645
‘‘(B) CONDOMINIUM
MANAGEMENT
ASSO-
CIATION.—For purposes of this paragraph, the 
term ‘condominium management association’ 
means an organization which meets the require-
ments of paragraph (1) of section 528(c) (other 
than subparagraph (E) thereof) with respect to 
a condominium project substantially all of the 
units of which are used as residences. 
‘‘(6) ALLOCATION IN CERTAIN CASES.—If less 
than 80 percent of the use of an item is for nonbusi-
ness purposes, only that portion of the expenditures 
for such item which is properly allocable to use for 
nonbusiness purposes shall be taken into account. 
‘‘(7) WHEN EXPENDITURE MADE; AMOUNT OF 
EXPENDITURE.—
‘‘(A) IN GENERAL.—Except as provided in 
subparagraph (B), an expenditure with respect 
to an item shall be treated as made when the 
original installation of the item is completed. 
‘‘(B) EXPENDITURES PART OF BUILDING 
CONSTRUCTION.—In the case of an expenditure 
in connection with the construction or recon-
struction of a structure, such expenditure shall 
be treated as made when the original use of the
646
constructed or reconstructed structure by the 
taxpayer begins. 
‘‘(C) AMOUNT.—The amount of any ex-
penditure shall be the cost thereof. 
‘‘(8) PROPERTY FINANCED BY SUBSIDIZED EN-
ERGY FINANCING.—For purposes of determining the 
amount of expenditures made by any individual with 
respect to any dwelling unit, there shall not be taken 
into account expenditures which are made from sub-
sidized energy financing (as defined in section 
48(a)(4)(C)). 
‘‘(e) BASIS ADJUSTMENTS.—For purposes of this 
subtitle, if a credit is allowed under this section for any 
expenditure with respect to any property, the increase in 
the basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so allowed. 
‘‘(f) TERMINATION.—The credit allowed under this 
section shall not apply to taxable years beginning after 
December 31, 2007.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a) is amended by striking 
‘‘and’’ at the end of paragraph (30), by striking the 
period at the end of paragraph (31) and inserting ‘‘,
647
and’’, and by adding at the end the following new 
paragraph: 
‘‘(32) to the extent provided in section 25C(e), 
in the case of amounts with respect to which a credit 
has been allowed under section 25C.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25B the fol-
lowing new item:
‘‘Sec. 25C. Residential energy efficient property.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to expenditures made after the 
date of the enactment of this Act. 
SEC. 1312. CREDIT FOR BUSINESS INSTALLATION OF 
QUALIFIED FUEL CELLS. 
(a) IN GENERAL.—Section 48(a)(3)(A) (defining en-
ergy property) is amended by striking ‘‘or’’ at the end of 
clause (i), by adding ‘‘or’’ at the end of clause (ii), and 
by inserting after clause (ii) the following new clause: 
‘‘(iii) qualified fuel cell property,’’. 
(b) ENERGY PERCENTAGE.—Subparagraph (A) of 
section 48(a)(2) (relating to energy percentage) is amend-
ed to read as follows: 
‘‘(A) IN GENERAL.—The energy percent-
age is—
648
‘‘(i) in the case of qualified fuel cell 
property, 15 percent, and 
‘‘(ii) in the case of any other energy 
property, 10 percent.’’. 
(c) QUALIFIED FUEL CELL PROPERTY.—Section 48 
(relating to energy credit) is amended—
(1) by redesignating subsection (b) as para-
graph (5) of subsection (a), 
(2) by striking ‘‘subsection (a)’’ in paragraph 
(5) of subsection (a), as redesignated by paragraph 
(1), and inserting ‘‘this subsection’’, and 
(3) by adding at the end the following new sub-
section: 
‘‘(b) QUALIFIED FUEL CELL PROPERTY.—For pur-
poses of subsection (a)(3)(A)(iii)—
‘‘(1) IN
GENERAL.—The term ‘qualified fuel 
cell property’ means a fuel cell power plant which—
‘‘(A) generates at least 0.5 kilowatt of elec-
tricity using an electrochemical process, and 
‘‘(B) has an electricity-only generation effi-
ciency greater than 30 percent. 
‘‘(2) LIMITATION.—The energy credit with re-
spect to any qualified fuel cell property shall not ex-
ceed an amount equal to $500 for each 0.5 kilowatt 
of capacity of such property.
649
‘‘(3) FUEL
CELL
POWER
PLANT.—The term 
‘fuel cell power plant’ means an integrated system, 
comprised of a fuel cell stack assembly and associ-
ated balance of plant components, which converts a 
fuel into electricity using electrochemical means. 
‘‘(4) TERMINATION.—The term ‘qualified fuel 
cell property’ shall not include any property placed 
in service after December 31, 2007.’’. 
(d) CONFORMING AMENDMENT.—Section 48(a)(1) is 
amended by inserting ‘‘except as provided in subsection 
(b)(2),’’ before ‘‘the energy’’ the first place it appears. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to property placed in service after 
April 11, 2005, under rules similar to the rules of section 
48(m) of the Internal Revenue Code of 1986 (as in effect 
on the day before the date of the enactment of the Rev-
enue Reconciliation Act of 1990). 
SEC. 1313. REDUCED MOTOR FUEL EXCISE TAX ON CER-
TAIN MIXTURES OF DIESEL FUEL. 
(a) IN GENERAL.—Paragraph (2) of section 4081(a) 
is amended by adding at the end the following: 
‘‘(D) DIESEL-WATER FUEL EMULSION.—In 
the case of diesel-water fuel emulsion at least 
16.9 percent of which is water and with respect 
to which the emulsion additive is registered by
650
a United States manufacturer with the Envi-
ronmental Protection Agency pursuant to sec-
tion 211 of the Clean Air Act (as in effect on 
March 31, 2003), subparagraph (A)(iii) shall be 
applied by substituting ‘19.7 cents’ for ‘24.3 
cents’.’’. 
(b) SPECIAL RULES
FOR DIESEL-WATER FUEL 
EMULSIONS.—
(1) REFUNDS FOR TAX-PAID PURCHASES.—Sec-
tion 6427 is amended by redesignating subsections 
(m) through (p) as subsections (n) through (q), re-
spectively, and by inserting after subsection (l) the 
following new subsection: 
‘‘(m) DIESEL FUEL USED
TO PRODUCE EMUL-
SION.—
‘‘(1) IN GENERAL.—Except as provided in sub-
section (k), if any diesel fuel on which tax was im-
posed by section 4081 at the regular tax rate is used 
by any person in producing an emulsion described in 
section 4081(a)(2)(D) which is sold or used in such 
person’s trade or business, the Secretary shall pay 
(without interest) to such person an amount equal to 
the excess of the regular tax rate over the incentive 
tax rate with respect to such fuel.
651
‘‘(2) DEFINITIONS.—For purposes of paragraph 
(1)—
‘‘(A) REGULAR TAX RATE.—The term ‘reg-
ular tax rate’ means the aggregate rate of tax 
imposed by section 4081 determined without re-
gard to section 4081(a)(2)(D). 
‘‘(B) INCENTIVE
TAX
RATE.—The term 
‘incentive tax rate’ means the aggregate rate of 
tax imposed by section 4081 determined with 
regard to section 4081(a)(2)(D).’’. 
(2) LATER
SEPARATION
OF
FUEL.—Section 
4081 (relating to imposition of tax) is amended by 
inserting after subsection (b) the following new sub-
section: 
‘‘(c) LATER SEPARATION OF FUEL FROM DIESEL-
WATER FUEL EMULSION.—If any person separates the 
taxable fuel from a diesel-water fuel emulsion on which 
tax was imposed under subsection (a) at a rate determined 
under subsection (a)(2)(D) (or with respect to which a 
credit or payment was allowed or made by reason of sec-
tion 6427), such person shall be treated as the refiner of 
such taxable fuel. The amount of tax imposed on any re-
moval of such fuel by such person shall be reduced by the 
amount of tax imposed (and not credited or refunded) on 
any prior removal or entry of such fuel.’’.
652
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on January 1, 2006. 
SEC. 1314. AMORTIZATION OF DELAY RENTAL PAYMENTS. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion) is amended by redesignating subsection (h) as sub-
section (i) and by inserting after subsection (g) the fol-
lowing new subsection: 
‘‘(h) AMORTIZATION OF DELAY RENTAL PAYMENTS 
FOR DOMESTIC OIL AND GAS WELLS.—
‘‘(1) IN GENERAL.—Any delay rental payment 
paid or incurred in connection with the development 
of oil or gas wells within the United States (as de-
fined in section 638) shall be allowed as a deduction 
ratably over the 24-month period beginning on the 
date that such payment was paid or incurred. 
