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<PRE>[DOCID: f:s820is.txt]






107th CONGRESS
  1st Session
                                 S. 820

   To amend the Energy Policy Act of 1992 to assess opportunities to 
  increase carbon storage on national forests derived from the public 
  domain and to facilitate voluntary and accurate reporting of forest 
projects that reduce atmospheric carbon dioxide concentrations, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 3, 2001

 Mr. Wyden (for himself and Mr. Craig) introduced the following bill; 
   which was read twice and referred to the Committee on Energy and 
                           Natural Resources

_______________________________________________________________________

                                 A BILL


 
   To amend the Energy Policy Act of 1992 to assess opportunities to 
  increase carbon storage on national forests derived from the public 
  domain and to facilitate voluntary and accurate reporting of forest 
projects that reduce atmospheric carbon dioxide concentrations, and for 
                            other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Forest Resources for the Environment 
and the Economy Act''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--Congress finds that--
            (1) the Federal Government should increase the long-term 
        forest carbon storage on public land while pursuing existing 
        statutory objectives;
            (2) insufficient information exists on the opportunities to 
        increase carbon storage on public land through improvements in 
        forest land management;
            (3) important environmental benefits to national forests 
        can be achieved through cooperative forest projects that 
        enhance fish and wildlife habitats, water, and other resources 
        on public or private land located in national forest 
        watersheds;
            (4) forest projects also provide economic benefits, 
        including--
                    (A) employment and income that contribute to the 
                sustainability of rural communities; and
                    (B) ensuring future supplies of forest products;
            (5) monitoring and verification of forest carbon storage 
        provides an important opportunity to create employment in rural 
        communities and substantiate improvements in natural habitats 
        or watersheds due to forestry activities; and
            (6) sustainable production of biomass energy feedstocks 
        provides a renewable source of energy that can reduce carbon 
        dioxide emissions and improve the energy security of the United 
        States by diversifying energy fuels.
    (b) Purpose.--The purpose of this Act is to promote sustainable 
forestry in the United States by--
            (1) increasing forest carbon sequestration in the United 
        States;
            (2) encouraging long term carbon storage in forests of the 
        United States;
            (3) improving water quality;
            (4) enhancing fish and wildlife habitats;
            (5) providing employment and income to rural communities;
            (6) providing new sources of forest products;
            (7) providing opportunities for use of renewable biomass 
        energy; and
            (8) improving the energy security of the United States.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Carbon sequestration.--The term ``carbon 
        sequestration'' means the action of vegetable matter in--
                    (A) extracting carbon dioxide from the atmosphere 
                through photosynthesis;
                    (B) converting the carbon dioxide to carbon; and
                    (C) storing the carbon in the form of roots, stems, 
                soil, or foliage.
            (2) Forestry carbon activity.--The term ``forestry carbon 
        activity'' means a forest management action that--
                    (A) increases carbon sequestration and/or maintains 
                carbon sinks,
                    (B) encourages long-term carbon storage, and
                    (C) has no net negative impact on watersheds and 
                fish and wildlife habitats.
            (3) Forest carbon program.--The term ``forest carbon 
        program'' means the program established by the Secretary of 
        Agriculture under section 5 of the Forest Resources for the 
        Environment and the Economy Act, to provide assistance through 
        cooperative agreements and State revolving loan funds.
            (4) Forest carbon reservoir.--The term ``forest carbon 
        reservoir'' means trees, roots, soils, or other biomass 
        associated with forest ecosystems or products from the biomass 
        that store carbon.
            (5) Forest carbon storage.--The term ``forest carbon 
        storage'' means the quantity of carbon sequestered from the 
        atmosphere and stored in forest carbon reservoirs, including 
        forest products.
            (6) Forest land--
                    (A) In general.--The term ``forest land'' means 
                land that is, or has been, at least 10 percent stocked 
                by forest trees of any size.
                    (B) Inclusions.--The term ``forest land'' 
                includes--
                            (i) land that had such forest cover and 
                        that will be naturally or artificially 
                        regenerated; and
                            (ii) a transition zone between a forested 
                        and nonforested area that is capable of 
                        sustaining forest cover.
            (7) Forest management action.--The term ``forest management 
        action'' means the practical application of forestry principles 
        to the regeneration, management, utilization, and conservation 
        of forests to meet specific goals and objectives, while 
        maintaining the productivity of the forests, including 
        management of forests for aesthetics, fish, recreation, urban 
        values, water, wilderness, wildlife, wood products, and other 
        forest values.
            (8) Invasive species.--The term ``invasive species'' means 
        any species that is not native to an ecosystem and whose 
        introduction does or is likely to cause economic or 
        environmental harm or harm to human health.
            (9) Nonindustrial private forest.--The term ``nonindustrial 
        private forest'' means forest land that is privately owned by 
        an individual or corporation that does not control a forest 
        products manufacturing facility and where management may 
        include objectives other than timber production.
            (10) Reforestation.--
                    (A) In general.--The term ``reforestation'' means 
                the reestablishment of forest cover naturally or 
                artificially.
                    (B) Inclusions.--The term ``reforestation'' 
                includes--
                            (i) planned replanting;
                            (ii) re-seeding; and
                            (iii) natural regeneration.
            (11) Revolving loan program.--The term ``revolving loan 
        program'' means a State revolving loan program established 
        under section 5.

