Buddy Garcia, Chairman Larry R. Soward, Commissioner Bryan W. Shaw,Ph.D., Commissioner Glenn Shankle,ExecutiveDirector 

## 08

## JAH 

## 24 PH 

## 3: 40

Protecting Texas byReducing undPreventing Pollution 

### January 17,2008 Docket No. 

### 2007-0939-RUL Mayor Riclial-dE. Greene, Regional Administrator U.S. Environmental Protection Agency 

### - Region 6 1445 

### Ross Avenue Dallas, Texas 75202-2733 Dear Mayor Greene: On December 5,

### 2007, the Texas Commission on Environmental Quality (Comniission) adopted a revision to tlie StateImplementation Plan (SIP). The Commission adopled an amendment to 30 Texas Administrative Code, Chapter 114, Control of Air Pollution fro111 Motor Vehicles, Subcliapter 

### K, Mobile Source Incentive Programs, Division 3, 

### $ 114.622, aiid con-esponding I-evision to the SIP. The adoption inlplenients Senate Bill 12 (SB 12), 80"' Legislature, 2007. Tlie adopted I-uleiiiakiiiganleiids

## 5 1 14.622to authorize the Coniinission to designate highways and roadways or portions of a liigliway or roadway 011 

### wliich travel by grant-funded veliicles may count towards the requirement that vehicles be operated at least 75 

### percent of the annual ~iiiles in tlie nonattainment areas aiid affected counties. The adopted ruleniaking also aiiiends 

### S; 114.622 to iiicl*easethe ~iiaxinium cost-effectiveness limits for a project froiii $13,000 per ton of nitrogen oxides reduced to $15,000 per ton. Finally, the adopted rulemaking amends $ 

### 114.622 to remove the option for grant recipients to permanently remove fro111 tlie State of Texas tlie old equipment or engines replaced under a grant project. Under this aiiiendnient, the Executive Director may still allow a locomotive to be permanently removed from the state in lieu of recycling or scrapping, if the grant reci~ielit has provided sufficient assurances that the old locolnotive will not be returned to the State of Texas. Enclosed is the proposed revision to tlie SIP, a public hearing certification, a complete record of the public hearings, and the accompanying order. 

### 1 look forward to your expeditious approval of this SIP revision. Sincerely,

u 

### dy arcia 

# WY 

# 'I:~w"

Chairman 

### I I



### Enclosures

cc: The I-lonorable Rick Perry, Governor of Texas MI-. Auburii Mitchell, Office oEBudget, Planning and Policy, Office of the Governor Mr. Glenn Sliankle, Executive Director, Texas Comniission 011 

### Environmental Quality

P.O. Box 13087 Aust~n, Texas 78711-3087 512-239-1000 Internet address: wwv.tceq.state.tx.us

,I 1 I/

### TlIE S17A1'E 

### 01: 'TEXAS 

### COUNTYOF TRAVIS

Tliis is to certify the attached are true and correct copies of docu~nents for revisioil to the Texas State Iniplcmentation Plan, 

### adoptccl on December 5, 2007, pursuant to 40 Code of Federal Regulations (C.F.R.) 

## 8 51.104. I am the records admi11ist1-ator for the Air Quality Division of the Tcxas Commission on Environmental Quality.

Director, Air Q~~ali ty Division Texas Commission on Environmental QualityTexas Commission on EnvironmentalQuality Public Hearings September 11, 2007 Concerning Revisions to Chapter 114 Control of Air Pollution from Motor Vehicles SB 12Texas Emission Reduction Plan Program Revisions Rule Project Number 2007-022-1 14-ENINTRODUCTION

The Texas Commission on Environmental Quality (commission) held public hearings in Austin, Houston, andArlington on September 11, 2007,to receivetestimony regarding proposed revisions to $114.622 and to the state implementation plan (SIP).

The rulemakingauthorizes the commissionto allow travel on highways and roadways designated by the commission to count towards the requirement that grant-funded vehicles operate at least 75 percentof the annual miles in the eligible counties as authorized in Senate Bill 12,80th Legislature, Regular Session, 2007; raises the cost-effectivenesscriteriafrom $13,000 perton of nitrogenoxides reduced to $15,000 perton as authorized in Senate Bill 12,80thLegislature, 2007; and removesthe option that vehicles, equipment,and engines replaced underthe program may be removedfrom the state in lieu of being recycled or scrapped.

The comment period closed on September 12, 2007. All testimony and comments have been reviewed and seriously considered. This hearing record contains a complete record of the public hearing and is divided into the following four sections:

0 Public IVotification and Proposal

0 Written and Oral Testimony

0 Evaluation of Testimony

0 Staff Recommendations/Order

Additional copies of this hearing record are maintained inthe TCEQ central office at 12100 Park 35 Circle, Austin, Texas 78753. For further information, please contact Steve Dayton at (512) 239- 6824.

# PUBLIC NOTIFICATION AND PROPOSALPUBLIC NOTIFICATION

Notification to the public of the proposed revisions was conducted by the following procedures:

1. Publication of notice of public hearing in the following newspapers on the date listed: Austin American-Statesman, August 10, 2007 Beaumont Enterprise, August 10, 2007 Corpus Christ; Caller-Times, August 10, 2007 El Paso Times,Aug~ist 10, 2007 Fort Worth Star-Telegram,August 10, 2007 Houston Chronicle,A~lgust 10,2007 Longview-News,August 10, 2007 SanAntonio Express-News, August 10,2007 VictoriaAdvocate, August 10,2007

2. Publication of the proposed rules in the August 24, 2007, issue of the Texas Register (32 TexReg 5324). 3. Publication of the Notice of Public Hearingsthe August 24, 2007, issue of the Texas Register (32TexReg 5491).

4. Correspondenceforwarding the notice of public hearing to the following officials and agencies: Speaker of the House Lieutenant Governor Alamo Area Council of Governments Capital Area Planning Council City of Victoria Planning Department Dallas Department of Environmental and Health Services Dallas Department of AviationEast Texas Council of Governments El Paso Clty-County Health and Environmental District El Paso Metropolitan Planning Organization Federal Highway Administration FortWorth Environmental Management Department Galveston County Health District Houston Department of Health and Human Services Harris County Publ~c Health and Environmental Services North Central Texas Council of Governments Houston-Galveston Area Council South East Texas Regional Planning Commission Texas Department of Transportation Texas Transportation Institute Arkansas Department of Pollution Control and Ecology Louisiana Department of Environmental Quality New Mexico Environmental Department Oklahoma Department of Environmental Quality U. S. Environmental Protection Agency Harris CountyJudge Mayor, City of Arlington hilayor, City of Austin Mayor, City of Houston Tarrant CountyJudge Travis CountyJudge

### Example oi :

### Newspaper Classified Ad San Antonio E

-- - NOTICE OF PUBLIC

HEARINGS ON PROPOSED RWISIONS TO 30 TAC CHAPTER 114 AND

TO THE STATE IMPLEMENTATION PLAN The Texas Commissiofi on Environmental Q~allt~ (commiss~on)will conduct public hear~ngsto redelve testimony regarding proposed ievislom to 30 TAC Chapter 114;Control of Air Pollution from Motor Vehlcles, 114.622, and to the state implementation plan (SIP), under the requirements of Texas Health and Safety Code, 382.017; Tex- as Government Code, Chapter 2001, Subchqpter8; and 40 Code of Federal Regulations 51.102 of the Un~ted States Environmental Protectlon Agency (EPA) .regulat~ons concerning SIPS. The proposed rulemeking would author~ze the corn- mission to aftow travel on h~ghways and roadways designaled by the cbmrn~ssion to count towards the requrrement that grantfunded vehicles operate at least 7596 of the annual miles In the'ef~giblecounties; raise the costeffectivenek criterla from $13,NHl per ton of nltrogen oxides reduced to $15,000 per ton; and remove the optionthat vehicles, eQulpment, and engines replaced under the program may be remove8 from the state In lie&' of "beinfj ,recycled or scrapped;
. Public hearings on this proposal wTil be held Austin, Texas,' un"'September 11 2007, at 1130 a.m., In Building F, Room 2210, at the Texas Cammis~ionon EnvponmentalQualiiy'complex located at 12100 Park 35 Circle: in Houston, Texas, on ~eptdmber 11,2007, at 3:30 p.m. at the Houston-Galveston Area Council located at 3555 Tlmrnom Lane, Sufte 120, Room A; and ir) ~rlingdn, Texas, on September 11, 2007, at 330 p.m. at the North Central Texas Council of Governments at 86 Six Flags Drlvi?, Centerpoint 11, In the MetropleX Confer- ence Room. The hearings will be structured'for the receipt of oral or written comments by idere~ted persons. RegisIration Will begin 30 minutes prior to the hearings, Individuals may present oral statements when called upon In order of legistrat~on, There w~llbe no open discussion during the hearings; howwer, commlsston staff members will be available to discuss the proposal 30 minutes prlor to the hearings. xpress-News, August 10,2007

Persons &&&g to ettend the hear&#& who have speclal ~un~catiorl or other ,';sffcommodation fieeds, sM contact Patncia Durbnt+mce of Legal Sewlces, at (512) 299-6082 *&quests should be made as far In advance as possibte.; Comments may be submrtted to Ratrioa Durbn, MC 205, Offtce of Legat Serv~ces, Texas;,Commrss~on on Envtronme~l ljuality, P.0, Box 1308ZLAustin, Texas 78711-3087; OF faxed to (512) 23-8. Electron~c comments*miai be suhmitted at~~.www5 tc~.slate.fjrus/rules/ edomments. Rle slze restrictions may apply to copnents. submitted through eCommW 1syste"i: !s& taeom&&ts shou~d* pm-. ject .Number2W@-O22-114- EN. The e'c6qmknt period closes'Se &2, 2007. Issued in Austin, Texas, on August 8, 2007.Il;~thleen !-Ihrtnc:: \!'hitc. C'iiiti~nla:; L;11-!-y Ii. Sowi~rd, C'or;/missioizu?- If. S.Buddy GiJ~.ci;l. Co,nrnissioi7ci. Glenn Shanlilc,Exccutirw Di~~'clor

Protc~ctiny 7cxasbyReducing andAcl~enliny Pollrition 

### NOTICE OF PUBLIC HEARINGS ONPROPOSED REVISIONS TO 30 

### TAC CHAPTER 114 AND TO THE STATE IMPLEMENTATION PLAN The Texas Commission on Environmental Quality (commission) will conduct public liearings to receive testimo~iyregarding proposed revisions to 30 TAC Chapter 114; Control of Air Pollution from Motor Vehicles, $1 14.622, and to the state implementation plan (SIP), ~~ncler the requirements of Texas Health and Safety Code, $382.017; Texas Government Code, Chapter 2001, Subchapter B; and 40 Code of Federal Regulations $5 1.102 of tlie United States Environmental Protection Agency (EPA) regulations concerning SIPS. The proposed rulemaking would autliorize the commission to allow travel on liigliways and roadways designated by the commission to count towards the requirement that grant-funded vehicles operate at least 75% of the annual miles ill 

### the eligible counties; raise tlie cost-effectiveness criteria from $13,000 per ton of nitrogen oxides reduced to $15.000 per ton; and remove tlie option that veliicles, equipment, and engines replaced under tlie program may be removed from tlie state in lieu of being ~eecycled or scrapped. Public liearings on this proposal will be held in Austin, Texas. on September 

### 11, 2007. at 11.00 a.m., in Building 

### F, Room 2210, at the Texas Commission on Environmental Quality complex located at 12100 Park 35 Circle; in Houston, Texas, on September 11, 2007. at 3.30 p.m. at the Houston-Galveston Area Council located at 3555 Timmons Lane, Suite 120,Room A; and in Arlington, Texas, on September l 

### I, 2007, at 3:30 p.m. at tlie North Central Texas Co~~ncil of Governments at 616 Six Flags Drive, Centel-point 

### 11, in tlie Metroplex Conference Room. The liearings will be structured for the receipt of oral 01. 

### written comments by interested persons. Registration will begin 30 minutes prior to tlie liearings. Individuals may present oral statements when called upon in order of registration. There will be no open discussion during tlie hearings; however, co~nmission staff members ~/ilI 

### be available to discussthe proposal 30 minutes prior to the hearings. Persons planning to attend the liearings, vlho have special comm~~nication or other accommodation needs, sliould contact Patricia Duron, Office of Legal Services, at (5 12) 239-6087. Requests should be made as far in advance aspossible. Comments may be submitted to Patricia Dulon, MC 205, Office of Legal Services, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 7871 1-3087, or faxed to (5 12) 239-4808. Electronic comments may be submitted at ~~~~I://~~~W~~I~~.~CCCJ.SIU~C.~X.US/I.ZI~~~/~L.~IIIIII~~~~S 

### File size restrictions may apply to comments sublnitted througli the ecomments system. All comments sliould reference Rule Prqject Number 2007-022-1 14-EN. The comment period closes September 12, 2007. Copies of the proposed rule can be obtained from the commission's Web site a1 M~,:/~i,r~i~~~ii~. /ccc/..s/a/r. /.Y.us/r~m~/~.~rlesil,~^o~~o,se crc/op/. ht~i~l. 

### For ful-tlier information, please contact Donna Huff, Air Quality Division, at (5 12)239-6628. Issued ir7Au,rlin, Texu.~, or7Ar,[gz[.r/ 8,3007Notice ofPublic Hearings on Pr+posedRevisions to 30 TAC Chapter I 14 # 1 The Texas Commission on Environ ental Quality (commission) will conduct public ileanngs to receive tflitimony concerning proposed revisions to 30 TAC Chapter 114. C6ntroi of Air Pollution from Motor Vehicles, under the requirementsiof

### exa as Health and Safety Code. $382.017;Texas Government code]chapter 2001. Subchapter B. The proposed rulemaking would i fplementrevisions to the Low In- 

## "t come Repair Assistance, Retrofit, and Accelerated Vehicle Retirement Progam (LIRAP)as a result of ~enlte Bill 12. 80thLegislature. 2007. The revisions would expand vehiclebwnerfinancial eligibility to 300% of the federal poverty rate and proylde incentives for certain vehicle owners to retire and replace their p&sent vehicles with newer, cleaner running vehicles. z 3 The commission will hold publich ings on this proposal in Houston on September 11. 2007, at Council located at 3555 T September 11, 2007, at 1:3 of Governments located at Metroplex Conference Room; and ib Austin on September 11,2007at 9:30 a.m. at the Texas Commissio' on Environmental Quality Complex located at 12100 Park 35 Circle in Building F, Room 22 10 The hearings will be structured for the by interested persons. Registratio hearings. Individuals may present order of registration. Therewill be ings; however, commission staffwi the proposal 30 minutes before the Persons who have special comm&ication or other accommodation needs who are planning to attend Williamson, Office of Legal Servi

htp://~~ill~5.tceq.srufe.tx.us/rules nts. File size restrictions may apply tocomments submitted the ecomments system. All comments should reference Rule Number 2007-026-1 14-EN.

(512) 239-1769. TRD-200703513 Robert Martinez

Filed: August 10,2007

Notice ofPublic Hearings on Proposed Revisions to 30 TAC Chapter 114 and to the StateIinpleinentation Plan The Texas Commission on Environmental Quality (commission) will conduct public hearings to receive testimony regarding proposed revisions to 30 TAC Chapter 114. Control of Air Pollution from Motor Vehicles, $114.622, and to the state implementation plan (SIP),under the requirements of Texas Health and Safety Code, $382.017: Texas Government Code, Chapter 2001. SubchapterB: and 40 Code ofFederal Regulations $51.102 of the United States Environmental Protection Agency (EPA) regulations concerning SIPS. The proposed rulemaking would authorize the con~mission to allou: travel on highways and roadways designated by the commission to count towards the requirement that pant-funded vehicles operate at least 7591ofthe annual miles in the eligible counties: raise the cost-effectiveness criteria from $13.000 per ton of nitrogen oxides reduced to $15.000 per ton; and remove the option that vehicles, equipment, and engines replaced under the program may be removed from the state in lieu of being recycled or scrapped. Public hearings on this proposal will be held in Austin. Texas, on September 11. 2007. at 11:OO a.m., in Building F, Room 2210, at the Texas Commission on Environmental Quality complex located at 12100 Park 35 Circle; in Houston, Texas, on September 11, 2007. at 3:30 p.m. at the Houston-Galveston Area Council located at 3555 Timmons Lane. Suite 120, Room A; and in Arlington, Texas. on September 11. 2007. at 3:30 p.m. at the North Central Texas Council of Governments at 616 SixFlags Drive, Centerpoint 11, in the Metroplex ConferenceRoom. The hearings will be structured for the receipt of oral 01. written comments by interested persons. Registration will begin 30 minutes prior to the hearings. Individuals may present oral statements when called upon in order of registration. There will be no open discussion during the hearings; however, commission staff members will be available to disc~~ss the proposal 30 minutes prior to the hearings. Persons planning to attend the hearings, who have special communication or other accommodatioil needs, should contact Patricia Duron, Office of Legal Services,at (512) 239-6087. Requests shouldbe made as far in advance as possible. Comments may be submitted to Patricia Duron, MC 205. Office of Legal Services, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 7871 1-3087, or faxed to (512) 239-4808. Electronic comments may be submitted at Irtp://~vww5.tceq.state.tx us/rules/ecomments. File size restriciions ma?:app!i, ro conlnlentsszrbmitted throz~gh the econlrnents s-vsrem.All comments should reference Rule Project Nlmber 2007-0-72-114-EAT. The conlnleni pel-iod closes Septenlber 12, 2007. Copies ojthe proposed I-ule can be obtained ,from the commissio~ikWeb site at Irtlp://,vww.tceq.statc.a:~~hzav/rules/proposc~adopt.lztml.For ,further info,-l?iafio~i, please contacrDonna Hzifl Air Quulih,Division, at (512)239-6628. TRD-200703518 Robert Mart~nez Director, Environmental Law Division Texas Commission on Environmental Quality Filed: August 10,2007

Notice ofWater Quality

# cat cations The following notices were issued during the period of July 26, 2007 through August 9, 2007. 

# 1

NOTICE.



### IN ADDITION August 24, 2007 

### 32 TexReg 5491(3) dismantled and its par s sold as used parts or used in the LIRAP: 

# I

compliance, and used as a reNot more than 10% of all vehid as replacement vehicles.

facility. Notwithstanding subsectjbn (b)ofthis section, the dismak

(b) - (c) (No change.) tler of a vehicle shall destroy the glne,aertifvs have been c market place. The dismantler shall accordance with any state and federel The dismantler shall pro has been destroyed to the automobile has taken receipt of a vehicle for

(d) A participating county. sdesignated entity, a participating recognized emissionsrepair facility and a participating vehicle retirementfacility 

# s [&] allow the ecutive director to conduct audits and inspections. 

# 1 emi;sions contrwuipmentand enestroyed and not resold into the -emove any mercury switches in

laws. vide certification that the vehicle. dealer from whom the dismantler retjement.

(e) (No change.) 

# I

TRD-200703515 Roberl Martinez Director,Environmental Law Divisi A person who causes. SL of1 14.66(c) and (dl of this title Subchapter D, Chapter 7, Water Cc violation occurs with each frauduleilt This agency hereby certifiesthat by legal counsel and foundto be ity to adopt.



### SUBCHAPTER K. M IlVCENTIVEPROGRA ffers, allows. orpermits a violation s subject to a civil penalty under de, for each violation. A separate

certification or prohibited resale. :he proposal hasbeen reviewed ~ithin the agency's legal author

### DIVISION 3. 

### DIESEL EMISSIONS REDUCTION INCENTIVE PROGRAM FOR ON-ROAD AND NON-ROAD VEHICLES 30 TAC $114.622 The Texas Commission on Environmental Quality (commission) proposes an amendment to $114.622. The amended section is proposed to be submitted to the United States Environmental Protection Agency (EPA) as a revisionto the state implementation plan. BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE PROPOSED RULES Senate Bill 12 (SB 12), 80th Legislature, 2007, amended the Texas Health and Safety Code, Chapter 386, Texas Emissions Reduction Plan (TERP) Program. Most of the new provisions addto existing project categories and do not require amendment of the rules for implementation. The TERP Guidelines will be revised to include the additional grant criteria established by SB 12. The proposed rulemaking amends s114.622 to implement the cost-effectiveness increase from $13,000 perton of nitrogen oxides reducedto $15,000 per ton underTexas Health and Safety, §386.106(a), as required by SB 12. Senate Bill 12 also authorizes the commission to designate highways and roadways or portionsof a highway or roadway onwhich travel bygrant-funded vehicles maycount towards the requirementthat vehicles be operated at least 75 percent of the annual miles in the nonattainment areas and affected counties. In addition tothe amendment proposedto implement SB 12,the rule will beamendedto remove the option for grant recipients to permanently removefrom the State of Texas the old equipment or engines replaced under a grant project. With this amendment, grant recipients will be requiredto recycle or scrapthe old equipment or engine. This amendment has been implemented for grants issued beginning in fiscal year 2007 and the rule change is intended to align the rules with current practice. SECTION BY SECTION DISCUSSION The proposed amendment would increase the cost-effectiveness of eligible projects and allow the commission to designate vehicle travel on highways and roadways to count towards the percentage of use requirement. The proposed amendment will also omit the optionto move replaced equipment from the State of Texas. For proposed projects that include the replacement or repower of equipment, the old equipment or engine must be recycled or scrapped. $714.622. Incentive Program Requirements. The proposed amendment to §114.622(b) allows the commission to designate highways and roadways or portions of a highway or roadway on which travel by grant-funded vehicles may count towards the requirement thatvehicles be operated at least 75 percent of the annual miles in the nonattainment areas and affected counties. Section 114.622(b) currently establishes a usage commitment of75 percentfor vehicle miles traveled or hours of operation to occur in a nonattainment area or affected county. The proposed amendment to §I 14.622(c) requires grant recipients to recycle or permanently scrap old equipment and engines. Section 114.622(c) currently includes an option for grant recipients to permanently remove fromthe state equipmentor engines



### 32 TexReg 5324 August 24,2007 

### TexasRegisterreplaced under the program, in lieu of recycling or scrapping. Beginning with grants issued in fiscal year 2007, the commission has not allowed grant recipients to use the removal option and has required that theold equipment or engineto be recycled or scrapped. After evaluating the implementation of the replacementand repower grantsfor several years, staff found that itwas difficult to ensure that old equipment and engines were actually removed from the state and, if removed, would not be returned to the state in the future. Staff determined that the best way to ensure that the reductions in emissions of nitrogen oxides are achieved is to not allow this option and to require'that the old equipment and engines be recycled or scrapped. The proposed amendment to §114.622(d) increases the costeffectiveness for projects from the current $13,000 per ton of nitrogen oxides emissions reduced to $15,000 per ton of nitrogen oxides emissions reduced. FISCAL NOTE: COSTS TO STATE AND LOCAL GOVERNMENT Jeff Howath, Analyst, Strategic Planning and Assessment, has determined that, for the first five-year period the proposed rule is in effect, no significant fiscal implications are anticipated for the agency and or other units of state or local government due to administration or enforcement of the proposed rule. The proposed rule implements portions of SB 12,80th Legislature, 2007, Regular Session, relating to the TERP program. The proposed amendment would expand the authorized area of use of grantfunded vehicles, ensure old equipment and engines are recycled or scrapped, and increase the cost-effectiveness limitsfor TERP grant funded projects. Senate Bill 12 amended Texas Health and Safety Code, Chapter 386, relating to the TERP program, including changes to the diesel emissions reduction incentive grant programs. The proposed amendment would implement portions of SB 12 by allowing travel on highways and roadways designated by the commission, to counttowards the requirement that grant-funded vehicles operate at least 75 percentof the annual miles inthe eligible counties; and raise the cap of the cost-effectiveness criteria for grant funded projectsfrom $13,000 perton of nitrogen oxides reduced to $1 5,000 per ton. In addition to the changes required under SB 12, staff recommends changes to 5114.622 to removethe option that vehicles, equipment, andengines replaced underthe program may be removed from the state in lieu of being recycled or scrapped. The proposed amendment will expand the a'uthorized area of usefor grant funded vehicles, andthis change is expected to result in a greater number of vehicle owners that may qualify for a grant. In addition, the proposed rule will increase the cost-effectiveness limits for eligible projects potentially bringing more types of projects into the program. As a result of both of these changes, the pool of eligible grant applicants is anticipated to expand. The agency was appropriated approximately $147 million in fiscal year 2008 and approximately $150 million in fiscal year 2009 for incentive payments for the Diesel Emissions Reduction Program. In addition, the agency was appropriated approximately $2.2 million In fiscal year 2008 and $2.2 million in fiscal year 2009 to administer the program. The proposed rule changes are not anticipated to affect the overall grant funding amounts nor costs to the agency for implementation of the program. PUBLIC BENEFITS AND COSTS Mr. Horvath also determined that for each year of the first five years the proposed rule is in effect, the public benefitanticipated from the changes seen in the proposed rule will be an improvement in air quality due to an expanded pool of eligible grant applicants for diesel emissions reduction incentive grants. Nofiscal implications are anticipated for businesses and individuals as a result of the proposed rule. The proposed rulemaking is related to a voluntary incentive grant program. The changes expandthe authorized area of use of grant-funded vehicles, ensure old equipment and engines are recycled or scrapped, and increase the cost-effectiveness limits for eligible grants. The proposed changes do not directly impact businesses and individuals, except tothe extentthose entities may apply for a grant. SMALL BUSINESS AND MICRO-BUSINESS ASSESSMENT No adverse fiscal implications are expected for small or microbusinesses as a result of the proposed rule. Participation in the program is voluntary. The proposed changes do not directly impact businesses and individuals, except to the extent those entities may apply for a grant. LOCAL EMPLOYMENT IMPACT STATEMENT Thecommission has reviewed this proposed rulemaking and determined that a local employment impact statement is not required because the proposed rule does not adversely affect a local economy in a material way for the first five years that the proposed rule is in effect. DRAFT REGULATORY IMPACT ANALYSIS DETERMINKTION The commission reviewed the rulemaking in light of the regulatory analysis requirements of Texas Government Code, §2001.0225, and determined that this rule action is not subject to 52001.0025 because it does not meet the definition of a "major environmental rule" as defined in that statute. A "major environmental rule" means a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure andthat may adversely affect in a material way the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The proposed amendment to Chapter 114 modifies the existing rules in accordance with SB 12, 80th Legislature. which amended Texas Health and Safety Code, Chapter 386. The proposed rule amendment is part of a voluntary incentive program with the goal of reducing diesel emissions and as such, the proposed rule will not adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. In addition, a regulatory impact analysis is not required because the proposed rule does not meet any of the four applicability criteriafor requiringa regulatory analysis of a "major environmental rule" as defined in the Texas Government Code. Texas Government Code, 52001.0225 applies only to a major environmental rule the result of which is to: 1) exceed a standard set by federal law, unless the rule is specifically required by state law; 2) exceed an express requirement of state law, unless the rule is specifically required by federal law; 3) exceed a requirement of a delegation agreement or contract between the state and an agency or representative of the federal government to implement a state and federal program; or 4) adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not exceed a standard set by fed

