‘‘(3) NATURAL
GAS
FUELING
STATION.—The
term ‘natural gas fueling station’ means any prop-
erty or equipment necessary to dispense natural gas
as a vehicular fuel.
‘‘(4) ALTERNATIVE
FUEL
AND
ALTERNATIVE
FUEL VEHICLE.—The terms ‘alternative fuel’ and
‘alternative fuel vehicle’ have the same meanings as
in section 301 of the Energy Policy Act of 1992.
‘‘(5) ULEV-CERTIFIED ALTERNATIVE FUEL VE-
HICLE.—The term ‘ULEV-certified alternative fuel
vehicle’ means any vehicle that operates on alter-
native fuel and has been certified by the California
Air Resources Board or by the Administrator to
meet the current ultra-low emission vehicle standard
as established by the California Air Resources Board
or as established under title II of this Act.’’.
TITLE III—TAX INCENTIVES
SEC. 301. CREDITS FOR NATURAL GAS VEHICLES, FUELING
STATIONS, AND FUEL.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to business related credits) is amended by
adding at the end the following new section:
‘‘SEC. 45D. CREDITS RELATED TO NATURAL GAS VEHICLES.
‘‘(a) CREDIT FOR VEHICLES.—
‘‘(1) IN GENERAL.—For purposes of section 38,
the natural gas vehicle property credit for any tax-
able year is an amount equal to 50 percent of the
cost of any qualified natural gas vehicle property
placed in service by the taxpayer during such taxable
year.
‘‘(2) QUALIFIED NATURAL GAS VEHICLE PROP-
ERTY.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), the term ‘qualified natural gas vehi-
cle property’ means any property which would
be qualified clean-fuel vehicle property as de-
fined in section 179A(c) if—
‘‘(i) paragraph (2) thereof did not
apply, and
‘‘(ii) the only clean-burning fuel under
such section were natural gas.
‘‘(B) VEHICLE MUST BE QUALIFIED NATU-
RAL GAS VEHICLE.—
‘‘(i) IN GENERAL.—Property shall not
be treated as qualified natural gas vehicle
property unless the motor vehicle of which
it is a part is a qualified natural gas vehi-
cle.
‘‘(ii) REASONABLE
EXPECTATION
AS
TO
CERTAIN
REQUIREMENTS.—For pur-
poses of this subsection, a vehicle shall be
treated as meeting the requirements of
subparagraphs (A) and (B) of subsection
(d)(1) if it is reasonably expected that such
vehicle will meet such requirements for a
reasonable period.
‘‘(3) INCREMENTAL
COST.—For purposes of
paragraph (1), in the case of a motor vehicle de-
scribed in section 179A(c)(1)(B), the cost taken into
account under subsection (a) shall not exceed the ex-
cess (if any) of—
‘‘(A) the cost of the qualified natural gas
vehicle property, over
‘‘(B) the cost of similar property in a gaso-
line or diesel vehicle of the same make and
model as the vehicle for which the taxpayer
claims the credit.
‘‘(4) TERMINATION.—
‘‘(A) IN GENERAL.—This subsection shall
not apply to property placed in service after the
first calendar year after the termination year.
‘‘(B) TERMINATION YEAR.—For purposes
of subparagraph (A), the termination year is
the first calendar year in which the number of
motor vehicles capable of using natural gas as
a fuel which are placed in service during such
year is at least 10 percent of the total number
of all motor vehicles placed in service during
such year. For purposes of the preceding sen-
tence, the term ‘motor vehicle’ has the meaning
given such term by section 179A(e)(2).
‘‘(b) CREDIT FOR FUELING STATIONS.—
‘‘(1) IN GENERAL.—For purposes of section 38,
the natural gas fueling property credit for any tax-
able year is an amount equal to the lesser of—
‘‘(A) $25,000, or
‘‘(B) 10 percent of the cost of any quali-
fied natural gas vehicle fueling property placed
in service by the taxpayer during such taxable
year.
‘‘(2) QUALIFIED NATURAL GAS VEHICLE FUEL-
ING PROPERTY.—For purposes of this section, the
term ‘qualified natural gas vehicle fueling property’
means any property—
‘‘(A) which is placed in service to fuel
motor vehicles propelled by natural gas;
‘‘(B) the original use of which commences
with the taxpayer; and
‘‘(C) which is of a character subject to the
allowance for depreciation.
‘‘(3) TERMINATION.—This subsection shall not
apply to property placed in service after the first cal-
endar year after the termination year (as defined in
subsection (a)(4)).
