BILL ANALYSIS S.B. 200 By: Armbrister (Stiles) 3-14-95 Committee Report (Unamended) BACKGROUND The 1990 Clean Air Act Amendments (CAAA) mandated the federal Clean Fuel Fleet Program to reduce motor vehicle air pollution in all ozone nonattainment areas classified as serious and above. States were given the option of adopting the federal program or designing their own program if they could demonstrate equivalent or greater air quality benefits. Texas has proposed its own program that affects government and private fleets with 15 or more vehicles. In 1989, the Texas Legislature passed statutes mandating the use of compressed natural gas or other alternative fuels to reduce total emissions in these areas. The CAAA Clean Fuel Fleet Program classifies reformulated gasoline (RFG) as an "EPA approved" clean alternative fuel, but the Texas Natural Resource Conservation Commission has not included RFG as an alternative fuel under the Texas Alternative Fuels Program, while favoring other alternative fuels. PURPOSE S.B. 200 authorizes the adoption of rules by the Texas Natural Resource Conservation Commission (TNRCC) to require the use of an alternative fuels program for motor vehicles of the public and private sector. Creates a schedule and requirements for the acquisition of motor vehicles that operate on alternative fuels. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is expressly granted to the Texas Natural Resource Conservation Commission in the following sections of the bill: SECTION 10 [Sec. 382.142 and Sec. 382.143, Health and Safety Code] and SECTION 19. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 382.131, Health and Safety Code, to define the following: (1) "Alternative fuel" to mean any fuel or power source that allows a clean-fuel vehicle to comply with the federal Clean Air Act; (2) "capable of being centrally fueled" to mean a fleet or part of a fleet of vehicles which can be fueled 100 percent of the time at a location owned, operated or controlled by the fleet operator, or under contract with the fleet operator; (3) "centrally fueled" to mean a fleet or part of a fleet of vehicles that are refueled 100 percent of the time at a location owned, operated or controlled by the fleet operator, or under contract with the fleet operator; the term does not include retail credit card purchases or commercial fleet service card purchases; (4) "clean-fuel vehicle" to mean a vehicle that has been certified to meet the federal clean-fuel vehicle standards and emission limits at least as stringent as applicable federal low-emissions standards; (5) "conventional gasoline" to mean any gasoline not meeting certified federal specifications; (6) "emissions" is the current statutory definition; subsection (6) is renumbered accordingly from the present statute; (7) the current definition of "fleet vehicle" is amended to include vehicles that are centrally fueled, capable of being centrally fueled, or fueled at facilities serving businesses and the general public, but does not include fleet vehicles parked at a residence and available for personal use by an individual, fleet vehicles parked at an individuals home when not in use, or a fleet vehicle with a gross vehicle weight over 26,000 pounds unless the vehicle is owned by the state or a mass transit authority; subsection (7) is renumbered accordingly from the present statute; (8) "mass transit authority" is the current statutory definition; subsection (8) is renumbered accordingly from the present statute; (9) "reformulated gasoline" to mean gasoline meeting federal certification requirements. SECTION 2. Amends Section 382.133, Health and Safety Code, to delete the references to compressed natural gas or an alternative fuel with lower emissions with regards to the Texas Natural Resource Conservation Commission requirements that a mass transit authority ensure that its vehicles can operate on compressed natural gas that result in comparably lower emissions; the change allows mass transit operate on an alternative fuel. Makes conforming changes. SECTION 3. Amends Section 382.134, Health and Safety Code, as follows: Sec. 382.134. LOCAL GOVERNMENT AND PRIVATE FLEET VEHICLES. (a) Clarifies that this section applies to fleet vehicles; (b) Deletes the discretionary role of the TNRCC in adopting rules under Sec. 382.133 (rulemaking authority already present) and makes the rules mandatory; clarifies that this section applies to fleet vehicles, and replaces references to compressed natural gas or other fuels that will reduce emissions; makes alternative fuel acceptable. (c) Requires rules adopted by the board (deleting a provision applying to rules only under this section) to require a local government or private person with fleet vehicles to have a proportion of new fleet vehicles and a proportion of all fleet vehicles able to operate on an alternative fuel, deleting a reference to compressed natural gas, as follows: (1) 30 percent of fleet vehicles purchased after September 1, 1998, and 10 percent of the total fleet as of September 1, 1998; deletes requirement that 30 percent of a total fleet must comply on September 1, 1998; (2) 50 percent of fleet vehicles purchased after September 1, 2000, and 20 percent of the total fleet as of September 1, 2000; deletes requirement that 50 percent of a total fleet must comply on September 1, 2000; (3) 90 percent of fleet vehicles purchased after September 1, 2002, and 45 percent of the total fleet as of September 1, 2002; deletes requirement that 90 percent of a total fleet must comply on September 1, 2002. (d) Prohibits rules adopted by the board from requiring a local government or private person to purchase a fleet vehicle able to operate on an alternative fuel if the person maintains a proportion of 90 percent or more alternative fuel vehicles in the person's fleet. (e) Provides that