Hill Heat

ENERGY TAX INCENTIVES

I. ENERGY PRODUCTION INCENTIVES

Renewable Energy Incentives

Long-term extension and modification of renewable energy production tax credit. The bill extends the placed-in-service date for wind facilities for one year (through December 31, 2009). The bill would also extend the placed-in-service date for three years (through December 31, 2011) for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; and trash combustion facilities. The bill also includes a new category of qualifying facilities that will benefit from the longer December 31, 2011 placed-in-service date—facilities that generate electricity from marine renewables (e.g., waves and tides). The bill would cap the aggregate amount of tax credits that can be earned for these qualifying facilities placed in service after December 31, 2009 to an amount that has a present value equal to 35% of the facility’s cost. The bill clarifies the availability of the production tax credit with respect to certain sales of electricity to regulated public utilities and updates the definition of an open-loop biomass facility, the definition of a trash combustion facility, and the definition of a nonhydroelectric dam. This proposal is estimated to cost $7.046 billion over ten years.

Long-term extension and modification of solar energy and fuel cell investment tax credit. The bill extends the 30% investment tax credit for solar energy property and qualified fuel cell property and the 10% investment tax credit for microturbines for six years (through the end of 2014). It also increases the $500 per half kilowatt of capacity cap for qualified fuel cells to $1,500 per half kilowatt of capacity. The bill removes an existing limitation that prevents public utilities from claiming the investment tax credit. The bill would also provide a new 10% investment tax credit for combined heat and power systems. The bill also allows these credits to be used to offset alternative minimum tax (AMT). This proposal is estimated to cost $1.376 billion over 10 years.

Long-term extension and modification of the residential energy-efficient property credit. The bill would extend the credit for residential solar property for six years (through the end of 2014). The bill would also increase the annual credit cap (currently capped at $2,000) to $4,000. The bill would include residential small wind equipment and geothermal heat pumps as property qualifying for this credit. The bill also allows the credit to be used to offset alternative minimum tax (AMT). This proposal is estimated to cost approximately $666 million over ten years.

Sales of electric transmission property. The bill extends the present-law deferral of gain on sales of transmission property by vertically integrated electric utilities to FERC-approved independent transmission companies. Rather than recognizing the full amount of gain in the year of sale, this provision allows gain on such sales to be recognized ratably over an 8-year period. The rule applies to sales before January 1, 2010. This proposal is revenue neutral over 10 years.

New Clean Renewable Energy Bonds (“CREBs”). The bill authorizes $2 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. This $2 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives. This proposal is estimated to cost $548 million over 10 years.

Carbon Mitigation Provisions

Carbon capture and sequestration (CCS) demonstration projects. The bill would provide $1.5 billion of tax credits for the creation of advanced coal electricity projects and certain coal gasification projects that demonstrate the greatest potential for carbon capture and sequestration (CCS) technology. Of these $1.5 billion of incentives, $1.25 billion would be awarded to advanced coal electricity projects and $250 million would be awarded to certain coal gasification projects. These tax credits would be awarded by Treasury through an application process, with the applicants that demonstrate the greatest carbon capture and sequestration percentage of total CO2 emissions receiving the highest priority. Applications will not be considered unless applicants can demonstrate that either their advanced coal electricity project would capture and sequester at least 65% of the facility’s carbon dioxide emissions or that their coal gasification project would capture and sequester at least 75% of the facility’s carbon dioxide emissions. Once these credits are awarded, recipients that fail to meet these minimum levels of carbon capture and sequestration would forfeit these tax credits. This proposal is estimated to cost $1.422 billion over 10 years.

Refund of certain coal excise taxes unconstitutionally collected from exporters. The Courts have determined that the Export Clause of the U.S. Constitution prevents the imposition of the coal excise tax on exported coal and, therefore, taxes collected on such exported coal are subject to a claim for refund. The bill would create a new procedure under which certain coal producers and exporters may claim a refund of these excise taxes that were imposed on coal exported from the United States. Under this procedure, coal producers or exporters that exported coal during the period beginning on or after October 1, 1990 and ending on or before the date of enactment of the bill, may obtain a refund (plus interest) from the Treasury of excise taxes paid on such exported coal and any interest accrued from the date of overpayment. _This proposal is estimated to cost $199 million over 10 years._

Solvency for the Black Lung Disability Trust Fund. The bill would enact the President’s proposal to bring the Black Lung Disability Trust Fund out of debt. Under current law, an excise tax is imposed on coal at a rate of $1.10 per ton for coal from underground mines and $0.55 per ton for coal from surface mines (aggregate tax per ton capped at 4.4 percent of the amount sold by the producer). Receipts from this tax are deposited in the Black Lung Disability Trust Fund, which is used to pay compensation, medical and survivor benefits to eligible miners and their survivors and to cover costs of program administration. The Trust Fund is permitted to borrow from the general fund any amounts necessary to make authorized expenditures if excise tax receipts do not provide sufficient funding. Reduced rates of excise tax apply after the earlier of December 31, 2013 or the date on which the Black Lung Disability Trust Fund has repaid, with interest, all amounts borrowed from the general fund of the Treasury. The President’s Budget proposes that the current excise tax rate should continue to apply beyond 2013 until all amounts borrowed from the general fund of the Treasury have been repaid with interest. After repayment, the reduced excise tax rates of $0.50 per ton for coal from underground mines and $0.25 per ton for coal from surface mines would apply (aggregate tax per ton capped at 2 percent of the amount sold by the producer). The bill would enact the President’s proposal. This proposal is estimated to raise $1.287 billion over 10 years.

Carbon audit of the tax code. The bill directs the Secretary of the Treasury to request that the National Academy of Sciences undertake a comprehensive review of the tax code to identify the types of specific tax provisions that have the largest effects on carbon and other greenhouse gas emissions and to estimate the magnitude of those effects. This proposal has no revenue effect.

II. TRANSPORTATION AND DOMESTIC FUEL SECURITY

Creates a new tax credit for cellulosic biofuels. The bill would create a new $1.01 per gallon tax credit for the production of cellulosic biofuels. This tax credit will be available through 2015. This proposal is estimated to cost $1.145 billion over ten years. Expansion of allowance for property to produce cellulosic alcohol. Under current law, taxpayers are allowed to immediately write off 50% of the cost of facilities that produce cellulosic ethanol if such facilities are placed in service before January 1, 2013. Consistent with other provisions in the bill that seek to be technology neutral, the bill would allow this write off to be available for the production of other cellulosic biofuels in addition to cellulosic ethanol. This proposal is estimated to be revenue neutral over 10 years.

