[Federal Register Volume 73, Number 203 (Monday, October 20, 2008)]
[Notices]
[Pages 62362-62379]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-24704]


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DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. FHWA-2006-26383]


Publication of Final Guidance on the Congestion Mitigation and 
Air Quality Improvement (CMAQ) Program

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Notice of publication of final guidance.

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SUMMARY: The purpose of this notice is to announce the publication of 
CMAQ final guidance. Sections 1101, 1103 and 1808 of the Safe, 
Accountable, Flexible, Efficient Transportation Equity Act: A Legacy 
for Users (SAFETEA-LU) (Pub. L. 109-59, Aug. 10, 2005) \1\ amend the 
Congestion Mitigation and Air Quality Improvement (CMAQ) Program, and 
authorize $8.6 billion to support the CMAQ program in 2005-2009. The 
interim guidance went into effect October 31, 2006; however, we 
solicited comments on the interim guidance on December 19, 2006, at 71 
FR 76038. This notice describes and discusses comments we received and 
announces the publication of the final CMAQ guidance. The notice also 
describes the effect of a provision of the Energy Independence and 
Security Act of 2007, Pub. L. 110-140 that affects CMAQ funding. This 
provision became effective on December 20, 2007, beyond the time for 
submitting comments on the interim guidance.
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    \1\ 23 U.S.C. 149 (2005).

FOR FURTHER INFORMATION CONTACT: Mike Koontz, Office of Natural and 
Human Environment, (202) 366-2076, michael.koontz@dot.gov; or Diane 
Liff (202) 366-6203, diane.liff@dot.gov, or Harold Aikens (202) 366-
1373, harold.aikens@dot.gov, Office of the Chief Counsel, Federal 
Highway Administration, 1200 New Jersey Avenue, SE., Washington, DC 
20590. Office hours are from 7:45 a.m. to 4:15 p.m., e.t., Monday 
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through Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Electronic Access

    Internet users may access this document, the notice of interim 
guidance and request for comment, and all comments received by the U.S. 
Department of Transportation (DOT) by using the Federal eRulemaking 
portal at http://www.regulations.gov. It is available 24 hours each 
day, 365 days each year. Electronic submission and retrieval help and 
guidelines are available under the help section of the Web site.
    An electronic copy of this document may also be downloaded by 
accessing the Office of the Federal Register's home page at: http://
www.archives.gov or the Government Printing Office's Web page at http:/
/www.gpoaccess.gov/nara.
    An electronic version of the final CMAQ guidance may be downloaded 
from the FHWA Web page at: http://www.fhwa.dot.gov/environment/
cmaq06gm.htm. It is also attached for reference below.

Background

    The CMAQ program was created by the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA) (Pub. L. 102-240, Dec. 
18, 1991) and continued under the Transportation Equity Act for the 
21st Century (TEA-21) (Pub. L. 105-178; Oct. 1998). Through 2005, the 
program supported nearly 16,000 transportation projects across the 
country. In SAFETEA-LU, the most recent authorization of the Federal-
aid highway program, Congress amended the CMAQ program and authorized 
funding to support the CMAQ program in 2005-2009 (see sections 1101, 
1103 and 1808 of SAFETEA-LU). More than $8.6 billion are authorized 
over the 5-year program (2005-2009), with annual authorization amounts 
increasing each year during this period.
    This final guidance updates and replaces previous program guidance 
issued in 1999. It focuses primarily on project eligibility provisions 
and identifies the types of projects that are eligible for CMAQ 
support. It also provides information on how CMAQ apportionments are 
calculated and the geographic areas where CMAQ funds can be used; 
discusses the project selection process and requirements for analyzing 
emissions benefits from potential projects as part of the selection 
process; and examines Federal, State and Metropolitan Planning 
Organization (MPO) program administration responsibilities.
    This final guidance includes discussions and directions on new or 
highlighted CMAQ topics under SAFETEA-LU and, in particular, emphasizes 
diesel engine retrofits and cost-effective congestion mitigation 
activities as priorities for CMAQ expenditures. It also provides 
relative cost-effectiveness data on various eligible project types to 
help inform the CMAQ project selection process.

Discussion of Comments Received to the Notice of Interim Guidance

    The FHWA published its Notice of Interim Guidance and Request for 
Comment on December 19, 2006 (71 FR 76038). In response to the notice, 
the FHWA received 42 comments. Of the 42 comments, 11 were submitted by 
or on behalf of transportation advocacy organizations, 9 were submitted 
by metropolitan planning organizations (MPO) or other similar regional 
governmental entities, 5 were received from State departments of 
transportation or other State government agencies, 3 were received from 
county governments, 2 from counsel representing transportation 
organizations, 2 from environmental advocacy organizations, and 1 
comment was submitted by a private citizen. It should be noted that the 
total does not sum to the 42 docket entries due to duplication 
associated with edited and resent documents and separate submittals for 
attachments. The FHWA considered each of these comments in adopting 
this final guidance. Following is a section-by-section analysis of the 
docketed comments and the FHWA's conclusions regarding issues raised:

Section-by-Section Discussion of Comments

Section IV. Priority for Use of CMAQ Funds

    A total of 14 comments were received about the guidance's treatment 
of project prioritization and selection for cost-effective CMAQ funded 
programs and activities, specifically diesel retrofits. The only 
comment received

[[Page 62363]]

regarding the priority of congestion relief projects (see comment below 
regarding the eligibility of single-occupant vehicle (SOV) capacity 
increases) pertained to items that are beyond the scope of this 
guidance.
    Respondents suggested a spectrum of possibilities. Some, noting the 
flexibility of CMAQ as its biggest asset, recommended leaving the 
priority and selection to the local decision makers. In particular, 
many State and local agencies, and organizations representing State and 
local governments, pointed to the SAFETEA-LU savings language, which 
states that the CMAQ program is not intended to disturb the existing 
authorities and roles of governmental agencies in making final project 
selections.
    Others suggested making cost effectiveness the sole reason to 
support project or program selection and sought mandatory set-asides 
for diesel retrofit projects. Some diesel retrofit manufacturers and 
related trade and air quality associations proposed new language for 
the guidance that would more strongly emphasize the priority of diesel 
retrofits. One group favoring priority of diesel retrofits proposed a 
number of ways that this could be done including: (1) Developing a 
point system for the award of CMAQ dollars to give (a higher) weight to 
retrofit projects; (2) utilizing an overmatch where the State share of 
funding would be greater for diesel retrofit projects, thereby 
necessitating less than a 20 percent match by project sponsors; (3) 
dedicating a specific percentage of total CMAQ funds to diesel 
retrofits; and (4) requiring States and MPOs, in situations where 
projects other than diesel retrofits are selected, to justify their 
rationale for choosing other less cost effective projects.
    There were other comments proposing variations on the theme of 
putting more emphasis on the benefits of diesel retrofit projects 
through a ratio or weighting formula, such as those used in 
California's Carl Moyer grant program. Some commenters also suggested 
that since some diesel retrofit projects reduced both particulate 
matter (PM) and ozone precursors, the final guidance should make these 
projects eligible for CMAQ funding in ozone nonattainment and 
maintenance areas as well.
    In general, the comments received supported a balanced approach by 
maintaining the guidance language that promotes the idea that cost 
effectiveness evaluations should guide the program prioritization and 
project selection, with a special focus on diesel retrofit and 
congestion reduction, while also continuing to recognize that 
successfully improving air quality and reducing congestion depends on a 
diverse mixture of activities and efforts.
    We believe that the existing language in the interim guidance 
provides adequate emphasis related to project priority and selection 
for use of CMAQ funds. Therefore, no changes were made to this section. 
Our decision not to change this section was based on our understanding 
of Congress' intent in this matter. Section 1808 of SAFETEA-LU includes 
a ``savings clause'' that states, ``[t]his paragraph is not intended to 
disturb the existing authorities and roles of governmental agencies in 
making final project selections.'' \2\ The savings clause demonstrates, 
in our view, Congress' understanding that many factors go into program 
funding decisions, and Congress' intention that the statutory diesel 
retrofit priority not disturb existing authorities and roles in project 
selection. Thus, under the final guidance, State and local authorities 
remain responsible for the selection and prioritization of projects 
under the CMAQ program that will best reduce air pollution and 
congestion, while, at the same time, fit the local fiscal, 
transportation, environment, and political landscape.
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    \2\ 23 U.S.C. 149(f)(3)(B) (2005).
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    Our conclusion regarding this legislative intent is further 
supported by the relevant legislative history. In addressing funding 
priority, the Conference Report on H.R. 3 (SAFETEA-LU) states: ``The 
priority is further clarified to ensure that governmental agencies 
retain existing authorities and roles in making final project 
selections. These clarifications to the original Senate priority 
language are intended to retain needed flexibility in utilizing CMAQ 
funds while providing States with direction to focus on cost-
effectiveness as an important consideration in distributing program 
funds.'' H.R. Rep. No. 109-203, at H7462 (July 28, 2005)(Conf. Rep.). 
In addition, a subsequent section of the Conference Report, Priorities 
Provision in Diesel Retrofit, further expands on this point: 
``Conferees expect that other priorities can still be pursued with 
applicable funds. Priority is not absolute and exclusive. That is one 
reason why the paragraph also includes language establishing that this 
paragraph is not intended to disturb existing authorities and roles in 
project selections.'' H.R. Rep. No. 109-203, at H7467 (July 28, 2005) 
(Conf. Rep.).
    The statutory language and legislative history also support the 
FHWA's decision declining to make changes proposed in a September 19, 
2007, letter to the Office of Management and Budget (OMB) by Senators 
Carper, Clinton, Isakson, and Voinovich, which we have placed in the 
docket. The letter requests that additional language be inserted in the 
final guidance to create a presumption requiring diesel retrofit 
projects to be funded first, and, further, requiring States and MPOs 
funding other than diesel retrofit projects to publish written 
justification for their selections. In addition, the letter requests 
revision of the definition of ``cost effective'' in the final guidance, 
by limiting that term to the cost per ton of emission reductions by 
pollutant.
    In our view, the requested changes would remove or greatly diminish 
the authority of States and MPOs to make final project selections. The 
plain language of the ``savings clause,'' as well as that provision's 
legislative history, discussed above, do not support additional limits 
on project selection or the imposition of a publication burden on 
States or MPOs. Adoption of the requested presumption would also limit 
the variety of eligible CMAQ projects and programs permitted under the 
statute (see 23 U.S.C. 149(c)). In addition, the requested revision of 
the definition of ``cost-effective'' would diminish the authority of 
States and MPOs to select a mix of project and program activities that 
best reflect the air quality and congestion challenges in their local 
areas.
    The final guidance does, however, encourage States and local 
agencies to take the priority language into account when selecting and 
funding their CMAQ projects. One good example of how this might be 
undertaken is an outreach effort initiated by Oregon's Rogue Valley 
Metropolitan Planning Organization (RVMPO), which sent a letter to 10 
private companies within the Rogue Valley community to initiate a 
conversation about using Federal funding for diesel retrofits by 
inviting them to a diesel retrofit workshop to discuss how retrofits 
could benefit the various companies and improve air quality in the 
area.

Section V. Annual Apportionments of CMAQ Funds to States

    Two comments called for a set-aside of CMAQ funds for diesel 
retrofit projects. Citing the importance of diesel retrofit projects, 
the respondents contended that a predetermined amount or percentage 
share of CMAQ apportionments should be reserved solely for diesel 
retrofits.
    The FHWA has neither the statutory authority nor the administrative 
discretion to establish or enforce such a

[[Page 62364]]

set-aside. Funding under the CMAQ program is apportioned to the States 
after a limited number of takedowns (e.g., 2 percent for State Planning 
and Research (SP&R)). Other than this very limited amount of CMAQ set-
aside, the vast majority of remaining apportioned funds is available to 
the States at their discretion, provided general project eligibility 
requirements are met.
    Two comments were received supporting a change in the final 
guidance that would allow a 100 percent Federal share for diesel 
projects. Respondents asserted that the additional Federal-aid funding 
would serve as a financial incentive to generate greater interest in 
diesel retrofit projects. As with the creation of new set-asides, the 
FHWA lacked statutory authority to increase the Federal match on CMAQ 
projects when these comments were received. However, subsequent 
enactment of the Energy Independence and Security Act of 2007, Public 
Law 110-140 (December 20, 2007) authorizes an increase in the Federal 
share of CMAQ funding up to 100 percent, at the discretion of the State 
for CMAQ projects obligated in FY 2008 and FY 2009.\3\
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    \3\ ``CMAQ PROJECTS--The Federal share payable on account of a 
project or program carried out under section 149 with funds 
obligated in fiscal year 2008 or 2009, or both, shall be not less 
than 80 percent and, at the discretion of the State, may be up to 
100 percent of the cost thereof.'' Sec. 1131(2).
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Section VI. Geographic Areas That Are Eligible To Use CMAQ Funds

    Several respondents requested clarification of the definition of 
ozone nonattainment areas, largely preferring removal of the qualifiers 
``one-hour'' and ``eight-hour'' ozone. These comments were submitted in 
apparent anticipation of possible changes arising from recent court 
decisions that may or may not reinstate some of the requirements 
attributed to former one-hour ozone areas. In view of the uncertainties 
surrounding this matter, we have decided not to revise the definitions 
at this time.
    In addition, similar comments were submitted in favor of 
consolidating the references to the two particulate matter terms. We 
have consolidated the terms in a few sections of the final guidance to 
avoid confusion between the two qualifiers for designated ozone 
nonattainment areas. However, we have done so only where the qualifier 
was not necessary, i.e., where the plain term ``ozone nonattainment 
area'' was sufficient. References to both one-hour and eight-hour ozone 
in other sections were included by necessity. For example, in outlining 
our treatment of CMAQ eligibility for the former one-hour areas where 
eight-hour ozone designations were not forthcoming, we discussed the 
areas separately and, in turn, used the two distinct terms. We have 
retained this discussion in the final guidance. As for the treatment of 
the two terms for particulate matter--PM-2.5 and PM-10--the interim 
guidance did not make a distinction between the two levels of the 
pollutant, and we will retain use of the singular term ``particulate 
matter'' or ``PM'' in the final guidance.
    One respondent made a case for modifying CMAQ geographic 
eligibility to include attainment areas, based on the need to provide 
resources to areas so they might avoid slipping into nonattainment 
status (i.e., use of the program as a preventive measure). While the 
commenter provides a compelling argument for application of CMAQ 
funding in attainment areas, and while there may be merit to such an 
extension of the program, the statute is clear that CMAQ funding is 
restricted to areas that are or were designated as nonattainment for 
ozone, carbon monoxide, or particulate matter (23 U.S.C. 149(a)). FHWA 
does not have the authority to make such a discretionary modification 
to fundamental, statutory eligibility requirements. Only those areas 
attaining the National Ambient Air Quality Standards (NAAQS) that are 
identified by Environmental Protection Agency (EPA) as maintenance 
areas or required to file maintenance plan documentation are eligible 
for CMAQ investments.