‘‘(2) HALF-YEAR CONVENTION.—For purposes 
of paragraph (1), any payment paid or incurred dur-
ing the taxable year shall be treated as paid or in-
curred on the mid-point of such taxable year. 
‘‘(3) EXCLUSIVE METHOD.—Except as provided 
in this subsection, no depreciation or amortization 
deduction shall be allowed with respect to such pay-
ments. 
‘‘(4) TREATMENT
UPON
ABANDONMENT.—If 
any property to which a delay rental payment relates
653
is retired or abandoned during the 24-month period 
described in paragraph (1), no deduction shall be al-
lowed on account of such retirement or abandon-
ment and the amortization deduction under this sub-
section shall continue with respect to such payment. 
‘‘(5) DELAY RENTAL PAYMENTS.—For purposes 
of this subsection, 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.’’. 
(b) 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. 1315. AMORTIZATION OF GEOLOGICAL AND GEO-
PHYSICAL EXPENDITURES. 
(a) IN GENERAL.—Section 167 (relating to deprecia-
tion), as amended by section 1314 of this title, is amended 
by redesignating subsection (i) as subsection (j) and by 
inserting after subsection (h) the following new subsection: 
‘‘(i) AMORTIZATION
OF GEOLOGICAL
AND GEO-
PHYSICAL EXPENDITURES.—
‘‘(1) IN
GENERAL.—Any geological and geo-
physical expenses paid or incurred in connection 
with the exploration for, or development of, oil or
654
gas within the United States (as defined in section 
638) shall be allowed as a deduction ratably over the 
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. 1316. ADVANCED LEAN BURN TECHNOLOGY MOTOR 
VEHICLE CREDIT. 
(a) IN GENERAL.—Subpart B of part IV of sub-
chapter A of chapter 1 (relating to other credits) is 
amended by adding at the end the following: 
‘‘SEC. 30B. ADVANCED LEAN BURN TECHNOLOGY MOTOR 
VEHICLE CREDIT. 
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter 
for the taxable year an amount equal to the sum of the 
credit amounts determined under subsection (b) with re-
655
spect to each qualified advanced lean burn technology 
motor vehicle placed in service by the taxpayer during the 
taxable year. 
‘‘(b) CREDIT AMOUNT.—For purposes of subsection 
(a)—
‘‘(1) FUEL
EFFICIENCY.—The credit amount 
with respect to any vehicle shall be—
‘‘(A) $500, if the city fuel economy of such 
vehicle is at least 125 percent but less than 150 
percent of the 2000 model year city fuel econ-
omy for a vehicle in the same inertia weight 
class, 
‘‘(B) $1,000, if the city fuel economy of 
such vehicle is at least 150 percent but less 
than 175 percent of the 2000 model year city 
fuel economy for a vehicle in the same inertia 
weight class, 
‘‘(C) $1,500, if the city fuel economy of 
such vehicle is at least 175 percent but less 
than 200 percent of the 2000 model year city 
fuel economy for a vehicle in the same inertia 
weight class, 
‘‘(D) $2,000, if the city fuel economy of 
such vehicle is at least 200 percent but less 
than 225 percent of the 2000 model year city
656
fuel economy for a vehicle in the same inertia 
weight class, 
‘‘(E) $2,500, if the city fuel economy of 
such vehicle is at least 225 percent but less 
than 250 percent of the 2000 model year city 
fuel economy for a vehicle in the same inertia 
weight class, and 
‘‘(F) $3,000, if the city fuel economy of 
such vehicle is at least 250 percent of the 2000 
model year city fuel economy for a vehicle in 
the same inertia weight class. 
‘‘(2) CONSERVATION.—The credit amount de-
termined under paragraph (1) with respect to any 
vehicle shall be increased by—
‘‘(A) $250, if the lifetime fuel savings of 
such vehicle is at least 1,500 gallons of motor 
fuel but less than 2,500 gallons of motor fuel, 
and 
‘‘(B) $500, if the lifetime fuel savings of 
such vehicle is at least 2,500 gallons of motor 
fuel. 
‘‘(c) LIMITATION BASED ON AMOUNT OF TAX.—The 
credit allowed under subsection (a) for the taxable year 
shall not exceed the excess of—
657
‘‘(1) the sum of the regular tax liability (as de-
fined in section 26(b)) plus the tax imposed by sec-
tion 55, over 
‘‘(2) the sum of the credits allowable under sub-
part A and sections 27 and 30A for the taxable 
year. 
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED ADVANCED LEAN BURN TECH-
NOLOGY MOTOR VEHICLE.—The term ‘qualified ad-
vanced lean burn technology motor vehicle’ means a 
motor vehicle—
‘‘(A) the original use of which commences 
with the taxpayer, 
‘‘(B) powered by an internal combustion 
engine that—
‘‘(i) is designed to operate primarily 
using more air than is necessary for com-
plete combustion of the fuel, and 
‘‘(ii) incorporates direct injection, 
‘‘(C) that only uses diesel fuel (as defined 
in section 4083(a)(3)), 
‘‘(D) the city fuel economy of which is at 
least 125 percent of the 2000 model year city 
fuel economy for a vehicle in the same inertia 
weight class, and
658
‘‘(E) that has received a certificate that 
such vehicle meets or exceeds the Bin 8 Tier II 
emission level established in regulations pre-
scribed by the Administrator of the Environ-
mental Protection Agency under section 202(i) 
of the Clean Air Act. 
‘‘(2) LIFETIME FUEL SAVINGS.—The term ‘life-
time fuel savings’ means, with respect to a qualified 
advanced lean burn technology motor vehicle, an 
amount equal to the excess (if any) of—
‘‘(A) 120,000 divided by the 2000 model 
year city fuel economy for the vehicle inertia 
weight class, over 
‘‘(B) 120,000 divided by the city fuel econ-
omy for such vehicle. 
‘‘(3) 2000 MODEL
YEAR
CITY
FUEL
ECON-
OMY.—The 2000 model year city fuel economy with 
respect to a vehicle shall be determined in accord-
ance with the following tables: 
‘‘(A) In the case of a passenger auto-
mobile:
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2000 model year city fuel 
economy is: 
1,500 or 1,750 lbs ....................................................................
43.7 mpg 
2,000 lbs ..................................................................................
38.3 mpg 
2,250 lbs ..................................................................................
34.1 mpg 
2,500 lbs ..................................................................................
30.7 mpg 
2,750 lbs ..................................................................................
27.9 mpg 
3,000 lbs ..................................................................................
25.6 mpg 
3,500 lbs ..................................................................................
22.0 mpg 
4,000 lbs ..................................................................................
19.3 mpg
659
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2000 model year city fuel 
economy is: 
4,500 lbs ..................................................................................
17.2 mpg 
5,000 lbs ..................................................................................
15.5 mpg 
5,500 lbs ..................................................................................
14.1 mpg 
6,000 lbs ..................................................................................
12.9 mpg 
6,500 lbs ..................................................................................
11.9 mpg 
7,000 or 8,500 lbs ....................................................................
11.1 mpg.
‘‘(B) In the case of a light truck:
‘‘If 
vehicle 
inertia 
weight 
class is: 
The 2000 model year city fuel 
economy is: 
1,500 or 1,750 lbs ....................................................................
37.6 mpg 
2,000 lbs ..................................................................................
33.7 mpg 
2,250 lbs ..................................................................................
30.6 mpg 
2,500 lbs ..................................................................................
28.0 mpg 
2,750 lbs ..................................................................................
25.9 mpg 
3,000 lbs ..................................................................................
24.1 mpg 
3,500 lbs ..................................................................................
21.3 mpg 
4,000 lbs ..................................................................................
19.0 mpg 
4,500 lbs ..................................................................................
17.3 mpg 
5,000 lbs ..................................................................................
15.8 mpg 
5,500 lbs ..................................................................................
14.6 mpg 
6,000 lbs ..................................................................................
13.6 mpg 
6,500 lbs ..................................................................................
12.8 mpg 
7,000 or 8,500 lbs ....................................................................
12.0 mpg.
