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                                                       Calendar No. 202
109th Congress                                                   Report
                                 SENATE
 1st Session                                                    109-133

======================================================================
 
                 DIESEL EMISSIONS REDUCTION ACT OF 2005

                                _______
                                

               September 7, 2005.--Ordered to be printed

                                _______
                                

    Mr. Inhofe, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [to accompany S. 1265]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S. 1265) to make grants and loans available to 
States and other organizations to strengthen the economy, 
public health, and environment of the United States by reducing 
emissions from diesel engines, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill, as amended, do pass.

                    General Statement and Background

    Diesel engines are an important part of the American 
economy, but they emit harmful emissions. On-road heavy duty 
diesel vehicles, such as transit buses and garbage trucks, and 
non-road diesel vehicles, such as construction equipment and 
tractors, account for roughly one-half of the nitrogen oxide 
and particulate matter emissions from mobile sources 
nationwide. These emissions contribute to ozone formation and 
fine particulate matter, and they contain numerous other 
chemicals that are listed by the Environmental Protection 
Agency (EPA) as hazardous air pollutants.
    EPA has finalized diesel fuel and new engine regulations 
that will reduce diesel emissions from new diesel buses, 
freight trucks, and non-road equipment by more than 80 percent 
from 2000 levels. EPA's 2001 Highway and 2004 Non-road Diesel 
Engine rules will greatly improve the environment and protect 
public health, but the full benefits will not be realized until 
2030 because of the long lifetime of the 11 million existing 
engines. The durability of the diesel engines used to power 
school buses, trucks and railroads, agriculture processes, and 
emergency response vehicles can last for hundreds of thousands 
of miles over a lifetime of more than 30 years.
    Additionally, EPA has designated 495 counties nationally as 
in nonattainment for the new ozone and/or particulate matter 
air quality standards. States must develop State Implementation 
Plans to achieve ozone and particulate matter reductions to 
meet these new standards.
    In order to help States and communities meet these 
standards and reduce exposure to harmful diesel emissions, 
substantial reductions in those emissions from the nation's 
aging diesel fleets are necessary. The voluntary program 
established in this bill should build off proven State and 
local programs that retrofit, repower, or replace older 
engines. Such an initiative would cost-effectively provide 
emissions reductions and dramatically accelerate the public 
health benefits.

                     Objectives of the Legislation

    The Diesel Emissions Reduction Act of 2005 (S. 1265) would 
establish voluntary national and State-level grant and loan 
programs for diesel emission reduction projects and programs. 
Addressing emissions from existing diesel engines is one of the 
most important steps that can be taken to improve air quality 
and protect public health.
    S. 1265 would:
         Authorize $1 billion over 5 years ($200 
million annually for fiscal years 2007 through 2011);
         Provide that 70 percent of the funds be 
distributed by EPA;
         Allocate 20 percent of funds to States to 
develop retrofit programs with an additional 10 percent 
available as an incentive for State's to match the Federal 
dollars being provided;
         Establish priority areas for projects--such as 
those that are more cost-effective and affect the most amount 
of people--and focuses the Federal program on public fleets; 
and
         Institute programs to help develop new 
technologies, encourage more action through non-financial 
incentives, and require EPA to conduct outreach to stakeholders 
and report on the success of the program.
    In developing this legislation, the committee worked with 
environmental, industry, and public officials from across the 
country. This legislation represents a carefully considered, 
bipartisan effort to reduce emissions from existing diesel 
engines.

