I
107TH CONGRESS
1ST SESSION
H. R. 2606
To provide project assistance, loan guarantees, and tax credits for a coal
gasification demonstration project, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 24, 2001
Mrs. CAPITO introduced the following bill; which was referred to the Com-
mittee on Science, and in addition to the Committees on Energy and
Commerce, and Ways and Means, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide project assistance, loan guarantees, and tax cred-
its for a coal gasification demonstration project, and
for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Coal Gasification Com-
mercial Demonstration Project Act of 2001’’.
SEC. 2. DEMONSTRATION.
(a) PROJECT GRANT.—
(1) AUTHORITY.—The Secretary of Energy
shall make a grant for a project to demonstrate the
commercial viability of a new coal gasification com-
bined cycle technology plant.
(2) AMOUNT.—A grant made under this sub-
section may be in an amount of—
(A) $5,000,000 for design, engineering,
and other necessary preconstruction project de-
velopment activities; and
(B) $10,000,000 for construction costs (in-
cluding engineering, procurement, and associ-
ated project development activities).
(3) LOCATION.—The demonstration project for
which a grant is made under this subsection shall be
located in Kanawha County, West Virginia, or any
adjacent county.
(4) TIMING.—Not later than 30 days after the
date of the enactment of this Act, any interested
party may submit to the Secretary of Energy a pro-
posal to construct and operate a coal gasification
plant in West Virginia consistent with this sub-
section, and not later than 60 days after the date of
the enactment of this Act, the Secretary of Energy
shall select the entity to be awarded the grant.
(b) ADDITIONAL DEMONSTRATION ASSISTANCE.—
There are authorized to be appropriated to the Secretary
of Energy for each of fiscal years 2003 and 2004
$20,000,000 for providing assistance to additional
projects that demonstrate the commercial viability of coal
gasification technology.
SEC. 3. LOAN GUARANTEES.
(a) AUTHORITY.—The Secretary of Energy shall pro-
vide loan guarantees for the project receiving a grant
under section 2(a).
(b) AMOUNT.—The total amount of loans guaranteed
under this section shall be 80 percent of the total project
costs of the project receiving a grant under section 2(a).
For purposes of this subsection, total project costs include
the cost of a generally available commercial loan to finance
the project.
(c) TERMS AND CONDITIONS.—The terms and condi-
tions of a loan guarantee under this section shall be estab-
lished by negotiation between the Secretary of Energy and
representatives of the recipient of the grant under section
2(a). The Secretary—
(1) shall commence such negotiations not later
than 30 days after the selection under section
2(a)(5) of an entity to be awarded the grant;
(2) shall review the terms and conditions for
loan guarantees in section 201(d) of the Geothermal
Energy Research, Development, and Demonstration
Act of 1974 (30 U.S.C. 1141(d)) in order to facili-
tate the funding and long-term success of the
project;
(3) shall negotiate in good faith and make best
efforts to conclude those negotiations within 120
days; and
(4) if the negotiations are not concluded within
120 days, shall agree to referral of the dispute re-
garding terms and conditions to binding arbitration
(as allowed by Executive Order 12988, February 5,
1996) for a period not to exceed 90 days, so that
the objectives of this section are fulfilled.
(d) DEFINITION.—In this section, the term ‘‘loan
guarantee’’ has the meaning given that term in section
502(3) of the Federal Credit Reform Act of 1990 (2
U.S.C. 661a(3)).
SEC. 4. PROJECT APPROVAL UNDER CLEAN AIR ACT.
All new source review approvals and related permits
required under the Clean Air Act and under applicable im-
plementation plans under that Act shall be issued for the
project receiving a grant under section 2(a) by the permit-
ting State agency upon—
(1) certification by the permit applicant that
emissions of each pollutant regulated under the
Clean Air Act will be no greater than the average
emission rate identified by the Administrator of the
Environmental Protection Agency in the 3 most re-
cently permitted new source review permits for coal
gasification plants as of June 1, 2001; and
(2) certification by the permit applicant, based
on modeling using a model approved for such pur-
poses by the Administrator and incorporating the
most relevant meteorological and air quality data
available to the applicant as of June 1, 2001, that
the plant will not violate any National Ambient Air
Quality Standard nor any Prevention of Deteriora-
tion air quality increment.
