II 

110TH CONGRESS 

1ST SESSION S. 1154 

To promote biogas production, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 18, 2007 

Mr. NELSON of Nebraska (for himself and Mr. CRAIG) introduced the 

following bill; which was read twice and referred to the Committee on Finance 

A BILL 

To promote biogas production, and for other purposes. 

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

3 SECTION 1. SHORT TITLE. 

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

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

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

10 1986 is amended by inserting after section 40A the fol11 lowing new section: 

2 

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

2 FEEDSTOCKS. 

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

4 the qualified biogas production credit for any taxable year 

5 is an amount equal to the product of— 

6 ‘‘(1) $4.27, and 

7 ‘‘(2) each million British thermal units 

8 (mmBtu) of biogas— 

9 ‘‘(A) produced by the taxpayer— 

10 ‘‘(i) from qualified energy feedstock, 

11 and 

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

13 7-year period beginning on the date the fa14 cility was originally placed in service, and 

15 ‘‘(B) either— 

16 ‘‘(i) sold by the taxpayer to an unre17 lated person during the taxable year, or 

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

19 taxable year. 

20 ‘‘(b) DEFINITIONS.— 

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

22 that— 

23 ‘‘(A) is derived by processing qualified en24 ergy feedstock in an anaerobic digester, and 

25 ‘‘(B) contains— 

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

3 

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

2 ‘‘(2) QUALIFIED ENERGY FEEDSTOCK.— 

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

4 energy feedstock’ means— 

5 ‘‘(i) manure of agricultural livestock, 

6 including litter, wood shavings, straw, rice 

7 hulls, bedding material, and other mate8 rials incidentally collected with the ma9 nure, 

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

11 other organic agricultural or food industry 

12 byproduct or waste material that is derived 

13 from— 

14 ‘‘(I) harvesting residues, 

15 ‘‘(II) wastes or byproducts from 

16 fermentation processes, ethanol pro17 duction, biodiesel production, slaugh18 ter of agricultural livestock, food pro19 duction, food processing, or food serv20 ice, or 

21 ‘‘(III) other organic wastes, by22 products, or sources, or 

23 ‘‘(iii) solid wood waste materials, in24 cluding waste pallets, crates, dunnage, 

25 manufacturing and construction wood 

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•S 1154 IS

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

2 trimmings. 

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

4 energy feedstock’ does not include— 

5 ‘‘(i) pressure-treated, chemically-treat6 ed, or painted wood wastes, 

7 ‘‘(ii) municipal solid waste, 

8 ‘‘(iii) landfills, or 

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

10 ‘‘(C) AGRICULTURAL LIVESTOCK.—The 

11 term ‘agricultural livestock’ means poultry, cat12 tle, sheep, swine, goats, horses, mules, and 

13 other equines. 

14 ‘‘(3) QUALIFIED FACILITY.—The term ‘quali15 fied facility’ means a facility that— 

16 ‘‘(A) uses anaerobic digesters to process 

17 qualified energy feedstock into biogas, 

18 ‘‘(B) is owned by the taxpayer, 

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

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

21 January 1, 2018, and 

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

23 ‘‘(i) marketed through interconnection 

24 with a gas distribution or transmission 

25 pipeline, or 

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•S 1154 IS

1 ‘‘(ii) used on-site or off-site in a quan2 tity that is sufficient to offset the con3 sumption of at least 50,000 mmBtu annu4 ally of commercially–marketed fuel derived 

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

6 or other fossil fuel. 

7 ‘‘(c) SPECIAL RULES.—For purposes of this sec8 tion— 

9 ‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX10 PAYER.—In the case of a facility in which more than 

11 1 person has an ownership interest, except to the ex12 tent provided in regulations prescribed by the Sec13 retary, production from the qualified facility shall be 

14 allocated among such persons in proportion to their 

15 respective ownership interests in the gross sales 

16 from such qualified facility. 

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

18 treated as related to each other if such persons 

19 would be treated as a single employer under the reg20 ulations prescribed under section 52(b). In the case 

21 of a corporation which is a member of an affiliated 

22 group of corporations filing a consolidated return, 

23 such corporation shall be treated as selling biogas to 

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

25 person by another member of such group. 

