BILL NUMBER: AB 1571 CHAPTERED 10/10/99 CHAPTER 923 FILED WITH SECRETARY OF STATE OCTOBER 10, 1999 APPROVED BY GOVERNOR OCTOBER 9, 1999 PASSED THE ASSEMBLY SEPTEMBER 10, 1999 PASSED THE SENATE SEPTEMBER 7, 1999 AMENDED IN SENATE SEPTEMBER 2, 1999 AMENDED IN SENATE AUGUST 25, 1999 AMENDED IN SENATE AUGUST 16, 1999 AMENDED IN ASSEMBLY MAY 6, 1999 INTRODUCED BY Assembly Member Villaraigosa and Senator Brulte FEBRUARY 26, 1999 An act to add Chapter 9 (commencing with Section 44275) of Part 5 of Division 26 of, the Health and Safety Code, relating to air pollution, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST AB 1571, Villaraigosa. Carl Moyer Memorial Air Standards Attainment Program. Existing law contains various provisions relative to air pollution control. This bill would create the Carl Moyer Memorial Air Quality Standards Attainment Program, to be administered by the State Air Resources Board. Under the program, the state board would be authorized to make grants for the purchase of low-emission, heavy-duty engines for vehicles, equipment, vessels, and locomotives, as specified. The bill would permit the administration of the program to be delegated to air pollution control districts and air quality management districts. The bill would require the state board, not later than January 15, 2000, to prepare a report on the implementation of the existing diesel emissions incentive program, as specified, and to submit that report to the Governor and the Legislature. The bill would also establish the Carl Moyer Program Advisory Board, as specified, to review the report, and to prepare and submit an additional report to the Legislature and the Governor by March 31, 2000, that may recommend a continuing program, as provided. The bill would create the Carl Moyer Memorial Air Quality Standards Attainment Trust Fund in the State Treasury to provide funds to carry out the program. The bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature hereby finds and declares as follows: (a) The state and federal governments have adopted ambient air quality standards to protect public health, and it is in the public interest that those standards be achieved as expeditiously as possible. (b) California air quality agencies have adopted a State Implementation Plan (SIP) for attaining the federal ambient air quality standards for ozone, which commits the state to substantially reduce emissions of oxides of nitrogen from mobile sources through the year 2010. The critical sources of those emissions to address are onroad heavy-duty vehicles, offroad nonrecreational equipment and vehicles, locomotives, diesel marine vessels, stationary agricultural engines, and other high-emitting diesel engines. (c) Plans are also being adopted to meet air quality goals for inhalable particulates that are also produced by these sources. (d) Air quality plans include intermediate milestone objectives and measures to ensure regular progress in reducing emissions. Steady progress in reducing oxides of nitrogen and particulate emissions is essential for meeting air quality goals. (e) Emission reductions from onroad heavy-duty vehicles, offroad nonrecreational equipment and vehicles, locomotives, diesel marine vessels, and stationary agricultural engines of the magnitude needed to achieve California SIP commitments and public health goals can only be achieved with a combination of appropriate state, national, and international emissions standards, and special programs targeting California nonattainment areas that must achieve emission reductions beyond those attainable through new emissions standards and normal turnover rates of vehicles, equipment, and vessels. (f) Several advanced low-NOx technologies have become available for retrofits, repowers, and new equipment purchases. These technologies, however, are limited in applicability and suitability and do not justify regulatory requirements. In addition to reducing NOx emissions, the new technologies may reduce particulate emissions, providing additional public health benefits. (g) Incentive-based programs with voluntary participation to introduce newer engines, electric motors and drives, and advanced technologies are the best way to supplement new engine emissions standards and to reduce emissions from onroad heavy-duty vehicles, offroad nonrecreational equipment and vehicles, locomotives, diesel marine vessels, and stationary agricultural engines to the extent needed to meet air quality goals while still protecting the economic competitiveness of California's industry and agriculture. (h) The Legislature further finds and declares that because of the extraordinary leadership and dedication shown by the late Dr. Carl Moyer in conceiving and developing the program embodied in this act, it is appropriate to recognize his vision and contributions to the public interest by dedicating the program to his memory. (i) The Carl Moyer Memorial Air Quality Standards Attainment Program created by subdivision (a) of Section 44280 of the Health and Safety Code and the Carl Moyer Memorial Air Quality Standards Attainment Trust Fund establish an incentive program that will substantially reduce emissions of oxides of nitrogen and fine particulate in California. It is the intent of the Legislature that the program be a multiyear program that will be a key component of California's plan to comply with federal Clean Air Act requirements. SEC. 2. Chapter 9 (commencing with Section 44275) is added to Part 5 of Division 26 of the Health and Safety Code, to read: CHAPTER 9. CARL MOYER MEMORIAL AIR QUALITY STANDARDS ATTAINMENT PROGRAM Article 1. Definitions 44275. As used in this chapter, the following terms have the following meaning: (a) "Advisory board" means the Carl Moyer Program Advisory Board created by Section 44297. (b) "Btu" means British thermal unit. (c) "Commission" means the State Energy Resources Conservation and Development Commission. (d) "Cost-effectiveness" means dollars provided to a project pursuant to subdivision (d) of Section 44283 for each ton of NOx emission reduction attributed to a project or to the program as a whole. In calculating cost-effectiveness, one-time grants of funds made at the beginning of a project shall be annualized using a time value of public funds or discount rate determined for each project by the state board, taking into account the interest rate on bonds, interest earned by state funds, and other factors as determined appropriate by the state board. Cost-effectiveness shall be calculated by dividing annualized costs by average annual emissions reduction of NOx in this state. (e) "Covered engine" includes any internal combustion engine or electric motor and drive powering a covered source. (f) "Covered source" includes onroad vehicles of 14,000 pounds GVWR or greater, offroad nonrecreational equipment and vehicles, locomotives, diesel marine vessels, stationary agricultural engines, and, as determined by the state board, other high-emitting diesel engine categories. (g) "Covered vehicle" includes any vehicle or piece of equipment powered by a covered engine. (h) "District" means a county air pollution control district or an air quality management district. (i) "Fund" means the Carl Moyer Memorial Air Quality Standards Attainment Trust Fund created by Section 44299. (j) "Mobile Source Air Pollution Reduction Review Committee" means the Mobile Source Air Pollution Reduction Review Committee created by Section 44244. (k) "Incremental cost" means the cost of the project less a baseline cost that would otherwise be incurred by the applicant in the normal course of business. Incremental costs may include added