Office of Operations Freight Management and Operations

Freight and Air Quality Handbook

4.0 Funding and Financing Tools for Freight Air Quality Improvements

No transportation project, no matter how beneficial, can proceed without funding. This section describes the major funding and financing options currently available for freight-related air quality improvements. The primary focus is on the suite of Federal tools and strategies available from the U.S. DOT and the U.S. EPA. This section also discusses state and local programs, though in less depth since these vary widely across the country.

4.1 State of the Practice

There are a number of ways to fund or finance freight air quality projects in the United States, though some are more widely used than others. Broadly speaking, existing funding and financing programs fall into one of four categories:

  • Federal-Aid Highway and Rail Programs. These are grant programs administered by the U.S. DOT that provide Federal transportation funds for projects that meet the criteria of a given funding program. For freight air quality purposes, the best known of these is the Congestion Mitigation and Air Quality Improvement Program (CMAQ), which also is the only Federal-aid highway program specifically targeted at addressing air quality issues. However, other programs have been successfully used to address freight transportation emissions.
  • Federal Financing Tools. These are credit facilities that allow sponsors of transportation projects to access capital in order to fund new infrastructure and/or equipment. These programs take the form of loans, credit enhancement, or debt financing and typically feature attractive terms such as low interest rates and long repayment periods. Although no financing tools are targeted directly towards improving air quality, these programs can apply to projects that have air quality benefits, and a few explicitly consider environmental benefits as part of the evaluation process.
  • Other Federal Programs. Besides the traditional U.S. DOT grant and loan programs, there are some other Federal programs administered by the EPA that provide support for diesel retrofits and other emissions reduction efforts.
  • State, Local, and Nonprofit Programs. Some state and local resource agencies have their own programs geared specifically towards reducing freight-related diesel emissions. In addition, there are nonprofit advocacy groups and public-private partnerships that focus on air quality. State programs typically take the form of grants or tax credits, while nonprofits sometimes offer loans or credit enhancement.

The following sections provide brief descriptions of these funding and financing tools and the types of freight air quality projects that could be funded with each. For the Federal programs, each section begins with a summary table that briefly describes the key features of each funding program. Readers seeking more information about a particular funding mechanism can then find the detailed description in the text. The state, local, and nonprofit funding opportunities are presented as examples. Rather than providing a comprehensive list of all such programs, the goal is to give readers a sense of the types of programs that may be available.

4.2 Federal-Aid Highway and Rail Programs

Federal-aid highway and rail programs vary widely in terms of scope, purpose, eligibility, and funding levels; as a result, their potential applications to freight air quality improvement also vary widely. An overview of each program is provided below, including a description of the program, project eligibility, and state and local share requirements. In addition, the key advantages and challenges associated with each program are discussed to give practitioners a sense of the practical issues that might be encountered when applying for funds. Table 4.1 summarizes the current U.S. DOT funding Programs.

Table 4.1 U.S. DOT Funding Programs

U.S. DOT Funding Programs

Funding Program

Eligibility

SAFETEA-LU Funding Level
(FY 2005-2009)

Freight Air Quality Application

Project Size

Who Approves Funding?

Surface Transportation Program (STP)

Funds projects on any Federal-aid highway, bridge projects on any public road, transit capital projects, and other state or local projects. Can be used for highway improvements to accommodate rail freight. Project selection criteria vary by state.

$32.6 billion

  • Preservation of abandoned rail corridors.
  • Highway bridge clearance projects to accommodate double-stacked freight trains.
  • Advanced truck stop electrification systems.

Any size; may require combination with other funding sources for very large projects.

State DOTs/MPOs
http://www.transportation.org/?siteid=37&pageid=332
http://www.ampo.org/directory/index.php

CMAQ Congestion Mitigation and Air Quality Improvement Program

Funds transportation projects in nonattainment and maintenance areas that improve air quality. Can be used for start up costs associated with operations (for up to three years).

$8.6 billion

  • Advanced truck stop electrification systems.
  • Construction of Intermodal freight facilities that result in air quality improvements on-road and non-road diesel engine retrofits (including Switcher/Shunter Locomotives acquisition or diesel retrofit and. Drayage Diesel Retrofit.
  • Cost-effective congestion mitigation activities. Capital investments that enhance air quality, such as on- or near-dock rail, cargo handling equipment, or container on barge facilities.
  • Heavy-duty truck retirement programs.
  • Railway reconstruction/refurbishment (i.e. for expansion to accommodate transshipped boxes and truckloads).

Any size.

State DOTs/MPOs
http://www.transportation.org/?siteid=37&pageid=332
http://www.ampo.org/directory/index.php


Rail Grade Crossings

Provides funding to eliminate rail-highway crossing hazards.

$880 million

  • Rail-highway grade separations.
  • Highway relocation to eliminate crossing.
  • Rail relocation to eliminate crossing (where most cost-effective).

Small projects; requires combination with other funding sources for very large projects.

State DOTs/MPOs
http://www.transportation.org/?siteid=37&pageid=332
http://www.ampo.org/directory/index.php

Truck Parking Facilities Grants

Pilot SAFETEA-LU program; provides grant funds for projects addressing the shortage of long-term parking for commercial vehicles on the NHS.

$25 million

  • Construction of commercial vehicle parking facilities adjacent to truck stops and travel plazas.
  • Constructing turnouts for commercial vehicles.
  • Improving geometric design of interchanges to improve truck access to parking facilities.

Small project; requires combination with other funding sources for very large projects.

U.S. DOT/FHWA

Capital Grants for Rail Relocation Projects

Provides grants for local rail line relocation and improvement projects. Projects should improve vehicle traffic flow, quality of life, and economic development.

$1.4 billion authorized
($20 million appropriated in FY 2008; $25 million in FY 2009)

  • Relocation of a rail line, with ancillary air quality benefits.

Any size, although legislation requires that at least one-half of the funding is used for projects that are $20 million or less.

U.S. DOT//FRA
http://www.fra.dot.gov

4.2.1 Congestion Mitigation and Air Quality Improvement Program (CMAQ

Overview

The CMAQ program funds transportation projects and programs that improve air quality (by reducing transportation-related emissions) in nonattainment and maintenance areas for ozone, carbon monoxide (CO), and particulate matter (PM10, PM2.5). Federal funds typically cover 80 percent of a project's cost (Pub. L. 110-140, Sect. 1131, The Energy Independence and Security Act of 2007 provided a 100 percent Federal share for CMAQ projects in FY 2008 and 2009. Continuation of this provision with new transportation legislation is unknown). Certain activities, including carpool/vanpool projects, priority control systems for emergency vehicles and transit vehicles, and traffic control signalization receive a Federal share of 100 percent. For 2005-2009, CMAQ was authorized for $8.6 billion in funding. CMAQ funds are apportioned by statutory formula each year to states based on the severity of their ozone and CO pollution. Each state is guaranteed a minimum apportionment of one-half of one percent of the year's total program funding. Individual CMAQ projects are selected by the state or MPOs.

Criteria and Eligibility

While CMAQ is not geared exclusively towards freight projects, many eligible projects are potentially freight-related. Routine maintenance projects and those that expand highway capacity are not eligible for funding, since they do not meet the program's goal of reducing emissions. As with all Federal-aid funding programs, to be eligible, a project must be included in the MPO's current transportation plan and TIP (or STIP for areas not represented by an MPO).