Extension of biodiesel production tax credit; extension and modification of renewable diesel tax credit. The bill extends for one year (through December 31, 2009) the $1.00 per gallon production tax credits for biodiesel and the small biodiesel producer credit of 10 cents per gallon. The bill also extends for one year (through December 31, 2009) the $1.00 per gallon production tax credit for diesel fuel created from biomass. The bill eliminates the current-law disparity in credit for biodiesel and agri-biodiesel and eliminates the requirement that renewable diesel fuel must be produced using a thermal depolymerization process. As a result, the credit will be available for any diesel fuel created from biomass without regard to the process used so long as the fuel is usable as home heating oil, as a fuel in vehicles, or as aviation jet fuel. The bill also clarifies that the $1 per gallon production credit for renewable diesel is limited to diesel fuel that is produced solely from biomass. Diesel fuel that is created by co-processing biomass with other feedstocks (e.g., petroleum) will be eligible for the 50 cent per gallon tax credit for alternative fuels. This proposal is estimated to cost $456 million over 10 years.

Reduces and modifies the ethanol tax credit. The bill reduces the current-law ethanol tax credit by more than 10% from 51 cents per gallon to 45 cents per gallon. In addition to this change, the bill would also limit the extent to which denaturants (i.e., chemicals added to ethanol and other alcohol fuels to make them undrinkable) may be counted in calculating the available credit. This proposal is estimated to raise $1.327 billion over 10 years.

Plug-in electric drive vehicle credit. The bill establishes a new credit for each qualified plug-in electric drive vehicle placed in service during each taxable year by a taxpayer. The base amount of the credit is $3,000. If the qualified vehicle draws propulsion from a battery with at least 5 kilowatt hours of capacity, the credit amount is increased by $200, plus another $200 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours up to 15 kilowatt hours. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records 60,000 sales. The credit is reduced in following calendar quarters. The credit is available against the alternative minimum tax (AMT). This proposal is estimated to cost $1.056 billion over 10 years.

Incentives for idling reduction units and advanced insulation for heavy trucks. The bill provides an exemption from the heavy vehicle excise tax for the cost of idling reduction units, such as auxiliary power units (APUs), which are designed to eliminate the need for truck engine idling (e.g., to provide heating, air conditioning, or electricity) at vehicle rest stops or other temporary parking locations. The bill would also exempt the installation of advanced insulation, which can reduce the need for energy consumption by transportation vehicles carrying refrigerated cargo. Both of these exemptions are intended to reduce carbon emissions in the transportation sector. This proposal is estimated to cost $96 million over 10 years.

Restructuring of New York Liberty Zone tax credits. The bill would implement a proposal included in the President’s FY 2009 Budget to provide the City of New York and the State of New York with tax credits for expenditures made for transportation infrastructure projects connecting with the New York Liberty Zone. This proposal is estimated to cost $1.117 billion over 10 years.

Fringe benefit for bicycle commuters. The bill allows employers to provide employees that commute to work using a bicycle limited fringe benefits to offset the costs of such commuting (e.g., bicycle storage). This proposal is estimated to cost $10 million over 10 years.

Extension and increase of alternative refueling stations tax credit. The bill increases the 30% alternative refueling property credit (capped at $30,000) to 50% (capped at $50,000). The credit provides a tax credit to businesses (e.g., gas stations) that install alternative fuel pumps, such as fuel pumps that dispense E85 fuel. The bill also extends this credit through the end of 2010. This proposal is estimated to cost $156 million over ten years.

Comprehensive study of biofuels. The bill directs the Secretary of the Treasury, in consultation with the Secretary of Agriculture and the Secretary of Energy and the Administrator of the Environmental Protection Agency, to request that the National Academy of Sciences produce an analysis of current scientific findings relating to the future production of biofuels and the domestic effects of a dramatic increase in the production of biofuels. This proposal has no revenue effect.

III. ENERGY CONSERVATION AND EFFICIENCY

Qualified Energy Conservation Bonds. The bill creates a new category of tax credit bonds to finance State and local government programs and initiatives designed to reduce greenhouse gas emissions. There is a national limitation of $3 billion which is allocated to States, municipalities and tribal governments. This proposal is estimated to cost $1.027 billion over 10 years.

Extension and modification of credit for energy-efficiency improvements to existing homes. The bill extends the tax credits for energy-efficient existing homes for one year (through December 31, 2008) and includes energy-efficient biomass fuel stoves as a new class of energy-efficient property eligible for a consumer tax credit of $300. This proposal is estimated to cost $1.061 billion over 10 years.

Extension of energy-efficient commercial buildings. The bill extends the energy-efficient commercial buildings deduction for five years (through December 31, 2013). This proposal is estimated to cost $891 million over 10 years.

Modification and extension of energy-efficient appliance credit. The bill would modify the existing energy-efficient appliance credit and extend this credit for three years (through the end of 2010). This proposal is estimated to cost $323 million over 10 years.

Accelerated depreciation for smart meters and smart grid systems. The bill would provide accelerated depreciation for smart electric meters and smart electric grid systems. Under current law, taxpayers are generally able to recover the cost of this property over the course of 20 years. The bill would cut the cost recovery time in half by allowing taxpayers to recover the cost of this property over a 10-year period. This proposal is estimated to cost $921 million over 10 years.

Extension and modification of qualified green building and sustainable design project bond. The bill would extend the authority to issue qualified green building and sustainable design project bonds through the end of 2012. Authority to issues these bonds is currently set to expire on September 30, 2009. The bill would also clarify the application of the reserve account rules to multiple bond issuances. This proposal is estimated to cost $45 million over 10 years.

EXTENSION OF TEMPORARY TAX PROVISIONS

I. EXTENDERS PRIMARILY AFFECTING INDIVIDUALS

Extension of the deduction of State and local general sales taxes. The bill extends for one year (through 2008) the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes. This proposal is estimated to cost $1.742 billion over 10 years.

Extension of above-the-line deduction for qualified tuition and related expenses. The bill extends the above-the-line tax deduction for qualified education expenses for one year (through 2008). For tax year 2007, the maximum deduction was $4,000 for taxpayers with AGI of $65,000 or less ($130,000 for joint returns) or $2,000 for taxpayers with AGI of $80,000 or less ($160,000 for joint returns). This proposal is estimated to cost $2.603 billion over 10 years.

Extension of special rules for regulated investment companies. The bill would for one year (through 2008) extend the tax treatment of interest-related dividends, short-term capital gain dividends, and other special rules applicable to foreign shareholders that invest in regulated nvestment companies. This proposal is estimated to cost $81 million over 10 years.