### 3SED RULES August 

### 24,2007 32 TexReg 5325era1 law, and the proposed technical requirements are consistent with applicable federal standards. In addition, this rulemaking does not exceed anexpress requirement of state law and is not proposed solely underthe general powersof the agency, but is specifically authorized by the provisions cited in the STATUTORY AUTHORITY section of this preamble. Finally, this rulemaking does not exceed a requirement of a delegation agreement or contract to implement a state andfederal program. The commission invites public comment on the draft regulatory impact analysis determination. TAKINGS IMPACT ASSESSMENT The commissionevaluatedthis rulemaking action and performed an analysisof whetherthe proposed ruleis subject toTexas Government Code, Chapter 2007. The primary purpose of the rulemaking is to amend Chapter 114 in accordancewith SB 12, 80th Legislature. The amendment implements a voluntary program and only affects motor vehicles and equipment which are not considered to be private real property. Therefore, promulgation and enforcement of this proposed rule is neither astatutory nor a constitutional taking because it does not affect private real property. Therefore,the rule does not constitute a taking under Texas Government Code, Chapter 2007. CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM The commission reviewed the proposed rulemaking and found the proposal is a rulemaking identified in the Coastal Coordination Act Implementation Rules, 31 TAC 5505.11(b)(2),concerning rules subject to the Texas Coastal Management Program (CMP) and will therefore, require that goals and policies of the CMP be considered during the rulemaking process. The commission reviewedthis action for consistency and determined the rulemaking for Chapter 114 does not impact any CMP goals or policies, because it adds criteria to a voluntary incentive grant program and does not govern air pollution emissions. Written comments onthe consistency of this rulemaking may be submitted to the contact person at the address listed under the SUBMITTAL OF COMMENTS section of this preamble. ANNOUNCEMENT OF HEARINGS Public hearingson this proposal will be held inAustin, Texas, on September 11, 2007, at 11:00 a.m., in Building F, Room 2210, at the Texas Commission on Environmental Quality complex located at 12100 Park 35Circle; in Houston, Texas, on September 11, 2007, at 3:30 p.m. at the Houston-Galveston Area Council located at 3555 Timmons Lane, Suite 120, Room A; and in Arlington, Texas, on September 11,2007, at 3:30 p.m. at the North Central Texas Council of Governments at 616 Six Flags Drive, Centerpoint II, inthe Metroplex Conference Room. The hearings will be structured forthe receipt oforalorwritten comments by interested persons. Registration will begin 30 minutes prior to the hearings. Individuals may present oral statements when called upon in order of registration. There will be no open discussion during the hearings; however, commission staff members will be available to discuss the proposal 30 minutes prior to the hearings. Persons planningto attendthe hearings, who havespecial communication or other accommodation needs, should contact Patricia Duron, Office of Legal Services, at (512) 239-6087. Requests should be made as far in advance as possible. SUBMITTAL OF COMMENTS Comments may be submitted to Patricia Duron, MC 205, Office of Legal Services, Texas Commission on Environmental Quality, P.O. Box 13087, Austin, Texas 78711-3087, or faxed to (512) 239-4808. Electronic comments may be submitted at http://www5.tceq.state.tx.us/rules/ecomments. File size restrictions may apply to comments submitted through the ecomments system. All comments should reference Rule Project Number 2007-022-114-EN. The comment period closes September 12, 2007. Copies of the proposed rule can be obtained from the commission's Web site at http://www.tceq.state.tx.us/nav/rules/proposeadopt.html. For further information, please contact Donna Huff, Air Quality Division, at (512) 239-6628. STATUTORY AUTHORITY The amendment is proposed under Texas Water Code, 55.102, which providesthe commission with the general powers to carry out its duties under the Texas Water Code; 55.103, which authorizes the commission to adopt any rules necessary to carry out the powers andduties under the provisions of the TexasWater Code and other laws of this state; and 55.105, which authorizes the commission by rule to establish and approve all general policy of the commission. The amendment is also proposed under Texas HealthandSafety Code,Texas Clean Air Act, 5382.017, which authorizes the commission to adopt rules consistent with the policy and purposesof the Texas CleanAir Act; 5382.002, which establishes the commission's purpose to safeguard the state's air resources, consistent with the protection of public health, general welfare, and physical property: 5382.011, which authorizesthe commission to establish the level of quality to be maintained in the state's air and to control the quality ofthe state's air; 5382.012, which authorizes the commission to prepare and develop a general, comprehensive plan for the control of the state's air; and Chapter 386, which establishes the TERP. Finally, the amendment is proposed as part of the implementation of SB 12, 80th Legislature, 2007. The proposed amendment implements Texas Clean Air Act, 55382.002, 382.011, 382.012, 382.017, Chapter 386 of the Texas Health and Safety Code, and SB 12, 80th Legislature, 2007. $114.622. Iizcentive PI-ograrn Requirements. (a) (No change.) (b) For a proposed project aslisted in subsection (a) ofthis section. other than a project involving a marine vessel or engine, not less than 75% of vehicle miles traveled orhours of operation projected for the five years immediately followingthe award ofa grantmust be projected to take place in a nonattainment area or affected county of this state. Thecommission may also allow vehicle travel on highways and roadways, orportions ofa highway orroadway. designatedby the commission and located outside a nonattainment area or affected county to countn (c) For a proposed project that includes a replacement of equipment or arepower, the old equipment or engine must be recycled or

## [;I scrapped [; eretkefM.tfe - f3mme&y-Mhwtrf 

### -1. (d) To be eligible for a grant, the cost-effectiveness of a proposed project as listed in subsection (a)of this section, except forinfrastructure projects and infrastructure purchases that arepart of a broader retrofit, repower, replacement, or add-on equipment project, must not exceed a cost-effectiveness of $15.000 [%kW3] per ton ofNO>emissionsreduced. Thecommission may set lower cost-effectiveness limits as needed to ensure the best use of available funds. The commiss~on



### 32 TexReg5326 August 24, 2007 TexasRegistermay also base project selection decisions on additional measures to evaluate the effectiveness ofprojects inreducingNO< emissions inrelation to the funds to be awarded. (e) - (i) (No change.) 0420, (51 2) 424-5028. This agency hereby certifies that the proposal has been reviewed by legal counsel andfound to bewithin the agency's legalauthority to adopt. Filed with the Oficeofthe Secretary of State onAugust 10,2007. TRD-200703517 Robert Martinez Director, Environmental Law Division Texas Commission on Environmental Quality Earliest possible date of adoption: September 23, 2007 For further information, please call: (512) 239-6087



### TIONS 

## PUBLIC SAFETY
COMMUNICATIONS

37 TAC 589.31 

### - 9.34

work.

year period the rule as a result of enforci effectiveness ofthe senior citizens. Ther on individuals, small

ment regarding this rule.



### PROPOSED RULES August 24,2007 32 TexReg 5327

# WRITTEN AND ORAL TESTIMONY

### INDEX OF WRITTEN TESTIMONY

Reference Number 

### W-I W

### -2 W

### -3 W-4 

### Submitted By Robert Stewart, BNSF Railway Company Laura Fiffick, City of Dallas Kathi L. Harris, EMISSTAR Brinton Payne, Fort Worth Chamber of commerce David L. Powell, Genesee 

### & Wyoming Inc. Jay Barksdale, Greater Dallas Chamber Cal Hodge, Neste Oil Chris Klaus, North Central Texas Council of Governments Charlie Jenkins, Port of HoustonAuthority Railpower Hybrid Technologies Corp. Jerry Roane, on behalf of himself Matthew G. Paulson, Union Pacific Railroad Company Guy Donaldson, U.S. Environmental Protection Agency

## KELLY HART & 

## HALLMAN LLP 301 CONGRESS AVENUE, SUITE2000 AUSTIN, TEXAS 78701 Telephone: (512) 495-6400 Telecopy: (51 2) 495-6617 Writer's Direct Dial: (51 2) 495-6426 Ernail Address: bob.stewart@khh.com 

### September 12,2007 Patricia Duron MC 205 -

### Office ofLegal Services Texas Commission on Environmental Quality PO Box 13087 Austin, 

### TX 7871 1-3087 201 Main Street, Suite 2500 FortWorth, Texas 76102 1000 Louisiana, Suite 4700 Houston, Texas 77002



### RECEIVED 

# SEP 1

## 2 2007 TEXASREGISTERTEAM Re: Rule ProjectNo. 2007-022-1 14-EN Dear Ms. Duron: These comments are submitted on behalf of the BNSF Railway Company ("BNSF") regarding the above-referenced rule project on changes to 

### 30 T.A.C. Chapter 1 14, Control ofAir Pollution fiom Motor Vehicles. BNSF is opposed to the change to Section 114.622, to remove the option that vehicles, equipment, and engines replaced under the incentive program may be removed from the state in lieu of being recycled or scraped. BNSF understands that incentive grant procedures implementedby TCEQ staff weremodified in 2007 along these same lines. BNSF understands that it has been difficult for TCEQ staff to insure that old equipment and engines were actually removed from the state, and ifremoved, would not be returned to the state

### in the future. This would appearto be an especially difficult problem with respect to trucks. Moreover,truck engines and equipment are likely ableto be readily recycled. The situation is vastly different with respect to locomotives. Thilocomotives replaced as part of the incentive grant program are not appropriate to use as cores for Gen Sets. This is due to different platform lengths and design of the frames. Moreover, the locomotives that are displaced out of Texas are often more dependable and reliable than other locomotives used in other locations within the BNSF system. The value ofthese displacedlocomotives is often even greater than the book value dueto a limited market. It is economicallywasteful and unnecessary to require these locomotivesto be recycled or scraped. The requirement to recycle or scrap would greatly increase the cost of future locomotive replacements in 

### Texas and will likely result 

### in less grant applications from BNSF. This will be a lose-lose situation for BNSF and air quality in the state of Texas. Up to January, 2007, locomotives have made up only 2% of the incentive grant projects but have resulted in 40% of the project NOx reductions. Having such large emissions reductions concentrated in such few projects resultsin 

### efficiencies for TCEQ staff.

### BNSF is confident that less draconian measures can be developed with regard to locomotives than requiring replaced locomotives to be recycled or scraped. For example, 

### an exceptionto the requirement to recycle or scrape could be developed specifically for locomotives that install and maintain a global positioning device. 

### With such a device, TCEQ staff could observe at BNSF headquarters in Fort Worth the positions of the each of these locomotives on a real time basis. Of course, for locomotives sold to a third party, the purchaser would be responsible for maintaining the global positioning device and for ensuring that the locomotives arenot operated inTexas. BNSF understands the difficultiesthat TCEQ staff has identified with respect to trucks. However, the broad proposed change in the rule is not justified and is economically wasteful with respect to locomotives. Other less draconian measures are available to insure that locomotives are not returned to the state of Texas. BNSF would be happy to discuss these alternatives further with TCEQ staffand appreciatesthe opportunity to comment on the proposed rules. Sincerely,

Robert T. Stewart 

### Attorneyfor 

### BNSFCIN

### OF DALLAS. 

### September 

### 12,2007

Texas 

### Commission on Environmental Quality 

### Officeof Lcgal 

### Services 

### Ms. ~csle~ 

### Williamson MC 205 

### P,O.Box 13087 

### Austin, 

## TX 787

### 11



### Dear

### Ms. Wj.Uiarnson

. 

### RE;,Rile

### ProjectNumb+ 2007-026-114-ENand 

### Rule 

### Project

### Number2007-022-1

### 14-EN

The

## City of

### Dallas 

### appreciatesthe 

### o&ortunity to 

### commcnt On the

### proposcd 

### changs to. 

### the

## LowIncomeRepair 

### Assistance,.Rerrofi and

## Accelerated Vehicle Retirement 

### Program (LIRAP) dd 

### the 

### TexasEmission 

### ~eduction Program (TERP).

### 7216

### successes of these programs are 

### ofgreat

### impoltancein 

### order 

### to improveair quality and

### protect the health 

### of

### citizens wholive and 

### work

### i.nNorth 

### CentraI 

### Texas.

The 

### City 

### of

## Dallas supportsthe

### proposed changesto&he

### LLEL4P

### program which wa expand the 

### eligibilitychtcria 

### to allow 

### for

### moreparticipationin Ule

### program 

### us well as 

### provide a grearcrincentive

### for the

### retirement 

### ofhigh emitting

### vehicles. 

## Kn the 

### ~allas.fiort Worth'(DFW)

### non-attainmantregion approximately300,000vehicles 

### fail the 

### emissions test 

### each 

### year 

### which results inan 

### increase ofemissions of

### nitrogen oxides.Because 

### thc DFW 

### &countyregion is a

### non-attainment areafor 

### ozone, tl~ere .is 

### a need 

### forpeater participationin 

### the

### LRAP

### program

### in order

### to replacethese

### high emitting

### vehicles that 

### are 

### negatively affecting

### the

### regions

## airquality. l3ckasin.g

### the qualifyingincome

### levels and allowing for the

### retirement and

### replacementof 

### vehicles at

### least 10

### years or older regardless 

### ofpassing 

### an emissioas

### test will Qow 

### for

### mohvehicic owner

### participationin

. 

### the 

### progm.Accordingto statistics 

### from the 

### North Central 

### Texas Council of 

### Govomrncnts

### Air Check 

### Texas 

### and Replacement

### AssistanceProgram, 

### inthe

### past 

### 5yeam, 

### . . 

### over2,000 applicants havebeen 

### denied 

### assistance

### toreplace

### orrepair high 

### eemitting vehiclesbecause of

### incornc 

### and vehiclerequkeno,ents. 'The

### Cityis also 

### very suppodve 

### of i:ncreasing

### rlkretirzmeat incentive 

### and 

### including

. 

### hybrid 

### vehicles in. 

### the type 

### of cars that

### canbe purchased. However, we

### have some 

### concerns

### overtbe stringent

### requirements

### for eligible 

### replacement 

### vehicles. 

### Many lowincome 

### familieswill face 

### challenges. 

### withpurchasing a

## 'three year old 

### or newer

### vehicle even

### with 

### the cxtra

### incentive.

### Wewould advocatc that 

### moreflexiblc options for 

### purchasing vehicles be 

### coisidered 

### for 

### ].ow income families. The 

### City would also 

### like 

### t3e 

### Commissionto

### considerchanging the

### vehiclc 

### inspectionand 

### ~naintenance program

### to includc the

### EnvironmentalProtectionAgency 

### fmal acceleration 

### s,i.mnulation mode emissions standards also ,bowt~ as the "final. 

### cut-points" emissions test. Thesc 

### standardswould cnsura 

### ehat.vehicles

### are passing'themost 

### stringent tests 

### for cleaner 

### vehicles. 

### TERP The City of 

### DalIas 

### is very 

### supportive of 

### the

### Texas Emissions ReductionPlan.

### and its 

### overallgod

### to assist

### withthe

### purchase of cleaner

### engines,vt$~icl.es,and 

### equipment. Raising

### thc 

## TERPcost effectiveness to 

### $15,000

### per ton allows 

### additional

## candidates tobe considcred

### for

### funding. Given

### that approximately

### 70percent 

### ofemissions intheDallas

### Fort

### Worth area

### are

### from non-road and 

### on-mad sources, it

### is 

### ofutmostimportancethat 

### participation 

### in this grant

### funded 

### program toreplacehigh

### cmittingengines,vehicles,

### arid equipmentthat

### have 

### anegativeimpact 

### on our air

### quality is

### increased. Howcver, while 

### the City 

### supports

### TCEQ's guidelinesto 

### evaluateprojects 

### baed on 

### cost effectiveness,

### we 

## fcdthat 

### thereare additional dteria

### that could be 

### given cqual or 

### greater 

### wejght 

### We suggest

### that 

### TCEQconsider

### induding additional

### factors, such as 

### predominate 

### location of

### the emission sourcce

### wwitfinthe 

### region,

### when evaluating

### wh,i.ch projects should

### rccei,ve

### rnonctaryincentivesunder 

### th6

### 7Ti~'pro~arn. 

### Inreference 

### to the change

### proposed by staff 

### of 

### TCEQto omitthe option 

### to remove o1.d 

### cquipmefit and engines

### Erom the State,the 

### City of

### Dajlas isvery supportive. 

### Ensuringthat

, 

### ol,d,

### high emittingequipmentand 

### engines wjll 

### be scrapped

### orr~c~cicd will

### resultin. 

### cmission reductions and improvements

### in 

### the region's 

### air 

### quality,

, The 

### City ofDallasis also supportive of 

### the.devclopmentand 

### support of a

### diesel,testing centcr 

### to cvaluate 

### retrofits and advanced technologies to 

### determine their 

### effectiveness in achieving emissions

### reductionsasoutlined 

### in

### SB 1.2. 

### There

### is cunenfly a

### lack 

### of verified testing centers 

### hthe 

### State

### of

### Texas.New tecbno1ogy.j.scritidal

### to reducing 

### emissions and 

### a new testing 

### ccnterwould 

### helpprovide options

### forNOx controls 

### in our

### region. 

### We

. 

### believe 

### that vsrl.ficationof retrofits

### has been umecessarily 

### slow 

### dueto 

### the costs and excessive

### requirements of

### the

### EPA verification pmgram,FAGE bd05



### In 

### an iffort

### to encouragepaaicjpation 

### in bolb tl,se

### TERP and L.RP

### programs, the 

### City of 

### ,Dallasisplanning to

### lkean outreach coordinator,

### Thepurpose 

### of the new

### positionis to 

### work with private contractors

### to the City as 

### wdl

### as citizens at auto

### pounds and inspection stations to

### rai.seawarenessabout

### both 

### programs and

. 

### provide

. assistance 

### with fillingout 

### applications. We 

### look

### fo.wardto our 

### continued invol,vement

### inc1e'an 

### air issues 

### across the

### segion and futu~ 

### discussions

### between the 

### City 

### ofDallas 

### andTCEQ. 

### If you 

### have 

### any questions ' 

### concerning thc 

### effortsof 

### thc City 

### of Dallas,

### pSease 

### feelfree to contact

### me at 

# .

Office

### of

### ~nvironm$mlQuality

### September 

### 11,2007 Texas Commission on Environmental Quality Austin, 

### TX 78711-3087 Dear TCEQ Commissioners and Staff, We would liketo thankthe TCEQ Commissioners fortheir support of the Texas EmissionsReduction Plan (TERP) andthe TERP staff for their diligencein overseeing and improving the TERP program. EmisstarLLC believes TERP is an 

### integralpart of the effort to improve air quality

### inTexas, and

### we appreciate TCEQ's support ofthe program anditsparticipants. As the TCEQ 

### is considering proposed changesto TERPrules and guidelines, we would like to make the following comments regarding the proposed rule changes:
I. Authorize travel on highways and roadwaysdesipatedby the commission to count towards the requirement thatgrant-funded vehicles operate at least 75 percent of the annualpiles in the eligible counties. 

### Emisstar supports this rule change because the additional mileage allowance may encourage more participation 

### in TERP by on-road operators and businesses who might not otherwise meet the 

### 75% requirement for operation in TERP-eligible counties. 2. Raise the cost-effectivenesscl-iteria porn $13,000 costper ton ofnitrogen oxides reduced to $15,000per ton. 

### Emisstar supports this rule change because the average costper ton 

### of NOx reduced would be expected to grow over time. The costs to replace engines and equipmentarenot likely to decrease at the samerate thatthe "dirtiest" engines and equipment (i.e., those emitting themostNOx) arebeing

MEbV YQRK HEW ENGLAND TEXAS 982 Iv'lontauk i-[igmvay, site8 21 SusanRoad 731 Brazes Streei, Suits550D Z~~yport. NY 17735 E+IevfE33sion. hlH 0293 Austin,T3: 791M

### removed from operation. As 

### a result, the costper ton ofNOx reduced will continue to increase, and for TERP to remain a successful program for improving air quality in Texas through 2013, it will need the flexibilityto fund projects that have higher costsper ton. For comparison, the CarlMoyer program in California has a legislative costper ton cap of $14,300. 3. 

