II 

109TH CONGRESS 

2D SESSION S. 4000 

To amend the Internal Revenue Code of 1986 to modify the alcohol credit 

and the alternative fuel credit, to amend the Clean Air Act to promote 

the installation of fuel pumps for E–85 fuel, to amend title 49 of 

the United States Code to require the manufacture of dual fueled automobiles, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 29, 2006 

Mr. LUGAR 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 modify 

the alcohol credit and the alternative fuel credit, to 

amend the Clean Air Act to promote the installation 

of fuel pumps for E–85 fuel, to amend title 49 of the 

United States Code to require the manufacture of dual 

fueled automobiles, 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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘National Fuels Initiative’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents of 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Declaration of United States policy on the development and use of renewable alternative fuels. 

Sec. 4. Modification to alcohol credit and alternative fuel credit. 

Sec. 5. Installation of E–85 fuel pumps by major oil companies at owned stations and branded stations. 

Sec. 6. Requirement to manufacture dual fueled automobiles. 

Sec. 7. Definition of automobile. 

Sec. 8. Average fuel economy standards. 

Sec. 9. Credit trading and compliance. 

Sec. 10. Consumer tax credit. 

Sec. 11. Advanced technology motor vehicles manufacturing credit. 

3 SEC. 2. FINDINGS. 

4 Congress makes the following findings: 

5 (1) The national security and economic pros6 perity of the United States is threatened by our oil 

7 dependence, and the reliance of the United States on 

8 oil imports impinges on our foreign policy. Adver9 sarial regimes rich in oil and natural gas are using 

10 their energy supplies as leverage against import-de11 pendent countries and are using increased revenues 

12 from oil and gas exports to gain international influ13 ence, fund anti-American appeals, entrench 

14 authoritarianism, and support terrorism. 

15 (2) Global competition for oil reserves is in16 creasing as supply is depleted, demand increases, 

17 and foreign governments attempt to exert more con18 trol over reserves. Supplies of oil are vulnerable to 

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1 tion, natural disasters, and terrorist attacks. A 

2 major loss in oil supply could result in a price shock 

3 extremely damaging to the economy of the United 

4 States and our way of life, and competition over 

5 scarce resources could create conflict. 

6 (3) Inefficient and unclean use of oil damages 

7 the environment and worsens the threat of global cli8 mate change. 

9 SEC. 3. DECLARATION OF UNITED STATES POLICY ON THE 

10 DEVELOPMENT AND USE OF RENEWABLE AL11 TERNATIVE FUELS. 

12 Congress declares that: 

13 (1) It is the policy of the United States to re14 duce dependence on imported oil through increased 

15 efficiency and diversification of fuel sources through 

16 dramatically expanded use of clean alternative fuels. 

17 Such a reduction will increase the foreign policy 

18 flexibility of the United States, make the United 

19 States less vulnerable to oil supply disruption, and 

20 promote economic growth. The United States will 

21 continue to promote research and development of a 

22 range of alternatives fuels, and it will implement 

23 policies to accelerate the deployment and commer24 cialization of existing efficiency and alternative fuels 

25 technologies. 


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1 (2) It is the policy goal of the United States to 

2 produce and utilize the equivalent of at least 

3 100,000,000,000 gallons of renewable fuel per year 

4 by 2025. This amount of renewable fuel, along with 

5 innovation in fuel efficiency, will substantially reduce 

6 the need for oil imports in the United States. 

7 (3) It is the policy of the United States to pro8 mote the development of a global biofuels market 

9 through partnerships with other nations and to re10 duce trade barriers for renewable fuels. 

11 SEC. 4. MODIFICATION TO ALCOHOL CREDIT AND ALTER12 NATIVE FUEL CREDIT. 

13 (a) INCOME TAX CREDIT FOR ALCOHOL.— 

14 (1) RATE BASED ON PRICE OF OIL.—Section 40 

15 of the Internal Revenue Code of 1986 (relating to 

16 alcohol used as fuel) is amended by striking ‘‘60 

17 cents’’ each place it appears and inserting ‘‘the ap18 plicable amount’’. 

19 (2) APPLICABLE AMOUNT.—Subsection (h) of 

20 section 40 of such Code is amended to read as fol21 lows: 

22 ‘‘(h) APPLICABLE AMOUNT.— 

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the term ‘applicable amount’ means, with re25 spect to any quarter— 


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1 ‘‘(A) $.05 for each $1 (or any fraction 

2 thereof) by which $45 exceeds— 

3 ‘‘(i) in the case of the alcohol mixture 

4 credit, the average price of a barrel of oil 

5 for the quarter during which the qualified 

6 mixture in which the alcohol was used is 

7 sold or used, and 

8 ‘‘(ii) in the case of the alcohol credit, 

9 the average price of a barrel of oil for the 

10 quarter during which the alcohol was sold 

11 or used, and 

12 ‘‘(B) $0 for any quarter in which the price 

13 of a barrel of oil is greater than $45. 

14 ‘‘(2) DETERMINATION OF AVERAGE PRICE.— 

15 The average price of a barrel of oil shall be deter16 mined under regulations prescribed by the Secretary. 

17 ‘‘(3) BARREL.—For purposes of this subsection, 

18 the term ‘barrel’ means 42 United States gallons.’’. 

19 (3) ELIMINATION OF SMALL ETHANOL PRO20 DUCER CREDIT.— 

21 (A) Section 40(a) of such Code is amend22 ed— 

23 (i) by striking ‘‘, plus’’ at the end of 

24 paragraph (2) and inserting a period, and 

25 (ii) by striking paragraph (3). 


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1 (B) Section 40(b) of such Code is amended 

2 by striking paragraph (4) and by redesignating 

3 paragraph (5) as paragraph (4). 