                      Section-by-Section Analysis

Section 1. Short title.
    This section provides that the Act may be cited as the 
`Diesel Emissions Reduction Act of 2005'.
Sec. 2. Definitions.
    This section provides definitions for terms used in the 
Act, including ``certified engine configuration,'' ``eligible 
entity,'' ``emerging technology,'' ``fleet,'' ``heavy-duty 
truck,'' ``medium-duty truck,'' and ``verified technology.''
    The term ``fleet'' is defined to make it clear that the Act 
applies to all diesel engines whether stationary or mobile. It 
also clarifies that a grant or loan can be provided to address 
one engine or many.
    The committee intends for the idling provisions (advanced 
truckstop electrification system and auxillary power unit as 
listed under the definition of ``verified technology'') be 
implemented through EPA's Smartway Transport Partnership. 
Idling technology verification means the technology is 
commercially available and is listed through the Smartway 
Transport Partnership program.
Sec. 3. National grant and loan programs.
    Section 3(a) would establish a national grant and loan 
program to be administered by the EPA. The EPA Administrator is 
to use 70 percent of the funds made available each fiscal year 
to provide grants and low-cost revolving loans to regional, 
State, local, or tribal agencies or port authority with 
jurisdiction over transportation or air quality and to 
nonprofit organizations and institutions that represents or 
provides pollution reduction or educational services to persons 
or organizations that own or operate diesel fleets or have as 
their principal purpose the promotion of air quality or 
transportation. Grants and loans are to achieve significant 
reductions in diesel emissions in terms of 1) tons of pollution 
produced and 2) exposure to the emissions, particularly in poor 
air quality areas.
    Section 3(b) would provide that not less than 50 percent of 
the funds available under the national grant and loan program 
are to be provided for the benefit of public fleets. Not less 
than 90 percent of the funds available under Section 3 shall be 
provided for projects using an engine configuration certified 
by EPA or the California Air Resources Board (CARB) or a 
pollution control technology verified by EPA or CARB. Not more 
than 10 percent of the funds available under the section would 
be provided for the development and commercialization of 
emerging technologies.
    Section 3(c) establishes detailed requirements for grant or 
loan applications. The Administrator is required to give 
priority to projects that a) maximize public health benefits; 
b) are the most cost-effective; c) serve areas with the highest 
population density; that are poor air quality areas, including 
nonattainment or maintenance areas, Class I areas, or areas 
with toxic air pollutant concerns; that receive a 
disproportionate quantity of air pollution from a diesel fleet, 
including ports, rail yards, truckstops, terminals, or 
distribution centers; or that use a community-based multi-
stakeholder collaborative process to reduce toxic emissions; d) 
include a technology that has a long expected useful life; e) 
will maximize the useful life of any retrofit technology; f) 
conserve diesel fuel; and g) use ultra low sulfur diesel fuel.
    Section 3(c)(3)(F) would give priority to proposed projects 
that use diesel fuel with a sulfur content of less than 15 
parts per million, as the Administrator determines to be 
appropriate. Since railroads will not be subject to a 15 parts 
per million (ppm) fuel requirement until 2012, the committee 
does not expect this priority to be applied to proposed 
railroad projects.
    Under Section 3(d), funds may be used to retrofit buses, 
medium-and heavy-duty trucks, marine engines, locomotives, or 
non-road engines used in construction, cargo-handling, 
agriculture, mining, or energy production equipment. Funds may 
also be used for idle-reduction programs.
    Subsection 3(d)(2) of the bill prohibits the use of grants 
and loans provided under this section for any emission 
reduction mandated under Federal, State, or local law. 
Voluntary or elective measures are not mandated and are not 
subject to this funding prohibition. For example, voluntary or 
elective measures could include, but are not limited to, early 
emissions reductions, reductions in excess of existing 
regulatory requirements, non-regulatory public fleet 
