Summaries of U. S. Legislation Provisions. Related to Alternative Energy

Calculation of fuel economy for natural gas vehicles is performed in a simi­lar fashion. For the purposes of this calculation, the fuel economy is equal to the weighted average of the fuel economy while operating on natural gas and while operating on either gasoline or diesel fuel. AMFA specifies that the en­ergy equivalency of 100 cubic feet of natural gas be equal to 0.823 gallons of gasoline, with the gallon equivalency of natural gas to be considered to have a fuel content, similar to that for alcohol fuels, equal to 0.15 gallons of fuel (49 U. S.C. §329059(c)). Calculations to determine the adjusted CAFE val­ues for natural gas alternative-fuel vehicles are performed in similar fashion. For example, under this conversion and gallon equivalency, a dedicated natu­ral gas vehicle that achieves 25 miles per 100 cubic feet of natural gas would have a CAFE value as follows:

FE = (25/100) X (100/0.823X1/0.15) = 203 mpg.

These calculation procedures, along with the fuel economy testing proce­dures for alternative-fuel vehicles, were codified by the EPA in 1994 (59 FR 39638; August 3, 1994).

AMFA also limits the extent to which these special considerations can im­prove a manufacturer’s average fuel economy. For model years 1993 through 2004, the maximum increase that can be attributed to this program is 1.2 mpg for each category of automobiles (domestic and import passenger car fleets and light truck fleets). The incentive program can be extended at the approval of the Secretary of Transportation for up to four years beyond MY 2004, but at a ceiling reduced from 1.2 mpg to 0.9 mpg. In the event that the Secretary of Transportation reduces the current CAFE requirement from 27.5 mpg for any model year, any increase of CAFE resulting from the AMFA calculation will be reduced by the CAFE standard, but may not be reduced to yield less than 0.7 mpg (49 U. S.C. §32906(b)).

For alternative dual-fuel vehicles, an assumption is made that the vehicles would operate 50 percent of the time on the alternative fuel and 50 percent of the time on conventional fuel, resulting in a fuel economy that is based on a harmonic average of alternative fuel and conventional fuel. The fuel economy for an alternative dual-fuel model is calculated by dividing 1.0 by the sum of 0.5 divided by the fuel economy as measured for the conventional fuel, and 0.5 divided by the fuel economy as measured for the alternative fuel, using the 0.15 volumetric conversion factor. For example, for an alternative dual­fuel model that achieves 15 mpg operating on an alcohol fuel and 25 mpg on the conventional fuel, the resulting CAFE would be:

Extends and modifies the production tax credit (PTC in EPACT) for elec­tricity produced by wind and closed-loop biomass facilities. The tax credit is expanded to include poultry waste facilities, including those that are gov­ernment-owned. All three types of facilities are qualified if placed in service before January 1, 2002. Poultry waste facilities must have been in service after 1999.

A nonrefundable tax credit of 20 percent is available for incremental re­search expenses paid or incurred in a trade or business.

Notes: The residential energy credit provided a credit (offset) against tax due for a portion of taxpayer expenditures for energy conservation and renew­able energy sources. The general business credit is a limited nonrefundable credit (offset) against income tax that is claimed after all other nonrefundable credits.

2001: The Economic Security and Recovery Act of 2001 (P. 107—104), which was signed into law in early 2002, includes a two-year extension of the production tax credit (PTC) for new wind, closed-loop biomass, and poultry waste facilities. The production tax credit, created originally in the Energy Policy Act of 1992, provided an inflation-adjusted tax credit of 1.5 cents per kilowatt-hour for electricity generated from qualifying projects. Under the new law, the production tax credit is now extended retroactively from the end of 2001 to December 31, 2003.

Source: DOE, http://www. eia. doe. gov/cneaf/solar. renewables/page/legisla tion/impact. html.

Note: Transportation: “FLEX FUEL” description introduced through AMFA with this language:

A “dual energy” vehicle is defined by AMFA as one:

i) Which is capable of operating on alcohol and on gasoline or diesel fuel;

ii) Which provides equal or superior energy efficiency, as calculated for the appli­cable model year during fuel economy testing for the Federal Government, while operating on alcohol as it does while operating on gasoline and diesel fuel; and

iii) Which, for model years 1993 through 1995 and, if the Administrator of the En­vironmental Protection Agency determines that an extension of this clause is war­ranted, for an additional period ending not later than the end of the last model year for which sections 513(b) and (d) apply, provides equal or superior energy efficiency, as calculated for the applicable model year during fuel economy test­ing for the Federal Government, while operating on a mixture of alcohol and gasoline or diesel fuel containing exactly 50 percent gasoline or diesel fuel as it does while operating on gasoline or diesel fuel. . .

Similarly, a “natural gas dual energy” vehicle is one:

i) Which is capable of operating on natural gas and on gasoline or diesel fuel; and

ii) Which provides equal or superior energy efficiency as calculated for the applicable model year during fuel economy testing for the Federal Government, while oper­ating on natural gas as it does while operating on gasoline or diesel fuel. . .

