WASHINGTON — Energy and climate change legislation unveiled yesterday in the Senate would create a $3 billion tax-credit bond program for vehicles powered by natural gas, allow private-activity bond financing for advanced nuclear power facilities, expand a nuclear loan guarantee program, and provide $2 billion of competitive grants for transportation projects.
The bill, drafted by Sens. John Kerry, D-Mass., and Joseph Lieberman, I-Conn., comes during an election season when lawmakers may be reluctant to support a climate-change overhaul, Kerry acknowledged during a briefing.
But if Congress cannot legislate a solution to environmental and energy concerns, then the Environmental Protection Agency will regulate one for them, he warned.
Sen. Barbara Boxer, D-Calif., chairman of the Senate Committee on Environment and Public Works praised the bill, saying, “The need for action is urgent,” and that she would work to “move it forward.”
President Obama also lauded the bill and urged Congress to pass legislation this year.
The 987-page bill, released as a discussion draft, focuses on three sectors: transportation, industrial, and power.
The draft would allow governments — including states, localities, tribal governments and governmental entities — to issue tax-credit bonds to finance natural-gas vehicle projects.
It would permit up to $3 billion of tax-credit bonds to be issued for such projects through Dec. 31, 2019.
All of the bond proceeds would have to be used for capital expenditures incurred by a governmental body for at least one natural-gas vehicle project built or vehicle purchased “primarily for governmental or public use.”
The natural-gas vehicle bonds provision is virtually identical to one that was in legislation introduced last year by Sen. Robert Menendez, D-N.J. That bill failed to advance to the Senate floor.
The draft would allow tax-credit bonds to be issued to pay for natural-gas vehicles or infrastructure.
Proceeds would have to be spent on a project within a five-year period, but the deadline could be extended by the Department of Energy secretary in some cases. However, any unspent or unextended funds would need to be redeemed 90 days after the five-year deadline.
The draft also would require the issuer to enter into “a binding commitment with a third party” to spend at least 10% of the project proceeds within six months of the issuance date.
The energy secretary would be responsible for allocating the bonds among projects “as the secretary determines appropriate.”
The bill does not include an option for issuers to receive direct payments from the federal government, in lieu of investors receiving tax credits, similar to Build America Bonds and several other tax-credit bonds that were recently converted into direct-pay bonds.
In addition, the legislation would funnel some of the revenues from the sale of emissions allowances into the highway trust fund, providing a new revenue source for the account, which is persistently close to going broke.
According to the draft, one-third of emissions allowances — up to a maximum value of $2.5 billion annually — would be auctioned and the proceeds deposited in the highway trust fund.
The fund could be used to support state and local transportation projects, and its outlays could be used to back grant anticipation revenue vehicles, or Garvee bonds.
The draft would allocate another one-third of emissions allowances — up to $1.875 billion annually — to the Department of Transportation secretary to be distributed as discretionary grants modeled after the Transportation Investment Generating Economic Recovery program.
TIGER was created by the American Recovery and Reinvestment Act and attracted 1,400 applications for 40 times more funding than was available. Congress authorized another $600 million for a second round of the program, dubbed TIGER II, in this fiscal year’s appropriations.
The other one-third of emissions allowances — up to $1.875 billion annually — would be distributed to states and metropolitan planning organizations for greenhouse gas emission reduction programs by the transportation secretary in decreasing amounts, from 12% of allowances in 2013 down to 5.8% in 2029, then increasing to a level amount of 6.7% from 2030 to 2034.
For the energy sector, the bill would expand a loan guarantee program to encourage more domestic production of nuclear power.
It would more than double to $100 billion the funding available for projects eligible for federal loan guarantees under the Energy Policy Act of 2005, and almost triple to $54 billion the amount available for nuclear power facilities under that total amount.
Recently, the Municipal Electric Authority of Georgia received $1.8 billion in federal loan guarantees to help build new nuclear units, to complement roughly $2.5 billion of municipal bonds it sold in March to help fund its share of the project.
Senate aides yesterday said they do not know the full cost of the bill yet, but expect to have it in about a month.
Lieberman said during a briefing on the bill that it would “stop the flow of dollars out of America … without adding a dime to our national deficit.”