SRC- MWN S.B. 5 77(R)BILL ANALYSIS Senate Research CenterS.B. 5 By: Brown, J. E. "Buster" Natural Resources 6/25/2001 Enrolled DIGEST AND PURPOSE The federal Clean Air Act authorizes the United States Environmental Protection Agency (EPA) to establish the maximum allowable concentrations of pollutants that can endanger human health, harm the environment, and cause property damage. A significant portion of Texas currently does not meet these standards and is facing severe sanctions if attainment is not reached by 2007. While the Texas Natural Resource Conservation Commission (commission) has submitted a proposed State Implementation Plan (SIP) requiring emissions reductions of sources under their control, there are significant areas of potential emission reductions the commission cannot regulate but which may be realized through incentive programs. S.B. 5 establishes programs to encourage emissions reductions. RULEMAKING AUTHORITY Rulemaking authority is expressly granted to the Texas Natural Resource Conservation Commission in SECTIONS 1 (Sections 386.106, 386.112, and 386.157, Health and Safety Code) and 11, to the comptroller in SECTIONS 3 (Section 152.0215, Tax Code) and 11, and to the commission and the comptroller in SECTIONS 1 (Section 386.053, Health and Safety Code) and 12 of this bill. SECTION BY SECTION ANALYSIS SECTION 1. (a) Sets forth legislative intent. (b) Amends Title 5C, Health and Safety Code, by adding Chapters 386, 387, 388, and 389, as follows: CHAPTER 386. TEXAS EMISSIONS REDUCTION PLAN SUBCHAPTER A. GENERAL PROVISIONS Sec. 386.001. DEFINITIONS. Defines "advisory board," "affected county," "commission," "council," "fund," "incremental cost," "laboratory," "nonattainment area," "plan," "site," and "utility commission." Sec. 386.002. EXPIRATION. Provides that this chapter expires August 31, 2008. [Sections 386.003-386.050 reserved for expansion] SUBCHAPTER B. TEXAS EMISSIONS REDUCTION PLAN Sec. 386.051. TEXAS EMISSIONS REDUCTION PLAN. (a) Requires the Public Utility Commission (PUC), the Texas Natural Resource Conservation Commission (commission), the comptroller, and the Texas Council on Environmental Technology (council) to establish and administer the Texas emissions reduction plan in accordance with this chapter. (b) Provides that under the plan, the commission, the comptroller, and the council are required to provide grants or other funding for certain conditions. (c) Requires the utility commission, under the plan, to provide grants or other funding for the energy efficiency grant program established under Subchapter E. (d) Provides that equipment purchased before September 1, 2001, is not eligible for a grant or other funding under the plan. Sec. 386.052. COMMISSION DUTIES. (a) Requires the commission, in administering the plan established under this chapter and in accordance with the requirements of this chapter, to perform certain procedures. (b) Provides that appropriate commission objectives include certain criteria. Sec. 386.053. GUIDELINES AND CRITERIA. (a) Requires the commission to adopt grant guidelines and criteria consistent with the requirements of this chapter. (b) Requires guidelines to include protocols to calculate projected emissions reductions, project cost-effectiveness, and safeguards to ensure that funded projects generate emissions reductions not otherwise required by state or federal law. (c) Requires the commission to make draft guidelines and criteria available to the public and the United States Environmental Protection Agency (EPA) before the 45th day preceding the date of final adoption and shall hold at least one public meeting to consider public comments on the draft guidelines and criteria before final adoption. Requires the public meeting to be held in the affected state implementation plan area, and if the guidelines affect more than one state implementation plan area, a public meeting to be held in each affected state implementation plan area affected by the guidelines. (d) Authorizes the commission to propose revisions to the guidelines and criteria adopted under this section as necessary to improve the ability of the plan to achieve its goals. Authorizes revisions to include, among other changes, adding additional pollutants or adjusting eligible program categories, as appropriate, to ensure that incentives established under this chapter achieve the maximum possible emissions reductions. Requires the commission to make a proposed revision available to the public before the 45th day preceding the date of final adoption of the revision and to hold at least one public meeting to consider public comments on the proposed revision before final adoption. (e) Authorizes the commission and the comptroller, because the legislature finds that the current state of air quality in the state jeopardizes the state's ability to meet federal air quality requirements, to adopt emergency rules under Section 2001.034, Government Code, with abbreviated notice, to carry out any rulemaking necessary to implement this chapter. (f) Provides that except as provided by Subsection (e), the rulemaking requirements of Chapter 2001, Government Code, do not apply to the adoption or revision of guidelines and criteria under this section. Sec. 386.054. MONITORING PROCEDURES. (a) Requires the commission to develop procedures for monitoring whether the emissions reductions projected for projects awarded grants under this chapter are actually achieved. Authorizes monitoring procedures to include project reviews and contract requirements that the grant recipient provide information semiannually about the project. Requires the report, if the commission requires an annual report, to contain a minimum amount of information required from a recipient and the report format shall be simple and convenient. (b) Requires monitoring and reviewing procedures to be sufficient to enable emissions reductions generated by funded projects to be fully credited to air quality plans. (c) Authorizes the commission to revise monitoring and review procedures from time to time as necessary or appropriate to enhance the effectiveness of the plan. Sec. 386.055. AVAILABILITY OF EMISSIONS REDUCTION CREDITS GENERALLY. (a) Prohibits a project funded under a program established under this chapter from being used for credit under any state or federal emissions reduction credit averaging, banking, or trading program. (b) Provides that an emissions reduction generated by a program established under this chapter to meet certain criteria. (c) Provides that a project involving a new emissions reduction measure that would otherwise generate marketable credits under state or federal emissions reduction credit averaging, banking, or trading programs is not eligible for funding under a program established under this chapter unless certain conditions are met. Sec. 386.056. AVAILABILITY OF EMISSIONS REDUCTIONS IN CERTAIN NONATTAINMENT AREAS. (a) Authorizes an owner or operator of a site located in the Houston-Galveston or Dallas-Fort Worth nonattainment area to use emissions reductions generated by a program established under this chapter to offset the requirements of commission rules relating to control of air pollution from oxides of nitrogen if certain conditions are. (b) Requires funds collected under this section to be used to generate emissions reductions needed to meet the commission's attainment demonstration. (c) Requires the commission to verify that emissions reductions generated from funds collected under this section occur in the same nonattainment area in which the site that purchased the emissions reductions is located. (d) Requires the commission to assure that the emissions reductions funded under the