PROPOSED RULES
Before an agency may permanently adopt a new or amended section or repeal an 
existing section, a proposal detailing the action must be published in the Texas 
Register at least 30 days before action is taken. The 30-day time period gives 
interested persons an opportunity to review and make oral or written comments on 
the section. Also, in the case of substantive action, a public hearing must be 
granted if requested by at least 25 persons, a governmental subdivision or 
agency, or an association having at least 25 members.
Symbology in proposed amendments. New language added to an existing section is 
indicated by the use of bold text. [Brackets] indicate deletion of existing 
material within a section.

TITLE 10. COMMUNITY DEVELOPMENT
PART I. Texas Department of Housing and Community Affairs 
CHAPTER 9.Texas Community Development Program
SUBCHAPTER A.Allocation of Program Funds
10 TAC sec.sec.9.1-9.4, 9.6, 9.7, 9.8, 9.9, 9.10
The Texas Department of Housing and Community Affairs (TDHCA) proposes 
amendments to sec.sec.9.1-9.4, 9.6, 9.7, 9.8, 9.9, and 9.10, concerning the 
allocation of Community Development Block Grant (CDBG) non-entitlement area 
funds under the Texas Community Development Program (TCDP). The amendments are 
being proposed to establish the standards and procedures by which TDHCA will 
allocate fiscal year 1997 community development, Young v. Cisneros, 
planning/capacity building, urgent need, economic development, colonia, and, 
housing funds. The amendments are being proposed to make changes to the 
application and selection criteria for the program fund categories. 
Ruth Cedillo, director of the Texas Community Development Program, has 
determined that for the period that the sections are in effect there will be no 
fiscal implications for state or local government as a result of enforcing or 
administering the sections. 
Ms. Cedillo also has determined that for the period that the sections are in 
effect, the public benefit as a result of enforcing the sections will be the 
equitable allocation of CDBG non-entitlement area funds to eligible units of 
general local government in Texas. There will be no effect on small businesses. 
There are no anticipated economic costs to persons who are required to comply 
with the sections as proposed. 
Comments on the proposal may be submitted to Anne Paddock, Deputy General 
Counsel, Texas Department of Housing and Community Affairs, 507 Sabine, Austin, 
Texas 78711-3941. 
The amendments are proposed under Texas Government Code, Chapter 2306, 
sec.2306.098, which provides TDHCA with the authority to allocate Community 
Development Block Grant non-entitlement area funds to eligible counties and 
municipalities according to department rules. 
Texas Government Code, Chapter 2306, sec.2306.098 is affected by the proposed 
amendments. 

sec.9.1.General Provisions. 
(a) Definitions and abbreviations. The following words and terms, when used in 
this subchapter, shall have the following meanings, unless the context clearly 
indicates otherwise. 
(1) Applicant-A unit of general local government which is preparing to submit or 
has submitted an application for Texas Community Development funds to the 
Department<nl> or to the Texas Department of Commerce<ol>. 
(2)-(5) (No change.) 
(6) Contract-A written agreement, including all amendments thereto, executed by 
the Department<nl>, or by Commerce, <ol> and contractor which is funded with 
community development block grant nonentitlement area funds. 
(7) Contractor-A unit of general local government with which the Department 
<nl>or Commerce <ol>has executed a contract. 
(8)-(19) (No change.)
(b) Overview-Community Development Block Grant nonentitlement area funds are 
distributed by the Texas Community Development Program to eligible units of 
general local government in the following program areas:
(1) (No change.)
(2) Texas Capital fund<nl>.<ol>[;] <nl> The Texas Capital Fund is administered 
by Commerce under an interagency agreement with the Department. Applications for 
the Texas Capital Fund shall be submitted to Commerce.<ol> 
(3)-(6) (No change.) 
(7) Young v. Cisneros fund<nl>;<ol>[. The Texas Capital Fund is administered by 
Commerce under an interagency agreement with the Department. Applications for 
the Texas Capital Fund shall be submitted to Commerce.] 
(8) housing [demonstration ]fund<nl>;<ol>[.] 
<nl>(9)<ol> <nl> small towns environment program fund.<ol> 
(c) Types of applications. 
(1) Single jurisdiction applications. An applicant may submit one application 
per Texas Community Development Program fund, as outlined in subsection (b) of 
this section, on its own behalf<nl>, or as a participant in a multi-
jurisdictional application,<ol> per funding cycle (except as specified for the 
Texas Capital Fund<nl>, community development fund, housing fund, colonia fund, 
and small towns environment program fund<ol>). 
<nl>(A)<ol> A city may submit a single jurisdiction application that includes 
beneficiaries located within the extraterritorial jurisdiction of the city. 
However, the applicant must document that each activity benefitting persons 
located in its extraterritorial jurisdiction is meeting its community and 
housing development needs, including the needs of low and moderate income 
persons. A city cannot submit a single jurisdiction application that includes 
beneficiaries located inside the corporate city limits and outside of the city's 
extraterritorial jurisdiction. In this instance, the city and county in which 
the beneficiaries outside of the city's extraterritorial jurisdiction are 
located must submit the project as a multi-jurisdiction application. 
<nl>(B)<ol> <nl>A county may submit an application on behalf of an incorporated 
city when the proposed application activities provide improvements to a public 
facility or service that is not owned or operated by the incorporated city and 
the persons benefitting from the application activities are located within the 
city's corporate city limits or the city's extraterritorial jurisdiction. If a 
county submits an application on behalf of an incorporated city, then the county 
and that city cannot submit another single jurisdiction application or be a 
participating jurisdiction in a multi-jurisdiction application submitted under 
the same Texas Community Development Program fund category. <ol>
<nl>(C)<ol> <nl>A county may submit a single jurisdiction application for a 
housing rehabilitation program that includes the rehabilitation of housing units 
in unincorporated areas and incorporated cities located in the county. The 
housing units that are rehabilitated under the county program must be located in 
unincorporated areas and in each incorporated city that is included as a 
participant in the county housing rehabilitation program. If a county submits a 
housing rehabilitation program application that includes the rehabilitation of 
housing units in incorporated cities, then the county cannot submit another 
single jurisdiction application or be a participating jurisdiction in a multi-
jurisdiction application submitted under the same Texas Community Development 
Program fund category. <ol>
(2) Multi jurisdiction applications. Subject to each participating community 
satisfying the application requirements of the Texas Community Development 
Program fund under which the application is submitted and this paragraph, an 
application will be accepted from two or more units of general local government 
if the application clearly demonstrates that the proposed activities will 
mutually benefit the residents of the communities applying for funds. A multi-
jurisdiction application solely for administrative convenience will not be 
accepted. Any community participating in a multi-jurisdiction application may 
not submit a single jurisdiction application under the project fund for which 
the multi-jurisdiction application was submitted. One of the participating 
communities must be primarily accountable to the Department and Commerce, in 
instances where the Texas Capital Fund is accessed, for financial compliance and 
program performance. Only one unit of general local government may be the 
official applicant and this applicant must enter into a legally binding 
cooperation agreement with each participant that incorporates Texas Community 
Development Program requirements. A proposed project which is located in more 
than one jurisdiction or in which beneficiaries from more than one jurisdiction 
will be counted must be submitted as a multi-jurisdiction application (except as 
specified for the Texas Capital Fund and single jurisdiction applications 
<nl>described in subparagraphs (A)-(C) of paragraph (1) of this subsection<ol> 
[which include beneficiaries located in a city's extraterritorial 
jurisdiction]). 
[(3) Applications for the Texas Capital Fund shall be submitted to Commerce.] 
(d) Eligible location. Only projects or activities which are located in the 
nonentitlement areas of the state are eligible for funding under the Texas 
Community Development Program.<nl>The only exception is Hidalgo County, an 
entitlement county, which is eligible for the colonia fund.<ol>
(e) Ineligible activities. Any type of activity not described or referred to in 
the Federal Housing and Community Development Act of 1974, Section 5305(a) (42 
United States Code Section 5301 et seq.) is ineligible for funding under the 
Texas Community Development Program. Specific ineligible activities include, but 
are not limited to, construction of buildings and facilities used for the 
general conduct of government (e.g., city halls and courthouses); new housing 
construction, except as described as eligible under the current Texas Community 
Development Program application guides; the financing of political activities; 
purchases of construction equipment; income payments, such as housing 
allowances; most operation and maintenance expenses; pre-contract costs, except 
for costs incurred prior to submittal of an application and paid with local 
government or other funds for administrative consultant and 
engineering/architectural services; prisons (unless the prison is located on a 
federal military installation closed by the federal government since 1989);<nl> 
state-supported facilities (unless the activity addresses job creation/retention 
by a state-supported facility located on a federal military installation closed 
by the federal government since 1989); <ol> and racetracks. 
(f) Citizen Participation. 
(1) (No change.) 
(2) Application requirements. Prior to submitting a formal application, an 
applicant for Texas Community Development Program funding shall satisfy the 
following requirements. 
(A) At least one public hearing shall be held prior to <nl>the preparation 
of<ol>[ preparing] its application and <nl>a public notice shall be published in 
a newspaper having general circulation in the city or county notifying the 
public of the availability of the application for public review<ol>[at least one 
additional public hearing shall be held] prior to submitting its completed 
application to the Department and, in the case of Texas Capital Fund 
applications, to Commerce.
[(B) The public hearings must be held at least seven days apart.] 
[(C) At least one of the public hearings must be held in the proposed project 
area, except for incorporated cities with a population less than 5,000 persons 
and applications which include multiple project areas.]
<nl>(B)<ol>[(D)] An applicant shall retain documentation of the hearing notices, 
a list of attendees at each hearing, minutes of the hearings, and any other 
records concerning the proposed use of funds for a period of three years or 
until the project, if funded, is closed out. Such records must be made available 
to the public in accordance with Texas Government Code , Chapter 552. 
<nl>(C)<ol>[(E)] The [first ]public hearing must include a discussion with 
citizens on the development of housing and community development needs, the 
amount of funding available, all eligible activities under the Texas Community 
Development Program,<nl> the plans of the applicant to minimize displacement of 
persons and to assist persons actually displaced as a result of activities 
assisted with Texas Community Development Program funds,<ol> and the use of past 
Texas Community Development Program contract funds, if applicable. Citizens, 
with particular emphasis on persons of low and moderate income who are residents 
of slum and blight areas, shall be encouraged to submit their views and 
proposals regarding community development and housing needs. Local organizations 
that provide services or housing for low to moderate income persons, including 
but not limited to, the local or area Public Housing Authority, the local or 
area Health and Human Services office, and the local or area Mental Health and 
Mental Retardation office, must receive written notification concerning the 
date, time, location, and topics to be covered at the first public hearing. 
Citizens shall be made aware of the location where they may submit their views 
and proposals should they be unable to attend the public hearing. 
<nl>(D)<ol> <nl> The notice announcing the availability of the application for 
public review must be published five days prior to the submission of the 
application and the published notice must include the fund category for which 
the application is submitted, the amount of funds requested, a description of 
the application activities, the location or locations of the application 
activities, and the location and hours when the application is available for 
review. <ol>
[(F) he second public hearing must include a discussion of the proposed project 
(including the locations of the proposed activities), the amount of funds being 
requested, the estimated amount of funds proposed for activities that will 
benefit low-and moderate-income persons, and the plans of the applicant to 
minimize displacement of persons and to assist persons actually displaced as a 
result of activities assisted with Texas Community Development Program funds, if 
applicable. The notice must include the location and hours when the application 
is available for review.] 
<nl>(E)<ol>[(G)] <nl> The public hearing held prior to submission of the 
application<ol>[At least one of the two required application public hearings] 
must be held after 5:00 p.m. on a weekday or at a convenient time on a Saturday 
or Sunday. 
(3)-(5) (No change.) 
(g) Appeals. An applicant for funding under the Texas Community Development 
Program may appeal the disposition of its application in accordance with this 
subsection. 
(1) (No change.) 
(2) The appeal must be submitted in writing to the Texas Community Development 
Program of the Department no later than 30 days after the date the announcement 
of community development fund and planning/capacity building fund contract 
awards is published in the Texas Register. In addition, timely appeals not 
submitted in writing at least five working days prior to the next regularly 
scheduled meeting of the state review committee will be heard at the subsequent 
meeting of the state review committee. The Department staff will evaluate the 
appeal and may either concur with the appeal and make an appropriate adjustment 
to the applicant's scores, or disagree with the appeal and prepare an appeal 
file for consideration by the state review committee at its next regularly 
scheduled meeting. The state review committee will make a final recommendation 
to the executive director of the Department. The decision of the executive 
director of the Department is final. If the appeal concerns a Texas Capital Fund 
application, the appeal must be submitted in writing to Commerce no later than 
30 days following the date of the notification letter of the denial. If the 
appeal concerns a <nl>small towns environment program fund, <ol>disaster relief 
fund<nl>,<ol> or urgent need fund application, the appeal must be submitted in 
writing to the Department no later than 30 days following the date of the 
notification letter of the denial. If the appeal concerns a housing 
[demonstration] fund, colonia fund or Young v. Cisneros fund application, the 
appeal must be submitted in writing to the Department no later than 30 days 
after the date the announcement of contracts awards is published in the Texas 
Register. The staff of either the Department or Commerce, when appropriate, 
evaluates the appeal and may either concur with the appeal or disagree with the 
appeal and prepare an appeal file for consideration by the appropriate executive 
director. The executive director, of the agency with which the appeal was filed, 
then considers the appeal within 30 days and makes the final decision. 
(3) In the event the appeal is sustained and the corrected scores would have 
resulted in project funding, the application is approved and funded. If the 
appeal concerning a community development fund or planning/capacity building 
fund application is rejected, the department notifies the applicant of its 
decision, including the basis for rejection after the meeting of the state 
review committee at which the appeal was considered. If the appeal concerns a 
Young v. Cisneros fund, Texas Capital Fund, housing [demonstration ]fund, 
colonia fund, disaster relief fund,.<nl> small towns environment program fund, 
<ol>or urgent need fund application, the applicant will be notified of the 
decision made by the appropriate executive director within 10 days after the 
final determination by the executive director. 
(4) (No change.) 
(h) Threshold requirements. An applicant must satisfy each of the following 
requirements in order to be eligible to apply for or to receive funding under 
the Texas Community Development Program: 
(1)-(3) (No change.) 
(4) demonstrate satisfactory performance on<nl> previously awarded<ol>[ existing 
and prior] Texas Community Development Program contracts; 
(5) resolve all outstanding compliance and audit findings related to 
<nl>previously awarded<ol>[existing and prior] Texas Community Development 
Program <nl>contracts and any other Department <ol>contracts; 
(6) (No change.) 
(7) Texas Community Development Program funds cannot be expended in any county 
that is designated as eligible for the Texas Water Development Board 
Economically Distressed Areas Program unless the county has adopted and is 
enforcing the Model Subdivision Rules established pursuant to Section 16.343 of 
the Water Code.[ Counties affected by this threshold requirement that are 
designated as eligible for the Texas Water Development Board Economically 
Distressed Areas Program are included in a notice published in the Texas 
Register on November 14, 1995.] An incorporated city that is located in a Texas 
Water Development Board Economically Distressed Areas Program eligible county 
that has not adopted, or is not enforcing, the Model Subdivision Rules, may 
submit an application for Texas Community Development Program funds. However, in 
lieu of county adoption of the Model Subdivision Rules, the incorporated city 
must adopt the Model Subdivision Rules prior to the expenditure of any Texas 
Community Development Program funds by the incorporated city. 
(i) (No change.) 
(j) False information. If an applicant provides false information in its 
community development fund or planning/capacity building fund application which 
has the effect of increasing the applicant's competitive advantage, the number 
of beneficiaries, or the percentage of low to moderate income beneficiaries, the 
Department refers the matter to the state review committee for disciplinary 
action. If the applicant provides false information in a Young v. Cisneros fund, 
colonia fund, disaster relief fund, housing [demonstration ]fund, <nl>small 
towns environment program fund, <ol>or urgent need fund application, the 
Department staff shall make a recommendation for action to the executive 
director of the Department. If the applicant provides false information in a 
Texas Capital Fund application, Commerce staff shall make a recommendation for 
action to the appropriate executive director. The state review committee makes a 
recommendation The state review committee makes a recommendation for action to 
the executive director of the Department at its next regularly scheduled 
meeting. Documentation of false information must be submitted at least ten 
business days prior to the next regularly scheduled meeting of the state review 
committee to be considered at that meeting. Recommendations that the state 
review committee or executive director may make include, but are not limited to: 
(1)-(3) (No change.) 
(k)-(m) (No change.) 
(n) Performance threshold requirements. In addition to the requirements of 
subsection (h) of this section, an applicant must satisfy the following 
performance requirements in order to be eligible to apply for program funds. A 
contract is considered executed for the purposes of this subsection on the date 
stated in Section 2 of such contract. 
(1) Obligate at least 50% of the total funds awarded under a contract (except 
for Texas Capital Fund contracts<nl>, housing fund contracts, and small towns 
environment program fund contracts <ol>) executed at least 12 months prior to 
the current program year application deadline. This paragraph does not apply to 
disaster relief fund applicants.
(2) Expend all but the reserved audit funds<nl>, or other reserved funds that 
are pre-approved by Texas Community Development Program staff,<ol> awarded under 
a contract (except for Texas Capital Fund contracts) executed at least 24 months 
prior to the current program year application deadline and submit to the 
Department a certificate of completion required by the most recent edition of 
the Texas Community Development Program Project Implementation Manual which 
documents the expenditure of all contract funds with the exception of any 
contract funds reserved for audits<nl> and other reserved funds that are pre-
approved by Texas Community Development Program staff<ol>.[ For the 1996 program 
year, this threshold applies to all Texas Community Development Program 
contractors, except for Texas Capital Fund contractors, with a contract start 
date on or prior to March 31, 1994.] This paragraph does not apply to disaster 
relief fund applicants. 
(3) Expend all but the audit funds for a Texas Capital Fund contract [funded 
prior to the 1995 program year] that has been in effect for at least 36 months 
and submit to <nl>Commerce<ol>[the Department] the close-out documents [(and any 
close-out document revisions requested by the Department) ]required by the most 
recent edition of the Texas Community Development Program Project Implementation 
Manual prior to submitting an application for the [1995 or 1996 program year 
]Texas Capital Fund program.[ The Department may direct that certain 1993 and 
1994 program year Texas Capital Fund program contracts be submitted to Commerce 
rather than the Department.] 
<nl>(4)<ol> <nl> Expend all but the reserved audit funds or other reserved funds 
that are pre-approved by Texas Community Development Program staff, awarded 
under a contract (except for Texas Capital Fund contracts and colonia 
demonstration fund projects) with a contract period of 36 months and that has 
been in effect for at least 36 months prior to the current program year 
application deadline, and submit to the Department a certificate of completion 
required by the most recent edition of the Texas Community Development Program 
Project Implementation Manual which documents the expenditure of all contract 
funds with the exception of any contract funds reserved for audits and other 
reserved funds that are pre-approved by Texas Community Development Program 
staff. This paragraph does not apply to disaster relief fund applicants. <ol>
(o)-(p) (No change.)

sec.9.2.Community Development Fund. 
(a) General provisions. This fund covers housing, public facilities, and public 
service projects. Eligible units of general local government may apply for 
funding of a single purpose project such as housing assistance, sewer 
improvements, water improvements, drainage, roads, or community centers, or for 
a multi-purpose project which consists of any combination of such eligible 
activities. 
(1) An applicant may not submit an application under this fund and also under 
any other Texas Community Development Program fund category at the same time if 
the proposed activity under each application is the same or substantially 
similar.<nl> An applicant may not submit a single jurisdiction application or be 
a participant in a multi-jurisdiction application under this fund and also 
submit a single jurisdiction application or be a participant in a multi-
jurisdiction application submitted under the housing rehabilitation fund.<ol> 
(2) (No change.) 
(b) Funding cycle. This fund is allocated [on an annual basis] to eligible units 
of general local government <nl>on a biennial basis for the 1997 and 1998 
program years <ol>pursuant to regional competitions held during the <nl>1997 
<ol>program year. Applications for funding must be received by the Texas 
Community Development Program by 5:00 p.m. on the date specified in the most 
recent application guide for this fund. 
(c) Allocation plan. 
(1) (No change.) 
(2) Each state planning region is provided with a <nl>1997 program year target 
allocation and a 1998 program year <ol>target allocation of funds for 
applications in its region that are ranked <nl>through the 1997 program year 
regional competitions <ol>in accordance with a shared scoring system involving 
the Department and the regional review committees.<nl> Where the remainder of 
the 1997 program year target allocation is insufficient to completely fund the 
next highest ranked applicant, the applicant receives complete funding of the 
original grant request through a combination of 1997 and 1998 program year 
funds.<ol> Where the remainder of the <nl>1998 program year target 
<ol>allocation is insufficient to completely fund the next ranked application, 
the Department works with the affected applicant to determine whether partial 
funding is feasible. If partial funding is not feasible, the remaining funds 
from all the target allocations are pooled to fund projects from among the 
highest ranked, unfunded applications from each of the 24 state planning 
regions. Selection criteria for such applications will consist of the selection 
criteria scored by the department under this fund. Marginal applicants' 
community distress scores are recomputed based on the applicants competing in 
the marginal pool competition only. 
(d) Selection procedures. 
(1)-(4) (No change.) 
(5) Following a final technical review, the Department staff presents the 
<nl>the 1997 program year and the 1998 program year <ol>funding recommendations 
to the state review committee. Department staff make a site visit to each of the 
applicants recommended for funding prior to the completion of contract 
agreements. 
(6) (No change.) 
(7) The executive director of the Department reviews the <nl>the 1997 <ol>final 
recommendations for project awards and announces the contract awards. 
(8) Upon announcement of <nl>the 1997 program year <ol>contract awards, the 
Department staff works with recipients to execute the contract agreements. While 
the award must be based on the information provided in the application, the 
Department may negotiate any element of the contract with the recipient as long 
as the contract amount is not increased and the level of benefits described in 
the application is not decreased. The level of benefits may be negotiated only 
when the project is partially funded with the remainder of the target allocation 
within a region. 
<nl>(9)<ol> <nl> When the 1998 program year Texas Community Development Program 
allocation becomes available, the executive director of the department reviews 
the 1998 program year final recommendations for project awards and announces the 
contract awards. <ol>
<nl>(10)<ol> <nl> Upon announcement of the 1998 program year contract awards, 
the department staff works with recipients to execute the contract agreements. 
While the award must be based on the information provided in the application, 
the department may negotiate any element of the contract with the recipient as 
long as the contract amount is not increased and the level of benefits described 
in the application is not decreased. The level of benefits may be negotiated 
only when the project is partially funded with the remainder of the target 
allocation within a region. <ol>
(e) Selection criteria. The following is an outline of the selection criteria 
used by the Department and the regional review committees for scoring 
applications under the community development fund. Seven hundred points are 
available. 
(1)-(2) (No change.) 
(3) Project impact (total-195 points). 
(A) Ten of the 195 points available are awarded to applicants which did not 
receive a community development fund contract award during the <nl>1996 program 
year<ol>[1994 and 1995 program years]. 
(B) Ten of the 195 points available are awarded to applicants that have closed 
all previously awarded community development fund contracts <nl>, with the 
exception of 1996 contracts,<ol> by the application deadline date. A previously 
awarded community development fund contract is considered to be closed when: all 
of the Texas Community Development Program funds needed to complete the contract 
activities, except for the reserved audit funds<nl> and other reserved funds 
that have been pre-approved by Texas Community Development Program staff<ol>, 
have been expended;[ the contract activities are finished and the beneficiaries 
have received access to the facilities and/or services provided under the 
contract;] and <nl>the certificate of completion<ol>[all contract close-out 
documents] required by the most recent edition of the Texas Community 
Development Program Project Implementation Manual <nl> has<ol>[have] been 
submitted to the Department. The <nl> certificate of completion<ol>[submitted 
close-out documents] must be complete and must meet Department standards for 
acceptability. 
(C) (No change.) 
(D) Other factors that will be evaluated by Department staff in the assignment 
of project impact scores within the point ranges for activities include, but are 
not limited to, the following: 
(i)-(iv) (No change.) 
(v) projects designed to bring existing services up to at least the state 
minimum standards as set by the applicable regulatory agency are given 
additional consideration<nl>;<ol>[.] 
<nl>(vi)<ol> <nl> projects which include self-help methods (volunteer labor, 
donated materials, donated equipment, etc.) to significantly reduce the project 
cost or to significantly increase the proposed improvements are given additional 
consideration. <ol>
(4)-(5) (No change.)

