II 

109TH CONGRESS 

2D SESSION S. 4012 

To promote a substantial commercial coal-to-fuel industry and decrease the 

dependence of the United States on foreign oil, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 29, 2006 

Mr. THUNE introduced the following bill; which was read twice and referred 

to the Committee on Energy and Natural Resources 

A BILL 

To promote a substantial commercial coal-to-fuel industry 

and decrease the dependence of the United States on 

foreign oil, 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 ‘‘National Transitional 

5 Fuel Security Act of 2006’’. 

6 SEC. 2. FINDINGS AND PURPOSES. 

7 (a) FINDINGS.—Congress finds that, as of the date 

8 of enactment of this Act— 

9 (1) fossil fuels provide more than 85 percent of 

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1 ergy consumption projected to increase for at least 

2 the next 2 decades; 

3 (2) United States oil production is at a 50-year 

4 low and continues to decline; 

5 (3) there has not been a new oil refinery built 

6 in the United States since 1976; 

7 (4) oil has reached prices of over $70 per barrel 

8 and is likely to remain high; 

9 (5) the United States relies on foreign sources 

10 of oil for approximately 60 percent of oil consumed 

11 in the United States; 

12 (6) recent world events and natural disasters 

13 have shown the vulnerability of the energy supply 

14 chain in the United States; 

15 (7) the Fischer-Tropsch technology can produce 

16 synthetic fuels that burn cleaner than traditionally17 produced fuels, by using abundant domestic coal re18 sources; 

19 (8) the coal reserves of the United States are 

20 estimated to be capable of producing more than 

21 800,000,000,000 barrels of oil; 

22 (9) the demand of the United States military 

23 for fuel products makes up 2 percent of total con24 sumption in the United States; 


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1 (10) increases in oil costs disproportionately im2 pact the military; 

3 (11) as a matter of national security, agencies 

4 of the Federal Government are eager to form part5 nerships with the energy industry and academia to 

6 create more sources of domestic energy and lessen 

7 the dependence of the United States on foreign 

8 sources of oil; 

9 (12) private industry is ready to commercialize 

10 the Fischer-Tropsch coal-to-fuel process, but is un11 able to generate necessary initial capital investment; 

12 and 

13 (13) it is in the best public interest of the 

14 United States that industry in the United States 

15 begin transformation from largely foreign petroleum16 based energy resources to domestic coal-based re17 sources, which are abundant. 

18 (b) PURPOSES.—The purposes of this Act are— 

19 (1) to establish a Federal pilot program that 

20 will encourage private investment and a commitment 

21 by businesses in the United States to begin the tran22 sition to a coal-to-fuel based industry relying upon 

23 Fischer-Tropsch technology; and 


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1 (2) at the conclusion of the pilot program, to 

2 achieve the transition in a manner that is cost-neu3 tral to the Treasury. 

4 SEC. 3. DEFINITIONS. 

5 In this Act: 

6 (1) BYPRODUCT.—The term ‘‘byproduct’’ 

7 means any residual product or secondary product of 

8 the Fischer-Tropsch process that may have a com9 mercial value, including carbon dioxide, fertilizer, 

10 hydrogen, and electricity. 

11 (2) COAL-TO-FUEL.—The term ‘‘coal-to-fuel’’ 

12 means— 

13 (A) with respect to a process or tech14 nology, the use of a feedstock, the majority of 

15 which is derived from the coal resources of the 

16 United States, using the class of chemical reac17 tions known as Fischer-Tropsch, to produce 

18 synthetic fuel; and 

19 (B) with respect to a facility, the portion 

20 of a facility that supplies inputs for the Fisch21 er-Tropsch process, Fischer-Tropsch finished 

22 fuel production, or the capture, transportation, 

23 or sequestration of byproducts of the use of coal 

24 at the facility, including carbon emissions. 


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1 (3) FACILITY.—The term ‘‘facility’’ means a 

2 coal-to-fuel demonstration facility constructed under 

3 the Plan. 

