Amend CSHB 2305 (senate committee report) by adding the following appropriately numbered SECTIONS to the bill and renumbering subsequent SECTIONS of the bill accordingly:

SECTION ____.  Sections 2158.004(a), (b), (c), and (d), Government Code, are amended to read as follows:

(a)  A state agency operating a fleet of more than 15 vehicles, excluding law enforcement and emergency vehicles, may not purchase or lease a motor vehicle unless that vehicle uses compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle.

(b)  A state agency may obtain equipment or refueling facilities necessary to operate vehicles using compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle:

(1)  by purchase or lease as authorized by law;

(2)  by gift or loan of the equipment or facilities; or

(3)  by gift or loan of the equipment or facilities or by another arrangement under a service contract for the supply of compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle.

(c)  If the equipment or facilities are donated, loaned, or provided through another arrangement with the supplier of compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle, the supplier is entitled to recoup its actual cost of donating, loaning, or providing the equipment or facilities through its fuel charges under the supply contract.

(d)  The commission may waive the requirements of this section for a state agency on receipt of certification supported by evidence acceptable to the commission that:

(1)  the agency's vehicles will be operating primarily in an area in which neither the agency nor a supplier has or can reasonably be expected to establish adequate refueling for compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle; or

(2)  the agency is unable to obtain equipment or refueling facilities necessary to operate vehicles using compressed natural gas, liquefied natural gas, liquefied petroleum gas, methanol or methanol/gasoline blends of 85 percent or greater, ethanol or ethanol/gasoline blends of 85 percent or greater, biodiesel or biodiesel/diesel blends of 20 percent or greater, hydrogen fuel cells, or electricity, including electricity to power a plug-in hybrid motor vehicle, at a projected cost that is reasonably expected to be no greater than the net costs of continued use of conventional gasoline or diesel fuels, measured over the expected useful life of the equipment or facilities supplied.

SECTION ____.  Subchapter A, Chapter 2158, Government Code, is amended by adding Section 2158.0051 to read as follows:

SECTION ____.  Subchapter B, Chapter 382, Health and Safety Code, is amended by adding Section 382.037 to read as follows:

SECTION ____.  Section 386.001(3), Health and Safety Code, is amended to read as follows:

(3)  "Commission" means the Texas [Natural Resource Conservation] Commission on Environmental Quality.

SECTION ____.  Section 386.002, Health and Safety Code, is amended to read as follows:

Sec. 386.002.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2019].

SECTION ____.  Section 386.051(b), Health and Safety Code, is amended to read as follows:

(b)  Under the plan, the commission and the comptroller shall provide grants or other funding for:

(1)  the diesel emissions reduction incentive program established under Subchapter C, including for infrastructure projects established under that subchapter;

(2)  the motor vehicle purchase or lease incentive program established under Subchapter D;

(3)  the air quality research support program established under Chapter 387;

(4)  the clean school bus program established under Chapter 390;

(5)  the new technology implementation grant program established under Chapter 391;

(6)  the regional air monitoring program established under Section 386.252(a);

(7)  a health effects study as provided by Section 386.252(a);

(8)  air quality planning activities as provided by Section 386.252(d) [386.252(a)];

(9)  a contract with the Energy Systems Laboratory at the Texas A&M Engineering Experiment Station for computation of creditable statewide emissions reductions as provided by Section 386.252(a) [386.252(a)(14)];

(10)  the clean fleet program established under Chapter 392;

(11)  the alternative fueling facilities program established under Chapter 393;

(12)  the natural gas vehicle grant program [and clean transportation triangle program] established under Chapter 394;

(13)  other programs the commission may develop that lead to reduced emissions of nitrogen oxides, particulate matter, or volatile organic compounds in a nonattainment area or affected county;

(14)  other programs the commission may develop that support congestion mitigation to reduce mobile source ozone precursor emissions; [and]

(15)  the seaport and rail yard areas emissions reduction [drayage truck incentive] program established under Subchapter D-1;

(16)  conducting research and other activities associated with making any necessary demonstrations in the state's air quality state implementation plan submitted to the United States Environmental Protection Agency that account for the impact of foreign emissions or an exceptional event;

(18)  the governmental alternative fuel fleet grant program established under Chapter 395.

SECTION ____.  Sections 386.0515(a) and (c), Health and Safety Code, are amended to read as follows:

(a)  In this section:

(1)  "Agricultural[, "agricultural] product transportation" means the transportation of a raw agricultural product from the place of production using a heavy-duty truck to:

(A) [(1)]  a nonattainment area;

(B) [(2)]  an affected county;

(C) [(3)]  a destination inside the clean transportation zone [triangle]; or

(D) [(4)]  a county adjacent to a county described by Paragraph (B) [Subdivision (2)] or that contains an area described by Paragraph (A) or (C) [Subdivision (1) or (3)].