sec.9.3.Young v. Cisneros Fund. 
(a) (No change.) 
(b) Funding cycle. This fund is <nl>available <ol>[allocated] to eligible units 
of general local government <nl> until the Department has obligated an amount 
equal to or less than the amount of funds that were originally committed from 
the 1994 and 1995 program year allocations.<ol>[ on a bi-annual basis for the 
1994 and 1995 program years pursuant to a competition held during the 1994 
program year.] Applications for funding <nl>were<ol>[from the 1994 and 1995 
program year allocations must be] received by the Texas Community Development 
Program by 5:00 p.m. on the date specified in the most recent application guide 
for this fund. 
(c) Selection procedures. 
(1)-(4) (No change.) 
(5) Following a final technical review, the Department staff makes funding 
recommendations for the applications selected by HUD [from the 1994 and 1995 
program year allocations ]to the executive director of the Department. 
(6) The executive director of the department reviews the [1994 program year 
]recommendations for project awards and announces the contract awards. 
(7) Upon announcement of the [1994 program year ]contract awards, the Department 
staff works with recipients to execute the contract agreements. While the award 
must be based on the information provided in the application, the Department may 
negotiate any element of the contract with the recipient as long as the contract 
amount is not increased and the level of benefits described in the application 
is not decreased. The level of benefits may be negotiated only when the project 
is partially funded. 
[(8) When the 1995 program year Texas Community Development Program allocation 
becomes available, the executive director of the Department reviews the 1995 
program year recommendations for project awards and announces the contract 
awards.] 
[(9) Upon announcement of the 1995 program year contract awards, the Department 
staff works with recipients to execute the contract agreements. While the award 
must be based on the information provided in the application, the Department may 
negotiate any element of the contract with the recipient as long as the contract 
amount is not increased and the level of benefits described in the application 
is not decreased. The level of benefits may be negotiated only when the project 
is partially funded.]

sec.9.4.Planning/Capacity Building Fund. 
(a) (No change.) 
(b) Funding cycle. This fund is allocated [on an annual basis] to eligible units 
of general local government <nl>on a biennial basis for the 1997 and 1998 
program years pursuant to<ol> [through] a statewide competition<nl> held during 
the 1997 program year<ol>. Applications for funding <nl>from the 1997 and 1998 
program year allocations <ol>must be received by the Texas Community Development 
Program by 5:00 p.m. on the date specified in the most recent application guide 
for this fund. 
(c) Selection procedures. Scoring and the recommended ranking of projects is 
done by staff and a committee composed of Department staff with input from the 
regional review committees. The application and selection procedures consist of 
the following steps. 
(1)-(6) (No change.) 
(7) The Department staff submits the <nl> 1997 program year and 1998 program 
year <ol>funding recommendations to the state review committee. The state review 
committee reviews the project rankings and provides funding recommendations to 
the executive director of the Department. 
(8) The executive director of the Department reviews the <nl>1997 program year 
<ol>funding recommendations and announces the contract awards. 
(9) Upon the announcement of the <nl> 1997 program year <ol>contract awards, the 
Department staff works with recipients to execute the contract agreements. The 
award is based on the information provided in the application and on the amount 
of funding proposed for each contract activity based on the matrix included in 
the most recent application guide for this fund. 
<nl>(10)<ol> <nl> When the 1998 program year Texas Community Development Program 
allocation becomes available, the executive director of the department reviews 
the 1998 program year funding recommendations and announces the contract awards. 
<ol>
<nl>(11)<ol> <nl> Upon the announcement of the 1998 program year contract 
awards, the department staff works with recipients to execute the contract 
agreements. The award is based on the information provided in the application 
and on the amount of funding proposed for each contract activity based on the 
matrix included in the most recent application guide for this fund. <ol>
(d) Selection criteria. The following is an outline of the selection criteria 
used by the Department for selection of the projects under the planning/capacity 
building fund. Four hundred thirty points are available.
(1)-(2) (No change.) 
(3) Planning strategy and products (total 275 points).
(A) Previous planning (50 points). 
(i) An applicant which has not previously received a planning/capacity building 
contract or an applicant which has received a planning/capacity building fund 
contract prior to the <nl>1989<ol>[1987] program and has not received any 
subsequent planning/capacity building fund contracts-50 points. 
(ii)-(iii) (No change.) 
(B) (No change.) 

sec.9.6.Urgent Need Fund. 
(a) General provision. Assistance under this fund is provided only to eliminate 
existing water and sewer conditions which pose a serious and immediate threat to 
the health or welfare of the residents of the applicant where other financial 
resources are not available to meet such conditions. A unit of general local 
government that wishes to receive assistance under this fund must submit an 
application, as provided by the Department, to the Department. There is no 
application deadline.<nl> However, an application for urgent need assistance is 
not accepted for funding until discussions between the potential applicant and 
representatives of the Department and other state regulatory and funding 
resource agencies (such as the Texas Natural Resource Conservation Commission 
and the Texas Water Development Board) have occurred and a determination is made 
that the potential applicant and the situation meet urgent need fund threshold 
criteria.<ol> An applicant may not submit an application under this fund and 
also <nl> under any other Texas Community Development Program fund category<ol> 
[under the community development fund or the colonia fund] at the same time if 
the proposed activity under each application is the same or substantially 
similar. An applicant may receive one contract award under this fund in any one 
program year. The Department may negotiate the level of funding to be provided 
to an applicant and the scope of work to be performed by the applicant.
(b) (No change.) 

sec.9.7.Texas Capital Fund.
(a) General Provisions. This fund covers projects which will result in either an 
increase in new, permanent employment within a community or retention of 
existing permanent employment. Under the main street improvements program, 
projects may also qualify if they meet the national program objective of aiding 
in the prevention or elimination of slum or blighted areas. 
(1)-(2) (No change.) 
(3) A firm financial commitment from all funding sources other than United 
States Department of Commerce Economic Development Administration or <nl>United 
States Department of Agriculture<ol>[Farmers Home Administration] is required 
upon submission of an application. 
(4) The leverage ratio between all funding sources and the Texas Capital Fund 
request must not be less than 1:1<nl> (except for the main street improvements 
program)<ol>. 
(5)-(11) (No change.) 
(12) A Texas Capital Fund contractor must satisfactorily close out a contract in 
support of a specific business or main street improvements 
<nl>project<ol>[program city] in order to be eligible to receive additional 
funds under the Texas Capital Fund for the same business or main street city. 
The contractor is eligible for an additional Texas Capital Fund award in support 
of a specific business, provided that the prerequisite program income choice has 
been selected, if the assisted business is not in the designated main street 
geographic area or if the main street project selected the elimination of slums 
and blight as its national program objective and the assisted business will 
create or retain jobs to meet the national program objective. 
(13) Commerce will not consider or accept an application for funding from a 
community, in support of a business project that is currently receiving Texas 
Capital Fund assistance through that same community <nl> unless all contract 
close-out documents, including the certificate of completion, required for the 
close out of Texas Capital Fund projects have been submitted to Commerce and the 
close-out documents substantially meet standards for acceptability <ol>. 
<nl>(14)<ol> <nl> The maximum grant amount for a real estate program or 
infrastructure program award may be increased to an amount not to exceed $1.5 
million if a unit of general local government's application is on behalf of a 
specific business, and that specific business will create or retain a designated 
number of jobs at a cost per job level that qualifies for the increased grant 
amount. The number of jobs, the cost per job, and the maximum percentage of 
Texas Capital Fund financing of the total project costs that qualify an 
application for the increased grant amount are defined in Texas Capital Fund 
application guides. Funds are not specifically reserved for projects that could 
receive grant awards that are greater than the maximum grant amount, however, a 
maximum amount of Texas Capital Fund financing that is available for projects 
that qualify for these larger grant amounts is also described in Texas Capital 
Fund application guides.<ol> 
(b) Overview. This fund is distributed to eligible units of general local 
government for eligible activities in the following program areas: 
(1) The infrastructure program. The [public ]infrastructure program provides 
funds for eligible activities such as the construction or improvement of 
water/wastewater facilities, public roads, natural gas-line main, electric-power 
services, and railroad spurs<nl>. <ol>[, except that funding] <nl> With the 
exception of railroad spurs, funding<ol> will not be provided for infrastructure 
improvements on private property. 
(2) The real estate [development ]program. The real estate [development ]program 
provides funds to purchase, construct, or rehabilitate real estate that is 
wholly or partially owned by the community and leased to a specific benefitting 
business (either a for-profit entity or a non-profit entity). 
(3) (No change.) 
(c) Funding cycle. The Texas Capital Fund will be available three times annually 
for economic development funding to consider projects that will create or retain 
permanent employment opportunities, primarily for low- and moderate-income 
persons.<nl> Real estate program or infrastructure program applications that 
meet the criteria for receiving amounts greater than the maximum grant amount 
can be submitted at any time during a program year subject to the availability 
of funds.<ol> Applications for the main street improvements program must be 
received by 5:00 p.m. on the date and location specified in the most recent 
application guide for this program. 
(d) Selection procedures. Commerce will accept applications <nl>three times 
annually<ol>[every four months]. Applications are reviewed after they have been 
competitively scored. Commerce staff will make recommendations to the executive 
director for final award. The application and selection procedures consist of 
the following steps: 
(1) Each applicant must submit a complete application to Commerce's Business 
<nl>and Fiscal Services<ol>[Development] Division.
<nl>(2)<ol> <nl> In accordance with the selection criteria for the real estate 
program and infrastructure program, applications received under the real estate 
program and infrastructure program are evaluated and scored by Commerce staff. 
<ol>
<nl>(3)<ol>[(2)] [Upon receipt of an application, ]Commerce staff 
<nl>then<ol>[will] review <nl>each application<ol>[it] for eligibility and 
completeness in descending order based on the scoring. In those instances where 
the staff determines that the application is incomplete (evidenced by thirteen 
(13) or more inadequacies on the Application Checklist), the application will be 
returned to the applicant and may be submitted in the next funding cycle. 
Returned applications will not be considered for the current funding cycle. 
Applications resubmitted for future funding cycles will by competing with those 
applications submitted for that cycle. No preferential placement will be given 
for applications previously submitted and not funded. In those instances where 
the staff determines that the application has 12 or less inadequacies on the 
Application Checklist, the applicant will be given ten business days to rectify 
all deficiencies. In the event staff determines that the application contains 
activities that are ineligible for funding, the application will be returned to 
the applicant. Staff then conducts a review of each complete application to make 
threshold determinations with respect to: 
(A) the financial feasibility of the business to be assisted based on a credit 
analysis; 
(B) the strength of commitments from all other public and/or private investments 
identified in the application; 
(C) the ability of the applicant to operate or maintain any public facility or 
service assisted with Texas Community Development Program funds, if 
infrastructure improvements are requested; 
(D) whether the use of Texas Capital Funds is appropriate to carry out the 
project proposed in the application; 
(E) whether there is evidence that at least 51% of the permanent jobs created or 
retained will benefit low- and moderate-income persons; 
(F) whether efforts have been made to maximize other financial resources; and 
(G) a copy of a complete application must be provided to the appropriate 
Regional Review Committee. Proposals submitted for funding under the Texas 
Capital Fund require regional review "from the standpoint of consistency with 
regional plans and other such considerations" as provided for under the Texas 
Review and Comment System and Chapter 391, Texas Local Government Code. Each 
regional review committee may, at its option, review and comment on an economic 
development proposal from a jurisdiction within its state planning region. These 
comments become part of the application file and are considered by the staff 
provided, such comments are received by the staff prior to the time that the 
staff makes a recommendation to the executive director of Commerce. 
<nl>(4)<ol>[(3)] Upon Commerce's determination that an application supports a 
feasible and eligible project, staff may schedule a visit to the applicant 
jurisdiction to discuss the project and program rules with the chief elected 
official, or his designee, and business representative(s), and to visit the 
project site.
<nl>(5)<ol>[(4)] Staff prepares a project report with recommendations for the 
executive director who makes the final award.
<nl>(6)<ol>[(5)] Upon the executive director's selection, the projects selected 
for funding are announced by Commerce. 
<nl>(7)<ol>[(6)] Commerce staff then negotiates the contract with the 
recipients. The contract terms are based on the information provided in the 
application, but Commerce may vary the terms of the contract with the recipient. 
[(7) For the main street improvements program, Commerce staff scores 
applications based on selection criteria related to project feasibility, 
leverage ratio and minority hiring. The Texas Historical Commission also scores 
applications based on selection criteria related to project feasibility using 
its scores to place the applicants in rank order from highest to lowest scores. 
The five projects ranked highest by the Texas Historical Commission receive 
additional points. Final scores are reviewed by Commerce staff. Scores on 
factors in these categories are derived from information provided by the 
applicant.] 
(e) Selection criteria for the <nl>real estate and infrastructure 
programs<ol>[Real Estate Improvements and Infrastructure Grant Programs] of the 
Texas Capital Fund [will ]focus upon factors which may include, but which are 
not limited to, paragraphs <nl>(1)-(8)<ol>[(1)-(7)] of this subsection. <nl>In 
addition to<ol>[Based on] the selection criteria described in paragraphs <nl> 
(1)-(8)<ol>[(1)-(7)] of this subsection, projects will be reviewed and evaluated 
upon the following additional factors: the history of the applicant community in 
the program; the strength of the business or marketing plan; the management 
experience of the business's principals; and the justification of the minimum 
Texas Capital Fund contribution necessary to serve the project: 
(1)-(5) (No change.) 
(6) Assistance for small businesses and manufacturers;[and] 
(7) Feasibility of project and ability to create and/or retain jobs<nl>; 
and<ol>[.] 
<nl>(8)<ol> <nl> Creation or retention of jobs primarily for low and moderate 
income persons. <ol> 
(f) Additional criteria for the [public ]infrastructure program. A minimum of a 
ten percent equity injection, based on total project costs in the form of cash, 
land, buildings, equipment, furniture, or fixtures by the business is required. 
(g) Additional criteria for the real estate [development ]program. A minimum of 
a ten percent equity injection, based on total project costs in the form of 
cash, land, buildings, equipment, furniture, or fixtures by the business is 
required if the business has been operating for at least three years. A minimum 
of a thirty-three percent equity injection, based on total project costs, in the 
form of cash, land, buildings, equipment, furniture, or fixtures by the business 
is required if the business has been operating for less than three years. 
<nl>(h)<ol> <nl>Selection criteria for the main street improvements program. 
Commerce staff and staff from the Texas Historical Commission review and 
evaluate the applications. The selection criteria focus upon factors which may 
include, but which are not limited to, paragraphs (1)-(8) of this subsection. In 
addition to the selection criteria described in paragraphs (1)-(8) of this 
subsection, projects will be reviewed and evaluated upon the following 
additional factors: the history of the applicant community in the program; the 
strength of the marketing plan; and the justification of the minimum Texas 
Capital Fund contribution necessary to serve the project. The terms and criteria 
used in this subsection are further defined in the application guidelines for 
this program. <ol>
[(h) Selection criteria for the main street improvements program. The following 
is an outline of the selection criteria used for selection of projects under the 
main street improvements program. The terms and criteria used in this subsection 
are further defined in the application guidelines for this program.] 
(1) Threshold criteria. In order for its application to be considered, an 
applicant must meet the requirements of either subparagraph (A) or (B), and (C) 
of this paragraph: 
(A) The national objective of aiding in the prevention or elimination of Slum or 
Blight on a spot basis. To show how this objective will be met, the applicant 
must; 
(i) document that the project qualifies as slum or blighted on a spot basis 
under local law; and 
(ii) describe the specific condition of blight or physical decay that is to be 
treated. 
(B) Area slums/blight objective. Document the boundaries of the area designated 
as a slum or blighted, document the conditions which qualified it under the 
definition in 10 TAC Section 9.1(a)<nl>
(15) <ol>[(16)], and the way in which the assisted activity addressed one or 
more of the conditions which qualified the area as slum or blighted. 
(C) Main street designation. The applicant must have been designated by the 
Texas Historical Commission as a Main Street City and must have received this 
designation two (2) years prior to submitting a Texas Capital Fund application 
for main street improvements. 
<nl>(2)<ol> <nl> Feasibility of the project. <ol>
<nl>(3)<ol> <nl> Creation of jobs paying an above-average wage. <ol>
<nl>(4)<ol> <nl> Generation of a greater ratio of private investment to Texas 
Capital Fund investment. <ol>
<nl>(5)<ol> <nl> Provision of job opportunities at the lowest possible Texas 
Capital Fund cost per job. <ol>
<nl>(6)<ol> <nl> Benefit to areas of the state most in need of new capital 
investment and/or jobs. <ol>
<nl>(7)<ol> <nl> Texas Historical Commission scoring.<ol>
<nl>(8)<ol> <nl> Community profile. <ol>
[(2) Project feasibility (total-50 points). Factors examined by the Texas 
Capital Fund staff include Texas Historical Commission Main Street designation 
and demonstrated successful experience in the Main Street program; marketing 
strategies and identified funding sources for Main Street efforts; documentation 
supporting secondary/indirect job creation or retention; community support and 
commitment to historic preservation and commercial revitalization; business 
occupancy rates; available space pre-lease commitments; and demonstrated 
linkages between downtown businesses; and management experience of the Main 
Street manager.] 
[(3) Leverage ratio (total-30 points). Points are awarded by dividing all other 
funds committed to the project, exclusive of Texas Capital Funds, by the amount 
of Texas Capital Funds requested, less administration, according to the 
following scales:] 
[(A) Applicant with population less than 5,000 persons:] 
[(i) 0.50: 1 (50%)-15 points;] 
[(ii) 1.00: 1 (100%)-20 points;] 
[(iii) 1.50: 1 (150%)-25 points;] 
[(iv) 2.00: 1 (200%)-30 points.] 
[(B) Applicant with population equal to or more than 5,000 persons:] 
[(i) 1.50: 1 (150%)-15 points;] 
[(ii) 2.00: 1 (200%)-20 points;] 
[(iii) 2.50: 1 (250%)-25 points;] 
[(iv) 3.00: 1 (300%)-30 points.] 
[(4) Minority hiring (total-10 points). Percentage of minorities presently 
employed by the applicant divided by the percentage of minority residents within 
the local community (10 points). In the event ten percent or less of the 
applicant's population base is composed of minority residents, the applicant has 
seven or fewer non-seasonal full-time employees, or five percent or more of the 
applicant's population base is living in group quarters or institutions, the 
applicant is assigned the average score on this factor for all applicants for 
the previous program year or the score based on the actual figures, whichever is 
higher.] 
[(5) Projects recommended by Texas Historical Commission (total-10 points). A 
maximum of ten points are awarded to the five applicants ranked highest by The 
Texas Historical Commission. The Texas Historical Commission scores applications 
based on the Main Street Improvements Program project feasibility selection 
criteria using its scores to place the applicants in rank order from highest to 
lowest scores.] 
[(A) Ranking 1-10 points;] 
[(B) Ranking 2-8 points;] 
[(C) Ranking 3-6 points;] 
[(D) Ranking 4-4 points;] 
[(E) Ranking 5-2 points.]

sec.9.8.Regional Review Committees. 
(a)-(b) (No change.) 
(c) General requirements. In the performance of its responsibilities, each 
regional review committee shall comply with all federal and state laws and 
regulations relating to the administration of community development block grant 
nonentitlement area funds including, but not limited to, requirements of this 
subchapter, the scoring procedures specified in the current Regional Review 
Committee Guidebook, and the procedures established by the regional review 
committee under the Texas Community Development Program. 
(1) (No change.) 
(2) Conflicts of interest. No member of a regional review committee shall vote 
on an application if the member is on the governing body of the applicant<nl> or 
in cases where that member has a personal or pecuniary interest as defined under 
state law<ol>. A county judge or county commissioner may not score an 
application from an incorporated city within the county, unless specifically 
authorized by the regional review committee.<nl> A regional review committee 
member may not discuss any application, including the scoring of any application 
that the member is allowed to score, with any person that may benefit from an 
award of Texas Community Development Program funds to such application. If a 
regional review committee member discusses an application with any person that 
may benefit from an award of Texas Community Development Program funds to such 
application, the regional review committee member shall abstain from the scoring 
of that application.<ol> 
(3)-(4) (No change.) 
(d) (No change.) 

