SB 727

relating to the creation of a small non-road engine purchase
incentive program under the Texas emissions reduction plan.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1.  Section 386.051(b), Health and Safety Code, is
(b)  Under the plan, the commission and the comptroller shall
provide grants or other funding for:
(1)  the diesel emissions reduction incentive program
established under Subchapter C, including for infrastructure
projects established under that subchapter;
(2)  the motor vehicle purchase or lease incentive
program established under Subchapter D;
(3)  the air quality research support program
(4)  the clean school bus program established under
(5)  the new technology implementation grant program
(6)  the regional air monitoring program established
(7)  a health effects study as provided by Section
(8)  air quality planning activities as provided by
(9)  a contract with the Energy Systems Laboratory at
the Texas A&M Engineering Experiment Station for computation of
creditable statewide emissions reductions as provided by Section
(10)  the Texas clean fleet program established under
(11)  the Texas alternative fueling facilities program
(12)  the Texas natural gas vehicle grant program
(13)  other programs the commission may develop that
lead to reduced emissions of nitrogen oxides, particulate matter,
or volatile organic compounds in a nonattainment area or affected
(14)  other programs the commission may develop that
support congestion mitigation to reduce mobile source ozone
(15)  the seaport and rail yard areas emissions
reduction program established under Subchapter D-1;
(16)  conducting research and other activities
associated with making any necessary demonstrations to the United
States Environmental Protection Agency to account for the impact of
foreign emissions or an exceptional event;
(17)  studies of or pilot programs for incentives for
port authorities located in nonattainment areas or affected
counties as provided by Section 386.252(a);
(18)  the governmental alternative fuel fleet grant
program established under Chapter 395;
(19)  remittance of funds to the state highway fund for
use by the Texas Department of Transportation for congestion
mitigation and air quality improvement projects in nonattainment
areas and affected counties; [and]
(20)  the Texas hydrogen infrastructure, vehicle, and
equipment grant program established under Subchapter G; and
(21)  the small non-road engine purchase incentive
program established under Subchapter H.
SECTION 2.  Section 386.252(a), Health and Safety Code, is
(a)  Money in the fund and account may be used only to
implement and administer programs established under the plan.
Subject to the reallocation of funds by the commission under
Subsection (h) and after remittance to the state highway fund under
Subsection (a-1), money from the fund and account to be used for the
programs under Section 386.051(b) shall initially be allocated as
(1)  four percent may be used for the clean school bus
(2)  eight percent total may be used between the Texas
hydrogen infrastructure, vehicle, and equipment grant program
established under Subchapter G and the new technology
implementation grant program under Chapter 391, from which at least
$1 million will be set aside for electricity storage projects
related to renewable energy and not more than $8 million may be used
for the Texas hydrogen infrastructure, vehicle, and equipment grant
(3)  five percent may be used for the Texas clean fleet
(4)  not more than $3 million may be used by the
commission to fund a regional air monitoring program in commission
Regions 3 and 4 to be implemented under the commission's oversight,
including direction regarding the type, number, location, and
operation of, and data validation practices for, monitors funded by
the program through a regional nonprofit entity located in North
Texas having representation from counties, municipalities, higher
education institutions, and private sector interests across the
(5)  7.5 percent may be used for the Texas natural gas
vehicle grant program under Chapter 394;
(6)  not more than $6 million may be used for the Texas
alternative fueling facilities program under Chapter 393, of which
a specified amount may be used for fueling stations to provide
natural gas fuel, except that money may not be allocated for the
Texas alternative fueling facilities program for the state fiscal
(7)  not more than $750,000 may be used each year to
support research related to air quality as provided by Chapter 387;
(8)  not more than $200,000 may be used for a health
(9)  at least $6 million but not more than 15 percent
may be used by the commission for administrative costs, including
all direct and indirect costs for administering the plan, costs for
conducting outreach and education activities, and costs
attributable to the review or approval of applications for
marketable emissions reduction credits;
(10)  six percent may be used by the commission for the
seaport and rail yard areas emissions reduction program established
(11)  2.5 percent may be used for the light-duty motor
vehicle purchase or lease incentive program established under
(12)  not more than $500,000 may be used by the
commission to contract with the Energy Systems Laboratory at the
Texas A&M Engineering Experiment Station annually for the
development and annual computation of creditable statewide
emissions reductions for the state implementation plan that are
(A)  wind and other renewable energy resources;
(B)  energy efficiency programs administered by
the Public Utility Commission of Texas or the State Energy
(C)  the implementation of advanced building
(13)  not more than $500,000 may be used for studies of
or pilot programs for incentives for port authorities located in
nonattainment areas or affected counties to encourage cargo
movement that reduces emissions of nitrogen oxides and particulate
(14)  two percent may be used for the small non-road
engine purchase incentive program established under Subchapter H;
(15)  the balance is to be used by the commission for
the diesel emissions reduction incentive program under Subchapter C
as determined by the commission.
