By: Landgraf H.B. No. 3868

Substitute the following for H.B. No. 3868:

By: Anchía C.S.H.B. No. 3868

A BILL TO BE ENTITLED

AN ACT

relating to programs established and funded under the Texas emissions reduction plan.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. 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);

(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);

(10) the Texas clean fleet program established under Chapter 392A [392];

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

[(12) the Texas natural gas vehicle grant 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;

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

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

(14) [(16)] conducting research and other activities associated with making any necessary demonstrations to the United States Environmental Protection Agency to account for the impact of foreign emissions or an exceptional event;

(15) [(17)] studies of or pilot programs for incentives for port authorities located in nonattainment areas or affected counties as provided by Section 386.252(a); and

(16) [(18) the governmental alternative fuel fleet grant program established under Chapter 395;

[(19)] remittance of funds to the state highway fund for use by the Texas Department of Transportation for congestion mitigation and air quality improvement projects in nonattainment areas and affected counties[; and

[(20) the Texas hydrogen infrastructure, vehicle, and equipment grant program established under Subchapter G].

SECTION 2. Subchapter B, Chapter 386, Health and Safety Code, is amended by adding Section 386.058 to read as follows:

Sec. 386.058. DATABASE AND PUBLIC OUTREACH INITIATIVE TO FACILITATE REPLACEMENT OF CERTAIN DIESEL-POWERED VEHICLES. (a) The commission shall administer a program designed to facilitate the replacement of pre-2009 model year diesel-powered vehicles by connecting applicants for a grant or other funding with owners of those diesel-powered vehicles to enable the applicant to partner with the vehicle owner for purposes of satisfying the requirements established under the plan.

(b) In administering the program, the commission shall:

(1) develop and maintain a database of owners of pre-2009 model year diesel-powered vehicles who are willing to partner with applicants for a state or local clean vehicle program as described by Subsection (a); and

(2) conduct a public outreach initiative to promote awareness of and participation in the program and in applicable state and local clean vehicle programs.

(c) The database developed under Subsection (b)(1) must:

(1) include owner contact information, vehicle information, and other relevant information as determined by the commission; and

(2) require applicants described by Subsection (a) to register with the commission in order to access the database.

(d) In conducting the public outreach initiative under Subsection (b)(2), the commission:

(1) shall include educational materials and information on the program on the commission's Internet website; and

(2) may collaborate with local governments, regional councils of government, port authorities, and other appropriate entities and stakeholders to recruit participants in the database and to encourage applications for state and local clean vehicle programs.

SECTION 3. Section 386.252(a), Health and Safety Code, is amended to read as follows:

(a) Money in the fund and account 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) and after remittance to the state highway fund under Subsection (a-1), money from the fund and account to be used for the programs under Section 386.051(b) shall initially be allocated as follows:

(1) four percent may be used for the clean school bus program under Chapter 390;

(2) three [eight] percent [total] may be used for [between the Texas hydrogen infrastructure, vehicle, and equipment grant program established under Subchapter G and] 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 [and not more than $8 million may be used for the Texas hydrogen infrastructure, vehicle, and equipment grant program];

(3) 21 [five] percent may be used for the Texas clean fleet program under Chapter 392A [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) [7.5 percent may be used for the Texas natural gas vehicle grant program under Chapter 394;

[(6) not more than $6 million 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)] not more than $750,000 may be used each year to support research related to air quality as provided by Chapter 387;

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

(7) [(9)] at least $6 million but not more than 15 percent may be used by the commission for administrative costs, including all direct and indirect costs for administering the plan, costs for conducting outreach and education activities, and costs attributable to the review or approval of applications for marketable emissions reduction credits;

(8) [(10)] six percent may be used by the commission for the seaport and rail yard areas emissions reduction program established under Subchapter D-1;

(9) [(11)] 2.5 percent may be used for the light-duty motor vehicle purchase or lease incentive program established under Subchapter D;

(10) [(12)] not more than $500,000 may be used by 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 for the state implementation plan that are obtained through:

(A) wind and other renewable energy resources;

(B) energy efficiency programs administered by the Public Utility Commission of Texas or the State Energy Conservation Office; or

