Presentation Overview of the Texas Emissions Reduction ... of... · Overview of the Texas Emissions Reduction Plan (TERP) Joint Hearing of the House Appropriations Subcommittee on

Overview of the Texas Emissions

Reduction Plan (TERP)

Joint Hearing of the House Appropriations

Subcommittee on Article VI, VII and VIII

and the House Environmental Regulation

Committee

July 10, 2012

Prepared by the Legislative Budget Board

Why TERP Was Created

• TERP was established through the creation of Chapters 386 and 387,

Health and Safety Code, by Senate Bill 5, 77th Legislature, 2001, with

the following main goals set forth:

– “To assure that the air in this state is safe to breathe and meets

minimum federal standards established under the Federal Clean

Air Act (42 U.S.C. section 7407);

– To develop multi-pollutant approaches to solving the state’s

environmental problems; and

– To adequately fund research and development that would make the

state a leader in new technologies to solve environmental problems

while creating new business and industry in the state.”

Source: Texas Commission on Environmental Quality, Texas Emissions Reduction Plan (TERP),

Biennial Report to the Legislature, December 2010

Legislative Budget Board

Page 2

Why TERP Was Created (continued)

• Senate Bill 5 also directed the Texas Commission on Environmental Quality

(TCEQ) to remove two mandatory measures for achieving reductions in

emissions of nitrogen oxides (NOx) identified in the State Implementation

Plan (SIP) and replace them with voluntary incentive programs. (SIP is the

roadmap the state uses to demonstrate to the EPA that Texas is on target to

reach air quality attainment status.) The two removed strategies, which applied

only in the Houston-Galveston and Dallas-Fort Worth nonattainment areas,

were:

– a limit on the use of construction and industrial equipment from 6 am to

10 am; and

– a requirement that the owners and operators of certain diesel-powered

construction, industrial, commercial, and lawn and garden equipment

replace such equipment with authorized lower emission replacements.

• Incentive funding was also expected to be available to help achieve reductions

in counties located in other nonattainment and near-nonattainment areas.


Page 3

Original Components of TERP


Page 4

Program Implementing Agency Current Status

Emissions Reduction Incentive

grants

TCEQ Existing

Motor Vehicle Purchase or Lease

Incentive Program

Comptroller of Public Accounts Never Implemented

Energy Efficiency Program Public Utility Commission Never Implemented

New Technology Research and

Development Program (NTRD)

Texas Council on Environmental

Technology (TCET) —moved to

the TCEQ in 2005

Eliminated by the 82nd

Legislature, Regular

Session, 2011

Building Energy Performance

Standards

Energy Systems Laboratory

(ESL) /Texas Engineering

Experiment Station (TEES)

Existing

Original TERP Funding Sources

• Revenues related to the TERP were directed to the Texas Emissions

Reduction Plan Account No. 5071, a General Revenue-Dedicated

Account created through passage of Senate Bill 5, 77th Legislature,

2001. The fund originally consisted of:

– $225 title fee on out-of-state vehicles registering in Texas, the

main funding source envisioned for TERP;

– 10 percent of the registration fee for truck trailers and commercial

vehicles;

– 1 percent surcharge on each sale, lease, or rental of new or used

off-road equipment;

– 2.5 percent of the total charge for retail sale or lease of year 1996

and earlier on-road diesel motor vehicles over 14,000 lbs; and

– $10 fee per commercial motor vehicle inspection.


Page 5

Funding Changes by the 78th

Legislature


Page 6

• The $225 registration fee on out-of-state vehicles was ruled unconstitutional and was never collected.

• To replace the lost revenue source, the 78th Legislature enacted House Bill 1365 which: – Established a new vehicle title transfer fee of $15 to $20,

depending on the county where the vehicle is registered;

– Increased the surcharge on off-road equipment from 1 to 2 percent; and

– Added a 1 percent surcharge for the sale, lease, or use of model year 1997 and later heavy-duty on-road vehicles.

• Revenue collections for TERP increased from $20.6 million in fiscal year 2002 to $143.1 million in fiscal year 2004.

TERP Legislation


Page 7

• Since it’s creation by the 77th Legislature, every succeeding legislature

has modified TERP.

78th Legislature, 2003

− House Bill 37, which transferred appropriations made to TCET to

the TCEQ;

− House Bill 43, which defined roles of the TCEQ and TCET in

administering NTRD; and

− House Bill 1365, which established new revenue sources for TERP

and increased the number of counties and types of projects eligible

for funding.

TERP Legislation (continued)


Page 8


– House Bill 2481

• Designated that a portion of the certificate of title fee going to

the TERP Account No. 5071 would instead be directed to the

Texas Mobility Fund, with an equal amount of money being

sent from the State Highway Fund No. 6 to the TERP Account

No. 5071; and

• Eliminated the TCET and designated that all NTRD funding

would be transferred to a nonprofit research organization in

Houston.

– House Bill 3469, which authorized the TCEQ to create the Texas

Clean School Bus Program to provide grants for technologies that

reduce diesel-exhaust emissions inside the cabin of a school bus.



Page 9


− Senate Bill 12, which raised the maximum cost-effectiveness of a

grant project and added marine vessels to the list of vehicles and

equipment eligible for funding.

− House Bill 160 added “rail relocation and improvement” as

projects eligible for TERP funding.

81st Legislature, 2009

− Senate Bill 1759 established the Clean Fleet Program, providing

incentives for the owners of large vehicle fleets to replace diesel

vehicles with hybrids or alternative fuel vehicles.


