77R16337 JJT-D                          
         By Brown, et al.                                         S.B. No. 5
         Substitute the following for S.B. No. 5:
         By Geren                                             C.S.S.B. No. 5
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the Texas emissions reduction plan; providing a
 1-3     penalty.
 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-5           SECTION 1.  (a)  It is the intent of the legislature to give
 1-6     the Texas Natural Resource Conservation Commission additional tools
 1-7     to:
 1-8                 (1)  assure that the air in this state is safe to
 1-9     breathe and meets minimum federal standards established under the
1-10     federal Clean Air Act (42 U.S.C. Section 7407);
1-11                 (2)  develop multipollutant approaches to solving the
1-12     state's environmental problems; and
1-13                 (3)  adequately fund research and development that will
1-14     make the state a leader in new technologies that can solve the
1-15     state's environmental problems while creating new business and
1-16     industry in the state.
1-17           (b)  Subtitle C, Title 5, Health and Safety Code, is amended
1-18     by adding Chapters 386, 387, 388, and 389 to read as follows:
1-19                CHAPTER 386.  TEXAS EMISSIONS REDUCTION PLAN
1-20                      SUBCHAPTER A.  GENERAL PROVISIONS
1-21           Sec. 386.001.  DEFINITIONS.  In this chapter:
1-22                 (1)  "Advisory board" means the Texas Emissions
1-23     Reduction Plan Advisory Board.
1-24                 (2)  "Affected county" includes:
 2-1                       (A)  Bastrop County;
 2-2                       (B)  Bexar County;
 2-3                       (C)  Caldwell County;
 2-4                       (D)  Comal County;
 2-5                       (E)  Ellis County;
 2-6                       (F)  Gregg County;
 2-7                       (G)  Guadalupe County;
 2-8                       (H)  Harrison County;
 2-9                       (I)  Hays County;
2-10                       (J)  Johnson County;
2-11                       (K)  Kaufman County;
2-12                       (L)  Nueces County;
2-13                       (M)  Parker County;
2-14                       (N)  Rockwall County;
2-15                       (O)  Rusk County;
2-16                       (P)  San Patricio County;
2-17                       (Q)  Smith County;
2-18                       (R)  Travis County;
2-19                       (S)  Upshur County;
2-20                       (T)  Victoria County;
2-21                       (U)  Williamson County; and
2-22                       (V)  Wilson County.
2-23                 (3)  "Commission" means the Texas Natural Resource
2-24     Conservation Commission.
2-25                 (4)  "Council" means the Texas Council on Environmental
2-26     Technology.
2-27                 (5)  "Fund" means the Texas emissions reduction plan
 3-1     fund.
 3-2                 (6)  "Incremental cost" means the cost of an
 3-3     applicant's project less a baseline cost that would otherwise be
 3-4     incurred by an applicant in the normal course of business.
 3-5     Incremental costs may include added lease or fuel costs as well as
 3-6     additional capital costs.
 3-7                 (7)  "Laboratory" means the Energy Systems Laboratory
 3-8     at the Texas Engineering Experiment Station of The Texas A&M
 3-9     University System.
3-10                 (8)  "Nonattainment area" means an area so designated
3-11     under Section 107(d) of the federal Clean Air Act (42 U.S.C.
3-12     Section 7407), as amended.
3-13                 (9)  "Plan" means the Texas emissions reduction plan.
3-14                 (10)  "Site" means the total of all stationary sources
3-15     located on one or more contiguous or adjacent properties, which are
3-16     under common control of the same person or persons under common
3-17     control.
3-18                 (11)  "Utility commission" means the Public Utility
3-19     Commission of Texas.
3-20           Sec. 386.002.  EXPIRATION. This chapter expires August 31,
3-21     2008.
3-22              (Sections 386.003-386.050 reserved for expansion
3-23                SUBCHAPTER B.  TEXAS EMISSIONS REDUCTION PLAN
3-24           Sec. 386.051.  TEXAS EMISSIONS REDUCTION PLAN. (a)  The
3-25     utility commission, the commission, the comptroller, and the
3-26     council shall establish and administer the Texas emissions
3-27     reduction plan in accordance with this chapter.
 4-1           (b)  Under the plan, the commission, the comptroller, and the
 4-2     council shall provide grants or other funding for:
 4-3                 (1)  the diesel emissions reduction incentive program
 4-4     established under Subchapter C, including for infrastructure
 4-5     projects established under that subchapter;
 4-6                 (2)  the motor vehicle purchase or lease incentive
 4-7     program established under Subchapter D; and
 4-8                 (3)  the new technology research and development
 4-9     program established under Chapter 387.
4-10           (c)  Under the plan, the utility commission shall provide
4-11     grants or other funding for the energy efficiency grant program
4-12     established under Subchapter E.
4-13           (d)  Equipment purchased before September 1, 2001, is not
4-14     eligible for a grant or other funding under the plan.
4-15           Sec. 386.052.  COMMISSION DUTIES.  (a)  In administering the
4-16     plan established under this chapter and in accordance with the
4-17     requirements of this chapter, the commission shall:
4-18                 (1)  manage plan funds and oversee the plan;
4-19                 (2)  produce guidelines, protocols, and criteria for
4-20     eligible projects;
4-21                 (3)  develop methodologies for evaluating project
4-22     cost-effectiveness;
4-23                 (4)  prepare reports regarding the progress and
4-24     effectiveness of the plan; and
4-25                 (5)  take all appropriate and necessary actions so that
4-26     emissions reductions achieved through the plan are credited by the
4-27     United States Environmental Protection Agency to the appropriate
 5-1     emissions reduction objectives in the state implementation plan.
 5-2           (b)  Appropriate commission objectives include:
 5-3                 (1)  achieving maximum reductions in oxides of nitrogen
 5-4     to demonstrate compliance with the state implementation plan;
 5-5                 (2)  preventing areas of the state from being in
 5-6     violation of national ambient air quality standards; and
 5-7                 (3)  achieving cost-saving and multiple benefits by
 5-8     reducing emissions of other pollutants.
 5-9           Sec. 386.053.  GUIDELINES AND CRITERIA. (a)  The commission
5-10     shall adopt grant guidelines and criteria consistent with the
5-11     requirements of this chapter.
5-12           (b)  Guidelines must include protocols to calculate projected
5-13     emissions reductions, project cost-effectiveness, and safeguards to
5-14     ensure that funded projects generate emissions reductions not
5-15     otherwise required by state or federal law.
5-16           (c)  The commission shall make draft guidelines and criteria
5-17     available to the public and the United States Environmental
5-18     Protection Agency before the 45th day preceding the date of final
5-19     adoption and shall hold at least one public meeting to consider
5-20     public comments on the draft guidelines and criteria before final
5-21     adoption.
5-22           (d)  The commission may propose revisions to the guidelines
5-23     and criteria adopted under this section as necessary to improve the
5-24     ability of the plan to achieve its goals.  Revisions may include,
5-25     among other changes, adding additional pollutants or adjusting
5-26     eligible program categories, as appropriate, to ensure that
5-27     incentives established under this chapter achieve the maximum
 6-1     possible emissions reductions.  The commission shall make a
 6-2     proposed revision available to the public before the 45th day
 6-3     preceding the date of final adoption of the revision and shall hold
 6-4     at least one public meeting to consider public comments on the
 6-5     proposed revision before final adoption.
 6-6           (e)  Because the legislature finds that the current state of
 6-7     air quality in the state jeopardizes the state's ability to meet
 6-8     federal air quality requirements, the commission and the
 6-9     comptroller may adopt emergency rules under Section 2001.034,
6-10     Government Code, with abbreviated notice, to carry out any
6-11     rulemaking necessary to implement this chapter.
6-12           (f)  Except as provided by Subsection (e), the rulemaking
6-13     requirements of Chapter 2001, Government Code, do not apply to the
6-14     adoption or revision of guidelines and criteria under this section.
6-15           Sec. 386.054.  MONITORING PROCEDURES.  (a)  The commission
6-16     shall develop procedures for monitoring whether the emissions
6-17     reductions projected for projects awarded grants under this chapter
6-18     are actually achieved.  Monitoring procedures may include project
6-19     reviews and contract requirements that the grant recipient provide
6-20     information annually about the project.  If the commission requires
6-21     an annual report, the report shall contain a minimum amount of
6-22     information required from a recipient and the report format shall
6-23     be simple and convenient.
6-24           (b)  Monitoring and reviewing procedures must be sufficient
6-25     to enable emissions reductions generated by funded projects to be
6-26     fully credited to air quality plans.
6-27           (c)  The commission may revise monitoring and review
 7-1     procedures from time to time as necessary or appropriate to enhance
 7-2     the effectiveness of the plan.
 7-3           Sec. 386.055.  AVAILABILITY OF EMISSIONS REDUCTION CREDITS
 7-4     GENERALLY. (a)  A project funded under a program established under
 7-5     this chapter may not be used for credit under any state or federal
 7-6     emissions reduction credit averaging, banking, or trading program.
 7-7           (b)  An emissions reduction generated by a program
 7-8     established under this chapter:
 7-9                 (1)  may not be used as a marketable emissions
7-10     reduction credit or, except as provided by Section 386.056, to
7-11     offset any emissions reduction obligation; and
7-12                 (2)  may be used to demonstrate conformity with the
7-13     state implementation plan.
7-14           (c)  A project involving a new emissions reduction measure
7-15     that would otherwise generate marketable credits under state or
7-16     federal emissions reduction credit averaging, banking, or trading
7-17     programs is not eligible for funding under a program established
7-18     under this chapter unless:
7-19                 (1)  the project includes the transfer of the
7-20     reductions that would otherwise be marketable credits to the state
7-21     implementation plan or the owner or operator as provided by Section
7-22     386.056; and
7-23                 (2)  the reductions are permanently retired.
7-24           Sec. 386.056.  AVAILABILITY OF EMISSIONS REDUCTIONS IN
7-25     CERTAIN NONATTAINMENT AREAS.  (a)  An owner or operator of a site
7-26     located in the Houston-Galveston or Dallas-Fort Worth nonattainment
7-27     area may use emissions reductions generated by a program
 8-1     established under this chapter to offset the requirements of
 8-2     commission rules relating to control of air pollution from oxides
 8-3     of nitrogen if:
 8-4                 (1)  the owner or operator of the site contributes to
 8-5     the fund $75,000 for each ton of emissions that is used, not to
 8-6     exceed 25 tons annually and not to exceed one-half ton per day;
 8-7                 (2)  the owner or operator of the site demonstrates to
 8-8     the commission's satisfaction that the site will be in full
 8-9     compliance with the commission's emissions reduction rules not
8-10     later than the fifth anniversary of the date on which the emissions
8-11     reductions would otherwise be required;
8-12                 (3)  emissions from the site are reduced by at least 80
8-13     percent from the established baseline; and
8-14                 (4)  the commission approves a petition by the owner or
8-15     operator that demonstrates that it is technically infeasible to
8-16     comply with the commission's emissions reduction requirements above
8-17     80 percent.
8-18           (b)  Funds collected under this section shall be used to
8-19     generate emissions reductions needed to meet the commission's
8-20     attainment demonstration.
8-21           (c)  The commission shall verify that emissions reductions
8-22     generated from funds collected under this section occur in the same
8-23     nonattainment area in which the site that purchased the emissions
8-24     reductions is located.