(C) the implementation of advanced building energy codes;

(11) [(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; and

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

SECTION 4. Chapter 390, Health and Safety Code, is amended by adding Section 390.0045 to read as follows:

Sec. 390.0045. REFUELING INFRASTRUCTURE, EQUIPMENT, AND SERVICES. A grant recipient may purchase, lease, or install refueling infrastructure or equipment or procure refueling services with money from a grant under the program if:

(1) the purchase, lease, installation, or procurement is made in conjunction with the replacement of a school bus as described by Section 390.004;

(2) the grant recipient demonstrates that a refueling station that meets the needs of the recipient is not available within five miles of the location at which the recipient's school buses are stored or primarily used; and

(3) for the purchase or installation of refueling infrastructure or equipment, the infrastructure or equipment will be owned and operated by the grant recipient, and for the lease of refueling infrastructure or equipment or the procurement of refueling services, a third-party service provider engaged by the grant recipient will provide the infrastructure, equipment, or services.

SECTION 5. Subtitle C, Title 5, Health and Safety Code, is amended by adding Chapter 392A to read as follows:

CHAPTER 392A. TEXAS CLEAN FLEET PROGRAM

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 392A.001. DEFINITIONS. In this chapter:

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

(2) "Certified" includes:

(A) new vehicle or new engine certification by the United States Environmental Protection Agency; or

(B) certification or approval by the United States Environmental Protection Agency of a system to convert a vehicle or engine to operate on an alternative fuel and a demonstration by the emissions data used to certify or approve the vehicle or engine, if the commission determines the testing used to obtain the emissions data is consistent with the testing required for approval of an alternative fuel conversion system for new and relatively new vehicles or engines under 40 C.F.R. Part 85.

(3) "Clean transportation zone" means:

(A) counties containing or intersected by a portion of an interstate highway connecting the cities of Houston, San Antonio, Dallas, and Fort Worth;

(B) counties located within the area bounded by the interstate highways described by Paragraph (A);

(C) counties containing or intersected by a portion of:

(i) an interstate highway connecting San Antonio to Corpus Christi or Laredo;

(ii) the most direct route using highways in the state highway system connecting Corpus Christi and Laredo; or

(iii) a highway corridor connecting Corpus Christi and Houston;

(D) counties located within the area bounded by the highways described by Paragraph (C);

(E) counties in this state all or part of which are included in a nonattainment area designated under Section 107(d) of the federal Clean Air Act (42 U.S.C. Section 7407); and

(F) counties designated as affected counties under Section 386.001.

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

(5) "Executive director" means the executive director of the commission.

(6) "Golf cart" has the meaning assigned by Section 551.401, Transportation Code.

(7) "Heavy-duty motor vehicle" means a motor vehicle that:

(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 motor vehicles or engines.

(8) "Hybrid vehicle" means a vehicle with at least two different energy converters and two different energy storage systems on board the vehicle for the purpose of propelling the vehicle.

(9) "Hydrogen vehicle" means a heavy-duty motor vehicle that uses hydrogen to operate the vehicle, including through the use of hydrogen fuel cells or an internal combustion engine that runs on hydrogen.

(10) "Incremental cost" has the meaning assigned by Section 386.001.

(11) "Medium-duty motor vehicle" means a motor vehicle with a gross vehicle weight rating of more than 8,500 pounds that:

(A) is certified to the United States Environmental Protection Agency's light-duty emissions standard; or

(B) has an engine certified to the United States Environmental Protection Agency's light-duty emissions standard.

(12) "Motor vehicle" has the meaning assigned by Section 386.151.

(13) "Natural gas engine" means an engine that operates:

(A) solely an natural gas, including compressed natural gas, liquefied natural gas, or liquefied petroleum gas; or

(B) on a combination of diesel fuel and natural gas, including compressed natural gas, liquefied natural gas, or liquefied petroleum gas, and is capable of achieving at least 60 percent displacement of diesel fuel with natural gas.

(14) "Natural gas vehicle" means a motor vehicle that is powered by a natural gas engine.

