HBA-LJP C.S.S.B. 5 77(R)    BILL ANALYSIS


Office of House Bill AnalysisC.S.S.B. 5
By: Brown, J. E. "Buster"
Environmental Regulation
5/17/2001
Committee Report (Substituted)




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
TNRCC cannot regulate but which may be realized through an incentive
program. C.S.S.B. 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, 386.152, and 386.157
Health and Safety Code), SECTION 12, and SECTION 13, to the Comptroller of
Public Accounts in SECTION 1 (Sections 386.053, 386.152, and 386.160,
Health and Safety Code), SECTION 3 (Section 152.0215, Tax Code), SECTION
12, and SECTION 13, and to the Public Utility Commission of Texas in
SECTION 12 of this bill. 

ANALYSIS

Texas Emissions Reduction Plan

C.S.S.B. 5 amends the Health and Safety Code to require the Public Utility
Commission of Texas (PUC), 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 new technology research
and development program, and requires PUC to provide grants or funding for
the energy efficiency grant 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 reductions in certain nonattainment
areas, and the review and reporting requirements of TNRCC (Secs.
386.052-386.057 and SECTION 21). 

The bill establishes the Texas Emissions Reduction Plan Advisory Board
(advisory board) consisting of 15 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 plan 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 16). 

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 energy
efficiency 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 for 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
requires TNRCC and the comptroller to adopt rules necessary to implement
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 13).
The bill sets forth provisions relating to TNRCC's calculations of
cost-effectiveness, the criteria of cost-effectiveness regarding the
determination of grant money, and adjustments to maximum costeffectiveness
amount and award amount (Secs. 386.105-386.107).  The bill requires TNRCC
to provide funding from the fund for infrastructure projects (Secs.
386.108-386.111). 

The bill requires TNRCC 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 an eligible person who purchases or leases a new
on-road diesel 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 new onroad diesel purchase or lease
incentive schedule (Secs. 386.112-386.114, and SECTION 14). 

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 new
light-duty motor vehicles and to adopt rules necessary to implement the
program not later than August 1, 2002.  The bill sets forth provisions
relating to the lightduty motor vehicle purchase or lease incentive
schedule program and the authorization of TNRCC to modify the incentive
emissions standards of a new light-duty motor vehicle to improve the
ability of the program to achieve its goals (Secs. 386.151-386.154 and
SECTION 13). 

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.  The bill also sets forth provisions regarding the publication
and the distribution of these lists by the comptroller (Secs. 386.155 and
386.156). 

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) vehicle class rating system.  If
EPA develops another vehicle emissions rating system that gives consumers
similar information by vehicle class, then TNRCC is  authorized by rule to
designate that vehicle rating system.  The bill provides that a person who
purchases or leases a new light-duty motor vehicle which meets incentive
emissions standards is eligible for lowemissions 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 new light-duty 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 August 1, 2002 to publish the first
annual list of vehicles eligible for light-duty motor vehicle purchase or
lease incentives (SECTION 13). 

Energy Efficiency Grant Program

The bill requires the PUC to develop an energy efficiency grant program to
increase the retirement, replacement, and recycling 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.
The bill sets forth provisions regarding the administration of grants, the
limitation on the duty of  participating utilities, and a required annual
report by PUC to TNRCC (Secs. 386.202-386.205). 

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 requirement  of a
municipality or county to adopt certain procedures no later than September
1, 2002 and the authorization of a municipality or county to establish
procedures to adopt local amendments to the International Residential Code
and the International Energy Conservation Code (Secs. 388.003 and SECTION
12).  The bill also provides for the enforcement of energy standards for
construction outside of a municipality (Sec. 388.004). 

The bill requires affected counties or political subdivisions, other than
school districts, in a nonattainment area or in an affected county to
implement all energy efficiency measures under established standards
regarding the financing of existing buildings or facilities to reduce
electricity consumption by the existing facilities of the political
subdivision.  The bill sets forth provisions regarding the goals and
reporting and evaluation requirements relating to energy conservation
measures of political subdivisions (Secs. 388.005388.006).  The bill sets
forth the information and technical assistance that the Energy Systems
Laboratory at the Texas Engineering Experiment Station of The Texas A&M
University (laboratory) is required to make available or to provide to
specified entities and persons.  The bill requires the laboratory to
develop a standardized report format relating to specified structures'
energy performance to be used by providers of home energy ratings (Secs.
388.007-388.008). 