4 (C)(i) Section 40(d)(3) of such Code is 

5 amended by striking subparagraph (C) and re6 designating subparagraph (D) as subparagraph 

7 (C). 

8 (ii) Section 40(d)(3)(C) of such Code, as 

9 redesignated by clause (i), is amended by strik10 ing ‘‘subparagraph (A), (B), or (C)’’ and insert11 ing ‘‘subparagraph (A) or (C)’’. 

12 (D) Section 40 of such Code is amended 

13 by striking subsection (g) and by redesignating 

14 subsection (h), as amended by paragraph (2), 

15 as subsection (g). 

16 (4) EXTENSION OF CREDIT.—Paragraph (1) of 

17 section 40(e) of such Code is amended— 

18 (A) in subparagraph (A), by striking 

19 ‘‘2010’’ and inserting ‘‘2020’’, and 

20 (B) in subparagraph (B), by striking 

21 ‘‘2011’’ and inserting ‘‘2021’’. 

22 (5) CONFORMING AMENDMENT.—Section 40(b) 

23 of such Code, as amended by subsection (a), is 

24 amended by striking paragraph (3) and by redesig25 nating paragraph (4) as paragraph (3). 


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1 (b) MODIFICATIONS TO EXCISE TAX CREDIT AND

2 PAYMENTS FOR ALCOHOL.— 

3 (1) IN GENERAL.—Paragraph (2) of section 

4 6426(b) of the Internal Revenue Code of 1986 is 

5 amended to read as follows: 

6 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

7 this subsection, the applicable amount shall be the 

8 amount determined under section 40(g).’’. 

9 (2) EXTENSION.— 

10 (A) ALCOHOL FUEL MIXTURE CREDIT.— 

11 Paragraph (5) of section 6426(b) of such Code 

12 is amended by striking ‘‘2010’’ and inserting 

13 ‘‘2020’’. 

14 (B) PAYMENTS.—Subparagraph (A) of 

15 section 6427(e)(5) of such Code is amended by 

16 striking ‘‘2010’’ and inserting ‘‘2020’’. 

17 (c) MODIFICATIONS TO EXCISE TAX AND PAYMENTS

18 FOR ALTERNATIVE FUEL.— 

19 (1) ALTERNATIVE FUEL CREDIT.— 

20 (A) RATE.— 

21 (i) IN GENERAL.—Paragraph (1) of 

22 section 6426(d) of the Internal Revenue 

23 Code of 1986 is amended by striking ‘‘50 

24 cents’’ and inserting ‘‘the applicable 

25 amount’’. 


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1 (ii) APPLICABLE AMOUNT.—Sub2 section (d) of section 6426 of such Code is 

3 amended by redesignating paragraphs (2), 

4 (3), and (4) as paragraphs (3), (4), and 

5 (5), respectively, and by inserting after 

6 paragraph (1) the following new para7 graph: 

8 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

9 this subsection, the applicable amount shall be the 

10 amount determined under section 40(g).’’. 

11 (B) EXTENSION.—Paragraph (5) of sec12 tion 6426(d) of such Code, as redesignated by 

13 paragraph (1), is amended by striking ‘‘2009 

14 (September 30, 2014, in the case of any sale or 

15 use involving liquified hydrogen)’’ and inserting 

16 ‘‘2020’’. 

17 (2) ALTERNATIVE FUEL MIXTURE CREDIT.— 

18 (A) RATE.— 

19 (i) IN GENERAL.—Paragraph (1) of 

20 section 6426(e) of the Internal Revenue 

21 Code of 1986 is amended by striking ‘‘50 

22 cents’’ and inserting ‘‘the applicable 

23 amount’’. 

24 (ii) APPLICABLE AMOUNT.—Sub25 section (e) of section 6426 of such Code is 


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1 amended by redesignating paragraphs (2) 

2 and (3) as paragraphs (3) and (4), respec3 tively, and by inserting after paragraph (1) 

4 the following new paragraph: 

5 ‘‘(2) APPLICABLE AMOUNT.—For purposes of 

6 this subsection, the applicable amount shall be the 

7 amount determined under section 40(g).’’. 

8 (B) EXTENSION.—Paragraph (4) of sec9 tion 6426(e) of such Code, as redesignated by 

10 paragraph (1), is amended by striking ‘‘2009 

11 (September 30, 2014, in the case of any sal or 

12 use involving liquified hydrogen)’’ and inserting 

13 ‘‘2020’’. 

14 (3) PAYMENTS.—Paragraph (5) of section 

15 6427(e) is amended by inserting ‘‘and’’ at the end 

16 of subparagraph (B), by striking subparagraphs (C) 

17 and (D), and by inserting after subparagraph (B) 

18 the following: 

19 ‘‘(C) any alternative fuel or alternative fuel 

20 mixture (as defined in subsection (d)(3) or 

21 (e)(3) of section 6426) sold or used after Sep22 tember 30, 2020.’’. 

23 (d) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to fuel used or sold in quarters 

25 beginning after the date of the enactment of this Act. 