lease or fuel costs pursuant to Section 44283 as well as incremental capital costs. (l) "New very low emission vehicle" means a vehicle that qualifies as a very low emission vehicle when it is a new vehicle, where new vehicle has the same meaning as defined in Section 430 of the Vehicle Code, or that is modified with the approval and warranty of the original equipment manufacturer to qualify as a very low emission vehicle within 12 months of delivery to an owner for private or commercial use. (m) "NOx" means oxides of nitrogen. (n) "Program" means the Carl Moyer Memorial Air Quality Standards Attainment Program created by subdivision (a) of Section 44280. (o) "Repower" means replacing an engine with a different engine. The term repower, as used in this chapter, generally refers to replacing an older, uncontrolled engine with a new, emissions-certified engine, although replacing an older emissions-certified engine with a newer engine certified to lower emissions standards may be eligible for funding under this program. (p) "Retrofit" means making modifications to the engine and fuel system such that the retrofitted engine does not have the same specifications as the original engine. (q) "Very low emission vehicle" means a vehicle with emissions significantly lower than otherwise applicable baseline emission standards or uncontrolled emission levels pursuant to Section 44282. Article 2. Program Introduction 44280. (a) There is hereby created the Carl Moyer Memorial Air Quality Standards Attainment Program. The program shall be administered by the state board in accordance with this chapter. The administration of the program may be delegated to the districts. (b) The program shall provide grants to offset the incremental cost of projects that reduce emissions of NOx from covered sources in California. Eligibility for grant awards shall be determined by the state board, in consultation with the districts, in accordance with this chapter. (c) The program shall also provide funding for a fueling infrastructure demonstration program and for technology development efforts that are expected to result in commercially available technologies in the near-term that would improve the ability of the program to achieve its goals. The infrastructure demonstration and technology development portions of the program shall be managed by the commission, in consultation with the state board. Article 3. Eligible Projects and Applicants 44281. (a) Eligible projects are any of the following: (1) Purchase of new very low or zero-emission covered vehicles or covered engines. (2) Emission-reducing retrofit of covered engines, or replacement of old engines powering covered sources with newer engines certified to more stringent emissions standards than the engine being replaced, or with electric motors or drives. (3) Purchase and use of emission-reducing add-on equipment for covered vehicles. (4) Development and demonstration of practical, low-emission retrofit technologies, repower options, and advanced technologies for covered engines and vehicles with very low emissions of oxides of nitrogen. (b) No new purchase, retrofit, repower, or add-on equipment shall be funded under this chapter if it is required by any local, state, or federal statute, rule, regulation, memoranda of agreement or understanding, or other legally binding document, except that an otherwise qualified project may be funded even if the State Implementation Plan assumes that the change in equipment, vehicles, or operations will occur, if the change is not required by a statute, regulation, or other legally binding document in effect as of the date the grant is awarded. No project funded by the program shall be used for credit under any state or federal emissions averaging, banking, or trading program. No emission reduction generated by the program shall be used as marketable emission reduction credits or to offset any emission reduction obligation of any entity. Projects involving new engines that would otherwise generate marketable credits under state or federal averaging, banking, and trading programs shall include transfer of credits to the engine end user and retirement of those credits toward reducing air emissions in order to qualify for funding under the program. A purchase of a low-emission vehicle or of equipment pursuant to a corporate or a controlling board's policy, but not otherwise required by law, shall generate surplus emissions reductions and may be funded by the program. (c) The program may also provide funding toward installation of fueling or electrification infrastructure as provided in Section 44284. (d) Eligible applicants may be any individual, company, or public agency that owns one or more covered vehicles that operate primarily within California or otherwise contribute substantially to the NOx emissions inventory in California. (e) It is the intent of the Legislature that all emission reductions generated by this chapter shall contribute to public health by reducing, for the life of the vehicle being funded, the total amount of emissions in California. Article 4. General Eligibility Criteria 44282. The following criteria apply to all projects to be funded through the program except for projects funded through the Advanced Technology Account and the Infrastructure Demonstration Program: (a) Except for projects involving marine vessels, 75 percent or more of vehicle miles traveled or hours of operation shall be projected to be in California for at least five years following the grant award. Projects involving marine vessels and engines shall be limited to those that spend enough time operating in California air basins over the lifetime of the project to meet the cost-effectiveness criteria based on NOx reductions in California, as provided in Section 44283. (b) To be eligible, projects shall meet cost-effectiveness per ton of NOx reduced requirements of Section 44283. (c) To be eligible, retrofits, repowers, and installation of add-on equipment for covered vehicles shall be performed, or new covered vehicles delivered to the end user, on or after the date the program is implemented. (d) Retrofit technologies, new engines, and new vehicles shall be certified for sale or under experimental permit for operation in California. (e) Repower projects that replace older, uncontrolled engines with new, emissions-certified engines or that replace emissions-certified engines with new engines certified to a more stringent NOx emissions standard are approvable subject to the other applicable selection criteria. The state board shall determine appropriate baseline emission levels for the uncontrolled engines being replaced. (f) Retrofit and add-on equipment projects shall document a NOx emission reduction of at least 25 percent and no increase in particulate emissions compared to the applicable baseline emissions accepted by the state board for that engine year and application. The state board shall determine appropriate baseline emission levels. Acceptable documentation shall be defined by the state board. After study of available emission reduction technologies and after public notice and comment, the state board may revise the minimum percentage NOx reduction criterion for retrofits and add-on equipment provided for in this section to improve the ability of the program to achieve its goals. (g) (1) For projects involving the purchase of new very low or zero-emission vehicles, engines shall be certified to an optional low NOx emissions standard established by the state board, except as provided for in paragraph (2). (2) For projects involving the purchase of new very low or zero-emission covered