339
(b) AMOUNT
OF QUALIFYING ADVANCED CLEAN
COAL TECHNOLOGY FACILITY CREDIT.—Subpart E of
part IV of subchapter A of chapter 1 (relating to rules
for computing investment credit) is amended by inserting
after section 48 the following:
‘‘SEC. 48A. QUALIFYING ADVANCED CLEAN COAL TECH-
NOLOGY FACILITY CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 46, the
qualifying advanced clean coal technology facility credit
for any taxable year is an amount equal to 10 percent
of the qualified investment in a qualifying advanced clean
coal technology facility for such taxable year.
‘‘(b) QUALIFYING ADVANCED CLEAN COAL TECH-
NOLOGY FACILITY.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the term ‘qualifying advanced clean coal tech-
nology facility’ means a facility of the taxpayer
which—
‘‘(A)(i)(I) original use of which commences
with the taxpayer, or
‘‘(II) is a retrofitted or repowered conven-
tional technology facility, the retrofitting or
repowering of which is completed by the tax-
payer (but only with respect to that portion of
340
the basis which is properly attributable to such
retrofitting or repowering), or
‘‘(ii) is acquired through purchase (as de-
fined by section 179(d)(2)),
‘‘(B) is depreciable under section 167,
‘‘(C) has a useful life of not less than 4
years,
‘‘(D) is located in the United States, and
‘‘(E) uses qualifying advanced clean coal
technology.
‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.—
For purposes of subparagraph (A) of paragraph (1),
in the case of a facility which—
‘‘(A) is originally placed in service by a
person, and
‘‘(B) is sold and leased back by such per-
son, or is leased to such person, within 3
months after the date such facility was origi-
nally placed in service, for a period of not less
than 12 years,
such facility shall be treated as originally placed in
service not earlier than the date on which such prop-
erty is used under the leaseback (or lease) referred
to in subparagraph (B). The preceding sentence
shall not apply to any property if the lessee and les-
341
sor of such property make an election under this
sentence. Such an election, once made, may be re-
voked only with the consent of the Secretary.
‘‘(c) QUALIFYING ADVANCED CLEAN COAL TECH-
NOLOGY.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualifying ad-
vanced clean coal technology’ means, with respect to
clean coal technology—
‘‘(A) which has—
‘‘(i) multiple applications, with a com-
bined capacity of not more than 5,000
megawatts (4,000 megawatts before 2009),
of advanced pulverized coal or atmospheric
fluidized bed combustion technology—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2000 and
2012, and
‘‘(III) having a design net heat
rate of not more than 9,500 Btu per
kilowatt hour when the design coal
has a heat content of more than 9,000
Btu per pound, or a design net heat
rate of not more than 9,900 Btu per
kilowatt hour when the design coal
342
has a heat content of 9,000 Btu per
pound or less,
‘‘(ii) multiple applications, with a
combined capacity of not more than 1,000
megawatts (500 megawatts before 2009
and 750 megawatts before 2013), of pres-
surized 
fluidized 
bed 
combustion
technology—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2000 and
2016, and
‘‘(III) having a design net heat
rate of not more than 8,400 Btu per
kilowatt hour when the design coal
has a heat content of more than 9,000
Btu per pound, or a design net heat
rate of not more than 9,900 Btu’s per
kilowatt hour when the design coal
has a heat content of 9,000 Btu per
pound or less, and
‘‘(iii) multiple applications, with a
combined capacity of not more than 2,000
megawatts (1,000 megawatts before 2009
and 1,500 megawatts before 2013), of in-
343
tegrated gasification combined cycle tech-
nology, with or without fuel or chemical co-
production—
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2000 and
2016,
‘‘(III) having a design net heat
rate of not more than 8,550 Btu per
kilowatt hour when the design coal
has a heat content of more than 9,000
Btu per pound, or a design net heat
rate of not more than 9,900 Btu per
kilowatt hour when the design coal
has a heat content of 9,000 Btu per
pound or less, and
‘‘(IV) having a net thermal effi-
ciency on any fuel or chemical co-pro-
duction of not less than 39 percent
(higher heating value), or
‘‘(iv) multiple applications, with a
combined capacity of not more than 2,000
megawatts (1,000 megawatts before 2009
and 1,500 megawatts before 2013) of tech-
nology for the production of electricity—
344
‘‘(I) installed as a new, retrofit,
or repowering application,
‘‘(II) operated between 2000 and
2016, and
‘‘(III) having a carbon emission
rate which is not more than 85 per-
cent of conventional technology, and
‘‘(B) which reduces the discharge into the
atmosphere of 1 or more of the following pollut-
ants to not more than—
‘‘(i) 5 percent of the potential com-
bustion concentration sulfur dioxide emis-
sions for a coal with a potential combus-
tion concentration sulfur emission of 1.2
lb/million btu of heat input or greater,
‘‘(ii) 15 percent of the potential com-
bustion concentration sulfur dioxide emis-
sions for a coal with a potential combus-
tion concentration sulfur emission of less
than 1.2 lb/million btu of heat input,
‘‘(iii) nitrogen oxide emissions of 0.1
lb per million btu of heat input from other
than cyclone-fired boilers,
345
‘‘(iv) 15 percent of the uncontrolled
nitrogen oxide emissions from cyclone-fired
boilers,
‘‘(v) particulate emissions of 0.02 lb
per million btu of heat input, and
‘‘(vi) the emission levels specified in
the new source performance standards of
the Clean Air Act (42 U.S.C. 7411) in ef-
fect at the time of retrofitting, repowering,
or replacement of the qualifying clean coal
technology unit for the category of source
if such level is lower than the levels speci-
fied in clause (i), (ii), (iii), (iv), or (v).
‘‘(2) EXCEPTIONS.—Such term shall not in-
clude any projects receiving or scheduled to receive
funding under the Clean Coal Technology Program,
or the Power Plant Improvement administered by
the Secretary of the Department of Energy.
‘‘(d) CLEAN COAL TECHNOLOGY.—For purposes of
this section, the term ‘clean coal technology’ means ad-
vanced technology which uses coal to produce 75 percent
or more of its thermal output as electricity including ad-
vanced pulverized coal or atmospheric fluidized bed com-
bustion, pressurized fluidized bed combustion, integrated
gasification combined cycle with or without fuel or chem-
346
ical co-production, and any other technology for the pro-
duction of electricity which exceeds the performance of
conventional technology.
‘‘(e) CONVENTIONAL TECHNOLOGY.—The term ‘con-
ventional technology’ means—
‘‘(1) coal-fired combustion technology with a de-
sign net heat rate of not less than 9,500 Btu per kil-
owatt hour (HHV) and a carbon equivalents emis-
sion rate of not more than 0.54 pounds of carbon
per kilowatt hour when the design coal has a heat
content of more than 9,000 Btu per pound,
‘‘(2) coal-fired combustion technology with a de-
sign net heat rate of not less than 10,500 Btu per
kilowatt hour (HHV) and a carbon equivalents emis-
sion rate of not more than 0.60 pounds of carbon
per kilowatt hour when the design coal has a heat
content of 9,000 Btu per pound or less, or
‘‘(3) natural gas-fired combustion technology
with a design net heat rate of not less than 7,500
Btu per kilowatt hour (HHV) and a carbon equiva-
lents emission rate of not more than 0.24 pounds of
carbon per kilowatt hour.
‘‘(f) DESIGN NET HEAT RATE.—The design net heat
rate shall be based on the design annual heat input to
and the design annual net electrical output from the quali-
347
fying advanced clean coal technology (determined without
regard to such technology’s co-generation of steam).
‘‘(g) SELECTION CRITERIA.—Selection criteria for
qualifying advanced clean coal technology facilities—
‘‘(1) shall be established by the Secretary of
Energy as part of a competitive solicitation,
‘‘(2) shall include primary criteria of minimum
design net heat rate, maximum design thermal effi-
ciency, environmental performance, and lowest cost
to the government, and
‘‘(3) shall include supplemental criteria as de-
termined appropriate by the Secretary of Energy.
‘‘(h) QUALIFIED INVESTMENT.—For purposes of
subsection (a), the term ‘qualified investment’ means, with
respect to any taxable year, the basis of a qualifying ad-
vanced clean coal technology facility placed in service by
the taxpayer during such taxable year.
‘‘(i) QUALIFIED PROGRESS EXPENDITURES.—
‘‘(1) INCREASE IN QUALIFIED INVESTMENT.—
In the case of a taxpayer who has made an election
under paragraph (5), the amount of the qualified in-
vestment of such taxpayer for the taxable year (de-
termined under subsection (c) without regard to this
section) shall be increased by an amount equal to
the aggregate of each qualified progress expenditure
348
for the taxable year with respect to progress expend-
iture property.
‘‘(2) PROGRESS EXPENDITURE PROPERTY DE-
FINED.—For purposes of this subsection, the term
‘progress expenditure property’ means any property
being constructed by or for the taxpayer and which
it is reasonable to believe will qualify as a qualifying
advanced clean coal technology facility which is
being constructed by or for the taxpayer when it is
placed in service.
‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE-
FINED.—For purposes of this subsection—
‘‘(A) SELF-CONSTRUCTED PROPERTY.—In
the case of any self-constructed property, the
term ‘qualified progress expenditures’ means
the amount which, for purposes of this subpart,
is properly chargeable (during such taxable
year) to capital account with respect to such
property.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—In the case of nonself-constructed prop-
erty, the term ‘qualified progress expenditures’
means the amount paid during the taxable year
to another person for the construction of such
property.
349
‘‘(4) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) SELF-CONSTRUCTED
PROPERTY.—
The term ‘self-constructed property’ means
property for which it is reasonable to believe
that more than half of the construction expendi-
tures will be made directly by the taxpayer.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—The term ‘nonself-constructed property’
means property which is not self-constructed
property.
‘‘(C) CONSTRUCTION, 
ETC.—The term
‘construction’ includes reconstruction and erec-
tion, and the term ‘constructed’ includes recon-
structed and erected.
‘‘(D) ONLY
CONSTRUCTION
OF
QUALI-
FYING
ADVANCED
CLEAN
COAL
TECHNOLOGY
FACILITY TO BE TAKEN INTO ACCOUNT.—Con-
struction shall be taken into account only if, for
purposes of this subpart, expenditures therefor
are properly chargeable to capital account with
respect to the property.
‘‘(5) ELECTION.—An election under this sub-
section may be made at such time and in such man-
ner as the Secretary may by regulations prescribe.
352
ronmental performance be placed in service
as soon as possible;
‘‘(ii) to allocate credits to taxpayers
that have a definite and credible plan for
placing into commercial operation a quali-
fying advanced clean coal technology facil-
ity, including—
‘‘(I) a site,
‘‘(II) contractual commitments
for procurement and construction,
‘‘(III) filings for all necessary
preconstruction approvals,
‘‘(IV) a demonstrated record of
having successfully completed com-
parable projects on a timely basis, and
‘‘(V) such other factors that the
Secretary shall determine are appro-
priate;
‘‘(iii) to allocate credits to a portion of
a facility (or a portion of the production
from a facility) if the Secretary determines
that such an allocation should maximize
the amount of efficient production encour-
aged with the available tax credits;
353
‘‘(C) to set progress requirements and con-
ditional approvals so that credits for approved
projects that become unlikely to meet the nec-
essary conditions that can be reallocated by the
Secretary to other projects;
‘‘(D) to reallocate credits that are not allo-
cated to 1 technology described in clauses (i)
through (iv) of subsection (c)(1)(A) because an
insufficient number of qualifying facilities re-
quested credits for one technology, to another
technology described in another subparagraph
of subsection (c) in order to maximize the
amount of energy efficient production encour-
aged with the available tax credits; and
‘‘(E) to provide taxpayers with opportuni-
ties to correct administrative errors and omis-
sions with respect to allocations and record-
keeping within a reasonable period after their
discovery, taking into account the availability of
regulations and other administrative guidance
from the Secretary.’’.
(c) RECAPTURE.—Section 50(a) (relating to other
special rules) is amended by adding at the end the fol-
lowing:
354
‘‘(6) SPECIAL RULES RELATING TO QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY FACILITY.—
For purposes of applying this subsection in the case
of any credit allowable by reason of section 48A, the
following shall apply:
‘‘(A) GENERAL
RULE.—In lieu of the
amount of the increase in tax under paragraph
(1), the increase in tax shall be an amount
equal to the investment tax credit allowed under
section 38 for all prior taxable years with re-
spect to a qualifying advanced clean coal tech-
nology facility (as defined by section 48A(b)(1))
multiplied by a fraction whose numerator is the
number of years remaining to fully depreciate
under this title the qualifying advanced clean
coal technology facility disposed of, and whose
denominator is the total number of years over
which such facility would otherwise have been
subject to depreciation. For purposes of the
preceding sentence, the year of disposition of
the qualifying advanced clean coal technology
facility property shall be treated as a year of re-
maining depreciation.
‘‘(B) PROPERTY CEASES TO QUALIFY FOR
PROGRESS
EXPENDITURES.—Rules similar to
355
the rules of paragraph (2) shall apply in the
case of qualified progress expenditures for a
qualifying advanced clean coal technology facil-
ity under section 48A, except that the amount
of the increase in tax under subparagraph (A)
of this paragraph shall be substituted in lieu of
the amount described in such paragraph (2).
‘‘(C) APPLICATION OF PARAGRAPH.—This
paragraph shall be applied separately with re-
spect to the credit allowed under section 38 re-
garding a qualifying advanced clean coal tech-
nology facility.’’.
(d) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules) is amended by adding at the end the
following:
‘‘(14) NO CARRYBACK OF SECTION 48A CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying advanced clean coal
technology facility credit determined under section
48A may be carried back to a taxable year ending
before January 1, 2002.’’.
(e) TECHNICAL AMENDMENTS.—
(1) Section 49(a)(1)(C) is amended by striking
‘‘and’’ at the end of clause (ii), by striking the pe-
356
riod at the end of clause (iii) and inserting ‘‘, and’’,
and by adding at the end the following:
‘‘(iv) the portion of the basis of any
qualifying advanced clean coal technology
facility attributable to any qualified invest-
ment (as defined by section 48A(c)).’’.
(2) Section 50(a)(4) is amended by striking
‘‘and (2)’’ and inserting ‘‘, (2), and (6)’’.
(3) Section 50(c) is amended by adding at the
end the following new paragraph:
‘‘(6) SPECIAL
RULE
FOR
QUALIFYING
AD-
VANCED CLEAN COAL TECHNOLOGY FACILITIES.—
Paragraphs (1) and (2) shall not apply to any prop-
erty with respect to the credit determined under sec-
tion 48A.’’.
(4) The table of sections for subpart E of part
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 48 the fol-
lowing:
‘‘Sec. 48A. Qualifying advanced clean coal technology facility
credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to periods after December 31,
2001, under rules similar to the rules of section 48(m)
of the Internal Revenue Code of 1986 (as in effect on the
357
day before the date of the enactment of the Revenue Rec-
onciliation Act of 1990).
SEC. 3118. CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.
(a) CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.—Subpart D of
part IV of subchapter A of chapter 1 (relating to business
related credits) is amended by adding after section 45J
the following:
‘‘SEC. 45K. CREDIT FOR PRODUCTION FROM QUALIFYING
ADVANCED CLEAN COAL TECHNOLOGY.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the qualifying advanced clean coal technology production
credit of any taxpayer for any taxable year is equal to—
‘‘(1) the applicable amount of advanced clean
coal technology production credit, multiplied by
‘‘(2) the sum of—
‘‘(A) the kilowatt hours of electricity, plus
‘‘(B) each 3,413 Btu of fuels or chemicals,
produced by the taxpayer during such taxable year
at a qualifying advanced clean coal technology facil-
ity during the 10-year period beginning on the date
the facility was originally placed in service.
‘‘(b) APPLICABLE AMOUNT.—For purposes of this
section, the applicable amount of advanced clean coal tech-
358
nology production credit with respect to production from
a qualifying advanced clean coal technology facility shall
be determined as follows:
‘‘(1) Where the design coal has a heat content
of more than 9,000 Btu per pound:
‘‘(A) In the case of a facility originally
placed in service before 2009, if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,400 ............................................................
$.0060
$.0038
More than 8,400 but not more than 8,550 ..........................
$.0025
$.0010
More than 8,550 but not more than 8,750 ..........................
$.0010
$.0010.
‘‘(B) In the case of a facility originally
placed in service after 2008 and before 2013,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,770 ............................................................
$.0105
$.0090
More than 7,770 but not more than 8,125 ..........................
$.0085
$.0068
More than 8,125 but not more than 8,350 ..........................
$.0075
$.0055.
‘‘(C) In the case of a facility originally
placed in service after 2012 and before 2017,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,380 ............................................................
$.0140
$.01
More than 7,380 but not more than 7,720 ..........................
$.0120
$.0090.
‘‘(2) Where the design coal has a heat content
of not more than 9,000 Btu per pound:
359
‘‘(A) In the case of a facility originally
placed in service before 2009, if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,500 ............................................................
$.0060
$.0038
More than 8,500 but not more than 8,650 ..........................
$.0025
$.0010
More than 8,650 but not more than 8,750 ..........................
$.0010
$.0010.
‘‘(B) In the case of a facility originally
placed in service after 2008 and before 2013,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 8,000 ............................................................
$.0105
$.009
More than 8,000 but not more than 8,250 ..........................
$.0085
$.0068
More than 8,250 but not more than 8,400 ..........................
$.0075
$.0055.
‘‘(C) In the case of a facility originally
placed in service after 2012 and before 2017,
if—
‘‘The facility design net heat rate, Btu/kWh (HHV) is
equal to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not more than 7,800 ............................................................
$.0140
$.0115
More than 7,800 but not more than 7,950 ..........................
$.0120
$.0090.
‘‘(3) Where the clean coal technology facility is
producing fuel or chemicals:
‘‘(A) In the case of a facility originally
placed in service before 2009, if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 40.6 percent ...................................................
$.0060
$.0038
Less than 40.6 but not less than 40 percent .......................
$.0025
$.0010
Less than 40 but not less than 39 percent ..........................
$.0010
$.0010.
360
‘‘(B) In the case of a facility originally
placed in service after 2008 and before 2013,
if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 43.9 percent ...................................................
$.0105
$.009
Less than 43.9 but not less than 42 percent .......................
$.0085
$.0068
Less than 42 but not less than 40.9 percent .......................
$.0075
$.0055.
‘‘(C) In the case of a facility originally
placed in service after 2012 and before 2017,
if—
‘‘The facility design net thermal efficiency (HHV) is equal
to:
The applicable amount is:
For 1st 5 years
of such service
For 2d 5 years of
such service
Not less than 44.2 percent ...................................................
$.0140
$.0115
Less than 44.2 but not less than 43.6 percent ....................
$.0120
$.0090.
‘‘(c) INFLATION ADJUSTMENT FACTOR.—For cal-
endar years after 2001, each amount in paragraphs (1),
(2), and (3) shall be adjusted by multiplying such amount
by the inflation adjustment factor for the calendar year
in which the amount is applied. If any amount as in-
creased under the preceding sentence is not a multiple of
0.01 cent, such amount shall be rounded to the nearest
multiple of 0.01 cent.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Any term used in this sec-
tion which is also used in section 48A shall have the
meaning given such term in section 48A.
361
‘‘(2) APPLICABLE RULES.—The rules of para-
graphs (3), (4), and (5) of section 45 shall apply.
‘‘(3) INFLATION
ADJUSTMENT
FACTOR.—The
term ‘inflation adjustment factor’ means, with re-
spect to a calendar year, a fraction the numerator
of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of
which is the GDP implicit price deflator for the cal-
endar year 2001.
‘‘(4) GDP IMPLICIT
PRICE
DEFLATOR.—The
term ‘GDP implicit price deflator’ means the most
recent revision of the implicit price deflator for the
gross domestic product as computed by the Depart-
ment of Commerce before March 15 of the calendar
year.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) is amended by striking ‘‘plus’’ at the end of
paragraph (18), by striking the period at the end of para-
graph (19) and inserting ‘‘, plus’’, and by adding at the
end the following:
‘‘(20) the qualifying advanced clean coal tech-
nology production credit determined under section
45K(a).’’.
362
(c) TRANSITIONAL RULE.—Section 39(d) (relating to
transitional rules) is amended by adding after paragraph
(14) the following:
‘‘(15) NO CARRYBACK OF SECTION 45K CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying advanced clean coal
technology production credit determined under sec-
tion 45K may be carried back to a taxable year end-
ing before the date of the enactment of section
45K.’’.
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by adding at the end the following:
‘‘Sec. 45K. Credit for production from qualifying advanced clean
coal technology.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to production after the date of the
enactment of this Act.
TITLE II—RELIABILITY
SEC. 3201. NATURAL GAS GATHERING LINES TREATED AS 7-
YEAR PROPERTY.
(a) IN GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to classification of certain property) is
amended by striking ‘‘and’’ at the end of clause (i), by
363
redesignating clause (ii) as clause (iii), and by inserting
after clause (i) the following new clause:
‘‘(ii) any natural gas gathering line,
and’’.
(b) NATURAL GAS GATHERING LINE.—Subsection (i)
of section 168 is amended by adding after paragraph (15)
the following new paragraph:
‘‘(16) NATURAL
GAS
GATHERING
LINE.—The
term ‘natural gas gathering line’ means—
‘‘(A) the pipe, equipment, and appur-
tenances determined to be a gathering line by
the Federal Energy Regulatory Commission, or
‘‘(B) the pipe, equipment, and appur-
tenances used to deliver natural gas from the
wellhead or a commonpoint to the point at
which such gas first reaches—
‘‘(i) a gas processing plant,
‘‘(ii) an interconnection with a trans-
mission pipeline certificated by the Federal
Energy Regulatory Commission as an
interstate transmission pipeline,
‘‘(iii) an interconnection with an
intrastate transmission pipeline, or
364
‘‘(iv) a direct interconnection with a
local distribution company, a gas storage
facility, or an industrial consumer.’’.
(c) ALTERNATIVE SYSTEM.—The table contained in
section 168(g)(3)(B) is amended by inserting after the
item relating to subparagraph (C)(i) the following:
‘‘(C)(ii) .......................................................................................................
10’’.
(d) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub-
paragraph (B) of section 56(a)(1) is amended by inserting
before the period the following: ‘‘or in clause (ii) of section
168(e)(3)(C)’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
SEC. 3202. NATURAL GAS DISTRIBUTION LINES TREATED
AS 10-YEAR PROPERTY.
(a) IN GENERAL.—Subparagraph (D) of section
168(e)(3) (relating to classification of certain property) is
amended by striking ‘‘and’’ at the end of clause (i), by
striking the period at the end of clause (ii) and by insert-
ing ‘‘, and’’, and by adding at the end the following new
clause:
‘‘(iii) any natural gas distribution
line.’’.