Extension of provision encouraging contributions of capital gain real property made for conservation purposes. The bill would extend for one year (through 2008) the increased contribution limits and carryforward period for amounts in excess of these limits for contributions of appreciated real property (including partial interests in real property) for conservation purposes. This proposal is estimated to cost $54 million over 10 years.

Extension of tax-free distributions from individual retirement plans for charitable purposes. The bill would extend for one year (through 2008) the provision that permits tax-free charitable contributions from an Individual Retirement Account (IRA) of up to $100,000 per taxpayer, per taxable year. This proposal is estimated to cost $465 million over 10 years.

Extension of above-the-line deduction for certain expenses of elementary and secondary school teachers. The bill extends for one year the $250 above-the-line tax deduction for teachers and other school professionals for expenses paid or incurred for books, supplies (other than nonathletic supplies for courses of instruction in health or physical education, computer equipment (including related software and services), other equipment, and supplementary materials used by the educator in the classroom for one year (i.e., to expenses paid or incurred in 2008). This proposal is estimated to cost $204 million over 10 years.

Extension of election to include combat pay in earned income for purposes of the earned income credit. The bill extends for one year (through 2008) the special rules that allow members of the armed services to include their combat pay in their earned income in order to qualify for the earned income tax credit. This proposal is estimated to cost $20 million over 10 years.

Extension of special rules for qualified mortgage bonds for veterans. The bill extends for one year (through 2008) the special rules that allows veterans to qualify for State-operated, tax-exempt mortgage revenue bond programs to provide lower-income individuals with access to mortgages with lower interest costs without regard to first-time home buyer requirement. This proposal is estimated to cost $158 million over 10 years.

Extension of special rules for distributions from retirement plans to individuals called to active duty. The bill extends for one year (through 2008) special rules that permit active duty reservists to make penalty-free withdrawals from retirement plans. This proposal is estimated to cost less than $500,000 over 10 years.

Reinstate the exclusion of amounts received under qualified group legal services plans. The bill reinstates for one year (through 2008) a provision that allows individuals to exclude certain amounts received under qualified group legal services plans from income. This proposal is estimated to cost $40 million over 10 years.

II. EXTENDERS PRIMARILY AFFECTING BUSINESSES

Extension of R&D credit. The bill extends the research credit for one year (through 2008). This proposal is estimated to cost $8.761 billion over 10 years.

Extension of Indian employment credit. The bill extends for one year (through 2008) the business tax credit for employers of qualified employees that work and live on or near an Indian reservation. The credit is for wages and health insurance costs paid to qualified employees (up to $20,000) in the current year over the amount paid in 1993. Wages for which the work opportunity tax credit is available are not qualified wages for the Indian employment tax credit. This proposal is estimated to cost $59 million over 10 years.

Extension of New Markets Tax Credit. The bill extends for one year (through 2009) the new markets tax credit, permitting a $3.5 billion maximum annual amount of qualified equity investments. This proposal is estimated to cost $1.315 billion over 10 years.

Extension of railroad track maintenance credit. The bill extends for one year (through 2008) the railroad track maintenance credit. The railroad track maintenance credit provides Class II and Class III railroads (e.g., short-line railroads) with a tax credit equal to 50 percent of gross expenditures for maintaining railroad tracks that they own or lease. This proposal is estimated to cost $165 million over 10 years.

Extension of 15-year straight-line cost recovery for qualified leasehold improvements and qualified restaurant improvements. The bill would extend for one year (through 2008) the special 15-year cost recovery period for certain leasehold and qualified restaurant improvements. Absent an extension of this provision, the cost recovery period for these facilities would be 39 years. This proposal is estimated to cost $5.399 billion over 10 years.

Extension of 7-year straight-line cost recovery period for motorsports entertainment complexes. The bill would extend for one year (through 2008) the special 7-year cost recovery period for property used for land improvement and support facilities at motorsports entertainment complexes. Absent an extension of this provision, the cost recovery period for these facilities would be 15 years. This proposal is estimated to cost $48 million over 10 years.

Extension of accelerated depreciation for business property on an Indian reservation. The bill would extend for one year (through 2008) the placed-in-service date for the special depreciation recovery period for qualified Indian reservation property. In general, qualified Indian reservation property is property used predominantly in the active conduct of a trade or business within an Indian reservation, which is not used outside the reservation on a regular basis and was not acquired from a related person. _ This proposal is estimated to cost $152 million over 10 years.

Extension of expensing of “brownfields” environmental remediation costs. The bill would extend for one year (through 2008) the provision that allows for the expensing of costs associated with cleaning up hazardous (“brownfield”) sites. This proposal is estimated to cost $178 million over 10 years.

Extension of deduction allowable with respect to income attributable to domestic production activities in Puerto Rico. The bill would extend for one year (through 2008) the provision extending the section 199 domestic production activities deduction to activities in Puerto Rico. This proposal is estimated to cost $116 million over 10 years.

Extension of special tax treatment of certain payments to controlling exempt organizations. The bill would extend for one year (through 2008) the special rules for interest, rents, royalties and annuities received by a tax exempt entity from a controlled entity. This proposal is estimated to cost $35 million over 10 years.

Reauthorization of Qualified Zone Academy Bonds (QZABs). The bill allows an additional $400,000,000 of QZAB issuing authority to State and local governments, which can be used to finance renovations, equipment purchases, developing course material, and training teachers and personnel at a qualified zone academy. In general, a qualified zone academy is any public school (or academic program within a public school) below college level that is located in an empowerment zone or enterprise community and is designed to cooperate with businesses to enhance the academic curriculum and increase graduation and employment rates. QZABs are a form of tax credit bonds which offer the holder a Federal tax credit instead of interest. The bill would improve the marketability of these bonds by modifying the current-law arbitrage restrictions. This proposal is estimated to cost $202 million over 10 years.

Extension of tax incentives for investment in the District of Columbia. The bill extends the designation of certain economically depressed census tracts within the District of Columbia as the District of Columbia Enterprise Zone. Businesses and individual residents within this enterprise zone are eligible for special tax incentives. The bill would also extend the $5,000 first-time homebuyer credit for the District of Columbia. The bill would extend both of these provisions for one year (through 2008). This proposal is estimated to cost $129 million over 10 years.

Extension of American Samoa economic development credit. The bill extends for one year (through 2008) the American Samoa economic development credit. In general, this credit provides certain domestic corporations operating in American Samoa with a possessions tax credit to offset their U.S. tax liability on income earned in American Samoa from active business operations, sales of assets used in a business, or certain investments in American Samoa. This proposal is estimated to cost $16 million over 10 years.

