HBA-LJP S.B. 5 77(R)BILL ANALYSIS Office of House Bill AnalysisS.B. 5 By: Brown, J. E. "Buster" Environmental Regulation 4/25/2001 Engrossed BACKGROUND AND PURPOSE The federal Clean Air Act authorizes the United States Environmental Protection Agency (EPA) to establish maximum allowable concentrations of pollutants because these pollutants in excess can endanger human health, harm the environment, and cause property damage. Areas where pollutants exceed EPA standards may be designated as nonattainment areas and if these areas do not meet EPA standards by 2007, all non-complying states face severe sanctions. Texas has four nonattainment and three near nonattainment areas, comprising 37 counties. These areas represent 70 percent of the state's population, 76 percent of aggregate employment, 82 percent of personal income, and 83 percent of gross state product. Because of Texas' integrated economy, all parts of the state have a stake in bringing these areas into compliance. The Texas Natural Resource Conservation Commission (TNRCC) has submitted a state implementation plan to regulate emissions in nonattainment areas. However, there are significant areas of potential emissions reductions the TNRCC cannot regulate but which may be realized through an incentive program. Senate Bill 5 establishes the Texas emissions reduction plan to reduce emissions in the state. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Natural Resource Conservation Commission in SECTION 1 (Sections 386.053, 386.112, and 386.152, Health and Safety Code), SECTION 14, and SECTION 15, and to the Comptroller of Public Accounts in SECTION 1 (Sections 386.152 and 386.160, Health and Safety Code), (Articles 9035 and 9036, V.T.C.S.), SECTION 3 (Section 152.0215, Tax Code), SECTION 13, SECTION 14, and SECTION 15 of this bill. ANALYSIS Texas Emissions Reduction Plan Senate Bill 5 amends the Health and Safety Code to require the Texas Natural Resource Conservation Commission (TNRCC), the comptroller of public accounts (comptroller), and the Texas Council on Environmental Technology (council) to establish and administer the Texas emissions reduction plan (plan). The bill requires TNRCC, the comptroller, and the council to provide grants or funding under the plan for the diesel emissions reduction incentive program, the motor vehicle purchase or lease incentive program, the local government grant program, and the new technology research and development program. The bill provides that equipment purchased before September 1, 2001 is not eligible for a grant or other funding under the plan (Sec. 386.051). The bill establishes the Texas emissions reduction plan fund (fund) as an account in the state treasury that is administered by the comptroller and sets forth provisions relating to the fees, surcharges, and payments that compose the fund, and the use and allocation of the fund for programs implemented and administered under the plan (Secs. 386.251 and 386.252). The bill sets forth provisions regarding the administration of the plan by TNRCC, including the duties, objectives, guidelines and criteria for awarding grants under the plan, monitoring procedures of the achievements of projects awarded grants, the general availability of emission reduction credits, the availability of emissions reduction credits in certain nonattainment areas, and the review and reporting requirements of TNRCC (Secs. 386.052-386.057 and SECTION 23). The bill establishes the Texas Emissions Reduction Plan Advisory Board (advisory board) consisting of 13 appointed members and sets forth provisions relating to the appointment, composition, terms, and the presiding officer of the members of the advisory board. The bill requires the advisory board to review the program and recommend to TNRCC changes to revenue sources or financial incentives or any legislative, regulatory, or budgetary changes needed. The bill requires TNRCC to provide necessary staff support to the advisory board (Sec. 386.058 and SECTION 18). The bill provides for the expiration of provisions relating to the Texas emissions reduction plan, the diesel emissions reduction incentive program, the motor vehicle purchase or lease incentive program, the local government grant program, and the Texas emissions reduction plan fund on August 31, 2008 (Sec. 386.002). Diesel Emissions Reduction Incentive Program The bill requires TNRCC to establish and administer a diesel emissions reduction incentive program, under which TNRCC is required to provide grants to eligible projects to offset the incremental cost of projects that reduce emissions of oxides of nitrogen from high-emitting diesel sources in nonattainment or affected counties of the state. The bill sets forth provisions relating to the eligibility, considerations, and applications of projects to receive grants under the diesel emissions reduction incentive program. The bill requires TNRCC to adopt criteria for setting priorities for projects eligible for grants no later than September 1, 2001 (Secs. 386.102-386.104 and SECTION 15). The bill sets forth provisions relating to TNRCC's calculations of cost-effectiveness, the criteria of costeffectiveness regarding the determination of grant money, and