METHANOL PROGRAMS

PART A-METHANOL VEHICLE DEMONSTRATION PROGRAMS

I

DEPARTMENT OF ENERGY PROGRAM

A funding level of $980,000 is provided by Public Law 98-461, the joint resolution making further continuing appropriations for fiscal year 1985, for a methanol vehicle demonstration program in the Department of Energy.

In the material under the heading "Department of Energy" in such public law, a total of $467,969,000 is provided for all energy conservation in the Department beginning in fiscal year 1985 and to remain available until expended. The following language from the conference report accompanying such public law makes clear that a part of that total amount is to be used for a methanol vehicle demonstration:

"The transportation programs include . . for a methanol vehicle demonstration.

. . a $1,500,000 decrease

"The methanol vehicle demonstration program provided in the Department of Energy is to be closely coordinated with that begun in the Department of Defense so that the maximum benefit may be derived."

Although this language does not indicate the amount from which the $1,500,000 decrease is made, the following examination of the legislative history indicates the proposed funding level which was before the conferees when they agreed to this decrease.

The House position for a funding level for a methanol vehicle demonstration program was presented in the committee report accompanying H.R. 5973, making appropriations for the Department of the Interior and related agencies (including the Department of Energy) for the fiscal year ending September 30, 1985. The committee report makes the following comment:

"The Committee recommends an appropriation of $2,500,000 for a methanol vehicle demonstration. This will permit the Federal Government to purchase up to 1,000 methanol-powered passenger automobiles during fiscal year 1985. . . . This program is included as section 105 of H.R. 5048 as reported by the Energy and Commerce Committee on May 17, 1984, and should be carried out in accordance with that proposal.

Therefore, the House position, at the time of the conference on the joint resolution which became Public Law 98-461, proposes a funding level of $2,500,000 for a methanol demonstration program to be carried out in accordance with the guidelines specified in section 105 of H.R. 5048.

The Senate legislative action on H.R. 5973 does not express a position on a methanol vehicle demonstration. The Senate report accompanying H.R. 5973 (which was reported by the Senate Committee on Appropriations but never considered by the full Senate) made no mention of the methanol vehicle demonstration.

Therefore, the only position directly expressed in the House and Senate reports on H.R. 5973 concerning a methanol vehicle demonstration for fiscal year 1985 is the language in the House report providing $2,500,000 for the demonstration. If this was the funding level before the conferees on the joint resolution which became Public Law 98-461 and the conferees agreed to a $1,500,000 decrease, as indicated by the statement of managers in the conference report, $1,000,000 remained for the demonstration. Because of section 327 of Public Law 98-461, which requires a 2-percent reduction in the funding levels for the Department of Energy and certain other departments, this $1,000,000 funding level was reduced to $980,000.

Thus, $980,000 is provided for a methanol vehicle demonstration program to be carried out by the Department of Energy and closely coordinated with the Department of Defense methanol program, with some indication in the legislative history that the demonstration is to be carried out in accordance with the provisions of section 105 of H.R. 5048, as reported by the House Committee on Energy and Commerce on May 17, 1984, which reads as follows:

"METHANOL DEMONSTRATION PROGRAM FOR FEDERAL VEHICLES

"SEC. 105. (a) The Secretary of Energy shall, to the extent funds are available, acquire not less than 1,000 methanol-powered passenger automobiles during fiscal year 1985 and shall, beginning in such fiscal year, conduct studies related to such vehicles, which shall include:

"(1) projects to demonstrate the performance of methanolpowered passenger automobiles;

“(2) an evaluation of the performance of methanol-powered passenger automobiles in cold weather;

"(3) a study of the fuel economy, safety, and emissions of methanol-powered passenger automobiles; and

"(4) a comparison of the operation and maintenance costs of methanol-powered passenger automobiles to the operation and maintenance costs of other passenger automobiles.

"(b)(1) At locations where vehicles acquired under subsection (a) are supplied with methanol, methanol shall be offered for sale to the public for use in other vehicles.

"(2) The requirement under paragraph (1) shall not apply after September 30, 1986.

"(c)(1) Upon the request of the head of any agency of the Federal Government, the Secretary may provide, to such Federal agency, vehicles acquired under subsection (a).

"(2) Any Federal agency receiving a vehicle under paragraph (a) shall pay to the Secretary, for each vehicle received, an amount not to exceed the value of a comparable gasoline-powered vehicle.

"(3) Any Federal agency receiving a vehicle under paragraph (1) shall cooperate with the study by the Secretary under subsection (a).

"(d) Upon request of the Secretary, the head of any Federal agency is authorized to detail, on a reimbursable basis, any of the personnel of such agency to the Department of Energy, to assist the Secretary in carrying out the duties of the Secretary under this section.

"(e)(1) The Secretary shall, during each 3-month period following the date of the enactment of this Act, submit a report to the Congress setting forth the actions taken and findings made under this section. The first such report shall be submitted not later than the last day of the second 3-month period beginning after the date of the enactment of this Act. The last such report shall be submitted not later than September 30, 1986.

"(2) The Secretary shall, not later than September 30, 1986, submit a final report to the Congress summarizing all actions taken and findings made under this section.

"(f) For purposes of this section:

"(1) The term 'acquire' means lease for a period of 60 continuous days or more, or purchase.

"(2) The term 'menthanol-powered passenger automobile' means a passenger automobile designed to operate using a fuel composed of not less than 85 percent methanol.

"(3) The term 'passenger automobile' has the meaning given such term in section 501(2) of the Motor Vehicle Information and Cost Savings Act (15 U.S.C. 2001(2)).