programs authorized by this subchapter used to offset commission requirements under this section benefit the community in which the site using the emissions reductions is located. Authorizes the commission, if there are no eligible emissions reduction projects within the community, to authorize projects in an adjacent community. Defines "community." Sec. 386.057. REVIEW AND REPORTING REQUIREMENTS. (a) Requires the commission, in consultation with the advisory board, annually to review programs established under the plan, including each project funded under the plan, the amount granted for the project, the emissions reductions attributable to the project, and the cost-effectiveness of the project. (b) Provides that not later than December 1, 2002, and not later than December 1 of each subsequent second year, the commission, in consultation with the advisory board, is required to publish and submit to the legislature a biennial plan report. Requires the report to include certain information. (c) Requires the report, for projects funded as part of the infrastructure program under Subchapter C, to meet certain criteria. (d) Requires the report to meet certain criteria. (e) Requires the commission to request public comment and hold a public meeting on each draft biennial report and, in producing a final biennial report, to consider and respond to all significant comments received. Sec. 386.058. TEXAS EMISSIONS REDUCTION PLAN ADVISORY BOARD. (a) The Texas Emissions Reduction Plan Advisory Board (advisory board) consists of certain members. (b) Requires the governor to appoint to the advisory board certain persons. (c) Requires the lieutenant governor to appoint to the advisory board certain persons. (d) Requires the speaker of the house of representatives to appoint to the advisory board certain persons. (e) Provides that appointed members of the advisory board serve staggered two-year terms. Provides that the terms of seven appointed members expire February 1 of each even-numbered year. Provides that the terms of eight appointed members expire February 1 of each odd-numbered year. Authorizes an appointed member to be reappointed to a subsequent term. (f) Provides that ex officio members of the advisory board are consists of certain persons. (h) Requires the advisory board to review the plan and to recommend to the commission changes to revenue sources or financial incentives or any legislative, regulatory, or budgetary changes needed. (i) Requires the commission to provide necessary staff support to the advisory board. [Sections 386.059-386.100 reserved for expansion] SUBCHAPTER C. DIESEL EMISSIONS REDUCTION INCENTIVE PROGRAM Sec. 386.101. DEFINITIONS. Defines "cost-effectiveness," "fuel cell," "motor vehicle," "non-road diesel," "non-road engine," "on-road diesel," "program," "qualifying fuel," "repower," and "retrofit." Sec. 386.102. PROGRAM. (a) Requires the commission to establish and administer a diesel emissions reduction incentive program. Requires the commission, under the program, to provide grants for eligible projects to offset the incremental cost of projects that reduce emissions of oxides of nitrogen from high-emitting diesel sources in nonattainment areas and affected counties of the state. Requires the commission to determine the eligibility of projects. (b) Provides that projects that may be considered for a grant under the program include certain projects or equipment. (c) Provides that a project listed in Subsection (b) is not eligible if it is required by any state or federal law, rule or regulation, memorandum of agreement, or other legally binding document. Provides that this subsection does not apply to certain projects or equipment. Sec. 386.103. APPLICATION FOR GRANT. (a) Provides that any person as defined by Section 382.003 that owns one or more on-road or non-road diesels that operate primarily within a nonattainment area or affected county of this state or that otherwise contributes to the state inventory of emissions of oxides of nitrogen may apply for a grant under the program. (b) Requires an application for a grant under this subchapter to be made on an application provided by the commission and to contain information required by the commission, including certain information. Sec. 386.104. ELIGIBILITY REQUIREMENTS. (a) Requires the commission to establish criteria for setting priorities for projects eligible to receive grants under this subchapter. Requires the commission to review and may modify the criteria and priorities as appropriate. (b) Requires a proposed project as described in Section 386.102 to meet the requirements of this section to be eligible for a grant under the program. (c) Provides that 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 is required to be projected to take place in a nonattainment area or affected county of this state. Provides that for a proposed project involving a marine vessel or engine, the vessel or engine are required to be operated in the intercoastal waterways or bays adjacent to a nonattainment area or affected county of this state for a sufficient amount of time over the lifetime of the project, as determined by the commission, to meet the cost-effectiveness requirements of Section 386.105. (d) Requires each proposed project to meet the cost-effectiveness requirements of Sections 386.105 and 386.106. (e) Requires a proposed repower project must exceed commission requirements relating to baseline emissions levels of the engines being replaced under the project. (f) Requires a proposed retrofit, repower, or add-on equipment project to document, in a manner acceptable to the commission, a reduction in emissions of oxides of nitrogen of at least 30 percent compared with the baseline emissions adopted by the commission for the relevant engine year and application. Authorizes the commission, after study of available emissions reduction technologies, after public notice and comment, and after consultation with the advisory board, to revise the minimum percentage reduction in emissions of oxides of nitrogen required by this subsection to improve the ability of the program to achieve its goals. (g) Provides that if a baseline emissions standard does not exist for on-road or non-road diesels in a particular category, the commission, for purposes of this subchapter, is required to establish an appropriate baseline emissions level for comparison purposes. (h) Authorizes the commission to approve payments to offset the incremental cost, over the expected lifetime of the motor vehicle or on-road or non-road diesel, of the use of qualifying fuel in a motor vehicle or on-road or non-road diesel if the proposed project as a whole, including the incremental fuel cost, meets the requirements of this subchapter. Requires the commission to develop an appropriate method for converting incremental fuel costs over the lifetime of the motor vehicle or on-road or non-road diesel into an initial cost for purposes of determining cost-effectiveness as required by Section 386.105. Sec. 386.105. CALCULATION OF COST-EFFECTIVENESS. (a) Provides that in calculating cost-effectiveness, one-time grants of money at the beginning of a project are to be annualized using a time value of public funds or discount rate determined for each project by the commission, taking into account the interest rate on bonds, interest earned by state funds, and other factors the commission considers appropriate. (b) Requires the commission to establish reasonable methodologies for evaluating project cost-effectiveness consistent with Subsection (a) and with accepted methods. (c) Requires the commission to develop protocols for calculating oxides of nitrogen emissions reductions not