Reduction Plan (TERP) Joint Hearing of the House Appropriations - - PowerPoint PPT Presentation

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

• nly 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.

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Original Components of TERP

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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

• ff-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.

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Funding Changes by the 78th Legislature

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• 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

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• 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)

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• 79th Legislature, 2005

– 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.

TERP Legislation (continued)

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• 80th Legislature, 2007

− 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.

TERP Legislation (continued)

• 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.

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TERP Legislation (continued)

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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.

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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

• btained 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

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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

Legislative Budget Board 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

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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

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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.

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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

• riginally 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.

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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
• ut of TERP Account No. 5071 in 2012-13.