69–010 

Calendar No. 585 

110TH CONGRESS REPORT " ! SENATE 2d Session 110–266 

LEGISLATION TO AUTHORIZE THE ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION AGENCY TO ACCEPT, AS PART OF A SETTLEMENT, 

DIESEL EMISSION REDUCTION SUPPLEMENTAL ENVIRONMENTAL 

PROJECTS 

FEBRUARY 28, 2008.—Ordered to be printed 

Mrs. BOXER, from the Committee on Environment and Public 

Works, submitted the following 

R E P O R T 

[To accompany S. 2146] 

The Committee on Environment and Public Works, to which was 

referred the bill (S. 2146) to authorize the Administrator of the Environmental Protection Agency to accept, as part of a settlement, 

diesel emission reduction Supplemental Environmental Projects, 

and for other purposes, having considered the same, reports favorably thereon without amendment and recommends that the bill do 

pass. 

PURPOSE OF THE BILL

The purpose of this legislation is to clarify that the Administrator of the Environmental Protection Agency (EPA) is authorized 

to accept, as part of a settlement, diesel emission reduction Supplemental Environmental Projects. 

GENERAL STATEMENT AND BACKGROUND

EPA estimates there are 11 million diesel engines in America 

lacking available control technology that could greatly reduce 

harmful pollution. The On and Off-Road vehicles using these engines produce more than 1000 tons of particulate matter every day. 

The pollution causes approximately 21,000 premature deaths in the 

United States each year, plus tens of thousands of Americans suffering from asthma attacks, heart attacks, and respiratory problems. 

Recognizing these harmful effects, EPA now requires all new onroad heavy duty diesel vehicles to be installed with pollution control technology. EPA estimates that when the 2001 Highway and 

2004 Non-road Diesel Engine rules are fully implemented harmful 


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diesel emissions will be reduced by more than 80 percent from 2000 

levels. The pollution prevented will have profound economic and 

health benefits. EPA estimates that for every dollar spent on the 

technology $16 of benefit will be generated—totaling $66 billion in 

economic and health benefits annually. 

In addition to reducing pollution from newly constructed diesel 

engines, EPA and Congress have acted to retrofit existing diesel vehicles with pollution control technology. EPA has been using Supplemental Environmental Projects (‘‘SEPs’’) to fund diesel retrofits, 

particularly on school buses. These projects are undertaken by a 

defendant as part of a settlement in an environmental enforcement 

action brought by EPA or the Department of Justice. They specifically do not include actions which a defendant is otherwise legally 

required to perform. So they generate environmental and public 

health benefits that would not have occurred without the settlement. 

SEPs have been an important funding stream for diesel retrofit 

projects. In December of 2007, EPA entered into a settlement with 

American Electric Power containing a federal SEP designating as 

much as $21 million for diesel retrofits. In February 2006, 

DaimlerChrysler entered into a settlement with EPA containing a 

SEP for $3 million for diesel retrofits. In 2004, Toyota agreed to 

spend $20 million on a diesel retrofit SEP aimed specifically at 

school buses. Archer Daniel Midlands has also spent upwards of $6 

million retrofitting school buses as part of a SEP. Between 2003 

and 2006 nearly $62 million in diesel retrofit projects have been 

funded by SEPs. Of all the diesel retrofits installed between 2003 

and 2006, 37% were financed in whole or in part by SEPs. 

Also recognizing the importance of reducing pollution from existing diesel engines, in 2005, Congress included the Diesel Emissions 

Reduction Act of 2005 as part of the enacted 2005 Energy Policy 

Act. The Diesel Emissions Reduction Act established national and 

State-level grant and loan programs for diesel emission reduction 

projects and programs. Congress appropriated $49.2 million in 

funds for this program for the first time in the FY2008 Omnibus 

Appropriations Act. 

Following Congressional action to fund the diesel retrofit program, EPA apparently has concluded that the Agency generally 

should cease funding diesel retrofit projects via SEPs. EPA believes 

that allowing diesel retrofits to be funded by SEPs once Congress 

has specifically appropriated monies for that purpose could violate 

the Miscellaneous Receipts Act. This legislation is intended to clarify that Congress did not intend the funding of the Diesel Emissions Reduction Act to affect EPA’s ability to enter into SEPs that 

fund diesel retrofit projects. 

