Energy Policy Act of 2005

Enacted August 8, 2005
The table below provides a summary of the Energy Policy Act (EPAct) of 2005 (Public Law 109-58) provisions related to alternative fuels and vehicles, air quality, fuel efficiency, and other transportation topics. Note that although legislation authorizes funding for activities, the funds still must be appropriated through a separate federal budgeting process. For more information, visit the EPAct website.

ReferenceDescription
Section 701
Federal Fleet Dual-Fuel Vehicles: Fuel Use Requirement
Requires federal fleets to use alternative fuels in dual-fuel vehicles unless the Department of Energy (DOE) determines an agency qualifies for a waiver. Grounds for a waiver include the lack of alternative fuel availability and cost restrictions.

For more information, visit the Federal Fleet Management website.
Section 702
Federal Fleets Incremental Cost Distribution
Requires the U.S. General Services Administration (and other federal agencies that procure vehicles for fleets) to spread the incremental cost of alternative fuel vehicles (AFVs) across all vehicles. This mandate modifies 42 U.S. Code 13212 (EPAct 1992 Section 303).
Section 703
Alternative Compliance for State and Alternative Fuel Provider Fleets
Expands compliance options under EPAct 1992 by allowing fleets to choose a petroleum reduction path in lieu of acquiring AFVs. Interested fleets must apply for and obtain a waiver from DOE. To receive a waiver, fleets must prove to DOE that they will achieve petroleum reductions equivalent to AFVs running on alternative fuels 100% of the time.

For more information, see the EPAct State and Alternative Fuel Provider Fleets website.
Section 704
Review of EPAct 1992 Programs: DOE Report
Requires DOE to submit a report to Congress 180 days after EPAct 2005 enactment. The report must examine and discuss the number of AFVs acquired by fleets covered by EPAct, the amount of alternative fuel used in AFVs acquired by covered fleets, the amount of petroleum displaced by covered fleets, the cost of compliance with EPAct, obstacles preventing compliance with EPAct and the use of alternative fuels, and projected impacts of EPAct 2005.

On December 10, 2008, DOE issued a Report to Congress: Review of Energy Policy Act of 1992 Programs and the Alternative Fuel Provider Fleet Mandate.
Section 705
Federal Agency Annual Reports to Congress
Changes the due date for annual agency reports under Executive Order (EO) 13149. EO 13149 directs federal agencies to reduce overall petroleum consumption in fleets by 20% by the year 2005.
Section 706
Joint Flexible Fuel/Hybrid Vehicle Commercialization Initiative
Directs DOE to establish a research program to advance the commercialization of hybrid flexible fuel vehicles or plug-in hybrid flexible fuel vehicles. EPAct 2005 requires vehicles to achieve at least 250 miles per petroleum gallon. A total of $40 million is authorized for the program ($3 million in 2006, $7 million in 2007, $10 million in 2008, and $20 million in 2009).
Section 707
Excluded Vehicles: Electric Utility Emergency Vehicles
Clarifies that excluded emergency vehicles include those used to repair transmission lines and restore electric service as determined by DOE.
Section 711
Hybrid Vehicles
Directs DOE to accelerate efforts to improve technologies used in hybrid vehicles, including batteries.
Section 712
Efficient Hybrid and Advanced Diesel Vehicles
Directs DOE to establish a program to encourage the domestic production and sale of efficient hybrid and advanced diesel vehicles. EPAct 2005 authorizes "such funds as necessary" from 2006 through 2015.
Sections 721-723
Advanced Vehicles Demonstration and Pilot Program

Establishes a competitive grant program, administered by Clean Cities, to fund up to 30 geographically dispersed advanced vehicle demonstration projects. EPAct 2005 authorizes $200 million (until expended) for this program.

Grant recipients will be limited to state and local government agencies and metropolitan transportation authorities. Applications must include a registered participant in the Clean Cities initiative. Participants can be public or private entities.

Projects are limited to $15 million each and require a 50% cost share. Grant funds may be used for:

  • AFVs (including neighborhood electric vehicles)
  • Fuel cell vehicles
  • Ultra low sulfur diesel vehicles
  • Fueling infrastructure acquisition and installation
  • Vehicle, infrastructure and equipment operation and maintenance of vehicles
Section 742
Diesel Truck Retrofit and Fleet Modernization Program
Authorizes the U.S. Environmental Protection Agency (EPA), in consultation with DOE, to administer a competitive grant program for modernizing fleets and retrofitting diesel trucks. Grants will be awarded with preference to state or local governments that allocate funds for major hauling operations, particularly at ports. A 50% cost share is required. Trucks being replaced must be Model Year (MY) 1998 or older. EPAct of 2005 authorizes $20 million in 2006, $35 million in 2007, $45 million in 2008, and such sums as necessary for 2008 through 2010.
Section 743
Fuel Cell School Buses
Establishes a DOE demonstration program involving fuel cell school bus manufacturers and at least two local government agencies currently using natural gas school buses. The non-federal cost share is at least 20% of infrastructure and 50% of vehicle costs. EPAct 2005 authorizes $25 million for fiscal years 2006 through 2009.