otherwise required by state or federal law in nonattainment areas and affected counties of this state from representative project types over the life of the projects. (d) Authorizes the commission to include in cost-effectiveness determinations only reductions in oxides of nitrogen emissions that are achieved in nonattainment areas and affected counties of this state. Sec. 386.106. COST-EFFECTIVENESS CRITERIA; DETERMINATION OF GRANT AMOUNT. (a) Prohibits the commission, except as provided by Section 386.107, from awarding a grant for a proposed project the cost-effectiveness of which, calculated in accordance with Section 386.105 and criteria developed under that section, exceeds $13,000 per ton of oxides of nitrogen emissions reduced in the nonattainment area or affected county for which the project is proposed. Provides that this subsection does not restrict commission authority under other law to require emissions reductions with a cost-effectiveness that exceeds $13,000 per ton. (b) Prohibits the commission from awarding a grant that, net of taxes, provides an amount that exceeds the incremental cost of the proposed project. (c) Requires the commission to adopt guidelines for capitalizing incremental lease costs so those costs may be offset by a grant under this subchapter. (d) Requires the commission, in determining the amount of a grant under this subchapter, to reduce the incremental cost of a proposed new purchase, lease, retrofit, repower, or add-on equipment project by the value of any existing financial incentive that directly reduces the cost of the proposed project, including tax credits or deductions, other grants, or any other public financial assistance. Sec. 386.107. ADJUSTMENT TO MAXIMUM COST-EFFECTIVENESS AMOUNT AND AWARD AMOUNT. Provides that after study of available emissions reduction technologies and costs and after public notice and comment, the commission, in consultation with the advisory board, is authorized to change the values of the maximum grant award criteria established in Section 386.106 to account for inflation or to improve the ability of the program to achieve its goals. Sec. 386.108. INFRASTRUCTURE PROJECTS. (a) Requires the commission to provide funding under Section 386.252(a)(1) for infrastructure projects. (b) Requires the commission, to implement the requirement of Subsection (a), to perform certain procedures. Sec. 386.109. ELIGIBLE INFRASTRUCTURE PROJECTS. Authorizes the commission to consider for funding under Section 386.108 certain criteria. Sec. 386.110. APPLICATION PACKAGE FOR INFRASTRUCTURE PROJECTS. (a) Requires the commission to develop a simple, standardized application package for infrastructure project grants under this subchapter. Requires the package to include certain information. (b) Requires the application form to require as much information as the commission determines is necessary to properly evaluate each project but shall otherwise minimize the information required. (c) Prohibits the commission from requiring an applicant, as part of the application process, to calculate tons of emissions reduced or cost-effectiveness. Sec. 386.111. APPLICATION REVIEW PROCEDURES. (a) Requires the commission to review an application for a grant for a project authorized under this subchapter, including an application for a grant for an infrastructure project, immediately on receipt of the application. Requires the commission, if the commission determines that an application is incomplete, to notify the applicant, not later than the 15th working day after the date on which the commission received the application, with an explanation of what is missing from the application. Requires the commission to record the date and time of receipt of each application the commission determines to be complete and to evaluate the completed application according to the appropriate project criteria. Requires the commission, subject to available funding, to make a final determination on an application as soon as possible and not later than the 60th working day after the date the application is determined to be complete. (b) Requires the commission to make every effort to expedite the application review process and to award grants to qualified projects in a timely manner. Requires the commission, to the extent possible, to coordinate project review and approval with any timing constraints related to project purchases or installations to be made by an applicant. (c) Authorizes the commission to deny an application for a project that does not meet the applicable project criteria or that the commission determines is not made in good faith, is not credible, or is not in compliance with this chapter and the goals of this chapter. (d) Requires the commission, subject to availability of funds, to award a grant under this subchapter in conjunction with the execution of a contract that obligates the commission to make the grant and the recipient to perform the actions described in the recipient's grant application. Requires the contract to incorporate provisions for recapturing grant money in proportion to any loss of emissions reductions or underachievement in dispensing qualifying fuel compared with the volume of emissions reductions or amount of fuel dispensed that was projected in awarding the grant. Requires grant money recaptured under the contract provision to be deposited in the fund and reallocated for other projects under this subchapter. (e) Authorizes an applicant to seek reimbursement for qualifying equipment installed after the effective date of this program. Sec. 386.112. ON-ROAD DIESEL PURCHASE OR LEASE INCENTIVE. (a) Requires the commission to develop a purchase or lease incentive program for new on-road diesels and to adopt rules necessary to implement the program and to reimburse a purchaser or lessee of a new on-road diesel that is eligible for reimbursement of incremental costs under this subchapter. (b) Requires the program to authorize statewide incentives for the reimbursement of incremental costs for the purchase or lease, according to the schedule provided by Section 386.113, of new on-road diesels that are certified by the EPA to an emissions standard provided by Section 386.113 if the purchaser or lessee of the on-road diesel agrees to register the vehicle in this state and to operate the on-road diesel in this state for not less than 75 percent of the on-road diesel's annual mileage. (c) Provides that only one incentive will be provided for each new on-road diesel. Requires the incentive to be provided to the purchaser if the on-road diesel is not purchased for the purpose of leasing the on-road diesel to another person, or to the lessee and not to the purchaser if the on-road diesel is purchased for the purpose of leasing the on-road diesel to another person. Requires a lease incentive for a new on-road diesel to be prorated based on an eight-year lease term. Sec. 386.113. ON-ROAD DIESEL PURCHASE OR LEASE INCENTIVE SCHEDULE. Provides that a new on-road diesel is eligible for reimbursement of incremental costs according to a certain schedule. Sec. 386.114. MODIFICATION OF INCENTIVE EMISSIONS STANDARDS. Provides that after evaluating new technologies and after public notice and comment, the commission, in consultation with the advisory board, is authorized to change the incentive emissions standards established by Section 386.113 to improve the ability of the program to achieve its goals. [Sections 386.115-386.150 reserved for expansion] SUBCHAPTER D. MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE PROGRAM Sec. 386.151. DEFINITIONS. Defines "bin" or "emissions plan," "light-duty motor vehicle," and "motor vehicle." Sec. 386.152. COMPTROLLER AND COMMISSION