(c)  The determining factor for eligibility for participation in a program established under Chapter 392 or [Chapter] 394[, as added by Chapter 892 (Senate Bill No.   385), Acts of the 82nd Legislature, Regular Session, 2011,] for a project relating to agricultural product transportation is the overall accumulative net reduction in emissions of oxides of nitrogen in a nonattainment area, an affected county, or the clean transportation zone [triangle].

SECTION ____.  Section 386.103, Health and Safety Code, is amended by adding Subsection (c) to read as follows:

SECTION ____.  Section 386.104(j), Health and Safety Code, is amended to read as follows:

(j)  The executive director may [shall] waive any eligibility requirements established under this section on a finding of good cause, which may include a waiver for short lapses in registration or operation attributable to economic conditions, seasonal work, or other circumstances.

SECTION ____.  Sections 386.116(a), (b), and (c), Health and Safety Code, are amended to read as follows:

(a)  In this section, "small business" means a business owned by a person who:

(1)  owns and operates not more than five [two] vehicles, one of which is:

(A)  an on-road diesel [with a pre-1994 engine model]; or

(B)  a non-road diesel [with an engine with uncontrolled emissions]; and

(2)  has owned the vehicle described by Subdivision (1)(A) or (B) for more than two years [one year].

(b)  The commission [by rule] shall develop a method of providing fast and simple access to grants under this subchapter for a small business. The method must:

(c)  The commission shall publicize and promote the availability of grants under this subchapter for small businesses [section] to encourage the use of vehicles that produce fewer emissions.

SECTION ____.  Chapter 386, Health and Safety Code, is amended by adding Subchapter D to read as follows:

SECTION ____.  The heading to Subchapter D-1, Chapter 386, Health and Safety Code, is amended to read as follows:

SUBCHAPTER D-1. SEAPORT AND RAIL YARD AREAS EMISSIONS REDUCTION [DRAYAGE TRUCK INCENTIVE] PROGRAM

SECTION ____.  The heading to Section 386.181, Health and Safety Code, is amended to read as follows:

Sec. 386.181.  DEFINITIONS [DEFINITION]; RULES.

SECTION ____.  Section 386.181(a), Health and Safety Code, is amended to read as follows:

(a)  In this subchapter:

(2)  "Drayage [, "drayage] truck" means a heavy-duty on-road or non-road vehicle that is used for drayage activities and that operates in or transgresses through [truck that transports a load to or from] a seaport or rail yard for the purpose of loading, unloading, or transporting cargo, including transporting empty containers and chassis.

SECTION ____.  Section 386.182, Health and Safety Code, is amended to read as follows:

Sec. 386.182.  COMMISSION DUTIES. (a)  The commission shall:

(1)  develop a purchase incentive program to encourage owners to:

(A)  replace older drayage trucks and cargo handling equipment [with pre-2007 model year engines] with newer drayage trucks and cargo handling equipment; or

(B)  repower drayage trucks and cargo handling equipment; and

(2)  [shall] adopt guidelines necessary to implement the program described by Subdivision (1).

(b)  The commission by rule and guideline shall establish criteria for the engines the models of drayage trucks and cargo handling equipment that are eligible for inclusion in an incentive program under this subchapter.  [The guidelines must provide that a drayage truck owner is not eligible for an incentive payment under this subchapter unless the truck being replaced contains a pre-2007 model year engine and the replacement truck's engine is from model year 2010 or later as determined by the commission and that the truck operates at a seaport or rail yard.]

SECTION ____.  The heading to Section 386.183, Health and Safety Code, is amended to read as follows:

Sec. 386.183.  DRAYAGE TRUCK AND CARGO HANDLING EQUIPMENT PURCHASE INCENTIVE.

SECTION ____.  Section 386.183, Health and Safety Code, is amended by amending Subsections (a), (b), (c), (d), and (e) and adding Subsection (a-1) to read as follows:

(a)  To be eligible for an incentive under this subchapter, a person must:

(1)  purchase a replacement drayage truck, piece of cargo handling equipment, or engine that under Subsection (a-1)(1)(A) or (2)(A), as applicable, and the guidelines adopted by the commission under Section 386.182 is eligible for inclusion in the program for an incentive under this subchapter; and

(2)  agree to:

(A)  register the drayage truck in this state, if the replacement or repowered vehicle is an on-road drayage truck;

(B)  operate the replacement or repowered drayage truck or cargo handling equipment in and within a maximum distance established by the commission of a seaport or rail yard in a nonattainment area of this state for not less than 50 percent of the truck's or equipment's [vehicle's] annual mileage or hours of operation, as determined by the commission; and

(C)  permanently remove the [a pre-2007] drayage truck, cargo handling equipment, or engine replaced under the program [containing a pre-2007 engine owned by the person] from operation in a nonattainment area of this state by destroying the engine in accordance with guidelines established by the commission, and if the incentive is for a replacement drayage truck or cargo handling equipment, scrapping the truck or equipment after the purchase of the replacement [new] truck or equipment in accordance with guidelines established by the commission.