SEC. 4. CARBON MANAGEMENT ON FEDERAL LAND; CARBON MONITORING AND 
              VERIFICATION GUIDELINES.

    (a) Definitions.--Title XVI of the Energy Policy Act of 1992 is 
amended by inserting before section 1601 (42 U.S.C. 13381) the 
following:

``SEC. 1600. DEFINITIONS.

    ``In this title:
            ``(1) Carbon sequestration.--The term `carbon 
        sequestration' means the action of vegetable matter in--
                    ``(A) extracting carbon dioxide from the atmosp
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here 
                through photosynthesis;
                    ``(B) converting the carbon dioxide to carbon; and
                    ``(C) storing the carbon in the form of roots, 
                stems, soil, or foliage.
            ``(2) Forest carbon storage.--The term `forest carbon 
        storage' means the quantity of carbon sequestered from the 
        atmosphere and stored in forest carbon reservoirs, including 
        forest products.
            ``(3) Forest carbon program.--The term `forest carbon 
        program' means the program established by the Secretary of 
        Agriculture under section 5 of the Forest Resources for the 
        environment and the Economy Act, to provide financial 
        assistance through cooperative agreements and State revolving 
        loan funds for forest carbon activities.
            ``(4) Forest carbon reservoir.--The term `forest carbon 
        reservoir' means trees, roots, soils, or other biomass 
        associated with forest ecosystems or products from the biomass 
        that store carbon.
            ``(5) Forest management action.--The term `forest 
        management action' means the practical application of forestry 
        principles to the regeneration, management, utilization, and 
        conservation of forests to meet specific goals and objectives, 
        while maintaining the productivity of the forests, including 
        management of forests for aesthetics, fish, recreation, urban 
        values, water, wilderness, wildlife, wood products, and other 
        forest values.''
    (b) Carbon Management on Federal Land.--Section 1604 of the Energy 
Policy Act of 1992 (42 U.S.C. 13384) is amended--
            (1) by inserting ``(a) Report.--'' before ``Not''; and
            (2) by adding at the end the following:
    ``(b) Carbon Management on Federal Land.--
            ``(1) In general.--Not later than 1 year after the date of 
        enactment of this subsection, after consultation with 
        appropriate Federal agencies, the Secretary of Agriculture, 
        acting through the Chief of the Forest Service, shall report to 
        Congress on--
                    ``(A) the quantity of carbon contained in the 
                forest carbon reservoir of the National Forest System 
                and the methodology and assumptions used to ascertain 
                that quantity;
                    ``(B) the potential to increase the quantity of 
                carbon in the National Forest System and provide 
                positive impacts on watersheds and fish and wildlife 
                habitats through forest management actions; and
                    ``(C) the role of forests in the carbon cycle and 
                the contributions of U.S. forestry to the global carbon 
                budget.
            ``(2) Contents.--The report shall also include an 
        assessment of any impacts of the forest management actions 
        identified under paragraph (1)(B) on timber harvests, wildlife 
        habitat, recreation, forest health, and other statutory 
        objectives of national forest system management.''
    (c) Monitoring and Verification of Carbon Storage.--Section 1605(b) 
of the Energy Policy Act of 1992 (42 U.S.C. 13385(b)) is amended by 
adding at the end the following:
            ``(5) Guidelines on reporting, monitoring, and verification 
        of carbon storage from forest management actions.--
                    ``(A) In general.--Not later than 18 months after 
                the date of enactment of this paragraph, the Secretary 
                of Agriculture, acting through the Chief of the Forest 
                Service, shall--
                            ``(i) review the guidelines established 
                        under paragraph (1) that address procedures for 
                        the accurate voluntary reporting of greenhouse 
                        gas sequestration from tree planting and forest 
                        management actions;
                            ``(ii) make recommendations to the 
                        Secretary of Energy for amendment of the 
                        guidelines; and
                            ``(iii) provide an opportunity for public 
                        comment on the guidelines established under 
                        subparagraph (A) prior to their submission to 
                        the Secretary of Energy.
                    ``(B) Carbon and forestry advisory council.--
                            ``(i) Establishment.--The Secretary of 
                        Agriculture, acting through the Chief of the 
                        Forest Service, shall establish a Carbon and 
                        Forestry Advisory Council for the purpose of--
                                    ``(I) advising the Secretary of 
                                Agriculture in the development and 
                                updating of guidelines for accurate 
                                voluntary reporting of greenhouse gas 
                                sequestration from forest management 
                                actions;
                                    (II) evaluating the potential 
                                effectiveness of the guidelines in 
                                verifying carbon inputs and outputs 
                                from various forest management 
                                strategies;
