HBA-LJP C.S.S.B. 5 77(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 5 By: Brown, J. E. "Buster" Environmental Regulation 5/17/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE The federal Clean Air Act authorizes the United States Environmental Protection Agency (EPA) to establish maximum allowable concentrations of pollutants because these pollutants in excess can endanger human health, harm the environment, and cause property damage. Areas where pollutants exceed EPA standards may be designated as nonattainment areas and if these areas do not meet EPA standards by 2007, all non-complying states face severe sanctions. Texas has four nonattainment and three near nonattainment areas, comprising 37 counties. These areas represent 70 percent of the state's population, 76 percent of aggregate employment, 82 percent of personal income, and 83 percent of gross state product. Because of Texas' integrated economy, all parts of the state have a stake in bringing these areas into compliance. The Texas Natural Resource Conservation Commission (TNRCC) has submitted a state implementation plan to regulate emissions in nonattainment areas. However, there are significant areas of potential emissions reductions TNRCC cannot regulate but which may be realized through an incentive program. C.S.S.B. 5 establishes the Texas emissions reduction plan to reduce emissions in the state. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas Natural Resource Conservation Commission in SECTION 1 (Sections 386.053, 386.112, 386.152, and 386.157 Health and Safety Code), SECTION 12, and SECTION 13, to the Comptroller of Public Accounts in SECTION 1 (Sections 386.053, 386.152, and 386.160, Health and Safety Code), SECTION 3 (Section 152.0215, Tax Code), SECTION 12, and SECTION 13, and to the Public Utility Commission of Texas in SECTION 12 of this bill. ANALYSIS Texas Emissions Reduction Plan C.S.S.B. 5 amends the Health and Safety Code to require the Public Utility Commission of Texas (PUC), the Texas Natural Resource Conservation Commission (TNRCC), the comptroller of public accounts (comptroller), and the Texas Council on Environmental Technology (council) to establish and administer the Texas emissions reduction plan (plan). The bill requires TNRCC, the comptroller, and the council to provide grants or funding under the plan for the diesel emissions reduction incentive program, the motor vehicle purchase or lease incentive program, the new technology research and development program, and requires PUC to provide grants or funding for the energy efficiency grant program. The bill provides that equipment purchased before September 1, 2001 is not eligible for a grant or other funding under the plan (Sec. 386.051). The bill establishes the Texas emissions reduction plan fund (fund) as an account in the state treasury that is administered by the comptroller and sets forth provisions relating to the fees, surcharges, and payments that compose the fund, and the use and allocation of the fund for programs implemented and administered under the plan (Secs. 386.251 and 386.252). The bill sets forth provisions regarding the administration of the plan by TNRCC, including the duties, objectives, guidelines and criteria for awarding grants under the plan, monitoring procedures of the achievements of projects awarded grants, the general availability of emission reduction credits, the availability of emissions reductions in certain nonattainment areas, and the review and reporting requirements of TNRCC (Secs. 386.052-386.057 and SECTION 21). The bill establishes the Texas Emissions Reduction Plan Advisory Board (advisory board) consisting of 15 appointed members and sets forth provisions relating to the appointment, composition, terms, and the presiding officer of the members of the advisory board. The bill requires the advisory board to review the plan and recommend to TNRCC changes to revenue sources or financial incentives or any legislative, regulatory, or budgetary changes needed. The bill requires TNRCC to provide necessary staff support to the advisory board (Sec. 386.058 and SECTION 16). The bill provides for the expiration of provisions relating to the Texas emissions reduction plan, the diesel emissions reduction incentive program, the motor vehicle purchase or lease incentive program, the energy efficiency grant program, and the Texas emissions reduction plan fund on August 31, 2008 (Sec. 386.002). Diesel Emissions Reduction Incentive Program The bill requires TNRCC to establish and administer a diesel emissions reduction incentive program, under which TNRCC is required to provide grants for eligible projects to offset the incremental cost of projects that reduce emissions of oxides of nitrogen from high-emitting diesel sources in nonattainment or affected counties of the state. The bill requires TNRCC and the comptroller to adopt rules necessary to implement the diesel emissions reduction incentive program. The bill requires TNRCC to adopt criteria for setting priorities for projects eligible for grants no later than September 1, 2001 (Secs. 386.102-386.104 and SECTION 13). The bill sets forth provisions relating to TNRCC's calculations of cost-effectiveness, the criteria of cost-effectiveness regarding the determination of grant money, and adjustments to maximum costeffectiveness amount and award amount (Secs. 386.105-386.107). The bill requires TNRCC to provide funding from the fund for infrastructure projects (Secs. 