vehicles for which no optional low-NOx emission standards are available, documentation shall be provided showing that the low or zero-emission engine emits not more than 70 percent of the NOx or NOx plus hydrocarbon emissions of a new engine certified to the applicable baseline NOx or NOx plus hydrocarbon emission standard for that engine and meets applicable particulate standards. The state board shall specify the documentation required. If no baseline emission standard exists for new vehicles in a particular category, the state board shall determine an appropriate baseline emission level for comparison. Article 5. Cost-Effectiveness Criteria 44283. (a) Grants shall not be made for projects with a cost-effectiveness, calculated in accordance with this section, of more than twelve thousand dollars ($12,000) per ton of NOx reduced in California. (b) Only NOx reductions occurring in this state shall be included in the cost-effectiveness determination. The extent to which emissions generated at sea contribute to air quality in California nonattainment areas shall be incorporated into these methodologies based on a reasonable assessment of currently available information and modeling assumptions. (c) The state board shall develop protocols for calculating the surplus NOx reductions in California from representative project types over the life of the project. (d) The cost of the NOx reduction is the amount of the grant from the program, including matching funds provided pursuant to subdivision (e) of Section 44287, plus any other state funds, or funds under the district's budget authority or fiduciary control, provided toward the project. The state board shall establish reasonable methodologies for evaluating project cost-effectiveness, consistent with the definition contained in subdivision (c) of Section 44275, and with accepted methods, taking into account a fair and reasonable discount rate or time value of public funds. (e) A grant shall not be made that, net of taxes, provides the applicant with funds in excess of the incremental cost of the project. Incremental lease costs may be capitalized according to guidelines adopted by the state board so that these incremental costs may be offset by a one-time grant award. (f) Funds under a district's budget authority or fiduciary control may be used to pay for the incremental cost of liquid or gaseous fuel, other than standard gasoline or diesel, which is integral to a NOx reducing technology that is part of a project receiving grant funding under the program. The fuel shall be approved for sale by the state board. The incremental fuel cost over the expected lifetime of the vehicle may be offset by the district if the project as a whole, including the incremental fuel cost, meets all of the requirements of this chapter, including the maximum allowed cost-effectiveness. The state board shall develop an appropriate methodology for converting incremental fuel costs over the vehicle lifetime into an initial cost for the purposes of determining project cost-effectiveness. Incremental fuel costs may not be included in project costs for fuels dispensed from any facility that was funded, in whole or in part, from the fund. (g) For purposes of determining any grant amount pursuant to this chapter, the incremental cost of any new purchase, retrofit, repower, or add-on equipment shall be reduced by the value of any current financial incentive that directly reduces the project price, including any tax credits or deductions, grants, or other public financial assistance. Project proponents applying for funding shall be required to state in their application any other public financial assistance to the project. (h) For projects that would repower offroad equipment by replacing uncontrolled diesel engines with new, certified diesel engines, the state board may establish maximum grant award amounts per repower. A repower project shall also be subject to the incremental cost maximum pursuant to subdivision (e). (i) After study of available emission reduction technologies and costs and after public notice and comment, the state board may reduce the values of the maximum grant award criteria stated in this section to improve the ability of the program to achieve its goals. Every year the state board shall adjust the maximum cost-effectiveness amount established in subdivision (a) and any per-project maximum set by the state board pursuant to subdivision (h) to account for inflation. Article 6. Infrastructure Demonstration Project 44284. (a) In order to provide sufficient support for low-emission vehicle projects at the start of the program, the commission shall administer a demonstration project that provides limited funds for fueling infrastructure. Expenditures from the fund for this demonstration program shall not exceed two million five hundred thousand dollars ($2,500,000). In addition to providing necessary financial assistance to a limited number of infrastructure projects, the purpose of the infrastructure demonstration program is to assess whether funding for infrastructure is an appropriate and cost-effective use of public funds. (b) The commission shall solicit applications for a balanced mix of demonstration projects involving fueling and electrification infrastructure that is linked to covered vehicle projects and that is consistent with program goals. The commission, in consultation with participating districts, shall make every effort to coordinate infrastructure projects with covered vehicle projects representing a broad variety of fuels, technologies, and applications as appropriate and consistent with this chapter. Infrastructure projects that begin to dispense qualifying fuel on or after the date the program is implemented are eligible for funding under the program. The commission may also subvene infrastructure funds to districts to solicit applications and to expend the funds in accordance with this section. The commission shall have oversight and reporting responsibility for any funds that are subvened pursuant to this subdivision. (c) Any fueling infrastructure funded under the program shall be approved for funding by both the commission and the applicable district. The commission, in consultation with the districts, shall develop guidelines and criteria for infrastructure projects to be funded under the program. (d) The purchase and installation of equipment at a site that is designed primarily to dispense qualifying fuel is eligible for funding under the program. "Qualifying fuel" includes any liquid or gaseous fuel, other than standard gasoline or diesel, which is ultimately dispensed into covered vehicles that provide NOx reductions in California, and which were introduced into operation in California on or after the date the program is implemented. (e) Infrastructure projects to dispense qualifying fuel are eligible for funding from the Infrastructure Demonstration Program at a rate of seven dollars ($7) in one-time funding per million Btus of qualifying fuel to be dispensed annually. Projects that cannot demonstrate sufficient annual fuel throughput to qualify for a one hundred thousand dollar ($100,000) award, that is, over 14,280 million Btus per year, are not eligible for funding. Projects that can demonstrate an annual throughput of more than 14,280 million Btus per year, however, may request funding in amounts less than one hundred thousand dollars ($100,000). Private access facilities are eligible for a maximum award of up to four hundred thousand dollars ($400,000). Public access or limited public access facilities are eligible for a maximum award of up to six hundred thousand dollars ($600,000). Cofunding may be required to receive the applicable award amount. Infrastructure project awards from the fund, net of taxes, shall not exceed the total cost of the infrastructure project less any other applicable grants or tax credits. (f) Infrastructure projects to dispense qualifying fuel shall meet all of the following criteria: (1) Provide documentation, signed by owners of vehicles that will use the fuel, to demonstrate that an approvable amount of qualifying fuel is expected to be dispensed over a period of at least five years. (2) Be designed to meet current industry standards and codes and any applicable regulations. (3) If the owner of the fuel storage and dispensing equipment will be fueling vehicles the owner does not own, the owner shall provide one or more statements, signed by the proposed fueling equipment owner and by the owners of those vehicles that are referenced in the demonstration of adequate fuel throughput pursuant to subdivision (e), that mutually satisfactory arrangements regarding fuel price have been made. If the owner and operator of the fueling equipment will use the equipment exclusively to fuel his or her own vehicles, no documentation regarding fuel pricing arrangements is required. (g) Infrastructure projects to dispense electricity to covered vehicles shall be eligible for funding from the Infrastructure Demonstration Program at the rate of a minimum of four thousand dollars ($4,000), up to a maximum of ten thousand dollars ($10,000) per charger infrastructure charge port including installation for each qualifying charger. A "qualifying charger" is any charger that dispenses 4,000 kWh or more of energy per year, through each of one or more charging ports, into one or more covered vehicles that provide NOx reductions in California. Awards shall be based on a sliding scale of four thousand dollars ($4,000) to fourteen thousand dollars ($14,000) per charger port for qualifying chargers that dispense between 4,000 kWh and 15,000 kWh of electricity per port. In order for the project to be eligible for funding, documentation shall be provided, signed by owners of the vehicles that will use the charger, to demonstrate that the claimed kilowatt hours of electricity are expected to be dispensed per year for a period of at least five years. Funding shall be limited to a maximum award of two hundred thousand dollars ($200,000) per business per location. Infrastructure project awards from the fund, net of taxes, shall not exceed the total cost of the infrastructure project less any other applicable grants or tax credits. (h) The commission, in consultation with the state board and the districts, shall develop a simple, standardized application package for a project to be funded from the Infrastructure Demonstration Program. In addition to the application form, an application package shall include a brief description of the program, the projects that are eligible for the funding that is available, the selection criteria and evaluation process, the documentation that is required, and who to contact for more information, as well as an example of the contract that an applicant will be required to execute before receiving a grant award. The application form shall require as much information as the commission determines is necessary to properly evaluate each project, but shall otherwise minimize the information required. An applicant shall not be required to calculate tons of emissions reduced or cost-effectiveness as part of the application. Application packages shall be finalized and published as soon as practicable. (i) The commission shall make staff or technical support contractors available on an as-needed basis within available budgetary resources to assist project proponents to address issues common to infrastructure projects eligible for funding. Those issues may involve permitting and safety requirements. (j) As part of the annual program reports required pursuant to Section 44295, the commission shall report on the use of Infrastructure Demonstration Program funds. The commission shall report on facilities funded, how those facilities are supporting covered vehicle projects, fuel or electricity dispensed from each facility, and associated emissions reductions and cost-effectiveness. The commission shall calculate a total cost-effectiveness of NOx reductions from the vehicles that fuel at facilities funded from the Infrastructure Demonstration Program. This total cost-effectiveness shall include program funding provided to vehicles as well as funding provided from the Infrastructure Demonstration Program. Article 7. Advanced Technology Development 44285. (a) From time to time, the commission shall issue specific requests for proposals (RFPs) or program opportunity notices (PONs) for technology proposals to be funded from the Advanced Technology Account. The first issuance of RFPs or PONs shall be no later than January 31, 2000. It is the intent of the Legislature that the technology grants be used to support development of emission-reducing technologies that could be used for projects eligible for funding pursuant to this chapter. It is also the intent of the Legislature that the technology grants be directed to a balanced mix of retrofit and add-on technologies to reduce emissions from the existing stock of targeted vehicles, as well as to advanced technologies for new engines and vehicles that produce very low or zero-NOx emissions. The commission, in consultation with the state board, may also consider funding technology projects that would allow qualifying fuels, as defined in subdivision (d) of Section 44284, to be produced from California energy resources, with preference given to projects involving otherwise unusable California energy resources, at prices lower than prices otherwise available and low enough to make projects that would qualify for funding under the program economically attractive to local businesses. Not more than 20 percent of Advanced Technology Account funds may be directed to those qualifying fuel projects. Advanced technologies and any retrofit or add-on projects that provide multiple benefits by reducing emissions of particulates and other air pollutants should be given special consideration by the commission in soliciting proposals and determining how to allocate funds. At least 50 percent of the funds available in the Advanced Technology Account shall be directed toward technologies that provide multiple benefits. (b) Proposals involving technologies that allow onroad covered vehicles to replace with electric power the power normally supplied by the vehicles' internal combustion engine while the vehicle is parked shall be eligible for funding from the Advanced Technology Account if they meet all applicable criteria under this section. (c) Technologies proposed for technology grants shall show clear and compelling evidence that the technology being funded has a strong commercialization plan and organization, is likely to be offered for commercial sale in California within five years of the application for funding, and that, once commercial, the technology will present opportunities for projects otherwise eligible for funding pursuant to this chapter. The commission shall specifically consider the projected NOx reducing potential and cost-effectiveness of the commercialized technology, the potential for the technology to contribute in a significant way to air quality goals, and the strength of the commercialization plan. (d) The commission may require cost sharing for technology projects, but shall not require repayment of funds granted. (e) Proposals for projects involving either