Section VII. Project Eligibility Provisions

    A number of respondents commented on the continuation of the 3-year 
limit on using CMAQ funds for operating costs, with responses both 
favoring the limit and calling for an end to this aspect of program 
eligibility.
    The 3-year limit on operating costs has been retained in the final 
guidance. The FHWA discussed our preference for a limitation on using 
CMAQ funds for operational support in the interim guidance. We continue 
to look upon long-term, limitless, operational support as a practice 
contrary to 23 U.S.C. 116, which places the responsibility for 
maintenance of transportation resources on States. Ending the 3-year 
limit for operational support would be akin to shifting this 
maintenance role to the Federal level. The focus of the CMAQ program is 
to provide new or expanded transportation resources that provide an air 
quality benefit, not the long-term continuation and support of existing 
services.
    One respondent called for the establishment of CMAQ eligibility for 
transit station rehabilitations. The commenter discussed the benefits 
of projects that seek to renovate or restore transit stations and 
terminals in need of repair, citing the corresponding increase in 
ridership that may ensue.
    The FHWA and Federal Transit Administration (FTA) have a 
longstanding policy on transit station projects. Those endeavors that 
involve existing facilities must expand the carrying capacity of the 
station or terminal. This policy--written into the interim guidance--
has been retained in the final guidance. The agencies are aware of the 
capital-intensive nature of these projects. No project that attempts to 
rebuild, renovate, or restore a major transit hub will be completed 
inexpensively. However, given the air quality goals of the CMAQ 
program, it is unlikely that restoration projects that leave system 
capacity at status quo levels will have any impact on network ridership 
and, hence, on clean air efforts. Both FHWA and FTA addressed this 
question in a January 2003 memorandum that elaborated on this 
policy.\4\
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    \4\ This memorandum is available at: http://www.fhwa.dot.gov/
environment/cmaqpgs/stationm.htm.
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    There were a few comments calling for the clarification of 
eligibility for projects that targeted reductions in pollutant 
precursors. We have reviewed the interim guidance with such 
clarification in mind and have retained the language as written in the 
final guidance. The eligibility of ozone and particulate matter 
precursors is discussed in a number of areas of the guidance document, 
most notably in part A.3., entitled ``Emission Reduction,'' in Section 
VII. ``Project Eligibility.''
    One respondent called for the further extension of eligibility 
guidelines to include capacity expansions for SOV highways. The 
commenter asserted that the congestion mitigation aspects of the CMAQ 
program provide a rationale for such an expansion of eligibility. Use 
of CMAQ funding for the provision of additional capacity available to 
SOVs is prohibited by 23 U.S.C. 149(b). This prohibition was part of 
the Intermodal Surface Transportation Efficiency Act of 1991, which 
created the CMAQ program and has been carried forward with each 
reauthorization of transportation legislation, including SAFETEA-LU. 
The sole exception allowed is for construction of high-occupancy 
vehicle (HOV) facilities available to SOVs only at off-peak times of 
the day. The

[[Page 62365]]

exception includes HOV facilities that are available to High Occupancy 
Toll (HOT), low-emission, and other vehicles as authorized under 23 
U.S.C. 166.
    Several commenters objected to the interim guidance's change in 
policy disallowing operating assistance for the initial 3 years of 
operations of major transit capital investment projects (New Starts). 
As stated in the interim guidance, this change was made to be 
consistent with FTA's requirement that project sponsors establish long-
term, dedicated sources of non-Federal funds for operating and 
maintaining New Starts. The point was made in the comments, however, 
that short-term, initial funding with CMAQ has never been a substitute 
for the development of long-term, non-Federal sources of funding, but 
rather has served as an important supplementary funding source, while 
farebox revenue is growing at the start of system operations. FTA 
acknowledges that transit agencies that used CMAQ funds for this 
purpose in the past also went on to establish sources of non-Federal 
funding to support operations for the long term.
    Another reason for the proposed change in policy was to return to 
the original intent in providing operating assistance under the CMAQ 
program. The original intent was to fund demonstrations of new types of 
service that could be easily terminated if they were not successful; it 
was not to provide operating assistance for permanent infrastructure 
projects. However, a review of the types of projects that have received 
operating assistance in the recent past indicated a number of projects 
that are not ``demonstrations.'' Some were major transit capital 
investment projects that did not involve Federal New Starts funding. 
The review showed there is a history of supporting permanent 
infrastructure as well as the demonstration-type projects that were 
originally envisioned. In light of this, it would be inconsistent for 
such non-Federal projects to continue receiving CMAQ operating 
assistance while the same type of project, if federally funded, was 
denied CMAQ operating assistance. Therefore, FTA has decided to return 
to the previous policy of allowing operating assistance for New Starts. 
The wording in the interim guidance disallowing operating assistance 
for New Start projects has been removed.
    One respondent suggested language that would prohibit States from 
using CMAQ funds to compete with services provided by the private 
sector. The Federal-aid highway program is a federally assisted State 
program. Consequently, the States exercise sovereignty in their project 
selection for all the Federal-aid highway program categories, including 
the CMAQ program. Under 23 U.S.C. 145, ``Federal-State Relationship,'' 
the States' role in determining transportation projects is protected. 
Given this statutory support for the States' position, the FHWA has no 
authority to amend the guidance with such a restriction, although we 
have retained our policy discouraging the use of CMAQ support for 
projects which may compete directly with private business services.

Section IX. Program Administration

    Several responders commented that the burden of preparing and 
submitting the annual reports required for the CMAQ program is 
understated and that the schedule for submittals is somewhat 
aggressive.
    We have outlined the burden or staff time requirements for the 
annual reports, as required under the Paperwork Reduction Act, 44 
U.S.C. 3501-3520, in a separate Federal Register notice, 71 FR 67420 
(November 21, 2006), and in our associated report to OMB. In view of 
the comments and further study of the issue, the FHWA has increased the 
time estimates for annual reports from the initial 6 hours for filing 
the report to a more representative 125 hours, which better reflects 
the necessary workload associated with compiling the information for 
State DOTs, metropolitan planning organizations, and other units of 
government. The final guidance incorporates this change.
    As to the schedule for submittals, we have extended the due date 
from February to March. This change was included in the interim 
guidance; we will retain the extension in the final guidance.

Appendix 4: Comparative Cost-Effectiveness of Potential CMAQ-Funded 
Retrofits

    There were 16 comments on the treatment of cost-effectiveness data, 
specifically as they appeared in Appendix 4 of the interim guidance.
    Diesel retrofits manufacturers and related trade and air quality 
associations made several recommendations for changes to Appendix 4. 
First, they suggested weighing the cost-effectiveness data for 
activities that reduce PM with those that reduce NOX and 
volatile organic compounds (VOCs) so that the data can be directly 
compared to each other. Second, they suggested that we include the 
diesel retrofit technologies in Figures A and D along with the projects 
that reduce NOX and VOCs. One commenter commissioned a study 
indicating that reducing a ton of NOX has health benefits 
14.2 times that of VOCs, while reducing a ton of PM has health benefits 
of 117.5 times that of VOCs.
    State and local agencies and national associations commented that 
the data presented in Appendix 4 were based on a dated study of project 
types that does not account for improvements in emission reduction 
technologies and that includes assumptions that may alter the cost-
effectiveness of projects. Specifically, commenters suggested that the 
data for inspection and maintenance programs were no longer accurate. 
Commenters also noted that cost-effectiveness is only one of the 
selection criteria and should not be the sole basis for decision-
making.
    Since the release of the interim guidance, the EPA has released its 
own analysis of the cost-effectiveness of diesel engine retrofit 
technologies and other mobile source emission reduction activities as 
required by the SAFETEA-LU. As such, we have removed Appendix 4 from 
our guidance and have instead provided an electronic link to the EPA 
guidance document providing this research (http://www.epa.gov/otaq/
stateresources/policy/general/420b07006.pdf). We intend to rely on the 
EPA data in determining cost effectiveness.

    Authority: Sections 1101, 1103 and 1808 of Pub. L. 109-59)

    Issued on: October 7, 2008.
Thomas J. Madison, Jr.,
Federal Highway Administrator.

The Congestion Mitigation and Air Quality (CMAQ) Improvement Program 
Under the Safe, Accountable, Flexible, Efficient Transportation Equity 
Act: A Legacy for Users; Final Program Guidance

October, 2008

    The guidance contained in this document is intended to be 
nonbinding, except insofar as it references existing statutory 
requirements. In this guidance document, the use of mandatory language 
such as ``shall,'' ``must,'' ``required,'' or ``requirement'' is only 
used to reflect statutory or regulatory mandates and does not create 
new requirements. This guidance does not create or confer any rights 
for or on any person and should not be construed as rules of general 
applicability and legal effect.

I. Introduction

    The CMAQ program was created under the Intermodal Surface 
Transportation Efficiency Act (ISTEA)

[[Page 62366]]

of 1991, continued under the Transportation Equity Act for the 21st 
Century (TEA-21), and reauthorized by the Safe, Accountable, Flexible, 
Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-
LU).\5\ Over $8.6 billion is authorized over the five-year program 
(2005-2009), with annual authorization amounts increasing each year 
during this period. Through 2005, the program has supported nearly 
16,000 transportation projects across the country.
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    \5\ Public Law 109-59, 119 Stat. 1144 (Aug. 10, 2005).
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    This guidance replaces the April 1999 version and provides 
information on the CMAQ program, including:
     Authorization levels and apportionment factors specific to 
the SAFETEA-LU.
     Flexibility and transferability provisions available to 
States.
     Geographic area eligibility for CMAQ funds.
     Project eligibility information.
     Project selection processes.
     Program administration.
    Appendices 1-3 provide updated statutory language relating to the 
CMAQ program. Appendix 4 provides supplemental information on diesel 
retrofit projects.
    Information on the current annual apportionment to each State and 
an electronic version of this guidance are available at http://
www.fhwa.dot.gov/environment/cmaqpgs/index.htm.
    This guidance document has been prepared by the Air Quality Team in 
FHWA's Office of Environment and Planning.

II. Program Purpose

    The purpose of the CMAQ program is to fund transportation projects 
or programs that will contribute to attainment or maintenance of the 
national ambient air quality standards (NAAQS) for ozone, carbon 
monoxide (CO), and particulate matter (PM).
    The CMAQ program supports two important goals of the Department of 
Transportation: Improving air quality and relieving congestion. While 
these goals are not new elements of the program, they are strengthened 
in a new provision added to the CMAQ statute by SAFETEA-LU, 
establishing priority consideration for cost-effective emission 
reduction and congestion mitigation activities when using CMAQ 
funding.\6\
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    \6\ 23 U.S.C. 149(f)(3) (SAFETEA-LU Sec.  1808(d)).
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    Reducing pollution and other adverse environmental effects of 
transportation projects and transportation system inefficiency have 
been long-standing objectives of the Department of Transportation. The 
strategic plans for the Department of Transportation and for the 
Federal Highway Administration both include performance measures 
specifically focused on reducing air pollution from transportation 
facilities. The CMAQ program provides funding for a broad array of 
tools to accomplish these goals. By choosing to fund a CMAQ project, a 
State or local government can improve air quality and make progress 
towards achieving attainment status and ensuring compliance with the 
transportation conformity provisions of the Clean Air Act.\7\
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    \7\ 42 U.S.C. 7506 Section 176(c).
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    Reducing congestion is also a key objective of the Department of 
Transportation, and one that has gained increasing attention in the 
past several years. The cost of congestion, which negatively affects 
the U.S. economy, quality of life, and air quality, has risen 
dramatically in the last 25 years despite record levels of 
transportation investment. Some economists estimate that the overall 
cost of congestion to the U.S. economy approaches $200 billion a year. 
As a result, in May 2006, the Department of Transportation announced 
its National Strategy to Reduce Congestion on America's Transportation 
Network (the Congestion Initiative) that aims to meaningfully reduce 
the economic and social costs of congestion on our nation's highways 
and in other transportation facilities.\8\ This strategy can be found 
at: http://isddc.dot.gov/OLPFiles/OST/012988.pdf.
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    \8\ Speaking before the National Retail Federation's annual 
conference on May 16, 2006, in Washington, DC, former U.S. 
Transportation Secretary Norman Mineta unveiled a new plan to reduce 
congestion plaguing America's roads, rails, and airports. The 
National Strategy to Reduce Congestion on America's Transportation 
Network includes a number of initiatives designed to reduce 
transportation congestion. The transcript of these remarks is 
available at the following URL: http://www.dot.gov/affairs/
minetasp051606.htm.
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    Since congestion relief projects also reduce idling, the negative 
emissions impacts of ``stop and go'' driving, and the number of 
vehicles on the road, they have a corollary benefit of improving air 
quality. Based on their emissions reductions, these types of projects, 
including investments in improved system pricing and operations, are 
eligible for CMAQ funding.\9\ The Department believes State and local 
governments can simultaneously reduce the costly impacts of congestion 
while also improving air quality.
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    \9\ 23 U.S.C. 149(b)(5).
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III. Authorization Levels Under the SAFETEA-LU

A. Authorization Levels

    Table 1 shows the SAFETEA-LU CMAQ authorization levels by fiscal 
year. The CMAQ funds will be apportioned to States each year based upon 
the apportionment factors discussed in Section V.