Proposals should include a detailed description of the project, including size, scope, location, and timetable, as well as an air quality analysis that quantifies anticipated emissions reductions that would result from project implementation. If it is difficult to quantify these benefits, a qualitative assessment may be made.

Key Advantages and Challenges

CMAQ funds have been used for a variety of freight-related projects that improve air quality by reducing truck emissions. Examples of CMAQ-funded freight projects include construction of intermodal facilities for moving containers off of highways and onto rail, moving containers off highways by defraying barge operating costs, rail track rehabilitation, diesel engine retrofits, idle-reduction projects, and new rail sidings. Additionally, though previously eligible, SAFETEA-LU highlighted advanced truck stop electrification systems (on non-Interstate right-of-way) (A provision for construction of truck stop electrification facilities in the Interstate ROW [U.S. Code Title 23, Section 111(d)] was removed in the SAFETEA-LU Technical Corrections Bill), on-road diesel engine retrofits, heavy duty truck retirement programs, and other cost-effective congestion mitigation activities as CMAQ eligible projects. SAFETEA-LU also established eligibility for non-road diesel engine retrofit projects (container gantry cranes, switcher/shunter locomotives). SAFETEA-LU directs states and MPOs to give priority to diesel retrofits and cost-effective congestion mitigation activities.

CMAQ may be used to fund construction and other activities that could benefit a private entity, if it can be documented that the project will remove truck traffic on the Federal-aid system or reduce other freight-related emissions, thus improving the region's air quality. This would be accomplished through a public-private partnership (PPP) agreement, the mechanism that allows spending public CMAQ funds on most private freight projects. Agencies considering the use of a PPP approach should develop a contract or memorandum of understanding that ensures a public air quality benefit is achieved.

The primary advantage of CMAQ for freight and air quality is that it is specifically targeted at projects that improve air quality. However, it is not freight-specific, so freight air quality projects must often compete for limited funds with other non-freight improvements. This is compounded by the fact that many states and MPOs have not fully integrated freight into their transportation planning and programming activities, so freight sometimes does not have a strong "voice" in project evaluation and selection.

The multijurisdictional nature of freight movements also poses a challenge for obtaining freight project funding under CMAQ. CMAQ funds are usually devoted to projects that have benefits in a specific nonattainment area, but freight nearly always moves in and out of a given metro area, which can interfere with CMAQ eligibility. Certain types of freight projects – such as intermodal freight terminals – remain eligible despite this fact. Others (like APUs on trucks) may not be given priority unless the vehicles are expected to remain in the nonattainment area the majority of the time. (In some cases, project sponsors require equipment, such as railyard switching engines, to stay in the nonattainment area for a certain period of time as a condition of receiving CMAQ funds.) Project sponsors should, therefore, make certain that a given project is eligible prior to developing an application for funding. In any event, sponsors need to show that sufficient air quality benefits will be realized within the nonattainment area in order to qualify for CMAQ funds.

4.2.2 Surface Transportation Program (STP)

Overview

The STP provides a flexible source of funding that states can use for projects on any Federal-aid highway, bridge projects on any public road, transit capital projects, and intercity/intracity bus terminals and facilities, among other things. Funds are apportioned to states based on three primary factors:

  • Total lane-miles of Federal-aid highways (25 percent);
  • Vehicle-miles traveled on lanes on Federal-aid highways (40 percent); and
  • Estimated tax payments contributed by state highway users to the Highway Account of the Highway Trust Fund (35 percent).

Notwithstanding the above criteria, each state receives a minimum of one-half of one percent of the total funds apportioned for the STP.

These funds may be used for a wide variety of transportation investments, including certain types of preventive maintenance (STP funds are only eligible for certain types of preventive maintenance and are never eligible for routine maintenance. See https://www.fhwa.dot.gov/preservation/100804.cfm) new road construction, and transit capital projects. SAFETEA-LU expanded eligibility to include advanced truck stop electrification projects. The Federal share for projects funded under STP is generally 80 percent.

Criteria

STP project selection criteria vary among states and MPOs, since transportation agencies can develop their own evaluation criteria subject to the planning requirements set out in statute (23 CFR Parts 450 and 500, 49 CFR Part 613). As a result, project sponsors need to consider STP selection criteria in their state or region in light of how those criteria would (or would not) apply to a freight air quality project. Not all states or MPOs specifically plan for freight, and as a result freight projects can have a hard time competing for scarce transportation funding.

Key Advantages and Challenges

Freight projects eligible for STP money include:

  • Preservation of abandoned rail corridors;
  • Highway bridge clearance increases to accommodate double-stack freight trains; and
  • Capital costs of advanced truck stop electrification systems not in an Interstate right-of-way but on an eligible publicly owned location.

Although truck stop electrification is the only category that is specifically targeted toward emissions reduction, the other project types often have ancillary air quality benefits, particularly if they create a mode shift from truck to rail. In this way, air quality benefits may be used to help move a freight project forward.

Although STP funds may be used for pollution abatement projects, that is just one of many potential uses for these funds. In addition, STP funds are suballocated in various ways, with certain portions going towards urban and rural areas, transportation enhancement, and other subcategories. As a result, air quality projects are not often considered for funding under STP, since most states prefer to use the money for new capacity, or other activities such as sidewalk construction and to steer air quality projects to the CMAQ program. Combined with the fact that a lot of states and MPOs still do not actively push freight projects from planning stages to implementation, this can make freight air quality projects a long shot in many places.

Because of the wide eligibility of STP projects, STP funds tend to get used up more quickly than other sources such as CMAQ. In addition, anti-idling efforts are essentially the only air quality technology strategy allowed under STP. It also is important to note that other idle-reduction strategies (such as shore power systems and idle-limiters) are not eligible under STP unless they are identified as Transportation Control Measures pursuant to Section 108 of the Clean Air Act. Project sponsors should make certain that a given project is eligible for STP funds prior to developing an application for funding.

Finally, some states restrict the use of STP for non-highway projects, which may make rail, marine, and air quality improvements ineligible.

4.2.3 National Highway System (NHS)

Overview

The NHS is composed of certain roadways identified as being critical to the nation's economy, defense, and mobility. The system currently includes about 160,000 miles of roads throughout the country. It is defined in statute and includes the Interstate system, the Strategic Highway Network (StraHNet), other Principal Arterial roadways not designated as part of the Interstate or StraHNet systems, highway connections between major military facilities and StraHNet, and designated intermodal connectors. NHS funds are distributed to states by formula allocation; SAFETEA-LU authorized $30.5 billion for the NHS for FY 2005 to 2009.

Generally, NHS projects receive 80 percent Federal funding with the remaining 20 percent coming from state and/or local sources. (Certain activities, such as HOT lanes and safety projects, receive a higher Federal share.)

Criteria and Eligibility

Eligible freight projects include construction, reconstruction, resurfacing, and rehabilitation on an intermodal connector – a designated roadway connecting the NHS with a truck-rail facility, port, pipeline terminal, or an airport. So, for example, a state could use NHS funding to improve a truck access route to a port, which could remove a bottleneck and thus reduce emissions. However, only designated NHS intermodal connectors are eligible for funding. The lists of these corridors are only updated intermittently since designation is largely a state responsibility. In addition, NHS connectors account for only a small percentage of the total number of connectors (many connectors do not meet the eligibility requirements for the NHS) (NHS Intermodal Connector Requirements may be found at http://ops.fhwa.dot.gov/freight/freight_analysis/nhs_intermod_fr_con/app_a.htm). This means that the freight facilities that qualify for funding under this program are quite limited.