sec.9.9.Colonia Fund. 
(a) General provisions. This fund covers the payment of assessments, access 
fees, and capital recovery fees for low and moderate income persons for eligible 
water and sewer improvements projects, all other program eligible activities, 
eligible planning activities projects, and the establishment of colonia self-
help centers to serve severely distressed unincorporated areas of counties which 
meet the definition of a colonia under this fund. A colonia is defined as: any 
identifiable unincorporated community that is determined to be a colonia on the 
basis of objective criteria, including lack of potable water supply, lack of 
adequate sewage systems, and lack of decent, safe, and sanitary housing; and was 
in existence as a colonia prior to November 28, 1990. For an eligible county to 
submit an application on behalf of eligible colonia areas, the colonia areas 
must be within 150 miles of the Texas-Mexico border region, except that any 
county that is part of a standard metropolitan statistical area with a 
population exceeding one million is not eligible under this fund. 
(1)-(2) (No change.) 
[(3) Eligibility for the Department's 1995 program year colonia economically 
distressed areas program fund (colonia EDAP fund) is limited to counties and 
cities that meet the following criteria: the county is eligible for the 
Department's colonia fund and the Texas Water Development Board's Economically 
Distressed Areas Program or in the case of an incorporated city, the city is 
located in a county that is eligible for the Department's colonia fund and the 
Texas Water Development Board's Economically Distressed Areas Program; to be 
eligible, a city applicant must have annexed the eligible colonia area since 
January 1, 1993, or must be in the process of annexing the eligible colonia area 
included in the application for the Department's colonia EDAP fund improvements; 
the county or city must have already received a funding commitment from the 
Texas Water Development Board's Economically Distressed Areas Program for a 
water or sewer system improvements project for the colonia areas included in the 
application for the Department's colonia EDAP fund improvements; and the county 
or city must have already completed the engineering design phase for the water 
or sewer system project that was funded by the Texas Water Development Board's 
Economically Distressed Areas Program.] 
(b) Eligible activities. The only eligible activities under the colonia fund 
are: 
(1)-(3) (No change.) 
[(4) For the Department's 1995 program year colonia EDAP fund, the only eligible 
activity, besides eligible associated engineering and administrative costs, is 
the provision of assistance to income-eligible persons for connection to water 
or sewer systems funded through the Texas Water Development Board's Economically 
Distressed Areas Program. For the purposes of this fund, connection to the water 
or sewer system includes access fees and improvements on private property such 
as taps, meters, yard service lines, service connections, connection fees and 
other costs associated with the connection of a housing unit occupied by income-
eligible persons to the water or sewer system.]
<nl>(4)<ol>[(5)] The establishment of colonia self-help centers and activities 
conducted by colonia self-help centers in accordance with the provisions of 
Chapter 2306, Subchapter Z, of the Government Code. 
(c) Types of applications. Eligible applicants may submit one application for[ 
the colonia EDAP fund,] the colonia construction fund and the colonia planning 
fund. Eligible planning activities cannot be included in an application for the 
colonia construction fund.<nl> Two separate fund categories are available under 
the colonia planning fund. The colonia area planning fund is available for 
eligible planning activities that are targeted to selected colonia areas. The 
colonia comprehensive planning fund is available for countywide comprehensive 
planning activities that include an assessment and profiles of a county's 
colonia areas. Separate competitions are held for the colonia area planning fund 
and colonia comprehensive planning fund allocations.<ol> 
(d) Funding cycle. The colonia construction fund and the colonia planning fund 
are allocated on an annual basis to eligible county applicants through 
competitions conducted during the program year.[ The colonia EDAP fund is 
distributed on a first-come, first-serve, basis for the 1995 program year.] 
Applications for funding must be received by the Department by 5:00 p.m. on the 
dates specified in the most recent application guide for each separate colonia 
fund category. The colonia self-help centers fund is allocated on an annual 
basis to counties included in Subchapter Z, Chapter 2306, Section 2306.582, 
Government Code, and/or counties designated as economically distressed areas 
under Chapter 17, Water Code. 
(e) Selection procedures. 
(1) On or before the application deadline, each eligible county may submit one 
application for[ the colonia EDAP fund,] the colonia construction fund and the 
colonia planning fund. Copies of the application must be provided to the 
applicant's regional planning commission and the Department. 
(2)-(4) (No change.) 
(5) Following a final technical review, the Department staff makes[ 1996 program 
year] funding recommendations to the executive director of the Department. 
(6) The executive director of the Department reviews the final recommendations[ 
for 1996 program year project awards] and announces the contract awards. 
(7) Upon announcement of[ 1996 program year] contract awards, the Department 
staff works with recipients to execute the contract agreements. While the award 
must be based on the information provided in the application, the Department may 
negotiate any element of the contract with the recipient as long as the contract 
amount is not increased and the level of benefits described in the application 
is not decreased. The level of benefits may be negotiated only when the project 
is partially funded. 
[(8) The Department evaluates the information provided in each 1995 program year 
colonia EDAP fund application and following a final technical review, the 
Department staff makes 1995 program year funding recommendations to the 
executive director of the Department.] 
[(9) The executive director of the Department reviews the 1995 program year 
funding recommendations and announces the contract awards.] 
[(10) Upon announcement of 1995 program year contract awards, the Department 
staff works with recipients to execute the contract agreements. While the award 
must be based on the information provided in the application, the Department may 
negotiate any element of the contract with the recipient as long as the contract 
amount is not increased and the level of benefits described in the application 
is not decreased. The level of benefits may be negotiated only when the project 
is partially funded.] 
(f) Selection criteria (colonia construction fund). The following is an outline 
of the selection criteria used by the Department for scoring colonia 
construction fund applications. Four hundred points are available.
(1)-(3) (No change.) 
(4) Project design (total-<nl>95<ol>[90] points). Each application is scored 
based on how the proposed project resolves the identified need and the severity 
of need within the applying jurisdiction. Each application is scored by a 
committee composed of Texas Community Development Program staff using the 
following information submitted in the application:
(A)-(I) (No change.) 
(g) Selection criteria (colonia <nl>area <ol>planning fund). The following is an 
outline of the selection criteria used by the Department for scoring 
applications for eligible planning activities under this fund. Three hundred 
fifty points are available. 
(1)-(3) (No change.) 
<nl>(h)<ol> <nl>Selection criteria (colonia comprehensive planning fund). The 
following is an outline of the selection criteria used by the Department for 
scoring applications for eligible planning activities under this fund. Two 
hundred points are available. <ol>
<nl>(1)<ol> <nl>Community distress (total-25 points). All community distress 
factor scores are based on the unincorporated population of the applicant. <ol>
<nl>(A)<ol> <nl>Percentage of persons living in poverty-15 <ol>
<nl>(B)<ol> <nl>Per capita income-10<ol>
<nl>(2)<ol> <nl> Project design (total-175 points). Each application is scored 
by a committee composed of Department staff using the following information 
submitted in the application: <ol>
<nl>(A)<ol> <nl>the severity of need for the comprehensive colonia planning 
effort and how effectively the proposed comprehensive planning effort will 
result in a useful assessment of colonia populations, locations, infrastructure 
conditions, housing conditions, and the development of short-term and long-term 
strategies to resolve the identified needs; <ol>
<nl>(B)<ol> <nl> the extent to which any previous planning efforts for colonia 
areas have been implemented; <ol>
<nl>(C)<ol> <nl> whether the applicant provides any local matching funds for 
project activities; and <ol>
<nl>(D)<ol> <nl> whether the applicant has adopted and enforced subdivision 
regulations or orders (counties that have adopted and enforced the Model 
Subdivision Rules established pursuant to Section 16.343 of the Water Code 
receive additional consideration); and <ol>
<nl>(E)<ol> <nl> the applicant's past performance on previously awarded Texas 
Community Development Program contracts. <ol>
[(h) Selection criteria (colonia EDAP fund). The following is an outline of the 
application information that is evaluated by a committee composed of Department 
staff.] 
[(1) The severity of need within the colonia area(s) and how the proposed 
activities to install water and sewer improvements on private property resolve 
the connection of income-eligible persons to the water and sewer systems 
financed through the Texas Water Development Board's Economically Distressed 
Areas Program.] 
[(2) The effective use of the Department's colonia EDAP funds to provide water 
or sewer connections/yard lines to water/sewer systems funded by the Texas Water 
Development Board's Economically Distressed Areas Program.] 
[(3) The Texas Community Development Program cost per low/moderate-income 
beneficiary.] 
[(4) Whether the applicant has provided any local matching funds for 
administrative, engineering, or construction activities.] 
[(5) Whether the applicant has adopted and enforced subdivision regulations or a 
subdivision ordinance.] 
[(6) If applicable, the projected water and/or sewer rates after completion of 
the project based on 3,000 gallons, 5,000 gallons and 10,000 gallons of usage.] 
[(7) The ability of the applicant to utilize the grant funds in a timely manner; 
the applicant's request should be timed so that the treatment, distribution, 
and/or collection systems funded by the Texas Water Development Board are nearly 
complete so that Texas Community Development Program funds for connections may 
be expended after a grant award is made.]
[(8) The availability of grant funds to the applicant for project financing from 
other sources.] 
[(9) The applicant's past use of Community Development Block Grant or Texas 
Community Development Program funds over each of the past three (3) years and 
the applicant's Community Needs Assessments or Final Statements, if applicable, 
for Community Development Block Grant or Texas Community Development Program 
applications during each of the past three (3) years.] 
[(10) The applicant's past performance on prior Texas Community Development 
Program contracts.] 
(i) (No change.)

sec.9.10.Housing [Demonstration] Fund.
(a) General provisions.<nl> Two separate fund categories are available under the 
housing fund.<ol> <nl> The housing demonstration<ol>[This] fund is available for 
public facilities and infrastructure improvements supporting the development and 
construction of single family and multifamily low to moderate income housing. 
The <nl>housing demonstration <ol>funds may not be used for the actual 
construction cost of new housing.<nl> The housing rehabilitation fund is 
available for the rehabilitation or existing owner-occupied and renter-occupied 
housing units and, in strictly limited circumstances, the construction of new 
housing that is accessible to persons with disabilities. The housing 
rehabilitation fund selection criteria places emphasis on housing activities 
that provide accessible housing for persons with disabilities. <ol> 
(1) (No change.) 
(2) Each applicant must meet the threshold requirements of Section 9.1(h) and 
Section 9.1(n) of this title (relating to General Provisions), in order to be 
eligible to apply for <nl>housing fund assistance <ol>[housing demonstration 
funds]. 
(3) In order to meet a national program objective <nl> under the housing 
demonstration fund<ol>, at least fifty-one percent (51%) of the housing units 
built in conjunction with each housing demonstration fund project must be 
occupied by low to moderate income persons. In the case of a rental housing 
construction project, occupancy by low to moderate income persons must be at 
affordable rents. Texas Community Development Program funds can be used to 
finance 100% of the eligible project costs when at least 51% of the units are 
occupied by low to moderate income persons.
(4) There is only one type of <nl> housing demonstration fund <ol>project that 
may qualify for assistance when less than 51% of the units will be occupied by 
low to moderate income persons. Eligible assistance may also be provided to 
reduce the cost of new construction of a multifamily non-elderly rental housing 
project. However, at least twenty percent (20%) of the units must be occupied by 
persons of low to moderate income at affordable rents. For this type of project, 
the maximum percentage of Texas Community Development Program funds available 
for the eligible project costs is equal to the percentage of the project's units 
that are occupied by persons of low to moderate income at affordable rents. 
<nl>(5)<ol> <nl> A housing rehabilitation fund applicant must document that at 
least 51% of the persons who would directly benefit from the implementation of 
housing activities proposed in the application are of low to moderate income. It 
generally expected that 100% of the persons benefitting from the housing 
activities will be low to moderate income persons. <ol>
(b) Eligible activities<nl> (housing demonstration fund)<ol>. The only eligible 
activities under the housing demonstration fund are: 
(1)-(4) (No change.) 
(c) Funding cycle<nl> (housing demonstration fund)<ol>. This fund is allocated 
on an annual basis to eligible units of general local government through a 
direct award basis. Applications for funding must be received by the Texas 
Community Development Program <nl>by<ol>[during] the application deadline date 
or dates specified in the application guide for this fund.<nl> Applications for 
the 1997 program year housing infrastructure fund will not be accepted if a 
sufficient number of eligible 1996 program year housing demonstration fund 
applications are submitted to utilize the combined amount of funds available 
through the 1996 housing demonstration fund and the 1997 housing infrastructure 
fund allocations.<ol> 
<nl>(d)<ol> <nl>Eligible activities (housing rehabilitation fund). The only 
eligible activities under the housing rehabilitation fund are:<ol> 
<nl>(1)<ol> <nl>Loan or deferred loan assistance for the rehabilitation of 
owner-occupied or renter-occupied housing units that are inhabited by persons 
with disabilities or that will be occupied by persons with disabilities after 
completion of the housing unit rehabilitation. Rehabilitated housing units must 
include any improvements necessary to make the housing unit accessible to 
persons with disabilities. <ol>
<nl>(2)<ol> <nl> Loan or deferred loan assistance for the rehabilitation of 
owner-occupied housing units that are not inhabited by persons with 
disabilities. <ol>
<nl>(3)<ol> <nl> Loan or deferred loan assistance for the construction of new 
housing units that include accessibility features for persons with disabilities. 
Construction of new housing must be provided through an eligible subrecipient 
such as a neighborhood-based non-profit organization or a non-profit 
organization serving the development needs of the TCDP-eligible community. In 
this instance, the applicant must provide documentation that confirms a need for 
a housing unit or units, that are accessible to persons with disabilities; and 
that there is no existing housing currently available in the applicant's 
jurisdiction that can satisfy or meet the documented need. <ol>
<nl>(4)<ol> <nl> Soft costs associated with the delivery of the housing program 
assistance including the preparation of work write-ups; required architectural 
or professional services that are directly attributable to a particular housing 
unit; interim and final inspections; and inspections for lead-based paint, 
asbestos, termites, and existing septic systems. <ol>
<nl>(5)<ol> <nl> Administrative costs associated with the housing assistance 
program. <ol>
<nl>(e)<ol> <nl>Funding cycle (housing rehabilitation fund). This fund is 
allocated on an annual basis to eligible units of general local government 
through a statewide competition. Applications for funding must be received by 
the Texas Community Development Program by 5:00 p.m. on the date specified in 
the most recent application guide for this fund.<ol>
<nl>(f)<ol>[(d)] Selection procedures.
(1) Each eligible local government may submit one application for funding under 
the housing demonstration fund<nl> and one application for funding under the 
housing rehabilitation fund<ol>. Two copies of the application must be submitted 
to the Department and at least one copy of the application must be submitted to 
the applicant's state planning region. 
(2) Upon receipt of an application, the Department staff performs an initial 
review to determine whether the application is complete and whether all proposed 
activities are eligible for funding. The results of this initial review are 
provided to the applicant. If not subject to disqualification, the applicant may 
correct any deficiencies identified by the Department staff in the timeframe 
stated in the notification. 
(3) Each regional review committee may, at its option, review and comment on an 
application from a local government within its state planning region. These 
comments become part of the application file, provided such comments are 
received by the Department prior to final review of an application. 
<nl>(4)<ol> <nl> The Department then scores the housing rehabilitation fund to 
determine rankings. Scores on the selection factors are derived from 
standardized data from the Census Bureau, other federal or state sources, and 
from information provided by the applicant.<ol>
<nl>(5)<ol>[(4)] Following a final technical review, the Department staff makes 
funding recommendations <nl>for the housing demonstration fund and the housing 
rehabilitation fund <ol>to the executive director of the Department. 
<nl>(6)<ol>[(5)] The executive director of the department reviews the 
recommendations for project awards and announces the contract awards.
<nl>(7)<ol>[(6)] Upon announcement of the contract awards, the Department staff 
works with recipients to execute the contract agreements. While the award must 
be based on the information provided in the application, the Department may 
negotiate any element of the contract with the recipient as long as the contract 
amount is not increased and the level of benefits described in the application 
is not decreased. The level of benefits may be negotiated only when the project 
is partially funded. 
<nl>(g)<ol> <nl>Selection criteria (housing rehabilitation fund). The following 
is an outline of the selection criteria used by the Department for scoring 
applications under this fund. Two hundred points are available. <ol>
<nl>(1)<ol> <nl>Community distress (total-25 points). All community distress 
factor scores are based on the unincorporated population of the applicant.<ol> 
<nl>(A)<ol> <nl> Percentage of persons living in poverty-15 <ol>
<nl>(B)<ol> <nl> Per capita income-10 <ol>
<nl>(2)<ol> <nl> Project design (total-175 points). Each application is scored 
by a committee composed of Department staff using the following information 
submitted in the application: <ol>
<nl>(A)<ol> <nl>how the proposed project will resolve the identified housing 
needs and the severity of the needs within the applicant's jurisdiction; <ol>
<nl>(B)<ol> <nl> whether the application includes a commitment to rehabilitate 
existing housing units addressing the needs of persons with disabilities 
(applications that include housing activities providing accessible housing for 
persons with disabilities receive additional consideration); <ol>
<nl>(C)<ol> <nl>whether the applicant provides any local matching funds for the 
administration or service delivery soft costs activities; and <ol>
<nl>(D)<ol> <nl> the applicant's past performance on previously awarded Texas 
Community Development Program contracts. <ol>
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 28, 1997.
TRD-9706973
Larry Paul Manley
Executive Director
Texas Department of Housing and Community Affairs
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 475-3726

10 TAC sec.9.11
The Texas Department of Housing and Community Affairs (TDHCA) proposes new 
sec.9.11 concerning the allocation of Community Development Block Grant (CDBG) 
non-entitlement area funds under the Texas Community Development Program (TCDP). 
The new section is being proposed to establish the standards and procedures by 
which TDHCA will allocate fiscal year 1997 TCDP Small Towns Environment Program 
funds. The proposed new section includes the fund application requirements and 
selection procedures. 
Ruth Cedillo, director of the Texas Community Development Program, has 
determined that for the period that the new section is in effect there will be 
no fiscal implications for state or local government as a result of enforcing or 
administering the new section. 
Ms. Cedillo also has determined that for the period that the new section is in 
effect, the public benefit as a result of enforcing the new section will be the 
equitable allocation of CDBG non-entitlement area funds to eligible units of 
general local government in Texas. There will be no effect on small businesses. 
There are no anticipated economic costs to persons who are required to comply 
with the section as proposed. 
Comments on the proposal may be submitted to Anne Paddock, Deputy General 
Counsel, Texas Department of Housing and Community Affairs, 507 Sabine, Austin, 
Texas 78711-3941. 
The new section is proposed under Texas Government Code, Chapter 2306, 
sec.2306.098, which provides TDHCA with the authority to allocate Community 
Development Block Grant non-entitlement area funds to eligible counties and 
municipalities according to department rules.
Texas Government Code, Chapter 2306, sec.2306.098 is affected by the proposed 
new section.

sec.9.11.Small Towns Environment Program Fund.
(a) General provisions. This fund is available to eligible units of general 
local government to provide financial assistance to cities and communities that 
are willing to address water and sewer needs through self-help methods that are 
encouraged and supported by the Small Towns Environment Program. The self-help 
method for addressing water and sewer needs is best utilized by cities and 
communities recognizing that conventional water and sewer financing and 
construction methods cannot provide an affordable response to the water or sewer 
needs. By utilizing a city's or community's own resources (human, material, and 
financial), the costs for the water or sewer improvements can be reduced 
significantly from the retail costs of the improvements through conventional 
construction methods. Participants in the small towns environment program fund 
should attain at least a forty percent reduction in the costs of the water or 
sewer project by using self-help in lieu of conventional financing and 
construction methods. 
(1) Small towns environment program funds can be used to cover material costs, 
certain engineering costs, administrative costs, and other necessary project 
costs that are approved by program staff. 
(2) In addition to the threshold requirements of Section 9.1(h) and Section 
9.1(n) of this title (relating to General Provisions), in order to be eligible 
to apply for small towns environment program funds, an applicant must document 
that at least 51% of the persons who would directly benefit from the 
implementation of each activity proposed in the application are of low to 
moderate income. 
(b) Funding cycle. This fund is available to eligible units of general local 
government through a direct award basis. There is no application deadline. 
However, an application for small towns environment program fund assistance is 
not accepted until Texas Community Development Program staff, representatives of 
the potential applicant, and residents from the community needing the financial 
assistance have discussed the self-help process and Texas Community Development 
Program staff determine that self-help is a feasible method for completion of 
the water or sewer project, the community is committed to self-help as the means 
to address the problem, and the community is ready and has the capacity to begin 
and complete a self-help project. 
(c) Selection procedures. Texas Community Development Program staff will provide 
guidance, assistance, and support to community leaders and residents willing to 
use self-help to solve their water and sewer problems. Staff will determine a 
community's readiness to begin a self-help project through evaluation of the 
following factors: 
(1) whether this is a strong local perception of the problem;
(2) community perception that local implementation is the best and may be the 
only solution; 
(3) whether the community residents have confidence that they can do it 
adequately; 
(4) whether the community has any other urgent competing priority; 
(5) whether local government representatives are supportive and understand the 
urgency of the community's needs; 
(6) public and private willingness to pay water or sewer service costs; 
(7) whether effort and attention have already been given to local assessment of 
the problem; and 
(8) whether the community has received any support from the county or regional 
field staff of the regulatory agency. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 28, 1997.
TRD-9706972
Larry Paul Manley
Executive Director
Texas Department of Housing and Community Affairs
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 475-3726

TITLE 13. CULTURAL RESOURCES
PART I. Texas State Library and Archives Commission
CHAPTER 6.State Records
Records Center Storage Services Fee Schedule
13 TAC sec.sec.6.122-6.123
The Texas State Library and Archives Commission proposes the new sec.sec.6.122-
6.123, concerning cost recovery fees for records center storage services 
provided to state agencies in the Austin area by the State and Local Records 
Management Division. The sections define records center storage terms and 
establish fees charged for different types of records storage services. The 
sections are proposed by the Commission to establish a cost recovery schedule 
for agencies using records storage services as mandated by Government Code, 
sec.441.017(b). 
William L. Dyess, Director, State and Local Records Management Division, has 
determined that for each year of the first five years the sections as proposed 
will be in effect, there will be no fiscal implications for state government as 
a result of enforcing or administering the sections. There will be no fiscal 
implications for local government as a result of enforcing or administering the 
sections. 
Mr. Dyess has determined that for each year of the first five years the sections 
as proposed are in effect the public benefits anticipated as a result of 
enforcing the sections as proposed will be the protection of disaster recovery 
backups and the cost-effective storage of non-current, infrequently used state 
records in hard copy, electronic, and microfilm formats. Use of the State 
Records Center will ensure the physical protection and timely retrieval of 
stored records to conduct state business and to provide public access. There 
will be no effect on small businesses. There is no anticipated economic cost to 
persons required to comply with the sections as proposed. 
Comments may be submitted to Elizabeth Love, Program Planning and Research 
Specialist, State and Local Records Management Division, Texas State Library, P. 
O. Box 12927, Austin, Texas 78711-2927, (512) 452-9242 ext. 137. 
The new sections are proposed under the Government Code, Title 4, Subtitle D, 
Chapter 441, sec.441.017(b), which requires the Texas State Library and Archives 
Commission to establish a cost recovery schedule for its records center storage 
services and sec.441.006(a)(2) and (14), which authorizes the Commission to 
adopt rules. 
The new sections affect Government Code sec.441.017(b). 

sec.6.122.Definitions.
The following words and terms, when used in these sections, have the following 
meanings, unless the context clearly indicates otherwise. Terms not defined in 
these sections have the meanings defined in the Government Code, 
sec.sec.441.031-441.039 and sec.sec.441.051-441.062.
Agency-A state executive, judicial, or legislative department, institution, 
board, or commission, including an eleemosynary institution.
Cubic foot-A storage measurement equal to a standard records center container 
(approximate measurements are 12-1/4 inches wide by 15-3/4 inches long by 10-1/4 
inches high).
Disaster recovery services-The temporary off-site storage and regular rotation 
of a security backup copy of records for the purpose of recovering information 
in the event of a disaster.
Microfilm-Roll microfilm, microfiche, computer output microfilm (COM), and all 
other formats produced by any method of microphotography or other means of 
miniaturization on film.
Microfilm 16mm roll equivalent-A storage measurement equal to a standard 16mm 
roll of microfilm and to 60 microfiche, microfiche jackets, or aperture cards. 
One reel of 35mm film is equal to two microfilm 16mm roll equivalents.

sec.6.123.Records Center Storage Services Fee Schedule. 
(a) The following fees will be charged for records center storage services 
provided to state agencies by the Texas State Library. 
(1) Records center stack storage. 
(A) The monthly fee is $.1874 per cubic foot. 
(B) The fee is assessed for the total volume of cubic feet stored in the records 
center stack areas on the last calendar day of each month. 
(2) Microfilm security vault storage. 
(A) The monthly fee is $.0353 per microfilm 16mm roll equivalent.
(B) The fee is assessed for the total volume of microfilm 16mm roll equivalents 
stored in the microfilm security vault on the last calendar day of each month. 
(3) Disaster recovery vault rotation services. 
(A) The monthly fee is $2.3806 per cubic foot. 
(B) The fee is assessed for the total volume of cubic feet processed into or out 
of disaster recovery vault storage during each month, which includes temperature 
and humidity controlled security storage for less than one month. 
(4) Disaster recovery vault storage. 
(A) The monthly fee is $1.5488 per cubic foot. 
(B) The fee is assessed for the total volume of cubic feet stored in the 
disaster recovery vault at the beginning of each month, minus the volume of 
cubic feet rotated out during that month. 
(b) The fee for containers other than the standard one cubic foot is determined 
based on the amount of shelf space that could be used if occupied by standard 
records center containers. For example, a container occupying the space that 
would otherwise hold two standard records center containers will be assessed a 
fee equivalent to twice the cubic foot fee. 
(c) The fees for records center storage services include the physical transfer 
of state records, inventory control indexing (with barcoding where applicable), 
storage in environment and security controlled facilities, circulation services, 
and final disposition. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt. 
Issued in Austin, Texas, on June 2, 1997.
TRD-9707116
Raymond Hitt
Assistant State Librarian
Texas State Library and Archives Commission
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 463-5460