              Table 1--SAFETEA-LU CMAQ Authorization Levels
------------------------------------------------------------------------
           Fiscal year  authorization               Amount authorized
------------------------------------------------------------------------
FY 2005........................................           $1,667,255,304
FY 2006........................................           $1,694,101,866
FY 2007........................................           $1,721,380,718
FY 2008........................................           $1,749,098,821
FY 2009........................................           $1,777,263,247
------------------------------------------------------------------------

B. Equity Bonus

    Similar to the minimum guarantee under the TEA-21, the Equity Bonus 
in SAFETEA-LU provides additional funding beyond the authorized levels 
so that each State receives a minimum percentage of its gas tax 
receipts back in the form of Federal-aid funds.\10\
---------------------------------------------------------------------------

    \10\ 23 U.S.C. 105 (SAFETEA-LU Sec.  1104).
---------------------------------------------------------------------------

C. Transferability of CMAQ Funds

    Since transportation and environmental program priorities 
fluctuate, States may choose to transfer a limited portion of their 
CMAQ apportionment to the following Federal-aid highway programs: 
Surface Transportation Program (STP), National Highway System (NHS), 
Highway Bridge Program (HBP), Interstate Maintenance (IM), Recreational 
Trails Program (RTP), and the Highway Safety Improvement Program 
(HSIP).
    States may transfer CMAQ funds according to the following 
provision: An amount not to exceed 50 percent of the quantity of the 
State's annual apportionment less the amount the State would have 
received if the CMAQ program had been authorized at $1,350,000,000.\11\ 
For example, if the annual national apportionment is $1.75 billion and 
a State receives $10 million more than it would have received if the 
national apportionment had been $1.35 billion, the State can transfer 
up to $5 million to other programs. Any transfer of such funds must 
still be obligated in nonattainment and maintenance areas.\12\ The 
amount of transferable funds will differ each year and by State, 
depending on overall authorization levels. Each year, the FHWA will 
inform States how much, if any, CMAQ funding is

[[Page 62367]]

transferable and will track this movement of CMAQ funds. States also 
may transfer CMAQ funds to other Federal agencies. The SAFETEA-LU 
provides additional flexibility to complete such transfers when the 
receiving Federal agency has entered into an agreement with the State 
to undertake an eligible Federal-aid project.\13\ These opportunities 
apply to projects that have met all CMAQ eligibility requirements prior 
to the transfer.
---------------------------------------------------------------------------

    \11\ 23 U.S.C. 126(c).
    \12\ 23 U.S.C. 149(b).
    \13\ 23 U.S.C. 132(a) (SAFETEA-LU Sec.  1119).
---------------------------------------------------------------------------

D. CMAQ and Innovative Finance: State Infrastructure Bank (SIB) and 
Section 129 Loans

    Projects with dedicated repayment streams, i.e., a consistent 
source of revenue, may be financed with loans through DOT's innovative 
finance program as an alternative or supplement to CMAQ funding.
    State Infrastructure Banks are State-directed programs that allow 
Federal-aid funds to be lent to sponsors of eligible Federal-aid 
projects (any project under Title 23 or capital projects, as defined by 
49 U.S.C. 5302, are eligible). SIBs may be capitalized with several 
Federal-aid highway apportionments including the National Highway 
System Program, the Surface Transportation Program, the Highway Bridge 
Program, the Interstate Maintenance Program, and the Equity Bonus 
program. (Note: CMAQ may not be used to capitalize a SIB, but SIB funds 
may be used to finance CMAQ projects). State funds also may be used to 
capitalize the SIB. The State then receives repayments over time that 
can be directed toward other transportation projects. For example, New 
York State was successful in utilizing its SIB to implement two truck 
stop electrification projects along the New York State Thruway.
    Section 129 loans (23 U.S.C. 129(a)(7)) allow States to use 
Federal-aid highway apportionments to make loans for projects with 
dedicated revenue streams (this is only applicable to highway, bridge, 
tunnel, ferry boat, and ferry terminal projects). A Section 129 loan 
may be used to construct a truck stop electrification facility if the 
facility is located on the Interstate right-of-way.\14\
---------------------------------------------------------------------------

    \14\ 23 U.S.C. 111(d) (SAFETEA-LU Sec.  1412).
---------------------------------------------------------------------------

    The SAFETEA-LU establishes a new SIB program under which all States 
are authorized to enter into cooperative agreements with the U.S. DOT 
to establish infrastructure revolving-funds eligible to be capitalized 
with Federal transportation funds.\15\ The key difference between a 
Section 129 loan and a SIB is that a Section 129 loan usually provides 
financing to an individual project and funding a SIB capitalizes a 
financial entity that can assist multiple projects. The two loan 
programs have similar maximum allowable terms established by Federal 
law:
---------------------------------------------------------------------------

    \15\ 23 U.S.C. 190 (SAFETEA-LU Sec.  1602).
---------------------------------------------------------------------------

     Both public and private entities are eligible to be 
project sponsors.
     Repayments begin within 5 years of project completion.
     Maximum loan term is 30 years after project authorization 
(Section 129) or 30 years after first repayment (SIB).
     Interest rate may be set by State, at or below market 
rates.
     Loans can only be made up to 80 percent of eligible 
project costs (Section 129). For SIBs, loans can be made up to 80 
percent of eligible project costs (although the non-Federal share can 
be reduced under 23 U.S.C. 120(b) if the sliding scale rate is used).
    These innovative loan programs can increase the efficiency of 
States' transportation investments and significantly leverage Federal 
resources by attracting non-Federal public and private investment, and 
provide greater flexibility to the States by allowing other types of 
project assistance in addition to grant assistance. This type of 
financing is important for new technologies or start-up businesses that 
may have difficulty finding financing in the private capital markets. 
In addition to SIBs and section 129 loans, the FHWA also administers 
the Transportation Infrastructure Finance and Innovation Act (TIFIA) 
program, which provides Federal credit assistance to large-scale 
projects greater than $50 million.
    The following example illustrates how a Section 129 loan could work 
to construct an idle-reduction facility on an Interstate right-of-way. 
A private party intends to build a stationary idle-reduction facility, 
and seeks grant funding for it from the State DOT. The idle reduction 
facility will eventually earn a profit by charging user fees, but since 
the capital costs are high, the private party needs assistance with 
financing the initial construction. Instead of providing an outright 
grant, the State could offer a loan of Federal-aid funds with flexible 
repayment terms. If the facility required $1 million for initial 
construction, the State could make a loan at 5 percent over 15 years. 
The State could accelerate the payments if the facility was more 
successful than expected, and delay repayment if the facility failed to 
meet revenue targets. The State could also build in credits for 
additional emissions reductions, providing incentives for additional 
loans or grants to idle reduction projects. More information on the 
DOT's innovative finance program is available at http://
www.fhwa.dot.gov/innovativefinance/.

IV. Priority for Use of CMAQ Funds

    The SAFETEA-LU directs States and MPOs to give priority to two 
categories of funding. First, priority is for diesel retrofits, 
particularly where necessary to facilitate contract compliance, and 
other cost-effective emission reduction activities, taking into 
consideration air quality and health effects. Second, priority is to be 
given to cost-effective congestion mitigation activities that provide 
air quality benefits.\16\ Other projects also may be cost-effective. 
The priority provisions in the statute apply to the portion of CMAQ 
funds derived from the application of sections 104(b)(2)(B) and 
104(b)(2)(C) of SAFETEA-LU, i.e., the CMAQ apportionment formula. They 
do not apply to areas where CMAQ funding has been derived from the 
minimum apportionment provisions.
---------------------------------------------------------------------------

    \16\ 23 U.S.C. 149(f)(3) (SAFETEA-LU Sec.  1808(d)).
---------------------------------------------------------------------------

    In accordance with the SAFETEA-LU,\17\ the EPA has released a 
guidance document, The Cost Effectiveness of Heavy-Duty Diesel 
Retrofits and Other Mobile Source Emission Reduction Projects and 
Programs, which provides cost-effectiveness data on diesel engine 
retrofit technologies and other CMAQ-eligible activities. It is 
available online at: http://www.epa.gov/cleandiesel/publications.htm.
---------------------------------------------------------------------------

    \17\ 23 U.S.C. 149(f)(2)(c) (SAFETEA-LU Sec.  1808(d)).
---------------------------------------------------------------------------

    In addition, the Transportation Research Board published The 
Congestion Mitigation and Air Quality Improvement Program: Assessing 10 
Years of Experience in 2002, providing a number of effectiveness 
measures for both emissions and travel activity.
    Though SAFETEA-LU establishes these CMAQ investment priorities, it 
also retains State and local agencies' authority in project selection. 
The law maintains the existing roles and authorities of public 
agencies, and substantial shifts in local procedures are not required 
by the SAFETEA-LU.\18\ However, project selection should reflect the 
positive cost-effectiveness relationships highlighted in the EPA 
guidance. State and local transportation programs that implement a 
broad array of these cost-effective measures may record a more rapid 
rate of progress toward their clean air goals, since many of these 
endeavors generate immediate benefits. Local procedures that elevate

[[Page 62368]]

the importance of these efforts in project selection--and rate them 
accordingly--may accelerate the drive to air quality attainment.\19\
---------------------------------------------------------------------------

    \18\ 23 U.S.C. 149(f)(3)(B) (SAFETEA-LU Sec.  1808(d)).
    \19\ U.S. House, Safe, Accountable, Flexible, Efficient 
Transportation Equity Act, a Legacy for Users, Conference Report (to 
accompany H.R. 3) (109 H. Rpt. 203), Section 1938, Priorities 
Provision in Diesel Retrofit.
---------------------------------------------------------------------------

    In addition to the SAFETEA-LU priority on cost-effectiveness, 
Section 176(c) of the Clean Air Act \20\ requires that the FHWA and FTA 
ensure timely implementation of transportation control measures (TCMs) 
in applicable State Implementation Plans (SIPs). These and other CMAQ-
eligible projects identified in approved SIPs should receive funding 
priority.
---------------------------------------------------------------------------

    \20\ 42 U.S.C. 7506 Section 176(c)(2)(B).
---------------------------------------------------------------------------

    The FHWA recommends that States and MPOs develop their 
transportation/air quality programs using complementary measures that 
provide alternatives to single-occupant vehicle (SOV) travel while 
improving traffic flow through operational strategies and balancing 
supply and demand through pricing, parking management, regulatory, or 
other means.

V. Annual Apportionments of CMAQ Funds to States

A. CMAQ Apportionments

    Federal CMAQ funds are apportioned annually to each State according 
to the severity of its ozone and CO problem (see Appendix 2). The 
population of each county (based upon Census Bureau data) that is in a 
nonattainment or maintenance area for ozone and/or CO is weighted by 
multiplying by the appropriate factor listed in Table 2. PM 
nonattainment and maintenance areas and former 1-hour areas, except 
those few 1-hour maintenance areas participating in Early Action 
Compacts, are not included in the apportionments.

    Note: CMAQ apportionments and CMAQ eligibility are two different 
things. Some areas in which CMAQ funds may be spent are not included 
in the apportionments (see Section VI.).


                               Table 2--SAFETEA-LU CMAQ Apportionment Factors \21\
----------------------------------------------------------------------------------------------------------------
                                          Classification at the time of annual
               Pollutant                              apportionment                      Weighting factor
----------------------------------------------------------------------------------------------------------------
Ozone (O3) or (CO)....................  Maintenance (these areas had to be        1.0
                                         previously eligible as nonattainment
                                         areas--See Section VI.).
Ozone.................................  Subpart 1 (``Basic'')...................  1.0
Ozone.................................  Marginal................................  1.0
Ozone.................................  Moderate................................  1.1
Ozone.................................  Serious.................................  1.2
Ozone.................................  Severe..................................  1.3
Ozone.................................  Extreme.................................  1.4
CO....................................  Nonattainment...........................  1.0
Ozone and CO..........................  Ozone nonattainment or maintenance and    1.2 x O3 factor
                                         CO nonattainment or maintenance.
All States--minimum apportionment.....  1/2 of 1 percent total annual             N/A
                                         apportionment of CMAQ funds.
----------------------------------------------------------------------------------------------------------------
\21\ 23 U.S.C. Sec.   104(b)(2) (SAFETEA-LU 1103(d)).

    CMAQ apportionments are calculated based on the nonattainment and 
maintenance areas that exist at the time of apportionment. Generally, 
apportionments are calculated prior to the beginning of each fiscal 
year.

B. Area Designations: Attainment vs. Nonattainment

    Each State is guaranteed a minimum apportionment of one-half 
percent of the year's total program funding, regardless of whether the 
State has any nonattainment or maintenance areas. These flexible funds 
or minimum apportionment funds can be used anywhere in the State for 
projects eligible for either CMAQ or the STP.\22\
---------------------------------------------------------------------------

    \22\ 23 U.S.C. 149(c) (SAFETEA-LU Sec.  1808(c)).
---------------------------------------------------------------------------

    The FHWA Budget Division identifies annual apportionments of CMAQ 
funds as either mandatory or flexible. All funding is considered 
mandatory for States with weighted populations yielding one-half 
percent or more of the authorized funds (based on the table above). 
Annual CMAQ funding apportioned through the application of sections 
104(b)(2)(B) and 104(b)(2)(C) must be used for projects in 
nonattainment/maintenance areas.\23\
---------------------------------------------------------------------------

    \23\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

    States with weighted populations yielding at least some apportioned 
value but less than one-half percent of the authorized funds receive 
both mandatory and flexible funds to reach the minimum apportionment. 
For example, if a State's weighted population yields two tenths of one 
percent of the authorized funds, it would receive two tenths of one 
percent of the national funds as mandatory funds, and three tenths of 
one percent as flexible funds. Thus, 40 percent of the State's funds 
would be mandatory and 60 percent would be flexible.
    For States with no areas applicable to the apportionment table, 
their minimum apportionment, one-half percent, is all flexible funding. 
The FHWA reports the breakdown of mandatory and flexible funds by State 
in its fiscal year apportionment tables.

C. Apportionments and State Allocation

    Notwithstanding the statutory formula for determining the 
apportionment amount, the State may use its CMAQ funds in any ozone, 
CO, or PM nonattainment or maintenance area. A State is under no 
statutory obligation to allocate CMAQ funds in the same way they are 
apportioned. States are encouraged to consult affected MPOs to 
determine regional and local CMAQ priorities and work with them to 
allocate funds accordingly.

