EARL POMEROY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH 

DAKOTA 

Mr. POMEROY. I thank the chair. And I also have written testimony submitted. I will try and abridge as quickly as I can, recognizing the disruption to this Committee caused by the earlier evacuation of the building. 

I want to talk about the wind production tax credit, clean renewable energy bonds, and the tax support for ethanol and biodiesel. 

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12 

All of these are important components of expanding our renewable 

energy usage in this country. 

First, production tax credit for wind: Congressman McDermott is 

exactly correct when he talks about the disruption caused by this 

production tax credit expiring, as it has on three occasions since 

1999. I will tell you, those Congresses were absolutely guilty of 

malfeasance when it comes to this one because it had no serious 

detractors as a component of energy policy. It just got put in the 

extenders and allowed to expire. 

In 2005 and 2006, more than 2400 megawatts of wind were being 

installed each year, yet in 2004, when the tax had expired for 10 

months, 389 megawatts were developed. A facility in North Dakota 

that now has 800 employees producing blades for these turbines 

was down to fewer than 25 employees at the end of 2003. That is 

just a very real indication of the utter disruption to this industry 

of having that credit lapse. 

Congressman Ramstad and I have introduced a bill that would 

extend that production tax credit for 5 years. I believe that is precisely what is needed to maximize the potential of wind. 

I was fascinated, Mr. Chairman, at the excellent hearing you had 

last week to have the proponent of the wind energy indicate that 

potentially 20 percent of the nation’s energy needs could be ultimately met if we really get at it in a serious way. It is going to 

take an extended production tax credit to do it. 

Clean renewable energy bonds: Again, Congressman McDermott 

is precisely correct when he talks about how we need to get municipal power systems and rural electric coops fully engaged in the 

business of moving toward renewable energy sources. The way we 

try and incentavize activity is through the tax code, but each of 

these entities, public power and coops, are not taxed. 

We have in the past floated, although it was not met with the 

approval of the prior chair, a notion of tradable tax credits so that 

a nontaxed entity could get the value of a tax credit and trade it 

to somebody who could then pay them for it. 

That didn’t go. So we developed this Clean Renewable Energy 

Bond mechanism whereby the ultimate bondholder—the bonds are 

sold. The ultimate bondholder, who is a taxed entity, gets the value 

of the tax incentive and the coop or public power system gets essentially the value of interest-free money. 

The benefit of this is very real, and the first year’s results surprised everyone. Eight hundred million dollars of Clean Renewable 

Energy Bonds were made available. It was estimated that that 

amount wouldn’t go for 2 years, take care of 2 years’ worth of need. 

It was over-subscribed the first year, and in fact, the waiting list 

was 176 projects that didn’t get any funding at all. Projects were 

allocated on a small to large basis, which meant some of the largest, most significant projects didn’t get a dime on this one. 

So we are seeking a billion dollars in each of the next 2 years 

in Clean Renewable Energy Bonds to provide meaningful incentives to the 25 percent of our nation’s power system that comes 

from nontaxed entities, public power and rural electric coops. 

Finally, Mr. Chairman, the biodiesel tax credit expires in 2008. 

Ethanol expires in 2010. We believe each of these should be made 

permanent. The biodiesel tax credit, for an example, has generated 

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13 

very substantial production enhancement. In 2000, about 25 million gallons produced; in 2004, when the tax credit came online, 

250 million gallons. 

The ethanol story is unfolding even as we speak. We are going 

to blow past the goals of the Energy Policy Act of 2005. That is a 

good thing. But undergirding it all is this tax credit that needs to 

continue, and those contemplating massive investments in new renewable energy plants, ethanol and biodiesel, need to know that 

that credit is going to be there to support them. 

Thank you, Mr. Chairman, for your consideration. 

[The prepared statement of Mr. Pomeroy follows:] 

Prepared Statement of The Honorable Earl Pomeroy, a Representative in 

Congress from the State of North Dakota 

Chairman Neal and Ranking Member English, I would like to thank you for the 

opportunity to testify before the subcommittee today regarding three pieces of legislation that I have introduced in the 110th Congress to incentivize the development 

of renewable energy. These bills would extend the current tax credits for ethanol 

and biodiesel, the renewable energy production tax credit and would allocate more 

money for the Clean Renewable Energy Bonds program. 

I would first like to discuss my bill H.R. 197, which will extend for 5 years the 

production tax credit (PTC) for electricity produced from wind and other renewable 

energy sources such as closed and open-loop biomass and geothermal power. The 

PTC provides a 1.5 cent per kilowatt hour tax credit for electricity that is produced 

from these qualified renewable sources. The credit is adjusted for inflation and is 

currently 2 cents per kilowatt hour. It is currently scheduled to expire at the end 

of 2008. Rep. Jim Ramstad (R–MN) and I introduced H.R. 197 on the first day of 

the 110th Congress and there are currently 87 bipartisan cosponsors. 

The PTC has a history of short term extensions and expirations that have hampered industry’s ability to effectively develop generation capacity. Since 1999 the 

PTC has expired three times. With each of these expirations came dramatic slow 

down in wind power investment and the loss of thousands of jobs across the industry. LM Glasfiber, a blade manufacturer in my district that is currently approaching 

800 employees, was forced to furlough 60–70 of what was then approximately 100 

employees when the credit had expired 2004. A 5-year extension will prevent this 

from happening and provide a level of stability for the industry that it has not had 

for many years. 

We have seen over the past 2 years how effective the PTC has been when there 

is some level of certainty that the credit will not expire. Over 2,400 megawatts 

(MW) of wind power were installed in each 2005 and 2006 when industry was assured that the credit was not going to expire at the end of that year, versus only 

389 MW in 2004 when the credit was expired for the first 10 months of the year. 

In my state of North Dakota we can see an example of a project that would not 

be going forward if the most recent extension had not been enacted. The 179 MW 

Langdon Wind Farm is scheduled to begin construction this year. Had the most recent one year extension not been enacted, this project would not be proceeding due 

to the risk that the facility would not be placed in service by the previous December 

31, 2007, expiration date. A 5-year extension will help utilities in their efforts to 

plan and construct renewable energy projects by providing the certainty that is necessary for large scale development. 

While investor-owned utilities and private developers are eligible for the PTC to 

incentivize renewable electricity development, rural electric cooperatives and public 

power utilities are ineligible for the PTC as they are not-for-profit utilities and 

therefore do not pay income tax. Rural electric co-ops and public power utilities, who 

serve 25% of the nation’s power needs, should be provided an incentive similar to 

the PTC to encourage them to develop renewable energy in a cost effective manner. 

To address this issue, Rep. Ron Lewis (R–KY) and I introduced the Clean Energy 

Bonds Act of 2005 (H.R. 2794) in the 109th Congress to create a new type of bond 

to help fund renewable energy projects by not-for-profit utilities. When a person 

purchases a regular bond, the issuer gives the bondholder interest payments on 

their investment. With clean energy bonds, instead of the issuer (the cooperative or 

public utility) paying out interest to bondholders, the bondholders receive a Federal 

income tax credit in recognition of their investment. The issuer can then utilize all 

bond proceeds to finance clean energy projects. 

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14 

The Energy Policy Act of 2005 authorized the creation of the Clean Renewable Energy Bonds (CREBs) program and allocated $800 million for the bonds. The first 

round of allocations was announced by the IRS at the end of 2006 with 610 projects 

awarded allocations. The IRS is currently in the process of accepting applications 

for an additional $400 million in allocations that were approved in the Tax Relief 

and Health Care Act of 2006. 

While the program has been a success to date, there has been one major flaw— an insufficient availability of the bonds to meet demand. The IRS received over $2.5 

billion in requests for the initial allocation of $800 million. To address the need for 

greater allocations of these bonds, Rep. Lewis and I have introduced H.R. 1965, 

which would provide a $1 billion allocation of CREBs in each 2008 and 2009. This 

additional allocation will provide not-for-profit utilities, who are often better situated to harness renewable energy sources like wind and biomass, further resources 

to finance renewable energy projects. I strongly urge the Committee’s support for 

increased allocations of Clean Renewable Energy Bonds. 

Finally, I would like to discuss H.R. 196, which Rep. Kenny Hulshof (R–MO) and 

I have introduced to permanently extend the current tax credits for biodiesel and 

ethanol as well as the current tariff on imported ethanol. As Congress debates energy policy that will reduce America’s dependence on foreign oil, many different 

technologies will need to be developed. Increased renewable electricity generation 

and energy efficiency will be vital, as will the increased use of alternative fuels in 

the transportation industry. 

Long term extensions of the current ethanol and biodiesel credits are necessary 

to ensure that these industries are able to gain a significant foothold in the market 

so that traditional petroleum based fuels are not able to force alternative fuels out 

of the market. 

The Energy Policy Act of 2005 mandated that 7.5 billion gallons per year of 

biofuels be used by 2012. Just 2 years ago that level seemed unreachable to some. 

Now a mere 20 months after the passage of the Energy Policy Act, over 5 billion 

gallons of biofuels will be produced this year and the 7.5 billion mark will be passed 

long before the 2012 deadline. This has largely been achieved because of the current 

tax credits for ethanol and biodiesel. These developing industries do not have the 

developed infrastructure that the oil and gas industry possess and there for need 

an incentive to compete. 

The statistics show that these credits have had their intended effect. The ethanol 

industry has more than tripled production capacity since 2000 and the biodiesel industry has increased its sales from 25 million gallons in 2004 when the biodiesel 

credit was first enacted to 250 million gallons in 2006. The increase in biofuels development in North Dakota alone has been astounding. Two years ago North Dakota 

produced just 35 million gallons of ethanol. Now, an additional 100 million gallons 

have come online with more than 250 million gallons of production capacity in various stages of development, as are over 100 million gallons of biodiesel production. 

The current ethanol credits include 51 cents per gallon available at the blender 

lever and 10 cents per gallon for small producers (those producers with less than 

60 million gallons per year of capacity). The biodiesel credits include the same 10 

cent per gallon credit for small agri-biodiesel producers and a $1 per gallon credit 

at the blender level for agri-biodiesel (50 cents per gallon of non agri-biodiesel). As 

the 51 cent per gallon credit for ethanol is also available for imported ethanol, a 

54 cent per gallon tariff on imported ethanol is imposed to prevent foreign ethanol 

that already receives subsidies in many countries around the word, from flooding 

the U.S. market and putting domestic producers out of business. 

As the Committee knows, currently, most of the ethanol produced in America is 

produced using corn as the primary feedstock. Though this has the potential to 

change, technology continues to develop that will allow the utilization of cellulosic 

ethanol. A long term extension of ethanol and biodiesel credits will provide an incentive to ensure that research into cellulosic ethanol technologies continues. This research has the potential to lead to commercial scale cellulosic ethanol plants that 

will be more energy efficient and dramatically increase the volume of biofuels that 

can be domestically produced. 

In addition to reducing America’s dependence on foreign oil, the biofuels industry 

represents a tremendous opportunity to revitalize America’s rural economies. The 

construction and operation of biofuels plants has led to the creation of thousands 

of jobs and billions of dollars in economic activity, much of it in rural states like 

North Dakota. A vibrant biofuels industry will ensure that money that would have 

otherwise flown outside of the country to pay for oil imports will flow into America’s 

heartland. 

Mr. Chairman, no single technology is going to cure America of its dependence 

on foreign oil or significantly reduce carbon emissions to address global warming. 

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15 

Instead multiple technologies and approaches must be implemented. The incentives 

that I have discussed will go a long way towards developing America’s renewable 

energy industries and aid in meeting those goals. I look forward to working with 

the Committee on these proposals. In addition to the industries I have discussed 

today, I believe that we must make significant investments in clean coal technology, 

energy efficiency and in the nations electric transmission grid which is currently inadequate to meet the growing demands of renewable energy and the American people. Thank you. 

f 

Chairman NEAL. Thank you, Mr. Pomeroy. 

The gentleman from Oregon, Mr. Blumenauer, is recognized. 

STATEMENT OF THE HONORABLE EARL BLUMENAUER, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the 

work that you have done focusing on areas of climate change and 

energy independence, issues that must be very closely linked. 

The importance of addressing the two issues simultaneously cannot be overestimated. Energy independence alone could drive us 

into a polluted, coal-dependent future. Tackling climate change 

without looking at how we produce and use energy is pointless. 

Fortunately, progress on these two challenges presents an opportunity to revitalize economies based on a clean, renewable energy 

and improve the quality of life. 

Unfortunately, the current tax policy takes us in precisely the 

wrong direction. The current tax code values wasteful and dirty energy generation by five to one, perhaps more, over clean, renewable 

technology. Under the current tax code, the oil industry receives 

over $5 billion each year to engage in policies that lead us further 

away from a sustainable future. 

Before I get to some specific ideas, I would like to lay out a series 

of principles that I hope we can work on with this Subcommittee 

to guide actions in the future, to serve as a screen to make sure 

that all our work takes us in the right direction on carbon. 

First, I hope that we make a commitment to reducing greenhouse 

gas emissions to make the tax code carbon neutral at the least, and 

make sure any changes result in reducing carbon emissions. 

Second, I think we ought to level the playingfield for energy 

sources as much as possible. Where there is favoritism in terms of 

the tax code or other incentives, it ought to be directed toward 

emerging sustainable technologies. 

We must make sure that all subsidies are cost-effective, sustainable, and consider the net environmental impacts of each. 

I join with my colleagues in urging that adequate time and certainty be provided for tax benefits under the code. We ought to promote cost-effective conservation and efficiency first. I couldn’t agree 

more with my colleague from the Northwest, Mr. McDermott. Since 

1980, our region has saved the equivalent of eight large coal plants 

directly through a regional strategy of conservation. 

We want to promote the most appropriate and efficient use of energy sources such as the direct use of natural gas instead of using 

it to produce electricity. It has been likened by a friend of mine 

that using natural gas to produce electricity is like using fine 

Scotch to wash your dishes. We have homes all across America 

smartinez on PROD1PC64 with HEARING

16 

with both gas and electric service that have electric hot water heaters. We ought to be thinking about ways to fix that. 

We ought to ensure that the Federal Government leads by example, that as the largest landlord, landowner, and employer, we set 

the standard; and finally, working on this Committee to make sure 

that United States trade policy promotes carbon reduction and energy efficiency. 

I would hope that we start with your work by commissioning a 

carbon audit of the tax code. I am currently drafting legislation to 

have the National Academy of Sciences convene a panel of experts 

to look at the code and identify activities that impact our carbon 

emission. I strongly support the references that have been made 

here to the production tax credit. I am pleased to cosponsor that 

legislation, and certainly would support a longer-term extension. 

Two ideas that I hope the Subcommittee will consider, either 

independently as legislation that has been introduced or that could 

be wrapped into larger legislation: One is House Resolution 1772, 

with Representative Cole and I, the Rural Wind Energy Act to 

produce an investment tax credit of $1500 per half kilowatt of capacity for small wind systems. 

I also have another piece of legislation that I hope you will look 

favorably upon to reward people who burn calories instead of gasoline. It is the Bike Commuter Act. Right now we provide substantial free parking to commuters, tax-free. We provide less support 

for commuters who use transit systems. We use zero support for 

people who don’t commit an assault on the environment in terms 

of emission, congestion. 

It is a relatively minor bill, but it would have a profound effect 

for millions of potential bike commuters. The typical commuter 

averages five miles, half of them five miles or less. A bike could 

make a difference. I wanted to put that on the table before I concluded my testimony. 

Thank you very much. 

[The prepared statement of Mr. Blumenauer follows:] 

Prepared Statement of The Honorable Earl Blumenauer, a Representative 

in Congress from the State of Oregon 

Thank you for the opportunity to testify today on changes to the tax code that 

will help us address two closely linked issues: climate change and energy independence. 

The importance of addressing these two issues simultaneously cannot be overstated. Energy independence alone could drive us to a polluted, coal dependent future. Tackling climate change without looking at how we produce and use energy 

is pointless. Fortunately, progress on these two challenges presents an opportunity 

to revitalize economies based on clean, renewable energy and improve quality of life. 

Addressing these issues through the tax system is logical. Unfortunately, current 

tax policy takes us in the wrong direction. The tax code values wasteful and dirty 

energy generation by 5 to 1—if not more—over clean, renewable technology. Under 

the current tax code, the oil industry receives over $5 billion each year to engage 

in policies that lead us further away from a sustainable future. This includes money 

to mine shale and tar sands, to expense various attributes of mining, drilling and 

refining, and to subsidize the extraction of oil from marginal sources. 

In my testimony I will discuss a few ideas that I have been working on to use 

the tax code to produce and use energy in a less carbon-intensive manner. But before I get to that, I’d like to lay out a series of principles that I hope can guide this 

Committee’s action on the issue in the future and serve as a screen to make sure 

all of our work takes us in the right direction on carbon. 

smartinez on PROD1PC64 with HEARING

17 

• A commitment to reducing greenhouse gas emissions: make the tax code carbon 

neutral at least, and make sure any changes result in reducing carbon emissions; 

• Level the playing field for energy sources as much as possible; 

• Where there is favoritism in terms of the tax code or other incentives, direct 

it towards emerging technologies; 

• Make sure all subsidies are cost-effective, sustainable, and consider the net environmental impacts of each; 

• Give adequate time and certainty for tax benefits; 

• Promote cost-effective conservation and efficiency first; 

• Promote the most appropriate and efficient use of energy sources, such as the 

direct use of natural gas instead of using it to produce electricity; 

• Ensure that the Federal Government leads by example; 

• U.S. trade policy should promote carbon reduction and energy efficiency. 

An action that could help direct our efforts to make the tax code as carbon friendly as possible would be to commission a carbon audit of the tax code. I am currently 

drafting legislation which would have the National Academy of Sciences convene a 

panel of experts to look at the tax code and identify activities that impact our carbon emissions. In addition to providing us with important information on how to 

‘‘green the tax code,’’ this exercise could also supply us with ideas on how to raise 

revenue. This audit could take some time, and there may be some obvious changes 

to the tax code we need to make immediately for the sake of carbon reduction. I 

would not want to hold those up with this audit. But to truly address global warming we need to go beyond the obvious. 

It is vital that any changes to the tax code increase incentives for producing energy in a clean, renewable manner. I strongly support the renewable production tax 

credit (PTC), which has made a huge difference to the development of renewable energy, especially wind, in my state and around the country. 

I am pleased to be a co-sponsor of Rep. Earl Pomeroy’s legislation to extend the 

production tax credit for five years. In fact, I would support a longer-term extension 

to give even more certainty to the industry. As has been discussed in this Committee, the short-term extensions of the credit in the past have created a boom-andbust cycle that is not conducive to the development of capital intensive projects like 

wind farms and geothermal plants. I understand this is an expensive endeavor, and 

pledge to help the Committee to look for additional revenue raisers in the energy 

realm that could offset the additional cost. 

There are a number of improvements we could make to the tax code to help meet 

our goals of reducing greenhouse gases and addressing energy independence. But I 

would like to focus on two ideas that I have put forward in legislation. 

Last month, Rep. Tom Cole and I introduced H.R. 1772, the Rural Wind Energy 

Development Act. This legislation would provide an investment tax credit of $1500 

per 1⁄2 kilowatt of capacity for small wind systems, which could be carried over for 

a customer unable to take advantage of the entire credit within a 1-year period. The 

bill also calls for a 3-year accelerated depreciation for small wind systems. 

Small wind systems are electric generators that produce 100 kilowatts or less of 

energy—but the wind energy industry estimates that this credit will be mostly used 

for turbines between 2 and 10 kW in size. The tax credit would be available to offset 

the high up-front costs of owning a small wind turbine for homeowners, farmers, 

and small businesses. It would allow these individuals to generate their own power, 

independent from the electric grid. They would be able to cut their energy bills and, 

at times, put power back into the grid. 

There is an existing investment tax credit available to homeowners who install 

small solar systems, which has been very successful in increasing the number of 

solar panels installed. This bill would simply expand that to include wind. 

I am pleased to tell you that H.R. 1772 currently has 17 bi-partisan co-sponsors, 

including the Chairman of the Ways and Means Committee, Charlie Rangel. 

Another piece of legislation I would like to highlight is H.R. 1498, which would 

address not the production of energy but the use of oil. The ‘‘Bike Commuter Act’’ 

would extend the transportation fringe benefit to bike commuters. It would reward 

commuters who burn calories instead of gas. 

Currently, employers may offer a transportation fringe benefit to their employees 

for certain costs incurred while commuting to work. Employees who take advantage 

of this benefit may receive a tax-exempt benefit of up to $215/month for drivers participating in qualified parking plans or $110/month for those who use transit or vanpooling. Current law also allows the option of taking cash compensation. My legislation aims to balance the incentive structure by extending the transportation fringe 

benefit to include bicycling. 

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With over 50 percent of the population commuting 5 miles or less to work, incentives for bicycle commuting have great potential to reduce single occupancy vehicle 

trips. A Rodale Press survey recently found that Americans want to have the opportunity to bike to work instead of drive, with 40% of those surveyed indicating they 

would commute by bike if safe facilities were available. I believe this is the type 

of message that Congress should be sending to our communities through the tax 

code: that we support efforts to reduce energy consumption, ease traffic congestion, 

and encourage healthy activities as part of our daily routines. 

I appreciate the opportunity to discuss the ways that we can reform the tax system to spur innovation, save energy, and make our communities more livable. I look 

forward to working with this Committee to craft legislation that will take us a big 

step in the right direction. 

f 

Chairman NEAL. We thank the gentleman. We always appreciate your vision on these energy issues. 

The gentlelady from Nevada, Ms. Berkley, is recognized. 

STATEMENT OF THE HONORABLE SHELLEY BERKLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEVADA 

Ms. BERKLEY. Thank you, Mr. Chairman. And I can’t thank 

you enough for holding this hearing. 