DUTIES REGARDING LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE PROGRAM. (a) Requires the comptroller and the commission to develop a purchase or lease incentive program for new light-duty motor vehicles and to adopt rules necessary to implement the program. (b) Requires the program to authorize statewide incentives for the purchase or lease, according to the schedule provided by Section 386.153, of new light-duty motor vehicles that are certified by the EPA to meet an emissions standard that is at least as stringent as those provided by Section 386.153 for a purchaser or lessee who agrees to register the vehicle in this state and to operate the vehicle in this state for not less than 75 percent of the vehicle's annual mileage. (c) Provides that only one incentive will be provided for each new light-duty motor vehicle. Requires the incentive to be provided to the lessee and not to the purchaser if the motor vehicle is purchased for the purpose of leasing the vehicle to another person. Sec. 386.153. LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE SCHEDULE. Provides that a new light-duty motor vehicle is eligible for an incentive according to a certain schedule. Sec. 386.154. MODIFICATION OF INCENTIVE EMISSIONS STANDARDS. Provides that after evaluating new technologies and after public notice and comment, the commission, in consultation with the advisory board, is authorized to change the incentive emissions standards established by Section 386.153 to improve the ability of the program to achieve its goals. Sec. 386.155. MANUFACTURER'S REPORT. Requires a manufacturer of motor vehicles, at the beginning of but not later than July 1 of each year preceding the vehicle model year, to provide to the commission a list of the new vehicle models that the manufacturer intends to sell in this state during that model year that meet the incentive emissions standards established by the schedules set out under Section 386.153. Authorizes the manufacturer to supplement the list provided to the commission under this section as necessary to include additional new vehicle models the manufacturer intends to sell in this state during the model year. Sec. 386.156. LIST OF ELIGIBLE MOTOR VEHICLES. (a) Provides that on August 1 each year the commission is required to publish and provide to the comptroller a list of the new model motor vehicles as listed for the commission under Section 386.155. Requires the commission to publish and provide to the comptroller supplements to that list as necessary to include additional new vehicle models listed in a supplement to the original list provided by a manufacturer under Section 386.155. (b) Requires the comptroller to distribute the list of eligible motor vehicles to all new motor vehicle dealers and leasing agents in this state. Sec. 386.157. VEHICLE EMISSIONS INFORMATION BROCHURE. (a) Provides that to enable consumers to make informed purchase decisions based on the relative amounts of emissions produced by motor vehicles within each vehicle class, the motor vehicle manufacturer is required to publish and make available to its dealers, for distribution to the dealers' customers, a brochure that includes the list of eligible motor vehicles prepared under Section 386.156 and the emissions and air pollution ratings, not including fuel efficiency, for each eligible motor vehicle based on data from the EPA's Green Vehicle Guide. Requires the brochure to also clearly present information on the emissions and air pollution ratings, not including fuel efficiency, for each motor vehicle on the list of eligible motor vehicles prepared by the manufacturer under Section 386.155, based on the motor vehicle's Bin certification number. Requires the brochure to indicate where the Bin certification information is located on each motor vehicle and to clearly explain how to interpret that information. Requires the brochure to also tell the consumer how to obtain further information from the EPA's Green Vehicle Guide. Requires the commission by rule to establish standards for compliance with this subsection. (b) Requires a new motor vehicle dealer or leasing agent to make available to the dealer's or leasing agent's prospective purchasers or lessees a copy of the list prepared and published by the commission under Section 386.156. Sec. 386.158. LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE. (a) Provides that a person who purchases or leases a new light-duty motor vehicle that has been listed under Section 386.155 is eligible for an incentive under this subchapter. (b) Requires a lease incentive for a new light-duty motor vehicle to be prorated based on a four-year lease term. (c) Provides that to receive money under an incentive program provided by this subchapter, the purchaser or lessee of a new light-duty motor vehicle eligible for an incentive under this subchapter to apply for the incentive in the manner provided by law or by rule of the comptroller. Sec. 386.159. PUBLIC INFORMATION. (a) Requires the commission in cooperation with the comptroller to develop and implement a program to inform the public and new motor vehicle dealers and leasing agents about the motor vehicle purchase or lease incentive program. (b) Requires he Texas Department of Transportation (department) to insert a notice describing the light-duty motor vehicle purchase or lease incentive program with each annual vehicle registration renewal notice. Requires the notice, to help a consumer to make informed new vehicle purchase decisions, to also include a statement that information on eligible motor vehicles and on the emissions and air pollution ratings, not including fuel efficiency, for eligible motor vehicles may be obtained from the commission or from new motor vehicle dealers and leasing agents. Requires the notice to state where the Bin certification information is located on each eligible motor vehicle, to clearly explain how to interpret that information, and to tell the consumer how to obtain further information from the EPA's Green Vehicle Guide. Sec. 386.160. COMPTROLLER TO ACCOUNT FOR MOTOR VEHICLE PURCHASE OR LEASE INCENTIVES. (a) Requires the comptroller by rule to develop a method to administer and account for the motor vehicle purchase or lease incentives authorized by this subchapter and to pay incentive money to the purchaser or lessee of a new motor vehicle, on application of the purchaser or lessee as provided by this subchapter. (b) Requires the comptroller to develop and publish forms and instructions for the purchaser or lessee of a new motor vehicle to use in applying to the comptroller for an incentive payment under this subchapter. Requires the comptroller to make the forms available to new motor vehicle dealers and leasing agents. Requires dealers and leasing agents to make the forms available to their prospective purchasers or lessees. (c) Requires the comptroller, in addition to other forms developed and published under this section, to develop and publish a verification form by which, with information provided by the dealer or leasing agent, the comptroller can verify the sale of a vehicle covered by this subchapter. Requires the verification form to include certain information. Provides that at the time of sale or lease of a vehicle eligible for an incentive under this subchapter, the dealer or leasing agent are required to complete the verification form supplied to the dealer by the comptroller. Requires the purchaser or lessee to include the completed verification form as part of the purchaser's application for an incentive. Requires the dealer to maintain a copy of the completed verification form for at least two years from the date of the transaction. Sec. 