Subtitle A—Nuclear Power

In what some might see as an odd choice of placement for a climate change bill, the nuclear power provisions appear as the very first part of the very first title of the bill. Title I seeks to expand benefits first accorded the nuclear industry in the Energy Policy Act of 2005. It also proposes expanded and extended tax benefits and provisions designed to promote the long-term competitiveness of the nuclear supply industry in the United States

Loan guarantees. As has been widely noted, the bill increases the authorization for loan guarantees from $18 billion to $54 billion, creating the opportunity for not just 2 or 3 plants, but 6 to 9 plants to qualify. To limit the time the government is exposed to credit risk under the loan guarantees, they become subject to gradually increasing carrying fees after five years of a new plant's operation.

License streamlining. Building on efforts the National Reserch Council (NRC) commenced in the 1990s and Congress endorsed in 2005, the bill calls for expedited licensing for applicants that employ an already certified design, have an early site permit, are located at a site that already hosts a nuclear plant, and have made a significant economic commitment to the project. Projects meeting those tests would not face an administrative hearing on non-contested issues and would benefit from a streamlined National Environmental Policy Act (NEPA) review by fully taking advantage of any reviews done in connection with an early site permit.

Standby support. The standby support to cover increased costs resulting from post-licensing litigation delays, first enacted in 2005, has been expanded to cover up to $500 million for the first 12 plants.

Duties. Import duties would be suspended on the import of specified reactor parts through 2020.

Tax benefits. Among the tax benefits for new reactors expanded or extended are: accelerated depreciation, a 10 percent investment tax credit for the first 8,000 MW of new construction, tax exempt bonds for public-private partnerships in new reactors, and a grant in lieu of the 10 percent tax credit for qualified public entities.

Research. The bill includes several research initiatives focused on construction cost reduction, fuel recycling and small plant design development.

Subtitle B—Offshore Oil and Gas

Revenue sharing from Outer Continental Shelf (OCS) areas in certain coastal states. Section 1202 creates a revenue allocation scheme for OCS revenues among states that (i) are not "Gulf Producing states" as defined in earlier legislation and (ii) are within 300 miles of a leased tract that had no oil or gas production as of January 2000. The revenues are allocated as follows: 37.5 percent goes to the state, of which 20 percent is allocated to the closest localities in inverse proportion to their distance from the tract; 12.5% goes to a land and water conservation fund; and the remaining 50% goes to deficit reduction. Revenues allocated to states and localities from projects in the OCS planning area are capped at $500 million from 2011 to 2055.

Revenue sharing from areas in Alaska adjacent zone. Section 1203 provides for revenue sharing in the Alaska Adjacent Zone in accordance with the Outer Continental Shelf Lands Act, except that 33 percent of any allocable share of the State of Alaska is allocated to Regional Corporations established under the Alaska Native Claims Settlement Act.

Reservation of lands and rights. Section 1204 amends the Outer Continental Shelf Lands Act to allow states to prohibit leasing for oil and gas drilling within 75 miles of the coastline of the state.

Impact studies. Section 1205 amends the Outer Continental Shelf Lands Act requiring the Department of the Interior to prepare assessments of the probability and potential environmental impact of oil spills in areas newly opened for production. If an assessment indicates that a state would be "significantly impacted" by an oil spill resulting from drilling activity in a given area, no leases may be issued for the area.

Subtitle C—Coal

The bill includes both financial incentives and performance standards to reduce greenhouse gas emissions from electric power generation, and repeals several Clean Air Act authorities.

CCS. The bill creates a national program for carbon capture and sequestration (CCS) from power plants and other industrial sources (so long as 30 states approve it). Early commercial demonstration of CCS technology would be supported by a grant program funded by a fee per kwh (residential exempt) on all fossil power generation (coal, gas, and oil), limited to $2.1 billion per year over 10 years. Full scale commercial deployment of up to 72 gigawatts of CCS-equipped power capacity is supported either through a reverse auction of bonus allowances based on metric tons avoided or a declining fixed subsidy covering the incremental costs of CCS based on carbon captured and sequestered, to be determined by the Administrator. See Sections 1411–1132.

