551
ganized under Alaska State law shall be eligible for 
financial assistance under this section. 
(b) USE
OF
ASSISTANCE.—Financial assistance 
under this section may be used only for—
(1) planning for mitigation of the potential ef-
fects of oil and gas exploration and development on 
environmental, social, cultural, recreational and sub-
sistence values; 
(2) implementing mitigation plans and main-
taining mitigation projects; 
(3) developing, carrying out, and maintaining 
projects and programs that provide new or expanded 
public facilities and services to address needs and 
problems associated with such effects, including fire-
fighting, police, water, waste treatment, medivac, 
and medical services; and 
(4) establishment of a coordination office, by 
the North Slope Borough, in the City of Kaktovik, 
which shall—
(A) coordinate with and advise developers 
on local conditions, impact, and history of the 
areas utilized for development; and 
(B) provide to the Committee on Resources 
of the Senate and the Committee on Energy 
and Resources of the Senate an annual report
552
on the status of coordination between devel-
opers and the communities affected by develop-
ment. 
(c) APPLICATION.—
(1) IN GENERAL.—Any community that is eligi-
ble for assistance under this section may submit an 
application for such assistance to the Secretary, in 
such form and under such procedures as the Sec-
retary may prescribe by regulation. 
(2) NORTH SLOPE BOROUGH COMMUNITIES.—A 
community located in the North Slope Borough may 
apply for assistance under this section either directly 
to the Secretary or through the North Slope Bor-
ough. 
(3) APPLICATION ASSISTANCE.—The Secretary 
shall work closely with and assist the North Slope 
Borough and other communities eligible for assist-
ance under this section in developing and submitting 
applications for assistance under this section. 
(d) ESTABLISHMENT OF FUND.—
(1) IN GENERAL.—There is established in the 
Treasury the Coastal Plain Local Government Im-
pact Aid Assistance Fund.
553
(2) USE.—Amounts in the fund may be used 
only for providing financial assistance under this 
section. 
(3) DEPOSITS.—Subject to paragraph (4), there 
shall be deposited into the fund amounts received by 
the United States as revenues derived from rents, 
bonuses, and royalties under on leases and lease 
sales authorized under this title. 
(4) LIMITATION
ON
DEPOSITS.—The total 
amount in the fund may not exceed $11,000,000. 
(5) INVESTMENT
OF
BALANCES.—The Sec-
retary of the Treasury shall invest amounts in the 
fund in interest bearing government securities. 
(e) AUTHORIZATION OF APPROPRIATIONS.—To pro-
vide financial assistance under this section there is author-
ized to be appropriated to the Secretary from the Coastal 
Plain Local Government Impact Aid Assistance Fund 
$5,000,000 for each fiscal year.
TITLE V—HYDROPOWER 
SEC. 30501. STUDY AND REPORT ON INCREASING ELECTRIC 
POWER PRODUCTION CAPABILITY OF EXIST-
ING FACILITIES. 
(a) IN GENERAL.—The Secretary of the Interior, in 
consultation with the Administrator of each Federal power 
marketing administration, shall conduct a study of the po-
554
tential for increasing electric power production capability 
at existing facilities under the administrative jurisdiction 
of the Secretary. 
(b) CONTENT.—The study under this section shall in-
clude identification and description in detail of each facil-
ity that is capable, with or without modification, of pro-
ducing additional hydroelectric power, including esti-
mation of the existing potential for the facility to generate 
hydroelectric power. 
(c) REPORT.—The Secretary shall submit to the Con-
gress a report on the findings, conclusions, and rec-
ommendations of the study under this section by not later 
than 12 months after the date of the enactment of this 
Act. The Secretary shall include in the report the fol-
lowing: 
(1) The identifications, descriptions, and esti-
mations referred to in subsection (b). 
(2) A description of activities the Secretary is 
currently conducting or considering, or that could be 
considered, to produce additional hydroelectric power 
from each identified facility. 
(3) A summary of action that has already been 
taken by the Secretary to produce additional hydro-
electric power from each identified facility.
555
(4) The costs to install, upgrade, or modify 
equipment or take other actions to produce addi-
tional hydroelectric power from each identified facil-
ity and the level of Federal power customer involve-
ment in the Secretary’s determination of such costs. 
(5) The benefits that would be achieved by such 
installation, upgrade, modification, or other action, 
including quantified estimates of any additional en-
ergy or capacity from each facility identified under 
subsection (b). 
(6) A description of actions that are planned, 
underway, or might reasonably be considered to in-
crease hydroelectric power production by replacing 
turbine runners. 
(7) A description of actions that are planned, 
underway, or might reasonably be considered to in-
crease hydroelectric power production by performing 
generator uprates and rewinds. 
(8) The impact of increased hydroelectric power 
production on irrigation, fish, wildlife, Indian tribes, 
river health, water quality, navigation, recreation, 
fishing, and flood control. 
(9) Any additional recommendations the Sec-
retary considers advisable to increase hydroelectric 
power production from, and reduce costs and im-
556
prove efficiency at, facilities under the jurisdiction of 
the Secretary. 
SEC. 30502. STUDY AND IMPLEMENTATION OF INCREASED 
OPERATIONAL 
EFFICIENCIES 
IN 
HYDRO-
ELECTRIC POWER PROJECTS. 
(a) IN GENERAL.—The Secretary of Interior shall 
conduct a study of operational methods and water sched-
uling techniques at all hydroelectric power plants under 
the administrative jurisdiction of the Secretary that have 
an electric power production capacity greater than 50 
megawatts, to—
(1) determine whether such power plants and 
associated river systems are operated so as to opti-
mize energy and capacity capabilities; and 
(2) identify measures that can be taken to im-
prove operational flexibility at such plants to achieve 
such optimization. 
(b) REPORT.—The Secretary shall submit a report on 
the findings, conclusions, and recommendations of the 
study under this section by not later than 18 months after 
the date of the enactment of this Act, including a sum-
mary of the determinations and identifications under 
paragraphs (1) and (2) of subsection (a). The Secretary 
shall include in the report the impact of optimized hydro-
electric power production on irrigation, fish, wildlife, In-
557
dian tribes, river health, water quality, navigation, recre-
ation, fishing, and flood control. 
(c) COOPERATION
WITH FEDERAL POWER MAR-
KETING ADMINISTRATIONS.—The Secretary shall coordi-
nate with the Administrator of each Federal power mar-
keting administration in determining how the value of 
electric power produced by each hydroelectric power facil-
ity that produces power marketed by the administration 
can be optimized. 
SEC. 30503. SHIFT OF PROJECT LOADS TO OFF-PEAK PERI-
ODS. 
(a) IN GENERAL.—The Secretary of the Interior 
shall—
(1) review electric power consumption by Bu-
reau of Reclamation facilities for water pumping 
purposes; and 
(2) make such adjustments in such pumping as 
possible to minimize the amount of electric power 
consumed for such pumping during periods of peak 
electric power consumption, including by performing 
as much of such pumping as possible during off-
peak hours at night. 
(b) CONSENT OF AFFECTED IRRIGATION CUSTOMERS 
REQUIRED.—The Secretary may not under this section 
make any adjustment in pumping at a facility without the
558
consent of each person that has contracted with the 
United States for delivery of water from the facility for 
use for irrigation and that would be affected by such ad-
justment. 
(c) EXISTING OBLIGATIONS NOT AFFECTED.—This 
section shall not be construed to affect any existing obliga-
tion of the Secretary to provide electric power, water, or 
other benefits from Bureau of Reclamation facilities.
TITLE VI—GEOTHERMAL 
ENERGY 
SEC. 30601. COMPETITIVE LEASE SALE REQUIREMENTS. 
(a) IN GENERAL.—Section 4 of the Geothermal 
Steam Act of 1970 (30 U.S.C. 1003) is amended to read 
as follows: 
‘‘LEASING PROCEDURES 
‘‘SEC. 4. (a) IN GENERAL.—
‘‘(1) NOMINATIONS.—The Secretary shall ac-
cept nominations at any time from qualified compa-
nies and individuals of areas to be leased under this 
Act. 
‘‘(2) COMPETITIVE LEASE SALE REQUIRED.—
The Secretary shall hold a competitive lease sale at 
least once every 2 years for lands in a State in that 
are located areas with respect to which there are 
nominations pending under paragraph (1).
559
‘‘(3) NONCOMPETITIVE
LEASING.—The Sec-
retary shall make available for a period of 2 years 
for noncompetitive leasing any lands for which a 
competitive lease sale is held, but for which the Sec-
retary does not receive any bids in a competitive 
lease sale.’’. 
(b) PENDING LEASE APPLICATIONS.—Not later than 
6 months after the date of the enactment of this Act, the 
Secretary of the Interior shall initiate competitive lease 
sales under the Geothermal Steam Act of 1970 (30 U.S.C. 
1001 et seq.), as amended by this Act, for areas with re-
spect to which applications for leasing are pending on the 
date of the enactment of this Act. 
SEC. 30602. SPECIAL PROVISIONS REGARDING DIRECT USE 
OF LOW TEMPERATURE GEOTHERMAL EN-
ERGY RESOURCES. 
(a) LEASING PROCEDURE.—Section 4 of the Geo-
thermal Steam Act of 1970 (30 U.S.C. 1003) is further 
amended by adding at the end the following: 
‘‘(b) LEASING OF LOW TEMPERATURE GEOTHERMAL 
RESOURCES.—Lands leased under this Act exclusively for 
qualified development and direct utilization of low tem-
perature geothermal resources shall be leased to any quali-
fied applicant who first applies for such lease under regu-
lations formulated by the Secretary.’’.
560
(b) LIMITATION ON LEASE AREA.—Section 7 of the 
Geothermal Steam Act of 1970 (30 U.S.C. 1006) is 
amended—
(1) in the first sentence by striking ‘‘A geo-
thermal lease’’ and inserting ‘‘(a) IN GENERAL.—
Except as provided in subsection (b), a geothermal 
lease’’; and 
(2) by adding at the end the following: 
‘‘(b) LEASING OF LOW TEMPERATURE GEOTHERMAL 
RESOURCES.—A geothermal lease for qualified develop-
ment and direct utilization of low temperature geothermal 
resources shall embrace not more than the minimum 
amount of acreage determined by the Secretary to be rea-
sonably necessary for such utilization.’’. 
(c) ANNUAL PAYMENT.—Section 5 of the Geothermal 
Steam Act of 1970 (30 U.S.C. 1004) is amended—
(1) in paragraph (c) by redesignating subpara-
graphs (1) and (2) as subparagraphs (A) and (B); 
(2) by redesignating paragraphs (a) through (d) 
in order as paragraphs (1) through (4); 
(3) by inserting ‘‘(a) IN GENERAL.—’’ after 
‘‘SEC. 5.’’; and 
(4) by adding at the end the following: 
‘‘(b) EXEMPTION FOR USE OF LOW TEMPERATURE 
RESOURCES.—
561
‘‘(1) IN GENERAL.—In lieu of any royalty or 
rental under subsection (a), a lease for qualified de-
velopment and direct utilization of low temperature 
geothermal resources shall provide for payment by 
the lessee of an annual fee per well of not less than 
$100, and not more than $1,000, in accordance with 
the schedule issued under paragraph (2). 
‘‘(2) SCHEDULE.—The Secretary shall issue a 
schedule of fees under this section under which a fee 
is based on the scale of development and utilization 
to which the fee applies.’’. 