‘‘(c) CREDIT FOR NATURAL GAS USED AS A TRANS-
PORTATION FUEL.—
‘‘(1) IN GENERAL.—For purposes of section 38,
the natural gas motor fuel credit for any taxable
year is an amount equal to—
‘‘(A) 25 cents per gallon of liquefied natu-
ral gas, and
‘‘(B) 25 cents per gasoline gallon equiva-
lent (as determined by the National Conference
on Weights and Measures) of compressed natu-
ral gas,
used during such taxable year by the taxpayer as a
fuel to propel a qualified natural gas vehicle.
‘‘(2) TERMINATION.—This subsection shall not
apply to fuel used after the first calendar year after
the termination year (as defined in subsection
(a)(4)).
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED NATURAL GAS VEHICLE.—The
term ‘qualified natural gas vehicle’ means any motor
vehicle (as defined in section 179A(e)(2)) fueled by
natural gas if—
‘‘(A) such vehicle—
‘‘(i) is used in a trade or business by
the taxpayer as part of a fleet consisting of
at least 5 motor vehicles which are so
used, or
‘‘(ii) consumes at least 1,500 gasoline
gallon equivalents of natural gas per year;
and
‘‘(B) the original use of such vehicle com-
mences with the taxpayer.
‘‘(2) NATURAL GAS.—The term ‘natural gas’
means compressed natural gas and liquefied natural
gas.
‘‘(e) SPECIAL RULES.—
‘‘(1) COORDINATION WITH SECTION 179A.—The
cost otherwise taken into account under section
179A with respect to any property shall be reduced
by the amount of the credit allowed under this sec-
tion with respect to such cost.
‘‘(2) CERTAIN RULES TO APPLY.—Rules similar
to the rules of subsection (a)(2), and paragraphs
(3), (4), (5), and (6) of subsection (e), of section
179A shall apply for purposes of subsections (a) and
(b).
‘‘(f) BENEFITS FOR TAX-EXEMPT ENTITIES.—In the
case of a tax-exempt entity—
‘‘(1) section 38(c) shall not apply to any credit
determined under this section, and
‘‘(2) the credits determined under this section
shall be treated for purposes of this title (other than
section 38, this subpart, and chapter 63) as allowed
under section 34 and not by section 38.
For purposes of this subsection, the term ‘tax-exempt en-
tity’ means an entity described in clause (i) or (ii) of sec-
tion 168(h)(2)(A).’’
(b) CONFORMING AMENDMENTS.—
(1) Subsection (b) of section 38 of such Code
is amended by striking ‘‘plus’’ at the end of para-
graph (11), by striking the period at the end of
paragraph (12) and inserting a comma, and by add-
ing at the end the following new paragraphs:
‘‘(13) the natural gas vehicle property credit de-
termined under section 45D(a),
‘‘(14) the natural gas fueling property credit
determined under section 45D(b), plus
‘‘(15) the natural gas motor fuel credit deter-
mined under section 45D(c).’’
(2) The table of sections for subpart D of part
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 45D. Credits related to natural gas vehicles.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 302. EXCISE TAXATION OF LIQUEFIED NATURAL GAS.
(a) IN GENERAL.—Paragraph (3) of section 4041(a)
of the Internal Revenue Code of 1986 is amended to read
as follows:
‘‘(3) COMPRESSED
OR
LIQUEFIED
NATURAL
GAS.—
‘‘(A) IN GENERAL.—There is hereby im-
posed a tax on compressed or liquefied natural
gas—
‘‘(i) sold by any person to an owner,
lessee, or other operator of a motor vehicle
or motorboat for use as a fuel in such
motor vehicle or motorboat, or
‘‘(ii) used by any person as a fuel in
a motor vehicle or motorboat unless there
was a taxable sale of such gas under clause
(i).
The rate of the tax imposed by this paragraph
shall be 48.54 cents per MCF (determined at
standard temperature and pressure) in the case
of compressed natural gas and 3.54 cents per
gallon in the case of liquefied natural gas.’’
(b) CONFORMING AMENDMENT.—Paragraph (2) of
section 4041(a) of such Code is amended by striking
‘‘(other’’ and all that follows through ‘‘4081)’’ and insert-
ing ‘‘(other than liquefied natural gas, kerosene, gas oil,
or fuel oil, or any product taxable under section 4081)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act.
SEC. 303. SHORTER DEPRECIATION RECOVERY PERIODS
FOR NATURAL GAS VEHICLES AND REFUEL-
ING PROPERTY.