CO2 performance standard. The bill establishes a CO2 performance standard for new coal-fired electric power plants. Plants permitted between 2009 and 2019 have to meet a standard requiring at least a 50 percent reduction within four years after the date on which 10 GW of capacity equipped with carbon capture and storage (CCS) is operating. Plants permitted after 2020 must meet a standard reflecting an emission reduction of 65 percent or more. Earlier adoption of CCS is encouraged by the reduction or loss of subsidies for plants that fail to meet the performance standard when they start operating. See Section 1441, adding Clean Air Act Section 801. This performance standard must be reviewed every five years.

Old plant transition. Coal-fueled replacement and retrofit plants receive accelerated depreciation and investment tax credits based on emissions reductions on a pounds of CO2 per MWh rate basis.

Limitation on the Environmental Protection Agency (EPA) authority. EPA will no longer be permitted to establish GHG performance standards for new and existing sources that are covered by the bill's GHG emission limits, although they remain authorized for some types of sources not subject to those limits.

Subtitle D—Renewable Energy and Energy Efficiency

Subtitle D makes "large-scale deployment" of renewable energy resources an essential component of the Act, to promote energy security, greenhouse gas reduction, and job creation. It emphasizes the need for clean/renewable energy deployment mandates, innovative funding methods, transmission provisions, better building codes, and better appliance standards.

Rural energy savings program. This program is intended to create jobs by lending money to energy efficiency operations. Potential recipients of funding include "any public power district, public utility district, or similar entity" that has obtained a loan from the Rural Utilities Service. To obtain a loan, the eligible entity must agree to use the loan funds to make loans to qualified consumers to implement energy efficiency measures. The entity must also create an implementation plan for use of the funds, describe the efficiency measures, and document the effectiveness of the measures. The loans are interest-free, but eligible entities must repay them over 10 years. Advances of loan funds are permitted, but they may not exceed half of the total loan amount in any single year. In addition, entities selected to receive a loan can obtain grants to defray costs up to 4 percent of the loan amount.

The loans to qualified consumers may bear interest up to 3 percent, to be used to offset personnel and program costs and to establish a loan loss reserve. They must be designed to finance energy efficiency measures that will enable a qualified consumer to repay comfortably in 10 years. They can only be used to fund efficiency measures on realty fixtures and manufactured homes. Loans to qualified consumers are to be repaid through additional utility charges. Finally, an eligible entity must audit the loans to determine how well the efficiency measures are working.

Verifying effectiveness. The bill requires at least one contract with a qualified entity to measure and verify the program's effectiveness. The contractor must develop and complete a recommended measurement/verification protocol for the Rural Utility Service, assemble a committee of representatives from eligible entities to assist in monitoring, provide measurement and verification training and consulting to eligible entities receiving loans, and develop a program to train employees at eligible entities properly. If useful, the contractor may use subcontractors.

Fast start demonstration projects. The bill calls for establishment of loan demonstration projects within 90 days of its enactment, authorizing any necessary implementing regulations. Entities participating in the projects must meet a lengthy set of criteria: they must promote energy savings, successfully measure the effectiveness of energy efficiency loans, include training for employees of eligible entities, allow most eligible entities in a State to participate, reduce generating capacity demand, provide loans to at least 20,000 consumers (if a single entity) or at least 80,000 (if a group of eligible entities), and serve areas where many consumers live in homes that are manufactured or more than 50 years old. The bill also authorizes additional demonstration projects not subject to the consumer number requirements.