I am here today to talk about a bill I have introduced, H.R. 1133, 

the Freedom through Renewable Energy Expansion Act, the FREE 

Act. I first introduced the FREE Act in the 109th Congress because 

it became clear to me that this nation cannot continue to depend 

on foreign countries for our energy needs. It is a matter of national 

security to become energy independent, and we can do this by turning to our own vast resources for alternative energy. 

The nation’s tax policy should be an integral part of the congressional effort to free the nation from polluting sources of energy. 

The FREE Act addresses this issue in two ways. First, it repeals 

tax breaks and other subsidies to oil, gas, and nuclear industries. 

Not only are these industries reaping record profits, but the energy 

they produce and the waste that results from it is harmful to the 

environment and exacerbates the problem of global warming. Repealing giveaways to these industries will free up some of the finances needed to achieve energy independence. 

Earlier this year, the House set aside $14 billion for the promotion of alternative energy when we passed the Clean Energy 

Act. By repealing additional subsidies that are unnecessary and 

wasteful, the FREE Act would cut Federal spending by nearly $13 

billion. Of this total cost savings, over $6 billion would come from 

repealed tax subsidies. 

The FREE Act’s second approach to securing independence is by 

changing the energy we use and how we use it. The FREE Act promotes the production and use of renewable energy, funds renewable energy research, and requires energy efficiency. 

Today I will highlight the use of tax credits to promote the production of renewable energy because it is under the jurisdiction of 

this Subcommittee. 

Various energy tax credits are currently available to the business 

and residential sectors, several of which Congress extended in the 

Energy Policy Act of 2005. However, these are about to expire, and 

without a long-term extension, the renewable energy will not be 

able to deliver the clean energy our nation needs. 

smartinez on PROD1PC64 with HEARING

19 

The production tax credit is currently available to facilities that 

produce alternative forms of power. This credit is set to expire at 

the end of 2008, and the FREE Act would extend it until January 

1, 2016. The commercial investment tax credit is currently available to businesses investing in solar, fuel cell, and geothermal 

properties. The FREE Act would extend this credit until January 

1, 2016, and would modify the geothermal ITC to match the solar 

ITC, which receives a higher credit level. 

We must also provide incentives to homeowners to promote renewable energy consumption to all sectors. The ITC for residential 

energy-efficient properties that use solar and fuel cell equipment 

currently expires on December 31, 2008, but the FREE Act would 

extend it another 7 years until 2015. 

Finally, the FREE Act would create a new small wind ITC that 

covers small wind systems used to power homes, farms, and small 

businesses. 

The FREE Act would provide long-term extension of these tax 

credits because it has become clear that short-term extensions will 

not provide a sufficient incentive. Southern Nevada, the community 

that I represent, has some of the best solar resources in the entire 

world, offering between 7,000 and 7,500 watt hours per square 

meter—but the construction of large-scale solar power plants takes 

5 to 7 years from planning to startup. 

Nevada Solar One, a 450-acre concentrating solar power facility 

just outside Las Vegas, will provide 64 megawatts of solar power 

when it comes online this spring. It took 61⁄2 years to build from 

planning to startup, and it is the only facility of its kind in the 

United States created in the last 15 years. 

If Congress does not pass a long-term extension of this credit, 

projects such as this with long construction periods will never be 

financially viable. A short-term extension of this credit will not 

offer enough incentives. 

The same is true for the effectiveness of the PTC as an incentive 

for geothermal energy production. Geothermal plants have a construction lead time of 3 years or more, which means that some of 

the largest new geothermal facilities may not go forward because 

they will not be able to meet the deadline for the PTC. 

Oftentimes, investors are scared away from a geothermal project 

because they are afraid they will not be able to place the facility 

in service in time to receive the credit. Geothermal is an untapped 

energy resource that is abundant in the state of Nevada and has 

enormous potential for energy production across the Western 

states. It would be inexcusable for Congress to let this clean energy 

resource go unused. 

In conclusion, while this Committee will deal with using tax 

credits to promote renewable energy production, there are other 

ways for the Federal Government to pave the way toward energy 

independence, and the FREE Act would help in those areas. 

I won’t go into them now because I see that my time is up. I will 

submit my entire statement for the record. I am delighted that we 

are doing this, Mr. Chairman. When I was in law school, standing 

in those long lines in the 1970s to gas up on an odd day or an even 

day depending on my license plate, if you would have told me that 

30 years later I would be sitting in Congress and this nation has 

smartinez on PROD1PC64 with HEARING

20 

done little or nothing to make a difference and change the way we 

do business in this country, I would have told you you were out of 

your mind. 

But I am here in Congress now. I think we all understand the 

urgency. And I am looking forward to working with all of you to 

make a difference for future generations of Americans. 

[The prepared statement of Ms. Berkley follows:] 

Prepared Statement of The Honorable Shelley Berkley, a Representative in 

Congress from the State of Nevada 

Mr. Chairman, 

Thank you for holding this hearing. I am here today to talk about a bill I have 

introduced, H.R. 1133, the Freedom through Renewable Energy Expansion Act, or 

FREE Act. 

I first introduced the FREE Act in the 109th Congress because it had become 

clear to me that this country cannot continue to depend on foreign countries for our 

energy needs. We must become energy independent and free from foreign fuels, and 

we can do this by turning to our own vast resources for alternative energy. 

The nation’s tax policy should be an integral part of the congressional effort to 

free the nation from polluting sources of energy. The FREE Act addresses this issue 

in two ways. First, it repeals tax breaks and other subsidies to the oil, gas and nuclear industries. Not only are these industries reaping record profits, but the energy 

they produce and the waste that results from it is harmful to the environment and 

exacerbates the problem of global warming. Repealing giveaways to these industries 

will free up some of the finances needed to achieve energy independence. 

Earlier this year, the House set aside $14 billion for the promotion of alternative 

energy when it passed the CLEAN Energy Act. By repealing additional subsidies 

that are unnecessary and wasteful, the FREE Act would cut Federal spending by 

nearly $13 billion. Of this total cost savings, over $6 billion would come from repealed tax subsidies. 

The FREE Act’s second approach to securing independence is by changing what 

energy we use and how we use it. The FREE Act promotes the production and use 

of renewable energy, funds renewable energy research, and requires energy efficiency. 

Today I will highlight the use of tax credits to promote the production of renewable energy because it is under the jurisdiction of this subcommittee. 

Various energy tax credits are currently available to the business and residential 

sectors, several of which Congress extended in the Energy Policy Act of 2005. However, these are about to expire, and without a long-term extension, the renewable 

industry will not be able to deliver the clean energy our country needs. 

The Production Tax Credit (PTC) is currently available to facilities that produce 

alternative forms of power. The PTC is set to expire at the end of 2008, and the 

FREE Act would extend it until January 1, 2016, another 7 years. 

The commercial Investment Tax Credit (ITC) is currently available to businesses 

investing in solar, fuel cell, and geothermal properties. The FREE Act would extend 

the ITC until January 1, 2016, and would modify the geothermal ITC to match the 

solar ITC, which receives a higher credit level. 

We must also provide incentives to home owners to promote renewable energy 

consumption in all sectors. The ITC for residential energy efficient properties that 

use solar and fuel cell equipment currently expires on December 31, 2008, but the 

FREE Act would extend it another 7 years, until December 31, 2015. 

Finally, the FREE Act would create a new small wind ITC that covers small wind 

systems used to power homes, farms, and small businesses. 

The FREE Act would provide a long-term extension of these tax credits because 

it has become clear that short-term extensions will not provide a sufficient incentive. Southern Nevada has some of the best solar resources in the entire world— 

offering between 7,000 and 7,500 watt-hours per square meter—but the construction 

of large scale solar power plants takes 5–7 years from planning to startup. 

Nevada Solar One, a 450-acre concentrating solar power facility just outside of 

Las Vegas, will provide 64 megawatts of solar power when it comes online this 

spring. It took 61⁄2 years to build, from planning to startup, and it is the only facility 

of its kind built in the U.S. in the last 15 years. If Congress does not pass a longterm extension of this credit, projects such as this with long construction periods 

will not be financially viable. A short-term extension of this credit will not offer 

enough incentive. 

smartinez on PROD1PC64 with HEARING

21 

The same is true for the effectiveness of the PTC as an incentive for geothermal 

energy production. Geothermal plants have a construction lead-time of 3 years or 

more, which means that some of the largest new geothermal facilities may not go 

forward because they will not be able to meet the deadline for the PTC. Often times, 

investors are scared away from a geothermal project because they are afraid they 

won’t be able to place a facility in service in time to receive the credit, and the 

project would not be financially viable without the credit. Geothermal is an untapped energy resource that is abundant in Nevada and has enormous potential for 

energy production across the Western states. It would be inexcusable for Congress 

to let this clean energy resource go unused. 

While this Committee will deal with using tax credits to promote renewable energy production, there are other ways for the Federal Government to pave the way 

toward energy independence, and the FREE Act would help in those areas. The 

FREE Act calls for several non-tax provisions, including a Federal Renewable Portfolio Standard that would require 20 percent of the nation’s energy come from renewable sources by 2016. The FREE Act would also strengthen the Federal energy 

purchase requirement to require that the Federal Government consume at least 20 

percent of its energy from renewable sources by 2015. 

The FREE Act would also create a Federal grant to schools that produce renewable energy, provide research funding for geothermal energy, and would raise the 

nation’s average fuel economy standards to 33 mpg by 2017. 

This government action combined with market incentives will help create a 

healthy renewable energy industry and move us in the direction of energy independence. Funded by repeals in unnecessary tax breaks, these efforts will free the country from foreign oil and unclean energy. Becoming energy independent will take 

time, and that is why we need to begin now. The FREE Act will point us in the 

right direction. 

f 

Chairman NEAL. We thank the gentlelady. 

The gentleman from California, Mr. Nunes, is recognized. 

STATEMENT OF THE HONORABLE DEVIN NUNES, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. NUNES. Thank you, Mr. Chairman and Ranking Member 

English. I appreciate the opportunity to testify today on our nation’s energy future. While gas prices have fallen over the winter, 

they are back on the rise just in time for the summer driving season. All we need is a hiccup in the supply chain of crude oil and 

the prices at the pump can quickly return to the historic levels we 

saw last year, or even higher. 

We have heard over and over again that we import 65 percent 

of our petroleum needs and that number is expected to rise. The 

situation has stifled economic development, put our nation’s security at risk, and placed an unnecessary burden on the family budget. 

We need to come to grips with the onerous policies of the past 

that are strangling us now. What we need is a comprehensive market-based strategy that will reduce our dependence on foreign 

sources of oil while bridging the gap to the next generation of energy. 

For these reasons, I and a number of my colleagues from both 

sides of the aisle introduced the American-Made Energy Freedom 

Act last Congress. This bill would provide short-term relief while 

funding a long-term solution for energy freedom. 

I am certainly flattered that H.R. 6, which was brought to the 

floor under the 100-hour agenda, included my idea of a secure trust 

fund to pay for the next generation of energy. However, I am consmartinez on PROD1PC64 with HEARING

22 

cerned with the approach taken in the bill. Instead of taxing energy companies, which will be inevitably passed on to consumers, 

I believe we should provide incentives for them to pay for the development of renewable and alternative energy. 

This could be accomplished by opening ANWR and investing the 

Federal share of the lease and royalty revenue into a trust fund. 

This fund would be used to pay for numerous renewable, alternative and advanced energy programs. 

Within the first 2 years of enactment, this legislation would provide an infusion of investment into numerous renewable and alternative energy programs, including the next generation of ethanol, 

coal to liquid technology, solar and fuel cell technology, and biofuel 

energy production. 

With that said, I am currently working on a new and improved 

version of my legislation. The general concept in the bill will remain the same, but I am expanding it into other areas of renewable energy production and conservation that have shown promising results. I expect that I will re-introduce some time this coming month. 

Certainly there are no quick fixes to our energy challenges. However, a few things are clear. We must recognize the possibility of 

global shortages and disruptions as demand continues to grow. We 

are in the midst of a Global War on Terror, fighting radicals whose 

stated objective is to destroy Western civilization. 

At the same time, we rely on certified state sponsors of terrorism 

for our petroleum needs. Therefore, we must contemplate the real 

possibility that oil will be used an economic weapon. Consequently, 

in my view, it is irresponsible for the United States to buy oil from 

fanatical regimes that are determined to destroy our way of life. 

It is time for energy freedom. It is time for energy security. And 

it is time for action on an American-made solution. 

Thank you, Mr. Chairman, and I yield back. 

[The prepared statement of Mr. Nunes follows:] 

Prepared Statement of The Honorable Devin Nunes, a Representative in 

Congress from the State of California 

Chairman Neal and Ranking Member English; 

I appreciate the opportunity to testify today on legislation that I and a number 

of my colleagues, including Senator Burr, introduced last Congress to address our 

nation’s energy future. While gas prices fell over the winter, they are back on the 

rise just in time for the summer driving season. All we need is a hiccup in the supply chain of crude oil, and the prices at the pump can quickly return to the historic 

levels we saw last year—or even higher. 

Indeed, in the past, we have attempted to address our nation’s energy security 

by looking at renewables and alternatives—only to see crude oil poured into the 

international market driving down the price per barrel of oil. In this case, basic economics take over and the cheaper energy source prevails. Because of this, crude oil 

has been the fuel of choice for more than a century. This economic addiction to 

cheap energy has led to the crisis we are now experiencing. 

As everyone on this Committee knows, we import 65% of our petroleum 

needs, and the Energy Information Administration (EIA) projects that by 2025 we 

will import 71% of our petroleum. While this is a tenuous situation, it is exacerbated by the fact that two-thirds of the world’s proven oil reserves are located in the volatile Middle East. The nexus of instability with the Middle 

East, as well as the threat of lost production from Nigeria and Venezuela, 

and a virtual halt to new energy exploration in the United States resulted 

in the price of oil reaching all-time highs last year. With this in mind, it 

does not surprise me that year after year we pay higher and higher prices for energy—whether at the pumps or in our home energy bills. This situation has stifled 

smartinez on PROD1PC64 with HEARING

23 

economic development, put our nation’s security at risk, and placed an unnecessary 

burden on the family budget. We need to come to grips with the onerous policies 

of the past that are strangling us now; this is an American-Made problem that requires an American-Made solution. 

Unfortunately, we, as legislators, have tried time and again to enact solutions to 

expand our energy resources only to be thwarted by a vocal minority of interest 

groups. Their only solution is social engineering by mandating that the American 

people change their lifestyle. This has not worked in the past and will not work 

today. What we need is a comprehensive market-based strategy that will reduce our 

dependence on foreign sources of oil while bridging the gap to the next generation 

of energy. Congress has a responsibility to deal with our nation’s energy demands 

in a bi-partisan manner that benefits all Americans. 

My bipartisan, bicameral, bill would provide short-term relief while funding a 

long-term solution for energy freedom. We would accomplish this by opening the 

Arctic National Wildlife Refuge (ANWR) to exploration and investing the Federal 

share of the lease and royalty revenue into an energy trust fund. This trust fund 

would be used to pay for numerous renewable, alternative, and advanced energy 

programs. At an estimated $40 billion over 30 years, this trust fund would be the 

largest investment in renewable, alternative, and advanced energy in our nation’s 

history—all at no cost to the taxpayer. 

Within the first 2 years of enactment of this legislation, numerous renewable and 

alternative energy programs would receive billions of dollars in much needed investment. This would include an infusion of investment into the next generation of ethanol (cellulosic), a deployment of Coal-to-Liquid (CTL) technology, an expansion of 

the use of solar and fuel cell technology, and significant growth in the biofuel energy 

production industry. A number of these investments would come in the form of market-based tax credits. 

Moreover, the bill funds numerous renewable energy provisions that were originally authorized in the Energy Policy Act of 2005 and have yet to receive significant 

funding. These Federal investments are needed to ensure breakthroughs in biotechnology, new feedstocks, harvesting, storage, transportation, and processing to 

produce a sustainable transportation fuel at a price competitive with fuel from the 

mature petroleum industry. Furthermore, enhancing Federal consumer tax credits 

is necessary to ensure that every home owner or small business has the opportunity 

to participate in our energy freedom by installing alternative energy systems that 

are economically viable and environmentally sensitive. 

Indeed, the proposals put forth in this legislation will have numerous benefits. 

First, it will bridge the gap in our efforts to transition to homegrown energy and 

reduce our dependence on foreign oil. Second, it will assist us in meeting Renewable 

Portfolio Standards which have been set by many states. Third, it will significantly 

reduce greenhouse gas emissions. Finally, all of this is accomplished by incubating 

technology rather than subsidize an industry. 

With that said, I am currently working on a new and improved version of my legislation. The general concept in the bill will remain the same, but I am expanding 

it into other areas of renewable energy production and conservation that have 

shown promising results. I expect that I will reintroduce it some time in the coming 

month. 

Certainly, there are no quick fixes to our energy challenges. However, one thing 

is clear. Americans cannot continue to rely on cheap imports for our energy future. 

It is important for us to recognize the possibility of global shortages or disruptions 

as demand for fossil fuel continues to grow. We must also contemplate the real possibility that oil will be used as an economic weapon against us. We are in the midst 

of a Global War on Terrorism, fighting radicals whose stated objective is to destroy 

Western civilization and install religious theocracies. At the same time, we rely on 

certified state-sponsors of terrorism for our petroleum needs. In my view, it is irresponsible for the United States to buy oil from fanatical regimes that are determined to destroy our way of life. It is time for energy freedom, it is time for energy 

security, and it is time for action on an American-Made solution. 

I appreciate the opportunity to testify today and I look forward to working with 

my colleagues on the Committee to address the tax provisions in my proposed legislation. 

f 

Chairman NEAL. We thank the gentleman. 

The gentleman from Louisiana, Mr. Jefferson, is recognized. 

smartinez on PROD1PC64 with HEARING

24 

STATEMENT OF THE HONORABLE WILLIAM J. JEFFERSON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF LOUISIANA 

Mr. JEFFERSON. Thank you, Mr. Chairman. It is a pleasure to 

be here with you and the Subcommittee, and to hear the remarkable expressions I have heard of so many Members today who talk 

about forward-looking proposals for energy independence. 

I have two proposals that would set a good example of collaboration between the oil and gas industries, alternative energy, agricultural industries, and finally, environmental groups. 

The first would be the Biomethane Tax Credit, which would ultimately provide Federal incentives for the production of biomethane 

from landfills, animal waste, sewage, biomass, and other renewable 

resources. 

Due to its environmental advantages, the demand for natural gas 

will continue to grow in the United States. Biomethane is a pipeline-quality natural gas substitute produced by purifying biogas. 

This biogas is a mixture of methane and other gases produced from 

the decomposition of organic materials, produced naturally in landfills, animal waste, sewage, and crop waste. It would definitely be 

a wise alternative to capture the biogas from these renewable 

waste sources, convert them, and use the biomethane for transportation or other energy applications. 

In 1998, the U.S. Department of Energy completed a study that 

estimated that worldwide, between 25 and 37 quadrillion BTUs of 

methane are released each year into the atmosphere due to natural 

decomposition of organic material. This would be the equivalent of 

up to 38 percent of all energy used in the country annually. According to this study, the amount of biomethane that can be captured 

domestically, for example, would be enough to replace 10 billion 

gallons of gasoline each year. 

There are several opportunities and benefits that can be realized 

from this. The sources of this biomethane would come from landfills, animal waste, and sewage, as I have said, which are largely 

untapped sources. Landfills generate a substantial amount of 

biogas through anaerobic degradation of waste. 

According to the EPA, there were 380 landfill gas electrification 

projects in place at the end of 2006. The EPA estimates that there 

are 600 to 700 additional landfill gas-to-energy projects that could 

be constructed nationwide. Farmers and other animal facility operators can install systems to convert their waste into usable biomethane, with a valuable sanitary fertilizer as a by-product. 

The environmental benefits are immeasurable. This natural gas 

is one of the cleanest fuels on the market today. Methane leaking 

from landfills, animal lagoons, and other waste sites pose significant greenhouse gas problems. Just by processing animal waste in 

lieu of streaming it into animal lagoons significantly reduces 

groundwater contamination. 

Finally, increasing the production of biogas and biomethane 

would do these things: one, substantially increase the supply of domestically produced, renewable non-fossil fuel energy; second, create jobs at home; third, convert a waste problem for farmers as 

well as provide them a valuable supplemental revenue source; and 

fourth, provide a valuable supplemental revenue source to municismartinez on PROD1PC64 with HEARING

25 

palities while reducing the amount of sewage solids that need to be 

processed. 

A tax credit for biomethane fuel produced from waste biogas for 

a reasonable time would lower the risk often associated with the 

price of natural gas and encourage the creation of more biomethane 

production facilities. 

Currently there are tax credits available for projects that produce 

electricity using biogas produced from waste of renewable sources. 

The Waste to Biomethane Tax Credit of 2007, which I advocate, 

will provide comparable tax credits for waste-to-biomethane production. By doing so, many of these sites could be economic energy 

generators. Since virtually every community faces the problem of 

waste disposal of sewage, solid municipal waste, or animal or crop 

waste, the environmental and economic impacts of this incentive 

would be far-reaching. 

The second proposal I have is the Waste Vegetable Oils Tax 

Credit. Used in its pure form in diesel engine vehicles, or blended 

with petroleum diesel to boost vehicle performance, biodiesel has 

significantly lower emissions than petroleum-based diesel when 

burned. According to a 1998 report by the U.S. National Renewable 

Energy Laboratory, it results in carbon monoxide reductions of approximately 50 percent over regular diesel, and carbon dioxide reductions of 78 percent. 

China actually serves as a good example of this policy’s importance. China’s biodiesel production began in 2001. At that time the 

oil wastes cost $212 per ton, while the price of petroleum-based diesel was $350 per ton. With little research or information available, 

a group began to design rudimentary equipment and experimented 

with fuel production. Since that time, the government there has 

stepped in and helped to expand them and boost their biodiesel industry. 