365
(b) ALTERNATIVE SYSTEM.—The table contained in
section 168(g)(3)(B) is amended by inserting after the
item relating to subparagraph (D)(ii) the following:
‘‘(D)(iii) .....................................................................................................
20’’.
(c) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub-
paragraph (B) of section 56(a)(1) is amended by inserting
before the period the following: ‘‘or in clause (iii) of section
168(e)(3)(D)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
SEC. 3203. PETROLEUM REFINING PROPERTY TREATED AS
7-YEAR PROPERTY.
(a) IN GENERAL.—Subparagraph (C) of section
168(e)(3) (relating to classification of certain property),
as amended by section 3201, is amended by striking
‘‘and’’ at the end of clause (ii), by redesignating clause
(iii) as clause (iv), and by inserting after clause (ii) the
following new clause:
‘‘(iii) any property used for the dis-
tillation, fractionation, and catalytic crack-
ing of crude petroleum into gasoline and
its other components, and’’.
(b) ALTERNATIVE SYSTEM.—The table contained in
section 168(g)(3)(B), as amended by section 3201, is
366
amended by inserting after the item relating to subpara-
graph (C)(ii) the following:
‘‘(C)(iii) ......................................................................................................
10’’.
(c) ALTERNATIVE MINIMUM TAX EXCEPTION.—Sub-
paragraph (B) of section 56(a)(1), as amended by section
3201, is amended by inserting ‘‘or (iii)’’ after ‘‘clause
(ii)’’.
(d) EFFECTIVE DATE.—The amendment made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
SEC. 3204. EXPENSING OF CAPITAL COSTS INCURRED IN
COMPLYING WITH ENVIRONMENTAL PROTEC-
TION AGENCY SULFUR REGULATIONS.
(a) IN GENERAL.—Section 179(b) (relating to elec-
tion to expense certain depreciable business assets) is
amended by adding at the end the following new para-
graph:
‘‘(5) LIMITATION FOR SMALL BUSINESS REFIN-
ERS.—
‘‘(A) IN GENERAL.—In the case of a small
business refiner electing to expense qualified
costs, in lieu of the dollar limitations in para-
graph (1), the limitation on the aggregate costs
which may be taken into account under sub-
section (a) for any taxable year shall not exceed
75 percent of the qualified costs.
367
‘‘(B) QUALIFIED COSTS.—For purposes of
this paragraph, the term ‘qualified costs’ means
costs paid or incurred by a small business re-
finer for the purpose of complying with the
Highway Diesel Fuel Sulfur Control Require-
ments of the Environmental Protection Agency.
‘‘(C) SMALL
BUSINESS
REFINER.—For
purposes of this paragraph, the term ‘small
business refiner’ means, with respect to any
taxable year, a refiner which, within the refin-
ing operations of the business, employs not
more than 1,500 employees on business days
during such taxable year performing services in
the refining operations of such businesses and
has an average total capacity of 155,000 bar-
rels per day or less.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to expenses paid or incurred after
the date of the enactment of this Act.
SEC. 3205. ENVIRONMENTAL TAX CREDIT.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related cred-
its) is amended by adding at the end the following new
section:
368
‘‘SEC. 45I. ENVIRONMENTAL TAX CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 38, the
amount of the environmental tax credit determined under
this section with respect to any small business refiner for
any taxable year is an amount equal to 5 cents for every
gallon of 15 parts per million or less sulfur diesel produced
at a facility by such small business refiner.
‘‘(b) MAXIMUM CREDIT.—For any small business re-
finer, the aggregate amount allowable as a credit under
subsection (a) for any taxable year with respect to any
facility shall not exceed 25 percent of the qualified capital
costs incurred by such small business refiner with respect
to such facility not taken into account in determining the
credit under subsection (a) for any preceding taxable year.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) SMALL
BUSINESS
REFINER.—The term
‘small business refiner’ means, with respect to any
taxable year, a refiner which, within the refining op-
erations of the business, employs not more than
1,500 employees on business days during such tax-
able year performing services in the refining oper-
ations of such businesses and has an average total
capacity of 155,000 barrels per day or less.
‘‘(2) QUALIFIED
CAPITAL
COSTS.—The term
‘qualified capital costs’ means, with respect to any
facility, those costs paid or incurred during the ap-
369
plicable period for compliance with the applicable
EPA regulations with respect to such facility, includ-
ing expenditures for the construction of new process
operation units or the dismantling and reconstruc-
tion of existing process units to be used in the pro-
duction of 15 parts per million or less sulfur diesel
fuel, associated adjacent or offsite equipment (in-
cluding tankage, catalyst, and power supply), engi-
neering, construction period interest, and sitework.
‘‘(3) APPLICABLE
EPA
REGULATIONS.—The
term ‘applicable EPA regulations’ means the High-
way Diesel Fuel Sulfur Control Requirements of the
Environmental Protection Agency.
‘‘(4) APPLICABLE PERIOD.—The term ‘applica-
ble period’ means, with respect to any facility, the
period beginning on the day after the date of the en-
actment of this section and ending with the date
which is 1 year after the date on which the taxpayer
must comply with the applicable EPA regulations
with respect to such facility.
‘‘(d) REDUCTION IN BASIS.—For purposes of this
subtitle, if a credit is determined under this section with
respect to any property by reason of qualified capital
costs, the basis of such property shall be reduced by the
amount of the credit so determined.
370
‘‘(e) CERTIFICATION.—
‘‘(1) REQUIRED.—Not later than the date
which is 30 months after the first day of the first
taxable year in which the environmental tax credit is
allowed with respect to a facility, the small business
refiner must obtain certification from the Secretary,
in consultation with the Administrator of the Envi-
ronmental Protection Agency, that the taxpayer’s
qualified capital costs with respect to such facility
will result in compliance with the applicable EPA
regulations.
‘‘(2) CONTENTS OF APPLICATION.—An applica-
tion for certification shall include relevant informa-
tion regarding unit capacities and operating charac-
teristics sufficient for the Secretary, in consultation
with the Administrator of the Environmental Protec-
tion Agency, to determine that such qualified capital
costs are necessary for compliance with the applica-
ble EPA regulations.
‘‘(3) REVIEW
PERIOD.—Any application shall
be reviewed and notice of certification, if applicable,
shall be made within 60 days of receipt of such ap-
plication.
‘‘(4) RECAPTURE.—Notwithstanding subsection
(f), failure to obtain certification under paragraph
371
(1) constitutes a recapture event under subsection
(f) with an applicable percentage of 100 percent.
‘‘(f) RECAPTURE OF ENVIRONMENTAL TAX CRED-
IT.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (e), if, as of the close of any taxable year,
there is a recapture event with respect to any facility
of the small business refiner, then the tax of such
refiner under this chapter for such taxable year shall
be increased by an amount equal to the product of—
‘‘(A) the applicable recapture percentage,
and
‘‘(B) the aggregate decrease in the credits
allowed under section 38 for all prior taxable
years which would have resulted if the qualified
capital costs of the taxpayer described in sub-
section (c)(2) with respect to such facility had
been zero.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
The applicable
recapture
‘‘If the recapture event occurs in:
percentage is:
Year 1 ........................................................................
100
Year 2 ........................................................................
Year 3 ........................................................................
Year 4 ........................................................................
372
Year 5 ........................................................................
Years 6 and thereafter ..............................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day
of the taxable year in which the qualified cap-
ital costs with respect to a facility described in
subsection (c)(2) are paid or incurred by the
taxpayer.
‘‘(3) RECAPTURE EVENT DEFINED.—For pur-
poses of this subsection, the term ‘recapture event’
means—
‘‘(A) FAILURE
TO
COMPLY.—The failure
by the small business refiner to meet the appli-
cable EPA regulations within the applicable pe-
riod with respect to the facility.
‘‘(B) CESSATION
OF
OPERATION.—The
cessation of the operation of the facility as a fa-
cility which produces 15 parts per million or
less sulfur diesel after the applicable period.
‘‘(C) CHANGE IN OWNERSHIP.—
‘‘(i) IN
GENERAL.—Except as pro-
vided in clause (ii), the disposition of a
small business refiner’s interest in the fa-
cility with respect to which the credit de-
scribed in subsection (a) was allowable.
373
‘‘(ii) AGREEMENT TO ASSUME RECAP-
TURE
LIABILITY.—Clause (i) shall not
apply if the person acquiring such interest
in the facility agrees in writing to assume
the recapture liability of the person dis-
posing of such interest in effect imme-
diately before such disposition. In the
event of such an assumption, the person
acquiring the interest in the facility shall
be treated as the taxpayer for purposes of
assessing any recapture liability (computed
as if there had been no change in owner-
ship).
‘‘(4) SPECIAL RULES.—
‘‘(A) TAX
BENEFIT
RULE.—The tax for
the taxable year shall be increased under para-
graph (1) only with respect to credits allowed
by reason of this section which were used to re-
duce tax liability. In the case of credits not so
used to reduce tax liability, the carryforwards
and carrybacks under section 39 shall be appro-
priately adjusted.
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for
374
purposes of determining the amount of any
credit under this chapter or for purposes of sec-
tion 55.
‘‘(C) NO RECAPTURE BY REASON OF CAS-
UALTY LOSS.—The increase in tax under this
subsection shall not apply to a cessation of op-
eration of the facility by reason of a casualty
loss to the extent such loss is restored by recon-
struction or replacement within a reasonable pe-
riod established by the Secretary.
‘‘(g) CONTROLLED GROUPS.—For purposes of this
section, all persons treated as a single employer under sub-
section (b), (c), (m), or (o) of section 414 shall be treated
as a single employer.’’.
(b) CREDIT MADE PART OF GENERAL BUSINESS
CREDIT.—Subsection (b) of section 38 (relating to general
business credit) is amended by striking ‘‘plus’’ at the end
of paragraph (16), by striking the period at the end of
paragraph (17) and inserting ‘‘, plus’’, and by adding at
the end the following new paragraph:
‘‘(18) in the case of a small business refiner,
the environmental tax credit determined under sec-
tion 45I(a).’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C
(relating to certain expenses for which credits are allow-
375
able) is amended by adding after subsection (d) the fol-
lowing new subsection:
‘‘(e) ENVIRONMENTAL TAX CREDIT.—No deduction
shall be allowed for that portion of the expenses otherwise
allowable as a deduction for the taxable year which is
equal to the amount of the credit determined for the tax-
able year under section 45I(a).’’.
(d) BASIS ADJUSTMENT.—Section 1016(a) (relating
to adjustments to basis) is amended by striking ‘‘and’’ at
the end of paragraph (33), by striking the period at the
end of paragraph (34) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(35) in the case of a facility with respect to
which a credit was allowed under section 45I, to the
extent provided in section 45I(d).’’.
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
is amended by adding at the end the following new item:
‘‘Sec. 45I. Environmental tax credit.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to expenses paid or incurred after
the date of the enactment of this Act.
376
SEC. 3206. DETERMINATION OF SMALL REFINER EXCEP-
TION TO OIL DEPLETION DEDUCTION.
(a) IN GENERAL.—Paragraph (4) of section 613A(d)
(relating to certain refiners excluded) is amended to read
as follows:
‘‘(4) CERTAIN
REFINERS
EXCLUDED.—If the
taxpayer or a related person engages in the refining
of crude oil, subsection (c) shall not apply to the
taxpayer for a taxable year if the average daily refin-
ery runs of the taxpayer and the related person for
the taxable year exceed 75,000 barrels. For purposes
of this paragraph, the average daily refinery runs for
any taxable year shall be determined by dividing the
aggregate refinery runs for the taxable year by the
number of days in the taxable year.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3207. TAX-EXEMPT BOND FINANCING OF CERTAIN
ELECTRIC FACILITIES.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter B of chapter 1 (relating to tax exemption require-
ments for State and local bonds) is amended by inserting
after section 141 the following new section:
377
‘‘SEC. 141A. TREATMENT OF GOVERNMENT-OWNED ELEC-
TRIC OUTPUT FACILITIES.
‘‘(a) EXCEPTIONS FROM PRIVATE BUSINESS USE
LIMITATIONS
WHERE
OPEN
ACCESS
REQUIREMENTS
MET.—
‘‘(1) GENERAL
RULE.—For purposes of this
part, the term ‘private business use’ shall not
include—
‘‘(A) any permitted open access activity by
a governmental unit with respect to an electric
output facility owned by such unit, or
‘‘(B) any permitted sale of electricity by a
governmental unit which is generated at an ex-
isting generation facility owned by such unit.
‘‘(2) PERMITTED OPEN ACCESS ACTIVITY.—For
purposes of this section—
‘‘(A) IN GENERAL.—The term ‘permitted
open access activity’ means any activity meeting
the open access requirements of any of the fol-
lowing clauses with respect to such electric out-
put facility:
‘‘(i) TRANSMISSION
AND
ANCILLARY
FACILITY.—In the case of a transmission
facility or a facility providing ancillary
services, the provision of transmission serv-
ice and ancillary services meets the open
378
access requirements of this clause only if
such services are provided on a non-
discriminatory open access basis—
‘‘(I) pursuant to an open access
transmission tariff filed with and ap-
proved by FERC, including an accept-
able reciprocity tariff, or
‘‘(II) under a regional trans-
mission organization agreement ap-
proved by FERC.
‘‘(ii) DISTRIBUTION
FACILITIES.—In
the case of a distribution facility, the deliv-
ery of electric energy meets the open ac-
cess requirements of this clause only if
such delivery is made on a nondiscrim-
inatory open access basis.
‘‘(iii) GENERATION
FACILITIES.—In
the case of a generation facility, the deliv-
ery of electric energy generated by such fa-
cility meets the open access requirements
of this clause only if—
‘‘(I) such facility is directly con-
nected to distribution facilities owned
by the governmental unit which owns
the generation facility, and
379
‘‘(II) such distribution facilities
meet the open access requirements of
clause (ii).
‘‘(B) SPECIAL RULES.—
‘‘(i) VOLUNTARILY FILED TARIFFS.—
Subparagraph (A)(i)(I) shall apply in the
case of a voluntarily filed tariff only if the
governmental unit files a report with
FERC within 90 days after the date of the
enactment of this section relating to
whether or not such governmental unit will
join a regional transmission organization.
‘‘(ii) CONTROL OF TRANSMISSION FA-
CILITIES BY REGIONAL TRANSMISSION OR-
GANIZATION.—A governmental unit shall
be treated as meeting the open access re-
quirements of subparagraph (A)(i) if a re-
gional transmission organization controls
the transmission facilities.
‘‘(iii) ERCOT UTILITY.—References
to FERC in subparagraph (A) shall be
treated as references to the Public Utility
Commission of Texas with respect to any
ERCOT utility (as defined in section
380
212(k)(2)(B) of the Federal Power Act (16
U.S.C. 824k(k)(2)(B))).
‘‘(3) PERMITTED SALE.—For purposes of this
subsection—
‘‘(A) IN GENERAL.—The term ‘permitted
sale’ means—
‘‘(i) any sale of electricity to an on-
system purchaser if the seller meets the
open access requirements of paragraph (2)
with respect to all distribution and trans-
mission facilities (if any) owned by such
seller, and
‘‘(ii) subject to subparagraphs (B)
and (C), any sale of electricity to a whole-
sale native load purchaser, and any load
loss sale, if—
‘‘(I) the seller meets the open ac-
cess requirements of paragraph (2)
with respect to all transmission facili-
ties (if any) owned by such seller, or
‘‘(II) in any case in which the
seller does not own any transmission
facilities, all persons providing trans-
mission services to the seller’s whole-
sale native load purchasers meet the
381
open access requirements of para-
graph (2) with respect to all trans-
mission facilities owned by such per-
sons.
‘‘(B) LIMITATION ON SALES TO WHOLE-
SALE NATIVE LOAD PURCHASERS.—A sale to a
wholesale native load purchaser shall be treated
as a permitted sale only to the extent that—
‘‘(i) such purchaser resells the elec-
tricity directly at retail to persons within
the purchaser’s distribution area, or
‘‘(ii) such electricity is resold by such
purchaser through one or more wholesale
purchasers (each of whom as of June 30,
2000, was a party to a requirements con-
tract or a firm power contract described in
paragraph (5)(B)(ii)) to retail purchasers
in the ultimate wholesale purchaser’s dis-
tribution area.
‘‘(C) LOAD LOSS SALES.—
‘‘(i) IN
GENERAL.—The term ‘load
loss sale’ means any sale at wholesale to
the extent that—
‘‘(I) the aggregate sales at whole-
sale during the recovery period does
382
not exceed the load loss mitigation
sales limit for such period, and
‘‘(II) the aggregate sales at
wholesale during the first calendar
year after the recovery period does not
exceed the excess carried under clause
(iv) to such year.
‘‘(ii) LOAD LOSS MITIGATION SALES
LIMIT.—For purposes of clause (i), the
load loss mitigation sales limit for the re-
covery period is the sum of the annual load
losses for each year of such period.
‘‘(iii) ANNUAL LOAD LOSS.—A govern-
mental unit’s annual load loss for each
year of the recovery period is the amount
(if any) by which—
‘‘(I) the megawatt hours of elec-
tric energy sold during such year to
wholesale 
native 
load 
purchasers
which do not constitute private busi-
ness use are less than
‘‘(III) the megawatt hours of
electric energy sold during the base
year to wholesale native load pur-
383
chasers which do not constitute pri-
vate business use.
The annual load loss for any year shall not
exceed the portion of the amount deter-
mined under the preceding sentence which
is attributable to open access requirements.
‘‘(iv) CARRYOVERS.—If the limitation
under clause (i) for the recovery period ex-
ceeds the aggregate sales during such pe-
riod which are taken into account under
clause (i), such excess (but not more than
10 percent of such limitation) may be car-
ried over to the first calendar year fol-
lowing the recovery period.
‘‘(v) RECOVERY PERIOD.—The recov-
ery period is the 7-year period beginning
with the start-up year.
‘‘(vi) START-UP YEAR.—The start-up
year is the calendar year which includes
the date of the enactment of this section
or, if later, at the election of the govern-
mental unit—
‘‘(I) the first year that the gov-
ernmental unit offers nondiscrim-
inatory open transmission access, or
384
‘‘(II) the first year in which at
least 10 percent of the governmental
unit’s wholesale customers’ aggregate
retail native load is open to retail
competition.
‘‘(4) ON-SYSTEM PURCHASER.—For purposes of
this section, the term ‘on-system purchaser’ means
any person whose electric equipment is directly con-
nected with any transmission or distribution facility
owned by the governmental unit owning the existing
generation facility if—
‘‘(A) such person—
‘‘(i) purchases electric energy from
such governmental unit at retail, and
‘‘(ii)(I) was within such unit’s dis-
tribution area at the close of the base year
or
‘‘(II) is a person as to whom the gov-
ernmental unit has a statutory service obli-
gation, or
‘‘(B) is a wholesale native load purchaser
from such governmental unit.
‘‘(5) WHOLESALE NATIVE LOAD PURCHASER.—
For purposes of this section—
385
‘‘(A) IN GENERAL.—The term ‘wholesale
native load purchaser’ means a wholesale pur-
chaser as to whom the governmental unit had—
‘‘(i) a statutory service obligation at
wholesale at the close of the base year, or
‘‘(ii) an obligation at the close of the
base year under a requirements or firm
sales contract if, as of June 30, 2000, such
contract had been in effect for (or had an
initial term of) at least 10 years.
‘‘(B) PERMITTED SALES UNDER EXISTING
CONTRACTS.—A private business use sale dur-
ing any year to a wholesale native load pur-
chaser (other than a person to whom the gov-
ernmental unit had a statutory service obliga-
tion) under a contract shall be treated as a per-
mitted sale by reason of being a load loss sale
only to the extent that the private business use
sales under the contract during such year ex-
ceed the lesser of—
‘‘(i) the private business use sales
under the contract during the base year, or
‘‘(ii) the maximum private business
use sales which would (but for this section)
386
be permitted without causing the bonds to
be private activity bonds.
This subparagraph shall only apply to the ex-
tent that the sale is allocable to bonds issued
before the date of the enactment of this section
(or bonds issued to refund such bonds).
‘‘(6) SPECIAL RULES.—
‘‘(A) TIME OF SALE RULE.—For purposes
of paragraphs (3)(C)(iii) and (5)(B), the deter-
mination of whether a sale after the date of the
enactment of this section is a private business
use shall be made with regard to this section.
‘‘(B) JOINT
ACTION
AGENCIES.—To the
extent provided in regulations, a joint action
agency, or a member of (or a wholesale native
load purchaser from) a joint action agency,
which is entitled to make a sale described in
subparagraph (A) or (B) in a year, may trans-
fer the entitlement to make that sale to the
member (or purchaser), or the joint action
agency, respectively.
‘‘(b) CERTAIN BONDS FOR TRANSMISSION AND DIS-
TRIBUTION FACILITIES NOT TAX EXEMPT.—
‘‘(1) IN GENERAL.—Section 103 shall not apply
to any bond issued on or after the date of the enact-
387
ment of this section if any portion of the proceeds
of the issue of which such bond is a part is used (di-
rectly or indirectly) to finance—
‘‘(A) any electric transmission facility, or
‘‘(B) any start-up electric utility distribu-
tion facility.
‘‘(2) EXCEPTIONS RELATING TO TRANSMISSION
FACILITIES.—Paragraph (1)(A) shall not apply to
any bond issued to finance—
‘‘(A) any repair of a transmission facility
in service on the date of the enactment of this
section, so long as the repair does not—
‘‘(i) increase the voltage level of such
facility over its level at the close of the
base year, or
‘‘(ii) increase the thermal load limit of
such facility by more than 3 percent over
such limit at the close of the base year,
‘‘(B) any qualifying upgrade of an electric
transmission facility in service on the date of
the enactment of this section, or
‘‘(C) any transmission facility necessary to
comply with an obligation under a shared or re-
ciprocal transmission agreement in effect on
such date.
388
‘‘(3) EXCEPTION FOR LOCAL ELECTRIC TRANS-
MISSION
FACILITY.—For 
purposes 
of 
this
subsection—
‘‘(A) IN GENERAL.—In the case of a gov-
ernmental unit which owns distribution facili-
ties, paragraph (1)(A) shall not apply to any
bond issued to finance an electric transmission
facility owned by such governmental unit and
located within such governmental unit’s dis-
tribution area, but only to the extent such facil-
ity is, or will be, necessary to supply electricity
to serve the retail native load, or wholesale na-
tive load, of such governmental unit or of 1 or
more other governmental units owning distribu-
tion facilities which are directly connected to
such electric transmission facility.
