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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2288 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2288

   To amend the Internal Revenue Code of 1986 to expand existing tax 
  credits to encourage the capture, utilization, and sequestration of 
                            carbon dioxide.

_______________________________________________________________________

                   IN THE SENATE OF THE UNITED STATES

                              May 5, 2014

Mr. Rockefeller introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL

 
   To amend the Internal Revenue Code of 1986 to expand existing tax 
  credits to encourage the capture, utilization, and sequestration of 
                            carbon dioxide.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Expanding Carbon Capture through 
Enhanced Oil Recovery Act of 2014''.

SEC. 2. EXPANSION OF TAX CREDIT FOR CAPTURE, UTILIZATION, AND 
              SEQUESTRATION OF CARBON DIOXIDE.

    (a) Technical Amendment.--Section 45Q of the Internal Revenue Code 
of 1986 is amended by striking the section heading and inserting the 
following:

``SEC. 45Q-1. STANDARD CARBON DIOXIDE SEQUESTRATION CREDIT.''.

    (b) Expansion of Carbon Dioxide Sequestration Credit.--Subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after section 45Q-1, as redesignated by 
subsection (a), the following new section:

``SEC. 45Q-2. COMPETITIVELY BID CARBON DIOXIDE SEQUESTRATION CREDIT.

    ``(a) Allowance of Credit.--
            ``(1) In general.--For purposes of section 38, the carbon 
        dioxide sequestration credit determined under this section for 
        any taxable year is equal to the amount determined under 
        subsection (c)(2) that is allocated to the qualified facility 
        and certified for such year for the capture, compression, and 
        transport of qualified carbon dioxide.
            ``(2) Credit claimed by taxpayer who captures, uses, and 
        disposes of carbon dioxide.--Except as provided in paragraph 
        (3) and pursuant to such requirements as are determined 
        appropriate by the Secretary, the credit allowed under this 
        section shall be attributable to the taxpayer who captured, 
        used (or contracted for use), and disposed (or contracted for 
        disposal) of the qualified carbon dioxide.
            ``(3) Election to allow credit to be claimed by taxpayer 
        who uses and disposes of carbon dioxide.--A taxpayer described 
        in paragraph (2) may elect, pursuant to such requirements as 
        are determined appropriate by the Secretary, to permit the 
        credits allowed under this section to be attributable to the 
        person who used and disposed of the qualified carbon dioxide.
    ``(b) General Requirements.--
            ``(1) In general.--Not later than 12 months after the date 
        of the enactment of this section and after providing 
        opportunity for public notice and comment, the Secretary, in 
        consultation with the Secretary of Energy, shall establish a 
        process for annual competitive bidding for carbon dioxide 
        sequestration credits under this section that includes the 
        following:
                    ``(A) Establishment of individual project tranches 
                for allocation of carbon dioxide sequestration credits 
                to different forms of qualified projects.
                    ``(B) Annual solicitation of bids for allocation of 
                carbon dioxide sequestration credits for qualified 
                projects within each individual project tranche.
                    ``(C) Allocation of credits, on a per project 
                basis, for the applicable crediting period.
                    ``(D) Allocation of credits in a manner that 
                ensures a net increase in revenue for the Federal 
                Government over a reasonable period of time (as 
                determined by the Secretary).
                    ``(E) Establishment of procedures for certifying 
                qualified projects that have received an allocation of 
                carbon dioxide sequestration credits.
            ``(2) Purpose.--The purpose of this section is--
                    ``(A) to reduce the incremental cost of carbon 
                dioxide capture, compression, and transport,
                    ``(B) to accelerate the deployment and advancement 
                of technologies that capture carbon dioxide,
                    ``(C) to significantly increase domestic oil 
                production through expansion of enhanced oil recovery 
                using anthropogenic carbon dioxide,
                    ``(D) to reduce the amount of anthropogenic carbon 
                dioxide that is released into the atmosphere and 
                contributing to climate change, and
                    ``(E) to produce a net increase in revenues for the 
                Federal Government over a reasonable period of time 
                from additional tax revenue and royalties collected on 
                oil recovered through qualified enhanced oil recovery 
                projects.