Market incentives and government support have enabled biodiesel production projects to expand nationwide since 2005. China 

now boasts more than 100 biodiesel production facilities. China 

generates more than 4.5 million tons of used oil and grease each 

year, roughly half of which could be collected through the establishment of an integrated collection and recycling system. 

As of 2000, the United States was producing in excess of 3 billion 

gallons of waste vegetable oil annually, mainly from industrial 

deep fryers in potato processing plants, snack food factories, and 

fast food restaurants. Waste vegetable oil has a stable market 

value of approximately 40 cents per gallon as of 2003, which is 

enough to make collection economically viable. 

The restaurant industry in Louisiana is one of the largest business organizations in the state, representing more than 7,000 establishments and related businesses, and is also one of the state’s 

largest private employers, with more than 132,000 employed directly and another 55,000 indirectly employed. The bill will amend 

the Internal Revenue Code 1986 to allow the small agri-biodiesel 

credit for biodiesel to extend to biodiesel produced from 100 percent 

waste vegetable oil products. The tax credit would give birth to a 

new lucrative industry such as an integrated collection and recycling of used oil to produce biodiesel. 

smartinez on PROD1PC64 with HEARING

26 

I thank the Committee for listening to what I have had to say 

here. I would like to thank you for your attention to this matter 

and urge the Committee to take these under consideration. 

Thank you very much. 

[The prepared statement of Mr. Jefferson follows:] 

Prepared Statement of The Honorable William J. Jefferson, a 

Representative in Congress from the State of Louisiana 

Thank you, Mr. Chairman, for inviting me to present my remarks on this important matter. I wish to express my sincere gratitude to the Committee for its continued interest in addressing our energy crisis as well as our environmental challenges. 

I would also like to take this opportunity to thank my colleagues from this panel, 

Congressmen McDermott and Peterson, whom I have partnered with in the past to 

address the energy needs of our country. 

I have two proposals that would set a good example of collaboration the oil and 

gas industries, alternative energy, agricultural industries and finally environmental 

groups. 

The first would be the Biomethane Tax Credit which would ultimately provide 

Federal incentives for the production of biomethane from landfills, animal waste, 

sewage, biomass and other renewable resources. 

Due to its environmental advantages, the demand for natural gas will continue 

to grow in the United States. Biomethane is a pipeline quality natural-gas substitute produced by purifying biogas. This biogas is a mixture of methane and other 

gases produced from the decomposition of organic materials, produced naturally in 

landfills, animal waste, sewage and crop waste. It would definitely be a wise alternative to capture the biogas from these renewable waste sources, convert them, and 

use the biomethane for transportation or other energy applications. 

In 1998, the U.S. Department of Energy completed a study that estimated that, 

worldwide, between 25 and 37 quadrillion BTUs of methane released each year into 

the atmosphere due to natural decomposition of organic material. This would be the 

equivalent of up to 38% of all the energy used in the country annually. According 

to this study, the amount of biomethane that can be captured domestically for example would be enough to replace 10 billion gallons of gasoline each year. 

There are several opportunities and benefits that can be realized from this. The 

sources of this biomethane would come from landfills, animal waste, and sewage, 

which are untapped sources. Landfills generate a substantial amount of biogas 

through anaerobic degradation of waste. According to the EPA, there were 380 landfill gas electrification projects in place at the end of 2006. EPA estimates that there 

are 600–700 additional landfill gas-to-energy projects that could be constructed nationwide. Farmers and other animal-facility operators can install systems to convert 

their waste into usable biomethane with a valuable sanitary fertilizer as a byproduct. 

The environmental benefits are immeasurable. This natural gas is one of the 

cleanest fuels on the market today. Methane leaking from landfills, animal lagoons 

and other waste sites pose significant greenhouse gas problems. Just by processing 

animal waste in lieu of streaming it into animal lagoons significantly reduces 

groundwater contamination. 

Finally increasing the production of biogas and biomethane would: 

• substantially increase the supply of domestically produced, renewable non-fossil 

fuel energy 

• create jobs at home 

• convert a waste problem for farmers as well as provide them a valuable supplementary revenue source 

• provide a valuable supplemental revenue source to municipalities while reducing the amount of sewage solids that need to be processed. 

A tax credit for biomethane fuel produced from waste biogas for a reasonable time 

would lower the risk often associated with the price of natural gas and encourage 

the creation of more biomethane production facilities. 

Currently, there are tax credits available for projects that produce electricityusing biogas produced from waste or renewable sources. The Waste to Biomethane 

Tax Credit of 2007 will provide comparable tax credits for waste-to-biomethane production. By doing so, many of these sites could be economic energy generators. Since 

virtually every community faces the problem of waste disposal of sewage, solid municipal waste or animal or crop waste, the environmental and economic impacts of 

this incentive would be far-reaching. 

smartinez on PROD1PC64 with HEARING

27 

The second proposal I have is the Waste Vegetable Oils Tax Credit. Used in its 

pure form in diesel-engine vehicles, or blended with petroleum diesel to boost vehicle performance, bio-diesel has significantly lower emissions than petroleum-based 

diesel when burned. According to a 1998 report by the U.S. National Renewable Energy Laboratory, it results in carbon monoxide reductions of approximately 50% over 

regular diesel, and carbon dioxide reductions of 78%. 

China actually serves as a good example of this policy’s importance. China’s biodiesel production began in 2001. At that time, the oil wastes cost $212 per ton, 

while the price of petroleum-based diesel was $350 per ton. With little research or 

information available, a group began to design rudimentary equipment and experimented with fuel production. Since that time, the government there stepped in and 

helped to expand them and boost their bio-diesel industry. 

Market incentives and government support have enabled bio-diesel production 

projects to expand nationwide since 2005. China now boasts more than 100 bio-diesel production facilities. China generates more than 4.5 million tons of used oil and 

grease each year, roughly half of which could be collected through the establishment 

of an integrated collection and recycling system. 

As of 2000, the United States was producing in excess of 3 billion gallons of waste 

vegetable oil annually, mainly from industrial deep fryers in potato processing 

plants, snack food factories and fast food restaurants. Waste vegetable oil has a stable market value of approximately 40 cents per gallon as of 2003, which is enough 

to make collection economically viable. 

The restaurant industry in Louisiana is one of the largest business organizations 

in the state, representing more than 7,000 establishments and related businesses 

and is also one of the state’s largest private employers with more than 132,000 employed directly and another 55,000 indirectly employed. The bill will amend Internal 

Revenue Code of 1986 to allow the small agri-biodiesel credit for bio-diesel to extend 

to biodiesel produced from 100% waste vegetable oils. This tax credit could give 

birth to a new lucrative industry such as an integrated collection and recycling of 

used oil to produce bio-diesel. 

I would like to once again thank the Committee for their time and attention to 

this matter. 

Thank you 

f 

Chairman NEAL. We thank the gentleman from Louisiana. 

Mr. JEFFERSON. And tell Mr. Doggett I missed him. I enjoyed 

his remarks. I wanted to make that remark to him myself. 

Chairman NEAL. We will give the panelists the chance to move 

along if they feel that they have to. And I know we have been 

joined by two new panelists. 

The chair would like to recognize the gentleman from Pennsylvania, Mr. Doyle. 

STATEMENT OF THE HONORABLE MIKE DOYLE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. DOYLE. Thank you, Mr. Chairman. And thank you for holding this hearing today and inviting me to testify. 

Today we will hear about the nexus between energy policies and 

tax incentives. At a local level, this is an important issue for my 

constituents in Pittsburgh, Pennsylvania; on a broader scale, it is 

an important issue for the residents of the Commonwealth of Pennsylvania and for our nation. 

Energy policy and taxes intersect in many areas, and Congress 

has often provided tax incentives, such as tax credits, to promote 

projects that exploit domestic sources of energy. The tax credits are 

necessary to attract the financing for projects that might not otherwise prove economically viable in the short term. 

smartinez on PROD1PC64 with HEARING

28 

However, in the long term, these projects often provide significant positive externalities, such as the use of alternative energy 

sources, environmental benefits, and to reduce reliance on foreign 

energy sources. For this reason, tax incentives play an important 

role in the development of energy resources and provide an important public-private partnership for the continued advancement of 

energy policy. 

The key to the nation’s long-term energy health is a comprehensive and inclusive national energy policy. Such a policy would include both traditional fossil fuels: coal, oil, and gas. It would also 

diversify the portfolio of fuels with renewable energy sources such 

as fuel cells, solar, wind power, and combined heat and power systems, as well as developing new technologies, like the research that 

is ongoing to extract gas from methane hydrates. 

One type of fuel source combines both the traditional fossil fuel, 

coal, with a substance that would otherwise be a hazardous waste 

to create a fuel product that is used in coke batteries as a feedstock 

for the production of coke. This type of fuel is known as refined coal 

from a qualified coal waste sludge recycling process, and last week 

I introduced a bill, H.R. 1976, that would expand the existing Section 45 refined coal credit to include a tax incentive for the production of this fuel. 

I would also like to recognize my distinguished colleague from 

Pennsylvania and the Ranking Member of the Select Revenue 

Measures Subcommittee, Congressman Phil English, who joined 

me as an original cosponsor of this important legislation. 

I believe that refined coal from a qualified coal waste sludge recycling process provides significant energy and environmental benefits because the process recaptures the BTU content of coal waste 

sludge and has the associated environmental benefits of disposing 

of the coal waste sludge in a manner that is approved by the Environmental Protection Agency. 

This is exactly the type of alternative energy technology that 

Congress has desired to encourage in the past, and the provision 

of a tax incentive for the production of refined coal from a qualified 

coal waste sludge recycling process significantly furthers sound energy, environmental, and economic policies. 

The qualified coal waste sludge recycling process combines coal 

and coal waste sludge to create a solid fuel product that is used by 

the domestic steel industry as a feedstock for the manufacture of 

coke. Coal waste sludge is the tar decanter sludge and other byproducts of the coking process, including such materials that have 

been stored in ground, in tanks, and in lagoons that have been generally treated as hazardous waste under applicable Federal environmental rules. 

Presently, there are three primary methods for the disposal of 

coal waste sludge: No. 1, manufacture of refined coal from a qualified coal waste sludge recycling process; No. 2, transportation to incinerators; or No. 3, transportation to foreign landfills. 

The most favorable method, from an energy and environmental 

perspective, is to use a process that processes liquefied coal waste 

sludge with coal into a refined coal fuel product for use in steel producers’ coke batteries. This method recaptures the significant energy content of the coal waste sludge and can be performed on the 

smartinez on PROD1PC64 with HEARING

29 

site of the steel producers’ coke operations. The disposal of coal 

waste sludge in this manner has been approved by the EPA. 

The alternative methods of disposal are to transport the coal 

waste sludge offsite for incineration, or to foreign countries for 

landfilling. The alternative methods have significant drawbacks, including the need to physically convey a hazardous waste—which is 

a dangerous, cumbersome, and expensive undertaking—and the 

failure to recapture the energy content of the coal waste sludge if 

it is incinerated or landfilled rather than combined with coal to create a coke feedstock. 

It is important to note that the production of domestic steel 

would greatly benefit from Section 45 tax credit for qualified coal 

waste sludge recycling. Steel companies can directly or indirectly 

share in the benefits of the tax credit, and this results in cheaper 

coke, which can result in steel companies being more competitive 

against coke imported from foreign countries like China. 

In the past, cheap Chinese coke has flooded the domestic market. 

Such competition has drastic implications because once a coke battery shuts down, it is no longer able to function to produce coke 

and new coke batteries must be built to fill that void that is left 

behind. The potential for cheap coal through unfair foreign competition is a threat to our domestic energy security. The availability 

of the credit has a secondary benefit of mitigating this threat. 

Finally, Mr. Chairman, H.R. 1976 would amend Section 45 to 

provide that refined coal from a qualified coal waste sludge recycling process is eligible for a credit. The amount of the credit would 

be set at an inflation-adjusted $3 per barrel of oil equivalent for refined coal from a qualified coal waste sludge recycling process produced and sold to an unrelated party. 

That credit would be in place for 4 years to allow for a sufficient 

period to encourage coke batteries to adopt the coal waste sludge 

recycling process. This incentive is an important component to the 

development of a national energy policy that includes a diverse 

portfolio of energy resources. 

These incentives can be used effectively to promote the development of projects that would not otherwise go forward, notwithstanding their positive energy and environmental benefits. Such incentives have seen success in areas like landfill gas and other alternative fuels. My legislation, H.R. 1976, to amend Section 45 to 

include refined coal, is part of an effort to follow the past successes 

with tax incentives that will have similar results. 

I encourage the Committee to include H.R. 1976 in the upcoming 

effort to stimulate energy innovation through the tax code, and 

look forward to working with you, Mr. Chairman, and the Members 

of the Committee to make our shared vision of a national energy 

policy a reality. And I thank you for your time. 

[The prepared statement of Mr. Doyle follows:] 

Prepared Statement of The Honorable Mike Doyle, a Representative in 

Congress from the State of Pennsylvania 

Background 

Thank you, Mr. Chairman. Today, we will hear about the nexus between energy 

policies and tax incentives. At a local level, this is an important issue for my constituents in Pittsburgh, Pennsylvania; on a broader scale, it is an important issue 

for residents of the Commonwealth of Pennsylvania and of our Nation. Energy polsmartinez on PROD1PC64 with HEARING

30 

icy and taxes intersect in many areas and Congress has often provided tax incentives, such as tax credits, to promote projects that exploit domestic sources of energy. The tax credits are necessary to attract the financing for projects that might 

not otherwise prove economically viable in the short term. However, in the longterm, these projects often provide significant positive externalities, such as the use 

of alternative energy sources, environmental benefits, and reduce reliance on foreign 

energy sources. For this reason, tax incentives play an important role in the development of energy resources and provide an important public-private partnership for 

the continued advancement of energy policy. 

The key to the nation’s long-term energy health is a comprehensive and inclusive 

national energy policy. Such a policy would include both traditional fossil fuels: coal, 

oil, gas, etc. It would also diversify the portfolio of fuels with renewable energy 

sources such as fuel cells, solar, wind power and combined heat and power systems, 

as well as developing new technologies, like the research that is ongoing to extract 

gas from methane hydrates. 

One type of fuel source combines both a traditional fossil fuel, coal, with a substance that would otherwise be a hazardous waste to create a fuel product that is 

used in coke batteries as a feedstock for the production of coke. This type of fuel 

is known as refined coal from a qualified coal waste sludge recycling process and 

last week I submitted a bill that would expand the existing Section 45 refined coal 

credit to include a tax incentive for the production of this fuel. 

I believe that refined coal from a qualified coal waste sludge recycling process provides significant energy and environmental benefits because the process recaptures 

the BTU content of ‘‘coal waste sludge’’ (described below) and has the associated environmental benefits of disposing of the coal waste sludge in a manner approved by 

the Environmental Protection Agency. The use of coal waste sludge as a fuel product 

offsets other fuels that would otherwise be used in the coke manufacturing process. 

This is exactly the type of alternative energy technology that Congress has desired 

to encourage in the past and the provision of a tax incentive for the production of 

refined coal from a qualified coal waste sludge recycling process significantly furthers sound energy, environmental, and economic policies. 

Description of Process 

The qualified coal waste sludge recycling process combines coal and coal waste 

sludge to create a solid fuel product that is used by the domestic steel industry as 

a feedstock for the manufacture of coke. Coal waste sludge is the tar decanter 

sludge and other byproducts of the coking process, including such materials that 

have been stored in ground, in tanks and in lagoons, that have generally been treated as hazardous wastes under applicable Federal environmental rules. 

Presently, there are three primary methods for disposal of coal waste sludge: 

• Manufacture of refined coal from a qualified coal waste sludge recycling process. 

• Transportation to incinerators. 

• Transportation to foreign landfills. 

The most favorable method, from an energy and environmental perspective, is to 

use a process (described in patent numbers 4,579,563 (April 1, 1986), 4,758,246 

(July 19, 1988) and 4,778,115 (October 18, 1988)) that processes liquefied coal waste 

sludge with coal into a refined coal fuel product for use in steel producers’ coke batteries. This method recaptures the significant energy content of the coal waste 

sludge and can be performed on the site of the steel producers’ coke operations. The 

disposal of coal waste sludge in this manner has been approved by the EPA. See 

50 Federal Register No. 120 (June 22, 1992). 

The alternative methods of disposal are to transport the coal waste sludge off-site 

for incineration or to foreign countries for land-filling. The alternative methods have 

significant drawbacks, including the need to physically convey a hazardous waste 

(which is a dangerous, cumbersome and expensive undertaking) and the failure to 

recapture the energy content of the coal waste sludge if it is incinerated or landfilled rather than combined with coal to create a coke feedstock. 

The manufacture of refined coal from a qualified coal waste sludge recycling process is a technology that should be promoted. While currently the process is primarily used to convert coal waste sludge produced in the current operations of coke 

batteries into a fuel product, there are other sources of coal waste sludge available 

to be processed into a refined coal product. For example, coal waste sludge was historically stored in domestic storage lagoons and storage tanks. There exists an abundant supply of coal waste sludge in these areas. In addition, ‘‘town gas’’ waste sites, 

which date back to the 19th century when coal gas was widely used as an energy 

source, also provide another potential source for an alternative fuel that could be 

capitalized upon by using the coal waste sludge recycling process. However, to fully 

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achieve these benefits, technological advances are needed to spur other industrial 

developments allowing economical and efficient clean up of these sources of coal 

waste sludge. 

Finally, it is important to note that the production of domestic steel would benefit 

greatly from the Section 45 tax credit for qualified coal waste sludge recycling. Steel 

companies can directly or indirectly share in the benefits of the tax credit and this 

results in cheaper coke, which can result in the steel companies being more competitive against coke imported from foreign countries such as China. In the past, cheap 

Chinese coke has flooded the domestic market and played a role in the demise of 

various coke operations that could not compete. Such competition has drastic implications because, once a coke battery shuts down, it is no longer able to function to 

produce coke and new coke batteries must be built to fill the void let behind. The 

potential for cheap coal through unfair foreign competition is a threat to domestic 

energy security. The availability of the credit has a secondary benefit of helping to 

mitigate such a threat. 

Explanation of Section 45 Amendment 

The bill that I have submitted would amend Section 45 to provide (i) that refined 

coal from a qualified coal waste sludge recycling process is eligible for a credit, (ii) 

a definition of ‘‘coal waste sludge’’ (i.e., the tar decanter sludge and related byproducts of the coking process, including such materials that have been stored in ground, 

in tanks and in lagoons, that have been treated as hazardous wastes under applicable Federal environmental rules absent liquefaction and processing with coal into 

a feedstock for the manufacture of coke), (iii) that a qualified coal waste sludge recycling facility shall be treated as placed in service for purposes of this amendment 

when such facility is in place and functioning to process coal with coal waste sludge, 

(iv) a placed-in-service window of 1 year from the date of enactment of the bill allowing for the construction of new qualified coal waste sludge recycling facilities, 

and (v) that the credit period would be for such refined coal that is produced and 

sold during the period beginning on the date of enactment of this amendment and 

ending on the date that is 4 years after the later of the first day of the fifth full 

month after the date of enactment or the facility’s placed-in-service date. 

Additional details set forth in the legislation include the following: 

• A qualified coal waste sludge recycling process liquefies and distributes approximately one-quarter to one-half gallon of liquefied coal waste sludge per ton of 

coal. Liquefied coal waste sludge in excess of such amounts would have adverse 

effects on the operations and equipment of the coke batteries that use refined 

coal from a qualified coal waste sludge recycling process as a feedstock to 

produce coke. Based on industry research, an excessive amount of coal waste 

sludge causes extreme and irreparable damage to the coke battery. Coal waste 

sludge has an energy content of approximately 7,000 to 16,000 BTUs per pound. 

• For purposes of this amendment, a ‘‘qualified coal waste sludge recycling facility’’ includes a plant, comprised of one or more batch tanks and/or one or more 

storage tanks, steam and spray pipes, processing pumps, variable speed drives, 

a flowmeter and related electrical equipment, that processes coal and liquefied 

coal waste sludge. 

The amount of the credit would be set at an inflation-adjusted $3.00 per barrelof-oil equivalent for refined coal from a qualified coal waste sludge recycling process 

produced and sold to an unrelated party. Producers of refined coal from a qualified 

coal waste sludge recycling process would only be able to claim credits once; i.e., if 

an income tax credit for the fuel production is claimed under Section 45, an income 

tax credit could not be claimed under any other code provision. However, the Section 

45 credit shall be available for refined coal that meets the requirements of Section 

45, notwithstanding the fact that such refined coal is purchased for use as a feedstock for coke by a taxpayer that has previously claimed credits under Section 45K 

for the production of coke or coke gas. Coke or coke gas produced from refined coal 

from a qualified coal waste sludge recycling process for which credits have been 

claimed under Section 45 would not be eligible for an income tax credit under Section 45K. However, a coke or coke gas credit under Section 45 may be claimed if 

such coke or coke gas was produced from a feedstock for which the refined coal credit under Section 45 has not been claimed. 

Final Remarks 

Tax incentives are an important component to the development of a national energy policy that includes a diverse portfolio of energy resources. Tax incentives can 

be used to effectively promote the development of projects that would not otherwise 

go forward—notwithstanding their positive energy and environmental benefits. Such 

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incentives have seen success in areas like landfill gas an other alternative fuels. The 

amendment of Section 45 to include refined coal from a qualified coal waste sludge 

recycling process is part of an effort to follow the past successes with tax incentives 

that will have similar results. Refined coal from a qualified coal waste sludge recycling process will achieve this benefit by utilizing a traditional fossil fuel, coal, together with what would otherwise be a hazardous waste, coal waste sludge, to create an alternative fuel. For this reason, tax incentives should be provided to attract 

the capital necessary to develop these projects. 

f 

Mr. LARSON [presiding]. We thank the gentleman from Pennsylvania for his succinct and insightful testimony. We know him to be 

a champion of energy conservation, and we are pleased to take his 

testimony before the Committee. 