8-25           (d)  The commission shall assure that the emissions
8-26     reductions funded under the programs authorized by this subchapter
8-27     used to offset commission requirements under this section benefit
 9-1     the community in which the site using the emissions reductions is
 9-2     located.  If there are no eligible emissions reduction projects
 9-3     within the community, the commission may authorize projects in an
 9-4     adjacent community.  In this subsection, "community" means a
 9-5     justice of the peace precinct.
 9-6           Sec. 386.057.  REVIEW AND REPORTING REQUIREMENTS. (a)  The
 9-7     commission, in consultation with the advisory board, annually shall
 9-8     review programs established under the plan, including each project
 9-9     funded under the plan, the amount granted for the project, the
9-10     emissions reductions attributable to the project, and the
9-11     cost-effectiveness of the project.
9-12           (b)  Not later than December 1, 2002, and not later than
9-13     December 1 of each subsequent second year, the commission, in
9-14     consultation with the advisory board, shall publish and submit to
9-15     the legislature a biennial plan report.  The report must include:
9-16                 (1)  the information included in the annual reviews
9-17     conducted under Subsection (a);
9-18                 (2)  specific information for individual projects as
9-19     required by Subsection (c);
9-20                 (3)  information contained in reports received under
9-21     Sections 386.205, 388.003(e), and 388.006; and
9-22                 (4)  a summary of the commission's activities under
9-23     Section 386.052.
9-24           (c)  For projects funded as part of the infrastructure
9-25     program under Subchapter C, the report must:
9-26                 (1)  describe and evaluate:
9-27                       (A)  the infrastructure facilities funded under
 10-1    that subchapter;
 10-2                      (B)  the degree to which the funded facilities
 10-3    are supporting on-road or non-road diesel projects;
 10-4                      (C)  the amount of fuel or electricity dispensed
 10-5    for each facility; and
 10-6                      (D)  associated emissions reductions and
 10-7    cost-effectiveness; and
 10-8                (2)  make a finding regarding the need for additional
 10-9    appropriations from the fund to improve the ability of the program
10-10    to achieve its goals.
10-11          (d)  The report must:
10-12                (1)  account for money received, money disbursed as
10-13    grants, money reserved for grants based on project approvals, and
10-14    any recommended transfer of money between allocations and must
10-15    estimate future demand for grant funds under the plan;
10-16                (2)  describe the overall effectiveness of the plan in
10-17    delivering the emissions reductions that may be credited to air
10-18    quality plans;
10-19                (3)  evaluate the effectiveness of the plan in
10-20    soliciting and evaluating project applications, providing awards in
10-21    a timely manner, and monitoring project implementation;
10-22                (4)  describe adjustments made to project selection
10-23    criteria and recommend any further needed changes or adjustments to
10-24    the grant programs, including changes in grant award criteria,
10-25    administrative procedures, or statutory provisions that would
10-26    enhance the plan's effectiveness and efficiency;
10-27                (5)  describe adjustments made to the maximum
 11-1    cost-effectiveness amount and award amount;
 11-2                (6)  evaluate the benefits of addressing additional
 11-3    pollutants as part of the plan; and
 11-4                (7)  include legislative recommendations necessary to
 11-5    improve the effectiveness of the plan.
 11-6          (e)  The commission shall request public comment and hold a
 11-7    public meeting on each draft biennial report and, in producing a
 11-8    final biennial report, shall consider and respond to all
 11-9    significant comments received.
11-10          Sec. 386.058.  TEXAS EMISSIONS REDUCTION PLAN ADVISORY BOARD.
11-11    (a)  The Texas Emissions Reduction Plan Advisory Board consists of
11-12    15 members appointed as provided by this section and seven ex
11-13    officio members as provided by this section.
11-14          (b)  The governor shall appoint to the advisory board:
11-15                (1)  a representative of the trucking industry;
11-16                (2)  a representative of the air conditioning
11-17    manufacturing industry;
11-18                (3)  a representative of the electric utility industry;
11-19                (4)  a representative of regional transportation; and
11-20                (5)  a representative of the Texas Council on
11-21    Environmental Technology.
11-22          (c)  The lieutenant governor shall appoint to the advisory
11-23    board:
11-24                (1)  a representative of the engine manufacturing
11-25    industry;
11-26                (2)  a representative of the air transportation
11-27    industry;
 12-1                (3)  a representative of the environmental community;
 12-2                (4)  a representative of the fuel cell industry; and
 12-3                (5)  a representative of the energy-efficient
 12-4    construction industry.
 12-5          (d)  The speaker of the house of representatives shall
 12-6    appoint to the advisory board:
 12-7                (1)  a representative of consumer groups;
 12-8                (2)  a representative of the construction industry;
 12-9                (3)  a representative of the automobile industry;
12-10                (4)  a representative of the agriculture industry; and
12-11                (5)  a representative of the fuel industry.
12-12          (e)  Appointed members of the advisory board serve staggered
12-13    two-year terms.  The terms of seven appointed members expire
12-14    February 1 of each even-numbered year.  The terms of eight
12-15    appointed members expire February 1 of each odd-numbered year.  An
12-16    appointed member may be reappointed to a subsequent term.
12-17          (f)  Ex officio members of the advisory board are:
12-18                (1)  the presiding officer of the senate standing
12-19    committee having primary jurisdiction over matters related to
12-20    natural resources;
12-21                (2)  the presiding officer of the house standing
12-22    committee having primary jurisdiction over matters related to
12-23    environmental regulation;
12-24                (3)  a representative of the commission, designated by
12-25    the executive director;
12-26                (4)  a representative of the General Land Office,
12-27    designated by the Commissioner of the General Land Office;
 13-1                (5)  a representative of the comptroller's office,
 13-2    designated by the comptroller;
 13-3                (6)  a representative of the Railroad Commission of
 13-4    Texas, designated by the presiding officer of the agency; and
 13-5                (7)  a representative of the United States
 13-6    Environmental Protection Agency's Region 6 office, designated by
 13-7    the United States Environmental Protection Agency Region 6
 13-8    administrator.
 13-9          (g)  The advisory board annually shall elect a presiding
13-10    officer.
13-11          (h)  The advisory board shall review the plan and shall
13-12    recommend to the commission changes to revenue sources or financial
13-13    incentives or any legislative, regulatory, or budgetary changes
13-14    needed.
13-15          (i)  The commission shall provide necessary staff support to
13-16    the advisory board.
13-17             (Sections 386.059-386.100 reserved for expansion
13-18        SUBCHAPTER C.  DIESEL EMISSIONS REDUCTION INCENTIVE PROGRAM
13-19          Sec. 386.101.  DEFINITIONS. In this subchapter:
13-20                (1)  "Cost-effectiveness" means the total dollar amount
13-21    expended divided by the total number of tons of oxides of nitrogen
13-22    emissions reduction attributable to that expenditure.
13-23    Cost-effectiveness for the program as a whole and for particular
13-24    projects under the program is calculated as provided by Sections
13-25    386.105 and 386.106.
13-26                (2)  "Fuel cell" means an electrochemical device that
13-27    uses fuel and oxidant to continuously generate electricity.
 14-1                (3)  "Motor vehicle" means a self-propelled device
 14-2    designed for transporting persons or property on a public highway
 14-3    that is required to be registered under Chapter 502, Transportation
 14-4    Code.
 14-5                (4)  "Non-road diesel" means a vehicle or piece of
 14-6    equipment, excluding a motor vehicle or on-road diesel or an
 14-7    implement of husbandry that is used exclusively for agricultural
 14-8    purposes, that is powered by a non-road engine, including:
 14-9                      (A)  non-road nonrecreational equipment and
14-10    vehicles;
14-11                      (B)  construction equipment;
14-12                      (C)  locomotives;
14-13                      (D)  marine vessels; and
14-14                      (E)  other high-emitting diesel engine categories
14-15    established by the commission.
14-16                (5)  "Non-road engine" means an internal combustion
14-17    engine that is:
14-18                      (A)  in or on a piece of equipment that is
14-19    self-propelled or that propels itself and performs another
14-20    function, excluding a vehicle that is used solely for competition;
14-21                      (B)  in or on a piece of equipment that is
14-22    intended to be propelled while performing its function; or
14-23                      (C)  designed to be and capable of being carried
14-24    or moved from one location to another.
14-25                (6)  "On-road diesel" means an on-road diesel-powered
14-26    motor vehicle that has a gross vehicle weight rating of 10,000
14-27    pounds or more.
 15-1                (7)  "Program" means the diesel emissions reduction
 15-2    incentive program established under this subchapter.
 15-3                (8)  "Qualifying fuel" includes any liquid or gaseous
 15-4    fuel or additives registered or verified by the United States
 15-5    Environmental Protection Agency that is ultimately dispensed into a
 15-6    motor vehicle or on-road or non-road diesel that provides
 15-7    reductions of emissions of oxides of nitrogen beyond reductions
 15-8    required by state or federal law.
 15-9                (9)  "Repower" means to replace an old engine powering
15-10    an on-road or non-road diesel with:
15-11                      (A)  a new engine that emits at least 30 percent
15-12    less than the oxides of nitrogen emissions standard required by
15-13    federal regulation for the current model year for that engine;
15-14                      (B)  an engine manufactured later than 1987 that
15-15    emits at least 30 percent less than the oxides of nitrogen
15-16    emissions standard emitted by a new engine certified to the
15-17    baseline oxides of nitrogen emissions standard for that engine;
15-18                      (C)  an engine manufactured before 1988 that
15-19    emits not more than 50 percent of the oxides of nitrogen emissions
15-20    standard emitted by a new engine certified to the baseline oxides
15-21    of nitrogen emissions standard for that engine; or
15-22                      (D)  electric motors, drives, or fuel cells.
15-23                (10)  "Retrofit" means to equip an engine and fuel
15-24    system with new emissions-reducing parts or technology verified by
15-25    the United States Environmental Protection Agency after manufacture
15-26    of the original engine and fuel system.
15-27          Sec. 386.102.  PROGRAM.  (a)  The commission shall establish
 16-1    and administer a diesel emissions reduction incentive program.
 16-2    Under the program, the commission shall provide grants for eligible
 16-3    projects to offset the incremental cost of projects that reduce
 16-4    emissions of oxides of nitrogen from high-emitting diesel sources
 16-5    in nonattainment areas and affected counties of the state.  The
 16-6    commission shall determine the eligibility of projects.
 16-7          (b)  Projects that may be considered for a grant under the
 16-8    program include:
 16-9                (1)  purchase or lease of non-road diesels;
16-10                (2)  emissions-reducing retrofit projects for on-road
16-11    or non-road diesels;
16-12                (3)  emissions-reducing repower projects for on-road or
16-13    non-road diesels;
16-14                (4)  purchase and use of emissions-reducing add-on
16-15    equipment for on-road or non-road diesels;
16-16                (5)  development and demonstration of practical,
16-17    low-emissions retrofit technologies, repower options, and advanced
16-18    technologies for on-road or non-road diesels with lower emissions
16-19    of oxides of nitrogen;
16-20                (6)  use of qualifying fuel; and
16-21                (7)  implementation of infrastructure projects.