    ``(c) Annual Competitive Bidding and Allocation of Credits.--
            ``(1) Application process.--
                    ``(A) In general.--For purposes of the annual 
                competitive bidding process under this section, the 
                Secretary shall--
                            ``(i) solicit bids for allocations of 
                        carbon dioxide sequestration credits from 
                        applications for qualified projects within each 
                        individual project tranche (as described in 
                        subparagraph (C)), and
                            ``(ii) require that an applicant submitting 
                        a bid for carbon dioxide sequestration credits 
                        for a qualified project--
                                    ``(I) be limited to bidding within 
                                a single project tranche for the 
                                project, and
                                    ``(II) include as part of their 
                                bid--
                                            ``(aa) subject to 
                                        subparagraph (D), the proposed 
                                        dollar amount of the carbon 
                                        dioxide sequestration credit 
                                        per metric ton of qualified 
                                        carbon dioxide, and
                                            ``(bb) the projected metric 
                                        tonnage of qualified carbon 
                                        dioxide associated with the 
                                        project over the crediting 
                                        period (as defined in 
                                        subsection (f)(4)).
                    ``(B) Application requirements.--An application 
                under subparagraph (A) shall contain such information 
                as the Secretary may require in order to make a 
                determination regarding an allotment of carbon dioxide 
                sequestration credits. Any information contained in the 
                application shall be protected as provided in section 
                552(b)(4) of title 5, United States Code.
                    ``(C) Project tranches.--The Secretary shall 
                establish 3 individual project tranches for qualified 
                projects in each of the following categories:
                            ``(i) Electric power projects (as described 
                        in subsection (f)(6)).
                            ``(ii) First-tranche industrial projects 
                        (as described in subsection (f)(8)).
                            ``(iii) Second-tranche industrial projects 
                        (as described in subsection (f)(15)).
                    ``(D) Per ton minimum and maximum.--The Secretary, 
                in consultation with the Secretary of Energy, shall 
                establish minimum and maximum dollar amounts for the 
                proposed dollar amount of the carbon dioxide 
                sequestration credit per metric ton of qualified carbon 
                dioxide in each project tranche.
            ``(2) Allocation of credits.--
                    ``(A) In general.--Following the receipt of bids 
                pursuant to the application process described in 
                paragraph (1), the Secretary, in consultation with the 
                Secretary of Energy, shall allocate carbon dioxide 
                sequestration credits to qualified projects with each 
                project tranche.
                    ``(B) Allocation to lowest bidder.--The Secretary 
                shall allocate the carbon dioxide sequestration credits 
                to qualified projects on the basis of the proposed 
                dollar amount for the carbon dioxide sequestration 
                credit per metric ton of qualified carbon dioxide 
                contained in the bid submitted by the applicant, with 
                credits to be allocated in the order of the lowest 
                submitted bid.
                    ``(C) Amount allocated per qualified project.--
                            ``(i) In general.--Subject to clause (ii), 
                        the amount of the carbon dioxide sequestration 
                        credit allocated to a qualified project shall 
                        be equal to the product of--
                                    ``(I) subject to paragraph (1)(D), 
                                the proposed dollar amount of the 
                                carbon dioxide sequestration credit per 
                                metric ton of qualified carbon dioxide 
                                (as proposed pursuant to paragraph 
                                (1)(A)(ii)(II)(aa)), and
                                    ``(II) subject to clause (iii), the 
                                projected metric tonnage of qualified 
                                carbon dioxide associated with the 
                                project over the crediting period (as 
                                projected pursuant to paragraph 
                                (1)(A)(ii)(II)(bb)).