adjustments to maximum cost-effectiveness amount and award amount (Secs. 386.105-386.107, Health and Safety Code). The bill requires TNRCC to provide funding from the fund for infrastructure demonstration projects and sets forth provisions relating to the implementation of these projects. The bill also sets forth provisions relating to eligibility, the application package, and procedures for reviewing an application for infrastructure demonstration projects (Secs. 386.108-386.111). The bill requires TNRCC to develop a purchase or lease incentive program for heavy-duty motor vehicles and to adopt rules necessary to implement the program and to reimburse an eligible person who purchases or leases a heavy-duty motor vehicle on or after January 1, 2002. The bill sets forth provisions relating to the statewide incentives for the reimbursement of incremental costs for the purchase or lease and the incentive schedule of a heavy-duty vehicle under the program (Secs. 386.112 and 386.113, and SECTION 16). Motor Vehicle Purchase or Lease Incentive Program The bill requires TNRCC and the comptroller to develop a purchase or lease incentive program to authorize incentives for the purchase or lease of light-duty motor vehicles and to adopt rules necessary to implement the program. The bill sets forth provisions relating to the eligibility schedule of a light-duty motor vehicle for the motor vehicle purchase or lease incentive program and the authorization of TNRCC to modify the incentive emissions standards of a light-duty motor vehicle to improve the ability of the program to achieve its goals (Secs. 386.151-386.154). At the beginning but not later than July 1 of each year preceding the vehicle model year, manufacturers of motor vehicles are required to provide a list of the new vehicle models that the manufacturer intends to sell in this state during that model year that meet certain incentive emissions standards and provide the amount of the incremental cost of the vehicles to TNRCC. The bill also sets forth provisions regarding the publication and the distribution of these lists by the comptroller (Secs. 386.155 and 386.156). To enable consumers to make informed decisions, the bill requires the motor vehicle manufacturer or distributor to affix on each new light-duty motor vehicle for sale or lease in this state a clearly legible label that shows the vehicle's class rating under the United States Environmental Protection Agency's (EPA) 5Star Green Vehicle Class Rating System and make the list of eligible motor vehicles available to the prospective purchaser or lessee. The bill provides that a person who purchases or leases a motor vehicle during the first year the model is offered for sale or lease is eligible for low-emissions vehicle purchase or lease incentive that is prorated based on a four-year lease term. To receive an incentive under a motor vehicle purchase or lease incentive program, the purchaser or lessee of an eligible motor vehicle is required to apply for the incentive in the manner provided by law or by rule of the comptroller (Secs. 386.157 and 386.158). The bill sets forth provisions relating to the public information program for the motor vehicle purchase or lease incentive program and the report of the program by the comptroller to TNRCC (Secs. 386.159 and 386.161). The bill requires the comptroller, by rule, to develop a method to administer and account for the motor vehicle purchase or lease incentives, and sets forth provisions relating to the comptroller prescribing the accounting, reporting, and verification procedures for motor vehicle purchase or lease incentives to new motor vehicle dealers and leasing agents (Sec. 386.160). The bill requires TNRCC no later than the 30th day after the effective date of this Act to publish the first annual list of vehicles eligible for motor vehicle purchase or lease incentives (SECTION 15). Local Government Grant Program The bill requires TNRCC to develop a competitive grant program to encourage the retirement and replacement of inefficient residential cooling equipment, household appliances and high-emitting noncommercial lawn and garden equipment, and the weatherization of residences. The bill authorizes the administration of the program by municipalities or counties, and sets forth provisions relating to the costeffectiveness requirement of a grant, projects conducted under a grant, the use of grant money, and the required disposal of retired equipment by a grant recipient (Secs. 386.201- 386.205). Texas Building Energy Performance Standards The bill provides for the adoption of the energy efficiency chapter of the International Residential Code, as it existed on May 1, 2001, as the energy code in this state for single-family residential construction. To achieve energy conservation in all other residential, commercial, and industrial construction, the bill provides for the adoption of the International Energy Conservation Code as it existed on May 1, 2001 for use in this state. The bill sets forth procedures regarding the authorization of a municipality to adopt local amendments to these codes, the administration and enforcement of the adopted codes, and the ensurance of inspections and