16-22          (c)  A project listed in Subsection (b) is not eligible if it
16-23    is required by any state or federal law, rule or regulation,
16-24    memorandum of agreement, or other legally binding document.  This
16-25    subsection does not apply to:
16-26                (1)  an otherwise qualified project, regardless of the
16-27    fact that the state implementation plan assumes that the change in
 17-1    equipment, vehicles, or operations will occur, if on the date the
 17-2    grant is awarded the change is not required by any state or federal
 17-3    law, rule or regulation, memorandum of agreement, or other legally
 17-4    binding document; or
 17-5                (2)  the purchase of an on-road diesel or equipment
 17-6    required only by local law or regulation or by corporate or
 17-7    controlling board policy of a public or private entity.
 17-8          Sec. 386.103.  APPLICATION FOR GRANT. (a)  Any person as
 17-9    defined by Section 382.003 that owns one or more on-road or
17-10    non-road diesels that operate primarily within a nonattainment area
17-11    or affected county of this state or that otherwise contributes to
17-12    the state inventory of emissions of oxides of nitrogen may apply
17-13    for a grant under the program.
17-14          (b)  An application for a grant under this subchapter must be
17-15    made on an application provided by the commission and must contain
17-16    information required by the commission, including:
17-17                (1)  a detailed description of the proposed project;
17-18                (2)  information necessary for the commission to
17-19    determine whether the project meets eligibility requirements for
17-20    the type of project proposed, including a statement of the amounts
17-21    of any other public financial assistance the project will receive;
17-22    and
17-23                (3)  other information the commission may require.
17-24          Sec. 386.104.  ELIGIBILITY REQUIREMENTS. (a)  The commission
17-25    shall establish criteria for setting priorities for projects
17-26    eligible to receive grants under this subchapter.  The commission
17-27    shall review and may modify the criteria and priorities as
 18-1    appropriate.
 18-2          (b)  A proposed project as described in Section 386.102 must
 18-3    meet the requirements of this section to be eligible for a grant
 18-4    under the program.
 18-5          (c)  For a proposed project as described by Section
 18-6    386.102(b), other than a project involving a marine vessel or
 18-7    engine, not less than 75 percent of vehicle miles traveled or hours
 18-8    of operation projected for the five years immediately following the
 18-9    award of a grant must be projected to take place in a nonattainment
18-10    area or affected county of this state.  For a proposed project
18-11    involving a marine vessel or engine, the vessel or engine must be
18-12    operated in the intercoastal waterways or bays adjacent to a
18-13    nonattainment area or affected county of this state for a
18-14    sufficient amount of time over the lifetime of the project, as
18-15    determined by the commission, to meet the cost-effectiveness
18-16    requirements of Section 386.105.
18-17          (d)  Each proposed project must meet the cost-effectiveness
18-18    requirements of Sections 386.105 and 386.106.
18-19          (e)  A proposed repower project must exceed commission
18-20    requirements relating to baseline emissions levels of the engines
18-21    being replaced under the project.
18-22          (f)  A proposed retrofit, repower, or add-on equipment
18-23    project must document, in a manner acceptable to the commission, a
18-24    reduction in emissions of oxides of nitrogen of at least 30 percent
18-25    compared with the baseline emissions adopted by the commission for
18-26    the relevant engine year and application.  After study of available
18-27    emissions reduction technologies, after public notice and comment,
 19-1    and after consultation with the advisory board, the commission may
 19-2    revise the minimum percentage reduction in emissions of oxides of
 19-3    nitrogen required by this subsection to improve the ability of the
 19-4    program to achieve its goals.
 19-5          (g)  If a baseline emissions standard does not exist for
 19-6    on-road or non-road diesels in a particular category, the
 19-7    commission, for purposes of this subchapter, shall establish an
 19-8    appropriate baseline emissions level for comparison purposes.
 19-9          (h)  The commission may approve payments to offset the
19-10    incremental cost, over the expected lifetime of the motor vehicle
19-11    or on-road or non-road diesel, of the use of qualifying fuel in a
19-12    motor vehicle or on-road or non-road diesel if the proposed project
19-13    as a whole, including the incremental fuel cost, meets the
19-14    requirements of this subchapter.  The commission shall develop an
19-15    appropriate method for converting incremental fuel costs over the
19-16    lifetime of the motor vehicle or on-road or non-road diesel into an
19-17    initial cost for purposes of determining cost-effectiveness as
19-18    required by Section 386.105.
19-19          Sec. 386.105.  CALCULATION OF COST-EFFECTIVENESS. (a)  In
19-20    calculating cost-effectiveness, one-time grants of money at the
19-21    beginning of a project shall be annualized using a time value of
19-22    public funds or discount rate determined for each project by the
19-23    commission, taking into account the interest rate on bonds,
19-24    interest earned by state funds, and other factors the commission
19-25    considers appropriate.
19-26          (b)  The commission shall establish reasonable methodologies
19-27    for evaluating project cost-effectiveness consistent with
 20-1    Subsection (a) and with accepted methods.
 20-2          (c)  The commission shall develop protocols for calculating
 20-3    oxides of nitrogen emissions reductions not otherwise required by
 20-4    state or federal law in nonattainment areas and affected counties
 20-5    of this state from representative project types over the life of
 20-6    the projects.
 20-7          (d)  The commission may include in cost-effectiveness
 20-8    determinations only reductions in oxides of nitrogen emissions that
 20-9    are achieved in nonattainment areas and affected counties of this
20-10    state.
20-11          Sec. 386.106.  COST-EFFECTIVENESS CRITERIA; DETERMINATION OF
20-12    GRANT AMOUNT. (a)  Except as provided by Section 386.107, the
20-13    commission may not award a grant for a proposed project the
20-14    cost-effectiveness of which, calculated in accordance with Section
20-15    386.105 and criteria developed under that section, exceeds $13,000
20-16    per ton of oxides of nitrogen emissions reduced in the
20-17    nonattainment area or affected county for which the project is
20-18    proposed.  This subsection does not restrict commission authority
20-19    under other law to require emissions reductions with a
20-20    cost-effectiveness that exceeds $13,000 per ton.
20-21          (b)  The commission may not award a grant that, net of taxes,
20-22    provides an amount that exceeds the incremental cost of the
20-23    proposed project.
20-24          (c)  The commission shall adopt guidelines for capitalizing
20-25    incremental lease costs so those costs may be offset by a grant
20-26    under this subchapter.
20-27          (d)  In determining the amount of a grant under this
 21-1    subchapter, the commission shall reduce the incremental cost of a
 21-2    proposed new purchase, lease, retrofit, repower, or add-on
 21-3    equipment project by the value of any existing financial incentive
 21-4    that directly reduces the cost of the proposed project, including
 21-5    tax credits or deductions, other grants, or any other public
 21-6    financial assistance.
 21-7          Sec. 386.107.  ADJUSTMENT TO MAXIMUM COST-EFFECTIVENESS
 21-8    AMOUNT AND AWARD AMOUNT. After study of available emissions
 21-9    reduction technologies and costs and after public notice and
21-10    comment, the commission, in consultation with the advisory board,
21-11    may change the values of the maximum grant award criteria
21-12    established in Section 386.106 to account for inflation or to
21-13    improve the ability of the program to achieve its goals.
21-14          Sec. 386.108.  INFRASTRUCTURE PROJECTS. (a)  The commission
21-15    shall provide funding under Section 386.252(a)(1) for
21-16    infrastructure projects.
21-17          (b)  To implement the requirement of Subsection (a), the
21-18    commission shall:
21-19                (1)  solicit applications for a balanced mix of
21-20    projects involving fueling and electrification infrastructure that
21-21    is linked to motor vehicle and on-road and non-road diesel projects
21-22    and consistent with program goals;
21-23                (2)  coordinate infrastructure projects with motor
21-24    vehicle and on-road and non-road diesel projects representing a
21-25    broad range of fuels, technologies, and applications as appropriate
21-26    and consistent with the goals of this chapter;
21-27                (3)  adopt guidelines and criteria for infrastructure
 22-1    projects to be funded under the program; and
 22-2                (4)  oversee, monitor, and evaluate the use of grants
 22-3    awarded under this program and report on the effectiveness of this
 22-4    grant program in relation to the purposes and goals of this
 22-5    chapter.
 22-6          Sec. 386.109.  ELIGIBLE INFRASTRUCTURE PROJECTS. The
 22-7    commission may consider for funding under Section 386.108:
 22-8                (1)  the purchase and installation at a site of
 22-9    equipment that is designed primarily to dispense qualifying fuel,
22-10    other than standard gasoline or diesel, or the purchase of on-site
22-11    mobile fueling equipment;
22-12                (2)  infrastructure projects, including auxiliary power
22-13    units, designed to dispense electricity to motor vehicles and
22-14    on-road and non-road diesels; and
22-15                (3)  a project that involves a technology that allows a
22-16    vehicle to replace with electric power, while the vehicle is
22-17    parked, the power normally supplied by the vehicle's internal
22-18    combustion engine.
22-19          Sec. 386.110.  APPLICATION PACKAGE FOR INFRASTRUCTURE
22-20    PROJECTS. (a)  The commission shall develop a simple, standardized
22-21    application package for infrastructure project grants under this
22-22    subchapter.  The package must include:
22-23                (1)  an application form;
22-24                (2)  a brief description of:
22-25                      (A)  the program;
22-26                      (B)  the projects that are eligible for available
22-27    funding;
 23-1                      (C)  the selection criteria and evaluation
 23-2    process; and
 23-3                      (D)  the required documentation;
 23-4                (3)  the name of a person or office to contact for more
 23-5    information;
 23-6                (4)  an example of the contract that an applicant will
 23-7    be required to execute before receiving a grant; and
 23-8                (5)  any other information the commission considers
 23-9    useful to inform the applicant and expedite the application
23-10    process.
23-11          (b)  The application form shall require as much information
23-12    as the commission determines is necessary to properly evaluate each
23-13    project but shall otherwise minimize the information required.
23-14          (c)  The commission may not require an applicant, as part of
23-15    the application process, to calculate tons of emissions reduced or
23-16    cost-effectiveness.
23-17          Sec. 386.111.  APPLICATION REVIEW PROCEDURES. (a)  The
23-18    commission shall review an application for a grant for a project
23-19    authorized under this subchapter, including an application for a
23-20    grant for an infrastructure project, immediately on receipt of the
23-21    application.  If the commission determines that an application is
23-22    incomplete, the commission shall notify the applicant, not later
23-23    than the 15th working day after the date on which the commission
23-24    received the application, with an explanation of what is missing
23-25    from the application.  The commission shall record the date and
23-26    time of receipt of each application the commission determines to be
23-27    complete and shall evaluate the completed application according to
 24-1    the appropriate project criteria.  Subject to available funding,
 24-2    the commission shall make a final determination on an application
 24-3    as soon as possible and not later than the 60th working day after
 24-4    the date the application is determined to be complete.
 24-5          (b)  The commission shall make every effort to expedite the
 24-6    application review process and to award grants to qualified
 24-7    projects in a timely manner.  To the extent possible, the
 24-8    commission shall coordinate project review and approval with any
 24-9    timing constraints related to project purchases or installations to
24-10    be made by an applicant.
24-11          (c)  The commission may deny an application for a project
24-12    that does not meet the applicable project criteria or that the
24-13    commission determines is not made in good faith, is not credible,
24-14    or is not in compliance with this chapter and the goals of this
24-15    chapter.