Federal Recognition of Emissions Reduction

The bill requires TNRCC, using information derived from the required
reports by PUC, the laboratory, and the State Energy Conservation Office,
to take all appropriate and necessary actions for EPA to credit the
emissions reductions achieved under the Texas emissions reduction plan and
Texas building energy performance standards to appropriate emissions
reduction objectives in the state implementation plan (Sec. 389.002). 

 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 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 17).  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 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 second 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 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 18).
The bill also sets forth provisions regarding the priorities and
considerations of eligibility, the application process, and cost-sharing of
projects for a grant under the new technology research and development
program (Secs. 387.005-387.007). 

Low-Emissions 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 "low-emissions vehicle" insignia for a
motor vehicle that is eligible for a motor vehicle purchase or lease
incentive.  The bill also sets forth provisions relating to 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 requires TNRCC to develop and sponsor a contest
in the state's public schools to select the best student design for the
"low-emissions vehicle" insignia. The bill requires TNRCC no later than the
45th day after the date on which the winning design is selected 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 15).  Until August 31, 2008, the bill entitles motor
vehicles with a "low-emissions vehicle" insignia in an easily readable
location on the back of the vehicle to travel in a preferential car pool or
high occupancy vehicle lane, regardless of the number of occupants in the
motor vehicle (Secs. 224.153 and 431.073). 

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.  The bill also requires DPS to collect a $1 fee
for the inspection of a motor vehicle registered in an area of the state
that is not a nonattainment or affected county and a $5 fee if the vehicle
is registered in a nonattainment or affected county.  The bill also sets
forth provisions relating to the remittance and deposit of the above fees
and surcharge 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 Transportation Code to require a motor vehicle
inspection station to collect a $60 fee for a motor vehicle inspection for
a vehicle that is brought into Texas and sets forth provisions regarding
the remittance of the fee and deposit of the fee in the Texas emissions
reduction plan fund (Sec. 548.256). 

The bill amends the Tax Code to provide for a surcharge equal to 0.5
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 five percent of the total consideration
on every retail sale or lease of every on-road diesel motor vehicle over
14, 000 pounds and is of a model year 1996 or earlier that is 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.   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
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 above surcharges on September
30, 2008 (Secs. 151.0515, 152.0215, and 156.054). 

The bill requires TNRCC to adopt all necessary rules 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.  The bill requires PUC to adopt all necessary rules to
carry out its duties delegated under this Act no later than the 45th day
after the effective date of this Act (SECTION 12). 

The bill requires TNRCC to submit to EPA 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 19).  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 20). 

EFFECTIVE DATE

On passage, or if the Act does not receive the necessary vote, the Act
takes effect September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.S.B. 5 amends the original to remove the requirement of the Texas
Natural Resource Conservation Commission (TNRCC) to develop the local
government 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 substitute requires the Public Utility
Commission of Texas (PUC) to develop an energy efficiency grant program to
increase the retirement, replacement, and recycling 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. 386.202, Health and Safety Code). 

C.S.S.B. 5 adds the PUC to the entities that are required to establish and
administer the Texas emissions reduction plan (plan) and requires PUC to
adopt all rules necessary to carry out the duties delegated under this Act
no later than the 45th day after effective date of this Act.  The
substitute removes the requirement of TNRCC to consider examples of
programs in other states that are similar to the Texas emissions reduction
plan (plan) during the development of the guidelines and criteria.  The
substitute modifies the use of emissions reduction credits that are
generated under a project under the plan and the reviews and reports
related to projects under the plan required to be submitted by TNRCC to the
legislature (Secs. 386.051, 386.053, 386.055, and 386.057, Health and
Safety Code and SECTION 12). 

The substitute increases, from 13 to 15, the number of members of the Texas
Emissions Reduction Plan Advisory Board and modifies the composition and
terms of the members of the advisory board (Sec. 386.058, Health and Safety
Code and SECTION 16).  The substitute modifies the applicability of the
diesel emissions reduction incentive program (program) with regard to
vehicles.  The substitute removes the requirement that the owner or
operator of a facility that constitutes or contains a stationary source
hold a permit for the facility to receive a grant under the program.  The
substitute removes the authorization of  TNRCC to establish maximum grant
awards per vehicle or engine replaced for projects that propose to repower
off-road equipment (Secs. 386.102, 386.104, 386.106, and 386.108, Health
and Safety Code). 