Extension of enhanced charitable deduction for contributions of food inventory. The bill would extend for one year (through 2008) the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory. This proposal is estimated to cost $71 million over 10 years.

Enhanced charitable deduction for contributions of book inventories to public schools. The bill would extend for one year (through 2008) the provision allowing C corporations to claim an enhanced deduction for contributions of book inventory to public schools (kindergarten through grade 12). This proposal is estimated to cost $31 million over 10 years.

Extension of enhanced deduction for corporate contributions of computer equipment for educational purposes. The bill would extend for one year (through 2008) a provision that encourages businesses to contribute computer equipment and software to elementary, secondary, and post-secondary schools by allowing an enhanced deduction for such contributions. This proposal is estimated to cost $260 million over 10 years.

Extension of special rule for S corporations making charitable contributions of property. The bill would extend for one year (through 2008) the provision allowing S corporation shareholders to take into account their pro rata share of charitable deductions even if such deductions would exceed such shareholder’s adjusted basis in the S corporation. The bill would also make a technical correction clarifying the application of this provision. This proposal is estimated to cost $62 million over 10 years.

Extension of work opportunity tax credit for Hurricane Katrina employees. The bill would extend for one year (through 2008) the provision that expired in August of 2007 which allowed employers to claim the work opportunity tax credit for hiring employees who were affected by Hurricane Katrina. This proposal is estimated to cost $16 million over 10 years.

Extension of active financing exception. The bill extends the active financing exception from Subpart F of the tax code for one year (through 2009). This proposal is estimated to cost $3.970 billion over 10 years.

Extend look-through treatment of payments between related controlled foreign corporations. The bill extends the current law look-through treatment of payments between related controlled foreign corporations for one year (through 2009). This proposal is estimated to cost $611 million over 10 years.

Extend special expensing rules for certain film and television productions. The bill would extend the current law special expensing rules for U.S. film and television productions for one year (through 2009). This proposal is estimated to cost $10 million over 10 years.

III. OTHER EXTENDERS

Extension of disclosures of certain tax return information. The bill would permanently extend the current-law terrorist activity disclosure provisions and the authority for purposes of coordination with the Department of Veterans Affairs. This proposal estimated to have no revenue effect.

Extension of authority for undercover operations. The bill would permanently extend the authorization for the IRS to engage in certain activities related to undercover operations, such as purchasing property, organizing business entities and use the proceeds from an undercover operation to pay additional expenses incurred in the undercover operation. This proposal is estimated to have a negligible revenue effect.

Extension of temporary increase in limit on cover over of run excise tax revenues to Puerto Rico and the Virgin islands. The bill extends for one year the provision providing for payment of $13.25 per gallon to cover over a $13.50 per proof gallon excise tax on distilled spirits produced in or imported into the United States. This proposal is estimated to cost $96 million over 10 years.

Extension of tax on failure to comply with mental health parity requirements applicable to group health plans. The bill extends on a prospective basis through the end of 2008 the $100 per day excise tax on group health plans that impose limits on mental health benefits that are not imposed on medical and surgical benefits. _This proposal is estimated to cost $25 million over 10 years._

ADDITIONAL TAX RELIEF

I. INDIVIDUAL TAX RELIEF

Additional standard deduction for real property taxes. The bill would provide an additional standard deduction for State and local real property taxes paid or accrued by taxpayers who claim the regular standard deduction. The maximum amount that may be claimed under this provision is $700 for joint filers and $350 for individuals. This proposal applies only for 2008. This proposal is estimated to cost $1.174 billion over 10 years.

Change in refundable child credit. The bill would increase the eligibility for the refundable child tax credit in 2008. The child tax credit is refundable to the extent of 15 percent of the taxpayer’s earned income in excess of approximately $12,050 as a result of inflation adjustments to the original floor of $10,000. The bill would reduce this floor to $8,500 for 2008. This proposal is estimated to cost $3.129 billion over 10 years.

Extension and modification of AMT credit allowance against incentive stock options (ISOs). Exercise of an ISO is a preference in the individual minimum tax. The amount of the preference is the difference between the market price on the date of exercise and the option price. In the past, many individuals exercised these options and there were dramatic reductions in the value of the stock after exercise. These individuals found that their minimum tax liability far exceeded any gain from the exercise of the option. The bill would waive past underpayments and would guarantee that minimum tax actually paid on the exercise of these options would be returned to the taxpayer. This proposal is estimated to cost $2.291 billion over 10 years.

II. BUSINESS-RELATED PROVISIONS

Uniform treatment of attorney-advanced expenses and court costs in contingency fee cases. Under current law, the tax treatment of attorney-advanced expenses and court costs in contingency fee cases depends on whether the contingency fee is structured as a “net” fee (i.e., the attorney’s compensation is based on a percentage of the gross recovery in the litigation net of the advanced litigation costs) or as a “gross” fee (i.e., the attorney’s compensation is based on a percantage of the gross recovery without regard to the amount of advanced litigation costs). Where the contingency fee is structured as a “gross” fee, the attorney is allowed to take a current deduction for advanced litigation costs as they are paid. Where the contingency fee is structured as a “net” fee, the attorney is not allowed to take a current deduction for advanced litigation costs. The bill would conform the tax treatment of “net” fee arrangements to the tax treatment of “gross” fee arrangements by allowing all advanced litigation costs to be deducted currently by the attorney. This proposal is estimated to cost $1.572 billion over 10 years.

Provisions related to film and television productions. Under current law, taxpayers have not been able to take full advantage of tax incentives that are intended to encourage film and television companies to produce films here in the United States rather than overseas because of a number of technical issues. The bill would fix these issues. This proposal is estimated to cost $468 million over 10 years.

Modification of penalty on understatement of taxpayer’s liability by tax return preparer. The bill would conform the penalty standards for return preparers with the standards for taxpayers. For undisclosed positions, the penalty standard for return preparers is reduced to substantial authority. For disclosed positions, a return preparer generally must have a reasonable basis for the position. For positions involving tax shelters and certain reportable transactions, a return preparer must have a reasonable belief that the position would more likely than not be sustained on the merits. This proposal is estimated to cost $22 million over ten years.

III. EXTENSION AND EXPANSION OF CERTAIN GO ZONE INCENTIVES

Extension and Expansion of Certain Gulf Opportunity (GO) Zone Incentives. The bill would allow taxpayers in affected GO Zone areas to amend prior returns to take into account receipt of hurricane-related recovery grants, waive the start-construction deadline for certain property eligible for bonus deprecation in the GO Zone, and allow projects in two additional counties in Alabama to qualify for tax-exempt bond financing. This provision is estimated to cost $1.333 billion over ten years.