(a-1)  To be eligible for purchase under this program:

(B)  emit oxides of nitrogen at a rate that is at least 25 percent less than the rate at which the truck or equipment being replaced under the program emits such pollutants;

(b)  To receive money under an incentive program provided by this subchapter, the purchaser of a drayage truck, piece of cargo handling equipment, or engine eligible for inclusion in the program must apply for the incentive in the manner provided by law, rule, or guideline of the commission.

(c)  Not more than one incentive may be provided for each drayage truck or piece of cargo handling equipment purchased or repowered.

(d)  An incentive provided under this subchapter may be used to fund not more than 80 percent of, as applicable, the purchase price of:

(1)  the drayage truck or cargo handling equipment; or

(2)  the engine and any other eligible costs associated with repowering the drayage truck or cargo handling equipment, as determined by the commission.

(e)  The commission shall establish procedures to verify that a person who receives an incentive:

(1)  has operated in a seaport or rail yard and owned or leased the drayage truck or cargo handling equipment to be replaced or repowered for at least two years prior to receiving the grant; and

(2)  as applicable:

(A)  after the purpose of the replacement drayage truck or cargo handling equipment, permanently destroys the engine and scraps the [drayage] truck or equipment replaced under the program [that contained the pre-2007 engine owned or leased by the person], in accordance with guidelines established by the commission; or

(B)  after repowering the drayage truck or cargo handling equipment, permanently destroys the engine that was contained in the truck or equipment in accordance with the guidelines established by the commission [, after the purchase of the new truck].

SECTION ____.  Section 386.252, Health and Safety Code, is amended to read as follows:

Sec. 386.252.  USE OF FUND. (a)  Money in the fund may be used only to implement and administer programs established under the plan. Subject to the reallocation of funds by the commission under Subsection (h), money [Money] appropriated to the commission to be used for the programs under Section 386.051(b) shall initially be allocated as follows:

(1)  [not more than] four percent may be used for the clean school bus program under Chapter 390;

(2)  [not more than] three percent may be used for the new technology implementation grant program under Chapter 391, from which at least $1 million will be set aside for electricity storage projects related to renewable energy;

(3)  five percent may [shall] be used for the clean fleet program under Chapter 392;

(4)  not more than $3 million may be used by the commission to fund a regional air monitoring program in commission Regions 3 and 4 to be implemented under the commission's oversight, including direction regarding the type, number, location, and operation of, and data validation practices for, monitors funded by the program through a regional nonprofit entity located in North Texas having representation from counties, municipalities, higher education institutions, and private sector interests across the area;

(5)  10 [not less than 16] percent may [shall] be used for the Texas natural gas vehicle grant program under Chapter 394;

(6)  not more than $6 million [five percent] may be used [to provide grants for natural gas fueling stations under the clean transportation triangle program under Section 394.010;

[(7)     not more than five percent may be used] for the Texas alternative fueling facilities program under Chapter 393, of which a specified amount may be used for fueling stations to provide natural gas fuel, except that money may not be allocated for the Texas alternative fueling facilities program for the state fiscal year ending August 31, 2019;

(7) [(8)]  not more than $750,000 [a specified amount] may be used each year to support research related to air quality as provided by Chapter 387;

(8) [(9)]  not more than $200,000 may be used for a health effects study[;

[(10) $500,000 is to be deposited in the state treasury to the credit of the clean air account created under Section 382.0622 to supplement funding for air quality planning activities in affected counties];

(9) [(11)]  at least $6 [$4] million but not more than $8 [and up to four percent to a maximum of $7] million[, whichever is greater,] is allocated to the commission for administrative costs, including all direct and indirect costs for administering the plan and costs for conducting outreach and education activities, and costs attributable to the review or approval of applications for marketable emissions reduction credits;

(10)  six [(12)     at least two] percent [and up to five percent of the fund is to] may be used by the commission for the seaport and rail yard areas emissions reduction [drayage truck incentive] program established under Subchapter D-1;

(11)  [(13)     not more than] five percent may be used for the light-duty motor vehicle purchase or lease incentive program established under Subchapter D;

(12) [(14)]  not more than $216,000 is allocated to the commission to contract with the Energy Systems Laboratory at the Texas A&M Engineering Experiment Station annually for the development and annual computation of creditable statewide emissions reductions obtained through wind and other renewable energy resources for the state implementation plan;

(13)  not more than $500,000 may be used for studies of or pilot programs for incentives for port authorities located in nonattainment areas or affected counties to encourage cargo movement that reduces emissions of nitrogen oxides and particulate matter [(15)     1.5 percent of the money in the fund is allocated for administrative costs incurred by the laboratory]; and

(14) [(16)]  the balance is to be used by the commission for the diesel emissions reduction incentive program under Subchapter C as determined by the commission.