(15) "Neighborhood electric vehicle" means a motor vehicle that:

(A) is originally manufactured to meet, and does meet, the equipment requirements and safety standards established for "low-speed vehicles" in federal Motor Vehicle Safety Standard No. 500 (49 C.F.R. Section 571.500);

(B) is a slow-moving vehicle, as defined by Section 547.001, Transportation Code, that is able to attain a speed of more than 20 miles per hour but not more than 25 miles per hour in one mile on a paved, level surface;

(C) is a four-wheeled motor vehicle;

(D) is powered by electricity or alternative power sources;

(E) has a gross vehicle weight rating of less than 3,000 pounds; and

(F) is not a golf cart.

(16) "Political subdivision" means a county, municipality, school district, junior college di, river authority, water district or other special district, or other political subdivision created under the constitution or a statute of this state.

(17) "Program" means the Texas clean fleet program established under this chapter.

(18) "Program project" means any of the following projects under the program:

(A) natural gas vehicle grant projects, as described by Section 392A.152(a);

(B) large fleet grant projects, as described by Section 392A.153(a);

(C) hydrogen infrastructure and vehicle grant projects, as described by Section 392A.154(a); and

(D) alternative fueling facilities grant projects, as described by Section 392A.155(a)(1).

(19) "Qualifying fuel" includes any liquid or gaseous fuel or additive registered or verified by the United States Environmental Protection Agency that is ultimately dispensed into a motor vehicle or a diesel-powered on-road or non-road vehicle that provides reductions of emissions of oxides of nitrogen beyond reductions required by state or federal law.

(20) "Renewable diesel means" a diesel fuel substitute produced from non-petroleum renewable source and refined from at least ninety-nine percent renewable feedstock.

(21) "Repower" means to replace an old engine powering a vehicle with a new engine, a used engine, a remanufactured engine, or electric motors, drives, or fuel cells.

Sec. 392A.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.

SUBCHAPTER B. ESTABLISHMENT AND ADMINISTRATION OF PROGRAM

Sec. 392A.051. TEXAS CLEAN FLEET PROGRAM. (a) The commission shall establish and administer the Texas clean fleet program to encourage a person that has diesel-powered vehicles to purchase or replace them with alternative fuel or hybrid vehicles, as described in Subsection (b). Under the program, the commission shall provide grants for eligible projects to offset the incremental cost of projects that reduce emissions of oxides of nitrogen from high-emitting sources in designated areas in the clean transportation zone.

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

(1) purchase or lease of on-road or non-road alternative fuel or hybrid vehicles powered by an alternative fuel engine certified to the current federal emissions standards applicable to that type of engine;

(2) replacement or repowering of diesel-powered on-road or non-road vehicles with alternative fuel or hybrid vehicles powered by an alternative fuel engine certified to the current federal emissions standards applicable to that type of engine;

(3) use of qualifying fuel; and

(4) implementation of infrastructure projects.

(c) A project listed in Subsection (b) is not eligible if it is required by any state or federal law, rule or regulation, memorandum of agreement, or other legally binding document. This subsection does not apply to:

(1) an otherwise qualified project, regardless of the fact that the state implementation plan assumes that the change in vehicles, equipment, or operations will occur, if on the date the grant is awarded the change is not required by any state or federal law, rule or regulation, memorandum of agreement, or other legally binding document; or

(2) the purchase of an alternative fuel or hybrid vehicle or infrastructure required only by local law or regulation or by corporate or controlling board policy of a public or private entity.

Sec. 392A.052. REFUELING INFRASTRUCTURE, EQUIPMENT, AND SERVICES. A grant recipient may purchase, lease, or install refueling infrastructure or equipment or procure refueling services with money from a grant under the program if:

(1) the purchase, lease, installation, or procurement is made in conjunction with the purchase or lease of a qualifying vehicle as described by Section 392A.102;

(2) the grant recipient demonstrates that a refueling station that meets the needs of the recipient is not available within five miles of the location at which the recipient's vehicles are stored or primarily used; and

(3) for the purchase or installation of refueling infrastructure or equipment, the infrastructure or equipment will be owned and operated by the grant recipient, and for the lease of refueling infrastructure or equipment or the procurement of refueling services, a third-party service provider engaged by the grant recipient will provide the infrastructure, equipment, or services.