reductions, and reductions to meet eligibility requirements for 
public works projects or public service contracts. 
Additionally, reductions should not be considered mandated if 
they are the result of voluntary or elective programs or 
projects included in a State Implementation Plan.
Sec. 4. State grant and loan programs.
    Section 4(a) provides that the Administrator shall use 30 
percent of the funds available in a fiscal year to support 
grant and loan programs administered by States that are 
designed to achieve significant reductions in diesel emissions. 
The Administrator is to provide this funding to the States 
``subject to the availability of adequate appropriations.'' 
Funding for this Act is dependent upon annual appropriations, 
and the legislation divides the funding between national and 
State programs. Due to this funding structure, there is likely 
a level of funding at which it does not make sense to have a 
State program because the funding would not even provide enough 
to administer a State program. Thus, based on the amount 
appropriated for a fiscal year and the number of States that 
apply and qualify for funding, the committee expects EPA to 
make a determination each year as to whether the States would 
be provided under this section. If EPA determines that there 
are not adequate appropriations, then all of the funding 
provided for the Act would be administered through the national 
program.
    Section 4(b) requires the Administrator to provide guidance 
to the States regarding the application process, permissible 
uses of funds, and the cost-effectiveness of emission reduction 
technologies, and it requires the establishment of application 
procedures.
    Section 4(c) establishes an allocation formula for the 
State grant programs. Using not more than 20 percent of the 
funds made available to carry out Section 4, EPA is to provide 
each of the States 2 percent of the total funds available, if 
each of the 50 States qualifies for an allocation. If fewer 
than 50 States qualify, the remaining funds are to be allocated 
among the qualifying States in proportion to their population. 
If a State agrees to match its allocation, the Administrator 
shall provide it an additional amount equal to 50 percent of 
its allocation. No funds provided under the Act are allowed to 
be used by a State as matching funds. Any funds not claimed by 
a State for a fiscal year are to be used to carry out the 
national program under Section 3.
    Section 4(d) provides States with flexibility to establish 
programs under this section to meet their needs. The section 
provides that Governors may determine the portion of funds to 
be provided as grants or loans. A grant or loan may be used for 
certified engine configurations or verified pollution control 
technologies.
Sec. 5. Evaluation and report.
    Not later than 1 year funds are first made available, and 
biennially thereafter, the Administrator shall submit to 
Congress a report evaluating the implementation of the programs 
under this Act. Section 5(b) provides a list of six items to be 
included in these reports.
Sec. 6. Outreach and incentives.
    Section 6(b) requires the EPA Administrator to establish a 
technology transfer program. The purpose of the program is to 
inform stakeholders of the benefits of verified and emerging 
technologies and to develop non-financial incentives for those 
technologies. Eligible stakeholders include: equipment owners 
and operators; engine, equipment, and emission and pollution 
control manufacturers; State and local air quality officials; 
and community, public health, educational, and environmental 
organizations.
    Section 6(c) requires the EPA Administrator to develop 
guidance to provide credit to a State for emissions reductions 
created by the use of eligible technologies as part of a Clean 
Air Act State Implementation Plan. This section should not 
delay any guidance that EPA is already in the process of 
developing.
    Section 6(d) requires the EPA Administrator, along with the 
Department of Commerce and industry, to inform foreign 
countries on the emissions reduction potential of technology 
developed or used in the United States.
Sec. 7. Effect of Act.
    Section 7 affirms that nothing in the bill affects 
authorities under the Clean Air Act.
Sec. 8. Authorization of appropriations.
    Section 8 authorizes $200 million annually for the Act in 
fiscal years 2007 through 2011.