6 

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

2 TRUSTS.—Under regulations prescribed by the Sec3 retary, rules similar to the rules of subsection (d) of 

4 section 52 shall apply. 

5 ‘‘(4) COORDINATION WITH CREDIT FROM PRO6 DUCING FUEL FROM A NONCONVENTIONAL

7 SOURCE.—The amount of biogas produced and sold 

8 or used by the taxpayer during any taxable year 

9 which is taken into account under this section shall 

10 be reduced by the amount of biogas produced and 

11 sold by the taxpayer in such taxable year which is 

12 taken into account under section 45K. 

13 ‘‘(5) CREDIT ELIGIBILITY IN THE CASE OF GOV14 ERNMENT-OWNED FACILITIES USING POULTRY

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

16 waste to produce biogas and owned by a govern17 mental unit, subparagraph (B) of subsection (b)(3) 

18 shall be applied by substituting ‘is leased or operated 

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

20 ‘‘(d) TRANSFERABILITY OF CREDIT.— 

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

22 the credit under this section through an assignment 

23 to any person. Such transfer may be revoked only 

24 with the consent of the Secretary. 

7 

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1 ‘‘(2) REGULATIONS.—The Secretary shall pre2 scribe such regulations as necessary to ensure that 

3 any credit transferred under paragraph (1) is 

4 claimed once and not reassigned by such other per5 son. 

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

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

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

9 such amount by the inflation adjustment factor for 

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

11 amount as increased under the preceding sentence is 

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

13 rounded to the nearest multiple of 0.1 cent. 

14 ‘‘(2) COMPUTATION OF INFLATION ADJUST15 MENT FACTOR.— 

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

17 not later than April 1 of each calendar year, de18 termine and publish in the Federal Register the 

19 inflation adjustment factor in accordance with 

20 this paragraph. 

21 ‘‘(B) INFLATION ADJUSTMENT FACTOR.— 

22 The term ‘inflation adjustment factor’ means, 

23 with respect to a calendar year, a fraction the 

24 numerator of which is the GDP implicit price 

25 deflator for the preceding calendar year and the 

8 

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1 denominator of which is the GDP implicit price 

2 deflator for calendar year 2007. The term 

3 ‘GDP implicit price deflator’ means the most 

4 recent revision of the implicit price deflator for 

5 the gross domestic product as computed and 

6 published by the Department of Commerce be7 fore March 15 of the calendar year.’’. 

8 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec9 tion 38(b) of the Internal Revenue Code of 1986 is amend10 ed by striking ‘‘plus’’ at the end of paragraph (30), by 

11 striking the period at the end of paragraph (31) and in12 serting ‘‘, plus’’, and by adding at the end the following 

13 new paragraph: 

14 ‘‘(32) the qualified biogas production credit 

15 under section 40B(a).’’. 

16 (c) CREDIT ALLOWED AGAINST AMT.—Section 

17 38(c)(4)(B) of the Internal Revenue Code of 1986 is 

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

19 striking the period at the end of clause (ii)(II) and insert20 ing ‘‘, and’’, and by adding at the end the following new 

21 clause: 

22 ‘‘(iii) the credit determined under sec23 tion 40B.’’. 

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

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

9 

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1 of the Internal Revenue Code of 1986 is amended by in2 serting after the item relating to section 40A the following 

3 new item: 

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

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

5 this section shall apply to biogas produced and sold or 

6 used in taxable years beginning after the date of the enact7 ment of this Act. 

8 SEC. 3. INCENTIVES FOR BIOGAS PRODUCTION. 

9 Title IX of the Farm Security and Rural Investment 

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

11 at the end the following: 

12 ‘‘SEC. 9012. COUNTER-CYCLICAL PAYMENTS FOR THE PRO13 DUCTION OF BIOGAS FROM CERTAIN RENEW14 ABLE FEEDSTOCK RESOURCES. 