386.161. REPORT TO COMMISSION; SUSPENSION OF PURCHASE OR LEASE INCENTIVES. (a) Requires the comptroller to report to the commission annually regarding motor vehicle purchase or lease incentives. (b) Requires the comptroller by order, if the balance available for motor vehicle purchase or lease incentives falls below 15 percent of the total allocated for the incentives during that fiscal year, to suspend the incentives until the date the comptroller can certify that the balance available in the fund for incentives is an amount adequate to resume the incentives or the beginning of the next fiscal year, whichever is earlier. Requires the comptroller, if the comptroller suspends the incentives, to immediately notify the commission and all new motor vehicle dealers and leasing agents that the incentives have been suspended. (c) Requires the comptroller to establish a toll-free telephone number available to motor vehicle dealers and leasing agents for the dealers and agents to call to verify that incentives are available. Authorizes the comptroller to provide for issuing verification numbers over the telephone line. (d) Provides that reliance by a dealer or leasing agent on information provided by the comptroller or commission is a complete defense to an action involving or based on eligibility of a vehicle for an incentive or availability of vehicles eligible for an incentive. [Sections 386.162-386.200 reserved for expansion] SUBCHAPTER E. ENERGY EFFICIENCY GRANT PROGRAM Sec. 386.201. DEFINITIONS. Defines "electric cooperative," "electric utility," and "municipally owned utility." Sec. 386.202. GRANT PROGRAM. (a) Requires the PUC to develop an energy efficiency grant program using program templates that are consistent with rules of the utility commission adopted under Section 39.905, Utilities Code. (b) Requires programs approved under this subchapter to include the retirement of materials and appliances that contribute to peak energy demand to ensure the reduction of energy demand, peak loads, and associated emissions of air contaminants. Sec. 386.203. ADMINISTRATION OF GRANTS. Requires money allocated by the utility commission under the grant program developed under this subchapter to be administered by electric utilities, electric cooperatives, and municipally owned utilities. Requires a participating electric utility, electric cooperative, or municipally owned utility to be reimbursed from the fund for costs incurred by the utility in administering the energy efficiency grant program established under this subchapter. Prohibits reimbursable administrative costs of a participating entity from exceeding 10 percent of the entity's total program budget before January 1, 2003, and from exceeding five percent of the entity's total program budget on or after that date. Sec. 386.204. LIMITATION ON DUTY OF PARTICIPATING UTILITY. (a) Provides that this subchapter obligates an electric utility, electric cooperative, or municipally owned utility only to administer the funding allocated to the entity by the utility commission in accordance with this subchapter. (b) Provides that the obligation of an electric utility under this subchapter is separate and apart from, and does not affect an obligation of the electric utility under, Section 39.905, Utilities Code, or a rule adopted under that section. (c) Prohibits emissions reductions achieved by a program implemented under this subchapter from being used by an electric utility, electric cooperative, or municipally owned utility to satisfy an obligation to reduce air contaminant emissions under state or federal law or a state or federal regulatory program. Sec. 386.205. EVALUATION OF STATE ENERGY EFFICIENCY PROGRAMS. Requires the PUC, in cooperation with the laboratory, to provide an annual report to the commission that, by county, quantifies the reductions of energy demand, peak loads, and associated emissions of air contaminants achieved from the programs implemented under this subchapter and from those implemented under Section 39.905, Utilities Code. [Sections 386.206-386.250 reserved for expansion] SUBCHAPTER F. TEXAS EMISSIONS REDUCTION PLAN FUND Sec. 386.251. FUND. (a) Provides that the Texas emissions reduction plan fund is an account in the state treasury. (b) Provides that the fund is administered by the comptroller for the benefit of the plan established under this chapter. Provides that the fund is exempt from the application of Section 403.095, Government Code. Requires interest earned on the fund to be credited to the fund. (c) Provides that the fund consists of certain funds. Sec. 386.252. USE OF FUND. (a) Authorizes money in the fund to be used only to implement and administer programs established under the plan and is required to be allocated for certain purposes. (b) Authorizes up to 15 percent of the money allocated under Subsection (a) to a particular program and not expended under that program by March 1 of the second fiscal year of a fiscal biennium to be used for another program under the plan as determined by the commission in consultation with the advisory board. CHAPTER 387. NEW TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM Sec. 387.001. DEFINITION. Defines "program." Sec. 387.002. TEXAS COUNCIL ON ENVIRONMENTAL TECHNOLOGY. (a) Provides that the Texas Council on Environmental Technology (council) consists of 11 members appointed by the governor to represent the academic and nonprofit communities. Requires the governor to designate from the council members a presiding officer of the council. Provides that members of the council serve six-year staggered terms, with the terms of three or four members expiring February 1 of each odd-numbered year. (b) Requires the council to work to enhance the entrepreneurial and inventive spirit of Texans to assist in developing solutions to air, water, and waste problems by certain procedures. (c) Requires council offices and projects to be housed at the Center for Energy and Environmental Resources at The University of Texas at Austin. Sec. 387.003. NEW TECHNOLOGY RESEARCH AND DEVELOPMENT PROGRAM. (a) Requires the council establish and administer a new technology research and development program as provided by this chapter. (b) Requires the council, under the program, to provide grants to be used to support development of emissions-reducing technologies that may be used for projects eligible for awards under Chapter 386 and other new technologies that show promise for commercialization. Provides that the primary objective of this chapter is to promote the development of commercialization technologies that will support projects that may be funded under Chapter 386 and this chapter. Sec. 387.004. SOLICITATION OF NEW TECHNOLOGY PROPOSALS. Requires the council from time to time to issue specific requests for proposals (RFPs) or program opportunity notices (PONs) for technology projects to be funded under the program. Sec. 387.005. ELIGIBLE PROJECTS; PRIORITIES. (a) Requires grants awarded under this chapter to be directed toward a balanced mix of certain technologies. (b) Requires the council to identify and evaluate and may consider making grants for technology projects that would allow qualifying fuels to be produced from energy resources in this state. Requires the council, in considering projects under this subsection, to give preference to projects involving otherwise unusable energy resources in this state and producing qualifying fuels at prices lower than otherwise available and low enough to make the projects to be funded under the program economically attractive to local businesses in the area for which the project is proposed. (c) Provides that in soliciting proposals under Section 387.004 and