                            ``(ii) Readjustment of credit amount based 
                        on crude oil price.--For each crediting year 
                        during the crediting period, the amount of the 
                        carbon dioxide sequestration credit shall be 
                        equal to the product of--
                                    ``(I) the amount of the credit, as 
                                determined under clause (i) in the 
                                allocation year, and
                                    ``(II) the quotient of--
                                            ``(aa) the annual average 
                                        West Texas Intermediate Crude 
                                        Oil price (per 42-gallon 
                                        barrel) for the year in which 
                                        the bid for carbon dioxide 
                                        sequestration credits was made, 
                                        divided by
                                            ``(bb) the annual average 
                                        West Texas Intermediate Crude 
                                        Oil price (per 42-gallon 
                                        barrel) for the applicable 
                                        crediting year.
                            ``(iii) Limitation for certain projects.--
                        For purposes of determining the amount of 
                        carbon dioxide sequestration credits allocated 
                        to a industrial project described in subsection 
                        (f)(14)(B)(ii) or an electric power project 
                        described in subsection (f)(14)(B)(iii), the 
                        projected metric tonnage of qualified carbon 
                        dioxide associated with the project over the 
                        crediting period shall not be greater than the 
                        product of--
                                    ``(I) 1,000,000 metric tons, and
                                    ``(II) the number of crediting 
                                years in the crediting period.
                    ``(D) Maximum level of credits.--
                            ``(i) In general.--Subject to clause (ii), 
                        the total amount of carbon dioxide 
                        sequestration credits allocated to all 
                        qualified projects within each project tranche 
                        shall not exceed the maximum amount as 
                        established for the applicable year, as 
                        follows:
                                    ``(I) Electric power projects.--The 
                                amount of carbon dioxide sequestration 
                                credits allotted to electric power 
                                projects shall not exceed--
                                            ``(aa) for any allocation 
                                        year during the period between 
                                        the first annual competitive 
                                        bidding process and the third 
                                        annual competitive bidding 
                                        process, $1,350,000,000,
                                            ``(bb) for any allocation 
                                        year during the period between 
                                        the fourth annual competitive 
                                        bidding process and the seventh 
                                        annual competitive bidding 
                                        process, $2,700,000,000,
                                            ``(cc) for the allocation 
                                        year in which the eighth annual 
                                        competitive bidding process 
                                        occurs, $4,050,000,000,
                                            ``(dd) for the allocation 
                                        year in which the ninth annual 
                                        competitive bidding process 
                                        occurs, $5,400,000,000, and
                                            ``(ee) for the allocation 
                                        year in which the tenth annual 
                                        competitive bidding process 
                                        occurs and each subsequent 
                                        allocation year, 
                                        $6,750,000,000.
                                    ``(II) First-tranche industrial 
                                projects.--The amount of carbon dioxide 
                                sequestration credits allotted to 
                                first-tranche industrial projects for 
                                any allocation year shall not exceed 
                                $400,000,000.
                                    ``(III) Second-tranche industrial 
                                projects.--The amount of carbon dioxide 
                                sequestration credits allotted to 
                                second-tranche industrial projects 
                                shall not exceed--
                                            ``(aa) for any allocation 
                                        year during the period between 
                                        the first annual competitive 
                                        bidding process and the third 
                                        annual competitive bidding 
                                        process, $300,000,000, and
                                            ``(bb) for the allocation 
                                        year in which the fourth annual 
                                        competitive bidding process 
                                        occurs and each subsequent 
                                        allocation year, $600,000,000.
                            ``(ii) Rollover of unallocated credit 
                        amounts.--
                                    ``(I) In general.--For purposes of 
                                clause (i), the maximum amount of 
                                carbon dioxide sequestration credits 
                                available to be allocated to all 
                                qualified projects within each project 
                                tranche for any applicable allocation 
                                year shall be increased by the amount 
                                of unallocated credits within such 
                                tranche for the preceding year.