(a) VEHICLES TREATED AS 3-YEAR PROPERTY.—
(1) Subparagraph (A) of section 168(e)(3) of
the Internal Revenue Code of 1986 is amended by
striking ‘‘and’’ at the end of clause (i), by striking
the period at the end of clause (ii) and inserting ‘‘,
and’’, and by adding at the end the following new
clause:
‘‘(iii) any automobile, general purpose
truck, or bus which is fueled in whole or
in part by compressed natural gas or lique-
fied natural gas.’’
(2) Subparagraph (A) of section 280F(a)(1) of
such Code is amended by adding at the end the fol-
lowing flush sentence:
‘‘The preceding sentence shall not apply to any pas-
senger 
automobile 
described 
in 
section
168(e)(3)(A)(iii).’’
(b) REFUELING PROPERTY TREATED
AS 7-YEAR
PROPERTY.—Subparagraph (C) of section 168(e)(3) of
such Code is amended—
(1) by striking ‘‘and’’ at the end of clause (i),
(2) by redesignating clause (ii) as clause (iii),
and
(3) by inserting after clause (i) the following
new clause:
‘‘(ii) any qualified clean-fuel vehicle
refueling property (as defined in section
179(d)), and’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to property placed in service after
the date of the enactment of this Act.
TITLE IV—REVISION OF
PURCHASE MANDATES
SEC. 401. STATEMENT OF POLICY.
It is the policy of the United States that—
(1) a viable, sustainable market for natural gas
and other low emission vehicles requires cooperative
efforts by and among fleet operators and other
users, fuel providers, and vehicle manufacturers;
(2) government mandates requiring private sec-
tor fleet purchases do not support such cooperative
efforts;
(3) the low-emission vehicle market should be
based on voluntary, economically sound decisions;
and
(4) market-oriented incentives can provide an
appropriate and effective means for developing a
self-sustaining market for such vehicles and fuels.
SEC. 402. REVISION OF MANDATE AUTHORITIES.
(a) REPEAL OF PRIVATE FLEET MANDATES.—Ex-
cept as provided in subsection (c), section 507 of the En-
ergy Policy Act of 1992 (42 U.S.C. 13257) is repealed.
(b) SUNSET OF FUEL PROVIDER MANDATE.—Sec-
tion 501(a)(1)(D) of the Energy Policy Act of 1992 (42
U.S.C. 13251(a)(1)(D)), relating to acquisitions for model
‘‘(2) to specify, as applicable, the models, lines,
or types of, or marketing or pricing practices, poli-
cies, or strategies for, vehicles subject to this Act; or
‘‘(3) to mandate, except as expressly provided
in this title, the purchase of alternative fueled vehi-
cles. Nothing in this Act shall be construed to give
the Secretary authority to mandate marketing or
pricing practices, policies, or strategies for alter-
native fuels, or to mandate the production, delivery,
or purchase of such fuels.’’.
(c) SECTION 506.—Section 506 of the Energy Policy
Act of 1992 (42 U.S.C. 13256) is amended by adding at
the end the following new subsection:
‘‘(d) CONSULTATION WITH OTHER FEDERAL AGEN-
CIES.—In carrying out this section, the Secretary shall
consult with the Secretary of Transportation, the Adminis-
trator, and other appropriate Federal agencies.’’.
(d) SECTION 509.—Section 509 of the Energy Policy
Act of 1992 (42 U.S.C. 13259) is amended to read as
follows:
‘‘SEC. 509. SECRETARY’S RECOMMENDATIONS TO CON-
GRESS.
‘‘By no later than June 30, 1997, the Secretary shall
recommend to Congress such measures as are necessary
to provide incentives for—
‘‘(1) fuel suppliers to make available to the
public replacement fuels, including providing for the
construction or availability of related fuel delivery
systems;
‘‘(2) suppliers of alternative fueled vehicles to
make available to the public alternative fueled vehi-
cles and to ensure the availability of necessary relat-
ed services; and
‘‘(3) motor vehicle owners to use replacement
fuels,
to the extent necessary to achieve the goals of replacement
fuel use established in this title and to ensure that the
availability of alternative fuels and of alternative fueled
vehicles are consistent with each other.’’.
(e) SECTION 510.—Section 510 of the Energy Policy
Act of 1992 (42 U.S.C. 13260) is amended—
(1) by striking ‘‘(a) IN GENERAL.—’’; and
(2) by striking subsection (b).
TITLE V—FEDERAL TRANSIT IN-
CENTIVES FOR NATURAL GAS
VEHICLES
SEC. 501. FINDING.
Section 5301(b) of title 49, United States Code, is
amended—
(1) by striking ‘‘and’’ at the end of paragraph
(8);
(2) by redesignating paragraph (9) as para-
graph (10); and
(3) by inserting after paragraph (8) the follow-
ing:
‘‘(9) the financial assistance provided under
this chapter reflects the Government’s commitment
to increase the use of natural gas and alternative
fuels as transportation fuels, particularly in trans-
portation management areas seeking to increase air
quality; and’’.