### Remove the option that vehicles, eqzripnzent,and engines replaced under the 

### program may be removedfiom the state in lieu ofbeing recycled orscrapped. 

### Emisstar doesnot support thisrule change. Wehave informationthat potential TERPparticipantshavebeenunwillingtoparticipate inTEWforthe past few grantrounds because the change in guidelines would not allow transfers or sales of equipmentout of state. Emisstarunderstands the need for the State of Texas to ensure that equipment or engines being replaced or repowered through TERP no longer operate in the state, to meet attainment standards specifiedby the federal Clean Air

### Act. However, this need is addressed by the stipulation

### in the TERP contract that the grant recipient ensure that the equipmentremains out of state. 

### In our opinion, thisrule would eliminate projects that might otherwise sigdicantIyimprove ah-quality, especially

### inkey areas, such as atports or 

### indense industrial areas. Toillustrate, our

### understanding is that some ofthe stevedoring companies at Texas ports have electednot to participate

### inTERP sincethe rules were revised. They continue to operate older equipment(e.g,,materials handling equipment such as forklifts), and may actuallybe adding new equipmentto their fleets, effectively increasing emissions 

### inthose areasbecause old equipment is neither scrappednor moved out of state. 

### In 2006, eleven stevedoring companies participated in 

### TERP; a year later, after TCEQbe,gana policy ofnot allowing sales ortransfers out of state, only 

### 6 stevedoring companiesappeartohave participated.



# -- -- 'HEW 

### YORK 

### MEW ENGLAND TEXAS 952 MontaukI-l~yl~i~ay, Suite 8 21 SusanRoad 701Brazas Street,Suite 500 Bayport, NY 11705 New Busion, NH ON70 Austin, T'X 70701

### Emisstar suggests adopting the following strategy to increase TERP participation, which will ultimately lead meeting the emissionsreductions goals specified by theprogram:



## - Allow TERF' participants the option of choosingwhether to take a 

### salvage value of$1000 and scrap the engine or equipment, or



## - Transfer or sellthe engineor equipment out of state, requiring that the TERPparticipant is contractuallyliable for ensuringthe 

### engine or equipmentnever.returnsto Texas. 

### Thankyou verymuch fortaking the time to read these comments. Ernisstar looks forward to continued involvementwith TCEQ and 

### the TERPprogram.

Sincerely,

Kathi L. Harris Program Director, Emisstar LLC

MEW YORK NEW ENGLA46P TEXAS 932 !dogtau k Highway, %YE 8 21 S~isan Road 701 Bia~a Sbeei,SuZe 6h,D Bayport, NY 17705 id*f Bmion, lrJH 03070 Ailstin, TX 78701From: ~bpayne@fortworthchamber.comz To : <bpayne@fortworthchamber.comz Date: Wed, Sep 12, 2007 3:44 PM Subject: 2007-022-114-EN

This email is a confirmation of the comment that was submitted for the referenced rulemaking. First Name: Brinton Last Name: Payne Company/Organization: Fort Worth Chamber of Commerce E-mail Address: bpayne@fortworthchamber.com Street Address: 777 Taylor St City: Fort Worth State: TX Zip Code: 76102 Phone Number: 817-336-2491 Fax Number: 817-877-4034 Rule: 2007-022-114-EN
Comments : September 12, 2007
Ms. Lesley Williamson Texas Commission on Environmental Quality Office of Legal Services MC 205 - P.O. BOX 13087 Austin, TX 78711-3087
Re: Rule Project Numbers 2007-026-114-EN and 2007-022-114-EN
Dear Ms. Williamson: During the 80th Session of the Texas Legislature, the Fort Worth Chamber, and other regional groups, strongly advocated on behalf of our members for the passage of Senate Bill 12; specifically for its enhancement and extension of the Low Income Repair and Assistance Program (LIRAP) and the Texas Emissions Reduction Plan (TERP). The efficient and effective implementation of these two programs is imperative to our region's air quality goals.
We urge you to make available all of the TERP funds appropriated for the program by increasing the cost effectiveness threshold to $15,000per ton of NOx reduced, for both on- and off-road equipment. This increase from the current limit of $5,000 for on-road and $10,000 for off-road sources, would encourage greater participation in TERP by individuals in the North Texas.
We sincerely hope that in making adjustments to the LIRAP and TERP programs, a common goal of ensuring both emissions reductions and State Implementation Plan credits by allowing the largest number of North Texans to participate inand benefit from these vital programs. Thank you again for your ongoing corrlrnitment to improving our s~atels air quality. Sincerely,

Brinton Payne Senior Director Goverrmient and Urban Affairs DivisionDavid L. Powell Vir':~ prcsid.en.t

# - Motive Power 

### August 

### 30, 2007 

### Ms. Patricia 

### Duron 

### MC-205, Ofice of 

### Legal Services 

### Texas Commission

### on Environmental Quality PO 

### Box 13087 

### Austin, TX 

### 7871 1-3087 Faxed 

### to: 

### 512-239-4808 Reference: 

## Rule Project

## umber 2007-022-1 14-EN Dear Ms. 

### Duron: I 

### am 

### writing this 

### letter in response to the TCEQ 

### proposals contained in Senate Bill 12, related to TERP 

### Program Revisions. 

### Our company has been 

### and continues

### to monitor emissionsfunding opportunitiesfor locomotives 

### in Texas. 

### While the 

### proposed increase in cost-effectiveness (CE) 

### might appear to be 

### a good thing 

### on the surface it 

### also 

### appears to mean 

### very little 

### in the 

### end. 

### The TCEQ has 

### used a much lower level 

### of CE 

### in past requests for projects (RF,Ps), 

### The latest 

### RFP from earlier this year required every type of project to 

### meet a much lower CE, Past 

### legislation also 

### requires TCEQ 

### to always maintain both 

### Locomotive and Marine projects at a 

### lower CE

### than other project types. 

### With thisin mind, 

### then, I am 

### doubtful that any project 

### will be 

### permitked 

### to use 

### the $15,00O/ton threshold and it 

### seems especially doubtful it could be used 

### for a railroad locomotive project. The 

## part of 

### this 

### proposal most damagingto 

### a railroad operator is that 

### we can not abide by 

### the statement; "With 

### this amendment, qrant recipients will 

### be'requiredto recvcle -orscrap the old equipment or enqine". Our company currently operates 

### 47 individual railroads, performs rail switching 

### services in 12 US 

### port facilities and provides rail switching services to dozens of 

### industrial customers 

### in 26 

### states including Texas. In light of 

### this new proposal, it 

### is unfortunate that we can not 

### and will 

## not participate 

### in a program 

### where we are forced to 

### scrap 

### an otherwise viable locomotive asset that 

### could be redeployed to 

### another region, state or 

## rail operation. Our locomotives 

### have significant asset value and 

### disposing of even one of 

### these assets 

### would be 

### economically unacceptable,

Gcncscc & Wyoming Inc. 4::537 Pak)ln Oaks I;ri:lrt, Suite 102, ,Tncksonville. Flon'rJa 32224, 904-596-7781 Fax 9()&223-4.50,7

### If these proposals 

### become effective as we 

### interpret them, 

### then TERP (TCEQ) 

### will 

### most 

### likely remove all incentive 

### for railroad 

### locomotive 

### operators to 

### participate. Certainly you 

### can appreciate that while 

### locomotive projects 

### constitute only 

### about 2% 

### of 

### all funded projects 

### and only 5% 

### of 

## all activities, they 

### make 

### up almost half of 

### the

### total 

### emissions reductions 

### realizedfrom the 

### program. 

### TCEQ must 

### also 

### realize that it 

### will 

### most assuredly 

### not receive any 

### more locomotive project 

### submittals ifthese 

### proposals are 

### adopted with 

### such restrictive 

### requirements. Further, locomotive 

### projects although perhaps a 

### relatively 

### small 

### number 

### in activity 

### size, require less 

### overall 

### TCEQ 

### project 

## time and 

### cost to manage 

### simply by 

### virtue of 

### there being 

### less 

### projects to 

### track, audit and 

### report:

### on as

### opposed to, say, 

### projects for 

### trucks and highway vehicles. 

### I 

### appreciate the 

### opportunity to respond to this proposal. 

### Considering these new changes, 

### TERP 

### fundingjust 

### isn't realistic

### for 

### our company as 

### proposed. ILlost sincerely,



### vice 

### President

# - Motive ower 

# k Genesee 

### & Wyoming 

### In 

# ,- 4337 

### Pablo 

### Oaks Court, 

### Ste. 101 Jacksonville, 

### FL 32224

2 Gcrlevee I% Wyoming Tnc. 4337 PaMo Oaks Court?

### SL~W 102,Jacksonville, Elcnrida 32224! 904-596-7781 

### Fax 904.-223-4503GREATER CHAMBER A repiotinl business ulliance 

### September 12,2007 

### Ms. Lesley \Xlfiamson Texas Commission on Environmental Quality Office of Legal Services MC 205 - 

### I1.O.Box 13087 Austin, 

### TX 78711-3087 

### Re: h//e l'roject Nwnbers 2007-026-114-ENatrd 

### 2007-022- 1

### I4-EAT 

### Dear bIs.Wfiamson: During the 8ut"Session of the Texas Legislature, the Greater Dallas Chamber strongly advocated on behalf of our members for the passage of Senate BLU 12; 

### specifically for its enhancement and extension of the Low Income Repair and Assistance Program (LIMP) and the Texas Emissions Reducuon Plan (TERP). Because mobile sources are the greatest source of nitrogen oxide POX) emissions in 

### the Dallas-Fort Worth regon, the efficient and effective implementation of these two programs is crucial to our region's air quality goals. With regard to proposed adjustments to LIRAP, we urge you to choose flexible alternatives when considering restrictions that would prevent large numbers of otherwise qualified fades from parucipating in the program, such as prohbitive restrictions on vehcle replacement. In keeping with the oliginal intent of the legslation, we want the program to be available to as many qualified Texans as possible in order to get the largest number of older, hgh-emitting vehcles offour roads. Addtionally, we urge you to make available all of the TERP funds appropriated for the program by increasing the cost effectiveness threshold to $15,000per ton of NOx reduced, for both on- and off-road equipment. This increase from the current ht of $5,000for on-road and $10,000 for off-road sources, would encourage greater pamcipauon in TERP by indviduals in the North Texas. It is the Chamber's hope, that when mahgadjustments to the LIRAP and TERP programs, you w~Ll remain mindful of our shared desire to ensure both emissions reductions and State Implementation Plan credt by allowing the largest number of North Texans to participate in and benefit from these vitalprograms. Onbehalf of the Greater Dallas Chamber,we thank you for your consideration of our concerns and for the TCEQ's on-going commitment to improving our state's air quality. Sincerely,

Jay Darksdale TricePresident Government Relations

700 NORTH PEARL, SUITE 1200 DALLAS, TEXAS 75201 214-746-6600 www.dallaschamber.orgSeptember 11,2007 Patricia Duron, MC205 Office of Legal Services Texas Commission on Environmental Quality

P.O. Box 13087 Austin, Texas 7871 1-3087 Via fax to (512) 239-4808. Re: Rule Project IVumber2007-022-1 14-EN Good afternoon. My name is Cal Hodge. I am speaking on behalf of IVeste Oil. Neste has two refineries in Finland. Neste employs about 4,700 people. Neste scientists have developed a renewable diesel technology that reduces Green House Gases (GHG), increases demand for agricultural products and improves energy security while reducing NOx emissions when added to dieselfuel. This science is so impressive that I came out of retirement to help bring it to America. Thank you for the opportunity to comment on the proposed rulemaking to amend §114.622 to implement the cost-effectiveness increase from $13,000 per ton of nitrogen oxides reduced to $15,000 per ton under Texas Health and Safety, §386.106(a), as required by SB 12. $15,000 per ton of nitrogen oxides reduced is a big number. I just want to make sure TCEQ knows that Neste's technology can produce some low hanging fruit that should be harvested along the way to $15,000 per ton. This technology produces renewable diesel fuel from either vegetable oils or animal fats by adding hydrogen to the bio feedstock to make renewable paraffinic hydrocarbons also known as alkanes. This technology is important to today's issue, NOx reduction cost, because adding alkanes to diesel fuel tends to reduce NOx emissions. It is low hanging NOx reduct~on fruit because it is cost competitive with the Fatty Acid Methyl Ester (FAME) technology that makes one form of biodiesel. Alkanes have been in diesel fuel since diesel fuel was first distilled from crude oil. As such they fit the existing blending, distribution and consumption infrastructure. The standalone process developed by Neste Oil's scientists makes this ultra high cetane, ultra low sulfur, essentially aromatic free diesel fuel. By controlling the operating conditions essentially constant quality product can be made from a wide range of vegetable and animal sources. By further adjusting operating conditions winter grade product with a Cloud Point of minus 20" C can also be produced. Being saturated hydrocarbons (That means containing as much hydrogen as possible.) they tend to burn more cleanly that typical diesel fuels and are stable and therefore suitable for use in emergency, standby and tactical applications. With the addition of the standard ultra low sulfur diesel fuel lubricity additive package NExBTLTM meets both ASTM D 975 Standard Specificationfor Diesel Fuel Oils and Texas Low Emission Diesel (TxLED) Standards. Neste has the only commercial standalone renewable diesel production facility in the world. They are building a second one and have ajoint venture agreement to build a third in Europe. Neste is seeking plant sites in the U.S. Texas is a good potential location. However,Texas needs to keep the door open. Therefore, TCEQ needsto be aware of the process. Adding these renewable alkanes to diesel fuels tends to reduce emissions of particulate matter (PM), hydrocarbons (HC), carbon monoxide (CO), toxic air pollutants (TAP) and NOx, the focus of today's comments.

19 Serenade PinesPlace + The Woodlands, Texas77382-2005The following chart is based on test results that show NExBTLTM reduces HC and CO emissions in heavyduty trucks.

Comparisonof HC and CO Emissionsfrom Truck Engines 

# - NExBTL" and Other Premium Dieselsvs. ULSD EN590

+RsducUon HC change % lnoreese + -30 -20 -10 0 10 20 30

t NExBTLmand GTL2 result in reductions in both HC and CO emissions, while GTLI and MKI are increasing the emissions. GTL1,Z=Gas-to-Liquid diesels; MKl = Swedish Envir. Class1 diesel 

# - Source: Sunin NMEC 15thlnternallonal Colloquium Fuels IJan 12,2005 AveraossolallBsbwith Scanla EuroA enoine
The next chart illustratesthe impact of NExBTLm on NOx and PM emission from heavy trucks. Similar tests on light duty diesel engines did not show the improvement in NOx emissions. However, given the vehicle population in America, the truck tests are much more important. Another important fact is that the base fuels, 

### ULSD EN590 diesel and the MKI Swedish Envir. Class 1diesel, are clean dieselfuels likeTxLED.
nESTEOIL Comparison of

### NOx and PM Emission from Truck Engines 

# - NExBTL" and 0ther.P:remium Diesels vs. ULSD EN590

+Reducfion NOx change (%)

b NExBTLmresults in largest reductionsin both NOxand PM emissions. GTLl.2= Gas-lo-Liqulddiesels; MKI= Swedish Envir. Class ? diesel Sourcs: Scanla NMECI5th lnternallonal Colloqulurn Fuels IJan 12.ZOOS Averages of ail tests wil)PScafili EumA engine NCZIO WI 

# ;3

These observed NOx emissions reductions are consistent with TCEQ's Unified Model that predicts NOx emissions based upon diesel fuel properties. Everyone one of NExBTL'sTM

19 Serenade Pines Place 

## + TheU'oodlands, Texas 77382-2005 Phone: 281.844.4162 + Fax: 281966.6914 

### + Email: A2ndOpinionlnc@~aol.comproperties is on the clean side of the base fuel in the Unified Model. When NExBTL'sTM properties are inserted into the Unified Model it predrcts NOx emissions decrease about 

### 22% as the model's minimum aromatics and maximum cetane limits are encountered. If the model is extrapolated to reflect NExBTL'sTM actual aromatic content and blending cetane, the predicted NOx reduction increases to 30%. This implies that at a 

### 20% renewable diesel 

### (R20) concentration a 

### 4to 6% decrease is NOx emissions is likely. Given the NOx problem is some air sheds, this looks like a technology TCEQ should explore and possibly champion.
n-TE OIL 

### Unified ModelValidates 

## NExBTL NQx Reduction NOx ChangeVs Cetane

30 40 50 80 Unified Model predicts NExBTL NOx reduction of: 

### /

### b???!= 8-16% Vs, Swedish 11

-21%Vs. TxLED

Cetane Difference

Currently NExBTLTM is undergoing EPA's Section 211 Fuel and Fuel Additives registration process. Because alkanes have always been in petroleum based diesel fuel the test results and registration process are expected to proceedsmoothly. Given the GHG, National Security and agriculture sector benefits of diesel fuels made from biomass there are political forces at work to create mandates and/or subsidies that reduce GHG and America's dependence on imported oil. In the haste to accomplish these goals definitions are being written that could exclude this newer technology and prevent TCEQ from harvesting this low hanging NOx reduction fruit. We will appreciate any assistance TCEQ can provide in maintaining a level playing field for this and other evolving technology that helps achieve these important goals. I look forward to answering TCEQ's questions about this technology and providing additional data as needed. Thank you for your time. ForA 2"d Opinion, Inc. 

# (2-2- Cal Hodge

19SerenadePines Place 

### + TheWoodlands, Texas 77362-2005 Phone: 281.844.4162 t Fax: 281 966.6914 

### + Email: A2ndOpinionInc@aol.com1'401th Central Texas Council C)i Governm~ents September 11,2007

Texas Commission on Environmental Quality Office of Legal Services Ms. Lesley Williamson MC 205 P.O. Box 13087 Austin, TX 78711-3087 Re: Rule Project Number 2007-026-114-EN and Rule Project Number 2007-022-114-EN Dear Ms.Williamson: The North Central Texas Councll of Governments (NCTCOG), committed to improving air quality in NorthTexas, reviewed the proposed rule amendments to the Low Income Repair Assistance, Retrofit, and Accelerated Vehicle Retirement Program (LIRAP) andthe Texas Emissions Reduction Plan (TERP) which the Texas Commission on Environmental Quality (TCEQ) issued in response to Senate Bill (SB) 12 passed by the 8oth Texas Legislature (LIRAP: Rule Project Number 2007-026-1 14-EN; TERP: Rule Project Number 2007-022-114-Ell). NCTCOG is asking the TCEQ to consider the following comments before final adoption of the proposed rules and in future implementation of these programs. 

### LIRAP While NCTCOG agrees with the proposed amendments based on SB 12 to Chapter 114, Control of Air Pollution from Motor Vehicles $1 14.62, $114.64, §I14.66, and §I14.70 recommended by the commission, NCTCOG would like to take this opportunity to alert the commission to concerns the region has regarding LIRAP. 1. In an effort to appropriately budget administrative expenditures for LIRAP, NCTCOG is requestingthe commission formally define the following section regarding appropriate administrative funding: §I14.62. LIRAP Funding. id) In a county with a vehicle emissions inspection and maintenance program under 9382.302, Health and Safety Code, not morethan 10 percent of tlie money provided for LIRAP may be used for administration of the proqram. 2. IVCTCOG is in the process of briefing all nine nonattainment county commissio~iers co~irts in North Texas on the legislative changes to LIRAP and TERP. All nine counties express serious concern over the matching requirement set forth by SB 12 in relation to the Local Initiatives Projects. The counties state the funds made 

### available for the Local Initiative Projects were

6'16 51:. Fiag:. Dii\/e Senterpo~nl Two P G. Bor 5388. Arlir~gton. Texas 76005-5008 (8171 640-3300 FAX 817-640-7836 @ recyclr-c papor www.nrtcoy.orgMs. Lesley Williamson Page Two September 1 1, 2007 originally collected from their counties, but now are only available 

### if the county matches these funds, which essentially equates to double-taxation. 3. Local elected officials also express grave concern over the replacement vehicle structure. By placing such stringent purchasing restrictions on eligible replacement vehicles, fear exists that fewfamilies will be able to take advantage of the replacement component of the program. More flexible options should have been considered for lower income families. 4. In an effort to capture more high-emittingvehicles, NCTCOG strongly encourages the commission to improve the vehicle inspection and maintenance program by adopting the more stringent United States Environmental Protection Agency 'final acceleration simulation mode



### . emissions standards, also known as the "final cut-points", emissions test. TERP NCTCOG concurs with proposed amendments to Chapter 1 14, Control of Air Pollution from Ivlotor Vehicles $1 14.622 resulting from SB 12, and would like to provide comment to the Commission regarding future implementation of TERP. 1. To further encourage participation in TERP, NCTCOG supports increasing the costeffectiveness threshold in future Requests for Grant Applications up to the $15,000 per ton of nitrogen oxides (NOx) reduced as proposed in this rulemaking. 2. In addition to allowing vehicle travel on highways and roadways, or portions of a highway or roadway, designated by the commission and located outside a nonattainment area or affected county to count towards the percentage of use requirement, NCTCOG urges the Commission to use all flexibility allowed in applying this clause to determining project cost-effectiveness. 3. In order to ensure emissions reductions and State Implementation Plan credit, NCTCOG supports removing the option that vehicles, equipment, and engines replaced under the program may be removed from the State in lieu of being recycled or scrapped. 3. In the past, TERP funding has been strategically allocated to assist Nonattainment and Early Action Compact Areas with achieving emissions reductions required for compliance with the federal ozone standard. P,s North Central Texas faces a very near ozone attainment year of 2009, NCTCOG requests the 

### Commission's support and provision of grant allocations necessary to meet the region's air quality goals. 4. Having previously partnered with TCEQ to achieve the goals of TERP, NCTCOG supports the award of third-party grants. Much value can be added through local implementation of TERP projects. As a regional agency, NCTCOG has the proximity and relationships necessary to encourage participation, target specific sources for emissions reductions, and provide assistance throughout the application and reporting processes. 5. As provided for in SB 12, NCTCOG encourages the development and support of a diesel jesting center. New technology is vital to reducing emissions and complying federal air quality standards; however, there is currer~tly 

### a lack of veri.lied options for controlljng NOx from mobileMs. Lesley Williamson Page Three
sources. A diesel testing center is an opportunity for the State to fulfill this need and prov~de increased options for NOx controls in nonattainment areas. 6. Due to the lack of available NOx control technology for mobile sources, NCTCOG also suggests that the Commission consider expanding requirements for technology verified by the U.S. Environmental Protection Agency and the California Air Resources Boardto include technology verified by testing programs outside the country. Other states have determined the needfor and permitted technology verified through similar processes in Europe and Asia to be included in their ail-quality programs. Thank you for reviewing NCTCOG's comments concerning the proposed rule amendments to andfuture 

### implementation of LlRAP and TERP. We appreciate your careful consideration and know that the commission shares our commitment to Improving air quality in North Central Texas. By implementing IVCTCOG's proposed suggestions, we have an opportunity to fulfill this goal. If you have any questions or would likefurther clarification, please contact me at (817) 695-9286 or at cklaus@nctcos.orq.

Senior Program Manager

cc: The Honorable Chad Adams, Ellis County Judge and Chair, NorthTexas Clean Air Steering Committee Mike Eastland, Executive Director, NCTCOG Michael Morris, P.E., Transportation Director, ICTCOG

### September 12,2007 Texas Commission on Environmental Quality P.O. Box 13087 Austin, Texas 787 11-3087 Attn: Ms. Patricia Duron 

### Re: Rule Project Number 2007-022-114-EN Dear Ms. Duron: ThePort of Houston Authority (PHA) has long been 

### an avid supporter of theTexasEmission Reduction Plan (TERP) program as well as an active program participant. Since the program's inception,the PHA has sought and obtained numerous grants that have been successful in reducing pollution in the Houston, Galveston, and Brazoria County nonattainment area. The PHA welcomes the opportunity to comment on the proposed TERP rule changes as authorized by Senate Bill 12and offers the following two comments on the proposed rules. The PHA supports the rule change requiring recycling or scrappage of old equipment for aproject that involves replacement or repowering. The PHA concurs with the Texas Commission on Environmental Quality (TCEQ)that the current version of the rule, allowing tracking of equipment that has been removed from the state, makes it difficult to determine whether the equipment permanently leaves the state. If the Commission decides to proceed with the designation of highways or roadways located outside of anonattainment area, forpurposes of determining eligibility or compliance with the percentage of use requirement, the PHA requests that the designation process include a notice and comment opportunity for stakeholders to have input. Again, the PHA thanks the TCEQ TERP staff for all their hard work in making this program a success. Sincerely,

Charlie Jenkins Director,Planning and Environment

### September 

### 12:

### 2007


## t-lybrid Technologies Corp.

Comments 

### On the Proposed Amendment to Texas Emissions Reduction Plan (TERP) Rules In 

### 30 Texas Administrative Code 

## 5 114.622 

### Rule Project Number 2007-022-114-E
Railpower Hybrid Technologies Corp is appreciative of the opportunity to coinment on the proposed rule changes to the TERP program. The commission is aware of the impact of the locomotive projects on the success of the TERPprogram. The following graphs were taken from the "TERP Summary Reports - 

### Grants Funded by Emission Source" and dated January 

### 26, 

### 2007 and posted on the TERP website.

Nurnber of Projects Locorrutive, Slalionary, 2% ACTIVITY EMISSION SOURCE 

### Locomotive Marine Non-Road On-Road Stationary

On-Road, 42% Non-Road, 51% TOTAL NO, (TONS) 40451 .I728 11099.7206 16954.5425 29151.9150

2925.2504 100,582.6013 NUMBER OF PROJECTS 28 61 764 640

20 1513 NUMBER OF ACTIVITIES 289 455 2241 2932 31 5,948 TONS PER DAYIN

2007 9.2972 

# 1 5.2258 9.5772 I 14.6460

1.6174 40.3636 TONS PER DAYIN

2008 9.4362 6.3445 10.7735 14 1528

1.6455 42.3525 GRANT AMOUNT $155,278,298.38

$35,882,870.60 $88,449,569.52 $119,814,133.51 $7,374,854.70 $406,799,726.71 TONS PER DAYIN

2009 12.5670

6.3445 10.6396 13.9139

1.6455 45.1104 COST PER TON $3,838.66 $3,232.77 $5,216.87 $4,109.99 $2,521.I0

$4,044.43Total NO, (tons)

Stationary, 3%

It is quite clear that the locomotive projects are vital tothe programs success. The locomotive projects makeup only 2%of the 1,513projects and only 

### 5% of the nearly 

### 6,000total activities while producing nearly half of tht: total 

### NOx reductions. If theproposed change of eliminating the option for locomotive projects to permanently remove the replaced locomotive out of the State of Texas is adopted, the railroad companies will find very few future opportunities to continue to apply to the TERPprogram, thus resulting in a severe shrinkage of the large piece of emission reduction pie that has contributed heavily to the great success of a nationally-renowned, clean air program. Can the program afford to eliminate this source of emissions reductions? Therailroad partners that have worked with TERP on previous locomotive projects have demonstrated that the mechanisms are in place to ensure that the older, high-polluting locomotive do not return to the State of Texas. It is working and can continue to do so. California Air Districts have acknowledged that the railroads can and will fulfill this control of the displaced locomotives with the Carl Moyer emission reduction projects and will continue to allow this option for locomotive applicants. Railpower knows that the railroad partners that are currently working with TERP will explain in further details the value of the older locomotives in other parts of the country, sowe will not bother to restate those issues. Railpower would like to highly recommend that the commission reconsider eliminating this permanent removal option for of the baseline equipment for locomotive projects for the sake of the continued success of the 

### TERPprogl-am. If the TERPprogram's priority is to succeed in playing a significant role in cleaning the air in the State of Texas and in helping produce and maintain an acceptable State Implementation Plan for the State,then locoinotive projects must remain a viable participant in the program. Thank you for your consideration to.thisvery importailt issue to the State of Texas. Sincerely,



### Railpower Hybrid Technologies Corp General 

### Manager -

### Emissions

### PatriciaDur6n MC205, Office ofLegal Services Texas Commission on Environmental Quality P.O.Box 13087 Austin, Texas 78711-3087



## AUTOMOTIVE 

# R 1 

# Z

. . . ., , : . .. <. .I

. .. 