publicly owned or privately owned vehicles or vessels shall be eligible for technology awards. (f) In developing RFPs and PONs and in evaluating proposals for funding, the commission shall consider that the primary objective of technology grants is to advance toward commercialization technologies that would support projects to be funded under the program. Article 8. Program Administration: General 44286. (a) The responsibilities of the state board include management of program funds and program oversight. The state board is responsible for producing guidelines, protocols, and criteria for covered vehicle projects and developing methodologies for evaluating project cost-effectiveness in accordance with this chapter. The state board shall have primary responsibility for the reporting aspects of the program. (b) The responsibilities of a district include local administration of project funds, monitoring funded projects, and reporting results to the state board, in accordance with this chapter. Any project funds awarded to a successful applicant shall be disbursed by the district. (c) Relative to the allocation of funds in the south coast district, for purposes of this program, Mobile Source Air Pollution Reduction Review Committee funds shall only be used as matching funds upon approval, by minute action, of the Mobile Source Air Pollution Reduction Review Committee. (d) The state board may reserve up to 10 percent of the program funds available each year to directly fund any project that is multidistrict in nature. A project that is multidistrict in nature shall be funded by the state board in coordination with the appropriate districts. The state board shall coordinate outreach efforts with a participating district to ensure that any parallel availability of a district grant and a grant from the state board is clear to an eligible applicant. Reserved funds not committed to a project funded directly by the state board by the end of the fiscal year shall be made available to the districts in the following year. (e) The commission, in consultation with the state board, shall manage the Advanced Technology Account and the Infrastructure Demonstration Program in accordance with this chapter. (f) The state board shall work closely with the commission and the districts for the duration of this program to maximize the ability of the program to achieve its goals. (g) The state board and the districts shall take all appropriate and necessary actions to ensure that emissions reductions achieved through the program are credited by the United States Environmental Protection Agency to the appropriate emission reduction objectives in the State Implementation Plan. 44287. (a) The state board shall establish grant criteria and guidelines consistent with this chapter for covered vehicle projects as soon as practicable, but not later than January 1, 2000. The adoption of guidelines is exempt from the rulemaking provisions of the Administrative Procedure Act, Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code. The state board shall solicit input and comment from the districts during the development of the criteria and guidelines and shall make every effort to develop criteria and guidelines that are compatible with existing district programs that are also consistent with this chapter. Guidelines shall include protocols to calculate project cost-effectiveness. The grant criteria and guidelines shall include safeguards to ensure that the project generates surplus emissions reductions. Guidelines shall enable and encourage districts to cofund projects that provide emissions reductions in more than one district. The state board shall make draft criteria and guidelines available to the public 45 days before final adoption, and shall hold at least one public meeting to consider public comments before final adoption. (b) The state board, in consultation with the participating districts, may propose revisions to the criteria and guidelines established pursuant to subdivision (a) as necessary to improve the ability of the program to achieve its goals. A proposed revision shall be made available to the public 45 days before final adoption of the revision and the state board shall hold at least one public meeting to consider public comments before final adoption of the revision. (c) The state board shall reserve funds for, and disburse funds to, districts from the fund for administration pursuant to this section and Section 44299.1. (d) The state board shall develop guidelines for a district to follow in applying for the reservation of funds, in accordance with this chapter. It is the intent of the Legislature that district administration of any reserved funds be in accordance with the project selection criteria specified in Sections 44281, 44282, and 44283 and all other provisions of this chapter. The guidelines shall be established and published by the state board as soon as practicable, but not later than January 1, 2000. (e) Funds shall be reserved by the state board for administration by a district that adopts an eligible program pursuant to this chapter and offers matching funds at a ratio of one dollar ($1) of matching funds committed by the district or the Mobile Source Air Pollution Reduction Review Committee for every two dollars ($2) committed from the fund. Funds available to the Mobile Source Air Pollution Reduction Review Committee may be counted as matching funds for projects in the South Coast Air Basin only if the committee approves the use of these funds for matching purposes. Matching funds may be any funds under the district's budget authority that are committed to be expended in accordance with the program. Funds committed by a port authority or a local government, in cooperation with a district, to be expended in accordance with the program may also be counted as district matching funds. Matching funds provided by a port authority or a local government may not exceed 30 percent of the total required matching funds in any district that applies for more than three hundred thousand dollars ($300,000) of the state board funds. Only a district, or a port authority or a local government teamed with a district, may provide matching funds. (f) Notwithstanding subdivision (e), a district need not provide matching funds for state board funds allocated to the district for program outreach activities pursuant to paragraph (4) of subdivision (a) of Section 44299.1. (g) A district may include within its matching funds a reasonable estimate of direct or in-kind costs for assistance in providing program outreach and application evaluation. In-kind and direct matching funds shall not exceed 15 percent of the total matching funds offered by a district. A district may also include within its matching funds any money spent on or after February 25, 1999, that would have qualified as matching funds but were not previously claimed as matching funds. (h) A district desiring a reservation of funds shall apply to the state board following the application guidelines established pursuant to this section. The state board shall approve or disapprove a district application not later than 60 days after receipt. Upon approval of any district application, the state board shall simultaneously approve a reservation of funding for that district to administer. Reserved funds shall be disbursed to the district so that funding of a district-approved project is not impeded. (i) Notwithstanding any other provision of this chapter, districts and the Mobile Source Air Pollution Reduction Review Committee shall not use funds collected pursuant to Section 41081 or Chapter 7 (commencing with