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

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

17 ‘agricultural livestock’ means— 

18 ‘‘(A) poultry; 

19 ‘‘(B) cattle; 

20 ‘‘(C) sheep; 

21 ‘‘(D) swine; 

22 ‘‘(E) goats; 

23 ‘‘(F) horses; 

24 ‘‘(G) mules; and 

25 ‘‘(H) other equines. 

10 

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

2 that— 

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

4 ‘‘(B) is derived by processing qualified en5 ergy feedstock in an anaerobic digester; and 

6 ‘‘(C) contains— 

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

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

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

10 provider of qualified energy feedstock, including a 

11 farmer, rancher, rural small business, agricultural 

12 cooperative, and partnership. 

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

14 ‘qualified biogas producer’ means a person that op15 erates a qualified facility. 

16 ‘‘(5) QUALIFIED ENERGY FEEDSTOCK.— 

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

18 energy feedstock’ means— 

19 ‘‘(i) manure of agricultural livestock, 

20 including litter, wood shavings, straw, rice 

21 hulls, bedding material, and other mate22 rials incidentally collected with the ma23 nure; 

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

25 other organic agricultural or food industry 

11 

•S 1154 IS

1 byproduct or waste material that is derived 

2 from— 

3 ‘‘(I) harvesting residues; 

4 ‘‘(II) wastes or byproducts from 

5 fermentation processes, ethanol pro6 duction, biodiesel production, slaugh7 ter of agricultural livestock, food pro8 duction, food processing, or food serv9 ice; or 

10 ‘‘(III) other organic wastes, by11 products, or sources; or 

12 ‘‘(iii) solid wood waste materials, in13 cluding waste pallets, crates, dunnage, 

14 manufacturing and construction wood 

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

16 trimmings. 

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

18 energy feedstock’ does not include— 

19 ‘‘(i) pressure-treated, chemically-treat20 ed, or painted wood wastes; 

21 ‘‘(ii) municipal solid waste; 

22 ‘‘(iii) landfills; or 

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

24 ‘‘(6) QUALIFIED FACILITY.—The term ‘quali25 fied facility’ means a facility that— 

12 

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1 ‘‘(A) uses anaerobic digesters to process 

2 qualified energy feedstock into biogas; 

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

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

5 ‘‘(i) marketed through interconnection 

6 with a gas distribution or transmission 

7 pipeline; or 

8 ‘‘(ii) used on-site or off-site in a quan9 tity that is sufficient to offset the con10 sumption of at least 50,000 mmBtu annu11 ally of commercially–marketed fuel derived 

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

13 or other fossil fuel. 

14 ‘‘(b) COUNTER-CYCLICAL PAYMENTS.— 

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

16 such funds of the Commodity Credit Corporation as 

17 are necessary to make counter-cyclical payments in 

18 accordance with this subsection to qualified biogas 

19 producers for qualified facilities placed in service be20 fore December 31, 2013. 

21 ‘‘(2) PAYMENT AMOUNT.— 

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

23 payments described in paragraph (1) shall be 

24 equal to the product obtained by multiplying— 

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1 ‘‘(i) the applicable amount calculated 

2 under subparagraph (B); and 

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

4 produced in any year during the 10-year 

5 period beginning on the date on which the 

6 qualified facility is placed into service. 

7 ‘‘(B) APPLICABLE AMOUNT.—The applica8 ble amount under subparagraph (A)(i) is the 

9 amount equal to 1.0 cent for every 1.0 cent 

10 that the annual average of average daily prices 

11 of natural gas on the Henry Hub Natural Gas 

12 Futures Market of the New York Mercantile 

13 Exchange is below $7.50 per mmBtu, as ad14 justed for inflation by the Secretary. 

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

16 make payments under this subsection once per cal17 endar year, on a date determined by the Secretary. 

18 ‘‘(4) USE OF PAYMENTS.—As a condition on re19 ceipt of payments under this subsection, a qualified 

20 biogas producer shall agree to use the payments first 

21 to pay down loans and other obligations incurred by 

22 the qualified biogas producer for the physical facili23 ties designed, built, and used to produce biogas. 

24 ‘‘(c) TRANSPORTATION COSTS.— 

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1 ‘‘(1) DEFINITION OF SECRETARY.—In this sub2 section, the term ‘Secretary’ means the Secretary, 

3 acting in consultation with the Secretary of Energy 

4 and the Administrator of the Environmental Protec5 tion Agency. 