TITLE 22. EXAMINING BOARDS
PART XI. Board of Nurse Examiners
CHAPTER 221.Advanced Practice Nurse
22 TAC sec.221.1, sec.221.3
The Board of Nurse Examiners proposes amendments to sec.221.1 and sec.221.3, 
concerning Advanced Practice Nurses, Definitions and Education. The amendments 
are being proposed to reflect the requirement for the master's degree for APN 
recognition beginning January 1, 2007. The Advanced Practice Advisory Committee 
of the Board of Nurse Examiners was charged by the Board to "establish a date 
beyond which a minimum of a master's degree will be required for advanced 
practice and identify issues relating to implementation of this requirement." 
The Advanced Practice Advisory Committee, composed of advanced practice nurses 
representing all areas of advanced practice, met to discuss this charge three 
times during the past year and voted to send the proposed recommendation to the 
Board. This date was chosen to notify potential students and others of the 
Board's future requirements and is consistent with dates already established by 
most advanced practice certifying bodies. 
The proposed amendments will cause all advanced practice nurses to have a 
minimum of a master's degree in order to practice in their specialty area 
beginning January 1, 2007. 
Katherine A. Thomas, MN, RN, executive director, has determined that there will 
be no fiscal implications for state or local government as a result of enforcing 
or administering the rule. 
There will be no effect on local government nor businesses to comply with the 
rule. 
Katherine A. Thomas, MN, RN, executive director, has determined that for each 
year of the first five years the rule as proposed will be in effect the public 
has increased assurance that the Board credentials qualified applicants, and 
serves to notify all potential students of future educational requirements. 
There may be increased cost to students required to comply with these rules. 
Written comments on the proposed amendment may be submitted to Erlene Fisher, 
Board of Nurse Examiners, Post Office Box 430; Austin, Texas 78767-0430. The 
amendments are proposed under the Nursing Practice Act, (Texas Civil Statutes, 
Article 4514), sec.1, which provides the Board of Nurse Examiners with the 
authority and power to make and enforce all rules and regulations necessary for 
the performance of its duties and conducting of proceedings before it and 
Article 4514, sec.8, which provides the Board of Nurse Examiners the authority 
and power to adopt rules for approval of a registered nurse to practice as an 
advanced practice nurse. 
There are no other rules, codes, or statutes that will be affected by this 
proposal. 

sec.221.1.Definitions.
The following words and terms, when used in this chapter, shall have the 
following meanings unless the context clearly indicates otherwise.
Advanced educational program-A post-basic advanced practice nurse program at the 
certificate or master's degree level. <nl> Beginning January 1, 2007, a master's 
degree in the advanced practice role and specialty will be required for 
recognition as an Advanced Practice Nurse. <ol>

sec.221.3.Education.
The registered professional nurse practicing as an advanced practice nurse shall 
have completed an advanced educational program of study appropriate to the 
practice area which meets the following criteria. 
(1)-(4) (No change.) 
<nl>(5)<ol> <nl> Beginning January 1, 2007, programs of study for advanced 
practice nurses shall be at the master's degree level. <ol>
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 30, 1997.
TRD-9707044
Katherine A. Thomas, MN, RN 
Executive Director 
Board of Nurse Examiners
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 305-6811

TITLE 25. HEALTH SERVICES
PART I. Texas Department of Health
CHAPTER 35.Pharmacy Services
SUBCHAPTER F.Reimbursement
25 TAC sec.35.601, sec.35.611
On behalf of the State Medicaid Director, the Texas Department of Health 
(department) submits a proposed amendment to sec.35.601, a proposed new 
sec.35.611 and a proposed repeal of sec.35.901, concerning reimbursement of 
Medicaid pharmacy providers for prescription services. The proposed amended and 
new sections provide new criteria for determining reimbursement to contract 
vendors participating in the Medicaid Vendor Drug Program, and replace the 
reimbursement methodology set out in the section proposed for repeal. 
The amendment clarifies sec.35.601 by specifying the percentages that apply to 
the drug ingredient cost. The new section sec.35.611 establishes a dispensing 
fee reimbursement formula for pharmacy providers participating in the Medicaid 
Vendor Drug Program which is based on an estimated dispensing expense, the drug 
acquisition cost for generic and brand name drugs, and an inventory management 
factor. The proposed new section also establishes a maximum dispensing fee. The 
proposed repeal eliminates the cost-based reimbursement methodology in 
sec.35.901, which requires pharmacies participating in the Medicaid Vendor Drug 
Program to submit annual cost reports that provide detailed financial and 
statistical information on pharmacies' operations. Implementation of the 
proposed amended, new and repealed sections is necessary in order for the 
department to administer the Medicaid Vendor Drug Program in an economical and 
efficient manner. The proposed new section establishes a clear and 
understandable reimbursement methodology which is less administratively 
burdensome on participating providers. 
The adoption of sec.35.611 and the repeal of sec.35.901 in the February 9, 1996, 
issue of the Texas Register (21 TexReg 957) were invalidated by an order issued 
by a state district court. The effect of the court's ruling was to require that 
the rules that were in effect prior to March 1, 1996, remain in force until the 
rules are lawfully repealed and a new rule is lawfully adopted. 
Joe Moritz, Health Care Financing Budget Director, has determined that for the 
first five-year period the sections are in effect there will be fiscal 
implications as a result of enforcing or administering the sections. The effect 
on state government is estimated to be a savings of $14.7 million in state 
fiscal year 1998 and $13.9 million in state fiscal year 1999. There will be no 
fiscal implications for local government. 
Mr. Moritz has also determined that for each of the first five years the 
sections are in effect the public benefit anticipated as a result of enforcing 
the sections will be that the Medicaid Vendor Drug Program can be operated in a 
more efficient and economical manner, while maintaining statewide access to 
existing Medicaid prescription services. The probable economic cost to persons 
as the result of implementing the proposed reimbursement methodology cannot be 
determined. However, pharmacy providers participating in the Medicaid Vendor 
Drug Program, as a whole, will realize a loss in revenue of $39.2 million in 
state fiscal year 1998 and $37.5 million in state fiscal year 1999. Small 
businesses will be affected in proportion to the participation of the small 
business in the Medicaid Vendor Drug Program. 
Comments on the proposal may be sent to Jeffrey Phelps, Health Care Finance, 
Texas Department of Health, 1100 West 49th Street, Austin, Texas, 78756, (512) 
794-6856. Comments will be accepted for 30 days following publication of this 
proposal in the Texas Register. In addition, a public hearing on the proposal 
will be held on June 16, 1997, at Texas Department of Human Services Board Room, 
Room 125-E, 701 West 51st Street, Austin, Texas, from 9:00 a.m. to noon. 
The proposed amendment and new section are proposed under the Human Resources 
Code sec.32.021, and Government Code, sec.531.021, which provides the Health and 
Human Services Commission with the authority to adopt rules to administer the 
state's medical assistance program and are submitted by the Texas Department of 
Health under its agreement with the Health and Human Services Commission to 
operate the purchased health services program, and as authorized under Chapter 
15, sec.1.07, Acts of the 72nd Legislature, First Called Session (1991). 
The proposed amendment and new section affect Chapter 32 of the Human Resources 
Code. 

sec.35.601.Legend and Nonlegend Medication.
For all medication, legend and nonlegend, covered by the Vendor Drug Program and 
appearing in the Texas Drug Code Index (TDCI) and updates, the following 
requirements must be met. 
(1) Reimbursement to the pharmaceutical provider is based on <nl>the 
department's best estimate of<ol> [estimated] acquisition cost (EAC), verifiable 
by invoice audit, plus the department's currently established dispensing fee per 
prescription, or the usual and customary price charged the general public, 
whichever is lower. 
(2) Estimated acquisition cost is defined as wholesale estimated acquisition 
cost (WEAC) or direct estimated acquisition cost (DEAC), according to the 
pharmacist's usual purchasing source and the pharmacist's usual purchasing 
quantity, or as <nl>a<ol> maximum allowable cost (MAC) for multi-source 
products. All drug purchases from a central purchasing entity must be billed to 
the department as warehouse purchases. The WEAC is established by the department 
using the current redbook or redbook update, less <nl>15%, which represents 
routine <ol> [a percentage representing routing] discounts received by 
pharmacists on wholesale drug purchases. The WEAC may not exceed wholesaler 
cost, as supplied by the drug manufacturers, plus a <nl>12% <ol> [percentage] 
markup representing wholesaler operating costs and profits. <nl> Exceptions to 
the percentages may be made where published prices are unavailable, or 
additional market information supplied to the department indicates that 
application of the specific WEAC percentages does not reflect actual available 
market prices.<ol> The DEAC is established by the department using direct price 
information supplied by drug manufacturers. Providers are reimbursed only at the 
DEAC on all drug products that are available from select 
manufacturers/distributors who actively seek and encourage direct purchasing. 
The TDCI is used as the reference from drugs included in the scope of benefits 
and for allowable package sizes. No acquisition cost is billed to the department 
for samples dispensed. 
(3) (No change.) 

sec.35.611.Dispensing Fee .
The Texas Department of Health (department) reimburses contracted Medicaid 
pharmacy providers according to the dispensing fee formula defined in this 
section. The dispensing fee is determined by the following formula: Dispensing 
Fee = (((Estimated Drug Ingredient Cost + Estimated Dispensing Expense) 
multiplied times (1 + Inventory Management Factor)) - Estimated Drug Ingredient 
Cost) + Delivery Fee, where; 
(1) The estimated drug ingredient costs are defined in sec.35.601 of this title 
(relating to Legend and Nonlegend Medication) and sec.35.605 of this title 
(relating to Texas Maximum Allowable Cost). 
(2) The estimated dispensing expense is $5.27 for state fiscal year 1997. This 
will be adjusted annually, subject to the availability of funds, to account for 
general inflation. 
(3) The inflation adjustment will be made, subject to the availability of funds, 
on the first day of the state fiscal year. The projected rate of inflation for 
the upcoming state fiscal year shall be based upon a forecast of the Implicit 
Price Deflator - Personal Consumption Expenditures produced by a nationally 
recognized forecasting firm. 
(4) The inventory management factor is 2%. 
(5) The total dispensing fee shall not exceed $200 per prescription. 
(6) A delivery fee shall be paid to approved providers offering no-charge 
prescription to all Medicaid recipients requesting delivery. The delivery fee is 
$.15 per prescription and is to be paid on all Medicaid prescriptions filled. 
This delivery fee is not to be paid for over-the-counter drugs which are 
prescribed as a benefit of this program. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on June 2, 1997.
TRD-9707111
Susan K. Steeg
General Counsel
Texas Department of Health
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 458-7236

SUBCHAPTER I.Support Documents
25 TAC sec.35.901
The proposed repeal is proposed under the Human Resources Code sec.32.021, and 
Government Code sec.531.021, which provides the Health and Human Services 
Commission with the authority to adopt rules to administer the state's medical 
assistance program and are submitted by the Texas Department of Health under its 
agreement with the Health and Human Services Commission to operate the purchased 
health services program, and as authorized under Chapter 15, sec.1.07, Acts of 
the 72nd Legislature, First Called Session (1991). 
The proposed repeal affects Chapter 32 of the Human Resources Code. 
sec.35.901.Reimbursement Methodology for the Pharmacy Dispensing Fee.
Issued in Austin, Texas, on June 2, 1997. 
TRD-9707110
Susan K. Steeg
General Counsel
Texas Department of Health
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 458-7236

TITLE 31. NATURAL RESOURCES AND CONSERVATION
PART I. Texas Natural Resource Conservation Commission 
CHAPTER 101.General Rules
30 TAC sec.101.29
(Editor's note: The text of the following section proposed for repeal will not 
be published. The section may be examined in the offices of the Texas Natural 
Resource Conservation Commission or in the Texas Register office, Room 245, 
James Earl Rudder Building, 1019 Brazos Street, Austin.) 
The commission proposes the repeal of existing sec.101.29, concerning Emissions 
Banking, new sec.101.29, concerning Emissions Banking and Trading, and revisions 
to the State Implementation Plan regarding the proposal. Since the proposed 
changes to sec.101.29 are extensive, the commission has determined that it is 
administratively more efficient to repeal sec.101.29 and replace it with a new 
sec.101.29. 
EXPLANATION OF PROPOSED RULES 
This rule proposal will expand the scope of the current banking program by 
allowing for the use of emission reduction credits (ERCs) to meet reasonably 
available control technology (RACT) requirements for the control of volatile 
organic compounds (VOCs) and nitrogen oxides (NO<sub>x <ol>) under Chapter 115, 
concerning Control of Air Pollution From Volatile Organic Compounds, and Chapter 
117, concerning Control of Air Pollution From Nitrogen Compounds respectively, 
and by creating a new type of credit known as the discrete emission reduction 
credit (DERC). Commission staff has prepared an issues paper that describes in 
more detail the background and provisions of the proposed rule. Copies of this 
issues paper may be obtained by contacting Susan Blevins at (512) 239-1296, or 
by mail at the commission, Office of Air Quality, MC 161, P.O. Box 13087, 
Austin, Texas 78711-3087. 
Since 1993, sec.101.29 has allowed limited banking and trading of ERCs and 
mobile emission reduction credits (MERCs) to meet nonattainment new source 
review offset requirements. Due partly to limitations on use, banking activity 
has been almost non-existent. The ability to use credits for purposes of RACT 
compliance is intended to stimulate credit trading activity and provide more 
flexible alternatives for compliance. Additionally, this proposal will allow for 
the trading of a new type of credit, the DERC. In August 1995, the United States 
Environmental Protection Agency (EPA) introduced the concept of a DERC through a 
voluntary trading rule referred to as the Open Market Trading Rule (OMTR). 
Instead of promulgating the OMTR, EPA now intends to allow states to establish 
their own trading rules in accordance with EPA guidance. At this time the 
guidance has not been released, but agency staff has consulted with EPA in the 
development of this proposal to ensure consistency with the guidance once 
released. 
ERCs and MERCs are generated by making enforceable, permanent emission 
reductions below the level required by state or federal regulations. The ERCs 
can then be banked and used later by the source which generated them, or they 
can be sold (traded) to another source and used to satisfy offset and other 
regulatory requirements. ERCs are created by eliminating future emissions, 
quantified during or before the period in which emission reductions are made, 
and are expressed in tons per year. By contrast, DERCs and mobile discrete 
emission reduction credits (MDERCs) are created during a discrete time period, 
quantified after the period in which emissions reductions are made, and 
expressed in tons. A MDERC is the counterpart of a MERC that has been quantified 
after the reduction has occurred. 
The commission has proposed new definitions in paragraph (a) to establish the 
terms used in this section. The requirements for banking and trading ERCs and 
MERCs remain unchanged except to add the ability to use credits as an 
alternative means of compliance with Chapter 115 and 117 control requirements. 
The proposal requires that any source opting to use credits to comply with RACT 
requirements must retire, as an environmental contribution, an additional 10% of 
the amount of credits needed to cover the source's compliance obligation. The 
proposal also establishes a timeline for review of applications associated with 
use of credits for Chapter 115 and Chapter 117 compliance. 
The proposal includes provisions for the generation and use of DERCs and MDERCs 
in sec.101.29(d). A DERC or MDERC is traded in units of one ton of the following 
pollutants: VOC, NO<sub>x, carbon monoxide, sulfur dioxide, and particulates 
with an aerodynamic diameter of less than or equal to a nominal 10 microns (as 
appropriate for MDERCs). The start date for the generation of DERCs and MDERCs 
is the effective date of this proposed section. Reductions that occurred prior 
to the effective date of the section, and that are still surplus on that date, 
may be registered as a credit if a notice of generation is submitted within six 
months after the effective date of the section. The proposed section requires 
that three notifications be made to the commission: notification of generation, 
notice of intent to use, and notice of use. The proposed section establishes the 
information to be submitted in these notices. 
The proposed rule provides a six-month window after the effective date of the 
rule for sources to convert any applicable ERCs to DERCs, if desired. During 
this time, a source may request to convert ERCs to DERCs, provided the reduction 
meets the requirements of the DERC portion of the rule. The procedure for 
converting ERCs to DERCs involves multiplying the amount of given ERCs 
(expressed in tons per year) by the number of years and/or fraction of a year 
since the ERC was generated. The number of DERCs thus derived must be rounded 
down to the nearest ton, and the resulting DERC value is expressed in tons. The 
entire ERC will be converted to DERCs, and may not be converted back. Once the 
six-month window has passed, a credit will be certified as either an ERC or DERC 
and may not be converted. After that time, future generation of credits will be 
locked in as either ERCs or DERCs. 
The provisions of the proposed section do not relieve a non-permitted source 
from obtaining necessary state authorization for construction and modifications. 
However, it is intended that such a source could eliminate short term increases 
from its nonattainment or prevention of significant deterioration netting 
calculations by acquisition of credits. Under the proposed section, a permitted 
facility would be allowed, on a limited basis, to exceed its permitted allowable 
by using DERCs and MDERCs. The agency staff believes that such an exceedance 
would not make a significant contribution of air contaminants to the atmosphere 
and therefore may be exempt from permitting requirements under Health and Safety 
Code, sec.382.057. 
Participation in the program is voluntary; however, all DERCs and MDERCs traded 
must be listed on the commission Registry and the selling price of the credits 
is required to be disclosed. DERCs and MDERCs will be certified by the 
commission upon receipt of a notice of intent to use. Sources are required to 
own the credits prior to use, and to acquire an additional 5% credit above the 
amount needed in order to cover the compliance margin. At the time a credit is 
used, the source must retire, as an environmental contribution, an amount equal 
to 10% of the credit used. 
FISCAL NOTE 
Stephen Minick, Strategic Planning and Appropriations Division, has determined 
that for the first five-year period the sections as proposed are in effect, 
there will be no significant fiscal implications anticipated for state and local 
governments as a result of administration or enforcement of the proposed 
sections. The proposal expands trading options as an alternative means of 
complying with nonattainment new source review offset provisions of Chapter 116, 
as well as with the emission control provisions of Chapters 115 and 117. The 
proposed rules would provide more flexibility, enabling sources to comply with 
rule requirements in a more cost-effective manner.
PUBLIC BENEFIT 
Mr. Minick also has determined that for each year of the first five years the 
sections as proposed are in effect, the public benefit anticipated as a result 
of implementing the sections will be the ability to satisfy Federal Clean Air 
Act amendments and the United States Environmental Protection Agency 
requirements, and potential early VOC and NO<sub>x emission reductions in ozone 
nonattainment areas. Also, the proposed section requires that 10% additional 
credits beyond the source's rule compliance obligation be retired as an 
environmental benefit. As the program is voluntary, there are no economic costs 
anticipated for any individual required to comply with these sections as 
proposed. 
TAKINGS IMPACT ASSESSMENT 
The commission has prepared a Takings Impact Assessment for these rules pursuant 
to Texas Government Code Annotated, Section 2007.043. The following is a summary 
of that assessment. The specific purpose of the rule proposal is to provide an 
alternative flexible, cost-effective method of complying with certain agency 
regulations. Promulgation and enforcement of the rules as proposed will not 
affect private real property. 
COASTAL MANAGEMENT PLAN
The commission has determined that the proposed rulemaking relates to an action 
or actions subject to the Texas Coastal Management Program (CMP) in accordance 
with the Coastal Coordination Act of 1991, as amended (Texas Natural Resource 
Code, sec.sec.33.201 et. seq.), and the commission's rules in 30 TAC Chapter 
281, Subchapter B, concerning Consistency with the Texas Coastal Management 
Program. As required by 31 TAC sec.505.11(b)(2) and 30 TAC sec.281.45(a)(3) 
relating to actions and rules subject to the CMP, agency rules governing air 
pollutant emissions must be consistent with the applicable goals and policies of 
the CMP. The commission has reviewed this proposed action for consistency with 
the CMP goals and policies in accordance with the rules of the Coastal 
Coordination Council, and has determined that the proposed action is consistent 
with the applicable CMP goals and policies. This proposal provides a flexible, 
cost-effective alternative approach to rule compliance by allowing emissions 
banking and trading. If adopted, it will not authorize any new sources of air 
emissions. Interested persons may submit comments on the consistency of the 
proposed rule with the CMP during the public comment period.
PUBLIC HEARING 
A public hearing on this proposal will be held in Austin on July 8, 1997, at 
10:00 a.m. in Building F, Room 2210 at the Texas Natural Resource Conservation 
Commission complex, located at 12100 North IH-35, Park 35 Technology Center, 
Austin Individuals may present oral statements when called upon in order of 
registration. Open discussion within the audience will not occur during the 
hearing; however, an agency staff member will be available to discuss the 
proposal 30 minutes prior to the hearing and will answer questions before and 
after the hearing.
Written comments may be mailed to Heather Evans, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 
239-4808. All comments should reference Rule Log Number 96158-101-AI. Comments 
must be received by 5:00 p.m., July 10, 1997. For further information, please 
contact Susan Blevins, Office of Air Quality, at (512) 239-1296.
Persons with disabilities who have special communication or other accommodation 
needs who are planning to attend the hearings should contact the agency at (512) 
239-4900. Requests should be made as far in advance as possible.
STATUTORY AUTHORITY 
The repeal is proposed under the Texas Health and Safety Code, the Texas Clean 
Air Act (TCAA), sec.382.017, which provides the commission with the authority to 
adopt rules consistent with the policy and purposes of the TCAA. 
The proposed repeal implements Health and Safety Code, sec.382.017.
sec.101.29.Emission Banking.
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 30, 1997.
TRD-9707035
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation Commission
Proposed date of adoption: August 20, 1997
For further information, please call: (512) 239-1970

The new section is proposed under the Texas Health and Safety Code, the Texas 
Clean Air Act (TCAA), sec.382.017, which provides the commission with the 
authority to adopt rules consistent with the policy and purposes of the TCAA.
The proposed new section implements Health and Safety Code, sec.382.017. 