(b)  [The commission may allocate unexpended money designated for the clean fleet program under Chapter 392 to other programs described under Subsection (a) after the commission allocates money to recipients under the clean fleet program.

[(c)     The commission may allocate unexpended money designated for the Texas alternative fueling facilities program under Chapter 393 to other programs described under Subsection (a) after the commission allocates money to recipients under the alternative fueling facilities program.

[(d)     The commission may reallocate money designated for the Texas natural gas vehicle grant program under Chapter 394 to other programs described under Subsection (a) if:

[(1)     the commission, in consultation with the governor and the advisory board, determines that the use of the money in the fund for that program will cause the state to be in noncompliance with the state implementation plan to the extent that federal action is likely; and

[(2)     the commission finds that the reallocation of some or all of the funding for the program would resolve the noncompliance.

[(e)     Under Subsection (d), the commission may not reallocate more than the minimum amount of money necessary to resolve the noncompliance.

[(e-1)     Money allocated under Subsection (a) to a particular program may be used for another program under the plan as determined by the commission.

[(f)]  Money in the fund may be used by the commission for programs under Sections 386.051(b)(13), (b)(14), and (b-1) as may be appropriated for those programs.

(c) [(g)]  If the legislature does not specify amounts or percentages from the total appropriation to the commission to be allocated under Subsection (a) or (b) [(f)], the commission shall determine the amounts of the total appropriation to be allocated under each of those subsections, such that the total appropriation is expended while maximizing emissions reductions.

(h)  Subject to the limitations outlined in this section and any additional limitations placed on the use of the appropriated funds, money allocated under this section to a particular program may be used for another program under the plan as determined by the commission, based on demand for grants for eligible projects under particular programs after the commission solicits projects to which to award grants according to the initial allocation provisions of this section.

SECTION ____.  Section 390.001, Health and Safety Code, is amended by amending Subdivision (1) and adding Subdivision (1-a) to read as follows:

(1)  "Commission" means the Texas Commission on Environmental Quality.

SECTION ____.  Section 390.002(b), Health and Safety Code, is amended to read as follows:

(b)  Projects that may be considered for a grant under the program include:

(1)  diesel oxidation catalysts for school buses built before 1994;

(2)  diesel particulate filters for school buses built from 1994 to 1998;

(3)  the purchase and use of emission-reducing add-on equipment for school buses, including devices that reduce crankcase emissions;

(4)  the use of qualifying fuel; [and]

(5)  other technologies that the commission finds will bring about significant emissions reductions; and

(6)  replacement of a pre-2007 model year school bus.

SECTION ____.  Section 390.004, Health and Safety Code, is amended by adding Subsections (c) and (d) to read as follows:

SECTION ____.  Section 390.005, Health and Safety Code, is amended to read as follows:

Sec. 390.005.  RESTRICTION ON USE OF GRANT. (a)  A recipient of a grant under this chapter shall use the grant to pay the incremental costs of the project for which the grant is made, which may include the reasonable and necessary expenses incurred for the labor needed to install emissions-reducing equipment. The recipient may not use the grant to pay the recipient's administrative expenses.

SECTION ____.  Section 390.006, Health and Safety Code, is amended to read as follows:

Sec. 390.006.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2019].

SECTION ____.  Section 391.002(b), Health and Safety Code, is amended to read as follows:

(b)  Projects that may be considered for a grant under the program include:

(1)  advanced clean energy projects, as defined by Section 382.003;

(2)  new technology projects that reduce emissions of regulated pollutants from stationary [point] sources;

(C)  the installation of systems that reduce flaring emissions and other site emissions by capturing waste heat to generate electricity solely for on-site service; and

(4) [(3)]  electricity storage projects related to renewable energy, including projects to store electricity produced from wind and solar generation that provide efficient means of making the stored energy available during periods of peak energy use.