REVENUE PROVISIONS

Current inclusion of deferred compensation paid by certain tax indifferent parties. *The bill would tax individuals on a current basis if such individuals receive deferred compensation from a tax indifferent party. Current law generally allows executives and other employees to defer paying tax on compensation until the compensation is paid. This deferral is made possible by rules that require the corporation paying the deferred compensation to defer the deduction that relates to this compensation until the compensation is paid. Matching the timing of the deduction with the income inclusion ensures that the executive is not able to achieve the tax benefits of deferred compensation at the expense of the Treasury. Instead, the corporation paying the compensation bears the expense of paying deferred compensation as a result of the deferred deduction. Where an individual is paid deferred compensation by a tax indifferent party (such as an offshore corporation in a tax haven jurisdiction), there is no offsetting deduction that can be deferred. As a result, individuals receiving deferred compensation from a tax indifferent party are able to achieve the tax benefits of deferred compensation at the expense of the Treasury. This proposal is estimated to raise $24.289 billion over 10 years.

Delay implementation of worldwide allocation of interest.* In 2004, Congress provided taxpayers with an election to take advantage of a liberalized rule for allocating interest expense between United States sources and foreign sources for purposes of determining a taxpayer’s foreign tax credit limitation. Although enacted in 2004, this election is not available to taxpayers until taxable years beginning after 2008. The bill would delay the phase-in of this new liberalized rule for ten years (for taxable years beginning after 2018). This proposal is estimated to raise $29.962 billion over 10 years.

2:36 Kerry: Today we’re looking at sequestration; we’re planning on having a hearing soon on gasification, maybe early next year. Climate change is on everyone’s tonguetips these days, with varying degrees of understanding. Al Gore and I held the very first hearings on global warming in 1989. We then went to Rio. And now we’re here, twenty years later, without a whole lot of progress, without any major federal commitment. That in itself is pretty stupefying. Scientists were warning us to keep concentrations below 550 PPM. We’re now seeing stark reevaluations. The IPCC study had a cutoff date of 2005. We’ve had two years of subsequent data. With respect to insect infestation in northern forests, understanding the importance of tropical forests, the melting of Antarctic and Greenland ice sheet, 100 billion metric tons per year, the super El Nino effects, the melt of the floating ice sheets, exposing more ocean to warming, therefore not a cycle of reflection but of absorption. Things are changing and changing fast. Now they’re estimating we can only tolerate 450 PPM. What’s already in the atmosphere will continue to do damage for 80 to 100 years. This kind of gathering is really important. We’re looking at coal as a critical component. We have huge amounts of it in the United States and China has huge amounts. At the rate we’re going we’re going to get to 600-900 PPM. Everyone’s talking about CCS. Today we want to hear the thoughts of those here. We need to know what’s the ability to capture, the ability to store. I’ll be introducing legislation today to establish 3-5 demonstration facilities and establish an interagency process to establish a regulatory framework. Most people suggest we can only do this if we kick into high gear demonstration projects. So we welcome our panel.

2:42 Dorgan: The question is not whether we engage in CCS but how. We’re going to continue to use coal but the question is how. In ND we have the only synthetic gasification project. We capture 50% of the CO2 and use it for enhanced oil recovery in Canada. The President’s budget did not request nearly enough money. We need to invest in the R&D. I’ve increased the funding by 30%. I think it’s essential to provide the funding for the research. I met a fellow with a company in Massachusetts engaged in algae issues. This guy used for 17 years in our national labs then the funding ran out. The algae feeds on CO2 and produces a superfuel. Wouldn’t it be interesting if we unlocked the mystery of all of this? We don’t do the research, we’re not going to unlock the opportunities. Capturing and sequestering carbon is essential in my judgment.

2:46 Kerry We’re going to pop out at 3 o’clock for a meeting with 30 CDOs on this very subject.

2:47 Stevens: I’m looking forward to the bipartisan work on creating demonstration projects.

We’re relying more and more on countries not exactly favorable to the United States. If we can develop more coal plants and we can do it in an environmentally sound way it makes sense for the United States.

2:49 Herzog I’ve been working on CCS for over 17 years. Coal is a critical fuel for the world. However, coal is responsible for about 40% of the world’s CO2 emissions. CCS is the critical technology to reduce emissions while maintaining affordable energy…It seems both prudent and relatively inexpensive to establish technological readiness now.

2:54 Fox Kinder Morgan is one of the largest pipeline companies in the world. We have extensive experience in transporting CO2 and injecting it into the ground. Capture is the most costly component. Post-combustion capture has been around for 60 years, is well established, but is expensive. Pre-combustion capture seek to reduce costs by removing nitrogen from the system. Pre-combustion capture could be used with IGCC plants. Combustion fuel with oxygen produces a very hot flame and existing steel cannot handle it. CO2 has been transported safely by pipeline for over 30 years. None of the leaks in the last twenty years have produced injuries.

Geological storage may be the most difficult challenge. The technology was not developed to store CO2 for long periods. Not much is known about saline aquifers, the main storage option. They need to be classified and monitored. Non-technical barriers like liability are very contentious. Another topic in the IOGCC report is ownership of the site—surface vs. mineral rights. The current tax structure does not support the development of a CCS pipeline structure.

2:59 Benson Safe and secure sequestration can be achieved. Two mechanisms are responsible for trapping and we know they work because they are the mechanisms responsible for the existence of oil and gas sources. In practice there is a great deal of engineering involved in safe sequestration. The question of scale cannot be ignored. Today there are three projects. Thousands will be needed. Worldwide public and private research efforts continue to make progress. There is an urgent need for large demonstration projects. Who will be responsible for long-term monitoring and liability? Scientific research has a role to play to provide a framework. Naturally occuring secondary trapping mechanisms provide greater security.

3:05 Burruss Fossil fuel usage will continue in both industrialized and developing nations. Models that stabilize concentrations at 550PPM suggest emissions must be cut by 70%. A critical issue is the integrity of the geological seals. Saline reservoirs have the potential for very large capacity but the utility of these reservoirs is unknown. On the topic of terrestrial sequestration, lthough we know naturally stored carbon in soils are prone to rerelease, the processes are poorly known.

3:10 Hannegan Advanced plants will be crucial to the future of US electricity production. With aggressive development and deployment of low-carbon plants, it is feasible to return emissions to 1990 levels by 2025. Advanced coal technologies is a key part. IGCC technology is still relatively new. It’s important to avoid choosing between coal technology options. In addition to the challenge of capturing CO2, there are storage issues. That includes permitting, public acceptance, legal liability, and possible new uses of CO2.