D. Federal Share and State/Local Match Requirements

    The Federal share for most CMAQ projects, generally, has been 80 
percent. However, under the Energy Independence and Security Act of 
2007,\24\ the Federal share for eligible CMAQ projects carried out with 
funds obligated in fiscal year 2008 or 2009, or both, may be, at the 
discretion of the State, up to 100 percent of the cost of the project 
or program.
---------------------------------------------------------------------------

    \24\ Pub. L. 110-140, Sect. 1131 (December 20, 2007).
---------------------------------------------------------------------------

VI. Geographic Areas That Are Eligible To Use CMAQ Funds

A. Eligible Areas

    CMAQ funds may be invested in all ozone, CO, and PM nonattainment 
and maintenance areas. Funds also may be

[[Page 62369]]

spent in the few remaining 1-hour ozone maintenance areas (these 
counties also have Early Action Compacts in place), since the 1-hour 
standard remains in effect for these areas.
    Funds also may be used for projects in proximity to nonattainment 
and maintenance areas if the benefits will be realized primarily within 
the nonattainment or maintenance area. The delineation of an area 
considered ``in proximity'' should be discussed with the FHWA and FTA 
field offices and elevated to headquarters if necessary.

B. Maintenance Areas

    CMAQ funds may be invested in maintenance areas that have approved 
maintenance plans under CAA section 175A. In States with ozone or CO 
maintenance areas but no nonattainment areas, mandatory CMAQ funds must 
be used in the maintenance areas.\25\
---------------------------------------------------------------------------

    \25\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

C. Maintenance Plan Requirement, SAFETEA-LU

    CMAQ funds may be invested in former 1-hour ozone areas that were 
not designated under the 8-hour standard but where the 1-hour standard 
has been revoked. Since these areas are required to file maintenance 
plans, they are considered eligible for CMAQ funding under provisions 
of the SAFETEA-LU.\26\
---------------------------------------------------------------------------

    \26\ 23 U.S.C. 149(b) (SAFETEA-LU Sec.  1808(a)).
---------------------------------------------------------------------------

D. Flexible Funds in PM Areas

    While States may use flexible CMAQ funding anywhere and for any 
CMAQ- or STP-eligible project (see V.B. on minimum apportionment), the 
FHWA encourages States and MPOs to evaluate the cost-effectiveness and 
benefits to public health of targeting flexible CMAQ funding to 
projects that reduce PM. Examples of such projects include implementing 
a diesel retrofit or idle reduction program, constructing freight/
intermodal transfer facilities, traffic signalization, or ITS projects 
that reduce congestion, paving dirt roads, and purchasing street 
sweeping equipment.

VII. Project Eligibility Provisions

A. Project Eligibility: General Conditions

    To be eligible for CMAQ funds, a project must be included in the 
MPO's current transportation plan and TIP (or the current STIP in areas 
without an MPO). In nonattainment and maintenance areas, the project 
also must meet the conformity provisions contained in section 176(c) of 
the Clean Air Act and the transportation conformity regulations.\27\ In 
addition, all CMAQ-funded projects need to complete National 
Environmental Policy Act (NEPA) requirements and meet basic eligibility 
requirements for funding under titles 23 and 49 of the United States 
Code.
---------------------------------------------------------------------------

    \27\ 40 CFR Parts 51 and 93
---------------------------------------------------------------------------

    The following should guide CMAQ eligibility decisions:
1. Capital Investment
    CMAQ funds may be used to establish new or expanded transportation 
projects or programs that reduce emissions, including capital 
investments in transportation infrastructure, congestion relief 
efforts, diesel engine retrofits, or other capital projects.
2. Operating Assistance
    There are several general conditions that must be met for operating 
assistance to be eligible under the CMAQ program:
    a. Operating assistance is limited to new transit services, 
intermodal facilities, and travel demand management strategies 
(including traffic operation centers); and the incremental cost of 
expanding existing transit services.
    b. In using CMAQ funds for operating assistance, the intent is to 
help start up viable new transportation services that can demonstrate 
air quality benefits and eventually cover their costs as much as 
possible. Other funding sources should supplement and ultimately 
replace CMAQ funds for operating assistance, as these projects no 
longer represent additional, net air quality benefits but have become 
part of the baseline transportation network.
    c. Operating assistance includes all costs of providing new 
transportation services, including, but not limited to, labor, fuel, 
administrative costs, and maintenance.
    d. When CMAQ funds are used for operating assistance, non-Federal 
share requirements still apply.
    e. With the focus on start-up costs only, operating assistance 
under the CMAQ program is limited to three years. The provisions in 23 
U.S.C. 116 place responsibilities for maintenance on States.\28\ Since 
facility maintenance is akin to operations, three years of CMAQ 
assistance provides adequate incentive and flexibility while not 
creating a pattern of excessive or even perpetual support. Exceptions 
are listed below under VII.D.7 Travel Demand Management, VII.D.8 Public 
Education, and VII.D.10 Carpooling and Vanpooling.
---------------------------------------------------------------------------

    \28\ 23 U.S.C. Sec.  116.
---------------------------------------------------------------------------

3. Emission Reduction
    Air quality improvement is defined by several distinct terms in 23 
U.S.C. Sec.  149. These terms include contribution to attainment, 
reduction in pollution, air quality benefits, and others. For purposes 
of this guidance, the FHWA uses emission reduction to represent this 
group of terms. CMAQ-invested projects or programs must reduce CO, 
ozone precursor (NOX and VOCs), PM, or PM precursor (e.g., 
NOX) emissions from transportation; these reductions must 
contribute to the area's overall clean air strategy and can be 
demonstrated by the assessment that is required under this 
guidance.\29\ States and MPOs also may consider the ancillary benefits 
of eligible projects, including greenhouse gas reductions, congestion 
relief, safety, or other elements, when programming CMAQ funds, though 
such benefits do not alone establish eligibility.
---------------------------------------------------------------------------

    \29\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

4. Planning and Project Development
    Activities in support of eligible projects also may be appropriate 
for CMAQ investments. Studies that are part of the project development 
pipeline (e.g., preliminary engineering) under NEPA are eligible for 
CMAQ support, as are FTA's Alternatives Analyses. General studies that 
fall outside specific project development do not qualify for CMAQ 
funding. Examples of such efforts include major investment studies, 
commuter preference studies, modal market polls or surveys, transit 
master plans, and others. These activities are eligible for Federal 
planning funds.

B. Projects Ineligible for CMAQ Funding

    The following projects are ineligible for CMAQ funding:
    1. Light-duty vehicle scrappage programs.\30\
---------------------------------------------------------------------------

    \30\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

    2. Projects that add new capacity for SOVs are ineligible for CMAQ 
funding unless construction is limited to high-occupancy vehicle (HOV) 
lanes.\31\ This HOV lane eligibility includes the full range of HOV 
facility uses authorized under 23 U.S.C. 166, such as high-occupancy 
toll (HOT) and low-emission vehicles.
---------------------------------------------------------------------------

    \31\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

    3. Routine maintenance and rehabilitation projects (e.g., 
replacement-in-kind of track or other equipment, reconstruction of 
bridges, stations, and other facilities, and

[[Page 62370]]

repaving or repairing roads) are ineligible for CMAQ funding as they 
only maintain existing levels of highway and transit service, and 
therefore do not reduce emissions.\32\ Other funding sources, such as 
STP and FTA's Section 5307 program, are available for such activities.
---------------------------------------------------------------------------

    \32\ 23 U.S.C. 116.
---------------------------------------------------------------------------

    4. Administrative costs of the CMAQ program may not be defrayed 
with program funds, e.g., support for a State's ``CMAQ Project 
Management Office'' is not eligible.
    5. Projects that do not meet the specific eligibility requirements 
of titles 23 and 49 U.S.C. are ineligible for CMAQ funds.
    6. Stand-alone projects to purchase fuel. One exception is listed 
below in Section VII.D.3.\33\
---------------------------------------------------------------------------

    \33\ 23 U.S.C. 149(k).
---------------------------------------------------------------------------

C. Public-Private Partnerships (PPPs)

    In a PPP, a private or non-profit entity's resources replace or 
supplement State or local funds and possibly a portion of the Federal-
aid in a selected project. The PPP elements of the program have been 
refined over the last two transportation reauthorizations, and these 
partnerships have become a critical part of CMAQ.\34\
---------------------------------------------------------------------------

    \34\ 23 U.S.C. 149(e).
---------------------------------------------------------------------------

    Partnerships should have a legally-binding written agreement in 
place between the public agency and the private or non-profit entity 
before a CMAQ-funded project may be implemented. These agreements 
should be developed under relevant Federal and State law and should 
specify the intended use for CMAQ funding; the roles and 
responsibilities of the participating entities; and how the disposition 
of land, facilities, and equipment will be carried out should the 
original terms of the agreement be altered (e.g., due to insolvency, 
change in ownership, or other changes in the structure of the PPP).
    Public funds should not be invested where a strong public benefit 
cannot be demonstrated. Consequently, CMAQ funds should be devoted to 
PPPs that benefit the general public by clearly reducing emissions, not 
for financing marginal projects. Consistent with the planning and 
project selection provisions of the Federal-aid highway program, the 
FHWA considers it essential that all interested parties have full, 
open, and timely access to the project selection process.
    There are several other statutory restrictions and special 
provisions on the use of CMAQ funds in PPPs. Eligible costs under this 
section should not include costs to fund an obligation imposed on 
private sector or non-profit entities under the CAA or any other 
Federal law.\35\ However, if the private or non-profit entity is 
clearly exceeding its obligations under Federal law, CMAQ funds may be 
used for that incremental portion of the project.
---------------------------------------------------------------------------

    \35\ 23 U.S.C. 149(e)(5).
---------------------------------------------------------------------------

    Eligible non-monetary activities that satisfy the non-Federal match 
requirements under the partnership provisions include the following:
     Ownership or operation of land, facilities, or other 
physical assets
     Construction or project management
     Other forms of participation approved by the U.S. DOT.
    Sharing of total project costs, both capital and operating, is a 
critical element of a successful public-private venture, particularly 
if the private entity is expected to realize profits as part of the 
joint venture. State and local officials are urged to consider a full 
range of cost-sharing options when developing a PPP, including a larger 
State/local match. For detailed information on cost principles beyond 
the scope of this guidance, please consult OMB Circular A-87, which 
focuses on determining allowable costs for State, local, and tribal 
governments; and 49 CFR part 18, which provides direction on 
administering Federal grants to State and local governments.

D. Eligible Projects and Programs

    Eligibility information is provided below. Not all possible 
requests for CMAQ funding are covered--this section provides examples 
of activities eligible for CMAQ funds.
1. Transportation Control Measures (TCMs)
    Most of the TCMs included in Section 108 of the CAA, listed below, 
are eligible for CMAQ funding. One CAA TCM, programs to encourage 
removal of pre-1980 light-duty vehicles, is specifically excluded from 
CMAQ eligibility.\36\
---------------------------------------------------------------------------

    \36\ 23 U.S.C. 149(b)(1)(A)(i).
---------------------------------------------------------------------------

    i. Programs for improved public transit;
    ii. Restriction of certain roads or lanes to, or construction of 
such roads or lanes for use by, passenger buses or HOV;
    iii. Employer-based transportation management plans, including 
incentives;
    iv. Trip-reduction ordinances;
    v. Traffic flow improvement programs that reduce emissions;
    vi. Fringe and transportation corridor parking facilities serving 
multiple-occupancy vehicle programs or transit service;
    vii. Programs to limit or restrict vehicle use in downtown areas or 
other areas of emission concentration particularly during periods of 
peak use;
    viii. Programs for the provision of all forms of high-occupancy, 
shared-ride services;
    ix. Programs to limit portions of road surfaces or certain sections 
of the metropolitan area to the use of non-motorized vehicles or 
pedestrian use, both as to time and place;
    x. Programs for secure bicycle storage facilities and other 
facilities, including bicycle lanes, for the convenience and protection 
of bicyclists, in both public and private areas;
    xi. Programs to control extended idling of vehicles;
    xii. Reducing emissions from extreme cold-start conditions;
    xiii. Employer-sponsored programs to permit flexible work 
schedules;
    xiv. Programs and ordinances to facilitate non-automobile travel, 
provision and utilization of mass transit, and to generally reduce the 
need for SOV travel, as part of transportation planning and development 
efforts of a locality, including programs and ordinances applicable to 
new shopping centers, special events, and other centers of vehicle 
activity; and
    xv. Programs for new construction and major reconstructions of 
paths, tracks, or areas solely for the use by pedestrian or other non-
motorized means of transportation when economically feasible and in the 
public interest.
2. Extreme Low-Temperature Cold Start Programs
    Projects intended to reduce emissions from extreme cold-start 
conditions are eligible for CMAQ funding. Such projects include 
retrofitting vehicles and fleets with water and oil heaters and 
installing electrical outlets and equipment in publicly-owned garages 
or fleet storage facilities (See Section VII.C. for a possible 
expansion to privately-owned equipment and facilities).
3. Alternative Fuels and Vehicles
Fuel
    With the exception of Missouri, Iowa, Minnesota, Wisconsin, 
Illinois, Indiana, and Ohio, fuel costs are not an eligible expense as 
a stand-alone project.\37\ Only these seven States may use CMAQ funds 
to purchase the alternative fuels defined in section 301 of the 1992 
Energy Policy Act (natural gas, ethanol, etc.) or biodiesel, assuming 
such projects meet

[[Page 62371]]

other applicable eligibility requirements noted in Section VII.B. 
above.
---------------------------------------------------------------------------

    \37\ SAFETEA-LU, Sec.  1808(k).
---------------------------------------------------------------------------

    Establishing publicly-owned fueling facilities and other 
infrastructure needed to fuel alternative-fuel vehicles is an eligible 
expense, unless privately-owned fueling stations are in place and 
reasonably accessible. Additionally, CMAQ funds may support converting 
a private fueling facility to support alternative fuels through a 
public-private partnership agreement (See Section VII.C.).
Non-Transit Vehicles
    CMAQ funds may be used to purchase publicly-owned alternative fuel 
vehicles, including passenger vehicles, refuse trucks, street cleaners, 
and others. Costs associated with converting fleets to run on 
alternative fuels are also eligible. When private vehicles are 
purchased, only the cost difference between the alternative fuel 
vehicles and comparable conventional fuel vehicles is eligible. Such 
vehicles should be fueled by one of the alternative fuels identified in 
section 301 of the 1992 Energy Policy Act or biodiesel. Eligible 
projects also include alternatives to diesel engines and vehicles.
Hybrid Vehicles
    Although not defined by the Energy Policy Act of 1992 as 
alternative fuel vehicles, certain hybrid vehicles that have lower 
emissions rates than their non-hybrid counterparts may be eligible for 
CMAQ investment. Hybrid passenger vehicles must meet EPA's low 
emissions and energy efficiency requirements for certification under 
the HOV exception provisions of the SAFETEA-LU to be eligible for CMAQ 
funding.\38\
---------------------------------------------------------------------------