sec.101.29.Emission Credit Banking and Trading.
(a) Definitions. Unless specifically defined in the Texas Clean Air Act (TCAA) 
or in the rules of the Texas Natural Resource Conservation Commission 
(commission), the terms used by the commission have the meanings commonly 
ascribed to them in the field of air pollution control. In addition to the terms 
which are defined by the TCAA, the following words and terms, when used in this 
section, shall have the following meanings, unless the context clearly indicates 
otherwise. 
(1) Activity - The amount of activity at a source measured in terms of 
production, use, raw materials input, vehicle miles traveled (VMT), or other 
similar units that have a direct correlation with the economic output and 
emission rate of the source (i.e., mass emitted per unit of activity).
(2) Actual emissions - Actual emissions as of a particular date shall equal the 
total emissions during the selected time period, using the unit's actual daily 
operating hours, production rates, types of materials processed, stored, or 
combusted during the selected time period. 
(3) Applicable emission point - The emission point that is either generating an 
emission reduction or using an emission reduction credit (ERC) or discrete 
emission reduction credit (DERC). 
(4) Baseline - Emissions that occur prior to an emission reduction strategy, 
considering all limitations required by applicable state and federal 
regulations. The baseline may not exceed the level of emissions reported in the 
1990 emission inventory or a subsequent emissions inventory. For reduction 
strategies that exceed 12 months, the baseline is established after the first 
year of generation and is fixed for the life of the strategy. A new baseline is 
established for each emission reduction strategy. 
(5) Baseline activity - The stationary source's actual level of activity 
averaged over any 24 consecutive month period during the 120 consecutive months 
which precede the emission reduction strategy or credit use period, using the 
source's actual daily activity level. 
(6) Baseline emission rate - The stationary source's average rate of emissions 
per unit of activity using the unit's actual daily operating hours, production 
rates, or types of materials processed, stored, or combusted for any 24 
consecutive month period during the 120 consecutive months which precede the 
emission reduction strategy or credit use period. 
(7) Baseline emissions - The stationary source's total emissions, averaged for a 
12-month period for ERCs or averaged for the discrete time period for DERCs, 
using the unit's actual daily operating hours, production rates, or types of 
materials processed, stored, or combusted for any 24 consecutive month period 
during the 120 consecutive months which precede the emission reduction strategy 
or credit use period. For sources in existence less than 24 months, a shorter 
time period not less than 12 months may be considered by the executive director. 
(8) Certified - Any emission reduction that is determined to be creditable upon 
review and approval by the executive director. 
(9) Curtailment - A temporary or partial reduction in activity level at any 
facility or mobile source. 
(10) Discrete emission reduction credit (DERC) - A creditable emission reduction 
that is created during a discrete time period, quantified after the period in 
which emissions reductions are made, and expressed in tons. 
(11) Discrete time period - The finite period of time in which a DERC is 
generated. 
(12) Emission reduction credit (ERC) - A certified emission reduction that is 
created by eliminating future emissions, quantified during or before the period 
in which emission reductions are made, and expressed in tons per year. 
(13) Emission reduction strategy - The method implemented to reduce the source's 
emissions beyond that required by state or federal regulation, law or agreed 
order. 
(14) Generation period - The discrete period of time over which a DERC is 
created. 
(15) Generator - The owner or operator of a source that creates an emission 
reduction. 
(16) Mobile discrete emission reduction credit (MDERC) - a credit that is 
surplus, generated by a mobile source as set forth in sec.114.29 of this title 
(relating to Accelerated Vehicle Retirement Program) or sec.114.39 of this title 
(relating to Mobile Emission Reduction Credit Program), and quantified after the 
period the reductions were made. 
(17) Most stringent allowable emissions level - The emissions rate of a 
stationary source, calculated using the maximum rated capacity of the source 
(unless the source is subject to federally enforceable limits which restrict the 
operating rate, or hours of operation, or both), considering all limitations 
required by applicable state and federal regulations. 
(18) Ozone season - The portion of the year when ozone monitoring is required to 
occur in a specific geographic area. The Houston/Galveston, Beaumont/Port 
Arthur, and El Paso nonattainment areas have a 12-month ozone season, whereas 
Dallas/Fort Worth's ozone season runs from March 1 to October 31. 
(19) Permanent - An emission reduction that is long lasting and unchanging for 
the remaining life of the source. 
(20) Protocol - A replicable and workable method of estimating emission rates or 
activity levels used to calculate the amount of emission reduction generated or 
credits required. 
(21) Quantifiable - An emission reduction that can be measured or estimated with 
confidence using replicable techniques. 
(22) Real reduction - A reduction in which actual emissions are reduced. 
(23) Shutdown - The permanent cessation of an activity producing emissions at a 
facility. 
(24) Surplus - An emission reduction that is not otherwise required of a source 
by a state or federal law, regulation, or agreed order.
(25) Use period - The period of time over which the user source applies DERCs to 
an applicable emission reduction requirement. 
(26) User - The owner or operator of a source that acquires and uses credits to 
meet a regulatory requirement, demonstrate compliance, or offset an emission 
increase. 
(27) Use strategy - The compliance requirement for which DERCs are being used. 
(b) Purpose. The purpose of this section is to allow the operator of a source to 
generate ERCs or DERCs by reducing emissions beyond the level required by local, 
state, and federal regulation and to allow the operator of a source to use these 
credits as offsets or as an alternative means of compliance with state 
regulations. 
(c) Emissions credit banking of ERCs and mobile emission reduction credits 
(MERCs). 
(1) General provisions. 
(A) Applicable criteria pollutants. Reductions of volatile organic compounds 
(VOCs) and nitrogen oxides (NO<sub>x) may qualify as ERCs or MERCs. In addition, 
reductions of carbon monoxide (CO) may qualify as MERCs. Reductions of other 
criteria pollutants are not creditable. Reductions of one criteria pollutant may 
not be used to meet the requirements of another pollutant, except at such time 
as urban airshed modeling demonstrates that one ozone precursor may be 
substituted for another. 
(B) Emission reduction requirements. To be creditable as an ERC, an emission 
reduction must be enforceable, permanent, quantifiable through a replicable 
methodology, real, and surplus. The reduction must be surplus at the time it is 
created, as well as when it is used. The creditable reduction must have occurred 
after January 1, 1990 for VOC and NO<sub>x, and the emission point's annual 
emissions prior to the ERC application must have been reported in the 1990 
emissions inventory or a subsequent emissions inventory. MERCs generated from 
reductions beyond those required by the Texas Clean Fleet Program must have 
occurred after January 1, 1992. MERCs generated from the accelerated retirement 
of high-emitting vehicles must have occurred after January 1, 1996. An emission 
reduction may be creditable as an ERC or DERC, but not both. A mobile source 
emission reduction may be creditable as a MERC or MDERC, but not both. 
(C) Eligible sources. Participation in emissions credit banking is strictly 
voluntary. The following sources are eligible to generate ERCs:
(i) any stationary source; 
(ii) any area source; 
(iii) any mobile source registered in the designated ozone nonattainment area; 
and 
(iv) any non-road mobile source or area source associated with actions by 
federal agencies under sec.101.30 of this title (relating to Conformity of 
General Federal and State Actions to State Implementation Plans).
(D) Life of an ERC or MERC. If an ERC is used prior to its expiration date, the 
ERC is effective for the life of the applicable user source except for an ERC 
which has been used for purposes of compliance with the provisions of 
sec.117.570 of this title (relating to Trading). An ERC is available for use for 
120 months from the date of the emission reduction except to the extent that 
regulatory changes after the date of the reduction reduce the creditable amount 
or invalidate the entire reduction for affected emission points. Only a NO<sub>x 
ERC that is used for compliance with Chapter 117 of this title (relating to 
Control of Air Pollution From Nitrogen Compounds) is subject to the applicable 
provisions of sec.117.570 of this title. The length of time a certified MERC is 
available for use is a function of the remaining vehicle miles of the mobile 
source, as determined in sec.114.29(f) of this title and sec.114.39(d) and (e) 
of this title. The Emissions Bank expiration date and useful life of the credit 
are calculated from the date the MERCs are certified. 
(E) Geographic scope. Only emission reductions generated in ozone nonattainment 
areas are creditable. An ERC or MERC must be used in the nonattainment area in 
which it is generated. 
(F) Public information. Information regarding the banking or sale of ERCs or 
MERCs may be obtained from the Texas Natural Resource Conservation Commission 
(commission) Emissions Bank, which is the registry of all ERCs and MERCs 
generated and used. 
(G) Authorization to emit. An ERC created under this section is a limited 
authorization to emit VOC and/or NO<sub>x in accordance with the provisions of 
this section, the Federal Clean Air Act (FCAA) and the Texas Clean Air Act 
(TCAA) as well as regulations promulgated thereunder. An ERC does not constitute 
a property right. Nothing in this section may be construed to limit the 
authority of the commission or the United States Environmental Protection Agency 
(EPA) to terminate or limit such authorization. 
[sub] x<ol> which is used to comply with the provisions of Chapter 117 of this 
title must meet all applicable provisions of sec.117.570 of this title and shall 
then be subject to all applicable provisions of sec.117.570 of this title in 
addition to the requirements of this section. The value of any NOtype-
name="sub">x<ol> ERC or MERC which is used to comply with Chapter 117 of this 
title may be reduced in accordance with sec.117.570(d) of this title. 
(2) ERC and MERC generation. 
(A) Methods of generation. ERC and MERCs may be generated using one of the 
following methods or any other method that meets the requirements of subsection 
(b)(1) and is approved by the executive director: 
(i) the permanent shutdown of equipment which causes a loss of capability to 
produce emissions; 
(ii) the installation and operation of pollution control equipment which reduces 
emissions below the level required of the emission source;
(iii) a change in a manufacturing process which reduces emissions below the 
level required of the emission source; 
(iv) the permanent curtailment in production, which reduces the source's 
capability to produce emissions; 
(v) pollution prevention projects that produce surplus emission reductions; 
(vi) an actual emission reduction resulting from the utilization of vehicles 
below the established emissions standard and/or the fleet percentages as 
required by the Texas Clean Fleet Program. 
(vii) an actual emissions reduction resulting from the accelerated retirement of 
high-emitting vehicles. 
(B) Calculation. The quantity of ERCs is determined by subtracting the source's 
new allowable emission limit (tons per year) from the emission source's baseline 
emissions. The source's new allowable emission limit equals the enforceable 
emission limit for the applicable emission point after the emission reduction 
strategy has been implemented. The quantity of MERCs must be calculated in 
accordance with sec.114.29(f) and 114.39(d) and (e) of this title. 
(C) Certification and registration. Stationary sources with potential ERCs may 
submit an ERC application to the Emissions Bank. Applications for total emission 
reductions, VOC and NO<sub>x combined, of less than 10 tons per year (TPY) will 
be registered in the Emissions Bank and subjected to a review upon use. 
Applications for 10 TPY or greater will be subjected to a review in accordance 
with paragraph (3)(D) of this subsection to determine the creditability of the 
reductions. Reductions determined to be creditable will be certified by the 
executive director and an ERC certificate will be issued to the owner. MERCs 
will be certified by the Emissions Bank for any emission reduction which has 
been registered in accordance with the specific requirements of sec.114.29 and 
sec.114.39 of this title. A MERC certificate will be issued by the executive 
director which indicates the total amount of certified emission reduction 
credits, the quantity available on an annual basis, and the date upon which the 
last annualized emission reduction expires. The applicant will be notified in 
writing if the executive director denies the ERC application. The applicant may 
submit a revised application at any time. 
(D) Protocols. The amount of ERC in TPY will be determined and certified based 
on actual monitoring results, when available, or otherwise calculated using good 
engineering practices including calculation methodologies in general use in new 
source review (NSR) permitting. The executive director shall have the authority 
to inspect and request information to assure that the emissions reductions have 
actually been achieved. MERC's will be determined and certified using the 
methodologies provided in sec.114.29 and sec.114.39 of this title. 
(E) ERC bank deposits. All ERCs are deposited in the Emissions Bank and reported 
as available credits by the Emissions Bank until they are withdrawn or expire. 
(F) Enforcement. ERCs generated by a stationary emission source will be made 
enforceable by: 
(i) amending an NSR permit to reflect the emission reduction and set a new 
maximum allowable emission limit; 
(ii) voiding an NSR permit when an emission source has been shut down; 
(iii) registering on a PI-8 form the emission reduction and the new maximum 
allowable emission limit for any standard exemption facility; or 
(iv) an agreed order which sets a new maximum allowable emission limit for a 
facility which is not required to have a permit or qualify for a standard 
exemption. 
(3) ERC and MERC use. 
(A) Use of ERCs and MERCS. ERCs and MERCs may be used as: 
(i) offsets for a new source or major modification to an existing source; 
(ii) mitigation offsets for action by federal agencies under sec.101.30 of this 
title; 
(iii) netting by the original applicant, if not used as an offset to meet a 
regulatory requirement or relied upon in the issuance of an NSR permit; or 
(iv) an alternative means of compliance with VOC and NO<sub>x reduction 
requirements as provided in Chapter 115 of this title (relating to the Control 
of Air Pollution from VOCs) and Chapter 117 of this title. 
(B) MERC use limitations. MERCs can only be used for the following purposes: 
(i) extending a compliance deadline for up to the life of the credit to the 
extent allowed in any provision of Chapter 115 of this title and sec.117.540 of 
this title (relating to Phased Reasonably Available Control Technology (RACT); 
(ii) complying with fleet requirements to the extent allowed by the Texas Clean 
Fleet Program Requirements for Motor Vehicle Fleets; 
(iii) providing offsets for a new major source or major modifications. When 
MERCs are used for purposes of this clause, offsets will be required, upon the 
expiration of the MERCs, through internal emission reductions (netting) or the 
purchase of additional credits as allowed under this section, or the facility 
will be required to shut down the emission source. 
(C) Calculation. The calculation of the number of ERCs needed by the user for 
offsets or for compliance with Chapter 115 or Chapter 117 of this title are as 
follows: 
(i) for ERC usage as offsets, the method for determining the number of ERCs 
needed by the user for offsets is provided in sec.116.150 of this title 
(relating to New Major Source or Major Modification in Ozone Nonattainment 
Area); or 
(ii) for ERC usage for compliance with Chapter 115 or Chapter 117 of this title, 
the number of ERCs needed equals the emission reduction that would have been 
generated if the affected emission point had implemented the respective 
requirements of Chapter 115 or Chapter 117 of this title, plus an additional 10% 
to be retired as an environmental contribution. 
(D) Review schedule. For ERCs which are to be used for compliance with the 
requirements of Chapter 115 or 117 of this title, the user must submit a notice 
of intent to use, at least 90 days prior to the planned utilization of the ERC. 
ERCs may be utilized only after the executive director grants approval of the 
notice of intent to use. The executive director shall have 30 days from date of 
receipt to determine if the registration application is complete. The executive 
director shall have 90 days from date of receipt to approve, modify, or deny the 
registration or 60 days after determination of completeness, whichever is later. 
For all other ERC applications not qualified for registration by the executive 
director, the applicant shall be notified in writing, within 60 calendar days of 
receipt of the applicant, of the reasons for denying the application. 
(E) Transfer. ERCs and MERCs are freely transferable in whole or in part, and 
may be traded or sold to a new owner anytime before the expiration date of the 
ERC. The Emissions Bank must be notified no later than 30 days after the 
transfer of any credits to another party. The old certificate must be submitted 
to the Emissions Bank. The executive director will issue a new certificate to 
the ERC purchaser reflecting the ERCs purchased by the new owner, and a revised 
certificate to the ERC seller showing any remaining ERCs available to the 
original owner. 
(F) Withdrawal. ERCs may be withdrawn from the Emissions Bank by the owner at 
any time prior to the expiration date of the credit and may be held by the 
owner. ERCs may still be used by the original owner for netting purposes after 
the ERCs have expired, as provided in sec.116.150 of this title. 
(G) Recording of ERC use. 
(i) ERCs and MERCs used as offsets must be included in the user's new source 
review permit application. The original ERC or MERC certificate must be 
submitted by the permit applicant to the executive director before the permit is 
issued. 
(ii) Use of ERCs or MERCs for purposes other than those specified in clause (i) 
of this subparagraph may not commence until the user has received approval from 
the executive director. The user must also keep a copy of the ERC certificate, 
the notice, and all backup data on site for a minimum of five years. 
(iii) If the executive director denies the stationary source's use of ERCs or 
MERCs, any person affected by the executive director's decision may file a 
motion for reconsideration. Notwithstanding the applicability provisions of 
sec.50.31(c)(7) of this title (relating to Purpose and Applicability), the 
requirements of sec.50.39 of this title (relating to Motion for Reconsideration) 
may apply. However, only a person affected may file a motion for 
reconsideration.
(d) Emission credit trading of DERCs and MDERCs. 
(1) General provisions. 
[sub]x[sub]2), and particulates with an aerodynamic diameter of less than or 
equal to a nominal 10 microns (PM<sub>10) may qualify as DERCs or MDERCs as 
appropriate. Reductions of other criteria pollutants are not creditable. 
Reductions of one pollutant may not be used to meet the reduction requirements 
for another pollutant, except at such time as urban airshed modeling 
demonstrates that one ozone precursor may be substituted for another. 
(B) Discrete emission reduction requirements. To be creditable as a DERC or 
MDERC, an emission reduction must be real, properly quantified, and surplus at 
the time the emission reduction is generated. For a DERC to be creditable, the 
emission point's annual emissions prior to the emission reduction strategy must 
have been reported in the 1990 emissions inventory or a subsequent emissions 
inventory. An emission reduction may be credited as either an ERC or DERC, or as 
a MERC or MDERC. 
(C) Credit measurement. A DERC or MDERC is equivalent to one ton of emissions of 
one pollutant. DERCs and MDERCs may not be broken down into units smaller than 
one ton. 
(D) Start date for discrete emission reductions. An emission reduction must be 
generated after the effective date of this section. However, reductions made 
after November 15, 1992 (January 1, 1992 if credits are generated from 
reductions beyond those required by the Texas Clean Fleet Program or January 1, 
1996 if credits are generated from the accelerated retirement of high-emitting 
vehicles and before the effective date of this section) may be creditable if the 
reduction is surplus on the effective date of this section. Sources that 
generated emission reductions prior to the effective date of this section must 
submit a notice of generation within six months of the effective date of this 
section or the reductions will not be creditable. 
(E) Eligible sources. Participation in emission credit trading is strictly 
voluntary. Stationary sources and any non-road mobile source or area source 
associated with actions by federal agencies under sec.101.30 of this title are 
eligible to generate and use DERCs, if there are no permits under the same 
commission account number that contain a condition or conditions precluding the 
use of DERCs. Mobile sources are eligible to generate MDERCs. Stationary and 
area sources may use MDERCs if there are no permits under the same commission 
account number that contain a condition or conditions precluding the use of 
DERCs or MDERCs. 
(F) Life of a DERC or MDERC. A DERC or MDERC is available for use after the 
notice of generation has been received by the commission Registry in accordance 
with subparagraph (J) of this paragraph, and may be used anytime thereafter. 
(G) Converting ERCs to DERCs. Certified ERCs and MERCs banked in the Emissions 
Bank prior to the effective date of this section may be converted to DERCs or 
MDERCs, respectively, if the emission reduction is surplus on the date the ERCs 
or MERCs are to be converted, the ERCs or MERCs have not expired, and the 
reduction meets the requirements of subsection (c)(3)(A) of this section. The 
conversion of ERCs to DERCs or MERCs to MDERCs, must occur within six months of 
the effective date of this section. A whole ERC, not a portion, must be 
converted to a DERC and may not be converted back to an ERC. 
(H) Geographic scope. Emission reductions generated in the state of Texas may be 
creditable and used in the state with the following limitations: 
[sub]x<ol> reductions generated in an ozone attainment area may be used in any 
county or portion of a county designated as being in attainment, but may not be 
used in an ozone nonattainment area. 
[sub]x<ol> reductions generated in an ozone nonattainment area may be used 
either in the same ozone nonattainment area in which they were generated, or in 
any ozone attainment area in the state of Texas. 
[sub]x<ol> reductions generated in an ozone nonattainment area may not be used 
in any other ozone nonattainment area. 
[sub] 10<ol> must be used in the same metropolitan statistical area in which the 
reduction was generated. 
(I) Ozone season. In areas having an ozone season of less than 12 months, VOC 
and NO<sub>x credits generated outside the ozone season may not be used during 
the ozone season. 
(J) The commission Registry. All required notices of DERC and MDERC generators 
and users must be submitted to the Registry. A notice submitted by a generator 
or user will automatically be posted to the Registry. The Registry will assign a 
unique number to each ton of emission reductions generated. The Registry will 
maintain current listings of all credits available or used for each ozone 
nonattainment area. One combined listing for all the counties or portions of 
counties designated as being in attainment in the state will be provided by the 
Registry. 
(K) Recordkeeping. The generator must maintain a copy of all notices and backup 
information submitted to the Registry for a minimum of five years following the 
completion of the generation period. The user must maintain a copy of all 
notices and backup information submitted to the Registry for a minimum of five 
years following the completion of the use period. Other relevant reference 
material or raw data must also be maintained on site by the participating 
sources. The user must also maintain a copy of the generator's notice and backup 
information for a minimum of five years after the use is completed. 
(L) Public information. All information submitted with a notice or report is 
public information and will not be considered confidential. Any information 
marked as confidential will not be accepted as part of the submittal and will be 
returned to the source. All notices and information regarding the generation, 
use, and availability of DERCs or MDERCs may be obtained from the Registry. 
(M) Program audits. 
(i) No later than three years after the effective date of this section, and 
every three years thereafter, the executive director will audit this program. 
(ii) The audit will evaluate the timing of credit generation and use, the impact 
of the program on the state's attainment demonstration and the emissions of 
hazardous air pollutants (HAPs), the availability and cost of credits, 
compliance by the participants, and any other elements the executive director 
may choose to include. 
(iii) The executive director will recommend measures to remedy any problems 
identified in the audit. The trading of DERCs or MDERCs may be discontinued by 
the executive director in part or in whole and in any manner as a remedy for 
problems identified in the program audit. 
(iv) The audit data and results will be completed and submitted to EPA and made 
available for public inspection within six months after the audit begins. 
(N) Authorization to emit. A DERC or MDERC created under this section is a 
limited authorization to emit the specified pollutants in accordance with the 
provisions of this section, the FCAA and the TCAA as well as regulations 
promulgated thereunder. A DERC or MDERC does not constitute a property right. 
Nothing in this section should be construed to limit the authority of the 
commission or the EPA to terminate or limit such authorization. 
(O) Program participation. The executive director has the authority to prohibit 
a company from participating in the emission credit trading of DERCs or MDERCs 
either as a generator or user, if the executive director determines that the 
company has violated the requirements of the program or abused the privileges 
provided by the program. 
[sub] x<ol> which is used to comply with the provisions of Chapter 117 of this 
title must meet all applicable provisions of sec.117.570 of this title and shall 
then be subject to all applicable provisions of sec.117.570 of this title in 
addition to the requirements of this section. The value of any NO<sub>x ERC 
which is used to comply with Chapter 117 of this title may be reduced in 
accordance with sec.117.570(d) of this title. 
(2) Protocols. The amount of DERC in tons will be determined and certified based 
on actual monitoring results, when available, or otherwise calculated using good 
engineering practices including calculation methodologies in general use in NSR 
permitting. The source must collect relevant data sufficient to characterize the 
process emissions of the affected pollutant and the process activity level for 
all representative phases of source operation during the period under which 
DERCs are created or used. The amount of MDERCs will be quantified in accordance 
with sec.114.29(f), sec.114.39(d) or
(e) of this title as appropriate. For the purposes of quantifying MDERCs, the 
terms "VMT" represents the actual vehicle miles traveled over the time period 
for which credit is desired, and the term "n" represents time period over which 
the credit is generated. 
(3) DERC generation. 
(A) Generation limitations. A DERC or MDERC may be generated by any strategy 
that reduces a source's emission rate below its baseline, except for the 
following: 
(i) curtailing an activity at a source; 
(ii) modification or discontinuation of any activity that is otherwise in 
violation of a federal, state or local law; 
(iii) emissions reductions required to comply with any provision under Title I 
of the FCAA regarding tropospheric ozone, or Title IV of the FCAA regarding acid 
rain; 
(iv) emission reductions of hazardous air pollutants, as defined in the FCAA 
sec.112, from application of a standard promulgated under the FCAA sec.112; 
(v) emission reductions credited or used under any other emissions trading 
program; 
(vi) emission reductions occurring at a source which received an alternative 
emission limitation to meet a state RACT requirement, except to the extent that 
the emissions are reduced below the level that would have been required had the 
alternative emission limitation not been issued; and
(vii) emission reductions at a facility with a flexible permit, unless the 
reductions are made permanent and enforceable or the generator can demonstrate 
that the emission reductions were not used to satisfy the conditions for the 
facilities under the flexible permit. 
(B) Calculation of emission reduction generated. 
(i) An emission reduction is generated when the operator of an emission source 
undertakes a strategy to reduce the source's emission rate per unit of activity 
below its baseline. 
(ii) For all emission reduction strategies, except shutdowns and mobile source 
emission reduction strategies, the emission reduction is calculated as follows: 
Figure 1: 30 TAC sec.101.29(b)(3)(B)(ii) 
(iii) The amount of DERCs or MDERCs generated must be rounded down to the 
nearest ton. 
(iv) For shutdown emission reduction strategies, the quantity of emission 
reduction generated is equivalent to the baseline emissions.
(v) The generation period for a shutdown is ten years. Shutdown DERCs must be 
generated and noticed to the Registry on an annual basis. 
(vi) If the generator exceeds the allowable emission limit for the applicable 
facility, no DERC will be generated. 
(vii) If the generator uses the emission reduction to net out of nonattainment 
new source review or increases emissions at another emission point within the 
property by an amount equal to or greater than the emission reduction generated, 
no DERC will be generated. 
(C) Notice of generation. A notice of generation and generator certification 
must be submitted to the Registry in accordance with the following requirements 
if the reduction is to be creditable and marketable: 
(i) the notice must be submitted no later than 90 days after the generation 
activity has been completed, or no later than 90 days after the completion of 
the first 12 months of generation, if the generation period exceeds 12 months, 
and every 12 months thereafter for each subsequent year of generation, whichever 
is sooner. 
(ii) The notice for a stationary or area source generator must include the 
following information for each pollutant reduced at each applicable emission 
point: 
(I) the name, address, county, telephone number, contact person, permit or 
standard exemption numbers, account number of the generator, and the unique 
facility identification number (FIN) and emission point number (EPN) of the 
applicable emission points, 
(II) the name of the owner and/or operator of the generator source, 
(III) the generation period, 
(IV) a complete description of the generation activity, 
(V) for shutdown emission reduction strategies, an explanation as to whether 
production shifted from the shut down facility to another facility in the same 
nonattainment area, 
(VI) the amount of DERCs generated, 
(VII) for VOC reductions, a list of the specific compounds reduced, 
(VIII) the baseline emission rate and baseline total emissions for each 
applicable pollutant and emission point, 
(IX) the most stringent emission rate and the most stringent emission level for 
the applicable emission point, considering all the applicable regulatory 
requirements, 
(X) a complete description of the protocol used to calculate the emission 
reduction generated, 
(XI) the actual calculations performed and data used by the generator to 
determine the amount of DERCs generated, and 
(XII) a statement that the emission reductions on which the DERCs are based are 
real, surplus, and not based on an emission reduction strategy prohibited in 
subsection (c)(3)(A) of this section. 
(iii) The notice for a mobile source generator must include information as 
required to verify the credit calculation. A mobile source generator shall also 
indicate in his notification whether credits have been banked under sec.114.39 
of this title. 
(iv) The notice must include a certification of generation, which shall contain 
certification under penalty of law by a responsible official of the generator 
source of truth, accuracy, and completeness. This certification shall state that 
based on information and belief formed after reasonable inquiry, the statements 
and information in the document are true, accurate and complete. 
(v) If a generator submits a notice late, the creditable portion of the 
reduction will be reduced at the discretion of the executive director.
(vi) The generator must provide a complete copy of the Notice of Generation, 
Certification, and backup information to the user. 
(vii) The generator is responsible for maintaining current information in the 
notice of generation after it is submitted to the Registry, such as address 
changes, or a change of ownership when the credits are sold or transferred. 
(D) Compliance burden and enforcement. 
(i) The generator is responsible for assuring that the DERCs or MDERCs generated 
are real, surplus, and quantified accurately. 
(ii) The notice of generation will be reviewed and the credits certified by the 
executive director at the time the credits are used. Certification by the 
executive director does not relieve the generator of any responsibilities.
(4) DERC and MDERC use. 
(A) Use requirements. 
(i) The user must have ownership of a sufficient amount of DERCs or MDERCs 
before the use period for which the specific DERCs or MDERCs are to be used. 
(ii) The user must hold sufficient DERCs or MDERCs to cover its compliance 
obligation at all times. 
(iii) The user shall acquire additional DERCs or MDERCs during the use period if 
the user determines that he does not possess enough DERCs or MDERCs to cover the 
entire use period. The user must acquire additional credits as allowed under 
this section prior to the shortfall, or the user will be in violation of this 
section. 
(iv) Source operators may acquire and use only DERCs or MDERCs listed on the 
Registry. 
(B) Use limitations. A DERC or MDERC may be used to meet a regulatory 
requirement or demonstrate compliance, except as prohibited by this paragraph. A 
DERC or MDERC may not be used: 
(i) before it has been acquired by the user; 
(ii) for netting to avoid the applicability of federal and state NSR 
requirements; 
(iii) to allow an emissions increase of an air contaminant that exceeds the 
limitations of sec.106.261 (3) or (4) or sec.106.262(3) of this title (relating 
to Facilities (Emission Limitations), and Facilities (Emission and Distance 
Limitations)) or sec.106.262(3) except as approved by the executive director; 
(iv) to meet FCAA requirements for: 
(I) new source performance standards under sec.111; 
(II) lowest achievable emission rate standards under sec.173(a)(2);
(III) best available control technology standards under sec.165(a)(4);
(IV) HAP standards under sec.112, including the requirements for maximum 
achievable control technology; 
(V) standards for solid waste combustion under sec.129; 
(VI) requirements for a vehicle inspection and maintenance program under 
sec.182(b)(4) or (c)(3); 
(VII) ozone control standards set under sec.183 (e) and (f);
(VIII) clean fueled vehicle requirements under sec.246; 
(IX) motor vehicle emissions standards under sec.202; 
(X) standards for nonroad vehicles under sec.213; 
(XI) requirements for reformulated gasoline under sec.211(k);
(XII) requirements for Reid vapor pressure standards under sec.211(h) and (i); 
(v) to exceed any allowable emission level, except for permitted facilities, 
which may use DERCs and MDERCs to exceed permit allowables by no more than 25 
tons for NO<sub>x or 5 tons for VOC in a 12-month period. This use is limited to 
one exceedance up to 12 months, within any 24-month period per use strategy. The 
use must extend beyond a 24-hour period; or 
(vi) to exceed the user's allowable emission level up to the prevention of 
significant deterioration levels as provided in 40 Code of Federal Regulations 
sec.52.21(b)(23), unless approved by the executive director prior to use in 
attainment areas only. The user must demonstrate that there will be no adverse 
impacts from the use of DERCs or MDERCs at the levels requested. 
(C) Use of DERCs or MDERCs for NSR offsets. 
(i) The user must obtain the executive director's approval prior to the use of 
specific DERCs or MDERCs to cover, at a minimum, one year of operation of the 
new or modified source in the NSR permit. 
(ii) The NSR permit must contain an enforceable requirement that the source 
obtain at least one additional year of offsets before continuing operation in 
each subsequent year. 
[sub] x<ol> which is used to comply with the provisions of Chapter 117 of this 
title must meet all applicable provisions of sec.117.570 of this title and shall 
then be subject to all applicable provisions of sec.117.570 of this title in 
addition to the requirements of this section. 
(E) Calculation of DERCs or MDERCs needed. 
(i) The amount of DERCs or MDERCs needed to demonstrate compliance or meet a 
regulatory requirement is calculated as follows: Figure 2: 30 TAC 
sec.101.29(d)(4)(E)(i) 
(ii) The amount of DERCs or MDERCs needed must be rounded up to the nearest ton. 
(iii) The user must possess 10% more DERCs or MDERCs than are needed, as 
calculated in clause (i) of this subparagraph, to ensure that the source's 
environmental contribution retirement obligation will be met in accordance with 
subparagraph (G)(i) of this paragraph. 
(iv) If the amount of DERCs or MDERCs needed to meet a regulatory requirement or 
to demonstrate compliance is greater than 10 tons, an additional 5% of the DERCs 
or MDERCs needed, as calculated in clause (i) of this subparagraph, must be 
acquired to ensure that sufficient DERCs are available to the user with an 
adequate compliance margin. 
(v) The amount of DERCs or MDERCs needed for NSR offsets equals the quantity of 
tons needed to achieve the maximum allowable emission level set in the user's 
NSR permit. The user must also purchase and retire enough DERCs or MDERCs to 
meet the offset ratio requirement in the user's ozone nonattainment area. The 
user must purchase and retire either the environmental contribution of 10% or 
the offset ratio, whichever is higher. 
(vi) DERCs or MDERCs that are not used during the use period are surplus and 
remain available for transfer or use by the holder. In addition, any portion of 
the calculated environmental contribution not attributed to actual use is also 
available. 
(F) Notice of intent to use. A notice of intent to use must be submitted to the 
Registry in accordance with the following requirements:
(i) DERCs or MDERCs may be used only after the user has submitted the notice to 
the Registry; 
(ii) the notice must be submitted at least 45 days prior to the first day of the 
use period, when the generator is a stationary source and 90 days when the 
generator is a mobile source and every 12 months thereafter for each subsequent 
year, if the use period exceeds 12 months; 
(iii) a copy of the notice must also be sent to the Federal Land Manager 30 days 
prior to use if the user is located within 100 kilometers of a Class I area. 
(iv) the notice for a stationary or area source user must include the following 
information for each use: 
(I) the name, address, county, telephone number, contact person, permit or 
standard exemption numbers, and account number of the user, the unique FIN and 
EPN identification numbers for each emission point, 
(II) the name of the owner and/or operator of the user source,
(III) the applicable state and federal requirements that the DERCs will be used 
to comply with and the intended use period, 
(IV) the amount of DERCs needed, 
(V) the baseline emission rate, activity level, and total emissions for the 
applicable emission points, 
(VI) the expected emission rate, activity level, and total emissions for the 
applicable emission points, 
(VII) the most stringent emission rate and the most stringent emission level for 
the applicable emission points, considering all applicable regulatory 
requirements, 
(VIII) a complete description of the protocol used to calculate the amount of 
DERCs needed, 
(IX) the actual calculations performed and data used by the user to determine 
the amount of DERCs needed, 
(X) the date on which the DERCs were acquired or will be acquired,
(XI) the DERC generator and the serial numbers of the DERCs acquired or to be 
acquired, 
(XII) the price of the DERCs acquired or the expected price of the DERCs to be 
acquired, and 
(XIII) a statement that due diligence was taken to verify that the DERCs were 
not previously used, that the DERCs were not generated as a result of actions 
prohibited under this regulation, and that the DERCs will not be used in a 
manner prohibited under this regulation. 
(v) the notice for a mobile source user must include information as required in 
sec.114.29 and sec.114.39 of this title. 
(vi) the notice must include a certification of use, which must contain 
certification under penalty of law by a responsible official of the user source 
of truth, accuracy, and completeness. This certification must state that based 
on information and belief formed after reasonable inquiry, the statements and 
information in the document are true, accurate and complete.
(vii) a user may submit a notice late in the case of an emergency, but the 
notice must be submitted before the DERCs can be used. The user must include a 
complete description of the emergency situation in the notice of intent to use. 
All other notices submitted less than 45 days prior, or 90 days prior for a 
mobile source, to use will be considered late and in violation.
(viii) the user is responsible for determining the credits it will purchase and 
notifying the executive director of the selected generating source in the notice 
of intent to use. The executive director will certify or reject the generating 
source's emission reduction within 14 days of receiving the notice of intent to 
use from the user if the generator is a stationary source and 30 days if the 
generator is a mobile source. If the generator's credits are rejected or the 
notice of generation is incomplete, the use of DERCs by the user may be delayed 
by the executive director. The user cannot use any DERCs that have not been 
certified by the executive director. The executive director may reject the use 
of DERCs by a source if the requirements of this section are not met. 
(G) Actual DERC or MDERC use. 
(i) The user shall calculate: 
(I) the amount of DERCs or MDERCs used, including the amount of DERCs or MDERCs 
retired to cover the environmental contribution associated with actual use; and 
(II) the amount of DERCs or MDERCs not used, including the amount of excess 
DERCs or MDERCs that were purchased to cover the environmental contribution but 
not associated with the actual use, and available for future use. 
(ii) A report of use must be submitted to the Registry in accordance with the 
following requirements: 
(I) a report of use must be submitted within 90 days after the end of the use 
period; 
(II) the report must be submitted within 90 days of the conclusion of each 12-
month use period, if applicable; 
(III) the report is to be used as the mechanism to update or amend the notice of 
intent to use and must include any information different from that reported in 
the notice of intent to use, including but not limited to the following items: 
(-a-) purchase price of the DERCs or MDERCs obtained prior to the current use 
period, 
(-b-) the actual amount of DERCs or MDERCs possessed during the use period, 
(-c-) the actual emissions during the use period for VOC and NO<Sub>x; 
(-d-) the actual amount of DERC or MDERCs used; 
(-e-) the actual environmental contribution; and 
(-f-) the amount of DERC's or MDERCs available for future use. 
(iii) The user is in violation of this section if the user submits the report of 
use later than the allowed 90 days following the conclusion of the use period. 
(iv) The Registry shall not contain proprietary information.
(H) Compliance burden and enforcement. 
(i) The user is responsible for assuring that a sufficient quantity of DERCs or 
MDERCs is acquired to cover the applicable source's emissions for the entire use 
period. The user should ensure that the credits are real, surplus, and properly 
quantified DERCs or MDERCs for purchase.
(ii) The user is in violation of this section if the user does not possess 
enough DERCs or MDERCs to cover the credit need for the use period. If the user 
possesses an insufficient quantity of DERCs or MDERCs to cover its compliance 
need, the user will be out of compliance for the entire use period, unless the 
user can demonstrate otherwise. 
(iii) Users may not transfer their compliance burden and legal responsibilities 
to a third party participant. Third party participants may only act in an 
advisory capacity to the user. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 30, 1997.
TRD-9707038
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation Commission
Proposed date of adoption: August 20, 1997
For further information, please call: (512) 239-1970