The substitute authorizes TNRCC to modify the incentive emissions standards
of the on-road diesel purchase or lease incentive program to improve the
ability of the program to achieve its goals and modifies the incentive
emissions standards of the light-duty motor vehicle purchase or lease
program (Secs. 386.114 and 386.153, Health and Safety Code).  If the United
States Environmental Protection Agency (EPA) develops another vehicle
emissions rating system, besides the current rating system, that gives
consumers similar information by vehicle class, then TNRCC is authorized by
rule to designate that vehicle rating system for purposes of the
"low-emissions vehicle" insignia program (Sec. 386.157, Health and Safety
Code).  The substitute also modifies the allocation of the Texas emissions
reduction plan fund (Sec. 386.252, Health and Safety Code). 

C.S.S.B. 5 modifies the projects that are eligible for funding under the
new technology research and development program and provides that members
of an advisory committee to the Texas Council on Environmental Technology
are not entitled to compensation (Secs. 387.005 and 387.009, Health and
Safety Code). 

C.S.S.B. 5 requires, rather than authorizes, a municipality or a county to
establish certain procedures relating to the enforcement and administration
of the adopted International Residential Code and the International Energy
Conservation Code.  The substitute modifies procedures related to local
amendments to these codes and the report that the Energy Systems Laboratory
at the Texas Engineering Experiment Station of The Texas A&M University
(laboratory) is required to annually submit to TNRCC regarding the local
amendments.  The substitute sets forth provisions regarding the powers of a
municipality within the boundaries of an airport operated by a joint board
and modifies the enforcement of energy standards outside the local
jurisdiction of a municipality (Secs. 388.003 and 388.004, Health and
Safety Code). 

The substitute removes provisions relating to the requirement of 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.  The substitute removes the Texas building energy
performance standards advisory committee and removes the authorization of
the laboratory to develop certain guidelines and programs, and set and
collect fees to perform certain tasks in support of the additional energy
conservation programs.  The substitute sets forth provisions relating to
the requirement of affected counties or political subdivisions in a
nonattainment area or in an affected county to implement all energy
efficiency measures under the standards established regarding the financing
of existing buildings or facilities to reduce electricity consumption by
the existing facilities of the political subdivision.  The substitute sets
forth provisions regarding the required information, technical assistance,
and the standardized report format relating to specified structures' energy
performance made available, provided, or developed by the laboratory (Secs.
388.005-388.008, Health and Safety Code). 

The substitute requires TNRCC to take all appropriate and necessary actions
for EPA to credit the emissions reductions achieved under Texas emissions
reduction plan and Texas building energy performance standards to
appropriate emissions reduction objectives in the state implementation plan
(Sec. 389.002, Health and Safety Code). 

C.S.S.B. 5 increases, from 0.25 percent to 0.5 percent of the price on
lease or rental amount, the surcharge imposed on the retail sale, lease, or
rental, of new or used equipment.  The substitute also increases, from one
percent to five percent of the total consideration, the surcharge imposed
on every retail sale or lease of every on-road diesel motor vehicle over
14, 000 pounds and is of a model year 1996 or earlier that is sold or
leased in this state (Secs. 151.0515 and 152.0215, Tax Code).  The
substitute removes the expiration date on provisions relating to the
exemption of diesel fuel tax on diesel fuel blended with water which is
clearly identified.  The substitute requires an inspection station to
collect a $60 fee for motor vehicle inspection for a vehicle that is
brought into Texas and sets forth provisions regarding the remittance of
the fee and deposit of the fee in the plan's fund (Sec. 548.256,
Transportation Code). 
 
C.S.S.B. 5 renames the "clean vehicle" insignia the "low-emissions vehicle"
insignia and removes the entitlement of motor vehicles with a
"low-emissions vehicle" insignia to privileged parking spaces of a
political subdivision or private property owner (Sec. 502.186,
Transportation Code).  The substitute sets forth provisions regarding the
development and sponsoring by TNRCC of a contest in the state's public
schools to select the best student design for the "low-emissions vehicle"
insignia.  The substitute requires TNRCC, rather than the Texas Department
of Transportation, no later than the 45th day after the date on which the
winning design is selected, rather than the 45th day after the effective
date of the Act, to make available to the county tax assessor-collector of
each county in the state the insignia (SECTION 15). 

The substitute removes provisions imposing 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.
The substitute removes provisions imposing a surcharge of $1 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 and
provisions imposing a surcharge of 25 cents per gallon on the sale of
bunker fuel by a petroleum refining facility in this state. 

C.S.S.B. 5 requires the comptroller and TNRCC to adopt rules necessary to
implement the motor vehicle purchase or lease incentive program no later
than August 1, 2002.  The substitute also modifies the date by which TNRCC
is required to publish the first annual list of vehicles eligible for
light-duty motor vehicle purchase or lease incentives (SECTION 13).