Key Advantages and Challenges

Intermodal access projects with air quality benefits (such as ones that improve traffic flow on an intermodal connector) could make use of NHS funding. Of course, freight projects seeking NHS funding must compete with non-freight projects, much like those applying for STP funds.

4.2.4 Truck Parking Facilities Grants

Overview

Truck Parking Facilities Grants is a pilot program that provides grants for projects that address the shortage of long-term parking for commercial vehicles on the NHS. SAFETEA-LU authorized $25 million over five years for the program, but after take-down charges and Congressional rescissions approximately $17 million was appropriated through fiscal year 2009. Fiscal Year 2010 provided another $5.84 million. Eligible projects include construction of new or expanded commercial vehicle parking facilities, construction of turnouts for commercial vehicles, improvement to interchanges, and Intelligent Transportation System (ITS) deployments promoting availability of parking.

Criteria and Eligibility

Applicants must describe the safety benefits that will result from the proposed project as well as mobility improvements and congestion relief. Applications are scored based on the following criteria:

  • Demonstration of severe shortage of commercial motor vehicle parking capacity/utilization in corridor or area to be addressed;
  • Extent to which the proposed solution resolves the shortage;
  • Cost-effectiveness of the proposal; and
  • Scope of the proposal, including evidence of input from a wide range of affected parties such as community groups, local governments, MPOs, and motorist/trucking organizations. According to the program language, funding priority is given to applicants that "demonstrate that their proposed projects are likely to have positive effects on highway safety, traffic congestion, or air quality (FHWA Truck Parking Facilities Fact Sheet)." However, air quality is not one of the evaluation criteria.

4.2.5 Rail-Highway Crossing Program

Overview

This program was previously a set-aside of the Surface Transportation Program (STP). It provides funding for projects that improve safety at railroad crossings by eliminating hazards (e.g., grade separation, or highway or rail relocation to eliminate a crossing) and/or installing or upgrading crossing devices. SAFETEA-LU funding from FY 2006-2009 for this program is $880 million. Each state receives a minimum of one-half of one percent of program funds. One-half of the apportioned funds are distributed based on formula factors for the Surface Transportation Program; the other one-half are distributed according to the number of public railway-highway crossings in each state. The legislation requires states to set aside at least one-half of their funding allocation for the installation of protective devices at rail-highway crossings. If all needs for installation of protective devices have been met, then the funds available can be used for other at-grade crossing projects eligible under this program. Only safety improvements are eligible. The Federal share of project funding is 90 percent (The Federal share may be 100 percent for certain improvements such as crossing closures, hazard elimination, signing, pavement markings, and active warning devices). Projects are approved for funding by their respective state DOTs and/or MPOs.

Criteria and Eligibility

Eligible projects include:

  • Separation or protection of grades at crossings;
  • The reconstruction of existing railroad grade crossing structures; and
  • The relocation of highways or rail lines to eliminate grade crossings.

States are responsible for determining which public crossings need improvements. Specific safety improvements could also reap air quality benefits, although these benefits are not themselves eligible for this funding. Project sponsors could, therefore, evaluate air quality benefits among the set of safety improvements being considered to determine if there are additional benefits worthy of consideration. It is important to note that SAFETEA-LU requires that states set aside at least 50 percent of the funding allocation for the installation of protective devices at rail-highway crossings. Only after all needs for installation of protective devices have been met can funds be used for other at-grade crossing projects eligible under this program.

Key Advantages and Challenges

This program could be used to fund grade separations that may have an ancillary air quality benefit. These emission reductions are generally achieved by reduced idling and congestion on the roadways that cross the tracks. In the vicinity of a major intermodal facility, much of this traffic also may be freight trucks.

Theoretically, a state could use the emissions reduction expected from a grade separation project as a factor in project evaluation and selection. However, the Rail-Highway Crossing Program is narrowly focused on safety, and only safety improvements are eligible. Therefore, a grade separation project would have to be justified primarily on safety grounds to obtain funding under this program.

4.2.6 Capital Grants for Rail Line Relocation

Overview

This program, established under SAFETEA-LU and administered by the FRA, provides grant funding for local rail line relocation and improvement projects that improve rail safety, motor vehicle traffic flow, community quality of life, or economic development, or involve the relocation of any part of the rail line. Under the legislation, $1.4 billion was authorized for these projects ($350 million per fiscal year), subject to appropriations. However, Congress did not appropriate any money for this program for FY 2006 or 2007. In FY 2008, Congress appropriated approximately $20 million for this program, $5.25 million of which was earmarked for nine noncompetitive projects. For FY 2009, $25 million were appropriated by Congress, with $17.1 million directed to 23 projects. Projects can be of any size, but the legislation requires that at least one-half of the total funding be used for projects costing $20 million or less. The Federal share of funding for any given project cannot be more than 90 percent. Only construction costs are reimbursable under this program. This includes architectural and engineering costs.

Criteria and Eligibility

The FRA issued a Final Rule outlining the regulations governing this program in July 2008 ("Implementation of Program for Capital Grants for Rail Line Relocation and Improvement Projects," Federal Register Volume 73, No. 134, Friday, July 11, 2008). According to the Final Rule, the criteria to be considered when selecting projects for funding include:

  • The ability of the state requesting the grant to fund the project without Federal assistance, as measured by:
    • The existence of state programs to improve railroads;
    • The state's use of available highway-rail grade crossing improvement funds provided through 23 U.S.C. 130; and
    • Other indicators of creditworthiness, such as bond ratings.
  • The allocation requirements mentioned above;
  • Equitable treatment of the various regions of the country;
  • The effects of the project on motor vehicle or pedestrian traffic, safety, community quality of life, and area commerce;
  • The effects of the project on freight and passenger rail operations on the rail line; and
  • Any other factors the FRA deems to be relevant in assessing the effectiveness of the proposed improvement in achieving the goals of the national program. This may include any air quality benefits associated with a rail line relocation. States are required to submit a complete description of the expected public and private benefits associated with their projects.

Key Advantages and Challenges

Like the Rail-Highway Crossing Program, Capital Grants for Rail Line Relocation theoretically could be used for an air quality project. Emissions reductions might score highly on the community quality of life criteria and presumably would be included in the applicant's list of public and private benefits. However, there are many other factors that the FRA considers when evaluating applications, including safety, emergency vehicle access, traffic counts at highway crossings, and the effects of the relocation on local industry (both positive and negative). To the extent that these priorities would compete with any air quality benefits, this could limit the applicability of this program for emissions reduction efforts.

4.3 Federal Financing Tools

Beyond traditional Federal-aid grant programs, there are a number of Federal financing tools available for freight-related air quality improvements. Many are targeted towards specific modes (such as rail) that sometimes get overlooked under grant funding programs. Below are detailed descriptions of the financing tools, their requirements, and eligible projects. Table 4.2 presents summary information about them.

Table 4.2 Federal Financing Tools

Federal Financing Tools

Funding Program

Eligibility

SAFETEA-LU Funding Level (FY 2005-2009)

Freight Air Quality Application

Project Size

Who Approves Funding?