‘‘(4) MOTOR VEHICLE.—The term ‘motor vehi-
cle’ has the meaning given such term by section 
30(c)(2). 
‘‘(5) CITY FUEL ECONOMY.—City fuel economy 
with respect to any vehicle shall be measured in ac-
cordance with testing and calculation procedures es-
tablished by the Administrator of the Environmental 
Protection Agency by regulations in effect on April 
11, 2005. 
‘‘(6) OTHER
TERMS.—The terms ‘passenger 
automobile’, ‘light truck’, and ‘manufacturer’ shall 
have the meanings given such terms in regulations 
prescribed by the Administrator of the Environ-
660
mental Protection Agency for purposes of the admin-
istration of title II of the Clean Air Act (42 U.S.C. 
7521 et seq.). 
‘‘(e) CARRYFORWARD ALLOWED.—
‘‘(1) IN GENERAL.—If the credit amount allow-
able under subsection (a) for a taxable year exceeds 
the amount of the limitation under subsection (c) for 
such taxable year (referred to as the ‘unused credit 
year’ in this paragraph), such excess shall be allowed 
as a credit carryforward for each of the 20 taxable 
years following the unused credit year. 
‘‘(2) RULES.—Rules similar to the rules of sec-
tion 39 shall apply with respect to the credit 
carryforward under paragraph (1). 
‘‘(f) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) REDUCTION IN BASIS.—The basis of any 
property for which a credit is allowable under sub-
section (a) shall be reduced by the amount of such 
credit (determined without regard to subsection (c)). 
‘‘(2) NO
DOUBLE
BENEFIT.—The amount of 
any deduction or credit allowable under this chapter 
(other than the credit allowable under subsection 
(a)), with respect to any vehicle shall be reduced by 
the amount of credit allowed under subsection (a)
661
(determined without regard to subsection (c)) for 
such vehicle for the taxable year. 
‘‘(3) PROPERTY USED BY TAX-EXEMPT ENTI-
TY.—In the case of a vehicle whose use is described 
in paragraph (3) or (4) of section 50(b) and which 
is not subject to a lease, the person who sold such 
vehicle to the person or entity using such vehicle 
shall be treated as the taxpayer that placed such ve-
hicle in service, but only if such person clearly dis-
closes to such person or entity in a document the 
amount of any credit allowable under subsection (a) 
with respect to such vehicle (determined without re-
gard to subsection (c)). 
‘‘(4) 
PROPERTY
USED
OUTSIDE
UNITED 
STATES, ETC., NOT QUALIFIED.—No credit shall be 
allowable under subsection (a) with respect to any 
property referred to in section 50(b)(1) or with re-
spect to the portion of the cost of any property 
taken into account under section 179. 
‘‘(5) ELECTION
NOT
TO
TAKE
CREDIT.—No 
credit shall be allowed under subsection (a) for any 
vehicle if the taxpayer elects not to have this section 
apply to such vehicle. 
‘‘(6) INTERACTION
WITH
AIR
QUALITY
AND 
MOTOR VEHICLE SAFETY STANDARDS.—Unless oth-
662
erwise provided in this section, a motor vehicle shall 
not be considered eligible for a credit under this sec-
tion unless such vehicle is in compliance with—
‘‘(A) the applicable provisions of the Clean 
Air Act for the applicable make and model year 
of the vehicle (or applicable air quality provi-
sions of State law in the case of a State which 
has adopted such provision under a waiver 
under section 209(b) of the Clean Air Act), and 
‘‘(B) the motor vehicle safety provisions of 
sections 30101 through 30169 of title 49, 
United States Code. 
‘‘(g) REGULATIONS.—
‘‘(1) IN GENERAL.—The Secretary shall pro-
mulgate such regulations as necessary to carry out 
this section, including regulations to prevent the 
avoidance of the purposes of this section through 
disposal of any motor vehicle or leasing of any motor 
vehicle for a lease period of less than the economic 
life of such vehicle. 
‘‘(2) DETERMINATION OF MOTOR VEHICLE ELI-
GIBILITY.—The Secretary, in coordination with the 
Secretary of Transportation and the Administrator 
of the Environmental Protection Agency, shall pre-
scribe such regulations as necessary to determine
663
whether a motor vehicle meets the requirements to 
be eligible for a credit under this section. 
‘‘(h) TERMINATION.—This section shall not apply to 
any property placed in service after December 31, 2007.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 1016(a), as amended by section 
1311 of this title, is amended by striking ‘‘and’’ at 
the end of paragraph (31), by striking the period at 
the end of paragraph (32) and inserting ‘‘, and’’, 
and by adding at the end the following: 
‘‘(33) to the extent provided in section 
30B(f)(1).’’. 
(2) Section 6501(m) is amended by inserting 
‘‘30B(f)(6),’’ after ‘‘30(d)(4),’’. 
(3) The table of sections for subpart B of part 
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 30A the fol-
lowing:
‘‘Sec. 30B. Advanced lean burn technology motor vehicle credit.’’.
(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 in taxable years end-
ing after such date.
664
SEC. 1317. CREDIT FOR ENERGY EFFICIENCY IMPROVE-
MENTS TO EXISTING HOMES. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits), as amended by section 1311, is amended by in-
serting after section 25C the following new section: 
‘‘SEC. 25D. ENERGY EFFICIENCY IMPROVEMENTS TO EXIST-
ING HOMES. 
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an in-
dividual, there shall be allowed as a credit against the tax 
imposed by this chapter for the taxable year an amount 
equal to 20 percent of the amount paid or incurred by 
the taxpayer for qualified energy efficiency improvements 
installed during such taxable year. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—The credit allowed by 
this section with respect to a dwelling unit shall not 
exceed $2,000. 
‘‘(2) PRIOR CREDIT AMOUNTS FOR TAXPAYER 
ON SAME DWELLING TAKEN INTO ACCOUNT.—If a 
credit was allowed to the taxpayer under subsection 
(a) with respect to a dwelling unit in 1 or more prior 
taxable years, the amount of the credit otherwise al-
lowable for the taxable year with respect to that 
dwelling unit shall be reduced by the sum of the 
credits allowed under subsection (a) to the taxpayer
665
with respect to the dwelling unit for all prior taxable 
years. 
‘‘(c) QUALIFIED ENERGY EFFICIENCY IMPROVE-
MENTS.—For purposes of this section, the term ‘qualified 
energy efficiency improvements’ means any energy effi-
cient building envelope component which meets the pre-
scriptive criteria for such component established by the 
2000 International Energy Conservation Code, as such 
Code (including supplements) is in effect on the date of 
the enactment of the Enhanced Energy Infrastructure and 
Technology Tax Act of 2005 (or, in the case of a metal 
roof with appropriate pigmented coatings which meet the 
Energy Star program requirements), if—
‘‘(1) such component is installed in or on a 
dwelling unit located in the United States and 
owned and used by the taxpayer as the taxpayer’s 
principal residence (within the meaning of section 
121), 
‘‘(2) the original use of such component com-
mences with the taxpayer, and 
‘‘(3) such component reasonably can be ex-
pected to remain in use for at least 5 years. 
If the aggregate cost of such components with respect to 
any dwelling unit exceeds $1,000, such components shall 
be treated as qualified energy efficiency improvements
666
only if such components are also certified in accordance 
with subsection (d) as meeting such prescriptive criteria. 
‘‘(d) CERTIFICATION.—The certification described in 
subsection (c) shall be—
‘‘(1) determined on the basis of the technical 
specifications or applicable ratings (including prod-
uct labeling requirements) for the measurement of 
energy efficiency (based upon energy use or building 
envelope component performance) for the energy ef-
ficient building envelope component, 
‘‘(2) provided by a local building regulatory au-
thority, a utility, a manufactured home production 
inspection primary inspection agency (IPIA), or an 
accredited home energy rating system provider who 
is accredited by or otherwise authorized to use ap-
proved energy performance measurement methods by 
the 
Residential 
Energy 
Services 
Network 
(RESNET), and 
‘‘(3) made in writing in a manner which speci-
fies in readily verifiable fashion the energy efficient 
building envelope components installed and their re-
spective energy efficiency levels. 
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
667
‘‘(1) BUILDING ENVELOPE COMPONENT.—The 
term ‘building envelope component’ means—
‘‘(A) any insulation material or system 
which is specifically and primarily designed to 
reduce the heat loss or gain of a dwelling unit 
when installed in or on such dwelling unit, 
‘‘(B) exterior windows (including sky-
lights), 
‘‘(C) exterior doors, and 
‘‘(D) any metal roof installed on a dwelling 
unit, but only if such roof has appropriate pig-
mented coatings which are specifically and pri-
marily designed to reduce the heat gain of such 
dwelling unit. 