24-16          (d)  Subject to availability of funds, the commission shall
24-17    award a grant under this subchapter in conjunction with the
24-18    execution of a contract that obligates the commission to make the
24-19    grant and the recipient to perform the actions described in the
24-20    recipient's grant application.  The contract must incorporate
24-21    provisions for recapturing grant money in proportion to any loss of
24-22    emissions reductions or underachievement in dispensing qualifying
24-23    fuel compared with the volume of emissions reductions or amount of
24-24    fuel dispensed that was projected in awarding the grant.  Grant
24-25    money recaptured under the contract provision shall be deposited in
24-26    the fund and reallocated for other projects under this subchapter.
24-27          (e)  An applicant may seek reimbursement for qualifying
 25-1    equipment installed after the effective date of this program.
 25-2          Sec. 386.112.  ON-ROAD DIESEL PURCHASE OR LEASE INCENTIVE.
 25-3    (a)  The commission shall develop a purchase or lease incentive
 25-4    program for new on-road diesels and shall adopt rules necessary to
 25-5    implement the program and to reimburse a purchaser or lessee of a
 25-6    new on-road diesel that is eligible for reimbursement of
 25-7    incremental costs under this subchapter.
 25-8          (b)  The program shall authorize statewide incentives for the
 25-9    reimbursement of incremental costs for the purchase or lease,
25-10    according to the schedule provided by Section 386.113, of new
25-11    on-road diesels that are certified by the United States
25-12    Environmental Protection Agency to an emissions standard provided
25-13    by Section 386.113 if the purchaser or lessee of the on-road diesel
25-14    agrees to register the vehicle in this state and to operate the
25-15    on-road diesel in this state for not less than 75 percent of the
25-16    on-road diesel's annual mileage.
25-17          (c)  Only one incentive will be provided for each new on-road
25-18    diesel.  The incentive shall be provided to the purchaser if the
25-19    on-road diesel is not purchased for the purpose of leasing the
25-20    on-road diesel to another person, or to the lessee and not to the
25-21    purchaser if the on-road diesel is purchased for the purpose of
25-22    leasing the on-road diesel to another person.  A lease incentive
25-23    for a new on-road diesel shall be prorated based on an eight-year
25-24    lease term.
25-25          Sec. 386.113.  ON-ROAD DIESEL PURCHASE OR LEASE INCENTIVE
25-26    SCHEDULE. A new on-road diesel is eligible for reimbursement of
25-27    incremental costs according to the following schedule:
 26-1               Incentive emissions standard        Reimbursement amount
 26-2                   (oxides of nitrogen)
 26-3         Date of manufacture     Date of manufacture
 26-4               (2001)             (10/01/02-9/30/06)
 26-5           2.5 g/bhp-hr NOx        1.2 g/bhp-hr NOx    up to $15,000
 26-6           1.5 g/bhp-hr NOx        0.5 g/bhp-hr NOx    up to $25,000
 26-7           0.0 g/bhp-hr NOx        0.0 g/bhp-hr NOx    up to $25,000
 26-8          Sec. 386.114.  MODIFICATION OF INCENTIVE EMISSIONS STANDARDS.
 26-9    After evaluating new technologies and after public notice and
26-10    comment, the commission, in consultation with the advisory board,
26-11    may change the incentive emissions standards established by Section
26-12    386.113 to improve the ability of the program to achieve its goals.
26-13             (Sections 386.115-386.150 reserved for expansion
26-14     SUBCHAPTER D.  MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE PROGRAM
26-15          Sec. 386.151.  DEFINITIONS.  In this subchapter:
26-16                (1)  "Bin" or "emissions bin" means a set of emissions
26-17    standards applicable to exhaust pollutants measured on the Federal
26-18    Test Procedure (FTP) according to 40 C.F.R. Section 86.1811-04.
26-19                (2)  "Light-duty motor vehicle" means a motor vehicle
26-20    with a gross vehicle weight rating of less than 10,000 pounds.
26-21                (3)  "Motor vehicle" means a self-propelled device
26-22    designed for transporting persons or property on a public highway
26-23    that is required to be registered under Chapter 502, Transportation
26-24    Code.
26-25          Sec. 386.152.  COMPTROLLER AND COMMISSION DUTIES REGARDING
26-26    LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE INCENTIVE PROGRAM. (a)
26-27    The comptroller and the commission shall develop a purchase or
 27-1    lease incentive program for new light-duty motor vehicles and shall
 27-2    adopt rules necessary to implement the program.
 27-3          (b)  The program shall authorize statewide incentives for the
 27-4    purchase or lease, according to the schedule provided by Section
 27-5    386.153, of new light-duty motor vehicles that are certified by the
 27-6    United States Environmental Protection Agency to meet an emissions
 27-7    standard that is at least as stringent as those provided by Section
 27-8    386.153 for a purchaser or lessee who agrees to register the
 27-9    vehicle in this state and to operate the vehicle in this state for
27-10    not less than 75 percent of the vehicle's annual mileage.
27-11          (c)  Only one incentive will be provided for each new
27-12    light-duty motor vehicle.  The incentive shall be provided to the
27-13    lessee and not to the purchaser if the motor vehicle is purchased
27-14    for the purpose of leasing the vehicle to another person.
27-15          Sec. 386.153.  LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE
27-16    INCENTIVE SCHEDULE. A new light-duty motor vehicle is eligible for
27-17    an incentive according to the following schedule:
27-18             Incentive emissions standard and incentive amount
27-19                           Model year 2003-2007
27-20                           Bin 4         $1,250
27-21                           Bin 3         $2,225
27-22                           Bin 2         $3,750
27-23                           Bin 1         $5,000
27-24          Sec. 386.154.  MODIFICATION OF INCENTIVE EMISSIONS STANDARDS.
27-25    After evaluating new technologies and after public notice and
27-26    comment, the commission, in consultation with the advisory board,
27-27    may change the incentive emissions standards established by Section
 28-1    386.153 to improve the ability of the program to achieve its goals.
 28-2          Sec. 386.155.  MANUFACTURER'S REPORT.  At the beginning of
 28-3    but not later than July 1 of each year preceding the vehicle model
 28-4    year, a manufacturer of motor vehicles shall provide to the
 28-5    commission a list of the new vehicle models that the manufacturer
 28-6    intends to sell in this state during that model year that meet the
 28-7    incentive emissions standards established by the schedules set out
 28-8    under Section 386.153.
 28-9          Sec. 386.156.  LIST OF ELIGIBLE MOTOR VEHICLES.  (a)  On
28-10    August 1 each year the commission shall publish and provide to the
28-11    comptroller a list of the new model motor vehicles as listed for
28-12    the commission under Section 386.155.
28-13          (b)  The comptroller shall distribute the list of eligible
28-14    motor vehicles to all new motor vehicle dealers and leasing agents
28-15    in this state.
28-16          Sec. 386.157.  VEHICLE EMISSIONS INFORMATION LABEL.  (a)  To
28-17    enable consumers to make informed purchase decisions based on the
28-18    relative amounts of emissions produced by motor vehicles within
28-19    each vehicle class, the motor vehicle manufacturer or distributor
28-20    shall affix on each new light-duty motor vehicle for sale or lease
28-21    in this state a clearly legible label that shows the vehicle's
28-22    class rating under the United States Environmental Protection
28-23    Agency's vehicle class rating system.  If the United States
28-24    Environmental Protection Agency develops another vehicle emissions
28-25    rating system that gives consumers similar emissions information by
28-26    vehicle class, the commission by rule may designate that vehicle
28-27    rating system.
 29-1          (b)  A new motor vehicle dealer or leasing agent shall make
 29-2    available to the dealer's or leasing agent's prospective purchasers
 29-3    or lessees a copy of the list prepared and published by the
 29-4    commission under Section 386.156.
 29-5          Sec. 386.158.  LIGHT-DUTY MOTOR VEHICLE PURCHASE OR LEASE
 29-6    INCENTIVE.  (a)  A person who purchases or leases a new light-duty
 29-7    motor vehicle that has been listed under Section 386.155 is
 29-8    eligible for an incentive under this subchapter.
 29-9          (b)  A lease incentive for a new light-duty motor vehicle
29-10    shall be prorated based on a four-year lease term.
29-11          (c)  To receive money under an incentive program provided by
29-12    this subchapter, the purchaser or lessee of a new light-duty motor
29-13    vehicle eligible for an incentive under this subchapter shall apply
29-14    for the incentive in the manner provided by law or by rule of the
29-15    comptroller.
29-16          Sec. 386.159.  PUBLIC INFORMATION.  (a)  The commission in
29-17    cooperation with the comptroller shall develop and implement a
29-18    program to inform the public and new motor vehicle dealers and
29-19    leasing agents about the motor vehicle purchase or lease incentive
29-20    program.
29-21          (b)  The Texas Department of Transportation shall insert a
29-22    notice describing the light-duty motor vehicle purchase or lease
29-23    incentive program with each annual vehicle registration renewal
29-24    notice.
29-25          Sec. 386.160.  COMPTROLLER TO ACCOUNT FOR MOTOR VEHICLE
29-26    PURCHASE OR LEASE INCENTIVES.  (a)  The comptroller by rule shall
29-27    develop a method to administer and account for the motor vehicle
 30-1    purchase or lease incentives authorized by this subchapter and to
 30-2    pay incentive money to the purchaser or lessee of a new motor
 30-3    vehicle, on application of the purchaser or lessee as provided by
 30-4    this subchapter.
 30-5          (b)  The comptroller shall develop and publish forms and
 30-6    instructions for the purchaser or lessee of a new motor vehicle to
 30-7    use in applying to the comptroller for an incentive payment under
 30-8    this subchapter.  The comptroller shall make the forms available to
 30-9    new motor vehicle dealers and leasing agents.  Dealers and leasing
30-10    agents shall make the forms available to their prospective
30-11    purchasers or lessees.
30-12          (c)  In addition to other forms developed and published under
30-13    this section, the comptroller shall develop and publish a
30-14    verification form by which, with information provided by the dealer
30-15    or leasing agent, the comptroller can verify the sale of a vehicle
30-16    covered by this subchapter.  The verification form shall include at
30-17    least the name of the purchaser, the vehicle identification number
30-18    of the vehicle involved, the date of the purchase, and the name of
30-19    the new motor dealer or leasing agent involved in the transaction.
30-20    At the time of sale or lease of a vehicle eligible for an incentive
30-21    under this subchapter, the dealer or leasing agent shall complete
30-22    the verification form supplied to the dealer by the comptroller.
30-23    The purchaser or lessee shall include the completed verification
30-24    form as part of the purchaser's application for an incentive.  The
30-25    dealer shall maintain a copy of the completed verification form for
30-26    at least two years from the date of the transaction.
30-27          Sec. 386.161.  REPORT TO COMMISSION; SUSPENSION OF PURCHASE
 31-1    OR LEASE INCENTIVES. (a)  The comptroller shall report to the
 31-2    commission annually regarding motor vehicle purchase or lease
 31-3    incentives.
 31-4          (b)  If the balance available for motor vehicle purchase or
 31-5    lease incentives falls below 15 percent of the total allocated for
 31-6    the incentives during that fiscal year, the comptroller by order
 31-7    shall suspend the incentives until the date the comptroller can
 31-8    certify that the balance available in the fund for incentives is an
 31-9    amount adequate to resume the incentives or the beginning of the
31-10    next fiscal year,  whichever is earlier.  If the comptroller
31-11    suspends the incentives, the comptroller shall immediately notify
31-12    the commission and all new motor vehicle dealers and leasing agents
31-13    that the incentives have been suspended.