386.108-386.111). The bill requires TNRCC to develop a purchase or lease incentive program for new on-road diesels and to adopt rules necessary to implement the program and to reimburse an eligible person who purchases or leases a new on-road diesel on or after January 1, 2002. The bill sets forth provisions relating to the statewide incentives for the reimbursement of incremental costs for the purchase or lease and the new onroad diesel purchase or lease incentive schedule (Secs. 386.112-386.114, and SECTION 14). Motor Vehicle Purchase or Lease Incentive Program The bill requires TNRCC and the comptroller to develop a purchase or lease incentive program to authorize incentives for the purchase or lease of new light-duty motor vehicles and to adopt rules necessary to implement the program not later than August 1, 2002. The bill sets forth provisions relating to the lightduty motor vehicle purchase or lease incentive schedule program and the authorization of TNRCC to modify the incentive emissions standards of a new light-duty motor vehicle to improve the ability of the program to achieve its goals (Secs. 386.151-386.154 and SECTION 13). At the beginning but not later than July 1 of each year preceding the vehicle model year, manufacturers of motor vehicles are required to provide a list of the new vehicle models that the manufacturer intends to sell in this state during that model year that meet certain incentive emissions standards. The bill also sets forth provisions regarding the publication and the distribution of these lists by the comptroller (Secs. 386.155 and 386.156). The bill requires the motor vehicle manufacturer or distributor to affix on each new light-duty motor vehicle for sale or lease in this state a clearly legible label that shows the vehicle's class rating under the United States Environmental Protection Agency's (EPA) vehicle class rating system. If EPA develops another vehicle emissions rating system that gives consumers similar information by vehicle class, then TNRCC is authorized by rule to designate that vehicle rating system. The bill provides that a person who purchases or leases a new light-duty motor vehicle which meets incentive emissions standards is eligible for lowemissions vehicle purchase or lease incentive that is prorated based on a four-year lease term. To receive an incentive under a motor vehicle purchase or lease incentive program, the purchaser or lessee of an eligible new light-duty motor vehicle is required to apply for the incentive in the manner provided by law or by rule of the comptroller (Secs. 386.157 and 386.158). The bill sets forth provisions relating to the public information program for the motor vehicle purchase or lease incentive program and the report of the program by the comptroller to TNRCC (Secs. 386.159 and 386.161). The bill requires the comptroller, by rule, to develop a method to administer and account for the motor vehicle purchase or lease incentives, and sets forth provisions relating to the comptroller prescribing the accounting, reporting, and verification procedures for motor vehicle purchase or lease incentives to new motor vehicle dealers and leasing agents (Sec. 386.160). The bill requires TNRCC no later than August 1, 2002 to publish the first annual list of vehicles eligible for light-duty motor vehicle purchase or lease incentives (SECTION 13). Energy Efficiency Grant Program The bill requires the PUC to develop an energy efficiency grant program to increase the retirement, replacement, and recycling of materials and appliances that contribute to peak energy demand to ensure the reduction of energy demand, peak loads, and associated emissions of air contaminants. The bill sets forth provisions regarding the administration of grants, the limitation on the duty of participating utilities, and a required annual report by PUC to TNRCC (Secs. 386.202-386.205). Texas Building Energy Performance Standards The bill provides for the adoption of the energy efficiency chapter of the International Residential Code, as it existed on May 1, 2001, as the energy code in this state for single-family residential construction. To achieve energy conservation in all other residential, commercial, and industrial construction, the bill provides for the adoption of the International Energy Conservation Code as it existed on May 1, 2001 for use in this state. The bill sets forth procedures regarding the requirement of a municipality or county to adopt certain procedures no later than September 1, 2002 and the authorization of a municipality or county to establish procedures to adopt local amendments to the International Residential Code and the International Energy Conservation Code (Secs. 388.003 and SECTION 12). The bill also provides for the enforcement of energy standards for construction outside of a municipality (Sec. 388.004). The bill requires affected counties or political subdivisions, other than school districts, in a nonattainment area or in an affected county to implement all energy efficiency measures under established standards regarding the financing of existing buildings or facilities to reduce electricity consumption by the existing facilities of the political subdivision. The bill sets forth provisions regarding the goals and reporting and evaluation requirements relating to energy conservation measures of political subdivisions (Secs. 388.005388.006). The bill sets forth the information and technical assistance that the