The chair now recognizes the distinguished gentleman from Minnesota and Chairman of the Agriculture Committee, Mr. Peterson. 

STATEMENT OF THE HONORABLE COLLIN C. PETERSON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA 

Mr. PETERSON. Thank you, Mr. Chairman, and I will try to be 

brief. You have my written testimony. I just want to hit on a couple 

points. 

We have been working in the Ag Committee on feedstock issues 

for the new cellulosic ethanol and biodiesel industry. But in my district, we have a big wind energy industry that has developed. And 

I have introduced a bill before, and have been working on this for 

a number of years. 

For whatever reason, when the electricity credit for these windmills was put in, it was done differently than was done for the lowincome housing tax credit program. When we set that program up 

back in 1986, I think there was a provision in there that allowed 

you to use as much as $25,000 of your earned income, where you 

could offset the credit against that earned income. When we set up 

the Section 45 credits, we didn’t allow that, so that you have to either have corporate income or passive income in order for you to 

utilize these credits. 

And I don’t know why it was done differently, when you have the 

same kind of basic issue. And so what has happened is the big utilities from outside of the state of Minnesota own all of these windmills in Minnesota. They are the ones that put them up, that got 

the tax credits and so forth. 

So what we are proposing is that my bill would have adopted the 

same basic formula that we have in the low-income tax credit area, 

which would allow ten farmers to go together and put up one of 

these wind generators and be able to use the credits against their 

Schedule F income or earned income. And it gives them an opportunity to be part of the ownership of this. 

There is a lot of interest out there in doing this. But they are 

precluded by the tax law. And I don’t think this would cost any 

money because all it does is change who gets the credits. Instead 

of a big power company getting it or a big corporation getting this 

and using it against their corporate income, ten farmers could go 

together and use it. It is the same amount of tax credit. The only 

thing it changes is who it goes to. 

smartinez on PROD1PC64 with HEARING

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The more we look at this, I don’t know why we have these 

earned income limitations on there in the first place. We have got 

some questions on the amount of the credit. We are working on legislation now with Congressman Walz, who also has a lot of these 

windmills in his district, and Congresswoman Herseth in South 

Dakota, where we may actually come in with some additional requests over and above what we initially put together in the last 

session to try to make this work. The long and the short of it is farmers are getting $2- to $3,000 

per wind generator rent on their farmland, and these corporations 

that are buying the tax credits after 10, or 15 years are making 

$100,000 a year. And we created this market in Minnesota by requiring that 10 percent of the renewable energy be wind energy. 

So we created this market, and we are letting out-of-state corporations benefit from it. It doesn’t make a lot of sense. I would encourage you to look at this issue. 

In addition to that, there is one other thing I wanted to put on 

the table. I haven’t introduced a bill on this, but we have been 

working on these feedstocks for the next generation ethanol plants 

and cellulosic ethanol. And initially, these plants are going to use 

agricultural waste. They are going to be using wheat straw, rice 

straw, and so forth. But eventually, we want to use switch grass 

and wood and those kinds of things in the future. 

But the more I look at this, I think as we develop this industry 

there is going to be an intermediate step where we are going to be 

looking at making some use of the next generation of feed stocks, 

either pelletizing the switch grass or maybe gasifying it. And there 

is nothing in the tax code to encourage us to be able to put those 

plants in, to get us so we can actually get the feedstock established, 

and have a place to use it, as we build these ethanol plants, which 

are going to take 5 or 6 years. 

So we are going to be putting something together in this area to 

try to fill that gap so that we can help build this industry as quickly as we can. And I haven’t got that bill ready yet, but when I do 

get it introduced, I would appreciate it if you would look at it. 

So I thank the Committee listening to me, and hope that you can 

do something to help us as you move through this process. 

[The prepared statement of Mr. Peterson follows:] 

Prepared Statement of The Honorable Collin C. Peterson, a Representative 

in Congress from the State of Minnesota 

Chairman Neal, Ranking Member English and other Members of the Subcommittee, I appreciate the time you are taking to hold a series of hearings to examine the need for tax incentives to continue us on a path to energy independence 

using renewable energy resources. 

Thank you for allowing me to appear today to talk about legislation that I have 

introduced to help encourage more local investment in wind turbines to provide renewable electricity. My legislation would allow individuals investing in wind energy 

facilities to be eligible for the $25,000 passive loss offset in the Internal Revenue 

Code. 

Under current tax law, individuals are eligible for tax deductions for losses incurred by industry investments. The passive loss limitation rule prevents individuals from making investments in an industry in which they are not active, simply 

to receive tax deductions. However, a $25,000 passive loss offset exists for individuals investing in oil and gas development and real estate. 

In rural areas, farmers, ranchers and other local individuals are looking to diversify their income by installing wind turbines for the production of electricity. This 

electricity generation could be connected to the grid, and farmers and ranchers 

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would help provide power from a renewable, domestic energy source, while creating 

sustainable rural development. 

Unfortunately, most rural residents do not have the ability to finance such 

projects, and attracting investors is difficult since the first years after installation 

often produce losses. My legislation would allow the $25,000 passive loss offset, currently only for oil, gas and real estate investments, to apply to individuals who invest in wind energy facilities. Individuals can use credits against their earned income. I would also like to take this opportunity to encourage you to keep in mind the 

chicken and egg situation that I know you are well aware of. Our inability to provide a longer term Section 45 Production Tax Credit is continuing our reliance on 

foreign component suppliers and leaving our country waiting to take advantage of 

the huge potential we have for wind energy. We are fortunate to have a plant that 

has recently opened in southern Minnesota to make the nose cones and blades for 

turbines. This company will provide 275 jobs in a town of 4,400 when it reaches full 

capacity—that is a huge economic impact in a rural Minnesota city. 

The continuation of the Section 45 credit and the continuation of the Section 29 

credit or another form of a credit that would apply to other types of renewable energy is another important discussion that I hope you will have. We need to provide 

the incentive to allow local communities, ag producers and businesses large and 

small to turn to renewable sources such as gasification and digesters to help with 

their power needs. This would be a nice compliment to the proposal that we hope 

to include in the farm bill to increase the availability and type of feedstocks for cellulosic ethanol. It would also work well with the incentives currently in the farm 

bill for removing livestock manure and poultry litter from watersheds that have too 

many nutrients—these are valuable commodities that can be made into energy. 

My state of Minnesota has been and continues to be a leader in the use of renewable energy, and the recent passage of an aggressive renewable portfolio standard 

continues that tradition. I believe it is important to give our average citizens the 

opportunity to participate in making our goals of renewable energy reachable. 

Thank you again for allowing me to testify, and I look forward to working with 

you to encouraging local ownership of renewable energy resources. I also look forward to working with you as we craft a new farm bill to ensure that your tax policies and our farm bill programs work in concert to help us supply more home-grown 

renewable energy. 

f 

Mr. LARSON. Thank you. Thank you, Mr. Chairman, and thank 

you for your testimony. And the Committee is honored to receive 

it. 

The chair now recognizes the distinguished Member of the Rules 

Committee from Massachusetts, Mr. McGovern. 

STATEMENT OF THE HONORABLE JAMES P. MCGOVERN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS 

Mr. MCGOVERN. Thank you, Mr. Chairman. And I want to 

thank you and Members of the Committee for giving me this opportunity to testify before you today. 

I am here to discuss legislation I introduced, H.R. 1475, the Commuter Benefits Equity Act of 2007. H.R. 1475 seeks to amend the 

Internal Revenue Code 1986 to increase and equalize the exclusion 

from gross income for parking and transportation fringe benefits 

and to provide for a common cost of living adjustment, and for 

other purposes. 

Transit benefits are authorized by Section 132(f) of the Internal 

Revenue Code, which allows for pretax salary deductions for transit 

and parking or employer-subsidized transit or parking. The current 

tax-free limit for transit is $110 per month, and the limit for parking is $215 per month. H.R. 1475 would create parity between the 

transit and parking portions at $200. To offset the cost of creating 

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parity, the tax-free limit of $215 per month for parking would be 

reduced to $200, and the cost of living adjustment included in Section 132(f) would be frozen in order to pay for the increase in the 

transit portion. 

Mr. Chairman, the transit benefit inequity has created a financial incentive for commuters to drive to work by themselves rather 

than utilize a form of public transportation or vanpool. In our efforts to reduce traffic congestion and end our fossil fuel dependencies, we simply cannot afford to promote tax policies that do 

more harm than good to the environment. 

As the Committee searches for ways to promote energy conservation, the role of public transportation cannot be ignored. Public 

transportation eases congestion by keeping cars off the road. It improves air quality by reducing automobile emissions, and perhaps 

most importantly, it reduces our dependency on foreign oil. 

Currently, public transportation reduces gasoline consumption in 

the United States by 1.4 billion gallons per year. Now, if we equalize the transit benefit with the parking benefit, the amount of savings will increase and our dependency on gasoline will be reduced. 

By leveling the playing field between the transit and parking portions, we can fix the current policy which discourages public transit 

use and encourages gasoline consumption. 

Mr. Chairman, I would also like to note the widespread support 

for this legislation. The bill currently has 50 cosponsors from every 

state and region of the country. And I encourage all Members of 

the Committee to consider supporting my legislation, and I look 

forward to working with you. 

I would like to ask unanimous consent to insert for the record 

letters of support from the American Public Transportation Association, letters from the Vanpool Services Corporation, and a report 

by Linda Bailey of INTERFACE International, all in support of 

what I am trying to do. 

Mr. LARSON. Without objection, so ordered. 

Mr. MCGOVERN. I thank the Chairman for listening to me, and 

Members of the Committee, and I hope that you will support this 

legislation. 

[The prepared statement of Mr. McGovern and the letters of support follow:] 

Prepared Statement of The Honorable James P. McGovern, a 

Representative in Congress from the State of Massachusetts 

I would like to thank my friend and colleague from Massachusetts, Chairman 

Neal, and the Committee for giving me the opportunity to come here today and testify. 

I would also like to thank the Chairman, as well as Representative Schwartz, 

Representative McDermott, and Representative Blumenauer for cosponsoring the 

bill. Your support is truly appreciated. 

I am here to discuss legislation I have introduced, H.R. 1475, the ‘‘Commuter Benefits Equity Act of 2007.’’ H.R. 1475 seeks to amend the Internal Revenue Code of 

1986 to increase and equalize the exclusion from gross income for parking and 

transportation fringe benefits and to provide for a common cost-of-living adjustment, 

and for other purposes. 

Transit Benefits are authorized by Section 132(f) of the Internal Revenue Code, 

which allows for pre-tax salary deductions for transit and parking or employer subsidized transit or parking. The current tax-free limit for transit is $110 per month 

and the limit for parking is $215 per month. 

H.R. 1475 would create parity between the transit and parking portions at $200. 

To offset the cost of creating parity, the tax-free limit of $215 per month for parking 

smartinez on PROD1PC64 with HEARING

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would be reduced to $200, and the cost of living adjustments included in Section 

132(f) would be frozen in order to pay for the increase in the transit portion. 

Mr. Chairman, this transit benefit inequity has created a financial incentive for 

commuters to drive to work by themselves, rather than utilize a form of public 

transportation or vanpool. In our efforts to reduce traffic congestion and end our fossil fuel dependencies, we simply cannot afford to promote tax policies that do more 

harm than good to the environment. 

As the Committee searches for ways to promote energy conservation, the role of 

public transportation cannot be ignored. Public transportation eases congestion by 

keeping cars off the road. It improves air quality by reducing automobile emissions. 

And perhaps most importantly, it reduces our dependency on foreign oil. 

Currently, public transportation reduces gasoline consumption in the United 

States by 1.4 billion gallons per year. If we equalize the transit benefit with the 

parking benefit, the amount of savings will increase, and our dependency on gasoline will be reduced. 

By leveling the playing field between the transit and parking portions, we can fix 

the current policy which discourages public transit use and encourages gasoline consumption. 

Mr. Chairman, I would also like to note the widespread support this legislation 

has demonstrated. The bill currently has over 50 cosponsors from states in every 

region of the country. 

I encourage all Members of this Committee to consider supporting my legislation 

and look forward to working with you. 

f 

Mr. LARSON. We thank the gentleman from Massachusetts for 

his cogent testimony. 

Now I will prevail upon the distinguished Member and classmate 

from the great state of Nebraska, Mr. Terry. 

STATEMENT OF THE HONORABLE LEE TERRY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA 

Mr. TERRY. I appreciate that. And before I go into my remarks, 

let me thank this Subcommittee for actually allowing us nonmembers of your prestigious Subcommittee and Committee to come and 

let you know about some of the ideas that we have to make sure 

that we become a more energy-independent country. 

Together with my good friend and Committee Member and cofounder of the Distributive Power Caucus, Mr. Doyle, sitting next 

to me, we wrote H.R. 805. And Albert Wynn is also an original cosponsor with us. And it allows for tax credits for both the creation 

and use of hydrogen fuel cells. 

President Bush, in his 2006 State of the Union address, outlined 

an Advanced Energy Initiative to drastically reduce our dependence on foreign sources of oil. The President set a national goal of 

75-percent reduction of oil imports from the Middle East by 2025. 

I think if we use the ideas that are being brought before you today, 

especially H.R. 805, we can significantly reduce our dependence on 

foreign oil a lot sooner than 2025. 

We are making tremendous breakthroughs in advanced energy 

technologies, like the use of hydrogen fuel cells for both vehicles 

and as a source of electrical production. In my home town, Omaha, 

several stationary fuel cells are used to power a data center in a 

large banking facility, First National Bank in downtown Omaha. 

The Lied Jungle uses fuel cells and co-generation to supply the 

electricity and humidity for their Lied Jungle. An office area on our 

Air Force base also uses this power. 

smartinez on PROD1PC64 with HEARING

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Our bill, H.R. 805, is designed to provide tax credits for new 

technologies like advanced automotive, stationary, and portable 

fuel cells, as well as refueling infrastructure and hydrogen production. It would allow a tax credit for devices using hydrogen up to 

30 percent of the amount paid by the taxpayer or $1,500, whichever is less. The credit would be available for amounts paid or incurred for hydrogen fuel devices prior to December 31, 2015. 

The bill also extends the existing residential energy efficiency tax 

credit for fuel cells and micro turbines through December 31, 2013, 

which this Committee did in the energy package of 2 years ago. 

This has been an important tax benefit that has helped push these 

technologies into the consumer marketplace. 

Testimony before our Committee, we had representatives of the 

automobile industry who testified—Energy and Commerce—it is 

going to be these breakthroughs in the consumer marketplace that 

are going to speed up the rollout of hydrogen fuel cells for the automobile industry. 

And then finally, Mr. Chairman, this bill also adds the requirement that these secondary uses of fuel or fuel cell power sources 

be used in public buildings. So the next building built that is a 

Federal Government building should have this type of technology 

in it, I would hope, for the baseload, then be able to help with peak 

power as well. 

Now, if we do all of these types of things to help the rollout of 

this technology in the marketplace sooner than later, we will have 

the technology breakthroughs to make sure that we meet our goals 

of 75-percent reduction of dependence on foreign oil a lot sooner 

than 2025. 

I appreciate your Committee listening to these type of ideas and 

initiatives, and I look forward to the bill that you all put together 

and hope that H.R. 805 can be part of that. Thank you. 

[The prepared statement of Mr. Terry follows:] 

Prepared Statement of The Honorable Lee Terry, a Representative in 

Congress from the State of Nebraska 

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to appear today in support of H.R. 805, a bill I have cosponsored with my friend 

and colleague on the Energy and Commerce Committee, Mr. Doyle (PA–14), and 

several others. 

In President Bush’s 2006 State of the Union address to Congress, he outlined the 

Advanced Energy Initiative to drastically reduce our dependence on foreign sources 

of energy. The President set a national goal of replacing more than 75% of our oil 

imports from the Middle East by 2025. We are making tremendous breakthroughs 

in advanced energy technologies, like the use of hydrogen fuel cells for both vehicles 

and stationary sources of power. Omaha is home to several stationary fuel cells including those at Henry Doorly Zoo, the First National Bank building in downtown 

Omaha, and Offutt Air Force Base. 

Our bill, H.R. 805, is designed to provide tax credits for new technologies like advanced automotive, stationary and portable fuel cells, as well as refueling infrastructure and hydrogen production. It would allow a tax credit for devices using hydrogen up to 30 percent of the amount paid by the taxpayer or $1,500 whichever 

is the lesser amount. The credit would be available for amounts paid or incurred 

for hydrogen fuel devices prior to December 31, 2015. 

The bill also extends the existing residential energy efficiency tax credit for fuel 

cells and micro turbines through December 31, 2013. This has been an important 

tax benefit that has helped push these technologies into the consumer marketplace. 

Finally, Mr. Chairman, H.R. 805 adds a requirement for the increased use of secondary fuel cell power sources in public buildings. Under the bill, any new Federal 

buildings constructed after December 31, 2008 in excess of 50,000 square feet must 

smartinez on PROD1PC64 with HEARING

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have as part of its design, provisions for a secondary, independent backup source 

of electrical power. The Administrator of the General Services Administration (GSA) 

must also consider the use of a fuel cell as part of the base load electric power needs 

of the Federal building. 

Thank you again, Mr. Chairman, for the opportunity to testify in support of H.R. 

805 and I urge the Subcommittee to move this legislation through the Committee 

to the House floor. 

f 

Mr. LARSON. Thank you, Mr. Terry. And as a cosponsor of your 

legislation along with Mr. Doyle, I am proud to receive it on the 

Committee. 

I am going to ask Members if they would care to inquire because 

I know the distinguished Ranking Member would look to do so. But 

we are going to switch panels. But does the distinguished Ranking 

Member have any questions he would like to ask the panelists before they—— 

Mr. ENGLISH. No. I want to thank Mr. Doyle for bringing to us 

a very detailed tax policy that I know has been worked through 

and interacts well with provisions that are already in the code. I 

am very grateful for his focus on how to take what is, in effect, 

sludge that has been declared a hazardous substance and recycle 

it. 

And I particularly want to thank Mr. Terry for thinking through 

how we can bring into the market aggressively hydrogen as a 

major energy source, which in my view is potentially one of the 

most flexible sources of energy. If we can use incentives to develop 

the technologies to make that transition, I think you have made a 

compelling case, sir. 

I want to thank both of these witnesses for their presentations. 

Mr. LARSON. Thank you. And if we could have—I know that we 

are joined by Representative Baird and Representative Davis. And 

if they could come forward. 

Let us begin with the distinguished gentleman and fellow classmate from the state of Washington, Mr. Baird. 

STATEMENT OF THE HONORABLE BRIAN BAIRD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. BAIRD. I thank my good friend and the Committee Members, and thank Ranking Member English, and appreciate very 

much this time. 

Legislation that we are proposing is supported by industry, supported by labor, and would have a very positive impact on energy 

consumption in this country. As we all know, our nation faces important energy challenges, and we have to work together to find 

ways to conserve energy. That is why I have been pleased to work 

very closely with my colleague, Ms. Schwartz, on introducing this 

legislation. 

What we are focusing on here is the potential to save energy by 

making our buildings more efficient. Buildings use 71 percent of all 

the electricity used in this country and comprise 80 percent of all 

electric expenditures in the U.S. Commercial buildings alone accounted for 35 percent of our entire nation’s electricity consumpsmartinez on PROD1PC64 with HEARING

39 

tion. This is not only a drain on our economy, it is a significant environmental impact. 

I am pleased to have introduced, therefore, H.R. 539 with my colleague, Congresswoman Schwartz, a Member of the Committee. 

The intent of this bill, the Buildings for the 21st Century Act, is 

to encourage energy-efficient, cost-saving commercial properties. 

Briefly, what the bill does is extend and improve upon the commercial buildings tax deduction, which was established in the Energy Policy Act of 2005. There are essentially two significant improvements. This is a tax deduction for energy-efficient building expenditures made by a building owner. 

In the 2005 energy bill, the deduction was limited to $1.80 per 

square foot for buildings that reduce their annual energy and 

power costs by at least 50 percent; and for buildings that do not 

achieve a 50 percent overall cost savings, there was nevertheless 

an allowance for partial deductions for reductions in lighting, heating, and cooling energy use. 

The provision, however, was set to expire at the end of 2007. Fortunately, we worked with the Committee to extend the provision 

until December 31, 2008. While we are pleased for the extension, 

we believe it is important to extend it to 2013, and the simple reason is there is a long startup time to planning and conducting some 

of these changes. And if it expires very quickly, people might say, 

we don’t think we can get in under the wire, and then they will 

forego the effort, and thereby we forego the savings and don’t take 

advantage of that. Increasing the level of deduction will be an 

added incentive for people to engage in these activities. 

Again, I would note we have 136 bipartisan cosponsors. The bill 

is supported by a coalition of business, trade, government, and 

agency groups ranging from the Edison Electric Institute to the 

Natural Resources Defense Council. It alone will not solve our energy challenges, but it is an important step. 

Again, I am very, very pleased and honored to be able to work 

with Ms. Schwartz on this. I thank the Committee for their consideration, and would hope we can include it. 

[The prepared statement of Mr. Baird follows:] 

Prepared Statement of The Honorable Brian Baird, a Representative in 

Congress from the State of Washington 

Good afternoon Chairman Neal, Ranking Member English, and Members of the 

Subcommittee. Thank you for the opportunity to address you today. 

As we all know, our nation is facing an energy crisis. We must work together to 

identify ways to conserve energy and protect our environment, and do so in a way 

that does not have a negative impact on our economy. 

I have focused on one area that I think presents an enormous opportunity for our 

nation to conserve our resources and improve our environment, while also saving 

businesses money. Congresswoman Allyson Schwartz, a Member of this Committee, 

and I have developed legislation that will provide the necessary economic incentives 

to make substantial progress towards becoming a more energy-efficient and environmentally-friendly nation. 

Before I get into the details of our bill, I would like to share some statistics with 

you about the impact of commercial buildings on the environment and on businesses’ bottom line. 