## RECEIVED 

# SEP I 0 2007 TEXAS REGISTER

## TEAM

Dear Sirs 

### Iwould liketo comment on the TERP program in referenceto Senate Bill 12. 

### Inthe past 

### Ihave submitted proposals tothe TCEQboth as unsolicited proposal and 

### as a TERP applicant and each time was turned downfor fundingbecause ofthe diesel contingent. Myproject is the TriTrackelectrified guideway that has thepotential to actually cleanup Texas air tohealthy standardsinthe unhealthy population centers ofTexas. The TERP program has since specifically listed diesel engines as the onlything that willbe considered which is ablessingtothosewho would 

### trytopropose areal solution and waste the&scarce resourceson aprogramthat will eventually crushthe concept based on a predisposition for dieselpower. As you know or shouldknow diesel engines produce significantNOx pollution based on the brake horsepower rating ofthe engine. TheNOx productionis a function ofthe fundamental part ofthe self-igniting combustion atvery high compression. The pollution is &omthe intakeairnotthe liquid fuel. What that meansisthere aretwo standards, oneforgasoline and atotally outrageous one for diesel 

### in comparisonto gasoline. Thepublic has not been educated onhow unmatched these standards are between gasoline engineswith catalytic converters and diesel enginesof today's technologyappliedtotrucks. There are somany games that arebeing played by creating categoriesofheavy trucks withnorequirement to be

### sociallyresponsible orto love your fellow man. The TCEQshould-asa minimum should be a 

### source for truth andthis comes for the 

### sunk cost of overhead. The

### TERPprogram ifonly allowed to be appliedto diesel engines is seriously flawed as diesel enginesneed to be obsolete soonrather than have the state buying more ofthese things to run 

### for decades. Even though a 2007 engine is cleaner than a 1987 engineit is not significantlycleaner. The energy and pollution that went into the production ofthat 1987 engineis not insignificant and requiring the scrapping of the engine that isfunctional but needs a new top end control is not the best approachasit is wastehl on all fronts. There are gasoline/electrichybrids made by Ford that would replace the total function ofa large bore polluting diesel power plant. The electric tractionmotor supplies thetakeoff power and the gasoline engine with catalytic converter is easily able to provide the average power of 99% of applications. The diesel hybrid bus by 

### GM is tremendouslymore polluting than the samebus 

# - with a gasolinehybrid yet the million dollarswasted onthe two busesthatroam the capitol



### . are 

### GM diesels. This purchase comes outofignorance and the TCEQ shouldtake a stand - -

### - - against such ignorance. Just a casual observationonthe million dollars spent on two buses is the diameter and blackness ofthepipe that comes out thetop ofthese things. They arejust as black as any other diesel bus and thepipe diameterisjist as large. You surely can'tjustify wasting amillion dollars on fuel savings so all that isleft isto justify the bus on pollution improvementyet these two buses will in no way solve Austin's pollution. CapMetro does account for 

### 6%of Austin's NOx pollution from their operations. What is misleading iswhen CapMetro offers free bus rides on ozone action days when they are the strawthat isbreaking the camel's back with their exhaust pipe emissions. Well meaning advocates for riding the bus often speak ofridingthe bus as something thatwill cleanup the airwhen in fact by using diesel they aremanytimesdirtier and with CapMetro ridership use more fuel. Diesels will not be required to be actually clean for another couple years by the EPAwho is gutless in 

### their enforcement ofthe law ofthe land. Once dieselsarerequired tomeetthe samepollution standardsasgasoline 

### I will retract these assertionsbut we arenot there yet and encouraging diesel manufacturers to build more ofthese devices sendsthe wrong message. We propose that 

### TERPmoney be used for engineering and development 

### ofthe replacement for diesel engines not buying more. Money spent developingthe replacement

### in either electrified solutions ornon-NOx emitting versions is multiplied across allnewproducts where buying diesel engines one at atime and scrappingthem does not have a multiplication effect but atbest it is addition. Why should the taxpayers be held responsiblefor the irresponsibilityof the company that bought adzrtypiece ofequipment in thefirst place? If you givethese guys more money in their pocket theywilljust go buy more and bigger trucks withthe netresult Texas will still have unhealthy air. Lfanythingthe TCEQ should ban dieseltrucks that are driven as a car. There is no reason that a dieselpickuptruck should be allowed on the street except for deals madewith theEPA stallingthe implementation ofthe ' 

### law aspassed. The 

### SIP is what is being referred to and it is on the edge ofcriminal that the law is being spat onby the 

### SIP concoction. Either we have clean air or we don't. Stalling for year afteryear is absurd. Although the 

### TERPplan is intended to doa good thing the approach guarantees failure as a system as it 

### willnotprovide the result that is desired. The measured airpollution in

### places where the TEDmoney has gone does not measure any different than placeswhere ithas not gone. The TCEQ isresponsiblefor resultsby their very name onthe 

### building.

### Our solution is to go after the tailpipe emissions of cars since there are more cars than diesel engines 

### in the stateby a large margin. Without going to the source of thepollution you will not achieve any appreciable measured improvement. 

### If some 

### TERP money were to be diverted to a more intelligent approachthat has a multiplication effect like 

### R&D then TERP can achieve its underlying goal ofcleaner air at aprice the taxpayers can afford that does not play favorites with those who are the very offenders. Sin?grely,

. , .: 

# d&-... ?.-7-PDo7 

### L&f/;,. Jej doane, 

### 101 S.

### Laurelwood Dr, Austin, Texas 78733 5 12-263-5344

# BAKER BOTTS RECEIVED 

## SEP 1 2 

## 2007 September 12,2007 

## TEXAS

## REGISTERTEAM
VIA 

### HAND 

### DELIVERY Ms. PatriciaDuron Office ofLegal Services (MC-205) Texas Commission on Environmental Quality 12100 Park 35 Circle, Building A Austin, Texas 78753 1500 S4NJACINTOCENTEP, AUSTIN 98 SP.N !.*~Cll.iTO BLVG. BEUIIdG AUSTIN, TEYP.2 DALLAS 7870 1-4078 DilBAl HONG KONG TEL +1 512.322.2500 HOUSTON FAX +1 512.222.2501 LONDON w. bokerbotis.com MOSCOW NEW YORK RIYADH WASHINGTON Matthew G. Paulson TEL +1 512.322.2582 FAX +1 512.322.8329 rnatthew.paulson@bakerbotts.com



### Re: Comments of Union Pacific Railroad Company onthe 

### Proposed Amendment to Texas Emissions -Reduction Plan ~ules' 

### in 30 Texas Administrative Code 

## 5 1

### 14.622;Rule ProjectNumber 2007-022-1 14-EN Dear Ms. Duron:
Enclosed please find the comments of Union Pacific Railroad Company ("Union Pacific") on the above proposal. Union Pacific appreciates the opportunity to comment on the proposed rule. If you have any questions, please do not hesitate to contact me.



### Matthew 

### G. Paulson Enclosure

cc: L. Schmid 

### G.Dickinson 

### S.Echevarria D. Young P. GiblinRulc 

### Project No. 

### 2007-022-1 

### 14-EN September 12, 

### 2007

Comments ofUnion Pacific Railroad Company 

### On the Proposed Amendment to Texas Emissions Reduction Plan Rules In 

### 30 Texas Administrative Code €j 

### 114.622 

### RuleProject

### Number 2007-022-114-EN 

# 1 1. Introduction Union Pacific Railroad Company ("Union Pacific") appreciates the opportunity to comment on the proposed revisions the to Texas Emissions Reduction Plan ("TERP") Diesel Emissioils Reduction Incentive Program ("Diesel Incentive Program") rules in 30 Texas Administrative Code Cnapter 114 (the "Proposal"). Union Pacific recognizes that the Proposal has been developed primarily to implement the 8lst Texas Legislature's revisions to the 

### TERP statute through Senate Bill 12. However, an aspect of the proposal that is not dictated by Senate Bill 12--eliminating the option for a grant recipient to permanently remove old equipment 

### from the state following replacement-will seriously hinder the ability of Union Pacific and other railroad companies operating in Texas to undertake new locomotive projects, result in the loss of already limited projects capable of capturingfurther available reductionsin emissions of nitrogen oxides ("NO,"), and create a general disincentive for participation in theprogram. Union Pacific would like to emphasize its continuing efforts to reduce emissions resulting from its operations throughout Texas and especially 

### in the state's ozone nonattainment areas. Over the last eight years, Union Pacific has invested over four billion dollars in fuel efficient locomotives and idle reduction technologies in Texas and across the nation. The company has taken a leadingrole 

### in the development and use ofUltra Low Emitting Locomotive ("ULEL") technology, commercialized as 

## "Genset Switchers.

## " In addition, we would like to stressthat railroad transportationisthe most environmentally friendly

### way to move freight. 

### 11. Specific Comments: The Scrappage Requirement is Unnecessary and 

### Will

, 

### Jeopardize FutureLocomotive Replacement Projects 

### A. Background The Proposal includes a revision to the TERP incentive program requirements that would eliminate the option for TERP grant recipients to peimanently remove old equipment or engines from the State following replacement under grant projects (the "Permanent Removal Option"). Under the Proposal, old equipment or engines must instead be recycled or scrapped. This revision is not required by Senate Bill 12. 

### It is unnecessary, and it standsto jeopardize the financial viability of future locomotive replacement projects that have been among the most cost effective sources of

### NOxreduction to result from the TERP incentiveprogram. Moreover, it is highly counter-productive to the stated program goal ofreducing 

### NO, emissions to create such a serious financial disincentive forprogram participants. Since 2004, Union Pacific has replaced 121 locomotives in Texas under five Diesel Incentive Program contracts. Nearly all of these locomotives have been "switch locomotives" servicing individual rail yards and terminals in the state's ozone nonattainment

### Rule Project No. 2007-022-1 14-EN



### areas. These locomotives are well suited for replacement under the TERP incentive program because they are typically assigned to a single rail yard, and because Union Pacific is actively working with suppliers to develop low-emissions technologies for its switch locomotive fleet. Roughly half of the locomotives replaced under the Diesel Incentive Program since 2004 have been scrapped and their engines destroyed. The rest of the locomotives have been reassigned to other Union Pacific locations outside of Texas to take advantage of their remaining usefi~l life under the Permanent Removal Option. 

### B. Switch Engine Replacement Projects are Well-Suited for Permanent Removal from Texas and Verificationis not Difficult 

### The Proposal provides that it is necessary to eliminate the Permanent Removal Option from the Diesel Incentive Program requirements because it is difficult to ensure that old equipment and engines are actually removed from the state and do not return in the future. Union Pacific recognizes that difficulties of this nature may exist when evaluating grant applications to replace certaintypes of equipment. However, with regard to switch locomotives, an 

### established record of success clearly demonstrates that, in this area, these difficulties do not exist at a level that warrants altering the economic balance of the program by eliminating the Permanent Removal Option. Union Pacific has maintained ownership and control of old switch locomotives following past replacements conducted under the TERP incentive program utilizing the Permanent Removal Option. The company operates over 1500 switch locomotives across the United States, giving it ample opportunity to relocate old locomotives that have remaining useful life. The company has no incentive 

### to return the switch locomotives to Texas. Switch locomotives are, by virtue of their design, unable to meet the requirements for line haul service and are assigned for use in and around local rail terminals. They do not move fieely about the country 

### as do line haul locomotives. Moreover, Union Pacific's state-of-the-art locomotive management system provides a reliable means for ensuring that switch locomotives that have been the subject of TERP replacement under the Permanent Removal Option are not returned to the state. Union Pacific has demonstrated the effectiveness of this management system to TCEQ grant staff in support of past applications, and Union Pacific's replacement programs have been highly successful. The program has effected significant ]YO, reductions in Texas nonattainment areas in a highly cost-effective manner. Relocation, as verified by Union Pacific's management system, has prevented the outright waste of valuable locomotive assets without threatening the effectiveness ofthe program. C. 

### Unnecessary Consequences oftheProposal 

### Unnecessarily eliminating the permanent Removal Option as proposed would have serious consequences. Specifically, the Proposal would jeopardize available NOx reductions in the future. Units that have several years of remaining service life when they are replaced in Texas with lower-emitting locomotive technology have significant value to Union Pacific in other areas of the country. Because TERP's methods for calculating the cost

### Rule Pro-jectNo. 

### 2007-022-114-ETu' 

### September 12,2007

effectiveness of a particular grant application account forNO, reductions over the activity life of the equipment in question, the Program creates incentives for replacing even relatively new equipment. Partially as a result ofthe past success of the Diesel Incentive Program, most of the oldest switch locomotives in Union Pacific's Texas fleet have already been replaced. 

### In the future, locomotives removed from Texas by Union Pacific under theprogram can reasonably be expected to have a longer remaining activity life and more value than the locomotives replaced in the past. TJnder the terms of the Proposal, Union Pacific and other switch locomotive operators would losethe ability to relocate this equipment. Burdened with the outright sacrifice of working equipment, the economic viability of future replacement programs would become highly uncertain. 

### D. Recommendations 

### 1. Retain PermanentRemoval Option Because the proposed revision to eliminatethe Permanent Removal Option is not required by Senate Bill 

### 12 or any other statutory mandate, Union Pacific recommends that the Commission refrain from unnecessarily constraining its grant staff 

### in evaluating grant applications against the incentive program's objectives and requirements. Rulemaking on this issue is counterproductive because staff's understandableconcerns about verifying the relocation of old equipment following replacement can be addressed through guidance without unnecessarily limiting flexibility under the incentive program. Grant applicants should be allowed to address these concerns through 

### an "alternate disposition plan" and dialogue duringthe applicationprocess. At a minimum, Union Pacific believes that, for the reasons stated above, the Proposal should be amended to allow the Permanent Removal Option 

### in switch locomotive replacement projects. However, it is likely that the Permanent Removal Option is equally well suitedtoprojects involving other equipment, especially where the replacement is conducted by a company with a large nationwide fleet of similar equipment. Thus, the better course is to retain the general Permanent Removal Option and address the issue on a case-by-case basis during the applicationevaluation process. 2. AdditionalRecommendations 

### Ln light of the Proposal's reference to TCEQ staffs recent evaluation of the implementation of replacement and repower grants and staffs resulting concerns about the effectiveness of some aspects of those grant programs, Union Pacific believes that additional suggestions about the effectiveness of the Diesel Incentive Program are appropriate. Union Pacific offerstwo additional suggestions.

a. Job-Assignment Grant Structure The Commission should develop "job assignment" criteria for awarding grmts that can be directly assigned to specificjobs or tasks conducted by 

### an applicant, rather than limiting grants to specific units or pieces of equipment. At a rail terminal, the terminal operator

### RuleProject 

### KO. 2007-022-1 14-EN 

### September 12,

### 2007

employs a fleet of switch locomotives to perform many discrete, well-defined jobs withn the terminal. When a locomotive on ajob is removed from service for fueling, maintenance, or inspection, a similarly-sized replacement locomotive must be assigned to the job immediately. The replacement locomotive will typically be ofthe same make and model astheunit it replaces, and the two units will typically have similar or identical emission characteristics. As a result, a job assi,.;nment-based evaluation ofmobile source emissions, rather than a 

### unit-based evaluation, isbest suited to rail operations. 

### A job assignment grant for emissions reductions directly connected to rail terminal job assignments would have significant air quality benefits. The Diesel Incentive Program's potential is not fully realized in situations where someofthe locomotives on ajob are ineligible for the grant program but have emission characteristics that are identical to eligible locomotives assigned to the samejob. Union Pacificbelieves that this situation is not unique to rail terminals, and developing a job assignment grant would expand the opportunity for achieving emissions reductions throughthe Diesel Incentive Program. 

### b. Lump-Sum Contracting 

### The Commission should simplify its process for awarding grants by contracting with grant recipients on a comprehensive "lump-sum" basis for a specified amount rather than by providing reimbursement on an expense-by-expense basis. The Diesel Incentive Program offers a straightforward application process and a logical method for awarding grant funds to obtainthe most cost-effective emissions reductions. However, the Program's reimbursement process is complicated and adds unnecessarilyto the administrative costs incurredby both TCEQ and grant recipients. Under the current program, reimbursement payments are issued on an expense-byexpense basis only after the grant recipient has documented acquisition of the specified equipment. The current program's complex, individualized reimbursement scheme hinders any administrative benefits that might flowfrom large, multi-unit replacement projects. 

### A lump-sum contracting scheme would encourage efficiency and si,pificantly reduce the administrative costs ofthe Diesel Incentive Program to both the Commission and the grant recipients. Under such a contracting approach, TCEQ might offer the applicant a fixed, per-unit dollar amount to replace multiple units of existing equipment with specified lower emitting equipment. The added certainty to result from establishing a constant, fixed reimbursement amount will better equip grant applicants to plan for and implement large replacement programs. A lump-sum contracting method will also provide the Commission with an earlier indication of each project's actual cost effectiveness. Simplifying the reimbursement process will ultimately enhance the Diesel Incentive Program's cost effectiveness. The lurnpsum contracting method employed 

### in the California Carl Moyer program is highly efficient and has proven to be quite successful for both the State of California and participating grant recipients.

### Rule 

### Project No. 2007-022-114-EN September 12,2007



### E. The Proposal Would Mowthe Commission to Designate Railways to Count Toward Minimum Nonattainment Area Operating Requirements 

### A proposed revision to 

### 30 Tex. Admin. Code 

### $ 114.622(b) repeats the precise language of Senate Bill 12

### in allowing "vehicle travel on highways and roadways,. or portions of a highway or roadway, designated by the commission and located outside a nonattainment area or affected county to count toward the percentage of use requirement." The language of Senate Bill 

### 12,proposed for incorporation into Commissionrules, supports Commission designation of certain railways to count toward the percentage of use requirement in locomotive replacement projects. 

### III. Conclusion 

### Union Pacific appreciates the opportunity to comment on 

### the Proposal. We recognize the effort TCEQ has committed to development of the Proposal and offer our assistance

### inthe Commission's effort to continue to improvethe Diesel Incentive Program.UNITED STATES ENVIRONMENTALPROTECTION AGENCY REGION 6 1445 ROSS AVENUE, SUITE 1200 DALLAS,TX 75202-2733



# . - September 12,2007

Ms.Patricia Duron Office of Legal Services,

### MC 205 Texas Commission on Environmental Quality P.O.Box 13087 Austin,

### TX 787 11-3087 

### Re: Rule Project Number 2007-022-1 14-EN Dear 

### Ms.Duron: Thank you-for the opportunity to comment on proposed changes to 30 TAC 114 regardingControl of AirPollution from Motor Vehicles, specifically

## 5 114.622,Incentive Frogram Requirements,in Subchapter 

### K: Mobile Source IncentivePrograms,Division 3: Diesel Ernissions Reduction IncentiveProgram for On-Road and Non-road Vehicles. The Texas Commission on Environmental Quality has proposed three revisions to this section. In 

## 5 114.622(b)the commission is allowed to designatehighways and roadways or portions thereof on which travel by grant-funded vehicles may count toward the requirement that vehicles be operated at least 

### 75percent of the annual miles in the nonattainment areas and affected counties. We supportthisrevision becauseTexas local fleets travel between Texas nonattatnment areas, especiallyin the eastern part of the State where the Statehas previously reduced emissions from 

### 110counties via regional fuel programs like the Low-RVP gasoline program and the TexasLow Emission Diesel program. Whereas the purpose of the proposed change is not necessarily to reduce emissions in the attainmentportion of the 110 county area, it is significantthat more, cleaner vehicles can be traveling on these highways and depoting in the nonattainment areas because more fleets will qualify forthe Texas Emission Reduction Plan (TERP)incentiveprogram. In $ 

### 114.622(c)it is proposed that grant recipientsrecycle or permanently scrap old equipment and engines. The revision aIso eliminatesthe option to remove the old engine or equipment from the State. The State's analysis of this option showed that it was difficult to determine the whereaboutsof these olditems, and thus difficult to enforce this provision. By eliminating this option,the SIPis strengthened. We support this proposed revision. The proposed revision to 

## 5 114.622(d)increases the cost-effectiveness for projects from the current $13,000

### per ton of nitrogen oxides (NOx)emissionsreduced to $15,000 per ton. By

InternetAddress (URL) http:llwww.epa.gov RecycledlRecyclable &Printed with Vegelable 011 Based Inks on RecycledPaper (Mlnlmurn25% Poslconsumer)- 

### decreasingthc cost-effectiveness of 

### eligible projects, [hepool of

### potential applicants for these projects will 

### be 

### expanded. With more projects being eligible for funding under

### TERP, the 

### more reductions 

### ofNOx can be 

### achieved. This is a 

### strengthening of 

### the SIP. Therefore we support his revision. Region 

### 6continues to offer Texas our support during the rulemalung process. 

### Please let us know how 

### we may be 

### of further assistance. 

### Sincerely yours,

Guy DonaIdson Chief Air 

### Planning 

### SectionINDEX OF ORAL TESTIMONY

Reference Number Submitted by Austin, Texas September 11, 2007 0-1 Christine Wolfe, Emisstar

Arlington, Texas September 11, 2007 Chris Klaus, lVorth Central Texas Council of Governments

Houston, Texas September 11,2007 Cal Hodge, Neste Oil

### TRANSCRIPT OF PROCEEDINGS BEFORE THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY AUSTIN, TEXAS



## ........................................................ NOTICE OF PUBLIC HEARING BY THE TEXAS COMMISSION ON ENVIRONMENTAL QUALITY ON PROPOSED REVISIONS TO 30 TAC CHAPTER 114 CONTROL OF AIR POLLUTION FROM MOTOR VEHICLES TCEQ RULE PROJECT NO. 2207-022-141-EN; S.B. 12 TERP SEPTEMBER 11, 2007



## ........................................................

BE IT REMEMBERED THAT at approximately 11:lO a.m. on Tuesday, the 11th day of SEPTEMBER, 2007, the above-entitled matter came 

### on for hearing at the Texas Commission on Environmental Quality, 12100 Park 35 Circle, Building F, Room 2210, Austin, Travis County, Texas, before an agency representative, Heather Parscal. The following proceedings were reported by MELISSA PARKHILL, Certified Shorthand Reporter, by machine shorthand method to wit:



### KX & 

### Associates 214-520-6868

### MS. 

### DURON: Good morning. I'd like to welcome everyone to this public hearing being conducted by the Texas Commission on Environmental Quality. My name is Pat Duron, and I'm with the Texas Register team of the general law division. 

### I would also like to introduce Heather Parscal with the air quality division. We're here this morning to receive oral and/or written comments on proposed revisions to 30 TAC Chapter 114, Control of Air Pollution to Motor Vehicles,

(T.C.E.Q. Rule Project 2007-022-114-E.N; Senate Bill 12, TERP

# .) 

### If you intend to present oral testimony and haven't already signed in at our registration table, please do that now. If you're not familiar with the proposed changes, copies of the proposal from the issue of the Texas Register are available at the registration table. We also have copies of the hearing notice so that if anyone is planning on sending written comments, you
can quickly find the information on where to fax or mail those in. We will continue to accept written comments on this proposal through September 12th. This hearing is structured strictly for the receipt of oral or written comments. Open discussion during the hearing is not allowed. However, if anyone



### KX & 

### Associates 214-520-6868

### has 

### any additional questions or comments regarding the proposal, there will be another opportunity after the hearing to have your questions answered. We will now begin receiving testimony in the order in which you've registered. Once I call your name, if you will please come up to the podium and state your name and who you represent and then present your testimony. And we have Christine Wolfe. MS. WOLFE: Good morning. My name is Christina Wolfe, and 

### I work for Emisstar, a consulting company here in Austin. We would like to thank the T.C.E.Q. commissioners for their support of the Texas emissions reduction.plan and the TERP staff for their diligence in overseeing and improving the TERP program. Emisstar believes TERP is an integral part of the effort to improve air quality in Texas, and we appreciate T.C.E.Q.'s support of the program and its participants. As the T.C.E.Q. is considering proposed changes to the TERP rules and guidelines, we would like to make the following comments regarding the proposed rule changes. I'm going to list the three proposed rule changes in order and then provide comments. The first one, to authorize travel on highways and roadways designated by 

### the Commission to

KX & 

### Associates 214-520-6868

### count towards the requirement that granted-funded vehicles operate at least 75 percent of the annual miles in the eligible counties. Emisstar supports this rule change because the additional mileage allowance may encourage more participation in TERP by on road operators and businesses who might not otherwise meet the 

### 75 percent requirement for operation in TERP-eligible counties. The second proposed rule change, raise the cost effectiveness from $13,000 cost per ton of nitrogen oxide reduced to 15,000 per ton. Emisstar supports this rule change because the average cost per ton of NOx reduced would be expected to grow over time. The costs to replace engines and equipment are not likely to decrease at the same rate that the dirtiest engine and equipment, that is those admitting the most NOx, are being removed from operation. As a result, the cost per ton of NOx reduced will continue to increase. And for TERP to remain a successful program for improving air quality in Texas through 2013, it will need the flexibility to fund projects that have higher costs per ton. For comparison, the Carl Moya program in California has a legislative cost per ton cap of $14,300. The final proposed rule change, removing the option that vehicles, equipment and engines replaced



### KX & 

### Associates 214-520-6868

### under the program may be removed from the state in lieu of being recycled or scrapped. Emisstar does not support this rule change. We have information that potential TERP 

### participants have been unwilling to participate in the program for the past few grant rounds because the change in guidelines would not allow transfers or sales of equipment out of state and out of country. Emisstar understands the need for the state of Texas to ensure that equipment or engines being replaced or repowered through TERP no longer operate in the state to meet attainment standards specified by the federal Clean Air Act. However, this need is addressed by the stipulation in the TERP contract that the grant recipient ensure that the equipment remain out of state. In our opinion, this rule would eliminate projects that might otherwise significantly improve air quality, especially in key areas, such as at ports or in dense industrial areas. To illustrate, our understanding is that some of the stevedoring companies at Texas ports have elected not to participate in TERP since the rules were revised. They continue to operate older equipment, in other words, material handling equipment such as forklifts, and may actually be adding new equipment to their fleets effectively increasing emissions in those
areas because old equipment is neither scrapped, nor



### KX & 

### Associates 214-520-6868

### moved, out of state. In 2006, 11 

### stevedoring companies participated in TERP. A year later after T.C.E.Q. began
a policy of not allowing sales or transfers out of state
or out of country, only six stevedoring companies appeared to have participated. Emisstar suggests adopting the following strategy to increase TERP participation, which will ultimately lead to meeting emissions reduction goals specified by the program. Allow TERP participants the option of choosing whether to take a salvage value of $1,000 and scrap or recycle the engine or equipment or transfer or sell the engine or equipment out of state or out of country requiring that the TERP participant is contractually liable for ensuring the engine or equipment never returns to Texas. Thank you very much for taking the time to hear these comments. Emisstar looks forward to continued involvement with T.C.E.Q. and the TERP program. MS. 