‘‘(2) MANUFACTURED HOMES INCLUDED.—The 
term ‘dwelling unit’ includes a manufactured home 
which conforms to Federal Manufactured Home 
Construction and Safety Standards (section 3280 of 
title 24, Code of Federal Regulations). 
‘‘(3) APPLICATION OF RULES.—Rules similar to 
the rules under paragraphs (3), (4), and (5) of sec-
tion 25C(d) shall apply. 
‘‘(f) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section for any ex-
penditure with respect to any property, the increase in the
668
basis of such property which would (but for this sub-
section) result from such expenditure shall be reduced by 
the amount of the credit so allowed. 
‘‘(g) APPLICATION OF SECTION.—This section shall 
apply to qualified energy efficiency improvements installed 
after the date of the enactment of the Enhanced Energy 
Infrastructure and Technology Tax Act of 2005, and be-
fore January 1, 2008.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016, as amended 
by section 1316 of this title, is amended by striking 
‘‘and’’ at the end of paragraph (32), by striking the 
period at the end of paragraph (33) and inserting ‘‘, 
and’’, and by adding at the end the following new 
paragraph: 
‘‘(34) to the extent provided in section 25D(f), 
in the case of amounts with respect to which a credit 
has been allowed under section 25D.’’. 
(2) The table of sections for subpart A of part 
IV of subchapter A of chapter 1, as amended by sec-
tion 1311, is amended by inserting after the item re-
lating to section 25C the following new item:
‘‘Sec. 25D. Energy efficiency improvements to existing homes.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to improvements installed after the
669
date of the enactment of this Act in taxable years ending 
after such date. 
Subtitle C—Alternative Minimum 
Tax Relief 
SEC. 1321. NEW NONREFUNDABLE PERSONAL CREDITS AL-
LOWED AGAINST REGULAR AND MINIMUM 
TAXES. 
(a) IN GENERAL.—
(1) SECTION 25C.—Section 25C(b), as added by 
section 1311 of this title, is amended by adding at 
the end the following new paragraph: 
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(2) SECTION 25D.—Section 25D(b), as added 
by section 1317 of this title, is amended by adding 
at the end the following new paragraph:
670
‘‘(3) LIMITATION
BASED
ON
AMOUNT
OF 
TAX.—The credit allowed under subsection (a) for 
the taxable year shall not exceed the excess of—
‘‘(A) the sum of the regular tax liability 
(as defined in section 26(b)) plus the tax im-
posed by section 55, over 
‘‘(B) the sum of the credits allowable 
under this subpart (other than this section) and 
section 27 for the taxable year.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Section 23(b)(4)(B) is amended by inserting 
‘‘and sections 25C and 25D’’ after ‘‘this section’’. 
(2) Section 24(b)(3)(B) is amended by striking 
‘‘and 25B’’ and inserting ‘‘, 25B, 25C, and 25D’’. 
(3) Section 25(e)(1)(C) is amended by inserting 
‘‘25C, and 25D’’ after ‘‘25B,’’. 
(4) Section 25B(g)(2) is amended by striking 
‘‘section 23’’ and inserting ‘‘sections 23, 25C, and 
25D’’. 
(5) Section 26(a)(1) is amended by striking 
‘‘and 25B’’ and inserting ‘‘25B, 25C, and 25D’’. 
(6) Section 904(i) is amended by striking ‘‘and 
25B’’ and inserting ‘‘25B, 25C, and 25D’’. 
(7) Section 1400C(d) is amended by striking 
‘‘and 25B’’ and inserting ‘‘25B, 25C, and 25D’’.
671
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005. 
SEC. 1322. CERTAIN BUSINESS ENERGY CREDITS ALLOWED 
AGAINST REGULAR AND MINIMUM TAXES. 
(a) IN GENERAL.—Subparagraph (B) of section 
38(c)(4) (relating to specified credits) is amended by re-
designating clause (ii) as clause (iv) and by striking clause 
(i) and inserting the following new clauses: 
‘‘(i) the credits determined under sec-
tions 40, 45H, and 45I, 
‘‘(ii) so much of the credit determined 
under section 46 as is attributable to sec-
tion 48(a)(3)(A)(iii), 
‘‘(iii) for taxable years beginning after 
December 31, 2005, and before January 1, 
2008, the credit determined under section 
43, and’’. 
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendment made by subsection (a) 
shall apply to credits determined under the Internal 
Revenue Code of 1986 for taxable years beginning 
after December 31, 2005.
672
(2) FUEL
CELLS.—Clause (ii) of section 
38(c)(4)(B) of the Internal Revenue Code of 1986, 
as amended by subsection (a) of this section, shall 
apply to credits determined under the Internal Rev-
enue Code of 1986 for taxable years ending after 
April 11, 2005. 
TITLE XIV—MISCELLANEOUS 
Subtitle C—Other Provisions 
SEC. 1441. CONTINUATION OF TRANSMISSION SECURITY 
ORDER. 
Department of Energy Order No. 202–03–2, issued 
by the Secretary of Energy on August 28, 2003, shall re-
main in effect unless rescinded by Federal statute. 
SEC. 1442. REVIEW OF AGENCY DETERMINATIONS. 
Section 7 of the Natural Gas Act (15 U.S.C. 717f) 
is amended by adding at the end the following: 
‘‘(i)(1) The United States Court of Appeals for the 
District of Columbia Circuit shall have original and exclu-
sive jurisdiction over any civil action—
‘‘(A) for review of any order or action of any 
Federal or State administrative agency or officer to 
issue, condition, or deny any permit, license, concur-
rence, or approval issued under authority of any 
Federal law, other than the Coastal Zone Manage-
ment Act of 1972 (16 U.S.C. 1451 et seq.), required
673
for the construction of a natural gas pipeline for 
which a certificate of public convenience and neces-
sity is issued by the Commission under this section; 
‘‘(B) alleging unreasonable delay by any Fed-
eral or State administrative agency or officer in en-
tering an order or taking other action described in 
subparagraph (A); or 
‘‘(C) challenging any decision made or action 
taken under this subsection. 
‘‘(2)(A) If the Court finds that the order, action, or 
failure to act is not consistent with the public convenience 
and necessity (as determined by the Commission under 
this section), or would prevent the construction and oper-
ation of natural gas facilities authorized by the certificate 
of public convenience and necessity, the permit, license, 
concurrence, or approval that is the subject of the order, 
action, or failure to act shall be deemed to have been 
issued subject to any conditions set forth in the reviewed 
order or action that the Court finds to be consistent with 
the public convenience and necessity. 
‘‘(B) For purposes of paragraph (1)(B), the failure 
of an agency or officer to issue any such permit, license, 
concurrence, or approval within the later of 1 year after 
the date of filing of an application for the permit, license, 
concurrence, or approval or 60 days after the date of
674
issuance of the certificate of public convenience and neces-
sity under this section, shall be considered to be unreason-
able delay unless the Court, for good cause shown, deter-
mines otherwise. 
‘‘(C) The Court shall set any action brought under 
paragraph (1) for expedited consideration.’’. 
SEC. 1443. ATTAINMENT DATES FOR DOWNWIND OZONE 
NONATTAINMENT AREAS. 
Section 181 of the Clean Air Act (42 U.S.C.7511) 
is amended by adding the following new subsection at the 
end thereof: 
‘‘(d) EXTENDED ATTAINMENT DATE FOR CERTAIN 
DOWNWIND AREAS.—
‘‘(1) DEFINITIONS.—(A) The term ‘upwind 
area’ means an area that—
‘‘(i) significantly contributes to nonattain-
ment in another area, hereinafter referred to as 
a ‘downwind area’; and 
‘‘(ii) is either—
‘‘(I) a nonattainment area with a later 
attainment date than the downwind area, 
or 
‘‘(II) an area in another State that 
the Administrator has found to be signifi-
cantly contributing to nonattainment in
675
the downwind area in violation of section 
110(a)(2)(D) and for which the Adminis-
trator 
has 
established 
requirements 
through notice and comment rulemaking to 
eliminate the emissions causing such sig-
nificant contribution. 