31-14          (c)  The comptroller shall establish a toll-free telephone
31-15    number available to motor vehicle dealers and leasing agents for
31-16    the dealers and agents to call to verify that incentives are
31-17    available.  The comptroller may provide for issuing verification
31-18    numbers over the telephone line.
31-19          (d)  Reliance by a dealer or leasing agent on information
31-20    provided by the comptroller or commission is a complete defense to
31-21    an action involving or based on eligibility of a vehicle for an
31-22    incentive or availability of vehicles eligible for an incentive.
31-23             (Sections 386.162-386.200 reserved for expansion
31-24              SUBCHAPTER E.  ENERGY EFFICIENCY GRANT PROGRAM
31-25          Sec. 386.201.  DEFINITIONS. In this subchapter:
31-26                (1)  "Electric cooperative" has the meaning assigned by
31-27    Section 11.003, Utilities Code.
 32-1                (2)  "Electric utility" has the meaning assigned by
 32-2    Section 31.002, Utilities Code.
 32-3                (3)  "Municipally owned utility" has the meaning
 32-4    assigned by Section 11.003, Utilities Code.
 32-5          Sec. 386.202.  GRANT PROGRAM. (a)  The utility commission
 32-6    shall develop an energy efficiency grant program using program
 32-7    templates that are consistent with rules of the utility commission
 32-8    adopted under Section 39.905, Utilities Code.
 32-9          (b)  Programs approved under this subchapter must include the
32-10    retirement, replacement, and recycling of materials and appliances
32-11    that contribute to peak energy demand to ensure the reduction of
32-12    energy demand, peak loads, and associated emissions of air
32-13    contaminants.
32-14          Sec. 386.203.  ADMINISTRATION OF GRANTS. Money allocated by
32-15    the utility commission under the grant program developed under this
32-16    subchapter shall be administered by electric utilities, electric
32-17    cooperatives, and municipally owned utilities.  A participating
32-18    electric utility, electric cooperative, or municipally owned
32-19    utility shall be reimbursed from the fund for costs incurred by the
32-20    utility in administering the energy efficiency grant program
32-21    established under this subchapter.  Reimbursable administrative
32-22    costs of a participating entity may not exceed 10 percent of the
32-23    entity's total program budget before January 1, 2003, and may not
32-24    exceed five percent of the entity's total program budget on or
32-25    after that date.
32-26          Sec. 386.204.  LIMITATION ON DUTY OF PARTICIPATING UTILITY.
32-27    (a)  This subchapter obligates an electric utility, electric
 33-1    cooperative, or municipally owned utility only to administer the
 33-2    funding allocated to the entity by the utility commission in
 33-3    accordance with this subchapter.
 33-4          (b)  The obligation of an electric utility under this
 33-5    subchapter is separate and apart from, and does not affect an
 33-6    obligation of the electric utility under, Section 39.905, Utilities
 33-7    Code, or a rule adopted under that section.
 33-8          (c)  Emissions reductions achieved by a program implemented
 33-9    under this subchapter may not be used by an electric utility,
33-10    electric cooperative, or municipally owned utility to satisfy an
33-11    obligation to reduce air contaminant emissions under state or
33-12    federal law or a state or federal regulatory program.
33-13          Sec. 386.205.  EVALUATION OF STATE ENERGY EFFICIENCY
33-14    PROGRAMS. In cooperation with the laboratory, the utility
33-15    commission shall provide an annual report to the commission that,
33-16    by county, quantifies the reductions of energy demand, peak loads,
33-17    and associated emissions of air contaminants achieved from the
33-18    programs implemented under this subchapter and from those
33-19    implemented under Section 39.905, Utilities Code.
33-20             (Sections 386.206-386.250 reserved for expansion
33-21            SUBCHAPTER F.  TEXAS EMISSIONS REDUCTION PLAN FUND
33-22          Sec. 386.251.  FUND.  (a)  The Texas emissions reduction plan
33-23    fund is an account in the state treasury.
33-24          (b)  The fund is administered by the comptroller for the
33-25    benefit of the Texas emissions reduction plan established under
33-26    this chapter.
33-27          (c)  The fund consists of money from:
 34-1                (1)  fees and other amounts charged and collected under
 34-2    Sections 502.1675 and 548.5055, Transportation Code;
 34-3                (2)  the surcharge on the sale, lease, or rental of new
 34-4    or used construction equipment under Section 151.0515, Tax Code;
 34-5    and
 34-6                (3)  surcharges collected under Sections 152.0215 and
 34-7    156.054, Tax Code.
 34-8          Sec. 386.252.  USE OF FUND.  (a)  Money in the fund may be
 34-9    used only to implement and administer programs established under
34-10    the plan and shall be allocated as follows:
34-11                (1)  for the diesel emissions reduction incentive
34-12    program, 67 percent of the money in the fund, of which not more
34-13    than three percent may be used for infrastructure projects and not
34-14    more than 15 percent may be used for on-road diesel purchase or
34-15    lease incentives;
34-16                (2)  for the motor vehicle purchase or lease incentive
34-17    program, 15 percent of the money in the fund;
34-18                (3)  for the energy efficiency grant program, 7.5
34-19    percent of the money in the fund;
34-20                (4)  for the new technology research and development
34-21    program, 7.5 percent of the money in the fund, of which up to
34-22    $250,000 is allocated for administration, up to $200,000 is
34-23    allocated for a health effects study, and $500,000 is to be
34-24    deposited in the state treasury to the credit of the clean air
34-25    account created under Section 382.0622 to supplement funding for
34-26    air quality planning activities in affected counties; and
34-27                (5)  for administrative costs incurred by the utility
 35-1    commission, the commission, the comptroller, and the laboratory,
 35-2    three percent.
 35-3          (b)  Up to 15 percent of the money allocated under Subsection
 35-4    (a) to a particular program and not expended under that program by
 35-5    March 1 of the second fiscal year of a fiscal biennium may be used
 35-6    for another program under the plan as determined by the commission
 35-7    in consultation with the advisory board.
 35-8                   CHAPTER 387.  NEW TECHNOLOGY RESEARCH
 35-9                          AND DEVELOPMENT PROGRAM
35-10          Sec. 387.001.  DEFINITION.  In this chapter, "program" means
35-11    the new technology research and development program.
35-12          Sec. 387.002.  TEXAS COUNCIL ON ENVIRONMENTAL TECHNOLOGY.
35-13    (a)  The Texas Council on Environmental Technology consists of 11
35-14    members appointed by the governor to represent the academic and
35-15    nonprofit communities.  The governor shall designate from the
35-16    council members a presiding officer of the council.  Members of the
35-17    council serve six-year staggered terms, with the terms of three or
35-18    four members expiring February 1 of each odd-numbered year.
35-19          (b)  The Texas Council on Environmental Technology shall work
35-20    to enhance the entrepreneurial and inventive spirit of Texans to
35-21    assist in developing solutions to air, water, and waste problems
35-22    by:
35-23                (1)  identifying and evaluating new technologies and
35-24    seeking the approval of the United States Environmental Protection
35-25    Agency for and facilitating the deployment of those technologies;
35-26    and
35-27                (2)  assisting the commission and the United States
 36-1    Environmental  Protection  Agency  in  the  process  of  ensuring
 36-2    credit for new, innovative, and creative technological
 36-3    advancements.
 36-4          (c)  Council offices and projects shall be housed at the
 36-5    Center for Energy and Environmental Resources at The University of
 36-6    Texas at Austin.
 36-7          Sec. 387.003.  NEW TECHNOLOGY RESEARCH AND DEVELOPMENT
 36-8    PROGRAM.  (a)  The Texas Council on Environmental Technology shall
 36-9    establish and administer a new technology research and development
36-10    program as provided by this chapter.
36-11          (b)  Under the program, the Texas Council on Environmental
36-12    Technology shall provide grants to be used to support development
36-13    of emissions-reducing technologies that may be used for projects
36-14    eligible for awards under Chapter 386 and other new technologies
36-15    that show promise for commercialization.  The primary objective of
36-16    this chapter is to promote the development of commercialization
36-17    technologies that will support projects that may be funded under
36-18    Chapter 386 and this chapter.
36-19          Sec. 387.004.  SOLICITATION OF NEW TECHNOLOGY PROPOSALS.  The
36-20    Texas Council on Environmental Technology from time to time shall
36-21    issue specific requests for proposals (RFPs) or program opportunity
36-22    notices (PONs) for technology projects to be funded under the
36-23    program.
36-24          Sec. 387.005.  ELIGIBLE PROJECTS; PRIORITIES.  (a)  Grants
36-25    awarded under this chapter shall be directed toward a balanced mix
36-26    of:
36-27                (1)  retrofit and add-on technologies to reduce
 37-1    emissions from the existing stock of vehicles targeted by the Texas
 37-2    emissions reduction plan;
 37-3                (2)  advanced technologies for new engines and vehicles
 37-4    that produce very-low or zero emissions of oxides of nitrogen,
 37-5    including stationary and mobile fuel cells;
 37-6                (3)  studies to improve air quality assessment and
 37-7    modeling;
 37-8                (4)  advanced technologies that promote increased
 37-9    building and appliance energy performance; and
37-10                (5)  advanced technologies that reduce emissions from
37-11    other significant sources.
37-12          (b)  The Texas Council on Environmental Technology shall
37-13    identify and evaluate and may consider making grants for technology
37-14    projects that would allow qualifying fuels to be produced from
37-15    energy resources in this state.  In considering projects under this
37-16    subsection, the council shall give preference to projects involving
37-17    otherwise unusable energy resources in this state and producing
37-18    qualifying fuels at prices lower than otherwise available and low
37-19    enough to make the projects to be funded under the program
37-20    economically attractive to local businesses in the area for which
37-21    the project is proposed.
37-22          (c)  In soliciting proposals under Section 387.004 and
37-23    determining how to allocate grant money available for projects
37-24    under this chapter, the Texas Council on Environmental Technology
37-25    shall give special consideration to advanced technologies and
37-26    retrofit or add-on projects that provide multiple benefits by
37-27    reducing emissions of particulates and other air pollutants.
 38-1          (d)  A project that involves publicly or privately owned
 38-2    vehicles or vessels is eligible for funding under this chapter if
 38-3    the project meets all applicable criteria.
 38-4          (e)  Studies authorized under Subsection (a)(3) shall be
 38-5    consistent with air quality research priorities identified by the
 38-6    commission.
 38-7          Sec. 387.006.  EVIDENCE OF COMMERCIALIZATION POTENTIAL
 38-8    REQUIRED.  (a)  An application for a technology grant under this
 38-9    chapter must show clear and compelling evidence that:
38-10                (1)  the proposed technology project has a strong
38-11    commercialization plan and organization; and
38-12                (2)  the technology proposed for funding:
38-13                      (A)  is likely to be offered for commercial sale
38-14    in this state within five years after the date of the application
38-15    for funding; and
38-16                      (B)  once commercialized, will offer
38-17    opportunities for projects eligible for funding under Chapter 386.