Support of state renewable energy and energy efficiency programs. GHG emission allowances are to be distributed from 2012 through 2021 under the Clean Air Act. Half of one percent of the allowances must go to Indian tribes, through competition, for renewable energy programs. Of the balance, all of which goes to the States, 1/3 must be divided equally, 1/3 must be apportioned by state population, and 1/3 must be apportioned by state energy consumption. States must use the allowances for energy efficiency purposes, renewable energy purposes, cost-effective programs for end-use energy consumers, Smart Grid development, and surface transportation capital projects. The States must also demonstrate that they are using the allowances in addition to, and not instead of, existing funding, and they must prioritize existing energy efficiency programs. Biennial reports must list entities receiving allowances, as well as the amounts and purposes of such allowances, and must document the improvements the allowances have helped create. If a State is not complying with the allowance requirements, the bill allows withholding of up to twice the number of allowances the State failed to use properly.

Voluntary renewable energy markets. Citing the growing success of voluntary renewable energy market in the United States, the bill requires the Comptroller General to submit a report on the market's effectiveness. The report must include an overview of reductions of carbon dioxide emissions, growth in the voluntary market, and recommended strategies to promote both emissions reductions and market growth.

Subtitle E—Clean Transportation

The bill calls for a national transportation low-emission energy plan. This plan must examine cost-effective electric vehicle refueling and improved infrastructure, aiming for "strategic deployment" in those areas by 2020. In order to gauge need, the bill requires pilot projects, at least one of which must be in a rural area and at least one of which must focus on freight issues. The bill authorizes the creation of a Low Emission Electric Power System (LEEP) coordinator within Department of Transportation (DOT), to oversee the plan's development and the implementation of the pilot projects.

Transportation planning. The bill requires Metropolitan Planning Organizations to include greenhouse gas emissions in their transportation planning. The bill also requires States to set surface transportation-related emission reduction targets and strategies to meet them. The plans the States create must "contribute to the achievement of national goals" under the Clean Air Act. At a minimum, they must also comply with emission models and methodologies established in the Act, inventory emission sources, remain consistent with existing state programs, and include appropriate transportation strategies. The bill specifies, however, that it is not intended to infringe on local land use authority.

Investing in transportation greenhouse gas emission reduction programs. The bill authorizes DOT to distribute GHG emissions allowances to States and metropolitan planning organizations to support reduction targets and strategies. No more than 10 percent may go to metropolitan planning organizations to develop and update transportation plans, and the amount set aside for that purpose must be apportioned by population. The remainder may go to metropolitan planning organizations for other purposes, and to state governments. A number of criteria are established for the distributions, including the quantity of total emissions to be reduced within a given area, the quantity per capita, the cost-effectiveness of reductions, progress towards achieving reduction targets, increased transportation options and mobility for the disadvantaged, and prior reductions achieved. Significantly, allowances are only permitted to fund strategies demonstrating emissions reductions that are "sustainable" throughout the applicable plan. With DOT authorization, recipients of allowances can agree to transfer all or part of them to private entities (or ineligible public entities). Finally, the bill requires allowances allocated to the Highway Trust Fund to be used to promote well-functioning transportation "through measures that are consistent with transportation efficiency planning."

Greenhouse Gas (GHG) regulations for vehicles. The bill requires GHG regulations for vehicles. The new regime aims to establish reduction targets, as well as emission models to address the emission reduction goals effectively. The bill requires a joint EPA-DOT assessment at least every six years after the regulations take effect. This assessment must examine the effects of several sources of emission reduction, including vehicle efficiency improvements, greenhouse gas emissions from fuel, reduction in mileage, and changes in consumer transportation demand. Based on the results, EPA and DOT may consider whether additional regulations are necessary.

Subtitle F—Clean Energy Research and Development

The new Section 781(c)(4) of the Clean Air Act allocates 2 percent of GHG emission allowances for clean energy technology research and development. Subtitle F defines clean energy technology to include various forms of renewable energy, efficient transmission and storage technologies, energy efficiency technologies for buildings and manufacturing, smart grid technologies (as defined in EISA 2007), materials research with energy efficiency applications, water security technologies, and transportation technologies that improve efficiency. Subtitle F provides that the award of allowances shall be made by the Secretary of Energy "taking into account the goals of ARPA-E," but does not specify whether the awards will be made through ARPA-E or other Department of Energy (DOE) program offices.