3:16 Wolfe I would like to begin by introducing Sealaska. We have over 17000 native shareholders that are descendants of the original inhabitants of southeast Alaska. We are sequestering carbon to preserve the earth’s natural functions. Any framework must encourage both sequestration and ecological benefit. Forests effectively sequester carbon. Providing carbon offset savings over fossil fuels will encourage forest management practices. Active forest management supports the principle we should first maintain what we have. The entire carbon forest budget must be taken into account so purchasers get what they are paying for. This must be done with the appropriate verification protocols. The ultimate reason to manage climate change is to preserve the world’s natural functions.

3:20 Stevens This carbon sequestration must be a diversified effort.

Wolfe I believe that the ability of forests to sequester and store carbon is part of an overall strategy.

Stevens Is it just standing forests?

Wolfe Younger forests are better at taking up carbon. We need to look at the total carbon budget, looking at standing forests and wood products.

Stevens Alaska has half the coal in the United States. Is it possible for the sequestration to take place there?

Benson Yes. There are significant resources in Alaska where CO2 could be sequestered in deep unmineable coalbeds.

Stevens Is methane sequestration possible?

Benson The issue of permafrost melting is significant but I’m not familiar with a strategy to manage those emissions. They have the global warming power about 22 times higher than CO2.

Stevens Should we have demonstration projects on methane?

Benson Remedial strategies to avoid methane emissions would be a good idea. It would be quite difficult to capture methane emissions from melting permafrost.

Stevens There’s a young scientist at the University of Alaska who discussed the potential to capture large amounts of methane.

Hannegan If you’re successful at harnessing natural gas from permafrost, you can use the CCS technology at those plants as well.

Stevens The amount projected of methane to be released is remarkable.

3:27 Ensign Demonstrations?

Herzog One saline formation is very different from others. There are lots of different characteristics.

Ensign Have you identified potential sites?

Herzog There’s a large set of aquifers in the Midwest, some in the Southeast. We think three projects could cover a lot of the different aspects of the formations.

Benson There’s been an atlas created. Outside of the Northeast and the coastal plains of the Southeast there are many attractive targets for sequestration.

Ensign Let’s say we have a 400 MW coal-fired power plant. How much physical volume of CO2 would that generate?

Burruss A 400-500 MW power plant would generate 300 million tons of CO2 per year. In subsurface volume as a fluid, over 20-50 years, that kind of project would use the equivalent of about a 1-2 billion barrel oil field.

Hannegan The largest existing post-combustion unit is about 50,000 tons per year. How you handle different kinds of coals needs to be dealt with.

Ensign If we’re talking about more coal plants, do we have that volume available? It looks like the other types of aquifers would have to be used.

Bensign 4000 Olympic-sized swimming pools is one coal plant per year. At the low end of the range in the US there are 3000 billion tons of capacity. Regionally the numbers can be quite different. The bottom line is that the numbers work.

Ensign If we can make a difference into the future we may not need every coal plant to have its carbon captured. Combining that with nuclear, other sources of energy, you can make a serious dent.

Hannegan The challenge with retrofitting can’t be understated. We’re primarily looking at new units.

3:34 Klobuchar Title VIII of Lieberman-Warner establishes a framework for CCS.

Herzog New projects will be less expensive than retrofitting but retrofitting would be possible.

Fox Trucks are three times as expensive as pipelines. You’ll either put it in pipelines or possible ships. We would need more infrastructure, on the order of $3 billion for one Permian Basin-degree system. Professor Sokolow broke down the emissions problem into seven wedges. You’d have to build about 40 of these in the United States. We certainly know how to pipeline CO2 safely. The coal plants don’t want to clean up CO2 to what is pipeline specs. We haven’t really addressed that.

Burruss One issue with pipelines and retrofitting is that the largest coal plants are along the Ohio and Mississippi River valleys. But the largest reservoirs are in west Texas and along the Texas coast. So to connect the two we need new pipeline infrastructure or we need new co-located plants.

Hannegan The energy penalty in capturing CO2 from pulverized coal is around 30%, but we see that can be brought down to 10-15%.

3:43 Stevens Why does the Ultragen project propose 25% CO2 capture?

Hannegan The 25% is a 200MW fully captured element of the 800MW plant.

Stevens Would the Ultragen project qualify under the current law?

Hannegan HR6 requires 85% capture and half a million tons. Ultragen 2 would treat 50% of the flue gas with 90% capture. The third project would qualify.

Stevens Can we sequester the carbon at the point of production?

Benson As we look to the future, colocation will be a very desirable attribute.

Stevens Twenty years ago we ran into the problem of line loss. Why haven’t we moved forward with colocation?

Burruss The only way we can go forward is to make the decision where to locate large demonstration projects.

Stevens Is it finally going to be a question of cost? What is the best use of the investment now?

Hannegan We’ve done some very detailed analysis. It involves making some significant R&D investments today. We’ve contrasted an approach which waits until the carbon constraints arrive with one that starts now. The underlying work behind this analysis contains detailed dollar amounts and investment priorities.

Benson We need to be building the fundamental research base, not just the demonstration projects. Small-scale pilot tests are important, complementary to the big-scale projects. All three are very important now.

3:50 Kerry How do you structure that investment?

Benson The DOE Office of Science is a very good model. Use-inspired fundamental research.

Kerry How urgent is what kind of investment?

Benson We need to do this yesterday.

Stevens Do we need a Los Alamos style project?

Hannegan The scientists and technology sector are in large agreement about what’s needed. We’ve developed a very specific roadmap.

3:52 Kerry Did MIT work through any of these best practices?

Herzog We’ve been in meetings with EFRI, the Coal Utilization Research Council, etc. There are some differences but the basic thrust is similar. I think there’s a pretty good agreement in the community about what the gaps are in our knowledge in order to move forward. In the Finance Committee we had an argument whether we know how to do this.

Fox We operate plants that capture CO2 right now. The Dakota Gasification Company is capturing CO2. This is something we know how to do.

Hannegan The examples he cited are from chemical plants, which are not electric power plants. We are at a much smaller scale of investment. The difficulty is in capturing CO2 from a pulverized coal plant.

Kerry But we do know that we have the technical capacity. The real issue is the efficiency and cost. Some private entities are moving forward, right?

Hannegan At a small scale, yes.

Kerry Why should the government be involved if the private sector is moving forward?

Burruss You raised the basic issue in your opening statement. The question is urgency. If we don’t do this fast enough to affect global warming, there’s not much point.

Kerry Also we’re much better equipped to handle the liability questions. Do we have the capacity to sequester?