### DURON: Thank you, Ms. Wolfe. Is there anyone else who would like to present testimony that hasn't already slgned in or do you wish to change your mind? Once begin, the Commission will continue to accept written comments on this proposal through



### KX & 

### Associates 

### 214-520-6868

### tomorrow, September 12th. We do appreciate your comments, and we thank 

### you for coming. The hearing is now closed. Thank 

### you. (Whereupon the hearing 

### is adjourned. )



### KX & 

### Associates 214-520-6868

### I REPORTER'S CERTIFICATE

STATE OF TEXAS ) 

### COUNTY 

### OF TRAVIS )



### I, 

### Melissa Parkhill, a Certified Shorthand Reporter in and for the State of Texas, do hereby certify that the above and foregoing contains 

### 7 pages, 

### a full and true transcription of my shorthand notes taken upon the occasion set forth in the caption hereof, as reduced to written form by 

### me and under my supervision. I further certify that this transcription of my notes truly and correctly reflects the exhibits offered into evidence, if any. I 

### further certify that the total cost for the preparation of this proceeding 

### is $ 

### for the original and one copy and 

### will be paid by the Texas Commission on ~nbironmental Quality. Cert

### ifi

CRCB 

### Firm Registration No. 478 8500 N. 

### Stemrnons Freeway, Suite 3015 Dallas, Texas 75247 214.520.6868 214.630.9200 (Fax)

KX & 

### Associates 214-520-6868- - 

# Texas 

# commission 

# on ~nvironmental Quality Public Hearing Registration
Date: September 11,2007 

### fine: 11:00

### AM 

# 1 Rule 

### Pl.ojeci No.: 2007-022-114-EN 

# / Short Title: 

## SB 12:

### Texas Emissions Reduction Plan Program Revisions

Location: TCEQ 

### Complex, 121 00 

### Park 35 

### Circle, Building 

### F, Room 2210,

### Austin, Texas 

## 1 Concerning: Proposed revisions to 30TAC Chapter 11 

### 4, Control of Air Pollutiori from Motor Vehicles I

Name (Please Print) Representing Presenting OI-al Testi~~~ony'? (Circle One) 

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# Texas Commission 

# on Environmental Quality

I 

## Public Hearing Registration Date: September 7 7, 2007 

### Titne: 11:OO

### AM 

# / Rule Poject No.: 2007-022-114-EN 

# 1 Short litle: 

### SB 12:

### Texas Eliiissioli~ Reduction Plan Program Revisions 

# i 1 Location: TCEQ Complex, 121 00 Park 35 Circle, Building 

### F, Room 2210, Austin, Texas 

# I Cc?ncer~-iing:Proposed revisions to 30 TAC Chapter 11 4, Control of Air Pollutio~~ from Motor Vehicles

Name (Please Print) Representing 

### 1 Presenting Oral Teslil.nony? (Circle One)

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### KX & 

### Associates 214-520-6868

### PROCEEDINGS MR. DAYTON: Well1 start the official public comment period. Good afternoon. I'd like to welcome everybody to the hearing conducted by the Texas Commission on Environmental Quality. My name is Steve Dayton. I'm with the Air Quality Division of the TCEQ, and I work with the Texas Emissions Reduction Plan Grants Program. I would also like to introduce Andrea Morrow with our Media Relations Group, and Santos Olivarez, who's with our Air Quality Division also. He



## - works with the Low Income Repair and Assistance Program. This hearing is to receive oral and written comments on proposed revisions to Title 30, 

### Texas Administrative Code, Chapter 114, Control of Air Pollution From Motor Vehicles. The TCEQ Rule Project number is No. 2007-022-114-EN, Senate Bill 12, 

### Texas Emissions Reduction Plan Program Revisions. If you intend to present oral testimony and you have not signed up yet, please mark on the sign-up sheet. If you're not familiar with the changes, we have copies of the rule package and the announcement. The hearing notice has information on how to submit written comments if you don't wish to submit oral comments. We will submit 

## -- continue to accept



### KX & 

### Associates 214-520-6868

### written comments on the proposal until tomorrow, 

# I Wednesday, September 12th, 2007. And, again, there's a 

# / phone number for submitting faxed comments at this point, since it's probably too late to get comments in by the mail. So if you do have anything you'd like to submit, please feel free to fax those in by tomorrow. This part of the hearing is just to accept 

# I the oral/written comments. Open discussion is not allowed. And if you have any additional questions or comments, again, we'll be here after the hearing. And I'll be happy to answer anything you'd like to know about the TERP program. With that, we will begin receiving the testimony. Right now, it appears like we only have one 

# ( person that's signed up. If after Mr. Klaus talks, if anybody else would like to speak, feel free. Sign up afterwards so that we can get your name. So I would call Chris Klaus of the North Central Texas Council of Governments to present any comments he would like. MR. KLAUS: I think I got it working this time. Is that working? Can you hear? THE REPORTER: 

### I think so. MR. KLAUS: My name is Chris Klaus with the North Central Texas Council of Governments. I have



### KX & 

### Associates 

### 214-520-6868

### comments with regards to Senate Bill 12, 

### both LIMP and TERP. For this part cf the hearing, I'll just cover the TERP comments that we have. The Council of Governments concurs with proposed amendments to Chapter 114, Control of Air Pollution from Motor Vehicles, Section 114.622 resulting from Senate Bill 12 and would like to provide comment to the Commission regarding future implementation of TERP. 

# I To further -- 

### No. 1, to further encourage participation in TERP, COG 

### supports increasing the cost-effectiveness threshold in future requests for 

# I grant applications up to the $15,000 per ton of nitrogen oxides reduced as proposed in this rulemaking. 

# I Number 2, in addition to allowing vehicle travel on highways and roadways or portions of a highway 

# I or 

### a roadway designated by the Commission and located 

# I outside a nonattainment area or affected county to count towards the percentage of use requirement, 

### COG urges the Commission to use all flexibility allowed in applying 

# I this clause to determining project cost-effectiveness. 

# I, Three, in order to ensure emission reductions and State Implementation Plan Credit, COG supports removing the option that vehicles, equipment, 

# I and engines replaced under the program may be removed from the State in lieu of being recycled or scrapped.



### KX & 

### Associates 214-520-6868

### Three, in the past, TERP funding has been strategically allocated to assist Nonattainment and Early Action Compact Areas with achieving emissions reductions required for compliance with the federal
ozone standard. As North Central Texas faces a very
near ozone attainment year of 2009, COG requests the Commission's support and provision of grant allocations necessary to meet the region's air quality goals. Four, having previously partnered with TCEQ to achieve the goals of TERP, COG supports the award of third-party grants. Much value can be added through the local implementation of TERP projects. As a regional agency, COG has the proximity and relationships necessary to encourage participation, target specific

sources for emissions reductions, and provide assistance to the application and recording 

## -- or reporting processes. Five, as provided for in Senate Bill 12, COG encourages the development and support of a diesel testing center. New technology is vital to reducing emissions and complying with federal air quality standards. However, there's currently a lack of verified options for controlling NOx from mobile sources. A diesel testing center is an opportunity for the State to fulfill this need and provide increased



### KX & 

### Associates 

### 214-520-6868

# 1. control technology for mobile sources, COG also suggests 1 

### 2

# I that the Commission consider expanding requirements for options for NOx controls in nonattainment areas. Six, due to the lack of available 

### NOx 

# I technology verified by the U.S. Environment Protection 

# I Agency and the California Air Resources Board to include 7 

# 1 technology verified by testing programs outside the 

# I programs. 

### 8 

### 9 10

Thank you for reviewing COG's comments country. Other states have determined the need for and permitted technology verified through similar processes in Europe and Asia to be included in their air quality

concerning the proposed rule amendments to and future implementation of 

### LIRAP and TERP. We appreciate your careful consideration and know that the Commission
l6

# 1 shares our commitment to improving air quality in North 17 

### 18 19 20 Central Texas. By implementing COG'S proposed suggestions, we have an opportunity to fulfill this goal. If you have any questions or would like 2 1 22



### KX & 

### Associates 214-520-6868 further ciarification, please contact me at (817) 695-9286 or cklaus@nctcog.org. Sincerely, Chris 23 24 25 Klaus. MR. DAYTON: Okay. 

### Is there anybody else that would like to present any comments?

### (No response.) 

### MR. DAYTON: Okay. Again, the Commission will accept written comments through tomorrow, Wednesday, September 12th. The notice includes the address and the fax number if you'd like to fax comments in. If there's no further comments, we will officially close the public hearing, and I'll be available for any questions however long you want. (End of proceedings.)



## KX & 

### Associates 

### 214-520-6868

### REPORTER'S CERTIFICATION

4 

### 5



## KX & 

### ASSOCIATES foregoing proceedings are a true and correct transcription of the proceedings and were reported 6 

### 7 8

Firm Registration #478 8500 North Stemmons Suite 3015 Dallas, Texas 75247 214-520-6868 214-630-9200 

### (fax) stenographically by me at the time 

### and place indicated. Given under my hand on this day of September, 2007.



### KX & 

### Associates 214-520-6868

### -1- 

# 1 Texas Commission on Environmental Quality 

# 1 I 

# 1 Public Hearing Registration 

# 1 Date: September

### I?, 2007 Tirne: 3:30 

### PM 

# I Rule Project No.: 2007-022-114-EN 

# I Short Title: 

### SB 12:Texas Emissions Reduction Plan Program Revisions 

# 1 Location: NCTCOG at 616 Six Flags Drive, Centerpoint 11, Metroplex Conference Room, Arlington, Texas 

# I Concerning: Proposed revisions to 30 TAC Chapter 114, Control of Air Pollution from Motor Vehicles 

### I 

# I Name (Please Print)

-.~ Representing Presenting Oral Testimony? (Circle One)

Yes No

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# I

# Texas Commission on 

# Environmental Quality Public Hearing Registration
Date: September 1

### I, 2007 Time: 3:30 PM Rule Project No.: 2007-022-1 14-EN Short Title: SB 12: Texas Emissions Reduction Plan Program Revisions 

# 1 Location: NCTCOG at 616 Six Flags Drive, Centeipoint 11, Metroplex Conference Room.Arlington. Texas 

### 1 Concerning: Proposed revisions to 30 TAC Chapter 114, Control of Air Pollutionfrom Motor Vehicles

Name Presenting Oral Testimony? Representing (Please Print)

I 

# I I Yes NO 

# *I

Yes No

Yes No 

## -1 Yes No

### MS. HUFF: 

### Good afternoon. The question-and-answer period will start now and will last until the official hearing begins at 3:30. Please be
aware that comments made before the hearing starts will not be part of the record. (Recess from 3:01 p.m. to 3:31 p.m.) MS. 

### HUFF: Okay. We'll go ahead and get started. Good afternoon. I 

### would like to welcome everyone to the public hearing being conducted by the Texas Commission on Environmental Quality. My name is Donna Huff, and I'm with the Air Quality Division. I 

### would also like to introduce Chad Lenz. He's also with the Air Quality Division. And Lisa Wheeler is around here, and she's with our Agency Communications Division. We're here this afternoon to receive oral and written comments on the proposed revisions to 30 TAC Chapter 114, Control of Air Pollution from Motor Vehicles, TCEQ Rule Project No. 2007-022-114-EN, Senate Bill 12, Texas Emissions Reduction Plan Program Revisions. If you intend to present oral testimony and haven't signed up at the registration table, please do so now. If 

### you're not familiar with the proposed



### KX & 

### Associates 

### 214-520-6868

### changes, copies of the proposal from the issue of the Texas Register are available at the registration table. We also have copies of the hearing notice, so that if anyone is planning to submit written comments, you can quickly find the information on where to fax or mail those in. And you may also submit via ecomments. We will continue to accept written comments
on this proposal until Wednesday, September 12, 2007. This hearing is structured strictly for the receipt of oral or written comments. Open discussion during the hearing is not allowed. However, if anyone has any additional questions or comments regarding the proposal, there will be another opportunity after the hearing to actually have your questions answered. We will now begin receiving testimony in the order in which you registered. Once 

## I call your name, if you'll please come up to the podium and state your name and who you represent, then present your testimony. And we have just one person signed up, and that's Mr. Cal Hodge. MR. CAL HODGE: Donna, 

### I hope you don't mind if I 

### turn this thing up just a little bit. There's

a little difference in your stature and my stature. I

KX & 

### Associates 214-520-6868

### KX & 

### Associates 214-520-6868 - 

### have copies for the staff that 

### I will give to you to make it easier to follow my comments. Good afternoon. My name is Cal Hodge. 

### I
am speaking on behalf of Neste Oil. Neste has two refineries in Finland. They employ about 4700 people total worldwide. And the Neste scientists have developed a renewable diesel technology that reduces Green House Gas emissions, increases the demand for agricultural products, and improves energy security while reducing NOx emissions when added to diesel fuel. This science is so impressive that 

### I actually came out of retirement to help bring it to America. 

## I thank you for the opportunity to comment on this proposed rulemaking. The $15,000 per ton of nitrogen oxide reduced seems like a pretty big number to me, and 

### I just wanted to make sure that the Commission knew about Nesters technology that can produce some low hanging fruit that should be harvested along the way to $15,000 per ton. This technology ' 

### produces renewable diesel fuel from either vegetable oils or animal fats by adding hydrogen to the bio feedstock to make renewable paraffinic hydrocarbons also known as alkanes. This technology is important to today's issue, NOx reduction costs, because adding alkanes to diesel fuel tends to reduce NOx emissions.

### It's low hanging NOx fruit because it's cost competitive with the Fatty Acid Methyl Ester or FAME technology that makes one form of biodiesel. Alkanes are not new. They have been in diesel fuel since diesel fuel was first distilled from crude oil. And as such, they fit the existing blending, distribution and consumption infrastructure. The standalone process developed by Neste scientists made this ultra high cetane, ultra low sulfur, essentially aromatic free diesel fuel. By controlling the operating conditions, essentially constant quality product can be made from a wide range of vegetable and animal sources. By further adjusting the operating conditions, a winter grade product with a Cloud Point in the minus-20 range
can also be produced. Being saturated hydrogen, that
means they contain as much hydrogen as possible. They tend to burn more cleanly than typical diesel fuels, and they're stable and, therefore, suitable for use in emergency standby and tactical applications. With the addition of the standard ultra low sulfur fuel 

## -- diesel fuel lubricity additive, the product contains both the ASTM D 975 Standard Specification and the Texas Low Emission Diesel Standards. Neste has the only commercial standalone renewable production facility in the world. They are 1 2 

### 3 

### 4 5 6 

### 7 8 

### 9 10 11 12 13 14 15 

### 16 17 18 19 20 2 1 22 

### 23 24 25 5

KX & 

### Associates 214-520-6868

### building a second one and have a joint agreement to build a third in Europe. And Neste is seeking plant sites in the U.S. 

### Texas has been identified 

### as having great potential for such a plant. However, Texas needs to keep the door open. And, therefore, my purpose today is to make sure that TCEQ is 

### fully aware of this process and its potential to reduce NOx emissions. Adding these renewable alkanes to diesel fuel tends to reduce the emissions of particulate matter, hydrocarbons, carbon monoxide, toxic air pollutants, and NOx, the focus of today's comments. On the second page of my comments, I 

### have

some charts that show hydrocarbon and CO 

### emission reductions from truck engines. These were tested versus European diesel fuels, which are very comparable in quality to Texas low emission diesel fuel. The NOx reduction is 

### interesting. It 

### shows about an 

### 18 percent NOx reduction, which is what we're talking about today. However, I've been in the business long enough to know that one set of tests does not make the world. Therefore, I 

### also downloaded the unified model from TCEQ's 

### Web site, and I 

### exorcised 

### it a little bit. I 

### put the properties of the Neste product into that model and found that the model confirmed the NOx reductions that Neste observed in the laboratory. 

### 1 2 3 

### 4 5 6 7 

### 8 9 

### 10 

## 11 12 13 

## 14 15 16 17 

### 18 

### 19 20 21 22 

### 23 24 25 

### 6



### KX & 

### Associates 

### 214-520-6868

### Currently, NExBTL is undergoing EPA Section 211 Fuel and Fuel Additives registration process. Now, because alkanes have always been in petroleum diesel, the test results and the registration process are expected to proceed smoothly. However, given the Green House Gas benefits, the national security, and the agricultural benefits of diesel fuels made from biomass, there are political forces that work to create mandates and/or subsidies that reduce Green House Gases and America's dependence on imported oil. In the haste to accomplish these goals, definitions are being written that could exclude this new technology and prevent the commission from harvesting that low hanging NOx reduction fruit. Therefore, we wanted to make you aware of this technology and ask for any assistance that you can provide to maintain a level playing field so that this and other evolving technology can help you achieve your goals of energy security, Green House Gases, and lower NOx emissions. I'll be happy to answer any questions you have about this technology, and I will submit a copy of these electronically tomorrow. 

### MS. HUFF: Is there anyone else who would like to present testimony at this time? Once again, the Commission will continue

KX & 

### Associates 214-520-68688



### to accept written comments on the Proposed Revisions 230, Texas Administrative Chapter 

### 114 until Wednesday, September 12th. If there are no further comments, this hearing is now closed. And we do appreciate your comments, and thank you for coming. (Hearing concluded at 3:40 p.m.)



### KX & 

### Associates 214-520-6868

### STATE 

### OF TEXAS * 

### COUNTY 

### OF HARRIS 

### *



## I, the undersigned certified shorthand 5



### correct. reporter in and for the State of Texas, certify that the 6



### I further certify that 

### I am neither attorney
or counsel for, nor related to or employed by, any of facts stated inthe foregoing pages are true and

the parties to the action in which this hearing is taken,

SUBSCRIBED AND SWORN TO under my 

### hand and seal of office
on this the 13th day of September, 

### 2097
! ,A., : 

### 6 

# - 37 

# yr 's; : 

# ~~,,~~~~~.~a~~,f/ri:~Z~,~~~C~722~ilcA, (I S~MANTHA DOWNING, CSR, 

### RPR Certified Shorthand Reporter in and for the State of Texas Certificate No. 7512 Expiration date: 

### 12-31-2008

# Texas Commission on Environmental Quality Public Hearing Registration Dafe: September 11,2007 Time: 3:30 PM 

### Rule Project No.:2007-022-1 

### 14-EN Short Title: SB 12: Texas Emissions Reduction Plan Program Revisions Location: Houston-GalvestonArea Council located at 

### 3555 Timmons Lane, Suite 120, RoomA, Houston, Texas Concerning: Proposed revisions to 30 TAC Chapter 114, Control of Air Pollution from Motor Vehicles

Name (Please Print) Representing 

# / Presenting Oral Testimony? I (Circle One) Yes 

# $4) },( 21' 

### v

### i 

# (

, 

# xCllel6, (:I/(

. LJ / / 1 

# mltd)s )lq(, J Yes 

# (';a

'.C_-,..L / ' .--,:\ 

# R 14 

## Y yes (NO ) 

# 3t>;7,Lp&5r 

# / f3jU5

. ., 

# A 2 

## 0i 

### / 

# rc*.' 

# c>No

...,---...a 

### I ,-I 7-

## -. 

# ijii(:k 

# iQ (-T~~~~~ yes 

### j \.-

NO 

### - 

### )

yes 

## {./fiGj' \. 

# I 4

# Texas Commission 

# on Environmental Quality Public Hearing Registration Date: Sepfe~nOer 11, 2007 

### Ti~ile: 3.30 

### PM Rule Project No.: 2007-022-114-EN 

### 1 Short Title: SB 

### '1 2:Texas Ernissions Reduction Plan Program Revisions I 

# 1 Location: Houston-GalvestonArea Council located at 3555 Tirnrnons Lane, Suite 120, RoomA, Houston, Texas 

### 1 Concerning: Proposed revisions to 30 TAC Chapter 114, Control of Air Pollutionfrom Motor Vehicles 

### I
Name (Please Print) Representing Presenting Oral Testimony? (Circle One)

Yes

Yes

@i~._LAYes No

Yes No

Yes No

Yes No

Yes No

Yes No

# EVALUATION OF

TESTIMONY

# Texas Commission on Environmental Quality INTER~FFICE MEMORWIDUM



### To: 

### Commissioners Date: 

### November 16, 2007 Thru: 

### Ms. LaDonna Castaiiuela, Chief Clerk Mr. Glenn Shankle, Executive Director $'rorn:&)t,Mr 

### David C Schanbacher 

### P.E., Chief'Engineer
Docket No.: 

### 2007-0939-RLIL Subject: 

### Commission Approval for Rulemaking Adoption Chapter 114, Control ofAir Pollution From MotorVehicles SenateBill 12: TexasEmissions Reduction Plan (TERP) Program Revisions Rule Project No.2007-022-1 14-EN Scope ofthe rulemaking: 

### Therule amends sections of Title30, Texas AdministrativeCode (TAC), Chapter 114,Control of Air Pollution from Motor Vehicles,to make changes to the criteria for grants underthe Texas Emissions Reduction Plan (TERP). Reasons forthe 

### rule package: 

### Senate Bill (SB) 12, sponsored by Senator Averitt and enacted by the 80th Texas Legislature, amended Texas Health and Safety Code (THSC), Chapter 386, to make changes to the TERP program. This rulemaking incorporates the changes established under SB 12 in the TERPrules. The rule changes to incorporate the revisions to the grant criteria made by SB 12 authorize the commission to: allow travel on highways and roadways designated by the coinmission to count towards the requirement that grant-funded vehicles operate at least 75 percent ofthe annual miles in the eligible counties; and raise the cost-effectiveness criteria froin $13,000 per ton ofnitrogen oxides 

### (NO,) emissions reduced to $15,000per ton. Tn addition to the changes required under SB 12,changes arebeingmadeto30TAC 

## 9 114.672to remove the option that vehicles, equipment, and enginesreplaced under the program may be removed from the state in lieu ofbeing recycled or scrapped. Statutory Authority: 

### The amendment is adopted under Texas Water Code, 95.102, which provides the commission with the general powers to carry out its duties under the Texas Water Code; 55.103, 

### which authorizes the coinmission to adopt any rules necessary to carry out the powers and duties under the provisions of the Texas Water Code and other laws of this state; and $5.105,which authorizes the commission by rule to establish and approve all general policy of the coinmission. The amendment is also adopted under THSC, Texas Clean Air Act, 9382.017. which autl~orizes the commission to adopt rules consistent with the policy and purposes of the Texas Clean Air Act; 5382.002, which establishes the commission's purpose to safeguard the state's air resources, consistent with the protection of public

### C:omniissio~~e~-s Page 2 November 16, 2007

Re: 

### Docket No. 2007-0939-RUL health, general welfare, and physical property; $382.011, which authorizes the commission to establish the level of quality to be maintained in the state's air and to control the quality of the state's air; 5382.012, which authorizes the commission to prepare and develop a general, comprehensive plan for the control of the state's air; and THSC, Chapter 386, which establishes the TERP. Finally, the amendment is adopted as part of the implementation of SB 12, 80'~ Legislature, 2007,. The adopted amendment implements Texas Clean Air Act, $$382.002, 382.011, 382.0-f2,'3%2.017, THSC, Chapter 386, and SB 12, 80"' Legislature, 2007. Potentially controversial matters: 

### Based on the comments received, the only controversial item is the change to 30TAC

## 5 114.622 removing the option that vehicles, equipment, and engines replaced under the program may be removed from the state in lieu of beingrecycled or scrapped. Several comments were received expressingconcerns about this change to the rules. Public comment: 

### Emisstar LLC (Emisstar),City of Dallas (Dallas), United States Environmental Protection Agency Region 6 (EPA), Fort Worth Chamber of Commerce (FWC),North Central Texas Council of Governments (NCTCOG), and Port ofHouston Authority 

### (PHA)submitted oral and/orwritten comments in support of all or part of the rulemaking. BNSF,Emisstar, Genessee & 

### Wyoming Inc. - 

### Motive Power (G&W), Railpower Hybrid Technologies Corp. (Railpower), and Union Pacific Railroad Company (UP) submitted oral and/or written comments expressing concerns and/or suggesting changes to part ofthe proposal. Dallas, FWC, Greater Dallas Chamber (GDC), NCTCOG, Neste Oil, PHA, UP, and one individual submitted oral and/or written comments not directly related to theTERP rulernaking. Significant changes from proposal: 

### No changes from the originaI proposal arerecommended. Key points in adoption rulemaking schedule: 

### TexasRegister proposal publication date: August 24,2007 Six-month 

### TexmRegi.vtcrfiling deadline: February 25, 2008 Anticipated 

### TexasRegister publication date: December 21,2007 Anticipated effective date: December 27,2007 Agency contacts: 

### Mr. Steve Dayton, Rule Prc~ject Manager, 239-6824, Air CJuality Division Mr. Brad Patterson, StaffAttorney, Environmental Law Division, 239- 1201 

### Ms. Patricia Dur6n, Texas Register Coordinator, 239-6087

AttachmentsConimiss~oners Page 3 November 16,2007

Re: Docket 

### No. 2007-0939-RUL

cc: Chief Clerk, 

### 5 copies Executive Director's Office Mr. David C. Schanbacher, 

### P.E. Mr.Daniel Womack Ms. Ashley 

### K. Wadick Office 

### of General Counsel Mr. SteveDayton Ms.Patricia Duron Mr. Brad Patterson

### The Texas Commission on Environmental Quality (commission) adopts an anlend~llent o $114.622 with 

### clrr~rlges to tlle proposed text as published in 

### the ALI~LIS~ 24, 2007, iss~~e of the TexasRegister.

### (32 TesRcg 5324).

Thc amended scction will be submitted to the United States 

### Environmental I'rotection Agency (EPA) as a revision to the state implementatiol~ plan.

BACICGROUND AND SUMMARY OFTI-IE FACTUAL BASIS FOR THEADOPTED 

### RULE Senate

### Bill 12 (SB 12), 

### 80th Legislat~~re, 2007, amended TexasHealth and Safety Code, Chapter 386, Texas Emissions Reduction T'lan 

### (TERP)Program. h/\/lost of the new provisions add to existing project categories and do not require amendment of the r~~les for in~plementation. The TERP Guidelines will be revised to include the additional grant criteria established by SB 12.