                                    ``(II) Unallocated credits.--For 
                                purposes of this clause, the amount of 
                                unallocated credits within a project 
                                tranche for an applicable allocation 
                                year shall be equal to the difference 
                                between--
                                            ``(aa) the applicable 
                                        maximum amount of carbon 
                                        dioxide sequestration credits 
                                        available to be allocated to 
                                        all qualified projects within 
                                        the project tranche for such 
                                        year, and
                                            ``(bb) the total amount of 
                                        carbon dioxide sequestration 
                                        credits allocated to all 
                                        qualified projects within the 
                                        project tranche for such year.
                            ``(iii) Total amount provided to qualified 
                        project for crediting period to be counted in 
                        allocation year.--For purposes of determining 
                        the total amount of carbon dioxide 
                        sequestration credits allocated in an 
                        applicable allocation year under this 
                        subparagraph, the total amount allocated to a 
                        qualified project for all crediting years 
                        during the crediting period shall be treated as 
                        a single allocation for the allocation year.
    ``(d) Certification.--
            ``(1) Certification process.--Not later than 90 days after 
        a carbon dioxide sequestration credit has been allocated to a 
        qualified project, the Secretary shall certify the amount of 
        the credit that has been allocated and that the applicant has 
        provided sufficient documentation and qualifying evidence to 
        demonstrate that--
                    ``(A) for a qualified project described in 
                subsection (f)(14)(B)(i), the project will be 
                constructed and operated in accordance with the 
                requirements under this section during the crediting 
                period, or
                    ``(B) for a qualified project described in clause 
                (ii) or (iii) of subsection (f)(14)(B), the project 
                will operate in accordance with the requirements under 
                this section during the crediting period.
            ``(2) Documentation.--The Secretary, after providing 
        opportunity for public notice and comment, shall establish 
        specifications for documentation required under paragraph (1), 
        which shall include sufficient evidence that--
                    ``(A) the applicant has established a plan or 
                entered into a binding contract for disposal of all 
                qualified carbon dioxide,
                    ``(B) for a qualified project described in 
                subsection (f)(14)(B)(i), the applicant has established 
                a plan for timely construction, installation, and 
                operation of carbon capture equipment, and
                    ``(C) for a qualified project described in clause 
                (ii) or (iii) of subsection (f)(14)(B), the project has 
                received assistance or has been allocated funding 
                pursuant to the requirements under such clauses.
            ``(3) Qualifying evidence.--For purposes of paragraph (1), 
        the term `qualifying evidence' means--
                    ``(A) the execution of a binding commitment (which 
                may be subject to customary closing conditions) by an 
                appropriate entity (such as a lender or the board of 
                directors of the entity that owns the qualified 
                project) to provide adequate financing for construction 
                of the project and installation of the necessary carbon 
                capture equipment,
                    ``(B) the execution of a binding commitment by the 
                applicant to execute a surety bond, in such amount as 
                is determined appropriate by the Secretary, not later 
                than 2 years after the date the Secretary certifies the 
                qualified project under this subsection, or
                    ``(C) for purposes of an electric power project, 
                the execution of an authorization--
                            ``(i) by the appropriate State agency or 
                        regulatory authority to permit recovery of the 
                        costs related to construction of the qualified 
                        project and installation of the necessary 
                        carbon capture equipment through imposition of 
                        a surcharge on the retail consumers of the 
                        electric utility that owns such project, or
                            ``(ii) by the State legislature to permit 
                        recovery of the costs related to construction 
                        of the qualified project and installation of 
                        the necessary carbon capture equipment through 
                        imposition of a surcharge on the retail 
                        consumers of any electric utility that is 
                        required, pursuant to State law, to purchase 
                        some or all of the net electrical output from 
                        the qualified project.
            ``(4) Revocation of certification.--
                    ``(A) Materially inaccurate representation.--The 
                Secretary may refuse to issue a certification or may 
                revoke a certification previously issued to a qualified 
                project if the Secretary determines that the applicant 
                made a materially inaccurate representation with 
                respect to the documentation or evidence submitted by 
                the applicant pursuant to the requirements under this 
                subsection.