(d) DEFINITIONS.—Section 2 of the Geothermal 
Steam Act of 1970 (30 U.S.C. 1001) is amended—
(1) in paragraph (f) by redesignating subpara-
graphs (1) through (4) in order as subparagraphs 
(A) through (D); 
(2) by redesignating paragraphs (a) through (f) 
in order as paragraphs (1) through (6); and 
(3) by adding at the end the following: 
‘‘(7) LOW
TEMPERATURE
GEOTHERMAL
RE-
SOURCES.—The term ‘low temperature geothermal 
resources’ means geothermal steam and associated 
geothermal resources having a wellhead temperature 
of less than 195 degrees Fahrenheit.
562
‘‘(8) QUALIFIED
DEVELOPMENT
AND
DIRECT 
UTILIZATION.—The term ‘qualified development and 
direct utilization’ means development and utilization 
in which all products of geothermal resources, other 
than any heat utilized, are returned to the geo-
thermal formation from which they are produced.’’. 
(e) EXISTING LEASES.—
(1) APPLICATION
TO
CONVERT.—Any lessee 
under a lease under the Geothermal Steam Act of 
1970 that was issued before the date of the enact-
ment of this Act may apply to the Secretary of the 
Interior, by not later than 18 months after the date 
of the enactment of this Act, to convert such lease 
to a lease for qualified development and direct utili-
zation of low temperature geothermal resources in 
accordance with the amendments made by this sec-
tion. 
(2) CONVERSION.—The Secretary shall approve 
such an application and convert such a lease to a 
lease in accordance with the amendments by not 
later than 180 days after receipt of such application, 
unless the Secretary determines that the applicant is 
not a qualified applicant with respect to the lease.
563
SEC. 30603. ROYALTIES AND NEAR-TERM PRODUCTION IN-
CENTIVES. 
(a) ROYALTY.—Section 5 of the Geothermal Steam 
Act of 1970 (30 U.S.C. 1004) is further amended in sub-
section (a) by striking paragraph (1) and inserting the fol-
lowing: 
‘‘(1) a royalty on direct use of geothermal 
steam and associated geothermal resources, other 
than low temperature geothermal resources, which 
shall be—
‘‘(A) 3.5 percent of the gross proceeds 
from the sale of electricity produced by such re-
sources; and 
‘‘(B) 0.75 percent of the gross proceeds 
from the sale of items produced by the direct 
use of such resources;’’. 
(b) NEAR-TERM PRODUCTION INCENTIVE.—
(1) IN
GENERAL.—Notwithstanding section 
5(a) of the Geothermal Steam Act of 1970, as 
amended by subsection (a), or any provision of any 
lease under that Act, the royalty required to be 
paid—
(A) under any qualified geothermal energy 
lease with respect to commercial production of 
heat or energy from a facility that begins such
564
production in the 6-year period beginning on 
the date of the enactment of this Act; or 
(B) on qualified expansion geothermal en-
ergy; 
shall be 50 percent of the amount of royalty other-
wise required to be paid under those provisions. 
(2) STATE SHARE.—Notwithstanding section 20 
of the Geothermal Steam Act of 1970 (30 U.S.C. 
1019), section 35 of the Mineral Leasing Act (30 
U.S.C.191), or section 6 of the Mineral Leasing Act 
for Acquired Lands (30 U.S.C. 355), in the case of 
monies received by the United States from royalty 
described in subparagraph (A) or (B) of paragraph 
(1), the percentage required to be paid by the Sec-
retary of the Treasury to a State under those sec-
tions shall be 100 percent. 
(3) 4-YEAR APPLICATION.—Paragraphs (1) and 
(2) apply only to commercial production of heat or 
energy from a facility in the first 4 years of such 
production. 
(4) NO EFFECT ON STATE PORTION.—This sub-
section shall not be construed to reduce the amount 
of royalty required to be paid to a State. 
(c) DEFINITIONS.—In this section:
565
(1) QUALIFIED EXPANSION GEOTHERMAL EN-
ERGY.—The term ‘‘qualified expansion geothermal 
energy’’ means geothermal energy produced from a 
generation facility for which—
(A) the production is increased by more 
than 10 percent as a result of expansion of the 
facility carried out in the 6-year period begin-
ning on the date of the enactment of this Act; 
and 
(B) such production increase is greater 
than 10 percent of the average production by 
the facility during the 5-year period preceding 
the expansion of the facility. 
(2) 
QUALIFIED
GEOTHERMAL
ENERGY 
LEASE.—The term ‘‘qualified geothermal energy 
lease’’ means a lease under the Geothermal Steam 
Act of 1970 (30 U.S.C. 1001 et seq.)—
(A) that was executed before the end of 
the 6-year period beginning on the date of the 
enactment of this Act; and 
(B) under which no commercial production 
of any form of heat or energy occurred before 
the date of the enactment of this Act. 
(d) ROYALTY EXISTING LEASES.—
566
(1) IN
GENERAL.—Any lessee under a lease 
issued under the Geothermal Steam Act of 1970 be-
fore the date of the enactment of this Act may mod-
ify the terms of the lease relating to payment of roy-
alties to comply with the amendment made by sub-
section (a), by applying to the Secretary of the Inte-
rior by not later than 18 months after the date of 
the enactment of this Act. 
(2) APPLICATION
OF
MODIFICATION.—Such 
modification shall apply to any use of geothermal 
steam and associated geothermal resources to which 
the amendment applies that occurs after the date of 
that application. 
SEC. 30604. CONSULTATION REGARDING GEOTHERMAL 
LEASING 
AND 
PERMITTING 
ON 
PUBLIC 
LANDS. 
(a) IN GENERAL.—Not later than 6 months after the 
date of the enactment of this Act, the Secretary of the 
Interior and the Secretary of Agriculture shall enter into 
and submit to the Congress a memorandum of under-
standing in accordance with this section regarding leasing 
and permitting, for geothermal development, of public 
lands under their respective administrative jurisdictions. 
(b) LEASE AND PERMIT APPLICATIONS.—The memo-
randum of understanding shall include provisions that—
567
(1) identify known geothermal areas on public 
lands within the National Forest System and when 
necessary review management plans to consider leas-
ing under the Geothermal Steam Act of 1970 (30 
U.S.C. 1001 et seq.) as a land use; 
(2) establish an administrative procedure for 
processing geothermal lease applications, including 
lines of authority, steps in application processing, 
and timeframes for application processing; 
(3) provide that the Secretary concerned 
shall—
(A) within 14 days after receiving an ap-
plication for a lease, determine whether the ap-
plication contains sufficient information to 
allow processing of the application; and 
(B) if the application is found not to con-
tain sufficient information to allow processing 
the application the Secretary shall, before the 
end of such 14-day period, provide written noti-
fication to the lease applicant that the applica-
tion is being returned to the applicant without 
processing and itemizing the deficiencies in the 
application that prevent processing; 
(4) provide that the Secretary concerned shall 
within 30 days after receiving a lease application,
568
provide written notice to the lease applicant regard-
ing the status of the application, including an esti-
mation of the time that will be required to complete 
action on the application; and 
(5) establish an administrative procedure for 
processing geothermal development permits, includ-
ing lines of authority, steps in permit processing, 
and timeframes for permit processing. 
(c) FIVE-YEAR LEASING PLAN.—The memorandum 
of understanding shall develop a 5-year plan for leasing 
under the Geothermal Steam Act of 1970 (30 U.S.C. 1001 
et seq.) of public land in the National Forest System. The 
plan for geothermal leasing shall be updated every 5 years. 
(d) DATA RETRIEVAL SYSTEM.—The memorandum 
of understanding shall establish a joint data retrieval sys-
tem that is capable of tracking lease and permit applica-
tions and requests and providing to the applicant or re-
quester information as to their status within the Depart-
ments of the Interior and Agriculture, including an esti-
mate of the time required for administrative action. 
SEC. 30605. REVIEW AND REPORT TO CONGRESS. 
The Secretary of the Interior shall promptly review 
and report to the Congress within 3 years after the date 
of the enactment of this Act regarding the status of all 
moratoria on and withdrawals from leasing under the Geo-
569
thermal Steam Act of 1970 (30 U.S.C. 1001 et seq.) of 
known geothermal resources areas (as that term is defined 
in section 2 of that Act (30 U.S.C. 1001), specifying for 
each such area whether the basis for such moratoria or 
withdrawal still applies. 
SEC. 30606. REIMBURSEMENT FOR COSTS OF NEPA ANAL-
YSES, DOCUMENTATION, AND STUDIES. 
(a) IN GENERAL.—The Geothermal Steam Act of 
1970 (30 U.S.C. 1001 et seq.) is amended by adding at 
the end the following: 
‘‘REIMBURSEMENT FOR COSTS OF CERTAIN ANALYSES, 
DOCUMENTATION, AND STUDIES 
‘‘SEC. 30. (a) IN GENERAL.—The Secretary of the 
Interior may, through royalty credits, reimburse a person 
who is a lessee, operator, operating rights owner, or appli-
cant for a lease under this Act for reasonable amounts 
paid by the person for preparation by the Secretary (or 
a contractor or other person selected by the Secretary) of 
any project-level analysis, documentation, or related study 
required under the National Environmental Policy Act of 
1969 (42 U.S.C. 4321 et seq.) with respect to the lease. 
‘‘(b) CONDITIONS.—The Secretary may provide reim-
bursement under subsection (a) only if—
‘‘(1) adequate funding to enable the Secretary 
to timely prepare the analysis, documentation, or re-
lated study is not appropriated;
570
‘‘(2) the person paid the amounts voluntarily; 
and 
‘‘(3) the person maintains records of its costs 
in accordance with regulations prescribed by the 
Secretary.’’. 
(b) APPLICATION.—The amendments made by this 
section shall apply with respect to any lease entered into 
before, on, or after the date of the enactment of this Act. 
(c) DEADLINE FOR REGULATIONS.—The Secretary 
shall issue regulations implementing the amendments 
made by this section by not later than 90 days after the 
date of the enactment of this Act. 
SEC. 30607. ASSESSMENT OF GEOTHERMAL ENERGY PO-
TENTIAL. 
The Secretary of Interior, acting through the Direc-
tor of the United States Geological Survey, shall update 
the 1978 Assessment of Geothermal Resources, and sub-
mit that updated assessment to the Committee on Re-
sources of the House of Representatives and the Com-
mittee on Energy and Natural Resources of the Senate—
(1) within 3 years after the date of enactment 
of this Act; and 
(2) thereafter as the availability of data and de-
velopments in technology warrant.
571
SEC. 30608. COOPERATIVE OR UNIT PLANS. 
(a) IN GENERAL.—Section 18 of the Geothermal 
Steam Act of 1970 (30 U.S.C. 1017) is amended to read 
as follows: 
‘‘COOPERATIVE OR UNIT PLANS 
‘‘SEC. 18. (a) ADOPTION OF PLAN BY LESSEES.—
‘‘(1) IN GENERAL.—For the purpose of more 
properly conserving the natural resources of any 
geothermal field, or like area, or any part thereof 
(whether or not any part of the geothermal field, or 
like area, is then subject to any cooperative or unit 
plan of development or operation), lessees thereof 
and their representatives may unite with each other, 
or jointly or separately with others, in collectively 
adopting and operating under a cooperative or unit 
plan of development or operation of such field, or 
like area, or any part thereof, if determined and cer-
tified by the Secretary to be necessary or advisable 
in the public interest. 
‘‘(2) MODIFICATION OF LEASE REQUIREMENTS 
BY SECRETARY.—The Secretary may, in the discre-
tion of the Secretary, and with the consent of the 
holders of leases involved, establish, alter, change, or 
revoke drilling, producing, rental, minimum royalty, 
and royalty requirements of such leases and to make 
such regulations with reference to such leases, with
572
the consent of the lessees, in connection with the in-
stitution and operation of any such cooperative or 
unit plan as the Secretary may deem necessary or 
proper to secure the proper protection of the public 
interest. 
