SRC-TJG, EPT H.B. 1365 78(R)   BILL ANALYSIS


Senate Research Center   H.B. 1365
By: Bonnen (Harris)
Natural Resources
4/15/2003
Engrossed


DIGEST AND PURPOSE 

The federal Clean Air Act authorizes the United States Environmental
Protection Agency (EPA) to establish the maximum allowable concentrations
of pollutants that have been shown to endanger human health, harm the
environment, and cause property damage. The Texas Emissions Reduction Plan
(TERP), as established by S.B. 5 of the 77th Texas Legislature, created
incentive programs to assist  in reaching attainment by 2007.  H.B. 1365
makes statutory adjustment to allow for a more efficient TERP and makes
changes to help ensure attainment is reached. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the Texas Commission on
Environmental Quality in SECTION 2 (Section 366.001(2), Health and Safety
Code), SECTION 13 (Section 386.116, Health and Safety Code), SECTION 17
(Section 388.003, Health and Safety Code), and in SECTION 26 of this bill. 

Rulemaking authority is expressly granted to the comptroller of public
accounts in SECTION 28 of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Sections 382.037(g) and (h), Health and Safety Code, as
follows: 
 
(g)  Deletes language specifying January 1, 2004, as the date before which
the Texas Commission on Environmental Quality (TCEQ) may not establish
vehicle fuel content standards to provide for vehicle fuel content for
clean motor vehicle fuels for any area of the state that are more
stringent or restrictive than those standards promulgated by the United
States Environmental Protection Agency applicable to that area unless the
fuel is specifically authorized by the legislature.  Authorizes TCEQ to
retain fuel standards for gasoline that were in effect before September 1,
2003.  Authorizes TCEQ to adopt standards for federal ultra-low sulfur
diesel vehicle fuel for on-road and off-road use not later than June 1,
2005.   Deletes an exception provided by Subsection (h). 

(h)  Authorizes TCEQ to provide incentives for the production and
distribution:  

(1)  of Texas low-emission diesel as described in revisions to the State
Implementation Plan for the control of ozone air pollution; and  

(2)  in the East Texas region as defined by Section 382.05181(c), of
cleanerburning fuels, as provided by Subsection (i). 
  
Deletes text prohibiting TCEQ from requiring distribution of low-emission
diesel prior to February 1, 2005. 

SECTION 2.  Amends Section 386.001(2), Health and Safety Code, to include
in the list of affected counties Henderson County, Hood County, Hunt
County, and any other county designated as an affected county by TCEQ rule
because of deteriorating air quality. 

 SECTION 3.  Amends Section 386.053(d), Health and Safety Code, as follows:

(d)  Authorizes TCEQ to propose revisions to the guidelines and criteria
adopted under this section as necessary to improve the ability of the plan
to achieve its goals. Authorizes revisions to include, among other
changes, adding additional pollutants, adding stationary engines or
engines used in stationary applications, adding vehicles and equipment
that use fuels other than diesel, or adjusting eligible program
categories, as appropriate, to ensure that incentives established under
this chapter achieve the maximum possible emissions reductions.   

SECTION 4.  Amends Sections 386.058(a) and (b), Health and Safety Code, as
follows: 

(a)  Provides that the Texas Emissions Reduction Plan Advisory Board
consists of 17 rather than 15 members appointed as provided by this
section and seven ex officio members as provided by this section. 
 
(b)  Requires the governor to appoint to the advisory board certain
individuals, including a representative of municipal government from a
serious nonattainment area, and a representative of a transportation
authority from such an area. 

SECTION 5.  Amends Sections 386.101(6) and (9), Health and Safety Code, as
follows: 

(6)  Changes the meaning of "on-road diesel" to mean an on-road
diesel-powered motor vehicle that has a gross vehicle weight rating of
greater than 8,500, rather than 10,000, pounds or more. 

(9)  Changes the meaning of "repower" to include replacing an old engine
powering an on-road or non-road diesel with a new engine, a used engine,
an original equipment manufacturer's remanufactured engine, or electric
motors, drives, or fuel cells.  Deletes previous definition of "repower." 