SEC. 5. INVESTMENT TAX CREDIT.
(a) ALLOWANCE
OF QUALIFYING COAL GASIFI-
CATION TECHNOLOGY FACILITY CREDIT.—Section 46 of
the Internal Revenue Code of 1986 (relating to amount
of credit) is amended by striking ‘‘and’’ at the end of para-
graph (2), by striking the period at the end of paragraph
(3) and inserting ‘‘, and’’, and by adding at the end the
following:
‘‘(4) the qualifying coal gasification technology
facility credit.’’
(b) AMOUNT OF QUALIFYING COAL GASIFICATION
TECHNOLOGY FACILITY CREDIT.—Subpart E of part IV
of subchapter A of chapter 1 of the Internal Revenue Code
of 1986 (relating to rules for computing investment credit)
is amended by inserting after section 48 the following:
‘‘SEC. 48A. QUALIFYING COAL GASIFICATION TECHNOLOGY
FACILITY CREDIT.
‘‘(a) IN GENERAL.—For purposes of section 46, the
qualifying coal gasification technology facility credit for
any taxable year is an amount equal to 10 percent of the
qualified investment in a qualifying coal gasification tech-
nology facility for such taxable year.
‘‘(b) QUALIFYING COAL GASIFICATION TECHNOLOGY
FACILITY.—
‘‘(1) IN GENERAL.—For purposes of subsection
(a), the term ‘qualifying coal gasification technology
facility’ means the coal gasification project described
in section 2 of the Coal Gasification Commercial
Demonstration Project Act of 2001.
‘‘(2) SPECIAL RULE FOR SALE-LEASEBACKS.—
For purposes of paragraph (1), in the case of a fa-
cility which—
‘‘(A) is originally placed in service by a
person, and
the aggregate of each qualified progress expenditure
for the taxable year with respect to progress expend-
iture property.
‘‘(2) PROGRESS EXPENDITURE PROPERTY DE-
FINED.—For purposes of this subsection, the term
‘progress expenditure property’ means any property
being constructed by or for the taxpayer and which
it is reasonable to believe will qualify as a qualifying
coal gasification technology facility which is being
constructed by or for the taxpayer when it is placed
in service.
‘‘(3) QUALIFIED PROGRESS EXPENDITURES DE-
FINED.—For purposes of this subsection—
‘‘(A) SELF-CONSTRUCTED PROPERTY.—In
the case of any self-constructed property, the
term ‘qualified progress expenditures’ means
the amount which, for purposes of this subpart,
is properly chargeable (during such taxable
year) to capital account with respect to such
property.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—In the case of nonself-constructed prop-
erty, the term ‘qualified progress expenditures’
means the amount paid during the taxable year
to another person for the construction of such
property.
‘‘(4) OTHER
DEFINITIONS.—For purposes of
this subsection—
‘‘(A) SELF-CONSTRUCTED
PROPERTY.—
The term ‘self-constructed property’ means
property for which it is reasonable to believe
that more than half of the construction expendi-
tures will be made directly by the taxpayer.
‘‘(B) 
NONSELF-CONSTRUCTED
PROP-
ERTY.—The term ‘nonself-constructed property’
means property which is not self-constructed
property.
‘‘(C) CONSTRUCTION, 
ETC.—The term
‘construction’ includes reconstruction and erec-
tion, and the term ‘constructed’ includes recon-
structed and erected.
‘‘(D) ONLY
CONSTRUCTION
OF
QUALI-
FYING COAL GASIFICATION TECHNOLOGY FACIL-
ITY TO BE TAKEN INTO ACCOUNT.—Construc-
tion shall be taken into account only if, for pur-
poses of this subpart, expenditures therefor are
properly chargeable to capital account with re-
spect to the property.