The Miscellaneous Receipts Act was passed in order to ensure 

that government agencies did not bypass the appropriations authority of Congress by augmenting their budgets via other means, 

for example: user fees, fees for training courses, parking fees, contract and lease fees and revenues, monetary awards in court cases 

involving the agencies, court costs and fees, or civil penalties. It is 

a misunderstanding of Congressional intent to interpret the use of 

funds to mitigate environmental damage as part of an environmental enforcement agreement as an augmentation of a Congressionally funded grant program to retrofit diesel engines with polluVerDate Aug 31 2005 06:46 Feb 29, 2008 Jkt 069010 PO 00000 Frm 00002 Fmt 6659 Sfmt 6602 E:\HR\OC\SR266.XXX SR266

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tion control technology. Congress never intended the Diesel Emissions Reduction Act to limit EPA’s ability to negotiate additional 

diesel retrofit projects as part of enforcement settlements. 

OBJECTIVES OF THE LEGISLATION

S. 2146 clarifies Congressional intent of the Diesel Emissions Reduction Act. S. 2146 authorizes EPA to continue to use SEPs to 

fund diesel retrofits regardless of the congressional funding of the 

Diesel Emissions Reduction Act, as long as such SEPs: (1) protect 

human health and the environment; (2) are related to the alleged 

violations; (3) do not constitute activities the defendant would otherwise be required to perform; and (4) does not provide funds for 

the agency to carry out internal operations. 

LEGISLATIVE HISTORY

On February 6, 2008, the Committee on Environment and Public 

Works favorably reported S. 2146 without amendment by voice 

vote. There were no rollcall votes. 

REGULATORY IMPACT STATEMENT

In compliance with section 11(b) of rule XXVI of the Standing 

Rules of the Senate, the committee makes evaluation of the regulatory impact of the reported bill. 

The bill does not create any additional regulatory burdens, nor 

will it cause any adverse impact on the personal privacy of individuals. 

MANDATES ASSESSMENT

In compliance with the Unfunded Mandates Reform Act of 1995 

(Public Law 104–4), the committee finds that S. 2146 would not impose Federal intergovernmental unfunded mandates on State, local, 

or tribal governments. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Section 403 of the Congressional Budget and Impoundment Control Act requires a statement of the cost of the reported bill, prepared by the Congressional Budget Office, be included in the report. 

CBO estimates that enacting S. 2146 would have no significant 

impact on the federal budget. Enacting the legislation could affect 

revenues; however, CBO estimates that any such impact would be 

insignificant. 

S. 2146 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

not affect the budgets of state, local, or tribal governments. 

According to the Environmental Protection Agency (EPA), most 

environmental violations by businesses or individuals are resolved 

through settlement agreements. As part of a settlement, an alleged 

violator may voluntarily agree to undertake an environmentally 

beneficial project related to the violation in exchange for a reduction in civil monetary penalties. Such projects are known as supplemental environmental projects (SEPs). Civil penalties are recorded 

on the budget as miscellaneous receipts (revenues). 


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Under EPA’s SEP policy, if the agency receives a specific appropriation for grants under the Diesel Emission Reduction Act 

(DERA), the agency may no longer agree to diesel SEPs as part of 

any enforcement settlement. Because the DERA grant program 

was appropriated about $50 million in 2008, EPA cannot agree to 

any diesel SEPs during 2008. 

S. 2146 would allow EPA to accept diesel emission reduction 

SEPs as part of a settlement of any alleged violations of environmental laws under certain conditions. To the extent the diesel 

SEPs permitted under this legislation would decrease the amount 

of penalties that otherwise would have been deposited in the Treasury, the federal government would realize some loss of revenues. 

However, based on information from EPA, CBO expects that in 

most cases, the diesel SEPs would displace other types of SEPs 

within a particular settlement agreement. Thus, we estimate that 

any loss of revenues would be less than $500,000 annually. 

The CBO staff contact for this estimate is Susanne S. Mehlman. 

This estimate was approved by Theresa Gullo, Deputy Assistant 

Director for Budget Analysis. 

CHANGES IN EXISTING LAW

Section 12 of rule XXVI of the Standing Rules of the Senate requires the committee to publish changes in existing law made by 

the bill as reported. Passage of this bill will make no changes to 

existing law. 

Æ 


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