87R23716 TYPED

By: Landgraf H.B. No. 4472

Substitute the following for H.B. No. 4472:

By: Dominguez C.S.H.B. No. 4472

A BILL TO BE ENTITLED

AN ACT

relating to the Texas emissions reduction plan.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 386.051(b), Health and Safety Code, is amended to read as follows:

(b) Under the plan, the commission and the comptroller shall provide grants or other funding for:

(1) the diesel emissions reduction incentive program established under Subchapter C, including for infrastructure projects established under that subchapter;

(2) the motor vehicle purchase or lease incentive program established under Subchapter D;

(3) the air quality research support program established under Chapter 387;

(4) the clean school bus program established under Chapter 390;

(5) the new technology implementation grant program established under Chapter 391;

(6) the regional air monitoring program established under Section 386.252(a);

(7) a health effects study as provided by Section 386.252(a);

(8) air quality planning activities as provided by Section 386.252(d);

(9) a contract with the Energy Systems Laboratory at the Texas A&M Engineering Experiment Station for computation of creditable statewide emissions reductions as provided by Section 386.252(a);

(10) the Texas clean fleet program established under Chapter 392;

(11) the Texas alternative fueling facilities program established under Chapter 393;

(12) the Texas natural gas vehicle grant program established under Chapter 394;

(13) other programs the commission may develop that lead to reduced emissions of nitrogen oxides, particulate matter, or volatile organic compounds in a nonattainment area or affected county;

(14) other programs the commission may develop that support congestion mitigation to reduce mobile source ozone precursor emissions;

(15) the seaport and rail yard areas emissions reduction program established under Subchapter D-1;

(16) conducting research and other activities associated with making any necessary demonstrations to the United States Environmental Protection Agency to account for the impact of foreign emissions or an exceptional event;

(17) studies of or pilot programs for incentives for port authorities located in nonattainment areas or affected counties as provided by Section 386.252(a); [and]

(18) the governmental alternative fuel fleet grant program established under Chapter 395;

(19) the purchase, maintenance, upgrade, and operation of air monitoring equipment as provided by Section 386.252(a);

(20) fee-based contracts entered into under the program established under Section 386.058; and

(21) the energy efficiency loan guarantee program established under Section 388.013.

SECTION 2. Subchapter B, Chapter 386, Health and Safety Code, is amended by adding Section 386.058 to read as follows:

Sec. 386.058. FEE-BASED CONTRACTS FOR PURCHASE OF REDUCTIONS IN EMISSIONS OF NITROGEN OXIDES. (a) The commission by rule shall establish a program authorizing the commission to enter into fee-based contracts for the purchase of reductions in emissions of nitrogen oxides.

(b) The program established under this section must:

(1) specify the types of projects that are eligible for fee-based contracts under the program, such as marine emission capture systems;

(2) measure nitrogen oxides emissions input and output on a continuous basis;

(3) require nitrogen oxides emissions reduced under the contract to be verified and certified by the commission;

(4) assign a dollar per ton fee based solely on the dollar per ton cost of the reduction in emissions of nitrogen oxides;

(5) require payments under the contract to be made only for actual reductions in nitrogen oxides emissions that are verified by the commission; and

(6) authorize the commission to enter into multiyear contracts under the program.

(c) Notwithstanding Section 386.055:

(1) the commission may enter into a fee-based contract under the program established under this section for a project involving a new emissions reduction measure that would otherwise generate marketable credits under a state or federal emissions reduction credit averaging, banking, or trading program if, during the term of the contract, the project is not used for credit under any state or federal emissions reduction credit averaging, banking, or trading program; and

(2) a project that was subject to a fee-based contract under the program established under this section may be used for credit under a state or federal emissions reduction credit averaging, banking, or trading program if:

(A) the contract has expired or otherwise terminated and the project is not subject to any other fee-based contract entered into under the program established under this section; and

(B) the project otherwise meets the requirements of the applicable state or federal emissions reduction credit averaging, banking, or trading program.

SECTION 3. Sections 386.104(c) and (c-1), Health and Safety Code, are amended to read as follows:

(c) Except as otherwise provided by this subsection, for a proposed project as described by Section 386.102(b), [other than a project involving a marine vessel or engine,] not less than 75 percent of vehicle miles traveled or hours of operation projected for the five years immediately following the award of a grant must be projected to take place in a nonattainment area or affected county of this state. The commission may set the minimum percentage of vehicle miles traveled or hours of operation required to take place in a nonattainment area or affected county at a percentage and for a period that is different from the percentage and period specified by this subsection, provided that the commission may not set the minimum percentage at a level that is less than 55 percent. The commission may allow vehicle travel on highways and roadways, or portions of a highway or roadway, designated by the commission and located outside a nonattainment area or affected county to count towards the percentage of use requirement in this subsection.