SECTION ____.  Section 391.102(f), Health and Safety Code, is amended to read as follows:

(f)  In reviewing a grant application under this chapter [coordinating interagency application review procedures], the commission may [shall]:

(1)  solicit review and comments from:

(A)  the comptroller to assess:

(i)  the financial stability of the applicant;

(ii)  the economic benefits and job creation potential associated with the project; and

(iii)  any other information related to the duties of that office;

(B)  the Public Utility Commission of Texas to assess:

(i)  the reliability of the proposed technology;

(ii)  the feasibility and cost-effectiveness of electric transmission associated with the project; and

(iii)  any other information related to the duties of that agency; and

(C)  the Railroad Commission of Texas to assess:

(i)  the availability and cost of the fuel involved with the project; and

(ii)  any other information related to the duties of that agency; and

(2)  consider the comments received under Subdivision (1) in the commission's grant award decision process[; and

[(3) as part of the report required by Section 391.104, justify awards made to projects that have been negatively reviewed by agencies under Subdivision (1)].

SECTION ____.  Section 391.104, Health and Safety Code, is amended to read as follows:

Sec. 391.104.  REPORTING REQUIREMENTS. The commission [annually] shall include in the biennial plan report required by Section 386.057(b) information [prepare a report] that summarizes the applications received and grants awarded in the preceding biennium [year]. Preparation of the information for the report may [must] include the participation of any [the] state agency [agencies] involved in the review of applications under Section 391.102, if the commission determines participation of the agency is needed.

SECTION ____.  Section 391.205(a), Health and Safety Code, is amended to read as follows:

(a)  Except as provided by Subsection (c), in awarding grants under this chapter the commission shall give preference to projects that:

(1)  involve the transport, use, recovery for use, or prevention of the loss of natural resources originating or produced in this state;

(2)  contain an energy efficiency component; [or]

(3)  include the use of solar, wind, or other renewable energy sources; or

(4)  recover waste heat from the combustion of natural resources and use the heat to generate electricity.

SECTION ____.  Section 391.304, Health and Safety Code, is amended to read as follows:

Sec. 391.304.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2019].

SECTION ____.  Section 392.001(1), Health and Safety Code, is amended to read as follows:

(1)  "Alternative fuel" means a fuel other than gasoline or diesel fuel, including electricity, compressed natural gas, liquefied [liquified] natural gas, hydrogen, propane, or a mixture of fuels containing at least 85 percent methanol by volume.

SECTION ____.  Sections 392.002(b) and (c), Health and Safety Code, are amended to read as follows:

(b)  An entity that places 10 [20] or more qualifying vehicles in service for use entirely in this state during a calendar year is eligible to participate in the program.

(c)  Notwithstanding Subsection (b), an entity that submits a grant application for 10 [20] or more qualifying vehicles is eligible to participate in the program even if the commission denies approval for one or more of the vehicles during the application process.

SECTION ____.  Section 392.003(a), Health and Safety Code, is amended to read as follows:

(a)  A vehicle is a qualifying vehicle that may be considered for a grant under the program if during the eligibility period established by the commission [calendar year] the entity purchases a new on-road vehicle that:

(1)  is certified to the appropriate current federal emissions standards as determined by the commission;

(2)  replaces a diesel-powered on-road vehicle of the same weight classification and use; and

(3)  is a hybrid vehicle or fueled by an alternative fuel.

SECTION ____.  Section 392.004(d), Health and Safety Code, is amended to read as follows:

(d)  The commission shall minimize, to the maximum extent possible, the amount of paperwork required for an application. [An applicant may be required to submit a photograph or other documentation of a vehicle identification number, registration information, inspection information, tire condition, or engine block identification only if the photograph or documentation is requested by the commission after the commission has decided to award a grant to the applicant under this chapter.]

SECTION ____.  Section 392.005, Health and Safety Code, is amended by amending Subsections (c) and (i) and adding Subsection (c-1) to read as follows:

(c)  As a condition of receiving a grant, the qualifying vehicle must be continuously owned, registered, and operated in the state by the grant recipient until the earlier of the fifth anniversary of the activity start date established by the commission [the date of reimbursement of the grant-funded expenses] or [until] the date the vehicle has been in operation for 400,000 miles after the activity start date established by the commission [of reimbursement]. Not less than 75 percent of the annual use of the qualifying vehicle, either mileage or fuel use as determined by the commission, must occur in the state.

(i)  The executive director may [shall] waive the requirements of Subsection (b)(2)(A) on a finding of good cause, which may include a waiver for short lapses in registration or operation attributable to economic conditions, seasonal work, or other circumstances.

SECTION ____.  Section 392.008, Health and Safety Code, is amended to read as follows:

Sec. 392.008.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2017].

SECTION ____.  Section 393.001, Health and Safety Code, is amended by amending Subdivision (1) and adding Subdivision (1-a) to read as follows:

(1)  "Alternative fuel" means a fuel other than gasoline or diesel fuel, other than biodiesel fuel, including electricity, compressed natural gas, liquefied [liquified] natural gas, hydrogen, propane, or a mixture of fuels containing at least 85 percent methanol by volume.