enforcement of the codes (Secs. 388.003). The bill also provides for the enforcement of energy standards for construction outside of a municipality (Sec. 388.004). The bill requires a municipality in a nonattainment area and an affected county, the nonattainment area, and the affected county to develop an energy efficiency and weatherization program for existing buildings that would result in certain energy savings, and sets forth provisions relating to the development, implementation, energy saving estimates, the adoption of noncode energy performance standards, and the required annual progress report by a municipality or affected county. The bill requires the Energy Systems Laboratory at the Texas Engineering Experiment Station of The Texas A&M University (laboratory) to develop a series of green building guidelines as part of the green building performance standards (Secs. 386.005 and 386.006). The bill sets forth provisions regarding the creation and composition of the Texas building energy performance standards advisory committee and the application of the adopted codes to any building or structure in this state for which a building permit application is received by a local jurisdiction on or after September 1, 2002 (Secs. 388.007 and 388.008). The bill requires that the laboratory have the authority to set and collect fees to perform certain tasks in support of the additional energy conservation programs, the distribution of information and technical assistance, and the development of an accreditation program for home energy rating services to be implemented by September 1, 2003 (Secs. 388.003-388.005, 388.009, and 388.010) New Technology Research and Development Program The bill establishes the Texas Council on Environmental Technology (council) to identify, evaluate, and deploy new technologies and assist TNRCC and the EPA in the process of ensuring credit for technological advancements. The bill provides that the council is composed of 11 members and sets forth provisions relating to the appointment and terms of the members, and the council offices and projects location (Sec. 387.002 and SECTION 19). The bill requires the council to establish and administer a new technology research program to provide grants to be used to support development of emissions-reducing and technologies with the designated monies from the environmental research fund contained within the general revenue fund (Secs. 387.003 and 387.008). The bill also authorizes the council to appoint advisory committees to assist the council in performing its duties and sets forth provisions relating to the composition of the advisory committees. The bill requires the council, no later than December 1, 2002, and not later than December 1 of each subsequent year, to report to the legislature on projects funded under the new technology research and development program (Secs. 387.009 and 387.010). The bill requires the council to issue a request no later than the 30th day after the adoption of rules governing the new technology research and development program, for proposals for projects to be funded under the program and sets forth provisions relating to the specific request of the council for proposals or program opportunity notices for technology projects (Sec. 387.004 and SECTION 20). The bill also sets forth provisions regarding the priorities and considerations of eligibility, the application process, and costsharing of projects for a grant under the new technology research program (Secs. 387.005-387.007). Clean Vehicles Insignia for Motor Vehicles The bill amends the Transportation Code to require the Department of Public Safety (DPS) to issue at the time of registration or reregistration of a motor vehicle a specially designed "clean vehicle" insignia for a motor vehicle that is eligible for a motor vehicle purchase and lease incentive. The bill also sets forth provisions relating to the contents and the fee for the insignia and the distribution of the funds under the plan to pay for the cost to the county for administrating the insignia. The bill provides for the expiration of provisions relating to the insignia on August 31, 2008 (Sec. 502.186). The bill also requires the Texas Department of Transportation no later than the 45th day after the effective date of this Act to make available to the county tax assessor-collector of each county in the state the insignia and sets forth provisions relating to the issuance of the insignias (SECTION 17). Exemptions for Motor Fuel Vehicles with a Clean Vehicle Insignia The bill entitles motor vehicles with a "clean vehicle" insignia to travel in a preferential car pool or high occupancy vehicle lanes, regardless of the number of occupants in the motor vehicle, and privileged parking spaces of a political subdivision or private property owner. The bill provides for the expiration of provisions relating to the above entitlements on August 31, 2008 (Secs. 224.153, 431.073, and 681.009). Fees The bill provides for the imposition of a surcharge on the registration of a truck-tractor or commercial motor vehicle in an amount equal to 10 percent of the total fees due for the registration of the truck-tractor or commercial motor vehicle and sets