### The aclopted rulemaking amends $114.622to implement the cost-effectiveness increase from $13,000 per ton of nitrogen oxides reduced to $15,000per ton ~lnder Texas I-Iealth and Safety Code, $386.106(a),

asrequired by SB 12. SenateBill 12 also authorizes the commission to designate highways and road~vnys or 130rlioi1sof a highway orroad\vay on which travel by grant-f~~nded vehicles may count towards the requirement that vehicles be operated at least 75 percent ofthe annual miles in the nonattainment areas and affected counties.

hi addi~ion to the amendmenl aclopted to implement SB 12, the rule will be amended to rernove the op~ion for 21-ant~'ecipic~its to 

### permanentlyremove from the Stale of'rexas the old eq~lipillent or engines rel~lnccd LI~I~CI- a 

### grant ~~roject. With this amendment, granl recipients will be required to recycle or scrap [he old equipment 01- 

### engine, wit11 one exception. Based on comments I-eceived, the ruleamendment is changed to authorize the executi\ie director to allowpermanent removal from the State of Texas in specific grants where the applicant has provided sufficient assurancesthat the old locomolive will not be returned to the Stale ofTexas.

SEC'TION DISCUSSION The adopted amendmenl \vould incl-easethe cost-effecti\7eness of eligible projects and allow the commission to designale vehicle travel on highways and roaclways to count towards the percentage of

use requirement. The adopled amendment will also 01ni t tlle option lo move I-eplacedequipment from the Slate ofTexas. For 131-oposed projects that include the replacement or repower of equipment, the old equipnlent or engine inust be 1-ecycled01. scrapped, with one exception. executive director may allow ~~ermanent removal ii-omthe State of 'Texas in specific grants where the applicant has provided sufficient assurances that the old locoinotive will not be ret~~rlled to the Stale of Texas.

SyIl4.622.

### Incelrliile P~.ogi.ni~~ Xeq11ii.ei1lei7f.s. The adopted nmendment to 

### $ i 14.622(b)allows the commission to designate highways and roadways or portions of a highway or roadway on which travel by grant-fi:nded vehicles ]naycount towards the requirement that vehicles be operated at leas1

### 75 percent of the annual miles in the nonatlainment areas and affected counties. Section 114.622(b)currently establishes a usage commitment of 

### 75 percent for veiiicle miles traveled to occi~l- in a nonattainment area 01- affected county.

The adopted amendment to 

## 8 114.622(c)I-equires grant 

### recipients to recycle or pe~manently scrap old equipnient and engines. Section 1i4.622(c) currently includes an option for grant recipients to permanently l.emove horn the state equipment 01- enginesreplaced under the program, in lieu of recycling 01- scrapping. Beginning with grants issued in Iiscal year 2007, the con~iuission has not allo\ved grant recrpients to use the remo\/aloption and has required that the old equipment or engine to be recycled or sci-apped. Afier e\7aluating the inlplenlenlation ofthe replacement and repower grants forseveral years, stafffound that it \\/asdifficult to ensure that old equipment and engines were actually renlovcd from the state and, ifI-emoved, would not be returned to the state in the fi~ture. Staff determined that the best \yay to ensure that the reductions 

### in emissions of nirrogen oxides are achieved is lo not allo\v this option 311dto reqL1ll.e that the old eclui~~ment and engines be recycled or scrapped, will1 one cxception. Based on comments received, $1 14.622(c) is being adopted with a change froill proposal to authorize Ihc executive director to allow penuanent removal SI-om the State of Texas in specific granls where the applicant has provided sufficient assurancesthat the old loco~notive will not be returned to the State ofTexas.

The ~clopted amendment to 1 14 622(d) I~CI-eases the cosl-eSSectivei~ess Sol-projects fi-omthe cui~ent $13,000 per ton of nitrogen oxldes clnlsslonsreduced lo $15,000per ton of nltrogen oxides emissions reduced.

FINAL REGLTLATORY 

### IMPACT ANALYSIS DETERMINATION The commission reviewed the ru1emal;ing in light of the I-egulatoryanalysis recluirements ofTexas Gavel-nmcnt Code, S2001.0225,and determined that lhis rille actioil is not subject to 92001.0025 because it does not meet the definition of a "major en\lironmental rule" as defined 

### in that statute. 

### A

!I ' major envil.onmenta1 rule" means a rule the specific intent of wl~ich is to protect the environment or reduce risl;s to human I~ealth from environmental exposure and that may adversely affect in a inaterial \\lay the economy.p~.oducli\,~ty. competition,jobs, thc en\~ironment, 01- the public health and safety of the state or a sectorol'lhe stare.

The ndoptcd amendment to Cllapter 114 modifies the existingrules in accol-dancewith SB 

### 12, 80th Legislature, \vhich amended Texas Iiealth and Safety Code, Chapter 386. 7'he aclopted amendment is part of a olunlar!~ inccnti\lc program \\lit11 the goal ofreducing diesel emissions and as such, llle adopted 1-ulewill not ad\rersely affect in a matel-ialway the economy, a sector 

### ofthe economy,productivity, compelition,jobs, the en\~ironment, or the public health and saSety of the state or a sector of the slate.



### In addition, a

### regulatory impact analysis is not required because the adopted 1.~1le does not iiieet any of the loi~r applicabilily crilel.ia for recl~iiring a regi~latol-y analysis of a "majorenvil-onmentalrule" as defined ill the Texas Go~~ernment Code. Texas 

### Gavel-nment Code, $2001.0225,applies onlyto a major 

### environmental r~~le th result of which is lo: 1) exceed a standard set by federal law, unless the rule is specifically required by slate law; 

### 2) exceed ail express requirement of state law, i~nless the rule is spec~fically l-eq~iil-ea by federal law; 

### 3) exceed a requirement of a delegation agreement or contract belween tile state and an agency or representative of the redera1 go~~e~-~iment to implement a slate and federal program; or 4) adopt a rule solely under the general powers of the agency instead of under a specific state law. Thisrulemaking does no1 exceed a standard set by federal law, and the technical requirei~~ents are consistent ~vitli applicable federal standards. 

### In addition, thisrulemaking does not exceed an exl~ress 1-eq~~irement of state law and is not adopted solely ~~nder the general powers ofthe agency. but is specirically authorized by the provisions cited in the STATUTORYAUTI-EORITY sec~ion of this pi-eamble. Finally, 1.1iis rulemal<ingdoes not exceed a recluirement of a delegation agreement or contract to implement a state and federal program.

TAI<INGS IMPACT ASSESSh4EIUT The commission evaluatecl this ruIemal<ingaction and pcrlbrmed an analysis of whether the adopted rule is subject to Texas Government Code, Chapter 2007. The primary purpose of therulemal<ingisto amenci Cliapter 114 in accoi-dancewith SB 12,SOth Legislati~re. The amendment implements a voluntnl-yprogram and only affects motor vehicles and equipment which are not considered to be private real property. 7Tl~ercfore, promulgation and enforcement of this adopted r~ile isneither a stalutory nor n constilu~ional laking because it doesnot afTect private real property. Therefore, therule does not COIISLI~LI~ a laking ~~ncler Texas Governi~~el~t Code,Chapler 2007.

### CONSlSTENCI' WI1'I-i 'I'I-IE COASTAL MANAGEMENT PROGIUM Thc commission re\/ie\vcdthe adopted rulernal<ingancl found the proposal is a rulemalting identified in tlic (.'oastal Coordination 

### Implementation Rules, 3

### 1 TAC $505.1l(b)(2).conceriling rules subject to the Te.\;asCoastal Management Program (CMP) and \\fill,therefore, require that goals andpolicies of the 

### CMPbe considered dul-inythe r~ilemalting process. The comn~ission reviewed this action for consislency and determi~~ed the rulemalting for Chapter 1 

### 14doesnot impact any CMP goals orpolicies because it 

### adds ~itei-ia to a 

### voluntary incentive grant program and does not govern airpollution emissions.

I'UBLIC COMMENT Thep~~blic hearings for this wlemaking \\/ereheld on: September 11,2007, 11 a.m., TexasCo~nmission

on Envil-onmental Qualib, 13100Park 

### 35 Circle, Austin: September 11,2007, 3.30p.m., North Central Texas Co~uncil of Go\le~uments, 

### 616 Six Flags Drive, Arlington; and September 11,2007, 3:30p.m., I-IOLIS~OII-Galvesto Area Council, 3555 l'in~mons Lane, I-iouston.

Emisstar LLC (Emisstar),City of Dallas (Dallas), United StatesEnvironmental Protection Agency Region G 

### (13PA),Fort Worth Chamber of'Commerce (FWC),North Central Texas Coi~llcil of Go\~ernments (NCTCOG),and Port of l-louston Authority (PI-IA) s~tbmitted oral andlor written
commcnts in support o1'all 01. 

### part of the I-ulemalting. BNSF, Emisstar, Genessee

### Br Wyo~ning h~c. - 

### Motive I'uwer (GGiJY). 

### Railpo\\lel- Hybrid Teclinologies Corp. (Railpower), and Uilion Pacific Railway Company 

### (UP) submitted oral andlor \witten comments esl~ressing concerns andlor suggesting changes lo pal-1ofrhe proposal. Dallas, FM7C, 

### Greater Dallas Chamber (GDC),NCTCOG, Neste Oil, PHA, UP and one 

### indiv~clual submittecl 01-a1ancllor written conlmentsnot directly related to the TERPrulenlalting.Ch(iil.gelo 51 /4.622(1,) i.egnrifing~/.rlvel 017 clesig~~nteti I/ighl.~/r~y.~ nizcl roac111~c~)~s. NCJ'COC;, Emisstar, and El'A expressed sLlpport for the change. NCTCOG also ~u-ged the conlmission
touse all llexibility allowed in applying this cla~~se to determining the project cost-effectiveness.

Thc com~nissiol~ ;rppl-eciatcsthe sopport !'or tl~c l~al~ges to tlie role. Regal-dingthe atlclitionnl ~.econ~meetl:~tion n~atle b!~ NCTCOG, I'esasI-Icaltli allcl Safety Code, §386.105(cl), states that only the I-etloctionsir~ 

### NO, en~issioas that are achieved ill tl~c nonattainmcl~t areas arid affected collntich lilay bc used to tlctel-lnir~e the cost-cff'cctivcness of'a project. Tl~erclore, thc cornrnissioli wo~ilcl r~ot bc able to con~iclcr the rcclactionh in NO, emissions occurri~~g on the tlesigllated high\\ajrsaatl r.oneltt~;~!~s o~rtsitlc ol'lllc nol~nttain~~~er~t areas allel ;rffectetl coi~nties whcn calculatingthe cost-cfibecti\leeessof a III-oject.



### UP commented that this cha:-lgewould s~rpport commission des~g~ation of certain railways to count to~vard the percentage ofuse requirement in loconlotjve I-eplacementprojects.

The con~lnission docs 

### tot agrce\vith UP"' interpretation of the rule chal~ge. The changeonly applies to \~cl~icles tl-a\~cling on clesignated higl~wajls ant1 roaclways, not raillines.

Chirnge toJl/4.(52_7(cjlo 1.eil1ove ll~e opiio//,jbr erj~~ij,ir~.enl rtild engilles ~.c/~laceclo~~ repowered zrnder thc 7'I;'RPpl-ogi-ai/1 ro 

### Dcpe/.i//ui7en1/)/ ~.eirlo\:ecl/i.u~~r [lieSlnte 

### ofl'e,xrts i17lic~i 

### oJDei1.1.g recycled 01. so-rpyed.



### NCTCOG, Dallas, EPA,

### PM'C, and I'l-IA expressed support for the change to the rule.

The co~n~nissioll i~l)preci;~tcs the s11ppo1.t for thc cl~a~~ges lo therole.Emisstar, 

### G&W. BNSI;, Railpower, and 

### UP did not SLIP~OI.~ the change to ths I.LI~~.

Emiss~al- stated that it has information that potential TEIU' participants have been ~lnwilling to parlicipate in 

### TERP forthe pas1 few grant rounds beca~lse the commission began not accepting the transfer or sale of the old equipment and engincs to ou~-of-state users. As an example, Einisstal- stated that se\~el.al slcvedo~-ing companies at Texas ports have elected to not participale in 

### TERP because of this 

## reiluil-em en^. Elmisstarreferred to data indicating that in 2006, eleven stevedoriilg companies participated in TEN', but a year later when the con~mission began not accepting the transfer option, oilly six stevedoring companies participated in the proLgarn.

Emisstar il~rtlier stated lhat the concerns abo~~t ensuring tliat the transfer occurs and that the equipment and engines are not relu~-ned to the state are addressed by the stipulation in the 

### TERP contract that the eq~~ipment must remain out of the state. Emisstar suggested thal the commission allow two options: 1) allo\v TEI<Pparlicipants llie option of choosing whether to take a salvage val~~e of $1,000 and scrap the engine or equipment; or 2)allow the transfer or sale of the engine or equipment out of state, with a recl~~irement that [he

### 'TERI' participant is contract~~ally iable for ensuring /.hatthe engine orequipment

never retLuns to Texas.



### G&W slated thal it operates 

### 47 individual raill-oads,perfol-msrail su/itchingservices in 

### 12

### U.S. port facilities and l~rovides rail switching services to dozens of industrial customers in 26 states, including Tcsns. G&M' staled [ha1i~ is ~~nfort~~nate that itcan not and will not participate in a program where it is forced to scrapan otliel-wise \,iablelocomo~ive asset tlia~ could be redeployed to another region, state or rail opcl-ation. G&W 

### ~LII-LIK~ stated that this change will likely remove all incentive forrailroad locomoti\~e ope]-atorsto participate in the TERP and [hat theprogram will not receive any Inore locomoti\ie submittals if this change becomes effective.BNSF staled tliat il understands thal ithas been diffici~lt Sol-

### TCEQ staff to ensure that old equip~llent and engines are removed f'romthe state and would not be I-etumedto the slate. However, 

### BNSF stated that the locomotives lilcely to be rel~laccd tinder the progl-am are not appropriate for use as cores to manufacti~re the new Cen Set loco~notives that would be purchased to replace the old locomotive. BKSF indicated that the locomotives that would be replaced in Texas are often morereliable than the loco~iioti\*es i~scd in other 13hrSFsystem locations and t1i:)t the value ofthose locolnotives is often gcaterthan the boolc value because of the limited mai-lcet. 

### BNSF stated tliat the rule change would grcatly increase the cost oi'f~~ture locornolive 

### replacements in Texas and will likelyresult in fewer grant applications ii-om

### BNSF. BNSI; referenced 

### TERP grant data llx-oughJanuary 

### 2007 that indicated that locomot~\,es have made up only 

### 2 percent ofthe n~unber ofTERPprojects but have resulted in 

### 40 percent of [he

### TEIU' NO, emissions reductions.

BNSF suggested an allel-nativeapproach to the scrapping oilly req~~irement where the co~nnlission could require that the grant recipient install global positioning systems on the locomotivesbeing replaced. I'he 

### TCEQ staff could then obsel-vethe location of the old locomotives on a real time basis.



### UP sta~ed that the change to [lierule w~ll ser~ously l~inder the ability of

### UP and other railroad companies o~er'~ting 111Texas to undcstake new locomotive l~rojects, result in the loss ol'alseady limited projects 

### capable orcapturlngf~~rtlier available 

### NO, emissionsreduclions, and create a general disincentive for pal-t~cipal~on 111 the program.



### UI' also slated that s\vitch engine replacement projects are well-suited foi-pel-manentremoval froin Texas and that \~eriiicatioii is not iliffic~~lt. 

### IJP explained tliat it has main~ained ownership and control of the old locomotives and that it has ample oppoi-tunity to [elocate old locomotives that have remaining useft11life. 

### UP stated that roughly half ofthe locoillotives replaced under the program have been scrappecl and their engines desll-oyed,with the rest of the locolllotivesbeing reassigned to other 

### UPlocations outs~cle of'resas. UP references i~s locomot~\~c management system as a reliable means of ensuring lhat 111~ locomot~vcs are not reti~l-ned to the slate and pointed Lo the silccess of the replacement projects that have becn completed.



### UP expl:lined that as a 1.esi11t of the 111-ogram's success, most of the oldest s\\filchlocomotives in UP'S Tesas Ilect have been i.eplaced and that locomoti\!es a\~ailable for fi~ture replacements have a longer remaining activity life and are of more value that the 1ocomoLivereplaced in the past.

Railpo\ver also siated its objection to this change to tlie rilles. Railpo\ver's comments reflected the same point of view asthe statements made by the railroad companies, including concern that railroad com],anies would find it harcl to participate in the 

### TER~P progl-amin the futul-e. Railpower also stated that thc Caliiol-niaAir Dislricts have aclaio\vledged that the l.ai11-oad companies have and will f~llfill the requirements to conlrol the Iocomoti\~es replaced under the Califo~nia Carl Moyer Program and will continue lo allo\\! the oplion of removing the ~ocomoti\~e li.0111 the stale.

The coul~nission ~r~~tlc~-stantls the concern csprcssctl ~.cg;irtling tlic cff'ccl this clla~lgc will liave 011 the pal-ticipation in tlic TERI' program by owners of'r~on-road equip~licnt ar~d locomoti\~es.As noted by Enlisstar, the con~mission begall not accepting tl~c option to transfer orsell tile old eqoil~n~erit a11t1 e~~gi~~es o~ttsitle the state beginning with tlie fiscal year 

### (FY) 2007 grantrounds. This cl1:111gc to therule will make pcrnlanelit the intcri~u tlecisior~ by tllc con~mission to not accept that ol)tion,~vilh o~~c escel)tion, The rule ~II~~II~IIICII~ is ~Jia11gcc1 to al~tliorize tile executive director to allot! pcr~nanent rc~noval from the State of'Tesas in sl~ccilic grantsnrlierctile apl)lic;1111 1133 PI-ot,iclctl sullicie~~t asslll.anccs that tlie old locomotive nlill not be retor~~ed to tile State ol'l'csns.l'lbis cl~atigc to the 1.111~ is 11:1sctl 011 ii umber ot'facto~-s, i~lclutling a tlctailetl internal review of the prograni by the co~nnlission's audit staff ant1 an evali~ation of the risks associateclwit11 thegrant awartl tlccisions. I11 atlclition, guitlelines publishccl ill 2006 by the

### EPA, entitled

### Diesel Retrofits: Q~~fi~~fifii~~g 111111 

### USI'II~ 7'11ei1. Bellefits ill SIPS(rlirlCol!\i)rllrity - 

### Gui(1t111ce ji,r 

### StrifenlltlLoctil

### Air c111r1

### T~.n~z.syo~.lc~tiol~ Agcllcies (El'A420-B-06-005, 

### JIIII~ 2006), statethat in ortlerto use enlissions rctl~~ctio~~s i'l-0111 all!. ~-cj)Iaec~lie~lls in a SIPor ~II a co~~fbr~llity determination thcvehicle, engixle,

orccli~ip~~w~it bcing rcplacctl sl~oultl be scral~et! 01. the 1.e1)lacetlcnginc rcturned to the original nian~~t'aclurcr 1.01- rc~nanliS:ict~lri~~g to a cleaner sta~lclard. Untler thej)rovision proj~osetl in the rulc cllange, tlie co~iinlissio~~ \voultl consitlcr tlle rcnlanufact~~re 1)rocessas a torin of scrapping the oltl e~lgilic.

Tl~c o~nlnission has very liltlc control over tllc replacetl equipnlcnt once it leaves the state. The comnlission is also lin~itctl in its ability to ensurethat tlie old eqnipolent orengines areactr~ally rcnio\,ctlfro~u tl~c statc. This change is pl.oposeti to atltlress tlxe risks associatctl with the replaccmcnt gri~nts as \vcll as tllc tlirection in the

### EI'A guidance to ensure that the oltl equipment ant1 engines arepcr~nane~itlj~ rc~noved fioln the emissions inventory ancl that thecnlissions re(l11ctio11s arcCI-ctlitable to the S11'.

Ho~.cvcr, the conlnlissio~~ agrees that raill-oat1con~pa~iies, in partic~~l:ir, mag be ableto adequately enslrl-cIllat :I locor~~oti\.c that is rc~novetl I'ronl Tesas is ~iot rcturnctl to tl~c state. Basetl on tlie conlnle~~ts rcccivetl, tlic rt~lc anic~itlmcnt is cliallgctl to autllorizctlle csccutive director to allow
~~errnancnt ~.eliio\;al fro111the State of Tesas in spcciticgrantswllcrc thc applicant 11asprovided sufficient ;isst~r;lnces tlliit the oltl locomotive lvill not be rcturnetl to tl~c Statcof Tesas.CIIOI~~L' 10 $114.622((1)iirci.crr.rirlg the ir~rsiii~~ciil ost-~lji~clivcliessfl.olir 

### $1 3,000lo $15,

### OOOpelA ton of 

### NU., eiilis.sioii,si.cti~icetl.



### NCI'COG, Emisstar, Dallas, and 

### EPA expressed supporl for the increase in the maxin~urncosteffectiveness limit.

Tlic coln~nissio~i apl)~.eci;rtes the sul)po~-t I'ol- tlie cli;inges to the I-ulc.

CGIW expressed concern thal the increase in the maximum cost-effectiveness 

### in the rules would nlean very little in the end. 

### GGIW expressed doubts that rail projecls would be allowed touse the maximum $15,000 cost-effectiveness limil, since past legislation required [hatthe commission always maintain locomoti\:e and marine ~projccts at a lower cost-effectiveness than other projects.

The commission agrees that past legislatioil requil-csthat locoinotive and marinevessel projects have a lo\ver cost-cfl'ccti\~cncss limit. TexasIIealtli and SafetyCotle, $386.102(e)(l), requires the coiiiinission to cstablisli cost-et'l'cctiveness liiiiits for gral~ts ~\\~ardcd 1111(lcr tlie programto an owllei oropcl-ator

### of a locon~otivc oriiiarinc vessel tliat arclo\\er tl~iiii the cost-effective~~css limits ilpplietl to other emissions retlnctioli pro,jects. Ilowever, tlic comnlission cloes iiot agreethat tlic rule chalige \\,ill Incan littleto rail projects. Because tlie limit on all ~~rojects is being raised, tlie conilnission will be able to set 

### a liiglicr liniit oli loco~llotive ant1 marine 111-ojcctsaswell. Dccisio~~s on Cl~e cost-cl'fcctive~iess limits to use for cacli project catcgor!,, subjectto tlie maximum li~iiit set

### I)!' this 1.~1~ clia~ige, \vill 1)c ~llatlc scl~arate t'roni this I-ulcmakiliga11c1 priorto tlie opening of cacli gl-anta~)l)lication ])cb~.iotl.