SECTION ____.  Section 393.002, Health and Safety Code, is amended to read as follows:

Sec. 393.002.  PROGRAM. (a)  The commission shall establish and administer the Texas alternative fueling facilities program to provide fueling facilities for alternative fuel in the clean transportation zone [nonattainment areas]. Under the program, the commission shall provide a grant for each eligible facility to offset the cost of those facilities.

(b)  An entity that constructs or[,] reconstructs[, or acquires] an alternative fueling facility is eligible to participate in the program.

SECTION ____.  Section 393.003, Health and Safety Code, is amended by amending Subsections (a) and (b) and adding Subsections (d) and (e) to read as follows:

(a)  An entity operating in this state that constructs or[,] reconstructs[, or acquires] a facility to [store, compress, or] dispense alternative fuels may apply for and receive a grant under the program.

(b)  The commission may [adopt guidelines to] allow a regional planning commission, council of governments, or similar regional planning agency created under Chapter 391, Local Government Code, or a private nonprofit organization to apply for and receive a grant to improve the ability of the program to achieve its goals.

SECTION ____.  Section 393.004, Health and Safety Code, is amended to read as follows:

Sec. 393.004.  ELIGIBILITY OF FACILITIES FOR GRANTS. (a)  In addition to the requirements of this chapter, the commission shall establish additional eligibility and prioritization criteria as needed to implement the program [The commission by rule shall establish criteria for prioritizing facilities eligible to receive grants under this chapter. The commission shall review and revise the criteria as appropriate].

(b)  The prioritization criteria established under Subsection (a) must provide that, for each grant round, the commission may not award a grant to an entity that does not [To be eligible for a grant under the program, the entity receiving the grant must] agree to make the alternative fueling facility accessible and available to the public [persons not associated with the entity] at times designated by the grant contract until each eligible entity that does agree to those terms has been awarded a grant [agreement].

(c)  The commission may not award more than one grant for each facility.

(4)  facilities located in the area in and between the Corpus Christi, Laredo, and San Antonio areas [A recipient of a grant under this chapter is not eligible to receive a second grant under this chapter for the same facility].

SECTION ____.  Section 393.005, Health and Safety Code, is amended to read as follows:

Sec. 393.005.  RESTRICTION ON USE OF GRANT. (a)  A recipient of a grant under this chapter shall use the grant only to pay the costs of the facility for which the grant is made. The recipient may not use the grant to pay the recipient's:

(1)  administrative expenses;

(3)  expenses for equipment or facility improvements that are not directly related to the delivery, storage, compression, or dispensing of the alternative fuel at the facility.

SECTION ____.  Section 393.006, Health and Safety Code, is amended to read as follows:

Sec. 393.006.  AMOUNT OF GRANT. (a)  Grants awarded under this chapter for a facility to provide alternative fuels other than natural gas may not exceed [For each eligible facility for which a recipient is awarded a grant under the program, the commission shall award the grant in an amount equal to] the lesser of:

(1)  50 percent of the sum of the actual eligible costs incurred by the grant recipient within deadlines established by the commission [to construct, reconstruct, or acquire the facility]; or

(2)  $600,000.

SECTION ____.  Section 393.007, Health and Safety Code, is amended to read as follows:

Sec. 393.007.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2018].

SECTION ____.  Section 394.001, Health and Safety Code, is amended by amending Subdivisions (1), (4), (5), and (8) and adding Subdivisions (1-a) and (7-a) to read as follows:

(1)  "Clean transportation zone" has the meaning assigned by Section 393.001 ["Advisory board" means the Texas Emissions Reduction Plan Advisory Board].

(4)  "Heavy-duty motor vehicle" means a motor vehicle that [with]:

(A)  has a gross vehicle weight rating of more than 8,500 pounds; and

(B)  is certified to or has an engine certified to the United States Environmental Protection Agency's emissions standards for heavy-duty vehicles or engines.

(5)  "Incremental cost" has the meaning assigned by Section 386.001 [means the difference between the manufacturer's suggested retail price of a baseline vehicle, the documented dealer price of a baseline vehicle, cost to lease or otherwise commercially finance a baseline vehicle, cost to repower with a baseline engine, or other appropriate baseline cost established by the commission, and the actual cost of the natural gas vehicle purchase, lease, or other commercial financing, or repower].

(8)  "Natural gas vehicle" means a motor vehicle that is powered by a natural gas engine [receives not less than 75 percent of its power from compressed or liquefied natural gas].