38-18          (b)  The Texas Council on Environmental Technology shall
38-19    consider specifically, for each proposed technology project
38-20    application:
38-21                (1)  the projected potential for reduced emissions of
38-22    oxides of nitrogen and the cost-effectiveness of the technology
38-23    once it has been commercialized;
38-24                (2)  the potential for the technology to contribute
38-25    significantly to air quality goals; and
38-26                (3)  the strength of the commercialization plan.
38-27          Sec. 387.007.  COST-SHARING.  The Texas Council on
 39-1    Environmental Technology may require cost-sharing for technology
 39-2    projects funded under this chapter but may not require repayment of
 39-3    grant money.
 39-4          Sec. 387.008.  ENVIRONMENTAL RESEARCH FUND.  (a)  The
 39-5    environmental research fund is an account in the general revenue
 39-6    fund.  The fund consists of money from gifts, grants, or donations
 39-7    to the fund for designated or general use and from any other source
 39-8    designated by the legislature.
 39-9          (b)  Money in the environmental research fund may be used
39-10    only for the operation and projects of the Texas Council on
39-11    Environmental Technology.
39-12          Sec. 387.009.  ADVISORY COMMITTEES.  The Texas Council on
39-13    Environmental Technology may appoint advisory committees as
39-14    necessary or desirable to assist the council in performing its
39-15    duties.  An advisory committee may include representatives of
39-16    industry, environmental groups, consumer groups, local governments,
39-17    agriculture, the commission, the General Land Office, and the
39-18    Railroad Commission of Texas.  Any senator or representative
39-19    desiring to do so may participate on any advisory committee
39-20    appointed under this section.  Members of an advisory committee are
39-21    not entitled to compensation.
39-22          Sec. 387.010.  REPORTS.  Not later than December 1, 2002, and
39-23    not later than December 1 of each subsequent second year, the Texas
39-24    Council on Environmental Technology shall report to the legislature
39-25    on projects funded under the new technology research and
39-26    development program, describing the technical objectives and
39-27    accomplishments of the project and the progress of the project
 40-1    technology toward commercialization.
 40-2         CHAPTER 388.  TEXAS BUILDING ENERGY PERFORMANCE STANDARDS
 40-3          Sec. 388.001.  LEGISLATIVE FINDINGS.  (a)  The legislature
 40-4    finds that an effective building energy code is essential to:
 40-5                (1)  reducing the air pollutant emissions that are
 40-6    affecting the health of residents of this state;
 40-7                (2)  moderating future peak electric power demand;
 40-8                (3)  assuring the reliability of the electrical grid;
 40-9    and
40-10                (4)  controlling energy costs for residents and
40-11    businesses in this state.
40-12          (b)  The legislature further finds that this state has a
40-13    number of unique climate types, all of which require more energy
40-14    for cooling than for heating, and that there are many
40-15    cost-effective measures that can reduce peak energy use and reduce
40-16    cooling and other energy costs in buildings.
40-17          Sec. 388.002.  DEFINITIONS.  In this chapter:
40-18                (1)  "Affected county" has the meaning assigned by
40-19    Section 386.001.
40-20                (2)  "Building" has the meaning assigned by the
40-21    International Building Code.
40-22                (3)  "Code official" means an individual employed by a
40-23    local jurisdiction to review construction plans and other
40-24    documents, inspect construction, or administer and enforce building
40-25    standards under this chapter.
40-26                (4)  "Code-certified inspector" means an inspector who
40-27    is certified by the International Code Council, the Building
 41-1    Officials and Code Administrators International, Inc., the
 41-2    International Conference of Building Officials, or the Southern
 41-3    Building Code Congress International to have met minimum standards
 41-4    for interpretation and enforcement of requirements of the
 41-5    International Energy Conservation Code and the energy efficiency
 41-6    chapter of the International Residential Code.
 41-7                (5)  "Commission" means the Texas Natural Resource
 41-8    Conservation Commission.
 41-9                (6)  "International Residential Code" means the
41-10    International Residential Code for One- and Two-Family Dwellings as
41-11    adopted by the International Code Council.
41-12                (7)  "International Energy Conservation Code" means the
41-13    International Energy Conservation Code as adopted by the
41-14    International Code Council.
41-15                (8)  "Laboratory" means the Energy Systems Laboratory
41-16    at the Texas Engineering Experiment Station of The Texas A&M
41-17    University System.
41-18                (9)  "Local jurisdiction" means the authority
41-19    responsible for implementation and enforcement of local building
41-20    codes.
41-21                (10)  "Municipality" has the meaning assigned by
41-22    Section 1.005, Local Government Code.
41-23                (11)  "Nonattainment area" has the meaning assigned by
41-24    Section 386.001.
41-25                (12)  "Single-family residential" means having the
41-26    character of a detached one- or two-family dwelling or a multiple
41-27    single-family dwelling not more than three stories high with
 42-1    separate means of egress, including the accessory structures of the
 42-2    dwelling.
 42-3          Sec. 388.003.  ADOPTION OF BUILDING ENERGY EFFICIENCY
 42-4    PERFORMANCE STANDARDS.  (a)  To achieve energy conservation in
 42-5    single-family residential construction, the energy efficiency
 42-6    chapter of the International Residential Code, as it existed on May
 42-7    1, 2001, is adopted as the energy code in this state for
 42-8    single-family residential construction.
 42-9          (b)  To achieve energy conservation in all other residential,
42-10    commercial, and industrial construction, the International Energy
42-11    Conservation Code as it existed on May 1, 2001, is adopted as the
42-12    energy code for use in this state for all other residential,
42-13    commercial, and industrial construction.
42-14          (c)  A municipality or county shall establish procedures:
42-15                (1)  for the administration and enforcement of the
42-16    codes; and
42-17                (2)  to ensure that code-certified inspectors shall
42-18    perform inspections and enforce the code in the inspectors'
42-19    jurisdictions.
42-20          (d)  A municipality or county may establish procedures to
42-21    adopt local amendments to the International Energy Conservation
42-22    Code and the energy efficiency chapter of the International
42-23    Residential Code.
42-24          (e)  Local amendments may not result in less stringent energy
42-25    efficiency requirements in nonattainment areas and in affected
42-26    counties than the energy efficiency chapter of the International
42-27    Residential Code or International Energy Conservation Code.  Local
 43-1    amendments must comply with the National Appliance Energy
 43-2    Conservation Act of 1987 (42 U.S.C. Sections 6291-6309), as
 43-3    amended.  The laboratory, at the request of a municipality or
 43-4    county, shall determine the relative impact of proposed local
 43-5    amendments to an energy code, including whether proposed amendments
 43-6    are substantially equal to or less stringent than the unamended
 43-7    code.  For the purpose of establishing uniform requirements
 43-8    throughout a region, and on request of a council of governments, a
 43-9    county, or a municipality, the laboratory may recommend a
43-10    climatically appropriate modification or a climate zone designation
43-11    for a county or group of counties that is different from the
43-12    climate zone designation in the unamended code.  The laboratory
43-13    shall:
43-14                (1)  report its findings to the council, county, or
43-15    municipality, including an estimate of any energy savings potential
43-16    above the base code from local amendments; and
43-17                (2)  annually submit a report to the commission:
43-18                      (A)  identifying the municipalities and counties
43-19    whose codes are more stringent than the unamended code, and whose
43-20    codes are equally stringent or less stringent than the unamended
43-21    code; and
43-22                      (B)  quantifying energy savings from this
43-23    program.
43-24          (f)  Each municipality and county shall periodically review
43-25    and consider revisions made by the International Code Council to
43-26    the International Energy Conservation Code and the energy
43-27    efficiency chapter of the International Residential Code adopted
 44-1    after May 1, 2001.
 44-2          (g)  The laboratory shall have the authority to set and
 44-3    collect fees to perform certain tasks in support of the
 44-4    requirements in Sections 388.004, 388.007, and 388.008.
 44-5          (h)  Within the boundaries of an airport operated by a joint
 44-6    board created under Subchapter D, Chapter 22, Transportation Code,
 44-7    the constituent agencies of which are populous home-rule
 44-8    municipalities, the powers of a municipality under this section are
 44-9    exclusively the powers of the joint board.
44-10          Sec. 388.004.  ENFORCEMENT OF ENERGY STANDARDS OUTSIDE OF
44-11    MUNICIPALITY.  For construction outside of the local jurisdiction
44-12    of a municipality:
44-13                (1)  a building certified by a national, state, or
44-14    local accredited energy efficiency program shall be considered in
44-15    compliance;
44-16                (2)  a building with inspections from private
44-17    code-certified inspectors using the energy efficiency chapter of
44-18    the International Residential Code or International Energy
44-19    Conservation Code shall be considered in compliance; and
44-20                (3)  a builder who does not have access to either of
44-21    the above methods for a building shall certify compliance using a
44-22    form provided by the laboratory, enumerating the code-compliance
44-23    features of the building.
44-24          Sec. 388.005.  ENERGY EFFICIENCY PROGRAMS IN CERTAIN
44-25    POLITICAL SUBDIVISIONS.  (a)  In this section, "political
44-26    subdivision" means:
44-27                (1)  an affected county; or
 45-1                (2)  any political subdivision other than a school
 45-2    district in a nonattainment area or in an affected county.
 45-3          (b)  Each political subdivision shall implement all energy
 45-4    efficiency measures that meet the standards established for a
 45-5    contract for energy conservation measures under Section 302.004(b),
 45-6    Local Government Code, in order to reduce electricity consumption
 45-7    by the existing facilities of the political subdivision.
 45-8          (c)  Each political subdivision shall establish a goal to
 45-9    reduce the electric consumption by the political subdivision by
45-10    five percent each year for five years, beginning January 1, 2002.
45-11          (d)  A political subdivision that does not attain the goals
45-12    under Subsection (c) must include in the report required by
45-13    Subsection (e) justification that the political subdivision has
45-14    already implemented all available measures.
45-15          (e)  A political subdivision annually shall report to the
45-16    State Energy Conservation Office, on forms provided by that office,
45-17    regarding the political subdivision's efforts and progress under
45-18    this section.  The State Energy Conservation Office shall provide
45-19    assistance and information to political subdivisions to help the
45-20    political subdivisions meet the goals set under this section.
45-21          Sec. 388.006.  STATE ENERGY CONSERVATION OFFICE EVALUATION.
45-22    The State Energy Conservation Office annually shall provide the
45-23    commission with an evaluation of the effectiveness of state and
45-24    political subdivision energy efficiency programs, including
45-25    programs under this chapter.
45-26          Sec. 388.007.  DISTRIBUTION OF INFORMATION AND TECHNICAL
45-27    ASSISTANCE.  (a)  The laboratory shall make available to builders,
 46-1    designers, engineers, and architects code implementation materials
 46-2    that explain the requirements of the International Energy
 46-3    Conservation Code and the energy efficiency chapter of the
 46-4    International Residential Code and that describe methods of
 46-5    compliance acceptable to code officials.
 46-6          (b)  The materials may include software tools, simplified
 46-7    prescriptive options, and other materials as appropriate.  The
 46-8    simplified materials may be designed for projects in which a design
 46-9    professional is not involved.
46-10          (c)  The laboratory may provide local jurisdictions with
46-11    technical assistance concerning implementation and enforcement of
46-12    the International Energy Conservation Code and the energy
46-13    efficiency chapter of the International Residential Code.