forth provisions relating to the remittance and deposit of such surcharges. The bill also requires DPS to collect a $1 fee for the inspection of a motor vehicle in an area of the state that is not a nonattainment or affected county and a $5 fee if the inspection is in a nonattainment or affected county. The bill also sets forth provisions relating to the remittance and deposit of these fees on the inspection of a motor vehicle. The bill provides for the expiration of the provisions regarding inspection fees and surcharges on August 31, 2008 (Sec. 502.1675 and 548.5055). The bill amends the Tax Code to provide for a surcharge equal to 0.25 percent of the price on lease or rental amount on the retail sale, lease, or rental, of new or used equipment and sets forth provisions relating to the collection, administration, enforcement, and deposit into the Texas emissions reduction plan fund of the surcharge. The bill provides for the imposition of a surcharge that is one percent of the total consideration on every retail sale or lease of every on-road diesel motor vehicle over 14, 000 pounds sold or leased in this state. The bill requires the comptroller by rule to adopt any additional procedures for the collection, administration, and enforcement of the on-road diesel motor vehicle surcharge and sets forth provisions for the deposit of these remitted surcharges. The bill provides for the expiration of the above provisions regarding surcharges on September 30, 2008 (Secs. 151.0515 and 152.0215, Tax Code). Provisions imposing a diesel fuel tax do not apply to the volume of water that is blended together with taxable diesel fuel that is clearly labeled. The provision relating to diesel fuel tax expires August 31, 2008 (Sec. 153.203). The bill also provides for the imposition of a $1 surcharge on a person, except specified persons, for each day that the person has the right to use or possess a room in a hotel that is ordinarily used for sleeping in a nonattainment or affected county and sets forth provisions relating to the collection, administration, and enforcement of such a surcharge, and the deposit of all the remitted surcharges. The bill provides for the expiration of the provisions relating to the surcharge on certain persons on September 30, 2008 (Sec. 156.054). The bill amends the Parks and Wildlife Code to provide for a surcharge for each application for an original or renewal certificate of number for a motorboat that will be operated primarily in a nonattainment or affected county of this state and sets forth provisions relating to the collection and remittance of the surcharge as well as for the expiration of this provision on August 31, 2008 (Sec. 31.0265). The bill amends V.T.C.S. to provide for a surcharge of $1 imposed on each fare collected by a taxi driver for transportation by taxi to and from an airport in a county that is in a nonattainment or affected county. The bill requires the comptroller to adopt any necessary rules for the administration, payment, collection, and enforcement of the surcharge, and sets forth provisions relating to the deposit of the surcharges and the payment, records, exemption, and the liability of unremitted taxi surcharges. The bill provides that a person who violates a rule adopted by the comptroller or provisions regarding a taxi surcharge under the plan commits a Class C misdemeanor. The bill provides for a surcharge of 25 cents per gallon imposed on the sale of bunker fuel by a petroleum refining facility in this state. The bill requires the comptroller to adopt any necessary rules for the administration, payment, collection, and enforcement of the surcharge, and sets forth provisions relating to the deposit, administration, payment, collection, enforcement, and exemptions of the surcharge. The bill provides for the expiration of the above provisions on August 31, 2008 (Articles 9035 and 9036, V.T.C.S.). The bill amends law to require TNRCC to adopt rules establishing the guidelines and criteria required to implement the programs established under this Act and to require the comptroller to adopt all rules necessary to carry out the duties delegated to the comptroller under this Act. Pending the adoption of these rules, the bill requires TNRCC to begin the implementation of the programs established under this Act using guidelines developed by a similar operating program in another state that is modified for application in this state (SECTION 14). The bill requires TNRCC and the comptroller to adopt rules necessary to implement the diesel emissions reduction and motor vehicle purchase or lease incentive programs within a specified time period (SECTION 15). The bill requires TNRCC to submit to the United States Environmental Protection Agency on the effective date of this Act a revision of the state implementation plan that deletes the requirements of the construction shift and the early purchase of Tier 2 and Tier 3 equipment and adds this Act (SECTION 21). The bill sets forth provisions for the continuance of this Act when certain other Acts of the 77th Legislature, Regular Session, 2001 purport to abolish certain funds and accounts (SECTION 22). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001.