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[House Report 110-705]
[From the U.S. Government Publishing Office]

                                                                       
110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-705

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 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

                                _______
                                

 June 10, 2008.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Dingell, from the Committee on Energy and Commerce, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 3754]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Energy and Commerce, to whom was referred 
the bill (H.R. 3754) 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, report favorably thereon without amendment 
and recommend that the bill do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     3
Committee Oversight Findings.....................................     3
Statement of General Performance Goals and Objectives............     4
New Budget Authority, Entitlement Authority, and Tax Expenditures     4
Earmarks and Tax and Tariff Benefits.............................     4
Committee Cost Estimate..........................................     4
Congressional Budget Office Estimate.............................     4
Federal Mandates Statement.......................................     5
Advisory Committee Statement.....................................     5
Constitutional Authority Statement...............................     6
Applicability to Legislative Branch..............................     6
Section-by-Section Analysis of the Legislation...................     6
Changes in Existing Law Made by the Bill, as Reported............     6

                          PURPOSE AND SUMMARY

    The purpose of H.R. 3754 is to authorize the Administrator 
of the Environmental Protection Agency (EPA) to accept, as part 
of a settlement, diesel emissions reduction Supplemental 
Environmental Projects (SEPs). Such diesel emission reduction 
projects may be accepted as part of settling alleged 
environmental violations provided that the projects: protect 
human health or the environment; are related to the underlying 
alleged violation; do not constitute activities that the 
defendant would otherwise be legally required to perform; and 
do not provide funds for the staff of the Agency or for the 
contractors to carry out the Agency's internal operations.

                  BACKGROUND AND NEED FOR LEGISLATION

    In the United States, on-road and off-road diesel engines 
and vehicles account for more than half of the nitrogen oxide 
and particulate matter emissions from mobile sources. According 
to the testimony before the Subcommittee on Energy and Air 
Quality on February 19, 2008, these vehicles and engines 
produce more than 1,000 tons of particulate matter every day, 
resulting in approximately 21,000 premature deaths every year, 
as well as increased asthma attacks, heart attacks, and 
respiratory problems.
    In response to the need for pollution reductions in this 
area, EPA now requires all new on-road and off-road heavy duty 
vehicles and engines to meet emission standards, which require 
the use of pollution control technology. Given the long life 
cycle of diesel engines, however, many of the older engines 
will remain in vehicle fleets for years. Programs to replace or 
retrofit these older engines with pollution control technology 
have proven a reliable and cost-effective method for reducing 
pollution from these sources. In recognition of this, both 
Congress and EPA have acted to promote clean diesel 
technologies.
    While EPA grants have accounted for some clean diesel 
programs, private parties have also funded clean diesel 
programs as part of settlements of cases in which EPA alleged 
violations of the Clean Air Act. During the period between 2003 
and 2006, 37 percent of all diesel retrofit projects were 
funded in whole or in part by SEPs, with funding reaching 
nearly $62 million.
    In Subtitle G, Sections 791-797 of the Energy Policy Act of 
2005, Congress authorized $1 billion over 5 years for the 
purpose of providing grants and revolving loans to reduce 
emissions from diesel engines. The Consolidated Appropriations 
Act, 2008 (which became public law 110-161) contained the first 
specific appropriation for these diesel emission reduction 
programs, but appropriated only $49.2 million. EPA estimates 
that these programs, if fully funded, would reduce particulate 
matter emissions by 70,000 tons, generate nearly $20 billion in 
economic benefit, and return $13 of benefit for every $1 
invested.
    As a result of specific appropriation of funds by Congress 
for clean diesel programs for fiscal year 2008, EPA concluded 
that it could violate the Miscellaneous Receipts Act to allow 
private parties to include diesel emissions reduction projects 
as part of settlements. The Miscellaneous Receipts Act (MRA) 
prevents Executive Branch agencies from bypassing the 
Congressional appropriations process by augmenting their 
budgets through other means. It is the position of EPA that the 
MRA prohibits it from accepting SEPs for activities explicitly 
covered by a specific appropriation or committee earmark.
    H.R. 3754 authorizes EPA to continue its policy of allowing 
diesel emission reduction SEPs as a part of settlements of any 
alleged violation of environmental law, notwithstanding the 
Miscellaneous Receipts Act. This Act continues EPA's policy 
requiring that such projects: protect human health or the 
environment; are related to the underlying alleged violation; 
do not constitute activities that the defendant would otherwise 
be legally required to perform; and do not provide funds for 
the staff of the Agency or for contractors to carry out the 
Agency's internal operations. For purposes of this Act a diesel 
emission reduction project shall be considered ``related to'' 
any Clean Air Act violation.
    H.R. 3754 is identical to S. 2146, which passed the Senate 
on February 29, 2008.