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1 SEC. 5. INSTALLATION OF E–85 FUEL PUMPS BY MAJOR OIL 

2 COMPANIES AT OWNED STATIONS AND 

3 BRANDED STATIONS. 

4 Section 211(o) of the Clean Air Act (42 U.S.C. 

5 7545(o)) is amended by adding at the end the following: 

6 ‘‘(11) INSTALLATION OF E–85 FUEL PUMPS BY

7 MAJOR OIL COMPANIES AT OWNED STATIONS AND

8 BRANDED STATIONS.— 

9 ‘‘(A) DEFINITIONS.—In this paragraph: 

10 ‘‘(i) E–85 FUEL.—The term ‘E–85 

11 fuel’ means a blend of gasoline approxi12 mately 85 percent of the content of which 

13 is derived from ethanol produced in the 

14 United States. 

15 ‘‘(ii) MAJOR OIL COMPANY.—The 

16 term ‘major oil company’ means any per17 son that, individually or together with any 

18 other person with respect to which the per19 son has an affiliate relationship or signifi20 cant ownership interest, has not less than 

21 4,500 retail station outlets according to 

22 the latest publication of the Petroleum 

23 News Annual Factbook. 

24 ‘‘(iii) SECRETARY.—The term ‘Sec25 retary’ means the Secretary of Energy, 

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1 trator of the Environmental Protection 

2 Agency and the Secretary of Agriculture. 

3 ‘‘(B) REGULATIONS.—The Secretary shall 

4 promulgate regulations to ensure that each 

5 major oil company that sells or introduces gaso6 line into commerce in the United States 

7 through wholly-owned stations or branded sta8 tions installs or otherwise makes available 1 or 

9 more pumps that dispense E–85 fuel (including 

10 any other equipment necessary, such as includ11 ing tanks, to ensure that the pumps function 

12 properly) at not less than the applicable per13 centage of the wholly-owned stations and the 

14 branded stations of the major oil company spec15 ified in subparagraph (C). 

16 ‘‘(C) APPLICABLE PERCENTAGE.—For the 

17 purpose of subparagraph (B), the applicable 

18 percentage of the wholly-owned stations and the 

19 branded stations shall be determined in accord20 ance with the following table: 

Applicable percentage of 

wholly-owned stations and 

‘‘Calendar year: branded stations (percent): 

2008................................................................................................... 5

2009 ................................................................................................... 10

2010 ................................................................................................... 15

2011 ................................................................................................... 20

2012 ................................................................................................... 25

2013 ................................................................................................... 30

2014 ................................................................................................... 35

2015 ................................................................................................... 40


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Applicable percentage of 

wholly-owned stations and 

‘‘Calendar year: branded stations (percent): 

2016 ................................................................................................... 45

2017 and each calendar year thereafter ............................................ 50. 

1 ‘‘(D) GEOGRAPHIC DISTRIBUTION.— 

2 ‘‘(i) IN GENERAL.—Subject to clause 

3 (ii), in promulgating regulations under 

4 subparagraph (B), the Secretary shall en5 sure that each major oil company described 

6 in subparagraph (B) installs or otherwise 

7 makes available 1 or more pumps that dis8 pense E–85 fuel at not less than a min9 imum percentage (specified in the regula10 tions) of the wholly-owned stations and the 

11 branded stations of the major oil company 

12 in each State. 

13 ‘‘(ii) REQUIREMENT.—In specifying 

14 the minimum percentage under clause (i), 

15 the Secretary shall ensure that each major 

16 oil company installs or otherwise makes 

17 available 1 or more pumps described in 

18 that clause in each State in which the 

19 major oil company operates. 

20 ‘‘(E) FINANCIAL RESPONSIBILITY.—In 

21 promulgating regulations under subparagraph 

22 (B), the Secretary shall ensure that each major 

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1 sumes full financial responsibility for the costs 

2 of installing or otherwise making available the 

3 pumps described in that subparagraph and any 

4 other equipment necessary (including tanks) to 

5 ensure that the pumps function properly. 

6 ‘‘(F) PRODUCTION CREDITS FOR EXCEED7 ING E–85 FUEL PUMPS INSTALLATION REQUIRE8 MENT.— 

9 ‘‘(i) EARNING AND PERIOD FOR AP10 PLYING CREDITS.—If the percentage of the 

11 wholly-owned stations and the branded sta12 tions of a major oil company at which the 

13 major oil company installs E–85 fuel 

14 pumps in a particular calendar year ex15 ceeds the percentage required under sub16 paragraph (C), the major oil company 

17 earns credits under this paragraph, which 

18 may be applied to any of the 3 consecutive 

19 calendar years immediately after the cal20 endar year for which the credits are 

21 earned. 

22 ‘‘(ii) TRADING CREDITS.—Subject to 

23 clause (iii), a major oil company that has 

24 earned credits under clause (i) may sell 

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1 able the purchaser to meet the requirement 

2 under subparagraph (C). 

3 ‘‘(iii) EXCEPTION.—A major oil com4 pany may not use credits purchased under 

5 clause (ii) to fulfill the geographic distribu6 tion requirement in subparagraph (D).’’. 

7 SEC. 6. REQUIREMENT TO MANUFACTURE DUAL FUELED 

8 AUTOMOBILES. 

9 (a) REQUIREMENT.— 

10 (1) IN GENERAL.—Chapter 329 of title 49, 

11 United States Code, is amended by inserting after 

12 section 32902 the following: 

13 ‘‘§ 32902A. Requirement to manufacture dual fueled 

14 automobiles 

15 ‘‘(a) REQUIREMENT.—Each manufacturer of new 

16 automobiles that are capable of operating on gasoline or 

17 diesel fuel shall ensure that the percentage of such auto18 mobiles, manufactured in any model year after model year 

19 2007 and distributed in commerce for sale in the United 

20 States, which are dual fueled automobiles is equal to not 

21 less than the applicable percentage set forth in the fol22 lowing table: 

The percentage of 

dual fueled automobiles 

manufactured shall be 

‘‘For the model year: not less than: 

2008.................................................................................. 10 percent 

2009 .................................................................................. 20 percent 

2010 .................................................................................. 30 percent 


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The percentage of 

dual fueled automobiles 

manufactured shall be 

‘‘For the model year: not less than: 

2011 .................................................................................. 40 percent 

1012 .................................................................................. 50 percent 

2013 .................................................................................. 60 percent 

2014 .................................................................................. 70 percent 

2015 .................................................................................. 80 percent 

2016 .................................................................................. 90 percent 

2017 and beyond ............................................................... 100 percent 

1 ‘‘(b) PRODUCTION CREDITS FOR EXCEEDING FLEXI2 BLE FUEL AUTOMOBILE PRODUCTION REQUIREMENT.— 

3 ‘‘(1) EARNING AND PERIOD FOR APPLYING

4 CREDITS.—If the number of dual fueled automobiles 

5 manufactured by a manufacturer in a particular 

6 model year exceeds the number required under sub7 section (a), the manufacturer earns credits under 

8 this section, which may be applied to any of the 3 

9 consecutive model years immediately after the model 

10 year for which such credits are earned. 