‘‘(B) RETAIL
LOAD.—The term ‘retail
load’ means, with respect to a governmental
unit, the electric load of end-users in the dis-
tribution area of the governmental unit.
‘‘(C) WHOLESALE
NATIVE
LOAD.—The
term ‘wholesale native load’ means—
‘‘(i) the retail load of such unit’s
wholesale native load purchasers (or of an
389
ultimate wholesale purchaser described in
subsection (a)(3)(B)(ii)), and
‘‘(ii) the electric load of purchasers
(not described in clause (i)) under whole-
sale requirements contracts which—
‘‘(I) do not constitute private
business use (determined without re-
gard to this section), and
‘‘(II) were in effect in the base
year.
‘‘(D) NECESSARY TO SERVE LOAD.—For
purposes of determining whether a transmission
facility is, or will be, necessary to supply elec-
tricity to retail native load or wholesale native
load—
‘‘(i) the governmental unit’s available
transmission rights shall be taken into ac-
count,
‘‘(ii) electric reliability standards or
requirements of national or regional reli-
ability organizations, regional transmission
organizations and the Electric Reliability
Council of Texas shall be taken into ac-
count, and
390
‘‘(iii) transmission, siting and con-
struction decisions of regional transmission
organizations and State and Federal regu-
latory and siting agencies, after a pro-
ceeding that provides for public input,
shall be presumptive evidence regarding
whether transmission facilities are nec-
essary to serve native load.
‘‘(E) QUALIFYING
UPGRADE.—The term
‘qualifying upgrade’ means an improvement or
addition to transmission facilities of the govern-
mental unit in service on the date of the enact-
ment of this section which—
‘‘(i) is ordered or approved by a re-
gional transmission organization or by a
State regulatory or siting agency, after a
proceeding that provides for public input,
and
‘‘(ii) is, or will be, necessary to supply
electricity to serve the retail native load, or
wholesale native load, of such govern-
mental unit or of one or more govern-
mental units owning distribution facilities
which are directly connected to such trans-
mission facility.
391
‘‘(4) START-UP
ELECTRIC
UTILITY
DISTRIBU-
TION FACILITY DEFINED.—For purposes of this sub-
section, the term ‘start-up electric utility distribution
facility’ means any distribution facility to provide
electric service for sale to the public if such facility
is placed in service—
‘‘(A) by a governmental unit that did not
operate an electric utility on the date of the en-
actment of this section, and
‘‘(B) during the first 10 years after the
date such governmental unit begins operating
an electric utility.
A governmental unit is treated as having operated
an electric utility on the date of the enactment of
this section if it operates electric output facilities
which were (on such date) operated by another gov-
ernmental unit to provide electric service for sale to
the public.
‘‘(5) EXCEPTION FOR REFUNDING BONDS.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any eligible refunding bond.
‘‘(B) ELIGIBLE
REFUNDING
BOND.—For
purposes of subparagraph (A), the term ‘eligible
refunding bond’ means any bond (or series of
bonds) issued to refund any bond issued before
392
the date of the enactment of this section if the
average maturity date of the issue of which the
refunding bond is a part is not later than the
average maturity date of the bonds to be re-
funded by such issue.
‘‘(c) DEFINITIONS; SPECIAL RULES.—For purposes
of this section—
‘‘(1) BASE
YEAR.—The term ‘base year’
means—
‘‘(A) the calendar year preceding the start-
up year, or
‘‘(B) at the election of the governmental
unit, the second or third calendar years pre-
ceding the start-up year.
‘‘(2) DISTRIBUTION AREA.—The term ‘distribu-
tion area’ means the area in which a governmental
unit owns distribution facilities.
‘‘(3) ELECTRIC OUTPUT FACILITY.—The term
‘electric output facility’ means an output facility
that is an electric generation, transmission, or dis-
tribution facility.
‘‘(4) DISTRIBUTION FACILITY.—The term ‘dis-
tribution facility’ means an electric output facility
that is not a generation or transmission facility.
393
‘‘(5) 
TRANSMISSION
FACILITY.—The 
term
‘transmission facility’ means an electric output facil-
ity (other than a generation facility) that operates at
an electric voltage of 69 kV or greater. To the ex-
tent provided in regulations, such term includes any
output facility that FERC determines is a trans-
mission facility under standards applied by FERC
under the Federal Power Act (as in effect on the
date of the enactment of this section).
‘‘(6) EXISTING GENERATION FACILITY.—
‘‘(A) IN
GENERAL.—The term ‘existing
generation facility’ means any electric genera-
tion facility if—
‘‘(i) such facility is originally placed in
service on or before the date of the enact-
ment of this Act and is owned by any gov-
ernmental unit on such date, or
‘‘(ii) such facility is originally placed
in service after such date if the construc-
tion of the facility commenced before June
1, 2000, and such facility is owned by any
governmental unit when it is placed in
service.
‘‘(B) DENIAL OF TREATMENT TO EXPAN-
SIONS.—Such term shall not include any facility
394
to the extent the generating capacity of such fa-
cility as of any date is 3 percent above the
greater of its nameplate or rated capacity as of
the date of the enactment of this section (or, in
the case of a facility described in subparagraph
(A)(ii), the date that the facility is placed in
service).
‘‘(7) 
REGIONAL
TRANSMISSION
ORGANIZA-
TION.—The term ‘regional transmission organiza-
tion’ includes an independent system operator.
‘‘(8) FERC.—The term ‘FERC’ means the
Federal Energy Regulatory Commission.
‘‘(9) GOVERNMENT-OWNED FACILITY.—An elec-
tric transmission facility shall be treated as owned
by a governmental unit as of any date to the extent
that—
‘‘(A) such unit acquired (before the base
year) long-term firm transmission capacity (as
determined under regulations) of such facility
for the purposes of serving customers to which
such unit had at the close of the base year—
‘‘(i) a statutory service obligation, or
‘‘(ii) an obligation under a require-
ments contract, and
395
‘‘(B) such unit holds such capacity as of
such date.
‘‘(10) STATUTORY SERVICE OBLIGATION.—The
term ‘statutory service obligation’ means an obliga-
tion under State or Federal law (exclusive of an obli-
gation arising solely under a contract entered into
with a person) to provide electric distribution serv-
ices or electric sales services, as provided in such
law.
‘‘(11) CONTRACT MODIFICATIONS.—A material
modification of a contract shall be treated as a new
contract.
‘‘(d) ELECTION TO TERMINATE TAX-EXEMPT BOND
FINANCING
FOR CERTAIN ELECTRIC OUTPUT FACILI-
TIES.—
‘‘(1) IN GENERAL.—At the election of a govern-
mental unit, section 103(a) shall not apply to any
bond issued by or on behalf of such unit after the
date of such election if any portion of the proceeds
of the issue of which such bond is a part are used
to provide any electric output facilities. Such an
election, once made, shall be irrevocable.
‘‘(2) OTHER EFFECTS OF ELECTION.—During
the period that the election under paragraph (1) is
396
in effect with respect to a governmental unit, the
term ‘private activity bond’ shall not include—
‘‘(A) any bond issued by such unit before
the date of the enactment of this section to pro-
vide an electric output facility if, as of the date
of the election, such bond was not a private ac-
tivity bond, and
‘‘(B) any bond to which paragraph (1)
does not apply by reason of paragraph (3).
‘‘(3) EXCEPTIONS FOR CERTAIN PROPERTY.—
‘‘(A) IN
GENERAL.—Paragraph (1) shall
not apply to any bond issued to provide prop-
erty owned by a governmental unit if such prop-
erty is—
‘‘(i) any qualifying transmission facil-
ity,
‘‘(ii) any qualifying distribution facil-
ity,
‘‘(iii) any facility necessary to meet
Federal or State environmental require-
ments applicable to an existing generation
facility owned by the governmental unit as
of the date of the election,
‘‘(iv) any property to repair any exist-
ing generation facility owned by the gov-
397
ernmental unit as of the date of the elec-
tion,
‘‘(v) any qualified facility (as defined
in section 45(c)(3)) producing electricity
from any qualified energy resource (as de-
fined in section 45(c)(1)), and
‘‘(vi) any energy property (as defined
in section 48(a)(3)) placed in service dur-
ing a period that the energy percentage
under section 48(a) is greater than zero.
‘‘(B) LIMITATION ON USE BY NONGOVERN-
MENTAL
PERSONS.—Subparagraph (A) shall
not apply to any property constructed, acquired
or financed for a principal purpose of providing
the facility (or the output thereof) to non-
governmental persons.
‘‘(4) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) QUALIFYING
DISTRIBUTION
FACIL-
ITY.—The term ‘qualifying distribution facility’
means a distribution facility meeting the open
access requirements of subsection (a)(2)(A)(ii).
‘‘(B) QUALIFYING
TRANSMISSION
FACIL-
ITY.—The term ‘qualifying transmission facil-
ity’ means a local transmission facility (as de-
398
fined in subsection (b)(3)) meeting the open ac-
cess requirements of subsection (a)(2)(A)(i).
‘‘(5) EFFECT OF ELECTION.—
‘‘(A) IN
GENERAL.—An election under
paragraph (1) shall be binding on any successor
in interest to, or any related party with respect
to, the electing governmental unit. For purposes
of this paragraph, a governmental unit shall be
treated as related to another governmental unit
if it is a member of the same controlled group
(as determined under regulations).
‘‘(B) TREATMENT OF ELECTING GOVERN-
MENTAL
UNIT.—A governmental unit which
makes an election under paragraph (1) shall be
treated for purposes of section 141 as a
person—
‘‘(i) which is not a governmental unit,
and
‘‘(ii) which is engaged in a trade or
business,
with respect to its purchase of electricity gen-
erated by an electric output facility placed in
service after the date of such election if such
purchase is under a contract executed after
such date.’’.
399
(b) WAIVER
OF CERTAIN LIMITATIONS NOT TO
APPLY TO DISTRIBUTION FACILITIES.—Section 141(d)(5)
is amended by inserting ‘‘(except in the case of an electric
output facility that is a distribution facility)’’ after ‘‘this
subsection’’.
(c) CLERICAL AMENDMENT.—The table of sections
for subpart A of part IV of subchapter B of chapter 1
is amended by inserting after the item relating to section
141 the following new item:
‘‘Sec. 141A. Treatment of government-owned electric output fa-
cilities.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on the date of the en-
actment of this Act, except that a governmental unit
may elect to have section 141A(a)(1) of the Internal
Revenue Code of 1986, as added by subsection (a),
take effect on April 14, 1996.
(2) BINDING
CONTRACTS.—The amendment
made by subsection (b) (relating to waiver of certain
limitations not to apply to distribution facilities)
shall not apply to facilities acquired pursuant to a
contract which was entered into before the date of
the enactment of this Act and which was binding on
such date and at all times thereafter before such ac-
quisition.
400
(3) COMPARABLE
TREATMENT
TO
BONDS
UNDER
1954
CODE
RULES.—References in the
amendments made by this Act to sections of the In-
ternal Revenue Code of 1986 shall be deemed to in-
clude references to comparable sections of the Inter-
nal Revenue Code of 1954.
SEC. 3208. SALES OR DISPOSITIONS TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION
OR STATE ELECTRIC RESTRUCTURING POL-
ICY.
(a) IN GENERAL.—Section 1033 (relating to involun-
tary conversions) is amended by redesignating subsection
(k) as subsection (l) and by inserting after subsection (j)
the following new subsection:
‘‘(k) SALES OR DISPOSITIONS TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION
OR STATE
ELECTRIC RESTRUCTURING POLICY.—
‘‘(1) IN GENERAL.—For purposes of this sub-
title, if a taxpayer elects the application of this sub-
section 
to 
a 
qualifying 
electric 
transmission
transaction—
‘‘(A) such transaction shall be treated as
an involuntary conversion to which this section
applies, and
401
‘‘(B) exempt utility property shall be treat-
ed as property which is similar or related in
service or use to the property disposed of in
such transaction.
‘‘(2) EXTENSION OF REPLACEMENT PERIOD.—
In the case of any involuntary conversion described
in paragraph (1), subsection (a)(2)(B) shall be ap-
plied by substituting ‘4 years’ for ‘2 years’ in clause
(i) thereof.
‘‘(3) QUALIFYING
ELECTRIC
TRANSMISSION
TRANSACTION.—For purposes of this subsection, the
term ‘qualifying electric transmission transaction’
means any sale or other disposition before January
1, 2009, of—
‘‘(A) property used in the trade or business
of providing electric transmission services, or
‘‘(B) any stock or partnership interest in a
corporation or partnership, as the case may be,
whose principal trade or business consists of
providing electric transmission services,
but only if such sale or disposition is to an inde-
pendent transmission company.
‘‘(4) 
INDEPENDENT
TRANSMISSION
COM-
PANY.—For purposes of this subsection, the term
‘independent transmission company’ means—
402
‘‘(A) a regional transmission organization
approved by the Federal Energy Regulatory
Commission,
‘‘(B) a person—
‘‘(i) who the Federal Energy Regu-
latory Commission determines in its au-
thorization of the transaction under section
203 of the Federal Power Act (16 U.S.C.
823b) is not a market participant within
the meaning of such Commission’s rules
applicable to regional transmission organi-
zations, and
‘‘(ii) whose transmission facilities to
which the election under this subsection
applies are under the operational control of
a Federal Energy Regulatory Commission-
approved regional transmission organiza-
tion before the close of the period specified
in such authorization, but not later than
the close of the period applicable under
subsection (a)(2)(B) as extended under
paragraph (2), or
‘‘(C) in the case of facilities subject to the
exclusive jurisdiction of the Public Utility Com-
mission of Texas, a person which is approved by
403
that Commission as consistent with Texas State
law regarding an independent transmission or-
ganization.
‘‘(5) EXEMPT
UTILITY
PROPERTY.—For pur-
poses of this subsection—
‘‘(A) IN
GENERAL.—The term ‘exempt
utility property’ means property used in the
trade or business of—
‘‘(i) generating, transmitting, distrib-
uting, or selling electricity, or
‘‘(ii) producing, transmitting, distrib-
uting, or selling natural gas.
‘‘(B) NONRECOGNITION OF GAIN BY REA-
SON OF ACQUISITION OF STOCK.—Acquisition of
control of a corporation shall be taken into ac-
count under this section with respect to a quali-
fying electric transmission transaction only if
the principal trade or business of such corpora-
tion is a trade or business referred to in sub-
paragraph (A).
‘‘(6) 
SPECIAL
RULE
FOR
CONSOLIDATED
GROUPS.—In the case of a corporation which is a
member of an affiliated group filing a consolidated
return, such corporation shall be treated as satis-
fying the purchase requirement of subsection (a)(2)
404
with respect to any qualifying electric transmission
transaction engaged in by such corporation to the
extent such requirement is satisfied by another
member of such group.
‘‘(7) ELECTION.—An election under paragraph
(1), once made, shall be irrevocable.’’.
(b) EXCEPTION FROM GAIN RECOGNITION UNDER
SECTION 1245.—Subsection (b) of section 1245 is amend-
ed by adding at the end the following new paragraph:
‘‘(9) DISPOSITIONS
TO
IMPLEMENT
FEDERAL
ENERGY REGULATORY COMMISSION OR STATE ELEC-
TRIC RESTRUCTURING POLICY.—At the election of
the taxpayer, the amount of gain which would (but
for this paragraph) be recognized under this section
on any qualified electric transmission transaction (as
defined in section 1033(k)) for which an election
under section 1033 is made shall be reduced by the
aggregate reduction in the basis of section 1245
property held by the taxpayer or, if insufficient, by
a member of an affiliated group which includes the
taxpayer at any time during the taxable year in
which such transaction occurred. The manner and
amount of such reduction shall be determined under
regulations prescribed by the Secretary.’’.
405
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to transactions occurring after the
date of the enactment of this Act.
SEC. 3209. DISTRIBUTIONS OF STOCK TO IMPLEMENT FED-
ERAL ENERGY REGULATORY COMMISSION
OR STATE ELECTRIC RESTRUCTURING POL-
ICY.
(a) IN GENERAL.—Subparagraph (A) of section
355(e)(3) (relating to special rules relating to acquisi-
tions) is amended by inserting after clause (iv) the fol-
lowing new clause:
‘‘(v) The acquisition of stock in any
controlled corporation in a qualifying elec-
tric transmission transaction (as defined in
section 1033(k)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to distributions after the date
of the enactment of this Act.
SEC. 3210. MODIFICATIONS TO SPECIAL RULES FOR NU-
CLEAR DECOMMISSIONING COSTS.
(a) REPEAL
OF LIMITATION
ON DEPOSITS INTO
FUND BASED ON COST OF SERVICE; CONTRIBUTIONS
AFTER FUNDING PERIOD.—Subsection (b) of section
468A is amended to read as follows:
‘‘(b) LIMITATION ON AMOUNTS PAID INTO FUND.—
406
‘‘(1) IN GENERAL.—The amount which a tax-
payer may pay into the Fund for any taxable year
shall not exceed the ruling amount applicable to
such taxable year.
‘‘(2) CONTRIBUTIONS
AFTER
FUNDING
PE-
RIOD.—Notwithstanding any other provision of this
section, a taxpayer may pay into the Fund in any
taxable year after the last taxable year to which the
ruling amount applies. Payments may not be made
under the preceding sentence to the extent such pay-
ments would cause the assets of the Fund to exceed
the nuclear decommissioning costs allocable to the
taxpayer’s current or former interest in the nuclear
powerplant to which the Fund relates. The limita-
tion under the preceding sentence shall be deter-
mined by taking into account a reasonable rate of
inflation for the nuclear decommissioning costs and
a reasonable after-tax rate of return on the assets
of the Fund until such assets are anticipated to be
expended.’’.
(b) CLARIFICATION
OF
TREATMENT
OF
FUND
TRANSFERS.—Subsection (e) of section 468A is amended
by adding at the end the following new paragraph:
‘‘(8) TREATMENT OF FUND TRANSFERS.—If, in
connection with the transfer of the taxpayer’s inter-
407
est in a nuclear powerplant, the taxpayer transfers
the Fund with respect to such powerplant to the
transferee of such interest and the transferee elects
to continue the application of this section to such
Fund—
‘‘(A) the transfer of such Fund shall not
cause such Fund to be disqualified from the ap-
plication of this section, and
‘‘(B) no amount shall be treated as distrib-
uted from such Fund, or be includible in gross
income, by reason of such transfer.’’.
(c) TREATMENT
OF CERTAIN DECOMMISSIONING
COSTS.—
(1) IN GENERAL.—Section 468A is amended by
redesignating subsections (f) and (g) as subsections
(g) and (h), respectively, and by inserting after sub-
section (e) the following new subsection:
‘‘(f) TRANSFERS INTO QUALIFIED FUNDS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(b), any taxpayer maintaining a Fund to which this
section applies with respect to a nuclear powerplant
may transfer into such Fund up to an amount equal
to the excess of the total nuclear decommissioning
costs with respect to such nuclear powerplant over
the portion of such costs taken into account in de-
408
termining the ruling amount in effect immediately
before the transfer.
‘‘(2) 
DEDUCTION
FOR
AMOUNTS
TRANS-
FERRED.—
‘‘(A) IN GENERAL.—The deduction allowed
by subsection (a) for any transfer permitted by
this subsection shall be allowed ratably over the
remaining estimated useful life (within the
meaning of subsection (d)(2)(A)) of the nuclear
powerplant beginning with the taxable year dur-
ing which the transfer is made.
‘‘(B) DENIAL
OF
DEDUCTION
FOR
PRE-
VIOUSLY DEDUCTED AMOUNTS.—No deduction
shall be allowed for any transfer under this sub-
section of an amount for which a deduction was
previously allowed or a corresponding amount
was not included in gross income. For purposes
of the preceding sentence, a ratable portion of
each transfer shall be treated as being from
previously deducted or excluded amounts to the
extent thereof.
‘‘(C) TRANSFERS OF QUALIFIED FUNDS.—
If—
409
‘‘(i) any transfer permitted by this
subsection is made to any Fund to which
this section applies, and
‘‘(ii) such Fund is transferred there-
after,
any deduction under this subsection for taxable
years ending after the date that such Fund is
transferred shall be allowed to the transferee
and not to the transferor. The preceding sen-
tence shall not apply if the transferor is an or-
ganization exempt from tax imposed by this
chapter.
‘‘(D) SPECIAL RULES.—
‘‘(i) GAIN
OR
LOSS
NOT
RECOG-
NIZED.—No gain or loss shall be recog-
nized on any transfer permitted by this
subsection.
‘‘(ii) TRANSFERS
OF
APPRECIATED
PROPERTY.—If appreciated property is
transferred in a transfer permitted by this
subsection, the amount of the deduction
shall be the adjusted basis of such prop-
erty.
‘‘(3) NEW RULING AMOUNT REQUIRED.—Para-
graph (1) shall not apply to any transfer unless the
410
taxpayer requests from the Secretary a new schedule
of ruling amounts in connection with such transfer.
‘‘(4) NO
BASIS
IN
QUALIFIED
FUNDS.—Not-
withstanding any other provision of law, the tax-
payer’s basis in any Fund to which this section ap-
plies shall not be increased by reason of any transfer
permitted by this subsection.’’.
(2) NEW RULING AMOUNT TO TAKE INTO AC-
COUNT TOTAL COSTS.—Subparagraph (A) of section
468A(d)(2) is amended to read as follows:
‘‘(A) fund the total nuclear decommis-
sioning costs with respect to such powerplant
over the estimated useful life of such power-
plant, and’’.
(d) DEDUCTION FOR NUCLEAR DECOMMISSIONING
COSTS WHEN PAID.—Paragraph (2) of section 468A(c)
is amended to read as follows:
‘‘(2) DEDUCTION
OF
NUCLEAR
DECOMMIS-
SIONING COSTS.—In addition to any deduction under
subsection (a), nuclear decommissioning costs paid
or incurred by the taxpayer during any taxable year
shall constitute ordinary and necessary expenses in
carrying on a trade or business under section 162.’’.
411
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3211. TREATMENT OF CERTAIN INCOME OF COOPERA-
TIVES.
(a) INCOME FROM OPEN ACCESS AND NUCLEAR DE-
COMMISSIONING TRANSACTIONS.—
(1) IN GENERAL.—Subparagraph (C) of section
501(c)(12) is amended by striking ‘‘or’’ at the end
of clause (i), by striking the period at the end of
clause (ii) and inserting a comma, and by adding at
the end the following new clauses:
‘‘(iii) from any open access trans-
action (other than income received or ac-
crued directly or indirectly from a mem-
ber), or
‘‘(iv) from any nuclear decommis-
sioning transaction.’’.