CHAPTER 115.Control of Air Pollution From Volatile Organic Compounds
SUBCHAPTER J.Administrative Provisions
Emissions Trading
30 TAC sec.115.950
The commission proposes new sec.115.950, concerning Emissions Trading, in 
Subchapter J (Administrative Provisions), and revisions to the State 
Implementation Plan regarding the proposal. 
EXPLANATION OF PROPOSED RULE 
Emissions banking and trading is an innovative approach to regulatory 
compliance, allowing a source to meet emission control requirements by 
purchasing and using credits generated by another source in the same ozone 
nonattainment area which has reduced its emissions below the level required by 
rule or permit. Prior to this proposal, banking and trading were not an option 
to meet the Chapter 115 volatile organic compound (VOC) control requirements, 
with the exception of limited intrasource trading available under 
sec.sec.115.910-115.916, regarding Alternate Means of Control. This new 
sec.115.950 enables sources to meet the VOC emission control requirements of 
Chapter 115, in whole or in part, by obtaining reduction credits in accordance 
with sec.101.29 of this title, regarding Emissions Banking and Trading. 
Concurrent with the sec.115.950 proposal, existing sec.101.29 is being repealed 
and new sec.101.29 is being proposed. The new section retains provisions that 
allow emission reduction credits (ERCs) and mobile emission reduction credits 
(MERCs) to be used for purposes of nonattainment offsetting. The new section 
will expand uses of ERCs to include compliance with reasonably available control 
technology requirements and to allow for the creation and use of discrete 
emission reduction credits (DERCs) and mobile discrete emission reduction 
credits (MDERCs). Also, revisions to Chapter 117 of this title, concerning 
Control of Air Pollution from Nitrogen Compounds, are being proposed concurrent 
with this proposal which provide more flexible trading options for sources of 
nitrogen oxides. New sec.115.950 allows sources to meet Chapter 115 VOC control 
requirements by applying ERCs, MERCs, DERCs, or MDERCs. Please refer to the 
sec.101.29 proposal for a more complete description of these types of credits, 
and the requirements for their generation and use.
FISCAL NOTE 
Stephen Minick, Strategic Planning and Appropriations Division, has determined 
that for the first five-year period the section as proposed is in effect, there 
will be no significant fiscal implications anticipated for state and local 
governments as a result of administration or enforcement of the section. The 
proposal adds trading as an alternative means of compliance with the provisions 
of Chapter 115, thereby providing more flexibility and enabling sources to 
comply in a more cost-effective manner.
PUBLIC BENEFIT 
Mr. Minick also has determined that for each year of the first five years the 
section as proposed is in effect, the public benefit anticipated as a result of 
implementing the section will be the ability to satisfy Federal Clean Air Act 
Amendments and the United States Environmental Protection Agency requirements, 
and potential early VOC emission reductions in ozone nonattainment areas. Also, 
proposed sec.101.29, concerning Emissions Banking and Trading, requires that 10% 
additional credits beyond the source's compliance obligation be retired as an 
environmental benefit. Therefore, the use of trading to comply with the 
requirements of Chapter 115 will result in additional VOC reductions which may 
be necessary for the timely attainment of the ozone standard. As the program is 
voluntary, there are no economic costs anticipated for small businesses, 
persons, or businesses required to comply with this section as proposed.
TAKINGS IMPACT ASSESSMENT
The commission has prepared a Takings Impact Assessment for this rule pursuant 
to Texas Government Code Annotated, sec.2007.043. The following is a summary of 
that assessment. The specific purpose of the new rule is to provide an 
alternative, cost-effective method of complying with the VOC control 
requirements of Chapter 115. Promulgation and enforcement of this rule will not 
affect private real property.
COASTAL MANAGEMENT PLAN
The commission has determined that the proposed rulemaking relates to an action 
or actions subject to the Texas Coastal Management Program (CMP) in accordance 
with the Coastal Coordination Act of 1991, as amended (Texas Natural Resource 
Code, sec.sec.33.201 et. seq.), and the commission's rules in 30 TAC Chapter 
281, Subchapter B, concerning Consistency with the Texas Coastal Management 
Program. As required by 31 TAC sec.505.11(b)(2) and 30 TAC sec.281.45(a)(3) 
relating to actions and rules subject to the CMP, agency rules governing air 
pollutant emissions must be consistent with the applicable goals and policies of 
the CMP. The commission has reviewed this proposed action for consistency with 
the CMP goals and policies in accordance with the rules of the Coastal 
Coordination Council, and has determined that the proposed action is consistent 
with the applicable CMP goals and policies. This proposal provides a flexible, 
cost-effective alternative approach to rule compliance by allowing emissions 
banking and trading. If adopted, it will not authorize any new sources of air 
emissions. Interested persons may submit comments on the consistency of the 
proposed rule with the CMP during the public comment period.
PUBLIC HEARING
A public hearing on this proposal will be held in Austin on July 8, 1997, at 
10:00 a.m. in Building F, Room 2210 at the Texas Natural Resource Conservation 
Commission complex, located at 12100 North IH-35, Park 35 Technology Center, 
Austin. Individuals may present oral statements when called upon in order of 
registration. Open discussion within the audience will not occur during the 
hearing; however, an agency staff member will be available to discuss the 
proposal 30 minutes prior to the hearing and will answer questions before and 
after the hearing.
Written comments may be mailed to Heather Evans, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 
239-4808. All comments should reference Rule Log Number 96158-101-AI. Comments 
must be received by 5:00 p.m., July 10, 1997. For further information, please 
contact Mike Magee, Air Policy and Regulations Division, (512) 239-1511. 
Persons with disabilities who have special communication or other accommodation 
needs who are planning to attend the hearings should contact the agency at (512) 
239-4900. Requests should be made as far in advance as possible.
STATUTORY AUTHORITY 
The new section is proposed under the Texas Health and Safety Code, the Texas 
Clean Air Act (TCAA), sec.382.017, which provides the commission with the 
authority to adopt rules consistent with the policy and purposes of the TCAA.
The proposed new section implements Health and Safety Code, sec.382.017. 

sec.115.950.Emissions Trading.
An owner or operator may meet the emission control requirements of this chapter, 
in whole or in part, by obtaining emission reduction credits or discrete 
emission reduction credits in accordance with sec.101.29 of this title (relating 
to Emission Credit Banking and Trading).
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt. 
Issued in Austin, Texas, on May 30, 1997.
TRD-9707036
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation Commission
Proposed date of adoption: August 20, 1997
For further information, please call: (512) 239-1970