AMFA directed NHTSA to establish two minimum driving ranges: one specification for the alcohol/gasoline or diesel dual-energy vehicles when oper­ating on alcohol and the other for natural gas dual-energy vehicles while operat­ing on natural gas. In establishing these criteria, AMFA directed the agency to consider consumer acceptability, economic practicability, technology, environ­mental impact, safety, driveability, performance, and other factors considered relevant. The minimum driving range for alcohol vehicles was set at 200 miles, and natural gas vehicle range was required to meet or exceed 100 miles. EPACT amended the natural gas dual-energy driving range to 200 miles. NHTSA codified this requirement in April 1996. EPACT also revised the terminology of the AMFA-qualified fuels. Section 301.8(A) of EPACT revised the defini­tions in Section 513h.1.C of the Motor Vehicle Information and Cost Savings Act by redefining both “dual-energy” and “natural gas dual-energy” vehicles as “dual-fuel” vehicles. In addition, a broader category of “alternative-fuel” ve­hicles was established that would also include vehicles capable of operating on liquefied petroleum gas, hydrogen, coal-derived liquefied petroleum, and fuels derived from biological materials. It also would include electric vehicles, which included those deriving power from battery sources and solar energy, ethers, and any other materials that the Secretary of Energy deemed to be substantially non-petroleum in origin, and which delivered substantial energy security and environmental benefits.

Section 6 of AMFA amended the fuel economy provisions of Title V of the Motor Vehicle Information and Cost Savings Act through the addition of sec­tion 513, which provides CAFE incentives for vehicles capable of operating on alternative fuels. Beginning in May 1993, manufacturers of alternative – fuel vehicles could qualify for special treatment in the calculation of their CAFE by computing the weighted average of the fuel economy while operat­ing on gasoline or diesel fuel, and when operating on alcohol after dividing the alcohol fuel economy by a factor of 0.15. As an example, a dedicated alternative-fuel vehicle that would achieve a 15 mpg fuel economy while op­erating on alcohol would have a CAFE calculated as follows:

Established a permanent 10 percent business energy tax credit for invest­ments in solar and geothermal equipment.

Established a 10-year, 1.5 cents per kilowatt-hour (kWh) production tax credit (PTC) for privately owned as well as investor-owned wind projects and biomass plants using dedicated crops (closed-loop) brought on-line between 1994 and 1993, respectively, and on June 30, 1999.

Instituted the Renewable Energy Production Incentive (REPI), which pro­vides an incentive of 1.5 cents per kWh (subject to annual congressional ap­propriations (section 1212)), for generation from biomass (except municipal solid waste), geothermal (except dry steam), wind, and solar by tax-exempt, publicly owned utilities and rural cooperatives.

Indefinitely extended the 10 percent business energy tax credit for solar and geothermal projects.

Repealed the standard 10 percent investment tax credit.

Eliminated the tax-free status of municipal solid waste (MSW) power plants (WTE) financed with industrial development bonds, reduced acceler­ated depreciation, and eliminated the 10 percent tax credit (PL. 96—223).

Extended the WPT business energy tax credit for solar property through 1988 at the rates of15 percent for 1986, 12 percent for 1987, and 10 percent for 1988; for geothermal property through 1988 at the rates of 15 percent for 1986, and 10 percent for 1987 and 1988; for ocean thermal property through 1988 at the rate of 15 percent; and for biomass property through 1987 at the rates of15 percent for 1986, and 10 percent for 1987. (The busi­ness energy tax credit for wind systems was not extended and, consequently, expired on December 31, 1985.)

Public utility property became eligible for accelerated depreciation.

In December 1982, the 1978 ETA energy tax credits terminated for the following categories of non-renewable energy property: alternative energy property such as synfuels equipment and recycling equipment, equipment for producing gas from geopressurized brine, shale-oil equipment, and cogen­eration equipment. The remaining energy tax credits, extended by the WPT, terminated on December 31, 1985.

Allowed accelerated depreciation of capital (five years for most renewable energy-related equipment), known as the Accelerated Cost Recovery System (ACRS); public utility property was not eligible.

Provided for a 25 percent tax credit against the income tax for incremental expenditures on research and development (R&D).

ACT OF 1982 (TEFRA) (P. L. 97-248)

Canceled further accelerations in ACRS mandated by ERTA, and pro­vided for a basis adjustment provision that reduced the cost basis for ACRS purposes by the full amount of any regular tax credits, energy tax credits, and rehabilitation tax credits.

Increased the ETA residential energy tax credits for solar, wind, and geo­thermal technologies from 30 percent to 40 percent of the first $10,000 in expenditures.

Increased the ETA business energy tax credit for solar, wind, geothermal, and ocean thermal technologies from 10 percent to 15 percent, and extended the credits from December 1982 to December 1985.

Expanded and liberalized the tax credit for equipment that either con­verted biomass into a synthetic fuel, burned the synthetic fuel, or used the biomass as a fuel.

Allowed tax-exempt interest on industrial development bonds for the de­velopment of solid waste-to-energy (WTE) producing facilities, for hydro­electric facilities, and for facilities for producing renewable energy.

This appendix contains summaries of some of the legislation pertinent to alternative fuels since the late 1970s.

1978: THE ENERGY TAX ACT OF 1978 (ETA) (P. L. 95-6)8)

Residential energy (income) tax credits for solar and wind energy equip­ment expenditures: 30 percent of the first $2,000 and 20 percent of the next $8,000.

Business energy tax credit: 10 percent for investments in solar, wind, geo­thermal, and ocean thermal technologies (in addition to standard 10 percent investment tax credit available on all types of equipment, except for property that also served as structural components, such as some types of solar collec­tors; e. g., roof panels). In sum, investors were eligible to receive income tax credits of up to 25 percent of the cost of the technology.

Percentage depletion for geothermal deposits: depletion allowance rate of 22 percent for 1978—1980 and 15 percent after 1983.

Updated: October 6, 2015 — 8:02 am