‘‘(B) The term ‘current classification’ means 
the classification of a downwind area under this sec-
tion at the time of the determination under para-
graph (2). 
‘‘(2) EXTENSION.—If the Administrator—
‘‘(A) determines that any area is a down-
wind area with respect to a particular national 
ambient air quality standard for ozone; and 
‘‘(B) approves a plan revision for such 
area as provided in paragraph (3) prior to a re-
classification under subsection (b)(2)(A), 
the Administrator, in lieu of such reclassification, 
shall extend the attainment date for such downwind 
area for such standard in accordance with paragraph 
(5). 
‘‘(3) REQUIRED APPROVAL.—In order to extend 
the attainment date for a downwind area under this 
subsection, the Administrator must approve a revi-
676
sion of the applicable implementation plan for the 
downwind area for such standard that—
‘‘(A) complies with all requirements of this 
Act applicable under the current classification 
of the downwind area, including any require-
ments applicable to the area under section 
172(c) for such standard; and 
‘‘(B) includes any additional measures 
needed to demonstrate attainment by the ex-
tended attainment date provided under this 
subsection. 
‘‘(4) PRIOR
RECLASSIFICATION
DETERMINA-
TION.—If, no more than 18 months prior to the date 
of enactment of this subsection, the Administrator 
made a reclassification determination under sub-
section (b)(2)(A) for any downwind area, and the 
Administrator approves the plan revision referred to 
in paragraph (3) for such area within 12 months 
after the date of enactment of this subsection, the 
reclassification shall be withdrawn and the attain-
ment date extended in accordance with paragraph 
(5) upon such approval. The Administrator shall 
also withdraw a reclassification determination under 
subsection (b)(2)(A) made after the date of enact-
ment of this subsection and extend the attainment
677
date in accordance with paragraph (5) if the Admin-
istrator approves the plan revision referred to in 
paragraph (3) within 12 months of the date the re-
classification 
determination 
under 
subsection 
(b)(2)(A) is issued. In such instances the ‘current 
classification’ used for evaluating the revision of the 
applicable implementation plan under paragraph (3) 
shall be the classification of the downwind area 
under this section immediately prior to such reclassi-
fication. 
‘‘(5) EXTENDED DATE.—The attainment date 
extended under this subsection shall provide for at-
tainment of such national ambient air quality stand-
ard for ozone in the downwind area as expeditiously 
as practicable but no later than the date on which 
the last reductions in pollution transport necessary 
for attainment in the downwind area are required to 
be achieved by the upwind area or areas.’’. 
SEC. 1444. ENERGY PRODUCTION INCENTIVES. 
(a) IN GENERAL.—A State may provide to any enti-
ty—
(1) a credit against any tax or fee owed to the 
State under a State law, or 
(2) any other tax incentive,
678
determined by the State to be appropriate, in the amount 
calculated under and in accordance with a formula deter-
mined by the State, for production described in subsection 
(b) in the State by the entity that receives such credit or 
such incentive. 
(b) ELIGIBLE ENTITIES.—Subsection (a) shall apply 
with respect to the production in the State of—
(1) electricity from coal mined in the State and 
used in a facility, if such production meets all appli-
cable Federal and State laws and if such facility 
uses scrubbers or other forms of clean coal tech-
nology, 
(2) electricity from a renewable source such as 
wind, solar, or biomass, or 
(3) ethanol. 
(c) EFFECT ON INTERSTATE COMMERCE.—Any ac-
tion taken by a State in accordance with this section with 
respect to a tax or fee payable, or incentive applicable, 
for any period beginning after the date of the enactment 
of this Act shall—
(1) be considered to be a reasonable regulation 
of commerce; and 
(2) not be considered to impose an undue bur-
den on interstate commerce or to otherwise impair,
679
restrain, or discriminate, against interstate com-
merce. 
SEC. 1446. REGULATION OF CERTAIN OIL USED IN TRANS-
FORMERS. 
Notwithstanding any other provision of law, or rule 
promulgated by the Environmental Protection Agency, 
vegetable oil made from soybeans and used in electric 
transformers as thermal insulation shall not be regulated 
as an oil as defined under section 2(a)(1)(A) of the Edible 
Oil Regulatory Reform Act (33 U.S.C. 2720(a)(1)(A)). 
SEC. 1447. RISK ASSESSMENTS. 
Subtitle B of title XXX of the Energy Policy Act of 
1992 is amended by adding at the end the following new 
section: 
‘‘SEC. 3022. RISK ASSESSMENT. 
‘‘Federal agencies conducting assessments of risks to 
human health and the environment from energy tech-
nology, production, transport, transmission, distribution, 
storage, use, or conservation activities shall use sound and 
objective scientific practices in assessing such risks, shall 
consider the best available science (including peer reviewed 
studies), and shall include a description of the weight of 
the scientific evidence concerning such risks.’’.
680
SEC. 1448. OXYGEN-FUEL. 
(a) PROGRAM.—The Secretary of Energy shall estab-
lish a program on oxygen-fuel systems. If feasible, the pro-
gram shall include renovation of at least one existing large 
unit and one existing small unit, and construction of one 
new large unit and one new small unit. Cost sharing shall 
not be required. 
(b) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary for car-
rying out this section—
(1) $100,000,000 for fiscal year 2006; 
(2) $100,000,000 for fiscal year 2007; and 
(3) $100,000,000 for fiscal year 2008. 
(c) DEFINITIONS.—For purposes of this section—
(1) the term ‘‘large unit’’ means a unit with a 
generating capacity of 100 megawatts or more; 
(2) the term ‘‘oxygen-fuel systems’’ means sys-
tems that utilize fuel efficiency benefits of oil, gas, 
coal, and biomass combustion using substantially 
pure oxygen, with high flame temperatures and the 
exclusion of air from the boiler, in industrial or elec-
tric utility steam generating units; and 
(3) the term ‘‘small unit’’ means a unit with a 
generating capacity in the 10–50 megawatt range.
681
SEC. 1449. PETROCHEMICAL AND OIL REFINERY FACILITY 
HEALTH ASSESSMENT. 
(a) ESTABLISHMENT.—The Secretary of Energy 
shall conduct a study of direct and significant health im-
pacts to persons resulting from living in proximity to pe-
trochemical and oil refinery facilities. The Secretary shall 
consult with the Director of the National Cancer Institute 
and other Federal Government bodies with expertise in the 
field it deems appropriate in the design of such study. The 
study shall be conducted according to sound and objective 
scientific practices and present the weight of the scientific 
evidence. The Secretary shall obtain scientific peer review 
of the draft study. 
(b) REPORT
TO CONGRESS.—The Secretary shall 
transmit the results of the study to Congress within 6 
months of the enactment of this section. 
(c) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary for ac-
tivities under this section such sums as are necessary for 
the completion of the study. 
SEC. 1450. UNITED STATES-ISRAEL COOPERATION. 
(a) FINDINGS.—The Congress finds that—
(1) on February 1, 1996, United States Sec-
retary of Energy Hazel R. O’Leary and Israeli Min-
ister of Energy and Infrastructure Gonen Segev 
signed the Agreement between the Department of
682
Energy of the United States of America and the 
Ministry of Energy and Infrastructure of Israel Con-
cerning Energy Cooperation, to establish a frame-
work for collaboration between the United States 
and Israel in energy research and development ac-
tivities; 
(2) the Agreement entered into force in Feb-
ruary 2000; 
(3) in February 2005, the Agreement was auto-
matically renewed for one additional 5-year period 
pursuant to Article X of the Agreement; and 
(4) under the Agreement, the United States 
and Israel may cooperate in energy research and de-
velopment in a variety of alternative and advanced 
energy sectors. 
(b) REPORT TO CONGRESS.—(1) The Secretary of 
Energy shall report to the Committee on Energy and 
Commerce of the House of Representatives and the Com-
mittee on Energy and Natural Resources of the Senate 
on—
(A) how the United States and Israel have co-
operated on energy research and development activi-
ties under the Agreement; 
(B) projects initiated pursuant to the Agree-
ment; and
683
(C) plans for future cooperation and joint 
projects under the Agreement. 
(2) The report shall be submitted no later than three 
months after the date of enactment of this Act. 
(c) SENSE OF CONGRESS.—It is the sense of the Con-
gress that energy cooperation between the Governments 
of the United States and Israel is mutually beneficial in 
the development of energy technology. 
SEC. 1451. CARBON-BASED FUEL CELL DEVELOPMENT. 