### FWC and GDC also recommended that the commission set I:he lilllits for all project types at the 

### maximum allowed of$15,000. 

### GDC stated that increasing the previous limits of $5,000 for on-road and$10,000 for non-road so111 ces ~~ould encourage greater part~c~pation ill 

### TERI' by i~~dividuals in the North l'cxas 81-ca.

The co~ii~nissior~ apj)l.Cciiltc~ the suppo~-t ofthe

### TERI' program by 

### FMJCant1 GDCand agrees that raising tlie cost-cffectivcncss limits for on-road ancl non-roacl projects ~vould encourage greater participatiori in the TEIZI' progranl. As explained in tlie rcsllonsc to the l~rcvious comment, 

### a clecisio~i 011the cost-cfi'ccti\~cness limits to sct fi~r c;~cl~ type ofproject, s~~bject to the maximum limit set 

### I)!. this rl~lc cl~al~ge, nrill be ~~~ade b!l the co~n~nission separate 1'1.om this rulemaking and prior 

### to opcl~il~g each g1-;111t aj)l)licatio~~ 1)criocI. Tl~c Co~ii~ncnts by FYVC a11c1

### GDC will 

### be co~~siclerctl 

### M~II~II that clecisio~~ is beiiig rnacle.



### NCTCOG and Dallas expressed support for the establishn~ent of a diesel Lesting center as authorized under 

### SB 12, 80th Texas Legislature.

The cstablisllri~e~~t of'a clicsel testing center is outsicle the scope of this rulemaking. The com~nission agrees tlint the cstablisl~n~cnt of a tliescl lestiog center as autllorized unclel-

### SB 12will p~.o\'itlc a valu:ible rcsollrce for tl~c state to e\ralostc~.etrolit systcnls a~~tl ncva~lced teclinologies to cleterluiuetheir cffectivetiess in recluci~lg eruissions ol'N0, and other poll~ttaots.



### NCTCOG i.ecluestcd the comn-iiss~on's support and p~.o\l~siol-i of allocation oSgrant f~~nds to the area necessar) to mect ~hc Jlallas-Fort Wol.th nonatia~nment area's 

### air qual~ly goals.

This conlment is outside of'tl~e scope of this r11le111nl;ing. 'The commission agreesthat the

### TERP ~~rogi-n~ii is an i~~iportallt tool ill I~elpillg tl~e Ilallas-Fort YVortli nonattaia~neot area to meet its airq~iilit!~ goals. Tlie coriin~ission \\'ill consitler tlle nectls of the area wlieii tlcterrnining how the fulidsjvill be allocatetl iiutl used.

NCTCOC; suggested that thc commission consider expanding the requirements that the einissions reductions that c:ln be atlributed to retrofit technology be vel-ifiedby the 

### EPA and the California Air Resousces Boarti to inciudc teclinology verified under testing programs o~~lside of the country. NCTCOG stated [hat other states have detesmined tlie nced for and permirled teclinologies verified tliro~~gli similar 131-ocesses in l',usope and Asia to be included in their air q~~ality programs.

This coliiment is olrtsitle of'tlie scopeof this ruleniaking. Thecomniission will seek additional ilifbrnlation I-cgartlingtlie I-eqilirementsof' other states for accel~ting rctrolit technologies for eniissions retluctiol~ creclit.

Neste Oil provided informalion regarding its teclii~ology to pl-oducerenewable diesel fuel from either vegetable oil or aniii~al fats by adding hydrogen to the bio-feedstoclc to make 1-enewableparaffinic hydrocarbons, also Icnown as alkanes. Neste Oil stated [hat adding alkanes lo diesel fuel tends to reduce IVO,. Neste Oil also stated that definitions are being written that could exclude this new technology and pre\fcn[thc commission from hasvesting the low-hanging N0,reduction fl-uit. Neste Oil asked for any assislance that the commission can provide to maintain a level playing field sothat this and other evol\,ingteclinology can help the commission to achieve the goals of energy security, reducing green house gases, and lowel.ing

### NO, emissions.

This coniliic~it is outsitlc of'tlie scopeof' this rulelnaltilig. Tlie statelncllt regartlilig tlefinitions bei~ig 1~1-ittc11 that rl~iglit csclutle thc nc\v technology 

### appear to bc in ~.cf'cl.cnce to tlie rules ~crt;iiliilig ~'CSRS I,o\v Eliiissioli Diesel (Ts1,ED) rccluil~cmeats sl~ccilictl in Cliapter 114, Subchul)tcr 

### 11,Di\ isioo 2. 'I'hosc rules inclutle sta~itlal-tls for cetalic aritl aroinatic levels in dieselfuel soltl in the eastern part oftl~c state. 'The co~nniissio~~'~ TsT,EII plyyarn staff may be coi~ti~ctctl ['or 111o1.c i~~l'ol.rn:~tion ~-cgnrtIi~ig hoiv tl~c 

### Ts1,ED ~.equi~-cmcnts 111ay possibly affect the sale a11c1 use of the S~lcl p~.otlocts that ma!, bccome ;~v:~il::ble from Neste Oil ifapprovccl by tlie 

### EPA t'or 11scin tlic U~~itctl States.



### UP recommended that tlie commission develop "job assignment" criteria for a\vardinggrants that can be dil.octly assigned to spccificjobs or taslcs conducted by an apl~licant, rather than limiting grants to speclfic units or-pieces o~equi1)ment. 

### UP explained that \\/hena locomotive 

### is removed from service at

a locat~on For fileling, maintenance, or inspection. a similarly-sized locomoti\~e nlust be assigned to the job. That replacenle~it loco~notive will have tlie sanle or simi!ar characleristics. 

### UP stated that the grant program's potenlial is not lillly realized in siti~ations \\4iel.e someofthe locomoti\~es on ajob are ineligible Tor tlie grant l)rogram but 11a\leemission cha~.acteristics that are identical to eligible loco~iioti\?es assigned 10 the samejob.

This co~niilc~lt is outside of thc scope of this I-olem;~king ancl appears to be aimecl at the req~ircment hat \rcl~icles a~~cl equipment replaced 11ntlerthe program ]nust Iiave beell owried and operntetl in Tcsas for the two years preccdirig the npplication sobmission. UP'S rccommelitlatioli \~~o~~ld rcclaire a major cha~rge to the methotlology Sol-verifying that a rctl~iction 

### in 

### NO, cmissiolls \\rill occur as a rcsr~lt of tllc rcl~laccment projcct.



### UP 

### recommended that the commission simplify ~ts process for awarding grants by contracting with grant I-ecipients on a compl-elicnsi\~e "I~ui~p-su111" basis t'or a specified amount rather than by providing I-ei1iibu1-sement on an e.cpcnse-by-expensebasis. 

### [J' slatcd that the reimb~~rsernent process is complicnrcd and adds unnecess:i~.ily to the 

### administrative costs inc~u-red by both the 

### TCEQ and the grant recipients.This comment is outsicle ol'the scope of'tliis rulemaking. I~nl~lementation of a lump-sum approacli woulcl rccluil-e stat11tor.y cllangcs.

One ~nd~\,~dual discussed 

### a technology 11e was develo1,ing called the TI-iT1-aclc electrified guideway. 

### He stated that the commission has specificallylisted diesel engines as the only thing that will be considered under the 

### TERP program. I-[e f~lrthel- stated that if the 

### 'I'ERP program is only allo\ved to be applied to diesel engines i~ is sel-iously llawed, as diesel engines need to be obsolete soon rather than have the state buying more of 111emto continue to run for decades. I-leproposed that 

### TERI' money be used for engineel-ingand de\!clopment of [hereplacement ros diesel engines, not buying more. 

### He explained that 

### if

### TERP money were diverted to a more intelligent approach that has a multiplication effect lilte rcsearch and development thcn the 

### TEIU' can achieve its underlying goal of cleaner air at a price the taxpayers can afford that does not play favorites with those who are the very offenders.

This co~n~ucnt is outsiclc of'thc scope of'tl~is rulem:ilci~~g. Tlie conlmission tloes not agreewith the statctilclltsthat tlic 

### '17ERP prograni only consicle~.~ tliescl engincs. Untler Texas Health a11d Safety Cotlc, S3S6.053(cl), tllc co~n~nission is a~rtliorizctl to cspancl thc progranl, through the criteria establisllccl in tl~c TEICP Guiclclincs, to irlclutle \leliiclcs allel cqoil)mel~t liat use fucls other tlian tlicscl. I3;isctl 011 tl1:it authority,the ~~rojcct critcria cslablisl~cel io thc 

### Te.uc~sE~~ri.s.siorr.s Retlticiiorr Plrr11 GuiOcli~re.s,/or~ E~rri.ssio~rs Rerlrrctio/~ l~rcerrtive Gl*(~lrt.s (RG388 -

### h4a!) 2004) allonls func1ing for velliclcs, cqnil)ment, ancl cngincs that usc l'ucls other tI1a11cliesel, including clcctric eiigincs. To clatc, the

### TERI' I)rogranl has I'u~lclccl ~~rojccts that i11c11l clc alternative I'uel \~cliiclcs andequipment, clcctric cquip~nent a11t1 engi~~es, allel clcctrilicatioi~ a~tl altel-nativefuel i~~l'rastructure. The conin~isr;io~l cllcourxgcs ~)~.o,jccts that nlect the grallt crilcl-ia ancl car1 be sho\vn to rcsult in sig~~ilica~~t rcd~rrtio~ls io 

### NO, cnlissions, 1.cgarc1less ol'tllc typc offuel usctl.

Regartling thc conln~cnts 011tl~c rlcccl for 

### TERP nloney to be elivcrtetl to researcli and

I5rle\~clopnient, f'c~ritlil~g I'roni thc TERP re\ cliue soi~rccs is u\lailablc tl~l.ollgli the Ncw Teclinology Rcscar-cl~ arlrl I)c\~elol)mcnt (NTIID) I'rograln cstal)lisllctl untler Tcsns lIcaltli ant1 Safety Code, Ch;lptc~. 387. This progt-;ln~ PI-ovitles I'untling f'or rcsc:ir~cl~, tlevelop~ncrlt, testing and certificatioli of nclv tccl~nologics that \vill rcslrlt in ~.ccluctions i~r e~iiissioris oSNO, ilntl other air pollutants. The TCEQ's flTJtI) pr.ogl.anl stafl'nlay bc co~itactctl f'or Inore il~forn~atioll about this program.

# STAFF RECOMMENDATIONS

### SUBCHAPTER

### K: MOBILE SOURCE INCENTIVE PROGRAMS DMSION3: DIESEL EMISSIONS REDUCTION INCENTIVE PROGRAM FOR ON-ROAD AND 

### NON-ROAD VEHICLES 5114.622

STATUTORY AUTHORITY The amendment is adopted under Texas Water Code, $5.102, which provides the commission with the general powers tocany out its dutiesunder the Texas Water Code; $5.103, which authorizes the commission to adopt any rules necessary to carry out the powers and dutiesunder the provisions ofthe Texas Water Code and other laws ofthis state; and 55.105, which authorizes the commission by rule to establish and approve all general policy ofthe commission. The amendment is also adopted under Texas Health and Safety Code, Texas Clean Air Act, $382.017, which authorizes the commission toadopt rules consistent with the policy and purposes ofthe Texas Clean Air Act; 5382.002, which establishes the commission's purpose to safeguard the state's airresources, consistent with the protection ofpublic health, general welfare, and physical property: $382.011,which authorizes the commission toestablish the level ofquality tobe maintained in the state's air and tocontrol the quality ofthe state's air; $382.012, which authorizes the commission toprepare and develop a general, comprehensive plan for the control of the state's air; and Chapter 386, which establishesthe TERP. Finally, the amendment is adopted aspart of the implementation of SB 12, 80thLegislature, 2007.

The adopted amendment implements Texas Clean Air Act, $$382.002,382.011,382.012, and 382.017, Texas Health and Safety Code, Chapter 386, and SB 12, 80th Legislature, 2007.$114.622. 

### Incentive Program Requirements.

(a)Eligible projects include:



### (1) purchase or lease of on-road and non-road diesels;

(2) 

### emissions-reducingretrofit projects for on-road ornon-road diesels;



### (3)emissions-reducingrepower projects for on-road or non-road diesels;



### (4)purchase and use of emissions-reducingadd-on equipment foron-road ornon-road diesels;



### (5)development and demonstration of practical, low-emissions retrofit technologies, repower options, and advanced technologies for on-road ornon-road dieselswith lower nitrogen oxides 

### (NO,) emissions;



### (6) use of qualifying fuel;



### (7) implementation of infrastructure projects;



### (8) replacement of on-road and non-road diesels with newer on-road and non-road diesels; and

### (9)

### other projects that have the potential to reduce anticipatedNO, emissions from diesel engines.

(b)For a proposed project as listed in subsection (a) ofthis section, other than a project involving a marine vessel or engine,not lessthan 75% ofvehicle miles traveled orhours ofoperation projected for the five years immediately followingthe award ofa grant must be projected totake place in a nonattainment area or affected county ofthis state. The commission may also allow vehicle travel on highways and roadways, orportions of a highway orroadway, designated by the commission and located outside a nonattainment area or affected countytocount towards the percentage ofuse requirement.

(c)For a proposed project that includes a replacement ofequipment ora repower, the old equipment or engine must be recycled or scrapped provided, however, that the executive director may allowpermanent removal from the State ofTexas in specific grants where the applicant has provided sufficient assurancesthat the old locomotive will not be returned tothe StateofTexas.

(d) Tobe eligible for a grant, the cost-effectiveness ofa proposed project as listed in subsection (a) ofthis section, except for infrastructure projects and infrastructure purchases that are part of a broader retrofit, repower, replacement, oradd-on equipment project, must not exceed a cost-effectiveness of 

### $15,000 per ton ofNO, emissions reduced. The commission may set lower cost-effectiveness limits as needed toensurethebest use of available funds. The commission may also baseproject selection decisions on additional measures toevaluatethe effectiveness ofprojects in reducingNO, emissions in relation to the fundstobe awarded.

### (e)Projects funded with a grant from this program may not be used for credit under any stateor federal emissions reduction credit averaging, banking, ortrading program except asprovided under Texas Health and Safety Code, 8386.056.

(f)

### A 

### proposed project as listed in subsection (a) ofthis section is not eligible ifit isrequired by any stateor federal law, rule or regulation, memorandum of agreement, or other legally binding document. This subsection doesnot apply to:

(1)

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

(2) 

### the purchase of an on-road diesel or equipment required only by local law or regulation or by corporate or controllingboard policy of a public or private entity.

(g)

### A proposed retrofit,repower, replacement, or add-on equipment project must achieve a reduction in 

### NO, emissionstothe level established inthe commission's 

### TexasEmissionsReduction Plan: Guidelines for EmissionsReduction Incentive Grants Program (RG-388) for that type ofproject compared with the baseline emissions adopted by the commission forthe relevant engine year and application.

(h) Ifa grant recipient fails to meet the terms of a project grant orthe conditions ofthis division, the executive director can require that the grant recipient return some or all ofthe grant fundingto the extent that emission reductions are not achieved or cannot be demonstrated. 

### 4

### (i)Criteria established in the guidelines, including revisions tothe commission's 

### TexasEmissions ReductionPlan: Guidelines for EmissionsReductionIncentive Grants Program (RG-388), apply tothe Texas Emissions Reduction Plan program. Notwithstanding the provisions ofthis chapter, as authorized under Texas Health and SafetyCode, $386.053(d),revisions tothe guidelines may include, among other changes, adding additional pollutants; adding stationary engines or engines used in 

### stationary applications; adding vehicles and equipment that use helsotherthan diesel; or adjusting eligible program categories; as appropriate,toensure that incentives established under this program achieve the maximum possible emission reductions.

# TEXAS COMD~SSION ON

which isfiled inthepermanentreadsoftheCommisskn. theeealofdim

### on

~adonna.~r~ek. 

### GhiiCj.e& ORDERADOPTING AhlJ7NDJ7D RU~~~'SS"nm"vironmenta~Qdu~ IIE\'ISION TOTI-IE STATE IR'II'LER'IENTATION PLAN

Docket No. 2007-0939-RUL



### On December 5, 2007, the Texas Comniission on Environmental Quality (Commission), during a public meeting, considered adoption of amended 

### $ 114.622. The Commission adopts this amendment, in Clial~ter 114, Coi~trol orAil. Pollution from Motor Vehicles, Subclial~ter 

### K, Mobile Source I~icentive Programs, Division 3; and col.rcsl~onding revision to the state implementation plan (SIP). The adopted r~~lemalting anlends 

## 5 114.622 to authorize the Commission to designate highways and roadways or portions of a Iiigliway or roadway on \\/Ilicll travel by grant-filnded veliicles may count towards the require~nent that veliicles be operated at least 75 percent of the annual miles in the nonattainment areas and affected counties. The atlopted 1.111emalting also amends 

## 3 114.622 to increase the ~iiaxim~lni cost-effectiveness limits for a project from $13,000 per ton of nitrogen oxides reduced to $15,000 pel-ton. Finally, the adopted rulemalting aniends 

### $ 114.622 to remove the option for grant recipients to permanently remove fi.011itlle State of Texas the old equip~iie~it orengines replaced under a grant project. Under this amendment, the Executive Director may still allow a locomotive to be permanently removed from tlie state in lieu of recycling or scrapping, if the grant recipient has provided sufficient assLirances that tlie old locomotive will not be ~.eturned to tlie State ofTexas. Under Tex. Health & Safety Code Ann. 

## $5 382.01

### 1, 382.012, and 382.023 (Vernon 2001), the Co~~~mission has Jlie ~l~~tIiol.ity to co~ltrol the cluality of tlie s~ate's ail- and to issue or-ders consistent with the ~)olicics ant1 I)uI-I)osesorthe Texas Clean Air. Act, Clial~ter. 382 of the Tex. Health & Sarety Code. The p~.oposeecl rule \,\)asp~~blisl~etl ror commcnt ill the August 24, 2007, issue of tile Tc.~-cls Xcgislo- (32 TesReg 5324). Pursuant to Tex. tlealtll & Safety Code Ann. 382.017 (Vernon ZOO]), Tex. Gov't Code Cllal~ter 2001 (Vernon 2000 SL Ve1.11011 SU~II. 2005), and 40 Code of Federal Regulations $ 

### 5 1.102, and arter 11roper notice, thc Collimission conductcd 11ublic 11eal.ingsto consider tlie amended rule and revision to the SIP. I'l.ol)u. 11oticei~lclutled 111.orninent advertisei~~ent in the at-eas afrectecl at least 30 clays priol- to 1.he dates of the hearings. Public Ilearings were held Sel~te~libcl- 1 1, 2007, at the Texas Commission on E~~\~ironmental Quality in Austirl, at tlie NOI-111 Cent~.al Texas Council of Governments ill AI-lington, and at the Houston-Gal\/esto~~ Area C'oullcil in J-louston. 71-l~e C'o~~~rnission cir-culnted heal-ing notices or its intc~lded action to the ~~ublic, includillg intclxsted IIU-XNI" 111e Rcgional Ad~~ii~~istr-ator- of the EPA, and all aly~licable local air ~~ollutio~~ cortr-ol agencies. Tile public was inviled to submit data, \:ie\\~s, and ~~ecomn~cndatio~~s or1 tlle p1.011oscclamendcd 

### I-LII~ al1d SIP I-evision, eitller ol.ally 01' ill writing, a( the l~ea~-il~gs 01- during tile conlrne~lt periocl. Priol-to the schedi~led hea~.ings, copies orthc 111-oposed amended I-ule and SIP ~.e\jision ulere available ror public inspection at the Comnlission's central orlice and on tile Con~n~rssion's Wcb site. Data, vie\vs, and ~~ecommenciations of intel-estedpersons r-egardinglie p~.oposed alliencled I-uleand SIP ~ru\,ision\\.cl.e subi1;illed to tile Commissioi~cIu~.illgthe comment period, and were considered by theCommission 

### as i.eflectrd 

### in the analysis oftestimony inco~po~~ntetl by reference to this 01-clcr.The Commission finds tlie analysis of testimony includes tlie names of all interested groups or associa~ions offering con?ilien[ on the ~~rol)osecl ame~ided rule and the SIP I-evisionand [heirposi~ion concerning the same. IT IS THEREFORE ORDERED 

### BY THE COh4MISSION the amcntled rule and re\,ision LO tlie SIP i~icorporatetl by refesence to this Osder are Iiereb)/ adoptecl. The Co~iimission Ti~r~lier authorizes staff to m;~l<e riny non-substantive re\,isionsto tlie r.i~le necessary lo comply ~vitli 

### TC.I-CIS R~gisi~i. ~.e~l~~ii.e~iie~its. The :lcloptetl ~wle :~nd the p~-enrnble to [lie adopLed n~le and tlie ~.e\lision to tlie SIP are incol-posated by ~.eresence 

### in tliis 01.tIer. as ifset fol-~h at leng~li \/erbati~:~ in tliis Osder. IT IS FURTI-IER ORDERED 

### BY THE COMMISSION that on behalf of [lie Commission, Lhe Cliaisman should transmit a copy of this Order, Logetliel with tlie adopted rule and re\/ision to the SII', to the Regional Administrator of EPA as a proposed revision to the Texas SIP pursuant to the Federal Clean Air Act, 1 10,cotIiIied at 42 U.S. Code Ann.

## 5s 7401 - 7671

### q, 

### as amended. This Order cons~itutes tlie Order oftlie Commission required by tlie Adminis~l.ative Procedure Act, Tex. Cov't Code, $ 2001.033 (Vesnon 2000 SL Ver1101i SLIPP. 2005). If any postion of tliis Order is 

### FOIany reason held to be invalid by a court of competent~LII-isdictio~i, the illvalidity ofany por~ion shall not affect (lievalidity of [he remaining portions.

Date issncd: 

# JAN 0

# 3 

# fflfl8 TEXAS COMMlSSlON ON ENVIRONMENTAL QUALITY

### RULES

22 TAC g851.28

No comments were receive regarding adoption of this amendment.

Thisagency hereby certifies hatthe adoption has been reviewed by legalcounsel and foundt bea valid exerciseof the agency's legal authority. 

# 9

Filed with the Office of the S cretary of State on December 14, 

# k 2007. TRD-200706377 Vincent Houston Acting Executive Director



# + + + 22 TAC g851.31 

# I TheTexas Boardof Professi nal Geoscientists (TBPG or Board) adopts anamendment to §8 1.31 regarding temporary licenses. It is adoptedwithout change to the proposedtext as published in the August 3, 2007, issu of the Texas Register (32 TexReg 4729). 