Sec. 392A.053. PROJECT PRIORITIZATION CRITERIA. The commission shall establish criteria for prioritizing projects eligible to receive grants under the program. The commission shall review and revise the criteria as appropriate.

Sec. 392A.054. APPLICATION FOR GRANT. (a) The commission shall develop a simple, standardized application package for grants under the program. The package must include:

(1) an application form;

(2) a brief description of:

(A) the program;

(B) the projects that are eligible for available funding;

(C) the selection criteria and evaluation process; and

(D) the required documentation;

(3) the name of a person or office to contact for more information;

(4) an example of the contract that an applicant will be required to execute before receiving a grant; and

(5) any other information the commission considers useful to inform the applicant and expedite the application process.

(b) The application form shall require as much information as the commission determines is necessary to properly evaluate each project but shall otherwise minimize the information required.

(c) The commission may allow an applicant to seek funds for multiple program projects through a single application, provided that an applicant follows all requirements specified by this chapter and all criteria established by the commission for any specific program project.

(d) The opening date, key requirements, and as much of the application form as the agency deems possible shall be made publicly available no later than 30 days prior to the opening of the application period.

(e) All applications submitted under this chapter shall be considered on a competitive basis.

(f) The commission may adopt guidelines to allow a political subdivision, 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.

Sec. 392A.055. APPLICATION REVIEW PROCEDURES. (a) The commission shall review an application for a grant for a project authorized under this chapter. If the commission determines that an application is incomplete, the commission shall notify the applicant with an explanation of what is missing from the application. The commission shall evaluate the completed application according to the appropriate project criteria. Subject to available funding, the commission shall make a final determination on an application as soon as possible.

(b) The commission shall make every effort to expedite the application review process and to award grants to qualified projects in a timely manner. To the extent possible, the commission shall coordinate project review and approval with any timing constraints related to project purchases or installations to be made by an applicant.

(c) The commission may deny an application for a grant that does not meet the applicable project criteria or that the commission determines is not made in good faith, is not credible, or is not in compliance with this chapter and the goals of this chapter.

(d) Subject to availability of funds, the commission shall award a grant under the program in conjunction with the execution of a contract that obligates the commission to make the grant and the recipient to perform the actions described in the recipient's grant application. The contract must incorporate provisions for recapturing grant money in proportion to any loss of emissions reductions compared with the volume of emissions reductions that was projected in awarding the grant. Grant money recaptured under the contract provision shall be deposited in the Texas emissions reduction plan fund and reallocated for other projects under this chapter.

(e) The commission shall provide for application submission and application status checks using procedures established by the commission, which may include application submission and application status checks to be made over the Internet.

Sec. 392A.056. ADDITIONAL GRANT PROCEDURES. (a) The commission, or its designee, shall oversee the grant process and is responsible for final approval of any grant under the program.

(b) The commission shall ensure payment for awards under the program is made not later than the 30th day after the date the request for reimbursement for an approved grant is approved by the commission.

SUBCHAPTER C. GENERAL GRANT CONDITIONS AND ELIGIBILITY

REQUIREMENTS

Sec. 392A.101. DUTY OF GRANT RECIPIENT TO MEET GRANT CONDITIONS. A grant recipient under this chapter is responsible for meeting all grant conditions, including reporting and monitoring as required by the commission through the grant contract.

Sec. 392A.102. QUALIFYING VEHICLES. (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 the person purchases, leases, or otherwise commercially finances a new on-road or non-road vehicle or, subject to Subsection (c), a used alternative fuel vehicle, that:

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

(2) replaces or repowers a diesel-powered on-road or non-road vehicle of the same use;

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

(4) emits oxides of nitrogen at a rate that is at least 25 percent less than the rate at which the engine in the vehicle being replaced or repowered under the program emits such pollutants.

(b) A vehicle is not a qualifying vehicle if the vehicle:

(1) is a neighborhood electric vehicle;

(2) has been used as a qualifying vehicle to qualify for a grant under the program for a previous reporting period or by another person; or

(3) has qualified for a similar grant in another jurisdiction if that grant is relied on for credit in the state implementation plan.