(2) DEFINITIONS.—Paragraph (12) of section
501(c) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(E) For purposes of subparagraph (C)—
‘‘(i) The term ‘open access trans-
action’ means any activity which would be
a permitted open access activity (as de-
412
fined in section 141A(a)(2)) if the coopera-
tive were a governmental unit.
‘‘(ii) The term ‘nuclear decommis-
sioning transaction’ means—
‘‘(I) any transfer into a trust,
fund, or instrument established to pay
any nuclear decommissioning costs if
the transfer is in connection with the
transfer of the cooperative’s interest
in a nuclear powerplant or nuclear
powerplant unit,
‘‘(II) any distribution from such
a trust, fund, or instrument, or
‘‘(III) any earnings from such a
trust, fund, or instrument.’’.
(b) INCOME
FROM
LOAD
LOSS
TRANSACTIONS
TREATED AS MEMBER INCOME.—Paragraph (12) of sec-
tion 501(c) is amended by adding after subparagraph (E)
the following new subparagraph:
‘‘(F)(i) In the case of a mutual or coopera-
tive electric company, income received or ac-
crued from a load loss transaction shall be
treated as an amount collected from members
for the sole purpose of meeting losses and ex-
penses.
413
‘‘(ii) For purposes of clause (i), the term
‘load loss transaction’ means any sale (whether
at wholesale or at retail) which would be a load
loss sale under rules similar to the rules of sec-
tion 141A(a)(3)(C).
‘‘(iii) A company shall not fail to be treat-
ed as a mutual cooperative company for pur-
poses of this paragraph by reason of the treat-
ment under clause (i).
‘‘(iv) A rule similar to the rule of this sub-
paragraph shall apply to an organization to
which section 1381 does not apply by reason of
section 1381(a)(2)(C).’’.
(c) EXCEPTION FROM UNRELATED BUSINESS TAX-
ABLE INCOME.—Subsection (b) of section 512 (relating to
modifications) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(18) TREATMENT OF LOAD LOSS SALES OF
MUTUAL OR COOPERATIVE ELECTRIC COMPANIES.—
In the case of a mutual or cooperative electric com-
pany described in section 501(c)(12), there shall be
excluded income which is treated as member income
under subparagraph (F) thereof.’’.
414
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 3212. REPEAL OF REQUIREMENT OF CERTAIN AP-
PROVED TERMINALS TO OFFER DYED DIESEL
FUEL AND KEROSENE FOR NONTAXABLE
PURPOSES.
Section 4101 (relating to certain approved terminals
of registered persons required to offer dyed diesel fuel and
kerosene for nontaxable purposes) is amended by striking
subsection (e).
SEC. 3213. ARBITRAGE RULES NOT TO APPLY TO PREPAY-
MENTS FOR NATURAL GAS.
(a) IN GENERAL.—Subsection (b) of section 148 (de-
fining higher yielding investments) is amended by adding
at the end the following new paragraph:
‘‘(4) EXCEPTION FOR CERTAIN PREPAYMENTS
TO ENSURE NATURAL GAS SUPPLY.—The term ‘in-
vestment property’ shall not include any prepayment
for the purpose of obtaining a supply of a natural
gas—
‘‘(A) at least 85 percent of which is to be
used in the State in which the issuer is located,
and
415
‘‘(B) which is to be used in a business of
one or more utilities each of which is owned and
operated by a State or local government, any
political subdivision or instrumentality thereof,
or any governmental unit acting for or on be-
half of such a utility.’’.
(b) PRIVATE LOAN FINANCING TEST NOT TO APPLY
TO PREPAYMENTS FOR NATURAL GAS.—Paragraph (2) of
section 141(c) (providing exceptions to the private loan fi-
nancing test) is amended by striking ‘‘or’’ at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ‘‘, or’’, and by adding at
the end the following new subparagraph:
‘‘(C) arises from a transaction described in
section 148(b)(4).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to obligations issued after October
22, 1986; except that section 148(b)(4)(A) of the Internal
Revenue Code of 1986, as added by this section, shall
apply only to obligations issued after the date of the enact-
ment of this Act.
416
TITLE III—PRODUCTION
SEC. 3301. OIL AND GAS FROM MARGINAL WELLS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business credits) is
amended by adding at the end the following:
‘‘SEC. 45J. CREDIT FOR PRODUCING OIL AND GAS FROM
MARGINAL WELLS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the marginal well production credit for any taxable year
is an amount equal to the product of—
‘‘(1) the credit amount, and
‘‘(2) the qualified credit oil production and the
qualified natural gas production which is attrib-
utable to the taxpayer.
‘‘(b) CREDIT
AMOUNT.—For purposes of this
section—
‘‘(1) IN GENERAL.—The credit amount is—
‘‘(A) $3 per barrel of qualified crude oil
production, and
‘‘(B) 50 cents per 1,000 cubic feet of
qualified natural gas production.
‘‘(2) REDUCTION AS OIL AND GAS PRICES IN-
CREASE.—
‘‘(A) IN GENERAL.—The $3 and 50 cents
amounts under paragraph (1) shall each be re-
417
duced (but not below zero) by an amount which
bears the same ratio to such amount (deter-
mined without regard to this paragraph) as—
‘‘(i) the excess (if any) of the applica-
ble reference price over $15 ($1.67 for
qualified natural gas production), bears to
‘‘(ii) $3 ($0.33 for qualified natural
gas production).
The applicable reference price for a taxable
year is the reference price of the calendar year
preceding the calendar year in which the tax-
able year begins.
‘‘(B) INFLATION
ADJUSTMENT.—In the
case of any taxable year beginning in a calendar
year after 2001, each of the dollar amounts
contained in subparagraph (A) shall be in-
creased to an amount equal to such dollar
amount multiplied by the inflation adjustment
factor for such calendar year (determined under
section 43(b)(3)(B) by substituting ‘2000’ for
‘1990’).
‘‘(C) REFERENCE PRICE.—For purposes of
this paragraph, the term ‘reference price’
means, with respect to any calendar year—
418
‘‘(i) in the case of qualified crude oil
production, the reference price determined
under section 29(d)(2)(C), and
‘‘(ii) in the case of qualified natural
gas production, the Secretary’s estimate of
the annual average wellhead price per
1,000 cubic feet for all domestic natural
gas.
‘‘(c) QUALIFIED CRUDE OIL
AND NATURAL GAS
PRODUCTION.—For purposes of this section—
‘‘(1) IN GENERAL.—The terms ‘qualified crude
oil production’ and ‘qualified natural gas production’
mean domestic crude oil or natural gas which is pro-
duced from a qualified marginal well.
‘‘(2) LIMITATION ON AMOUNT OF PRODUCTION
WHICH MAY QUALIFY.—
‘‘(A) IN GENERAL.—Crude oil or natural
gas produced during any taxable year from any
well shall not be treated or qualified crude oil
production or qualified natural gas production
to the extent production from the well during
the taxable year exceeds 1,095 barrels or barrel
equivalents.
‘‘(B) PROPORTIONATE REDUCTIONS.—
419
‘‘(i) SHORT TAXABLE YEARS.—In the
case of a short taxable year, the limitations
under this paragraph shall be proportion-
ately reduced to reflect the ratio which the
number of days in such taxable year bears
to 365.
‘‘(ii) WELLS NOT IN PRODUCTION EN-
TIRE YEAR.—In the case of a well which is
not capable of production during each day
of a taxable year, the limitations under
this paragraph applicable to the well shall
be proportionately reduced to reflect the
ratio which the number of days of produc-
tion bears to the total number of days in
the taxable year.
‘‘(3) DEFINITIONS.—
‘‘(A) QUALIFIED
MARGINAL
WELL.—The
term ‘qualified marginal well’ means a domestic
well—
‘‘(i) the production from which during
the taxable year is treated as marginal
production under section 613A(c)(6), or
‘‘(ii) which, during the taxable year—
420
‘‘(I) has average daily production
of not more than 25 barrel equiva-
lents, and
‘‘(II) produces water at a rate
not less than 95 percent of total well
effluent.
‘‘(B) CRUDE OIL, ETC.—The terms ‘crude
oil’, ‘natural gas’, ‘domestic’, and ‘barrel’ have
the meanings given such terms by section
613A(e).
‘‘(C) BARREL
EQUIVALENT.—The term
‘barrel equivalent’ means, with respect to nat-
ural gas, a conversation ratio of 6,000 cubic
feet of natural gas to 1 barrel of crude oil.
‘‘(d) OTHER RULES.—
‘‘(1) PRODUCTION ATTRIBUTABLE TO THE TAX-
PAYER.—In the case of a qualified marginal well in
which there is more than one owner of operating in-
terests in the well and the crude oil or natural gas
production exceeds the limitation under subsection
(c)(2), qualifying crude oil production or qualifying
natural gas production attributable to the taxpayer
shall be determined on the basis of the ratio which
taxpayer’s revenue interest in the production bears
421
to the aggregate of the revenue interests of all oper-
ating interest owners in the production.
‘‘(2) OPERATING
INTEREST
REQUIRED.—Any
credit under this section may be claimed only on
production which is attributable to the holder of an
operating interest.
‘‘(3) PRODUCTION
FROM
NONCONVENTIONAL
SOURCES
EXCLUDED.—In the case of production
from a qualified marginal well which is eligible for
the credit allowed under section 29 for the taxable
year, no credit shall be allowable under this section
unless the taxpayer elects not to claim the credit
under section 29 with respect to the well.
‘‘(4) 
NONCOMPLIANCE
WITH
POLLUTION
LAWS.—For purposes of subsection (c)(3)(A), a
marginal well which is not in compliance with the
applicable State and Federal pollution prevention,
control, and permit requirements for any period of
time shall not be considered to be a qualified mar-
ginal well during such period.’’.
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) is amended by striking ‘‘plus’’ at the end of
paragraph (17), by striking the period at the end of para-
graph (18) and inserting ‘‘, plus’’, and by adding at the
end the following:
422
‘‘(19) the marginal oil and gas well production
credit determined under section 45J(a).’’.
(c) CARRYBACK.—Subsection (a) of section 39 (relat-
ing to carryback and carryforward of unused credits gen-
erally) is amended by adding at the end the following:
‘‘(3) 10-YEAR CARRYBACK FOR MARGINAL OIL
AND GAS WELL PRODUCTION CREDIT.—In the case
of the marginal oil and gas well production credit—
‘‘(A) this section shall be applied sepa-
rately from the business credit (other than the
marginal oil and gas well production credit),
‘‘(B) paragraph (1) shall be applied by
substituting ‘10 taxable years’ for ‘1 taxable
years’ in subparagraph (A) thereof, and
‘‘(C) paragraph (2) shall be applied—
‘‘(i) by substituting ‘31 taxable years’
for ‘21 taxable years’ in subparagraph (A)
thereof, and
‘‘(ii) by substituting ‘30 taxable years’
for ‘20 taxable years’ in subparagraph (A)
thereof.’’.
(d) COORDINATION WITH SECTION 29.—Section
29(a) is amended by striking ‘‘There’’ and inserting ‘‘At
the election of the taxpayer, there’’.
423
(e) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter I
is amended by adding at the end the following:
‘‘Sec. 45J. Credit for producing oil and gas from marginal wells.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to production in taxable years be-
ginning after December 31, 2001.
SEC. 
3302. 
TEMPORARY 
SUSPENSION 
OF 
LIMITATION
BASED ON 65 PERCENT OF TAXABLE INCOME
AND EXTENSION OF SUSPENSION OF TAX-
ABLE INCOME LIMIT WITH RESPECT TO MAR-
GINAL PRODUCTION.
(a) LIMITATION BASED ON 65 PERCENT OF TAX-
ABLE INCOME.—Subsection (d) of section 613A (relating
to limitation on percentage depletion in case of oil and
gas wells) is amended by adding at the end the following
new paragraph:
‘‘(6) TEMPORARY SUSPENSION OF TAXABLE IN-
COME LIMIT.—Paragraph (1) shall not apply to tax-
able years beginning after December 31, 2001, and
before January 1, 2007, including with respect to
amounts carried under the second sentence of para-
graph (1) to such taxable years.’’.
(b) EXTENSION OF SUSPENSION OF TAXABLE IN-
COME LIMIT WITH RESPECT
TO MARGINAL PRODUC-
TION.—Subparagraph (H) of section 613A(c)(6) (relating
424
to temporary suspension of taxable income limit with re-
spect to marginal production) is amended by striking
‘‘2002’’ and inserting ‘‘2007’’.
(c) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 2001.
SEC. 3303. DEDUCTION FOR DELAY RENTAL PAYMENTS.
(a) IN GENERAL.—Section 263 (relating to capital
expenditures) is amended by adding after subsection (i)
the following:
‘‘(j) DELAY RENTAL PAYMENTS FOR DOMESTIC OIL
AND GAS WELLS.—
‘‘(1) IN GENERAL.—Notwithstanding subsection
(a), a taxpayer may elect to treat delay rental pay-
ments incurred in connection with the development
of oil or gas within the United States (as defined in
section 638) as payments which are not chargeable
to capital account. Any payments so treated shall be
allowed as a deduction in the taxable year in which
paid or incurred.
‘‘(2) DELAY RENTAL PAYMENTS.—For purposes
of paragraph (1), the term ‘delay rental payment’
means an amount paid for the privilege of deferring
development of an oil or gas well under an oil or gas
lease.’’.
425
(b) CONFORMING AMENDMENT.—Section 263A(c)(3)
is amended by inserting ‘‘263(j),’’ after ‘263(i),’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2001.
SEC. 3304. ELECTION TO EXPENSE GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES.
(a) IN GENERAL.—Section 263 (relating to capital
expenditures) is amended by adding after subsection (j)
the following:
‘‘(k) GEOLOGICAL
AND
GEOPHYSICAL
EXPENDI-
TURES FOR DOMESTIC OIL AND GAS WELLS.—Notwith-
standing subsection (a), a taxpayer may elect to treat geo-
logical and geophysical expenses incurred in connection
with the exploration for, or development of, oil or gas with-
in the United States (as defined in section 638) as ex-
penses which are not chargeable to capital account. Any
expenses so treated shall be allowed as a deduction in the
taxable year in which paid or incurred.’’.
(b) 
CONFORMING
AMENDMENT.—Section
263A(c)(3), as amended by section 3303(b), is amended
by inserting ‘‘263(k),’’ after ‘‘263(j),’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs paid or incurred in taxable
years beginning after December 31, 2001.
426
SEC. 3305. FIVE-YEAR NET OPERATING LOSS CARRYBACK
FOR LOSSES ATTRIBUTABLE TO OPERATING
MINERAL INTERESTS OF OIL AND GAS PRO-
DUCERS.
(a) IN GENERAL.—Paragraph (1) of section 172(b)
(relating to years to which loss may be carried) is amended
by adding at the end the following new subparagraph:
‘‘(H) LOSSES ON OPERATING MINERAL IN-
TERESTS OF OIL AND GAS PRODUCERS.—In the
case of a taxpayer which has an eligible oil and
gas loss (as defined in subsection (j)) for a tax-
able year, such eligible oil and gas loss shall be
a net operating loss carryback to each of the 5
taxable years preceding the taxable year of such
loss.’’.
(b) ELIGIBLE OIL AND GAS LOSS.—Section 172 is
amended by redesignating subsection (j) as subsection (k)
and by inserting after subsection (i) the following new sub-
section:
‘‘(j) ELIGIBLE OIL AND GAS LOSS.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘eligible oil and
gas loss’ means the lesser of—
‘‘(A) the amount which would be the net
operating loss for the taxable year if only in-
come and deductions attributable to operating
427
mineral interests (as defined in section 614(d))
in oil and gas wells are taken into account, or
‘‘(B) the amount of the net operating loss
for such taxable year.
‘‘(2) 
COORDINATION
WITH
SUBSECTION
(b)(2).—For purposes of applying subsection (b)(2),
an eligible oil and gas loss for any taxable year shall
be treated in a manner similar to the manner in
which a specified liability loss is treated.
‘‘(3) ELECTION.—Any taxpayer entitled to a 5-
year carryback under subsection (b)(1)(H) from any
loss year may elect to have the carryback period
with respect to such loss year determined without re-
gard to subsection (b)(1)(H).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to net operating losses for taxable
years beginning after December 31, 2001.
SEC. 3306. EXTENSION AND MODIFICATION OF CREDIT FOR
PRODUCING FUEL FROM A NONCONVEN-
TIONAL SOURCE.
(a) IN GENERAL.—Section 29 is amended by adding
at the end the following new subsection:
‘‘(h) EXTENSION FOR OTHER FACILITIES.—
‘‘(1) EXTENSION FOR OIL AND CERTAIN GAS.—
In the case of a well for producing qualified fuels de-
428
scribed in subparagraph (A) or (B)(i) of subsection
(c)(1)—
‘‘(A) APPLICATION OF CREDIT FOR NEW
WELLS.—Notwithstanding subsection (f), this
section shall apply with respect to such fuels—
‘‘(i) which are produced from a well
drilled after the date of the enactment of
this subsection and before January 1,
2007, and
‘‘(ii) which are sold not later than the
close of the 4-year period beginning on the
date that such well is drilled, or, if earlier,
January 1, 2010.
‘‘(B) EXTENSION
OF
CREDIT
FOR
OLD
WELLS.—Subsection (f)(2) shall be applied by
substituting ‘2007’ for ‘2003’ with respect to
wells described in subsection (f)(1)(A) with re-
spect to such fuels.
‘‘(2) EXTENSION FOR FACILITIES PRODUCING
QUALIFIED FUEL FROM LANDFILL GAS.—
‘‘(A) IN GENERAL.—In the case of a facil-
ity for producing qualified fuel from landfill gas
which was placed in service after June 30,
1998, and before January 1, 2007, this section
shall apply to fuel produced at such facility dur-
429
ing the 5-year period beginning on the later
of—
‘‘(i) the date such facility was placed
in service, or
‘‘(ii) the date of the enactment of this
subsection.
‘‘(B) REDUCTION OF CREDIT FOR CERTAIN
LANDFILL FACILITIES.—In the case of a facility
to which paragraph (1) applies and which is
subject to the 1996 New Source Performance
Standards/Emmissions Guidelines of the Envi-
ronmental Protection Agency, subsection (a)(1)
shall be applied by substituting ‘$2’ for ‘$3’.
‘‘(3) SPECIAL
RULES.—In determining the
amount of credit allowable under this section solely
by reason of this subsection—
‘‘(A) DAILY LIMIT.—The amount of quali-
fied fuels sold during any taxable year which
may be taken into account by reason of this
subsection with respect to any project shall not
exceed an average barrel-of-oil equivalent of
200,000 cubic feet of natural gas per day. Days
before the date the project is placed in service
shall not be taken into account in determining
such average.
430
‘‘(B) EXTENSION PERIOD TO COMMENCE
WITH UNADJUSTED CREDIT AMOUNT.—In the
case of fuels sold during 2001 and 2002, the
dollar amount applicable under subsection
(a)(1) shall be $3 (without regard to subsection
(b)(2)). In the case of fuels sold after 2002,
subparagraph (B) of subsection (d)(2) shall be
applied by substituting ‘2002’ for ‘1979’.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to fuel sold after the date of the
enactment of this Act.
SEC. 3307. BUSINESS RELATED ENERGY CREDITS ALLOWED
AGAINST REGULAR AND MINIMUM TAX.
(a) IN GENERAL.—Subsection (c) of section 38 (re-
lating to limitation based on amount of tax) is amended
by redesignating paragraph (3) as paragraph (4) and by
inserting after paragraph (2) the following new paragraph:
‘‘(3) SPECIAL RULES FOR SPECIFIED ENERGY
CREDITS.—
‘‘(A) IN GENERAL.—In the case of speci-
fied energy credits—
‘‘(i) this section and section 39 shall
be applied separately with respect to such
credits, and
431
‘‘(ii) in applying paragraph (1) to
such credits—
‘‘(I) the tentative minimum tax
shall be treated as being zero, and
‘‘(II) the limitation under para-
graph (1) (as modified by subclause
(I)) shall be reduced by the credit al-
lowed under subsection (a) for the
taxable year (other than the specified
energy credits).
‘‘(B) SPECIFIED
ENERGY
CREDITS.—For
purposes of this subsection, the term ‘specified
energy credits’ means the credits determined
under sections 45G, 45H, 45I, 45J, and 45K.’’.
(b) CONFORMING AMENDMENT.—Subclause (II) of
section 38(c)(2)(A)(ii) is amended by inserting ‘‘or the
specified energy credits’’ after ‘‘employment credit’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years ending after the
date of the enactment of this Act.
SEC. 3308. TEMPORARY REPEAL OF ALTERNATIVE MIN-
IMUM TAX PREFERENCE FOR INTANGIBLE
DRILLING COSTS.
(a) IN GENERAL.—Clause (ii) of section 57(a)(2)(E)
is amended by adding at the end the following new sen-
432
tence: ‘‘The preceding sentence shall not apply to taxable
years beginning after December 31, 2001, and before Jan-
uary 1, 2005.’’.
(b) EFFECTIVE DATES.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3309. ALLOWANCE OF ENHANCED RECOVERY CREDIT
AGAINST THE ALTERNATIVE MINIMUM TAX.
(a) IN GENERAL.—Subparagraph (B) of section
38(c)(3), as amended by section 3307, is amended by add-
ing at the end the following new sentence: ‘‘For taxable
years beginning before January 1, 2005, such term in-
cludes the credit determined under section 43.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2001.
SEC. 3310. EXTENSION OF CERTAIN BENEFITS FOR EN-
ERGY-RELATED BUSINESSES ON INDIAN RES-
ERVATIONS.
(a) DEPRECIATION FOR PROPERTY ON INDIAN RES-
ERVATIONS.—Paragraph (8) of section 168(j) (relating to
termination) is amended by adding at the end the fol-
lowing new sentence: ‘‘The preceding sentence shall be ap-
plied by substituting ‘December 31, 2006’ for ‘December
433
31, 2003’ in the case of property placed in service as part
of a facility for—
‘‘(A) the generation or transmission of
electricity (including from any qualified energy
resource, as defined in section 45(c)),
‘‘(B) an oil or gas well,
‘‘(C) the transmission or refining of oil or
gas, or
‘‘(D) the production of any qualified fuel
(as defined in section 29(c)).’’.
(b) EMPLOYMENT OF INDIANS.—Subsection (f) of
section 45A (relating to termination) is amended by add-
ing at the end the following new sentence: ‘‘The preceding
sentence shall be applied by substituting ‘December 31,
2006’ for ‘December 31, 2003’ in the case of wages paid
for services performed at a facility described in section
168(j)(8).’’.