CHAPTER 117.Control of Air Pollution from Nitrogen Compounds 
SUBCHAPTER D.Administrative Provisions
30 TAC sec.117.540, sec.117.570
The commission proposes amendments to sec.117.540, concerning Phased Reasonably 
Available Control Technology (RACT), and sec.117.570, concerning Trading, in 
Subchapter D (Administrative Provisions), and revisions to the State 
Implementation Plan regarding the proposal. Chapter 117 was originally adopted 
in May 1993 in response to a requirement by the United States Environmental 
Protection Agency (EPA) and the 1990 Federal Clean Air Act (FCAA) Amendments for 
states to apply RACT requirements to major sources of nitrogen oxides (NOsub>x). 
Chapter 117 applies in the following counties designated nonattainment for 
ozone: Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, 
and Waller (Houston/Galveston ozone nonattainment area) and Hardin, Jefferson, 
and Orange (Beaumont/Port Arthur ozone nonattainment area).
EXPLANATION OF PROPOSED RULES 
Section 117.540 and sec.117.570 are being amended to make the rule requirements 
consistent with new sec.101.29 of this title, regarding Emissions Banking and 
Trading. Existing sec.101.29 is being repealed, and new sec.101.29 is being 
added, concurrent with these amendments to Chapter 117. The amendments retain 
provisions that allow emission reduction credits (ERCs) and mobile emission 
reduction credits (MERCs) to be used for purposes of nonattainment offsetting. 
The amendments will expand uses of ERCs to include compliance with RACT 
requirements and to allow for the creation and use of discrete emission 
reduction credits (DERCs) and mobile discrete emission reduction credits 
(MDERCs). Under the amendments, sources may meet Chapter 117 NO<sub>x control 
requirements by applying ERCs, MERCs, DERCs, or MDERCs. Please refer to the 
sec.101.29 proposal for a more complete description of these types of credits, 
and the requirements for their generation and use. Also, revisions to Chapter 
115 of this title, concerning Control of Air Pollution from Volatile Organic 
Compounds (VOC), are being proposed concurrent with this proposal which provide 
more flexible trading options for sources of VOCs. 
Section 117.540 allows affected sources to petition the agency for additional 
time to comply with Chapter 117 requirements. The rule section was developed in 
response to companies' concerns that in spite of good faith efforts to achieve 
compliance by the required date, delays in delivery, construction, and 
installation of control equipment could be encountered in some cases. As 
originally adopted and previously amended, sec.117.540 requires documentation of 
the specific reasons for any requested compliance extension. This proposal 
requires that reduction credits, if reasonably available, must be obtained by 
sources seeking extensions past the Chapter 117 compliance date. The proposed 
sec.117.540 requires that phased RACT petitions contain detailed documentation 
that credits are not reasonably available. In addition, sec.117.540(b) and (c) 
are proposed for deletion, since the uses of MERCs for Chapter 117 compliance as 
outlined in these subsections are now addressed in new proposed sec.101.29(d). 
Existing sec.117.570 allows trading as an alternative method for sources of 
NO<sub>x to comply with the control requirements of Chapter 117. Revisions to 
sec.117.570 in this proposal update rule references to include MERCs, DERCs, and 
MDERCs clarify rule requirements, and eliminate redundant rule provisions now 
contained in proposed sec.101.29. 
New sec.117.570(c)(4) specifies requirements for credit generation by units 
participating in a source cap in accordance with sec.117.223 (Source Cap). Under 
sec.117.223, heat input is calculated by taking the actual historical average of 
the daily heat input for each participating unit during a specified 24 
consecutive month period, plus one standard deviation of the average daily heat 
input for that period. This provision for adding one standard deviation affords 
companies a compliance margin that accounts for normal fluctuations in the 
actual daily heat input. A source cap allowable emission rate based on 
historical heat input, without including this margin, could result in 
exceedances of the source cap under normal operating conditions unless either a 
compliance margin was provided, or the source lowered its actual emission rate 
to compensate for these fluctuations. In order to assure that credits generated 
under a source cap represent actual emission reductions, new sec.117.570(c)(4) 
requires that one standard deviation may not be included in the calculation of 
reduction credits generated. In addition, the source cap allowable must be 
reduced by the amount of the creditable reductions claimed for the unit in 
question. 
FISCAL NOTE 
Stephen Minick, Strategic Planning and Appropriations Division, has determined 
that for the first five-year period the sections as proposed are in effect, 
there will be no significant fiscal implications anticipated for state and local 
governments as a result of administration or enforcement of the sections. The 
proposal adds trading as an alternative means of compliance with the provisions 
of Chapter 117, thereby providing more flexibility and enabling sources to 
comply in a more cost-effective manner. 
PUBLIC BENEFIT 
Mr. Minick also has determined that for each year of the first five years the 
sections as proposed are in effect, the public benefit anticipated as a result 
of implementing the sections will be the ability to satisfy FCAA Amendments and 
the EPA requirements, and potential early NO<sub>x emission reductions in ozone 
nonattainment areas. Also, proposed sec.101.29, concerning Emissions Banking and 
Trading, requires that 10% additional credits beyond the source's compliance 
obligation be retired as an environmental benefit. Therefore, the use of trading 
to comply with the requirements of Chapter 117 will result in additional 
NO<sub>x reductions which may be necessary for the timely attainment of the 
ozone standard. As the program is voluntary, there are no economic costs 
anticipated for small businesses, persons, or businesses required to comply with 
these sections as proposed.
TAKINGS IMPACT ASSESSMENT 
The commission has prepared a Takings Impact Assessment for these rules pursuant 
to Texas Government Code Annotated, sec.2007.043. The following is a summary of 
that assessment. The specific purpose of the rule amendments is to provide an 
alternative flexible, cost-effective method of complying with the NO<sub>x 
control requirements of Chapter 117. Promulgation and enforcement of these rule 
amendments will not affect private real property.
COASTAL MANAGEMENT PLAN
The commission has determined that the proposed rulemaking relates to an action 
or actions subject to the Texas Coastal Management Program (CMP) in accordance 
with the Coastal Coordination Act of 1991, as amended (Texas Natural Resource 
Code, sec.sec.33.201 et seq.), and the commission's rules in 30 TAC Chapter 281, 
Subchapter B, concerning Consistency with the Texas Coastal Management Program. 
As required by 31 TAC sec.505.11(b)(2) and 30 TAC sec.281.45(a)(3) relating to 
actions and rules subject to the CMP, agency rules governing air pollutant 
emissions must be consistent with the applicable goals and policies of the CMP. 
The commission has reviewed this proposed action for consistency with the CMP 
goals and policies in accordance with the rules of the Coastal Coordination 
Council, and has determined that the proposed action is consistent with the 
applicable CMP goals and policies. This proposal provides a flexible, cost-
effective alternative approach to rule compliance by allowing emissions banking 
and trading. If adopted, the rules will not authorize any new sources of air 
emissions. Interested persons may submit comments on the consistency of the 
proposed rules with the CMP during the public comment period.
PUBLIC HEARING
A public hearing on this proposal will be held in Austin on July 8, 1997, at 
10:00 a.m. in Building F, Room 2210 at the Texas Natural Resource Conservation 
Commission complex, located at 12100 North IH-35, Park 35 Technology Center, 
Austin. Individuals may present oral statements when called upon in order of 
registration. Open discussion within the audience will not occur during the 
hearing; however, an agency staff member will be available to discuss the 
proposal 30 minutes prior to the hearing and will answer questions before and 
after the hearing.
Written comments may be mailed to Heather Evans, Office of Policy and Regulatory 
Development, MC 205, P.O. Box 13087, Austin, Texas 78711-3087 or faxed to (512) 
239-4808. All comments should reference Rule Log Number 96158-101-AI. Comments 
must be received by 5:00 p.m., July 10, 1997. For further information, please 
contact Mike Magee, Air Policy and Regulations Division, (512) 239-1511. Persons 
with disabilities who have special communication or other accommodation needs 
who are planning to attend the hearings should contact the agency at (512) 239-
4900. Requests should be made as far in advance as possible.
STATUTORY AUTHORITY
The amendments are proposed under the Texas Health and Safety Code, the Texas 
Clean Air Act (TCAA), sec.382.017, which provides the commission with the 
authority to adopt rules consistent with the policy and purposes of the TCAA. 
The proposed amendments implement Health and Safety Code, sec.382.017.

sec.117.540.Phased Reasonably Available Control Technology (RACT).
[(a)] The owner or operator affected by the provisions of this chapter (relating 
to Control of Air Pollution from Nitrogen Compounds) who determines that 
compliance by May 31, 1999 is not practicable may submit a petition for phased 
RACT. The process for submitting a petition and receiving approval shall be 
based on the following: 
(1) (No change.) 
(2) The owner or operator of the affected unit or units shall submit information 
in the petition to the Texas Natural Resource Conservation Commission 
(commission) and a copy to the United States Environmental Protection Agency 
(EPA) Regional Office in Dallas which will demonstrate all of the following: 
<nl>(A)<ol> <nl>emission reduction credits (ERCs) or discrete emission reduction 
credits (DERCs), in accordance with sec.101.29 of this title (relating to 
Emission Credit Banking and Trading), are not reasonably available in an amount 
equal to the quantity of emission reductions required under this chapter. If 
ERCs or DERCs are reasonably available, they shall be applied to meet the 
emission reductions required under this chapter, in accordance with sec.117.570 
of this title (relating to Trading) and sec.101.29 of this title. <ol>
<nl>(B)<ol>[(A)] compliance by May 31, 1999 is impracticable due to the 
unavailability of nitrogen oxides (NO<sub>x) abatement equipment, engineering 
services, or construction labor; system unreliability; manufacturing 
unreliability; equipment unreliability; or other technological and economic 
factors as the commission determines are appropriate; 
<nl>(C)<ol>[(B)] there is a proposed stage-by-stage program for compliance and 
clearly specified compliance milestones for each unit; 
<nl>(D)<ol>[(C)] there is a commitment to implement the portion of the phased 
RACT petition that can be implemented by May 31, 1999; and 
<nl>(E)<ol>[(D)] the final compliance date specified in the petition shall be as 
soon as practicable, but in no case later than August 31, 2000, except as 
approved by the executive director.
(3) (No change.) 
<nl>(4)<ol> <nl> All petitions for phased RACT shall include a list of the 
company names, addresses, and telephone numbers of persons who own or control 
ERCs or DERCs, and who have been contacted in efforts to obtain the ERCs or 
DERCs for purposes of meeting the emission reductions required under this 
chapter. For each person or company contacted, the list shall contain a 
description of the information obtained, including but not limited to the date 
of contact, availability of the ERCs or DERCs, sale price requested by the owner 
or controller of the ERCs or DERCs, sale price offered by the prospective buyer 
of the ERCs or DERCs, and an explanation of the reasons why the ERCs or DERCs, 
if available, were not purchased for purposes of meeting the emission reductions 
required under this chapter. <ol>
<nl>(5)<ol>[(4)] All petitions for phased RACT shall include copies of legally 
binding contracts with the primary vendors for each project, signed by an 
authorized official of the company, showing a detailed design or installation 
schedule for the required services or equipment to be provided by that vendor, 
with a completion date no later than August 31, 2000, except as approved by the 
executive director. Any commercially sensitive financial information or trade 
secrets should be excised from the contracts.
<nl>(6)<ol>[(5)] Within 30 days of receiving a petition for phased RACT, the 
executive director shall inform the applicant in writing that the petition is 
complete or that additional information is required. If the petition is 
deficient, the notification shall state any additional information required. The 
requested information correcting the deficiency shall be received by the 
executive director within 30 days of the date of the letter notifying the 
applicant of the deficiency.
<nl>(7)<ol>[(6)] The executive director shall approve or deny the petition 
within 90 days of receiving an administratively complete phased RACT petition. 
The executive director shall approve a petition for phased RACT if the executive 
director determines that compliance is not practicable by May 31, 1999, because 
of either the unavailability of nitrogen oxides abatement equipment, engineering 
services, or construction labor; system unreliability; manufacturing 
unreliability; equipment unreliability; or other technological and economic 
factors as the executive director determines are appropriate.
<nl>(8)<ol>[(7)] Any person affected by the executive director's decision to 
deny a petition for phased RACT or to deny a revision to an approved phased RACT 
petition may file a motion for reconsideration. Notwithstanding the 
applicability provisions of sec.50.31(c)(7) of this title (relating to Purpose 
and Applicability), the requirements of sec.50.39 of this title (relating to 
Motion for Reconsideration) apply. However, only a person affected may file a 
motion for reconsideration. Approved petitions for phased RACT may be revised by 
the executive director upon a showing of just cause by the applicant.
<nl>(9)<ol>[(8)] Approval of a phased RACT schedule by the <nl>commission<ol> 
[TNRCC] does not waive any applicable federal requirements or eliminate the need 
for approval by EPA. 
<nl>(10)<ol>[(9)] The holder of an approved phased RACT determination shall 
comply with each specified compliance milestone and each date for compliance 
provided in the approved petition, as well as any other condition established in 
the approval. 
[(b) The executive director may approve the use of a mobile source emission 
reduction credit (MERC), created from vehicle scrappage, to achieve NO<sub>x 
emissions reductions equivalent to those required by this chapter, on an interim 
basis from May 31, 1999 to the date of final compliance, for a period not to 
exceed 36 months. Any plan involving the use of a MERC may be approved if the 
executive director determines that it conforms to the provisions of sec.117.570 
of this title (relating to Trading) and sec.114.29 of this title (relating to 
Accelerated Vehicle Retirement Program). Executive director approval does not 
necessarily constitute satisfaction of all federal requirements, nor eliminate 
the need for approval by EPA.] 
[(c) The executive director may approve the use of a MERC, created from clean-
fuel vehicles, to achieve NO<sub>x emissions reductions equivalent to those 
required by this chapter, on an interim basis from May 31, 1999 to the date of 
final compliance, for a period not to exceed that specified in sec.114.39 of 
this title (relating to MERC Program). Any plan involving the use of a MERC may 
be approved if the executive director determines that it conforms to the 
provisions of sec.117.570 of this title (relating to Trading) and sec.114.39 of 
this title. Executive director approval does not necessarily constitute 
satisfaction of all federal requirements, nor eliminate the need for approval by 
EPA.] 

sec.117.570.Trading.
(a) An owner or operator may reduce the amount of emission reductions 
[otherwise] required by sec.117.105 or sec.117.205 of this title (relating to 
Emission Specifications), sec.117.107 of this title (relating to Alternative 
System-Wide Emission Specifications), sec.117.207 of this title (relating to 
Alternative Plant-Wide Emission Specifications), or sec.117.223 of this title 
(relating to Source Cap) by obtaining an emission reduction credit <nl>(ERC), 
mobile emission reduction credit (MERC), discrete emission reduction credit 
(DERC), or mobile discrete emission reduction credit (MDERC)<ol> [which is] 
established in accordance with this section <nl>and sec.101.29 of this title 
(relating to Emission Credit Banking and Trading)<ol>. <nl>Any ERCs, MERCs, 
DERCs, or MDERCs for nitrogen oxides (NO<sub>x) generated under the provisions 
of sec.101.29 of this title used for the purposes of this chapter become subject 
to the limitations and provisions of this section. For the purposes of this 
section, the term "RC" refers to an ERC, MERC, DERC, or MDERC, whichever is 
applicable.<ol> 
[(b) The following requirements must be met in order for a particular unit to be 
eligible to use this section:] 
[(1) The unit or source creating the reduction credit (RC) must be located in 
the same federally designated ozone nonattainment area as the unit subject to 
the requirements of this section;] 
[(2) RCs must be generated from a stationary source or sources; and] 
[(3) The emission reduction which is the basis for establishment of the RC must 
have occurred after January 1, 1990.] 
<nl>(b)<ol>[(c)] Reduction credits 
<nl>(RCs)<ol> shall be generated as follows.
(1) For sources not subject to the emission specifications of sec.117.105 or 
sec.117.205 of this title, creditable RCs <nl> used to meet compliance with 
those sections<ol>shall be established in accordance with the following 
requirements: 
[(A) RCs shall be calculated in accordance with the establishment of stationary 
source emission reduction credits (ERCs) under sec.101.29(c)(f) of this title 
(relating to Emissions Banking); and] 
<nl>(A)<ol>[(B)] The source shall use emissions test data to establish the 
actual emissions baseline in accordance with the testing requirements of 
sec.117.209(b) of this title (relating to Initial Control Plan Procedures), or 
sec.117.111 or sec.117.211 of this title (relating to Initial Demonstration of 
Compliance), as applicable. The actual emissions baseline is defined as the 
actual annual emissions, in tons per year, from a source determined by use of 
data representative of actual operations in 1990 or later, assuming full 
compliance with all applicable state and federal rules and regulations. 
<nl>(B)<ol> <nl>If the source creating the RC has been shut down or irreversibly 
changed, the source shall use the best available data and good engineering 
practice to establish the actual emissions baseline. <ol>
(2) For sources subject to the emission specifications of sec.117.105 or 
sec.117.205 of this title, creditable RCs shall be calculated using the 
following equations: 
Figure 1: 30 TAC sec.117.570(b)(2)
(3) RCs from shutdown units may be generated only by units participating in a 
source cap in accordance with sec.117.223 of this title.
<nl>(4)<ol> <nl> For units participating in a source cap in accordance with 
sec.117.223 of this title, creditable RCs may be generated only under the 
following conditions: <ol>
<nl>(A)<ol> <nl>The source cap allowable must be reduced by the amount of the 
creditable reductions claimed for the unit or units, and <ol> 
<nl>(B)<ol> <nl>the actual historical average of the daily heat input for the 
unit or units may not include one standard deviation of the actual average daily 
heat input for the period for which creditable reductions are claimed. <ol>
<nl>(c)<ol>[(d)] Reduction credits shall be used as follows. 
(1) An owner or operator complying with sec.117.223 of this title may reduce the 
amount of emission reductions otherwise required by complying with [both of] the 
following equations instead of the equations in sec.117.223(b)(1) and (2) of 
this title.
Figure 2: 30 TAC sec.117.570(c)(1) 
(2) An owner or operator complying with sec.117.105, sec.117.107, sec.117.205, 
or sec.117.207 of this title may reduce the amount of emission reduction 
otherwise required by those sections for a unit or units at a major source by 
complying with individual unit emission limits calculated from the following 
equation: 
Figure 3: 30 TAC sec.117.570(c)(2) 
(3) RCs from shutdown units may be used only by units participating in a source 
cap in accordance with sec.117.223 of this title.
[(e) RCs may be freely transferred in whole or in part and may be sold or 
conveyed in any manner in accordance with the laws of the State of Texas. The RC 
may be sold outright or leased for some time period agreed to by the parties 
subject to subsection (g) of this section, but not less than six months. Any 
owner or operator shall document the use of a leased RC in the final control 
plan in accordance with sec.117.115 or sec.117.215 of this title (relating to 
Final Control Plan Procedures), or in the revised final control plan in 
accordance with sec.117.117 or sec.117.217 of this title (relating to Revision 
of Final Control Plan), identifying the lessee and lessor, the amount of RCs 
leased, and the conditions of the lease. Approved RCs must be acquired by a 
source prior to their utilization under subsection (d) of this section.] 
[sub]x<ol> emission specification established by rule or permit for the unit or 
units generating <nl>an ERC<ol> [the RC] shall require the user of the 
<nl>ERC<ol> [RC] to obtain an approved new reduction credit or otherwise reduce 
emissions prior to the effective date of such rule or permit change. For units 
using an <nl> ERC<ol> [RC] in accordance with this section which are subject to 
new, more stringent rule or permit limitations, the owner or operator using the 
<nl>ERC<ol> [RC] shall submit a revised final control plan to the executive 
director [of the TNRCC] in accordance with sec.117.117 or sec.117.217 of this 
title (relating to Revision of Final Control Plan) to revise the basis for 
compliance with the emission specifications of this chapter. The owner or 
operator using the <nl>ERC<ol> [RC] shall submit the revised final control plan 
as soon as practicable, but no later than 90 days prior to the effective date of 
the new, more stringent rule or permit limitations. In addition, the owner or 
operator of a unit generating the <nl>ERC<ol> [RC] shall submit a revised 
registration application to the executive director, in accordance with 
subsection <nl>(e)(1)<ol>[(g)(1)] of this section, within 90 days prior to the 
effective date of any new, more stringent rule or permit limitations affecting 
that unit. If a more stringent NO<sub>x emission specification is established by 
rule or permit for the unit or units generating the <nl>ERC<ol> [RC], the value 
of the <nl>ERC<ol> [RC] shall be recalculated as follows:
Figure 4: 30 TAC sec.117.570(d) 
<nl>(e)<ol>[(g)] The RC program established by this section shall be 
administered as follows: 
<nl>(1)<ol> <nl>For emission units subject to the emission specifications of 
this chapter, which generate ERCs, MERCs, DERCs, or MDERCs, and for which the 
owner or operator elects to comply with the individual emission specifications 
of sec.sec.117.105, 117.107, 117.205, or 117.207 of this title, the enforceable 
emission limit R<sub>Bj shall be calculated using the maximum rated capacity. 
<ol>
<nl>(2)<ol> <nl> For emission units subject to the emission specifications of 
this chapter, which generate ERCs, MERCs, DERCs, or MDERCs, and for which the 
owner or operator elects to achieve compliance using sec.117.223 of this title, 
the enforceable emission limit R<sub>Bj shall be substituted for R<sub>j in the 
source cap allowable mass emission rate equations of sec.117.223(b)(1) and (2) 
of this title, and those allowable rates shall be the enforceable limits for 
those sources.<ol>
[(1) The owner or operator of a source seeking to create or revise a RC, 
including those credits created as an ERC under sec.101.29 of this title and 
used for compliance with the provisions of this section, shall submit a 
registration application to the Executive Director using the RC registration 
form approved by the Executive Director. The Executive Director shall annotate 
the RC registration application with the date of receipt. The RC registration 
shall include information sufficient to calculate the RC value under subsection 
(c) of this section. The Executive Director shall perform an engineering 
evaluation of the claimed credit and may adjust the value of the RC on the basis 
of this evaluation. The application must clearly state the enforceable limits 
for each unit generating a credit. For emission units subject to the emission 
specifications of this chapter, which generate RCs, and for which the owner or 
operator elects to comply with the individual emission specifications of 
sec.117.105, sec.117.107, sec.117.205, or sec.117.207 of this chapter, the 
enforceable emission limit R<sub>Bj shall be calculated using the maximum rated 
capacity. For emission units subject to the emission specifications of this 
chapter, which generate RCs, and for which the owner or operator elects to 
achieve compliance using sec.117.223 of this title, the enforceable emission 
limit R<sub>Bj[sub]i in the source cap allowable mass emission rate equations of 
sec.117.223(b)(1) and (2) of this title and those allowable rates shall be the 
enforceable limits for those sources.] 
[(2) Registration applications must be received at least 90 days prior to the 
planned utilization of the RC. RCs may be utilized only after the Executive 
Director grants approval of the registration application.]
[(3) The Executive Director shall have 30 days from date of receipt to determine 
if the registration application is complete.] 
[(4) The Executive Director shall have 90 days from date of receipt to approve, 
modify, or deny the registration or 60 days after determination of completeness, 
whichever is later.] 
[(5) The Executive Director may revoke approval of a registration under this 
section at any time upon a determination that the requirements of this section 
are not being met, and may require submittal of a revised control plan for the 
generator or user of a RC upon such a finding. The owner or operator shall 
submit a revised control plan to the Executive Director as soon as practicable, 
but no later than 90 days after the date of the Executive Director's 
notification that approval of a registration has been revoked.]
[(6) Denial or modification of a registration by the Executive Director may be 
appealed according to the provisions of sec.101.29(c)(3)(E)(iii)(l)(2) of this 
title.] 
[(7) The owner or operator desiring to utilize the RC in accordance with 
subsection (d) of this section shall document this in the initial control plan 
submitted in accordance with sec.117.109 or sec.117.209 of this title (relating 
to Initial Control Plan Procedures). The change of a control plan to include a 
RC after April 1, 1994 shall require a revision to the initial control plan and 
resubmission of the plan for approval as soon as practicable. RCs may be 
utilized only after the Executive Director grants approval of the revised 
initial control plan.] 
[(8) The owner or operator desiring to utilize the RC in accordance with 
subsection (d) of this section shall document this in the final control plan 
submitted in accordance with sec.117.115 or sec.117.215 of this title (relating 
to Final Control Plan Procedures). The new emission limit for each unit as 
calculated in subsection (d) of this section shall be clearly listed and will be 
considered federally enforceable. RCs may be utilized only after the Executive 
Director grants approval of the final control plan.] 
[(9) After submission of the final control plan in accordance with sec.117.115 
or sec.117.215 of this title, an owner or operator who wishes to transfer an RC 
to revise the basis for compliance with the emission specifications of this 
chapter shall submit a revised final control plan to the Executive Director in 
accordance with sec.117.117 or sec.117.217 of this title. The owner or operator 
shall not vary from the representations made in the final control plan without 
prior approval from the Executive Director.] 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt.
Issued in Austin, Texas, on May 30, 1997.
TRD-9707037
Kevin McCalla
Director, Legal Division
Texas Natural Resource Conservation Commission
Proposed date of adoption: August 20, 1997
For further information, please call: (512) 239-1970