Transportation Infrastructure Finance and Innovation Act (TIFIA)

Provides loans and credit assistance for major transportation investments of national or regional significance, including public intermodal freight facilities. SAFETEA-LU expanded TIFIA eligibility to private rail projects.

Private sponsors are eligible.

SAFETEA-LU authorizes $122 million per year to pay the subsidy costs of supporting Federal credit under TIFIA. This level of funding can support loans with a total value of more than $2 billion annually.

  • Public or private rail facilities providing benefits to highway users
  • Intermodal freight transfer facilities
  • Access to freight facilities and service improvements, including ITS
  • Surface transportation infrastructure modifications to facilitate intermodal interchange, transfer, and access into and out of ports

$50 million minimum, no specific maximum; air quality benefits would be ancillary to capacity expansion project

U.S. DOT
http://tifia.fhwa.dot.gov

State Infrastructure Banks (SIB)

SAFETEA-LU authorizes all 50 states, the District of Columbia, Puerto Rico, and U.S. territories to establish infrast

Private sponsors are eligible.

Highway Account – Up to 10 percent of NHS, STP, Bridge, and Equity Bonus programs, at the discretion of the state DOT.

Rail Account – Funds made available for capital projects under Subtitle V (Rail Programs) of Title 49.

  • Truck stop electrification
  • Certain rail capital projects
  • Other applications as determined by state enabling legislation

Any size; depends on state capitalization. Generally small projects are funded.

State DOT (and/or SIB Board established).
http://www.transportation.org/
?siteid=37&pageid=332

Railroad Rehabilitation and Improvement Financing (RRIF)

Loans and credit assistance to both public and private sponsors of rail and intermodal projects.
Private sponsors are eligible.

$35 billion; $7 billion is directed to shortline and regional railroads.

  • Locomotive rehab or purchase to improve fuel economy/productivity and reduce emissions
  • "Green" locomotive purchase

Generally small projects; emissions reductions are usually an ancillary benefit.

U.S. DOT/FRA
http://www.fra.dot.gov

Private Activity Bonds

Title XI Section 1143 of SAFETEA-LU amends Section 142(a) of the IRS code to allow the issuance of tax-exempt private activity bonds for highway and freight transfer facilities.

Private sponsors are eligible.

Up to $15 billion.

  • Rail-truck transfer facilities
  • Port access projects
  • Air quality initiative as part of a larger infrastructure expansion

Any size; potential for large infrastructure projects.

U.S. DOT
https://www.fhwa.dot.gov/
ipd/p3/tools_programs/pabs.htm

GARVEE Bonds

Financing instrument that allows state to issue debt backed by future Federal-aid highway revenues. Eligibility for freight projects is constrained by the underlying Federal-aid programs that will be used for debt service.

N/A

  • Any application that is authorized by the underlying grant programs

Typically large projects or groups of projects ($10 million or larger).

State DOT/Local Government must be willing to dedicate future revenue.
http://www.transportation.org/
?siteid=37&pageid=332

SEP-15

Experimental process for FHWA to evaluate new approaches to project delivery involving public private partnerships. The Secretary of Transportation is authorized to waive certain regulations on a case-by-case basis. PPP arrangements may involve innovative financing.

N/A

  • Air quality benefits likely to be ancillary to a capacity improvement; planners should note additional benefits that would accrue if project were accelerated

Typically large capacity expansions.

https://www.fhwa.dot.gov/
ipd/p3/tools_programs/sep15.htm

Section 129 Loans

Provides Federal funding to public or private project sponsors for tolled or free roads that are not part of the Interstate system. Loans extended by states are treated as eligible Federal-aid project costs; when they are repaid, states can use the funds on other Title 23 eligible projects.

N/A

  • Truck access route to a port or intermodal terminal
  • Only for highways, bridges, and tunnels, but repaid loan amounts may be used for any Title 23 eligible project

No limit, but loans are limited to 80 percent of eligible project costs.

State DOT
https://www.fhwa.dot.gov/
ipd/finance/tools_programs/
federal_credit_assistance/
section_129/index.htm

4.3.1 Railroad Rehabilitation and Improvement Financing (RRIF)

Overview

This program provides loans and loan guarantees to public and private sponsors of rail and intermodal transportation investments. The funds may be used to acquire, improve, or rehabilitate intermodal or rail equipment and facilities, or to refinance debt incurred for these activities. They also can be used to develop new intermodal or railroad facilities. RRIF loans may not be used for operating expenses.

SAFETEA-LU expanded the RRIF program tenfold, from $3.5 billion to $35 billion, with $7 billion reserved for shortline and regional railroads. The legislation also specifically added rail infrastructure and rail bottleneck relief to the list of program priorities.

Loans may be used to fund up to 100 percent of a project; repayment periods are up to 25 years with interest rates equal to the cost of borrowing to the government. The program is managed by the Federal Railroad Administration (FRA).

Criteria and Eligibility

RRIF applications are scored based on the following criteria:

  • Eligibility of the Applicant – Eligible applicants include railroads, state and local governments, government-sponsored authorities and corporations, joint ventures that include at least one railroad, and limited option freight shippers who intend to construct a new rail connection;
  • Eligibility of the Project – Priority is given to projects that enable U.S. companies to be more competitive in international markets, are endorsed by existing state rail plans, or preserve or enhance rail or intermodal service to small communities or rural areas;
  • Creditworthiness of the Applicant – Creditworthiness is measured by financial statements, financial projections, and a credit rating from a nationally recognized rating agency;
  • Extent to which the Project will Enhance Safety – How the project will contribute to safe railroad operations for both rail employees and the public;
  • Significance of the Project – In terms of generating economic benefits and improving the rail transportation system;
  • Improvement to the Environment – Any environmental benefits that are expected to result from the project, including air quality benefits/emissions reductions; and
  • Improvement in Service or Capacity – Any anticipated service improvements in the railroad system, or the reduction of service or capacity problems expected to result from the project.

Key Advantages and Challenges

As noted above, environmental benefits are considered when the FRA evaluates applications for RRIF loans, and the program can be (and has been) used to finance rail equipment purchases that reduce emissions. Furthermore, RRIF loans are not subject to the geographical constraints that can make it difficult to fund similar projects with CMAQ dollars.

As a practical matter, however, the assets purchased must generate a positive financial return that would allow the railroad to pay the loan back. Fuel savings and increased productivity of cleaner, more efficient equipment may well provide such a return, but the rate of return also is affected by the higher initial costs of the equipment purchase. Since railroads are mostly private, for-profit companies, projects also would be subject to the vagaries of the economic cycle. Railroads would be unlikely to take out a RRIF loan to purchase additional rolling stock (green or otherwise) in a slack economic environment, especially if they already have significant idle capacity.

Finally, it is important to remember that emissions reductions achieved with a RRIF loan are likely to be an ancillary benefit of a larger project. As a result, project sponsors need to understand the conditions under which an additional investment in fuel-saving or idle reduction technology would be attractive to the railroad. This would include factors such as interest rate, repayment term, and potential productivity improvements. Officials should work with their railroad partners to identify these conditions and tailor projects so that they conform to the railroads' business interests while achieving a public air quality benefit.