11 ‘‘(2) TRADING CREDITS.—A manufacturer that 

12 has earned credits under paragraph (1) may sell 

13 credits to another manufacturer to enable the pur14 chaser to meet the requirement under subsection 

15 (a).’’. 

16 (2) TECHNICAL AMENDMENT.—The table of 

17 sections for chapter 329 of title 49, United States 

18 Code, is amended by inserting after the item relating 

19 to section 32902 the following: 

‘‘32902A. Requirement to manufacture dual fueled automobiles.’’. 


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1 (b) ACTIVITIES TO PROMOTE THE USE OF CERTAIN

2 ALTERNATIVE FUELS.—The Secretary of Transportation 

3 shall carry out activities to promote the use of fuel mix4 tures containing gasoline or diesel fuel and 1 or more al5 ternative fuels, including a mixture containing at least 85 

6 percent of methanol, denatured ethanol, and other alcohols 

7 by volume with gasoline or other fuels, to power auto8 mobiles in the United States. 

9 SEC. 7. DEFINITION OF AUTOMOBILE. 

10 (a) IN GENERAL.—Section 32901(a)(3) of title 49, 

11 United States Code, is amended by striking ‘‘rated at— 

12 ’’ and all that follows through the period at the end and 

13 inserting ‘‘rated at not more than 10,000 pounds gross 

14 vehicle weight.’’. 

15 (b) FUEL ECONOMY INFORMATION.—Section 

16 32908(a) of title 49, United States Code, is amended, by 

17 striking ‘‘section—’’ and all that follows through ‘‘(2)’’ 

18 and inserting ‘‘section, the term’’. 

19 (c) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to model year 2009 and each sub21 sequent model year. 

22 SEC. 8. AVERAGE FUEL ECONOMY STANDARDS. 

23 (a) STANDARDS.—Section 32902 of title 49, United 

24 States Code, is amended— 

25 (1) in subsection (a)— 


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1 (A) in the header, by inserting ‘‘MANUFAC2 TURED BEFORE MODEL YEAR 2012’’ after 

3 ‘‘NON-PASSENGER AUTOMOBILES’’; and 

4 (B) by adding at the end the following: 

5 ‘‘This subsection shall not apply to automobiles 

6 manufactured after model year 2011.’’; 

7 (2) in subsection (b)— 

8 (A) in the header, by inserting ‘‘MANUFAC9 TURED BEFORE MODEL YEAR 2012’’ after 

10 ‘‘PASSENGER AUTOMOBILES’’; 

11 (B) by inserting ‘‘and before model year 

12 2009’’ after ‘‘1984’’; and 

13 (C) by adding at the end the following: 

14 ‘‘Such standard shall be increased by 4 percent 

15 per year for model years 2009 through 2011 

16 (rounded to the nearest 1/10 mile per gallon)’’; 

17 (3) by amending subsection (c) to read as fol18 lows: 

19 ‘‘(c) AUTOMOBILES MANUFACTURED AFTER MODEL

20 YEAR 2011.—(1) Not later than 18 months before the be21 ginning of each model year after model year 2011, the 

22 Secretary of Transportation shall prescribe, by regula23 tion— 


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1 ‘‘(A) an average fuel economy standard for 

2 automobiles manufactured by a manufacturer in 

3 that model year; or 

4 ‘‘(B) based on 1 or more vehicle attributes that 

5 relate to fuel economy— 

6 ‘‘(i) separate standards for different class7 es of automobiles; or 

8 ‘‘(ii) standards expressed in the form of a 

9 mathematical function. 

10 ‘‘(2)(A) Except as provided under paragraphs (3) and 

11 (4) and subsection (d), standards under paragraph (1) 

12 shall attain a projected aggregate level of average fuel 

13 economy of 27.5 miles per gallon for all automobiles man14 ufactured by all manufacturers for model year 2012. 

15 ‘‘(B) The projected aggregate level of average fuel 

16 economy for model year 2013 and each succeeding model 

17 year shall be increased by 4 percent from the level for the 

18 prior model year (rounded to the nearest 1/10 mile per 

19 gallon). 

20 ‘‘(C) Notwithstanding subparagraphs (A) and (B), 

21 the fleetwide average fuel economy standard for passenger 

22 automobiles manufactured by a manufacturer in a model 

23 year for that manufacturer’s domestic fleet and for its for24 eign fleet as calculated under section 32904 as in effect 

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1 tive shall not be less than 92 percent of the average fuel 

2 economy projected by the Secretary for the combined do3 mestic and foreign fleets manufactured by all manufactur4 ers in that model year. 

5 ‘‘(3) If the actual aggregate level of average fuel 

6 economy achieved by manufacturers for each of 3 consecu7 tive model years is at least 5 percent less than the pro8 jected aggregate level of average fuel economy for such 

9 model year, the Secretary shall make appropriate adjust10 ments to the standards prescribed under this subsection. 

11 ‘‘(4)(A) Notwithstanding paragraphs (1) through (3) 

12 and subsection (b), the Secretary of Transportation may 

13 prescribe a lower average fuel economy standard for 1 or 

14 more model years if the Secretary of Transportation, in 

15 consultation with the Secretary of Energy, determines that 

16 the minimum standards prescribed under paragraph (2) 

17 or (3) or subsection (b) for each model year— 

18 ‘‘(i) are technologically unachievable; 

19 ‘‘(ii) cannot be achieved without materially re20 ducing the overall safety of automobiles manufac21 tured or sold in the United States; or 

22 ‘‘(iii) is shown, by clear and convincing evi23 dence, not to be cost effective. 