‘‘(b) REQUIREMENT
OF
PLANS
UNDER
NEW 
LEASES.—The Secretary—
‘‘(1) may provide that geothermal leases issued 
under this Act after the date of the enactment of 
this section shall contain a provision requiring the 
lessee to operate under such a reasonable coopera-
tive or unit plan; and 
‘‘(2) may prescribe such a plan under which 
such lessee shall operate, which shall adequately pro-
tect the rights of all parties in interest, including the 
United States. 
‘‘(c) MODIFICATION OF RATE OF PROSPECTING, DE-
VELOPMENT, AND PRODUCTION.—The Secretary may re-
quire that any plan authorized by the this section that 
applies to lands owned by the United States contain a pro-
vision under which authority is vested in the Secretary, 
or any person, committee, or State or Federal officer or 
agency as may be designated in the plan, to alter or mod-
ify from time to time the rate of prospecting and develop-
573
ment and the quantity and rate of production under such 
plan. 
‘‘(d) EXCLUSION FROM DETERMINATION OF HOLD-
ING OR CONTROL.—Any lands that are subject to any plan 
approved or prescribed by the Secretary under this section 
shall not be considered in determining holdings or control 
under any provision of this Act. 
‘‘(e) POOLING
OF CERTAIN LANDS.—If separate 
tracts of lands cannot be independently developed and op-
erated to use geothermal steam and associated geothermal 
resources pursuant to this Act in conformity with an es-
tablished development program—
‘‘(1) any such lands, or a portion thereof, may 
be pooled with other lands, whether or not owned by 
the United States, for purposes of such development 
and operation under a communitization agreement 
providing for an apportionment of production or roy-
alties among the separate tracts of land comprising 
the production unit, if such pooling is determined by 
the Secretary to be in the public interest; and 
‘‘(2) operation or production pursuant to such 
an agreement shall be treated as operation or pro-
duction with respect to each tract of land that is 
subject to the agreement.
574
‘‘(f) PLAN REVIEW.—No more than 5 years after ap-
proval of any cooperative or unit plan of development or 
operation, and at least every 5 years thereafter, the Sec-
retary shall review each such plan and, after notice and 
opportunity for comment, eliminate from inclusion in such 
plan any lands that the Secretary determines are not rea-
sonably necessary for cooperative or unit operations under 
the plan. Such elimination shall be based on scientific evi-
dence, and shall occur only if it is determined by the Sec-
retary to be for the purpose of conserving and properly 
managing the geothermal resource. Any land so eliminated 
shall be eligible for an extension under subsection (c) or 
(g) of section 6 if it meets the requirements for such an 
extension. 
‘‘(g) APPROVAL
BY
SECRETARY.—The Secretary 
may, on such conditions as the Secretary may prescribe, 
approve operating, drilling, or development contracts made 
by one or more lessees of geothermal leases, with one or 
more persons, associations, or corporations if, in the dis-
cretion of the Secretary, the conservation of natural re-
sources or the public convenience or necessity may require 
or the interests of the United States may be best served 
thereby. All leases operated under such approved oper-
ating, drilling, or development contracts, and interests
575
thereunder, shall be excepted in determining holdings or 
control under section 7 of this Act.’’.
SEC. 30609. ROYALTY ON BYPRODUCTS. 
Section 5 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1004) is further amended in subsection (a) by 
striking paragraph (2) and inserting the following: 
‘‘(2) a royalty on any byproduct that is a min-
eral named in the first section of the Mineral Leas-
ing Act (30 U.S.C. 181), and that is derived from 
production under the lease, at the rate of the royalty 
that applies under that Act to production of such 
mineral under a lease under that Act;’’. 
SEC. 30610. REPEAL OF AUTHORITIES OF SECRETARY TO 
READJUST TERMS, CONDITIONS, RENTALS, 
AND ROYALTIES. 
Section 8 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1007) is amended by repealing subsections (a) and 
(b), and by striking ‘‘(c)’’. 
SEC. 30611. CREDITING OF RENTAL TOWARD ROYALTY. 
Section 5 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1004) is further amended—
(1) in subsection (a)(2) by inserting ‘‘and’’ 
after the semicolon at the end; 
(2) in subsection (a)(3) by striking ‘‘; and’’ and 
inserting a period;
576
(3) by striking paragraph (4) of subsection (a); 
and 
(4) by adding at the end the following: 
‘‘(c) CREDITING OF RENTAL TOWARD ROYALTY.—
Any annual rental under this section that is paid with re-
spect to a lease before the first day of the year for which 
the annual rental is owed shall be credited to the amount 
of royalty that is required to be paid under the lease for 
that year.’’. 
SEC. 30612. LEASE DURATION AND WORK COMMITMENT RE-
QUIREMENTS. 
(a) IN GENERAL.—Section 6 of the Geothermal 
Steam Act of 1970 (30 U.S.C. 1005) is amended—
(1) by striking so much as precedes subsection 
(c), and striking subsections (e), (g), (h), (i), and 
(j); 
(2) by redesignating subsections (c), (d), and 
(f) in order as subsections (g), (h), and (i); 
(3) by inserting before subsection (g), as so re-
designated, the following: 
‘‘LEASE TERM AND WORK COMMITMENT REQUIREMENTS 
‘‘SEC. 6. (a) PRIMARY TERM.—
‘‘(1) IN GENERAL.—A geothermal lease shall be 
for a primary term of ten years. 
‘‘(2) INITIAL EXTENSION.—The Secretary shall 
extend the primary term of a geothermal lease for
577
5 years if, for each year after the fifth year of the 
lease—
‘‘(A) the Secretary determined under sub-
section (c) that the lessee satisfied the work 
commitment requirements that applied to the 
lease for that year; or 
‘‘(B) the lessee paid in accordance with 
subsection (d) the value of any work that was 
not completed in accordance with those require-
ments. 
‘‘(3) ADDITIONAL EXTENSION.—The Secretary 
shall extend the primary term of a geothermal lease 
(after an extension under paragraph (2)) for an ad-
ditional 5 years if, for each year after the fifteenth 
year of the lease, the Secretary determined under 
subsection (c) that the lessee satisfied the work com-
mitment requirements that applied to the lease for 
that year. 
‘‘(b) REQUIREMENT
TO SATISFY ANNUAL WORK 
COMMITMENT REQUIREMENT.—
‘‘(1) IN GENERAL.—The lessee for a geothermal 
lease shall, for each year after the fifth year of the 
lease, satisfy work commitment requirements pre-
scribed by the Secretary that apply to the lease for 
that year.
578
‘‘(2) PRESCRIPTION OF WORK COMMITMENT RE-
QUIREMENTS.—The Secretary shall issue regulations 
prescribing minimum work commitment require-
ments for geothermal leases, that—
‘‘(A) require that a lessee, in each year 
after the fifth year of the primary term of a 
geothermal lease, diligently work to achieve 
commercial production or utilization of steam 
under the lease; 
‘‘(B) require that in each year to which 
work commitment requirements under the regu-
lations apply, the lessee shall significantly re-
duce the amount of work that remains to be 
done to achieve such production or utilization; 
‘‘(C) describe specific work that must be 
completed by a lessee by the end of each year 
to which the work commitment requirements 
apply; 
‘‘(D) carry forward and apply to work 
commitment requirements for a year, work 
completed in any year in the preceding 3-year 
period that was in excess of the work required 
to be performed in that preceding year; and
579
‘‘(E) establish transition rules for leases 
issued before the date of the enactment of this 
subsection. 
‘‘(3) TERMINATION
OF
APPLICATION
OF
RE-
QUIREMENTS.—Work commitment requirements pre-
scribed under this subsection shall not apply to a 
geothermal lease after the date on which geothermal 
steam is produced or utilized under the lease in com-
mercial quantities. 
‘‘(c) DETERMINATION OF WHETHER REQUIREMENTS 
SATISFIED.—The Secretary shall, by not later than 21 
days after the end of each year for which work commit-
ment requirements under subsection (b) apply to a geo-
thermal lease—
‘‘(1) determine whether the lessee has satisfied 
the requirements that apply for that year; 
‘‘(2) notify the lessee of that determination; and 
‘‘(3) in the case of a notification that the lessee 
did not satisfy work commitment requirements for 
the year, include in the notification—
‘‘(A) a description of the specific work that 
was not completed by the lessee in accordance 
with the requirements; and 
‘‘(B) the amount of the dollar value of 
such work that was not completed, reduced by
580
the amount of expenditures made for work com-
pleted in a prior year that is carried forward 
pursuant to subsection (b)(2)(D). 
‘‘(d) PAYMENT
OF
VALUE
OF
UNCOMPLETED 
WORK.—
‘‘(1) IN GENERAL.—If the Secretary notifies a 
lessee that the lessee failed to satisfy work commit-
ment requirements under subsection (b), the lessee 
shall pay to the Secretary, by not later than the end 
of the 60-day period beginning on the date of the 
notification, the dollar value of work that was not 
completed by the lessee, in the amount stated in the 
notification (as reduced under subsection (c)(3)(B)). 
‘‘(2) 
FAILURE
TO
PAY
VALUE
OF 
UNCOMPLETED WORK.—If a lessee fails to pay such 
amount to the Secretary before the end of that pe-
riod, the lease shall terminate upon the expiration of 
the period. 
‘‘(e) CONTINUATION AFTER COMMERCIAL PRODUC-
TION OR UTILIZATION.—If geothermal steam is produced 
or utilized in commercial quantities within the primary 
term of the lease under subsection (a) (including any ex-
tension of the lease under subsection (a)), such lease shall 
continue until the date on which geothermal steam is no 
longer produced or utilized in commercial quantities.
581
‘‘(f) CONVERSION OF GEOTHERMAL LEASE TO MIN-
ERAL LEASE.—The lessee under a lease that has produced 
geothermal steam for electrical generation, has been deter-
mined by the Secretary to be incapable of any further com-
mercial production or utilization of geothermal steam, and 
that is producing any valuable byproduct in payable quan-
tities may, within 6 months after such determination—
‘‘(1) convert the lease to a mineral lease under 
the Mineral Leasing Act (30 U.S.C. 181 et seq.) or 
under the Mineral Leasing Act for Acquired Lands 
(30 U.S.C. 351 et seq.), if the lands that are subject 
to the lease can be leased under that Act for the 
production of such byproduct; or 
‘‘(2) convert the lease to a mining claim under 
the general mining laws, if the byproduct is a 
locatable mineral.’’. 
(b) CONFORMING AMENDMENT.—
(1) Section 18 of the Geothermal Steam Act of 
1970 (30 U.S.C. 1017) is amended by striking ‘‘sub-
section (c) or (g)’’ and inserting ‘‘subsection (g)’’. 
(2) Section 20 of the Geothermal Steam Act of 
1970 (30 U.S.C. 1019) is amended by striking ‘‘, in-
cluding the payments referred to in section 6(i),’’.
582
SEC. 30613. ADVANCED ROYALTIES REQUIRED FOR SUS-
PENSION OF PRODUCTION. 
Section 5 of the Geothermal Steam Act of 1970 (30 
U.S.C. 1004) is further amended by adding at the end 
the following: 
‘‘(d) ADVANCED ROYALTIES REQUIRED FOR SUS-
PENSION OF PRODUCTION.—(1) If production of heat or 
energy under a geothermal lease is suspended after the 
date of any such production for which royalty is required 
under section 5(a), the Secretary shall require the lessee, 
until the end of such suspension, to pay royalty in advance 
at the monthly pro-rata rate of the average annual rate 
at which such royalty was paid each year in the 5-year-
period preceding the date of suspension. 