Buildings use 71% of all electricity, and comprise 80% of all electric expenditures 

in the U.S. Commercial buildings alone account for 35% of our entire nation’s electricity consumption. 

This not only indicates a huge drain on our natural resources but also represents 

a significant cost to businesses. In fact, energy accounts for nearly a third of a typsmartinez on PROD1PC64 with HEARING

40 

ical building’s costs and is generally a property owner’s single largest operating expense. 

For these reasons, I am pleased to have introduced H.R. 539 with my colleague, 

Congresswoman Schwartz. The intent of this bill, the Buildings for the 21st Century 

Act, is to encourage energy-efficient, cost-saving commercial properties. 

Why exactly does our bill do? 

The Buildings for the 21st Century Act extends and improves upon the commercial buildings tax deduction established in the Energy Policy Act of 2005. This is 

a tax deduction for energy efficient building expenditures made by a building owner. 

In the 2005 energy bill, this deduction was limited to $1.80 per square foot for buildings that reduce their annual energy and power costs by at least 50%. For those 

commercial buildings that do not achieve the 50% overall cost savings, the 2005 bill 

also allowed for partial deductions for reducing lighting, heating, and cooling energy 

use. This provision was set to expire at the end of 2007. Fortunately, we worked together to get it extended at the end of last year until December 31, 2008. 

While we were pleased to see this extension, we believe it is very important that 

the deduction be extended to 2013. Our legislation does this. It also enhances the 

deduction to $2.25 per square foot and 75 cents per square foot for the partial deduction. 

Due to the significant amount of time and resources needed to plan and prepare 

for major construction, it is important that the deduction be extended for a significant amount of time. The truth is that commercial buildings have lead times for 

planning of 2 to 4 years. This means that, if the deduction is set to expire in the 

near future, many companies will simply choose not to make improvements on their 

buildings. 

Increasing the amount of the deduction will also encourage more builders and business owners to utilize the deduction. As you may know, $2.25 per square foot 

was the initial proposal supported by a large environmental and industry coalition. 

This figure was based on calculations to ensure that the deduction maximized market participation without extraneous cost to taxpayers. Unfortunately, a last minute 

agreement in Congress reduced the deduction to its present $1.80. 

The Buildings for the 21st Century Act has 136 bipartisan cosponsors. It is supported by a coalition of business, trade, government, and energy efficiency groups, 

ranging from the Edison Electric Institute to the Natural Resources Defense Council. 

Although our impending energy crisis cannot be solved with one piece of legislation alone, the Buildings for the 21st Century Act takes a meaningful step towards 

a more energy-efficient economy. Our bill will have an overall positive effect on both 

the environment and the economy, and should be enacted. 

I strongly believe that we can take considerable steps towards becoming a more 

environmentally conscious society with legislation such as this. When we create environmental policies that make sense for business, we will achieve greater cooperation in conserving energy and protecting the environment. 

Thank you. 

f 

Mr. LARSON. I thank the gentleman for his succinct testimony, 

and I am going to yield to the gentlelady from Pennsylvania for a 

comment. But I would just say to the panelists that we are pleased 

that you are all here. But we are anticipating having votes in about 

20 minutes, so brevity is the soul of wit. 

The gentlelady from Pennsylvania. 

Ms. SCHWARTZ. Thank you, Mr. Chairman. And I am pleased 

to just take a couple minutes to thank Mr. Baird for working with 

me on this legislation. And I think the fact that we have 136 of our 

colleagues working with us on this—and I have certainly heard 

from many, many different segments, whether they are architects 

or builders or contractors, that this is really very important for us 

to do, to be able to really work in a very constructive way, and in 

this case to reduce our use of electricity. 

I think many people—we often concentrate on other uses, whether they are industrial uses or cars. The fact that buildings use 80 

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percent of our electricity, and that commercial buildings alone consume 35 percent of the electricity in this country, if we could reduce that by a few percentage points would be very dramatic in our 

use. 

And as we move toward energy independence—and this legislation also doesn’t pick winners and losers. I think this is going to 

be one of the most difficult things for our Committee and the Congress to work on, is to think about new ways and to be able to encourage new sources of energy. 

But this is a case that really is going to help reduce use, and that 

is very exciting. And at the same time, it is also going to reduce 

cost. And if we can help build buildings that are going to last for 

75 years, many of them, if we can do that right and help businesses be able to reduce costs, I am really just very excited about 

doing that. Thank you for your work that you have done. 

Mr. LARSON. I am sure the gentlelady will submit for the record 

additional comments as well. 

Ms. SCHWARTZ. I will. 

Mr. LARSON. And the chair will now recognize the distinguished 

gentleman from New Jersey, Mr. Ferguson. 

Ms. SCHWARTZ. And I am going to just ask if I can submit 

some letters of endorsement. 

Mr. LARSON. Without objection, so ordered. 

Ms. SCHWARTZ. Thank you very much. 

[The prepared statement of Ms. Schwartz and letters of endorsement follow:] 

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Mr. BLUMENAUER. Mr. Chairman, just would you entertain 30 

seconds from another Member of the Committee? 

Mr. LARSON. How about 20 seconds? You are so recognized, Mr. 

Blumenauer. 

Mr. BLUMENAUER. I just want to say, the notion of being able 

to deal with the energy footprint up front in the design function, 

we are getting there sooner rather than later. But the legislation 

that is being discussed here ought to be a part of something that 

we do because it will pay dividends forever if we can move that up 

earlier in the process. 

By the time the footings are poured, about 80 percent of the energy footprint is established. And so I would like us to probe this 

to see if there are ways that this could be a part of the comprehensive effort that the Committee does. 

Mr. LARSON. As always, the gentleman from Oregon adds insight to our process. 

The distinguished gentleman from New Jersey, Mr. Ferguson. 

STATEMENT OF THE HONORABLE MIKE FERGUSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. FERGUSON. Thank you, Chairman Neal and—I am sorry, 

Chairman Larson today, and Mr. English, for allowing me the opportunity to testify before the Subcommittee on tax incentives and 

alternative energy sources. Recent months, renewable energy and 

energy security have dominated the domestic energy debate. Renewable energy technology holds tremendous potential to make 

great advancements toward energy security in the 21st century. 

In my home state of New Jersey, we have seen what a difference 

renewable energy can make not only in promoting a clean, healthy 

environment by reducing greenhouse gases, but also in cutting the 

cost of energy bills for consumers. In 2001, New Jersey began offering 70 percent rebates on solar power installations for residential 

homes and businesses. Five years later, New Jersey is the second 

largest state market for solar power, and 2,000 homes and businesses have taken advantage of the program. There continues to be 

a long waiting list for that program. 

That is why in the 110th Congress I introduced H.R. 1596, the 

Clean and Green Renewable Energy Tax Credit Act. This legislation builds upon the efforts that I began in the 109th Congress 

with H.R. 4300. My bill would extend the existing Federal tax credits for solar energy until 2016. 

Under this legislation, consumers would receive a $3,000 per kilowatt Federal tax credit for any solar energy installation. For example, the typical home roof-mounted system is $10,000 per kilowatt installed, and the average system is 3 kilowatts, making the 

total cost to the homeowner $30,000. Under the legislation, the consumer would receive a Federal tax credit of $9,000 for a $30,000 

system. 

The Clean and Green Renewable Energy Tax Credit Act would 

also extend the tax credits created in the Energy Policy Act of 2005 

for insulation, windows, and heating and cooling equipment for 2 

years. Additionally, it extends the production tax credit for wind fasmartinez on PROD1PC64 with HEARING

48 

cilities through 2013, and creates a 30 percent investment tax credit for small wind systems for both businesses and residents. 

I am also a cosponsor of H.R. 550, the Securing America’s Energy 

Independence Act. This legislation, led by Representative Camp 

and Representative McNulty, not only extends the investment tax 

credit for residential and commercial solar and fuel cell equipment 

for an additional 8 years, but also provides alternative minimum 

tax relief for fuel cells and solar energy. While the solar tax credits 

created in the Energy Policy Act are a good first step, this 8-year 

extension is critical to leave more time for research and development and for the additional time that is required to finance solar 

and fuel cell projects. 

Throughout my terms in Congress, I have been a strong proponent for solar energy. I believe that solar energy holds significant 

promise in job creation, energy security, reliability, and helping to 

decrease the number of dangerous emissions being released into 

our atmosphere. And one must look no further than New Jersey to 

see how successful these cooperative state and Federal tax incentive programs can be. 

However, to truly benefit from this energy source, it is our job 

as lawmakers to make this technology widely available and affordable to both consumers and utilities. While it is of the utmost importance to make this technology an energy option for homeowners, 

I believe we also must take these initiatives even further and remove the exclusion for utilities in the investment tax credit. 

Many energy companies, namely PSEG, a large energy company 

headquartered in New Jersey, have stated their interest in investing in solar technology. These companies recognize the potential in 

solar energy, and are taking the lead in environmental responsibility and energy independence. 

Again, I would like to thank you for allowing me to testify today. 

And I urge you to take action to extend and expand these renewable energy tax credits and make this energy more affordable and 

accessible to consumers. I have seen the success that we have had 

in New Jersey with these initiatives, and I believe that we can see 

the same kind of success on a national level. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Ferguson follows:] 

Prepared Statement of The Honorable Mike Ferguson, a Representative in 

Congress from the State of New Jersey 

I’d like to thank Chairman Neal and Ranking Member English for allowing me 

the opportunity to testify before the Subcommittee on Select Revenue Measures on 

tax incentives for alternative energy sources. In recent months, renewable energy 

and energy security have dominated the domestic energy debate. Renewable energy 

technology holds tremendous potential to make great advancements towards energy 

security in the 21st century. 

In my home state of New Jersey we have seen what a difference renewable energy 

can make not only in promoting a clean, healthy environment by reducing greenhouse gasses, but also in cutting the cost of energy bills for consumers. In 2001 New 

Jersey began offering 70% rebates on solar-power installations for residential homes 

and businesses. Five years later, New Jersey is the second largest state market for 

solar power and 2,000 homes and businesses have taken advantage of the program 

and there continues to be a long waiting list. 

That is why in the 110th Congress I introduced H.R. 1596; the Clean and Green 

Renewable Energy Tax Credit Act. This legislation builds upon efforts that I began 

in the 109th Congress with H.R. 4300. My bill would extend the existing Federal 

tax credits for solar energy until 2016. Under this legislation, consumers would resmartinez on PROD1PC64 with HEARING

49 

ceive a $3,000 per kilowatt Federal tax credit for any solar energy installation. For 

example, the typical home roof-mounted system is $10,000 per kilowatt installed, 

and the average system is 3 kilowatts, making the total cost to the homeowner 

$30,000. Under this legislation the consumer would receive a Federal tax credit of 

$9,000 for a $30,000 system. 

The Clean and Green Renewable Energy Tax Credit Act would also extend the 

tax credits created in the Energy Policy Act of 2005 for insulation, windows, and 

heating and cooling equipment for 2 years. Additionally, it extends the production 

tax credit for wind facilities through 2013 and creates a 30% investment tax credit 

for small wind systems for both businesses and residences. 

I am also a cosponsor of H.R. 550, the Securing America’s Energy Independence 

Act. This legislation, led by Rep. Camp and Rep. McNulty not only extends the investment tax credit for residential and commercial solar and fuel cell equipment for 

an additional 8 years but also provides alternative minimum tax relief for fuel cells 

and solar energy. While the solar tax credits created in EPACT are a good first step, 

this 8 year extension is critical to leave more time for research and development 

and for the additional time that is required to finance solar and fuel cell projects. 

Throughout my term in Congress I have been a strong proponent of solar energy. 

I believe that solar energy holds significant promise in job creation, energy security, 

reliability, and helping to decrease the number of dangerous emissions being released into our atmosphere and one must look no further than New Jersey to see 

how successful these cooperative state and Federal tax incentive programs can be. 

However, in order to truly benefit from this energy source, it is our job, as lawmakers, to make this technology widely available and affordable to both consumers 

and utilities. While it is of utmost importance to make this technology an energy 

option for homeowners, I believe that we must take these initiatives even further 

and remove the exclusion for utilities in the investment tax credit. Many energy 

companies, namely PSEG, a large energy company headquartered in New Jersey, 

have stated their interest in investing in solar technology. These companies recognize the potential in solar energy and are taking a lead in environmental responsibility and energy independence. 

Again, I’d like to thank you for allowing me to testify today and I urge you to 

take action to extend and expand these renewable energy tax credits and make this 

energy more affordable and accessible to consumers. I have seen the success that 

New Jersey has had with these initiatives and I believe that we can see the same 

kind of success on a national level. 

f 

Mr. LARSON. And thank the gentleman from New Jersey for his 

testimony. 

And now I recognize the gentleman from Illinois, Mr. Shimkus. 

STATEMENT OF THE HONORABLE JOHN SHIMKUS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Mr. SHIMKUS. Thank you, Mr. Chairman. I will be brief. I will 

ask that my whole statement be submitted for the record, and just 

say a couple quick things. 

Congress recognized the potential for coal to liquid in the 2005 

Highway Reauthorization and Excise Tax Simplification Act. The 

Act provides a 50 cents per gallon tax credit for coal to liquid production through September 2009. But since it takes 5 to 7 years 

to build a coal-to-liquid facility, and since no facilities are yet being 

built, the current law credit is having no impact. So my basic legislation is to extend that to 2020. 

Other provisions that we hope that you all will consider—Jeff 

Davis is going to testify here. This is legislation that I am on with 

Chairman Rahall and Rick Boucher, which would extend a 20-percent investment tax credit for the construction of coal to liquid 

fuels production facilities, and alternatively, an election to expense 

investment in such facilities; and for the global warming crowd, a 

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tax credit to facilitate projects that will capture and second quarter 

carbon dioxide produced from coal to liquid facilities. 

Thank you, Mr. Chairman, and I will yield back. 

[The prepared statement of Mr. Shimkus follows:] 

Prepared Statement of The Honorable John Shimkus, a Representative in 

Congress from the State of Illinois 

Mr. Chairman, 

Thank you for the opportunity to testify today before your Subcommittee in support of legislation that would accelerate the deployment of coal-to-liquid CTL production facilities in the United States. 

America’s abundant coal reserves can produce the ultra-clean CTL transportation 

fuels needed to help the United States reduce its dependency on oil imported from 

unfriendly and unstable regimes. CTL fuel would be readily usable today in existing 

transportation markets and could be delivered through existing pipelines. 

And we can produce CTL fuels in an environmentally-friendly way. Coal liquefaction plants generate carbon dioxide in a highly concentrated form which allows 

for the capture CO2 for use in enhanced oil and coal bed methane recovery, or for 

safe storage underground. Further, the tailpipe emissions from CTL fuels are cleaner than conventional diesel. 

Unlike many other potential alternative energy sources, CTL technologies are 

proven to be effective. CTL technology has been used internationally for decades. 

Today, CTL technologies are being developed for industrial-scale production in 

China and by other major industrial competitors of the United States. CTL fuels are 

used today to meet more than 30 percent of South Africa’s transportation needs. 

Unfortunately, CTL production facilities are not yet being built in the United 

States. The costs of engineering and building a CTL facility are huge—in the billions of dollars—and private investors face risks that future changes in energy 

prices will destroy the economics of CTL production. As a result, investors today 

simply lack the financial certainty they need to undertake these projects. 

For these reasons, Federal participation in the development of a U.S. CTL industry is critically important. Congress recognized the potential for CTL in the 2005 

Highway Reauthorization and Excise Tax Simplification Act. The Act provided a 50- 

cents-per-gallon tax credit for CTL produced through September 30, 2009. But since 

it takes 5 to 7 years to build a CTL facility, and since no facilities are yet being 

built, the current-law credit is having no impact. Investors need a longer-term production credit, and other incentives, before they can commit funds to CTL projects. 

To foster U.S. CTL production, I joined with 28 of my colleagues, including Chairmen Rahall and Boucher, as an original cosponsor to legislation introduced by 

Chairman Rahall and Representative Geoff Davis of Kentucky. Included in H.R. 370 

are the following critical tax incentives that I would urge the Committee on Ways 

and Means to approve. 

• Extension through September 30, 2020, of the 50-cent alternative fuel tax credit 

for production of transportation fuel derived from coal. 

• A 20-percent investment tax credit for the construction of CTL fuels production 

facilities or, alternatively, an election to expense investments in such facilities. 

• A tax credit to facilitate projects that will capture and sequester carbon dioxide 

produced from CTL facilities. 

I would urge the Committee to include these provisions in an energy bill this 

spring. Enactment of these incentives would be a major step in our efforts to increase alternative energy production and reduce our reliance on imported oil. Thank 

you for your consideration of these issues. 

f 

Mr. LARSON. I thank the gentleman from Illinois for his brevity. 

And of course, as you have indicated, you will submit your testimony for the record and we deeply appreciate that. 

And the chair will now recognize the distinguished gentleman 

from Arizona, Mr. Grijalva. 

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STATEMENT OF THE HONORABLE RAU ́ L GRIJALVA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ARIZONA 

Mr. GRIJALVA. Thank you, Mr. Chairman, Ranking Member 

English, and Members of the Subcommittee. It is a pleasure to be 

here with you to discuss a piece of legislation that I hope you will 

agree is an important measure for Indian Country and for the nation at large. 

The legislation I am speaking about, my bill, cosponsored by my 

colleague from Arizona, Congressman Pastor, H.R. 1954, would 

amend the Internal Revenue Code of 1986 to allow Indian tribal 

governments who are tax-exempt to transfer their share of the production tax credit to their taxable partners in joint venture renewable energy projects on tribal lands. This is a relatively small 

change in the current law, but would be meaningful and important 

for Native people and their economic development. 

Under current law, if a tribal government wishes to enter into 

a joint venture with an outside partner for a renewable energy 

project taking place on its land, the tribe cannot take advantage of 

the production tax credit for renewable resources as a private landowner could because it has no tax liability to offset, nor can it 

transfer its portion of credit to its taxable partners. 

So by way of example, if you have a private business providing 

100 percent of financing for a renewable energy joint venture with 

a tribe, the private business may only receive 50 percent of the tax 

credit, whereas if that business located its project on private lands, 

it could take advantage of 100 percent of the tax credit. 

This situation puts tribes at a tremendous disadvantage when 

trying to attract renewable energy projects to their lands. Let me 

just emphasize that by excluding tribes from this activity, we are 

missing out on a huge opportunity to not only facilitate production 

of many thousands of megawatts of clean power, but we are also 

losing an opportunity to help improve conditions for tribal peoples 

who are in dire need of sustainable economic development on their 

lands. 

Tribal lands in the U.S. have a vast potential in renewable energy production. Wind generation potential on tribal lands could 

produce a net estimated 14 percent of the total U.S. energy production, while the solar electricity potential is estimated at 4.5 times 

the annual total electricity needs of the U.S. Tribal lands also contain significant geothermal resources. 

While providing for much-needed economic development in these 

areas, renewable energy projects would also allow tribes to offer 

power to their own people. I should note that in Arizona, the Navajo Nation, for example, 37 percent of the households on that nation do not have electricity. 

In addition, many tribes would like to play a role in helping to 

address the climate crisis. This would provide outside businesses 

an incentive to partner with tribes and tap into the vast renewable 

resources on tribal lands. 

To show their commitment to producing renewable energy, tribes 

are moving forward with small projects, with grants, and funding 

from carbon offset purchases. However, these are small-scale demonstration projects. What tribes need to do now is to be on an even 

playing field with other private landowners in the development of 

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1 2004 Department of Energy figures. 

utility-sized projects that can begin to benefit from the outstanding 

resources on tribal lands. 

My proposal, all it would do is level the playing field for Native 

people who want clean and sustainable economic development on 

their lands, by putting them in the same position as any other 

landowner. I hope you will join me in looking at this legislation, 

and hopefully your support. 

Thanks for your time, and I will be glad to answer any questions 

or submit any additional information for the record. Thank you, 

Mr. Chairman. 

[The prepared statement of Mr. Grijalva follows:] 

Prepared Statement of The Honorable Rau ́ l M. Grijalva, a Representative 

in Congress from the State of Arizona 

Mr. Chairman, Ranking Member English and Members of the Subcommittee. It 

is a great pleasure to be here this afternoon to discuss a proposal that I am personally very excited to be working on. I hope you will agree that this is an important 

measure for Indian Country and for the nation at large. 

My bill, H.R. 1954, would amend the Internal Revenue Code of 1986 to allow Indian tribal governments, who are tax-exempt, to transfer their share of the production tax credit to their taxable partners in joint venture, renewable energy projects 

on tribal lands. 

This is a relatively small change in current law, but would be meaningful and important for Native peoples and their economic development. 

Under current law, if a tribal government wishes to enter into a joint venture 

with outside partners for a renewable energy project taking place on its lands, the 

tribe cannot take advantage of the production tax credit for renewable resources as 

a private landowner could because it has no tax liability to offset, nor can it transfer 

its portion of the credit to its taxable partners. 

By way of an example, if you have a private business providing 100% financing 

for a renewable energy joint venture with a tribe, the private business may only receive 50% of the tax credit, whereas if the business located its project on private 

lands, it could take advantage of 100% of the credit. 

This situation puts tribes at a tremendous disadvantage when trying to attract 

renewable energy projects to their lands. 

By excluding tribes from this activity, we are missing out on a huge opportunity 

to not only facilitate production of many thousands of megawatts of clean power, 

but we also are losing an opportunity to help improve conditions for tribal peoples, 

who are in dire need of sustainable economic development on their lands. 

Tribal lands in the U.S. have vast potential in renewable energy production. Wind 

generation potential on tribal lands could produce an estimated 14% of total U.S. 

energy production, while the solar electricity potential is estimated at 4.5 times the 

annual total electricity needs of the U.S.1 Tribal lands also contain significant geothermal resources. 