DIVISION D
SEC. 4101. CAPACITY BUILDING FOR ENERGY-EFFICIENT,
AFFORDABLE HOUSING.
Section 4(b) of the HUD Demonstration Act of 1993
(42 U.S.C. 9816 note) is amended—
(1) in paragraph (1), by inserting before the
semicolon at the end the following: ‘‘, including ca-
pabilities regarding the provision of energy efficient,
434
affordable housing and residential energy conserva-
tion measures’’; and
(2) in paragraph (2), by inserting before the
semicolon the following: ‘‘, including such activities
relating to the provision of energy efficient, afford-
able housing and residential energy conservation
measures that benefit low-income families’’.
SEC. 4102. INCREASE OF CDBG PUBLIC SERVICES CAP FOR
ENERGY CONSERVATION AND EFFICIENCY
ACTIVITIES.
Section 105(a)(8) of the Housing and Community
Development Act of 1974 (42 U.S.C. 5305(a)(8)) is
amended—
(1) by inserting ‘‘or efficiency’’ after ‘‘energy
conservation’’;
(2) by striking ‘‘, and except that’’ and insert-
ing ‘‘; except that’’; and
(3) by inserting before the period at the end the
following: ‘‘; and except that each percentage limita-
tion under this paragraph on the amount of assist-
ance provided under this title that may be used for
the provision of public services is hereby increased
by 10 percent, but such percentage increase may be
used only for the provision of public services con-
cerning energy conservation or efficiency’’.
435
SEC. 4103. FHA MORTGAGE INSURANCE INCENTIVES FOR
ENERGY EFFICIENT HOUSING.
(a) SINGLE FAMILY HOUSING MORTGAGE INSUR-
ANCE.—Section 203(b)(2) of the National Housing Act
(12 U.S.C. 1709(b)(2)) is amended, in the first undesig-
nated paragraph beginning after subparagraph (B)(iii)
(relating to solar energy systems)—
(1) by inserting ‘‘or paragraph (10)’’; and
(2) by striking ‘‘20 percent’’ and inserting ‘‘30
percent’’.
(b) MULTIFAMILY
HOUSING
MORTGAGE
INSUR-
ANCE.—Section 207(c) of the National Housing Act (12
U.S.C. 1713(c)) is amended, in the second undesignated
paragraph beginning after paragraph (3) (relating to solar
energy systems and residential energy conservation meas-
ures), by striking ‘‘20 percent’’ and inserting ‘‘30 per-
cent’’.
(c) COOPERATIVE
HOUSING
MORTGAGE
INSUR-
ANCE.—Section 213(p) of the National Housing Act (12
U.S.C. 1715e(p)) is amended by striking ‘‘20 per centum’’
and inserting ‘‘30 percent’’.
(d) REHABILITATION
AND NEIGHBORHOOD CON-
SERVATION HOUSING MORTGAGE INSURANCE.—Section
220(d)(3)(B)(iii) of the National Housing Act (12 U.S.C.
1715k(d)(3)(B)(iii)) is amended by striking ‘‘20 per cen-
tum’’ and inserting ‘‘30 percent’’.
436
(e) LOW-INCOME MULTIFAMILY HOUSING MORT-
GAGE INSURANCE.—Section 221(k) of the National Hous-
ing Act (12 U.S.C. 1715l(k)) is amended by striking ‘‘20
per centum’’ and inserting ‘‘30 percent’’.
(f) ELDERLY HOUSING MORTGAGE INSURANCE.—
The proviso at the end of section 213(c)(2) of the National
Housing Act (12 U.S.C. 1715v(c)(2)) is amended by strik-
ing ‘‘20 per centum’’ and inserting ‘‘30 percent’’.
(g) CONDOMINIUM
HOUSING
MORTGAGE
INSUR-
ANCE.—Section 234(j) of the National Housing Act (12
U.S.C. 1715y(j)) is amended by striking ‘‘20 per centum’’
and inserting ‘‘30 percent’’.
SEC. 4104. PUBLIC HOUSING CAPITAL FUND.
Section 9(d)(1) of the United States Housing Act of
1937 (42 U.S.C. 1437g(d)(1)) is amended—
(1) in subparagraph (I), by striking ‘‘and’’ at
the end;
(2) in subparagraph (K), by striking the period
at the end and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(L) improvement of energy and water-use
efficiency by installing fixtures and fittings that
conform to the American Society of Mechanical
Engineers/American National Standards Insti-
437
tute standards A112.19.2-1998 and A112.18.1-
2000, or any revision thereto, applicable at the
time of installation, and by increasing energy
efficiency and water conservation by such other
means as the Secretary determines are appro-
priate.’’.
SEC. 4105. GRANTS FOR ENERGY-CONSERVING IMPROVE-
MENTS FOR ASSISTED HOUSING.
Section 251(b)(1) of the National Energy Conserva-
tion Policy Act (42 U.S.C. 8231(1)) is amended—
(1) by striking ‘‘financed with loans’’ and in-
serting ‘‘assisted’’;
(2) by inserting after ‘‘1959,’’ the following:
‘‘which are eligible multifamily housing projects (as
such term is defined in section 512 of the Multi-
family Assisted Housing Reform and Affordability
Act of 1997 (42 U.S.C. 1437f note)) and are subject
to a mortgage restructuring and rental assistance
sufficiency plans under such Act,’’; and
(3) by inserting after the period at the end of
the first sentence the following new sentence: ‘‘Such
improvements may also include the installation of
energy and water conserving fixtures and fittings
that conform to the American Society of Mechanical
Engineers/American National Standards Institute
438
standards A112.19.2-1998 and A112.18.1-2000, or
any revision thereto, applicable at the time of instal-
lation.’’.
SEC. 4106. NORTH AMERICAN DEVELOPMENT BANK.
Part 2 of subtitle D of title V of the North American
Free Trade Agreement Implementation Act (22 U.S.C.
290m–290m-3) is amended by adding at the end the fol-
lowing:
‘‘SEC. 545. SUPPORT FOR CERTAIN ENERGY POLICIES.
‘‘Consistent with the focus of the Bank’s Charter on
environmental infrastructure projects, the Board members
representing the United States should use their voice and
vote to encourage the Bank to finance projects related to
clean and efficient energy, including energy conservation,
that prevent, control, or reduce environmental pollutants
or contaminants.’’.
DIVISION E
SEC. 5000. SHORT TITLE.
This division may be cited as the ‘‘Clean Coal Power
Initiative Act of 2001’’.
SEC. 5001. FINDINGS.
Congress finds that—
(1) reliable, affordable, increasingly clean elec-
tricity will continue to power the growing United
States economy;
439
(2) an increasing use of electrotechnologies, the
desire for continuous environmental improvement, a
more competitive electricity market, and concerns
about rising energy prices add importance to the
need for reliable, affordable, increasingly clean elec-
tricity;
(3) coal, which, as of the date of the enactment
of this Act, accounts for more than 1⁄2 of all elec-
tricity generated in the United States, is the most
abundant fossil energy resource of the United
States;
(4) coal comprises more than 85 percent of all
fossil resources in the United States and exists in
quantities sufficient to supply the United States for
250 years at current usage rates;
(5) investments in electricity generating facility
emissions control technology over the past 30 years
have reduced the aggregate emissions of pollutants
from coal-based generating facilities by 21 percent,
even as coal use for electricity generation has nearly
tripled;
(6) continuous improvement in efficiency and
environmental performance from electricity gener-
ating facilities would allow continued use of coal and
440
preserve less abundant energy resources for other
energy uses;
(7) new ways to convert coal into electricity can
effectively eliminate health-threatening emissions
and improve efficiency by as much as 50 percent,
but initial deployment of new coal generation meth-
ods and equipment entails significant risk that gen-
erators may be unable to accept in a newly competi-
tive electricity market; and
(8) continued environmental improvement in
coal-based generation and increasing the production
and supply of power generation facilities with less
air emissions, with the ultimate goal of near-zero
emissions, is important and desirable.
SEC. 5002. DEFINITIONS.
In this division:
(1) COST
AND
PERFORMANCE
GOALS.—The
term ‘‘cost and performance goals’’ means the cost
and performance goals established under section
5004.
(2) SECRETARY.—The term ‘‘Secretary’’ means
the Secretary of Energy.
SEC. 5003. CLEAN COAL POWER INITIATIVE.
(a) IN GENERAL.—The Secretary shall carry out a
program under—
441
(1) this division;
(2) the Federal Nonnuclear Energy Research
and Development Act of 1974 (42 U.S.C. 5901 et
seq.);
(3) the Energy Reorganization Act of 1974 (42
U.S.C. 5801 et seq.); and
(4) title XIII of the Energy Policy Act of 1992
(42 U.S.C. 13331 et seq.),
to achieve cost and performance goals established by the
Secretary under section 5004.
SEC. 5004. COST AND PERFORMANCE GOALS.
(a) REVIEW AND ASSESSMENT.—The Secretary shall
perform an assessment that establishes measurable cost
and performance goals for 2005, 2010, 2015, and 2020
for the programs authorized by this division. Such assess-
ment shall be based on the latest scientific, economic, and
technical knowledge.
(b) CONSULTATION.—In establishing the cost and
performance goals, the Secretary shall consult with rep-
resentatives of—
(1) the United States coal industry;
(2) State coal development agencies;
(3) the electric utility industry;
(4) railroads and other transportation indus-
tries;
442
(5) manufacturers of advanced coal-based
equipment;
(6) institutions of higher learning, national lab-
oratories, and professional and technical societies;
(7) organizations representing workers;
(8) organizations formed to—
(A) promote the use of coal;
(B) further the goals of environmental pro-
tection; and
(C) promote the production and generation
of coal-based power from advanced facilities;
and
(9) other appropriate Federal and State agen-
cies.
(c) TIMING.—The Secretary shall—
(1) not later than 120 days after the date of
the enactment of this Act, issue a set of draft cost
and performance goals for public comment; and
(2) not later than 180 days after the date of
the enactment of this Act, after taking into consider-
ation any public comments received, submit to the
Committee on Energy and Commerce and the Com-
mittee on Science of the House of Representatives,
and to the Senate, the final cost and performance
goals.
443
SEC. 5005. AUTHORIZATION OF APPROPRIATIONS.
(a) CLEAN COAL POWER INITIATIVE.—Except as
provided in subsection (b), there are authorized to be ap-
propriated to the Secretary to carry out the Clean Coal
Power Initiative under section 5003 $200,000,000 for
each of the fiscal years 2002 through 2011, to remain
available until expended.
(b) LIMIT ON USE OF FUNDS.—Notwithstanding sub-
section (a), no funds may be used to carry out the activi-
ties authorized by this Act after September 30, 2002, un-
less the Secretary has transmitted to the Committee on
Energy and Commerce and the Committee on Science of
the House of Representatives, and to the Senate, the re-
port required by this subsection and 1 month has elapsed
since that transmission. The report shall include, with re-
spect to subsection (a), a 10-year plan containing—
(1) a detailed assessment of whether the aggre-
gate funding levels provided under subsection (a) are
the appropriate funding levels for that program;
(2) a detailed description of how proposals will
be solicited and evaluated, including a list of all ac-
tivities expected to be undertaken;
(3) a detailed list of technical milestones for
each coal and related technology that will be pur-
sued;
444
(4) recommendations for a mechanism for
recoupment of Federal funding for successful com-
mercial projects; and
(5) a detailed description of how the program
will avoid problems enumerated in General Account-
ing Office reports on the Clean Coal Technology
Program, including problems that have resulted in
unspent funds and projects that failed either finan-
cially or scientifically.
(c) APPLICABILITY.—Subsection (b) shall not apply
to any project begun before September 30, 2002.
SEC. 5006. PROJECT CRITERIA.
(a) IN GENERAL.—The Secretary shall not provide
funding under this division for any project that does not
advance efficiency, environmental performance, and cost
competitiveness well beyond the level of technologies that
are in operation or have been demonstrated as of the date
of the enactment of this Act.
(b) TECHNICAL CRITERIA FOR CLEAN COAL POWER
INITIATIVE.—
(1) GASIFICATION.—(A) In allocating the funds
authorized under section 5005(a), the Secretary
shall ensure that at least 80 percent of the funds are
used only for projects on coal-based gasification
technologies, including gasification combined cycle,
445
gasification fuel cells, gasification coproduction and
hybrid gasification/combustion.
(B) The Secretary shall set technical milestones
specifying emissions levels that coal gasification
projects must be designed to and reasonably ex-
pected to achieve. The milestones shall get more re-
strictive through the life of the program. The mile-
stones shall be designed to achieve by 2020 coal gas-
ification projects able—
(i) to remove 99 percent of sulfur dioxide;
(ii) to emit no more than .05 lbs of NOx
per million BTU;
(iii) to achieve substantial reductions in
mercury emissions; and
(iv) to achieve a thermal efficiency of 60
percent (higher heating value).
(2) OTHER PROJECTS.—For projects not de-
scribed in paragraph (1), the Secretary shall set
technical milestones specifying emissions levels that
the projects must be designed to and reasonably ex-
pected to achieve. The milestones shall get more re-
strictive through the life of the program. The mile-
stones shall be designed to achieve by 2010 projects
able—
(A) to remove 97 percent of sulfur dioxide;
446
(B) to emit no more than .08 lbs of NOx
per million BTU;
(C) to achieve substantial reductions in
mercury emissions; and
(D) to achieve a thermal efficiency of 45
percent (higher heating value).
(c) FINANCIAL CRITERIA.—The Secretary shall not
provide a funding award under this division unless the re-
cipient has documented to the satisfaction of the Secretary
that—
(1) the award recipient is financially viable
without the receipt of additional Federal funding;
(2) the recipient will provide sufficient informa-
tion to the Secretary for the Secretary to ensure
that the award funds are spent efficiently and effec-
tively; and
(3) a market exists for the technology being
demonstrated or applied, as evidenced by statements
of interest in writing from potential purchasers of
the technology.
(d) FINANCIAL ASSISTANCE.—The Secretary shall
provide financial assistance to projects that meet the re-
quirements of subsections (a), (b), and (c) and are likely
to—
447
(1) achieve overall cost reductions in the utiliza-
tion of coal to generate useful forms of energy;
(2) improve the competitiveness of coal among
various forms of energy in order to maintain a diver-
sity of fuel choices in the United States to meet elec-
tricity generation requirements; and
(3) demonstrate methods and equipment that
are applicable to 25 percent of the electricity gener-
ating facilities that use coal as the primary feedstock
as of the date of the enactment of this Act.
(e) FEDERAL SHARE.—The Federal share of the cost
of a coal or related technology project funded by the Sec-
retary shall not exceed 50 percent.
(f) APPLICABILITY.—Neither the use of any par-
ticular technology, nor the achievement of any emission
reduction, by any facility receiving assistance under this
title shall be taken into account for purposes of making
any determination under the Clean Air Act in applying
the provisions of that Act to a facility not receiving assist-
ance under this title, including any determination con-
cerning new source performance standards, lowest achiev-
able emission rate, best available control technology, or
any other standard, requirement, or limitation.
448
SEC. 5007. STUDY.
(a) IN GENERAL.—Not later than 1 year after the
date of the enactment of this Act, and once every 2 years
thereafter through 2016, the Secretary, in cooperation
with other appropriate Federal agencies, shall transmit to
the Committee on Energy and Commerce and the Com-
mittee on Science of the House of Representatives, and
to the Senate, a report containing the results of a study
to—
(1) identify efforts (and the costs and periods
of time associated with those efforts) that, by them-
selves or in combination with other efforts, may be
capable of achieving the cost and performance goals;
(2) develop recommendations for the Depart-
ment of Energy to promote the efforts identified
under paragraph (1); and
(3) develop recommendations for additional au-
thorities required to achieve the cost and perform-
ance goals.
(b) EXPERT ADVICE.—In carrying out this section,
the Secretary shall give due weight to the expert advice
of representatives of the entities described in section
5004(b).
SEC. 5008. CLEAN COAL CENTERS OF EXCELLENCE.
As part of the program authorized in section 5003,
the Secretary shall award competitive, merit-based grants
449
to universities for the establishment of Centers of Excel-
lence for Energy Systems of the Future. The Secretary
shall provide grants to universities that can show the
greatest potential for advancing new clean coal tech-
nologies.
DIVISION F
SEC. 6001. SHORT TITLE.
This division may be cited as the ‘‘Energy Security
Act’’.
TITLE 
I—GENERAL 
PROTEC-
TIONS FOR ENERGY SUPPLY
AND SECURITY
SEC. 6101. STUDY OF EXISTING RIGHTS-OF-WAY ON FED-
ERAL LANDS TO DETERMINE CAPABILITY TO
SUPPORT NEW PIPELINES OR OTHER TRANS-
MISSION FACILITIES.
(a) IN GENERAL.—Within 1 year after the date of
the enactment of this Act, the head of each Federal agency
that has authorized a right-of-way across Federal lands
for transportation of energy supplies or transmission of
electricity shall review each such right-of-way and submit
a report to the Secretary of Energy and the Chairman
of 
the 
Federal 
Energy 
Regulatory 
Commission
regarding—
450
(1) whether the right-of-way can be used to
support new or additional capacity; and
(2) what modifications or other changes, if any,
would be necessary to accommodate such additional
capacity.
(b) CONSULTATIONS AND CONSIDERATIONS.—In per-
forming the review, the head of each agency shall—
(1) consult with agencies of State, tribal, or
local units of government as appropriate; and
(2) consider whether safety or other concerns
related to current uses might preclude the avail-
ability of a right-of-way for additional or new trans-
portation or transmission facilities, and set forth
those considerations in the report.
SEC. 6102. INVENTORY OF ENERGY PRODUCTION POTEN-
TIAL OF ALL FEDERAL PUBLIC LANDS.
(a) INVENTORY REQUIREMENT.—The Secretary of
the Interior, in consultation with the Secretary of Agri-
culture and the Secretary of Energy, shall conduct an in-
ventory of the energy production potential of all Federal
public lands other than national park lands and lands in
any wilderness area, with respect to wind, solar, coal, and
geothermal power production.
(b) LIMITATIONS.—
451
(1) IN GENERAL.—The Secretary shall not in-
clude in the inventory under this section the matters
to be identified in the inventory under section 604
of the Energy Act of 2000 (43 U.S.C. 6217).
(2) WIND AND SOLAR POWER.—The inventory
under this section—
(A) with respect to wind power production
shall be limited to sites having a mean average
wind speed—
(i) exceeding 12.5 miles per hour at a
height of 33 feet; and
(ii) exceeding 15.7 miles per hour at
a height of 164 feet; and
(B) with respect to solar power production
shall be limited to areas rated as receiving 450
watts per square meter or greater.
(c) EXAMINATION OF RESTRICTIONS AND IMPEDI-
MENTS.—The inventory shall identify the extent and na-
ture of any restrictions or impediments to the development
of such energy production potential.
(d) GEOTHERMAL POWER.—The inventory shall in-
clude an update of the 1978 Assessment of Geothermal
Resources by the United States Geological Survey.
(e) COMPLETION AND UPDATING.—The Secretary—
452
(1) shall complete the inventory by not later
than 2 years after the date of the enactment of this
Act; and
(2) shall update the inventory regularly there-
after.
(f) REPORTS.—The Secretary shall submit to the
Committee on Resources of the House of Representatives
and to the Committee on Energy and Natural Resources
of the Senate and make publicly available—
(1) a report containing the inventory under this
section, by not later than 2 years after the effective
date of this section; and
(2) each update of such inventory.
SEC. 6103. REVIEW OF REGULATIONS TO ELIMINATE BAR-
RIERS TO EMERGING ENERGY TECHNOLOGY.
(a) IN GENERAL.—Each Federal agency shall carry
out a review of its regulations and standards to determine
those that act as a barrier to market entry for emerging
energy-efficient technologies, including fuel cells, combined
heat and power, and distributed generation (including
small-scale renewable energy).
(b) REPORT
TO CONGRESS.—No later than 18
months after date of the enactment of this Act, each agen-
cy shall provide a report to the Congress and the President
detailing all regulatory barriers to emerging energy-effi-
453
cient technologies, along with actions the agency intends
to take, or has taken, to remove such barriers.
(c) PERIODIC REVIEW.—Each agency shall subse-
quently review its regulations and standards in this man-
ner no less frequently than every 5 years, and report their
findings to the Congress and the President. Such reviews
shall include a detailed analysis of all agency actions taken
to remove existing barriers to emerging energy tech-
nologies.
SEC. 
6104. 
INTERAGENCY 
AGREEMENT 
ON 
ENVIRON-
MENTAL REVIEW OF INTERSTATE NATURAL
GAS PIPELINE PROJECTS.
(a) IN GENERAL.—The Secretary of Energy, in co-
ordination with the Federal Energy Regulatory Commis-
sion, shall establish an administrative interagency task
force to develop an interagency agreement to expedite and
facilitate the environmental review and permitting of
interstate natural gas pipeline projects.
(b) TASK FORCE MEMBERS.—The task force shall in-
clude a representative of each of the Bureau of Land Man-
agement, the United States Fish and Wildlife Service, the
Army Corps of Engineers, the Forest Service, the Envi-
ronmental Protection Agency, the Advisory Council on
Historic Preservation, and such other agencies as the Sec-
454
retary of Energy and the Federal Energy Regulatory
Commission consider appropriate.
(c) TERMS OF AGREEMENT.—The interagency agree-
ment shall require that agencies complete their review of
interstate pipeline projects within a specific period of time
after referral of the matter by the Federal Energy Regu-
latory Commission.
(d) SUBMITTAL OF AGREEMENT.—The Secretary of
Energy shall submit a final interagency agreement under
this section to the Congress by not later than 6 months
after the effective date of this section.
SEC. 6105. ENHANCING ENERGY EFFICIENCY IN MANAGE-
MENT OF FEDERAL LANDS.
(a) SENSE OF THE CONGRESS.—It is the sense of
Congress that Federal land managing agencies should en-
hance the use of energy efficient technologies in the man-
agement of natural resources.
(b) ENERGY EFFICIENT BUILDINGS.—To the extent
economically practicable, the Secretary of the Interior and
the Secretary of Agriculture shall seek to incorporate en-
ergy efficient technologies in public and administrative
buildings associated with management of the National
Park System, National Wildlife Refuge System, National
Forest System, and other public lands and resources man-
aged by such Secretaries.
455
(c) ENERGY EFFICIENT VEHICLES.—To the extent
economically practicable, the Secretary of the Interior and
the Secretary of Agriculture shall seek to use energy effi-
cient motor vehicles, including vehicles equipped with bio-
diesel or hybrid engine technologies, in the management
of the National Park System, National Wildlife Refuge
System, and other public lands and managed by the Secre-
taries.
SEC. 6106. EFFICIENT INFRASTRUCTURE DEVELOPMENT.