‘‘(2) Paragraph (1) shall not apply if the suspension 
is required or otherwise caused by the Secretary, the Sec-
retary of a military department, or a State or local govern-
ment.’’.
SEC. 30614. ANNUAL RENTAL. 
(a) ANNUAL RENTAL RATE.—Section 5 of the Geo-
thermal Steam Act of 1970 (30 U.S.C. 1004) is further 
amended in subsection (a) in paragraph (3) by striking 
‘‘$1 per acre or fraction thereof for each year of the lease’’ 
and all that follows through the end of the paragraph and 
inserting ‘‘$1 per acre or fraction thereof for each year 
of the lease in the case of a lease awarded in a noncompeti-
583
tive lease sale; or $2 per acre or fraction thereof for the 
first year, $3 per acre or fraction thereof for each of the 
second through tenth years, and $5 per acre or fraction 
thereof for each year after the 10th year thereof, in the 
case of a lease awarded in a competitive lease sale; and’’. 
(b) TERMINATION OF LEASE FOR FAILURE TO PAY 
RENTAL.—Section 5 of the Geothermal Steam Act of 
1970 (30 U.S.C. 1004) is further amended by adding at 
the end the following: 
‘‘(e) TERMINATION OF LEASE FOR FAILURE TO PAY 
RENTAL.—
‘‘(1) IN GENERAL.—The Secretary shall termi-
nate any lease with respect to which rental is not 
paid in accordance with this Act and the terms of 
the lease under which the rental is required, upon 
the expiration of the 45-day period beginning on the 
date of the failure to pay such rental. 
‘‘(2) 
NOTIFICATION.—The 
Secretary 
shall 
promptly notify a lessee that has not paid rental re-
quired under the lease that the lease will be termi-
nated at the end of the period referred to in para-
graph (1). 
‘‘(3) REINSTATEMENT.—A lease that would 
otherwise terminate under paragraph (1) shall not 
terminate under that paragraph if the lessee pays to
584
the Secretary, before the end of the period referred 
to in paragraph (1), the amount of rental due plus 
a late fee equal to 10 percent of such amount.’’.
TITLE VII—COAL 
SEC. 30701. SHORT TITLE. 
This title may be cited as the ‘‘Coal Leasing Amend-
ments Act of 2003’’. 
SEC. 30702. REPEAL OF THE 160-ACRE LIMITATION FOR 
COAL LEASES. 
Section 3 of the Mineral Leasing Act (30 U.S.C. 203) 
is amended in the first sentence by striking ‘‘such lease,’’ 
and all that follows through the end of the sentence and 
inserting ‘‘such lease.’’. 
SEC. 30703. MINING PLANS. 
Section 2(d)(2) of the Mineral Leasing Act (30 
U.S.C. 202a(2)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(2)’’; and 
(2) by adding at the end the following: 
‘‘(B) The Secretary may establish a period of more 
than 40 years if the Secretary determines that the longer 
period—
‘‘(i) will ensure the maximum economic recovery 
of a coal deposit; or
585
‘‘(ii) the longer period is in the interest of the 
orderly, efficient, or economic development of a coal 
resource.’’. 
SEC. 30704. PAYMENT OF ADVANCE ROYALTIES UNDER 
COAL LEASES. 
(a) IN GENERAL.—Section 7(b) of the Mineral Leas-
ing Act of 1920 (30 U.S.C. 207(b)) is amended to read 
as follows: 
‘‘(b)(1) Each lease shall be subjected to the condition 
of diligent development and continued operation of the 
mine or mines, except where operations under the lease 
are interrupted by strikes, the elements, or casualties not 
attributable to the lessee. 
‘‘(2)(A) The Secretary of the Interior, upon deter-
mining that the public interest will be served thereby, may 
suspend the condition of continued operation upon the 
payment of advance royalties. 
‘‘(B) Such advance royalties shall be computed based 
on the average price for coal sold in the spot market from 
the same region during the last month of each applicable 
continued operation year. 
‘‘(C) The aggregate number of years during the ini-
tial and any extended term of any lease for which advance 
royalties may be accepted in lieu of the condition of contin-
ued operation shall not exceed 20.
586
‘‘(3) The amount of any production royalty paid for 
any year shall be reduced (but not below zero) by the 
amount of any advance royalties paid under such lease to 
the extent that such advance royalties have not been used 
to reduce production royalties for a prior year. 
‘‘(4) This subsection shall be applicable to any lease 
or logical mining unit in existence on the date of the enact-
ment of this paragraph or issued or approved after such 
date. 
‘‘(5) Nothing in this subsection shall be construed to 
affect the requirement contained in the second sentence 
of subsection (a) relating to commencement of production 
at the end of 10 years.’’. 
(b) AUTHORITY TO WAIVE, SUSPEND, OR REDUCE 
ADVANCE ROYALTIES.—Section 39 of the Mineral Leas-
ing Act (30 U.S.C. 209) is amended by striking the last 
sentence. 
SEC. 30705. ELIMINATION OF DEADLINE FOR SUBMISSION 
OF COAL LEASE OPERATION AND RECLAMA-
TION PLAN. 
Section 7(c) of the Mineral Leasing Act (30 U.S.C. 
207(c)) is amended by striking ‘‘and not later than three 
years after a lease is issued,’’.
587
SEC. 30706. AMENDMENTS RELATING TO FINANCIAL ASSUR-
ANCES WITH RESPECT TO BONUS BIDS. 
(a) PROHIBITION ON REQUIRING SURETY BONDS.—
Section 2(a) of the Mineral Leasing Act (30 U.S.C. 
201(a)) is amended by adding at the end the following: 
‘‘(4) The Secretary shall not require a surety bond 
or any other financial assurance to guarantee payment of 
deferred bonus bid installments with respect to any coal 
lease issued based upon a cash bonus bid. 
‘‘(5) Notwithstanding any other provision of law, if 
the lessee under a coal lease fails to pay any installment 
of a deferred cash bonus bid within 10 days after the Sec-
retary provides written notice that payment of such in-
stallment is past due—
‘‘(A) such lease shall automatically terminate; 
‘‘(B) any deferred bonus payments that have 
not been paid to the United States with respect to 
such lease shall no longer be owed to the United 
States; and 
‘‘(C) any bonus payments already made to the 
United States with respect to such lease shall not be 
returned to the lessee or credited in any future lease 
sale.’’. 
(b) CONFORMING AMENDMENT.—Section 2(a)(1) of 
the Mineral Leasing Act (30 U.S.C. 201(a)(1)) is amend-
ed by striking ‘‘Upon default or cancellation of any coal
588
lease for which bonus payments are due, any unpaid re-
mainder of the bid shall be immediately payable to the 
United States.’’. 
SEC. 30707. INVENTORY REQUIREMENT. 
(a) REVIEW OF ASSESSMENTS.—
(1) IN GENERAL.—The Secretary of the Inte-
rior, in consultation with the Secretary of Agri-
culture and the Secretary of Energy, shall review 
coal assessments and other available data to iden-
tify—
(A) public lands with coal resources; 
(B) the extent and nature of any restric-
tions or impediments to the development of coal 
resources on public lands identified under para-
graph (1); and 
(C) with respect to areas of such lands for 
which sufficient data exists, resources of com-
pliant coal and supercompliant coal. 
(2) DEFINITIONS.—For purposes of this sub-
section—
(A) the term ‘‘compliant coal’’ means coal 
that contains not less than 1.0 and not more 
than 1.2 pounds of sulfur dioxide per million 
Btu; and
589
(B) the term ‘‘supercompliant coal’’ means 
coal that contains less than 1.0 pounds of sul-
fur dioxide per million Btu. 
(b) COMPLETION AND UPDATING OF THE INVEN-
TORY.—The Secretary—
(1) shall complete the inventory under sub-
section (a) by not later than 2 years after the date 
of the enactment of this Act; and 
(2) shall update the inventory as the availability 
of data and developments in technology warrant. 
(c) REPORT.—The Secretary shall submit to the 
Committee on Resources of the House of Representatives 
and to the Committee on Energy and Natural Resources 
of the Senate and make publicly available—
(1) a report containing the inventory under this 
section, by not later than 2 years after the effective 
date of this section; and 
(2) each update of such inventory. 
SEC. 30708. APPLICATION OF AMENDMENTS. 
The amendments made by this title apply with re-
spect to any coal lease issued before, on, or after the date 
of the enactment of this Act.
590
TITLE VIII—INSULAR AREAS 
ENERGY SECURITY 
SEC. 30801. INSULAR AREAS ENERGY SECURITY. 
Section 604 of the Act entitled ‘‘An Act to authorize 
appropriations for certain insular areas of the United 
States, and for other purposes’’, approved December 24, 
1980 (Public Law 96–597; 94 Stat. 3480–3481), is 
amended—
(1) in subsection (a)(4) by striking the period 
and inserting a semicolon; 
(2) by adding at the end of subsection (a) the 
following new paragraphs: 
‘‘(5) electric power transmission and distribu-
tion lines in insular areas are inadequate to with-
stand damage caused by the hurricanes and ty-
phoons which frequently occur in insular areas and 
such damage often costs millions of dollars to repair; 
and 
‘‘(6) the refinement of renewable energy tech-
nologies since the publication of the 1982 Territorial 
Energy Assessment prepared pursuant to subsection 
(c) reveals the need to reassess the state of energy 
production, consumption, infrastructure, reliance on 
imported energy, and indigenous sources in regard 
to the insular areas.’’;
591
(3) by amending subsection (e) to read as fol-
lows: 
‘‘(e)(1) The Secretary of the Interior, in consultation 
with the Secretary of Energy and the chief executive offi-
cer of each insular area, shall update the plans required 
under subsection (c) by—
‘‘(A) updating the contents required by sub-
section (c); 
‘‘(B) drafting long-term energy plans for such 
insular areas with the objective of reducing, to the 
extent feasible, their reliance on energy imports by 
the year 2010 and maximizing, to the extent fea-
sible, use of indigenous energy sources; and 
‘‘(C) drafting long-term energy transmission 
line plans for such insular areas with the objective 
that the maximum percentage feasible of electric 
power transmission and distribution lines in each in-
sular area be protected from damage caused by hur-
ricanes and typhoons. 
‘‘(2) Not later than May 31, 2004, the Secretary of 
the Interior shall submit to the Congress the updated 
plans for each insular area required by this subsection.’’; 
and 
(4) by amending subsection (g)(4) to read as 
follows:
592
‘‘(4) 
POWER
LINE
GRANTS
FOR
TERRI-
TORIES.—
‘‘(A) IN GENERAL.—The Secretary of the 
Interior is authorized to make grants to govern-
ments of territories of the United States to 
carry out eligible projects to protect electric 
power transmission and distribution lines in 
such territories from damage caused by hurri-
canes and typhoons. 
‘‘(B) ELIGIBLE PROJECTS.—The Secretary 
may award grants under subparagraph (A) only 
to governments of territories of the United 
States that submit written project plans to the 
Secretary for projects that meet the following 
criteria: 
‘‘(i) The project is designed to protect 
electric power transmission and distribu-
tion lines located in one or more of the ter-
ritories of the United States from damage 
caused by hurricanes and typhoons. 
‘‘(ii) The project is likely to substan-
tially reduce the risk of future damage, 
hardship, loss, or suffering. 
‘‘(iii) The project addresses one or 
more problems that have been repetitive or
593
that pose a significant risk to public health 
and safety. 
‘‘(iv) The project is not likely to cost 
more than the value of the reduction in di-
rect damage and other negative impacts 
that the project is designed to prevent or 
mitigate. The cost benefit analysis required 
by this criterion shall be computed on a 
net present value basis. 