(c) A used alternative fuel vehicle that is proposed to replace an on-road or non-road heavy-duty or medium-duty motor vehicle must be of a model year that is not more than six years older than the current model year at the time of the submission of the grant application.

Sec. 392A.103. GRANT ELIGIBILITY FOR QUALIFYING VEHICLE REPLACEMENT OR REPOWERING PROJECT. (a) To be eligible for a grant for the replacement or repowering of a qualifying vehicle under the program, a project must:

(1) result in a reduction in emissions of nitrogen oxides or other pollutants, as established by the commission, of at least 25 percent, 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) replace or repower a vehicle that:

(A) is an on-road or non-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;

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

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

(D) is in operating condition and has at least two years of remaining useful life, as determined in accordance with criteria established by the commission.

(b) 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 or the date the vehicle has been in operation for 400,000 miles after the activity start date established by the commission. 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.

(c) For purposes of Subsection (b), the commission shall establish the activity start date based on the date the commission accepts verification of the disposition of the vehicle being replaced.

(d) The commission shall include and enforce the usage provisions in the grant contracts. The commission shall monitor compliance with the contract requirements, including submission of reports on at least an annual basis, or more frequently as determined by the commission.

(e) The commission by contract may require the return of all or a portion of grant funds for a grant recipient's noncompliance with the usage and percentage of use requirements under this section.

(f) A vehicle or engine 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 that permanently removes the vehicle from operation in this state. The commission shall provide a means for an applicant to propose an alternative method of complying with the requirements of this subsection. The commission shall enforce the requirements of this subsection.

(g) The commission shall establish baseline emission levels for emissions of nitrogen oxides for on-road or non-road vehicles being replaced. The commission may consider and establish baseline emission rates for additional pollutants of concern, as determined by the commission.

(h) Mileage requirements established by the commission under Subsection (a)(2)(B) may differ by vehicle weight categories and type of use.

(i) On a finding of good cause, the executive director may waive the requirements of:

(1) Subsection (a)(2)(A), which may include a waiver for short lapses in registration or operation attributable to economic conditions, seasonal work, or other circumstances; or

(2) Subsection (f).

Sec. 392A.104. GRANT ELIGIBILITY FOR PROJECT RELATING TO AGRICULTURAL PRODUCT TRANSPORTATION. (a) In this section, "agricultural product transportation" means the transportation of a raw agricultural product from the place of production using a heavy-duty truck to:

(1) a nonattainment area, as defined by Section 386.001;

(2) an affected county, as defined by Section 386.001;

(3) a destination inside the clean transportation zone; or

(4) a county adjacent to a county described by Subdivision (2) or that contains an area described by Subdivision (1) or (3).

(b) Notwithstanding any other provision of this chapter, the determining factor for eligibility for participation in the program with respect to a grant 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.

Sec. 392A.105. RESTRICTION ON USE OF GRANT. Subject to Section 392A.152(c), a recipient of a grant under the program shall use the grant to pay the incremental costs of any purchase, replacement, or repowering project for which the grant is made, which may include the initial cost of the alternative fuel or hybrid vehicle, 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.

SUBCHAPTER D. PROGRAM PROJECTS

Sec. 392A.151. ALLOCATION OF FUNDS. (a) Money initially allocated to the program under Section 386.252(a)(3) shall be allocated to the program projects as follows:

(1) 35.5 percent for natural gas vehicle grant projects, as described by Section 392A.152(a);

(2) 24 percent for large fleet grant projects, as described by Section 392A.153(a);

(3) 23.5 percent for hydrogen infrastructure and vehicle grant projects, as described by Section 392A.154(a); and

(4) 17 percent for the alternative fueling facilities grant projects, as described by Section 392A.155(a)(1).

(b) Subject to the limitations outlined in this subsection, money allocated under this section to a particular program project may be used for another program project as determined by the commission, based on demand for grants for eligible projects after the commission solicits projects to which to award grants according to the initial allocation provisions of this section. If the commission determines there is insufficient demand for the program projects described by Subsection (a), the commission may redirect funds to other programs under the Texas emissions reduction plan, as provided by Section 386.252(h).