    \38\ 23 U.S.C. 166(e) (SAFETEA-LU Sec.  1121(a)). The required 
rulemaking developed by EPA has been published in the Federal 
Register at 72 FR 29102, http://www.epa.gov/fedrgstr/EPA-AIR/2007/
May/Day-24/a9821.htm.
---------------------------------------------------------------------------

    Projects involving heavier vehicles, including refuse haulers and 
delivery trucks, also may be appropriate for program support. 
Eligibility should be based on a comparison of the emissions 
projections of these larger candidate vehicles and other comparable 
models.
4. Congestion Reduction & Traffic Flow Improvements
    Traffic flow improvements may include the following:
a. Traditional Improvements
    Traditional traffic flow improvements, such as the construction of 
roundabouts, HOV lanes, left-turn or other managed lanes, are eligible 
for CMAQ funding provided they demonstrate net emissions benefits.
b. Intelligent Transportation Systems
    Intelligent Transportation Systems (ITS) projects, such as traffic 
signal synchronization projects, traffic management projects, and 
traveler information systems, can be effective in relieving traffic 
congestion, enhancing transit bus performance, and improving air 
quality. The following have the greatest potential for improving air 
quality:
     Regional multi-modal traveler information systems.
     Traffic signal control systems.
     Freeway management systems.
     Electronic toll-collection systems.
     Transit management systems.
     Incident management programs.
    A lengthier discussion of the benefits associated with various 
operational improvements can be found at: http://ops.fhwa.dot.gov/
program_areas/programareas.htm.
c. Value/Congestion Pricing
    As part of its Congestion Initiative referenced above, the 
Department broadly promotes highway congestion pricing and is also 
seeking an area-wide demonstration of the effectiveness of congestion 
pricing (along with other elements). Congestion pricing is a market-
based mechanism that allows tolls to rise and fall depending on 
available capacity and demand. It has gained increasing attention and 
popularity in recent years following several highly successful facility 
demonstrations in the U.S. and several network wide demonstrations 
abroad. Tolls can be charged electronically, thereby eliminating the 
need for tollbooths. In addition to the benefits associated with 
reducing congestion, revenue is generated that can be used to pay for a 
wide range of transportation improvements, including Title 23--eligible 
transit services in the newly tolled corridor.
    Parking pricing can include time-of-day parking charges that 
reflect congested conditions. These strategies should be designed to 
influence trip-making behavior and may include charges for using a 
parking facility at peak periods, or a range of employer-based parking 
cash-out policies that provide financial incentives to avoid parking or 
driving alone. Parking pricing integrated with other pricing strategies 
is encouraged.
    Pricing encompasses a variety of market-based approaches such as:
     HOT lanes, or High Occupancy Toll lanes, on which variable 
tolls are charged to drivers of low-occupancy vehicles using HOV lanes, 
such as the ``FasTrak'' Lanes on I-15 in San Diego and the recently 
converted I-394 in Minneapolis in which prices vary dynamically every 
two minutes based on traffic conditions
     New variably tolled express lanes on existing toll-free 
facilities, such as the ``91 Express Lanes'' on State Route 91 in 
Orange County, CA
     Variable tolls on existing or new toll roads, such as on 
the bridges and tunnels operated by the Port Authority of New York and 
New Jersey
     Network-wide or cordon pricing, such as implemented in 
Stockholm, London and Singapore
     Usage-based vehicle pricing, such as mileage-based vehicle 
taxation being explored by the State of Oregon, or pay-per-mile car 
insurance
    As with any eligible CMAQ project, value pricing should generate an 
emissions reduction. Marketing and outreach efforts to expand and 
encourage the use of eligible pricing measures may be funded 
indefinitely. Eligible expenses for reimbursement include, but are not 
limited to: Tolling infrastructure, such as transponders and other 
electronic toll or fare payment systems; small roadway modifications to 
enable tolling, marketing, public outreach, and support services, such 
as transit in a newly tolled corridor. Innovative pricing approaches 
yet to be deployed in the U.S. also may be supported through the Value 
Pricing Pilot Program. A more complete discussion of projects currently 
underway in the U.S. can be found at: http://ops.fhwa.dot.gov/tolling_
pricing/value_pricing/index.htm.
    Operating expenses for traffic flow improvements are eligible for 
CMAQ funding for three years if they can be shown to produce air 
quality benefits, if the expenses are incurred from new or additional 
services, and if previous funding mechanisms, such as fares or fees for 
services, are not displaced.
    Projects or programs that involve the purchase of integrated, 
interoperable emergency communications equipment are eligible for CMAQ 
funding.\39\
---------------------------------------------------------------------------

    \39\ 23 U.S.C. 149(b)(6) (SAFETEA-LU Sec.  1808(b)(4)).
---------------------------------------------------------------------------

5. Transit Improvements
    Many transit projects are eligible for CMAQ funds. The general 
guideline for determining eligibility is whether the project increases 
capacity and would likely result in an increase in transit ridership 
and a potential reduction in congestion. As with other types of CMAQ 
projects, there should be a quantified estimate of the project's

[[Page 62372]]

emissions benefits accompanying the proposal.
    The FTA administers most transit projects. Once the FTA determines 
a project eligible, CMAQ funds will be transferred from the FHWA to the 
FTA, and the project will be administered according to the requirements 
of the FTA's Urbanized Area Formula Grant Program.\40\ Certain types of 
transit projects for which the FTA lacks statutory authority, such as 
diesel retrofit equipment for public school bus fleets, are 
administered by the FHWA.
---------------------------------------------------------------------------

    \40\ 49 U.S.C. 5307.
---------------------------------------------------------------------------

a. Facilities
    New transit facilities (e.g., lines, stations, terminals, transfer 
facilities) are eligible if they are associated with new or enhanced 
mass transit service. Routine maintenance or rehabilitation of existing 
facilities is not eligible, as it does not reduce emissions. However, 
rehabilitation of a facility may be eligible if the vast majority of 
the project involves physical improvements that will increase capacity. 
In such cases there should be supporting documentation showing an 
increase in transit ridership that is more than minimal. If the vast 
majority of the project involves capacity enhancements, other elements 
involving refurbishment and replacement-in-kind also are eligible.
b. Vehicles and Equipment
    New transit vehicles (bus, rail, or van) to expand the fleet or 
replace existing vehicles are eligible. Transit agencies are encouraged 
to purchase vehicles that are most cost-effective in reducing 
emissions. Diesel engine retrofits, such as replacement engines and 
exhaust after-treatment devices, are eligible if certified or verified 
by the EPA or California Air Resources Board (CARB). Routine preventive 
maintenance for vehicles is not eligible as it only returns the 
vehicles to baseline conditions. Besides diesel engine retrofits, other 
transit equipment may be eligible if it represents a major system-wide 
upgrade that will significantly improve speed or reliability of transit 
service, such as advanced signal and communications systems.
c. Fuel
    Fuel, whether conventional or alternative fuel, is an eligible 
expense only as part of a project providing operating assistance for 
new or expanded transit service under the CMAQ program. This includes 
fuels and fuel additives considered diesel retrofit technologies by the 
EPA or CARB. See Section VII.D.3 for statutory exceptions for certain 
states regarding the purchase of alternative fuel with CMAQ funds.
d. Operating Assistance
    Operating assistance to introduce new transit service or expand 
existing service is eligible. It may be a new type of service, service 
to a new geographic area, or an expansion of existing service providing 
additional hours of service or reduced headways. For a service 
expansion, only the operating costs of the new increment of service are 
eligible. Eligible operating costs include labor, fuel, maintenance, 
and related expenses. Operating assistance may be CMAQ-funded for a 
maximum of three years. The intent is to support the demonstration of 
new services that may prove successful enough to sustain with other 
funding sources, and to free up CMAQ funds to generate new air quality 
benefits.
e. Transit Fare Subsidies
    CMAQ funds may be used to subsidize regular transit fares in an 
effort to prevent the NAAQS from being exceeded, but only under the 
following conditions: The reduced or free fare should be part of a 
comprehensive area-wide program to prevent the NAAQS from being 
exceeded. ``Ozone Action'' programs vary in scope around the country, 
but they generally include actions that individuals and employers can 
take and they are aimed at all major sources of air pollution, not just 
transportation. The subsidized fare should be available to the general 
public and may not be limited to specific groups. It may only be 
offered during periods of elevated pollution when the threat of 
exceeding the NAAQS is greatest; it is not intended for the entire 
high-ozone season. Finally, the fare subsidy proposal should 
demonstrate that the responsible local agencies will combine the 
reduced or free fare with a robust marketing program to inform SOV 
drivers of other transportation options. Because the fare subsidy is 
not strictly a form of operating assistance, it would not be subject to 
the three-year limit.
6. Bicycle and Pedestrian Facilities and Programs
    Bicycle and pedestrian facilities and programs are included as a 
TCM in section 108(f)(1)(A) of the CAA. The following are eligible 
projects:
     Constructing bicycle and pedestrian facilities (paths, 
bike racks, support facilities, etc.) that are not exclusively 
recreational and reduce vehicle trips;
     Non-construction outreach related to safe bicycle use;
     Establishing and funding State bicycle/pedestrian 
coordinator positions for promoting and facilitating nonmotorized 
transportation modes through public education, safety programs, etc. 
(Limited to one full-time position per State) \41\
---------------------------------------------------------------------------

    \41\ 23 U.S.C. 217(d).
---------------------------------------------------------------------------

7. Travel Demand Management
    Travel demand management (TDM) encompasses a diverse set of 
activities that focuses on physical assets and services that provide 
real-time information on network performance and support better 
decision-making for travelers choosing modes, times, routes, and 
locations. Such projects can help ease congestion and reduce SOV use--
contributing to mobility, while enhancing air quality and saving energy 
resources. Similar to ITS and Value Pricing, today's TDM programs seek 
to optimize the performance of local and regional transportation 
networks. The following activities are eligible if they are explicitly 
aimed at reducing SOV travel and associated emissions:
     Fringe parking.
     Traveler information services.
     Shuttle services.
     Guaranteed ride home programs.
     Market research and planning in support of TDM 
implementation.
     Carpools, vanpools (see item 10 below).
     Traffic calming measures.
     Parking pricing.
     Variable road pricing.
     Telecommuting.
     Employer-based commuter choice programs.
    CMAQ funds may support capital expenses and up to three years of 
operating assistance to administer and manage new or expanded TDM 
programs.
    Marketing and outreach efforts to expand use of TDM measures may be 
funded indefinitely, but only if they are broken out as distinct line 
items (see Section VII.D.8. below).
    Eligible telecommuting activities include planning, preparing 
technical and feasibility studies, and training. Construction of 
telecommuting centers and computer and office equipment purchases 
should not be supported with CMAQ funds.
8. Public Education and Outreach Activities
    The goal of CMAQ-funded public education and outreach activities is 
to educate the public, community leaders, and potential project 
sponsors about connections among trip making and transportation mode 
choices, traffic

[[Page 62373]]

congestion, and air quality. Public education and outreach can help 
communities reduce emissions and congestion by inducing drivers to 
change their transportation choices. More important, an informed public 
is likely to support larger regional measures necessary to reduce 
congestion and meet CAA requirements.
    A wide range of public education and outreach activities is 
eligible for CMAQ funding, including activities that promote new or 
existing transportation services, developing messages and advertising 
materials (including market research, focus groups, and creative), 
placing messages and materials, evaluating message and material 
dissemination and public awareness, technical assistance, programs that 
promote the Tax Code provision related to commute benefits,\42\ transit 
``store'' operations, and any other activities that help forward less-
polluting transportation options.
---------------------------------------------------------------------------

    \42\ Section 132(f) of the Internal Revenue Code allows 
employers to pay their employees, as of November 5, 2007, up to $115 
per month for transit and vanpool expenses and up to $215 per month 
for qualified parking. 26 U.S.C. 132(f). Each of these benefits is 
subject to annual increases based on changes to the Consumer Price 
Index. 26 U.S.C. 1(f)(3). Alternately, employers may allow employees 
to use their pre-tax income to purchase these commuter benefits. 
Employers may also provide a combination of these employer-paid and 
employee paid tax-free benefits. For more information, please visit 
http://www.commuterchoice.com/.
---------------------------------------------------------------------------

    Using CMAQ funds, communities have disseminated many transportation 
and air quality public education messages, including maintain your 
vehicle; curb SOV travel by trip chaining, telecommuting and using 
alternate modes; fuel properly; observe speed limits; don't idle your 
vehicle for long durations; eliminate ``jack-rabbit'' starts and stops, 
and others.
    The It All Adds Up to Cleaner Air public education messages and 
materials (regarding vehicle maintenance, proper fueling, trip 
chaining, and alternate modes) have been successful in raising 
awareness, garnering funds and in-kind support, and building coalitions 
of diverse groups across the country. These commercial-quality 
materials, which were developed in response to requests by State and 
local transportation and air agencies, are free and communities are 
encouraged to use and build on them. More information is available at 
http://www.italladdsup.gov/.
    Long-term public education and outreach can be effective in raising 
awareness that can lead to changes in travel behavior and ongoing 
emissions reductions; therefore, these activities may be funded 
indefinitely.
9. Transportation Management Associations
    Transportation Management Associations (TMAs) are groups of 
citizens, firms, or employers that organize to address the 
transportation issues in their immediate locale by promoting rideshare 
programs, transit, shuttles, or other measures. TMAs can play a useful 
role in brokering transportation services to private employers.
    CMAQ funds may be used to establish TMAs provided that they reduce 
emissions. Eligible expenses include TMA start-up costs and up to three 
years of operating assistance. Eligibility of specific TMA activities 
is addressed throughout this guidance.
10. Carpooling and Vanpooling
    Eligible activities can be divided into two types of costs: 
Marketing (which applies to both carpools and vanpools) and vehicle 
(which applies to vanpools only). a. Carpool/vanpool marketing covers 
existing, expanded, and new activities designed to increase the use of 
carpools and vanpools, and includes purchase and use of computerized 
matching software and outreach to employers. Guaranteed ride home 
programs are also considered marketing tools. Marketing costs may be 
funded indefinitely. b. Vanpool vehicle capital costs include 
purchasing or leasing vans for use in vanpools. Eligible operating 
costs, limited to three years, include empty-seat subsidies, 
maintenance, insurance, administration, and other related expenses.
    CMAQ funds should not be used to buy or lease vans that would 
directly compete with or impede private sector initiatives. States and 
MPOs should consult with the private sector prior to using CMAQ funds 
to purchase vans, and if private firms have definite plans to provide 
adequate vanpool service, CMAQ funds should not be used to supplant 
that service.
    Carpooling and vanpooling activities may be funded with up to 100% 
federal funding, with certain limitations.\43\
---------------------------------------------------------------------------