                    ``(B) Failure to begin construction or place 
                equipment in service.--The Secretary shall revoke a 
                certification previously issued to a qualified project 
                if--
                            ``(i) construction of the project has not 
                        begun within 2 years after the date of 
                        certification, or
                            ``(ii) subject to subparagraph (C), the 
                        project has not placed in service the required 
                        carbon capture equipment--
                                    ``(I) in the case of a project that 
                                proposed to retrofit or upgrade its 
                                existing carbon capture equipment to 
                                increase carbon capture capacity, 
                                within 3 years after the date of 
                                certification, or
                                    ``(II) in the case of a project 
                                that proposed construction of a new 
                                facility, within 5 years after the date 
                                of certification.
                    ``(C) Extensions.--
                            ``(i) First extension.--An applicant that 
                        has failed to place in service the required 
                        carbon capture equipment by the applicable 
                        dates described in subparagraph (B)(ii) may 
                        receive an extension of up to 180 days before 
                        revocation of certification, provided--
                                    ``(I) that the applicant request an 
                                extension not later than 90 days before 
                                the applicable date under subparagraph 
                                (B)(ii), and
                                    ``(II) barring construction 
                                disruptions beyond the control of the 
                                applicant, that the applicant maintains 
                                a continuous program of construction 
                                that involves continuing physical work 
                                of a significant nature, as determined 
                                by the Secretary.
                            ``(ii) Second extension.--An applicant that 
                        has failed to place in service the required 
                        carbon capture equipment before expiration of 
                        an extension granted under clause (i) may 
                        receive an additional extension of up to 180 
                        days before revocation of certification, 
                        provided--
                                    ``(I) that the applicant request 
                                the additional extension not later than 
                                90 days before expiration of the 
                                extension granted under clause (i), and
                                    ``(II) barring construction 
                                disruptions beyond the control of the 
                                applicant, that the applicant maintains 
                                a continuous program of construction 
                                that involves continuing physical work 
                                of a significant nature, as determined 
                                by the Secretary.
                    ``(D) Begin construction.--For purposes of 
                subparagraph (B)(i), construction of a qualified 
                project begins when--
                            ``(i) physical work of a significant nature 
                        has begun, or
                            ``(ii) the applicant pays or incurs 5 
                        percent or more of the total cost of the 
                        project.
            ``(5) Reallocation.--
                    ``(A) In general.--Any carbon dioxide sequestration 
                credits that have been allocated to a qualified project 
                that does not receive certification, or has had its 
                certification revoked, shall be rescinded, with the 
                amount of such credits to be made available for 
                reallocation pursuant to the process described under 
                subsection (c) and any additional requirements as are 
                determined appropriate by the Secretary.
                    ``(B) Recapture of credit.--The Secretary shall 
                provide for recapturing the benefit of any credit 
                allotted to a qualified project that does not receive 
                certification, or has had its certification revoked.
            ``(6) Public disclosure and annual reports.--
                    ``(A) Disclosure of certification or revocation.--
                Not later than 30 days after issuing a certification or 
                revocation under this subsection, the Secretary shall 
                publicly disclose--
                            ``(i) the amount of the credit associated 
                        with the certification or revocation, and
                            ``(ii) a description of the qualified 
                        projected associated with such certification or 
                        revocation.
                    ``(B) Annual report.--The Secretary shall annually 
                publish a report regarding the carbon dioxide 
                sequestration credits allowed under this section, 
                including the amount of credits that--
                            ``(i) have been certified under this 
                        subsection, and
                            ``(ii) are available for allocation during 
                        the next annual competitive bidding process 
                        within each project tranche.