determining how to allocate grant money available for projects under this chapter, the council is required to give special consideration to advanced technologies and retrofit or add-on projects that provide multiple benefits by reducing emissions of particulates and other air pollutants. (d) Provides that a project that involves publicly or privately owned vehicles or vessels is eligible for funding under this chapter if the project meets all applicable criteria. (e) Requires studies authorized under Subsection (a)(3) to be consistent with air quality research priorities identified by the commission and conducted in an independent and objective manner. Sec. 387.006. EVIDENCE OF COMMERCIALIZATION POTENTIAL REQUIRED. (a) Requires an application for a technology grant under this chapter to show clear and compelling evidence that certain conditions are met. (b) Requires the council to consider specifically, for each proposed technology project application certain criteria. Sec. 387.007. COST-SHARING. Authorizes the council to require cost-sharing for technology projects funded under this chapter but is prohibited from requiring repayment of grant money, except that the council will require provisions for recapturing grant money for noncompliance with grant requirements. Requires grant money recaptured under the contract provision to be deposited in the environmental research fund and reallocated for other projects under this chapter. Sec. 387.008. ENVIRONMENTAL RESEARCH FUND. (a) Provides that the environmental research fund is an account in the general revenue fund. Provides that the fund consists of money from gifts, grants, or donations to the fund for designated or general use and from any other source designated by the legislature. (b) Authorizes money in the environmental research fund to be used only for the operation and projects of the council. Sec. 387.009. ADVISORY COMMITTEES. Sets forth provisions regarding advisory committees. Sec. 387.010. REPORTS. Sets forth provisions regarding reports. CHAPTER 388. TEXAS BUILDING ENERGY PERFORMANCE STANDARDS Sec. 388.001. LEGISLATIVE FINDINGS. Sets forth legislative intent. Sec. 388.002. DEFINITIONS. Defines "affected county," "building," "code official," "codecertified inspector," "commission," "international residential code," "international energy conservation code," "laboratory," "local jurisdiction," "municipality," "nonattainment area," and "single-family residential." Sec. 388.003. ADOPTION OF BUILDING ENERGY EFFICIENCY PERFORMANCE STANDARDS. (a) Provides that to achieve energy conservation in single-family residential construction, the energy efficiency chapter of the International Residential Code, as it existed on May 1, 2001, is adopted as the energy code in this state for single-family residential construction. (b) Provides that to achieve energy conservation in all other residential, commercial, and industrial construction, the International Energy Conservation Code as it existed on May 1, 2001, is adopted as the energy code for use in this state for all other residential, commercial, and industrial construction. (c) Requires a municipality to establish certain procedures. (d) Authorizes a municipality or county to establish procedures to adopt local amendments to the International Energy Conservation Code and the energy efficiency chapter of the International Residential Code. (e) Prohibits local amendments from resulting in less stringent energy efficiency requirements in nonattainment areas and in affected counties than the energy efficiency chapter of the International Residential Code or International Energy Conservation Code. Requires local amendments to comply with the National Appliance Energy Conservation Act of 1987 (42 U.S.C. Sections 6291-6309), as amended. Requires the laboratory, at the request of a municipality or county, to determine the relative impact of proposed local amendments to an energy code, including whether proposed amendments are substantially equal to or less stringent than the unamended code. Provides that for the purpose of establishing uniform requirements throughout a region, and on request of a council of governments, a county, or a municipality, the laboratory is authorized to recommend a climatically appropriate modification or a climate zone designation for a county or group of counties that is different from the climate zone designation in the unamended code. Requires the laboratory to perform certain procedures. (f) Requires each municipality, and each county that has established procedures under Subsection (d), to periodically review and consider revisions made by the International Code Council to the International Energy Conservation Code and the energy efficiency chapter of the International Residential Code adopted after May 1, 2001. (g) Requires the laboratory to have the authority to set and collect fees to perform certain tasks in support of the requirements in Sections 388.004, 388.007, and 388.008. (h) Provides that within the boundaries of an airport operated by a joint board created under Subchapter D, Chapter 22, Transportation Code, the constituent agencies of which are populous home-rule municipalities, the powers of a municipality under this section are exclusively the powers of the joint board. Sec. 388.004. ENFORCEMENT OF ENERGY STANDARDS OUTSIDE OF MUNICIPALITY. Provides that for construction outside of the local jurisdiction of a municipality certain criteria be met. Sec. 388.005. ENERGY EFFICIENCY PROGRAMS IN CERTAIN POLITICAL SUBDIVISIONS. (a) Defines "political subdivision." (b) Requires each political subdivision to implement all energy efficiency measures that meet the standards established for a contract for energy conservation measures under Section 302.004(b), Local Government Code, in order to reduce electricity consumption by the existing facilities of the political subdivision. (c) Requires each political subdivision to establish a goal to reduce the electric consumption by the political subdivision by five percent each year for five years, beginning January 1, 2002. (d) Requires a political subdivision that does not attain the goals under Subsection (c) to include in the report required by Subsection (e) justification that the political subdivision has already implemented all available measures. (e) Requires a political subdivision annually to report to the State Energy Conservation Office, on forms provided by that office, regarding the political subdivision's efforts and progress under this section. Requires the State Energy Conservation Office to provide assistance and information to political subdivisions to help the political subdivisions meet the goals set under this section. Sec. 388.006. STATE ENERGY CONSERVATION OFFICE EVALUATION. Requires the State Energy Conservation Office annually to provide the commission with an evaluation of the effectiveness of state and political subdivision energy efficiency programs, including programs under this chapter. Sec. 388.007. DISTRIBUTION OF INFORMATION AND TECHNICAL ASSISTANCE. (a) Requires the laboratory to make available to builders, designers, engineers, and architects code implementation materials that explain the requirements of the International Energy Conservation Code and the energy efficiency chapter of the International Residential Code and that describe methods of compliance acceptable to code officials. (b) Authorizes the materials to include software tools, simplified prescriptive options, and other materials as appropriate. Authorizes the simplified materials to be designed for projects in which a design professional is not involved. (c) Authorizes the laboratory to provide local jurisdictions with technical assistance