939 
24-month period beginning on the date that such ex-
pense was paid or incurred. 
‘‘(2) SPECIAL
RULES.—For purposes of this 
subsection, rules similar to the rules of paragraphs 
(2), (3), and (4) of subsection (h) shall apply.’’. 
(b) CONFORMING AMENDMENT.—Section 263A(c)(3) 
is amended by inserting ‘‘167(h), 167(i),’’ after ‘‘under 
section’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after the date of the enactment of 
this Act. 
SEC. 1345. EXTENSION AND MODIFICATION OF CREDIT FOR 
PRODUCING FUEL FROM A NONCONVEN-
TIONAL SOURCE. 
(a) IN GENERAL.—Section 29 (relating to credit for 
producing fuel from a nonconventional source) is amended 
by adding at the end the following new subsection: 
‘‘(h) EXTENSION FOR OTHER FACILITIES.—Notwith-
standing subsection (f)— 
‘‘(1) NEW OIL AND GAS WELLS AND FACILI-
TIES.—In the case of a well or facility for producing 
qualified fuels described in subparagraph (A) or (B) 
of subsection (c)(1) which was drilled or placed in 
service after the date of the enactment of this sub-
940 
section and before January 1, 2007, this section 
shall apply with respect to such fuels produced at 
such well or facility and sold during the period— 
‘‘(A) beginning on the later of January 1, 
2004, or the date that such well is drilled or 
such facility is placed in service, and 
‘‘(B) ending on the earlier of the date 
which is 4 years after the date such period 
began or December 31, 2009. 
‘‘(2) OLD OIL AND GAS WELLS AND FACILI-
TIES.—In the case of a well or facility producing 
qualified fuels described in subparagraph (A) or 
(B)(i) of subsection (c)(1) or a facility producing 
natural gas and byproducts by coal gasification from 
lignite, subsection (f)(2) shall be applied by sub-
stituting ‘2008’ for ‘2003’ with respect to wells and 
facilities described in subsection (f)(1) with respect 
to such fuels. 
‘‘(3) 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
941 
shall apply to fuel produced at such facility and 
sold during the period— 
‘‘(i) beginning on the later of January 
1, 2004, or the date that such facility is 
placed in service, and 
‘‘(ii) ending on the earlier of the date 
which is 4 years after the date such period 
began or December 31, 2009. 
‘‘(B) REDUCTION OF CREDIT FOR CERTAIN 
LANDFILL FACILITIES.—In the case of a facility 
to which subparagraph (A) applies and which is 
located at a landfill which is required pursuant 
to section 60.751(b)(2) or section 60.33c of 
title 40, Code of Federal Regulations (as in ef-
fect on April 3, 2003) to install and operate a 
collection and control system which captures 
gas generated within the landfill, subsection 
(a)(1) shall be applied to gas so captured by 
substituting ‘$2’ for ‘$3’ for the taxable year 
during which such system is required to be in-
stalled and operated. 
‘‘(4) FACILITIES PRODUCING FUELS FROM AG-
RICULTURAL AND ANIMAL WASTE.— 
‘‘(A) IN GENERAL.—In the case of any fa-
cility for producing liquid, gaseous, or solid
942 
fuels from qualified agricultural and animal 
wastes, including such fuels when used as feed-
stocks, which is placed in service after the date 
of the enactment of this subsection and before 
January 1, 2007, this section shall apply with 
respect to fuel produced at such facility and 
sold during the period— 
‘‘(i) beginning on the later of January 
1, 2004, or the date that such facility is 
placed in service, and 
‘‘(ii) ending on the earlier of the date 
which is 4 years after the date such period 
began or December 31, 2009. 
‘‘(B) QUALIFIED AGRICULTURAL AND ANI-
MAL WASTE.—For purposes of this paragraph, 
the term ‘qualified agricultural and animal 
waste’ means agriculture and animal waste, in-
cluding by-products, packaging, and any mate-
rials associated with the processing, feeding, 
selling, transporting, or disposal of agricultural 
or animal products or wastes. 
‘‘(5) FACILITIES PRODUCING REFINED COAL.— 
‘‘(A) IN GENERAL.—In the case of a facil-
ity described in subparagraph (C) for producing 
refined coal which is placed in service after the
943 
date of the enactment of this subsection and be-
fore January 1, 2008, this section shall apply 
with respect to fuel produced at such facility 
and sold before the close of the 5-year period 
beginning on the date such facility is placed in 
service. 