    ``(e) Review and Modification.--
            ``(1) External review.--The Secretary, through such methods 
        as are determined appropriate, shall establish an external 
        review of the annual competitive bidding process by a panel of 
        independent experts to--
                    ``(A) propose recommendations to--
                            ``(i) improve the annual competitive 
                        bidding process,
                            ``(ii) ensure the transparency, 
                        effectiveness, and efficiency of such process, 
                        and
                            ``(iii) ensure that the purposes described 
                        in subsection (b)(2) are being achieved through 
                        such process, and
                    ``(B) for purposes of a review described in 
                paragraph (2)(B), evaluate the impact of the annual 
                competitive bidding process on incremental oil 
                production and Federal revenues.
            ``(2) Requirements for external review.--The review process 
        described in paragraph (1) shall be completed not later than--
                    ``(A) 180 days prior to the fourth annual 
                competitive bidding process after the date of the 
                enactment of this section, and
                    ``(B) every four years after the previous review 
                under this subsection.
            ``(3) Modification.--Following any review completed under 
        this subsection, the Secretary, in consultation with the 
        Secretary of Energy, may modify the annual competitive bidding 
        process to adopt recommendations included in the review and 
        ensure that the purposes described in subsection (b)(2) are 
        being achieved through such process, including adjustment of 
        the minimum and maximum dollar amounts for the proposed dollar 
        amount of the carbon dioxide sequestration credit per metric 
        ton of qualified carbon dioxide, as established under 
        subsection (c)(1)(D).
            ``(4) Revenue determinations.--
                    ``(A) In general.--Not later than 7 years after the 
                date of the enactment of this section, and every 4 
                years thereafter, the Secretary, in consultation with 
                the Chairman of the Securities and Exchange Commission 
                and the Secretary of Energy, shall conduct a study to 
                determine--
                            ``(i) the actual and projected increase in 
                        Federal revenues that is attributable to 
                        increases in oil production from enhanced oil 
                        recovery methods using qualified carbon dioxide 
                        that is captured from qualified projects, and
                            ``(ii) the actual and projected decrease in 
                        Federal revenues that is attributable to the 
                        credits allowed under this section.
                    ``(B) Report to congress.--If the Secretary 
                determines that the projected decrease in revenues 
                described in clause (ii) of subparagraph (A) is greater 
                than the projected increase in revenues described in 
                clause (i) of such subparagraph, the Secretary shall 
                submit to Congress a report that provides a detailed 
                analysis of the projections and recommendations for 
                further legislative or administrative action.
    ``(f) Definitions.--In this section:
            ``(1) Allocation year.--The term `allocation year' means 
        the year in which the Secretary allocates carbon dioxide 
        sequestration credits to qualified projects.
            ``(2) Annual capture capacity.--The term `annual capture 
        capacity' means the average annual amount of qualified carbon 
        dioxide that is projected to be captured, compressed, and 
        transported over the crediting period.
            ``(3) Carbon capture equipment.--The term `carbon capture 
        equipment' means equipment to capture and pressurize qualified 
        carbon dioxide.
            ``(4) Crediting period.--The term `crediting period' means 
        the period, for up to 10 crediting years (as described in 
        paragraph (5)), subsequent to--
                    ``(A) for a qualified project described in 
                paragraph (14)(B)(i), the date on which the carbon 
                capture equipment is placed into service, or
                    ``(B) for a qualified project described in clause 
                (ii) or (iii) of paragraph (14)(B), the date on which 
                the project is certified under subsection (d).
            ``(5) Crediting year.--The term `crediting year' means a 
        year during the crediting period in which the taxpayer may 
        claim the carbon dioxide sequestration credit.
            ``(6) Electric power project.--
                    ``(A) In general.--The term `electric power 
                project' means a project, including a polygeneration 
                project, that--
                            ``(i) subject to subparagraph (B), uses 
                        coal or petroleum residuals as feedstock and 
                        has a post-carbon capture equivalent emissions 
                        rate that is equal to or less than 780 pounds 
                        per megawatt hour under normal operating 
                        conditions, or
                            ``(ii) subject to subparagraph (B), uses 
                        natural gas for greater than 50 percent of its 
                        feedstock and has a post-carbon capture 
                        equivalent emissions rate that is equal to or 
                        less than 400 pounds per megawatt hour under 
                        normal operating conditions.