                                HEARINGS

    The Subcommittee on Energy and Air Quality held on 
Wednesday, February 13, 2008, a hearing entitled, ``H.R. 3754: 
Authorizing Supplemental Environmental Projects to Incent 
Reductions of Diesel Emissions.'' The Subcommittee received 
testimony from the following witnesses: The Honorable Jim 
Costa, Representative of the 20th District of California; Mr. 
Tim Regan, Senior Vice President, Corning Incorporated; and Mr. 
Conrad Schnieder, Advocacy Director, Clean Air Task Force.

                        COMMITTEE CONSIDERATION

    Upon conclusion of the Subcommittee hearing held on 
February 13, 2008, the Subcommittee on Energy and Air Quality 
immediately proceeded to meet in open markup session to 
consider H.R. 3754. The Subcommittee favorably forwarded H.R. 
3754 to the full Committee for consideration by a voice vote. 
No amendments were offered during Subcommittee consideration. 
On Thursday, March 13, 2008, the full Committee met in open 
markup session and ordered H.R. 3754 favorably reported to the 
House by a voice vote. No amendments were offered during full 
Committee consideration.

                            COMMITTEE VOTES

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. 
There were no record votes taken in connection with ordering 
H.R. 3754 reported to the House.

                      COMMITTEE OVERSIGHT FINDINGS

    Regarding clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Subcommittee on Energy and Air 
Quality held a legislative hearing on H.R. 3754, and the 
oversight findings of the Committee regarding the bill are 
reflected in this report.

         STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

    The purpose of H.R. 3754 is to clarify Congressional intent 
to authorize EPA to continue using Supplemental Environmental 
Projects to fund diesel emission reduction projects 
notwithstanding the Miscellaneous Receipts Act, as long as such 
SEPs: protect human health and the environment; are related to 
the alleged violation; do not constitute activities the 
defendant would otherwise be required to perform; and, do not 
provide funds for the staff of the Agency or for the 
contractors to carry out the Agency's internal operations.

   NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

    Regarding compliance with clause 3(c)(2) of rule XIII of 
the Rules of the House of Representatives, the Committee adopts 
as its own the estimate of budget authority and revenues 
regarding H.R. 3754 prepared by the Director of the 
Congressional Budget Office pursuant to section 402 of the 
Congressional Budget Act of 1974.

                  EARMARKS AND TAX AND TARIFF BENEFITS

    Regarding compliance with clause 9 of rule XXI of the Rules 
of the House of Representatives, H.R. 3754 does not contain any 
Congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI.

                        COMMITTEE COST ESTIMATE

    The Committee adopts as its own the cost estimate on H.R. 
3754 prepared by the Director of the Congressional Budget 
Office pursuant to section 402 of the Congressional Budget Act 
of 1974.

                  CONGRESSIONAL BUDGET OFFICE ESTIMATE

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate on 
H.R. 3754 provided by the Congressional Budget Office pursuant 
to section 402 of the Congressional Budget Act of 1974:

                                                    March 25, 2008.
Hon. John D. Dingell,
Chairman, Committee on Energy and Commerce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3754, a bill 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.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
            Sincerely,
                                                   Peter R. Orszag.
    Enclosure.

H.R. 3754--A bill 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

    CBO estimates that enacting H.R. 3754 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.
    H.R. 3754 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).
    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.
    H.R. 3754 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.
    On February 25, 2008, CBO transmitted a cost estimate for 
S. 2146 as ordered reported by the Senate Committee on 
Environment and Public Works on February 6, 2008. That bill is 
identical to H.R. 3754, and thus the cost estimates are the 
same.
    The CBO staff contact for this estimate is Susanne S. 
Mehlman. This estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                       FEDERAL MANDATES STATEMENT

    The Committee adopts as its own the estimate of Federal 
mandates regarding H.R. 3754 prepared by the Director of the 
Congressional Budget Office pursuant to section 423 of the 
Unfunded Mandates Reform Act.

                      ADVISORY COMMITTEE STATEMENT

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act would be created by H.R. 
3754.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds that the 
Constitutional authority for H.R. 3754 is provided in Article 
I, section 8, clause 3, which grants Congress the power to 
regulate commerce with foreign nations, among the several 
States, and with the Indian Tribes.

                  APPLICABILITY TO LEGISLATIVE BRANCH

    The Committee finds that H.R. 3754 does not relate to the 
terms and conditions of employment or access to public services 
or accommodations within the meaning of section 102(b)(3) of 
the Congressional Accountability Act of 1995.

             SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. EPA authority to accept diesel emissions reduction 
        supplemental environmental projects

    Section 1 of H.R. 3754 provides the Environmental 
Protection Agency authority to accept diesel emission 
Supplemental Environmental Projects as part of a settlement of 
any alleged violations of environmental law, provided that the 
projects: protect human health or the environment; are related 
to the underlying alleged violations; do not constitute 
activities defendants would otherwise be legally required to 
perform; and do not provide funds for the Agency's internal 
operations.

         CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

    Regarding clause 3(e) of rule XIII of the Rules of the 
House of Representatives, H.R. 3754 does not amend any existing 
law.

                                  
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