4 (4) INVESTOR.—The term ‘‘investor’’ means a 

5 nongovernmental entity that, in accordance with a 

6 contractual arrangement with the Secretary— 

7 (A) invests in and holds a minority non8 controlling interest in 1 or more facilities; and 

9 (B) shares in the revenues of the facilities. 

10 (5) PLAN.—The term ‘‘Plan’’ means the plan 

11 developed by the Secretary and submitted to Con12 gress under section 4. 

13 (6) RESERVE.—The term ‘‘Reserve’’ means the 

14 Strategic Petroleum Reserve established under sec15 tion 154 of the Energy Policy and Conservation Act 

16 (42 U.S.C. 6234). 

17 (7) SECRETARY.—The term ‘‘Secretary’’ means 

18 the Secretary of Energy. 

19 (8) SYNTHETIC FUEL.—The term ‘‘synthetic 

20 fuel’’ means— 

21 (A) synthetic petroleum; or 

22 (B) synthetic refined fuel products (includ23 ing jet fuel, gasoline, diesel, and motor oil) suit24 able for transportation that are produced 

25 through a coal-to-fuel process. 


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1 SEC. 4. CONSTRUCTION OF COAL-TO-FUEL DEMONSTRA2 TION FACILITIES. 

3 (a) IN GENERAL.—Not later than 180 days after the 

4 date of enactment of this Act, the Secretary shall submit 

5 to Congress a plan for the construction of not more than 

6 5 coal-to-fuel demonstration facilities in accordance with 

7 this Act, including the requirements described in sub8 section (b). 

9 (b) REQUIREMENTS.—The Secretary shall— 

10 (1) provide the Federal share of the cost of the 

11 construction of the facilities through a 5-year phased 

12 sale of petroleum products from the Reserve that 

13 corresponds to the phases of construction of the fa14 cilities; 

15 (2) in accordance with applicable law, including 

16 section 603.105 of title 10, Code of Federal Regula17 tions (or a successor regulation)), offer to enter into 

18 contracts or cooperative agreements with investors; 

19 (3) enter into 1 or more multiyear contracts 

20 with the Secretary of Defense under which the De21 partment of Defense will procure substantial quan22 tities of jet fuel and diesel produced at the facilities; 

23 (4) enter into contracts or promulgate regula24 tions if necessary— 

25 (A) to resupply the Reserve at no cost with 

26 sufficient synthetic petroleum, synthetic refined 


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1 fuel products, or nonsynthetic crude oil pur2 chased with proceeds derived from the sale of 

3 synthetic fuel (whichever is determined by the 

4 Secretary to be more advantageous to the Fed5 eral Government) to compensate for petroleum 

6 products sold in accordance with paragraph (3); 

7 and 

8 (B) as soon as practicable, if advan9 tageous, as determined by the Secretary, to re10 quire that all petroleum requirements of the Re11 serve be met with synthetic fuel; 

12 (5) produce and offer for public sale synthetic 

13 fuel products and byproducts from the facilities; 

14 (6) in accordance with section 6, divest owner15 ship of the facilities through public sale to non16 governmental entities; and 

17 (7) ensure that after the Secretary has carried 

18 out the Plan, all costs and expenditures by the Fed19 eral Government under the Plan shall be fully reim20 bursed to the Treasury through— 

21 (A) net revenues generated by the sale of 

22 petroleum products; 

23 (B) resupply of the Reserve; and 


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1 (C) final divestiture and sale of all of the 

2 assets of the Federal Government under the 

3 Plan to nongovernmental entities. 

4 (c) REVENUE.— 

5 (1) IN GENERAL.—Except as provided in sec6 tion 5(b), any revenue raised from the activities de7 scribed in subsection (b) shall be used— 

8 (A) to pay operating expenses; and 

9 (B) to distribute profit shares to any com10 mercial investors in accordance with contractual 

11 terms. 

12 (2) REMAINING REVENUE.—Remaining revenue 

13 shall be deposited in the general fund of the Treas14 ury. 