‘‘(v) The project design has taken into 
consideration long-term changes to the 
areas and persons it is designed to protect 
and has manageable future maintenance 
and modification requirements. 
‘‘(vi) The project plan includes an 
analysis of a range of options to address 
the problem it is designed to prevent or 
mitigate and a justification for the selec-
tion of the project in light of that analysis. 
‘‘(vii) The applicant has demonstrated 
to the Secretary that the matching funds 
required by subparagraph (D) are avail-
able. 
‘‘(C) PRIORITY.—When making grants 
under this paragraph, the Secretary shall give
594
priority to grants for projects which are likely 
to—
‘‘(i) have the greatest impact on re-
ducing future disaster losses; and 
‘‘(ii) best conform with plans that 
have been approved by the Federal Govern-
ment or the government of the territory 
where the project is to be carried out for 
development or hazard mitigation for that 
territory. 
‘‘(D) 
MATCHING
REQUIREMENT.—The 
Federal share of the cost for a project for which 
a grant is provided under this paragraph shall 
not exceed 75 percent of the total cost of that 
project. The non-Federal share of the cost may 
be provided in the form of cash or services. 
‘‘(E) TREATMENT OF FUNDS FOR CERTAIN 
PURPOSES.—Grants provided under this para-
graph shall not be considered as income, a re-
source, or a duplicative program when deter-
mining eligibility or benefit levels for Federal 
major disaster and emergency assistance. 
‘‘(F) 
AUTHORIZATION
OF
APPROPRIA-
TIONS.—There is authorized to be appropriated 
to carry out this paragraph $5,000,000 for each
595
fiscal year beginning after the date of the en-
actment of this paragraph.’’.
TITLE IX—MISCELLANEOUS 
PROVISIONS 
SEC. 30901. REPORT ON ENERGY FACILITY RIGHTS-OF-WAY 
AND CORRIDORS ON FEDERAL LANDS. 
(a) REPORT TO CONGRESS.—
(1) IN GENERAL.—Not later than 1 year after 
the date of the enactment of this section, the Sec-
retary of Agriculture and the Secretary of the Inte-
rior, in consultation with the Secretaries of Com-
merce, Defense, and Energy and the Federal Energy 
Regulatory Commission, shall submit to the Commit-
tees on Energy and Commerce and Resources of the 
House of Representatives and the Committee on En-
ergy and Natural Resources of the Senate a joint re-
port—
(A) addressing—
(i) the location of existing rights-of-
way and designated and de facto corridors 
for oil and gas pipelines and electric trans-
mission and distribution facilities on Fed-
eral lands; and 
(ii) opportunities for additional oil 
and gas pipeline and electric transmission
596
capacity within such rights-of-way and cor-
ridors; and 
(B) containing a plan for making available, 
upon request, to the appropriate Federal, State, 
and local agencies, tribal governments, and 
other persons involved in the siting of oil and 
gas pipelines and electricity transmission facili-
ties Geographic Information System-based in-
formation regarding the location of such exist-
ing rights-of-way and corridors and any planned 
rights-of-way and corridors. 
(2) CONSULTATIONS AND CONSIDERATIONS.—
In undertaking the report, the Secretary of the Inte-
rior and the Secretary of Agriculture shall consult 
with—
(A) other agencies of Federal, State, tribal, 
or local units of government as appropriate; 
(B) persons involved in the siting of oil 
and gas pipelines and electric transmission fa-
cilities; and 
(C) other interested members of the public. 
(3) LIMITATION.—The Secretary of the Interior 
and the Secretary of Agriculture shall limit the dis-
tribution of the report and Geographic Information 
System-based information referred to in paragraph
597
(1) as necessary for national and infrastructure se-
curity reasons, if either Secretary determines that 
such information is authorized to be withheld from 
public disclosure pursuant to a national security or 
other exception under section 552(b) of title 5, 
United States Code (popularly known as the ‘‘Free-
dom of Information Act’’). 
(b) CORRIDOR DESIGNATIONS.—
(1) WITHIN
THE
CONTIGUOUS
WESTERN 
STATES.—Not later than 24 months after the date 
of the enactment of this section, the Secretaries of 
Agriculture, Commerce, Defense, Energy, and the 
Interior, in consultation with the Federal Energy 
Regulatory Commission and the affected utility in-
dustries, jointly shall—
(A) designate, pursuant to title 5 of the 
Federal Land Policy and Management Act of 
1976 (43 U.S.C. 1761 et seq.), and other appli-
cable Federal laws, corridors needed or useful 
for oil and gas pipelines and electricity trans-
mission and facilities on Federal lands in the 
eleven contiguous Western States as that term 
is defined in section 103(o) of the Federal Land 
Policy and Management Act of 1976 (43 U.S.C. 
1702(o));
598
(B) perform any environmental reviews 
that may be required to complete the designa-
tions of corridors for such facilities on Federal 
lands in those States; and 
(C) incorporate the designated corridors 
into the relevant departmental and agency land 
use and resource management plans or the 
equivalent. 
(2) WITHIN
THE
REMAINING
STATES.—Not 
later than 4 years after the date of the enactment 
of this section, the Secretaries of Agriculture, Com-
merce, Defense, Energy, and the Interior, in con-
sultation with the Federal Energy Regulatory Com-
mission and the affected utility industries, jointly 
shall identify corridors needed or useful for oil and 
gas pipelines and electricity transmission and dis-
tribution facilities on Federal lands in the States 
other than those described in paragraph (1), and 
shall schedule prompt action to identify, designate, 
and incorporate these corridors into the land use 
plan. 
(3) ONGOING
RESPONSIBILITIES.—The Secre-
taries of Agriculture, Commerce, Defense, Energy, 
and the Interior, in consultation with the Federal 
Energy Regulatory Commission and the affected
599
utility industries, shall ensure that additional cor-
ridors as may be needed or useful for oil and gas 
pipelines and electricity transmission and distribu-
tion facilities on Federal lands are promptly des-
ignated. The Secretaries shall provide a process for 
the prompt review of applications for such corridors. 
(c) FACTORS TO CONSIDER.—When carrying out this 
section, the Secretaries shall take into account the need 
for upgraded and new electricity transmission and dis-
tribution facilities to improve reliability, relieve congestion, 
and enhance the capability of the national grid to deliver 
electricity. 
(d) DEFINITION OF CORRIDOR.—As used in this sec-
tion and for purposes of title V of the Federal Land Policy 
and Management Act of 1976, the term ‘corridor’ shall 
mean a linear strip of land without definite width, but lim-
ited by technological, environmental, and topographical 
factors, and that contains or may in the future contain 
one or more utility, communication, or transportation fa-
cilities. A corridor is a land use designation identified for 
the purpose of establishing policy direction as to the pre-
ferred location of compatible linear facilities and compat-
ible and conflicting land uses. It does not imply entitle-
ment of use or limits as to siting facilities in additional 
locations. Appropriate environmental review and regu-
600
latory permitting reflecting work already undertaken in 
the designation of a corridor shall precede occupancy on 
a project-specific basis. 
SEC. 30902. ELECTRICITY TRANSMISSION LINE RIGHT-OF-
WAY, CLEVELAND NATIONAL FOREST AND 
ADJACENT PUBLIC LANDS, CALIFORNIA. 
(a) ISSUANCE.—Subject to subsection (c), the Sec-
retary of the Interior and the Secretary of Agriculture 
shall issue all necessary grants, easements, permits, plan 
amendments, and other approvals to allow for the siting 
and construction of a high-voltage electricity transmission 
line right-of-way running approximately north to south 
through the Trabuco Ranger District of the Cleveland Na-
tional Forest in the State of California and adjacent lands 
under the jurisdiction of the Bureau of Land Management 
and the Forest Service. The right-of-way approvals shall 
provide all necessary Federal authorization from the Sec-
retary of the Interior and the Secretary of Agriculture for 
the routing, construction, operation, and maintenance of 
a 500 KV transmission line capable of meeting the long-
term electricity transmission needs of the region between 
the existing Valley-Serrano transmission line to the north 
and the Telega–Escondido transmission line to the south, 
and for connecting to future generating capacity that may 
be developed in the region.
601
(b) PROTECTION OF WILDERNESS AREAS.—The Sec-
retary of the Interior and the Secretary of Agriculture 
shall not allow any portion of a transmission line right-
of-way corridor identified in subsection (a) to enter any 
identified wilderness area in existence as of the date of 
the enactment of this section. 
(c) ENVIRONMENTAL
AND
ADMINISTRATIVE
RE-
VIEWS.—
(1) DEPARTMENT
OF
INTERIOR
OR
LOCAL 
AGENCY.—The Secretary of the Interior, acting 
through the Bureau of Land Management, shall be 
the lead Federal agency with overall responsibility to 
ensure completion of required environmental and 
other reviews of the approvals to be issued under 
subsection (a). 
(2) NATIONAL FOREST SYSTEM LAND.—For the 
portions of the corridor on National Forest System 
lands, the Secretary of Agriculture shall complete all 
required environmental reviews and administrative 
actions in coordination with the Secretary of the In-
terior. 
(3) EXPEDITIOUS
COMPLETION.—The reviews 
required for issuance of the approvals under sub-
section (a) shall be completed not later than 1 year 
after the date of the enactment of this Act.
602
(d) TIME
FOR ISSUANCE.—The necessary grants, 
easements, permits, plan amendments, and other approv-
als for the transmission line right-of-way shall be issued 
not later than 60 days after the completion of the environ-
mental reviews under subsection (c). 
(e) OTHER TERMS AND CONDITIONS.—The trans-
mission line right-of-way shall be subject to such terms 
and conditions as the Secretary of the Interior and the 
Secretary of Agriculture consider necessary, as a result 
of the environmental reviews under subsection (c), to pro-
tect the value of historic, cultural, and natural resources 
under the jurisdiction of the Department of the Interior 
or the Department of Agriculture. 
(f) PREFERENCE AMONG PROPOSALS.—The Sec-
retary of the Interior and the Secretary of Agriculture 
shall give a preference to any application or preapplication 
proposal for a transmission line right-of-way, as described 
in subsection (a), that was submitted before December 31, 
2002, over all other applications and proposals for the 
same or similar right-of-way submitted on or after that 
date. 
SEC. 30903. CONSULTATION REGARDING ENERGY RIGHTS-
OF-WAY ON PUBLIC LANDS. 
(a) IN GENERAL.—Not later than 6 months after the 
date of the enactment of this Act, the Secretary of the
603
Interior and the Secretary of Agriculture shall enter into, 
and submit to the Congress, a memorandum of under-
standing in accordance with this section regarding the 
processing of new applications for linear rights of way for 
electrical transmission lines and oil or gas pipelines on 
public lands within the jurisdiction of the Secretary of the 
Interior and National Forest System lands within the ju-
risdiction of the Secretary of Agriculture. 
(b) CONTENTS.—The memorandum of understanding 
shall include provisions that—
(1) establish an administrative procedure for 
processing right-of-way applications, including lines 
of authority, steps in application processing, and 
timeframes for application processing; 
(2) provide for coordination of planning relating 
to the granting of these rights-of-way; 
(3) provide for coordination of environmental 
compliance efforts to avoid duplication of effort; and 
(4) provide for coordination of use of right-of-
way stipulations to achieve consistency.
SEC. 30904. ENHANCING ENERGY EFFICIENCY IN MANAGE-
MENT OF FEDERAL LANDS. 
(a) SENSE OF THE CONGRESS.—It is the sense of the 
Congress that Federal agencies should enhance the use of
604
energy efficient technologies in the management of natural 
resources. 