(a) GRANT AUTHORITY.—The Secretary of Energy is 
authorized to make a single grant to a qualified institution 
to design and fabricate a 5-kilowatt prototype coal-based 
fuel cell with the following performance objectives: 
(1) A current density of 600 milliamps per 
square centimeter at a cell voltage of 0.8 volts. 
(2) An operating temperature range not to ex-
ceed 900 degrees celsius. 
(b) QUALIFIED INSTITUTION.—For the purposes of 
subsection (a), a qualified institution is a research-inten-
sive institution of higher education with demonstrated ex-
pertise in the development of carbon-based fuel cells allow-
ing the direct use of high sulfur content coal as fuel, and 
which has produced a laboratory-scale carbon-based fuel 
cell with a proven current density of 100 milliamps per 
square centimeter at a voltage of 0.6 volts.
684
(c) AUTHORIZATION
OF APPROPRIATIONS.—There 
are authorized to be appropriated to the Secretary of En-
ergy for carrying out this section $850,000 for fiscal year 
2006. 
TITLE XV—ETHANOL AND 
MOTOR FUELS 
Subtitle A—General Provisions 
SEC. 1501. RENEWABLE CONTENT OF MOTOR VEHICLE 
FUEL. 
(a) IN GENERAL.—Section 211 of the Clean Air Act 
(42 U.S.C. 7545) is amended—
(1) by redesignating subsection (o) as sub-
section (q); and 
(2) by inserting after subsection (n) the fol-
lowing: 
‘‘(o) RENEWABLE FUEL PROGRAM.—
‘‘(1) DEFINITIONS.—In this section: 
‘‘(A) ETHANOL.—(i) The term ‘cellulosic 
biomass ethanol’ means ethanol derived from 
any lignocellulosic or hemicellulosic matter that 
is available on a renewable or recurring basis, 
including—
‘‘(I) dedicated energy crops and trees; 
‘‘(II) wood and wood residues; 
‘‘(III) plants;
685
‘‘(IV) grasses; 
‘‘(V) agricultural residues; and 
‘‘(VI) fibers. 
‘‘(ii) The term ‘waste derived ethanol’ 
means ethanol derived from—
‘‘(I) animal wastes, including poultry 
fats and poultry wastes, and other waste 
materials; or 
‘‘(II) municipal solid waste. 
‘‘(B) RENEWABLE FUEL.—
‘‘(i) IN GENERAL.—The term ‘renew-
able fuel’ means motor vehicle fuel that—
‘‘(I)(aa) is produced from grain, 
starch, oilseeds, or other biomass; or 
‘‘(bb) is natural gas produced 
from a biogas source, including a 
landfill, sewage waste treatment plant, 
feedlot, or other place where decaying 
organic material is found; and 
‘‘(II) is used to replace or reduce 
the quantity of fossil fuel present in a 
fuel mixture used to operate a motor 
vehicle. 
‘‘(ii) INCLUSION.—The term ‘renew-
able fuel’ includes cellulosic biomass eth-
686
anol, waste derived ethanol, and biodiesel 
(as defined in section 312(f) of the Energy 
Policy Act of 1992 (42 U.S.C. 13220(f)) 
and any blending components derived from 
renewable fuel (provided that only the re-
newable fuel portion of any such blending 
component shall be considered part of the 
applicable volume under the renewable fuel 
program established by this subsection). 
‘‘(C) SMALL REFINERY.—The term ‘small 
refinery’ means a refinery for which average ag-
gregate daily crude oil throughput for the cal-
endar year (as determined by dividing the ag-
gregate throughput for the calendar year by the 
number of days in the calendar year) does not 
exceed 75,000 barrels. 
‘‘(2) RENEWABLE FUEL PROGRAM.—
‘‘(A) IN GENERAL.—Not later than 1 year 
after the enactment of this subsection, the Ad-
ministrator shall promulgate regulations ensur-
ing that motor vehicle fuel sold or dispensed to 
consumers in the contiguous United States, on 
an annual average basis, contains the applicable 
volume of renewable fuel as specified in sub-
paragraph (B). Regardless of the date of pro-
687
mulgation, such regulations shall contain com-
pliance provisions for refiners, blenders, and 
importers, as appropriate, to ensure that the re-
quirements of this section are met, but shall not 
restrict where renewable fuel can be used, or 
impose any per-gallon obligation for the use of 
renewable fuel. If the Administrator does not 
promulgate such regulations, the applicable per-
centage referred to in paragraph (4), on a vol-
ume percentage of gasoline basis, shall be 2.2 
in 2005. 
‘‘(B) APPLICABLE VOLUME.—
‘‘(i) CALENDAR YEARS 2005 THROUGH 
2012.—For the purpose of subparagraph 
(A), the applicable volume for any of cal-
endar years 2005 through 2012 shall be 
determined in accordance with the fol-
lowing table:
Applicable volume of 
renewable fuel 
‘‘Calendar year 
(in billions of gallons) 
2005 ...................................................................................................
3.1
2006 ...................................................................................................
3.3
2007 ...................................................................................................
3.5
2008 ...................................................................................................
3.8
2009 ...................................................................................................
4.1
2010 ...................................................................................................
4.4
2011 ...................................................................................................
4.7
2012 ...................................................................................................
5.0
‘‘(ii) CALENDAR
YEAR
2013
AND 
THEREAFTER.—For the purpose of sub-
688
paragraph (A), the applicable volume for 
calendar year 2013 and each calendar year 
thereafter shall be equal to the product ob-
tained by multiplying—
‘‘(I) the number of gallons of 
gasoline that the Administrator esti-
mates will be sold or introduced into 
commerce in the calendar year; and 
‘‘(II) the ratio that—
‘‘(aa) 5.0 billion gallons of 
renewable fuels; bears to 
‘‘(bb) the number of gallons 
of gasoline sold or introduced 
into commerce in calendar year 
2012. 
‘‘(3) NON-CONTIGUOUS STATE OPT-IN.—Upon 
the petition of a non-contiguous State, the Adminis-
trator may allow the renewable fuel program estab-
lished by subtitle A of title XV of the Energy Policy 
Act of 2005 to apply in such non-contiguous State 
at the same time or any time after the Adminis-
trator promulgates regulations under paragraph (2). 
The Administrator may promulgate or revise regula-
tions under paragraph (2), establish applicable per-
centages under paragraph (4), provide for the gen-
689
eration of credits under paragraph (6), and take 
such other actions as may be necessary to allow for 
the application of the renewable fuels program in a 
non-contiguous State. 
‘‘(4) APPLICABLE PERCENTAGES.—
‘‘(A) PROVISION
OF
ESTIMATE
OF
VOL-
UMES OF GASOLINE SALES.—Not later than Oc-
tober 31 of each of calendar years 2005 
through 2011, the Administrator of the Energy 
Information Administration shall provide to the 
Administrator of the Environmental Protection 
Agency an estimate of the volumes of gasoline 
that will be sold or introduced into commerce in 
the United States during the following calendar 
year. 
‘‘(B) DETERMINATION
OF
APPLICABLE 
PERCENTAGES.—
‘‘(i) IN
GENERAL.—Not later than 
November 30 of each of the calendar years 
2005 through 2011, based on the estimate 
provided under subparagraph (A), the Ad-
ministrator shall determine and publish in 
the Federal Register, with respect to the 
following calendar year, the renewable fuel
690
obligation that ensures that the require-
ments of paragraph (2) are met. 
‘‘(ii) REQUIRED ELEMENTS.—The re-
newable fuel obligation determined for a 
calendar year under clause (i) shall—
‘‘(I) be applicable to refiners, 
blenders, and importers, as appro-
priate; 
‘‘(II) be expressed in terms of a 
volume percentage of gasoline sold or 
introduced into commerce; and 
‘‘(III) subject to subparagraph 
(C)(i), consist of a single applicable 
percentage that applies to all cat-
egories of persons specified in sub-
clause (I). 
‘‘(C) ADJUSTMENTS.—In determining the 
applicable percentage for a calendar year, the 
Administrator shall make adjustments—
‘‘(i) to prevent the imposition of re-
dundant obligations to any person specified 
in subparagraph (B)(ii)(I); and 
‘‘(ii) to account for the use of renew-
able fuel during the previous calendar year
691
by small refineries that are exempt under 
paragraph (11). 