‘‘(5) ELECTION.—Except as otherwise provided
by regulations, an election under this subsection may
be made only on or before the due date prescribed
by law (including extensions) for filing the tax-
payer’s return of the tax imposed by this chapter for
the first taxable year in which the taxpayer makes
a qualified investment. Such an election shall apply
to the taxable year for which made and to all subse-
quent taxable years. Such an election, once made,
may not be revoked except with the consent of the
Secretary.
‘‘(e) COORDINATION WITH OTHER CREDITS.—This
section shall not apply to any property with respect to
which the rehabilitation credit under section 47 or the en-
ergy credit under section 48 is allowed unless the taxpayer
elects to waive the application of such credit to such prop-
erty.
‘‘(f) TERMINATION.—This section shall not apply
with respect to any qualified investment made more than
10 years after the effective date of this section.’’
(c) RECAPTURE.—Section 50(a) of the Internal Rev-
enue Code of 1986 (relating to other special rules) is
amended by adding at the end the following:
‘‘(6) SPECIAL RULES RELATING TO QUALIFYING
COAL
GASIFICATION
TECHNOLOGY
FACILITY.—For
purposes of applying this subsection in the case of
any credit allowable by reason of section 48A, the
following shall apply:
‘‘(A) GENERAL
RULE.—In lieu of the
amount of the increase in tax under paragraph
(1), the increase in tax shall be an amount
equal to the investment tax credit allowed under
section 38 for all prior taxable years with re-
spect to a qualifying coal gasification tech-
nology facility (as defined by section 48A(b)(1))
multiplied by a fraction whose numerator is the
number of years remaining to fully depreciate
under this title the qualifying coal gasification
technology facility disposed of, and whose de-
nominator is the total number of years over
which such facility would otherwise have been
subject to depreciation. For purposes of the
preceding sentence, the year of disposition of
the qualifying coal gasification technology facil-
ity property shall be treated as a year of re-
maining depreciation.
‘‘(B) PROPERTY CEASES TO QUALIFY FOR
PROGRESS
EXPENDITURES.—Rules similar to
the rules of paragraph (2) shall apply in the
case of qualified progress expenditures for a
qualifying coal gasification technology facility
under section 48A, except that the amount of
the increase in tax under subparagraph (A) of
this paragraph shall be substituted in lieu of
the amount described in such paragraph (2).
‘‘(C) APPLICATION OF PARAGRAPH.—This
paragraph shall be applied separately with re-
spect to the credit allowed under section 38 re-
garding a qualifying coal gasification technology
facility.’’
(d) SPECIAL RULE RELATING TO BASIS ADJUST-
MENT.—Section 50(c) of the Internal Revenue Code of
1986 (relating to basis adjustment for investment credit
property) is amended by adding at the end the following:
‘‘(6) NONAPPLICATION.—Paragraphs (1) and
(2) shall not apply to any qualifying coal gasification
technology facility credit under section 48A.’’
(e) TRANSITIONAL RULE.—Section 39(d) of the In-
ternal Revenue Code of 1986 (relating to transitional
rules) is amended by adding at the end the following:
‘‘(10) NO CARRYBACK OF SECTION 48A CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying coal gasification tech-
nology facility credit determined under section 48A
may be carried back to a taxable year ending before
the date of enactment of section 48A.’’
(f) TECHNICAL AMENDMENTS.—
(1) Section 49(a)(1)(C) of the Internal Revenue
Code of 1986 is amended by striking ‘‘and’’ at the
end of clause (ii), by striking the period at the end
of clause (iii) and inserting ‘‘, and’’, and by adding
at the end the following:
‘‘(iv) the portion of the basis of any
qualifying coal gasification technology fa-
cility attributable to any qualified invest-
ment (as defined by section 48A(c)).’’
(2) Section 50(a)(4) of such Code is amended
by striking ‘‘and (2)’’ and inserting ‘‘(2), and (6)’’.