46-14          Sec. 388.008.  DEVELOPMENT OF HOME ENERGY RATINGS.  (a)  The
46-15    laboratory shall develop a standardized report format to be used by
46-16    providers of home energy ratings.  The form must be designed to
46-17    give potential buyers information on a structure's energy
46-18    performance, including:
46-19                (1)  insulation;
46-20                (2)  types of windows;
46-21                (3)  heating and cooling equipment;
46-22                (4)  water heating equipment;
46-23                (5)  additional energy conserving features, if any;
46-24                (6)  results of performance measurements of building
46-25    tightness and forced air distribution; and
46-26                (7)  an overall rating of probable energy efficiency
46-27    relative to the minimum requirements of the International Energy
 47-1    Conservation Code or the energy efficiency chapter of the
 47-2    International Residential Code, as appropriate.
 47-3          (b)  The laboratory shall establish a public information
 47-4    program to inform homeowners, sellers, buyers, and others regarding
 47-5    home energy ratings.
 47-6          (c)  The home energy ratings program shall be implemented by
 47-7    September 1, 2002.
 47-8           CHAPTER 389.  EMISSIONS REDUCTION RECOGNITION EFFORTS
 47-9          Sec. 389.001.  DEFINITION. In this chapter, "commission"
47-10    means the Texas Natural Resource Conservation Commission.
47-11          Sec. 389.002.  USE OF CERTAIN INFORMATION FOR FEDERAL
47-12    RECOGNITION OF EMISSIONS REDUCTIONS.  The commission, using
47-13    information derived from the reports to the commission under
47-14    Sections 386.205, 388.003(e), and 388.006, shall take all
47-15    appropriate and necessary actions so that emissions reductions
47-16    achieved by means of activities under Chapters 386 and 388 are
47-17    credited by the United States Environmental Protection Agency to
47-18    the appropriate emissions reduction objectives in the state
47-19    implementation plan.
47-20          SECTION 2.  Subchapter C, Chapter 151, Tax Code, is amended
47-21    by adding Section 151.0515 to read as follows:
47-22          Sec. 151.0515.  TEXAS EMISSIONS REDUCTION PLAN SURCHARGE.
47-23    (a)  In this section, "equipment" includes all off-road, heavy-duty
47-24    diesel equipment classified as construction equipment, other than
47-25    implements of husbandry used solely for agricultural purposes,
47-26    including:
47-27                (1)  pavers;
 48-1                (2)  tampers/rammers;
 48-2                (3)  plate compactors;
 48-3                (4)  concrete pavers;
 48-4                (5)  rollers;
 48-5                (6)  scrapers;
 48-6                (7)  paving equipment;
 48-7                (8)  surface equipment;
 48-8                (9)  signal boards/light plants;
 48-9                (10)  trenchers;
48-10                (11)  bore/drill rigs;
48-11                (12)  excavators;
48-12                (13)  concrete/industrial saws;
48-13                (14)  cement and mortar mixers;
48-14                (15)  cranes;
48-15                (16)  graders;
48-16                (17)  off-highway trucks;
48-17                (18)  crushing/processing equipment;
48-18                (19)  rough terrain forklifts;
48-19                (20)  rubber tire loaders;
48-20                (21)  rubber tire tractors/dozers;
48-21                (22)  tractors/loaders/backhoes;
48-22                (23)  crawler tractors/dozers;
48-23                (24)  skid steer loaders;
48-24                (25)  off-highway tractors; and
48-25                (26)  Dumpsters/tenders.
48-26          (b)  In each county in this state, a surcharge is imposed on
48-27    the retail sale, lease, or rental of new or used equipment in an
 49-1    amount equal to 0.5 percent of the sale price or the lease or
 49-2    rental amount.
 49-3          (c)  The surcharge shall be collected at the same time and in
 49-4    the same manner and shall be administered and enforced in the same
 49-5    manner as the tax imposed under this subchapter.  The comptroller
 49-6    shall adopt any additional procedures needed for the collection,
 49-7    administration, and enforcement of the surcharge authorized by this
 49-8    section and shall deposit all remitted surcharges to the credit of
 49-9    the Texas emissions reduction plan fund.
49-10          (d)  This section expires September 30, 2008.
49-11          SECTION 3.  Subchapter B, Chapter 152, Tax Code, is amended
49-12    by adding Section 152.0215 to read as follows:
49-13          Sec. 152.0215.  TEXAS EMISSIONS REDUCTION PLAN SURCHARGE.
49-14    (a)  A surcharge is imposed on every retail sale or lease of every
49-15    on-road diesel motor vehicle that is over 14,000 pounds and is of a
49-16    model year 1996 or earlier and that is sold or leased in this
49-17    state.  The amount of the surcharge is five percent of the total
49-18    consideration.
49-19          (b)  The surcharge shall be collected at the same time and in
49-20    the same manner and shall be administered and enforced in the same
49-21    manner as the tax imposed under this chapter.  The comptroller by
49-22    rule shall adopt any additional procedures needed for the
49-23    collection, administration, and enforcement of the surcharge
49-24    authorized by this section and shall deposit all remitted
49-25    surcharges to the credit of the Texas emissions reduction plan
49-26    fund.
49-27          (c)  This section expires September 30, 2008.
 50-1          SECTION 4. Section 153.203, Tax Code, is amended to read as
 50-2    follows:
 50-3          Sec. 153.203.  EXCEPTIONS.  (a)  The tax imposed by this
 50-4    subchapter does not apply to:
 50-5                (1)  diesel fuel delivered by a permitted supplier to a
 50-6    common or contract carrier, oceangoing vessel (including ship,
 50-7    tanker, or boat), or barge for export from this state, if the
 50-8    diesel fuel is moved forthwith outside this state;
 50-9                (2)  diesel fuel sold by a permitted supplier to the
50-10    federal government for its exclusive use;
50-11                (3)  diesel fuel sold or delivered by a permitted
50-12    supplier to another permitted supplier or to the bulk storage
50-13    facility of an agricultural bonded user, or dyed diesel fuel sold
50-14    or delivered by a permitted supplier to the bulk storage facility
50-15    of a dyed diesel fuel bonded user, to the bulk storage facility of
50-16    a diesel tax prepaid user, or to a purchaser who provides a signed
50-17    statement as provided by Section 153.205 of this code, but not
50-18    including a delivery of tax-free diesel fuel into the fuel supply
50-19    tanks of a motor vehicle, except for a motor vehicle owned by the
50-20    federal government;
50-21                (4)  diesel fuel sold or delivered by a permitted
50-22    supplier into the storage facility of a permitted aviation fuel
50-23    dealer, from which diesel fuel will be sold or delivered solely
50-24    into the fuel supply tanks of aircraft or aircraft servicing
50-25    equipment;
50-26                (5)  diesel fuel sold or delivered by a permitted
50-27    supplier into fuel supply tanks of railway engines, motorboats, or
 51-1    refrigeration units or other stationary equipment powered by a
 51-2    separate motor from a separate fuel supply tank;
 51-3                (6)  kerosene when delivered by a permitted supplier
 51-4    into a storage facility at a retail business from which all
 51-5    deliveries are exclusively for heating, cooking, lighting, or
 51-6    similar nonhighway use;
 51-7                (7)  diesel fuel sold or delivered by one aviation fuel
 51-8    dealer to another aviation fuel dealer who will deliver the diesel
 51-9    fuel exclusively into the supply tanks of aircraft or aircraft
51-10    servicing equipment;
51-11                (8)  diesel fuel sold by a permitted supplier to a
51-12    public school district in this state for its exclusive use;
51-13                (9)  diesel fuel sold by a permitted supplier to a
51-14    commercial transportation company that provides public school
51-15    transportation services to a school district under Section 34.008,
51-16    Education Code, and used by the company exclusively to provide
51-17    those services; or
51-18                (10)  diesel fuel sold by a permitted supplier to a
51-19    person, other than a political subdivision, who owns, controls,
51-20    operates, or manages a commercial motor vehicle as defined by
51-21    Section 548.001, Transportation Code, if the fuel:
51-22                      (A)  is delivered exclusively into the fuel
51-23    supply tank of the commercial motor vehicle; and
51-24                      (B)  is used exclusively to transport passengers
51-25    for compensation or hire between points in this state on a fixed
51-26    route or schedule.
51-27          (b)  The tax imposed by this subchapter does not apply to the
 52-1    volume of water that is blended together with taxable diesel fuel
 52-2    when the finished product sold or used is clearly identified on the
 52-3    retail pump, storage tank, and sales invoice as a combination of
 52-4    diesel fuel and water.
 52-5          SECTION 5.  Subchapter B, Chapter 156, Tax Code, is amended
 52-6    by adding Section 156.054 to read as follows:
 52-7          Sec. 156.054.  TEXAS EMISSIONS REDUCTION PLAN SURCHARGE.
 52-8    (a)  In this section, "nonattainment area" and "affected county"
 52-9    have the meanings assigned by Section 386.001, Health and Safety
52-10    Code.
52-11          (b)  A person owning, operating, managing, or controlling a
52-12    hotel located in a nonattainment area or an affected county shall
52-13    collect a surcharge imposed by this section.
52-14          (c)  A $1 surcharge is imposed on a person for each day that
52-15    the person has the right to use or possess a room in a hotel that
52-16    is ordinarily used for sleeping.
52-17          (d)  Sections 156.101, 156.102, and 156.103 do not apply to
52-18    the surcharge authorized by this section.
52-19          (e)  The surcharge shall be collected at the same time and in
52-20    the same manner and shall be administered and enforced in the same
52-21    manner as the tax imposed under this subchapter.  The comptroller
52-22    shall adopt any additional procedures needed for the collection,
52-23    administration, and enforcement of the surcharge authorized by this
52-24    section and shall deposit all remitted surcharges to the credit of
52-25    the Texas emissions reduction plan fund.
52-26          (f)  This section expires September 30, 2008.
52-27          SECTION 6.  Section 224.153, Transportation Code, is amended
 53-1    by adding Subsection (c) to read as follows:
 53-2          (c)  A motor vehicle displaying the "low-emissions vehicle"
 53-3    insignia authorized by Section 502.186 in an easily readable
 53-4    location on the back of the vehicle is entitled to travel in a
 53-5    preferential car pool or high occupancy vehicle lane designated
 53-6    under this section regardless of the number of occupants in the
 53-7    vehicle.  This subsection expires August 31, 2008.
 53-8          SECTION 7.  Section 431.073, Transportation Code, is amended
 53-9    by adding Subsection (d) to read as follows:
53-10          (d)  A motor vehicle displaying the "low-emissions vehicle"
53-11    insignia authorized by Section 502.186 in an easily readable
53-12    location on the back of the vehicle is entitled to travel in a high
53-13    occupancy vehicle lane designated under this section regardless of
53-14    the number of occupants in the vehicle.  This subsection expires
53-15    August 31, 2008.
53-16          SECTION 8.  Subchapter D, Chapter 502, Transportation Code,
53-17    is amended by adding Section 502.1675 to read as follows:
53-18          Sec. 502.1675.  TEXAS EMISSIONS REDUCTION PLAN SURCHARGE.
53-19    (a)  In addition to the registration fees charged under Section
53-20    502.167, a surcharge is imposed on the registration of a
53-21    truck-tractor or commercial motor vehicle under that section in an
53-22    amount equal to 10 percent of the total fees due for the
53-23    registration of the truck-tractor or commercial motor vehicle under
53-24    that section.