    \43\ 23 U.S.C. 120(c).
---------------------------------------------------------------------------

11. Freight/Intermodal
    Projects and programs targeting freight capital costs--rolling 
stock or ground infrastructure--are eligible provided that air quality 
benefits can be demonstrated.\44\ Freight projects that reduce 
emissions fall generally into two categories: Primary efforts that 
target emissions directly or secondary projects that reduce net 
emissions.
---------------------------------------------------------------------------

    \44\ 23 U.S.C. 149(b)(3).
---------------------------------------------------------------------------

    Successful primary projects could include new diesel engine 
technology or retrofits of vehicles or engines. Eligibility is not 
confined to highway projects, but also applies to nonroad mobile 
freight projects, such as rail.\45\ See Section VII.D.12. below on 
diesel retrofit technology--examples of primary freight projects--and 
for information on EPA's guidance and model rule for emissions 
reduction credit in the SIP and conformity processes.
---------------------------------------------------------------------------

    \45\ 23 U.S.C. 149(b)(3).
---------------------------------------------------------------------------

    Secondary projects reduce emissions through shifts in or additions 
to infrastructure. Support for an intermodal container transfer 
facility may be eligible if the project demonstrates reduced diesel 
engine emissions when balancing the drop in truck VMT against the 
increase in locomotive or other non-highway activity. Intermodal 
facilities, such as inland transshipment ports or near/on-dock rail, 
may generate substantial emissions reductions through the decrease in 
miles traveled for pre-1986 heavy-duty diesel trucks. This secondary, 
indirect effect on truck traffic and the ensuing drop in diesel 
emissions help demonstrate eligibility.
    The transportation function of these freight/intermodal projects 
should be emphasized. Marginal projects that support freight operations 
in a very tangential manner are not eligible for CMAQ funding. 
Warehouse handling equipment, for example, is not an eligible 
investment of program funds. However, equipment that provides a 
transportation function or directly supports this function is eligible, 
such as railyard switch locomotives or shunters.
12. Diesel Engine Retrofits & Other Advanced Truck Technologies
    The SAFETEA-LU places a new emphasis on diesel engine retrofits and 
the various types of projects that fall under this broad category.\46\ 
These efforts are defined as vehicle replacement, repowering (replacing 
an engine with a cleaner diesel engine, alternative fuels, etc.), 
rebuilding an engine, or other technologies determined by the EPA as 
appropriate for reducing emissions from diesel engines.\47\ This latter 
point, highlighting developing technologies, establishes a degree of 
flexibility and a need for periodic adjustment in the definition by the 
EPA. The legislation defines retrofit projects as applicable to both 
on-road motor vehicles and nonroad

[[Page 62374]]

construction equipment; the latter must be used in Title 23 projects 
based in nonattainment or maintenance areas for either PM or ozone.\48\
---------------------------------------------------------------------------

    \46\ 23 U.S.C. 149(f)(3) (SAFETEA-LU Sec.  1808(d)).
    \47\ 23 U.S.C. 149(f)(2) (SAFETEA-LU Sec.  1808(d)).
    \48\ 23 U.S.C. 149(b)(7) (SAFETEA-LU Sec.  1808(b)).
---------------------------------------------------------------------------

    There are a number of project types in the diesel retrofit area for 
which CMAQ funds are eligible. Assuming all other CMAQ criteria are 
met, eligible projects include diesel engine replacement; full engine 
rebuilding and reconditioning; and purchase and installation of after-
treatment hardware, including particulate matter traps and oxidation 
catalysts, and other technologies; and support for heavy-duty vehicle 
retirement programs. Project agreements involving replacements of 
either engine or full vehicle should include a provision for disposal 
of the engine block and a process to verify the retirement of this 
equipment.\49\
---------------------------------------------------------------------------

    \49\ Reimbursement of costs for full-vehicle replacement may be 
limited to those elements that lead to emission reductions.
---------------------------------------------------------------------------

    CMAQ funds may be used to purchase and install emission control 
equipment on school buses. (Such projects, generally, should be 
administered by FHWA; see VII.D.5, Transit Improvements, above.) In 
addition, although CMAQ funds should not be used for the initial 
purchase of airport parking lot shuttles, funds may be used for 
purchase and installation of after treatment hardware or repowering 
(with a hybrid drive train, for example).
    Refueling is not eligible as a stand-alone project, but is eligible 
if it is required to support the installation of emissions control 
equipment, repowering, rebuilding, or other retrofits of non-road 
engines.\50\ For example, ultra-low sulfur diesel (ULSD) may be 
purchased as part of a project to install diesel particulate filters on 
nonroad construction equipment because these devices need ULSD to 
function properly. Costs associated with ULSD are eligible for CMAQ 
funding only until the standards are effective and the fuel becomes 
commonly available through the regional supply and logistics chain, 
effectively rendering ULSD the only remaining diesel fuel distributed. 
Eligible costs are limited to the difference between standard nonroad 
diesel fuel and ULSD.
---------------------------------------------------------------------------

    \50\ 23 U.S.C. 149(f) (SAFETEA-LU Sec.  1808(d)).
---------------------------------------------------------------------------

    In addition to equipment and technology, outreach activities that 
provide information exchange and technical assistance to diesel owners 
and operators on retrofit options are eligible investments. These 
projects could include the actual education and outreach program, 
construction or acquisition of appropriate buildings, and other efforts 
to promote the use of retrofit technologies. Please see Appendix 4 for 
more detail on diesel retrofits and the various strategies available in 
this developing air quality field.
    The FHWA acknowledges that diesel retrofit projects may include 
nonroad mobile source endeavors, which traditionally have been outside 
the Federal-aid process. However, the SAFETEA-LU clarifies CMAQ 
eligibility for nonroad diesel retrofit projects.\51\ Areas that fund 
these projects are not required to take credit for the projects in the 
transportation conformity process. For areas that want to take credit, 
the EPA developed guidance for estimating diesel retrofit emission 
reductions and for applying the credit in the SIP and transportation 
conformity processes. The guidance can be found at http://www.epa.gov/
otaq/stateresources/transconf/policy.htm#retrofit.
---------------------------------------------------------------------------

    \51\ 23 U.S.C. 149(b)(7) (SAFETEA-LU Sec.  1808(b)).
---------------------------------------------------------------------------

    In addition to retrofit projects, upgrading long-haul heavy-duty 
diesel trucks with advanced technologies, such as idle reduction 
devices, cab and trailer aerodynamic fixtures, and single-wide or other 
efficient tires, has been demonstrated by the EPA's Smart Way Transport 
Partnership Program to reduce NOX emissions and save fuel. 
These strategies also are eligible for CMAQ support. Such projects 
funded directly by CMAQ that involve the private sector should be part 
of a Public-Private Partnership, as discussed in Section VII.C.
13. Idle Reduction
    Idle reduction projects that reduce emissions and are located 
within, or in proximity to and primarily benefiting, a nonattainment or 
maintenance area are eligible for CMAQ investment (The geographic 
requirement mainly applies to off-board projects, i.e., truck stop 
electrification (TSE) efforts). However, if CMAQ funding is used for an 
on-board project (i.e., auxiliary power units, direct fired heaters, 
etc.) the vehicle--usually a heavy-duty truck--should travel within, or 
in proximity to and primarily benefiting, a nonattainment or 
maintenance area.
    There have been several instances where operating assistance funds 
have been requested for TSE services. CMAQ funding to date for TSE 
projects has been limited to capital costs (i.e. deployment of TSE 
infrastructure). Operating assistance for TSE projects should not be 
funded under the CMAQ program because TSE projects generate their own 
revenue stream and therefore should be able to cover all operating 
expenses from the accumulated revenue. See Section III.D for 
information on innovative financing opportunities available for these 
efforts.
    The SAFETEA-LU also permits electrification or other idling 
reduction facilities and equipment to be constructed or located on 
rights-of-way of the Interstate system.\52\ Prior to the enactment of 
the SAFETEA-LU, this activity was prohibited.
---------------------------------------------------------------------------

    \52\ 23 U.S.C. 111(d) (SAFETEA-LU Sec.  1412).
---------------------------------------------------------------------------

    The EPA issued guidance in January 2004 on methods for calculating 
emissions reduction credits in SIPs and in the transportation 
conformity process for long-haul truck idle reduction projects. The 
guidance can be found at http://www.epa.gov/smartway/idlingimpacts.htm.
14. Training
    The SAFETEA-LU provides that States and MPOs may use Federal-aid 
funds to support training and educational development for the 
transportation workforce.\53\ The FHWA encourages State and local 
officials to weigh the air quality benefits of such training against 
other cost-effective strategies detailed elsewhere in this guidance 
before using CMAQ funds for this purpose. Training funded with CMAQ 
dollars should be directly related to implementing air quality 
improvements and be approved in advance by the FHWA Division office.
---------------------------------------------------------------------------

    \53\ 23 U.S.C. 504(e) (SAFETEA-LU Sec.  5204(e)).
---------------------------------------------------------------------------

15. Inspection/Maintenance (I/M) Programs
    Funds under the CMAQ program may be used to establish either 
publicly or privately owned I/M facilities. Eligible activities include 
construction of facilities, purchase of equipment, I/M program 
development, and one-time start-up activities, such as updating quality 
assurance software or developing a mechanic training curriculum. The I/
M program must constitute new or additional efforts,\54\ existing 
funding (including inspection fees) should not be displaced, and 
operating expenses are eligible for three years.
---------------------------------------------------------------------------

    \54\ 23 U.S.C. 149(b).
---------------------------------------------------------------------------

Privately Owned I/M Facilities
    In States that rely on privately owned I/M facilities, State or 
local I/M program-related administrative costs may be funded under the 
CMAQ program as in States that use public I/M facilities. However, CMAQ 
support to establish I/M facilities at privately owned stations, such 
as service stations

[[Page 62375]]

that own the equipment and conduct emission test-and-repair services, 
requires a public-private partnership (See Section VII.C.).
    The establishment of ``portable'' I/M programs, including remote 
sensing, is also eligible under the CMAQ program, provided that they 
are public services, reduce emissions, and do not conflict with 
statutory I/M requirements or EPA regulations.
16. Experimental Pilot Projects
    State and local organizations have experimented with various types 
of transportation services to better meet the travel needs of their 
constituents. These ``experimental'' projects may show promise in 
reducing emissions, but do not yet have supporting data. The FHWA has 
supported and funded some of these projects as demonstrations to 
determine their benefits and costs. These experimental pilots are not 
intended to bypass the definition of basic project eligibility but seek 
to better define the projects' future role in strategies to reduce 
emissions.
    For a project or program to qualify as an experimental pilot, it 
should be defined as a transportation project and be expected to reduce 
emissions by decreasing vehicle miles traveled (VMT), fuel consumption, 
congestion, or by other factors. The FHWA encourages States and MPOs to 
creatively address their air quality problems and to experiment with 
new services, innovative financing arrangements, public-private 
partnerships, and complementary approaches that use transportation 
strategies to reach clean air goals. The CMAQ program may be used to 
support a well-conceived project even if the proposal may not fully 
meet the eligibility criteria of this guidance.
    Given the untried nature of these pilot projects, before-and-after 
studies should be completed to determine actual project impacts on air 
quality as measured by net emissions reduced. These assessments should 
document the project's immediate impacts in addition to long-term 
benefits. A schedule for completing the study should be a part of the 
project agreement. Completed studies should be submitted to the FHWA 
Division office within three years of implementation of the project or 
one year after the project's completion, whichever is sooner.

VIII. Project Selection Process--General Conditions

    Proposals for CMAQ funding should include a precise description of 
the project, providing information on its size, scope, location, and 
timetable. Also, an assessment of the project's expected emission 
reduction benefits should be completed prior to project selection to 
better inform the selection of CMAQ projects (See Below).

A. Air Quality Analysis

1. Quantitative Analyses
    Quantified emissions benefits (i.e., emissions reductions) and 
disbenefits (i.e., emissions increases) should be included in all 
project proposals, except where it is not possible to quantify 
emissions benefits (see Qualitative Assessment, below). Benefits and 
disbenefits should be included for all pollutants for which the area is 
in nonattainment or maintenance status and should include appropriate 
precursor emissions. Benefits should be listed in a consistent fashion 
(i.e., kg/day) across projects to allow accurate comparison during the 
project selection process. Net benefits from all emissions sources 
involved should be included in the analysis. For example, in analyzing 
a commuter rail project, net benefits would include emissions 
reductions from the auto trips avoided, and emissions increases tied to 
locomotive operation.
    State and local transportation and air quality agencies conduct 
CMAQ-project air quality analyses with different approaches, analytical 
capabilities, and technical expertise. The SAFETEA-LU encourages State 
DOTs and MPOs to consult with State and local air quality agencies 
about the estimated emission reductions from CMAQ proposals.\55\ 
However, while no single method is specified, every effort must be 
taken to ensure that determinations of air quality benefits are 
credible and based on a reproducible and logical analytical 
procedure.\56\
---------------------------------------------------------------------------

    \55\ 23 U.S.C. 149(e) (SAFETEA-LU Sec.  1808(e)).
    \56\ 23 U.S.C. 149(b)(1); (SAFETEA-LU Sec.  1808(b)).
---------------------------------------------------------------------------

2. Qualitative Assessment
    Although quantitative analysis of air quality impacts is expected 
for almost all project types, an exception will be made when it is not 
possible to accurately quantify emissions benefits. In these cases, 
qualitative assessments based on reasoned and logical determinations 
that the projects or programs will decrease emissions and contribute to 
attainment or maintenance of a NAAQS are acceptable.
    Public education, marketing, and other outreach efforts, which can 
include advertising alternatives to SOV travel, employer outreach, and 
public education campaigns, may fall into this category. The primary 
benefit of these activities is enhanced communication and outreach that 
is expected to influence travel behavior, and thus air quality.
3. Analyzing Groups of Projects
    In some situations, it may be more appropriate to examine the 
impacts of comprehensive strategies to improve air quality by grouping 
projects. For example, transit improvements coupled with demand 
management to reduce SOV use in a corridor might best be analyzed 
together. Other examples include linked signalization projects, transit 
improvements, marketing and outreach programs, and ridesharing programs 
that affect an entire region or corridor.
4. Tradeoffs
    As noted above, emissions benefits should be calculated for all 
pollutants for which an area is in nonattainment or maintenance status. 
Some potential projects may lead to benefits for one pollutant and 
increased emissions for another, especially when the balance involves 
precursors such as NOX and VOC. States and MPOs should 
consult with relevant air agencies to weigh the net benefits of the 
project.