SECTION 3.  Chapter 386, Health and Safety Code, is amended
by adding Subchapter H to read as follows:
SUBCHAPTER H.  SMALL NON-ROAD ENGINE PURCHASE INCENTIVE PROGRAM
Sec. 386.351.  DEFINITIONS.  In this subchapter:
(1)  "Four-stroke engine" means an engine that goes
through the steps of compression, power, exhaust, and intake in
(2)  "Non-road engine" means an engine powering
equipment that has less than 25 horsepower.
(3)  "Ozone precursors" means pollutants, including
nitrogen oxides and volatile organic compounds, that create ground
level ozone through chemical reactions.
(4)  "Program" means the small non-road engine purchase
incentive program established under this subchapter.
(5)  "Two-stroke engine" means an engine that goes
through the steps of compression, power, exhaust, and intake in two
piston strokes and mixes fuel with oil in the process.
Sec. 386.352.  PROGRAM.  (a)  The commission shall develop a
small non-road engine purchase incentive program designed to reduce
emissions, including the emissions of ozone precursors,
particulate matter, and carbon monoxide, produced by two-stroke and
(b)  The program shall authorize statewide financial
incentives for the purchase by persons in this state of:
(1)  new non-road engines that are electrically powered
or powered by another alternative technology designated by the
(2)  batteries designated by the commission.
(c)  The commission shall adopt rules necessary to implement
the program, including designating alternative technologies and
products eligible for incentives.
Sec. 386.353.  ELIGIBILITY.  (a)  The purchase by a person in
this state of non-road engines  or batteries is eligible for an
incentive under the program if:
(A)  the non-road engine purchased is
electrically powered or powered by another alternative technology
designated by the commission; or
(B)  the battery purchased is necessary to improve
the efficiency of an electrically powered non-road engine owned or
operated by the person, as established by commission rule;
(2)  the purchase meaningfully reduces emissions in
this state, as determined by the criteria established under
(3)  the purchase satisfies any minimum purchase
quantity requirements established by the commission to ensure
efficient administration of the program.
(b)  The commission shall establish criteria for determining
whether a purchase of non-road engines or batteries meaningfully
reduces emissions in this state. The commission shall review and
revise the criteria as appropriate. The criteria must include:
(1)  the proposed frequency of use of the newly
(2)  the degree to which the purchase reduces the use of
existing two-stroke and four-stroke non-road engines; and
(3)  the cost-effectiveness of the purchase as it
relates to advancing the purpose of the program under Section
(c)  When establishing criteria under this section, the
commission may allow for greater incentives for purchases that
(1)  health risks to equipment operators when using
(2)  emissions of ozone precursors from non-road
engines that operate primarily within a nonattainment area or an
(d)  The commission may require the disposal of a two-stroke
engine or four-stroke engines replaced by a non-road engine that is
the subject of an incentive under this subchapter.
Sec. 386.354.  APPLICATION FOR INCENTIVE.  (a)  A person who
makes a purchase that meets the eligibility requirements under
Section 386.353 may apply for an incentive under the program.
(b)  An application for an incentive under this chapter must
be made on a form provided by the commission and must contain any
(1)  determine whether the project meets eligibility
(2)  ensure the efficient administration of the
(c)  To reduce the administrative burden for the commission
and applicants, the commission may streamline the application
(1)  reducing data entry and the copying of
(2)  implementing a system to accept applications
electronically through the commission's Internet website.
Sec. 386.355.  AMOUNT OF INCENTIVE; ADMINISTRATION.  (a)  An
incentive provided under this subchapter may not exceed 80 percent
of the cost of eligible purchases of non-road engines and
(b)  The commission shall set standards for determining
incentive amounts, and may revise these standards as needed to:
(1)  reflect changes to federal emission standards and
developments in technological capabilities and scientific
(2)  maximize the cost-effectiveness of the program in
(c)  The commission shall publicize and promote the
availability of incentives under this subchapter to encourage
eligible purchases of non-road engines and batteries.
(d)  The commission shall include in the biennial plan report
required by Section 386.057(b) a report of commission actions and
SECTION 4.  The Texas Commission on Environmental Quality
shall adopt rules and establish procedures under Subchapter H,
Chapter 386, Health and Safety Code, as added by this Act, as soon
as practicable after the effective date of this Act.
SECTION 5.  This Act takes effect September 1, 2025.