the choice of clean-fuel vehicles and alternative fuels is in the fleet operator's discretion. SECTION 4. Amends Section 382.135, Health and Safety Code, by deleting references to compressed natural gas and specifies that a fleet vehicle with dual fleet conversion capable of operating on an alternative fuel and gasoline or diesel power is acceptable in complying with required proportions of fleet vehicles capable of operating on an alternative fuel. SECTION 5. Amends Section 382.136 (a), Health and Safety Code, to change the authority of the TNRCC (board) to make an exception to complying with this program if the board determines that affected vehicles will be operating in an area that cannot establish adequate (rather than central) refueling, and deletes references to compressed natural gas. Adds subsection (4) allowing the board to make an exception if the projected net costs for conversion are expected not to exceed comparable costs for vehicles operating on reformulated gasoline and diesel. SECTION 6. Amends Sections 382.138 (a) and (b), Health and Safety Code, by deleting references to compressed natural gas, and deletes the inclusion Section 382.133 in the TNRCC's evaluation and determination of whether alternative fuels are effective in complying with the federal Clean Air Act. SECTION 7. Amends Section 382.139, Health and Safety Code, to delete references to compressed natural gas with regard to the current requirement that the TNRCC mandate the use of alternative fuels if the mandate is necessary to comply with the federal Clean Air Act; changes the requirement that the TNRCC must mandate the use of alternative fuels if it is effective in maintaining and achieving compliance with federal law, to mandating the TNRCC to mandate alternative fuels use if it is effective in maintaining or achieving compliance. SECTION 8. Amends Section 382.140 (a), Health and Safety Code, to delete references to compressed natural gas in the authority of the TNRCC to conduct studies and pilot programs in determining the effectiveness of the use of alternative fuels in complying with federal law. SECTION 9. Amends Section 382.141, Health and Safety Code, to delete references to compressed natural gas in the required TNRCC report to the governor and the legislature on use of alternative fuels. SECTION 10. Amends Chapter 382, Subchapter F, Health and Safety Code, by adding Section 382.142 and 382.143 as follows: Sec. 382.142. PROGRAM COMPLIANCE CREDITS. (a) Allows the requirements of what percentages of fleets must be alternatively fueled to be met through the purchase, lease or other acquisition of clean-fuel vehicles or through program compliance credits. (b) (1) Requires rules adopted under this section to provide for the issuance of program compliance credits for the acquisition of clean-fuel vehicles that meet more stringent emissions control standards required, if a fleet is comprised of a higher percentage of clean-fuel vehicles than required, a purchase of a clean-fuel vehicle in a category not required, or the possession of a clean-fuel vehicle prior to the requirements; (2) provides for program compliance credits to be awarded based upon the emissions certification level of the vehicle as follows: LEVs - one credit, ULEVs - two credits, ILEVs and ZEVs - three credits; (3) compliance credits may be banked, traded, sold or purchased by anyone else in the same nonattainment area; (4) vehicles converted prior to September 1, 1998, may be counted toward compliance if they are capable of operating on an alternative fuel, meet minimum federal emissions standards, and do not exceed 30 percent of the fleet on September 1, 1998. (5) compliance credits applies to the following vehicles: (A) vehicles purchased by certain school districts capable of using alternative fuels; (B) vehicles purchased by metropolitan mass transit authorities in capable of using alternative fuels; (C) vehicles purchased by regional mass transit authorities capable of using alternative fuels; (D) vehicles purchased by city transit departments capable of using alternative fuels; (E) vehicles purchased by a state agency which are in compliance with the alternative fuels program. Sec. 382.143. TEXAS MOBILE EMISSIONS REDUCTION CREDIT PROGRAM. (a) Requires the TNRCC (board), by rule, to establish a Texas Mobile Emissions Reduction Credit (MERC) Program. (b) Requires rules adopted to comply with EPA's minimum requirements for an acceptable Mobile Emissions Reduction Credit program, and must provide for the following elements: (1) participation shall be voluntary for all vehicle owners, whether subject to fleet requirements or not, and participants may generate mobile emissions reduction credits, though certain minimum numbers of vehicles may be required for participation; (2) mobile emissions reductions credits shall be calculated on a per-pollutant basis and granted to an eligible vehicle owner for purchasing more or cleaner vehicles than required by law, or a contract to do so; (3) mobile emissions reduction credit values shall be determined in accordance with federal rules and guidelines; (4) mobile emissions reductions credits may be used to demonstrate compliance with any mobil source emissions reductions requirements, and to satisfy Reasonably Available Control Technology and federal Clean Air Act requirements; (5) trading, buying, selling, or banking of mobil emissions reduction credits. (c) Creates the Texas Mobile Emissions Reduction Credit Fund and administered by the TNRCC, in a way that allows qualified vehicle owner to receive mobile emissions reductions credits if: the vehicle owner enters into a contract with the board to purchase and place in service clean-fuel vehicles as specified by the board, and the vehicle owner agrees to name the Environmental Protection Agency as a third-party beneficiary to