(c-1) For a proposed project involving a marine vessel or engine, the vessel or engine must be operated in the intercoastal waterways or bays adjacent to a nonattainment area or affected county of this state for a sufficient percentage [amount] of time over the lifetime of the project, as determined by the commission, to meet the cost-effectiveness requirements of Section 386.105. The percentage determined by the commission under this subsection may not be less than 55 percent.

SECTION 4. Section 386.154(d), Health and Safety Code, is amended to read as follows:

(f) A new light-duty motor vehicle powered by an electric drive is eligible for a $750 incentive if the vehicle:

(1) is a motorcycle as defined by Section 541.201, Transportation Code;

(2) was manufactured for use primarily on public streets, roads, and highways;

(3) has not been modified from the original manufacturer's specifications;

(4) has a maximum speed capability of at least 55 miles per hour;

(5) is propelled to a significant extent by an electric motor that draws electricity from a hydrogen fuel cell or from a battery that:

(A) has a capacity of not less than four kilowatt hours; and

(B) is capable of being recharged from an external source of electricity;

(6) was acquired on or after September 1, 2013, or a later date as established by the commission, by the person applying for the incentive under this subsection and for use or lease by that person and not for resale; and

(7) is not a motor-assisted scooter or pocket bike or minimotorbike as those terms are defined by Section 551.351, Transportation Code.

(g) The incentive under Subsection (g) is limited to 500 vehicles for each state fiscal biennium.

SECTION 5. Sections 386.252(a) and (f), Health and Safety Code, as effective September 1, 2021, are amended to read as follows:

(a) Money in the fund and account may be used only to implement and administer programs established under the plan. Subject to the reallocation of funds by the commission under Subsection (h), money from the fund and account to be used for the programs under Section 386.051(b) shall initially be allocated per fiscal year as follows:

(1) $3 million [four percent] may be used for the clean school bus program under Chapter 390;

(2) $5 million [three percent] may be used for the new technology implementation grant program under Chapter 391, from which at least $1 million will be set aside for electricity storage projects related to renewable energy;

(3) $4 million [five percent] may be used for the Texas clean fleet program under Chapter 392;

(4) not more than $3 million may be used by the commission to fund a regional air monitoring program in commission Regions 3 and 4 to be implemented under the commission's oversight, including direction regarding the type, number, location, and operation of, and data validation practices for, monitors funded by the program through a regional nonprofit entity located in North Texas having representation from counties, municipalities, higher education institutions, and private sector interests across the area;

(5) $8 million [10 percent] may be used for the Texas natural gas vehicle grant program under Chapter 394;

(6) not more than $6 million may be used for the Texas alternative fueling facilities program under Chapter 393, of which a specified amount may be used for fueling stations to provide natural gas fuel, except that money may not be allocated for the Texas alternative fueling facilities program for the state fiscal year ending August 31, 2019;

(7) not more than $1 million [$750,000] may be used each year to support research related to air quality as provided by Chapter 387;

(8) not more than $200,000 may be used for a health effects study;

(9) at least $6 million but not more than $16 million may be used by the commission for administrative costs, including all direct and indirect costs for administering the plan, costs for conducting outreach and education activities, and costs attributable to the review or approval of applications for marketable emissions reduction credits;

(10) $5 million [six percent] may be used by the commission for the seaport and rail yard areas emissions reduction program established under Subchapter D-1;

(11) $4 million [five percent] may be used for the light-duty motor vehicle purchase or lease incentive program established under Subchapter D;

(12) not more than $216,000 may be used by the commission to contract with the Energy Systems Laboratory at the Texas A&M Engineering Experiment Station annually for the development and annual computation of creditable statewide emissions reductions obtained through wind and other renewable energy resources for the state implementation plan;

(13) not more than $500,000 may be used for studies of or pilot programs for incentives for port authorities located in nonattainment areas or affected counties to encourage cargo movement that reduces emissions of nitrogen oxides and particulate matter; [and]

(14) not more than $10 million may be used by the commission for the purchase, maintenance, upgrade, and operation of air monitoring equipment, including data analysis, to be used in nonattainment areas and affected counties;

(15) not more than $10 million may be used by the commission for fee-based contracts entered into under the program established under Section 386.058

(16) not more than $5 million may be allocated for the energy efficiency loan guarantee program established under Section 388.013; and

(17) the balance is to be used by the commission for:

(A) the diesel emissions reduction incentive program under Subchapter C as determined by the commission; and

(B) funding research at the Texas A&M Transportation Institute to determine:

(1) the cost effectiveness of existing emissions reduction programs; and

(2) cost effective programs not currently authorized to receive program funding that would improve the emissions reduction capabilities of the program

(f) Not more than $5 [$2.5] million from the fund and account may be used by the commission to conduct research and other activities associated with making any necessary demonstrations to the United States Environmental Protection Agency to account for the impact of foreign emissions or an exceptional event.