SECTION 6.  Amends Section 386.102(b), Health and Safety Code, as follows:

 (b)  Provides that projects that may be considered for a grant include:
  
  (1)  purchase or lease of on-road or non-road diesels;
  (6)  purchase and use of qualifying fuel;
  (8)  production and distribution of a fuel as provided by Section
382.037(h); and 
(9)  replacement of on-road or non-road diesels with newer on-road or
non-road diesels. 
 
SECTION 7.  Amends Section 386.103(a), Health and Safety Code, to
authorize TCEQ to adopt guidelines to allow a person other than the owner
to apply for and receive a grant in order to improve the ability of the
program to achieve its goals. 
 
SECTION 8.  Amends Sections 386.104(a) and (f), Health and Safety Code, as
follows: 
 
(a)  Requires TCEQ to give preference to a grant applicant that is a
political subdivision or that contracts for services with a political
subdivision.  Provides that if a person that contracts for service with a
political subdivision receives a grant under this subchapter, the person
may spend the grant money only for equipment or a vehicle used to carry
out the contract with the political subdivision. 

(f)  Requires a proposed retrofit, repower, replacement, or add-on
equipment project to document, in a manner acceptable to TCEQ, a reduction
in emissions of oxides of nitrogen of at least 30 percent compared with
the baseline emissions adopted by TCEQ for the relevant engine year and
application.  
 
SECTION 9.  Amends Section 386.105, Health and Safety Code, by adding
Subsection (e) to  authorize TCEQ to allow for the apportionment of
credits associated with a project between the plan and another program or
entity if the part of the credit assigned to the program that is part of
the plan still meets any applicable cost-effectiveness criteria. 
 
SECTION 10.  Amends Section 386.106(a), Health and Safety Code, to
prohibit TCEQ, except as provided by Section 386.107 and except for
infrastructure purchases that are part of a broader retrofit, repower,
replacement, or add-on equipment project, from awarding a grant for a
proposed project the cost-effectiveness of which, calculated in accordance
with Section 386.105 and criteria developed under that section, exceeds
$13,000 per ton of oxides of nitrogen emissions reduced in the
nonattainment area or affected county for which the project is proposed.  

SECTION 11.  Amends Section 386.109, Health and Safety Code, as follows:
 
Sec. 386.109.  ELIGIBLE INFRASTRUCTURE PROJECTS.  Authorizes TCEQ to
consider for funding under Section 386.108 a project that involves:  car
pooling, van pooling, telecommuting, or other workforce programs designed
to reduce traffic congestion; and technology and software that track the
resulting reductions in vehicle miles traveled; and a project that
involves technology and software that monitor in real time the use of
alternative fuels or vehicle add-ons. 

SECTION 12.  Amends Section 386.112(b), Health and Safety Code, to add
diesels certified by the California Air Resources Board to the provisions
of this subsection requiring the program to authorize statewide incentives
for the reimbursement of incremental costs for the purchase or lease,
according to the schedule provided by Section 386.113, of new on-road
diesels that are certified by the United States Environmental Protection
Agency or the California Air Resources Board to an emissions standard
provided by Section 386.113 if the purchaser or lessee of the onroad
diesel agrees to register the vehicle in this state and to operate the
on-road diesel in this state for not less than 75 percent of the on-road
diesel's annual mileage. 
 
SECTION 13.  Amends Subchapter C, Chapter 386, Health and Safety Code, by
adding Sections 386.115 and 386.116, as follows: 
 
Sec. 386.115.  MODIFICATION OF VEHICLE ELIGIBILITY.  Authorizes TCEQ,
after evaluating the availability of vehicles meeting the emissions
standards and after public notice and comment, in consultation with the
advisory board, to expand the program to include other on-road vehicles,
regardless of fuel type used, that meet the emissions standards, have a
gross vehicle weight rating of greater than 8,500 pounds, and are
purchased or leased in lieu of a new on-road diesel. 
 
Sec. 386.116.  SMALL BUSINESS INCENTIVES.  (a)  Defines "small business."

(b)  Requires TCEQ by rule to develop a method of providing fast and
simple access to grants under this subchapter for a small business. 
 
(c)  Requires TCEQ to publicize and promote the availability of grants
under this section to encourage the use of vehicles that produce fewer
emissions. 
 
(d)  Requires TCEQ, on or before December 1 of each even-numbered year, to
report TCEQ actions and results under this section to certain state
officials. 
 