concerning implementation and enforcement of the International Energy Conservation Code and the energy efficiency chapter of the International Residential Code. Sec. 388.008. DEVELOPMENT OF HOME ENERGY RATINGS. (a) Requires the laboratory to develop a standardized report format to be used by providers of home energy ratings. Requires the form to be designed to give potential buyers information on a structure's energy performance, including certain equipment. (b) Requires the laboratory to establish a public information program to inform homeowners, sellers, buyers, and others regarding home energy ratings. (c) Requires the home energy ratings program to be implemented by September 1, 2002. CHAPTER 389. EMISSIONS REDUCTION RECOGNITION EFFORTS Sec. 389.001. DEFINITION. Defines "commission." Sec. 389.002. USE OF CERTAIN INFORMATION FOR FEDERAL RECOGNITION OF EMISSIONS REDUCTIONS. Requires the commission, using information derived from the reports to the commission under Sections 386.205, 388.003(e), and 388.006, to take all appropriate and necessary actions so that emissions reductions achieved by means of activities under Chapters 386 and 388 are credited by the EPA to the appropriate emissions reduction objectives in the state implementation plan. SECTION 2. Amends Chapter 151C, Tax Code, by adding Section 151.0515, to read as follows: Sec. 151.0515. TEXAS EMISSIONS REDUCTION PLAN SURCHARGE. Defines "equipment." (b) Provides that in each county in this state, a surcharge is imposed on the retail sale, lease, or rental of new or used equipment in an amount equal to one percent of the sale price or the lease or rental amount. (c) Requires the surcharge to be collected at the same time and in the same manner and to be administered and enforced in the same manner as the tax imposed under this subchapter. Requires the comptroller to adopt any additional procedures needed for the collection, administration, and enforcement of the surcharge authorized by this section and shall deposit all remitted surcharges to the credit of the Texas emissions reduction plan fund. (d) Provides that this section expires September 30, 2008. SECTION 3. Amends Chapter 152B, Tax Code, by adding Section 152.0215, to read as follows: Sec. 152.0215. TEXAS EMISSIONS REDUCTION PLAN SURCHARGE. (a) Provides that a surcharge is imposed on every retail sale or lease of every on-road diesel motor vehicle that is over 14,000 pounds and is of a model year 1996 or earlier and that is sold or leased in this state. Provides that the amount of the surcharge is 2.5 percent of the total consideration. (b) Requires the surcharge to be collected at the same time and in the same manner and to be administered and enforced in the same manner as the tax imposed under this chapter. Requires the comptroller by rule to adopt any additional procedures needed for the collection, administration, and enforcement of the surcharge authorized by this section and to deposit all remitted surcharges to the credit of the Texas emissions reduction plan fund. (c) Provides that this section expires September 30, 2008. SECTION 4. Amends Section 153.203, Tax Code, to read as follows: Sec. 153.203. EXCEPTIONS. (a) Provides that the tax imposed by this subchapter does not apply to certain criteria. (b) Provides that the tax imposed by this subchapter does not apply to the volume of water, fuel ethanol, biodiesel, or mixtures thereof that are blended together with taxable diesel fuel when the finished product sold or used is clearly identified on the retail pump, storage tank, and sales invoice as a combination of diesel fuel and water, fuel ethanol, biodiesel, or mixtures thereof. SECTION 5. Amends Section 224.153, Transportation Code, by adding Subsection (c), to provides that a motor vehicle displaying the "low-emissions vehicle" insignia authorized by Section 502.186 in an easily readable location on the back of the vehicle is entitled to travel in a preferential car pool or high occupancy vehicle lane designated under this section regardless of the number of occupants in the vehicle. Provides that this subsection expires August 31, 2008. SECTION 6. Amends Section 431.073, Transportation Code, by adding Subsection (d), to make a conforming change. SECTION 7. Amends Chapter 502D, Transportation Code, by adding Section 502.1675, to read as follows: Sec. 502.1675. TEXAS EMISSIONS REDUCTION PLAN SURCHARGE. (a) Provides that in addition to the registration fees charged under Section 502.167, a surcharge is imposed on the registration of a truck-tractor or commercial motor vehicle under that section in an amount equal to 10 percent of the total fees due for the registration of the truck-tractor or commercial motor vehicle under that section. (b) Requires the county tax assessor-collector to remit the surcharge collected under this section to the comptroller at the time and in the manner prescribed by the comptroller for deposit in the Texas emissions reduction plan fund. (c) Provides that this section expires August 31, 2008. SECTION 8. Amends Chapter 502D, Transportation Code, by adding Section 502.186, to read as follows: Sec. 502.186. "LOW-EMISSIONS VEHICLE" INSIGNIA FOR CERTAIN MOTOR VEHICLES. (a) Requires the department, at the time of registration or reregistration of the motor vehicle, to issue a specially designed "low-emissions vehicle" insignia for a motor vehicle that meets qualifications for the light-duty motor vehicle purchase or lease incentives under Subchapter D, Chapter 386, Health and Safety Code. (b) Requires the department to issue a "low-emissions vehicle" insignia under this section without the payment of any additional fee to a person who meets certain criteria. (c) Provides that this section expires August 31, 2008. SECTION 9. Amends Section 548.256, Transportation Code, by adding Subsections (c) and (d) to read as follows: (c) Requires the inspection station to collect a fee of $225 for each inspection performed under this section and shall remit the fee to the department. Authorizes the inspection station, of each fee collected, to retain $5 to cover administrative costs. Requires the department to remit all fees collected under this subsection to the comptroller for deposit in the Texas emissions reduction plan fund. Provides that the fee imposed by this subsection does not apply to an inspection performed on a vehicle owned by active duty military personnel and their dependents. Provides that this subsection expires August 31, 2008. (d) Provides that certain persons are exempted from the requirements of Subsection (c). SECTION 10. Amends Chapter 548H, Transportation Code, by adding Section 548.5055, to read as follows: Sec. 548.5055. TEXAS EMISSION REDUCTION PLAN FEE. (a) Requires the department, in addition to other fees required by this subchapter, to fund the Texas emissions reduction plan established under Chapter 386, Health and Safety Code, to collect for every commercial motor vehicle required to be inspected under Subchapter D, a fee of $10. (b) Requires the department to remit fees collected under this section to the comptroller at the time and in the manner prescribed by the comptroller for deposit in the Texas emission reduction plan fund. (c) Provides that this section expires August 31, 2008. SECTION 11. (a) Requires the commission, not later than the 45th day after the effective date of this Act, to adopt all necessary rules required to implement programs established under this Act. (b) Requires the comptroller, not later than the 45th day after the effective date of this Act, to adopt all rules necessary to enable the comptroller to carry out the comptroller's duties under this Act. (c) Requires the PUC, not later than the 45th day