                    ``(B) Emissions reductions.--Beginning with the 
                annual competitive bidding process that occurs 5 years 
                after the initial annual competitive bidding process, 
                and every 5 years thereafter, the applicable post-
                carbon capture equivalent emissions rate under clauses 
                (i) and (ii) of subparagraph (A) shall be reduced by 15 
                percent from the applicable rate for the preceding 5-
                year period, provided that the Secretary has 
                determined, in consultation with the Secretary of 
                Energy, that such reduction is both technologically and 
                economically feasible.
            ``(7) Energy output.--The term `energy output' means the 
        total amount of chemical and thermal energy generated by the 
        conversion of a feedstock.
            ``(8) First-tranche industrial project.--
                    ``(A) In general.--The term `first-tranche 
                industrial project' means an industrial project that 
                employs 1 or more of the following processes:
                            ``(i) Natural gas processing.
                            ``(ii) Fermentation.
                            ``(iii) Ammonia production.
                            ``(iv) Existing gasification of--
                                    ``(I) coal,
                                    ``(II) petroleum residuals,
                                    ``(III) biomass, or
                                    ``(IV) waste streams.
                    ``(B) Existing gasification.--For purposes of this 
                paragraph, the term `existing gasification' means a 
                gasification process used by an industrial project that 
                has been placed in service on or before the date on 
                which the applicant submits a bid for an allocation of 
                carbon dioxide sequestration credits.
            ``(9) Industrial project.--The term `industrial project' 
        means a project for which the electrical power output is 50 
        percent or less of the total energy output of such project.
            ``(10) Polygeneration project.--The term `polygeneration 
        project' means a project--
                    ``(A) that produces both electricity and another 
                marketable product, such as chemicals or alternative 
                liquid or gaseous fuels,
                    ``(B) that is able to supply not less than 150 
                megawatts of electricity for sale to a power 
                distribution system, and
                    ``(C) for which greater than 50 percent of the 
                energy output from the gasification process is provided 
                to the power block.
            ``(11) Power block.--The term `power block' means a steam 
        turbine electric generating unit or a gas turbine combined 
        cycle unit in an electric power project (including a 
        polygeneration project).
            ``(12) Qualified carbon dioxide.--
                    ``(A) In general.--The term `qualified carbon 
                dioxide' means carbon dioxide that is--
                            ``(i) captured from a source described in 
                        subparagraph (B),
                            ``(ii) used, or contracted for use, by the 
                        taxpayer as a tertiary injectant in a qualified 
                        enhanced oil recovery project, and
                            ``(iii) disposed of, or contracted for 
                        disposal, by the taxpayer in secure geological 
                        storage.
                    ``(B) Sources of qualified carbon dioxide.--The 
                sources described in this subparagraph are as follows:
                            ``(i) Electric power generation.
                            ``(ii) Chemical production.
                            ``(iii) Gasification of coal.
                            ``(iv) Petroleum residuals.
                            ``(v) Biomass and waste streams.
                            ``(vi) Natural gas processing.
                            ``(vii) Fermentation.
                            ``(viii) Clinker production.
                            ``(ix) Fluidized catalytic cracking and 
                        other refinery processes.
                            ``(x) Steel and aluminum production.
                            ``(xi) Mining and manufacturing.
            ``(13) Qualified enhanced oil recovery project.--The term 
        `qualified enhanced oil recovery project' means any project--
                    ``(A) which involves the use of qualified carbon 
                dioxide as a tertiary injectant (in accordance with 
                sound engineering principles) and which can reasonably 
                be expected to result in more than an insignificant 
                increase in the amount of crude oil which will 
                ultimately be recovered, and
                    ``(B) which is located within the United States 
                (within the meaning of section 638(1)).