Energy Systems Laboratory at the Texas Engineering Experiment Station of The Texas A&M University (laboratory) is required to make available or to provide to specified entities and persons. The bill requires the laboratory to develop a standardized report format relating to specified structures' energy performance to be used by providers of home energy ratings (Secs. 388.007-388.008). Federal Recognition of Emissions Reduction The bill requires TNRCC, using information derived from the required reports by PUC, the laboratory, and the State Energy Conservation Office, to take all appropriate and necessary actions for EPA to credit the emissions reductions achieved under the Texas emissions reduction plan and Texas building energy performance standards to appropriate emissions reduction objectives in the state implementation plan (Sec. 389.002). New Technology Research and Development Program The bill establishes the Texas Council on Environmental Technology (council) to identify, evaluate, and deploy new technologies and assist TNRCC and EPA in the process of ensuring credit for technological advancements. The bill provides that the council is composed of 11 members and sets forth provisions relating to the appointment and terms of the members, and the council offices and projects location (Sec. 387.002 and SECTION 17). The bill requires the council to establish and administer a new technology research program to provide grants to be used to support development of emissions-reducing technologies with the designated monies from the environmental research fund contained within the general revenue fund (Secs. 387.003 and 387.008). The bill also authorizes the council to appoint advisory committees to assist the council in performing its duties and sets forth provisions relating to the composition of the advisory committees. The bill requires the council, no later than December 1, 2002, and not later than December 1 of each subsequent second year, to report to the legislature on projects funded under the new technology research and development program (Secs. 387.009 and 387.010). The bill requires the council to issue a request no later than the 30th day after the adoption of rules governing the new technology research and development program, for proposals for projects and sets forth provisions relating to the specific request of the council for proposals or program opportunity notices for technology projects (Sec. 387.004 and SECTION 18). The bill also sets forth provisions regarding the priorities and considerations of eligibility, the application process, and cost-sharing of projects for a grant under the new technology research and development program (Secs. 387.005-387.007). Low-Emissions Vehicles Insignia for Motor Vehicles The bill amends the Transportation Code to require the Department of Public Safety (DPS) to issue at the time of registration or reregistration of a motor vehicle a specially designed "low-emissions vehicle" insignia for a motor vehicle that is eligible for a motor vehicle purchase or lease incentive. The bill also sets forth provisions relating to the fee for the insignia and the distribution of the funds under the plan to pay for the cost to the county for administrating the insignia. The bill provides for the expiration of provisions relating to the insignia on August 31, 2008 (Sec. 502.186). The bill requires TNRCC to develop and sponsor a contest in the state's public schools to select the best student design for the "low-emissions vehicle" insignia. The bill requires TNRCC no later than the 45th day after the date on which the winning design is selected to make available to the county tax assessor-collector of each county in the state the insignia and sets forth provisions relating to the issuance of the insignias (SECTION 15). Until August 31, 2008, the bill entitles motor vehicles with a "low-emissions vehicle" insignia in an easily readable location on the back of the vehicle to travel in a preferential car pool or high occupancy vehicle lane, regardless of the number of occupants in the motor vehicle (Secs. 224.153 and 431.073). Fees The bill provides for the imposition of a surcharge on the registration of a truck-tractor or commercial motor vehicle in an amount equal to 10 percent of the total fees due for the registration of the truck-tractor or commercial motor vehicle. The bill also requires DPS to collect a $1 fee for the inspection of a motor vehicle registered in an area of the state that is not a nonattainment or affected county and a $5 fee if the vehicle is registered in a nonattainment or affected county. The bill also sets forth provisions relating to the remittance and deposit of the above fees and surcharge on the inspection of a motor vehicle. The bill provides for the expiration of the provisions regarding inspection fees and surcharges on August 31, 2008 (Sec. 502.1675 and 548.5055). The bill amends the Transportation Code to require a motor vehicle inspection station to collect a $60 fee for a motor vehicle inspection for a vehicle that is brought into Texas and sets forth provisions regarding the remittance of the fee and deposit of the fee in the Texas emissions reduction plan fund (Sec. 548.256). The bill amends the Tax Code to provide for a surcharge equal to 0.5 percent of the price on lease or rental amount on the retail sale, lease, or rental, of new or used equipment and sets forth provisions relating to the collection, administration, enforcement, and