Sec. 392A.152. NATURAL GAS VEHICLE GRANT PROJECTS. (a) This section applies only to a grant under the program involving:

(1) the replacement of a motor vehicle with a natural gas vehicle; or

(2) the repowering of a motor vehicle with a natural gas engine.

(b) As a condition of receiving a grant to which this section applies and in addition to the requirements of Section 392A.103(b), not less than 75 percent of the annual use of the qualifying natural gas vehicle, either mileage or fuel use as determined by the commission, must occur in the clean transportation zone.

(c) For purposes of Section 392A.105, the incremental costs of the replacement or repower of a motor vehicle for which a grant to which this section applies 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.

(d) The commission shall develop a grant schedule for grants to which this section applies that:

(1) assigns a standardized grant in an amount up to 90 percent of the incremental cost of a natural gas vehicle purchase, lease, other commercial finance, or repowering;

(2) is based on:

(A) the certified emission level of nitrogen oxides, or other pollutants as determined by the commission, of the engine powering the natural gas vehicle; and

(B) the usage of the natural gas vehicle; and

(3) may take into account the overall emissions reduction achieved by the natural gas vehicle.

(e) Not less than 60 percent of the total amount of grants to which this section applies that are awarded for the purchase and repowering of motor vehicles must be awarded to motor vehicles with a gross vehicle weight rating of at least 33,001 pounds. The minimum grant requirement under this subsection does not apply if the commission does not receive enough grant applications to satisfy the requirement for motor vehicles described by this subsection that are eligible to receive a grant to which this section applies.

(f) A person may not receive a grant to which this section applies 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 the program 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.

(g) The commission shall reduce the amount of a grant to which this section applies as necessary to keep the combined incentive total at or below the incremental cost of the vehicle for which the grant is awarded if the grant recipient is eligible to receive an automatic incentive at or before the time a grant is awarded under the program.

(h) The commission shall establish criteria for:

(1) awarding grants to which this section applies to reimburse eligible costs;

(2) the commission to compile and regularly update a listing of potentially eligible natural gas vehicles and natural gas engines that are certified to the appropriate current federal emissions standards as determined by the commission;

(3) 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;

(4) assigning a standardized grant amount for each qualifying vehicle or engine repower for grants to which this section applies; and

(5) requiring applicants for grants to which this section applies to identify natural gas fueling stations that are available to fuel the qualifying vehicle in the area of its use.

Sec. 392A.153. LARGE FLEET GRANT PROJECTS. (a) This section applies only to a grant under the program for an entity operating in this state that:

(1) operates a fleet of at least 75 vehicles; and

(2) places 10 or more qualifying vehicles in service for use entirely in this state during a calendar year.

(b) Notwithstanding Subsection (a)(2), an entity that submits a grant application for 10 or more qualifying vehicles is eligible to participate in the program with respect to a grant to which this section applies even if the commission denies approval for one or more of the vehicles during the application process.

(c) The amount the commission shall award for each vehicle being replaced or repowered is up to 90 percent, as determined by the commission, of the incremental cost for replacement or repowering of a heavy-duty vehicle. The commission may revise the standards for determining grant amounts as needed to reflect changes to federal emission standards and decisions on pollutants of concern.

Sec. 392A.154. HYDROGEN INFRASTRUCTURE AND VEHICLE GRANT PROJECTS. (a) This section applies only to a grant under the program involving a hydrogen project described by Subsection (b).

(b) The commission shall prioritize the awarding of grants to which this section applies in the following order:

(1) projects to replace on-road heavy-duty motor vehicles with newer on-road hydrogen vehicles;

(2) projects to purchase, lease, or repower on-road heavy-duty motor vehicles with a powertrain that runs on or is powered by hydrogen;

(3) projects to implement hydrogen refueling infrastructure that will be accessible and available to the public at times designated by the grant contract;

(4) projects to replace non-road heavy-duty motor vehicles with newer non-road hydrogen vehicles; and

(5) projects to purchase, lease, or repower non-road heavy-duty motor vehicles with a powertrain that runs on or is powered by hydrogen.

(c) Subject to Subsection (b), in awarding grants to which this section applies, the commission shall give preference to the most cost-effective projects that will result in the greatest reduction in emissions of oxides of nitrogen.

