March 12,2003

Senators Introduce Tax Incentives for Alternative Energy

WASHINGTON -- The four Senate committee leaders with jurisdiction over energy taxes and
energy policy last night introduced a comprehensive bill including a series of alternative energy
production tax incentives. The sponsors were Sen. Chuck Grassley, chairman of the Committee on Finance, Sen. Max Baucus, Finance Committee ranking member, Sen. Pete Domenici, chairman of the Committee on Energy and Natural Resources, and Sen. Jeff Bingaman, ranking member of the Energy Committee.

“It makes sense to use the tax code to develop alternative energy,” Grassley said. “Cutting
taxes is an effective way to encourage positive, environmentally conscious ways to produce electricity and fuel. I’m glad to work with my colleagues to advance a good, green energy package.”

Baucus said: “I'm pleased to be working together to introduce this important energy tax
package that will form the core of a strong energy strategy. Our forward thinking energy tax package will reduce our dependence on foreign oil imports and encourage energy conservation through tax incentives. Given the rising gasoline and oil prices, it’s important that we take advantage of this opportunity to provide relief to consumers across the country.”

Domenici said: “I think these subsidies are very important to ensuring that a broad range of
energy technologies are available to the marketplace.”

Bingaman said: “These tax incentives will help increase and diversify our nation’s energy
supplies and help us use those resources more efficiently and effectively. It’s a balanced package that includes key components needed to support a comprehensive energy strategy.”

The Energy Tax Incentives Act of 2003 (S. 597) is substantially similar to the energy tax
incentives bill, developed by Grassley and Baucus, that received overwhelming support by the full
Senate in April 2002. The bill never received final approval because negotiations between the House and Senate over a broader energy policy bill never yielded a final product before Congress adjourned.

The Energy Tax Incentives Act of 2003 includes:

< Wind energy. The package includes an extension of the wind energy production tax credit
until 2007. Grassley authored the Wind Energy Incentives Act of 1993, which established the
first-ever wind energy production tax credit.

< Biomass. The bill extends the tax credit for the production of biomass, which became law in
1992, and expands the definition of biomass to include saw dust, tree trimmings, agricultural
byproducts and untreated construction debris. Also included is the extension of the tax credit
for the production of electricity from poultry waste and closed loop biomass co-fired with
coal.

< Biodiesel. The bill provides an income tax credit and excise tax rate reduction for biodiesel
fuel mixtures. These new incentives will encourage the production of biodiesel, a cleanburning
alternative fuel made from domestic renewable sources, such as soybean oil. The
income tax credit applies to biodiesel made from vegetable oil and animal fats.

< Small ethanol producer credit. The legislation expands the definition of an eligible small
ethanol producer so small cooperative producers of ethanol will receive the same tax benefits
as large companies. It also clarifies that the tax credit can flow through to the patrons of the
cooperatives.

< Fuel taxes. The bill moves a portion of the taxes from gasohol – gasoline blended with
ethanol – from the general fund into the Highway Trust Fund to ensure that fuel taxes are
used for highways, not unrelated government programs.

< Energy-efficient appliances. The bill encourages the manufacture and use of super energyefficient
washing machines and refrigerators with a tax credit for the production of those
appliances.

< Swine and bovine waste. The package provides new opportunities for energy production, a
useful method of waste disposal and increased farm income by creating a production tax
credit for electricity generated from swine and bovine waste.

< Multiple tax incentives to increase traditional oil and gas production, including provisions for
marginal well production and tax benefits from the production of fuel from non-conventional
sources such as coal bed methane and heavy oil.

Grassley said he hopes for Finance Committee consideration and approval of the Energy Tax
Incentives Act of 2003 as soon as possible.

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