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1 ‘‘(B) If a lower standard is prescribed for a model 

2 year under subparagraph (A), such standard shall be the 

3 maximum standard that— 

4 ‘‘(i) is technologically achievable; 

5 ‘‘(ii) can be achieved without materially reduc6 ing the overall safety of automobiles manufactured 

7 or sold in the United States; and 

8 ‘‘(iii) is cost effective. 

9 ‘‘(5) In determining cost effectiveness under para10 graph (4)(A)(iii), the Secretary of Transportation shall 

11 take into account the total value to the Nation of reduced 

12 petroleum use, including the value of reducing external 

13 costs of petroleum use, using a value for such costs equal 

14 to 50 percent of the value of a gallon of gasoline saved 

15 or the amount determined in an analysis of the external 

16 costs of petroleum use that considers— 

17 ‘‘(A) value to consumers; 

18 ‘‘(B) economic security; 

19 ‘‘(C) national security; 

20 ‘‘(D) foreign policy; 

21 ‘‘(E) the impact of oil use— 

22 ‘‘(i) on sustained cartel rents paid to for23 eign suppliers; 


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1 ‘‘(ii) on long-run potential gross domestic 

2 product due to higher normal-market oil price 

3 levels, including inflationary impacts; 

4 ‘‘(iii) on import costs, wealth transfers, 

5 and potential gross domestic product due to in6 creased trade imbalances; 

7 ‘‘(iv) on import costs and wealth transfers 

8 during oil shocks; 

9 ‘‘(v) on macroeconomic dislocation and ad10 justment costs during oil shocks; 

11 ‘‘(vi) on the cost of existing energy security 

12 policies, including the management of the Stra13 tegic Petroleum Reserve; 

14 ‘‘(vii) on the timing and severity of the oil 

15 peaking problem; 

16 ‘‘(viii) on the risk, probability, size, and 

17 duration of oil supply disruptions; 

18 ‘‘(ix) on OPEC strategic behavior and 

19 long-run oil pricing; 

20 ‘‘(x) on the short term elasticity of energy 

21 demand and the magnitude of price increases 

22 resulting from a supply shock; 

23 ‘‘(xi) on oil imports, military costs, and re24 lated security costs, including intelligence, 


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1 homeland security, sea lane security and infra2 structure, and other military activities; 

3 ‘‘(xii) on oil imports, diplomatic and for4 eign policy flexibility, and connections to geo5 political strife, terrorism, and international de6 velopment activities; 

7 ‘‘(xiii) all relevant environmental hazards 

8 under the jurisdiction of the Environmental 

9 Protection Agency; and 

10 ‘‘(xiv) on well-to-wheels urban and local air 

11 emissions of ‘pollutants’ and their 

12 uninternalized costs; 

13 ‘‘(F) the impact of the oil or energy intensity 

14 of the United States economy on the sensitivity of 

15 the economy to oil price changes, including the mag16 nitude of gross domestic product losses in response 

17 to short term price shocks or long term price in18 creases; 

19 ‘‘(G) the impact of United States payments for 

20 oil imports on political, economic, and military devel21 opments in unstable or unfriendly oil exporting 

22 countries; 

23 ‘‘(H) the uninternalized costs of pipeline and 

24 storage oil seepage, and for risk of oil spills from 


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1 production, handling, and transport, and related 

2 landscape damage; and 

3 ‘‘(I) additional relevant factors, as determined 

4 by the Secretary. 

5 ‘‘(6) When considering the value to consumers of a 

6 gallon of gasoline saved, the Secretary of Transportation 

7 may not use a value less than the greatest of— 

8 ‘‘(A) the average national cost of a gallon of 

9 gasoline sold in the United States during the 12- 

10 month period ending on the date on which the new 

11 fuel economy standard is proposed; 

12 ‘‘(B) the most recent weekly estimate by the 

13 Energy Information Administration of the Depart14 ment of Energy of the average national cost of a 

15 gallon of gasoline (all grades) sold in the United 

16 States; or 

17 ‘‘(C) the gasoline prices projected by the En18 ergy Information Administration for the 20-year pe19 riod beginning in the year following the year in 

20 which the standards are established. 

21 ‘‘(7) In prescribing standards under this subsection, 

22 the Secretary may prescribe standards for 1 or more 

23 model years. 

24 ‘‘(8)(A) Not later than December 31, 2016, the Sec25 retary of Transportation, the Secretary of Energy, and the 


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1 Administrator of the Environmental Protection Agency 

2 shall submit a joint report to Congress on the state of 

3 global automotive efficiency technology development, and 

4 on the accuracy of tests used to measure fuel economy 

5 of automobiles under section 32904(c), utilizing the study 

6 and assessment of the National Academy of Sciences re7 ferred to in subparagraph (B). 

8 ‘‘(B) The Secretary shall enter into appropriate ar9 rangements with the National Academy of Sciences to con10 duct a comprehensive study of the technological opportuni11 ties to enhance fuel economy and an analysis and assess12 ment of the accuracy of fuel economy tests used by the 

13 Administrator of the Environmental Protection Agency to 

14 measure fuel economy for each model under section 

15 32904(c). Such analysis and assessment shall identify any 

16 additional factors or methods that should be included in 

17 tests to measure fuel economy for each model to more ac18 curately reflect actual fuel economy of automobiles. The 

19 Secretary and the Administrator of the Environmental 

20 Protection Agency shall furnish, at the request of the 

21 Academy, any information which the Academy determines 

22 to be necessary to conduct the study, analysis, and assess23 ment under this subparagraph. 