While providing for much-needed economic development in these traditionally impoverished areas, renewable energy projects would also allow tribes to offer power 

to their own people, many of whom do not have electricity in their homes. Arizona 

tribes are in great need of electrification. For example, almost 37 percent of all 

households on the Navajo Nation do not have electricity. 

In addition, many tribes would like to play a role in helping to address the climate crisis, and this would provide outside businesses an incentive to partner with 

tribes and tap into the vast renewable resources on tribal lands. 

To show their commitment to producing renewable energy, tribes are moving forward with projects with Federal grant money and with funding from carbon offset 

purchases, however, most of these are small-scale demonstration projects. What 

tribes need now is to be on an even playing field with other private landowners in 

the development of utility-sized projects that can begin to benefit from the outstanding resources on tribal lands. 

In short, all my proposal would do is level the playing field for Native peoples 

who want clean and sustainable economic development on their lands, by putting 

them in the same position as any other landowner. I hope you will join me in supporting this important legislation. 

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Thank you for your time and I am happy to answer any questions you might have. 

f 

Mr. LARSON. I thank the gentleman from Arizona and his longstanding commitment to Native Americans and to their economic 

security, which makes the whole nation secure. And I look forward 

to following through with you on your legislation. 

The chair will now recognize the distinguished gentleman from 

Kentucky, Mr. Davis. 

STATEMENT OF THE HONORABLE GEOFF DAVIS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF KENTUCKY 

Mr. DAVIS. Thank you, Mr. Chairman, Ranking Member 

English, and Members of the Committee. Thank you for allowing 

us this time to present ideas on ways to update and improve our 

existing tax incentives for alternative energy. I support offering tax 

incentives to promote the commercial development of technology 

that increases the availability of alternative fuels. There are many 

proposals before the Ways and Means Committee to encourage its 

development. 

What I propose today is not a tax incentive in the traditional 

sense. Rather, the tax provision I am here to discuss is a simple 

method of returning money paid in the form of an unconstitutional 

tax. That money should be returned to the taxpayer and could be 

better used for reinvestment in research and development and the 

deployment of new technology and the production of cleaning energy. 

I am here to discuss H.R. 1762, a bill to facilitate and expedite 

direct refunds to coal producers and exporters of the coal excise 

tax, unconstitutionally imposed and collected on coal exported from 

the United States. Representative Artur Davis and I introduced 

this bill in March. The bill enjoys bipartisan support in both the 

House and Senate, with the Senate bill being S. 373 introduced by 

Senators Bunning and Rockefeller. 

The bill is necessary to facilitate the refund of an unconstitutional excise tax collected on coal exported from the United States. 

The tax should never have been collected in the first place. This 

provision will help U.S. coal producers and exporters harmed by 

the collection of this tax on coal exports to recover the funds paid. 

These refunds can be used for reinvestment and research and development on coal to liquids technology, clean coal technology, and 

coal blending. 

This is an issue of equity and fairness. The Export Clause of the 

United States Constitution provides that ‘‘No Tax or Duty shall be 

laid on Articles exported from any State.’’ The Coal Excise Tax was 

declared unconstitutional as applied to exported coal in a 1998 district court case, Ranger Fuel v. United States. The U.S. Government never appealed the ruling. The Ranger Fuel case clearly establishes that the money paid in the unconstitutional taxes are due 

to the taxpayer. 

H.R. 1762 addresses problems associated with the two types of 

refund claims, administrative claims pursuant to the Internal Revenue Code, and Tucker Act claims. Claims were filed by the indussmartinez on PROD1PC64 with HEARING

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try under both scenarios, and to date, the IRS has refused to refund all the money owed, despite repeated court decisions requiring 

refund of principal and statutory interest. 

Tucker Act claims going back to approximately 1990 are based 

on a 2000 U.S. Court of Appeals for the Federal Circuit entitled 

Cyprus Amax Coal v. United States. In that case, the Court of Appeals held that producers and the exporters could claim a refund 

under the Tucker Act. The Tucker Act allows for the recovery of 

any IRS tax illegally or erroneously collected within a 6-year statute of limitations. In the subsequent case of Elkhorn Mining v. 

United States, the Court of Appeals for the Federal Circuit held 

that principal and statutory interest are due to the producers and 

exporters for the ‘‘illegally levied taxes.’’ 

Notwithstanding repeated rulings by the courts against the IRS 

that the principal and statutory interest amounts on certain CET 

refund claims are owed to coal producers and exporters, the IRS 

has again appealed the issue. The IRS has taken this position even 

though the courts have clearly established that the export of coal 

makes the tax unconstitutional and makes the refund due. 

The IRS continues to appeal the issue of whether or not it owes 

principal and interest on Tucker Act claims filed by coal producers 

and exporters. The legislation is necessary to ensure that all claimants will be able to recover all amounts owed during the 6-year period of recovery under the Tucker Act, and all administrative refund claims. 

The correction provided by H.R. 1762 is set out in the form of an 

off-code provision and will not result in a change to the Internal 

Revenue Code. There is no need for legislation to apply prospectively because the marketplace has addressed the issue for the foreseeable future. 

H.R. 1762 is simple and straightforward and will facilitate direct 

refunds plus statutory interest on the unconstitutionally collected 

tax to producers and exporters when they establish that the coal 

upon which the tax was paid was exported. The IRS has 180 days 

from filing of a claim to determine whether the exporter has proved 

the coal was exported and that a refund is due, and another 180 

days to refund the money owed the taxpayer. 

The bill also tracks the exact statutory time periods for which refunds of the unconstitutionally collected tax are allowed under current law. Refunds will be made from the fourth quarter 1990 to 

present, even though the unconstitutional burden of this tax was 

imposed an additional 12 years for exports, since 1978. Refunds of 

tax already paid through the administrative claims process will be 

prohibited to prevent any possibility of double dipping. 

This resolution will also end the needless litigation between industry and the U.S. Government concerning CET refunds. Although entitled to the refunds of the unconstitutional coal excise 

tax on exported coal, the IRS continues to deny certain administrative claims and continues to litigate issues that have been repeatedly rule on by the courts. This affects both the producers and the 

unaffiliated coal exporters. 

The refunds will infuse the industry with additional capital that 

can be used for reinvestment and job creation. This was unconstitutionally levied. Coal excise taxes paid to the Treasury are owed 

smartinez on PROD1PC64 with HEARING

55 

to the taxpayers who bore the burden of these taxes, and the monies can in turn be used for reinvestment in alternative energy, 

clean burning coal, and ultimately help our economy. 

I appreciate the Committee’s time, and I am open to any questions. 

[The prepared statement of Mr. Davis follows:] 

Prepared Statement of The Honorable Geoff Davis, a Representative in 

Congress from the State of Kentucky 

Chairman Neal, Ranking Member English and Members of the Committee, my 

name is Geoff Davis, and I represent Kentucky’s 4th Congressional District. Thank 

you for allowing us this time to present ideas on ways to update and improve our 

existing tax incentives for alternative energy. I support offering tax incentives to 

promote the commercial development of technology that increases the availability of 

alternative fuels. There are many proposals before the Ways and Means Committee 

to encourage the development of energy alternatives. 

What I propose today is not a tax ‘‘incentive’’ in the traditional sense. Rather, the 

tax provision I am here to discuss is a simple method of returning money paid in 

the form of an unconstitutional tax. That money should be returned to the taxpayer 

and could better be used for reinvestment in research and development and the deployment of new technology for the production of cleaner energy. 

I am here today to discuss H.R. 1762, a bill to facilitate and expedite direct refunds to coal producers and exporters of the coal excise tax (CET) unconstitutionally 

imposed and collected on coal exported from the United States. Representative 

Artur Davis and I introduced this bill in March. The bill enjoys bipartisan support 

in both the House and Senate. The Senate bill is S. 373 and was introduced by Senators Jim Bunning and Jay Rockefeller. 

The bill is necessary to facilitate the refund of an unconstitutional excise tax illegally collected on coal exported from the U.S. The tax should never have been collected in the first place. This provision will help U.S. coal producers and exporters 

harmed by the collection of this tax on coal exports to recover the funds paid. Refunds can be used for reinvestment, research and development and the commercial 

deployment of programs such as CO2 sequestration, coal-to-liquids, clean coal technology and coal blending technology. 

This is an issue of equity and fairness. The Export Clause of the United States 

Constitution provides that ‘‘No Tax or Duty shall be laid on Articles exported from 

any State.’’ The Coal Excise Tax (CET) was declared unconstitutional as applied to 

exported coal in a 1998 U.S. district court case, Ranger Fuel v. United States. The 

U.S. Government never appealed this ruling. The Ranger Fuel case clearly establishes that the money paid in the unconstitutional taxes are due to the taxpayer. 

H.R. 1762 addresses problems associated with the two types of refund claims: administrative claims pursuant to the Internal Revenue Code and Tucker Act claims. 

Claims were filed by the industry under both scenarios. To date, the IRS has refused to refund all money owed, despite repeated court decisions requiring refund 

of principal and statutory interest. 

Tucker Act claims going back to approximately 1990 are based on a 2000 U.S. 

Court of Appeals for the Federal Circuit ruling entitled, Cyprus Amax Coal v. 

United States. In that case, the Court of Appeals held that producers and the exporters could claim a refund under the Tucker Act. The Tucker Act allows for the 

recovery of any Internal Revenue Tax illegally or erroneously collected within a 6- 

year statute of limitations. In the subsequent case of Clintwood Elkhorn Mining Co., 

et al vs. United States, the Court of Appeals for the Federal Circuit held that principal and statutory interest are due to the producers and exporters for the ‘‘illegally 

levied taxes.’’ 

Notwithstanding repeated rulings by the courts against the IRS that the principal 

and statutory interest amounts on certain CET refund claims are owed to coal producers and exporters, the IRS has again appealed the issue. The IRS has taken this 

position even though the courts have clearly established that the export of the coal 

makes the tax unconstitutional, and make the refund due. The IRS continues to appeal the issue of whether or not it owes principal and interest on claims filed by 

coal producers and exporters. The legislation is necessary to ensure that all claimants will be able to recover all amounts owed during the six year period of recovery 

under the Tucker Act and all administrative refund claims. 

The correction provided by H.R. 1762 is set out in the form of an off-code provision 

and will not result in a change to the Internal Revenue Code. There is no need for 

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the legislation to apply prospectively because the marketplace has addressed the 

issue for the future. 

H.R. 1762 is simple and straightforward. It will facilitate the direct refunds of, 

plus statutory interest on, the unconstitutionally collected tax to producers and exporters when they establish that the coal upon which the tax was paid was exported. The IRS has 180 days from filing of a claim to determine whether the exporter has proved the coal was exported and that a refund is due. The IRS then 

has another 180 days to refund the money owed to the taxpayer. The bill also tracks 

the exact statutory time periods for which refunds of the unconstitutionally collected 

tax are allowed under current law. Refunds will be made on taxes paid from the 

4th quarter of 1990 to present, even though the unconstitutional burden of this tax 

was imposed for an additional 12 years of exports (since 1978). Refunds of tax already paid through the administrative claims process will be prohibited to prevent 

any possibility of ‘‘double dipping.’’ 

H.R. 1762 will also end the needless litigation between industry and the U.S. Government concerning CET refunds. Although entitled to the refunds of the unconstitutional CET on exported coal, the Internal Revenue Service (IRS) continues to deny 

certain administrative claims, and continues to litigate issues that have been repeatedly ruled on by the courts. This affects both coal producers and unaffiliated 

coal exporters. 

These refunds will infuse the industry with additional capital that can be used 

for reinvestment and job creation. The coal excise tax was unconstitutionally levied. 

Coal excise taxes paid to the Treasury are owed to the taxpayers who bore the burden of this tax. These funds are better spent by the industry creating jobs and investing in research and development that promotes clean burning fuels and alternative energy sources. 

I appreciate very much the Committee’s time and consideration of this important 

measure, and ask that the measure be given consideration for passage this Congress. 

f 

Mr. LARSON. Thank you very much. I appreciate the testimony 

from the gentleman from Kentucky. 

I will now recognize the gentleman from Pennsylvania, Mr. Murphy, and ask that the gentleman from Washington state, Mr. Inslee, come forward as well, and just remind the panelists that we 

have a vote that is going on. 

Mr. Murphy. 

STATEMENT OF THE HONORABLE TIM MURPHY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF PENNSYLVANIA 

Mr. MURPHY. Thank you, Mr. Chairman and distinguished colleagues of the Committee. And thank you for allowing me to speak 

on behalf of my legislation, the Environmental Restoration Act. 

Please allow me to explain how this bill can be a key component 

of our national strategy to achieve energy independence. 

This Congress has been keenly aware of our nation’s need to 

produce more energy here at home. We import too much energy 

sources from the most volatile regions of the globe. These dependent relationships compromise our long-term national security, economic security, and energy security. 

More than a century ago, much of the modern industrial world 

was literally built by Pittsburgh Energy and Pittsburgh Steel. Andrew Carnegie did not manufacture steel in Pittsburgh because the 

region had abundant supplies of iron ore. Rather, steel was made 

in Southwestern Pennsylvania because we had energy, and lots of 

it, in the form of coal and the water resources to transport it. 

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To this day, Pittsburgh sits on top of a 250-year supply of coal. 

The Pittsburgh coal seam is one of the most valuable natural resource stockpiles in the entire world. As we seek to capitalize on 

domestic energy supplies, we must make coal, clean coal energy, a 

big part of this equation. 

Coal produces more than half our domestic electricity, and this 

Congress has provided extensive funding for research and clean 

coal initiatives that will virtually eliminate emissions in future 

plants. However, the coal mines of decades past did not emphasize 

clean air or clean water. 

One of the unfortunate legacies of the coal mining industry are 

mountains and mountains of waste coal, also known as gob. In the 

past, mining technology was less sophisticated in separating out 

coal from other materials. These gob piles are a mixture of coal, 

clay, rocks, soil, and other unusable raw materials. These massive 

piles can be seen on the horizon in any mining state. They are unsightly, and a source of air pollution from their dust and acid mine 

runoff that pollutes our streams every time it rains. 

However, the 1.1 billion tons of waste coal in the U.S. are potential sources of energy. By using waste coal as a fuel source in 

power plants, the existing waste coal sites can be reclaimed, the 

mine drainage associated with these sites ameliorated, and the 

mine lands can be reclaimed for other uses. It is an expensive process, however. But creating energy out of waste coal has obvious 

benefits for cleaning up the environment while producing that energy. 

Toward the objective of recycling more waste coal, the Environmental Restoration Act would encourage energy producers to address waste coal by providing a business tax credit for waste coal 

energy production. This year’s bill would provide a tax credit to an 

energy producer of 51.7 cents per million BTUs of heat input from 

the qualified waste coal recycling. Simply put, the bill would provide an essential incentive for the private sector to overcome the 

financial costs of recycling waste coal and maximize its energy potential. 

Mr. Chairman, I know you and Members of the Subcommittee 

share my unequivocal goal of obtaining energy independence based 

on cleaner alternative sources for energy for America. In pursuit of 

that energy independence, we need to conserve our energy use, diversify our energy sources, and explore new sources of energy. I believe the Environmental Restoration Act can be an indispensable 

part of such a strategy. 

Thank you for allowing me this time today and for your consideration of the Environmental Restoration Act. I look forward to continuing cooperation to secure an energy-independent future for our 

nation. Thank you. 

[The prepared statement of Mr. Murphy follows:] 

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Mr. LARSON. I thank the gentleman from Pennsylvania for his 

insightful testimony, and would now call upon the gentleman from 

Washington state, Mr. Inslee, a leader and introducer of an Apollo 

plan for energy independence for the country. 

Mr. Inslee. 

STATEMENT OF THE HONORABLE JAY INSLEE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON 

Mr. INSLEE. Thank you, Mr. Chairman. And we are all leaders 

on energy. We need to be. 

I have got four points I would like to quickly make. The first 

point, I was just reading an article asking what the new frontier 

is for America after the original western frontier and then the 

space frontier. What is the new frontier? 

And I would suggest the new frontier is clean energy. And we are 

here today, and this Committee can really advance the ball on that 

and I hope to work with the Committee to do that. I have introduced several bills—a plug-in hybrid bill, a co-generation bill, a 

Marine energy bill, and lastly, the big smorgasbord piece, the new 

Apollo energy project bill, which has a whole host of new tax incentives to help American businesses develop these new technologies. 

And I think this can play a pivotal role in what really is the new 

frontier of the new Apollo project for our country. 

The second point, I want to point to the Committee that it will 

have, I believe, some funds available to us to help develop these 

new economic marvels because we are at some point going to have 

a cap and trade system that will generate significant revenues to 

be used in these new investments. 

If you look at—we don’t know the precise contours of that program, but I think it is reasonable to expect that it could generate 

$20 billion by 2020 and $60 billion by 2025 from the auctions, permits that would be sold to bidders on the open market for the right 

to put carbon dioxide in the atmosphere. 

So as we go forward, this discussion of where we find tax incentives to incentivize new investment in American technology, I think 

we should be aware we are going to have some funds with which 

to make those investments. And that is a nice parallel situation, 

where we have a fund to produce this money and a way to use it 

to create technologies to reduce CO2 emissions. 

The third point, and I think it maybe might be one of the most 

important ones I would like to make, is that whatever this Committee does, I think it is extremely important to take a position 

that tax incentives are effective when they are long-term and predictable, and investors can have confidence that they will be there 

for longer than short periods of a 1- or 2-year period. 

I have been writing a book for the last year about the development of the clean energy in the United States—the electrification 

of the car, the wave energy, the solar energy, wonderful things that 

are going on, the energy efficiency industries, companies that are 

finding out how to use our computer systems, for instance, more efficiently. 

And I think every single businessperson I have talked to that is 

engaged in developing these new technologically oriented companies, they all have one thing to say to me: Do not do short-term 

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tax incentives. Do them long term. Because when you go to a venture capitalist or the equity funds, the only way to really make 

them work is to give predictability that the business plan is going 

to last more than 1 or 2 years. 

Investors are not interested in putting money into companies 

that are going to fold in 14 months because Congress has a change 

of flavor, and the tax break dries up and goes away. So the one 

thing I would really urge the Committee to do is whatever we do, 

do it for a longer period of time so that we can unlock the investment capital. 

One difference from the Apollo project, the original one and the 

second one that I am advancing, is that that one was done pretty 

much with all public funds. This one is one where we have got to 

use public funds to leverage huge investments from the private 

capital system, which can be much more change-inducing than 

even the original Apollo project. So I would urge you to make them 

long term. 

Fourth, I would urge the Committee to be scrupulous in its review of these new sources of energy. Not all ‘‘alternative’’ energy 

sources are created equal when it comes to carbon dioxide in particular. And I would urge the Committee to focus its precious resources of tax incentives on the measures that will help us deal 

with global warming. 

Now, one case in point is coal. I think there is a good possibility 

we can burn coal cleanly, capture the CO2, bury it underground, 

and produce electricity in an economic manner. However, some 

have suggested we do what is called coal to liquids, where we gasify coal, we make it into a liquid, and we burn it in our cars. 

That is something that does not reduce CO2 emissions, unfortunately. It will either create twice as many emissions per gallon of 

gasoline or, at best case scenario, only as good as gasoline. I don’t 

think we have enough resources to use our tax breaks on industries 

that will not solve the global warming problem. I urge us to target. 

And thank you for your interest, Mr. Chair. 

[The prepared statement of Mr. Inslee follows:] 

Prepared Statement of The Honorable Jay Inslee, a Representative in 

Congress from the State of Washington 

Thank you for allowing me the opportunity to testify before this Committee regarding the tax provisions included in energy proposals that I am leading. While 

I serve on the Energy and Commerce Committee, the Select Committee on Energy 

and Global Warming and the Natural Resources, this Committee has the opportunity to significantly impact policy that will take this country into the next new 

energy economy. 

Climate change is a fact. We have the opportunity to create jobs and become an 

international leader on the development of new technologies that reduce our emissions and change the way we rely on energy. 

The energy proposals that I have worked on with my colleagues from all over the 

country include the following tax provisions that I request your favorable review on. 

• The Get Real Incentives to Drive (GRID) PLUG–IN Vehicles bill, H.R. 589, will 

provide a $3,000 tax credit to consumers that purchase a vehicle that runs on 

electricity. 

• The Marine Hydrokinetic Renewable Energy Act provides for the inclusion of 

ocean, tidal and wave power in Section 45 Production Tax Credits, extends the 

5-year accelerated depreciation benefit to ocean and tidal technologies, as well 

as establishes a 30 percent Investment Tax Credit. 

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• The Industrial Cogeneration Act of 2007 would provide a 10 percent investment 

tax credit for combined heat and power properties with electrical capacities up 

to 50 megawatts. 

• The New Apollo Energy Act of 2007 is currently in draft form. This new bill 

will include several provisions that were in the New Apollo Energy Act of 2005. 

During the 109th Congress, H.R. 2828 included the following tax provisions: 

• Extension of the Biodiesel Tax Credits for 10 years. 

• Expand the Production Tax Credit for renewable resources by removing the 

1⁄2 credit periods for solar and geothermal so that they receive the full 10-year 

credit period. 

• Create incentives for re-tooling investment in new facilities and assets to 

produce energy efficient technologies and domestic clean energy production 

technologies. 

• There are provisions that will be included in the New Apollo Energy Act of 

2007: 

• Expansion of the Investment Tax Credit provided for solar energy and fuel 

cells and include small wind, geothermal, biomass and kinetic hydropower 

projects. 

• Extension and expansion of the Clean Renewable Energy Bonds for 10-years. 

• Increase in the annual cap on the 30 percent tax credit for residential solar 

tax credits and water heaters from $2,000 to $4,000. 