‘‘(B) REFINED
COAL.—For purposes of 
this paragraph, the term ‘refined coal’ means a 
fuel which is a liquid, gaseous, or solid syn-
thetic fuel produced from coal (including lig-
nite) or high carbon fly ash, including such fuel 
used as a feedstock. 
‘‘(C) COVERED FACILITIES.— 
‘‘(i) IN GENERAL.—A facility is de-
scribed in this subparagraph if such facil-
ity produces refined coal using a tech-
nology which the taxpayer certifies (in 
such manner as the Secretary may pre-
scribe) results in— 
‘‘(I) a qualified emission reduc-
tion, and 
‘‘(II) a qualified enhanced value. 
‘‘(ii) QUALIFIED
EMISSION
REDUC-
TION.—For purposes of this subparagraph, 
the term ‘qualified emission reduction’
944 
means a reduction of at least 20 percent of 
the emissions of nitrogen oxide and either 
sulfur dioxide or mercury released when 
burning the refined coal (excluding any di-
lution caused by materials combined or 
added during the production process), as 
compared to the emissions released when 
burning the feedstock coal or comparable 
coal predominantly available in the market-
place as of January 1, 2003. 
‘‘(iii) 
QUALIFIED
ENHANCED 
VALUE.—For purposes of this subpara-
graph, the term ‘qualified enhanced value’ 
means an increase of at least 50 percent in 
the market value of the refined coal (ex-
cluding any increase caused by materials 
combined or added during the production 
process), as compared to the value of the 
feedstock coal. 
‘‘(iv) ADVANCED CLEAN COAL TECH-
NOLOGY UNITS EXCLUDED.—A facility de-
scribed in this subparagraph shall not in-
clude any advanced clean coal technology 
unit (as defined in section 48A(e)). 
‘‘(6) COALMINE GAS.—
945 
‘‘(A) IN
GENERAL.—This section shall 
apply to coalmine gas— 
‘‘(i) captured or extracted by the tax-
payer during the period beginning on the 
day after the date of the enactment of this 
subsection and ending on December 31, 
2006, and 
‘‘(ii) utilized as a fuel source or sold 
by or on behalf of the taxpayer to an unre-
lated person during such period. 
‘‘(B) COALMINE
GAS.—For purposes of 
this paragraph, the term ‘coalmine gas’ means 
any methane gas which is— 
‘‘(i) liberated during or as a result of 
coal mining operations, or 
‘‘(ii) extracted up to 10 years in ad-
vance of coal mining operations as part of 
a specific plan to mine a coal deposit. 
‘‘(C) SPECIAL RULE FOR ADVANCED EX-
TRACTION.—In the case of coalmine gas which 
is captured in advance of coal mining oper-
ations, the credit under subsection (a) shall be 
allowed only after the date the coal extraction 
occurs in the immediate area where the 
coalmine gas was removed.
946 
‘‘(D) NONCOMPLIANCE
WITH
POLLUTION 
LAWS.—This paragraph shall not apply to the 
capture or extraction of coalmine gas from coal 
mining operations with respect to any period in 
which such coal mining operations are not in 
compliance with applicable Federal pollution 
prevention, control, and permit requirements. 
‘‘(7) COKE AND COKE GAS.—In the case of a 
facility for producing coke or coke gas which was 
placed in service before January 1, 1993, or after 
June 30, 1998, and before January 1, 2007, this 
section shall apply with respect to coke and coke gas 
produced in such facility and sold during the during 
the period— 
‘‘(A) beginning on the later of January 1, 
2004, or the date that such facility is placed in 
service, and 
‘‘(B) ending on the earlier of the date 
which is 4 years after the date such period 
began or December 31, 2009. 
‘‘(8) SPECIAL
RULES.—In determining the 
amount of credit allowable under this section solely 
by reason of this subsection— 
‘‘(A) FUELS
TREATED
AS
QUALIFIED 
FUELS.—Any fuel described in paragraph (3),
947 
(4), (5), or (6) shall be treated as a qualified 
fuel for purposes of this section. 
‘‘(B) 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 property or facil-
ity shall not exceed an average barrel-of-oil 
equivalent of 200,000 cubic feet of natural gas 
per day. Days before the date the property or 
facility is placed in service shall not be taken 
into account in determining such average. 