In December 2008, DOE issued Fuel Cell School Buses: Report to Congress describing the results of the program.
Section 754
Diesel Fueled Vehicles: Meeting Tier 2 Standards
Directs DOE to accelerate efforts to ensure that diesel vehicles meet Tier 2 emissions standards through improved diesel combustion and after-treatment technologies.
Section 756
Heavy-Duty Vehicle Idle Reduction Analysis and Deployment Program
Directs EPA to conduct analysis on emissions reduced and fuel saved as a result of idle reduction measures. It also requires EPA, in consultation with the U.S. Department of Transportation (DOT), to develop a deployment program that supports the deployment of idle reduction technologies and promotes improved air quality and reduced emissions. The non-federal cost share is 50%. EPAct 2005 authorizes $19.5 million in 2006, $30 million in 2007, and $45 million in 2008.
Section 757
Biodiesel Engine Testing Program
Directs DOE to work with engine and fuel injection manufacturers to test biodiesel in advanced diesel fuel engines, determine impacts of different biodiesel blendstocks, and study the emissions and warranty impacts of different blendstocks. EPAct 2005 authorizes $5 million each year from 2006 through 2010.
Section 758
Ultra-Efficient Engine Technology for Aircraft
Directs DOE to enter into a cooperative agreement with the National Aeronautics and Space Administration for the development of ultra-efficient engine technologies for aircraft. The goal is a 10% efficiency improvement and a 70% reduction of NOx during take off and landing. The agreement will also explore advanced concepts including hybrid fuel cells systems and alternative fuels in turbines. EPAct 2005 authorizes $50 million per year for 2006 through 2010.
Section 759
Fuel Economy Incentive Requirements
Requires automobile manufacturers to label all dual-fuel (bi-fuel and flex-fuel) vehicles to inform owners that the vehicle can be operated on an alternative fuel. If any dual-fuel automobile is not labeled, it is ineligible to receive the fuel economy incentives included in 49 U.S. Code 32906. This requirement applies to dual-fuel automobiles manufactured on or after September 1, 2006.
Section 771
Fuel Economy Standards
Authorizes additional funding to support DOT's National Highway Traffic Safety Administration (NHTSA) work on fuel economy standards. EPAct 2005 authorizes $3.5 million each year 2006 through 2010.
Section 772
Extension of Maximum Increase for Alternative Fueled Vehicles
Modifies the incentives for dual-fuel AFVs by extending the current Corporate Average Fuel Economy (CAFE) credits for dual-fuel AFVs through 2010. EPAct 2005 also authorizes NHTSA to consider extending the incentives through 2014.
Section 773
Study of Reducing Use of Fuel for Automobiles
Directs NHTSA to study the feasibility and effects of significantly reducing petroleum consumed by automobiles by MY 2014. The study will examine and make recommendations regarding the current CAFE requirements; ways automakers can contribute to significant reductions; potential impacts fuel cell vehicles can make toward petroleum reduction; and the effects petroleum reduction would have on gasoline supplies, the auto industry, motor vehicle safety, and air quality. The report is due to Congress in August 2006.

In August 2006, NHSTA issued a Study of Feasibility and Effects of Reducing Use of Fuel for Automobiles: Report to Congress.
Section 774
Update Fuel Economy Test Procedures
Requires EPA to evaluate and/or adjust fuel economy test procedures to reflect real-world driving scenarios (higher speeds, faster acceleration, temperature variation, use of air conditioning, etc.).

Starting with model year 2008 vehicles, EPA changed the way it estimates fuel economy. For more information, learn about the ratings on fueleconomy.gov.
Section 782
Federal and State Procurement of Fuel Cell Vehicles and Hydrogen Energy Systems
Requires federal fleets to begin leasing or purchasing fuel cell vehicles and hydrogen energy systems no later than January 1, 2010. DOE will provide incremental cost funding and may provide exemptions if the vehicles are not available or appropriate for fleet needs. EPAct 2005 authorizes $15 million in 2008, $25 million in 2009, $65 million in 2010, and such funds as necessary each year for 2011 through 2015.
Section 791-797
Diesel Emission Reductions
Establishes a program to make grants and loans available to state and local government agencies and non-profit organizations for reducing emissions from diesel engines. The program focuses on replacing/retrofitting engines in non-attainment areas and requires that at least 50% of federal program funds be used toward public fleets. EPA or California Air Resources Board certified or verified technologies qualify. Natural gas vehicle repowers and replacements are also eligible. EPAct 2005 authorizes $200 million per year for 2006-2010.

EPA's Report to Congress: Highlights of the Diesel Emissions Reduction Program outlines the programs that resulted from these sections.
Section 1341
Alternative Fuel Motor Vehicle Credit

Provides a tax credit for the purchase of a new dedicated AFV. The tax credit is for 50% of the incremental vehicle cost, plus an additional 30% of the incremental cost for vehicles that meet or exceed the most stringent emissions standards available for certification under the Clean Air Act (other than a zero emission standard), or that meet or exceed California's Super Ultra Low Emission Vehicle standards.