SEC. 502. DEFINITIONS.
Section 5302(a) of title 49, United States Code, is
amended—
(1) by redesignating paragraphs (1) through
(13) as paragraphs (2) through (14), respectively;
(2) by inserting before paragraph (2), as redes-
ignated by paragraph (1) of this section, the follow-
ing:
‘‘(1) ‘alternative fuel’ and ‘alternative fueled ve-
hicle’ have the meanings given such terms in section
301 of the Energy Policy Act of 1992.’’;
(3) by redesignating paragraphs (9) through
(14), as redesignated by paragraph (1) of this sec-
tion, as paragraphs (12) through (17), respectively;
(4) by inserting after paragraph (8), as redesig-
nated by paragraph (1) of this section, the following:
‘‘(9) ‘natural gas’ includes compressed natural
gas and liquified natural gas.
‘‘(10) ‘natural gas fueling station’ means any
property or equipment necessary to dispense natural
gas as a vehicular fuel.
‘‘(11) ‘natural gas vehicle’ means a vehicle that
will operate on—
‘‘(A) natural gas alone;
‘‘(B) natural gas mixed in combination
with another fuel in a dual-fuel configuration;
or
‘‘(C) natural gas or another fuel (but not
in combination) in a bifuel configuration.’’;
(5) by redesignating paragraph (17), as redesig-
nated by paragraph (3) of this section, as paragraph
(18); and
(6) by inserting after paragraph (16), as redes-
ignated by paragraph (3) of this section, the follow-
ing:
‘‘(17) ‘ULEV-certified alternative fueled vehi-
cle’ and ‘ULEV-certified alternative fueled bus’
mean a vehicle or bus that operates on alternative
fuel and has been certified by the California Air Re-
sources Board or the Environmental Protection
Agency as meeting the current Ultra-Low Emission
Vehicle standard, as established by the California
Air Resources Board or the Environmental Protec-
tion Agency.’’.
SEC. 503. FACTORS IN METROPOLITAN PLANNING.
Section 5303(b) of title 49, United States Code, is
amended by adding at the end the following:
‘‘(16) the opportunities that the metropolitan
planning organization has to stimulate the use of
natural gas vehicles and ULEV-certified alternative
fueled vehicles and the installation of a fueling infra-
structure to support such vehicles.’’.
SEC. 504. RESEARCH, DEVELOPMENT, AND DEMONSTRA-
TION PROJECTS.
Section 5312(b)(1) of title 49, United States Code,
is amended—
(1) by striking ‘‘and’’ at the end of subpara-
graph (E);
(2) by redesignating subparagraph (F) as sub-
paragraph (G); and
(3) by inserting after subparagraph (E) the fol-
lowing:
‘‘(F) the relationship between environ-
mental policy and transportation policy, par-
ticularly the potential applications for natural
gas vehicles and ULEV-certified alternative
fueled vehicles in urban settings; and’’.
SEC. 505. ENVIRONMENTAL FACTORS RELATED TO FUND-
ING FOR BUSES.
Section 5323 of title 49, United States Code, is
amended by adding at the end the following:
‘‘(m) FUNDING FOR NEW NATURAL GAS BUSES AND
RELATED PROPERTY AND EQUIPMENT.—A Government
grant for a project to be assisted under this chapter that
involves acquiring buses powered by natural gas, or any
ULEV-certified alternative fueled bus, and all real prop-
erty or equipment related to the fueling thereof, shall not
be less than 90 percent of the cost of the project.’’.
TITLE 
VI—GOVERNMENT 
CON-
TRACT INCENTIVES FOR NAT-
URAL GAS VEHICLES
SEC. 601. PREFERENCE FOR CONTRACTORS USING NATU-
RAL GAS VEHICLES.
(a) ARMED SERVICES ACQUISITIONS.—(1) Chapter
141 of title 10, United States Code, is amended by insert-
ing after section 2398 the following new section:
‘‘§ 2398a. Preference for contractors using natural
gas vehicles
‘‘(a) PREFERENCE FOR CONTRACTORS.—In entering
into contracts with private entities for the procurement of
goods or services, the Secretary of Defense shall give a
preference to entities that use, to the maximum extent
practicable, either of the following:
‘‘(1) Motor vehicles that operate on natural gas.