the contract; the contract may be enforced by a Texas court, and specific performance may be granted. (d) The acquisition of a clean-fuel vehicle may qualify for mobile emissions reduction credits and for program compliance credits. (e) The following are violations: claiming a mobile emissions reduction credit without meeting appropriate acquisition requirements and submitting data, or counterfeiting or dealing commercially in mobile emissions reduction credits. (f) Provides for civil penalty of not more than $25,000 per violation. (g) Administration of credit trading programs shall be established by TNRCC board rule as follows: (1) Mobile emissions reductions credits must be banked; (2) mobile emissions reductions credits may be generated by the following ways: (A) the use, acquisition, or purchase of more clean-fueled vehicles than required, calculated by the provided formula, based on additional emissions benefit using the most recent EPA model, vehicle miles traveled, consideration of the use of heavy duty vehicles, and the life of the vehicle; (B) the purchase or acquisition of vehicles which meet more stringent low emission vehicle requirements, calculated by the provided formula; (C) the purchase or acquisition of a vehicle with certified levels of evaporative emissions less than five grams per test, calculated by the provided formula. (3) A vehicle owner applying for mobile emission reduction credits shall submit a registration application using an approved form, and the applicant must clearly state the emission standard of the vehicle, the number of vehicle miles to be travelled, the number of years the vehicle is to be used, and the results of the mobil emission reductions credit calculation used to estimate the credit value in grams per year. (4) The mobil emissions reduction credit must include sufficient information to calculate the value under this section. (5) Gives the board the authority to evaluate claimed credits and adjust the credits based on the evaluation. (6) Mobil emission reduction credit applications must be received at least 90 days prior to using the credit. (7) The board 30 days to determine if the application is complete. (8) The board 90 days to approve or deny the application. (9) The board may revoke approval of a registration if requirements are not met. (h) Stipulates that the mobil emission reduction credits also apply to the following: (A) vehicles purchased by certain school districts capable of using alternative fuels, if purchased after September 1, 1991; (B) vehicles purchased by metropolitan mass transit authorities in capable of using alternative fuels; (C) vehicles purchased by regional mass transit authorities capable of using alternative fuels; (D) vehicles purchased by city transit departments capable of using alternative fuels; (E) vehicles purchased by a state agency which are in compliance with the alternative fuels program. SECTION 11. Amends Subsection (c), Section 14, Chapter 141, Acts of 63rd Legislature, Regular Session, 1973 (Article 1118x, Vernon's Texas Civil Statutes), by deleting references to compressed natural gas or fuels with lower emissions than compressed natural gas as acceptable for use in certain vehicles used by a metropolitan mass transit authority; changes references to the Air Control Board to the Texas Natural Resource Conservation Commission to conform with current law; changes references to "traditional" gasoline or diesel fuels to "conventional" gasoline or diesel fuels. SECTION 12. Amends Section 14, Chapter 141, Article 1118x, V.T.C.S. as follows: Changes (d) by deleting references to compressed natural gas or fuels with lower emissions than compressed natural gas with regard to the vehicles that must be in compliance with the alternative gas fuels program by certain statutory dates which are in use by a metropolitan mass transit authority; changes Air Control Board to Texas Natural Resource Conservation Commission to conform with current law (e) Deletes references to compressed natural gas or other fuels. (g) Changes references to the Texas Air Control Board to the Texas Natural Resource Conservation Commission to conform with current law. (h) Deletes references to compressed natural gas or other fuels; changes references to the Texas Air Control Board to the Texas Natural Resource Conservation Commission; deletes "traditional" and inserts "conventional" in reference to gasoline or diesel fuel. Adds (i) by giving "alternative fuel" and "conventional gasoline" the meaning assigned by this Act. SECTION 13. Amends Section 20, Article 1118y, V.T.C.S., by amending Subsections (e), (f), (g), and (h), and by adding Subsection (k) as follows: (e) is changed by deleting references to compressed natural gas or fuels with lower emissions than compressed natural gas as acceptable for use in certain vehicles used by regional transit authority; deletes references to compressed natural gas; deletes "traditional" and inserts "conventional" in reference to gasoline or diesel fuels. (f) Changes references to the Texas Air Control Board to the Texas Natural Resource Conservation Commission to conform with current law; deletes references to compressed natural gas or other fuels. (g) and (h) delete references to compressed natural gas or other fuels. (k) is added to give "alternative fuel" and "conventional gasoline" the meaning assigned by this Act. SECTION 14. Amends Section 6, Article 1118z, V.T.C.S., by amending Subsections (k), (l), and (m), and by adding Subsection (p) as follows: (k) deletes reference to compressed natural gas or fuels with lower emissions than compressed natural gas with regard to certain vehicles acceptable for use that are in use by a city transit departments in acceptable for use after certain dates; deletes references to compressed natural gas or other fuels; deletes "traditional" and