(a) IN GENERAL.—The Secretary of Energy and the
Chairman of the Federal Energy Regulatory Commission
shall jointly undertake a study of the location and extent
of anticipated demand growth for natural gas consumption
in the Western States, herein defined as the area covered
by the Western System Coordinating Council.
(b) CONTENTS.—The study under subsection (a)
shall include the following:
(1) A review of natural gas demand forecasts
by Western State officials, such as the California
Energy Commission and the California Public Utili-
ties Commission, which indicate the forecasted levels
of demand for natural gas and the geographic dis-
tribution of that forecasted demand.
(2) A review of the locations of proposed new
natural gas-fired electric generation facilities cur-
456
rently in the approval process in the Western States,
and their forecasted impact on natural gas demand.
(3) A review of the locations of existing inter-
state natural gas transmission pipelines, and inter-
state natural gas pipelines currently in the planning
stage or approval process, throughout the Western
States.
(4) A review of the locations and capacity of
intrastate natural gas pipelines in the Western
States.
(5) Recommendations for the coordination of
the development of the natural gas infrastructure in-
dicated in paragraphs (1) through (4).
(c) REPORT.—The Secretary shall report the findings
and recommendations resulting from the study required
by this section to the Committee on Energy and Com-
merce of the House of Representatives and to the Com-
mittee on Energy and Natural Resources of the Senate
no later than 6 months after the date of the enactment
of this Act. The Chairman of the Federal Energy Regu-
latory Commission shall report on how the Commission
will factor these results into its review of applications of
interstate pipelines within the Western States to the Com-
mittee on Energy and Commerce of the House of Rep-
resentatives and to the Committee on Energy and Natural
457
Resources of the Senate no later than 6 months after the
date of the enactment of this Act.
TITLE II—OIL AND GAS
DEVELOPMENT
Subtitle A—Offshore Oil and Gas
SEC. 6201. SHORT TITLE.
This subtitle may be referred to as the ‘‘Royalty Re-
lief Extension Act of 2001’’.
SEC. 6202. LEASE SALES IN WESTERN AND CENTRAL PLAN-
NING AREA OF THE GULF OF MEXICO.
(a) IN GENERAL.—For all tracts located in water
depths of greater than 200 meters in the Western and
Central Planning Area of the Gulf of Mexico, including
that portion of the Eastern Planning Area of the Gulf of
Mexico encompassing whole lease blocks lying west of 87
degrees, 30 minutes West longitude, any oil or gas lease
sale under the Outer Continental Shelf Lands Act occur-
ring within 2 years after the date of the enactment of this
Act shall use the bidding system authorized in section
8(a)(1)(H) of the Outer Continental Shelf Lands Act (30
U.S.C. 1337(a)(1)(H)), except that the suspension of roy-
alties shall be set at a volume of not less than the fol-
lowing:
(1) 5 million barrels of oil equivalent for each
lease in water depths of 400 to 800 meters.
458
(2) 9 million barrels of oil equivalent for each
lease in water depths of 800 to 1,600 meters.
(3) 12 million barrels of oil equivalent for each
lease in water depths greater than 1,600 meters.
(b) RELATIONSHIP TO EXISTING AUTHORITY.—Ex-
cept as expressly provided in this section, nothing in this
section is intended to limit the authority of the Secretary
of the Interior under the Outer Continental Shelf Lands
Act (43 U.S.C. 1301 et seq.) to provide royalty suspen-
sion.
SEC. 6203. SAVINGS CLAUSE.
Nothing in this subtitle shall be construed to affect
any offshore pre-leasing, leasing, or development morato-
rium, including any moratorium applicable to the Eastern
Planning Area of the Gulf of Mexico located off the Gulf
Coast of Florida.
SEC. 6204. ANALYSIS OF GULF OF MEXICO FIELD SIZE DIS-
TRIBUTION, INTERNATIONAL COMPETITIVE-
NESS, AND INCENTIVES FOR DEVELOPMENT.
(a) IN GENERAL.—The Secretary of the Interior and
the Secretary of Energy shall enter into appropriate ar-
rangements with the National Academy of Sciences to
commission the Academy to perform the following:
459
(1) Conduct an analysis and review of existing
Gulf of Mexico oil and natural gas resource assess-
ments, including—
(A) analysis and review of assessments re-
cently performed by the Minerals Management
Service, the 1999 National Petroleum Council
Gas Study, the Department of Energy’s Off-
shore Marginal Property Study, and the Ad-
vanced Resources International, Inc. Deepwater
Gulf of Mexico model; and
(B) evaluation and comparison of the accu-
racy of assumptions of the existing assessments
with respect to resource field size distribution,
hydrocarbon potential, and scenarios for leas-
ing, exploration, and development.
(2) Evaluate the lease terms and conditions of-
fered by the Minerals Management Service for Lease
Sale 178, and compare the financial incentives of-
fered by such terms and conditions to financial in-
centives offered by the terms and conditions that
apply under leases for other offshore areas that are
competing for the same limited offshore oil and gas
exploration and development capital, including off-
shore areas of West Africa and Brazil.
460
(3) Recommend what level of incentives for all
water depths are appropriate in order to ensure that
the United States optimizes the domestic supply of
oil and natural gas from the offshore areas of the
Gulf of Mexico that are not subject to current leas-
ing moratoria. Recommendations under this para-
graph should be made in the context of the impor-
tance of the oil and natural gas resources of the
Gulf of Mexico to the future energy and economic
needs of the United States.
(b) REPORT.—Not later than 180 days after the date
of the enactment of this Act, the Secretary of the Interior
shall submit a report to the Committee on Resources in
the House of Representatives and the Committee on En-
ergy and Natural Resources in the Senate, summarizing
the findings of the National Academy of Sciences pursuant
to subsection (a) and providing recommendations of the
Secretary for new policies or other actions that could help
to further increase oil and natural gas production from
the Gulf of Mexico.
461
Subtitle B—Improvements to
Federal Oil and Gas Management
SEC. 6221. SHORT TITLE.
This subtitle may be cited as the ‘‘Federal Oil and
Gas Lease Management Improvement Demonstration Pro-
gram Act of 2001’’.
SEC. 6222. STUDY OF IMPEDIMENTS TO EFFICIENT LEASE
OPERATIONS.
(a) IN GENERAL.—The Secretary of the Interior and
the Secretary of Agriculture shall jointly undertake a
study of the impediments to efficient oil and gas leasing
and operations on Federal onshore lands in order to iden-
tify means by which unnecessary impediments to the expe-
ditious exploration and production of oil and natural gas
on such lands can be removed.
(b) CONTENTS.—The study under subsection (a)
shall include the following:
(1) A review of the process by which Federal
land managers accept or reject an offer to lease, in-
cluding the timeframes in which such offers are
acted upon, the reasons for any delays in acting
upon such offers, and any recommendations for ex-
pediting the response to such offers.
(2) A review of the approval process for appli-
cations for permits to drill, including the timeframes
462
in which such applications are approved, the impact
of compliance with other Federal laws on such time-
frames, any other reasons for delays in making such
approvals, and any recommendations for expediting
such approvals.
(3) A review of the approval process for surface
use plans of operation, including the timeframes in
which such applications are approved, the impact of
compliance with other Federal laws on such time-
frames, any other reasons for delays in making such
approvals, and any recommendations for expediting
such approvals.
(4) A review of the process for administrative
appeal of decisions or orders of officers or employees
of the Bureau of Land Management with respect to
a Federal oil or gas lease, including the timeframes
in which such appeals are heard and decided, any
reasons for delays in hearing or deciding such ap-
peals, and any recommendations for expediting the
appeals process.
(c) REPORT.—The Secretaries shall report the find-
ings and recommendations resulting from the study re-
quired by this section to the Committee on Resources of
the House of Representatives and to the Committee on
463
Energy and Natural Resources of the Senate no later than
6 months after the date of the enactment of this Act.
SEC. 6223. ELIMINATION OF UNWARRANTED DENIALS AND
STAYS.
(a) IN GENERAL.—The Secretary shall ensure that
unwarranted denials and stays of lease issuance and un-
warranted restrictions on lease operations are eliminated
from the administration of oil and natural gas leasing on
Federal land.
(b) PREPARATION
OF LEASING PLAN
OR ANAL-
YSIS.—In preparing a management plan or leasing anal-
ysis for oil or natural gas leasing on Federal lands admin-
istered by the Bureau of Land Management or the Forest
Service, the Secretary concerned shall—
(1) identify and review the restrictions on sur-
face use and operations imposed under the laws (in-
cluding regulations) of the State in which the lands
are located;
(2) consult with the appropriate State agency
regarding the reasons for the State restrictions iden-
tified under paragraph (1);
(3) identify any differences between the State
restrictions identified under paragraph (1) and any
restrictions on surface use and operations that would
apply under the lease; and
464
(4) prepare and provide upon request a written
explanation of such differences.
(c) REJECTION OF OFFER TO LEASE.—
(1) IN GENERAL.—If the Secretary rejects an
offer to lease Federal lands for oil or natural gas de-
velopment on the ground that the land is unavailable
for oil and natural gas leasing, the Secretary shall
provide a written, detailed explanation of the reasons
the land is unavailable for leasing.
(2) PREVIOUS RESOURCE MANAGEMENT DECI-
SION.—If the determination of unavailability is
based on a previous resource management decision,
the explanation shall include a careful assessment of
whether the reasons underlying the previous decision
are still persuasive.
(3) SEGREGATION OF AVAILABLE LAND FROM
UNAVAILABLE LAND.—The Secretary may not reject
an offer to lease Federal land for oil and natural gas
development that is available for such leasing on the
ground that the offer includes land unavailable for
leasing. The Secretary shall segregate available land
from unavailable land, on the offeror’s request fol-
lowing notice by the Secretary, before acting on the
offer to lease.
465
(d) DISAPPROVAL OR REQUIRED MODIFICATION OF
SURFACE USE PLANS OF OPERATIONS AND APPLICATION
FOR PERMIT TO DRILL.—The Secretary shall provide a
written, detailed explanation of the reasons for dis-
approving or requiring modifications of any surface use
plan of operations or application for permit to drill with
respect to oil or natural gas development on Federal lands.
(e) PRESERVATION
OF
FEDERAL
AUTHORITY.—
Nothing in this section or in any identification, review, or
explanation prepared under this section shall be
construed—
(1) to limit the authority of the Federal Gov-
ernment to impose lease stipulations, restrictions, re-
quirements, or other terms that are different than
those that apply under State law; or
(2) to affect the procedures that apply to judi-
cial review of actions taken under this subsection.
SEC. 6224. LIMITATION ON COST RECOVERY FOR APPLICA-
TIONS.
Notwithstanding sections 304 and 504 of the Federal
Land Policy and Management Act of 1976 (43 U.S.C.
1734, 1764) and section 9701 of title 31, United States
Code, the Secretary shall not recover the Secretary’s costs
with respect to applications and other documents relating
to oil and gas leases.
466
SEC. 6225. CONSULTATION WITH SECRETARY OF AGRI-
CULTURE.
Section 17(h) of the Mineral Leasing Act (30 U.S.C.
226(h)) is amended to read as follows:
‘‘(h)(1) In issuing any lease on National Forest Sys-
tem lands reserved from the public domain, the Secretary
of the Interior shall consult with the Secretary of Agri-
culture in determining stipulations on surface use under
the lease.
‘‘(2)(A) A lease on lands referred to in paragraph (1)
may not be issued if the Secretary of Agriculture deter-
mines, after consultation under paragraph (1) and con-
sultation with the Regional Forester having administrative
jurisdiction over the National Forest System Lands con-
cerned, that the terms and conditions of the lease, includ-
ing any prohibition on surface occupancy for lease oper-
ations, will not be sufficient to adequately protect such
lands under the National Forest Management Act of 1976
(16 U.S.C. 1600 et seq.).
‘‘(B) The authority of the Secretary of Agriculture
under this paragraph may be delegated only to the Under-
secretary of Agriculture for Natural Resources and Envi-
ronment.
‘‘(3) The Secretary of Agriculture shall include in the
record of decision for a determination under paragraph
(2)(A)—
467
‘‘(A) any written statement regarding the deter-
mination that is prepared by a Regional Forester
consulted by the Secretary under paragraph (2)(A)
regarding the determination; or
‘‘(B) an explanation why such a statement by
the Regional Forester is not included.
Subtitle C—Miscellaneous
SEC. 6231. OFFSHORE SUBSALT DEVELOPMENT.
Section 5 of the Outer Continental Shelf Lands Act
of 1953 (43 U.S.C. 1334) is amended by adding at the
end the following:
‘‘(k) SUSPENSION
OF OPERATIONS
FOR SUBSALT
EXPLORATION.—Notwithstanding any other provision of
law or regulation, to prevent waste caused by the drilling
of unnecessary wells and to facilitate the discovery of addi-
tional hydrocarbon reserves, the Secretary may grant a re-
quest for a suspension of operations under any lease to
allow the reprocessing and reinterpretation of geophysical
data to identify and define drilling objectives beneath
allocthonus salt sheets.’’.
SEC. 6232. PROGRAM ON OIL AND GAS ROYALTIES IN KIND.
(a) APPLICABILITY OF SECTION.—Notwithstanding
any other provision of law, the provisions of this section
shall apply to all royalty in kind accepted by the Secretary
of the Interior under any Federal oil or gas lease or permit
468
under section 36 of the Mineral Leasing Act (30 U.S.C.
192), section 27 of the Outer Continental Shelf Lands Act
(43 U.S.C. 1353), or any other mineral leasing law, in
the period beginning on the date of the enactment of this
Act through September 30, 2006.
(b) TERMS AND CONDITIONS.—All royalty accruing
to the United States under any Federal oil or gas lease
or permit under the Mineral Leasing Act (30 U.S.C. 181
et seq.) or the Outer Continental Shelf Lands Act (43
U.S.C. 1331 et seq.) shall, on the demand of the Secretary
of the Interior, be paid in oil or gas. If the Secretary of
the Interior makes such a demand, the following provi-
sions apply to such payment:
(1) Delivery by, or on behalf of, the lessee of
the royalty amount and quality due under the lease
satisfies the lessee’s royalty obligation for the
amount delivered, except that transportation and
processing reimbursements paid to, or deductions
claimed by, the lessee shall be subject to review and
audit.
(2) Royalty production shall be placed in mar-
ketable condition by the lessee at no cost to the
United States.
(3) The Secretary of the Interior may—
469
(A) sell or otherwise dispose of any royalty
oil or gas taken in kind (other than oil or gas
taken under section 27(a)(3) of the Outer Con-
tinental 
Shlef 
Lands 
Act 
(43 
U.S.C.
1353(a)(3)) for not less than the market price;
and
(B) transport or process any oil or gas roy-
alty taken in kind.
(4) The Secretary of the Interior may, notwith-
standing section 3302 of title 31, United States
Code, retain and use a portion of the revenues from
the sale of oil and gas royalties taken in kind that
otherwise would be deposited to miscellaneous re-
ceipts, without regard to fiscal year limitation, or
may use royalty production, to pay the cost of—
(A) transporting the oil or gas,
(B) processing the gas, or
(C) disposing of the oil or gas.
(5) The Secretary may not use revenues from
the sale of oil and gas royalties taken in kind to pay
for personnel, travel, or other administrative costs of
the Federal Government.
(c) REIMBURSEMENT OF COST.—If the lessee, pursu-
ant to an agreement with the United States or as provided
in the lease, processes the royalty gas or delivers the roy-
470
alty oil or gas at a point not on or adjacent to the lease
area, the Secretary of the Interior shall—
(1) reimburse the lessee for the reasonable costs
of transportation (not including gathering) from the
lease to the point of delivery or for processing costs;
or
(2) at the discretion of the Secretary of the In-
terior, allow the lessee to deduct such transportation
or processing costs in reporting and paying royalties
in value for other Federal oil and gas leases.
(d) BENEFIT TO THE UNITED STATES REQUIRED.—
The Secretary may receive oil or gas royalties in kind only
if the Secretary determines that receiving such royalties
provides benefits to the United States greater than or
equal to those that would be realized under a comparable
royalty in value program.
(e) REPORT TO CONGRESS.—For each of the fiscal
years 2002 through 2006 in which the United States takes
oil or gas royalties in kind from production in any State
or from the Outer Continental Shelf, excluding royalties
taken in kind and sold to refineries under subsection (h),
the Secretary of the Interior shall provide a report to the
Congress describing—
(1) the methodology or methodologies used by
the Secretary to determine compliance with sub-
471
section (d), including performance standards for
comparing amounts received by the United States
derived from such royalties in kind to amounts likely
to have been received had royalties been taken in
value;
(2) an explanation of the evaluation that led the
Secretary to take royalties in kind from a lease or
group of leases, including the expected revenue effect
of taking royalties in kind;
(3) actual amounts received by the United
States derived from taking royalties in kind, and
costs and savings incurred by the United States as-
sociated with taking royalties in kind; and
(4) an evaluation of other relevant public bene-
fits or detriments associated with taking royalties in
kind.
(f) DEDUCTION OF EXPENSES.—
(1) IN
GENERAL.—Before making payments
under section 35 of the Mineral Leasing Act (30
U.S.C. 191) or section 8(g) of the Outer Continental
Shelf Lands Act (30 U.S.C. 1337(g)) of revenues
derived from the sale of royalty production taken in
kind from a lease, the Secretary of the Interior shall
deduct amounts paid or deducted under subsections
472
(b)(4) and (c), and shall deposit such amounts to
miscellaneous receipts.
(2) ACCOUNTING
FOR
DEDUCTIONS.—If the
Secretary of the Interior allows the lessee to deduct
transportation or processing costs under subsection
(c), the Secretary may not reduce any payments to
recipients of revenues derived from any other Fed-
eral oil and gas lease as a consequence of that de-
duction.
(g) CONSULTATION WITH STATES.—The Secretary
of the Interior—
(1) shall consult with a State before conducting
a royalty in kind program under this title within the
State, and may delegate management of any portion
of the Federal royalty in kind program to such State
except as otherwise prohibited by Federal law; and
(2) shall consult annually with any State from
which Federal oil or gas royalty is being taken in
kind to ensure to the maximum extent practicable
that the royalty in kind program provides revenues
to the State greater than or equal to those which
would be realized under a comparable royalty in
value program.
(h) PROVISIONS FOR SMALL REFINERIES.—
473
(1) PREFERENCE.—If the Secretary of the In-
terior determines that sufficient supplies of crude oil
are not available in the open market to refineries not
having their own source of supply for crude oil, the
Secretary may grant preference to such refineries in
the sale of any royalty oil accruing or reserved to the
United States under Federal oil and gas leases
issued under any mineral leasing law, for processing
or use in such refineries at private sale at not less
than the market price.
(2) PRORATION
AMONG
REFINERIES
IN
PRO-
DUCTION AREA.—In disposing of oil under this sub-
section, the Secretary of the Interior may, at the
discretion of the Secretary, prorate such oil among
such refineries in the area in which the oil is pro-
duced.
(i) DISPOSITION TO FEDERAL AGENCIES.—
(1) ONSHORE ROYALTY.—Any royalty oil or gas
taken by the Secretary in kind from onshore oil and
gas leases may be sold at not less than the market
price to any department or agency of the United
States.
(2) OFFSHORE ROYALTY.—Any royalty oil or
gas taken in kind from Federal oil and gas leases on
the Outer Continental Shelf may be disposed of only
474
under section 27 of the Outer Continental Shelf
Lands Act (43 U.S.C. 1353).
(j) PREFERENCE FOR FEDERAL LOW-INCOME EN-
ERGY ASSISTANCE PROGRAMS.—In disposing of royalty oil
or gas taken in kind under this section, the Secretary may
grant a preference to any person, including any State or
Federal agency, for the purpose of providing additional re-
sources to any Federal low-income energy assistance pro-
gram.
SEC. 6233. MARGINAL WELL PRODUCTION INCENTIVES.
To enhance the economics of marginal oil and gas
production by increasing the ultimate recovery from mar-
ginal wells when the cash price of West Texas Inter-
mediate crude oil, as posted on the Dow Jones Commod-
ities Index chart, is less than $15 per barrel for 180 con-
secutive pricing days or when the price of natural gas de-
livered at Henry Hub, Louisiana, is less than $2.00 per
million British thermal units for 180 consecutive days, the
Secretary shall reduce the royalty rate as production de-
clines for—
(1) onshore oil wells producing less than 30
barrels per day;
(2) onshore gas wells producing less than 120
million British thermal units per day;
475
(3) offshore oil wells producing less than 300
barrels of oil per day; and
(4) offshore gas wells producing less than 1,200
million British thermal units per day.
SEC. 6234. REIMBURSEMENT FOR COSTS OF NEPA ANAL-
YSES, DOCUMENTATION, AND STUDIES.
(a) IN GENERAL.—The Mineral Leasing Act (30
U.S.C. 181 et seq.) is amended by inserting after section
37 the following:
‘‘REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES,
DOCUMENTATION, AND STUDIES
‘‘SEC. 38. (a) IN GENERAL.—The Secretary of the
Interior may, through royalty credits, reimburse a person
who is a lessee, operator, operating rights owner, or appli-
cant for an oil or gas lease under this Act for amounts
paid by the person for preparation by the Secretary (or
a contractor or other person selected by the Secretary) of
any project-level analysis, documentation, or related study
required under the National Environmental Policy Act of
1969 (42 U.S.C. 4321 et seq.) with respect to the lease.
‘‘(b) CONDITIONS.—The Secretary may provide reim-
bursement under subsection (b) only if—
‘‘(1) adequate funding to enable the Secretary
to timely prepare the analysis, documentation, or re-
lated study is not appropriated;
‘‘(2) the person paid the costs voluntarily; and
476
‘‘(3) the person maintains records of its costs
in accordance with regulations prescribed by the
Secretary.’’.
(b) APPLICATION.—The amendments made by this
section shall apply with respect to any lease entered into
before, on, or after the date of the enactment of this Act.
(c) DEADLINE FOR REGULATIONS.—The Secretary
shall issue regulations implementing the amendments
made by this section by not later than 90 days after the
date of the enactment of this Act.
SEC. 6235. ENCOURAGEMENT OF STATE AND PROVINCIAL
PROHIBITIONS ON OFF-SHORE DRILLING IN
THE GREAT LAKES.
(a) FINDINGS.—The Congress finds the following:
(1) The water resources of the Great Lakes
Basin are precious public natural resources, shared
and held in trust by the States of Illinois, Indiana,
Michigan, Minnesota, New York, Ohio, Pennsyl-
vania, and Wisconsin, and the Canadian Province of
Ontario.