(3) The table of sections for subpart E of part
IV of subchapter A of chapter 1 of such Code is
amended by adding after the item relating to section
48 the following:
‘‘Sec. 48A. Qualifying coal gasification technology facility credit.’’
(g) EFFECTIVE DATE.—The amendments made by
this section shall apply to periods after December 31,
2001, under rules similar to the rules of section 48(m)
of the Internal Revenue Code of 1986 (as in effect on the
day before the date of enactment of the Revenue Reconcili-
ation Act of 1990).
SEC. 6. PRODUCTION TAX CREDIT.
(a) CREDIT FOR PRODUCTION FROM QUALIFYING
COAL GASIFICATION TECHNOLOGY FACILITY.—Subpart
D of part IV of subchapter A of chapter 1 of the Internal
Revenue Code of 1986 (relating to business related cred-
its), is amended by adding at the end the following:
‘‘SEC. 45E. CREDIT FOR PRODUCTION FROM QUALIFYING
COAL GASIFICATION TECHNOLOGY FACILITY.
‘‘(a) GENERAL RULE.—For purposes of section 38,
the qualifying coal gasification technology facility produc-
tion credit of any taxpayer for any taxable year is equal
to—
‘‘(1) the applicable amount of coal gasification
technology production credit, multiplied by
‘‘(2) the kilowatt hours of electricity produced
by the taxpayer during such taxable year at a quali-
fying coal gasification facility.
‘‘(b) APPLICABLE AMOUNT.—For purposes of this
section, the applicable amount of coal gasification tech-
nology facility production credit with respect to production
from a qualifying coal gasification technology facility shall
be $0.0125.
‘‘(c) INFLATION ADJUSTMENT FACTOR.—For cal-
endar years after 2002, the amount in subsection (b) shall
be adjusted by multiplying such amount by the inflation
adjustment factor for the calendar year in which the
amount is applied. If any amount as increased under the
preceding sentence is not a multiple of 0.0001 cent, such
amount shall be rounded to the nearest multiple of 0.0001
cent.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—Any term used in this sec-
tion which is also used in section 48A shall have the
meaning given such term in section 48A.
‘‘(2) INFLATION
ADJUSTMENT
FACTOR.—The
term ‘inflation adjustment factor’ means, with re-
spect to a calendar year, a fraction the numerator
of which is the GDP implicit price deflator for the
preceding calendar year and the denominator of
which is the GDP implicit price deflator for the cal-
endar year 2001.
‘‘(3) GDP IMPLICIT
PRICE
DEFLATOR.—The
term ‘GDP implicit price deflator’ means the most
recent revision of the implicit price deflator for the
gross domestic product as computed by the Depart-
ment of Commerce before March 15 of the calendar
year.’’
(b) CREDIT TREATED AS BUSINESS CREDIT.—Sec-
tion 38(b) of the Internal Revenue Code of 1986 is amend-
ed by striking ‘‘plus’’ at the end of paragraph (12), by
striking the period at the end of paragraph (13) and in-
serting ‘‘, plus’’, and by adding at the end the following:
‘‘(14) the qualifying coal gasification technology
facility production credit determined under section
45E(a).’’
(c) TRANSITIONAL RULE.—Section 39(d) of the In-
ternal Revenue Code of 1986 (relating to transitional
rules), as amended by section 5, is amended by adding
at the end the following:
‘‘(11) NO CARRYBACK OF SECTION 45C CREDIT
BEFORE EFFECTIVE DATE.—No portion of the un-
used business credit for any taxable year which is
attributable to the qualifying coal gasification tech-
nology facility production credit determined under
section 45E may be carried back to a taxable year
ending before the date of enactment of section
45E.’’
(d) CLERICAL AMENDMENT.—The table of sections
for subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 is amended by add-
ing at the end the following:
‘‘Sec. 45E. Credit for production from qualifying coal gasification
technology facility.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to production on or after the date
of enactment of this Act.
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