SECTION 14.  Amends Section 386.205, Health and Safety Code, as follows:
 
Sec. 386.205.  EVALUATION OF STATE ENERGY EFFICIENCY PROGRAMS.  (a)
Creates subsection from existing text.  

(b)  Requires TCEQ to compute energy efficiency credits based on the
energy savings incentive programs under Section 39.905, Utilities Code. 
 
(c)  Requires TCEQ to include the new energy efficiency credits described
by  Subsection (b) in the state implementation plan. 
 
SECTION 15.  Amends Section 386.252(a), Health and Safety Code, as follows:
 
(a)  Authorizes money in the fund to be used only to implement and
administer programs established under the plan and requires it to be
allocated as follows: 

(1)  for the diesel emissions reduction incentive program, 87.5, rather
than 72, percent of the money in the fund, of which not less rather than
more than five rather than three percent shall, rather than may, be used
for programs implemented by political subdivisions, rather than
infrastructure projects, and not more than 10 percent may be used for
on-road diesel purchase or lease incentives; 

(2)  for the new technology research and development program, 9.5, rather
than 7.5 percent of the money in the fund, of which up to $250,000 is
allocated for administration, up to $200,000 is allocated for a health
effects study, $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, and not less than 20 percent is to be allocated each year to
support research related to air quality for the Houston-Galveston-Brazoria
and Dallas-Fort Worth nonattainment areas by a nonprofit organization
based in Houston; 

(3)  notwithstanding Subdivisions (1) and (2), for the energy efficiency
grant program, any available money that remains in the fund after other
programs established under the plan are fully funded; and 

(4)  for administrative costs incurred by the utility commission, TCEQ,
the comptroller, and the laboratory, three percent.  [Text redesignated
from Subdivision 5.] 

Deletes text relating to the motor vehicle purchase or lease incentive
program, 15 percent of the money in the fund; and  for the energy
efficiency grant program, 7.5 percent of the money in the fund. 
 
SECTION 16.  Amends Subchapter F, Chapter 386, Health and Safety Code, by
adding Section 386.253, as follows: 
 
Sec. 386.253.  TEMPORARY FEE ON DELIVERY OF UNDYED DIESEL FUEL. (a)
Defines "bulk facility," "cargo tank," and "withdrawal from bulk." 
 
(b)  Sets forth legislative findings and declarations.

(c)  Provides that a temporary fee is imposed on the delivery of undyed
diesel fuel on withdrawal from bulk of that fuel as provided by this
subsection. Requires each operator of a bulk facility on withdrawal from
bulk of undyed diesel fuel to collect from the person who orders the
withdrawal a temporary fee in certain amounts  
  
(d)  Provides that the temporary fee is in addition to and is required to
be administered, reported, collected, and enforced in the same manner as
the fee imposed under Section 26.3574, Water Code, except that a person
who has a permit issued under Section 26.3574, Water Code, is not required
to obtain an additional permit under this section. 
 
(e)  Requires the comptroller to deduct two percent of the amount
collected under this section as the state's charge for its services and to
credit that amount to the general revenue fund.  Requires the balance of
the temporary fees and the penalties and interest collected by the
comptroller under this section to be deposited to the credit of the Texas
emissions reduction plan fund. 
  
(f)  Authorizes money deposited under this section to the credit of the
Texas emissions reduction plan fund to be used only to fund the diesel
emissions reduction incentive program under Subchapter C. 
 
SECTION 17.  Amends Section 388.003, Health and Safety Code, by amending
Subsection (d) and adding Subsections (i), (j), and (k), as follows: 

(d)  Authorizes a municipality or county to establish procedures to adopt:
(1)  local amendments to the International Energy Conservation Code and
the energy efficiency chapter of the International Residential Code; or
(2)  local building codes that meet or exceed the green building standards
under Section 388.009. 
 
(i)  Requires a building certified by a national, state, or local
accredited energy efficiency program to be considered in compliance. 
 
(j)  Requires TCEQ, as required by Section 389.002, to report the energy
savings identified under Subsection (e)(2) to the United States
Environmental Protection Agency and to periodically revise the state
implementation plan to reflect the emissions reductions achieved. 
 