Section 44220), or pursuant to Section 9250.11 of the Vehicle Code, as matching funds to fund a project with stationary or portable engines, locomotives, or marine vessels. (j) Any funds reserved for a district pursuant to this section are available to the district for a period of not more than two years from the time of reservation. Funds not expended by June 30 of the second calendar year following the date of the reservation shall revert back to the state board as of that June 30, and shall be deposited in the Covered Vehicle Account established pursuant to Section 44299. The funds may then be redirected based on applications to the fund. Regardless of any reversion of funds back to the state board, the district may continue to request other reservations of funds for local administration. Each reservation of funds shall be accounted for separately, and unused funds from each application shall revert back to the state board as specified in this subdivision. (k) The state board shall specify a date each year when district applications are due. If the eligible applications received in any year oversubscribe the available funds, the state board shall reserve funds on an allocation basis, pursuant to subdivision (b) of Section 44299.1. The state board may accept a district application after the due date for a period of months specified by the state board. Funds may be reserved in response to those applications, in accordance with this chapter, out of funds remaining after the original reservation of funds for the year. (1) Guidelines for a district application shall require information from an applicant district to the extent necessary to meet the requirements of this chapter, but shall otherwise minimize the information required of a district. (m) A district application shall be reviewed by the state board immediately upon receipt. If the state board determines that an application is incomplete, the applicant shall be notified within 10 working days with an explanation of what is missing from the application. A completed application fulfilling the criteria shall be approved as soon as practicable, but not later than 60 working days after receipt. (n) The commission, in consultation with the districts, shall establish project approval criteria and guidelines for infrastructure projects consistent with Section 44284 as soon as practicable, but not later than February 15, 2000. The commission shall make draft criteria and guidelines available to the public 45 days before final adoption, and shall hold at least one public meeting to consider public comments before final adoption. (o) The commission, in consultation with the participating districts, may propose revisions to the criteria and guidelines established pursuant to subdivision (n) as necessary to improve the ability of the program to achieve its goals. A revision may be proposed at any time, or may be proposed in response to a finding made in the annual report on the program published by the state board pursuant to Section 44295. A proposed revision shall be made available to the public 45 days before final adoption of the revision and the commission shall hold at least one public meeting to consider public comments before final adoption of the revision. Article 9. Program Administration: Application Evaluation and Program Outreach 44288. (a) An application for a project grant shall be reviewed by the administering district immediately upon receipt. If the administering district determines that an application is incomplete, the applicant shall be notified within five working days with an explanation of what is missing from the application. The date and time of receipt of each application determined to be complete shall be recorded and the completed application shall be evaluated with respect to the appropriate project selection criteria. A district shall make every effort to process an application and grant an award rapidly and to coordinate project approval with any purchase or installation timing constraint on an applicant. Notwithstanding any other provision of this chapter, the administering district may determine that an application is not in good faith, not credible, or not in compliance with this chapter and its objectives. (b) A participating district may request assistance from the state board on an as needed basis to clarify project evaluation protocols or to obtain information necessary to properly evaluate an application. (c) An application for a grant for an infrastructure project shall be reviewed by the commission immediately upon receipt. If the commission determines that an application is incomplete, the applicant shall be notified within five working days with an explanation of what is missing from the application. The date and time of receipt of each application determined to be complete shall be recorded and the completed application shall be evaluated with respect to the appropriate project selection criteria. A complete grant application fulfilling the project selection criteria shall be approved as soon as practicable, but not later than 60 working days after receipt. Notwithstanding any other provision of this chapter, the commission may determine that an application is not in good faith, not credible, or not in compliance with this chapter and its objectives. The commission shall expedite the processing of an application and shall grant an award as rapidly as possible. (d) Funds shall be awarded in conjunction with the execution of a contract that obligates the state board or a participating district to make the grant and obligates the grantee to take the actions described in the grant application. A contract shall incorporate the recapturing provisions contained in subdivision (c) of Section 44291. 44290. The state board and participating districts shall institute an outreach program to inform potential participants, technology suppliers, vendors, engine and equipment dealers and distributors, fleet owners, industry organizations and publications, districts, and rail and port organizations of the availability of grants, and of the requirements and objectives of the grant program. The state board and district shall vigorously recruit grant applications and publish examples of successful projects. The commission shall work closely with the state board and districts so that infrastructure and technology development projects are closely coordinated with overall program implementation. Outreach efforts on the part of the state board shall be coordinated with district outreach efforts. Article 10. Monitoring 44291. (a) The state board shall assist districts with developing procedures to monitor whether the emission reductions projected in successful grant applications are actually achieved. Monitoring procedures may include project audits, and may also include requirements, as part of the contract between the state board or districts and the grant recipients, that each grant recipient provide information about the project on an annual basis. Information required from grant recipients should be minimized and the format for reporting the information should be made simple and convenient. (b) As soon as practicable, the commission, in consultation with the districts, shall publish procedures to monitor and audit infrastructure projects. These procedures shall ensure that the amount of qualifying fuel dispensed annually is greater than or equal to the amount upon which the grant award is based and that any project qualifying for funding on the basis of public accessibility or limited public accessibility is, in fact, providing that accessibility. (c) The monitoring and auditing