SECTION ____.  Section 394.003(a), Health and Safety Code, is amended to read as follows:

(a)  A vehicle is a qualifying vehicle that may be considered for a grant under the program if during the eligibility period established by the commission [calendar year] the entity:

(1)  purchased, leased, or otherwise commercially financed the vehicle as a new on-road heavy-duty or medium-duty motor vehicle that:

(A)  is a natural gas vehicle;

(B)  is certified to the appropriate current federal emissions standards as determined by the commission; and

(C)  replaces an on-road heavy-duty or medium-duty motor vehicle of the same weight classification and use; [and

[(D)     is powered by an engine certified to:

[(i)     emit not more than 0.2 grams of nitrogen oxides per brake horsepower hour; or

[(ii)     meet or exceed the United States Environmental Protection Agency's Bin 5 standard for light-duty engines when powering the vehicle;] or

(2)  repowered the on-road motor vehicle to a natural gas vehicle powered by a natural gas engine that[:

[(A)]  is certified to the appropriate current federal emissions standards as determined by the commission[; and

[(B)     is:

[(i)     a heavy-duty engine that is certified to emit not more than 0.2 grams of nitrogen oxides per brake horsepower hour; or

[(ii)     certified to meet or exceed the United States Environmental Protection Agency's Bin 5 standard for light-duty engines when powering the vehicle].

SECTION ____.  Section 394.005, Health and Safety Code, is amended by amending Subsections (a), (b), (c), (f), (g), and (i) and adding Subsection (c-1) to read as follows:

(a)  The commission [by rule] shall establish criteria for prioritizing qualifying vehicles eligible to receive grants under this chapter. The commission shall review and revise the criteria as appropriate [after consultation with the advisory board].

(b)  To be eligible for a grant under the program:

(1)  the use of the qualifying vehicle must be projected to result in a reduction in emissions of nitrogen oxides of at least 25 percent as compared to the motor vehicle or engine being replaced, based on:

(A)  the baseline emission level set by the commission under Subsection (g); and

(B)  the certified emission rate of the new vehicle; and

(2)  the qualifying vehicle must:

(A)  replace a heavy-duty or medium-duty motor vehicle that:

(i)  is an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;

(ii)  satisfies any minimum average annual mileage or fuel usage requirements established by the commission;

(iii)  satisfies any minimum percentage of annual usage requirements established by the commission; and

(iv)  is in operating condition and has at least two years of remaining useful life, as determined in accordance with criteria established by the commission; [or]

(B)  replace a heavy-duty or medium-duty motor vehicle that:

(C)  be a heavy-duty or medium-duty motor vehicle repowered with a natural gas engine that:

(i)  is installed in an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;

(ii)  satisfies any minimum average annual mileage or fuel usage requirements established by the commission;

(iii)  satisfies any minimum percentage of annual usage requirements established by the commission; and

(iv)  is installed in an on-road vehicle that, at the time of the vehicle's repowering, was in operating condition and had at least two years of remaining useful life, as determined in accordance with criteria established by the commission.

(c)  As a condition of receiving a grant, the qualifying vehicle must be continuously owned, leased, or otherwise commercially financed and registered and operated in the state by the grant recipient until the earlier of the fourth anniversary of the activity start date established by the commission [the date of reimbursement of the grant-funded expenses] or [until] the date the vehicle has been in operation for 400,000 miles after the activity start date established by the commission [of reimbursement]. Not less than 75 percent of the annual use of the qualifying vehicle, either mileage or fuel use as determined by the commission, must occur in the clean transportation zone[:

[(1)     the counties any part of which are included in the area described by Section 394.010(a); or

[(2)     counties designated as nonattainment areas within the meaning of Section 107(d) of the federal Clean Air Act (42 U.S.C. Section 7407)].

(f)  A heavy-duty or medium-duty motor vehicle replaced under this program must be rendered permanently inoperable by crushing the vehicle, by making a hole in the engine block and permanently destroying the frame of the vehicle, or by another method approved by the commission, or be [that] permanently removed [removes the vehicle] from operation in this state. The commission shall establish criteria for ensuring the permanent destruction or permanent removal of the engine or vehicle. The commission shall enforce the destruction and removal requirements. For purposes of this subsection, "permanent removal" means the permanent export of the vehicle or engine to a destination outside of the United States, Canada, or the United Mexican States.

(g)  The commission shall establish baseline emission levels for emissions of nitrogen oxides for on-road heavy-duty or medium-duty motor vehicles being replaced or repowered by using the emission certification for the engine or vehicle being replaced. The commission may consider deterioration of the emission performance of the engine of the vehicle being replaced in establishing the baseline emission level. The commission may consider and establish baseline emission rates for additional pollutants of concern[, as determined by the commission after consultation with the advisory board].