                          Legislative History

    Senators Voinovich, Carper, Inhofe, Jeffords, Isakson, 
Clinton, Hutchison, and Feinstein introduced S. 1265, the 
Diesel Emissions Reduction Act of 2005, on June 16, 2005. It 
was then referred to the Senate Committee on Environment and 
Public Works. A legislative hearing was held by the 
Subcommittee on Clean Air, Climate Change, and Nuclear Safety 
on July 12, 2005. A full committee business meeting was held on 
July 20, 2005, and the committee ordered S. 1265, as amended, 
to be reported to the full Senate.

                                Hearings

    The Subcommittee on Clean Air, Climate Change, and Nuclear 
Safety held a hearing on the bill on July 12, 2005. Witnesses 
included: Wayne Nastri, Region IX Administrator, U.S. 
Environmental Protection Agency; Margaret Keliher, County 
Judge, Dallas, Texas; Joseph P. Koncelik, Director, Ohio 
Environmental Protection Agency; Michael Cross, Vice President, 
Cummins Inc., General Manger, Fleetguard Emissions Solutions; 
Conrad Schneider, Advocacy Director, Clean Air Task Force; 
Timothy J. Regan, President, Emissions Control Technology 
Association; and Stuart Nemser, Founder/Chairman, Compact 
Membrane Systems, Inc.

                             Rollcall Votes

    The Committee on Environment and Public Works met to 
consider S. 1265 on July 20, 2005. The committee agreed 
unanimously to an amendment by Senator Voinovich. The committee 
approved S. 1265, as amended, by unanimous consent.

                      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. 1265 would not 
impose Federal intergovernmental unfunded mandates on State, 
local, or tribal governments.

                          Cost of Legislation

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

S. 1265, Diesel Emissions Reduction Act of 2005, As ordered reported by 
        the Senate Committee on Environment and Public Works on July 
        20, 2005
Summary
    S. 1265 would authorize the appropriation of $200 million 
for each of fiscal years 2007 through 2011 to the Environmental 
Protection Agency (EPA) to support grants and loans to States 
and other organizations working to reduce emissions from diesel 
engines. Under the bill, EPA would establish a technology 
transfer program including nonfinancial incentives to promote 
the use of technologies that reduce diesel emissions. The bill 
also would require EPA to work with the Department of Commerce 
to inform foreign countries of the potential of technology used 
or developed to reduce emissions in the United States. CBO 
estimates that those outreach activities would cost $2 million 
annually.
    CBO estimates that implementing this legislation would cost 
$660 million over the next 5 years, assuming appropriation of 
the necessary amounts. Enacting S. 1265 would not affect direct 
spending or revenues. S. 1265 contains no intergovernmental or 
private-sector mandates as defined by the Unfunded Mandates 
Reform Act (UMRA). The bill would benefit local and tribal 
governments within the State of Alaska; any costs they incur 
would result from complying with conditions for receiving 
Federal assistance.
Estimated Cost to the Federal Government
    CBO estimates that implementing the bill would cost $660 
million over the 2006-2010 period, assuming appropriation of 
the amounts authorized for each year. Those estimated outlays 
are based on historical patterns for similar activities. The 
estimated budgetary impact of S. 1265 is shown in the following 
table. The costs of this legislation fall within budget 
functions 300 (natural resources and environment) and 370 
(commerce and housing credit).

 
                 By Fiscal Year, in Millions of Dollars
------------------------------------------------------------------------
                                   2006    2007    2008    2009    2010
------------------------------------------------------------------------
 CHANGES IN SPENDING SUBJECT TO
          APPROPRIATION
Grants and Loans to Support
 Reductions in Diesel Emissions.
    Authorization Level.........       0     200     200     200     200
    Estimated Outlays...........       0     100     160     190     200
Outreach Activities.............
    Estimated Authorization            2       2       2       2       2
     Level......................
    Estimated Outlays...........       2       2       2       2       2
Total Changes...................
    Estimated Authorization            2     202     202     202     202
     Level......................
    Estimated Outlays...........       2     102     162     192     202
------------------------------------------------------------------------

Intergovernmental and Private-Sector Impact
    S. 1265 contains no intergovernmental or private-sector 
mandates as defined by UMRA. The bill would authorize the 
appropriation of $1 billion for grants and loans to promote the 
reduction of diesel emissions. States would be eligible to 
receive a percentage of those funds for their use in the 
administration of programs that are designed to achieve 
significant reductions in diesel emissions. Any costs incurred 
by State, local, or tribal governments would result from 
complying with conditions for receiving Federal assistance.
    Estimate Prepared By: Federal Costs: Susanne S. Mehlman; 
Impact on State, Local, and Tribal Governments: Lisa Ramirez-
Branum; Impact on the Private Sector: Selena Caldera.
    Estimate Approved By: Peter H. Fontaine, 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.