Two recent examples of RRIF loans used to finance locomotive purchases or rehabilitation illustrate some of these points. In 2008, a regional railroad located in the Midwest received a $31 million RRIF loan. The funds were used to purchase 12 new locomotives, which allowed the railroad to increase train lengths, tonnage, and operating speeds while providing enhanced service to recently constructed ethanol plants. The new locomotives also are more fuel efficient with lower emissions. Similarly, in 2007 a railroad service company with shortline operations in the Midwest and Southeast received a RRIF loan for $59 million, part of which was used to rehabilitate 24 locomotives to increase fuel efficiency, reduce diesel emissions, and improve reliability. In both cases, the railroads included the expected fuel savings and emissions reductions that would result from these projects in their application.

4.3.2 Transportation Infrastructure Finance and Innovation Act (TIFIA)

Overview

The TIFIA credit program is designed to leverage limited Federal resources and stimulate private capital investment by providing credit assistance (up to 33 percent of the project cost) for major transportation investments of national or regional significance. Credit assistance is provided through secured loans, loan guarantees, or lines of credit.

SAFETEA-LU authorizes $122 million per year to pay the subsidy costs of supporting Federal credit under TIFIA. There is no limit on the amount of credit assistance that can be provided to borrowers in a given fiscal year. Repayment of TIFIA loans is required to come from dedicated revenue sources, such as tolls or user fees. As of April 2009, TIFIA assistance amounted to $6.6 billion, leveraging $24.4 billion in transportation investments for a total of 18 projects. About $994 million in TIFIA debt has been repaid to date. Additional information on this financing program is available at http://tifia.fhwa.dot.gov/.

Criteria and Eligibility

Project costs must be at least $50 million or one-third of the state's annual apportionment of Federal-aid highway funds, whichever is less (There is an exception for ITS projects, which must be at least $15 million).

Eligibility for freight facilities include:

  • Public or private freight rail facilities providing benefits to highway users;
  • Intermodal freight transfer facilities;
  • Access to freight facilities and service improvements, including capital investments for ITS; and,
  • Port terminals, only when related to surface transportation infrastructure modifications to facilitate intermodal interchange, transfer, and access into and out of the port.

Applications are evaluated based on a set of eight criteria that are specified in statute (23 U.S.C. 602(b)(2)), each with a specific weight assigned by the U.S. DOT:

  • Significance to the regional or national transportation system (20 percent), defined as the national or regional significance of the project in terms of generating economic benefits, supporting international commerce, or otherwise enhancing the national transportation system.
  • Private participation (20 percent), or the extent to which the project fosters innovating public-private financing arrangements that attract private debt or equity investment.
  • Environmental benefits (20 percent), or the extent to which the project helps to maintain or protect the environment. This includes reductions in air, water, or noise pollution that would not otherwise occur if the project were not built, as well as any major mitigation efforts and whether those efforts go above and beyond what is required by law.
  • Project acceleration (12.5 percent), which is the likelihood that TIFIA assistance would allow the project to proceed earlier than it would otherwise be able to.
  • Creditworthiness of the project (12.5 percent), including a determination by the Secretary of Transportation that any financing for the project has appropriate security features, such as a rate covenant, to secure repayment of the loan.
  • Use of technology (five percent), which is the proposed use of new technologies, such as intelligent transportation systems (ITS), that enhance the project's efficiency.
  • Consumption of budget authority (five percent), or the amount of budget authority consumed by the project sponsor in funding the requested credit instrument.
  • Reduced Federal grant assistance (five percent), which is the extent to which credit assistance would reduce the amount of Federal grant assistance required for the project.

Because TIFIA focuses on very large-scale capacity projects, applicants must have circulated a Draft Environmental Impact Statement (DEIS) at the time of application for TIFIA credit assistance, unless the project has received a Finding of No Significant Impact or a Categorical Exclusion (A Finding of No Significant Impact (FONSI) means that a preliminary environmental assessment has found that the proposed project would have no significant environmental impacts. Categorical Exclusions are certain types of projects that are exempt from detailed environmental analysis because they are known to have no significant environmental impacts. Most states have lists of project types that are categorical exclusions). The U.S. DOT will not obligate funds under TIFIA before a Record of Decision has been issued for the project following EPA regulations.

Key Advantages and Challenges

Environmental benefits are specifically considered in TIFIA project evaluation, and they receive more weight than most of the other criteria. However, the program is focused on capacity enhancement, particularly large-scale projects that are difficult to fund through traditional means. Although such improvements may well have air quality benefits, they are unlikely to move forward on those grounds alone. Practitioners should, therefore, look for ways to strengthen a potential TIFIA application through the inclusion of an emissions-reduction strategy with quantifiable results. An example might be a port expansion that includes improvements to highway and/or rail access.

4.3.3 State Infrastructure Banks (SIB)

Overview

The SIB program allows states to establish revolving funds to pay for infrastructure investments. These funds are capitalized with Federal transportation funds authorized through FY 2009. It is possible to create multistate SIBs, which may be used to finance regional freight improvements that cross state boundaries. Through a SIB, states can lend money to public and private sponsors of transportation projects. SIB funds also may be used to provide credit assistance for projects being financed by other means. When loans are repaid, the funds are "recycled" to finance future transportation investments. Some states (such as Florida) have established state-funded SIBs, which can be integrated with the Federal SIB program.

States participating in the SIB program may capitalize the account(s) in their SIBs with Federal surface transportation funds (However, a SIB cannot be capitalized with CMAQ funds, although SIB funds can be used for a CMAQ-eligible project) for each of FY 2005-2009 as follows:

  • Highway Account – Up to 10 percent of the funds apportioned to the state for the NHS, STP, Bridge, and Equity Bonus;
  • Transit Account – Up to 10 percent of funds made available for capital projects under Urbanized Area Formula Grants, Capital Investment Grants, and Formula Grants for Other Than Urbanized Areas;
  • Rail Account – Funds made available for capital projects under Subtitle V (Rail Programs) of 49 USC; and
  • The state must match Federal funds used to capitalize the SIB on an 80-20 Federal/non-Federal basis.

Currently, 31 states and Puerto Rico have SIBs. These states have issued more than $5 billion in loans.

Criteria and Eligibility

Selection criteria vary by state, since it is left up to individual states to develop enabling legislation. All projects must be eligible for Federal-aid under Title 23 or Title 49, United States Code. Projects that are eligible for CMAQ funds also are eligible for SIB funding.

Key Advantages and Challenges

Because they are focused on capacity improvements, SIBs rarely fund projects that are solely focused on freight air quality. However, it is possible to do so. For example, New York State used its SIB to implement two truck stop electrification projects on the New York State Thruway.

A SIB can make loans that many private lenders would consider to be too risky, thus allowing a project sponsor to achieve a public benefit that may otherwise not be realized. A SIB cannot be capitalized with CMAQ funds, but SIB funds can be used to finance CMAQ projects that have a consistent revenue stream which can be used to repay the loan.

SIB structures vary widely by state, so project sponsors should consult their state's enabling legislation to determine which (if any) freight air quality projects can be funded through a SIB. This also would allow practitioners to identify other projects where a SIB application might be strengthened with the addition of an air quality component.