‘‘(C) EXTENSION PERIOD TO COMMENCE 
WITH UNADJUSTED CREDIT AMOUNT AND NEW 
PHASEOUT ADJUSTMENT.—For purposes of ap-
plying subsection (b)(2), in the case of fuels 
sold after 2003— 
‘‘(i) paragraphs (1)(A) and (2) of sub-
section (b) shall be applied by substituting 
‘$35.00’ for ‘$23.50’, and 
‘‘(ii) subparagraph (B) of subsection 
(d)(2) shall be applied by substituting 
‘2002’ for ‘1979’. 
‘‘(D) DENIAL OF DOUBLE BENEFIT.—This 
subsection shall not apply to any facility pro-
ducing qualified fuels for which a credit was al-
948 
lowed under this section for the taxable year or 
any preceding taxable year by reason of sub-
section (g).’’. 
(b) TREATMENT AS BUSINESS CREDIT.— 
(1) CREDIT MOVED TO SUBPART RELATING TO 
BUSINESS
RELATED
CREDITS.—The Internal Rev-
enue Code of 1986 is amended by redesignating sec-
tion 29, as amended by this Act, as section 45K and 
by moving section 45K (as so redesignated) from 
subpart B of part IV of subchapter A of chapter 1 
to the end of subpart D of part IV of subchapter A 
of chapter 1. 
(2) CREDIT TREATED AS BUSINESS CREDIT.— 
Section 38(b) is amended by striking ‘‘plus’’ at the 
end of paragraph (19), by striking the period at the 
end of paragraph (20) and inserting ‘‘, plus’’, and 
by adding at the end the following: 
‘‘(21) the nonconventional source production 
credit determined under section 45K(a).’’. 
(3) CONFORMING AMENDMENTS.— 
(A) Section 30(b)(2)(A), as redesignated 
by section 1317(a), is amended by striking 
‘‘sections 27 and 29’’ and inserting ‘‘section 
27’’.
949 
(B) Sections 43(b)(2) and 613A(c)(6)(C) 
are 
each 
amended 
by 
striking 
‘‘section 
29(d)(2)(C)’’ 
and 
inserting 
‘‘section 
45K(d)(2)(C)’’. 
(C) Section 45K(a), as redesignated by 
paragraph (1), is amended by striking ‘‘At the 
election of the taxpayer, there shall be allowed 
as a credit against the tax imposed by this 
chapter for the taxable year’’ and inserting 
‘‘For purposes of section 38, if the taxpayer 
elects to have this section apply, the nonconven-
tional source production credit determined 
under this section for the taxable year is’’. 
(D) Section 45K(b), as so redesignated, is 
amended by striking paragraph (6). 
(E) Section 53(d)(1)(B)(iii) is amended by 
striking ‘‘under section 29’’ and all that follows 
through ‘‘or not allowed’’. 
(F) Section 55(c)(2) is amended by strik-
ing ‘‘29(b)(6),’’. 
(G) Subsection (a) of section 772 is 
amended by inserting ‘‘and’’ at the end of para-
graph (9), by striking paragraph (10), and by 
redesignating paragraph (11) as paragraph 
(10).
950 
(H) Paragraph (5) of section 772(d) is 
amended by striking ‘‘the foreign tax credit, 
and the credit allowable under section 29’’ and 
inserting ‘‘and the foreign tax credit’’. 
(I) The table of sections for subpart B of 
part IV of subchapter A of chapter 1 is amend-
ed by striking the item relating to section 29. 
(J) The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as 
amended by this Act, is amended by inserting 
after the item relating to section 45J the fol-
lowing new item: 
‘‘Sec. 45K. Credit for producing fuel from a nonconventional source.’’. 
(c) DETERMINATIONS UNDER NATURAL GAS POLICY 
ACT OF 1978.—Subparagraph (A) of section 45K(c)(2), 
as redesignated by subsection (b)(1), is amended— 
(1) by inserting ‘‘by the Secretary, after con-
sultation with the Federal Energy Regulatory Com-
mission,’’ after ‘‘shall be made’’, and 
(2) by inserting ‘‘(as in effect before the repeal 
of such section)’’ after ‘‘1978’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to fuel produced and sold after December 
31, 2003, in taxable years ending after such date.