after the effective date of this Act, to adopt all rules necessary to carry out its duties under this Act. (d) Requires a municipality required to establish procedures under Subsection (c), Section 388.003, Health and Safety Code, as added by this Act, to establish the procedures not later than September 1, 2002. SECTION 12. (a) Provides that except as provided by Subsection (b) of this section, not later than August 1, 2001, if this Act takes immediate effect, or the effective date of this Act if this Act does not take immediate effect, the commission and the comptroller of public are required to adopt rules necessary to implement the diesel emissions reduction incentive program established under Subchapter C, Chapter 386, Health and Safety Code, as added by this Act. (b) Requires the commission, not later than September 1, 2001, as required by Section 386.104, Health and Safety Code, as added by this Act, to adopt criteria for setting priorities for projects eligible for grants under Subchapter C, Chapter 386, Health and Safety Code, as added by this Act. (c) Provides that not later than August 1, 2002, the commission and the comptroller to adopt rules necessary to implement the motor vehicle purchase or lease incentive program established under Subchapter D, Chapter 386, Health and Safety Code, as added by this Act. (d) Requires the commission, not later than August 1, 2002, to publish the first annual list of vehicles eligible for light-duty motor vehicle purchase or lease incentives, as required by Section 386.156, Health and Safety Code, as added by this Act. SECTION 13. Provides that the vehicle purchase or lease incentives authorized by Sections 386.113 and 386.153, Health and Safety Code, as added by this Act, apply only to the sale or lease of a vehicle that occurs on or after August 1, 2002. SECTION 14. (a) Requires the commission to develop and sponsor a contest in the state's public schools to select the best student design for the "low-emissions vehicle" insignia authorized by Section 502.186, Transportation Code, as added by this Act. Requires the commission, not later than January 1, 2002, to provide to each public school in the state a contest packet containing rules and procedures for participating in the contest, an explanation of the criteria the commission will use in selecting the best design, and a deadline for the submission of student designs. Requires the commission to select and announce the winner of the contest not later than the 30th day after the contest submission deadline. Authorizes the commission to publicize and otherwise promote the contest and the winning design. (b) Requires the commission to make the "low-emissions vehicle" insignia available to the county tax assessor-collector of each county in the state not later than the 45th day after the date on which the winning design is selected and announced. Requires the county tax assessor-collector of each county in the state to begin issuing the "low-emissions vehicle" insignia to persons who qualify for the insignia not later than the 10th working day after the date the insignia are available . SECTION 15. (a) Provides that in making the initial appointments to the Texas Emissions Reduction Plan Advisory Board as created by Section 386.058, Health and Safety Code, as added by this Act, the appointing authorities, by mutual agreement, are required to designate their appointees so that seven members' terms expire February 1, 2002, and eight members' terms expire February 1, 2003. (b) Requires appointments to the Texas Emissions Reduction Plan Advisory Board to be made not later than July 1, 2001, if this Act takes immediate effect, or not later than the effective date of this Act, if this Act does not take immediate effect. SECTION 16. Requires the governor, as soon as practicable after the effective date of this Act, to appoint members to the council, as created by Section 387.002, Health and Safety Code, as added by this Act. Requires the governor, in making the initial appointments, to designate the appointees so that three members' terms expire February 1, 2003, four members' terms expire February 1, 2005, and four members' terms expire February 1, 2007. SECTION 17. Requires the council, not later than the 30th day after the adoption of rules governing the new technology research and development program established under Chapter 387, Health and Safety Code, as added by this Act, to issue requests for proposals for projects to be funded under the new technology research and development program. SECTION 18. Requires the commission, not later than October 1, 2001, to submit to the EPA a revision to 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 the provisions of this Act. Requires the commission to include with the revision a report on the effectiveness of the Texas emissions reduction plan in delivering emissions reductions to the degree sufficient to replace the requirements of the construction shift and the early purchase of Tier 2 and Tier 3 equipment. SECTION 19. (a) Provides that notwithstanding any Act of the 77th Legislature, Regular Session, 2001, that purports to abolish all funds and accounts created or re-created in the state treasury by another Act of the 77th Legislature, Regular Session, 2001, the Texas emissions reduction plan fund created by Subchapter F, Chapter 386, Health and Safety Code, as added by this Act, and the environmental research fund created by Section 387.008, Health and Safety Code, as added by this Act, are accounts in the general revenue fund and the accounts and money deposited to the accounts are exempt from any Act of the 77th Legislature, Regular Session, 2001, that purports to abolish all funds and accounts created or re-created by another Act of the 77th Legislature, Regular Session, 2001, and to require the deposit of money that would be deposited to the credit of a special account or fund be deposited to the credit of the unobligated portion of the general revenue fund unless the fund, account, or dedication is exempted under that Act. (b) Provides that this section prevails over any other Act of the 77th Legislature, Regular Session, 2001, regardless of the relative dates of enactment, that purports to abolish all funds and accounts created or re-created in the state treasury by another Act of the 77th Legislature, Regular Session, 2001, and to require the deposit of money that would be deposited to the credit of a special account or fund be deposited to the credit of the unobligated portion of the general revenue fund unless the fund, account, or dedication is exempted under that Act. SECTION 20. Requires the commission to submit the final biennial plan report required by Section 386.057, Health and Safety Code, as added by this Act, to the legislature not later than December 1, 2008. SECTION 21. Provides that the expiration of Sections 151.0515 and 152.0215, Tax Code, as added by this Act, does not affect an obligation that was incurred, a violation that occurred, or an offense that was committed under those sections before the expiration date of those sections. Provides that an obligation incurred, a violation that occurred, or an offense committed before the expiration date of those sections is governed by the law in effect at the time the obligation was incurred, the violation occurred, or the offense was committed, and the former law is continued in effect after the expiration date for that purpose. Provides that for purposes of this section, a violation occurs or an offense is committed before the expiration date of those sections if any element of the violation or offense occurs before that date. SECTION 22. Effective date: upon passage or September 1, 2001.