4.3.4 Grant Anticipation Revenue Vehicles(GARVEE Bonds)

Overview

GARVEE bonds are debt instruments issued by a state to finance a transportation investment and backed by the state's anticipated future Federal-aid grant receipts. Under the legislation, a state may be reimbursed for debt service and/or issuance costs with dollars from the state’s future Federal-aid highway apportionments (23 U.S.C. 122, "Reimbursements to States for Bond and Other Debt Instrument Financing Costs"). To comply with Federal requirements for a fiscally constrained planning process, the Federal share of debt-related costs anticipated to be reimbursed over the life of the bonds must be designated as Advance Construction (AC) and included in the State Transportation Improvement Program (STIP). In this way, the state's future revenue from Federal-aid grants is converted to immediate funding for needed transportation improvements. FHWA approves only the project to be financed with a bond issue, not the actual issuance of debt, which is under the authority of the state. A SIB can issue GARVEE bonds on behalf of a project. Since its creation, 22 states plus Puerto Rico and the Virgin Islands have issued more than $9.6 billion in GARVEE bonds.

Criteria and Eligibility

Eligibility for freight air quality projects is constrained by the underlying Federal-aid highway programs that will be used to repay debt service. In other words, the project must meet the eligibility criteria for whatever grant program(s) are being used to back up the bonds. Other characteristics of the underlying grant programs, such as matching requirements, also carry over. The AC amount designated when the project is approved must consist of some combination of eligible funding categories. The state does, however, retain the right to decide each year which funding categories to obligate for AC conversion.

Key Advantages and Challenges

There are few (if any) examples of freight air quality projects funded through GARVEE debt issuance. However, due to the nature of the program, any air quality improvement that is eligible for a given Federal grant apportionment also would be eligible for GARVEE funding. So, for example, a state could leverage future CMAQ dollars to make an eligible freight air quality improvement.

GARVEE bonds are one way to leverage future Federal transportation funding to accelerate a freight air quality improvement. They also offer flexibility of funding sources, since as long as a project conforms to the requirements of the underlying Federal-aid programs, it can be funded with GARVEE bonds. However, in the past some states have been cautious about pledging future Federal transportation dollars to fund current projects because they are fearful that they may over commit themselves. Future Federal-aid revenue streams are not guaranteed, and many states have balanced budget requirements that limit their ability to deal with potential over commitments. Project planners should, therefore, find out their state's policy before attempting to use GARVEE bonds for a freight air quality project.

4.3.5 Private Activity Bonds

Overview

States and local governments are allowed to issue tax-exempt bonds to finance highway and freight transfer facility projects sponsored by the private sector, under an amendment to the IRS Code made in Title XI Section 11143 of SAFETEA-LU. SAFETEA-LU includes a cap of $15 billion on private activity bonds.

Passage of the private activity bond legislation reflects the Federal Government's desire to increase private sector investment in U.S. transportation infrastructure. Providing private developers and operators with access to tax-exempt interest rates lowers the cost of capital significantly, enhancing investment prospects. Increasing the involvement of private investors in highway and freight projects generates new sources of money, ideas, and efficiency. Private activity bonds also may be combined with TIFIA credit assistance.

Criteria and Eligibility

There are no specified criteria or eligibility requirements for this program, except that the bond issuer must be a government agency acting as a conduit for the private entity. Because the intent of the program is to attract private capital to transportation improvements, any project using Private Activity Bonds would need to provide a positive financial return sufficient to repay the bonds.

Proposed application requirements issued by the U.S. DOT encourage applicants to submit applications to the DOT with basic information such as project description, amount of bonding authority requested, borrower information, project schedule, financials, and other key information (http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2006_register&docid=fr05ja06-64).

Key Advantages and Challenges

Current allocations total about $6.3 billion for seven projects, but bonds have been issued for only two, neither of which are specifically geared towards freight. However, there are two freight transfer projects that were approved for PAB issuance: The RidgePort Logistics Center in Will County, Illinois and the CenterPoint Intermodal Center in Joliet, Illinois. Applications also have been received for intermodal facilities in Kansas City and Seneca, Illinois. To the extent that these projects would shift freight from trucks to rail, they do offer a substantial air quality benefit.

A project undertaken with private activity bond funding would have to generate a sufficient return on investment to enable the borrower to repay the bond. This might exclude many air quality projects, unless air quality benefits are definitively linked to fuel savings or other economic benefits that would accrue to private sector partners. As with RRIF loans, the terms would have to be attractive enough to the private sector borrower. In the case of "green" technology, repowering, and the like, this would be affected by any extra up-front costs associated with the cleaner equipment.

Given the typical size of PAB-funded projects (each of the approved projects is worth several hundred million dollars), the best approach for a freight air quality initiative may be to integrate it into a larger capacity enhancement, such as a major port expansion.

4.3.6 Section 129 Loans

Overview

Section 129 loans, which are named after the section of United States Code in which they are described (23 U.S.C. 129(a)), allow Federal participation in loans made by states to toll projects or to non-toll projects that have a dedicated revenue stream. States may extend loans to public or private sponsors of transportation projects; recipients are selected according to each state's specific laws and processes. The loan amount is treated as an eligible Federal-aid project cost, so states can seek reimbursement from the Federal government up to the maximum Federal share (80 percent of eligible project costs). States have broad authority to negotiate loan terms with prospective borrowers.

As with most other loan programs, a dedicated repayment source must be identified and a pledge for repayment secured in advance. States can use repaid loan amounts to fund other Title 23 eligible transportation projects, thus allowing them to "recycle" Federal-aid highway funds. They also can use repayments for additional credit enhancement activities.

Loans can be for any amount up to the maximum Federal share. The loan may be used for any phase of a project, with the stipulation that costs incurred prior to loan authorization may not be paid using loan proceeds. Recipients must begin to pay back the loans 5 years after project completion, and repayment must be completed within 30 years of loan authorization.

Criteria and Eligibility

Section 129 loans can be made to any public or private project sponsor that is building or planning to build a Federal-aid eligible toll project or a non-toll highway project with an identified revenue stream for loan repayment. Eligibility requirements are determined by the pot of money the Federal funding originates in – for instance, a Section 129 loan financed with CMAQ funds must go to a CMAQ eligible project. Other specific selection criteria within these eligibility requirements are determined by individual states.

Key Advantages and Challenges

Section 129 loans are designed to provide easily accessible start-up financing for toll roads or other privately sponsored projects. Since repaid amounts can be used on any Title 23-eligible transportation project, states could conceivably attempt to target these "recycled" funds towards freight air quality projects, including CMAQ projects (such as locomotive rehabilitation or replacement), truck stop electrification, and intermodal access projects.

4.3.7 Special Experimenatl Project 15 (SEP-15)

Overview

SEP-15 is an experimental process for FHWA to identify, for trial evaluation, new public-private partnership approaches to project delivery. The goal is to allow transportation projects to be delivered quickly while simultaneously protecting taxpayer money and the environment.

Criteria and Eligibility

There are no specific SEP-15 eligibility requirements or selection criteria since the program is intended to develop financing approaches outside of the traditional Federal funding universe. Under the legislation enabling SEP-15, the Secretary of Transportation may waive Title 23 requirements and regulations on a case-by-case basis. SEP-15 allows FHWA to experiment within four major components of project delivery:

  • Contracting;
  • Compliance with FHWA's internal NEPA process and other environmental regulations;
  • Right-of-way acquisition; and
  • Project finance (23 U.S.C. 502).

This experimentation may involve other elements of the transportation planning process and/or deviations from current requirements under Title 23 U.S.C. governing transportation projects or applicable FHWA regulations. Project sponsors under SEP-15 may suggest modifications to traditional FHWA project approval processes.