IX. Program Administration

A. Project Selection--MPO and State Responsibilities

    CMAQ projects are selected by the State or the MPO. MPOs, State 
DOTs, and transit agencies should develop CMAQ project selection 
processes in accordance with the metropolitan and/or statewide planning 
process. The selection process should involve State and/or local 
transportation and air quality agencies. This selection process 
provides an opportunity for States and/or local agencies to present a 
case for the selection of eligible projects that will best use CMAQ 
funding to meet the requirements and advance the goals of the Clean Air 
Act.
    The CMAQ project selection process should be transparent, in 
writing, and publicly available. The process should identify the 
agencies involved in rating proposed projects, clarify how projects are 
rated, and name the committee or group responsible for making the final 
recommendation to the MPO board or other approving body. The selection 
process should also clearly identify the basis for rating projects, 
including emissions benefits, cost effectiveness, and any other 
ancillary selection factors such as congestion relief, greenhouse gas 
reductions, safety, system preservation, access to opportunity, 
sustainable development and freight, reduced SOV reliance, multi-modal 
benefits, and others. At a minimum,

[[Page 62376]]

projects should be identified by year and proposed funding source.
    Close coordination is encouraged between the State and MPO to 
ensure that CMAQ funds are used appropriately and to maximize their 
effectiveness in meeting the CAA requirements. While the program of 
projects is being developed, the State or MPO should consult with FHWA 
and FTA to resolve any questions about eligibility. This will ensure 
that the projects programmed for CMAQ funding in the TIP are all 
eligible.
    States and MPOs should fulfill this responsibility so that 
nonattainment and maintenance areas are able to make good-faith efforts 
to attain and maintain the NAAQS by the prescribed deadlines. State 
DOTs and MPOs should consult with State and local air quality agencies 
to develop an appropriate project list of CMAQ programming priorities 
that will have the greatest impact on air quality. In developing this 
list, MPOs and States should evaluate the cost-effectiveness of the 
projects and give priority consideration to those that will create the 
greatest emissions reductions for the least cost. The SAFETEA-LU calls 
out diesel retrofits as one type of cost-effective project to which 
priority consideration shall be given. The EPA has conducted a study of 
the cost-effectiveness of diesel retrofits in reducing PM, 
NOX, and VOC emissions.\57\ In addition, the National 
Academy of Science's Transportation Research Board has evaluated the 
cost-effectiveness of other CMAQ eligible projects, with a focus on 
NOX and HC reductions. This study can be found at http://
www.fhwa.dot.gov/environment/cmaqpgs/index.htm. Information on the 
cost-effectiveness of CMAQ-eligible projects can be used as a guidepost 
in evaluating the different types of projects under consideration by an 
MPO or State. However, cost-effectiveness ultimately will depend on 
local conditions and project specific factors that affect emission 
reductions and costs.
---------------------------------------------------------------------------

    \57\ More information is available at http://www.epa.gov/
cleandiesel/publications.htm.
---------------------------------------------------------------------------

B. Federal Agency Responsibilities and Coordination

1. Eligibility Determinations
    The FTA determines the eligibility of transit projects, and the 
FHWA determines the eligibility of all other projects. The FHWA, FTA, 
and EPA field offices should establish and maintain a consultation and 
coordination process to review CMAQ funding proposals as needed. While 
the eligibility determination is not made jointly, every effort should 
be made to satisfy the concerns raised by the agencies' field offices. 
The FHWA or FTA field offices may request additional information from 
the State or MPO to help determine eligibility. The consultation 
process should provide for timely review and handling of CMAQ funding 
proposals. The FHWA and FTA headquarters offices are available to 
consult with their field offices on eligibility determinations.
2. Program Administration
    The FHWA Division offices and the FTA Regional offices are 
responsible for administering the CMAQ program. In general, the FHWA 
transfers funds to the FTA to administer CMAQ-funded transit projects. 
In cases where the FTA lacks statutory authority (e.g., school bus 
fleets), the FHWA will administer the transit project. For projects 
that involve transit and non-transit elements, such as park-and-ride 
lots and intermodal passenger projects, the administering agency is 
decided on a case-by-case basis. All other projects are administered by 
the FHWA.
3. Tracking Mandatory/Flexible Funds
    The FHWA Division office is responsible for tracking obligation of 
mandatory and flexible CMAQ funds in appropriate areas (See Section 
V.B.).

C. Annual Reports

    States should prepare annual reports detailing how CMAQ funds have 
been invested. CMAQ reporting is not only useful for the FHWA, the FTA, 
and the general public, but maintenance of a cumulative database of all 
CMAQ projects is required by SAFETEA-LU. In addition, the annual 
reports will be key in developing the CMAQ Evaluation and Assessment, a 
major research effort designed to gauge the impact of the program, and 
also required by the statute.\58\
---------------------------------------------------------------------------

    \58\ 23 U.S.C. 149(h) (SAFETEA-LU Sec.  1808(f)).
---------------------------------------------------------------------------

    CMAQ annual reports should be submitted through the Web-based CMAQ 
Tracking System. More information on the CMAQ system is available at: 
http://www.fhwa.dot.gov/environment/cmaqpgs/usersguidemail.htm.
    The FHWA Division offices, State DOTs, and MPOs should develop a 
process for entering and approving the data in a timely manner. This 
report should be approved by the FHWA Division office by the first day 
of March following the end of the previous Federal fiscal year 
(September 30) and cover all CMAQ obligations for that fiscal year. 
Thus, State DOTs and MPOs should report the data early enough that the 
Division office has time to review and comment on the report. The 
report as entered into the CMAQ Tracking System should include:
    1. A list of projects funded under CMAQ, in seven main project 
categories:
     Transit: Facilities, vehicles, and equipment, operating 
assistance for new transit service, etc. Include all transit projects 
whether administered by the FTA or the FHWA.
     Shared Ride: Vanpool and carpool programs and parking for 
shared-ride services.
     Traffic Flow Improvements: Traffic management and control 
services, signalization projects, ITS projects, intersection 
improvements, and construction or dedication of HOV lanes.
     Demand Management: Trip reduction programs, transportation 
management plans, flexible work schedule programs, vehicle restriction 
programs.
     Pedestrian/Bicycle: Bikeways, storage facilities, 
promotional activities.
     I/M and other TCMs: Projects not covered by the above 
categories.
     STP/CMAQ: Projects funded with flexible funds.
    For reporting purposes, obligations for all CMAQ-eligible phases 
(beginning with the NEPA process) should be reported for the project 
they support.
    2. The amount of CMAQ funds obligated or deobligated for each 
project during the Federal fiscal year. Enter deobligations as a 
negative number. (Do not include Advance Construct funds, as these are 
not obligations of federal CMAQ funds. Such projects should be reported 
later when converted to CMAQ funds.)
    3. Emissions benefits (and disbenefits) for each project developed 
from project-level analyses. Report projected emissions benefits 
expected to occur in the first year that a project is fully 
operational, in kilograms reduced per day. Benefits should be reported 
the first time a project is entered into the system, and only then to 
avoid double counting of benefits. (Because funds may be obligated for 
a project over several years, an individual CMAQ project may show up in 
reports for multiple years.) Additionally, address all pollutants for 
which the area is in nonattainment or maintenance status. Do not enter 
emissions benefits for deobligations or projects funded with flexible 
funds (STP/CMAQ).
    4. Public-private partnerships and experimental pilot projects 
should be identified in the system. Transmit electronic versions of 
completed before-

[[Page 62377]]

and-after studies for experimental pilot projects to the Division 
offices (See Section VII.D.16., Experimental Pilot Projects).
    5. Other required information: MPO, nonattainment/maintenance area, 
project description.
    6. Optional information: TIP, State and/or FMIS project numbers--
highly recommended. Other optional information includes: Greenhouse gas 
emission reductions, cost effectiveness, safety, congestion relief, and 
other ancillary benefits.

Appendix 1: 23 U.S.C. 149

SAFETEA-LU Changes in Underlined Italics

    Sec.  149. Congestion mitigation and air quality improvement 
program
    (a) Establishment.--The Secretary shall establish and implement 
a congestion mitigation and air quality improvement program in 
accordance with this section.
    (b) Eligible Projects.--Except as provided in subsection (c), a 
State may obligate funds apportioned to it under section 104 (b)(2) 
for the congestion mitigation and air quality improvement program 
only for a transportation project or program if the project or 
program is for an area in the State that is or was designated as a 
nonattainment area for ozone, carbon monoxide, or particulate matter 
under section 107(d) of the Clean Air Act (42 U.S.C. 7407 (d)) and 
classified pursuant to section 181(a), 186(a), 188(a), or 188(b) of 
the Clean Air Act (42 U.S.C. 7511 (a), 7512 (a), 7513 (a), or 7513 
(b)) or is or was designated as a nonattainment area under such 
section 107 (d) after December 31, 1997, or is required to prepare, 
and file with the Administrator of the Environmental Protection 
Agency, maintenance plans under the Clean Air Act (42 U.S.C. 7401 et 
seq.) and--
    (1)(A)(i) if the Secretary, after consultation with the 
Administrator determines, on the basis of information published by 
the Environmental Protection Agency pursuant to section 108(f)(1)(A) 
of the Clean Air Act (other than clause (xvi)) that the project or 
program is likely to contribute to--
    (I) The attainment of a national ambient air quality standard; 
or
    (II) the maintenance of a national ambient air quality standard 
in a maintenance area; and
    (ii) a high level of effectiveness in reducing air pollution, in 
cases of projects or programs where sufficient information is 
available in the database established pursuant to subsection (h) to 
determine the relative effectiveness of such projects or programs; 
or,
    (B) in any case in which such information is not available, if 
the Secretary, after such consultation, determines that the project 
or program is part of a program, method, or strategy described in 
such section 108(f)(1)(A);
    (2) if the project or program is included in a State 
implementation plan that has been approved pursuant to the Clean Air 
Act and the project will have air quality benefits;
    (3) the Secretary, after consultation with the Administrator of 
the Environmental Protection Agency, determines that the project or 
program is likely to contribute to the attainment of a national 
ambient air quality standard, whether through reductions in vehicle 
miles traveled, fuel consumption, or through other factors;
    (4) to establish or operate a traffic monitoring, management, 
and control facility or program if the Secretary, after consultation 
with the Administrator of the Environmental Protection Agency, 
determines that the facility or program, including advanced truck 
stop electrification systems, is likely to contribute to the 
attainment of a national ambient air quality standard; (removed 
``or'')
    (5) if the program or project improves traffic flow, including 
projects to improve signalization, construct high occupancy vehicle 
lanes, improve intersections, improve transportation systems 
management and operations that mitigate congestion and improve air 
quality, and implement intelligent transportation system strategies 
and such other projects that are eligible for assistance under this 
section on the day before the date of enactment of this paragraph;
    (6) if the project or program involves the purchase of 
integrated, interoperable emergency communications equipment; or
    (7) if the project or program is for--
    (A) the purchase of diesel retrofits that are--
    (i) for motor vehicles (as defined in section 216 of the Clean 
Air Act (42 U.S.C. 7550)); or
    (ii) published in the list under subsection (f)(2) for non-road 
vehicles and non-road engines (as defined in section 216 of the 
Clean Air Act (42 U.S.C. 7550)) that are used in construction 
projects that are--
    (I) located in nonattainment or maintenance areas for ozone, 
PM10, or PM2.5 (as defined under the Clean Air 
Act (42 U.S.C. 7401 et seq.)); and
    (II) funded, in whole or in part, under this title; or
    (B) the conduct of outreach activities that are designed to 
provide information and technical assistance to the owners and 
operators of diesel equipment and vehicles regarding the purchase 
and installation of diesel retrofits.
    No funds may be provided under this section for a project which 
will result in the construction of new capacity available to single 
occupant vehicles unless the project consists of a high occupancy 
vehicle facility available to single occupant vehicles only at other 
than peak travel times. In areas of a State which are nonattainment 
for ozone or carbon monoxide, or both, and for PM-10 resulting from 
transportation activities, the State may obligate such funds for any 
project or program under paragraph (1) or (2) without regard to any 
limitation of the Department of Transportation relating to the type 
of ambient air quality standard such project or program addresses.
    (c) States Receiving Minimum Apportionment.--
    (1) States without a nonattainment area.--If a State does not 
have, and never has had, a nonattainment area designated under the 
Clean Air Act (42 U.S.C. 7401 et seq.), the State may use funds 
apportioned to the State under section 104 (b)(2) for any project in 
the State that--
    (A) would otherwise be eligible under this section as if the 
project were carried out in a nonattainment or maintenance area; or
    (B) is eligible under the surface transportation program under 
section 133.
    (2) States with a nonattainment area.--If a State has a 
nonattainment area or maintenance area and receives funds under 
section 104 (b)(2)(D) above the amount of funds that the State would 
have received based on its nonattainment and maintenance area 
population under subparagraphs (B) and (C) of section 104 (b)(2), 
the State may use that portion of the funds not based on its 
nonattainment and maintenance area population under subparagraphs 
(B) and (C) of section 104 (b)(2) for any project in the State 
that--
    (A) would otherwise be eligible under this section as if the 
project were carried out in a nonattainment or maintenance area; or
    (B) is eligible under the surface transportation program under 
section 133.
    (d) Applicability of Planning Requirements.--Programming and 
expenditure of funds for projects under this section shall be 
consistent with the requirements of sections 134 and 135 of this 
title.
    (e) Partnerships With Nongovernmental Entities.--
    (1) In general.--Notwithstanding any other provision of this 
title and in accordance with this subsection, a metropolitan 
planning organization, State transportation department, or other 
project sponsor may enter into an agreement with any public, 
private, or nonprofit entity to cooperatively implement any project 
carried out under this section.
    (2) Forms of participation by entities.--Participation by an 
entity under paragraph (1) may consist of--
    (A) Ownership or operation of any land, facility, vehicle, or 
other physical asset associated with the project;
    (B) cost sharing of any project expense;
    (C) carrying out of administration, construction management, 
project management, project operation, or any other management or 
operational duty associated with the project; and
    (D) any other form of participation approved by the Secretary.
    (3) Allocation to entities.--A State may allocate funds 
apportioned under section 104 (b)(2) to an entity described in 
paragraph (1).
    (4) Alternative fuel projects.--In the case of a project that 
will provide for the use of alternative fuels by privately owned 
vehicles or vehicle fleets, activities eligible for funding under 
this subsection--
    (A) May include the costs of vehicle refueling infrastructure, 
including infrastructure that would support the development, 
production, and use of emerging technologies that reduce emissions 
of air pollutants from motor vehicles, and other capital investments 
associated with the project;
    (B) shall include only the incremental cost of an alternative 
fueled vehicle, as compared to a conventionally fueled vehicle, that 
would otherwise be borne by a private party; and