                                    ``(III) estimating the effect of 
                                proposed implementation on carbon 
                                sequestration and storage;
                                    ``(IV) assisting the Secretary of 
                                Agriculture in reporting annually to 
                                Congress on the results of the carbon 
                                storage program; and
                                    ``(V) assisting the Secretary of 
                                Agriculture in assessing the 
                                vulnerability of forests to adverse 
                                effects of climate change.
                            ``(ii) Membership.--The Advisory Council 
                        shall be composed of the following 16 members 
                        with interest and expertise in carbon 
                        sequestration and forestry management, 
                        appointed by the Secretaries of Agriculture and 
                        Energy:
                                    ``(I) 1 member representing 
                                national professional forestry 
                                organizations;
                                    ``(II) 2 members representing 
                                environmental or conservation 
                                organizations;
                                    ``(III) 1 member representing 
                                nonindustrial, private landowners;
                                    ``(IV) 1 member representing forest 
                                industry;
                                    ``(V) 1 member representing 
                                American Indian Tribes;
                                    ``(VI) 1 member representing forest 
                                laborers;
                                    ``(VII) 3 members representing the 
                                academic scientific community;
                                    ``(VIII) 2 members representing 
                                State forestry organizations;
                                    ``(IX) 1 member representing the 
                                Department of Energy;
                                    ``(X) 1 member representing the 
                                Environmental Protection Agency;
                                    ``(XI) 1 member representing the 
                                Department of Agriculture;
                                    ``(XII) 1 member representing
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 the 
                                Department of the Interior
                            ``(iii) Terms.--
                                    ``(I) In general.--Except as 
                                provided in subclause (III), a member 
                                of the Advisory Council shall be 
                                appointed for a term of 3 years.
                                    ``(II) Consecutive terms.--No 
                                individual may serve on the Advisory 
                                Council for more than 2 consecutive 
                                terms.
                                    ``(III) Initial terms.--Of the 
                                members first appointed to the Advisory 
                                Council--
                                            ``(aa) 1 member appointed 
                                        under each of subclauses (II), 
                                        (VI), (VII), (X), and (XIII) of 
                                        clause (ii) shall serve an 
                                        initial term of 1 year; and
                                            ``(bb) 1 member appointed 
                                        under each of subclauses (I), 
                                        (IV), (VII), (IX), (XI), and 
                                        (XIV) shall serve an initial 
                                        term of 2 years.
                            ``(iv) Vacancy.--A vacancy on the Advisory 
                        Council shall be filled in the manner in which 
                        the original appointment was made.
                            ``(v) Continuation.--Any member appointed 
                        to fill a vacancy occurring before the 
                        expiration of the term shall be appointed only 
                        for the remainder of the term.
                            ``(vi) Compensation.--
                                    ``(I) In general.--Except as 
                                provided in subclause (II), a member of 
                                the Advisory Council shall serve 
                                without compensation, but may be 
                                reimbursed for reasonable costs 
                                incurred while in the actual 
                                performance of duties vested in the 
                                Advisory Council.
                                    ``(II) Federal officers and 
                                employees.--A member of the Advisory 
                                Council who is a full-time officer or 
                                employee of the United States shall 
                                receive no additional compensation or 
                                allowances because of the service of 
                                the member on the Advisory Council.
                                    ``(III) Support.--The Secretary 
                                shall provide financial and 
                                administrative support for the Advisory 
                                Council.
                            ``(vii) Use of existing council.--The 
                        Secretary of Agriculture may use an existing 
                        council to perform the tasks of the Carbon and 