(k)  Requires TCEQ, by rule, to designate a method by which a
municipality, county, builder, or other person can estimate: 
  
(1)  the energy savings and emissions reductions that would be generated
by the adoption of a code, the implementation of a standard under this
chapter, or the construction of a project that implements the code or
standards; and 
  
(2)  the emissions reduction credits that the municipality or county could
accrue toward attainment under the state implementation plan as reported
by TCEQ under Section 389.002. 

SECTION 18.  Amends Section 388.004, Health and Safety Code, as follows:
 
Sec. 388.004.  ENFORCEMENT OF ENERGY STANDARDS OUTSIDE OF MUNICIPALITY.
(a)  New subsection created from existing text.  

(b)  Requires a builder to retain until the third anniversary of the date
on which compliance is achieved the original copy of any documentation
that establishes compliance under this section.  Requires the builder on
receipt of any compliance documentation to provide a copy to the owner of
the building. 
 
(c)  Requires a single-family residence built in the unincorporated area
of a county the construction of which was completed on or after September
1, 2001, but not later than August 31, 2002, to be considered in
compliance. 
 
SECTION 19.  Amends Chapter 388, Health and Safety Code, by adding
Sections 388.009 and 388.010, as follows: 
 
Sec. 388.009.  GREEN BUILDING PROGRAM.  (a) Defines  "National Housing
Act." 
 
(b)  Authorizes the General Land Office (GLO), in consultation with the
laboratory, TCEQ, and an advisory committee appointed by the GLO, to
develop a green building accreditation program for buildings that exceed
the building energy performance standards under Section 388.003 by 15
percent or more. 
 
(c)  Requires GLO, if the General Land Office adopts a program under this
section, in consultation with the laboratory, to update the program on or
before  December 1 of each even-numbered year using the best available
green building practices. 
 
(d)  Requires the program, if GLO adopts a program under this section, to
use a checklist system to produce a green building scorecard to help: 
  
(1)  home buyers compare potential homes and, by providing a copy of the
completed scorecard to a mortgage lender, qualify for energy-efficient
mortgages under the National Housing Act; and 
  
(2)  communities qualify for emissions reduction credits by adopting codes
that meet or exceed the green building or energy performance standards
established under this chapter. 
 
(e)  Requires GLO, if it adopts a program under this section, to base
green building standards for commercial buildings on federal agency
programs. 
 
(f)  Authorizes GLO to establish a public information program to inform
homeowners, sellers, buyers, and others regarding green building ratings. 
 
(g)  Requires the laboratory, if GLO adopts a program under this section,
to establish a system to measure the reduction in energy and emissions
produced under the green building program and report those savings to
TCEQ. 

Sec. 388.010.  OUTREACH TO NEAR-NONATTAINMENT AREAS.  Requires TCEQ to
conduct outreach to near-nonattainment areas and affected counties on the
benefits of implementing energy efficiency initiatives, including the
promotion of green building programs and urban heat island mitigation
techniques, as a way to meet air quality attainment goals under the
federal Clean Air Act (42 U.S.C. Section 7401 et seq.). 

SECTION 20.  Amends Chapter 389, Health and Safety Code, by adding Section
389.003, as follows: 
 
Sec. 389.003.  COMPUTING ENERGY EFFICIENCY CREDITS.  Requires TCEQ to
develop a method to use in computing the credits received for emissions
reductions obtained through energy efficiency initiatives. 
 
SECTION 21.  Amends Subchapter H, Chapter 2155, Government Code, by adding
Section 2155.451, as follows: 
 
Sec. 2155.451.  VENDORS THAT MEET OR EXCEED AIR QUALITY STANDARDS. (a)
Provides that this section applies only to a contract to be performed,
wholly or partly, in an affected county, as that term is defined by
Section 386.001, Health and Safety Code. 
 
(b)  Authorizes TCEQ and state agencies procuring goods or services to:
  
(1)  give preference to goods or services of a vendor that demonstrates
that the vendor meets or exceeds any state or federal environmental
standards, including voluntary standards, relating to air quality; or 
  
(2)  require that a vendor demonstrate that the vendor meets or exceeds
any state or federal environmental standards, including voluntary
standards, relating to air quality. 
 