A cap-and-trade program to reduce greenhouse gas emissions would include an 

emissions allowance auction program that could generate tens of billions of dollars 

to offset tax incentives. Following the allocation and auction scheme proposed by 

Senator Feinstein and assuming that carbon credits will be trading at a minimum 

of $20 per ton—a conservative estimate, according to experts—we can expect annual 

revenues in 2010 to be about $20 billion. Following the same scheme—whereby a 

decreasing number of credits will be given away for free and an increasing number 

of credits will be sold at auction—we estimate that annual revenues by 2025 will 

be in the range of $60 billion. I advocate using a large portion of these revenues 

to fund tax provisions that will encourage private investment in energy efficiency 

and renewable energy technologies. That way we can help American businesses 

meet emissions reductions targets while increasing America’s competitive edge in a 

global clean energy economy. 

Lastly, as we move forward with crafting these proposals, I urge you to keep in 

mind that not all energy solutions are created equally. When it comes to providing 

for energy security and protecting the climate system, Congress must address the 

impacts that technologies like IGCC, or Coal to Liquids, have on the environment. 

With this in mind, I support IGCC (integrated gasification combined cycle) clean 

coal technology for electricity generation because it improves air quality and is highly compatible with carbon capture and sequestration. On the other hand, I do not 

think that the Federal Government should be providing incentives for the construction of coal-to-liquids plants, which could lead to a doubling of carbon dioxide emissions from transportation fuels. 

I look forward to working with the Committee to identify truly clean alternative 

energy technologies that will put America on a path toward a sustainable, secure 

and clean energy future. 

f 

Mr. LARSON. Well, I thank the gentleman from Washington 

state, and it is an honor to serve with him on the Select Committee 

on Energy Independence and Global Warming. And again, your 

knowledge and understanding of the need to leverage new financial 

platforms that will assist in this area of technology transfer, and 

your admonitions to the Committee with regard to the scarcity of 

resources and to appropriately invest them, are well received and 

taken. 

I thank the gentleman for his testimony. You may submit further 

testimony if you like. I would like to thank all the witnesses for 

their testimony today. It was extremely helpful as we move forward 

in crafting our legislation in the Committee. 

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Without objection, Chairman Neal has asked that the record will 

remain open for 2 weeks for any additional material that needs to 

be included. 

If there are no further comments or questions, the hearing will 

stand adjourned. 

[Whereupon, at 4:45 p.m., the Subcommittee was adjourned.] 

[Submissions for the record follows:] 

Statement of The Honorable Jerry Weller, a Representative in Congress 

from the State of Illinois 

Thank you, Mr. Chairman, for allowing me to testify on what I feel is one of the 

most important issues facing our Nation. 

As we look for ways to become a more energy independent nation, I believe we 

should continue down the path that we laid in the Energy Policy Act of 2005. With 

the Energy Policy Act of 2005, we took steps forward in reducing our dependence 

on foreign oil by creating policy that increased the use of renewable energy in tandem with increasing our domestic production and increasing energy efficiency and 

conservation. 

Mr. Chairman, as I mentioned last week at the hearing many of the tax incentives included in the energy bill have produced real results in my district back 

home. 

Due to the energy bill, we have seen over $100 million invested in wind energy 

and 4 to 5 new ethanol and biodiesel plants in my district. Stepan Company, a biodiesel producer located in Joliet, Illinois, doubled its production of biodiesel fuel because of the changes made in the energy bill. Transco Products Inc., a small manufacturing facility that provides services for many of our energy providers, has tripled 

the number of people they employ since passage of the energy bill. Even last week, 

I was at the ground breaking of a new biodiesel facility in Seneca, Illinois that will 

produce roughly 30 new permanent jobs and approximately 60 million gallons of biodiesel. 

In total, we saw investment in renewable energy double in the United States to 

$68 billion. It is this investment we need to continue to fuel. The tax incentives we 

passed are spurring investment and in turn aiding us towards the goal of energy 

independence. 

As Congressman McDermott mentioned in his testimony, together we introduced 

H.R. 1385, the EXTEND the Energy Efficiency Incentives Act of 2007. With the support of a broad business coalition, from the utilities to builders and manufacturers, 

this measure continues on what we started in the energy bill with tax incentives 

for residential and commercial energy efficiency. 

Among its provisions the bill extends both the tax credit for energy efficient residential new home and equipment and the tax deduction for energy efficient buildings to 2010 and 2011. Often overlooked, energy efficiency is a great tool that we 

can use to achieve energy independence. By increasing efficiency, we can reduce energy demand and also reduce carbon emissions. 

Mr. Chairman, in closing, I want to also touch upon another bill I introduced earlier this year. 

H.R. 765 establishes a new tax credit for consumers who purchase a new concept 

vehicle, which a U.S. auto manufacturer has introduced, that combines hybrid and 

flexible fuel technologies that will be available to consumers in the near future. 

With a maximum credit amount of $3,500, it is this marriage of these technologies 

that will create a vehicle that will be a better steward to our environment and will 

further reduce our dependence on foreign sources of oil. 

If just 5 percent of the U.S. vehicle fleet were powered by hybrids operating on 

E85 ethanol, oil imports could be reduced by about 140 million barrels a year. In 

addition, these vehicles will produce about 25% less carbon dioxide. In providing 

this tax credit, we can promote a greater sense of innovation for the future of automobiles. 

Mr. Chairman, I want to thank you again for letting me testify here today and 

I look forward to working with everyone on the Committee as we look for solutions 

to the energy crisis we as a Nation are facing. 

f 

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Statement of The Honorable Pete Hoekstra, a Representative in Congress 

from the State of Michigan 

Thank you, Chairman Neal and Ranking Member English, for the opportunity to 

testify before you on tax legislation that is important for energy conservation, the 

reduction of harmful emissions and the growth of our nation’s economy. 

A small business owner in Michigan’s Second Congressional District brought to 

my attention a problem with the U.S. tax code, a problem that harms the environment and limits economic activity in an important American industry. The problem 

is that many of the heating, ventilation, air conditioning and refrigeration (HVACR) 

systems in today’s buildings are old, inefficient and harmful to the environment and 

need to be replaced. 

The average lifespan of an air conditioning system in a commercial building is 15 

to 20 years, yet the tax code treats them as though their lifespan is 39 years. The 

depreciation schedule in the tax code acts as a disincentive to invest and replace 

large, old and inefficient HVACR systems in commercial buildings. 

The unfair treatment of HVACR systems in the tax code is the reason I introduced, with bipartisan support, H.R. 1888, the Cool and Efficient Buildings Act. 

The legislation would shorten the depreciation schedule for HVACR systems in 

commercial buildings to 20 years, which would more accurately reflect the lifespan 

of these units. The commonsense change would positively impact energy efficiency, 

the environment and economy. 

Reducing the depreciation period will provide an incentive for building owners to 

retire old systems and upgrade to more efficient equipment by allowing them to expense more of the costs of the systems each year. By replacing a building’s existing 

units, building owners and managers lower energy costs and energy demand. 

Such a simple change in the tax code will improve the environment in many important ways: First, as I mentioned, the replacement of old systems with newer, advanced technological systems greatly increases efficiency. New chillers are 40 percent more efficient than chillers installed 20 years ago. 

The EOP Group, an analytical consulting firm, found replacing inefficient commercial cooling equipment will save 137 trillion BTUs a year by 2015. The savings 

is equivalent to the amount of energy consumed by approximately 1.4 million average U.S. households. Commercial cooling equipment is one of the largest users of 

electricity, replacing old systems with newer technology is one of the easiest energy 

efficiency measures to undertake. 

Secondly, it is estimated that the accelerated replacement of cooling equipment 

would reduce carbon dioxide emissions by 1 million metric tons in 2007, rising to 

95 million metric tons in 2015. The savings are equivalent to emissions released by 

approximately 174,672 U.S. passenger vehicles in 2007 and would increase to about 

16.5 million passenger vehicles in 2015. 

Thirdly, it would provide an incentive for the replacement of the 33,300 chillers 

still in use in 2005 that use chlorofluorocarbon (CFC) refrigerants. This represents 

42 percent of the original 80,000 CFC chillers banned from production in the United 

States in 1995 due to concerns over the impact of CFCs on the environment. 

The U.S. air conditioning and refrigeration industry employs more than 130,000 workers and contributes $30 billion annually to the U.S. economy. The U.S. HVACR 

industry exports $4.7 billion annually, providing an industry trade surplus of more 

than $2.1 billion. 

Lowering the depreciation period to an accurate 20 years would encourage building owners to invest in new systems, save small businesses money and create business for American manufacturers and contractors. 

H.R. 1888, the Cool and Efficient Buildings Act, would make a commonsense 

change to the U.S. tax code to the benefit of the U.S. economy and all Americans. 

I would like to express my appreciation to the 28 Members of Congress who have 

joined me in co-sponsoring H.R. 1888 in the 110th Congress and the various organizations that support this measure, including the Air Conditioning Contractors of 

America, the Air-Conditioning and Refrigeration Institute, Associated Builders and 

Contractors, Associated General Contractors, the Council for an Energy Efficient 

Economy, and the Sheet Metal Air Conditioning Contractors National Association. 

Mr. Chairman, thank you again for the opportunity to present this legislation before your Subcommittee. 

f 

Statement of AARP 

On behalf of AARP’s 38 million members we thank you for holding this hearing 

on the 2007 Medicare Trustees’ Report. The annual Report of the Trustees offers 

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an important opportunity for Members of Congress to closely examine the financial 

health of the Medicare program. 

Hospital Insurance (HI) Trust Fund 

The new insolvency date for the Hospital Insurance (HI) Trust Fund is 1 year 

later than projected in last year’s report, which means that Medicare beneficiaries’ 

coverage is not in immediate jeopardy. It is important to note that predicting solvency over the long term is very difficult since it depends on estimates of both payroll tax income and health care spending. Part A solvency has averaged 12 years 

since the program began 36 years ago. In the past, Congress has stepped in to either increase Trust Fund income or decrease spending from the Trust Fund so that 

the reserves are not depleted. 

The Trustees’ findings are not unusual for Medicare Part A which has averaged 

a 12 year solvency projection since the program began 36 years ago (see Chart 1, 

p. 8). 

The HI Trustees’ report can be viewed as an early warning system—providing 

Congress with ample opportunity to act judiciously to strengthen and improve the 

Medicare program for current and future beneficiaries. This report is no different, 

but it does highlight the urgent need to control rising costs across the entire health 

care system—not just within Medicare. 

Supplementary Medical Insurance (SMI) Trust Fund 

Because the SMI or Medicare Part B Trust Fund is funded by premiums and general tax revenues, it faces cost pressure, but not insolvency. As in the private sector, 

Part B growth still outpaces the growth in the Gross Domestic Product (GDP) due 

in large part to growth in physician and hospital outpatient spending. Estimating 

conventions require the Trustees’ baseline to reflect current law, which include significant cuts in physician payments scheduled to take effect as a result of the Sustainable Growth Rate (SGR) formula. Congress has consistently voted to override 

these mandated reductions since 2003. CMS actuaries have estimated that continuous overrides of the SGR would result in $300–$400 billion in aggregate expenditures in the Part B program over 10 years. 

Each time Congress overrides the SGR there is a direct cost for Medicare beneficiaries. That’s because by law, the monthly Part B premium is set at 25 percent 

of Part B spending. The Part B premium has doubled since 2000—due in large part 

to increases in physician spending. The Trustees estimate that premium increases 

could be as much as 20 percent higher over 10 years if Congress prevents projected 

reductions in physician payments. Medicare beneficiaries would also pay higher copayments for physician care as payments to physicians increase. 

Congress must address the physician payment issue in order to control Part B expenditures and protect Medicare beneficiaries from burdensome out-of-pocket costs. 

Short-term fixes simply exacerbate spending growth and only delay needed discussions about how to slow rising expenditures. A new Medicare physician payment 

system should be designed with the beneficiary in mind by holding cost-sharing and 

premium increases down and improving the care beneficiaries receive. AARP believes Medicare’s physician payment system should be changed from one that rewards quantity to one that rewards quality. 

Medicare Advantage 

Because Medicare Advantage (Part C) plans are required to offer all Part A and 

Part B benefits, they are paid for from both the HI and SMI trust funds. 

The Medicare Trustees note that in 2006 there was a substantial increase in MA 

enrollment due to higher payments for MA plans provided under the Medicare Modernization Act (MMA). Ultimately, the solvency of the Medicare Trust Funds is negatively affected by current excess payment policies to MA plans. 

AARP believes Medicare payments should be neutral with respect to coverage options. Therefore, AARP urges Congress to more closely align MA plan payments 

with payments for traditional Medicare. 

Currently, Medicare payments clearly favor the MA program over traditional 

Medicare, which is unfair to the majority of beneficiaries who participate in the traditional program. All taxpayers and all Medicare beneficiaries—not just the 18 percent of Medicare beneficiaries enrolled in private MA plans—are funding these excess payments. 

When private plans were introduced to Medicare, they were expected to provide 

extra benefits to beneficiaries by achieving greater efficiencies at a lower cost to the 

program than traditional Medicare through the use of care coordination, negotiated 

prices, provider networks and other strategies. Given the fact that MA plans have 

control over hospital and physician services, as well as the opportunity to manage 

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and coordinate care, it is reasonable for Congress to hold MA plans to payment levels that are no more than those for the fee-for-service program. 

In order to minimize the disruption to beneficiaries who rely on MA plans for 

their health care, AARP believes Congress should phase out MA plan payments that 

exceed fee-for-service costs over a period of time. Because geographic variations in 

spending continue to be a problem in the Medicare program, including within the 

MA program, AARP believes it is important that Congress address the payment 

areas with the largest discrepancies first. It is important that those areas of the 

country that provide care most efficiently are not penalized. 

Medicare Funding Warning 

The Trustees’ report includes the second ‘‘funding warning’’ in this year’s annual 

report. The Medicare Modernization Act requires the Trustees to issue this warning 

if general revenues account for 45 percent of combined HI and SMI expenditures 

at any period during a 7-year window. 

AARP believes the 45 percent trigger is an arbitrary limit and provides a false 

alarm about Medicare’s funding situation. General revenues have always financed 

a significant portion of Medicare Part B. 

Moreover, because of the way the trigger is designed, policy options to avoid the 

trigger are limited and may do little to help long-run cost growth. For example, 

while researchers have documented worrisome trends in obesity rates and chronic 

conditions for current and future Medicare beneficiaries, efforts to improve preventive services may reduce Part A costs, but increase Part B costs, thereby setting off 

the trigger. Similarly, shifting services from inpatient to outpatient settings has the 

same effect. 

AARP believes the 45 percent trigger should ultimately be repealed so that Congress is not distracted from the real issue—runaway health costs in the entire 

health care system. Runaway costs burden not only Medicare and other Federal 

health care programs, but negatively impact state and local governments, employers, and individuals. Congress must begin to address the problem of system wide 

health care cost growth—it is not just a Medicare problem, and it cannot be addressed in Medicare alone. 

Medicare Part D 

Because Part D is financed similarly to Part B, it too faces cost pressure, but not 

insolvency. The Trustees’ Part D cost estimates are substantially lower than those 

reported last year, primarily due to lower prescription drug plan bid submissions. 

However, the Trustees are projecting the average annual increases in spending to 

be nearly 13 percent—due mainly to increases in per capita drug costs (about 2⁄3) 

and enrollment (about 1⁄3). 

The projected increase in Part D spending is clear evidence of the need for Congress to enact policies to further help lower drug costs. 

AARP supports legislation to: 

• Remove the prohibition on the Secretary of HHS from negotiating with pharmaceutical manufacturers on behalf of Medicare beneficiaries (H.R. 4, S. 3); 

• Allow for a pathway for the approval of lower cost, safe, comparable, and interchangeable versions of biologic drugs (H.R. 1038, S. 623); 

• Legalize personal and wholesale importation of prescription drugs, starting with 

Canada (H.R. 380, S. 242); 

• Prevent abuses in patent settlements between generic and brand name prescription drug manufacturers (S. 316); and 

• Provide full funding for comparative effectiveness research authorized in the 

MMA. 

Conclusion 

The Medicare program is vitally important to tens of millions of Americans and 

their families. Each year, the Trustees’ Report presents the challenges faced by the 

program and offers the opportunity to make some improvements for the future. 

AARP believes Congress must make changes to the way Medicare pays physicians 

and Medicare Advantage plans to keep the program strong for the future. In addition, Congress can take important steps to help reduce the price of prescription 

drugs for all Americans. Ultimately, however, it must address the underlying rate 

of growth of health care costs in the entire health system—not just Medicare—if we 

are truly to achieve meaningful reform. 

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Chart 1 

Projections of Part A Solvency Have Varied Widely 

Average number of years until insolvency is 12 (1970–2007) 

Source: Derived from CRS, April 1995, and the Annual Reports of the Board of Trustees of 

the Hospital Insurance Trust Fund, 1996–2007. 

Notes: 

• No insolvency dates indicated in 1973 and 1974. 

• No long-range projection in 1989. 

• Range reported, as indicated by the white bars: 1975 Report—late 1990s; 1976 Report— 

early 1990s; 1977 Report—late 1980s. 

f 

Statement of David B. Goldstein, Natural Resources Defense Council 

I. Introduction 

My name is David B. Goldstein and I am Energy Program Director of the Natural 

Resources Defense Council, a national environmental advocacy organization with 

over 1.2 million members and activists nationwide. NRDC has been active in developing and advocating an energy strategy that is based on providing energy services 

at least cost. The strategy offers environmental benefits as well as promoting economic development and the growth of jobs. 

The Alliance to Save Energy, a bipartisan, nonprofit coalition of more than 120 

business, government, environmental, and consumer leaders, also supports the recommendations in this testimony. 

The foundation of a least cost strategy is energy efficiency. Energy efficiency 

means the provision of the same (or better) energy services for lower energy use and 

cost, substituting more advanced technologies or designs for brute force use of energy resources. Although energy efficiency is defined as providing at least the same 

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1 A large number of books and articles documenting the large efficiency potential that can be 

realized at no cost has been published over the past 30 years. The following is a selection of 

some of the most convincing: 

S.D. Freeman, et al. ‘‘A Time To Choose.’’ Cambridge, MA: Ballinger Publishing, 1974. 

Ahern, Doctor, et al. ‘‘Energy Alternatives for California: Paths to the Future’’ RAND Corporation, R–1793–CSA/RF, 197. 

Lovins, A. and H. Soft Energy Paths. P. Craig, D. Goldstein, R. Kukulka, A. Rosenfeld. ‘‘Energy Extension for California: Context 

and Potential.’’ Proceedings of the 1976 Summer Workshop on an Energy Extension Service. 

Lawrence Berkeley Laboratory, LBL–5236, 1977. 

R. Cavanagh, et al. ‘‘Choosing an Electrical Energy Future for the Pacific Northwest: An Alternative Scenario.’’ U.S. Department of Energy. DOE/CS/10045–T1, 1980. 

L. King, D.B. Goldstein, et al., ‘‘Moving California Toward a Renewable Energy Future,’’ Natural Resources Defense Council, San Francisco, 1980. 

Solar Energy Research Institute: ‘‘A New Prosperity: Building a Sustainable Energy Future— 

The SERI Solar/Conservation Study,’’ Brickhouse Publishing, Handover, MA 1981. 

D.B. Goldstein, M. Gardner, et al. ‘‘A Model Electric Power and Conservation Plan for the Pacific Northwest,’’ Northwest Conservation Act Coalition, 1982. 

Northwest Conservation and Electric Power Plan, Northwest Power Planning Council, Portland, OR, 1986. 

J. Goldemberg, et al., Energy for a Sustainable World, World Resources Institute, Washington, 

D.C., 1987. 

1989 Supplement to the Northwest Conservation and Electric Power Plan. Northwest Power 

Planning Council, Portland, OR, 1989. 

‘‘California’s Energy Outlook, 1987 Biennial Report’’ and ‘‘1987 Conservation Report,’’ California Energy Commission. 

A. Meyer, H. Geller, D. Lashof, M.B. Zimmerman, P.M. Miller, D.B. Goldstein et al., America’s 

Energy Choices, Union of Concerned Scientists, Cambridge, MA (1991). 

Energy Efficiency Report, California Energy Commission, 1993. 

S. Bernow, et al., ‘‘Energy Innovations: A Prosperous Path to a Clean Environment,’’ ASE, 

ACEEE, NRDC, Tellus Institute, UCS, 1997. 

Inter-Laboratory Working Group on Energy Efficient and Low-Carbon Technologies, ‘‘Potential 

Impacts of Energy Efficient and Low-Carbon Technologies by 2010 and Beyond,’’ U.S. Department of Energy, Sept. 1997. 

A.H. Rosenfeld, and D. Hafemeister, ‘‘Energy Efficient Buildings,’’ Scientific American, April 

1998. 

R. Watson, Oil and Conservation Resources Fact Sheet: A Least-Cost Planning Perspective, NRDC, San Francisco, 1998. 

Douglas H. Ogden. Boosting Prosperity: Reducing the Threat of Global Climate Change 

Through Sustainable Energy Investment. American Council for an Energy Efficient Economy, 

ACEEE Report Number E963, 1995. 

‘‘Northwest Power in Transition.’’ (Northwest Power Planning Council, Portland, OR, Publication 98–22A, Adopted July 1, 1998. 

Howard Geller, Stephen Bernow, and William Dougherty. Meeting America’s Kyoto Protocol 

Target: Policies and Impacts. American Council for an Energy Efficient Economy, ACEEE Report #E993, 1999. 

Howard Geller, Steven Nadel, R. Neal Elliott, Martin Thomas, and John DeCicco. Approaching the Kyoto Targets: Five Key Strategies for the United States. American Council for an Energy Efficient Economy, ACEEE Report #E981, 1998. 

Inter-Laboratory Working Group. Scenarios for a Clean Energy Future, Oak Ridge National 

Laboratory and Lawrence Berkeley National Laboratory, (2000). 

‘‘Cutting Carbon Emissions at a Profit’’ (F. Krause, International Project for Sustainable Energy Paths, IPSEP, 2001). 