deposit into the Texas emissions reduction plan fund of the surcharge. The bill provides for the imposition of a surcharge that is five percent of the total consideration on every retail sale or lease of every on-road diesel motor vehicle over 14, 000 pounds and is of a model year 1996 or earlier that is sold or leased in this state. The bill requires the comptroller by rule to adopt any additional procedures for the collection, administration, and enforcement of the on-road diesel motor vehicle surcharge and sets forth provisions for the deposit of these remitted surcharges. Provisions imposing a diesel fuel tax do not apply to the volume of water that is blended together with taxable diesel fuel that is clearly labeled. The bill also provides for the imposition of a $1 surcharge on a person, except specified persons, for each day that the person has the right to use or possess a room in a hotel that is ordinarily used for sleeping in a nonattainment or affected county and sets forth provisions relating to the collection, administration, and enforcement of such a surcharge, and the deposit of all the remitted surcharges. The bill provides for the expiration of the provisions relating to the above surcharges on September 30, 2008 (Secs. 151.0515, 152.0215, and 156.054). The bill requires TNRCC to adopt all necessary rules to implement the programs established under this Act and to require the comptroller to adopt all rules necessary to carry out the duties delegated to the comptroller under this Act. The bill requires PUC to adopt all necessary rules to carry out its duties delegated under this Act no later than the 45th day after the effective date of this Act (SECTION 12). The bill requires TNRCC to submit to EPA on the effective date of this Act a revision of the state implementation plan that deletes the requirements of the construction shift and the early purchase of Tier 2 and Tier 3 equipment and adds this Act (SECTION 19). The bill sets forth provisions for the continuance of this Act when certain other Acts of the 77th Legislature, Regular Session, 2001 purport to abolish certain funds and accounts (SECTION 20). EFFECTIVE DATE On passage, or if the Act does not receive the necessary vote, the Act takes effect September 1, 2001. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 5 amends the original to remove the requirement of the Texas Natural Resource Conservation Commission (TNRCC) to develop the local government grant program to encourage the retirement and replacement of inefficient residential cooling equipment, household appliances and high-emitting noncommercial lawn and garden equipment, and the weatherization of residences. The substitute requires the Public Utility Commission of Texas (PUC) to develop an energy efficiency grant program to increase the retirement, replacement, and recycling of materials and appliances that contribute to peak energy demand to ensure the reduction of energy demand, peak loads, and associated emissions of air contaminants (Sec. 386.202, Health and Safety Code). C.S.S.B. 5 adds the PUC to the entities that are required to establish and administer the Texas emissions reduction plan (plan) and requires PUC to adopt all rules necessary to carry out the duties delegated under this Act no later than the 45th day after effective date of this Act. The substitute removes the requirement of TNRCC to consider examples of programs in other states that are similar to the Texas emissions reduction plan (plan) during the development of the guidelines and criteria. The substitute modifies the use of emissions reduction credits that are generated under a project under the plan and the reviews and reports related to projects under the plan required to be submitted by TNRCC to the legislature (Secs. 386.051, 386.053, 386.055, and 386.057, Health and Safety Code and SECTION 12). The substitute increases, from 13 to 15, the number of members of the Texas Emissions Reduction Plan Advisory Board and modifies the composition and terms of the members of the advisory board (Sec. 386.058, Health and Safety Code and SECTION 16). The substitute modifies the applicability of the diesel emissions reduction incentive program (program) with regard to vehicles. The substitute removes the requirement that the owner or operator of a facility that constitutes or contains a stationary source hold a permit for the facility to receive a grant under the program. The substitute removes the authorization of TNRCC to establish maximum grant awards per vehicle or engine replaced for projects that propose to repower off-road equipment (Secs. 386.102, 386.104, 386.106, and 386.108, Health and Safety Code). The substitute authorizes TNRCC to modify the incentive emissions standards of the on-road diesel purchase or lease incentive program to improve the ability of the program to achieve its goals and modifies the incentive emissions standards of the light-duty motor vehicle purchase or lease program (Secs. 386.114 and 386.153, Health and Safety Code). If the United States Environmental Protection Agency (EPA) develops another vehicle emissions rating system, besides the current rating system, that gives consumers similar information by vehicle class, then TNRCC is authorized by rule to designate that vehicle rating system for purposes of the "low-emissions vehicle" insignia program (Sec. 386.157, Health and Safety Code). The substitute also modifies the allocation of the Texas