"(4) The term 'Secretary' means the Secretary of Energy. "(g) There are authorized to be appropriated to carry out the provisions of this section $3,000,000 for fiscal year 1985 and $1,000,000 for fiscal year 1986."

II

DEPARTMENT OF DEFENSE (ARMY) PROGRAM

A funding level of $1,300,000 is provided for this program by Public Law 98-461, the joint resolution making further continuing appropriations for fiscal year 1985. This funding is derived from the following general appropriation made by such public law:

"RESEARCH, DEVELOPMENT, TEST, AND EVALUATION, ARMY

"For expenses necessary for basic and applied scientific research, development, test, and evaluation, including maintenance, rehabilitation, lease, and operation of facilities and equipment, as authorized by law; $4,349,015,000 . . . to remain available for obligation until September 30, 1986."

The following language from the statement of managers in the conference report accompanying the public law made clear that $1,300,000 of the $4,349,015,000 was to be used to carry out a methanol car research project:

"METHANOL CAR RESEARCH

"The Army is directed to use within available funds the sum of $1,300,000 to carry out the methanol car research project authorized in section 202(a) of the DoD Authorization Act for 1985. Approximately 50 percent of the methanol used in this project shall be derived from coal and approximately 50 percent shall be derived from natural gas. The Army is directed to coordinate its efforts with the Department of Energy, which is carrying out companion research on methanol fuels."

Thus, the legislative history of Public Law 98-461 indicates that the Army is to use $1,300,000 to carry out a methanol car research project, that the project is to be coordinated with companion research being carried out by the Department of Energy, and that the project is to be carried out in accordance with section 202(a) of the Department of Defense Authorization Act of 1985, which reads as follows:

"PROVISIONS RELATING TO ARMY PROGRAMS

"SEC. 202. (a)(1) Of the amount authorized in section 201 for the Army, the sum of $1,300,000 is available only for—

"(A) the purchase of new methanol cars;

"(B) establishing the reliability and durability of such vehicles in laboratory and fleet tests;

"(C) testing a percentage of the methanol fleet in cold weather environments; and

"(D) resolving related support functions for the safe and efficient storage, distribution, and the use of neat methanol fuel for such vehicles.

"(2) Not later than September 30, 1985, the Secretary of the Army shall submit to the Committee on Armed Services of the Senate and House of Representatives a report on the progress of the methanol fuel program referred to in paragraph (1)(B).

"(b)(1) The Secretary of the Army shall proceed with the competitive development of a Joint Tactical Missile System having the following design goals:

"(A) A maximum range of 200 kilometers.

"(B) A payload at maximum range of 1,000 pounds.

"(2) In the development of the Joint Tactical Missile System, the Secretary of the Army shall make maximum use of proven missile system technology with the objective of completing the competitive full-scale engineering development of the system by July 1, 1987. "(3) Not later than January 1 of 1985, 1986, and 1987, the Secretary shall submit to the Committee on Armed Services of the Senate and House of Representatives a report on the progress of the development of the system referred to in paragraph (1).'

PART B-TAX PROVISIONS RELATING TO THE USE OF METHANOL AS A TRANSPORTATION FUEL

Section 4041 of the Internal Revenue Code of 1954 concerns the use of methanol as a transportation fuel. It reads as follows:

CHAPTER 31-RETAIL EXCISE TAXES

SUBCHAPTER A. Special fuels.

SUBCHAPTER B. Heavy trucks and trailers.

Subchapter A-Special Fuels

Sec. 4041. Imposition of tax.

Sec. 4042. Tax on fuel used in commercial transportation on inland waterways.

SEC. 4041. IMPOSITION OF TAX.

(a) DIESEL FUEL AND SPECIAL MOTOR FUELS.

(1) DIESEL FUEL.-There is hereby imposed a tax of 15 cents a gallon on any liquid (other than any product taxable under section 4081)

(A) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle for use as a fuel in such vehicle; or

(B) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid under paragraph (A).

(2) SPECIAL MOTOR FUELS.-There is hereby imposed a tax of 9 cents a gallon on benzol, benzene, naphtha, liquefied petroleum gas, casing head and natural gasoline, or any other liquid (other than a kerosene, gas, oil, or fuel oil, or any product taxable under section 4081 or paragraph (1) of this subsection)—

(A) sold by any person to an owner, lessee, or other operator of a motor vehicle or motorboat for use as a fuel in such motor vehicle or motorboat, or

(B) used by any person as a fuel in a motor vehicle or motorboat unless there was a taxable sale of such liquid under subparagraph (A).

(3) TERMINATION.-On and after October 1, 1988, the taxes imposed by this subsection shall not apply.

(b) EXEMPTION FOR OFF-HIGHWAY BUSINESS USE; EXEMPTION FOR QUALIFIED METHANOL AND ETHANOL FUEL.

(1) EXEMPTION FOR OFF-HIGHWAY BUSINESS USE.

(A) IN GENERAL.-No tax shall be imposed by subsection (a) on liquids sold for use or used in an off-highway busi

ness use.

(B) TAX WHERE OTHER USE.—If a liquid on which no tax was imposed by reason of subparagraph (A) is used otherwise than in an off-highway business use, a tax shall be imposed by paragraph (1)(B) or (2)(B) of subsection (a) (whichever is appropriate).

(C) OFF-HIGHWAY BUSINESS USE DEFINED. For purposes of this subsection, the term "off-highway business use" has the meaning given to such term by section 6421(d)(2). (2) QUALIFIED METHANOL AND ETHANOL FUEL.—

(A) IN GENERAL.-No tax shall be imposed by subsection (a) on any qualified methanol or ethanol fuel.

(B) QUALIFIED METHANOL OR ETHANOL FUEL.-The term "qualified methanol or ethanol fuel" means any liquid at