Geller, H. Energy Revolution: Policies for a Sustainable Future. Island Press, 2003. 2Saving Energy, Growing Jobs: How Environmental Protection Promotes Economic Growth, 

Profitability, Innovation, and Competition. David B. Goldstein. (Point Richmond, California: Bay 

Tree Publishing, 2007.) 

level of energy services, in many or all cases, the value of service improvements for 

efficiency technologies and designs exceeds the energy savings themselves. 

Comprehensive studies of least cost energy futures, whether performed by state 

energy offices, national labs, environmental advocates, or national governments virtually always find that energy efficiency is the dominant new resource by virtue of 

its lowest cost and its near-universal availability.1

And more recent analysis shows that where policies have promoted efficiency aggressively, the remaining efficiency resource grows, because the policies lead to innovation and new technology development.2

II. Energy Efficiency is the Biggest, Cheapest, and Fastest New Energy Resource Available to the Nation 

A. Energy Efficiency is the Biggest GHG Reduction Resource 

Both prospective analyses of energy options and retrospective studies of where 

new energy has come from in jurisdictions that have promoted energy efficiency 

reach the same conclusions: that energy efficiency is by far the largest available resmartinez on PROD1PC64 with HEARING

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3 ‘‘Energy Technology Perspectives—Scenarios and Strategies to 2050.’’ International Energy 

Agency, 2006. 

source. Usually the contribution of efficiency is larger than all other options combined. 

An International Energy Agency study that concluded that global emissions could 

be held constant by 2050 (compared to a business as usual doubling) found that 78% 

of the emission savings were due to energy efficiency, 12% to renewables, and 10% 

to nuclear power.3 Yet, despite accounting for the lion’s share of the benefits, very 

little discussion is devoted to efficiency and to the policies needed to achieve it. 

The energy efficiency advocacy community’s 1992 study America’s Energy Choices 

found that greenhouse gas emissions could be cut by 70% in 40 years, when the 

business as usual projection was for an increase of about 55%. Efficiency alone reduced emissions by 55% compared to business as usual, while renewables increased 

the reduction to 82%. So efficiency was more than twice as important as an emissions reduction strategy than renewables and fuel substitution combined. This result occurred despite the fact that efficiency levels were limited to then-current technology, while we now see that where policy has been aggressive, new options are 

available in 2006 that were not foreseen in 1992. 

Looking retrospectively, California has held its energy electricity consumption per 

capita constant since 1975, compared to 60% growth for the rest of the country. Considering that the rest of the country was also improving efficiency, this result means 

that California now derives more than half of its electricity supply from energy efficiency. Renewables make up 13% or 14% of what’s left. 

B. Energy Efficiency is the Cheapest GHG Reduction Resource 

While some zero carbon approaches, such as renewable energy are cost-effective 

today, they offer little purely cost advantage compared to conventional resources. 

(They do offer other economic advantages such as diversity of energy supply, promotion of U.S. competitiveness, and reduction of import dependence.) Other zero 

carbon sources, such as nuclear, are substantially more expensive than conventional 

supply. But efficiency is typically one-third to one-half the cost of conventional energy supply. 

Efficiency is based on investments in new technologies, and on better designs that 

out-perform existing ones. Frequently, these more efficient products have side benefits whose values dwarf even the value of the energy savings. 

By promoting efficiency, we encourage innovation and the development of new 

technologies. Thus, even the potential contributions in studies like that of the IEA 

underestimate what efficiency can deliver if we really try, and overestimate the 

costs of expanding the markets for efficiency. For the products in which standards 

and incentives have been strongest and most consistent, the potential for further increases in efficiency is undiminished. In contrast, in products where little progress 

has been made, due to failure of energy policy to promote them, the potential is 

smaller. 

So efficiency technologies follow a learning curve, in which increased experience 

leads to improved performance and lower cost. 

Renewable energy sources have also exhibited a learning curve effect, which is another reason for supporting them. But they are mostly at least twice the cost of efficiency. 

C. Energy Efficiency is the Fastest GHG Reduction Resource 

Energy efficiency can be obtained much faster than other resources. For example, 

the Energy Policy Act of 2005 established tax credits for super efficient air conditioners when it was passed in August 2005. By 2006, in markets where the tax credit was promoted by utilities, 15% of all air conditioners sold to existing homes were 

at the efficient level. No other resource could have come on line from a standing 

start so strongly in one year. 

Other incentives for efficient products have achieved their savings with lead times 

measured in months, not years. Even the slower policy mechanisms for energy efficiency deployment, such as codes and standards, have lead times of only 3–5 years. 

III. Incentives for Energy Efficiency 

A. Efficiency Provides the Best Bang for the Buck 

Efficiency resources are cheaper than conventional resources as discussed above. 

But from the point of view of the Federal budget, the situation is even better than 

that. Tax incentives for energy efficiency are leveraged in two different ways. 

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4See http://newbuildings.org/gtf/index.htm. 

The first form of leverage is straightforward. Tax incentives such as those in the 

McDermott/Markey/Weller Bill (H.R. 1385) are designed such that the tax incentive 

covers typically 30%–50% of the incremental costs of energy efficiency. Thus, each 

dollar spent by the Treasury is matched by $1–$2 of investment by the private sector. 

More importantly, these tax incentives are designed to encourage only the most 

advanced technologies. Virtually no Federal money will be spent on ‘‘free riders’’ because the number of taxpayers achieving these levels of efficiency is utterly insignificant. For the commercial buildings tax deduction, for example, a detailed study 

by the New Buildings Institute could find only 100 buildings nationwide that met 

the McDermott/Markey/Weller energy efficiency target.4 So virtually any taxpayer 

taking advantage of the incentives is producing new energy savings that would not 

have occurred otherwise. 

More importantly, these incentives, along with the manufacturer tax credits for 

efficient appliances, are part of a program that has been called market transformation. Such a program is an effort to introduce new technologies into the marketplace by making it financially feasible for suppliers to offer them, or viewed alternately, by providing market signals such that consumers will be able to buy or 

specify them. These products and services are expected to be (and have always 

turned out to be) cost effective on their own merit. The incentives are merely 

priming the pump by providing reinforcing market signals that these heightened 

new levels of efficiency can be produced and sold by suppliers and that a market 

for them exists so that consumers can demand them. 

The tax incentives will greatly ramp up the prevalence of these efficiency measures for the 3 or 4 or 5 years they are in effect, but after the incentives expire, other 

market interventions and perhaps simply the self-interest of all participants is overwhelmingly likely to provide greater and greater market share for these technologies in the future. Thus, by paying for the first few years of super efficiency, 

the government is buying higher market shares and infinitely many years into the 

future of new energy savings. 

Perhaps the best example of this sort of market transformation is the ‘‘Golden 

Carrot’’ TM program of the Super Efficient Refrigerator Program, Inc. (SERP). The 

utilities participating in SERP offered a contract of up to $30 million to the manufacturer that could offer the greatest energy savings in mass-produced refrigerators 

for the least incentive per unit. This contest produced a new generation of refrigerators that saved 30%–40% compared to the stringent 1993 standards by the mid1990s. 

But the experience in meeting the SERP specifications, both by the winner of the 

program and by other companies that needed to compete with the winner, produced 

technologies that were so well-established in industry that they were accepted in a 

consensus efficiency standard adopted by the Department of Energy effective in 

2001. 

So, by paying for less than 200,000 refrigerators, the SERP market transformation effort produced a situation in which over 7 million refrigerators sold every 

year from 2001 and onward will meet the efficiency targets of the program. This 

is the kind of leverage that we can expect from the tax incentives for energy efficiency in buildings and appliances. 

B. The Consequences of Better Cost Effectiveness in a Budget-Constrained World 

Ideally, Congress should provide economic incentives for any improvements to the 

energy system that are cost effective or needed for the environment. But this would 

likely entail a budget far greater than will actually be available. How can we 

achieve the best environmental and economic result within a budget constraint? 

The answer to that is very clear. Congress can get the greatest amount of greenhouse gas emission savings—and also the greatest amount of economic benefits— 

within a given budget constraint by rank-ordering all of the available options in 

terms of environmental and economic benefits per dollar of Federal money spent, 

and then picking the cheapest resources first. This economic-based approach is 

much different from a politically-based approach of ‘‘sharing the wealth’’ among different aspirants to tax incentives. The ‘‘sharing the wealth’’ principle guarantees 

that every dollar spent on the less cost-effective resources will reduce environmental 

benefits and economic benefits compared to a scenario that goes with the cheapest 

buys first. 

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While NRDC has not done a comprehensive analysis of all the options before this 

Committee, we feel confident that when such an analysis is done, it will find that 

the energy efficiency measures for buildings are at the very top of the list. 

Therefore, assuming that this result is validated, the efficiency tax incentives 

should be fully funded and the remaining budget either divided up among other aspirants or increased to cover all meritorious investments. 

C. Additional Economic Benefits of Energy Efficiency in the Commercial Sector 

While the following may or may not be counted by the Joint Committee on Taxation, the plain economic fact is that tax incentives for energy efficiency in commercial applications, such as the commercial buildings tax deduction in McDermott/ 

Markey/Weller, actually raise revenues for the government rather than decreasing 

them. 

The reason for this is that energy costs in a business are a deductible business 

expense. A company in the 35% tax bracket that saves $1.00 square foot on in its 

energy bill (about the amount that it would take to qualify for the commercial buildings tax deduction) finds itself with that extra dollar no longer being deductible on 

its corporate income tax return, so the Federal Government gets $0.35. It is quick 

to see that a $2.25 tax deduction that produces a $1 annual increase in taxable income will pay back its initial cost to the government in enhanced tax collections 

within 3 years of the building being placed in service. This effect is so large that 

we have estimated that by the end of 10 years, the cumulative enhanced revenues 

from the commercial buildings tax deduction will pay for the entire cost of all the 

other incentives in the bill. And over 20 years, of course, the effect becomes much 

larger because of market transformation effects increasing the revenue generation 

and the fact that the tax deduction sunsets after 5 years. 

IV. Energy Efficiency Incentives Produce Jobs 

Expanding energy efficiency increases jobs in 2 different ways. First, the employment intensity of energy efficiency is similar to that of the rest of the economy. Energy efficiency involves contractor labor in installing efficiency measures in buildings, manufacturing labor in producing the efficiency technologies, and service sector labor in designing more efficient buildings and products. These are similar in 

labor intensity to the rest of the economy. But energy supply itself has much lower 

job intensity. Thus, a project that costs a million dollars and saves a million dollars 

in energy costs over its lifetime will produce an increase in net jobs because the million dollars spent on efficiency is more labor intensive than the million dollars spent 

on energy. 

This effect is enhanced by the fact that all of the energy efficiency measures of 

the type being discussed here are cost effective. Rather than $1 million of investment in energy efficiency saving a $1 million in energy supply, it saves $2 or $3 

million in direct energy costs. The additional savings represents money available to 

businesses and consumers to either distribute to their shareholders or to spend on 

other pursuits. This re-spending also produces substantial increases in employment. 

Energy efficiency also serves to enhance domestic employment as opposed to foreign jobs. And the new jobs produced are not merely within the United States as 

a whole, but within communities as they currently exist. So, for example, when new 

energy efficient homes are constructed, the builders and their contractors offer these 

services through jobs that are located at the site of the construction. These jobs cannot be outsourced to another region of the United States, much less to a foreign 

country. When home retrofit projects are initiated, they provide domestic jobs for 

energy raters who will advise the householder on what the most profitable upgrades 

are and then will inspect the finished work to assure both the IRS and the resident 

that the work has been done properly, for contractors and subcontractors who will 

do the work, and to component suppliers who will sell the insulation, equipment, 

etc. All of these jobs are domestic. 

In contrast, most supply-side resources (with the exception of distributed energy 

resources such as solar) may or may not offer domestic jobs, but even when they 

do, the jobs often are located in remote areas where the new employment opportunities may come at the cost of disrupting family lives and establishing unstable (boom 

and bust) energy development communities. 

More broadly, incentives for energy efficiency at the highest levels of technology 

encourage American businesses to be at the cutting edge of the world in terms of 

new technologies. These build on American strengths: innovation and the ability to 

start small businesses that can be competitive and facilitate the development of new 

companies that can become global leaders. 

They increase U.S. competitiveness and promote export markets. 

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V. Summary 

We urge the Committee to consider the manifold economic as well as environmental benefits of energy efficiency when deciding what energy incentives to offer. 

We encourage the Committee to support all cost effective, performance-based green 

energy incentives. 

If all worthy efficiency and renewable energy incentives cannot be funded, we 

urge the Committee to maximize environmental and economic benefits by fully funding the most cost effective proposals first. 

f 

Enterprise Rent-A-Car 

April 23, 2007 

The Honorable Richard E. Neal, Chairman 

Subcommittee on Select Revenue Measures 

Committee on Ways and Means 

U.S. House of Representatives 

Washington, D.C. 20515 

Dear Chairman Neal and Ranking Member English: 

Enterprise Rent-A-Car Company (‘‘Enterprise’’) respectfully tenders this letter in 

response to the Subcommittee’s request for submissions in connection with its April 

24, 2007 hearing on proposals for Federal tax incentives for alternative energy 

sources. Enterprise appreciates the opportunity to communicate its views to the 

Subcommittee. 

Enterprise is a family-owned company headquartered in St. Louis, Missouri, that 

is celebrating its 50th Anniversary in 2007. Enterprise is the largest car rental company in North America with almost 7,000 airport and local rental offices, 65,000 employees, and approximately 900,000 vehicles in its rental and leasing fleet. 

For its 50th Anniversary, Enterprise recognized the opportunity to celebrate the 

company’s first 50 years by making meaningful and significant commitments for the 

next 50 years. To that end, Enterprise has: 

• Partnered with the National Arbor Day Foundation and the U.S. Forest Service 

to underwrite the planting of 50 million trees—1 million trees a year for each 

of the next 50 years in national forests throughout the United States, as well 

as in Canada and Europe. 

• Donated $25 million to a leading plant science center to start the Enterprise 

Rent-A-Car Institute for Renewable Fuels, which is tasked with finding new 

ways to create fuel from renewable and reliable plant sources. 

Enterprise will continue its efforts to decrease the impact of the company’s operations on the environment in the future. The company’s approach is built on a commitment to ensure the sustainability of Enterprise’s business, as well as the sustainability of the world Enterprise shares. For example: 

• 47% of the company’s worldwide rental fleet averages 28 mpg or better . . . and 

28% averages 32 mpg or better. 

• 33% of Enterprise’s U.S. fleet qualify for the Environmental Protection Agency’s 

‘‘SmartWay Seal.’’ 

• Enterprise’s fleet is populated with a significant number of alternative fuel vehicles—from 38,000 FlexFuel vehicles to 3,000 gasoline/electric hybrid vehicles—making it the largest fleet of alternative fuel vehicles among the country’s 

car rental companies. 

• Enterprise manages, in major metropolitan areas, vanpool businesses that provide more than 1,700 vans that transport over 16,000 urban commuters each 

day. 

Enterprise does not have a set of concrete policy recommendations to make to the 

House Ways and Means Committee or to Congress with respect to proposals on tax 

incentives for alternative energy sources. However, Enterprise believes that it is the 

role of the Federal Government to incentivize the economic behavior it seeks to encourage—such as more widespread use of biofuels such as E85 and biodiesel, increased consumer demand for flexible fuel vehicles, and the expansion of the infrastructure for providing these biofuels to consumers. As a nationwide company that 

has already made both the financial and operational commitment to biofuels, Enterprise is prepared to provide whatever information may be of interest to the Committee as it considers its Federal policy options in the alternative fuel area. 

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Please do not hesitate to contact me if there are questions about Enterprise’s comprehensive environmental platform or the public policy steps that Congress can take 

to encourage Enterprise and other companies to expand their commitment to alternative energy sources, particularly biofuels. 

Sincerely yours, 

Gregory M. Scott 

f 

Partner 

Methanol Institute 

April 30, 2007 

Hon. Richard E. Neal 

U.S. House of Representatives 

2208 Rayburn House Office Building 

Washington, DC 20515 

Dear Ways and Means Select Revenue Measures Subcommittee Leaders, 

First, while the Energy Policy Act of 2005 (P.L. 109–58) did include methanol 

fueled vehicles under the definition of qualifying alternative motor vehicles for the 

vehicle tax credits (Section 1341), the final legislation mistakenly did not include 

methanol alternative fueling stations as qualifying for the infrastructure installation 

tax credit (Section 1342). 

Second, the Volumetric Ethanol Excise Tax Credit established under the American Jobs Creation Act (P.L. 108–357) includes methanol produced from renewable 

resources as a qualifying alcohol fuel for VEETC treatment. However, the alternative fuel tax incentives adopted under the SAFETEA bill (P.L. 109–59) mistakenly failed to include methanol as a qualifying alternative fuel along with CNG, 

LNG, LPG, hydrogen, Fischer-Tropsch fuels, and P–Series fuels. This means that 

methanol produced from natural gas or coal gasification does not qualify for any 

Federal tax incentives even though these fuels have been defined as qualifying alternative fuels under previous Federal legislation (Alternative Motor Fuels Act of 1988 

and Energy Policy Act of 1992). 

During the 1990s methanol was considered a viable alternative to gasoline, with 

thousands of methanol flexible fuel vehicles on the road, served by nearly 200 fueling stations. While support for methanol gave way to compressed natural gas, battery electric and ethanol vehicles, there is a resurgence of interest in the use of 

methanol today. Much of this interest is generated by simple economics: the current 

contract price for methanol is about $1.00 per gallon, and we have recently seen 

spot sales of less than 80¢ per gallon. Even adjusting for methanol’s slightly lower 

energy content than gasoline, the full delivered cost to the consumer would be just 

$2.00 per gallon. 

Methanol also offers the broadest range of potential production feedstocks. In the 

U.S. and on a global basis, natural gas is the typical feedstock for methanol production. Today, much of the 2.4 billion gallons of methanol consumed each year is imported from countries with access to inexpensive natural gas, such as Trinidad and 

Chile. In Kingsport, Tennessee, Eastman Chemical operates a coal-based methanol 

plant that was the U.S. DOE’s first successful integrated gasification combined cycle 

commercial demonstration project. Mature gasification technologies—like that employed in Kingsport—can be utilized for the gasification of biomass (forest thinnings, 

waste wood, municipal waste) for the production of cellulosic methanol. With energy 

efficiencies in the 60–70% range, one ton of biomass can be converted into 165–185 

gallons of methanol. By comparison, the potential yields from cellulosic ethanol may 

only reach 60 gallons of fuel per ton of biomass. 

With bills like the DRIVE Act (H.R. 670), there is an increasing call for truly 

flexible fuel vehicles that can run on any combination of gasoline ethanol or methanol. An ‘‘A–85’’ or alcohol compatible FFV would offer significant benefits in fuel 

diversity, price competition and consumer choice. The late Roberta Nichols, who 

founded the Ford Motor Company’s industry leading FFV technology development 

wrote, ‘‘The good news is, the FFV can use either methanol or ethanol and, in fact, 

some of the early experimental cars ran well on a combination of all three fuels 

(methanol, ethanol, and/or gasoline), which made them really flexible!’’ 

As the trade association for the global methanol industry, the Methanol Institute 

is seeking a level playing field with respect to Federal tax incentives for the use of 

methanol as an alternative fuel. We believe that technical corrections to current tax 

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credits for alternative fuels and alternative fueling station equipment installation 

can greatly help put the methanol option back on the table. 

Sincerely, 

John Lynn 

f 

President & CEO 

Statement of Wayne F. Krouse 

As the President, C.E.O. and Founder of a U.S. company with hydrokinetic power 

projects currently in development, I appreciate the opportunity to provide my 

thoughts in writing to the Subcommittee on Select Revenue Measures regarding the 

need to include hydrokinetic power technologies (river, ocean and tidal) as qualifying resources in the Section 45 Production Tax Credit (PTC). I also would like to 

express my support for H.R. 2036, Congressman Jay Inslee’s Marine and 

Hydrokinetic Renewable Energy Promotion Act of 2007, as well as Senator Gordon 

Smith’s S. 411 and S. 425. 

Hydro Green Energy, LLC (HGE) is a Houston, TX-based renewable energy 

project developer and equipment manufacturer that designs, builds and operates 

hydrokinetic power systems that generate electricity exclusively from moving water 

without having to first construct dams, impoundments or conduits. Our systems operate in rivers, tidal areas and oceans. HGE has a U.S. Patent and several U.S. and 

international patents are pending. 

Hydro Green Energy is presently in the Federal Energy Regulatory Commission’s 

(FERC) licensing and permitting process for its first project Minnesota, with the 

goal of becoming the first commercially-operational, licensed hydrokinetic power 

project in the United States. Hydro Green Energy is also in various stages of development in Illinois, Mississippi, New York, Texas and Washington. 

Hydrokinetic power holds great promise as a new, carbon-free, low or no impact, 

domestic energy source. In fact, a recent study by the Electric Power Research Institute (EPRI) found that the U.S. could develop at a minimum 13,000 megawatts of 

river and ocean-based hydrokinetic power by 2025. Earlier estimates by the Department of Energy (DOE) showed even greater potential and suggested that the U.S. 

might be able to double its existing hydropower output with the development of new 

technologies. 

Like all emerging energy technologies, hydrokinetic power sources face high capital costs. In addition, these technologies face costly and time-consuming regulatory 

hurdles not faced by any other energy source. The development costs for 

hydrokinetic technologies are very similar, if not higher, to the development costs 

of the resources presently included in the Section 45 production tax credit. In short, 

hydrokinetic power deserves inclusion in all policies designed to encourage the development of new renewable energy sources, such as the Section 45 PTC. 

As the Committee moves forward with the implementation of policies to better develop our abundant supply of renewable energy, I hope that the Committee will act 

to include hydrokinetic power in the Section 45 PTC. By doing so, we will ensure 

that these promising technologies are given an opportunity to develop, which will 

give the U.S. an abundant new source of clean energy, as well as an exportable technology for a potentially vast worldwide market that is already developing. 

Æ 

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