‘‘(5) EQUIVALENCY.—For the purpose of para-
graph (2), 1 gallon of either cellulosic biomass eth-
anol or waste derived ethanol—
‘‘(A) shall be considered to be the equiva-
lent of 1.5 gallon of renewable fuel; or 
‘‘(B) if the cellulostic biomass ethanol or 
waste derived ethanol is derived from agricul-
tural residue or wood residue or is an agricul-
tural byproduct (as that term is used in section 
919 of the Energy Policy Act of 2005), shall be 
considered to be the equivalent of 2.5 gallons of 
renewable fuel. 
‘‘(6) CREDIT PROGRAM.—
‘‘(A) IN GENERAL.—The regulations pro-
mulgated to carry out this subsection shall pro-
vide for the generation of an appropriate 
amount of credits by any person that refines, 
blends, or imports gasoline that contains a 
quantity of renewable fuel that is greater than 
the quantity required under paragraph (2). 
Such regulations shall provide for the genera-
tion of an appropriate amount of credits for 
biodiesel fuel. If a small refinery notifies the
692
Administrator that it waives the exemption pro-
vided paragraph (11), the regulations shall pro-
vide for the generation of credits by the small 
refinery beginning in the year following such 
notification. 
‘‘(B) USE
OF
CREDITS.—A person that 
generates credits under subparagraph (A) may 
use the credits, or transfer all or a portion of 
the credits to another person, for the purpose 
of complying with paragraph (2). 
‘‘(C) LIFE
OF
CREDITS.—A credit gen-
erated under this paragraph shall be valid to 
show compliance—
‘‘(i) in the calendar year in which the 
credit was generated or the next calendar 
year; or 
‘‘(ii) in the calendar year in which the 
credit was generated or next two consecu-
tive calendar years if the Administrator 
promulgates regulations under paragraph 
(7). 
‘‘(D) INABILITY TO PURCHASE SUFFICIENT 
CREDITS.—The regulations promulgated to 
carry out this subsection shall include provi-
sions allowing any person that is unable to gen-
693
erate or purchase sufficient credits to meet the 
requirements under paragraph (2) to carry for-
ward a renewable fuel deficit provided that, in 
the calendar year following the year in which 
the renewable fuel deficit is created, such per-
son shall achieve compliance with the renewable 
fuel requirement under paragraph (2), and shall 
generate or purchase additional renewable fuel 
credits to offset the renewable fuel deficit of the 
previous year. 
‘‘(7) SEASONAL
VARIATIONS
IN
RENEWABLE 
FUEL USE.—
‘‘(A) STUDY.—For each of the calendar 
years 2005 through 2012, the Administrator of 
the Energy Information Administration shall 
conduct a study of renewable fuels blending to 
determine whether there are excessive seasonal 
variations in the use of renewable fuels. 
‘‘(B) REGULATION
OF
EXCESSIVE
SEA-
SONAL VARIATIONS.—If, for any calendar year, 
the Administrator of the Energy Information 
Administration, based on the study under sub-
paragraph (A), makes the determinations speci-
fied in subparagraph (C), the Administrator 
shall promulgate regulations to ensure that 35
694
percent or more of the quantity of renewable 
fuels necessary to meet the requirement of 
paragraph (2) is used during each of the peri-
ods specified in subparagraph (D) of each sub-
sequent calendar year. 
‘‘(C) DETERMINATIONS.—The determina-
tions referred to in subparagraph (B) are 
that—
‘‘(i) less than 35 percent of the quan-
tity of renewable fuels necessary to meet 
the requirement of paragraph (2) has been 
used during one of the periods specified in 
subparagraph (D) of the calendar year; 
‘‘(ii) a pattern of excessive seasonal 
variation described in clause (i) will con-
tinue in subsequent calendar years; and 
‘‘(iii) promulgating regulations or 
other requirements to impose a 35 percent 
or more seasonal use of renewable fuels 
will not prevent or interfere with the at-
tainment of national ambient air quality 
standards or significantly increase the 
price of motor fuels to the consumer. 
‘‘(D) PERIODS.—The two periods referred 
to in this paragraph are—
695
‘‘(i) April through September; and 
‘‘(ii) January through March and Oc-
tober through December. 
‘‘(E) 
EXCLUSIONS.—Renewable 
fuels 
blended or consumed in 2005 in a State which 
has received a waiver under section 209(b) shall 
not be included in the study in subparagraph 
(A). 
‘‘(8) WAIVERS.—
‘‘(A) IN GENERAL.—The Administrator, in 
consultation with the Secretary of Agriculture 
and the Secretary of Energy, may waive the re-
quirement of paragraph (2) in whole or in part 
on petition by one or more States by reducing 
the national quantity of renewable fuel required 
under this subsection—
‘‘(i) based on a determination by the 
Administrator, after public notice and op-
portunity for comment, that implementa-
tion of the requirement would severely 
harm the economy or environment of a 
State, a region, or the United States; or 
‘‘(ii) based on a determination by the 
Administrator, after public notice and op-
portunity for comment, that there is an in-
696
adequate domestic supply or distribution 
capacity to meet the requirement. 
‘‘(B) PETITIONS FOR WAIVERS.—The Ad-
ministrator, in consultation with the Secretary 
of Agriculture and the Secretary of Energy, 
shall approve or disapprove a State petition for 
a waiver of the requirement of paragraph (2) 
within 90 days after the date on which the peti-
tion is received by the Administrator. 
‘‘(C) TERMINATION OF WAIVERS.—A waiv-
er granted under subparagraph (A) shall termi-
nate after 1 year, but may be renewed by the 
Administrator after consultation with the Sec-
retary of Agriculture and the Secretary of En-
ergy. 
‘‘(9) STUDY AND WAIVER FOR INITIAL YEAR OF 
PROGRAM.—Not later than 180 days after the enact-
ment of this subsection, the Secretary of Energy 
shall complete for the Administrator a study assess-
ing whether the renewable fuels requirement under 
paragraph (2) will likely result in significant adverse 
consumer impacts in 2005, on a national, regional, 
or State basis. Such study shall evaluate renewable 
fuel supplies and prices, blendstock supplies, and 
supply and distribution system capabilities. Based
697
on such study, the Secretary shall make specific rec-
ommendations to the Administrator regarding waiv-
er of the requirements of paragraph (2), in whole or 
in part, to avoid any such adverse impacts. Within 
270 days after the enactment of this subsection, the 
Administrator 
shall, 
consistent 
with 
the 
rec-
ommendations of the Secretary, waive, in whole or in 
part, the renewable fuels requirement under para-
graph (2) by reducing the national quantity of re-
newable fuel required under this subsection in 2005. 
This paragraph shall not be interpreted as limiting 
the Administrator’s authority to waive the require-
ments of paragraph (2) in whole, or in part, under 
paragraph (8) or paragraph (10), pertaining to 
waivers. 
‘‘(10) ASSESSMENT AND WAIVER.—The Admin-
istrator, in consultation with the Secretary of En-
ergy and the Secretary of Agriculture, shall evaluate 
the requirement of paragraph (2) and determine, 
prior to January 1, 2007, and prior to January 1 
of any subsequent year in which the applicable vol-
ume of renewable fuel is increased under paragraph 
(2)(B), whether the requirement of paragraph (2), 
including the applicable volume of renewable fuel 
contained in paragraph (2)(B) should remain in ef-
698
fect, in whole or in part, during 2007 or any year 
or years subsequent to 2007. In evaluating the re-
quirement of paragraph (2) and in making any de-
termination under this section, the Administrator 
shall consider the best available information and 
data collected by accepted methods or best available 
means regarding—
‘‘(A) the capacity of renewable fuel pro-
ducers to supply an adequate amount of renew-
able fuel at competitive prices to fulfill the re-
quirement of paragraph (2); 
‘‘(B) the potential of the requirement of 
paragraph (2) to significantly raise the price of 
gasoline, food (excluding the net price impact 
on the requirement in paragraph (2) on com-
modities used in the production of ethanol), or 
heating oil for consumers in any significant 
area or region of the country above the price 
that would otherwise apply to such commodities 
in the absence of such requirement; 
‘‘(C) the potential of the requirement of 
paragraph (2) to interfere with the supply of 
fuel in any significant gasoline market or region 
of the country, including interference with the 
efficient operation of refiners, blenders, import-
699
ers, wholesale suppliers, and retail vendors of 
gasoline, and other motor fuels; and 
‘‘(D) the potential of the requirement of 
paragraph (2) to cause or promote exceedances 
of Federal, State, or local air quality standards. 