procedures shall be sufficient to allow emission reductions generated to be fully credited to air quality plans. The monitoring procedures shall contain provisions for recapturing grant awards in proportion to any loss of emission reductions or underachievement in dispensing qualifying fuel compared with the reductions and fuel dispensing projected in the grant application. Funds recaptured shall be deposited in the accounts from which the funds were originally expended. From time to time, monitoring and auditing procedures shall be revised as appropriate to enhance program effectiveness. (d) The state board shall monitor district programs to ensure that participating districts conduct their programs consistent with the criteria and guidelines established by the state board and the commission pursuant to this chapter. The monitoring procedures shall contain provisions for recapture of funds not yet awarded to approved projects if a district fails to show that they are implementing a program consistent with the approved program. If the state board determines, pursuant to this subdivision, that moneys from the fund allocated to a district should be recaptured, the state board shall hold at least one public meeting to consider public comments prior to recapturing the allocated funds. The state board shall make every effort to assist districts to implement programs in an approved manner and shall only recapture allocated funds if these efforts fail to address problems adequately. Recaptured funds shall be deposited in the Covered Vehicle Account. The state board shall not recapture funds already awarded to approved projects. Article 11. Reporting 44295. (a) Not later than March 1, 2001, and each March 1 thereafter, through March 1, 2003, the state board in cooperation with participating districts, and assisted by the commission with regard to projects funded from the Infrastructure Demonstration Program and the Advanced Technology Account, shall publish, and notwithstanding Section 7550.5 of the Government Code, provide the Legislature with, a program report. The report shall describe each covered vehicle project funded by the state board and by districts that have received funds pursuant to this chapter, the amount granted for the project, and the emission reductions obtained and the cost-effectiveness of the project. For projects funded from the Advanced Technology Account, the report shall describe the technical objectives and accomplishments of the project, and the progress of the technology toward commercialization. For projects funded from the Infrastructure Demonstration Program, the report shall describe whether the funding has been critical to supplying qualifying fuel and supporting vehicles that reduce NOx emissions in California, shall include a discussion of demonstration program cost-effectiveness pursuant to subdivision (j) of Section 44284, and shall make a finding as to the need for additional moneys to be appropriated from the fund to the Infrastructure Demonstration Program in order to improve the ability of the program to achieve its goals. (b) The report shall detail funds received, funds granted, funds reserved for grants based on project approvals, district matching funds and the sources of those funds, and any recommended transfer of funds between accounts, and shall estimate future demand for grant funds. (c) The report shall describe the overall effectiveness of the program in delivering the emission reductions required by air quality plans, including rate of progress plans and milestone and conformity tests, as well as attainment and maintenance plans. The report shall evaluate the effectiveness of the program in soliciting and evaluating project applications, providing awards in a timely manner, and monitoring project implementation. The report shall describe any adjustments made to the project selection criteria and recommend any further needed changes or adjustments to the grant program, including changes in grant award criteria, administrative procedures, or statutory provisions that would enhance the effectiveness and efficiency of the grant program. (d) The state board shall request comments and hold public meetings on each draft annual report to obtain public comments. The state board shall consider and respond to all significant comments received in producing a final annual report. (e) A final annual report shall be published within 90 days from the date of publication of each draft annual report. Article 12. Disposition of Funds 44296. (a) All program funds shall be encumbered prior to January 1, 2002. No grants shall be made by districts using money reserved within the fund after that date, and no technology or infrastructure project may be funded by the commission after that date. (b) On January 1, 2002, all unencumbered funds reserved for districts shall revert back to the state board, and thereafter shall be permanently allocated by the state board to districts in proportion to the aggregate net disbursements that the participating districts received during the life of the grant program, to be used in accordance with the goals and objectives of the grant program and to be granted by the districts in accordance with the procedures and criteria in place at the termination of the grant program or as subsequently modified by the districts as needed to better meet the grant program objectives and protect human health and welfare. (c) Notwithstanding subdivision (b), the advisory board may recommend that unused funds be allocated to fund a continuing statewide program similar to the program established as part of the advisory board recommendations for a continuing program pursuant to Section 44297. (d) Notwithstanding any provision in the Budget Act of 1999, funds appropriated in that act to carry out the provisions of this act shall only be available for encumbrance during the 1999-2000 fiscal year. Article 13. Continuing Program Recommendation 44297. (a) Not later than January 15, 2000, the state board, in cooperation with participating districts, shall prepare a report on the implementation, to date, of the diesel emissions incentives program funded under the Budget Act of 1998. Notwithstanding Section 7550.5 of the Government Code, the state board shall submit the report to the Governor, the Legislature, and the advisory board. The report shall describe district efforts to implement the existing program and provide an overview of the types of project applications received. The report shall assess the need for emission reductions and incentive programs relative to the state implementation plan, and the potential for emission reductions with continued funding, and shall assess whether the program should be continued and funded in the future. The report shall also identify and inventory all available state and local funds that may be utilized in carrying out a continuing program including, but not necessarily limited to, county district vehicle registration funding, air pollution penalties from diesel and other air quality violations, funds from the High Polluter Repair or Removal Account, created pursuant to subdivision (a) of Section 44091, that are not expected to be utilized for low-income repair assistance, and funds received from the federal government pursuant to the Congestion Management and Air Quality program. The report shall also analyze the possible use of mitigation fees, alternative settlements for compliance with state air quality and environmental protection laws and regulations, contributions by users of diesel equipment, and funds resulting from the mitigation of adverse environmental impacts