Key Advantages and Challenges

To date, there have been 12 projects located throughout the country that have been approved for various waivers of requirements or experimental delivery approaches through the SEP-15 program. None are specifically targeted towards air quality improvement; rather, most are capacity enhancements. Many seek minor modifications to administrative requirements under various financing programs, especially TIFIA. At least one application (for initial projects under the Oregon Innovative Partnerships Program) acknowledges the importance to freight movements of certain roads proposed for improvement, but it does not mention potential air quality benefits. Like most other Federal financing tools, SEP-15 appears to be focused primarily on large capacity enhancement projects. Since capacity enhancements for freight may have ancillary air quality benefits, planners should stress such benefits in SEP-15 applications and note any extra benefits that would accrue if the project were accelerated.

4.4 EPA National Clean Diesel Campaign

In addition to the traditional (U.S. DOT) funding and financing programs, the U.S. EPA also provides Federal funding for freight air quality as part of its National Clean Diesel Campaign (NCDC). The programs administered by the EPA under the NCDC are described in this section and summarized in Table 4.3. Funding levels are described in terms of the program's normal annual appropriation (in this case, for FY 2009) and in terms of one-time funding from the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA was a $787 billion fiscal stimulus package designed as a response to the economic crisis. Among other things, the bill provided grant funding for programs and projects that have environmental benefits, including those that relate to freight emissions.

Table 4.3 EPA Funding Programs

EPA Funding Programs

Funding Program

Eligibility

Funding Level
(FY 2009)

Freight Air Quality Application

Project Size

National Clean Diesel Funding Assistance Program

Provides grant money to reduce diesel emissions through technology applications, alternative fuels, and equipment replacement. Technologies must be certified by EPA and CARB.

EPA: $32 million
ARRA: $156 million

  • Add-on emissions control devices
  • Idle reduction devices
  • Alternative fuels
  • Shore-power systems
  • Engine repowers/upgrades
  • Equipment replacement

Small. Total FY 2009 funding is $32 million, but American Recovery and Reinvestment Act provided substantial one-time resources.

Clean Diesel Emerging Technologies Program

Provides grant funds for the implementation of emerging technologies (not yet certified by CARB or EPA) to reduce diesel emissions.

EPA: $4 million
ARRA: $20 million

  • Certain emissions upgrades to previously manufactured engines
  • List includes selective catalytic reduction systems, diesel oxidation catalysts, and emissions upgrade kits

Small. Total FY 2009 funding is $4 million, but American Recovery and Reinvestment Act provided substantial one-time resources.

SmartWay Clean Diesel Finance Program

Provides nonprofits with grant money to establish low-cost financing programs for buyers of eligible diesel vehicles, equipment, and emissions control retrofit devices

EPA: $6 million
ARRA: $30 million

  • Exhaust controls
  • Engine upgrades
  • Aerodynamic improvements
  • Low-rolling resistance tires
  • Purchase of new equipment meeting stricter emissions requirements
  • Idle reduction devices

Small. Total FY 2009 funding is $6 million, but American Recovery and Reinvestment Act provided substantial one-time resources.

State Clean Diesel Grant Program

Formula to states for the implementation of clean diesel grant and loan programs.

EPA: $18 million
ARRA: $88 million

  • EPA- or CARB-certified engine retrofits
  • EPA-certified idle reduction technology
  • Technologies from EPA's Emerging Technologies List
  • Incremental costs of early replacement/repower with certified engine configurations

Small. Total FY 2009 funding is $18 million, but American Recovery and Reinvestment Act provided substantial one-time resources.

The NCDC was established to promote diesel emission reduction strategies. There are two main components of the program:

  • A regulatory program that includes new fuel and emissions standards designed to reduce emissions from new (and in some cases remanufactured) diesel engines; and
  • The Diesel Emissions Reduction Act (DERA), which is a set of innovative partnership strategies that seeks to encourage government, nonprofit, and industry stakeholders to adopt policies that reduce their fleet's emissions. In FY 2009, total DERA funding was $60 million. However, the ARRA provided the DERA program with an additional $300 million in one-time funding on top of the existing program's annual appropriations.

There are four distinct programs within the DERA. Each is described below.

  • National Clean Diesel Funding Assistance Program. This program provides grant funding to reduce emissions from existing diesel engines through a variety of strategies, such as: add-on emission control technologies; idle reduction devices; alternative fuels; engine repowers; engine upgrades; and/or vehicle or equipment replacement. Funds also may be used to create innovative finance programs to fund diesel emissions reduction projects. Only technologies that have been verified and certified by the EPA and California Air Resources Board (CARB) may be implemented with these funds.
  • Clean Diesel Emerging Technologies Program. This program is similar to the National Clean Diesel Funding Assistance Program, except that it is limited to the implementation of "emerging technologies," defined as devices or systems that reduce emissions from diesel engine powered vehicles or equipment that has not been certified or verified by EPA or the CARB, but for which an approvable application and test plan have been submitted for verification. A list of such technologies is available at: www.epa.gov/cleandiesel/prgemerglist.htm.
  • SmartWay Clean Diesel Finance Program. SmartWay is a partnership with the freight sector that seeks to encourage private sector adoption of various emissions reduction strategies. The program is predicated on the notion that the improvements will pay for themselves through fuel savings and/or productivity enhancements. Through nonprofit partners, SmartWay offers low-cost financing to truckers and fleet owners interested in installing emission reduction technologies on their trucks. Eligible applications include exhaust controls, engine upgrades, idle reduction devices, aerodynamic improvements, and vehicle or equipment replacement, among other things. Upgrades must be EPA and CARB certified.
  • State Clean Diesel Grant Program. Through this program, EPA allocated formula funding to states to establish grant and loan programs for clean diesel projects. Participating states receive two-thirds of program funds as base funding; those that match the entire base funding amount are awarded extra funds equal to one-half of their base funding. The funds may be used to implement EPA- or CARB-certified engine retrofits, EPA-verified idle reduction technologies, technologies from EPA's Emerging Technologies List, and the incremental costs associated with early engine replacement/repowering with certified engine configurations.

DERA grant and loan funding opportunities are available either at the national level or through a network of regional diesel collaboratives, which partner with the EPA to implement the various emissions reduction strategies in their areas. The regional collaboratives are as follows:

  • Northeast Diesel Collaborative (Maine, Vermont, New Hampshire, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Puerto Rico, Virgin Islands);
  • West Coast Collaborative (Washington, Oregon, Idaho, California, Nevada, Arizona, Hawaii, Alaska);
  • Mid-Atlantic Diesel Collaborative (Pennsylvania, West Virginia, Virginia, District of Columbia);
  • Midwest Clean Diesel Initiative (Minnesota, Michigan, Wisconsin, Illinois, Indiana, Ohio);
  • Southeast Diesel Collaborative (Kentucky, Tennessee, North Carolina, South Carolina, Mississippi, Alabama, Georgia, Florida);
  • Blue Skyways Collaborative (New Mexico, Texas, Louisiana, Arkansas, Oklahoma, Kansas, Nebraska, Iowa, Minnesota); and
  • Rocky Mountain Diesel Collaborative (Colorado, Utah, Wyoming, Montana, South Dakota, North Dakota).

Many regional diesel collaboratives also have established their own funding and financing initiatives. Practitioners should, therefore, check with the regional collaborative for their state to find out about potential funding opportunities. This is especially important when considering projects for Recovery Act funding, as application windows for those funds already may have closed. More information on Clean Diesel Campaign funds can be found on the EPA website, at http://epa.gov/otaq/diesel/grantfund.htm.