24 ‘‘(C) The report submitted under subparagraph (A) 

25 shall include— 


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1 ‘‘(i) the study of the National Academy of 

2 Sciences referred to in subparagraph (B); and 

3 ‘‘(ii) an assessment by the Secretary of techno4 logical opportunities to enhance fuel economy and 

5 opportunities to increase overall fleet safety. 

6 ‘‘(D) The report submitted under subparagraph (A) 

7 shall identify and examine additional opportunities to re8 form the regulatory structure under this chapter, includ9 ing approaches that seek to merge vehicle and fuel require10 ments into a single system that achieves equal or greater 

11 reduction in petroleum use and environmental benefits. 

12 ‘‘(E) The report submitted under subparagraph (A) 

13 shall— 

14 ‘‘(i) include conclusions reached by the Admin15 istrator of the Environmental Protection Agency, as 

16 a result of detailed analysis and public comment, on 

17 the accuracy of current fuel economy tests; 

18 ‘‘(ii) identify any additional factors that the Ad19 ministrator determines should be included in tests to 

20 measure fuel economy for each model to more accu21 rately reflect actual fuel economy of automobiles; 

22 and 

23 ‘‘(iii) include a description of options, formu24 lated by the Secretary and the Administrator, to in25 corporate such additional factors in fuel economy 


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1 tests in a manner that will not effectively increase 

2 or decrease average fuel economy for any automobile 

3 manufacturer. 

4 ‘‘(F) There is authorized to be appropriated to the 

5 Secretary such amounts as are required to carry out the 

6 study, analysis, and assessment required by subparagraph 

7 (B).’’; and 

8 (4) in subsection (g)(2), by striking ‘‘(and sub9 mit the amendment to Congress when required 

10 under subsection (c)(2) of this section)’’. 

11 (b) CONFORMING AMENDMENTS.— 

12 (1) IN GENERAL.—Chapter 329 of title 49, 

13 United States Code, is amended— 

14 (A) in section 32903— 

15 (i) by striking ‘‘passenger’’ each place 

16 it appears; 

17 (ii) by striking ‘‘section 32902(b)–(d) 

18 of this title’’ each place it appears and in19 serting ‘‘subsection (c) or (d) of section 

20 32902’’; 

21 (iii) by striking subsection (e); and 

22 (iv) by redesignating subsection (f) as 

23 subsection (e); and 

24 (B) in section 32904(a)— 


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1 (i) by striking ‘‘passenger’’ each place 

2 it appears; and 

3 (ii) in paragraph (1), by striking 

4 ‘‘subject to’’ and all that follows through 

5 ‘‘section 32902(b)–(d) of this title’’ and in6 serting ‘‘subsection (c) or (d) of section 

7 32902’’. 

8 (2) EFFECTIVE DATE.—The amendments made 

9 by paragraph (1) shall apply to automobiles manu10 factured after model year 2011. 

11 SEC. 9. CREDIT TRADING AND COMPLIANCE. 

12 (a) CREDIT TRADING.—Section 32903(a) of title 49, 

13 United States Code, is amended— 

14 (1) by inserting ‘‘Credits earned by a manufac15 turer under this section may be sold to any other 

16 manufacturer and used as if earned by that manu17 facturer; except that credits earned by a manufac18 turer described in section 32904(b)(1)(A)(i) may not 

19 be sold to or purchased by a manufacturer described 

20 in 32904(b)(1)(A)(ii),’’ after ‘‘earns credits.’’; and 

21 (2) by striking ‘‘3 consecutive model years im22 mediately’’ each place it appears and inserting 

23 ‘‘model years’’. 

24 (b) TREATMENT OF IMPORTS.— 


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1 (1) CONFORMING AMENDMENT.—Section 

2 32904(b) is amended by striking ‘‘passenger’’ each 

3 place it appears. 

4 (2) APPLICABILITY.—The amendments made 

5 by paragraph (1) shall apply to automobiles manu6 factured after model year 2011. 

7 (c) MULTI-YEAR COMPLIANCE PERIOD.—Section 

8 32904(c) of such title is amended— 

9 (1) by inserting ‘‘(1)’’ before ‘‘The Adminis10 trator’’; and 

11 (2) by adding at the end the following: 

12 ‘‘(2) The Secretary, by rule, may allow a manufac13 turer to elect a multi-year compliance period of not more 

14 than 4 consecutive model years in lieu of the single model 

15 year compliance period otherwise applicable under this 

16 chapter.’’. 

17 SEC. 10. CONSUMER TAX CREDIT. 

18 (a) ELIMINATION ON NUMBER OF NEW QUALIFIED

19 HYBRID AND ADVANCED LEAN BURN TECHNOLOGY VE20 HICLES ELIGIBLE FOR ALTERNATIVE MOTOR VEHICLE

21 CREDIT.— 

22 (1) IN GENERAL.—Section 30B of the Internal 

23 Revenue Code of 1986 is amended— 

24 (A) by striking subsection (f); and 


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1 (B) by redesignating subsections (g) 

2 through (j) as subsections (f) through (i), re3 spectively. 

4 (2) CONFORMING AMENDMENTS.— 

5 (A) Paragraphs (4) and (6) of section 

6 30B(h) of such Code are each amended by 

7 striking ‘‘(determined without regard to sub8 section (g))’’ and inserting ‘‘determined without 

9 regard to subsection (f))’’. 

10 (B) Section 38(b)(25) of such Code is 

11 amended by striking ‘‘section 30B(g)(1)’’ and 

12 inserting ‘‘section 30B(f)(1)’’. 

13 (C) Section 55(c)(2) of such Code is 

14 amended by striking ‘‘section 30B(g)(2)’’ and 

15 inserting ‘‘section 30B(f)(2)’’. 

