Honorable Joe Straus, Speaker of the House, House of Representatives
FROM:
Ursula Parks, Director, Legislative Budget Board
IN RE:
HB14 by Morrison (Relating to the Texas emissions reduction plan.), As Passed 2nd House
Estimated Two-year Net Impact to General Revenue Related Funds for HB14, As Passed 2nd House: an impact of $0 through the biennium ending August 31, 2017.
The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill.
Fiscal Year
Probable Net Positive/(Negative) Impact to General Revenue Related Funds
2016
$0
2017
$0
2018
$0
2019
$0
2020
$0
2021
$0
Fiscal Year
Probable Savings/(Cost) from Texas Emissions Reduction Plan 5071
2016
($29,047,668)
2017
($29,035,068)
2018
($29,035,068)
2019
($29,035,068)
2020
($107,653,495)
2021
($107,653,495)
Fiscal Year
Change in Number of State Employees from FY 2015
2016
6.0
2017
6.0
2018
6.0
2019
6.0
2020
6.0
Fiscal Analysis
The bill would extend the TERP program, currently set to expire on August 31, 2019, to August 31, 2023. It would also extend several of the grant programs within TERP. The Light-Duty Motor Vehicle Purchase or Lease Incentive (LDMVPLI) program would be extended from August 31, 2015 to August 31, 2023. The Texas Clean School Bus program and the New Technology Implementation Grant (NTIG) program would both be extended from August 31, 2019 to August 31, 2023. The Texas Clean Fleet Program (CFP) and the Texas Natural Gas Vehicle Grant (NGVG) program would both be extended from August 31, 2017 to August 31, 2023.
The bill would combine the Alternative Fueling Facilities (AFF) program and the Clean Transportation Triangle (CTT) programs into one program under the AFF program name, and the combined program would be extended from August 31, 2018 to August 31, 2023. The funding allocations for the two programs, each receiving 5 percent of TERP funding under current law, would be set at 10 percent.
The bill would expand the definition of the "Clean Transportation Triangle to include areas within the existing triangle, as well as areas between Laredo, San Antonio, and Corpus Christi, as well as areas designated as nonattainment or near nonattainment, thereby making those areas eligible for AFF program funding.
The bill would make changes to the NTIG program, changing the eligibility of emissions sources under the program from "point sources" to "stationary sources." The list of projects eligible for funding under the NTIG program would be expanded to include new technology projects that reduce emissions from oil and gas production, storage, and transmission activities through replacement, repower, or retrofit of stationary compressor engines or installation of systems to reduce or eliminate flaring of gas or the burning of gas using other combustion control devices.
The bill would remove an allocation of 1.5 percent of TERP funds for the Texas Engineering Experiment Station (TEES) for administrative costs, but it would provide that funds in the TERP Account No. 5071 could still be allocated to TEES for administrative costs.
The bill would add Government Code, Section 2158.0051 to establish the state's intent that the motor vehicle fleet of a state agency, a county, or a municipality with 15 or more vehicles be converted to alternative fuel vehicles or replaced with alternative fuel vehicles, and would prioritize the replacement of vehicles in the fleet. The bill would exempt law enforcement and emergency vehicles from the replacement and conversion goal.
The bill would establish Health and Safety Code, Chapter 395, as the Governmental Alternative Fuel Fleet (GAFF) grant program. The bill would define alternative fuel as compressed natural gas, liquefied natural gas, liquefied petroleum gas, hydrogen fuel cells, or electricity, including electricity to power fully electric vehicles and plug-in hybrid motor vehicles. The bill would define a political subdivision as a school district, junior college district, river authority, water district or other special district, or other political subdivision created by the state, other than a county or municipality.
The bill would require the Texas Commission on Environmental Quality (TCEQ) to administer the new GAFF grant program that would assist an eligible state agency, county, municipality, or political subdivision with the purchase or lease of new motor vehicles that operate primarily on an alternative fuel. Political subdivisions, as defined by the bill, would only be eligible to apply for grants from the program if on April 1 of an even-numbered year, the TCEQ has awarded less than 75 percent of the total amount to be awarded in that fiscal year to other eligible applicants.
The program could also provide a grant to an eligible recipient to lease or purchase and install refueling infrastructure and equipment that would store and dispense the alternative fuel needed for a motor vehicle, and would also provide for the procurement of infrastructure services. The TCEQ would establish specific criteria and procedures to implement and administer the program, and TCEQ would be required to provide an online application for the submission of all required application documents. Funding for alternative fueling stations would be limited to 10 percent of total grant awards.
The bill would provide for the GAFF grant program as an eligible use of General Revenue-Dedicated Texas Emissions Reduction Plan (TERP) Account No. 5071 funding. The bill would limit the use of TERP funding for the program to not more than 3 percent of the balance in the account at the beginning of each fiscal year. The bill would authorize appropriations to the TCEQ from the General Revenue-Dedicated Texas Emissions Reduction Plan (TERP) Account No. 5071 to administer the grant program, not to exceed 0.75 percent of the total amount of money awarded under the program in that fiscal year and not to exceed $1.0 million. The bill would require TCEQ to submit a biennial report including information on grant awards made under the program.
The bill would take effect September 1, 2015. The GAFF grant program would expire August 31, 2025.
Methodology
Because the bill expands the types of NTIG projects that are eligible for TERP funding to include oil and gas-related activities, the TCEQ would require additional staff with expertise in the oil and gas field. It is estimated that an additional 3.0 FTEs and $277,668 in fiscal year 2016 and $265,068 in 2017 would be needed for to administer the TERP grant program. These amounts are included in the table above and would be paid out of the General Revenue-Dedicated TERP Account No. 5071.