(2) The environmental dangers associated with
off-shore drilling in the Great Lakes for oil and gas
outweigh the potential benefits of such drilling.
(3) In accordance with the Submerged Lands
Act (43 U.S.C. 1301 et seq.), each State that bor-
477
ders any of the Great Lakes has authority over the
area between that State’s coastline and the bound-
ary of Canada or another State.
(4) The States of Illinois, Michigan, New York,
Pennsylvania, and Wisconsin each have a statutory
prohibition of off-shore drilling in the Great Lakes
for oil and gas.
(5) The States of Indiana, Minnesota, and Ohio
do not have such a prohibition.
(6) The Canadian Province of Ontario does not
have such a prohibition, and drilling for and produc-
tion of gas occurs in the Canadian portion of Lake
Erie.
(b) ENCOURAGEMENT OF STATE AND PROVINCIAL
PROHIBITIONS.—The Congress encourages—
(1) the States of Illinois, Michigan, New York,
Pennsylvania, and Wisconsin to continue to prohibit
off-shore drilling in the Great Lakes for oil and gas;
(2) the States of Indiana, Minnesota, and Ohio
and the Canadian Province of Ontario to enact a
prohibition of such drilling; and
(3) the Canadian Province of Ontario to require
the cessation of any such drilling and any production
resulting from such drilling.
478
TITLE III—GEOTHERMAL
ENERGY DEVELOPMENT
SEC. 6301. ROYALTY REDUCTION AND RELIEF.
(a) ROYALTY REDUCTION.—Section 5(a) of the Geo-
thermal Steam Act of 1970 (30 U.S.C. 1004(a)) is amend-
ed by striking ‘‘not less than 10 per centum or more than
15 per centum’’ and inserting ‘‘not more than 8 per cen-
tum’’.
(b) ROYALTY RELIEF.—
(1) IN GENERAL.—Notwithstanding section 5 of
the Geothermal Steam Act of 1970 (30 U.S.C.
1004(a)) and any provision of any lease under that
Act, no royalty is required to be paid—
(A) under any qualified geothermal energy
lease with respect to commercial production of
heat or energy from a facility that begins such
production in the 5-year period beginning on
the date of the enactment of this Act; or
(B) on qualified expansion geothermal en-
ergy.
(2) 3-YEAR APPLICATION.—Paragraph (1) ap-
plies only to commercial production of heat or en-
ergy from a facility in the first 3 years of such pro-
duction.
(c) DEFINITIONS.—In this section:
479
(1) QUALIFIED EXPANSION GEOTHERMAL EN-
ERGY.—The term ‘‘qualified expansion geothermal
energy’’—
(A) subject to subparagraph (B), means
geothermal energy produced from a generation
facility for which the rated capacity is increased
by more than 10 percent as a result of expan-
sion of the facility carried out in the 5-year pe-
riod beginning on the date of the enactment of
this Act; and
(B) does not include the rated capacity of
the generation facility on the date of the enact-
ment of this Act.
(2) 
QUALIFIED
GEOTHERMAL
ENERGY
LEASE.—The term ‘‘qualified geothermal energy
lease’’ means a lease under the Geothermal Steam
Act of 1970 (30 U.S.C. 1001 et seq.)—
(A) that was executed before the end of
the 5-year period beginning on the date of the
enactment of this Act; and
(B) under which no commercial production
of any form of heat or energy occurred before
the date of the enactment of this Act.
480
SEC. 6302. EXEMPTION FROM ROYALTIES FOR DIRECT USE
OF LOW TEMPERATURE GEOTHERMAL EN-
ERGY RESOURCES.
Section 5 of the Geothermal Steam Act of 1970 (30
U.S.C. 1004) is amended—
(1) in paragraph (c) by redesignating subpara-
graphs (1) and (2) as subparagraphs (A) and (B);
(2) by redesignating paragraphs (a) through (d)
in order as paragraphs (1) through (4);
(3) by inserting ‘‘(a) IN GENERAL.—’’ after
‘‘SEC. 5.’’; and
(4) by adding at the end the following new sub-
section:
‘‘(b) EXEMPTION FOR USE OF LOW TEMPERATURE
RESOURCES.—
‘‘(1) IN GENERAL.—In lieu of any royalty or
rental under subsection (a), a lease for qualified de-
velopment and direct utilization of low temperature
geothermal resources shall provide for payment by
the lessee of an annual fee of not less than $100,
and not more than $1,000, in accordance with the
schedule issued under paragraph (2).
‘‘(2) SCHEDULE.—The Secretary shall issue a
schedule of fees under this section under which a fee
is based on the scale of development and utilization
to which the fee applies.
481
‘‘(3) DEFINITIONS.—In this subsection:
‘‘(A) LOW
TEMPERATURE
GEOTHERMAL
RESOURCES.—The term ‘low temperature geo-
thermal resources’ means geothermal steam and
associated geothermal resources having a tem-
perature of less than 195 degrees Fahrenheit.
‘‘(B) QUALIFIED DEVELOPMENT AND DI-
RECT UTILIZATION.—The term ‘qualified devel-
opment and direct utilization’ means develop-
ment and utilization in which all products of
geothermal resources, other than any heat uti-
lized, are returned to the geothermal formation
from which they are produced.’’.
SEC. 6303. AMENDMENTS RELATING TO LEASING ON FOR-
EST SERVICE LANDS.
The Geothermal Steam Act of 1970 is amended—
(1) in section 15(b) (30 U.S.C. 1014(b))—
(A) by inserting ‘‘(1)’’ after ‘‘(b)’’; and
(B) in paragraph (1) (as designated by
subparagraph (A) of this paragraph) in the
first sentence—
(i) by striking ‘‘with the consent of,
and’’ and inserting ‘‘after consultation
with the Secretary of Agriculture and’’;
and
482
(ii) by striking ‘‘the head of that De-
partment’’ and inserting ‘‘the Secretary of
Agriculture’’; and
(2) by adding at the end the following:
‘‘(2)(A) A geothermal lease for lands withdrawn or
acquired in aid of functions of the Department of Agri-
culture may not be issued if the Secretary of Agriculture,
after the consultation required by paragraph (1) and con-
sultation with any Regional Forester having administra-
tive jurisdiction over the lands concerned, determines that
no terms or conditions, including a prohibition on surface
occupancy for lease operations, would be sufficient to ade-
quately protect such lands under the National Forest
Management Act of 1976 (16 U.S.C. 1600 et seq.).
‘‘(B) The authority of the Secretary of Agriculture
under this paragraph may be delegated only to the Under-
secretary of Agriculture for Natural Resources and Envi-
ronment.
‘‘(3) The Secretary of Agriculture shall include in the
record of decision for a determination under paragraph
(2)(A)—
‘‘(A) any written statement regarding the deter-
mination that is prepared by a Regional Forester
consulted by the Secretary under paragraph (2)(A)
regarding the determination; or
483
‘‘(B) an explanation why such a statement by
the Regional Forester is not included.
SEC. 6304. DEADLINE FOR DETERMINATION ON PENDING
NONCOMPETITIVE LEASE APPLICATIONS.
Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of the Interior shall, with
respect to each application pending on the date of the en-
actment of this Act for a lease under the Geothermal
Steam Act of 1970 (30 U.S.C. 1001 et seq.), issue a final
determination of—
(1) whether or not to conduct a lease sale by
competitive bidding; and
(2) whether or not to award a lease without
competitive bidding.
SEC. 6305. OPENING OF PUBLIC LANDS UNDER MILITARY
JURISDICTION.
(a) IN GENERAL.—Except as otherwise provided in
the Geothermal Steam Act of 1970 (30 U.S.C. 1001 et
seq.) and other provisions of Federal law applicable to de-
velopment of geothermal energy resources within public
lands, all public lands under the jurisdiction of a Secretary
of a military department shall be open to the operation
of such laws and development and utilization of geo-
thermal steam and associated geothermal resources, as
that term is defined in section 2 of the Geothermal Steam
484
Act of 1970 (30 U.S.C. 1001), without the necessity for
further action by the Secretary or the Congress.
(b) CONFORMING AMENDMENT.—Section 2689 of
title 10, United States Code, is amended by striking ‘‘in-
cluding public lands,’’ and inserting ‘‘other than public
lands,’’.
(c) TREATMENT OF EXISTING LEASES.—Upon the
expiration of any lease in effect on the date of the enact-
ment of this Act of public lands under the jurisdiction of
a military department for the development of any geo-
thermal resource, such lease may, at the option of the
lessee—
(1) be treated as a lease under the Geothermal
Steam Act of 1970 (30 U.S.C. 1001 et seq.), and be
renewed in accordance with such Act; or
(2) be renewed in accordance with the terms of
the lease, if such renewal is authorized by such
terms.
(d) REGULATIONS.—The Secretary of the Interior,
with the advice and concurrence of the Secretary of the
military department concerned, shall prescribe such regu-
lations to carry out this section as may be necessary. Such
regulations shall contain guidelines to assist in deter-
mining how much, if any, of the surface of any lands
opened pursuant to this section may be used for purposes
485
incident to geothermal energy resources development and
utilization.
(e) CLOSURE
FOR PURPOSES
OF NATIONAL DE-
FENSE OR SECURITY.—In the event of a national emer-
gency or for purposes of national defense or security, the
Secretary of the Interior, at the request of the Secretary
of the military department concerned, shall close any lands
that have been opened to geothermal energy resources
leasing pursuant to this section.
SEC. 6306. APPLICATION OF AMENDMENTS.
The amendments made by this title apply with re-
spect to any lease executed before, on, or after the date
of the enactment of this Act.
SEC. 6307. REVIEW AND REPORT TO CONGRESS.
The Secretary of the Interior shall promptly review
and report to the Congress regarding the status of all mor-
atoria on and withdrawals from leasing under the Geo-
thermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) of
known geothermal resources areas (as that term is defined
in section 2 of that Act (30 U.S.C. 1001), specifying for
each such area whether the basis for such moratoria or
withdrawal still applies.
486
SEC. 6308. REIMBURSEMENT FOR COSTS OF NEPA ANAL-
YSES, DOCUMENTATION, AND STUDIES.
(a) IN GENERAL.—The Geothermal Steam Act of
1970 (30 U.S.C. 1001 et seq.) is amended by adding at
the end the following:
‘‘REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES,
DOCUMENTATION, AND STUDIES
‘‘SEC. 38. (a) IN GENERAL.—The Secretary of the
Interior may, through royalty credits, reimburse a person
who is a lessee, operator, operating rights owner, or appli-
cant for a lease under this Act for amounts paid by the
person for preparation by the Secretary (or a contractor
or other person selected by the Secretary) of any project-
level analysis, documentation, or related study required
under the National Environmental Policy Act of 1969 (42
U.S.C. 4321 et seq.) with respect to the lease.
‘‘(b) CONDITIONS.—The Secretary shall may provide
reimbursement under subsection (a) only if—
‘‘(1) adequate funding to enable the Secretary
to timely prepare the analysis, documentation, or re-
lated study is not appropriated;
‘‘(2) the person paid the costs voluntarily; and
‘‘(3) the person maintains records of its costs
in accordance with regulations prescribed by the
Secretary.’’.
487
(b) APPLICATION.—The amendments made by this
section shall apply with respect to any lease entered into
before, on, or after the date of the enactment of this Act.
(c) DEADLINE FOR REGULATIONS.—The Secretary
shall issue regulations implementing the amendments
made by this section by not later than 90 days after the
date of the enactment of this Act.
TITLE IV—HYDROPOWER
SEC. 6401. STUDY AND REPORT ON INCREASING ELECTRIC
POWER PRODUCTION CAPABILITY OF EXIST-
ING FACILITIES.
(a) IN GENERAL.—The Secretary of the Interior shall
conduct a study of the potential for increasing electric
power production capability at existing facilities under the
administrative jurisdiction of the Secretary.
(b) CONTENT.—The study under this section shall in-
clude identification and description in detail of each facil-
ity that is capable, with or without modification, of pro-
ducing additional hydroelectric power, including esti-
mation of the existing potential for the facility to generate
hydroelectric power.
(c) REPORT.—The Secretary shall submit to the Con-
gress a report on the findings, conclusions, and rec-
ommendations of the study under this section by not later
than 12 months after the date of the enactment of this
488
Act. The Secretary shall include in the report the fol-
lowing:
(1) The identifications, descriptions, and esti-
mations referred to in subsection (b).
(2) A description of activities the Secretary is
currently conducting or considering, or that could be
considered, to produce additional hydroelectric power
from each identified facility.
(3) A summary of action that has already been
taken by the Secretary to produce additional hydro-
electric power from each identified facility.
(4) The costs to install, upgrade, or modify
equipment or take other actions to produce addi-
tional hydroelectric power from each identified facil-
ity.
(5) The benefits that would be achieved by such
installation, upgrade, modification, or other action,
including quantified estimates of any additional en-
ergy or capacity from each facility identified under
subsection (b).
(6) A description of actions that are planned,
underway, or might reasonably be considered to in-
crease hydroelectric power production by replacing
turbine runners.
489
(7) A description of actions that are planned,
underway, or might reasonably be considered to in-
crease hydroelectric power production by performing
generator uprates and rewinds.
(8) The impact of increased hydroelectric power
production on irrigation, fish, wildlife, Indian tribes,
river health, water quality, navigation, recreation,
fishing, and flood control.
(9) Any additional recommendations the Sec-
retary considers advisable to increase hydroelectric
power production from, and reduce costs and im-
prove efficiency at, facilities under the jurisdiction of
the Secretary.
SEC. 6402. INSTALLATION OF POWERFORMER AT FOLSOM
POWER PLANT, CALIFORNIA.
(a) IN GENERAL.—The Secretary of the Interior may
install a powerformer at the Bureau of Reclamation Fol-
som power plant in Folsom, California, to replace a gener-
ator and transformer that are due for replacement due
to age.
(b) REIMBURSABLE COSTS.—Costs incurred by the
United States for installation of a powerformer under this
section shall be treated as reimbursable costs and shall
bear interest at current long-term borrowing rates of the
United States Treasury at the time of acquisition.
490
(c) LOCAL COST SHARING.—In addition to reimburs-
able costs under subsection (b), the Secretary shall seek
contributions from power users toward the costs of the
powerformer and its installation.
SEC. 6403. STUDY AND IMPLEMENTATION OF INCREASED
OPERATIONAL 
EFFICIENCIES 
IN 
HYDRO-
ELECTRIC POWER PROJECTS.
(a) IN GENERAL.—The Secretary of Interior shall
conduct a study of operational methods and water sched-
uling techniques at all hydroelectric power plants under
the administrative jurisdiction of the Secretary that have
an electric power production capacity greater than 50
megawatts, to—
(1) determine whether such power plants and
associated river systems are operated so as to maxi-
mize energy and capacity capabilities; and
(2) identify measures that can be taken to im-
prove operational flexibility at such plants to achieve
such maximization.
(b) REPORT.—The Secretary shall submit a report on
the findings, conclusions, and recommendations of the
study under this section by not later than 18 months after
the date of the enactment of this Act, including a sum-
mary of the determinations and identifications under
paragraphs (1) and (2) of subsection (a).
491
(c) COOPERATION BY FEDERAL POWER MARKETING
ADMINISTRATIONS.—The Secretary shall coordinate with
the Administrator of each Federal power marketing ad-
ministration in—
(1) determining how the value of electric power
produced by each hydroelectric power facility that
produces power marketed by the administration can
be maximized; and
(2) implementing measures identified under
subsection (a)(2).
(d) LIMITATION
ON IMPLEMENTATION
OF MEAS-
URES.—Implementation under subsections (a)(2) and
(b)(2) shall be limited to those measures that can be im-
plemented within the constraints imposed on Department
of the Interior facilities by other uses required by law.
SEC. 6404. SHIFT OF PROJECT LOADS TO OFF-PEAK PERI-
ODS.
(a) IN GENERAL.—The Secretary of the Interior
shall—
(1) review electric power consumption by Bu-
reau of Reclamation facilities for water pumping
purposes; and
(2) make such adjustments in such pumping as
possible to minimize the amount of electric power
consumed for such pumping during periods of peak
492
electric power consumption, including by performing
as much of such pumping as possible during off-
peak hours at night.
(b) CONSENT OF AFFECTED IRRIGATION CUSTOMERS
REQUIRED.—The Secretary may not under this section
make any adjustment in pumping at a facility without the
consent of each person that has contracted with the
United States for delivery of water from the facility for
use for irrigation and that would be affected by such ad-
justment.
(c) EXISTING OBLIGATIONS NOT AFFECTED.—This
section shall not be construed to affect any existing obliga-
tion of the Secretary to provide electric power, water, or
other benefits from Bureau of Reclamation facilities.
TITLE V—ARCTIC COASTAL
PLAIN DOMESTIC ENERGY
SEC. 6501. SHORT TITLE.
This title may be cited as the ‘‘Arctic Coastal Plain
Domestic Energy Security Act of 2001’’.
SEC. 6502. DEFINITIONS.
In this title:
(1) COASTAL
PLAIN.—The term ‘‘Coastal
Plain’’ means that area identified as such in the
map entitled ‘‘Arctic National Wildlife Refuge’’,
dated August 1980, as referenced in section 1002(b)
493
of the Alaska National Interest Lands Conservation
Act of 1980 (16 U.S.C. 3142(b)(1)), comprising ap-
proximately 1,549,000 acres.
(2) SECRETARY.—The term ‘‘Secretary’’, except
as otherwise provided, means the Secretary of the
Interior or the Secretary’s designee.
SEC. 6503. LEASING PROGRAM FOR LANDS WITHIN THE
COASTAL PLAIN.
(a) IN GENERAL.—The Secretary shall take such ac-
tions as are necessary—
(1) to establish and implement in accordance
with this title a competitive oil and gas leasing pro-
gram under the Mineral Leasing Act (30 U.S.C. 181
et seq.) that will result in an environmentally sound
program for the exploration, development, and pro-
duction of the oil and gas resources of the Coastal
Plain; and
(2) to administer the provisions of this title
through regulations, lease terms, conditions, restric-
tions, prohibitions, stipulations, and other provisions
that ensure the oil and gas exploration, development,
and production activities on the Coastal Plain will
result in no significant adverse effect on fish and
wildlife, their habitat, subsistence resources, and the
environment, and including, in furtherance of this
494
goal, by requiring the application of the best com-
mercially available technology for oil and gas explo-
ration, development, and production to all explo-
ration, development, and production operations
under this title in a manner that ensures the receipt
of fair market value by the public for the mineral re-
sources to be leased.
(b) REPEAL.—Section 1003 of the Alaska National
Interest Lands Conservation Act of 1980 (16 U.S.C.
3143) is repealed.
(c) COMPLIANCE WITH REQUIREMENTS UNDER CER-
TAIN OTHER LAWS.—
(1) COMPATIBILITY.—For purposes of the Na-
tional Wildlife Refuge System Administration Act of
1966, the oil and gas leasing program and activities
authorized by this section in the Coastal Plain are
deemed to be compatible with the purposes for which
the Arctic National Wildlife Refuge was established,
and that no further findings or decisions are re-
quired to implement this determination.
(2) ADEQUACY OF THE DEPARTMENT OF THE
INTERIOR’S LEGISLATIVE ENVIRONMENTAL IMPACT
STATEMENT.—The 
‘‘Final 
Legislative 
Environ-
mental Impact Statement’’ (April 1987) on the
Coastal Plain prepared pursuant to section 1002 of
495
the Alaska National Interest Lands Conservation
Act of 1980 (16 U.S.C. 3142) and section 102(2)(C)
of the National Environmental Policy Act of 1969
(42 U.S.C. 4332(2)(C)) is deemed to satisfy the re-
quirements under the National Environmental Policy
Act of 1969 that apply with respect to actions au-
thorized to be taken by the Secretary to develop and
promulgate the regulations for the establishment of
a leasing program authorized by this title before the
conduct of the first lease sale.
(3) COMPLIANCE WITH NEPA FOR OTHER AC-
TIONS.—Before conducting the first lease sale under
this title, the Secretary shall prepare an environ-
mental impact statement under the National Envi-
ronmental Policy Act of 1969 with respect to the ac-
tions authorized by this title that are not referred to
in paragraph (2). Notwithstanding any other law,
the Secretary is not required to identify nonleasing
alternative courses of action or to analyze the envi-
ronmental effects of such courses of action. The Sec-
retary shall only identify a preferred action for such
leasing and a single leasing alternative, and analyze
the environmental effects and potential mitigation
measures for those two alternatives. The identifica-
tion of the preferred action and related analysis for
496
the first lease sale under this title shall be completed
within 18 months after the date of the enactment of
this Act. The Secretary shall only consider public
comments that specifically address the Secretary’s
preferred action and that are filed within 20 days
after publication of an environmental analysis. Not-
withstanding any other law, compliance with this
paragraph is deemed to satisfy all requirements for
the analysis and consideration of the environmental
effects of proposed leasing under this title.
(d) RELATIONSHIP TO STATE AND LOCAL AUTHOR-
ITY.—Nothing in this title shall be considered to expand
or limit State and local regulatory authority.
(e) SPECIAL AREAS.—
(1) IN
GENERAL.—The Secretary, after con-
sultation with the State of Alaska, the city of
Kaktovik, and the North Slope Borough, may des-
ignate up to a total of 45,000 acres of the Coastal
Plain as a Special Area if the Secretary determines
that the Special Area is of such unique character
and interest so as to require special management
and regulatory protection. The Secretary shall des-
ignate as such a Special Area the Sadlerochit Spring
area, comprising approximately 4,000 acres as de-
picted on the map referred to in section 6502(1).
497
(2) MANAGEMENT.—Each such Special Area
shall be managed so as to protect and preserve the
area’s unique and diverse character including its
fish, wildlife, and subsistence resource values.
(3) EXCLUSION
FROM
LEASING
OR
SURFACE
OCCUPANCY.—The Secretary may exclude any Spe-
cial Area from leasing. If the Secretary leases a Spe-
cial Area, or any part thereof, for purposes of oil
and gas exploration, development, production, and
related activities, there shall be no surface occu-
pancy of the lands comprising the Special Area.
(4) DIRECTIONAL DRILLING.—Notwithstanding
the other provisions of this subsection, the Secretary
may lease all or a portion of a Special Area under
terms that permit the use of horizontal drilling tech-
nology from sites on leases located outside the area.
(f) LIMITATION
ON
CLOSED
AREAS.—The Sec-
retary’s sole authority to close lands within the Coastal
Plain to oil and gas leasing and to exploration, develop-
ment, and production is that set forth in this title.
(g) REGULATIONS.—
(1) IN
GENERAL.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out this title, including rules and regulations relating
to protection of the fish and wildlife, their habitat,
498
subsistence resources, and environment of the Coast-
al Plain, by no later than 15 months after the date
of the enactment of this Act.