(i)  The executive director may [shall] waive the requirements of Subsection (b)(2)(A)(i) or (B)(ii) on a finding of good cause, which may include short lapses in registration or operation due to economic conditions, seasonal work, or other circumstances.

SECTION ____.  Section 394.006, Health and Safety Code, is amended to read as follows:

Sec. 394.006.  RESTRICTION ON USE OF GRANT. A recipient of a grant under this chapter shall use the grant to pay the incremental costs of the replacement or vehicle repower for which the grant is made, which may include a portion of the initial cost of the natural gas vehicle or natural gas engine, including the cost of the natural gas fuel system and installation [and the reasonable and necessary expenses incurred for the labor needed to install emissions-reducing equipment].  The recipient may not use the grant to pay the recipient's administrative expenses.

SECTION ____.  Section 394.007(c), Health and Safety Code, is amended to read as follows:

(c)  A person may not receive a grant under this chapter that, when combined with any other grant, tax credit, or other governmental incentive, exceeds the incremental cost of the vehicle or vehicle repower for which the grant is awarded. A person shall return to the commission the amount of a grant awarded under this chapter that, when combined with any other grant, tax credit, or other governmental incentive, exceeds the incremental cost of the vehicle or vehicle repower for which the grant is awarded.

SECTION ____.  Sections 394.008(a) and (b), Health and Safety Code, are amended to read as follows:

(a)  The commission shall establish [adopt] procedures for:

(1)  awarding grants under this chapter to reimburse eligible costs; [in the form of rebates; and]

(2)  streamlining the grant application, contracting, reimbursement, and reporting process for qualifying natural gas vehicle purchases or repowers; and

(3)  preapproving the award of grants to applicants who propose to purchase and replace motor vehicles described by Section 394.005(b)(2)(B).

(b)  Procedures established [adopted] under this section must:

(1)  provide for the commission to compile and regularly update a listing of potentially eligible [preapproved] natural gas vehicles and natural gas engines that are certified to the appropriate current federal emissions standards as determined by the commission[:

[(A)     powered by natural gas engines certified to emit not more than 0.2 grams of nitrogen oxides per brake horsepower hour; or

[(B)     certified to the United States Environmental Protection Agency's light-duty Bin 5 standard or better];

(2)  [if a federal standard for the calculation of emissions reductions exists,] provide a method to calculate the reduction in emissions of nitrogen oxides, volatile organic compounds, carbon monoxide, particulate matter, and sulfur compounds for each replacement or repowering;

(3)  assign a standardized grant [rebate] amount for each qualifying vehicle or engine repower under Section 394.007;

(4)  allow for processing applications [rebates] on an ongoing first-come, first-served basis;

(5)  [provide for contracts between the commission and participating dealers under Section 394.009;

[(6)     allow grant recipients to assign their grant funds to participating dealers to offset the purchase or lease price;

[(7)]  require grant applicants to identify natural gas fueling stations that are available to fuel the qualifying vehicle in the area of its use;

(6) [(8)]  provide for payment not later than the 30th day after the date the request for reimbursement for an approved grant is received;

(7) [(9)]  provide for application submission and application status checks using procedures established by the commission, which may include application submission and status checks to be made over the Internet; and

(8) [(10)]  consolidate, simplify, and reduce the administrative work for applicants and the commission associated with grant application, contracting, reimbursement, and reporting requirements.

SECTION ____.  Section 394.012, Health and Safety Code, is amended to read as follows:

Sec. 394.012.  EXPIRATION. This chapter expires on the last day of the state fiscal biennium during which the commission publishes in the Texas Register the notice required by Section 382.037 [August 31, 2017].

SECTION ____.  Subtitle C, Title 5, Health and Safety Code, is amended by adding Chapter 395 to read as follows:

SECTION ____.  Sections 394.009, 394.010, and 394.011, Health and Safety Code, are repealed.

SECTION ____.  As soon as practicable after the effective date of this Act, the Texas Commission on Environmental Quality shall implement the online application process required by Section 395.010(c), Health and Safety Code, as added by this Act. Prior to the implementation of the online application process, the commission may accept applications for a grant under Chapter 395, Health and Safety Code, as added by this Act, in any manner provided by the commission.

SECTION ____.  (a) The changes in law made by this Act apply only to a Texas emissions reduction plan grant awarded on or after the effective date of this Act. A grant awarded before the effective date of this Act is governed by the law in effect on the date the award was made, and the former law is continued in effect for that purpose.

(b)  The changes in law made by this Act to Section 501.138, Transportation Code, apply only to a fee collected on or after the effective date of this Act. A fee collected before the effective date of this Act is governed by the law in effect when the fee was collected, and the former law is continued in effect for that purpose.