emissions reduction plan fund (Sec. 386.252, Health and Safety Code). C.S.S.B. 5 modifies the projects that are eligible for funding under the new technology research and development program and provides that members of an advisory committee to the Texas Council on Environmental Technology are not entitled to compensation (Secs. 387.005 and 387.009, Health and Safety Code). C.S.S.B. 5 requires, rather than authorizes, a municipality or a county to establish certain procedures relating to the enforcement and administration of the adopted International Residential Code and the International Energy Conservation Code. The substitute modifies procedures related to local amendments to these codes and the report that the Energy Systems Laboratory at the Texas Engineering Experiment Station of The Texas A&M University (laboratory) is required to annually submit to TNRCC regarding the local amendments. The substitute sets forth provisions regarding the powers of a municipality within the boundaries of an airport operated by a joint board and modifies the enforcement of energy standards outside the local jurisdiction of a municipality (Secs. 388.003 and 388.004, Health and Safety Code). The substitute removes provisions relating to the requirement of a municipality in a nonattainment area and an affected county, the nonattainment area, and the affected county to develop an energy efficiency and weatherization program for existing buildings that would result in certain energy savings. The substitute removes the Texas building energy performance standards advisory committee and removes the authorization of the laboratory to develop certain guidelines and programs, and set and collect fees to perform certain tasks in support of the additional energy conservation programs. The substitute sets forth provisions relating to the requirement of affected counties or political subdivisions in a nonattainment area or in an affected county to implement all energy efficiency measures under the standards established regarding the financing of existing buildings or facilities to reduce electricity consumption by the existing facilities of the political subdivision. The substitute sets forth provisions regarding the required information, technical assistance, and the standardized report format relating to specified structures' energy performance made available, provided, or developed by the laboratory (Secs. 388.005-388.008, Health and Safety Code). The substitute requires TNRCC to take all appropriate and necessary actions for EPA to credit the emissions reductions achieved under Texas emissions reduction plan and Texas building energy performance standards to appropriate emissions reduction objectives in the state implementation plan (Sec. 389.002, Health and Safety Code). C.S.S.B. 5 increases, from 0.25 percent to 0.5 percent of the price on lease or rental amount, the surcharge imposed on the retail sale, lease, or rental, of new or used equipment. The substitute also increases, from one percent to five percent of the total consideration, the surcharge imposed on every retail sale or lease of every on-road diesel motor vehicle over 14, 000 pounds and is of a model year 1996 or earlier that is sold or leased in this state (Secs. 151.0515 and 152.0215, Tax Code). The substitute removes the expiration date on provisions relating to the exemption of diesel fuel tax on diesel fuel blended with water which is clearly identified. The substitute requires an inspection station to collect a $60 fee for motor vehicle inspection for a vehicle that is brought into Texas and sets forth provisions regarding the remittance of the fee and deposit of the fee in the plan's fund (Sec. 548.256, Transportation Code). C.S.S.B. 5 renames the "clean vehicle" insignia the "low-emissions vehicle" insignia and removes the entitlement of motor vehicles with a "low-emissions vehicle" insignia to privileged parking spaces of a political subdivision or private property owner (Sec. 502.186, Transportation Code). The substitute sets forth provisions regarding the development and sponsoring by TNRCC of a contest in the state's public schools to select the best student design for the "low-emissions vehicle" insignia. The substitute requires TNRCC, rather than the Texas Department of Transportation, no later than the 45th day after the date on which the winning design is selected, rather than the 45th day after the effective date of the Act, to make available to the county tax assessor-collector of each county in the state the insignia (SECTION 15). The substitute removes provisions imposing a surcharge for each application for an original or renewal certificate of number for a motorboat that will be operated primarily in a nonattainment or affected county of this state. The substitute removes provisions imposing a surcharge of $1 on each fare collected by a taxi driver for transportation by taxi to and from an airport in a county that is in a nonattainment or affected county and provisions imposing a surcharge of 25 cents per gallon on the sale of bunker fuel by a petroleum refining facility in this state. C.S.S.B. 5 requires the comptroller and TNRCC to adopt rules necessary to implement the motor vehicle purchase or lease incentive program no later than August 1, 2002. The substitute also modifies the date by which TNRCC is required to publish the first annual list of vehicles eligible for light-duty motor vehicle purchase or lease incentives (SECTION 13).