‘‘(2) Motor vehicles that—
‘‘(A) operate on alternative fuel (as defined
in section 301 of the Energy Policy Act of 1992
(42 U.S.C. 13211); and
‘‘(B) are certified by the California Air Re-
sources Board or by the Administrator of the
Environmental Protection Agency as meeting
the ultra-low emission vehicle standard estab-
lished by the California Air Resources Board or
the Environmental Protection Agency.
‘‘(b) REQUIREMENT TO APPLY PREFERENCE
TO
SUBCONTRACTORS.—The Secretary of Defense shall re-
quire an entity with which the Department of Defense has
entered into a contract for the procurement of goods or
services to give a preference, in entering into subcontracts
to carry out such contract, to entities that use, to the max-
imum extent practicable, motor vehicles described in sub-
section (a).’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 2398 the following new item:
‘‘2398a. Preference for contractors using natural gas vehicles.’’.
(b) CIVILIAN AGENCY ACQUISITIONS.—Title III of
the Federal Property and Administrative Services Act of
1949 (41 U.S.C. 251 et seq.) is amended by adding at
the end the following new section:
‘‘SEC. 317. PREFERENCE FOR CONTRACTORS USING NATU-
RAL GAS VEHICLES.
‘‘(a) PREFERENCE FOR CONTRACTORS.—In entering
into contracts with private entities for the procurement of
goods or services, an executive agency shall give a pref-
erence to entities that use, to the maximum extent prac-
ticable, either of the following:
‘‘(1) Motor vehicles that operate on natural gas.
‘‘(2) Motor vehicles that—
‘‘(A) operate on alternative fuel (as defined
in section 301 of the Energy Policy Act of 1992
(42 U.S.C. 13211); and
‘‘(B) are certified by the California Air Re-
sources Board or by the Administrator of the
Environmental Protection Agency as meeting
the ultra-low emission vehicle standard estab-
lished by the California Air Resources Board or
the Environmental Protection Agency.
‘‘(b) REQUIREMENT
OF APPLY PREFERENCE
TO
SUBCONTRACTORS.—The head of an executive agency
shall require an entity with which the executive agency has
entered into a contract for the procurement of goods or
services to give a preference, in entering into subcontracts
to carry out such contract, to entities that use, to the max-
imum extent practicable, motor vehicles described in sub-
section (a).’’.
(2) The table of sections in section 1 of such Act is
amended by inserting after the item relating to section
316 the following new item:
‘‘317. Preference for contractors using natural gas vehicles.’’.
(c) EFFECTIVE DATE.—Section 2398a of title 10,
United States Code, as added by subsection (a), and sec-
tion 317 of the Federal Property and Administrative Serv-
ices Act of 1949, as added by subsection (b), shall apply
with respect to contracts entered into after the expiration
of the 60-day period beginning on the date of the enact-
ment of this Act.
TITLE VII—RESEARCH, DEVEL-
OPMENT, AND DEMONSTRA-
TION INCENTIVES FOR NATU-
RAL GAS VEHICLES
SEC. 701. NATURAL GAS VEHICLE RESEARCH, DEVELOP-
MENT, AND DEMONSTRATION PROJECTS AT
THE DEPARTMENT OF ENERGY.
(a) NATURAL GAS VEHICLE RESEARCH, DEVELOP-
MENT, AND DEMONSTRATION PROGRAM.—(1) The Sec-
retary of Energy shall conduct a 5-year program, in ac-
cordance with sections 3001 and 3002 of the Energy Pol-
icy Act of 1992, of natural gas vehicle research, develop-
ment, and demonstration.
(2) The natural gas vehicle program conducted pur-
suant to this section shall include activities relating to—
(A) onboard storage of both compressed natural
gas and liquified natural gas for vehicular use, in-
cluding high-strength materials, low-cost carbon
fiber, low-cost manufacturing processes, and ad-
vanced concepts;
(B) engine design for cycle optimization for me-
dium-duty and heavy-duty vehicles in—
(i) compression ignition and dual-fuel cy-
cles; and
(ii) exhaust after treatment; and
(C) fuel dispensing for low-cost metering, tech-
nical and cryogenic fueling devices, and fuel condi-
tioning.
(b) COOPERATION WITH INDUSTRY.—In developing
the program pursuant to this section, the Secretary of En-
ergy shall consult with the natural gas vehicle industry
to ensure cooperation between the public sector and the
private sector.
TITLE VIII—MINIMUM DISTANCE
SEC. 801. MINIMUM DISTANCE.
Section 32901(c)(2) of title 49, United States Code,
is amended by adding at the end the following new sub-
paragraph;
‘‘(D) Notwithstanding subparagraphs (A) and (B), in
the case of dual fueled automobiles capable of operating
on natural gas, the minimum driving range shall be 100
miles.’’.
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