(d) The amount the commission shall award for each vehicle being replaced or repowered is up to 90 percent, as determined by the commission, of the incremental cost for replacement of a heavy-duty or light-duty vehicle. The commission may revise the standards for determining grant amounts as needed to reflect changes to federal emission standards and decisions on pollutants of concern.

(e) In addition to the requirements of this chapter, the commission shall establish additional eligibility and prioritization criteria as needed to implement the program with respect to grants to which this section applies.

Sec. 392A.155. ALTERNATIVE FUELING FACILITIES GRANT PROJECTS. (a) This section:

(1) applies only to a grant issued under the program to provide fueling facilities for alternative fuel in the clean transportation zone; and

(2) does not apply to the use of grant money under the program that is used pursuant to Section 392A.052 for the purchase, lease, or installation of refueling infrastructure or equipment or the procurement of refueling services.

(b) Under the program, the commission shall provide a grant to which this section applies for each eligible alternative fueling facility to offset the cost of those facilities.

(c) An entity that constructs or reconstructs an alternative fueling facility is eligible to participate in the program with respect to a grant to which this section applies.

(d) To ensure that alternative fuel vehicles have access to fuel and to build the foundation for a self-sustaining market for alternative fuels in Texas, the commission shall provide for strategically placed fueling facilities in the clean transportation zone to enable an alternative fuel vehicle to travel in those areas relying solely on the alternative fuel.

(e) The commission shall maintain a listing to be made available to the public online of all vehicle fueling facilities that have received funding through a grant to which this section applies, including location and hours of operation.

(f) An entity operating in this state that constructs or reconstructs a facility to dispense alternative fuels may apply for and receive a grant under the program with respect to a grant to which this section applies.

(g) In addition to the requirements of this chapter, the commission shall establish additional eligibility and prioritization criteria as needed to implement the program with respect to grants to which this section applies.

(h) The prioritization criteria established under Subsection (g) must provide that, for each grant round, the commission may not award a grant to an entity that does not agree to make the alternative fueling facility accessible and available to the public at times designated by the grant contract until each eligible entity that does agree to those terms has been awarded a grant.

(i) The commission may not award more than one grant to which this section applies for each facility.

(j) The commission may give preference to or otherwise limit grant selections to:

(1) fueling facilities providing specific types of alternative fuels;

(2) fueling facilities in a specified area or location; and

(3) fueling facilities meeting other specified prioritization criteria established by the commission.

(k) For fueling facilities to provide natural gas, the commission shall give preference to:

(1) facilities providing both liquefied natural gas and compressed natural gas at a single location;

(2) facilities located not more than one mile from an interstate highway system;

(3) facilities located in the area in and between the Houston, San Antonio, and Dallas-Fort Worth areas; and

(4) facilities located in the area in and between the Corpus Christi, Laredo, and San Antonio areas.

(l) A recipient of a grant to which this section applies shall use the grant only to pay the costs of the facility for which the grant is made. In addition to any other limitation provided by this chapter, the recipient may not use the grant to pay the recipient's:

(1) expenses for the purchase of land or an interest in land; or

(2) 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.

(m) Each grant to which this section applies must be awarded using a contract that requires the recipient to meet operational, maintenance, and reporting requirements as specified by the commission.

(n) A grant to which this section applies that is awarded for a facility to provide an alternative fuel other than natural gas may not exceed 50 percent of the sum of the actual eligible costs incurred by the grant recipient within deadlines established by the commission.

(o) A grant to which this section applies that is awarded for a facility to provide natural gas may not exceed:

(1) $400,000 for a compressed natural gas facility;

(2) $400,000 for a liquefied natural gas facility; or

(3) $600,000 for a facility providing both liquefied and compressed natural gas.

(p) The requirements of Sections 392A.052 and 392A.103 do not apply to an applicant that is only seeking funding through a grant to which this section applies.

SECTION 6. The following provisions of the Health and Safety Code are repealed:

(1) Section 386.0515;

(2) Subchapter G, Chapter 386;

(3) Section 386.252(g);

(4) Chapter 392;

(5) Chapter 393;

(6) Chapter 394; and

(7) Chapter 395.

SECTION 7. This Act takes effect September 1, 2025.