[[Page 62378]]

    (C) shall apply other governmental financial purchase 
contributions in the calculation of net incremental cost.
    (5) Prohibition on federal participation with respect to 
required activities.--A Federal participation payment under this 
subsection may not be made to an entity to fund an obligation 
imposed under the Clean Air Act (42 U.S.C. 7401 et seq.) or any 
other Federal law.
    (f) Cost-Effective Emission Reduction Guidance.--
    (1) Definitions.--In this subsection, the following definitions 
apply:
    (A) Administrator.--The term `Administrator' means the 
Administrator of the Environmental Protection Agency.
    (B) Diesel retrofit.--The term `diesel retrofit' means a 
replacement, repowering, rebuilding, after treatment, or other 
technology, as determined by the Administrator.
    (2) Emission reduction guidance.--The Administrator, in 
consultation with the Secretary, shall publish a list of diesel 
retrofit technologies and supporting technical information for--
    (A) Diesel emission reduction technologies certified or verified 
by the Administrator, the California Air Resources Board, or any 
other entity recognized by the Administrator for the same purpose;
    (B) diesel emission reduction technologies identified by the 
Administrator as having an application and approvable test plan for 
verification by the Administrator or the California Air Resources 
Board that is submitted not later that 18 months of the date of 
enactment of this subsection;
    (C) available information regarding the emission reduction 
effectiveness and cost effectiveness of technologies identified in 
this paragraph, taking into consideration air quality and health 
effects.
    (3) Priority.--
    (A) In general.--States and metropolitan planning organizations 
shall give priority in distributing funds received for congestion 
mitigation and air quality projects and programs from apportionments 
derived from application of sections 104(b)(2)(B) and 104(b)(2)(C) 
to--
    (i) diesel retrofits, particularly where necessary to facilitate 
contract compliance, and other cost-effective emission reduction 
activities, taking into consideration air quality and health 
effects; and
    (ii) cost-effective congestion mitigation activities that 
provide air quality benefits.
    (B) Savings.--This paragraph is not intended to disturb the 
existing authorities and roles of governmental agencies in making 
final project selections.
    (4) No effect on authority or restrictions.--Nothing in this 
subsection modifies or otherwise affects any authority or 
restriction established under the Clean Air Act (42 U.S.C. 7401 et 
seq.) or any other law (other than provisions of this title relating 
to congestion mitigation and air quality).
    (g) Interagency Consultation.--The Secretary shall encourage 
States and metropolitan planning organizations to consult with State 
and local air quality agencies in nonattainment and maintenance 
areas on the estimated emission reductions from proposed congestion 
mitigation and air quality improvement programs and projects.
    (h) Evaluation and Assessment of Projects.--
    (1) In general.--The Secretary, in consultation with the 
Administrator of the Environmental Protection Agency, shall evaluate 
and assess a representative sample of projects funded under the 
congestion mitigation and air quality program to--
    (A) determine the direct and indirect impact of the projects on 
air quality and congestion levels; and
    (B) ensure the effective implementation of the program.
    (2) Database.--Using appropriate assessments of projects funded 
under the congestion mitigation and air quality program and results 
from other research, the Secretary shall maintain and disseminate a 
cumulative database describing the impacts of the projects.
    (3) Consideration.--The Secretary, in consultation with the 
Administrator, shall consider the recommendations and findings of 
the report submitted to Congress under section 1110(e) of the 
Transportation Equity Act for the 21st Century (112 Stat. 144), 
including recommendations and findings that would improve the 
operation and evaluation of the congestion mitigation and air 
quality improvement program.

SAFETEA-LU Section 1808: Additional Provisions

    The following provisions were included in the SAFETEA-LU Section 
1808. These provisions do not amend 23 U.S.C. and therefore sunset 
when the SAFETEA-LU expires. To avoid confusion, they are presented 
here separate from the rest of the statutory text.
    (g) Flexibility in the State of Montana.--The State of Montana 
may use funds apportioned under section 104(b)(2) of title 23, 
United States Code, for the operation of public transit activities 
that serve a nonattainment or maintenance area.
    (h) Availability of Funds for State of Michigan.--The State of 
Michigan may use funds apportioned under section 104(b)(2) of such 
title for the operation and maintenance of intelligent 
transportation system strategies that serve a nonattainment or 
maintenance area.
    (i) Availability of Funds for the State of Maine.--The State of 
Maine may use funds apportioned under section 104(b)(2) of such 
title to support, through September 30, 2009, the operation of 
passenger rail service between Boston, Massachusetts, and Portland, 
Maine.
    (j) Availability of Funds for Oregon.--The State of Oregon may 
use funds apportioned on or before September 30, 2009, under section 
104(b)(2) of such title to support the operation of additional 
passenger rail service between Eugene and Portland.
    (k) Availability of Funds for Certain Other States.--The States 
of Missouri, Iowa, Minnesota, Wisconsin, Illinois, Indiana, and Ohio 
may use funds apportioned under section 104(b)(2) of such title to 
purchase alternative fuel (as defined in section 301 of the Energy 
Policy Act of 1992 (42 U.S.C. 13211)) or biodiesel.

Appendix 2: 23 U.S.C. 104(b)(2) Apportionment

    (2) Congestion mitigation and air quality improvement program.--
    (A) In general.--For the congestion mitigation and air quality 
improvement program, in the ratio that--
    (i) the total of all weighted nonattainment and maintenance area 
populations in each State; bears to
    (ii) the total of all weighted nonattainment and maintenance 
area populations in all States.
    (B) Calculation of weighted nonattainment and maintenance area 
population.-Subject to subparagraph (C), for the purpose of 
subparagraph (A), the weighted nonattainment and maintenance area 
population shall be calculated by multiplying the population of each 
area in a State that was a nonattainment area or maintenance area as 
described in section 149(b) for ozone or carbon monoxide by a factor 
of--
    (i) 1.0 if, at the time of apportionment, the area is a 
maintenance area;
    (ii) 1.0 if, at the time of the apportionment, the area is 
classified as a marginal ozone nonattainment area under subpart 2 of 
part D of title I of the Clean Air Act (42 U.S.C. 7511 et seq.);
    (iii) 1.1 if, at the time of the apportionment, the area is 
classified as a moderate ozone nonattainment area under such 
subpart;
    (iv) 1.2 if, at the time of the apportionment, the area is 
classified as a serious ozone nonattainment area under such subpart;
    (v) 1.3 if, at the time of the apportionment, the area is 
classified as a severe ozone nonattainment area under such subpart;
    (vi) 1.4 if, at the time of the apportionment, the area is 
classified as an extreme ozone nonattainment area under such 
subpart;
    (vii) 1.0 if, at the time of the apportionment, the area is not 
a nonattainment or maintenance area as described in section 149(b) 
for ozone, but is classified under subpart 3 of part D of title I of 
such Act (42 U.S.C. 7512 et seq.) as a nonattainment area described 
in section 149(b) for carbon monoxide; or
    (viii) 1.0 if, at the time of apportionment, an area is 
designated as nonattainment for ozone under subpart 1 of part D of 
title I of such Act (42 U.S.C. 7512 et seq.).
    (C) Additional Adjustment for Carbon Monoxide Areas.--If, in 
addition to being designated as a nonattainment or maintenance are 
for ozone as described in section 149(b), any county within the area 
was also classified under subpart 3 of part D of title I of the 
Clean Air Act (42 U.S.C. 7512 et seq.) as a nonattainment or 
maintenance area described in section 149(b) for carbon monoxide, 
the weighted nonattainment or maintenance area population of the 
county, as determined under clauses (i) through (vi) or clause 
(viii) of subparagraph (B), shall be further multiplied by a factor 
of 1.2.
    (D) Minimum apportionment.--Notwithstanding any other provision 
of this paragraph, each State shall receive a minimum of \1/2\ of 1 
percent of the funds apportioned under this paragraph.
    (E) Determinations of population.--In determining population 
figures for the

[[Page 62379]]

purposes of this paragraph, the Secretary shall use the latest 
available annual estimates prepared by the Secretary of Commerce.

Appendix 3: Considerations for Diesel Retrofit Projects

    The term diesel retrofit includes any technology or system that 
achieves emission reductions beyond that required by the EPA 
regulations at the time of engine certification. Assuming all other 
criteria are met, eligible diesel retrofit projects include the 
replacement of high-emitting vehicles/equipment with cleaner 
vehicles/equipment (including hybrid or alternative fuel models), 
repowering or engine replacement, rebuilding the engine to a cleaner 
standard, the purchase and installation of advanced emissions 
control technologies (such as particulate matter traps or oxidation 
catalysts) or the use of a cleaner fuel to support eligible nonroad 
devices. The legislation defines retrofit projects as applicable to 
both on-road motor vehicles and nonroad construction equipment. 
Retrofit strategies include:

Emissions Control Technologies

    The EPA and the California Air Resources Board (CARB) have 
retrofit technology verification programs that evaluate the 
performance of advanced emissions control technologies and engine 
rebuild kits. CMAQ-funded diesel retrofit projects must use retrofit 
technologies that are verified under the EPA's Voluntary Diesel 
Retrofit Program or CARB.\59\ A list of EPA-verified technologies is 
available at http://www.epa.gov/otaq/retrofit/retroverifiedlist.htm. 
CARB's verification program can be found at http://www.arb.ca.gov/
diesel/verdev/home/home.htm. In addition, for more detailed 
information on the cost-effectiveness of various diesel retrofit 
technologies, the EPA's study, ``The Cost-Effectiveness of Heavy-
Duty Diesel Retrofits and Other Mobile Source Emission Reduction 
Projects and Programs'' can be found at: http://www.epa.gov/
cleandiesel/publications.htm.
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    \59\ 23 U.S.C. 149(b)(7) (SAFETEA-LU Sec.  1808(b)).
---------------------------------------------------------------------------

Refueling

    Refueling is eligible when combined with an overall diesel 
retrofit project for which the cleaner fuel is required. For 
example, ultra-low sulfur diesel (ULSD) may be purchased as part of 
a project to install diesel particulate filters on highway 
construction equipment only because these devices require ULSD to 
function properly.
    Fuel-related technologies identified in EPA's list of retrofit 
strategies are eligible only until standards for such clean fuel are 
effective. For example, ULSD is eligible for CMAQ only until the 
standard is effective. For on-road use, ULSD is mandated for use in 
October 2006. According to EPA's regulatory development calendar, 
low sulfur diesel (500 ppm of sulfur) will be required for nonroad 
use in 2007, while ULSD (15 ppm of sulfur) will be required for 
nonroad use in 2010.

Vehicle/Equipment Replacement Projects

    Replacement projects occur when older vehicles/equipment are 
replaced with cleaner vehicles/equipment before they would have been 
removed through normal fleet turnover or attrition. The vehicle or 
equipment being replaced should be scrapped or the engine 
remanufactured to a cleaner standard. For areas that want to take 
credit in the SIP and transportation conformity processes for these 
projects, see the EPA's retrofit guidance at: http://www.epa.gov/
otaq/stateresources/transconf/policy.htm#retrofit.
    Generally, the replacement vehicle or equipment would perform 
the same function as the vehicle or equipment that is being replaced 
(e.g., an excavator used to dig pipelines or utility trenches would 
be replaced by an excavator that continues these duties).
    In addition, the vehicle or equipment being replaced would be in 
good working order and able to perform the duties of the new vehicle 
or equipment. Removing vehicles that no longer function or are at 
the end or their useful life will not lead to an emissions 
reduction.

Repower or Engine Replacement Projects

    Engine replacement projects involve the replacement of an older, 
higher emitting engine with a newer, cleaner engine. Engine 
replacements can also be combined with emission control 
technologies. The engines being replaced should be scrapped or 
remanufactured to a cleaner standard. As noted above, for areas that 
want to take credit in the SIP and transportation conformity 
processes for these projects, see EPA's retrofit guidance at: http:/
/www.epa.gov/otaq/stateresources/transconf/policy.htm#retrofit.
    New engines also must be EPA-certified.\60\ For a complete list 
of all EPA certified large highway and nonroad engines, please 
consult the list at http://www.epa.gov/otaq/certdata.htm.
---------------------------------------------------------------------------

    \60\ 23 U.S.C. 149(b)(7) (SAFETEA-LU Sec.  1808(b)).
---------------------------------------------------------------------------

    For more information on diesel retrofits, please see the EPA's 
National Clean Diesel Campaign Web site at http://www.epa.gov/
cleandiesel/.

 [FR Doc. E8-24704 Filed 10-17-08; 8:45 am]
BILLING CODE 4910-22-P