inserts "conventional" in reference to gasoline or diesel fuels. (l) deletes references to compressed natural gas or other fuels; changes references to the Air Control Board to Texas Natural Resource Conservation Commission to conform with current law. (m) deletes references to compressed natural gas or other fuels. (p) gives "alternative fuel" and "conventional gasoline" the meaning assigned by this Act. SECTION 15. Amends Section 3.29, Article 601b, V.T.C.S., (State Purchasing and General Services Act) as follows; (a) and (b) (1), (2), and (3) Deletes language allowing another alternative fuel other than compressed natural gas with comparably lower emissions to be acceptable for certain vehicles or equipment acquired by a state agency, and adds language allowing the same to acquire or operate vehicles or equipment or have access to facilities capable of using liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity. (b) (4) (A) Changes language exempting the agency from the acceptable fuel requirements if a central station is available for compressed natural gas, to exempting the agency if an adequate fueling station is not reasonably available and providing liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity, and deletes "alternative fuels" language. (b) (4) (B) Adds liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity, and deletes "alternative fuels" language, to use as factors in determining whether a state agency qualifies for exemptions from fuel use requirements as follows: if the net cost of providing equipment and facilities necessary is reasonably expected to result in no greater net cost than the use of "conventional" (deletes "traditional") fuels. (c) (1), (2), (3) Adds language to allow state agencies to include the use of liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity as acceptable fuels, and deletes "alternative fuels" language, in the calculation of required percentages of vehicles in compliance with the law, and determining the benefits of the listed acceptable fuels; also changes references to the Air Control Board to Texas Natural Resource Conservation Commission to conform with current law. (c) (4) Adds the use of liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity to the acceptable percentages of acceptably fueled vehicles, and in financial reporting requirements, and deletes "alternative fuels" language. (d) Deletes language requiring the commission to work with other entities in meeting certain percentage requirements of "other alternative fuels," and requires the commission to work with other entities in maintaining a percentage of vehicles using liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity. (e) Adds liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity, and deletes "alternative fuels" language, to factor for state agencies exemptions from acceptable fuel requirements if the net cost of providing equipment and facilities necessary is reasonably expected to result in no greater net cost than the use of "conventional" (deletes "traditional") fuel; changes language that exempts an agency from acceptable fuel requirements if a central refueling compressed natural gas station is not convenient to language exempting an agency from acceptable fuel requirements if a listed acceptable fuel is not represented by an adequate fueling station. (f) Deletes language requiring the commission to comply with all federal and state safety standards relating to "other alternative fuels," and requires the commission to comply with all federal and state safety standards relating to liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity. (g) Deletes language regarding an "alternative fuel" in reference to a vehicle which is capable of using acceptable fuel, and replaces it with liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity. (h) Changes references to "traditional" fuels and replaces it with "an engine powered by conventional" fuel; deletes language referring to "alternative fuel" in allowing the commission to extend the dates when acceptable fueled vehicles under this section, and replaces the language with liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity. (i) is added so that vehicles purchased by the Texas Transportation Institute for the purpose of performing crash tests are not subject to alternative fuels requirements. (j) is added to include the definition of "conventional gasoline" as provided by this act. SECTION 16. Amends Subsection (b), Section 113.286, Natural Resources Code, by allowing the Alternative Fuels Conversion Fund to finance activities supporting or encouraging the use of liquefied natural gas, liquefied petroleum gas, methanol of methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, or electricity rather than alternative fuels. SECTION 17. Amends Section 113.287, Natural Resources Code, by deleting references to "alternative," so that only beneficial fuels are included in the Fuels Conversion Loan Program. SECTION 18. States legislative intent that the Alternative Fuels Council is authorized to certify projects associated with the following fuels: compressed natural gas, liquefied natural gas, liquefied petroleum gas, electricity, methanol, ethanol, other alcohols including any mixture thereof containing 85 percent or more by volume of such alcohol with gasoline or other fuels. SECTION 19. Requires TNRCC to adopt rules no later than September 1, 1997. SECTION 20. Effective date: September 1, 1995. SECTION 21. Emergency clause. SUMMARY OF COMMITTEE ACTION SB 200 was considered by the House Committee on Environmental Regulation in a public hearing on March 14, 1995. SB 200 was reported favorably without amendment with the recommendation that it do pass and be printed, by a record vote of eight yeas (8), no nays (0), one present not voting (1), and no absent (0).