53-25          (b)  The county tax assessor-collector shall remit the
53-26    surcharge collected under this section to the comptroller at the
53-27    time and in the manner prescribed by the comptroller for deposit in
 54-1    the Texas emissions reduction plan fund.
 54-2          (c)  This section expires August 31, 2008.
 54-3          SECTION 9.  Subchapter D, Chapter 502, Transportation Code,
 54-4    is amended by adding Section 502.186 to read as follows:
 54-5          Sec. 502.186.  "LOW-EMISSIONS VEHICLE" INSIGNIA FOR CERTAIN
 54-6    MOTOR VEHICLES. (a)  At the time of registration or reregistration
 54-7    of the motor vehicle, the department shall issue a specially
 54-8    designed "low-emissions vehicle" insignia for a motor vehicle that
 54-9    meets qualifications for the light-duty motor vehicle purchase or
54-10    lease incentives under Subchapter D, Chapter 386, Health and Safety
54-11    Code.
54-12          (b)  The department shall issue a "low-emissions vehicle"
54-13    insignia under this section without the payment of any additional
54-14    fee to a person who:
54-15                (1)  applies to the department on a form provided by
54-16    the department; and
54-17                (2)  submits proof that the motor vehicle being
54-18    registered is a vehicle described by Subsection (a).
54-19          (c)  This section expires August 31, 2008.
54-20          SECTION 10. Section 548.256, Transportation Code, is amended
54-21    by adding Subsection (c) to read as follows:
54-22          (c)  The inspection station shall collect a fee of $60 for
54-23    each inspection performed under this section and remit the fee to
54-24    the department.  The department shall remit all fees collected
54-25    under this subsection to the comptroller for deposit in the Texas
54-26    emissions reduction plan fund.
54-27          SECTION 11.  Subchapter H, Chapter 548, Transportation Code,
 55-1    is amended by adding Section 548.5055 to read as follows:
 55-2          Sec. 548.5055.  TEXAS EMISSIONS REDUCTION PLAN FEE.  (a)  In
 55-3    this section, "nonattainment area" and "affected county" have the
 55-4    meanings assigned by Section 386.001, Health and Safety Code.
 55-5          (b)  In addition to other fees required by this subchapter,
 55-6    to fund the Texas emissions reduction plan established under
 55-7    Chapter 386, Health and Safety Code, the department shall collect,
 55-8    for every motor vehicle required to be inspected under this
 55-9    chapter, a fee of:
55-10                (1)  $1, if the vehicle being inspected is not
55-11    registered in a nonattainment area or an affected county in this
55-12    state; or
55-13                (2)  $5, if the vehicle being inspected is registered
55-14    in a nonattainment area or an affected county in this state.
55-15          (c)  The department shall remit fees collected under this
55-16    section to the comptroller at the time and in the manner prescribed
55-17    by the comptroller for deposit in the Texas emissions reduction
55-18    plan fund.
55-19          (d)  This section expires August 31, 2008.
55-20          SECTION 12.  (a)  Not later than the 45th day after the
55-21    effective date of this Act, the Texas Natural Resource Conservation
55-22    Commission shall adopt all necessary rules required to implement
55-23    programs established under this Act.
55-24          (b)  Not later than the 45th day after the effective date of
55-25    this Act, the comptroller of public accounts shall adopt all rules
55-26    necessary to enable the comptroller to carry out the comptroller's
55-27    duties under this Act.
 56-1          (c)  Not later than the 45th day after the effective date of
 56-2    this Act, the Public Utility Commission of Texas shall adopt all
 56-3    rules necessary to carry out its duties under this Act.
 56-4          (d)  A municipality or county required to establish
 56-5    procedures under Section 388.003(c), Health and Safety Code, as
 56-6    added by this Act, shall establish the procedures not later than
 56-7    September 1, 2002.
 56-8          SECTION 13.  (a)  Except as provided by Subsection (b) of
 56-9    this section, not later than August 1, 2001, if this Act takes
56-10    immediate effect, or the effective date of this Act if this Act
56-11    does not take immediate effect, the Texas Natural Resource
56-12    Conservation Commission and the comptroller of public accounts
56-13    shall adopt rules necessary to implement the diesel emissions
56-14    reduction incentive program established under Subchapter C, Chapter
56-15    386, Health and Safety Code, as added by this Act.
56-16          (b)  Not later than September 1, 2001, the Texas Natural
56-17    Resource Conservation Commission, as required by Section 386.103,
56-18    Health and Safety Code, as added by this Act, shall adopt criteria
56-19    for setting priorities for projects eligible for grants under
56-20    Subchapter C, Chapter 386, Health and Safety Code, as added by this
56-21    Act.
56-22          (c)  Not later than August 1, 2002, the Texas Natural
56-23    Resource Conservation Commission and the comptroller of public
56-24    accounts shall adopt rules necessary to implement the motor vehicle
56-25    purchase or lease incentive program established under Subchapter D,
56-26    Chapter 386, Health and Safety Code, as added by this Act.
56-27          (d)  Not later than August 1, 2002, the Texas Natural
 57-1    Resource Conservation Commission shall publish the first annual
 57-2    list of vehicles eligible for light-duty motor vehicle purchase or
 57-3    lease incentives, as required by Section 386.156, Health and Safety
 57-4    Code, as added by this Act.
 57-5          SECTION 14.  The vehicle purchase or lease incentives
 57-6    authorized by Sections 386.113 and 386.153, Health and Safety Code,
 57-7    as added by this Act, apply only to the sale or lease of a vehicle
 57-8    that occurs on or after January 1, 2002.
 57-9          SECTION 15. (a)  The Texas Natural Resource Conservation
57-10    Commission shall develop and sponsor a contest in the state's
57-11    public schools to select the best student design for the
57-12    "low-emissions vehicle" insignia authorized by Section 502.186,
57-13    Transportation Code, as added by this Act.  Not later than January
57-14    1, 2002, the commission shall provide to each public school in the
57-15    state a contest packet containing rules and procedures for
57-16    participating in the contest, an explanation of the criteria the
57-17    commission will use in selecting the best design, and a deadline
57-18    for the submission of student designs. The commission shall select
57-19    and announce the winner of the contest not later than the 30th day
57-20    after the contest submission deadline.  The commission may
57-21    publicize and otherwise promote the contest and the winning design.
57-22          (b)  The Texas Natural Resource Conservation Commission shall
57-23    make the "low-emissions vehicle" insignia available to the county
57-24    tax assessor-collector of each county in the state not later than
57-25    the 45th day after the date on which the winning design is selected
57-26    and announced. The county tax assessor-collector of each county in
57-27    the state shall begin issuing the "low-emissions vehicle" insignia
 58-1    to persons who qualify for the insignia not later than the 10th
 58-2    working day after the date the insignia are available.
 58-3          SECTION 16. (a)  In making the initial appointments to the
 58-4    Texas Emissions Reduction Plan Advisory Board as created by Section
 58-5    386.058, Health and Safety Code, as added by this Act, the
 58-6    appointing authorities, by mutual agreement, shall designate their
 58-7    appointees so that seven members' terms expire February 1, 2002,
 58-8    and eight members' terms expire February 1, 2003.
 58-9          (b)  Appointments to the advisory board shall be made not
58-10    later than July 1, 2001, if this Act takes immediate effect, or not
58-11    later than the effective date of this Act, if this Act does not
58-12    take immediate effect.
58-13          SECTION 17.  As soon as practicable after the effective date
58-14    of this Act, the governor shall appoint members to the Texas
58-15    Council on Environmental Technology, as created by Section 387.002,
58-16    Health and Safety Code, as added by this Act.  In making the
58-17    initial appointments, the governor shall designate the appointees
58-18    so that three members' terms expire February 1, 2003, four members'
58-19    terms expire February 1, 2005, and four members' terms expire
58-20    February 1, 2007.
58-21          SECTION 18.  Not later than the 30th day after the adoption
58-22    of rules governing the new technology research and development
58-23    program established under Chapter 387, Health and Safety Code, as
58-24    added by this Act, the Texas Council on Environmental Technology
58-25    shall issue requests for proposals for projects to be funded under
58-26    the new technology research and development program.
58-27          SECTION 19.  On the effective date of this Act, the Texas
 59-1    Natural Resource Conservation Commission shall submit to the United
 59-2    States Environmental Protection Agency a revision to the state
 59-3    implementation plan that deletes the requirements of the
 59-4    construction shift and the early purchase of Tier 2 and Tier 3
 59-5    equipment and adds the provisions of this Act.
 59-6          SECTION 20.  (a)  Notwithstanding any Act of the 77th
 59-7    Legislature, Regular Session, 2001, that purports to abolish all
 59-8    funds and accounts created or re-created in the state treasury by
 59-9    another Act of the 77th Legislature, Regular Session, 2001, the
59-10    Texas emissions reduction plan fund created by Subchapter F,
59-11    Chapter 386, Health and Safety Code, as added by this Act, and the
59-12    environmental research fund created by Section 387.008, Health and
59-13    Safety Code, as added by this Act, are accounts in the general
59-14    revenue fund and the accounts and money deposited to the accounts
59-15    are exempt from any Act of the 77th Legislature, Regular Session,
59-16    2001, that purports to abolish all funds and accounts created or
59-17    re-created by another Act of the 77th Legislature, Regular Session,
59-18    2001, and to require the deposit of money that would be deposited
59-19    to the credit of a special account or fund be deposited to the
59-20    credit of the unobligated portion of the general revenue fund
59-21    unless the fund, account, or dedication is exempted under that Act.
59-22          (b)  This section prevails over any other Act of the 77th
59-23    Legislature, Regular Session, 2001, regardless of the relative
59-24    dates of enactment, that purports to abolish all funds and accounts
59-25    created or re-created in the state treasury by another Act of the
59-26    77th Legislature, Regular Session, 2001, and to require the deposit
59-27    of money that would be deposited to the credit of a special account
 60-1    or fund be deposited to the credit of the unobligated portion of
 60-2    the general revenue fund unless the fund, account, or dedication is
 60-3    exempted under that Act.
 60-4          SECTION 21.  Section 386.002, Health and Safety Code, as
 60-5    added by this Act notwithstanding, the Texas Natural Resource
 60-6    Conservation Commission shall submit the final biennial plan report
 60-7    required by Section 386.057, Health and Safety Code, as added by
 60-8    this Act, to the legislature not later than December 1, 2008.
 60-9          SECTION 22.  The expiration of Sections 151.0515, 152.0215,
60-10    and 156.054, Tax Code, as added by this Act, does not affect an
60-11    obligation that was incurred, a violation that occurred, or an
60-12    offense that was committed under those sections before the
60-13    expiration date of those sections.  An obligation incurred, a
60-14    violation that occurred, or an offense committed before the
60-15    expiration date of those sections is governed by the law in effect
60-16    at the time the obligation was incurred, the violation occurred, or
60-17    the offense was committed, and the former law is continued in
60-18    effect after the expiration date for that purpose.  For purposes of
60-19    this section, a violation occurs or an offense is committed before
60-20    the expiration date of those sections if any element of the
60-21    violation or offense occurs before that date.
60-22          SECTION 23.  This Act takes effect immediately if it receives
60-23    a vote of two-thirds of all the members elected to each house, as
60-24    provided by Section 39, Article III, Texas Constitution.  If this
60-25    Act does not receive the vote necessary for immediate effect, this
60-26    Act takes effect September 1, 2001.