Burruss The known capacity in oil and gas reservoirs, about 100 billion tons of CO2. But that doesn’t get the job done if we need to capture 90% of all industrial processes.

Kerry If you don’t argue with the science, you can’t be half-pregnant on this thing. That said, it seems to me you’ve got about ten years to get it right, to reduce your goal from 550 to 450, it seems we’ve got a very small goal. What do we do?

Benson The DOE atlas does include saline aquifers, about 3000 billion tons of CO2. If you took all the stationary sources you could sequester all the emissions for hundreds of years.

Kerry We were talking about the energy bill and the transportation piece, we’re hoping to get that done in December.

Hannegan Our work, looking at the electricity sector, a significant portion would come from CCS. In terms of transportation, if you’re able to de-carbonize the electricity sector early, we can provide energy to other sectors.

Kerry What are the top priorities?

Fox We need to fund the larger demonstration projects but also do some of the smaller projects.

Hannegan The first is the demonstrations. The second is the regulatory scheme to give investors confidence. The third is environmental aspects are important. Monitoring and verifying. The key regulatory issues include the ownership of the CO2. Who owns the pore space? The transfer of liability.

Kerry It seems to me that you can’t ask the company to assume the risk of liability. You’re going to have to do something like the Anderson Act with nuclear. I don’t know how you do it otherwise.

Hannegan There’s the economic risk given that these coal plants are billion-dollar investments, now with significant increase in the capital outlays.

Kerry Are there any other new technologies we should look at?

Benson I think capture with geological storage is the primary candidate out there.

Hannegan There are some enterprising folks out there, such as the Texas plant capturing CO2 at the minemouth and producing a carbonate material.

Kerry Why doesn’t the USGS have a role?

Burruss The simple reason is we don’t have the budget or the authorization. We believe we have the best expertise to do storage assessments.

Kerry The DOE atlas I’m told is useful but doesn’t have the sufficient resolution.

Burruss That’s a fair statement but could the USGS do the assessment? We can’t assess for commercial projects. But we can assess capacity. Part of it is the basic question of the storage capacity of saline aquifers. It’s unknown.

Kerry What are the known risks?

Herzog Leakage, but it’s a fairly low danger. It could be dangerous in high concentrations. But the biggest risk is that it would go back out.

Kerry Acidification?

Herzog Acidification isn’t a big risk but leaching other materials into drinking water could be a problem.

Hannegan The promise of biomass and CCS coming together is very promising. As a long term objective there’s some synergy worth pursuing.

4:15 Thune The critical role of clean coal and CCS in ensuring our energy independence. I know the focus has been on geological carbon storage but I’d like to highlight carbon sequestration. Altering crop planting practices, stopping erosion, changing grazing practices. 40-60 billion tons of CO2 over the next decades. It’s going to require leadership from the private and public sectors. One question: the carbon offset issue the range is $5-$20 a ton. According the Fox’s testimony the cost of CCS is $11-$57 a ton.

Herzog In terms of the types of cuts from 60%-90% the technology is going to be competitive with other kinds of mitigations. At first it would be more expensive but there’s a lot of technology in the pipeline that need to be nurtured with R&D.

Hannegan We’ve identified R&D that will bring costs down from $50 a ton. Investment in R&D before the applying the carbon constraint provides the best benefits.

Wolfe At $20 a ton private land owners can get quite motivated in forest management.

4:20 PM Kerry Thank you very much. We stand adjourned.

From EE News:

The Energy and Natural Resources Committee yesterday cleared in a largely bipartisan fashion the first major energy bill of the Democratic-controlled Senate, but only after a testy battle over coal-based transportation fuels highlighted the divisive nature of such debates.

After several hours of back and forth, the committee approved the underlying bill, 20-3. It deals with biofuels, energy efficiency and carbon sequestration. Only three Republicans voted against the bill: Sens. Craig Thomas (R-Wyo.), Richard Burr (R-N.C.) and Jim DeMint (R-S.C.).

But even with the overwhelming committee vote, it appears the legislation could be the subject of several heated fights as it moves to the floor, especially over a renewable portfolio standard (RPS) and coal-to-liquids (CTL) technology.

Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) told reporters after the vote he does not know exactly when the bill will come to the floor. He does, however, anticipate floor time before the Memorial Day recess.

Aides for Majority Leader Harry Reid (D-Nev.) said there is no specific schedule for the bill, adding it will not be on the floor next week as the Senate is expected to take up the Water Resources Development Act (see related story).

A refining industry lobbyist said he thinks Reid may have to shelve the energy package until after the recess, citing the possibility of a sprawling debate. The lobbyist noted the fierce coal-to-liquids battle that is certain to resurface on the floor. The source also noted the full Senate must deal with Bingaman’s plan for a renewable portfolio standard, which the committee sidestepped, and the possibility of multiple amendments on ethanol and other issues.

“This bill is not ready for primetime,” the lobbyist said.

At the close of the markup, the ranking member of the committee, Sen. Pete Domenici (R-N.M.), said lawmakers will continue to try to move the bill in a bipartisan manner, but he also admitted it may take a while to get the legislation past the Senate.

“When it gets to the floor … you should not expect such a short session of the Senate, it will be there for quite a few days,” Domenici said.

Bingaman several times during the course of the markup emphasized he does not view the measure as a comprehensive energy bill. More opportunities for lawmakers to move their energy priorities will present themselves, he said.

“We have a number of areas we were trying to address, this is not a comprehensive energy bill,” Bingaman added. CTL debate dominates markup session

Much of the debate yesterday centered on an amendment offered by a pair of coal-state senators that would have created a new federal mandate for the use of CTL.

After a 90-minute debate on the matter, the panel – in a 12-11 party-line vote – defeated the amendment from Sens. Craig Thomas (R-Wyo.) and Jim Bunning (R-Ky.) that would have established a coal program to mirror the existing federal mandate for biofuels.

The amendment attempt seemingly ended a bipartisan truce that reigned over the committee’s first effort of the 110th Congress to create an energy bill. Bingaman and Domenici had tried to keep CTL a renewable portfolio standard off the table during the markup.

Early on, Bingaman attempted to assure lawmakers they would have an opportunity to offer their proposals either on the floor or in other legislation down the road. But Thomas said he decided the markup was the appropriate venue to move his CTL bill.

“That’s what this committee is for, to deal with these issues,” Thomas said after the vote. “We’re going to continue to work on it.”

Bingaman told reporters after the markup that he expected the CTL issue to again become a point of contention when the bill is brought up before the full Senate.

The Thomas-Bunning bill would create a new federal mandate requiring the use of 21 billion gallons of coal liquids by 2022. Additionally, in an effort to deal with the environmental concerns, the senators included a provision stating that the greenhouse gas emissions levels of CTL fuels would not exceed that of conventional gasoline.