(b) ENERGY EFFICIENT BUILDINGS.—To the extent 
practicable, the Secretary of the Interior, the Secretary 
of Commerce, and the Secretary of Agriculture shall seek 
to incorporate energy efficient technologies in public and 
administrative buildings associated with management of 
the National Park System, National Wildlife Refuge Sys-
tem, National Forest System, National Marine Sanc-
tuaries System, and other public lands and resources man-
aged by the Secretaries. 
(c) ENERGY EFFICIENT VEHICLES.—To the extent 
practicable, the Secretary of the Interior, the Secretary 
of Commerce, and the Secretary of Agriculture shall seek 
to use energy efficient motor vehicles, including vehicles 
equipped with biodiesel or hybrid engine technologies, in 
the management of the National Park System, National 
Wildlife Refuge System, National Forest System, National 
Marine Sanctuaries System, and other public lands and 
resources managed by the Secretaries.
SEC. 30905. PERMITTING OF WIND ENERGY DEVELOPMENT 
PROJECTS ON PUBLIC LANDS. 
(a) REQUIRED POLICIES AND PROCEDURES.—The 
Secretary of the Interior shall process right-of-way appli-
cations for wind energy site testing and monitoring facili-
605
ties on public lands administered by the Bureau of Land 
Management in accordance with policies and procedures 
that are substantially the same as those set forth in Bu-
reau of Land Management Instruction Memorandum No. 
2003-020, dated October 16, 2002. 
(b) LIMITATION ON RENT AND OTHER CHARGES.—
(1) IN GENERAL.—The Secretary of the Inte-
rior may not impose rent and other charges with re-
spect to any wind energy development project on 
public lands that, in the aggregate, exceed 50 per-
cent of the maximum amount of rent that could be 
charged with respect to that project under the terms 
of the Bureau of Land Management Instruction 
Memorandum referred to in subsection (a). 
(2) TERMINATION.—Paragraph (1) shall not 
apply after the earlier of—
(A) the date on which the Secretary of the 
Interior determines there exists at least 10,000 
megawatts of electricity generating capacity 
from non-hydropower renewable energy re-
sources on public lands; or 
(B) the end of the 10-year period begin-
ning on the date of the enactment of this Act. 
(3) STATE SHARE NOT AFFECTED.—This sub-
section shall not affect any State share of rent and
606
other charges with respect to any wind energy devel-
opment project on public lands. 
SEC. 30906. SENSE OF THE CONGRESS REGARDING GEN-
ERATION CAPACITY OF ELECTRICITY FROM 
RENEWABLE ENERGY RESOURCES ON PUB-
LIC LANDS. 
It is the sense of the Congress that the Secretary of 
the Interior shall, within the next 10 years after the date 
of the enactment of this Act, seek to have approved non-
hydropower renewable energy projects located on the pub-
lic lands with a generation capacity of at least 10,000 
megawatts of electricity. 
SEC. 30907. ASSESSMENT OF OCEAN THERMAL ENERGY RE-
SOURCES. 
(a) RESOURCE ASSESSMENT.—Not later than 3 
months after the date of the enactment of this Act, and 
each year thereafter, the Secretary of the Interior shall—
(1) review assessments of ocean thermal energy 
resources, other than resources of any area of the 
Outer Continental Shelf that is subject to a morato-
rium on leasing for energy exploration or develop-
ment, that are available in the United States and its 
territories and possessions; and 
(2) undertake new assessments of such re-
sources as necessary.
607
(b) CONSIDERATIONS.—In reviewing and under-
taking assessments under subsection (a), the Secretary 
shall take into account changes in market conditions, 
available technologies, and other relevant factors. 
(c) REPORTS.—Not later than 1 year after the date 
of the enactment of this Act, and each year thereafter, 
the Secretary shall publish a report on reviews and assess-
ments under subsection (a). Each report shall contain—
(1) a detailed inventory of the available amount 
and characteristics of ocean thermal energy re-
sources; 
(2) estimates of the costs of actions needed to 
develop and accelerate efforts to commercialize ocean 
thermal energy conversion; and 
(3) such other information as the Secretary 
considers would be useful in developing ocean ther-
mal energy resources. 
SEC. 30908. SENSE OF THE CONGRESS REGARDING DEVEL-
OPMENT OF MINERALS UNDER PADRE IS-
LAND NATIONAL SEASHORE. 
(a) FINDINGS.—The Congress finds the following: 
(1) Pursuant to Public Law 87–712 (16 U.S.C. 
459d et seq.; popularly known as the ‘‘Federal Ena-
bling Act’’) and various deeds and actions there-
under, the United States is the owner of the surface
608
estate only of certain lands constituting the Padre 
Island National Seashore. 
(2) Ownership of the oil, gas, and other min-
erals in the subsurface estate of the lands consti-
tuting the Padre Island National Seashore was never 
acquired by the United States and ownership of 
those interests are held by the State of Texas and 
private parties. 
(3) The Federal Enabling Act expressly con-
templated that the United States would recognize 
the ownership and future development of the oil, 
gas, and other minerals in the subsurface estate of 
the lands constituting the Padre Island National 
Seashore by the owners and their mineral lessees 
and recognized that approval of the State of Texas 
was required to create Padre Island National Sea-
shore. 
(4) Approval was given for the creation of 
Padre Island National Seashore by the State of 
Texas through TEX. REV. CIV. STAT. ANN. Art. 
6077(t) (Vernon 1970), which expressly recognized 
that development of the oil, gas, and other minerals 
in the subsurface of the lands constituting Padre Is-
land National Seashore would be conducted with full
609
rights of ingress and egress under the laws of the 
State of Texas. 
(b) SENSE OF THE CONGRESS.—With regard to Fed-
eral law, any regulation of the development of oil, gas, or 
other minerals in the subsurface of the lands constituting 
Padre Island National Seashore should be made as if those 
lands retained the status that they had on September 27, 
1962.
DIVISION D—TAX
SEC. 40001. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This division may be cited as the 
‘‘Energy Tax Policy Act of 2003’’. 
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this division an 
amendment or repeal is expressed in terms of an amend-
ment to, or repeal of, a section or other provision, the ref-
erence shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
TITLE I—CONSERVATION 
SEC. 41001. CREDIT FOR RESIDENTIAL SOLAR ENERGY 
PROPERTY. 
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal 
credits) is amended by inserting after section 25B the fol-
lowing new section:
610
‘‘SEC. 25C. RESIDENTIAL SOLAR ENERGY PROPERTY. 
‘‘(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 the sum of—
‘‘(1) 15 percent of the qualified photovoltaic 
property expenditures made by the taxpayer during 
such year, and 
‘‘(2) 15 percent of the qualified solar water 
heating property expenditures made by the taxpayer 
during the taxable year. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM
CREDIT.—The credit allowed 
under subsection (a) shall not exceed—
‘‘(A) $2,000 for each system of property 
described in subsection (c)(1), and 
‘‘(B) $2,000 for each system of property 
described in subsection (c)(2). 
‘‘(2) SAFETY CERTIFICATIONS.—No credit shall 
be allowed under this section for an item of property 
unless—
‘‘(A) in the case of solar water heating 
equipment, such equipment is certified for per-
formance and safety by the non-profit Solar 
Rating Certification Corporation or a com-
parable entity endorsed by the government of
611
the State in which such property is installed, 
and 
‘‘(B) in the case of a photovoltaic system, 
such system meets appropriate fire and electric 
code requirements. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED SOLAR WATER HEATING PROP-
ERTY
EXPENDITURE.—The term ‘qualified solar 
water heating property expenditure’ means an ex-
penditure for property to heat water for use in a 
dwelling unit located in the United States and used 
as a residence if at least half of the energy used by 
such property for such purpose is derived from the 
sun. 
‘‘(2) QUALIFIED PHOTOVOLTAIC PROPERTY EX-
PENDITURE.—The term ‘qualified photovoltaic prop-
erty expenditure’ means an expenditure for property 
which uses solar energy to generate electricity for 
use in a dwelling unit. 
‘‘(3) SOLAR PANELS.—No expenditure relating 
to a solar panel or other property installed as a roof 
(or portion thereof) shall fail to be treated as prop-
erty described in paragraph (1) or (2) solely because 
it constitutes a structural component of the struc-
ture on which it is installed.
612
‘‘(4) LABOR
COSTS.—Expenditures for labor 
costs properly allocable to the onsite preparation, as-
sembly, or original installation of the property de-
scribed in paragraph (1) or (2) and for piping or 
wiring to interconnect such property to the dwelling 
unit shall be taken into account for purposes of this 
section. 
‘‘(5) SWIMMING POOLS, ETC., USED AS STOR-
AGE MEDIUM.—Expenditures which are properly al-
locable to a swimming pool, hot tub, or any other 
energy storage medium which has a function other 
than the function of such storage shall not be taken 
into account for purposes of this section. 
‘‘(d) SPECIAL RULES.—
‘‘(1) DOLLAR AMOUNTS IN CASE OF JOINT OC-
CUPANCY.—In the case of any dwelling unit which is 
jointly occupied and used during any calendar year 
as a residence by 2 or more individuals the following 
shall apply: 
‘‘(A) The amount of the credit allowable 
under subsection (a) by reason of expenditures 
made during such calendar year by any of such 
individuals with respect to such dwelling unit 
shall be determined by treating all of such indi-
613
viduals as 1 taxpayer whose taxable year is 
such calendar year. 
‘‘(B) There shall be allowable with respect 
to such expenditures to each of such individ-
uals, a credit under subsection (a) for the tax-
able year in which such calendar year ends in 
an amount which bears the same ratio to the 
amount determined under subparagraph (A) as 
the amount of such expenditures made by such 
individual during such calendar year bears to 
the aggregate of such expenditures made by all 
of such individuals during such calendar year. 
‘‘(C) Subparagraphs (A) and (B) shall be 
applied separately with respect to qualified 
solar water heating property expenditures and 
qualified photovoltaic property expenditures. 
‘‘(2) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as 
defined in such section), such individual shall be 
treated as having made his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of 
any expenditures of such corporation. 
‘‘(3) CONDOMINIUMS.—
614
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be 
treated as having made his proportionate share 
of any expenditures of such association. 
‘‘(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. 
‘‘(4) 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. 
‘‘(5) 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.
615
‘‘(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 
constructed or reconstructed structure by the 
taxpayer begins. 
‘‘(C) AMOUNT.—The amount of any ex-
penditure shall be the cost thereof. 
‘‘(6) 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)(A)). 
‘‘(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
616
December 31, 2006 (December 31, 2008, with respect to 
qualified photovoltaic property expenditures).’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 1016 is amended 
by striking ‘‘and’’ at the end of paragraph (27), by 
striking the period at the end of paragraph (28) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(29) 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 solar energy property.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2003. 
SEC. 41002. EXTENSION AND EXPANSION OF CREDIT FOR 
ELECTRICITY PRODUCED FROM RENEWABLE 
RESOURCES. 
(a) EXTENSION OF CREDIT FOR WIND AND CLOSED-
LOOP BIOMASS FACILITIES.—Subparagraphs (A) and (B) 
of section 45(c)(3) are each amended by striking ‘‘2004’’ 
and inserting ‘‘2007’’.
617
(b) EXPANSION OF CREDIT FOR OPEN-LOOP BIO-
MASS, LANDFILL GAS FACILITIES, AND TRASH COMBUS-
TION FACILITIES.—Paragraph (3) of section 45(c) is 
amended by adding at the end the following new subpara-
graphs: 
‘‘(D) OPEN-LOOP BIOMASS FACILITIES.—
In the case of a facility using open-loop biomass 
to produce electricity, the term ‘qualified facil-
ity’ means any facility owned by the taxpayer 
which is originally placed in service before Jan-
uary 1, 2007. 