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

7 loans, loan guarantees, and grants to providers— 

8 ‘‘(A) for collecting qualified energy feed9 stock and transporting the feedstock to a quali10 fied facility that produces biogas using manure 

11 of agricultural livestock from multiple, smaller 

12 farming operations, as determined by the Sec13 retary; or 

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

15 equipment or facilities used in connection with 

16 the collection and transportation under sub17 paragraph (A). 

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

19 grant under this subsection, a provider shall— 

20 ‘‘(A) demonstrate financial need, as deter21 mined by the Secretary; and 

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

23 of— 

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

25 commitment by a qualified facility to acVerDate Aug 31 2005 03:10 Apr 21, 2007 Jkt 059200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S1154.IS S1154
15 

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1 cept the qualified energy feedstock from 

2 the provider; 

3 ‘‘(ii) the location of the qualified facil4 ity; and 

5 ‘‘(iii) a plan for environmentally– 

6 sound and economically–sustainable contin7 ued transportation of the qualified energy 

8 feedstock. 

9 ‘‘(4) COST SHARING.— 

10 ‘‘(A) IN GENERAL.— 

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

12 under this subsection shall not exceed 75 

13 percent of the annual cost of the activity 

14 funded under paragraph (2)(A). 

15 ‘‘(ii) MAXIMUM AMOUNT OF COM16 BINED GRANT AND LOAN.—The combined 

17 amount of a grant and loan made or guar18 anteed for purchase or construction of 

19 equipment used in connection with trans20 port of qualified energy feedstock shall not 

21 exceed 75 percent of the cost of the activ22 ity funded under paragraph (2)(B). 

23 ‘‘(B) FACTORS.—In determining the 

24 amount of a grant or loan, the Secretary shall 

25 take into consideration, as applicable— 

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1 ‘‘(i) the size, location, and biogas pro2 duction efficiency of the qualified facility; 

3 ‘‘(ii) the estimated quantity of biogas 

4 to be produced by the qualified facility; 

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

6 or small rural businesses within a reason7 able distance of the qualified facility, as 

8 determined by the Secretary; 

9 ‘‘(iv) the expected environmental bene10 fits of producing biogas from qualified en11 ergy feedstocks by the qualified facility; 

12 and 

13 ‘‘(v) such other factors as the Sec14 retary determines to be appropriate. 

15 ‘‘(5) INTEREST RATE.— 

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

17 Secretary under this subsection shall bear inter18 est at the rate equivalent to the rate of interest 

19 charged on Treasury securities of comparable 

20 maturity on the date the loan is approved. 

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

22 each loan will remain in effect for the term of 

23 the loan. 

24 ‘‘(6) FUNDING.— 

17 

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

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

3 on each October 1 thereafter through October 

4 1, 2011, out of any funds in the Treasury not 

5 otherwise appropriated, the Secretary of the 

6 Treasury shall transfer to the Secretary to 

7 carry out this subsection $10,000,000, to re8 main available until expended. 

9 ‘‘(B) RECEIPT AND ACCEPTANCE.—The 

10 Secretary shall be entitled to receive, shall ac11 cept, and shall use to carry out this subsection 

12 the funds transferred under subparagraph (A), 

13 without further appropriation. 

14 ‘‘(d) IMPLEMENTATION.— 

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

16 after the date of enactment of this section, the Sec17 retary shall promulgate such regulations as are nec18 essary to implement this section, including a notice 

19 describing the method by which the Secretary deter20 mines and adjusts the average price under sub21 section (b)(2)(B). 

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

23 regulations and administration of this section shall 

24 be made without regard to— 

18 

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

2 section 553 of title 5, United States Code; 

3 ‘‘(B) the Statement of Policy of the Sec4 retary of Agriculture effective July 24, 1971 

5 (36 Fed. Reg. 13804), relating to notices of 

6 proposed rulemaking and public participation in 

7 rulemaking; and 

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

9 Code (commonly known as the ‘Paperwork Re10 duction Act’).’’. 

Æ