                        Forestry Advisory Council providing--
                                    ``(I) Council representation, 
                                membership terms and background, and 
                                Council responsibilities reflect those 
                                stated in subparagraph (B), and
                                    ``(II) The responsibilities of the 
                                Council, as described in subparagraph 
                                (A), are a priority for the Council.
                    ``(C) Criteria.--
                            ``(i) In general.--The recommendations 
                        described in subparagraph (A)(ii) shall include 
                        reporting guidelines that--
                                    ``(I) are based on--
                                            ``(aa) measuring increases 
                                        in carbon storage in excess of 
                                        the carbon storage that would 
                                        have occurred in the absence of 
                                        the reforestation, forest 
                                        management, forest protection, 
                                        or other forest management 
                                        actions; and
                                            ``(bb) comprehensive carbon 
                                        accounting that reflects net 
                                        increases in the carbon 
                                        reservoir and takes into 
                                        account any carbon emissions 
                                        resulting from disturbance of 
                                        carbon reservoirs existing at 
                                        the start of a forest 
                                        management action;
                                    ``(II) include options for--
                                            ``(aa) estimating the 
                                        indirect effects of forest 
                                        management actions on carbon 
                                        storage, including possible 
                                        emissions of carbon that may 
                                        result elsewhere as a result of 
                                        the project's impact on timber 
                                        supplies or possible 
                                        displacement of carbon 
                                        emissions to other lands owned 
                                        by the reporting party;
                                            ``(bb) quantifying the 
                                        expected carbon storage over 
                                        various time periods, taking 
                                        into account the likely 
                                        duration of carbon stored in 
                                        the carbon reservoir; and
                                            ``(cc) considering the 
                                        economic and social affects of 
                                        management alternatives.
                            ``(ii) Accurate monitoring, measurement, 
                        and verification.--
                                    ``(I) In general.--The 
                                recommendations described in 
                                subparagraph (A)(ii) shall include 
                                recommended practices for monitoring, 
                                measurement, and verification of carbon 
                                storage from forest management actions.
                                    ``(II) Requirements.--The 
                                recommended practices shall, to the 
                                maximum extent practicable--
                                            ``(aa) be based on 
                                        statistically sound sampling 
                                        strategies that build on 
                                        knowledge of the carbon 
                                        dynamics of forests and 
                                        agricultural land;
                                            ``(bb) include cost-
                                        effective combinations of field 
                                        conditions measurements 
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with 
                                        modeling to compute carbon 
                                        stocks and changes in stocks;
                                            ``(cc) include guidance on 
                                        how to sample and calculate 
                                        carbon sequestration across 
                                        multiple participating 
                                        ownerships; and
                                            ``(dd) do not prevent use 
                                        of more precise measurements, 
                                        if desired by a reporting 
                                        entity.
                    ``(D) State forest carbon programs.--The 
                recommendations described in subparagraph (A)(ii) shall 
                include guidelines to States for reporting, monitoring, 
                and verifying carbon storage under the forest carbon 
                program.
                    ``(E) Biomass energy projects.--The recommendations 
                described in subparagraph (A)(ii) shall include 
                guidelines for calculating net greenhouse gas 
                reductions from biomass energy projects, including--