16 (D) Section 1016(a)(36) of such Code is 

17 amended by striking ‘‘section 30B(h)(4)’’ and 

18 inserting ‘‘section 30B(g)(4)’’. 

19 (E) Section 6501(m) of such Code is 

20 amended by striking ‘‘section 30B(h)(9)’’ and 

21 inserting ‘‘section 30B(g)(9)’’. 

22 (b) EXTENSION OF ALTERNATIVE VEHICLE CREDIT

23 FOR NEW QUALIFIED HYBRID MOTOR VEHICLES.—Para24 graph (3) of section 30B(i) of such Code (as redesignated 


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1 by subsection (a)) is amended by striking ‘‘December 31, 

2 2009’’ and inserting ‘‘December 31, 2010’’. 

3 (c) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to property placed in service after 

5 December 31, 2005, in taxable years ending after such 

6 date. 

7 SEC. 11. ADVANCED TECHNOLOGY MOTOR VEHICLES MAN8 UFACTURING CREDIT. 

9 (a) IN GENERAL.—Subpart B of part IV of sub10 chapter A of chapter 1 of the Internal Revenue Code of 

11 1986 (relating to foreign tax credit, etc.) is amended by 

12 adding at the end the following new section: 

13 ‘‘SEC. 30D. ADVANCED TECHNOLOGY MOTOR VEHICLES 

14 MANUFACTURING CREDIT. 

15 ‘‘(a) CREDIT ALLOWED.—There shall be allowed as 

16 a credit against the tax imposed by this chapter for the 

17 taxable year an amount equal to 35 percent of the quali18 fied investment of an eligible taxpayer for such taxable 

19 year. 

20 ‘‘(b) QUALIFIED INVESTMENT.—For purposes of this 

21 section— 

22 ‘‘(1) IN GENERAL.—The qualified investment 

23 for any taxable year is equal to the incremental costs 

24 incurred during such taxable year— 


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1 ‘‘(A) to re-equip, expand, or establish any 

2 manufacturing facility in the United States of 

3 the eligible taxpayer to produce advanced tech4 nology motor vehicles or to produce eligible 

5 components, 

6 ‘‘(B) for engineering integration performed 

7 in the United States of such vehicles and com8 ponents as described in subsection (d), 

9 ‘‘(C) for research and development per10 formed in the United States related to advanced 

11 technology motor vehicles and eligible compo12 nents, and 

13 ‘‘(D) for employee retraining with respect 

14 to the manufacturing of such vehicles or compo15 nents (determined without regard to wages or 

16 salaries of such retrained employees). 

17 ‘‘(2) ATTRIBUTION RULES.—In the event a fa18 cility of the eligible taxpayer produces both advanced 

19 technology motor vehicles and conventional motor 

20 vehicles, or eligible and non-eligible components, only 

21 the qualified investment attributable to production 

22 of advanced technology motor vehicles and eligible 

23 components shall be taken into account. 

24 ‘‘(c) DEFINITIONS.—In this section: 


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1 ‘‘(1) ADVANCED TECHNOLOGY MOTOR VEHI2 CLE.—The term ‘advanced technology motor vehicle’ 

3 means— 

4 ‘‘(A) any qualified electric vehicle (as de5 fined in section 30(c)(1)), 

6 ‘‘(B) any new qualified fuel cell motor ve7 hicle (as defined in section 30B(b)(3)), 

8 ‘‘(C) any new advanced lean burn tech9 nology motor vehicle (as defined in section 

10 30B(c)(3)), 

11 ‘‘(D) any new qualified hybrid motor vehi12 cle (as defined in section 30B(d)(2)(A) and de13 termined without regard to any gross vehicle 

14 weight rating), 

15 ‘‘(E) any new qualified alternative fuel 

16 motor vehicle (as defined in section 30B(e)(4), 

17 including any mixed-fuel vehicle (as defined in 

18 section 30B(e)(5)(B)), and 

19 ‘‘(F) any other motor vehicle using electric 

20 drive transportation technology (as defined in 

21 paragraph (3)). 

22 ‘‘(2) ELECTRIC DRIVE TRANSPORTATION TECH23 NOLOGY.—The term ‘electric drive transportation 

24 technology’ means technology used by vehicles that 

25 use an electric motor for all or part of their motive 


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1 power and that may or may not use off-board elec2 tricity, such as battery electric vehicles, fuel cell ve3 hicles, engine dominant hybrid electric vehicles, plug4 in hybrid electric vehicles, and plug-in hybrid fuel 

5 cell vehicles. 

6 ‘‘(3) ELIGIBLE COMPONENTS.—The term ‘eligi7 ble component’ means any component inherent to 

8 any advanced technology motor vehicle, including— 

9 ‘‘(A) with respect to any gasoline or diesel10 electric new qualified hybrid motor vehicle— 

11 ‘‘(i) electric motor or generator; 

12 ‘‘(ii) power split device; 

13 ‘‘(iii) power control unit; 

14 ‘‘(iv) power controls; 

15 ‘‘(v) integrated starter generator; or 

16 ‘‘(vi) battery; 

17 ‘‘(B) with respect to any hydraulic new 

18 qualified hybrid motor vehicle— 

19 ‘‘(i) accumulator or other energy stor20 age device; 

21 ‘‘(ii) hydraulic pump; 

22 ‘‘(iii) hydraulic pump-motor assembly; 

23 ‘‘(iv) power control unit; and 

24 ‘‘(v) power controls; 


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1 ‘‘(C) with respect to any new advanced 

2 lean burn technology motor vehicle— 

3 ‘‘(i) diesel engine; 

4 ‘‘(ii) turbo charger; 

5 ‘‘(iii) fuel injection system; or 

6 ‘‘(iv) after-treatment system, such as 

7 a particle filter or NOx absorber; and 

8 ‘‘(D) with respect to any advanced tech9 nology motor vehicle, any other component sub10 mitted for approval by the Secretary. 