81st Legislature, 2009 (cont’d)

− House Bill 1796

• Established the New Technology Implementation (NTIG)

Program within TERP to provide incentives for clean energy

projects, new technology projects, and electricity storage

projects; and

• Transferred the administration of the NTRD program back to

the TCEQ from the nonprofit research organization that had

been administering it.


Page 10



Page 11

82nd Legislature, 2011

− Senate Bill 20 and Senate Bill 385 both establish three new grant

programs within TERP:

• The Natural Gas Vehicle Rebate Program;

• The Natural Gas Fueling Station program; and

• The Alternative Fueling Facilities Program.

− Senate Bill 527 eliminates the NTRD program and creates a new air

monitoring program to fund regional air monitoring projects.

− Currently, the TERP program is set to expire on September 1, 2019.


Page 12

Current Statutory Funding

Allocations for TERP

Program

Statutory Funding

Allocation (Annual)

TCEQ administrative costs Up to $3.4 million

Regional Air Monitoring Program Up to $7 million in 2012 and 2013

& up to $3 million in future years

Emissions Reduction Incentive grants Remaining funds

Clean Fleet Program 5 percent

Clean School Bus Program Up to 4 percent

On-Road Diesel Purchase or Lease Incentives Up to 10 percent

New Technology Incentive Grants, including electricity storage projects related to

renewable energy

Specified amount

Air Quality Research Specified amount

Health effects study Up to $200,000

Supplement funding for Air Quality planning – transfer to Clean Air Account No. 151 Up to $500,000

Energy Systems Lab (ESL) – develop and compute creditable emissions reductions

obtained through wind and other renewable energy resources for the SIP

Up to $216,000

ESL administrative costs Up to 1.5 percent

2012-13 Estimated Expenditures


Page 13

1TCEQ Rider 21 allocates an additional $8M per fiscal year for Emissions Reduction Incentive Grants, once revenue

exceeds the Biennial Revenue Estimate. This is not included above.

2012-13 Expenditures

(in millions) Percent of Total

TCEQ Administration $6.4 5.6%

Regional Air Monitoring Program $14.0 12.1%

Emissions Reduction Incentive Grants1 $55.7 48.3%

Texas Clean Fleet Program (minimum) $5.7 5.0%

Texas Clean School Bus Program (maximum) $4.6 4.0%

Texas Natural Gas Vehicle Grant Program (minimum) $18.3 15.9%

Alternative Fueling Stations/Clean Transportation

Triangle Program (maximum) $4.6 4.0%

Alternative Fueling Facilities Program $2.3 2.0%

Health Effects Study (maximum) $0.4 0.3%

TCEQ Research $2.0 1.7%

Energy System Laboratory Contract (maximum) $0.4 0.4%

TCEQ Total $114.3 99.2%

Texas Engineering Experiment Station (ESL admin. costs) $0.9 0.8%

GRAND TOTAL $115.2 100.0%

TERP Revenue Sources

Fiscal Year 2011


Page 14

On-Road Diesel Fee

(1%-2.5%)

$10.0

(6%)

Vehicle Title

Transfer Fee

$98.5

(61%)

10% Commercial

Vehicle Registration

Surcharge

$10.1

(6%)

$10 Commercial

Vehicle Surcharge

$5.3

(3%)

2% Fee on

Sale/Lease of

Off-Road Diesel

$34.2

(21%)

Interest

$4.1

(3%)

Total Revenue:

$162.2 million


Page 15

TERP GR-Dedicated Account No. 5071

Revenue, Expenditures &Fund Balance

(in millions)

Fiscal Years 2002 to 2013

$0

$100

$200

$300

$400

$500

$600

$700

Expenditures

Revenues

Fund Balance

(*projected)

Sources: TCEQ, Comptroller of Public Accounts, LBB


Page 16

Funding Levels:

2008-09 to 2012-13 Biennium

• During the 2008-09 biennium, the TCEQ received $337.8 million in

total funding for TERP.

• During the 2010-11 biennium, the TCEQ’s funding for TERP was

reduced to $233.0 million.

• During the 2012-13 biennium, the TCEQ’s funding for TERP was

further reduced to an appropriated level of $114.3 million.

• The TEES appropriation for the ESL for TERP, which was $1.9

million per biennium since 2006, was reduced to $0.9 million in 2012-

13.


Page 17

2012-13

Biennial Revenue Estimate

• The Comptroller’s Biennial Revenue Estimate (BRE) for 2012-13

projected $306.5 million would be received into the TERP Account

No. 5071, including $153.6 million in funds transferred from the State

Highway Fund No. 6 to the TERP Account No. 5071.

• Through May 31, 2012, the TCEQ reports that fiscal year 2012

revenues are being collected at a level 18.1 percent higher than

originally expected.

• The TCEQ expects to receive an additional $16 million for TERP

programs because it is expected that the BRE will be exceeded for

2012-13 for the TERP Account No. 5071, and the TCEQ has

appropriation authority for up to $8 million per year in excess of the

BRE provided in TCEQ’s Rider 21.


Page 18

Estimated Fund Balance in

TERP GR-Dedicated Account No. 5071

• According to the TCEQ, the fund balance in TERP Account No. 5071

totaled $412.8 million on August 31, 2011.

• Using the fund balance on August 31, 2011 as reported by TCEQ, the

Comptroller’s 2012-13 Biennial Revenue Estimate for TERP Account

No. 5071, the projected fund balance as of August 31, 2013 is $601.7

million. This assumes TCEQ and TEES will expend all appropriations

out of TERP Account No. 5071 in 2012-13.

Documents

Presentation Overview of the Texas Emissions Reduction ... of... · Overview of the Texas Emissions Reduction Plan (TERP) Joint Hearing of the House Appropriations Subcommittee on