15 (d) INCLUSIONS.—In submitting the Plan to Con16 gress, the Secretary shall include— 

17 (1) a description of not more than 5 proposed 

18 locations for the construction of facilities; 

19 (2) estimated construction costs for the facili20 ties; 

21 (3) estimated production goals for each facility, 

22 which shall be— 

23 (A) for at least 3 of the facilities, not less 

24 than 30,000 barrels of synthetic fuel per day; 

25 and 


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1 (B) for the remaining facilities, not less 

2 than 5,000 barrels of synthetic fuel per day; 

3 (4) a sequestration plan for any carbon dioxide 

4 byproduct; 

5 (5) a proposed marketing plan for all byprod6 ucts; 

7 (6) coal procurement plans; 

8 (7) product contracting and coordination plans 

9 with the Secretary of Defense; 

10 (8) a phased construction plan; 

11 (9) a plan for the phased withdrawal of petro12 leum products from the Reserve to finance the 

13 phased construction and operation of the facilities; 

14 (10) proposed management plans, including the 

15 participation of investors; and 

16 (11) a proposed plan to divest ownership of the 

17 facilities and recoup remaining expenses. 

18 SEC. 5. NON-FEDERAL INVESTMENT. 

19 (a) IN GENERAL.—The Federal share of the cost of 

20 construction of each facility under the Plan shall be not 

21 less than 51 percent. 

22 (b) RETURN ON INVESTMENTS.—After recoupment 

23 of the Federal share of the construction and operation of 

24 a facility, the Secretary shall distribute profits realized 


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1 from the operation of the facility to investors in an amount 

2 that is proportional to their investment. 

3 SEC. 6. DIVESTITURE. 

4 (a) IN GENERAL.—The Secretary shall divest owner5 ship of the facilities not earlier than the date on which 

6 the Secretary determines that— 

7 (1) the total production goal of 100,000 barrels 

8 of synthetic fuel per day has been met; 

9 (2) an amount equal to or greater than the 

10 total Federal share for the construction and oper11 ation of the facilities has been deposited in the gen12 eral fund of the Treasury; and 

13 (3) a quantity of fuel equal to the quantity of 

14 petroleum products withdrawn from the Reserve 

15 under section 7(a) has been deposited in the Re16 serve. 

17 (b) MANAGEMENT.—The Secretary shall manage 

18 each facility until the Secretary divests ownership of the 

19 facility. 

20 (c) TRANSFER OF CONTRACTS.—A contract de21 scribed in section 4(b)(3) shall be transferable to a subse22 quent owner of a facility the synthetic fuel production of 

23 which is the subject of the contract. 

24 (d) PROHIBITION ON PURCHASE TO CLOSE.—No 

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1 trol of a facility for purposes of removing the facility from 

2 operation. 

3 SEC. 7. AUTHORIZATIONS. 

4 (a) SALE OF PETROLEUM.— 

5 (1) IN GENERAL.—Notwithstanding section 161 

6 of the Energy Policy and Conservation Act (42 

7 U.S.C. 6241) and subject to paragraphs (2) and (3), 

8 the Secretary may sell petroleum products with9 drawn from the Reserve at a public sale to finance 

10 the construction of facilities. 

11 (2) AMOUNT.—In carrying out paragraph (1), 

12 the Secretary may sell not more than 20,000,000 

13 barrels of petroleum products withdrawn from the 

14 Reserve each year for a period of 5 years. 

15 (3) LIMITATION.—The Secretary may sell a 

16 total of not more than 100,000,000 barrels of petro17 leum under this subsection. 

18 (b) PROCUREMENT OF REAL ESTATE.— 

19 (1) IN GENERAL.—In selecting sites for the 

20 construction of a facility, the Secretary shall give 

21 priority to sites on Federal land. 

22 (2) UNAVAILABILITY.—If Federal land is not 

23 available, the Secretary may procure non-Federal 

24 land. 

Æ 


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