# ?

No comments were recei garding adoptionof this amendment. Thisagency hereby certifies theadoption has been reviewed by legalcounsel andfoundt a valid exercise of the agency's legal authority. Filedwith the Office of the ecretary of State on December 14, 

# 9' 2007. TRD-200706378 Vincent Houston Acting Executive Director



### TITLE 30. 

### ENVIRONMENTAL QUALITY 

## PART 1. 

## TEXAS COMMISSION ON ENVIRONMENTAL QUALITY CHAPTER 114. 

### CONTROL OF AIR POLLUTION FROM MOTOR VEHICLES SUBCHAPTER 

### K. MOBILE SOURCE INCENTIVE PROGRAMS DIVISION 3. 

### DIESEL EMISSIONS REDUCTION INCENTIVE PROGRAM FOR ON-ROAD AND NON-ROAD VEHICLES 30 TAC g114.622 The Texas Commission on Environmental Quality (commission) adopts anamendmentto S114.622 withchanges to the proposed text as published in the August 24, 2007, issue of the Texas Register (32 TexReg 5324). The amendedsection will be submitted to the United States Environmental ProtectionAgency (EPA) as a revision to the state implementation plan. BACKGROUND AND SUMMARY OF THE FACTUAL BASIS FOR THE ADOPTED RULE Senate Bill 12 (SB 12), 80th Legislature,2007, amended Texas Healthand Safety Code, Chapter386, Texas Emissions Reduction Plan (TERP) Program. Most of the new provisions add to existing project categories and do not requireamendment of the rules for implementation. The TERP Guidelines will be revised to includethe additional grant criteria established by SB 12. The adopted rulemaking amends S114.622 to implement the cost-effectiveness increase from $13,000 per ton of nitrogen oxides reduced to $15,000 per ton under Texas Health and Safety Code, §386.106(a), as required by SB 12. Senate Bill 12 also authorizes the commissionto designate highways and roadways or portions of a highway or roadway on which travel by grant-funded vehicles may count towards the requirement that vehicles beoperated at least 75 percent ofthe annual miles inthe nonattainment areas and affectedcounties. In additionto the amendment adopted to implement SB 12,the rule will be amendedto removethe optionfor grant recipients to permanently remove from the State of Texas the old equipment



### ADOPTED RULES December 28,2007 32 TexReg10005or engines replaced under a grant project. With this amendment, grant recipients will be required to recycle orscrapthe old equipment or engine, with one exception. Based on comments received, the rule amendment is changed to authorize the executive director to allow permanent removal from the StateofTexas in specific grants where the applicant has provided sufficientassurances that the old locomotive will not be returned tothe State of Texas. SECTION DISCUSSION The adopted amendment would increase the cost-effectiveness of eligible projectsandallowthecommission to designate vehicle travel on highways and roadways to count towards the percentage of use requirement. The adopted amendment will also omit the option to move replaced equipment from the Stateof Texas. For proposed projects that include the replacement or repower of equipment, the old equipment or engine must be recycled or scrapped, with one exception. The executive director may allow permanent removal from the State of Texas in specific grants where the applicant has provided sufficient assurances that the old locomotive will not be returned to the State of Texas. 5114.622. Incentive Program Requirements. The adopted amendment to 5114.622(b)allows the commission to designate highways and roadways or portions of a highway or roadway on which travel by grant-funded vehicles may count towards the requirement that vehicles be operated at least 75 percent of the annual miles in the nonattainment areas and affected counties. Section 114.622(b)currently establishes a usage commitmentof 75 percent for vehicle miles traveledtooccur in a nonattainment area or affected county. The adopted amendment to §114.622(c) requires grant recipients to recycleor permanently scrap old equipmentandengines. Section 114.622(c) currently includes an option for grant recipients to permanently remove from the state equipmentor engines replaced under the program, in lieu of recycling or scrapping. Beginning with grants issued in fiscal year 2007, the commission has not allowed grant recipients to use the removal option and has required that the old equipment or engine to be recycled or scrapped. After evaluating the implementation of the replacement and repower grants fo;several years, staff found that it was difficult to ensure that old equipment and engines were actually removed from the state and, if removed, would not be returnedto the state in the future. Staff determinedthat the best way to ensure that the reductions in emissions of nitrogen oxides are achieved is to not allow this option and to require that the old equipmentandengines be recycled or scrapped, withone exception. Based on comments received, §114.622(c) is being adopted with a change from proposal to authorize the executive director to allow permanent removal from the State of Texas in specific grants where the applicant has provided sufficient assurances thatthe old locomotive will not be returnedtothe State of Texas. The adopted amendment to 5114.622(d) increases the cost-effectiveness for projects from the current $13,000 per ton of nitrogen oxides emissions reducedto $15,000 per ton of nitrogen oxides emissions reduced. FINAL REGULATORY IMPACT ANALYSIS DETERMINATION The commission reviewed the rulemaking in light of the regulatory analysis requirements of Texas Government Code, 52001.0225, and determined that this rule action is not subject to 52001.0025 because it does not meet the definition of a "major environmental rule" as defined in that statute. A "major environmental rule" means a rule the specific intent of which is to protect the environment or reduce risks to human health from environmental exposure and that may adversely affect ina material way the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. The adopted amendment to Chapter 114 modifies the existing rules in accordance with SB 12, 80th Legislature, which amended Texas Health and Safety Code, Chapter 386. The adopted amendment is part of a voluntary incentive program with the goal of reducing diesel emissions and as such, the adopted rule will not adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, or the public health and safety of the state or a sector of the state. In addition, a regulatory impact analysis is not required because the adopted ruledoes not meetany ofthe four applicability criteria for requiring a regulatory analysis of a "major environmental rule" as defined in the Texas Government Code. Texas Government Code, 52001.0225, applies only to a major environmental rule the result of which is to: 1) exceed a standard set by federal law, unless the rule is specifically required by state law; 2) exceed an express requirement of state law, unless the rule is specifically required byfederal law; 3) exceed a requirement of a delegation agreement or contract between the state and an agency or representative ofthefederal governmenttoimplement a state and federal program; or 4) adopt a rule solely under the general powers of the agency instead of under a specific state law. This rulemaking does not exceed a standard set by federal law, and the technical requirements are consistent with applicable federal standards. In addition, this rulemaking does not exceed an exnress reauirement of state law and is not adopted solely underthe general powersofthe agency, but isspecifically authorized bv the ~rovisions cited in the STATUTORYAUTHORITY section 6f this preamble. Finally, this rulemaking does not exceed a requirement of a delegation agreement or contract to implement a state and federal program. TAKINGS IMPACT ASSESSMENT Thecommission evaluated this rulemaking action and performed an analysis of whether the adopted rule is subject to Texas Government Code, Chapter 2007. The primary purpose of the rulemaking isto amend Chapter 114 inaccordance with SB 12,80th Legislature. The amendment implements a voluntary program and only affects motor vehicles and equipment which are not considered to be private real property. Therefore, promulgation and enforcement of this adopted rule is neither a statutory nor a constitutional taking because it does notaffect private real property. Therefore, the ruledoes not constitute a taking underTexas Government Code, Chapter 2007. CONSISTENCY WITH THE COASTAL MANAGEMENT PROGRAM Thecommission reviewedtheadopted rulemaking and found the proposal is a rulemaking identified in the Coastal Coordination Act Implementation Rules, 31 TAC 5505.1 1(b)(2), concerning rules subjecttothe Texas Coastal Management Program (CMP) andwill, therefore, requirethat goals and policies of the CMP beconsidered during the rulemaking process. The commission reviewed this action for consistency and determined the rulemakingfor Chapter 114 does not impact any CMP goals or policies



### 32 TexReg10006 December 28,2007 

### TexasRegisterbecause it adds criteria to a voluntary incentivegrant program and does not govern air pollutionemissions. PUBLIC COMMENT The public hearings for this rulemaking were held on: September 11, 2007, 11 a.m., Texas Commission on Environmental Quality, 12100 Park 35 Circle, Austin; September 11, 2007, 3:30 p.m., North Central Texas Council of Governments, 616 Six Flags Drive, Arlington; and September 11, 2007. 3:30 p.m., Houston-Galveston Area Council, 3555 Timmons Lane, Houston. Emisstar LLC (Emisstar), City of Dallas (Dallas), United States Environmental Protection Agency Region 6 (EPA), Fort Worth Chamber of Commerce (FWC), North Central Texas Council of Governments (NCTCOG), and Port of Houston Authority (PHA) submitted oral andlor written comments in support of all or part of the rulemaking. BNSF, Emisstar, Genessee & Wyoming Inc.- Motive Power (G&W), Railpower Hybrid Technologies Corp. (Railpower),and Union Pacific Railway Company (UP) submitted oral and/or written comments expressing concerns andlor suggesting changes to part of the proposal. Dallas, FWC, Greater DallasChamber (GDC),NCTCOG, Neste Oil, PHA, UP Emisstarstatedthat it hasinformationthat potentialTERP participants have been unwillingto participate inTERPforthe past few grant rounds becausethe commission began not accepting the transfer or sale of the old equipment and enginesto out-of-state users. As an example, Emisstar stated that several stevedoring companies at Texas ports have elected to not participate in TERP because of this requirement. Emisstar referred to data indicating that in 2006, eleven stevedoring companies participated inTERP, but a year later when the commission began not accepting the transfer option, only six stevedoring companies participatedin the program. Emisstarfurtherstatedthatthe concerns about ensuringthat the transfer occurs and that the equipment and engines are not returned to the state are addressedbythe stipulation in the TERP contract that the equipment must remain out of the state. Emisstar suggestedthat the commission allow two options: 1) allow TERP participantsthe option of choosing whether to take a salvage value of $1,000 and scrap the engine or equipment; or 2) allowthetransfer or sale of the engine or equipment out of state, with a requirement that the TERP participant is contractually liable for ensuring that the engine or equipment never returns to Texas. and one individualsubmitted 6ral andlor written comments not GgW that it operates 47 individual railroads, pelforms directly related to the TERP rulemaking. rail switchina services in 12 U.S. ~ort facilities and ~rovides rail RESPONSETO COMMENTS switchina s&rvices to dozensof industrial customers'in26 states. including~exas. G&W stated that it is unfortunatethat it can not Change to §114.622(b) regarding designated and will not participatein a programwhere it is forcedto scrap and roadways. an otherwise viable locomotive asset that could be rede~loved to NCTCOG, Emisstar, and EPAexpressed support forthe change. NCTCOG also urged the commissionto use allflexibility allowed in applying this clause to determiningthe project cost-effectiveness. The commission appreciates the support for the changes to the rule. Regarding the additional recommendation made by NCTCOG, Texas Health and Safety Code, §386.105(d), states that only the reductions in NOxemissions that are achieved in the nonattainment areas and affected counties may be used to determine the cost-effectiveness of a project. Therefore, the commission would not be able to consider the reductions in NOx emissions occurring on the designated highways and roadways outside of the nonattainment areas and affected counties when calculating the cost-effectiveness of a project. UPcommentedthat this changewould support commission designationof certain railwaysto counttowardthe percentageof use requirement in locomotive replacement projects. The commission does not agree with UP'Sinterpretation of the rule change. The change only applies to vehicles traveling on designated highwaysand roadways, not rail lines. Change to §114.622(c) to remove the option for equipment and engines replacedor repowered underthe TERP program to be permanently removed from the State of Texas in lieu of being recycledor scrapped. NCTCOG, Dallas, EPA, FWC, and PHA expressed support for the change to the rule. The commissionappreciates the support for the changes to the rule. Emisstar, G&W, BNSF, Railpower, and UP did not support the change to the rule. another region, state or rail operation. G&W further siatid that this changewill likely removeall incentivefor railroad locomotive operators to participateinthe TERP andthatthe program will not receiveany more locomotivesubmittals if this change becomes effective. BNSF stated that it understands that it has been difficult for TCEQ staff to ensure that old equipment and engines are removed from the state and would not be returned to the state. However, BNSF stated that the locomotives likely to be replaced under the program are not appropriate for use as cores to manufacture the new Gen Set locomotives that would be purchased to replace the old locomotive. BNSF indicated that the locomotives that would be replaced in Texas are often more reliablethan the locomotives used in other BNSF svstem locationsandthatthe value of those locomotives isofteng;eater than the book value because of the limited market. BNSF stated that the rule change would greatly increase the cost of future locomotive replacements in Texas and will likely result in fewer grant applications from BNSF. BNSF referenced TERP grant data through January 2007 that indicatedthat locomotives have made up only 2 percent of the number of TERP projects but have resulted in 40 percent of the TERP NOxemissions reductions. BNSF suggested an alternativeapproach to the scrapping only requirement where the commission could requirethat the grant recipient install global positioning systems on the locomotives being replaced. The TCEQ staff couldthen observe the location of the old locomotives on a realtime basis. UP stated that the change to the rule will seriously hinder the ability of UP and other railroad companies operating inTexas to undertake new locomotive projects, result in the loss of already limited projects capable of capturing further available NO, emissions reductions, and create a generaldisincentivefor participation in the program.


### ADOPTED RULES December 28,2007 32 TexReg10007UP also statedthat switch engine replacement projects are wellsuited for permanent removal from Texas and that verification is not difficult. UP explained that it has maintained ownership and control of the old locomotives and that it has ample opportunity to relocate old locomotives that have remaining useful life. UP stated that roughly half of the locomotives replaced under the program have been scrapped and their engines destroyed, with the rest of the locomotives being reassigned to other UP locations outside of Texas. UP references its locomotive management system as a reliable means of ensuring that the locomotives are not returnedto the state and pointedtothe success of the replacement projects that have been completed. UP explained that as a result of the program's success, most of the oldest switch locomotives in UP'STexas fleet have been replaced and that locomotives available for future replacements have a longer remaining activity life and are of more value that the locomotive replaced in the past. Railpower also stated its objection to this change to the rules. Railpower's comments reflected the same point of view as the statements made by the railroad companies, including concern that railroad companies would find it hard to participate in the TERP program inthe future. Railpower also stated that the California Air Districts have acknowledged that the railroad companies have and will fulfill the requirements to control the locomotives replaced under the California Carl Moyer Program and will continue to allow the option of removingthe locomotive from the state. The commission understands the concern expressed regarding the effect this change will have on the participation inthe TERP program by owners of non-road equipment and locomotives. As noted by Emisstar,the commission began not accepting the option to transfer or sell the old equipment and engines outsidethe state beginning with thefiscal year (FY) 2007 grant rounds. This change to the rulewill make permanent the interim decision by the commission to not accept that option, with one exception. The rule amendment is changed to authorize the executive director to allow permanent removal from the State of Texas in specific grants where the applicant has provided sufficient assurances that the old locomotive will not be returnedtothe State of Texas. This change to the rule is based on a number of factors, including a detailed internal review of the program by the commission's audit staff and an evaluation of the risks associated with the grant award decisions. In addition, guidelines published in 2006 by the EPA, entitled Diesel Retrofits: Quantiwng and Using Their Benefits in SIPSand Conformity- Guidance for State and LocalAir and Transportation Agencies (EPA420-B-06-005, June 2006), statethat inorder to useemissions reductions from any replacements in a SIP or in a conformity determination the vehicle, engine, or equipment being replaced should bescraped or the replaced engine returned to the original manufacturer for remanufacturingto acleaner standard. Underthe provision proposed in the rule change, the commission would consider the remanufacture process as a form of scrapping the old engine.The commission has very little control over the replaced equipment once it leaves the state. The commission is also limited in its ability to ensure that the old equipment or engines are actually removed from the state. This change is proposed to address the risks associated with the replacement grants as well as the direction in the EPA guidance to ensure that the old equipment and engines are permanently removed from the emissions inventory and that the emissions reductions are creditable to the SIP. However, the commission agrees that railroad companies, in particular, may be able to adequately ensure that a locomotive that isremoved fromTexas is not returnedtothe state. Basedon the comments received, the rule amendment is changed to authorize the executive director to allow permanent removal from the StateofTexas in specific grants where the applicant has providedsufficient assurances that the old locomotive will not be returned to the State of Texas. Change to §114.622(d) increasingthe maximum cost-effectivenessfrom $13,000 to $15,00Operton ofNOx emissions reduced. NCTCOG, Emisstar, Dallas. and EPA expressed support for the increase in the maximum cost-effectiveness limit. The commission appreciates the support for the changesto the rule. G&Wexpressed concern that the increase in the maximum costeffectiveness inthe rules would mean very little inthe end. G&W expressed doubts that rail projects would be allowed to use the maximum $1 5,000 cost-effectiveness limit, since past legislation required that the commission always maintain locomotive and marine projects at a lower cost-effectiveness than other projects. The commission agrees that past legislation requires that locomotive and marine vessel projects have a lower cost-effectiveness limit. Texas Health and Safety Code, §386.102(e)(I), requires the commission to establish cost-effectiveness limits for grants awarded under the program to an owner or operator of a locomotive or marine vessel that are lower than the cost-effectiveness limits applied to other emissions reduction projects. However, the commission does not agree that the rule change will mean little to rail projects. Because the limit on all projects is being raised,the commission will be able to set a higher limit on locomotive and marine projects as well. Decisions on the cost-effectiveness limits to use for each project category, subject to the maximum limit set by this rule change, will be made separate from this rulemaking and prior to the opening of each grant application period. FWC and GDC also recommendedthat the commission set the limits for all project types at the maximum allowed of $15,000. GDC stated that increasing the previous limits of $5.000 for onroad and $10,000 for non-road sources would encourage greater participation in TERP by individuals inthe North Texas area. The commission appreciates the support of the TERP program by FWC and GDC and agrees that raising the cost-effectiveness limits for on-road and non-road projects would encourage greater participation in the TERP program. As explained in the response to the previous comment, a decision on the cost-effectiveness limits to set for each type of project, subject to the maximum limit set by this rule change, will be made bythe commission separate from this rulemakingand priortoopening each grant application period. The comments by FWC and GDC will be considered when that decision is being made. Othercomments notdirectly relatedto this rulemaking. NCTCOG and Dallas expressed support for the establishment of a diesel testing center as authorized under SB 12,80th Texas Legislature. The establishment of a diesel testing center is outsidethe scope of this rulemaking. The commission agrees that the establishment of a diesel testing center as authorized under SB 12 will



### 32 TexReg10008 December 28, 2007 TexasRegisprovide a valuable resource for the state to evaluate retrofit systems and advanced technologies to determine their effectiveness in reducing emissions of NOxand other pollutants. NCTCOG requested the commission's support and provision of allocation of grant funds to the area necessary to meet the Dallas-Fort Worth nonattainment area's air quality goals. This comment is outside of the scope of this rulemaking. The commission agreesthat the TERP program is an important tool in helping the Dallas-Fort Worth nonattainment area to meet its air quality goals. The commission will consider the needs of the areawhen determining how the fundswill be allocated and used. NCTCOG suggested that the commission consider expanding the requirements that the emissions reductions that can be attributed to retrofit technology beverified bythe EPAand the CaliforniaAir Resources Board to include technology verified under testing programs outside of the country. NCTCOG stated that other states have determined the need for and permitted technologies verified through similar processes in Europe and Asia to be included intheir air quality programs. This comment is outside of the scope of this rulemaking. Thecommission will seek additional information regarding the requirements of other states for accepting retrofit technologies for emissions reduction credit. Neste Oil provided information regarding its technology to produce renewable diesel fuel from either vegetable oil or animal fats by adding hydrogen to the bio-feedstock to make renewable paraffinic hydrocarbons, also known as alkanes. Neste Oil stated that adding alkanes to diesel fuel tends to reduce NOx. Neste Oil also stated that definitions are beingwritten that could exclude this new technology and prevent the commission from harvesting the low-hanging NOxreduction fruit. Neste Oil asked for any assistance that the commission can provide to maintain a level playing field so that this and other evolving technology can help the commission to achieve the goals of energy security, reducing green house gases, and lowering NO, emissions. This comment is outside of the scope of this rulemaking. The statement regarding definitions being written that might exclude the newtechnology appear to be inreferencetothe rules pertaining to Texas Low Emission Diesel (TxLED) requirements specified in Chapter 114, Subchapter H, Division 2. Those rules include standards for cetane andaromatic levels indiesel fuel sold in the eastern part of the state. The commission's TxLED program staff may be contacted for more information regarding how the TxLED requirements may possibly affect the sale and use of the fuel products that may become available from Neste Oil if approved by the EPAfor use in the United States. UP recommended that the commission develop ''job assignment" criteria for awarding grants that can be directly assigned to specific jobs or tasks conducted by an applicant, rather than limiting grants to specific units or pieces of equipment. UP explained that when a locomotive is removed from service at a location for fueling, maintenance, or inspection, a similarly-sized locomotive must be assigned to the job. That replacement locomotive will have the same or similar characteristics. UP stated that the grant program's potential is not fully realized in situations where some of the locomotives on ajob are ineligible for the grant program but have emission characteristics that are identical to eligible locomotives assigned to the same job. This comment is outside of the scope of this rulemaking and appears to be aimed at the requirement that vehicles and equipment replaced under the program must have been owned and operated in Texas for the two years preceding the application submission. UP'S recommendation would require a major change to the methodology for verifying that a reduction in NOx emissions will occur as a result of the replacement project. UP recommended that the commission simplify its process for awarding grants by contracting with grant recipients on a comprehensive "lump-sum" basisfor a specified amount rather than by providing reimbursement on an expense-by-expense basis. UP stated that the reimbursement process is complicated and adds unnecessarily to the administrative costs incurred by both the TCEQ and the grant recipients. This comment is outside of the scope of this rulemaking. Implementation of a lump-sum approach would require statutory changes. One individual discussed a technology hewas developing called theTriTrack electrified guideway. Hestated that the commission has specifically listed diesel engines as the only thing that will be considered under the TERP program. He further stated that if the TERP program is only allowed to be applied to diesel engines it isseriously flawed, asdiesel engines needto be obsolete soon rather than have the state buying moreof them to continue to run for decades. He proposed that TERP money be used for engineering and development of the replacement for diesel engines, not buying more. He explained that if TERP money were diverted to a more intelligent approach that has a multiplication effect like research and development then the TERP can achieve its underlying goal of cleaner air at a price the taxpayers can afford that does not play favorites with those who are the very offenders. This comment is outside of the scope of this rulemaking. The commission does not agree with the statements that the TERP program only considers diesel engines. UnderTexas Health and Safety Code, §386.053(d), the commission is authorized to expand the program, through the criteria established inthe TERP Guidelines, to include vehicles and equipment that use fuels other than diesel. Based on that authority, the project criteria established in the Texas Emissions Reduction Plan Guidelines for Emissions Reduction Incentive Grants (RG388- May 2004) allows funding for vehicles, equipment, andengines that usefuels other than diesel, including electric engines. To date, the TERP program hasfunded projects that include alternative fuel vehicles and equipment, electric equipment and engines, and electrification and alternative fuel infrastructure. The commission encourages projects that meet the grant criteria and can be shown to result in significant reductions in NOxemissions, regardless of the type of fuel used. Regarding the comments on the need for TERP money to be diverted to research and development, funding from the TERP revenue sources is available through the New Technology Research and Development (NTRD) Program established under Texas Health and Safety Code, Chapter 387. This program provides funding for research, development, testing andcertification of new technologies that will result in reductions in emissions of NOxand other air pollutants. The TCEQ's NTRD program staff may be contacted for more information about this program. STATUTORY AUTHORITY The amendment is adopted under Texas Water Code, s5.102, which provides the commission with the general powers to carry out its duties under the Texas Water Code; s5.103, which authorizes the commissionto adopt any rules necessaryto carry


### ADOPTED RULES December 28,2007 32 TexReg10009out the powers and duties under the provisions of the Texas Water Code and other laws of this state; and 35.105, which authorizes the commission by rule to establish and approve all general policy of the commission. The amendment is also adopted under Texas Health and Safety Code, Texas Clean Air Act, 5382.017, which authorizes the commission to adopt rules consistent with the policy and purposes of the Texas Clean Air Act; 5382.002, which establishes the commission's purpose to safeguard the state's air resources, consistent with the protection of public health, general welfare, and physical property: §382.011, which authorizes the commission to establish the level of quality to be maintained in the state's air and to control the quality of the state's air; 5382.012, which authorizes the commission to prepare and develop a general, comprehensive plan for the control of the state's air; and Chapter 386, which establishes the TERP. Finally, the amendment is adopted as part of the implementation of SB 12, 80th Legislature, 2007. The adopted amendment implements Texas Clean Air Act, §§382.002, 382.011, 382.012, and 382.017, Texas Health and Safety Code, Chapter 386, and SB 12,80th Legislature, 2007. $114.622. Incentive Program Requirements. (a) Eligible projects include: (1) purchase or lease of on-road and non-road diesels; (2) emissions-reducing retrofit projects foron-road or nonroad diesels; (3) emissions-reducing repower projects for on-road or non-road diesels; (4) purchase and use of emissions-reducing add-on equipment for on-road or non-road diesels; (5) development and demonstration of practical, low-emissions retrofit technologies, repower options, and advanced technologies for on-road or non-road diesels with lower nitrogen oxides (NOx) emissions; (6) use of qualifying fuel; (7) implementation of infrastructure projects; (8) replacement of on-road and non-road diesels with newer on-road and non-road diesels; and (9) other projects that have the potential to reduce anticipated NOxemissions from diesel engines. (b) Fora proposedproject aslisted in subsection (a) of this section, other than aproject involving a marine vessel or engine, not less than 75% of vehicle miles traveled or hours of operation projected for the five years immediately following the award of agrant mustbeprojected to take place in a nonattainment area or affected county of this state. The commission may also allow vehicle travel on highways and roadways, orportionsof ahighway orroadway, designated by the commission and located outside anonattainment area or affected county to count towards the percentage ofuse requirement. (c) For a proposed project that includes a replacement of equipment or arepower,the old equipment or engine must berecycled or scrapped provided, however, that the executive director may allow permanent removal from the StateofTexasin specific grants where the applicant has provided sufficient assurances that the old locomotive will not be returned to the State of Texas. (d) To be eligible for a grant, the cost-effectiveness of a proposed project aslisted in subsection(a)ofthis section, except for infrastructure projects and infrastructure purchases that arepart ofabroader retrofit, repower, replacement, or add-on equipment project, must not exceed a cost-effectiveness of $15,000 per ton of NOxemissions reduced. The commission may set lower cost-effectiveness limits as needed to ensure thebest use of available funds. The commissionmay alsobaseproject selection decisions on additional measuresto evaluate the effectiveness of projects in reducing NOTemissions in relation to the funds to be awarded. (e) Projects funded with a grant from this program may not be used for credit under any stateor federal emissions reduction credit averaging, banking, or trading program except as provided underTexas Health and Safety Code, 5386.056. (f) Aproposed project as listed in subsection (a) of this section is not eligibleif 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 equipment, vehicles, or operations will occur, if on the date the grant is awarded the changeisnot requiredby any stateor federallaw,rule orregulation, memorandum of agreement, or other legally binding document; or (2) the purchase ofanon-road dieselorequipment required only by local law or regulation or by corporate or controlling board policy of a public or private entity. (g) A proposed retrofit, repower, replacement, or add-on equipment project must achieve a reduction in NOxemissions to the level established in the commission's Texas Emissions Reduction Plan: Guidelines for Emissions Reduction Incentive Grants Program (RG-388) for that type of project compared with the baseline emissions adopted by the commission for the relevant engine year and application. (h) Ifagrant recipient failsto meet the terms of aproject grant or the conditions of this division, the executive director can require that the grant recipient return some or all of the grant funding to the extent that emission reductions are not achieved or cannot be demonstrated. (i) Criteria established in the guidelines, including revisions to the commission's TexasEmissions Reduction Plan: Guidelines for Emissions Reduction Incentive Grants Program (RG-388), apply to the Texas Emissions Reduction Plan program. Notwithstanding the provisions of this chapter, as authorized under Texas Health and Safety Code, 5386.053(d), revisions to the guidelines may include, among other changes, adding additional pollutants; adding stationary enginesor 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 program achieve the maximum possible emission reductions. This agency hereby certifies that the adoption hasbeen reviewed by legal counsel and found to be avalid exercise ofthe agency's legal authority. Filedwith the Office of the Secretary of State on December 17,

TRD-200706393 Robert Martinez Director Texas Commission on EnvironmentalQuality Effective date: January 6,2008 Proposal publication date: August 24,2007 For further information,please call: (512)239-6087



### 32 TexReg10010 December 28,2007 TexasRegis