That language did little to assuage committee Democrats, who balked at the legislation over lingering questions about GHG emissions and the feasibility of carbon sequestration from CTL.

“If we move forward fast with coal-to-liquids, and we don’t have carbon capture [and] carbon sequestration ducks in a row, we’re setting ourselves up for a disaster,” said Sen. Jon Tester (D-Mont.).

But Republicans argued that even as Congress attempts to deal with climate change, it must also deal with pressing energy security concerns. “There is a reality that we’re facing, and that is the reality of energy security,” said Sen. Larry Craig (R-Idaho). “Here’s an opportunity to vote for U.S. coal and against Saudi oil.”

Bingaman questioned whether the committee had done enough research to endorse such a significant mandate for CTL, essentially the same level as the mandate for advanced biofuels. And three Democrats who have previously endorsed the use of CTL – Sens. Byron Dorgan (N.D.), Ken Salazar (Colo.) and Tester – said they could not support the amendment either because of the timing or their concerns on how it would affect GHG emissions. All three ended up voting against the amendment but said they could support other CTL language in the future.

The committee did adopt a Bingaman amendment, 15-8, that would create a program to study large-scale capture of carbon from industrial sources. Bingaman touted the provision as a potential step toward testing the feasibility of carbon sequestration from CTL development.

The amendment authorizes $100 million per year over five years for the program. But the language also states that only projects that capture at least 85 percent of CO2 would be eligible for the grants.

The majority of committee Republicans voted against the amendment, arguing it would essentially delay the use of CTL for five years or more. “Senator Bingaman has found a nice way to stop the development of coal-to-liquids by an amendment that puts into place something that we don’t even understand how to do,” Domenici said. Panel adopts measures on GHG standards, biofuels studies

Only one other amendment during yesterday’s markup broke the committee along party lines and required a voice vote.

That amendment – sponsored by Bingaman – would require that any renewable fuel facility built after the bill is signed into law should produce fuels that achieve at least a 20 percent reduction in lifecycle GHG emissions.

Bingaman described such a target as “very achievable” and said the Renewable Fuels Association – the main lobbying group for the biofuels industry – has endorsed the language.

Yet Domenici called the provision largely unnecessary, given that the committee has already received assurances that cellulosic ethanol and other advanced biofuels produce fewer emissions than conventional gasoline.

“We’ve been told we have no worries, clearly we’re going to come in better than gasoline. Now all of a sudden in the last week or so we have someone coming along, ‘Well we want to put in an EPA condition,’” Domenici said. “I don’t think we should do it, it’s a far cry from where we started.”

The committee also adopted by a voice vote an amendment from Sen. Jim DeMint (R-S.C.) directing several federal agencies to conduct a study on increasing the ethanol blend in gasoline to more than 10 percent.

The Engine Manufacturers Association and the Alliance of Automobile Manufacturers backed the amendment, saying in a letter to the committee that the use of “mid-level” blends would be “entirely new products that will raise new questions, risks and challenges across a multifaceted range of energy, environmental, legal, safety and economic issues.”

The committee then adopted by a voice vote amendments to establish a research program for electric vehicles and a slew of other noncontroversial measures, including those authorizing studies for the distribution of biofuels, to allow federal agencies to acquire electric vehicles and to promote the use of new materials in industrial processes to improve energy efficiency. Offshore drilling measure shelved

A pair of senators – Dorgan and Craig – offered an amendment that would expand offshore drilling around the United States and neighboring nations. The lawmakers withdrew their amendment without a vote, saying they did not want to jeopardize the bipartisan nature of the legislation. They then expressed interest in pursuing the issue down the road.

“Many are hiding in the illusion that we don’t need more production in our standard fuels, and they are denying the reality that we do,” Craig said.

The bill would allow new oil and gas drilling in the eastern Gulf of Mexico within 45 miles of Florida’s coast. It also includes language granting U.S. companies the right to participate in exploration and production off Cuba’s coast and asking the Interior Department to conduct an inventory of outer continental shelf resources off the southeastern United States.

Even though the language was never voted on, the amendment drew a quick negative reaction from several coastal state lawmakers.

“It would be a really bad idea, it would break faith for those who negotiated in good faith on that issue [last year],” said Sen. Mel Martinez (R-Fla.), in reference to legislation approved last year allowing for new eastern gulf drilling for areas off the Florida coast. Bill’s focus remains on biofuels mandate, efficiency

The centerpiece of the bill that cleared the committee yesterday – the portion that is likely to receive the most attention when the bill hits the floor – is the dramatic expansion of the existing federal biofuels mandate.

The Bingaman-Domenici bill would put in place a 36-billion-gallon biofuels mandate by 2022 as well as provide a series of incentives for the industry’s development, such as loan guarantees for renewable fuel facilities, grants for the creation of renewable fuel corridors and transport of biomass to refiners.

Moreover, the legislation sets specific targets for the use of cellulosic ethanol, specifically hitting a mandate of 21 billion gallons by 2022.

In addition to the biofuels mandate, the legislation includes provisions aimed at spurring research and construction of renewable fuels infrastructure.

The bill would provide a federal loan guarantee of up to $250 million for renewable fuel facilities, grants for creation of renewable fuel corridors and grants for transport of biomass to refiners.

It calls for a 50 percent increase in bioenergy research through 2009, creates seven bioenergy research centers and directs the Energy Department to conduct several studies having to do with additional expansion of biofuels.

The legislation also contains an efficiency component that would codify efficiency standards for several products, boosting programs that spur use of efficient lighting technologies, and increasing conservation in federal buildings.

On the transportation side, the bill sets an overall goal of reducing gasoline use by 45 percent by 2030. The bill provides loan guarantees for plants that make fuel-efficient vehicles and their parts.

Other steps include grants to automakers to help retool current plants to make advanced technology vehicles and authorized funding for new research into batteries and lightweight vehicle materials.

Lawmakers also brought into the fold two carbon sequestration measures.

One of the measures would require the Energy Department, U.S. EPA and U.S. Geologic Survey to conduct a sweeping assessment of the potential for underground CO2 storage in all corners of the country, including Alaska and Hawaii. DOE would be required to estimate potential volumes of oil and gas that could be recovered after the carbon injections, as well as the potential risks if the CO2 leaks back into the atmosphere.

The other portion authorizes DOE to establish seven regional CO2 sequestration partnerships that bring together the work of federal, state and local governments, as well as industry and academia. The programs now run through fiscal 2009; under the bill, it would stretch through 2012.