            ``(14) Qualified project.--
                    ``(A) In general.--The term `qualified project' 
                means a project--
                            ``(i) described in subparagraph (B), and
                            ``(ii) at which carbon capture equipment is 
                        placed in service to capture qualified carbon 
                        dioxide from 1 or more sources described in 
                        paragraph (12)(B) within a single project 
                        tranche.
                    ``(B) Categories of projects.--The projects 
                described in this subparagraph are as follows:
                            ``(i) A project that captures qualified 
                        carbon dioxide using carbon capture equipment 
                        that is placed in service after December 31, 
                        2014, including retrofits or upgrades of 
                        existing carbon capture equipment that 
                        increases carbon capture capacity.
                            ``(ii) An electric power project that--
                                    ``(I) received assistance under 
                                subtitle A of title IV of the Energy 
                                Policy Act of 2005 (42 U.S.C. 15961 et 
                                seq.), and
                                    ``(II) captures qualified carbon 
                                dioxide using carbon capture equipment 
                                that was placed in service before 
                                December 31, 2014.
                            ``(iii) An electric power project or an 
                        industrial project that--
                                    ``(I) was allocated funding by the 
                                Department of Energy for large-scale 
                                carbon capture and sequestration 
                                projects from the amount appropriated 
                                for fossil energy research and 
                                development under title IV of division 
                                A of the American Recovery and 
                                Reinvestment Act of 2009 (Public Law 
                                111-5, 123 Stat. 139), and
                                    ``(II) captures qualified carbon 
                                dioxide using carbon capture equipment 
                                that was placed in service before 
                                December 31, 2014.
            ``(15) Second-tranche industrial project.--
                    ``(A) In general.--The term `second-tranche 
                industrial project' means an industrial project that 
                employs 1 or more of the following processes:
                            ``(i) New-build gasification of--
                                    ``(I) coal,
                                    ``(II) petroleum residuals,
                                    ``(III) biomass, or
                                    ``(IV) waste streams.
                            ``(ii) A refinery for production of cement, 
                        steel, or iron.
                            ``(iii) Hydrogen production.
                    ``(B) New-build gasification.--For purposes of this 
                paragraph, the term `new-build gasification' means a 
                gasification process used by an industrial project that 
                is placed in service after the date on which the 
                applicant submits a bid for an allocation of carbon 
                dioxide sequestration credits.
            ``(16) Secure geological storage.--The term `secure 
        geological storage' has the same meaning given to such term 
        under section 45Q-1(d)(2).
    ``(g) Denial of Double Benefit.--A credit shall not be allowed 
under this section for any carbon dioxide for which a credit is allowed 
under section 45Q-1.''.
    (c) Conforming Amendments.--
            (1) Table of sections.--The table of sections for subpart D 
        of part IV of subchapter A of chapter 1 of such Code is amended 
        by striking the item relating to section 45Q and inserting the 
        following new items:

``Sec. 45Q-1. Standard carbon dioxide sequestration credit.
``Sec. 45Q-2. Competitively bid carbon dioxide sequestration credit.''.
            (2) General business credit.--Section 38(b) of such Code is 
        amended--
                    (A) by striking paragraph (34),
                    (B) by redesignating paragraphs (35) and (36) as 
                paragraphs (36) and (37), and
                    (C) by inserting after paragraph (33) the following 
                new paragraphs:
            ``(34) the standard carbon dioxide sequestration credit 
        determined under section 45Q-1(a),
            ``(35) the competitively bid carbon dioxide sequestration 
        credit determined under section 45Q-2(a),''.
            (3) Denial of double benefit.--Section 45Q-1(d) of such 
        Code is amended by adding at the end the following new 
        paragraph:
            ``(8) Denial of double benefit.--A credit shall not be 
        allowed under this section for any carbon dioxide for which a 
        credit is allowed under section 45Q-2.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to carbon dioxide captured after December 31, 2014.
                                 <all>
```