                            ``(i) net changes in carbon storage 
                        resulting from changes in land use; and
                            ``(ii) the effect that using biomass to 
                        generate electricity (including co-firing of 
                        biomass with fossil fuels) has on the 
                        displacement of greenhouse gas emissions from 
                        fossil fuels.
                    ``(F) Amendment of guidelines.--Not later than 180 
                days after receiving the recommendations from the 
                Secretary of Agriculture, the Secretary of Energy, 
                acting through the Administrator of the Energy 
                Information Administration, shall revise the guidelines 
                established under paragraph (1) to include the 
                recommendations.
                    ``(G) Review of guidelines by the advisory 
                council.--
                            ``(i) Periodic review.--At least every 24 
                        months, the Secretary of Agriculture shall--
                                    ``(I) convene the Advisory Council 
                                to evaluate the latest scientific and 
                                observational information on reporting, 
                                monitoring, and verification of carbon 
                                storage from forest management actions; 
                                and
                                    ``(II) issue revised guidelines for 
                                reporting, monitoring, and verification 
                                of carbon storage from forest 
                                management actions as necessary.
                            ``(ii) Consistency with future laws.--The 
                        Secretary of Agriculture shall convene the 
                        Advisory Council as necessary to ensure that 
                        the guidelines for reporting, monitoring, and 
                        verification of carbon storage from forest 
                        management actions are revised to be consistent 
                        with any Federal laws enacted after the date of 
                        enactment of this Act.
            ``(6) Monitoring of forest carbon programs.--
                    ``(A) In general.--Forest Carbon Program reports 
                shall--
                            ``(i) be developed in accordance with the 
                        guidelines issued under paragraph (1),
                            ``(ii) state the quantity of carbon storage 
                        realized,
                            ``(iii) include the data used to monitor 
                        and verify the carbon storage,
                            ``(iv) be consistent with reporting 
                        requirements of the Energy Information 
                        Administration, and
                            ``(v) ensure the avoidance of double 
                        counting of forest carbon activities.
                    ``(B) States and cooperative agreement 
                participants.--States receiving assistance to establish 
                revolving loans and entities participating in 
                cooperative agreements for forest carbon programs 
                shall--
                            ``(i) monitor and verify carbon storage 
                        achieved under the program in accordance with 
                        guidelines issued under subparagraph (5)(E),
                            ``(ii) report annually to the Secretary of 
                        Agriculture on the results of the carbon 
                        storage program, and
                            ``(iii) report annually to any non-
                        governmental organization, business, or other 
                        entity that provides funding for the carbon 
                        storage program.
                    ``(C) Secretary of agriculture.--
                            ``(i) In general.--The Secretaries shall 
                        report annually to Congress on the results of 
                        the carbon storage program.
                            ``(ii) Inclusions.--The report shall 
                        include--
                                    ``(I) specifications consistent 
                                with subparagraph (A),
                                    ``(II) an assessment of the 
                                effectiveness of monitoring and 
                                verification,
                                    ``(III) a report on carbon 
                                activities associated with cooperative 
                                agreements for the forest carbon 
                                program, and
                                    ``(IV) a State Forest Carbon 
                                Program compliance report established 
                                by--
                                            ``(aa) reviewing reports 
                                        submitted by states under 
                                        clause (B)(ii),
                                            ``(bb) verifying compliance 
                                        with the guidelines under 
                                        subparagraph (A),
                                            ``(cc) notifying the State 
                                        of compliance status,
                                            ``(dd) notifying the State 
                                        of any corrections that are 
                                        needed to attain compliance, 
                                        and
                                            ``(ee) establishing an 
                                        opportunity for re-submission 
                                        by the State.''