(2) REVISION
OF
REGULATIONS.—The Sec-
retary shall periodically review and, if appropriate,
revise the rules and regulations issued under sub-
section (a) to reflect any significant biological, envi-
ronmental, or engineering data that come to the Sec-
retary’s attention.
SEC. 6504. LEASE SALES.
(a) IN GENERAL.—Lands may be leased pursuant to
this title to any person qualified to obtain a lease for de-
posits of oil and gas under the Mineral Leasing Act (30
U.S.C. 181 et seq.).
(b) PROCEDURES.—The Secretary shall, by regula-
tion, establish procedures for—
(1) receipt and consideration of sealed nomina-
tions for any area in the Coastal Plain for inclusion
in, or exclusion (as provided in subsection (c)) from,
a lease sale;
(2) the holding of lease sales after such nomina-
tion process; and
(3) public notice of and comment on designa-
tion of areas to be included in, or excluded from, a
lease sale.
499
(c) LEASE SALE BIDS.—Bidding for leases under
this title shall be by sealed competitive cash bonus bids.
(d) ACREAGE MINIMUM IN FIRST SALE.—In the first
lease sale under this title, the Secretary shall offer for
lease those tracts the Secretary considers to have the
greatest potential for the discovery of hydrocarbons, tak-
ing into consideration nominations received pursuant to
subsection (b)(1), but in no case less than 200,000 acres.
(e) TIMING
OF
LEASE
SALES.—The Secretary
shall—
(1) conduct the first lease sale under this title
within 22 months after the date of the enactment of
this title; and
(2) conduct additional sales so long as sufficient
interest in development exists to warrant, in the Sec-
retary’s judgment, the conduct of such sales.
SEC. 6505. GRANT OF LEASES BY THE SECRETARY.
(a) IN GENERAL.—The Secretary may grant to the
highest responsible qualified bidder in a lease sale con-
ducted pursuant to section 6504 any lands to be leased
on the Coastal Plain upon payment by the lessee of such
bonus as may be accepted by the Secretary.
(b) SUBSEQUENT
TRANSFERS.—No lease issued
under this title may be sold, exchanged, assigned, sublet,
or otherwise transferred except with the approval of the
500
Secretary. Prior to any such approval the Secretary shall
consult with, and give due consideration to the views of,
the Attorney General.
SEC. 6506. LEASE TERMS AND CONDITIONS.
(a) IN GENERAL.—An oil or gas lease issued pursu-
ant to this title shall—
(1) provide for the payment of a royalty of not
less than 121⁄2 percent in amount or value of the
production removed or sold from the lease, as deter-
mined by the Secretary under the regulations appli-
cable to other Federal oil and gas leases;
(2) provide that the Secretary may close, on a
seasonal basis, portions of the Coastal Plain to ex-
ploratory drilling activities as necessary to protect
caribou calving areas and other species of fish and
wildlife;
(3) require that the lessee of lands within the
Coastal Plain shall be fully responsible and liable for
the reclamation of lands within the Coastal Plain
and any other Federal lands that are adversely af-
fected in connection with exploration, development,
production, or transportation activities conducted
under the lease and within the Coastal Plain by the
lessee or by any of the subcontractors or agents of
the lessee;
501
(4) provide that the lessee may not delegate or
convey, by contract or otherwise, the reclamation re-
sponsibility and liability to another person without
the express written approval of the Secretary;
(5) provide that the standard of reclamation for
lands required to be reclaimed under this title shall
be, as nearly as practicable, a condition capable of
supporting the uses which the lands were capable of
supporting prior to any exploration, development, or
production activities, or upon application by the les-
see, to a higher or better use as approved by the
Secretary;
(6) contain terms and conditions relating to
protection of fish and wildlife, their habitat, and the
environment 
as 
required 
pursuant 
to 
section
6503(a)(2);
(7) provide that the lessee, its agents, and its
contractors use best efforts to provide a fair share,
as determined by the level of obligation previously
agreed to in the 1974 agreement implementing sec-
tion 29 of the Federal Agreement and Grant of
Right of Way for the Operation of the Trans-Alaska
Pipeline, of employment and contracting for Alaska
Natives and Alaska Native Corporations from
throughout the State;
502
(8) prohibit the export of oil produced under
the lease; and
(9) contain such other provisions as the Sec-
retary determines necessary to ensure compliance
with the provisions of this title and the regulations
issued under this title.
(b) PROJECT LABOR AGREEMENTS.—The Secretary,
as a term and condition of each lease under this title and
in recognizing the Government’s proprietary interest in
labor stability and in the ability of construction labor and
management to meet the particular needs and conditions
of projects to be developed under the leases issued pursu-
ant to this title and the special concerns of the parties
to such leases, shall require that the lessee and its agents
and contractors negotiate to obtain a project labor agree-
ment for the employment of laborers and mechanics on
production, maintenance, and construction under the
lease.
SEC. 6507. COASTAL PLAIN ENVIRONMENTAL PROTECTION.
(a) NO SIGNIFICANT ADVERSE EFFECT STANDARD
TO GOVERN AUTHORIZED COASTAL PLAIN ACTIVITIES.—
The Secretary shall, consistent with the requirements of
section 6503, administer the provisions of this title
through regulations, lease terms, conditions, restrictions,
prohibitions, stipulations, and other provisions that—
503
(1) ensure the oil and gas exploration, develop-
ment, and production activities on the Coastal Plain
will result in no significant adverse effect on fish
and wildlife, their habitat, and the environment;
(2) require the application of the best commer-
cially available technology for oil and gas explo-
ration, development, and production on all new ex-
ploration, development, and production operations;
and
(3) ensure that the maximum amount of sur-
face acreage covered by production and support fa-
cilities, including airstrips and any areas covered by
gravel berms or piers for support of pipelines, does
not exceed 2,000 acres on the Coastal Plain.
(b) SITE-SPECIFIC ASSESSMENT AND MITIGATION.—
The Secretary shall also require, with respect to any pro-
posed drilling and related activities, that—
(1) a site-specific analysis be made of the prob-
able effects, if any, that the drilling or related activi-
ties will have on fish and wildlife, their habitat, and
the environment;
(2) a plan be implemented to avoid, minimize,
and mitigate (in that order and to the extent prac-
ticable) any significant adverse effect identified
under paragraph (1); and
504
(3) the development of the plan shall occur
after consultation with the agency or agencies hav-
ing jurisdiction over matters mitigated by the plan.
(c) REGULATIONS TO PROTECT COASTAL PLAIN
FISH AND WILDLIFE RESOURCES, SUBSISTENCE USERS,
AND THE ENVIRONMENT.—Before implementing the leas-
ing program authorized by this title, the Secretary shall
prepare and promulgate regulations, lease terms, condi-
tions, restrictions, prohibitions, stipulations, and other
measures designed to ensure that the activities undertaken
on the Coastal Plain under this title are conducted in a
manner consistent with the purposes and environmental
requirements of this title.
(d) COMPLIANCE WITH FEDERAL AND STATE ENVI-
RONMENTAL LAWS AND OTHER REQUIREMENTS.—The
proposed regulations, lease terms, conditions, restrictions,
prohibitions, and stipulations for the leasing program
under this title shall require compliance with all applicable
provisions of Federal and State environmental law and
shall also require the following:
(1) Standards at least as effective as the safety
and environmental mitigation measures set forth in
items 1 through 29 at pages 167 through 169 of the
‘‘Final Legislative Environmental Impact State-
ment’’ (April 1987) on the Coastal Plain.
505
(2) Seasonal limitations on exploration, develop-
ment, and related activities, where necessary, to
avoid significant adverse effects during periods of
concentrated fish and wildlife breeding, denning,
nesting, spawning, and migration.
(3) That exploration activities, except for sur-
face geological studies, be limited to the period be-
tween approximately November 1 and May 1 each
year and that exploration activities shall be sup-
ported by ice roads, winter trails with adequate snow
cover, ice pads, ice airstrips, and air transport meth-
ods, except that such exploration activities may
occur at other times, if—
(A) the Secretary determines, after afford-
ing an opportunity for public comment and re-
view, that special circumstances exist necessi-
tating that exploration activities be conducted
at other times of the year; and
(B) the Secretary finds that such explo-
ration will have no significant adverse effect on
the fish and wildlife, their habitat, and the envi-
ronment of the Coastal Plain.
(4) Design safety and construction standards
for all pipelines and any access and service roads,
that—
506
(A) minimize, to the maximum extent pos-
sible, adverse effects upon the passage of mi-
gratory species such as caribou; and
(B) minimize adverse effects upon the flow
of surface water by requiring the use of cul-
verts, bridges, and other structural devices.
(5) Prohibitions on public access and use on all
pipeline access and service roads.
(6) Stringent reclamation and rehabilitation re-
quirements, consistent with the standards set forth
in this title, requiring the removal from the Coastal
Plain of all oil and gas development and production
facilities, structures, and equipment upon completion
of oil and gas production operations, except that the
Secretary may exempt from the requirements of this
paragraph those facilities, structures, or equipment
that the Secretary determines would assist in the
management of the Arctic National Wildlife Refuge
and that are donated to the United States for that
purpose.
(7) Appropriate prohibitions or restrictions on
access by all modes of transportation.
(8) Appropriate prohibitions or restrictions on
sand and gravel extraction.
(9) Consolidation of facility siting.
507
(10) Appropriate prohibitions or restrictions on
use of explosives.
(11) Avoidance, to the extent practicable, of
springs, streams, and river system; the protection of
natural surface drainage patterns, wetlands, and ri-
parian habitats; and the regulation of methods or
techniques for developing or transporting adequate
supplies of water for exploratory drilling.
(12) Avoidance or reduction of air traffic-re-
lated disturbance to fish and wildlife.
(13) Treatment and disposal of hazardous and
toxic wastes, solid wastes, reserve pit fluids, drilling
muds and cuttings, and domestic wastewater, includ-
ing an annual waste management report, a haz-
ardous materials tracking system, and a prohibition
on chlorinated solvents, in accordance with applica-
ble Federal and State environmental law.
(14) Fuel storage and oil spill contingency plan-
ning.
(15) Research, monitoring, and reporting re-
quirements.
(16) Field crew environmental briefings.
(17) Avoidance of significant adverse effects
upon subsistence hunting, fishing, and trapping by
subsistence users.
508
(18) Compliance with applicable air and water
quality standards.
(19) Appropriate seasonal and safety zone des-
ignations around well sites, within which subsistence
hunting and trapping shall be limited.
(20) Reasonable stipulations for protection of
cultural and archeological resources.
(21) All other protective environmental stipula-
tions, restrictions, terms, and conditions deemed
necessary by the Secretary.
(e) CONSIDERATIONS.—In preparing and promul-
gating regulations, lease terms, conditions, restrictions,
prohibitions, and stipulations under this section, the Sec-
retary shall consider the following:
(1) The stipulations and conditions that govern
the National Petroleum Reserve-Alaska leasing pro-
gram, as set forth in the 1999 Northeast National
Petroleum Reserve-Alaska Final Integrated Activity
Plan/Environmental Impact Statement.
(2) The environmental protection standards
that governed the initial Coastal Plain seismic explo-
ration program under parts 37.31 to 37.33 of title
50, Code of Federal Regulations.
(3) The land use stipulations for exploratory
drilling on the KIC–ASRC private lands that are set
509
forth in Appendix 2 of the August 9, 1983, agree-
ment between Arctic Slope Regional Corporation and
the United States.
(f) FACILITY CONSOLIDATION PLANNING.—
(1) IN GENERAL.—The Secretary shall, after
providing for public notice and comment, prepare
and update periodically a plan to govern, guide, and
direct the siting and construction of facilities for the
exploration, development, production, and transpor-
tation of Coastal Plain oil and gas resources.
(2) OBJECTIVES.—The plan shall have the fol-
lowing objectives:
(A) Avoiding unnecessary duplication of fa-
cilities and activities.
(B) Encouraging consolidation of common
facilities and activities.
(C) Locating or confining facilities and ac-
tivities to areas that will minimize impact on
fish and wildlife, their habitat, and the environ-
ment.
(D) Utilizing existing facilities wherever
practicable.
(E) Enhancing compatibility between wild-
life values and development activities.
510
SEC. 6508. EXPEDITED JUDICIAL REVIEW.
(a) FILING OF COMPLAINT.—
(1) DEADLINE.—Subject to paragraph (2), any
complaint seeking judicial review of any provision of
this title or any action of the Secretary under this
title shall be filed in any appropriate district court
of the United States—
(A) except as provided in subparagraph
(B), within the 90-day period beginning on the
date of the action being challenged; or
(B) in the case of a complaint based solely
on grounds arising after such period, within 90
days after the complainant knew or reasonably
should have known of the grounds for the com-
plaint.
(2) VENUE.—Any complaint seeking judicial re-
view of an action of the Secretary under this title
may be filed only in the United States Court of Ap-
peals for the District of Columbia.
(3) LIMITATION
ON
SCOPE
OF
CERTAIN
RE-
VIEW.—Judicial review of a Secretarial decision to
conduct a lease sale under this title, including the
environmental analysis thereof, shall be limited to
whether the Secretary has complied with the terms
of this division and shall be based upon the adminis-
trative record of that decision. The Secretary’s iden-
511
tification of a preferred course of action to enable
leasing to proceed and the Secretary’s analysis of
environmental effects under this division shall be
presumed to be correct unless shown otherwise by
clear and convincing evidence to the contrary.
(b) LIMITATION ON OTHER REVIEW.—Actions of the
Secretary with respect to which review could have been
obtained under this section shall not be subject to judicial
review in any civil or criminal proceeding for enforcement.
SEC. 6509. RIGHTS-OF-WAY ACROSS THE COASTAL PLAIN.
(a) EXEMPTION.—Title XI of the Alaska National In-
terest Lands Conservation Act of 1980 (16 U.S.C. 3161
et seq.) shall not apply to the issuance by the Secretary
under section 28 of the Mineral Leasing Act (30 U.S.C.
185) of rights-of-way and easements across the Coastal
Plain for the transportation of oil and gas.
(b) TERMS AND CONDITIONS.—The Secretary shall
include in any right-of-way or easement referred to in sub-
section (a) such terms and conditions as may be necessary
to ensure that transportation of oil and gas does not result
in a significant adverse effect on the fish and wildlife, sub-
sistence resources, their habitat, and the environment of
the Coastal Plain, including requirements that facilities be
sited or designed so as to avoid unnecessary duplication
of roads and pipelines.
512
(c) REGULATIONS.—The Secretary shall include in
regulations under section 6503(g) provisions granting
rights-of-way and easements described in subsection (a)
of this section.
SEC. 6510. CONVEYANCE.
In order to maximize Federal revenues by removing
clouds on title to lands and clarifying land ownership pat-
terns within the Coastal Plain, the Secretary, notwith-
standing the provisions of section 1302(h)(2) of the Alas-
ka National Interest Lands Conservation Act (16 U.S.C.
3192(h)(2)), shall convey—
(1) to the Kaktovik Inupiat Corporation the
surface estate of the lands described in paragraph 2
of Public Land Order 6959, to the extent necessary
to fulfill the Corporation’s entitlement under section
12 of the Alaska Native Claims Settlement Act (43
U.S.C. 1611); and
(2) to the Arctic Slope Regional Corporation
the subsurface estate beneath such surface estate
pursuant to the August 9, 1983, agreement between
the Arctic Slope Regional Corporation and the
United States of America.
SEC. 6511. LOCAL GOVERNMENT IMPACT AID AND COMMU-
NITY SERVICE ASSISTANCE.
(a) FINANCIAL ASSISTANCE AUTHORIZED.—
513
(1) IN
GENERAL.—The Secretary may use
amounts available from the Coastal Plain Local Gov-
ernment Impact Aid Assistance Fund established by
subsection (d) to provide timely financial assistance
to entities that are eligible under paragraph (2) and
that are directly impacted by the exploration for or
production of oil and gas on the Coastal Plain under
this title.
(2) ELIGIBLE
ENTITIES.—The North Slope
Borough, Kaktovik, and other boroughs, municipal
subdivisions, villages, and any other community or-
ganized under Alaska State law shall be eligible for
financial assistance under this section.
(b) USE
OF
ASSISTANCE.—Financial assistance
under this section may be used only for—
(1) planning for mitigation of the potential ef-
fects of oil and gas exploration and development on
environmental, social, cultural, recreational and sub-
sistence values;
(2) implementing mitigation plans and main-
taining mitigation projects; and
(3) developing, carrying out, and maintaining
projects and programs that provide new or expanded
public facilities and services to address needs and
problems associated with such effects, including fire-
514
fighting, police, water, waste treatment, medivac,
and medical services.
(c) APPLICATION.—
(1) IN GENERAL.—Any community that is eligi-
ble for assistance under this section may submit an
application for such assistance to the Secretary, in
such form and under such procedures as the Sec-
retary may prescribe by regulation.
(2) NORTH SLOPE BOROUGH COMMUNITIES.—A
community located in the North Slope Borough may
apply for assistance under this section either directly
to the Secretary or through the North Slope Bor-
ough.
(3) APPLICATION ASSISTANCE.—The Secretary
shall work closely with and assist the North Slope
Borough and other communities eligible for assist-
ance under this section in developing and submitting
applications for assistance under this section.
(d) ESTABLISHMENT OF FUND.—
(1) IN GENERAL.—There is established in the
Treasury the Coastal Plain Local Government Im-
pact Aid Assistance Fund.
(2) USE.—Amounts in the fund may be used
only for providing financial assistance under this
section.
515
(3) DEPOSITS.—Subject to paragraph (4), there
shall be deposited into the fund amounts received by
the United States as revenues derived from rents,
bonuses, and royalties under on leases and lease
sales authorized under this title.
(4) LIMITATION
ON
DEPOSITS.—The total
amount in the fund may not exceed $10,000,000.
(5) INVESTMENT
OF
BALANCES.—The Sec-
retary of the Treasury shall invest amounts in the
fund in interest bearing government securities.
(e) AUTHORIZATION OF APPROPRIATIONS.—To pro-
vide financial assistance under this section there is author-
ized to be appropriated to the Secretary from the Coastal
Plain Local Government Impact Aid Assistance Fund
$5,000,000 for each fiscal year.
SEC. 6512. REVENUE ALLOCATION.
(a) FEDERAL AND STATE DISTRIBUTION.—
(1) IN
GENERAL.—Notwithstanding section
6504 of this Act, the Mineral Leasing Act (30
U.S.C. 181 et. seq.), or any other law, of the
amount of adjusted bonus, rental, and royalty reve-
nues from oil and gas leasing and operations author-
ized under this title—
(A) 50 percent shall be paid to the State
of Alaska; and
516
(B) the balance shall be deposited into the
Renewable 
Energy 
Technology 
Investment
Fund and the Royalties Conservation Fund as
provided in this section.
(2) ADJUSTMENTS.—Adjustments to bonus,
rental, and royalty amounts from oil and gas leasing
and operations authorized under this title shall be
made as necessary for overpayments and refunds
from lease revenues received in current or subse-
quent periods before distribution of such revenues
pursuant to this section.
(3) TIMING
OF
PAYMENTS
TO
STATE.—Pay-
ments to the State of Alaska under this section shall
be made semiannually.
(b) RENEWABLE ENERGY TECHNOLOGY INVEST-
MENT FUND.—
(1) ESTABLISHMENT
AND
AVAILABILITY.—
There is hereby established in the Treasury of the
United States a separate account which shall be
known as the ‘‘Renewable Energy Technology In-
vestment Fund’’.
(2) DEPOSITS.—Fifty percent of adjusted reve-
nues from bonus payments for leases issued under
this title shall be deposited into the Renewable En-
ergy Technology Investment Fund.
517
(3) USE, GENERALLY.—Subject to paragraph
(4), funds deposited into the Renewable Energy
Technology Investment Fund shall be used by the
Secretary of Energy to finance research grants, con-
tracts, and cooperative agreements and expenses of
direct research by Federal agencies, including the
costs of administering and reporting on such a pro-
gram of research, to improve and demonstrate tech-
nology and develop basic science information for de-
velopment and use of renewable and alternative fuels
including wind energy, solar energy, geothermal en-
ergy, and energy from biomass. Such research may
include studies on deployment of such technology in-
cluding research on how to lower the costs of intro-
duction of such technology and of barriers to entry
into the market of such technology.
(4) USE FOR ADJUSTMENTS AND REFUNDS.—If
for any circumstances, adjustments or refunds of
bonus amounts deposited pursuant to this title be-
come warranted, 50 percent of the amount necessary
for the sum of such adjustments and refunds may
be paid by the Secretary from the Renewable Energy
Technology Investment Fund.
(5) CONSULTATION AND COORDINATION.—Any
specific use of the Renewable Energy Technology In-
518
vestment Fund shall be determined only after the
Secretary of Energy consults and coordinates with
the heads of other appropriate Federal agencies.
(6) REPORTS.—Not later than 1 year after the
date of the enactment of this Act and on an annual
basis thereafter, the Secretary of Energy shall trans-
mit to the Committee on Science of the House of
Representatives and the Committee on Energy and
Natural Resources of the Senate a report on the use
of funds under this subsection and the impact of and
efforts to integrate such uses with other energy re-
search efforts.
(c) ROYALTIES CONSERVATION FUND.—
(1) ESTABLISHMENT
AND
AVAILABILITY.—
There is hereby established in the Treasury of the
United States a separate account which shall be
known as the ‘‘Royalties Conservation Fund’’.
(2) DEPOSITS.—Fifty percent of revenues from
rents and royalty payments for leases issued under
this title shall be deposited into the Royalties Con-
servation Fund.
(3) USE, GENERALLY.—Subject to paragraph
(4), funds deposited into the Royalties Conservation
Fund—
519
(A) may be used by the Secretary of the
Interior and the Secretary of Agriculture to fi-
nance grants, contracts, cooperative agree-
ments, and expenses for direct activities of the
Department of the Interior and the Forest
Service to restore and otherwise conserve lands
and habitat and to eliminate maintenance and
improvements backlogs on Federal lands, in-
cluding the costs of administering and reporting
on such a program; and
(B) may be used by the Secretary of the
Interior to finance grants, contracts, coopera-
tive agreements, and expenses—
(i) to preserve historic Federal prop-
erties;
(ii) to assist States and Indian Tribes
in preserving their historic properties;
(iii) to foster the development of
urban parks; and
(iv) to conduct research to improve
the effectiveness and lower the costs of
habitat restoration.
(4) USE FOR ADJUSTMENTS AND REFUNDS.—If
for any circumstances, refunds or adjustments of
royalty and rental amounts deposited pursuant to