of transportation projects. (b) The Carl Moyer Program Advisory Board is hereby created in state government for purposes of assessing implementation of the program and determining whether the program should continue to be funded. The advisory board shall have the following specified responsibilities: (1) To review the report prepared by the state board pursuant to subdivision (a) on program implementation. (2) To hold a public hearing on the need for a continuing program. (3) Notwithstanding Section 7550.5 of the Government Code, to prepare a report and submit it to the Legislature and the Governor on or before March 31, 2000. The report may recommend a continuing program, similar to the program established by this chapter, that will make a significant contribution toward attaining air quality standards in California. The report shall recommend revenue sources for funding financial incentives, together with any legislative or budget action needed to implement a continuing program. (c) The advisory board shall consist of 13 members. Four of the members shall be public members. Two public members shall be appointed by the Senate Committee on Rules, and two public members shall be appointed by the Speaker of the Assembly. The Secretary for Environmental Protection shall appoint the following nine members: (1) The executive officer of the state board. (2) One member of the commission. (3) One representative of the heavy-duty trucking industry. (4) One representative of the agricultural industry. (5) One representative of the construction industry. (6) One representative from the locomotive industry. (7) One representative from the marine industry. (8) One representative of a regional transportation agency. (9) One member of a public interest environmental organization. (d) The executive officer of the state board shall serve as the chairperson of the advisory committee (e) The advisory board may appoint ex officio officers. (f) The advisory board may request assistance from the state board and the commission for administrative services and staff support, and these agencies may provide these services, to the extent they determine it is feasible, within existing budgetary resources. (g) This article shall remain in effect only until April 1, 2000, and as of that date is repealed, unless a later enacted statute, that is enacted on or before April 1, 2000, deletes or extends that date. Article 14. Funds 44299. (a) The Carl Moyer Memorial Air Quality Standards Attainment Trust Fund is hereby created in the State Treasury. The Controller shall transfer any unencumbered funds appropriated to the commission or the state board for the diesel emissions reduction incentive program by Items 3360-001-0314 and 3900-001-0001 of Section 2.00 of the Budget Act of 1998 (Ch. 324, Stats. 1998), and Items 3360-001-0314, 3360-001-0001, 3360-001-0465, 3900-001-0001, and 3900-001-0115 of Section 2.00 of the Budget Act of 1999 (Ch. 50, Stats. 1999), to the trust fund. The money in the trust fund shall be available upon appropriation by the Legislature to carry out the purposes of this chapter. (b) To ensure that emission reductions are obtained as needed from air pollution sources, the following accounts are hereby created in the trust fund: (1) The Covered Vehicle Account. (2) The Advanced Technology Account. (c) Notwithstanding Sections 16475, 16475.1, and 16480.6 of the Government Code, all of the interest earned on money in the trust fund shall be deposited in the trust fund. 44299.1. (a) To ensure that emission reductions are obtained as needed from pollution sources, any money deposited in or appropriated to the fund shall be segregated and administered as follows: (1) Ten percent, not to exceed two million dollars ($2,000,000), shall be allocated to the Infrastructure Demonstration Project to be used pursuant to Section 44284. (2) Ten percent shall be deposited in the Advanced Technology Account to be used to support research, development, demonstration, and commercialization of advanced low-emission technologies for covered sources that show promise of contributing to the goals of the program. (3) Not more than 2 percent of the moneys in the fund shall be allocated to program support and outreach costs incurred by the state board and the commission directly associated with implementing the program pursuant to this chapter. These funds shall be allocated to the state board and the commission in proportion to total program funds administered by the state board and the commission. (4) Not more than 2 percent of the moneys in the fund shall be allocated to direct program outreach activities. The state board may use these funds for program outreach contracts or may allocate outreach funds to participating air districts in proportion to each district's allocation from the Covered Vehicle Account. The state board shall report on the use of outreach funds in their reports to the Legislature pursuant to Section 44295. (5) The balance shall be deposited in the Covered Vehicle Account to be expended to offset added costs of new very low or zero-emission vehicle technologies, and emission reducing repowers, retrofits, and add-on equipment for covered vehicles and engines. (b) Funds in the Covered Vehicle Account shall be allocated to a district that submits an eligible application to the state board pursuant to Section 44287. The state board shall determine the maximum amount of annual funding from the Covered Vehicle Account that each district may receive. This determination shall be based on the population in each district as well as the relative importance of obtaining NOx reductions in each district, specifically through the program. SEC. 3. (a) It is the intent of the Legislature that funds appropriated to the State Energy Resources Conservation and Development Commission for the Diesel Emissions Incentive Program pursuant to Item 3360-001-0001 of Section 2.00 of the Budget Act of 1999 are to be encumbered for the support of the Carl Moyer Memorial Air Quality Standards Attainment Program as follows: (1) Two million dollars ($2,000,000) for Advanced Technology Development grants awarded pursuant to Article 7 (commencing with Section 44285) of Chapter 9 of Part 5 of Division 26 of the Health and Safety Code. (2) Two million dollars ($2,000,000) for the Infrastructure Demonstration Program described in Article 6 (commencing with Section 44284) of Chapter 9 of Part 5 of Division 26 of the Health and Safety Code. (b) Funds specified in subdivision (a), and any other funds appropriated during the 1999-2000 fiscal year to the State Energy Resources Conservation and Development Commission for support of the Carl Moyer Memorial Air Quality Standards Attainment Program, may be used for any of the following purposes: (1) Grants. (2) Loans. (3) Contracts. (4) Technical support. (c) Any unencumbered funds appropriated to the State Air Resources Board for the diesel emissions reduction incentive program by the Budget Act of 1998 and the Budget Act of 1999, other than those funds listed in the items in subdivision (a) of Section 44299, shall be transferred by the Controller to the Carl Moyer Memorial Air Quality Standards Attainment Trust Fund for the support of the Carl Moyer Air Quality Standards Attainment Program. SEC. 4. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to begin the implementation of a program to achieve reductions in air pollution emissions that adversely affect public health and the environment, and that are required to be achieved by the State Implementation Plan pursuant to federal law as soon as possible, it is necessary that this act take effect immediately.