SEC. 5. FOREST CARBON COOPERATIVE AGREEMENTS AND LOAN PROGRAM.

    (a) Forest Carbon Cooperative Agreement.--The Secretary may enter 
into cooperative agreements with willing landowners from State or local 
governments, American Indian tribes, Alaska Natives, native Hawaiians 
and private, nonprofit entities for forest carbon activities on private 
land, state land, American Indian land, Alaska Native land, or native 
Hawaiian land.
    (b) Forest Carbon Revolving Loan Program.--
            (1) In general.--In collaboration with State Foresters and 
        non-governmental organizations, the Secretary shall provide 
        assistance to States so that States may establish a revolving 
        loan program for forest carbon activities on non-industrial 
        pr
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ivate forest (NIPF) land.
            (2) Eligibility.--An owner of non-industrial private forest 
        land shall be eligible for assistance from a revolving loan 
        fund for forest carbon activity on not more than a total of 
        5,000 acres of their NIPF land holdings.
            (3) Loan terms.--A loan agreement under the program shall--
                    (A) have loan interest rates that are established 
                by the State--
                            (i) as necessary to encourage participation 
                        of NIPF landowners in the loan program,
                            (ii) not to exceed a real rate of return in 
                        excess of 3%, and
                            (iii) that will further the forest carbon 
                        program objectives;
                    (B) require that all loan obligations be repaid to 
                the State--
                            (i) at the time of harvest of land covered 
                        by the program; or
                            (ii) in accordance with any other repayment 
                        schedule determined by the State;
                            (iii) proportional to the percentage 
                        decrease of carbon stock;
                    (C) include provisions that provide for private 
                insurance or that otherwise release the owner from the 
                financial obligation for any portion of the timber, 
                forest products, or other biomass that--
                            (i) is lost to insects, disease, fire, 
                        storm, flood, or other natural destruction 
                        through no fault of the owner; or
                            (ii) cannot be harvested because of 
                        restrictions on tree harvesting imposed by the 
                        Federal State, or local government after the 
                        date of the agreement;
                    (D) impose a lien on all timber, forest products, 
                and biomass grown on land covered by the loan, with an 
                assurance that the terms of the lien shall transfer 
                with the land on sale, lease, or transfer of the land;
                    (E) include a buyout option that--
                            (i) specifies financial terms allowing the 
                        owner to terminate the agreement before 
                        harvesting timber from the stand established 
                        with loan funds; and
                            (ii) repays the loan with interest;
                    (F) recognize that, until the loan is paid in full 
                by the participating landowner or otherwise terminated 
                in accordance with this Act, all reductions in 
                atmospheric greenhouse gases achieved by the project 
                funded by the loan are attributable to the non-Federal 
                entities that provide funding for a loan (including the 
                State or any other person, company, or non-governmental 
                organization that provides funding to the State for 
                purposes of issuing the loan); and
                    (G) include provisions for the monitoring and 
                verification of carbon storage.
            (4) Cancellation of loan terms for permanent 
        conservation.--
                    (A) In general.--The State shall cancel the loan 
                agreement under paragraph (3) and any liens on the 
                timber, forest products, and biomass under paragraph 
                (3)(C) if the borrower donates to the State or may 
                cancel the loan agreement under paragraph (3) and any 
                liens on the timber, forest products, and biomass under 
                paragraph (3)(C) if the borrower donates to another 
                appropriate entity a permanent conservation easement 
                that--
                            (i) furthers the purposes of this Act, 
                        including managing the land in a manner that 
                        maximizes the forest carbon reservoir of the 
                        land; and
                            (ii) permanently protects the covered 
                        private forest land and resources at a level 
                        above what is required under applicable 
                        Federal, State, and local law.
                    (B) Continuation of forest management actions.--The 
                conservation easement may allow the continuation of 
                forest management actions that increase carbon storage 
                on the land and forest or otherwise further the 
                purposes of this Act.
            (5) Reinvestment of funds.--All funds collected under a 
        loan issued under this subsection (including loan repayments, 
        loan buyouts, and any interest payments) shall be reinvested by 
        the State in the program and used by the State to make 
        additional loans under the program in accordance with this 
        subsection.
            (6) Records.--The State Forester shall--
                    (A) maintain all records related to any loan 
                agreement funded from a revolving loan fund; and
                    (B) make the records available to the public.
            (7) Matching funds.--
                    (A) In general.--In order to be eligible to 
                continue participating in the program, any State in the 
                program under this section shall provide matching funds 
                equal to at least 25 percent of the Federal funds made 
                available to the State for the program, beginning the 
                second year of program participation.
                    (B) Form.--The State may provide the matching funds 
                in the form of in-kind administrative services, 
                technical assistance, and procedures to ensure 
                accountability for the use of Federal funds.
            (8) Loan funding distribution.--
                    (A) In general.--Not later than 180 days after the 
                date of enactment of this Act, in consultation with 
                State Foresters, the Secretary shall--
                            (i) establish a formula under which Federal 
                        funds shall be distributed under this 
                        subsection among eligible States; and
                            (ii) report the formula and methodology to 
                        Congress.
                    (B) Basis.--The formula shall--