(h) Subject to the limitations outlined in this section, money allocated under this section to a particular program may be used for another program under the plan as determined by the commission, based on demand for grants for eligible projects under particular programs. [after the commission solicits projects to which to award grants according to the initial allocation provisions of this section.]

SECTION 6. Chapter 388, Health and Safety Code, is amended by adding Section 388.013 to read as follows:

Sec. 388.013. ENERGY EFFICIENCY LOAN GUARANTEE PROGRAM. (a) The comptroller and the State Energy Conservation Office by rule shall establish and administer a program that issues or guarantees loans to be used for improvements that increase the energy efficiency of residences that are not newly constructed.

(b) Rules adopted under this section must establish eligibility requirements for receipt of a loan issued or guaranteed under this section, including emissions reduction cost-effectiveness criteria with preference given to nonattainment areas or affected counties.

(c) The State Energy Conservation Office annually shall submit to the commission and the laboratory a report that:

(1) evaluates the effectiveness of the program established under this section; and

(2) quantifies energy savings and emissions reductions as a result of this program for consideration in the state implementation plan for emissions reduction credit.

SECTION 7. Section 389.002, Health and Safety Code, is amended to read as follows:

Sec. 389.002. USE OF CERTAIN INFORMATION FOR FEDERAL RECOGNITION OF EMISSIONS REDUCTIONS. The commission, using information derived from the reports to the commission under Sections 386.205, 388.003(e), [and] 388.006, and 388.013, shall take all appropriate and necessary actions so that emissions reductions achieved by means of activities under Chapters 386 and 388 are credited by the United States Environmental Protection Agency to the appropriate emissions reduction objectives in the state implementation plan.

SECTION 8. Section 391.002(b), Health and Safety Code, is amended to read as follows:

(b) Projects that may be considered for a grant under the program include:

(1) advanced clean energy projects, as defined by Section 382.003;

(2) new technology projects that reduce emissions of regulated pollutants from stationary sources;

(3) new technology projects that reduce emissions from upstream and midstream oil and gas production, completions, gathering, storage, processing, and transmission activities through:

(A) the replacement, repower, or retrofit of stationary compressor engines;

(B) the installation of systems to reduce or eliminate the loss of gas, flaring of gas, or burning of gas using other combustion control devices; or

(C) the installation of systems that reduce flaring emissions and other site emissions [by capturing waste heat to generate electricity solely for on-site service]; and

(4) electricity storage projects related to renewable energy, including projects to store electricity produced from wind and solar generation that provide efficient means of making the stored energy available during periods of peak energy use.

SECTION 9. Section 391.205(a), Health and Safety Code, is amended to read as follows:

(a) Except as provided by Subsection (c), in awarding grants under this chapter the commission shall give preference to projects that:

(1) involve the transport, use, recovery for use, or prevention of the loss of natural resources originating or produced in this state;

(2) contain an energy efficiency component;

(3) include the use of solar, wind, or other renewable energy sources; [or]

(4) recover waste heat from the combustion of natural resources and use the heat to generate electricity; or

(5) reduce flaring emissions and other site emissions.

SECTION 10. Section 391.301, Health and Safety Code, is amended to read as follows:

Sec. 391.301. RESTRICTION ON USE OF GRANT. A recipient of a grant under this chapter must use the grant to pay the incremental costs of the purchase, lease, or [and] installation of the project for which the grant is made, which may include reasonable and necessary expenses for the labor needed to install emissions-reducing equipment. The recipient may [not] use the grant for the costs of operating and maintaining the emissions-reducing equipment.

SECTION 11. Section 394.003, Health and Safety Code, is amended by amending Subsection (a) and adding Subsection (c) to read as follows:

(a) A vehicle is a qualifying vehicle that may be considered for a grant under the program if during the eligibility period established by the commission the entity:

(1) purchased, leased, or otherwise commercially financed the vehicle as an [a new] on-road heavy-duty or medium-duty motor vehicle that:

(A) is a new natural gas vehicle or, subject to Subsection (c), a used natural gas vehicle;

(B) is certified to the appropriate current federal emissions standards as determined by the commission; and

(C) replaces an on-road heavy-duty or medium-duty motor vehicle of the same weight classification and use; or

(2) repowered the on-road motor vehicle to a natural gas vehicle powered by a natural gas engine that is certified to the appropriate current federal emissions standards as determined by the commission.

