Comments and Testimonies

BEFORE THE PENNSYLVANIA HOUSE OF REPRESENTATIVES
ENERGY AND NATURAL RESOURCES COMMITTEE
Comments of Clean Air Council on H.B. 120

April 11, 2003

Members of the Committee, good afternoon, my name is Michael Fiorentino, and I am the Air Program Manager for Clean Air Council. The Council is a non-profit environmental organization dedicated to everyone's right to breathe clean air. Founded in 1967, Clean Air Council's work also includes sustainable transportation and clean energy programs.

I appreciate the opportunity to testify before the Committee today. Specifically, Clean Air Council would very much like to thank Representative Ellen Bard for her unflagging leadership and coalition-building efforts in bringing important, smart energy legislation to the Assembly.

The focus of the Council's testimony today is H.B. 120, concerning the Alternative Fuels Incentive Grant program (AFIG). Clean Air Council has long supported the AFIG program and have been active in defending AFIG from efforts to use its funding for non-related purposes.

AFIG is a significant program because we live in a state that is plagued by persistent air quality problems. As much as 80% of the population of the Commonwealth live in areas that do not meet the 1997 federal health standards for ozone. Motor vehicles are responsible for a large portion of the pollutants that form ozone. AFIG was developed primarily as a tool to foster a transition to cleaner technologies for our transportation needs so that people would enjoy the health benefits of improved air quality.

Clean Air Council supports efforts to restore viability to the AFIG program, and believes H.B. 120 has good potential to achieve that. However, the Council strongly recommends the bill be changed to address the concerns reflected in these comments.

• References in §7202(b)(1) to two year draw-downs on the incremental cost percentage should be removed. One of the flaws of the existing AFIG law is this percentage draw-down which has resulted in an under-utilization of the Fund by its anticipated beneficiaries. It is this circumstance which calls the legislature to act today in order to rectify the dearth of applications for grants. We must not make the same mistake in the new legislation. There are too many factors at work to make a reliable estimate as to how soon incremental costs for these alternative vehicle and fuel technologies will become inconsequential to the consumer. As long as there remains an ultimate cap in funding available in any given year (§7202(b)(4)), maintaining a higher percentage of incremental cost grant eligibility will continue to accomplish the purposes of the AFIG program without need for budgetary concern.
  
  Section 7202(b)(1) and (1.1) are duplicative and conflict in some ways. For example, (b)(1) addresses retrofitting of vehicles of several types and purchase of new dedicated vehicles, both at 60%, while (b)(1.1) (i)-(iv) addresses those types as well as hybrid vehicles and at rates of 70% to 90%. Furthermore, (b)(1) addresses the types of entities eligible to receive grants while (b)(1.1) does not. In light of the need for clarity, it will be useful to harmonize the two sub-sections, while maintaining the higher variable percentages of (b)(1.1) and deleting the percentage draw-down of (b)(1).

• It is also recommended that the bill be stripped of reference to a Pennsylvania Energy Office (PEO) if it has been determined that the Department of Environmental Protection is going to manage and distribute the Fund.

• As currently drafted, the new AFIG legislation appears to not include annual reporting duties to the General Assembly. Section 7203 had called for the Department to report on grant activities with the Fund, but because the text is bracketed it appears slated for removal.

• Completely new to the AFIG program under this legislation is revenue generation for the AFIG Fund from royalties accruing to the Oil and Gas Lease Fund, and an Alternative Fuels Production Grant Program. (§7204.1 and §7206 respectively) Although encouraging such development in Pennsylvania has some positive features, it is not necessarily aligned with the grant criteria of §7202(c) for improvement of air quality, attainment of air quality standards, and protection of the natural environment. Clean Air Council contends, therefore, that such fuel production grants must not be allowed to supplant the existing goals of AFIG--the providing of grants for alternative-fueled vehicles and fueling stations.
  
  On its own, §7206 would allow single grantees for single fuel production facilities to obtain up to approximately $3 million a year for five years from the AFIG fund. Although the Council does not possess exact figures at this time, it is believed that annual revenue from the utility gross receipts tax is not significantly more than that amount. The Council acknowledges the 10% annual limitation in §7202(3) and submits that this limitation is critical. Still, it is possible that this traditional sole source of revenue for the Fund could be completely depleted through a handful of production grants made by the Department, leaving individual residents, school districts, small businesses and other entities out of luck on their grant applications for traditional AFIG purposes. Although the Oil and Gas Lease Fund royalties are a new source of revenue, that is only the case if §7204.1 makes it through the legislative process and is not removed before final passage. Even if it does become law, this stream of revenue may fluctuate substantially from year to year, providing little assurance of adequate funding for AFIG's primary mission.
  
  Although it may be legitimate for Pennsylvania to subsidize the production of fuels, and the Council does not take a position at this time on particular fuels, such subsidies should not come from AFIG funding streams. If the political reality is that a production grant is critical to the success of this legislation then there must be a limitation developed in the law itself.
  
  In light of the distinct possibility of overwhelming draw on the Fund for production grants, Clean Air Council believes it is highly necessary to set forth a limit on the percentage of the Fund that may be used for this type of grant not to exceed 30%.

• Lastly, the focus of the AFIG legislation must remain the advancement of alternative fueled vehicles and the necessary infrastructure. The Committee is urged to resist and reject any efforts to apply AFIG funds to stationary source energy systems.