                            (i) be based on maximizing the potential 
                        for meeting the objectives of this Act;
                            (ii) give appropriate consideration to--
                                    (I) the acreage of un-stocked or 
                                under-producing private forest land in 
                                each State;
                                    (II) the potential productivity of 
                                such land;
                                    (III) the potential long-term 
                                carbon storage of such land;
                                    (IV) the potential to achieve other 
                                environmental benefits;
                                    (V) the number of owners eligible 
                                for loans under this section in each 
                                State; and
                                    (VI) the need for reforestation, 
                                timber stand improvement, or other 
                                forestry investments consistent with 
                                the objectives of this Act; and
                            (iii) give priority to States that have 
                        experienced or are expected to experience 
                        significant declines in emplo
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yment levels in 
                        the forestry industries due to declining timber 
                        harvests on Federal land.
            (9) Private funding.--A revolving loan fund may accept and 
        distribute as loans any funds provided by non-governmental 
        organizations, businesses, or persons in support of the 
        purposes of this Act.
            (10) Bonneville power administration.--
                    (A) In general.--The States of Washington, Oregon, 
                Idaho, and Montana may apply for funding from the 
                Bonneville Power Administration for purposes of funding 
                loans that meet both the objectives of this Act and the 
                fish and wildlife objectives of the Bonneville Power 
                Administration under the Pacific Northwest Electric 
                Power and Conservation Act (16 U.S.C. 839 et seq.).
                    (B) Application of requirements under other law.--
                An application under subparagraph (A) shall be subject 
                to all rules and procedures established by the Pacific 
                Northwest Electric Power and Conservation Planning 
                Council and the Bonneville Power Administration under 
                the Pacific Northwest Electric Power and Conservation 
                Act (16 U.S.C. 839 et seq.).
    (c) Requirements.--
            (1) Eligible forestry carbon activities.--Eligible forestry 
        carbon activities that--
                    (A) help restore under-producing or understocked 
                forest lands,
                    (B) provide for protection of forests from non-
                forest use,
                    (C) allow a variety of sustainable management 
                alternatives, and
                    (D) have no net negative impact on watersheds and 
                fish and wildlife habitats.
            (2) Guidance.--The Secretary, working through the US Forest 
        Service and in collaboration with States, shall provide 
        guidance on eligible forestry carbon activities based on the 
        criteria of this section.
            (3) Activities required under other law.--Funding shall not 
        be provided under this section for activities required under 
        other applicable Federal, State, or local laws.
            (4) Pre-agreement activities.--Funding shall not be 
        provided for costs incurred before entering into a cooperative 
        or loan agreement under this Act.
            (5) Limitation on land considered for funding.--No new loan 
        agreements shall be entered into under this section to fund 
        reforestation of land harvested after the date of enactment of 
        this Act if the landowner received revenues from the harvest 
        sufficient to reforest the land.
            (6) Eligible tree species.--
                    (A) In general.--Selection of tree species for loan 
                projects shall be consistent with Executive Order No. 
                13112, ``Invasive Species''.
                    (B) Program funding.--Funding for reforestation 
                activities shall be provided for--
                            (i) tree species native to a region,
                            (ii) tree species that formerly occupied 
                        the site, or
                            (iii) non-native tree species or hybrids 
                        that are non-invasive.
            (7) Forest-management plan.--Priority shall be given to 
        projects on land under a forestry management plan or forest 
        stewardship plan, if the plan is consistent with the objectives 
        of the carbon storage program.
            (8) Use of funds.--
                    (A) funds will be used to pay--
                            (i) the cost of purchasing and planting 
                        tree seedings; and
                            (ii) other costs associated with the 
                        planted trees, including planning, site 
                        preparation, forest management, monitoring, 
                        measurement and verification, and consultant 
                        and contractor fees.
                    (B) funds will not be used to--
                            (i) pay the owner for the owner's own 
                        labor; or
                            (ii) purchase capital items or expendable 
                        items, such as vehicles, tools, and other 
                        equipment.
            (9) Financial assistance amount.--The amount of financial 
        assistance provided under this section shall not exceed--
                    (A) 100 percent of total project costs, whether 
                they constitute the only funding source or are used in 
                combination with funds received from any other source; 
                or
                    (B) $100,000 during any 2-year period.
            (10) Federal funding.--During fiscal years 2001 through 
        2010, civil penalties collected under section 113 of the Clean 
        Air Act (42 U.S.C. 7413) and under section 309(d) of the 
        Federal Water Pollution Control Act (33 U.S.C. 1319(d)) shall 
        be available, without further appropriation, to fund 
        cooperative agreements and revolving loan funds authorized in 
        this section.
            (11) Allocation of funds.--
                    (A) In general.--The Secretary shall--
                            (i) allocate 15 percent of available funds 
                        for Cooperative agreements as specified under 
                        subsection (a), and
                            (ii) allocate 85 percent of available funds 
                        for State revolving loan programs as specified 
                        under subsection (b), after determining that 
                        States have implemented a system to administer 
                        the loans in accordance with this Act.
                                 &lt;all&gt;

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