‘‘(E) LANDFILL GAS FACILITIES.—In the 
case of a facility producing electricity from gas 
derived from the biodegradation of municipal 
solid waste, the term ‘qualified facility’ means 
any facility owned by the taxpayer which is 
originally placed in service before January 1, 
2007. 
‘‘(F) TRASH COMBUSTION FACILITIES.—In 
the case of a facility which burns municipal 
solid waste to produce electricity, the term 
‘qualified facility’ means any facility owned by 
the taxpayer which is originally placed in serv-
ice after the date of the enactment of this sub-
paragraph and before January 1, 2007.’’.
618
(c) DEFINITION AND SPECIAL RULES.—Subsection 
(c) of section 45 is amended by adding at the end the 
following new paragraphs: 
‘‘(5) OPEN-LOOP
BIOMASS.—The term ‘open-
loop biomass’ means any solid, nonhazardous, cel-
lulosic waste material which is segregated from other 
waste materials and which is derived from—
‘‘(A) any of the following forest-related re-
sources: mill residues, precommercial thinnings, 
slash, and brush, 
‘‘(B) solid wood waste materials, including 
waste pallets, crates, dunnage, manufacturing 
and construction wood wastes (other than pres-
sure-treated, 
chemically-treated, 
or 
painted 
wood wastes), and landscape or right-of-way 
tree trimmings, but not including municipal 
solid waste (garbage), gas derived from the bio-
degradation of solid waste, or paper that is 
commonly recycled, or 
‘‘(C) agriculture sources, including orchard 
tree crops, vineyard, grain, legumes, sugar, and 
other crop by-products or residues. 
Such term shall not include closed-loop biomass. 
‘‘(6) 
REDUCED
CREDIT
FOR
CERTAIN 
PREEFFECTIVE DATE FACILITIES.—In the case of
619
any facility described in subparagraph (D) or (E) of 
paragraph (3) which is placed in service before the 
date of the enactment of this paragraph—
‘‘(A) subsection (a)(1) shall be applied by 
substituting ‘1.0 cents’ for ‘1.5 cents’, and 
‘‘(B) the 5-year period beginning on the 
date of the enactment of this paragraph shall 
be substituted in lieu of the 10-year period in 
subsection (a)(2)(A)(ii). 
‘‘(7) CREDIT ELIGIBILITY FOR OPEN-LOOP BIO-
MASS FACILITIES.—In the case of any facility de-
scribed in paragraph (3)(D) which is placed in serv-
ice before the date of enactment of this paragraph, 
if the owner of such facility is not the producer of 
the electricity, the person eligible for the credit al-
lowable under subsection (a) is the lessee or the op-
erator of such facility. 
‘‘(8) LIMIT ON REDUCTIONS FOR GRANTS, ETC., 
FOR
OPEN-LOOP
BIOMASS
FACILITIES.—If 
the 
amount of the credit determined under subsection 
(a) with respect to any open-loop biomass facility is 
required to be reduced under paragraph (3) of sub-
section (b), the fraction under such paragraph shall 
in no event be greater than 1⁄2.
620
‘‘(9) COORDINATION
WITH
SECTION
29.—The 
term ‘qualified facility’ shall not include any facility 
the production from which is allowed as a credit 
under section 29 for the taxable year or any prior 
taxable year.’’. 
(d) QUALIFIED ENERGY RESOURCES.—Paragraph 
(1) of section 45(c) (relating to qualified energy resources) 
is amended to read as follows: 
‘‘(1) QUALIFIED
ENERGY
RESOURCES.—The 
term ‘qualified energy resources’ means any resource 
described in paragraph (3) which is used to generate 
electricity at a qualified facility.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to electricity sold after the date 
of the enactment of this Act, in taxable years ending after 
such date. 
SEC. 41003. CREDIT FOR QUALIFIED FUEL CELL POWER 
PLANTS. 
(a) BUSINESS PROPERTY.—
(1) IN GENERAL.—Subparagraph (A) of section 
48(a)(3) (defining energy 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:
621
‘‘(iii) equipment which is part of a 
qualified fuel cell power plant,’’. 
(2) QUALIFIED FUEL CELL POWER PLANT.—
Subsection (a) of section 48 is amended by redesig-
nating paragraphs (4) and (5) as paragraphs (5) 
and (6), respectively, and by inserting after para-
graph (3) the following new paragraph: 
‘‘(4) QUALIFIED FUEL CELL POWER PLANT.—
For purposes of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified 
fuel cell power plant’ means a fuel cell power 
plant that has an electricity-only generation ef-
ficiency greater than 30 percent. 
‘‘(B) LIMITATION.—The energy credit with 
respect to any qualified fuel cell power plant for 
any taxable year shall not exceed—
‘‘(i) $500 for each 1⁄2 kilowatt of ca-
pacity of the power plant, reduced by 
‘‘(ii) the aggregate energy credits al-
lowed with respect to such power plant for 
all prior taxable years. 
‘‘(C) FUEL
CELL
POWER
PLANT.—The 
term ‘fuel cell power plant’ means an integrated 
system comprised of a fuel cell stack assembly 
and associated balance of plant components
622
that converts a fuel into electricity using elec-
trochemical means. 
‘‘(D) TERMINATION.—Such term shall not 
include any property placed in service after De-
cember 31, 2006.’’. 
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to property placed in 
service after December 31, 2003, 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 Revenue Reconciliation 
Act of 1990). 
(b) NONBUSINESS PROPERTY.—
(1) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable 
personal credits) is amended by inserting after sec-
tion 25C the following new section: 
‘‘SEC. 25D. NONBUSINESS QUALIFIED FUEL CELL POWER 
PLANT. 
‘‘(a) IN GENERAL.—In the case of an individual, 
there shall be allowed as a credit against the tax imposed 
by this chapter for the taxable year an amount equal to 
10 percent of the qualified fuel cell power plant expendi-
tures which are paid or incurred during such year.
623
‘‘(b) LIMITATIONS.—The credit allowed under sub-
section (a) with respect to any qualified fuel cell power 
plant for any taxable year shall not exceed—
‘‘(1) $500 for each 1⁄2 kilowatt of capacity of 
the power plant, reduced by 
‘‘(2) the aggregate energy credits allowed with 
respect to such power plant for all prior taxable 
years. 
‘‘(c) QUALIFIED FUEL CELL POWER PLANT EX-
PENDITURES.—For purposes of this section, the term 
‘qualified fuel cell power plant expenditures’ means ex-
penditures by the taxpayer for any qualified fuel cell power 
plant (as defined in section 48(a)(4))—
‘‘(1) which meets the requirements of subpara-
graphs (B) and (D) of section 48(a)(3), and 
‘‘(2) which is installed on or in connection with 
a dwelling unit—
‘‘(A) which is located in the United States, 
and 
‘‘(B) which is used by the taxpayer as a 
residence. 
Such term includes expenditures for labor costs properly 
allocable to the onsite preparation, assembly, or original 
installation of the property.
624
‘‘(d) SPECIAL RULES.—For purposes of this section, 
rules similar to the rules of section 25C(d) shall apply. 
‘‘(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.—This section shall not apply to 
any expenditure made after December 31, 2006.’’. 
(2) CONFORMING AMENDMENTS.—
(A) Subsection (a) of section 1016 is 
amended by striking ‘‘and’’ at the end of para-
graph (28), by striking the period at the end of 
paragraph (29) and inserting ‘‘, and’’, and by 
adding at the end the following new paragraph: 
‘‘(30) to the extent provided in section 25D(e), 
in the case of amounts with respect to which a credit 
has been allowed under section 25D.’’. 
(B) The table of sections for subpart A of 
part IV of subchapter A of chapter 1 is amend-
ed by inserting after the item relating to section 
25C the following new item:
‘‘Sec. 25D. Nonbusiness qualified fuel cell power plant.’’.
(3) EFFECTIVE DATE.—The amendments made 
by this subsection shall apply to expenditures paid
625
or incurred after December 31, 2003, in taxable 
years ending after such date. 
SEC. 41004. 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) is amended by inserting after section 25D the fol-
lowing new section: 
‘‘SEC. 25E. 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 shall not ex-
ceed $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 in 1 or more prior tax-
able years, the amount of the credit otherwise allow-
626
able for the taxable year with respect to that dwell-
ing shall not exceed the amount of $2,000 reduced 
by the sum of the credits allowed under subsection 
(a) to the taxpayer with respect to the dwelling for 
all prior taxable years. 
‘‘(c) CARRYFORWARD OF UNUSED CREDIT.—If the 
credit allowable under subsection (a) exceeds the limita-
tion imposed by section 26(a) for such taxable year re-
duced by the sum of the credits allowable under this sub-
part (other than this section) for such taxable year, such 
excess shall be carried to the succeeding taxable year and 
added to the credit allowable under subsection (a) for such 
succeeding taxable year. 
‘‘(d) 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 (or, in the 
case of metal roofs with appropriate pigmented coatings, 
meets the Energy Star program requirements), if—
‘‘(1) such component is installed in or on a 
dwelling—
‘‘(A) located in the United States, and
627
‘‘(B) 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 exceeds $1,000, such components shall be 
treated as qualified energy efficiency improvements only 
if such components are also certified in accordance with 
subsection (e) as meeting such criteria. 
‘‘(e) CERTIFICATION.—The certification described in 
subsection (d) 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 effi-
cient 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-
628
proved energy performance measurement methods by 
the 
Residential 
Energy 
Services 
Network 
(RESNET), and 
‘‘(3) made in writing in a manner that specifies 
in readily verifiable fashion the energy efficient 
building envelope components installed and their re-
spective energy efficiency levels. 
‘‘(f) DEFINITIONS AND SPECIAL RULES.—
‘‘(1) TENANT-STOCKHOLDER IN COOPERATIVE 
HOUSING CORPORATION.—In the case of an indi-
vidual who is a tenant-stockholder (as defined in sec-
tion 216) in a cooperative housing corporation (as 
defined in such section), such individual shall be 
treated as having paid his tenant-stockholder’s pro-
portionate share (as defined in section 216(b)(3)) of 
the cost of qualified energy efficiency improvements 
made by such corporation. 
‘‘(2) CONDOMINIUMS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who is a member of a condominium man-
agement association with respect to a condo-
minium which he owns, such individual shall be 
treated as having paid his proportionate share 
of the cost of qualified energy efficiency im-
provements made by such association.
629
‘‘(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. 
‘‘(3) BUILDING ENVELOPE COMPONENT.—The 
term ‘building envelope component’ means insulation 
material or system which is specifically and pri-
marily designed to reduce the heat loss or gain of a 
dwelling when installed in or on such dwelling, exte-
rior windows (including skylights) and doors, and 
metal roofs with appropriate pigmented coatings 
which are specifically and primarily designed to re-
duce the heat gain of a dwelling when installed in 
or on such dwelling. 
‘‘(4) MANUFACTURED HOMES INCLUDED.—For 
purposes of this section, the term ‘dwelling’ includes 
a manufactured home which conforms to Federal 
Manufactured Home Construction and Safety Stand-
ards (section 3280 of title 24, Code of Federal Reg-
ulations, as in effect on April 3, 2003).
630
‘‘(g) 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 
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. 
‘‘(h) APPLICATION OF SECTION.—This section shall 
apply to qualified energy efficiency improvements installed 
after December 31, 2003, and before January 1, 2007.’’. 
(b) CONFORMING AMENDMENTS.—
(1) Subsection (c) of section 23 is amended by 
striking ‘‘section 1400C’’ and inserting ‘‘sections 
25E and 1400C’’. 
(2) Subsection (a) of section 1016 is amended 
by striking ‘‘and’’ at the end of paragraph (29), by 
striking the period at the end of paragraph (30) and 
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph: 
‘‘(31) to the extent provided in section 25E(g), 
in the case of amounts with respect to which a credit 
has been allowed under section 25E.’’. 