4.5 State, Local, and Nonprofit Programs

Some states, localities, and regions have their own diesel emissions reduction programs. Like their national counterparts, these programs employ a variety of strategies to encourage the adoption of clean diesel technologies. There also are some nonprofit organizations and public-private partnerships that work to reduce diesel emissions through advocacy and outreach as well as offering low-cost financing for retrofits. Several of these programs are described in this section. While this does not represent a comprehensive list of all such programs across the country, it can serve as a reference of the types of programs that may be available for state or local project sponsors. Planners should check with their state environmental agencies and advocacy groups to get information on programs for their state.

4.5.1 State Diesel Emission Programs

Examples of state diesel emissions reduction grant programs in California, Oregon, and Texas are described below.

Carl Moyer Program (California). The Carl Moyer Memorial Air Quality Standards Attainment Program is a state and local partnership administered by the California Air Resources Board (CARB), itself a division of the California EPA. The program provides incentive grants to encourage the adoption of cleaner-than-required engines and equipment. The grants can be used for on road, off-road, stationary, marine, and locomotive engines, as well as fleet modernization efforts and idle reduction technologies. Since its inception in 1998, the program has provided over $154 million in grant awards to California-based private companies.

Oregon Clean Diesel Initiative. The Oregon Department of Environmental Quality offers grants and tax credits to qualifying businesses that retrofit their diesel engines with emissions reduction equipment that reduces diesel particulate matter by at least 25 percent. To qualify for incentives, the retrofit technology must be verified by the U.S. EPA and/or the California Air Resources Board (CARB). Alternatively, the Oregon DEQ can determine that the device has been through comparable testing. The device also must be used in Oregon for at least three years following the retrofit, for at least one-half of the total miles driven or hours operated. Grants are awarded to entities based on several preferences, including:

  • Proportion of miles driven or hours operated in Oregon;
  • Benefit to disadvantaged populations or areas that already have high concentrations of particulate matter;
  • High cost-effectiveness;
  • Commit funding, materials, or expertise from third parties;
  • Reduce more emissions in Oregon;
  • Applicants demonstrate a commitment to making additional air quality improvements; and
  • Applicants have the capacity to complete the project.

Any person may apply for a tax credit in Oregon after completing a qualifying diesel retrofit. The credit can reduce the applicant’s Oregon tax liability by up to one-half the cost of retrofitting the diesel engine.

Texas Emissions Reduction Plan (TERP). TERP is a comprehensive set of incentive programs aimed at improving air quality in Texas. Through the Texas Commission on Environmental Quality (TCEQ), TERP provides grant money to eligible projects to reduce diesel emissions (primarily NOx) from high-emitting mobile and stationary sources, including trucks and locomotives. Only projects located in nonattainment areas and the counties adjacent to them are eligible. This includes the Houston-Galveston-Brazoria, Dallas-Fort Worth, Beaumont-Port Arthur, Tyler-Longview, Austin, and San Antonio areas. There are two programs housed within the TERP:

  • Emissions Reduction Incentive Grants help offset the costs of reducing emissions from high-emitting diesel engines. Eligible projects include purchase or lease, repowering, replacement, or retrofits of diesel locomotives, trucks, stationary equipment, and marine vessels. Also eligible are refueling structures (for qualifying fuel), rail relocation and improvement, and electrification/idle reduction efforts (either on-site or on-vehicle).
  • Rebate Grants are only issued for repowering or replacement of certain non-road and on-road vehicles and equipment. The equipment must be operated 75 percent of the time in the eligible counties and must have a service life of five or seven years. The application process is designed to be shorter and less burdensome, which makes it more attractive for smaller businesses that might otherwise be put off by a complicated application process. In fact, part of the program funding is specifically set aside for qualifying small businesses.

4.5.2 LOCAL AND REGIONAL PROGRAMS

There also are a number of local and regional programs around the country. These tend to be located in areas with significant air quality problems. Two examples are described below for the Los Angeles region and the Houston-Galveston area. Both programs include elements that respond specifically to freight-generated emissions.

Gateway Cities Clean Air Program. The Gateway Cities Clean Air Program was created to provide a financial incentive to help reduce air pollution in Southern California. It was a six-year pilot program that began in 2002 and ended in 2008. The program was managed by the Gateway Cities Council of Governments (an intergovernmental organization for 27 cities in the Los Angeles/Long Beach area, with a combined population of two million people) with funding from the Port of Long Beach, Port of Los Angeles, California Air Resources Board, South Coast Air Quality Management District, and United States EPA. Through the Gateway Cities Clean Air Program, participating truck owners received $24.5 million in grants to replace 643 highly polluting older model heavy-duty diesel trucks with newer and cleaner, lower-emitting trucks.

Houston-Galveston Clean Vehicles Program. The Houston-Galveston Area Council (H-GAC) is the designated MPO for the Houston-Galveston region. Like Southern California, the Houston area faces significant air quality problems, stemming in part from growing freight activity at the Port of Houston and around the region. To help combat the problem, H-GAC has implemented a Clean Vehicles Program, which provides grants to fund projects that improve air quality. Engine retrofits, repowering/replacement, alternative fuels conversion, and the establishment of publicly accessible alternative fuels infrastructure are all eligible. Public or private fleets operating primarily within the eight-county ozone nonattainment area can apply for funding. The vehicles must spend at least 75 percent of their operating hours in the eight-county region and must travel more than 12,000 miles per year.

For private fleets, H-GAC will reimburse project sponsors at a rate of $70,000 per ton of NOx reduced per year, up to 75 percent of total costs; for public fleets, the rate is $150,000 per ton of NOx reduced per year, also up to 75 percent of project costs. H-GAC staff evaluate applications based on the expected annual emissions reduction and tons per year reduced; and capital cost-effectiveness, which is the cost per ton of the emissions reduction.

Once a project is awarded grant funding, the sponsor implements it and invoices H-GAC for reimbursement of project costs. Participants are required to submit quarterly monitoring reports for a period of five years, and H-GAC staff are authorized to audit and/or visit the project to ensure compliance.

4.5.3 Cascade Sierra Solutions

Cascade Sierra Solutions (CSS) is a multistate, corridor-level nonprofit initiative that seeks to reduce freight emissions by helping truck owner-operators and fleets make technological improvements that will save fuel and reduce diesel emissions. The program covers Washington, Oregon, and California. It provides a variety of services, including:

  • Regulatory advice, such as information about idling/emission rules and air quality goals for states and local governments;
  • Equipment selection, providing information about different brands and models of emission reduction equipment;
  • Financing, or matching customers with financing options allowing them to purchase and install the devices;
  • Installation contracting, which involves coordinating the installation of fuel-saving technology by qualified contractors; and
  • Monitoring, testing, certification, and reporting, whereby CSS monitors the use and operation of the devices to ensure that program objectives are being met.

In 2008, CSS received a $1.13 million grant through the EPA SmartWay partnership to implement a lease program with the goal of installing emission and idle reduction technology on 1,700 trucks nationwide. The CSS program (called Everybody Wins USA) offers truck owners interest rates of eight to 11 percent, a three-year repayment period, and the ability to purchase the equipment for $10 at the end of the term.

Previous Section | Next Section | Top
Office of Operations