(c) A used natural gas vehicle that is proposed to replace an on-road heavy-duty or medium-duty motor vehicle must be of model year 2017 or later, provided that the model year may not be more than six years older than the current model year at the time of the submission of the grant application.

SECTION 12. Section 394.005(b), Health and Safety Code, is amended to read as follows:

(b) To be eligible for a grant under the program:

(1) the use of the qualifying vehicle must be projected to result in a reduction in emissions of nitrogen oxides of at least 25 percent as compared to the motor vehicle or engine being replaced, based on:

(A) the baseline emission level set by the commission under Subsection (g); and

(B) the certified emission rate of the qualifying [new] vehicle; and

(2) the qualifying vehicle must:

(A) replace a heavy-duty or medium-duty motor vehicle that:

(i) is an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;

(ii) satisfies any minimum average annual mileage or fuel usage requirements established by the commission;

(iii) satisfies any minimum percentage of annual usage requirements established by the commission; and

(iv) is in operating condition and has at least two years of remaining useful life, as determined in accordance with criteria established by the commission;

(B) replace a heavy-duty or medium-duty motor vehicle that:

(i) is owned by the applicant;

(ii) is an on-road vehicle that has been:

(a) owned, leased, or otherwise commercially financed and operated in Texas as a fleet vehicle for at least the two years immediately preceding the submission of a grant application; and

(b) registered in a county located in the clean transportation zone for at least the two years immediately preceding the submission of a grant application; and

(iii) otherwise satisfies the mileage, usage, and useful life requirements established under Paragraph (A) as determined by documentation associated with the vehicle; or

(C) be a heavy-duty or medium-duty motor vehicle repowered with a natural gas engine that:

(i) is installed in an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;

(ii) satisfies any minimum average annual mileage or fuel usage requirements established by the commission;

(iii) satisfies any minimum percentage of annual usage requirements established by the commission; and

(iv) is installed in an on-road vehicle that, at the time of the vehicle's repowering, was in operating condition and had at least two years of remaining useful life, as determined in accordance with criteria established by the commission.

SECTION 13. Section 501.138, Transportation Code, is amended by amending Subsections (b-1), (b-2), and (b-3) and adding Subsection (b-4) to read as follows:

(b-1) Except as provided by Subsection (b-4), fees [Fees] collected under Subsection (b) to be sent to the comptroller shall be deposited to the credit of the Texas [Mobility Fund, except that $5 of each fee imposed under Subsection (a)(1) and deposited on or after September 1, 2008, and before September 1, 2015, shall be deposited to the credit of the Texas] emissions reduction plan fund.

(b-2) The comptroller shall establish a record of the amount of the fees deposited to the credit of the Texas emissions reduction plan fund [Mobility Fund] under Subsection (b-1). On or before the fifth workday of each month, the Texas Department of Transportation shall remit to the comptroller for deposit to the credit of the Texas Mobility Fund [emissions reduction plan fund] an amount of money equal to the amount of the fees deposited by the comptroller to the credit of the Texas emissions reduction plan fund [Mobility Fund] under Subsection (b-1) in the preceding month. The Texas Department of Transportation shall use for remittance to the comptroller as required by this subsection money in the state highway fund that is not required to be used for a purpose specified by Section 7-a, Article VIII, Texas Constitution, and may not use for that remittance money received by this state under the congestion mitigation and air quality improvement program established under 23 U.S.C. Section 149.

(b-3) This subsection and Subsections (b-1) and [Subsection] (b-2) expire on the last day of the state fiscal biennium during which the Texas Commission on Environmental Quality publishes in the Texas Register the notice required by Section 382.037, Health and Safety Code.

(b-4) Fees collected under Subsection (b) to be sent to the comptroller shall be deposited to the credit of the Texas Mobility Fund if the fees are collected on or after the last day of the state fiscal biennium during which the Texas Commission on Environmental Quality publishes in the Texas Register the notice required by Section 382.037, Health and Safety Code.

SECTION 14. The changes in law made by this Act apply only to a Texas emissions reduction plan grant awarded on or after the effective date of this Act. A grant awarded before the effective date of this Act is governed by the law in effect on the date the award was made, and the former law is continued in effect for that purpose.

SECTION 15. The change in law made by this Act to Section 501.138, Transportation Code, applies only to a fee collected on or after the effective date of this Act. A fee collected before the effective date of this Act is governed by the law in effect when the fee was collected, and the former law is continued in effect for that purpose.

SECTION 16. This Act takes effect September 1, 2021.