The credit is available for the purchase of qualified light-, medium-, and heavy-duty dedicated AFVs that operate on natural gas, propane, hydrogen, or a fuel blend of at least 85% methanol. Mixed fuel vehicles may also qualify for reduced credit amounts.

For tax exempt entities, the credit can be passed back to the vehicle seller. The tax credit is available for vehicles purchased between January 1, 2006 and December 31, 2010.

Section 1341
Fuel Cell Motor Vehicle Credit

Provides a base tax credit of $8,000 for the purchase of light-duty fuel cell vehicles. The $8,000 credit is valid until December 31, 2009. After that, the credit is $4,000. To qualify, the vehicles must meet or exceed Bin 5 Tier II emission levels.

Base tax credits are also available for medium- and heavy-duty fuel cell vehicles. The Internal Revenue Service will determine the credit amount based on a sliding scale by vehicle weight.

For tax-exempt entities, the credit can be passed back to the vehicle seller. The credit is available until December 31, 2014.

Section 1341
Advanced Lean Burn Technology Motor Vehicle Credit

Provides a fuel economy credit of up to $2,400 for light-duty advanced lean burn technology motor vehicles meeting specific fuel economy and emissions standards. The fuel economy credit is based on efficiency gains over MY 2002 baselines. A conservation credit increases the fuel economy credit by up to $1,000 based on lifetime fuel savings.

Section 1341
Hybrid Motor Vehicle Credit

Provides a fuel economy credit of up to $2,400 for light-duty hybrid electric vehicles and trucks. The fuel economy credit is based on efficiency gains over MY 2002 baselines. A conservation credit increases the fuel economy credit by up to $1,000 based on lifetime fuel savings. To qualify for the credits, the vehicles must meet certain emissions standards based on gross vehicle weight ratings (GVWR).

The credit will phase out after a manufacturer has sold 60,000 qualified vehicles.

Section 1342
Alternative Fuel Infrastructure Tax Credit

Provides a tax credit equal to 30% of the cost of alternative fueling equipment, up to $30,000. Qualifying equipment includes fueling equipment for natural gas, propane, hydrogen, E85, or biodiesel blends of B20 or more. Consumers who purchase qualified residential fueling equipment may receive a tax credit of up to $1,000. For tax exempt entities, the credit can be passed back to the equipment seller. The credit is effective for equipment placed into service after December 31, 2005. The credit for natural gas, propane, E85, and biodiesel equipment expires December 31, 2009. The credit for hydrogen equipment expires in 2014.

This legislation replaces the Tax Deduction Timeline for the refueling property tax deduction extended by the Working Families Tax Relief Act of 2004.

Section 1344
Biodiesel Excise Tax
Extends the tax credit for biodiesel producers established in the American Jobs Creation Act of 2004 (Public Law 108-357) through 2008. The tax credit is $.50 per gallon of waste-grease biodiesel and $1.00 for agri-biodiesel. If the fuel is used in a mixture, the credit is $0.01 cent per percentage point of agri-biodiesel used or $0.005 per percentage point of waste-grease biodiesel.
Section 1345
Small Agri-Biodiesel Producer Credit
Provides a $.10 tax credit for each gallon of biodiesel produced by small producers (i.e. production capacity of less than 60 million gallons annually). This tax credit is capped after the first 15 million gallons produced annually.
Section 1346
Renewable Diesel Tax Credit
Amends the biodiesel tax credits to include renewable diesel fuel, which is derived from biomass by a thermal depolymerization process. The credit is $1 per gallon of renewable diesel. To qualify, the fuel must meet ASTM D975 or D396.
Section 1347
Small Ethanol Producer Credit
Changes the definition of a "small ethanol producer" to a production capacity of up to 60 million gallons, as opposed to 30 million gallons.
Section 1348
Clean Fuel Tax Deduction
Extends the sunset date of the clean fuel vehicle and refueling property tax deductions to December 31, 2005. This incentive was initially made available to business or personal taxpayers under EPAct 1992 (Public Law-102-486), Title XIX-Revenue Provisions, Section 179A. Under Section 179A, the deductions were scheduled to expire on December 31, 2004.
Section 1823
Alternative Fuels Report Hythane and Biodiesel
Directs DOE to report on the potential for hythane and biodiesel to become large-scale sustainable alternative fuels. The report will include assessments of the environmental and energy security benefits of biodiesel and activities necessary to make hythane a competitive transportation fuel. DOE may issue grants to universities or colleges to assist in the report. The report is due to Congress in August 2006.
Section 1825
Fuel Cell and Hydrogen Technology Study
Directs DOE to enter into contract with the National Academy of Sciences and National Research Council to carry out a study that provides a budget roadmap for fuel cell technologies and the transition from petroleum to hydrogen in a significant percentage of vehicles sold by 2020.
Section 1831
Review of EPAct of 1992
Requires DOE to submit a report to Congress 180 days after EPAct 2005 enactment. The report must examine and discuss the number of AFVs acquired by covered fleets, the amount of alternative fuel used in AFVs acquired by fleets covered by EPAct 1992, the amount of petroleum displaced by covered fleets, the cost of compliance with EPAct, obstacles preventing compliance with EPAct and the use of alternative fuels, and projected impacts of EPAct 2005.