11 ‘‘(4) ELIGIBLE TAXPAYER.—The term ‘eligible 

12 taxpayer’ means any taxpayer if more than 20 per13 cent of the taxpayer’s gross receipts for the taxable 

14 year is derived from the manufacture of motor vehi15 cles or any component parts of such vehicles. 

16 ‘‘(d) ENGINEERING INTEGRATION COSTS.—For pur17 poses of subsection (b)(1)(B), costs for engineering inte18 gration are costs incurred prior to the market introduction 

19 of advanced technology vehicles for engineering tasks re20 lated to— 

21 ‘‘(1) establishing functional, structural, and 

22 performance requirements for component and sub23 systems to meet overall vehicle objectives for a spe24 cific application, 


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1 ‘‘(2) designing interfaces for components and 

2 subsystems with mating systems within a specific ve3 hicle application, 

4 ‘‘(3) designing cost effective, efficient, and reli5 able manufacturing processes to produce components 

6 and subsystems for a specific vehicle application, 

7 and 

8 ‘‘(4) validating functionality and performance of 

9 components and subsystems for a specific vehicle ap10 plication. 

11 ‘‘(e) LIMITATION BASED ON AMOUNT OF TAX.—The 

12 credit allowed under subsection (a) for the taxable year 

13 shall not exceed the excess of— 

14 ‘‘(1) the sum of— 

15 ‘‘(A) the regular tax liability (as defined in 

16 section 26(b)) for such taxable year, plus 

17 ‘‘(B) the tax imposed by section 55 for 

18 such taxable year and any prior taxable year 

19 beginning after 1986 and not taken into ac20 count under section 53 for any prior taxable 

21 year, over 

22 ‘‘(2) the sum of the credits allowable under sub23 part A and sections 27, 30, and 30B for the taxable 

24 year. 


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1 ‘‘(f) REDUCTION IN BASIS.—For purposes of this 

2 subtitle, if a credit is allowed under this section for any 

3 expenditure with respect to any property, the increase in 

4 the basis of such property which would (but for this para5 graph) result from such expenditure shall be reduced by 

6 the amount of the credit so allowed. 

7 ‘‘(g) NO DOUBLE BENEFIT.— 

8 ‘‘(1) COORDINATION WITH OTHER DEDUCTIONS

9 AND CREDITS.—Except as provided in paragraph 

10 (2), the amount of any deduction or other credit al11 lowable under this chapter for any cost taken into 

12 account in determining the amount of the credit 

13 under subsection (a) shall be reduced by the amount 

14 of such credit attributable to such cost. 

15 ‘‘(2) RESEARCH AND DEVELOPMENT COSTS.— 

16 ‘‘(A) IN GENERAL.—Except as provided in 

17 subparagraph (B), any amount described in 

18 subsection (b)(1)(C) taken into account in de19 termining the amount of the credit under sub20 section (a) for any taxable year shall not be 

21 taken into account for purposes of determining 

22 the credit under section 41 for such taxable 

23 year. 

24 ‘‘(B) COSTS TAKEN INTO ACCOUNT IN DE25 TERMINING BASE PERIOD RESEARCH EXVerDate Aug 31 2005 23:47 Oct 04, 2006 Jkt 059196 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\S4000.IS S4000

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1 PENSES.—Any amounts described in subsection 

2 (b)(1)(C) taken into account in determining the 

3 amount of the credit under subsection (a) for 

4 any taxable year which are qualified research 

5 expenses (within the meaning of section 41(b)) 

6 shall be taken into account in determining base 

7 period research expenses for purposes of apply8 ing section 41 to subsequent taxable years. 

9 ‘‘(h) BUSINESS CARRYOVERS ALLOWED.—If the 

10 credit allowable under subsection (a) for a taxable year 

11 exceeds the limitation under subsection (e) for such tax12 able year, such excess (to the extent of the credit allowable 

13 with respect to property subject to the allowance for depre14 ciation) shall be allowed as a credit carryback to each of 

15 the 15 taxable years immediately preceding the unused 

16 credit year and as a carryforward to each of the 20 taxable 

17 years immediately following the unused credit year. 

18 ‘‘(i) SPECIAL RULES.—For purposes of this section, 

19 rules similar to the rules of section 179A(e)(4) and para20 graphs (1) and (2) of section 41(f) shall apply 

21 ‘‘(j) ELECTION NOT TO TAKE CREDIT.—No credit 

22 shall be allowed under subsection (a) for any property if 

23 the taxpayer elects not to have this section apply to such 

24 property. 


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1 ‘‘(k) REGULATIONS.—The Secretary shall prescribe 

2 such regulations as necessary to carry out the provisions 

3 of this section. 

4 ‘‘(l) TERMINATION.—This section shall not apply to 

5 any qualified investment after December 31, 2010.’’. 

6 (b) CONFORMING AMENDMENTS.— 

7 (1) Section 1016(a) of the Internal Revenue 

8 Code of 1986 is amended by striking ‘‘and’’ at the 

9 end of paragraph (36), by striking the period at the 

10 end of paragraph (37) and inserting ‘‘, and’’, and by 

11 adding at the end the following new paragraph: 

12 ‘‘(38) to the extent provided in section 

13 30D(g).’’. 

14 (2) Section 6501(m) of such Code is amended 

15 by inserting ‘‘30D(k),’’ after ‘‘30C(e)(5),’’. 

16 (3) The table of sections for subpart B of part 

17 IV of subchapter A of chapter 1 of such Code is 

18 amended by inserting after the item relating to sec19 tion 30C the following new item: 

‘‘Sec. 30D. Advanced technology motor vehicles manufacturing credit.’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to amounts incurred in taxable 

22 years beginning after December 31, 1999. 

Æ 


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