(3) Subsection (d) of section 1400C is amended 
by inserting ‘‘and section 25E’’ after ‘‘this section’’. 
(4) The table of sections for subpart A of part 
IV of subchapter A of chapter 1 is amended by in-
631
serting after the item relating to section 25D the 
following new item:
‘‘Sec. 25E. Energy efficiency improvements to existing homes.’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2003. 
SEC. 41005. BUSINESS CREDIT FOR CONSTRUCTION OF NEW 
ENERGY EFFICIENT HOME. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by inserting after section 45F the fol-
lowing new section: 
‘‘SEC. 45G. NEW ENERGY EFFICIENT HOME CREDIT. 
‘‘(a) IN GENERAL.—For purposes of section 38, in 
the case of an eligible contractor, the credit determined 
under this section for the taxable year is an amount equal 
to the aggregate adjusted bases of all energy efficient 
property installed in a qualified new energy efficient home 
during construction of such home. 
‘‘(b) LIMITATIONS.—
‘‘(1) MAXIMUM CREDIT.—
‘‘(A) IN GENERAL.—The credit allowed by 
this section with respect to a dwelling shall not 
exceed $2,000. 
‘‘(B) PRIOR CREDIT AMOUNTS ON SAME 
DWELLING TAKEN INTO ACCOUNT.—If a credit
632
was allowed under subsection (a) with respect 
to a dwelling in 1 or more prior taxable years, 
the amount of the credit otherwise allowable for 
the taxable year with respect to that dwelling 
shall not exceed the amount of $2,000 reduced 
by the sum of the credits allowed under sub-
section (a) with respect to the dwelling for all 
prior taxable years. 
‘‘(2) COORDINATION
WITH
REHABILITATION 
AND ENERGY CREDITS.—For purposes of this sec-
tion—
‘‘(A) the basis of any property referred to 
in subsection (a) shall be reduced by that por-
tion of the basis of any property which is attrib-
utable to qualified rehabilitation expenditures 
(as defined in section 47(c)(2)) or to the energy 
percentage of energy property (as determined 
under section 48(a)), and 
‘‘(B) expenditures taken into account 
under either section 47 or 48(a) shall not be 
taken into account under this section. 
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE CONTRACTOR.—The term ‘eligi-
ble contractor’ means the person who constructed 
the new energy efficient home, or in the case of a
633
manufactured home which conforms to Federal 
Manufactured Home Construction and Safety Stand-
ards (section 3280 of title 24, Code of Federal Reg-
ulations, as in effect on April 3, 2003), the manufac-
tured home producer of such home. 
‘‘(2) ENERGY
EFFICIENT
PROPERTY.—The 
term ‘energy efficient property’ means any energy 
efficient building envelope component, and any en-
ergy efficient heating or cooling appliance. 
‘‘(3) QUALIFIED
NEW
ENERGY
EFFICIENT 
HOME.—The term ‘qualified new energy efficient 
home’ means a dwelling—
‘‘(A) located in the United States, 
‘‘(B) the construction of which is substan-
tially completed after December 31, 2003, 
‘‘(C) the original use of which is as a prin-
cipal residence (within the meaning of section 
121) which commences with the person who ac-
quires such dwelling from the eligible con-
tractor, and 
‘‘(D) which is certified to have a level of 
annual heating and cooling energy consumption 
that is at least 30 percent below the annual 
level of heating and cooling energy consumption 
of a comparable dwelling constructed in accord-
634
ance with the standards of the 2000 Inter-
national Energy Conservation Code and to have 
building envelope component improvements ac-
count for 1⁄3 of such 30 percent. 
‘‘(4) CONSTRUCTION.—The term ‘construction’ 
includes reconstruction and rehabilitation. 
‘‘(5) ACQUIRE.—The term ‘acquire’ includes 
purchase and, in the case of reconstruction and re-
habilitation, such term includes a binding written 
contract for such reconstruction or rehabilitation. 
‘‘(6) BUILDING ENVELOPE COMPONENT.—The 
term ‘building envelope component’ means insulation 
material or system which is specifically and pri-
marily designed to reduce the heat loss or gain of a 
dwelling when installed in or on such dwelling, exte-
rior windows (including skylights) and doors, and 
metal roofs with appropriate pigmented coatings 
which are specifically and primarily designed to re-
duce the heat gain of a dwelling when installed in 
or on such dwelling. 
‘‘(7) MANUFACTURED HOME INCLUDED.—The 
term ‘dwelling’ includes a manufactured home con-
forming to Federal Manufactured Home Construc-
tion and Safety Standards (section 3280 of title 24,
635
Code of Federal Regulations, as in effect on April 3, 
2003). 
‘‘(d) CERTIFICATION.—
‘‘(1) METHOD.—A certification described in 
subsection (c)(3)(D) shall be determined on the 
basis of one of the following methods: 
‘‘(A) The technical specifications or appli-
cable ratings (including product labeling re-
quirements) for the measurement of energy effi-
ciency for the energy efficient building envelope 
component or energy efficient heating or cooling 
appliance, based upon energy use or building 
envelope component performance. 
‘‘(B) An energy performance measurement 
method that utilizes computer software ap-
proved by organizations designated by the Sec-
retary. 
‘‘(2) PROVIDER.—Such certification shall be 
provided by—
‘‘(A) in the case of a method described in 
paragraph (1)(A), a local building regulatory 
authority, a utility, a manufactured home pro-
duction inspection primary inspection agency 
(IPIA), or an accredited home energy rating 
systems provider who is accredited by, or other-
636
wise authorized to use, approved energy per-
formance measurement methods by the Home 
Energy Ratings Systems Council or the Na-
tional Association of State Energy Officials, or 
‘‘(B) in the case of a method described in 
paragraph (1)(B), an individual recognized by 
an organization designated by the Secretary for 
such purposes. 
‘‘(3) FORM.—Such certification shall be made 
in writing in a manner that specifies in readily 
verifiable fashion the energy efficient building enve-
lope components and energy efficient heating or 
cooling appliances installed and their respective en-
ergy efficiency levels, and in the case of a method 
described in subparagraph (B) of paragraph (1), ac-
companied by written analysis documenting the 
proper application of a permissible energy perform-
ance measurement method to the specific cir-
cumstances of such dwelling. 
‘‘(4) REGULATIONS.—
‘‘(A) IN GENERAL.—In prescribing regula-
tions under this subsection for energy perform-
ance measurement methods, the Secretary shall 
prescribe procedures for calculating annual en-
ergy costs for heating and cooling and cost sav-
637
ings and for the reporting of the results. Such 
regulations shall—
‘‘(i) be based on the National Home 
Energy Rating Technical Guidelines of the 
National Association of State Energy Offi-
cials, the Home Energy Rating Guidelines 
of the Home Energy Rating Systems 
Council, or the modified 2001 California 
Residential ACM manual, 
‘‘(ii) provide that any calculation pro-
cedures be developed such that the same 
energy efficiency measures allow a home to 
qualify for the credit under this section re-
gardless of whether the house uses a gas 
or oil furnace or boiler or an electric heat 
pump, and 
‘‘(iii) require that any computer soft-
ware allow for the printing of the Federal 
tax forms necessary for the credit under 
this section and explanations for the home-
buyer of the energy efficient features that 
were used to comply with the requirements 
of this section. 
‘‘(B) PROVIDERS.—For purposes of para-
graph (2)(B), the Secretary shall establish re-
638
quirements for the designation of individuals 
based on the requirements for energy consult-
ants and home energy raters specified by the 
National Association of State Energy Officials. 
‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is determined 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 determined. 
‘‘(f) APPLICATION OF SECTION.—Subsection (a) shall 
apply to dwellings purchased during the period beginning 
on January 1, 2004, and ending on December 31, 2006.’’. 
(b) CREDIT MADE PART OF GENERAL BUSINESS 
CREDIT.—Subsection (b) of section 38 (relating to current 
year business credit) is amended by striking ‘‘plus’’ at the 
end of paragraph (14), by striking the period at the end 
of paragraph (15) and inserting ‘‘, plus’’, and by adding 
at the end thereof the following new paragraph: 
‘‘(16) the new energy efficient home credit de-
termined under section 45G.’’. 
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C 
(relating to certain expenses for which credits are allow-
able) is amended by adding at the end thereof the fol-
lowing new subsection:
639
‘‘(d) NEW ENERGY EFFICIENT HOME EXPENSES.—
No deduction shall be allowed for that portion of expenses 
for a new energy efficient home otherwise allowable as a 
deduction for the taxable year which is equal to the 
amount of the credit determined for such taxable year 
under section 45G.’’. 
(d) LIMITATION ON CARRYBACK.—Subsection (d) of 
section 39 is amended by adding at the end the following 
new paragraph: 
‘‘(11) NO CARRYBACK OF NEW ENERGY EFFI-
CIENT HOME CREDIT BEFORE EFFECTIVE DATE.—
No portion of the unused business credit for any 
taxable year which is attributable to the credit deter-
mined under section 45G may be carried back to any 
taxable year ending before January 1, 2004.’’. 
(e) DEDUCTION FOR CERTAIN UNUSED BUSINESS 
CREDITS.—Subsection (c) of section 196 is amended by 
striking ‘‘and’’ at the end of paragraph (9), by striking 
the period at the end of paragraph (10) and inserting ‘‘, 
and’’, and by adding after paragraph (10) the following 
new paragraph: 
‘‘(11) the new energy efficient home credit de-
termined under section 45G.’’. 
(f) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1
640
is amended by inserting after the item relating to section 
45F the following new item:
‘‘Sec. 45G. New energy efficient home credit.’’.
(g) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2003. 
SEC. 41006. ENERGY CREDIT FOR COMBINED HEAT AND 
POWER SYSTEM PROPERTY. 
(a) IN GENERAL.—Subparagraph (A) of section 
48(a)(3) (defining energy property) is amended by strik-
ing ‘‘or’’ at the end of clause (ii), by adding ‘‘or’’ at the 
end of clause (iii), and by inserting after clause (iii) the 
following new clause: 
‘‘(iv) combined heat and power system 
property,’’. 
(b) COMBINED HEAT AND POWER SYSTEM PROP-
ERTY.—Subsection (a) of section 48 is amended by redes-
ignating paragraphs (5) and (6) as paragraphs (6) and 
(7), respectively, and by inserting after paragraph (4) the 
following new paragraph: 
‘‘(5) COMBINED
HEAT
AND
POWER
SYSTEM 
PROPERTY.—For purposes of this subsection—
‘‘(A) COMBINED HEAT AND POWER SYS-
TEM PROPERTY.—The term ‘combined heat and 
power system property’ means property com-
prising a system—
641
‘‘(i) which uses the same energy 
source for the simultaneous or sequential 
generation of electrical power, mechanical 
shaft power, or both, in combination with 
the generation of steam or other forms of 
useful thermal energy (including heating 
and cooling applications), 
‘‘(ii) which has an electrical capacity 
of more than 50 kilowatts or a mechanical 
energy capacity of more than 67 horse-
power or an equivalent combination of elec-
trical and mechanical energy capacities, 
‘‘(iii) which produces—
‘‘(I) at least 20 percent of its 
total useful energy in the form of 
thermal energy, and 
‘‘(II) at least 20 percent of its 
total useful energy in the form of elec-
trical or mechanical power (or com-
bination thereof), 
‘‘(iv) the energy efficiency percentage 
of which exceeds 60 percent (70 percent in 
the case of a system with an electrical ca-
pacity in excess of 50 megawatts or a me-
chanical energy capacity in excess of