SECTION 22.  Amends Subchapter Z, Chapter 271, Local Government Code, by
adding Section 271.907, as follows: 
 
Sec. 271.907.  VENDORS THAT MEET OR EXCEED AIR QUALITY STANDARDS. (a)
Defines "governmental agency." 
  
(b)  Provides that this section applies only to a contract to be
performed, wholly or partly, in an affected county, as that term is
defined by Section 386.001, Health and Safety Code. 
 
(c)  Authorizes a governmental agency procuring goods or services to:
  
(1)  give preference to goods or services of a vendor that demonstrates
that the vendor meets or exceeds any state or federal environmental
standards, including voluntary standards, relating to air quality; or 
  
(2)  require that a vendor demonstrate that the vendor meets or exceeds
any state or federal environmental standards, including voluntary
standards, relating to air quality. 
 
SECTION 23.  Amends Section 151.0515, Tax Code, by amending Subsections
(a), (b), and (c) and adding Subsection (b-1), as follows: 

(a)  Redefines  "equipment" to include all off-road, heavy-duty diesel
equipment other than implements of husbandry used solely for agricultural
purposes, including:  mining equipment; and drilling equipment used in
drilling an oil, gas, or water well. 
 
(b)  Provides that in each county in this state, a surcharge is imposed on
the retail sale, lease, or rental of new or used equipment in an amount
equal to two, rather than one, percent of the sale price or the lease or
rental amount. 
 
(b-1)  Provides that in each county in this state, a surcharge is imposed
on the storage, use, or other consumption in this state of new or used
equipment.  Provides that the surcharge is at the same percentage rate as
is provided by Subsection (b) on the sales price or the lease or rental
amount of the equipment. 
 
(c)  Requires the surcharge to be collected at the same time and in the
same manner and shall be administered and enforced in the same manner as
the tax imposed under this chapter, rather than subchapter.  
 
SECTION 24.  Amends Section 224.153, Transportation Code, by adding
Subsection (d) to prohibit the Texas Department of Transportation from
authorizing vehicles addressed in Subsection (c) to use a high occupancy
vehicle lane if such use would violate federal transit funding
restrictions. 
 
SECTION 25.  Amends Section 545.353, Transportation Code, by adding
Subsection (j) to prohibit TCEQ from determining or declaring, or agreeing
to determine or declare, a prima facie speed limit for environmental
purposes on a part of the highway system. 
 
SECTION 26.  Requires TCEQ, not later than December 1, 2003, to adopt
rules needed to implement Sections 388.010 and 389.003, Health and Safety
Code, as added by this Act; and to develop a method for computing energy
efficiency credits, as required by Section 389.003, Health and Safety
Code, as added by this Act. 
 
SECTION 27.  (a)  Requires TCEQ to compose a report that identifies the
emissions reduction strategies likely to be required to achieve the
eight-hour ozone standard component of the National Ambient Air Quality
Standards throughout this state. 
 
(b)  Requires TCEQ to submit the report to certain state officials on the
earlier of the following dates:  January 1, 2004, or the date on which
TCEQ proposes a mid-course review state implementation plan for the
one-hour ozone component of the National Ambient Air Quality Standards for
the Houston-Galveston nonattainment area or the Dallas-Fort Worth
nonattainment area. 
 
 SECTION 28.  Effective date:  the first day of the first month beginning
on or after the earliest date on which this Act may take effect if it
receives a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution.  Provides that if
this Act does not receive the vote necessary for effect before September
1, 2003, this Act takes effect September 1, 2003.  Authorizes the
comptroller of public accounts to adopt emergency rules for the
implementation of this Act. 
 
SECTION 29.  Provides that the expiration of Section 386.253, Health and
Safety Code, as added by this Act, does not affect a fee imposed or an
obligation incurred before the date on which that provision expires.
Provides that a fee imposed or an obligation incurred before the
expiration of that provision is governed by the law in effect on the date
the fee was imposed or the obligation was incurred, and that law is
continued in effect for purposes of the liability for and collection of
that fee or obligation. 
 
SECTION 30.  Requires TCEQ, not later than the first anniversary of the
effective date of this Act,  to develop a method for computing energy
efficiency credits as required by Section 386.205(b), Health and Safety
Code, as added by this Act.