If the Administrator determines, by clear and con-
vincing information, after public notice and the op-
portunity for comment, that the requirement of 
paragraph (2) would have significant and meaning-
ful adverse impact on the supply of fuel and related 
infrastructure or on the economy, public health, or 
environment of any significant area or region of the 
country, the Administrator may waive, in whole or 
in part, the requirement of paragraph (2) in any one 
year for which the determination is made for that 
area or region of the country, except that any such 
waiver shall not have the effect of reducing the ap-
plicable volume of renewable fuel specified in para-
graph (2)(B) with respect to any year for which the 
determination is made. In determining economic im-
pact under this paragraph, the Administrator shall 
not consider the reduced revenues available from the 
Highway Trust Fund (section 9503 of the Internal 
Revenue Code of 1986) as a result of the use of eth-
anol.
700
‘‘(11) SMALL REFINERIES.—
‘‘(A) IN
GENERAL.—The requirement of 
paragraph (2) shall not apply to small refineries 
until the first calendar year beginning more 
than 5 years after the first year set forth in the 
table in paragraph (2)(B)(i). Not later than De-
cember 31, 2007, the Secretary of Energy shall 
complete for the Administrator a study to de-
termine whether the requirement of paragraph 
(2) would impose a disproportionate economic 
hardship on small refineries. For any small re-
finery that the Secretary of Energy determines 
would experience a disproportionate economic 
hardship, the Administrator shall extend the 
small refinery exemption for such small refinery 
for no less than two additional years. 
‘‘(B) ECONOMIC HARDSHIP.—
‘‘(i) EXTENSION OF EXEMPTION.—A 
small refinery may at any time petition the 
Administrator for an extension of the ex-
emption from the requirement of para-
graph (2) for the reason of dispropor-
tionate economic hardship. In evaluating a 
hardship petition, the Administrator, in 
consultation with the Secretary of Energy,
701
shall consider the findings of the study in 
addition to other economic factors. 
‘‘(ii) DEADLINE FOR ACTION ON PETI-
TIONS.—The Administrator shall act on 
any petition submitted by a small refinery 
for a hardship exemption not later than 90 
days after the receipt of the petition. 
‘‘(C) CREDIT PROGRAM.—If a small refin-
ery notifies the Administrator that it waives the 
exemption provided by this Act, the regulations 
shall provide for the generation of credits by 
the small refinery beginning in the year fol-
lowing such notification. 
‘‘(D) OPT-IN
FOR
SMALL
REFINERS.—A 
small refinery shall be subject to the require-
ments of this section if it notifies the Adminis-
trator that it waives the exemption under sub-
paragraph (A). 
‘‘(12) 
ETHANOL
MARKET
CONCENTRATION 
ANALYSIS.—
‘‘(A) ANALYSIS.—
‘‘(i) IN
GENERAL.—Not later than 
180 days after the date of enactment of 
this subsection, and annually thereafter, 
the Federal Trade Commission shall per-
702
form a market concentration analysis of 
the ethanol production industry using the 
Herfindahl-Hirschman Index to determine 
whether there is sufficient competition 
among industry participants to avoid price 
setting and other anticompetitive behavior. 
‘‘(ii) SCORING.—For the purpose of 
scoring 
under 
clause 
(i) 
using 
the 
Herfindahl-Hirschman 
Index, 
all 
mar-
keting arrangements among industry par-
ticipants shall be considered. 
‘‘(B) REPORT.—Not later than December 
1, 2005, and annually thereafter, the Federal 
Trade Commission shall submit to Congress 
and the Administrator a report on the results 
of the market concentration analysis performed 
under subparagraph (A)(i).’’. 
(b) 
PENALTIES
AND
ENFORCEMENT.—Section 
211(d) of the Clean Air Act (42 U.S.C. 7545(d)) is 
amended as follows: 
(1) In paragraph (1)—
(A) in the first sentence, by striking ‘‘or 
(n)’’ each place it appears and inserting ‘‘(n), 
or (o)’’; and
703
(B) in the second sentence, by striking ‘‘or 
(m)’’ and inserting ‘‘(m), or (o)’’. 
(2) In the first sentence of paragraph (2), by 
striking ‘‘and (n)’’ each place it appears and insert-
ing ‘‘(n), and (o)’’. 
(c) SURVEY OF RENEWABLE FUEL MARKET.—
(1) SURVEY AND REPORT.—Not later than De-
cember 1, 2006, and annually thereafter, the Admin-
istrator of the Environmental Protection Agency (in 
consultation with the Secretary of Energy acting 
through the Administrator of the Energy Informa-
tion Administration) shall—
(A) conduct, with respect to each conven-
tional gasoline use area and each reformulated 
gasoline use area in each State, a survey to de-
termine the market shares of—
(i) conventional gasoline containing 
ethanol; 
(ii) reformulated gasoline containing 
ethanol; 
(iii) conventional gasoline containing 
renewable fuel; and 
(iv) reformulated gasoline containing 
renewable fuel; and
704
(B) submit to Congress, and make publicly 
available, a report on the results of the survey 
under subparagraph (A). 
(2) RECORDKEEPING
AND
REPORTING
RE-
QUIREMENTS.—The Administrator of the Environ-
mental Protection Agency (hereinafter in this sub-
section referred to as the ‘‘Administrator’’) may re-
quire any refiner, blender, or importer to keep such 
records and make such reports as are necessary to 
ensure that the survey conducted under paragraph 
(1) is accurate. The Administrator, to avoid duplica-
tive requirements, shall rely, to the extent prac-
ticable, on existing reporting and recordkeeping re-
quirements and other information available to the 
Administrator including gasoline distribution pat-
terns that include multistate use areas. 
(3) APPLICABLE
LAW.—Activities carried out 
under this subsection shall be conducted in a man-
ner designed to protect confidentiality of individual 
responses. 
SEC. 1502. FUELS SAFE HARBOR. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of Federal or State law, no renewable fuel, as defined 
by section 211(o)(1) of the Clean Air Act, or methyl ter-
tiary butyl ether (hereafter in this section referred to as
705
‘‘MTBE’’), used or intended to be used as a motor vehicle 
fuel, nor any motor vehicle fuel containing such renewable 
fuel or MTBE, shall be deemed a defective product by vir-
tue of the fact that it is, or contains, such a renewable 
fuel or MTBE, if it does not violate a control or prohibi-
tion imposed by the Administrator of the Environmental 
Protection Agency (hereinafter in this section referred to 
as the ‘‘Administrator’’) under section 211 of such Act, 
and the manufacturer is in compliance with all requests 
for information under subsection (b) of such section 211 
of such Act. If the safe harbor provided by this section 
does not apply, the existence of a claim of defective prod-
uct shall be determined under otherwise applicable law. 
Nothing in this subsection shall be construed to affect the 
liability of any person for environmental remediation costs, 
drinking water contamination, negligence for spills or 
other reasonably foreseeable events, public or private nui-
sance, trespass, breach of warranty, breach of contract, 
or any other liability other than liability based upon a 
claim of defective product. 
(b) EFFECTIVE DATE.—This section shall be effec-
tive as of September 5, 2003, and shall apply with respect 
to all claims filed on or after that date. 
SEC. 1503. FINDINGS AND MTBE TRANSITION ASSISTANCE. 
(a) FINDINGS.—Congress finds that—
706
(1) since 1979, methyl tertiary butyl ether 
(hereinafter in this section referred to as ‘‘MTBE’’) 
has been used nationwide at low levels in gasoline to 
replace lead as an octane booster or anti-knocking 
agent; 
(2) Public Law 101–549 (commonly known as 
the ‘‘Clean Air Act Amendments of 1990’’) (42 
U.S.C. 7401 et seq.) established a fuel oxygenate 
standard under which reformulated gasoline must 
contain at least 2 percent oxygen by weight; 
(3) at the time of the adoption of the fuel oxy-
gen standard, Congress was aware that significant 
use of MTBE would result from the adoption of that 
standard, and that the use of MTBE would likely be 
important to the cost-effective implementation of 
that program; 
(4) Congress was aware that gasoline and its 
component additives can and do leak from storage 
tanks; 
(5) the fuel industry responded to the fuel oxy-
genate standard established by Public Law 101–549 
by making substantial investments in—
(A) MTBE production capacity; and 
(B) systems to deliver MTBE-containing 
gasoline to the marketplace;