With regard to the bill's extension of the TERP program and various component program extension, this estimate assumes that the overall level of TERP appropriations would continue at 2014-15 levels, with the addition of funding for the 3.0 FTEs discussed above. Allocations for various programs would, however change. For instance, the LDMVPLI, which is set to expire on August 31, 2015, would receive a $3.9 million annual allocation of TERP Account No. 5071 funding, whereas under current law those funds would go to the DERI program.
In fiscal years 2018 through 2019, the TCFP and NGVG, which would receive no funding in those years under current law would, upon enactment of the bill, continue receiving their current TERP Account No. 5071 allocations of 5 percent for the TCFP program and 16 percent for the NGVG program. These allocations for 2014-15 are $3.9 million and $12.4 million, respectively. Under current law, this combined $16.3 million allocation would be allocated instead to the DERI program for fiscal years 2018 and 2019. With regard to the combined AFF program, the program would receive the 10 percent allocation, or $7.8 million. Because the CTT program would expire under current law at the end of fiscal year 2017, that allocation which would have also shifted to the DERI as well in fiscal year 2018 and future years would be directed instead to the AFF program.
This estimate assumes that no additional funds would be appropriated out of the TERP Account No. 5071 because of the bill's expansion of the areas eligible for CTT program funding. Because the bill does not increase the maximum statutory allocation for CTT grant funding of 5 percent of TERP funding, this estimate assumes that funding for the program would remain constant, as compared to 2014-15, while the number of entities eligible to apply for funding would increase.
In fiscal years 2020 and 2021, this estimate assumes that the current amount of TERP funds would continue at current levels to fund the various existing programs which would continue to operate through fiscal year 2023, whereas under current law, appropriations out of the TERP Account No. 5071 to the TCEQ would be eliminated. Thus, in the table above a cost to the TERP Account No. 5071 is included equal to 2014-15 appropriations to the TCEQ of $77.6 million per year.
With regard to the GAFF grant program, this estimate assumes that the Legislature would appropriate 3 percent of the balance in the TERP Account No. 5071. Based on the Comptroller's Biennial Revenue Estimate for 2016-17 of a fiscal year 2016 beginning balance of $959.1 million, it is assumed that $28.77 million would be appropriated per fiscal year beginning in fiscal year 2016, of which not more than $2.9 million would be available for alternative fueling station funding. That amount could increase or decrease in future years depending on how much the Legislature would appropriate from the account, as well as actual revenues to the account. TCEQ reports that it would require additional resources to administer the grant program established by the bill. This estimate assumes that appropriations would be limited to 0.75 percent of the amount of grant funds, or $215,775 per fiscal year. This amount represents a portion of the total cost to the TERP Account No. 5071 shown in the table above. This estimate assumes that funding would provide for 3.0 additional FTEs. The TCEQ identified the need for additional funding for professional service contract costs in fiscal year 2016 for the development of the online application system required by the bill. These costs are not included because this estimate assumes that any costs in excess of the $215,755 per fiscal year authorized for administration would reasonably be absorbed using existing agency resources.
Although the cost to convert the entire state fleet of vehicles to alternative fuels could be much greater than the estimate included in the table above, this estimate assumes that agencies would only convert their fleets to the extent that alternative fuel vehicle purchases are priced similarly to conventional fuel vehicles or to the extent that agencies would receive funding from the grant program established by the bill. Existing language in Government Code, Section 2158.0013 provides that purchasing requirements relating to alternatively fueled vehicles established by Government Code, Subchapter A do not apply if a state agency demonstrates that the state agency will incur net costs in meeting the requirements of the subchapter, and the bill provides additionally that fleets be converted to alternative fuels only when feasible. Thus, it is assumed that state agencies would only comply with the goals for alternative fuel fleet conversions when funds would be made available for that purpose or when no net costs would be incurred.
This estimate assumes that $25.7 million would be available for fleet conversions grants, after accounting for the 10 percent authorized funding for alternative fueling stations and the 0.75 percent allocation for administrative costs. This estimate assumes that $6.9 million annually would be used to convert 865 light-duty vehicles at a cost of $8,000 each; $4.6 million annually would be used to convert 360 medium-duty vehicles at a cost of $13,000 each; and $14.1 million annually would be used to convert 216 heavy-duty vehicles at a cost of $65,000 each. The average conversion cost for such vehicles was supplied by TCEQ.
Although enactment of the bill would require the TCEQ to retain the 49.0 Full-Time Equivalent (FTE) currently administering the TERP program in 2020 and 2021, no increase in FTEs is shown in the table above in those years, other than the 3.0 FTEs added for the expansion of the NTIG program and the 3.0 FTEs to administer the GAFF grant program. Although the non-GAFF grant program FTEs would otherwise be eliminated under current law with the program set to expire on August 31, 2019, the FTE level would not otherwise change as compared to fiscal year 2015.
This estimate assumes that appropriations to TEES for TERP activities would remain at 2014-15 levels.
Local Government Impact
Local governments could incur impacts in converting their fleets to alternative fuel vehicles. This estimate assumes that local governments would only convert their fleets to the extent that alternative fuel vehicle purchases are priced similarly to conventional fuel vehicles or to the extent that local governments would receive funding from the $25.7 million per fiscal year appropriated for the grant program. Therefore, the bill could result in savings to a local government in an amount equivalent to the grant funding provided by the TCEQ.
Source Agencies:
304 Comptroller of Public Accounts, 582 Commission on Environmental Quality, 712 Texas A&M Engineering Experiment Station