TITLE 43. TRANSPORTATION
PART I. Texas Department of Transportation
CHAPTER 1. Management
SUBCHAPTER F. Advisory Committees
43 TAC sec.sec.1.82, 1.83, 1.85
The Texas Department of Transportation proposes amendments to sec.sec.1.82, 
1.83, and 1.85, concerning statutory and department advisory committees. 
Texas Civil Statutes, Article 6252-33, provides that a state agency which is 
advised by an advisory committee shall adopt rules that state the purpose of the 
committee and describe the task of the committee and the manner in which the 
committee will report to the agency. Texas Civil Statutes, Article 6252-33, 
further provides that a state agency shall establish by rule a date on which the 
committee will automatically be abolished unless the governing body of the 
agency affirmatively votes to continue the committee in existence. House Bill 
1418, 75th Legislature, 1997, which, if enacted, will require the creation of a 
Household Goods Carrier Advisory Committee to provide a forum for household 
goods carriers and the general public to make recommendations on modernizing and 
streamlining the rules to effect an efficient registration process for 
businesses and individuals, conduct a study of the feasibility and necessity of 
requiring any vehicle liability insurance for household goods carriers required 
to register under Texas Civil Statutes, Article 6675c, sec.8, and recommend a 
maximum level of liability for loss or damage of motor carriers. 
In anticipation of the passage of House Bill 1418, amendments to sec.1.82 and 
sec.1.83 are proposed to create the Household Goods Carrier Advisory Committee 
to comply with the legislation. If House Bill 1418 is not enacted, the proposed 
amendment creating this new committee will not be adopted. 
Section 1.83 and sec.1.85 presently mandate that the department's statutory and 
department advisory committees shall be abolished on September 1, 1997, unless 
continued in existence by affirmative vote of the commission. These sections are 
amended to reflect the department advisory committees will continue in existence 
until September 1, 1999 and the statutory advisory committees will continue 
until September 1, 2001. 
The amendments to sec.1.83 authorize the Public Transportation Committee to 
create issue subcommittees and continue the following statutory advisory 
committees: Aviation Advisory Committee, Public Transportation Advisory 
Committee, and Vehicle Storage Facility/Tow Truck Rules Advisory Committee. 
To comply with Texas Civil Statutes, Article 6252-33, sec.1.85 has various 
proposed amendments. One proposed amendment to sec.1.85 abolishes the 
Registration and Title System Liaison Committee and Dealer Advisory Board, 
County Tax Assessor-Collector Review Team, El Paso District Citizen's Advisory 
Committee, Hydraulics and Erosion Control Laboratory Industry Advisory 
Committee, Transportation Systems Efficiency Advisory Committee, and Transit 
Operators' Advisory Committee because these committees have fulfilled their 
mission. The amendment also abolishes the Consultant Engineering Advisory 
Committee, Quality Control/Quality Assurance Specification Development 
Committee, and the Quality Control/Quality Assurance Certification Advisory 
Committee because these committees merely exchange information and do not advise 
the department. 
Another amendment to sec.1.85 changes the names of the Tow Truck Rules Advisory 
Committee to the Vehicle Storage Facility/Tow Truck Rules Advisory Committee, 
the Local Intelligent Vehicle Highway Systems (IVHS) Steering Committee to 
Intelligent Transportation Systems Steering Committee, and the Safety Management 
System to the Partners in Texas Transportation Safety Committee to more 
accurately reflect the tasks of the committees. 
An additional amendment to sec.1.85 also continues the Bicycle Advisory 
Committee, Intelligent Transportation Systems Committee, Motor Transportation 
Advisory Committee, Partners in Texas Transportation Safety Committee, Statewide 
Transportation Policy Committee, and Traffic Records Council. 
Frank J. Smith, Director, Budget and Finance Division, has determined that for 
each year of the first five-year period the amended sections are in effect there 
will be fiscal implications for state government as a result of enforcing or 
administering the amended sections. The estimated additional costs for state 
government for the Household Goods Advisory Committee is $1,245.98 in fiscal 
year 1997, $2,183.27 in fiscal year 1998, and $1,091.64 each year in fiscal 
years 1999, 2000, and 2001. The estimated cost for the existing committees is 
$62,263.90 per year for each of the next five fiscal years. There are no 
anticipated fiscal implications for local governments as a result of enforcing 
or administering the amended sections. There are no anticipated economic costs 
to persons who are required to comply with the amended sections as proposed. 
Joanne Walsh, Director, Management Services Office, has certified that there 
will be no significant impact on local economies or overall employment as a 
result of enforcing or administering the amended sections. 
Ms. Walsh also has determined that for each year of the first five years the 
amended sections are in effect the public benefits anticipated as a result of 
enforcing the sections will be to continue to provide forums to facilitate 
communication among the department, other governmental agencies, and the public 
regarding transportation issues. There is no anticipated effect on small 
businesses. 
Written comments on the proposed amendments may be submitted to Joanne Walsh, 
Director, Management Services Office, Texas Department of Transportation, 125 
East 11th Street, Austin, Texas 78701. The deadline for receipt of written 
comments will be at 5:00 p.m. on July 11, 1997. 
The amendments are proposed under Transportation Code, sec.201.101 which 
provides the Texas Transportation Commission with the authority to establish 
rules for the conduct of the work of the Texas Department of Transportation, and 
Texas Civil Statutes, Article 6252-33 which requires a state agency to adopt 
rules that state the purpose and task of the committees. 
No other statutes, articles, or codes are affected by the proposed amended 
sections. 

sec.1.82. Statutory Advisory Committee Operations and Procedures. 
(a) Applicability. This section applies to statutory advisory committees. 
(b) Membership. 
(1) Aviation. 
[(A)] The commission will appoint the members of the Aviation Advisory Committee 
to staggered terms of three years, unless sooner removed at the discretion of 
the commission, with two members' terms expiring August 31 of each year. 
[(B) The commission will appoint six members in August, 1995 for initial terms 
as follows: two to serve terms expiring August 31, 1997, two to serve terms 
expiring August 31, 1998, and two to serve terms expiring August 31, 1999. 
(C) Existing members shall serve until the commission appoints new members under 
subparagraph (B) of this paragraph.] 
<nl>(2)<ol> <nl> Household Goods Carriers. Pursuant to Texas Civil Statutes, 
Article 6675c, sec.8(f), the department's assistant executive director for 
motorist services shall appoint to the Household Goods Carrier Advisory 
Committee: <ol>
<nl>(A)<ol> <nl>three members as representatives of the general public;<ol>
<nl>(B)<ol> <nl>one member as a representative of the department; and <ol>
<nl>(C)<ol> <nl>one member each as representatives of motor carriers 
transporting household goods using small equipment, motor carriers transporting 
household goods using medium equipment, and motor carriers transporting 
household goods using large equipment. <ol> 
<nl>(3)<ol> [(2)] Public Transportation. Members of the Public Transportation 
Advisory Committee shall be appointed and shall serve pursuant to 
<nl>Transportation Code, sec.455.004 <ol> [Texas Civil Statutes, Article 6663b]. 
<nl>(4)<ol> [(3)] <nl> Vehicle Storage Facility/<ol>Tow Truck Rules. The 
department's assistant executive director for motorists services will appoint to 
the <nl> Vehicle Storage Facility/<ol>Tow Truck Rules Advisory Committee two 
members who represent the general public and one member each as representatives 
of the following: 
(A) tow truck operators; 
(B) vehicle storage facility operators; 
(C) owners of property having parking facilities; 
(D) law enforcement agencies or municipalities; and 
(E) insurance companies. 
<nl>(5)<ol> [(4)] Officers. Each committee shall elect a chair and vice-chair by 
majority vote of the members of the committee. 
(c)-(h) (No change.)

sec.1.83. Statutory Advisory Committees. 
(a) Aviation Advisory Committee. 
(1) Purpose. Created pursuant to <nl>Transportation Code, sec.21.003<ol> [Texas 
Civil Statutes, Article 46c-3], the Aviation Advisory Committee provides a 
direct link for general aviation users' input into the Texas Airport System. The 
committee provides a forum for exchange of information concerning the users' 
view of the needs and requirements for the economic development of the aviation 
system. The members of the committee are an avenue for interested parties to 
utilize to voice their concerns and have that data conveyed for action for 
system improvement. Additionally, committee members are representatives of the 
department and its Aviation Division, able to furnish data on resources 
available to the Texas aviation users. 
(2)-(3) (No change.) 
(4) Duration. The committee is abolished September 1, <nl>2001<ol> [1997], 
unless continued in existence by affirmative vote of the commission. 
<nl>(b)<ol> <nl>Household Goods Carriers Advisory Committee. <ol>
<nl>(1)<ol> <nl>Purpose. The Household Goods Carriers Advisory Committee 
provides a forum for household goods carriers and the general public to provide 
input into modernizing and streamlining department rules adopted under Texas 
Civil Statutes, Article 6675c, sec.8(c), which are designed to protect customers 
of household goods movers from deceptive or unfair practices and unreasonably 
hazardous activities on the part of movers. The committee, with representation 
from the regulated community, the general public, and the department, helps 
ensure effective communication among interested parties and valuable input into 
modernizing and streamlining department rules affecting household goods carriers 
and their customers. <ol>
<nl>(2)<ol> <nl> Duties. The committee shall: <ol>
<nl>(A)<ol> <nl>examine the rules adopted under Texas Civil Statutes, Article 
6675c, sec.8(c) and advise the department on methods of modernizing and 
streamlining such rules; <ol> 
<nl>(B)<ol> <nl>conduct a study of the feasibility and necessity of requiring 
any vehicle liability insurance for household goods carriers required to 
register under Texas Civil Statutes, Article 6675c,sec.8; <ol>
<nl>(C)<ol> <nl>recommend a maximum level of liability for loss or damage of 
household goods carriers required to register under Texas Civil Statutes, 
Article 6675c, sec.8, not to exceed 60 cents per pound; and <ol>
(D) perform other duties as assigned by the Motor Carrier Division Director. 
<nl>(3)<ol> <nl> Meetings. The committee shall meet at the request of the Motor 
Carrier Division Director.<ol> 
<nl>(4)<ol> <nl> Duration. The committee is abolished September 1, 2001, unless 
continued in existence by affirmative vote of the commission.<ol> 
<nl>(5)<ol> <nl> Rulemaking. Section 1.84 of this title (relating to Rulemaking) 
does not apply to the Household Goods Carrier Advisory Committee.<ol>
<nl>(c)<ol> [(b)] Public Transportation Advisory Committee. 
(1) Purpose. Created pursuant to <nl>Transportation Code, sec.455.004<ol> [Texas 
Civil Statutes, Article 6663b], the Public Transportation Advisory Committee 
provides a forum for the exchange of information between the department, the 
commission, and committee members representing the transit industry and the 
general public. Advice and recommendations expressed by the committee provide 
the department and the commission with a broader perspective regarding public 
transportation matters that will be considered in formulating department 
policies. 
(2) Duties. The committee shall: 
(A) advise the commission on the needs and problems of the state's public 
transportation providers, including recommending methods for allocating state 
public transportation funds if the allocation methodology is not specified by 
statute; 
(B) comment on proposed rules or rule changes involving public transportation 
matters during their development and prior to final adoption unless an emergency 
requires immediate action by the commission; and 
(C) perform other duties as determined by order of the commission.
(3) Meetings. The committee shall meet: 
(A) as necessary, at the call of its chair, but not exceeding once each month; 
(B) at the request of the commission; and 
(C) as required by sec.1.84 of this title (relating to Rulemaking).
<nl>(4)<ol> <nl> Public transportation technical committees. <ol>
<nl>(A)<ol> <nl>The Public Transportation Advisory Committee may appoint one or 
more technical committees to advise it on specific issues, such as vehicle 
specifications, funding allocation methodologies, training and technical 
assistance programs, and level of service planning. <ol>
<nl>(B)<ol> <nl>A technical committee shall report any findings and 
recommendations to the Public Transportation Advisory Committee.<ol> 
<nl>(5)<ol> [(4)] Duration. The committee is abolished September 1, <nl>2001<ol> 
[1997], unless continued in existence by affirmative vote of the commission.
<nl>(d)<ol> [(c)] <nl> Vehicle Storage Facility/<ol>Tow Truck Rules Advisory 
Committee. 
(1) Purpose. Created pursuant to Texas Civil Statutes, Article 6675c, the 
purpose of the <nl>Vehicle Storage Facility/<ol>Tow Truck Rules Advisory 
Committee is to advise the department on the development of rules concerning the 
registration of tow trucks under Texas Civil Statutes, Article 6675c, and the 
administration of the Vehicle Storage Facility Act, Texas Civil Statutes, 
Article 6687-9a. The committee, with representation from the regulated 
community, law enforcement, and the general public, helps ensure effective 
communication among interested parties and valuable input into the development 
of rules affecting the tow truck industry. 
(2) Duties. The committee shall advise the department on the adoption of rules 
regarding: 
(A) the application of Texas Civil Statutes, Article 6675c to tow trucks; and 
(B) the administration by the department of the Vehicle Storage Facility Act. 
(3) Meetings. The committee shall meet: 
(A) at the request of the Motor Carrier Division Director; and 
(B) as required by sec.1.84 of this title (relating to Rulemaking).
(4) Duration. The committee is abolished September 1, <nl>2001<ol> [1997], 
unless continued in existence by affirmative vote of the commission. 

sec.1.85. Department Advisory Committees. 
(a) Creation. 
[(1) Quality Control/Quality Assurance Specification Development Committee. 
(A) Purpose. The Quality Control/Quality Assurance Specification Development 
Committee is created for the purpose of developing a quality control/quality 
assurance specification for hot-mix asphaltic concrete pavement. Through a 
formalized review process, the committee provides a forum for the exchange of 
information through a committee composed of the department engineering staff, 
highway industry material suppliers, and contractor representatives. Advice and 
recommendations expressed by the committee provide the department and the 
commission with increased insight in material and construction methods for 
quality control and quality assurance, thus aiding the department and the 
commission's goals of ensuring industry input into design standards and 
practices. 
(B) Duties. The committee shall advise the department and the commission 
concerning the development of a quality control/quality assurance hot-mix 
asphaltic concrete pavement specification. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the pavement engineer of the Design Division. 
(D) Duration. Upon completion of the quality control/quality assurance hot-mix 
asphaltic concrete specification, the committee is abolished.
(2) Quality Control/Quality Assurance Certification Advisory Committee. 
(A) Purpose. The purpose of the Quality Control/Quality Assurance Certification 
Advisory Committee is to review the Specialist Certification Program and to 
maintain a forum for the exchange of information between the department and the 
paving industry. Advice and recommendations expressed by the committee provide 
the department and the commission greater insight into pavement technology, 
testing, and specialist training, thus facilitating the department's and the 
commission's goals of ensuring safe, efficient, and economical pavement design, 
construction, and maintenance practices for increased pavement life and 
performance. 
(B) Duties. The committee shall provide advice and recommendations concerning: 
(i) modifications and improvements to the training program curriculum and 
operations; 
(ii) decertification claims; 
(iii) recertification refresher courses; and 
(iv) other matters as required to successfully implement and continue the 
Specialist Certification Program. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the assistant executive director for field operations.
(3) Consultant Engineering Advisory Committee. 
(A) Purpose. The purpose of the Consultant Engineering Advisory Committee is to 
coordinate and facilitate the use of the consultant engineering community in 
department operations. 
(B) Duties. The committee shall review, discuss, and recommend items of mutual 
concern between the department and the consultant engineering community. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the deputy executive director for transportation planning and 
development.] 
<nl>(1)<ol> [(4)] Project advisory committees. 
(A) Purpose. The executive director may authorize a district engineer to create, 
by written order, an ad hoc project advisory committee composed of the following 
members as may be deemed appropriate by the district engineer: department staff; 
affected property owners and business establishments; technical experts; 
professional consultants representing the department; and representatives of 
local governmental entities, the general public, chambers of commerce, and the 
environmental community. A project advisory committee shall serve the purpose of 
facilitating, evaluating, and achieving support and consensus from the affected 
community and governmental entities in the initial stages of a highway 
improvement project. Advice and recommendations of a committee provide the 
department with an enhanced understanding of public, business, and private 
concerns about a project from the development phase through the implementation 
phase, thus facilitating the department's communications and traffic management 
objectives, resulting in a greater cooperation between the department and all 
affected parties during project development and construction.
(B) Duties. A project advisory committee shall: 
(i) maintain community and local government communication; and 
(ii) respond in a timely fashion to affected parties' concerns about project 
development and construction. 
(C) Manner of reporting. A project advisory committee shall report its advice 
and recommendations to the district engineer. 
(D) Duration. A project advisory committee may be abolished at any stage of 
project development, but in no event may a committee continue beyond completion 
of the project. 
<nl>(2)<ol> [(5)] Statewide Transportation Policy Committee. 
(A) Purpose. <nl>Transportation Code, sec.201.601 <ol> [Texas Civil Statutes, 
Article 6663(f)], and 23 United States Code sec.135 require the department to 
develop a statewide multimodal transportation plan that encompasses all modes of 
transportation. Federal law further provides that in developing the plan the 
department must seek public input from interested parties. To comply with these 
requirements, the Statewide Transportation Policy Committee, to be composed of 
private transportation providers and other governmental agencies and individuals 
concerned with transportation, will advise the department on its statewide 
transportation plan. The committee will provide a forum for identifying issues 
to be addressed by the planning process and for providing input into the 
department's planning process. The committee members represent a constituency of 
interests and in this way broaden input into the planning process. 
(B) Duties. The committee shall: 
(i) review and comment on issue papers prepared as part of developing 
recommended goals for Texas' transportation system; 
(ii) review and comment on the draft statewide transportation plan; 
(iii) have its members serve as chairs of issue committees to develop and 
explore issues that pertain to the statewide transportation planning process; 
and 
(iv) provide logistical assistance such as furnishing data and existing planning 
materials. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the commission. 
(D) Statewide transportation policy issue committees. 
(i) The Statewide Transportation Policy Committee may appoint one or more issue 
committees to advise it on specific planning issues, such as environmental, 
intermodal, financial, and special transportation needs.
(ii) An issue committee shall report its advice and recommendations to the 
Statewide Transportation Policy Committee. 
(E) Reimbursement. The department may reimburse a member of the Statewide 
Transportation Policy Committee or an issue committee for reasonable and 
necessary travel expenses. Current rules and laws governing reimbursement of 
expenses for state employees shall govern reimbursement of expenses for advisory 
committee members. 
[(6) Transit Operators' Advisory Committee. 
(A) Purpose. Through an open communication process the Transit Operators' 
Advisory Committee provides a forum for the exchange of information between 
transit operators and the Public Transportation Division. 
(B) Duties. The committee shall: 
(i) provide input to the Public Transportation Division on procedures that are 
developed for the routine management of grant programs;
(ii) provide input to the Public Transportation Division in the development of 
the Rural Transit Assistance Program as recommended in the Federal Transit 
Administration's Circular 9040.1C, which stipulates that operators should be 
given maximum opportunity to participate in the development process; and 
(iii) perform other duties as determined by the Public Transportation Division 
director. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the Public Transportation Division director.]
<nl>(3)<ol> [(7)] Ad hoc transit advisory panels. 
(A) Purpose. In order to provide for effective and timely input from affected 
public transportation providers and riders, the commission, by minute order, may 
create an ad hoc transit advisory panel. 
(B) Duties. An ad hoc advisory panel shall advise the Public Transportation 
Division on a single issue or program that only affects a specific segment of 
the public transportation industry or of the public. An example of an ad hoc 
panel would be a committee created to advise the division on the funding 
allocation rules for a particular grant program. 
(C) Manner of reporting. An ad hoc advisory panel shall report its advice and 
recommendations to the Public Transportation Division director.
(D) Duration. An ad hoc advisory panel shall be abolished no later than 90 days 
after its creation. 
[(8) Registration and Title System (RTS) Liaison Committee and Dealer System 
Advisory Board. 
(A) Purpose. The Registration and Title System (RTS) Liaison Committee and 
Dealer System Advisory Board provide forums to aid in the implementation of the 
RTS. The purpose of the committee and board is to obtain feedback from the 
primary users of the system, and to seek solutions to potential impediments 
before the system is put in daily use. 
(B) Duties. The committee and board shall: 
(i) identify RTS user requirements; 
(ii) convey system status information to the users and obtain the input of 
users; and 
(iii) obtain system acceptance approval from the users. 
(C) Manner of reporting. The committee and board shall report their advice and 
recommendations to the Vehicle Titles and Registration Division director. 
(9) County Tax Assessor-Collector Review Team. 
(A) The County Tax Assessor-Collector Review Team provides a forum for the 
review of proposed motor vehicle title and registration related policies and 
procedures prior to implementation. The review team advises the department of 
the potential impact of such policies and procedures on the offices of Texas' 
county tax assessor-collectors, who are the department's statutorily designated 
agents for motor vehicle title and registration matters. By establishing formal 
two-way communication, the review team provides an opportunity for partnering, 
thus allowing for the smoothest possible operation of Texas' motor vehicle title 
and registration system. 
(B) Duties. The team shall: 
(i) advise the department of the potential impact of proposed policies and 
procedures; and 
(ii) suggest changes or improvements to the department's title and registration 
operations. 
(C) Manner of reporting. The team shall report its advice and recommendations to 
the Vehicle Titles and Registration Division director.] 
<nl>(4)<ol> [(10)] Rulemaking advisory committees. 
(A) Purpose. The commission, by order, may create ad hoc rulemaking advisory 
committees pursuant to the Government Code, Chapter 2001, sec.2001.031, for the 
purpose of receiving advice from experts, interested persons, or the general 
public with respect to contemplated rulemaking. 
(B) Duties. A rulemaking advisory committee shall provide advice and 
recommendations with respect to a specific contemplated rulemaking.
(C) Manner of reporting. A rulemaking advisory committee shall report its advice 
and recommendations to the division responsible for the development of the 
rules. 
(D) Duration. A rulemaking committee shall be abolished upon final adoption of 
rules by the commission. 
[(11) Hydraulics and Erosion Control Laboratory Industry Advisory Committee 
(IAC). 
(A) Purpose. The IAC provides a forum through which affected industry groups and 
personnel may comment on and participate in the formal evaluation program for 
erosion control products undertaken by the Texas Department of Transportation/ 
Texas Transportation Institute Hydraulic and Erosion Control Laboratory. Through 
the IAC, the department is assured that open lines of communication with 
affected industries are maintained. In this way, the department assures product 
evaluation takes place with substantive industry comment and that any erosion 
control materials used by the department will be of the highest possible 
quality. 
(B) Duties. The IAC shall provide advice and recommendations concerning the: 
(i) results of the current product evaluation cycle; and 
(ii) product evaluation procedures for the next available evaluation cycle. 
(C) Manner of reporting. The IAC shall report its advice and recommendations to 
the assistant executive director for field operations.]
<nl>(5)<ol> [(12)] Traffic Records Council (TRC). 
(A) Purpose. The TRC coordinates and guides the planning and implementation of 
various Texas traffic records systems. The overall goal of the TRC is to share 
information regarding the various state data bases related to traffic records, 
establish a mutual understanding of the overall state goal of increasing the 
safety and efficiency of the roadway system, and to develop strategies for 
continued cooperation among all state and local participants with an interest in 
the traffic records process. 
(B) Duties. The TRC shall: 
(i) assist the department in the coordination and guidance of the planning and 
implementation of the various Texas traffic records systems to improve 
information quality and quantity; 
(ii) provide recommendations concerning the implementation of a strategic plan 
for the improvement of the state's record systems; 
(iii) help transfer related information on technology and systems through 
meetings and forums; and 
(iv) provide recommendations to the various agencies on system enhancements and 
linkages. 
(C) Manner of reporting. The TRC shall report its advice and recommendations to 
the various participating agencies, including the department and its Traffic 
Operations Division. 
<nl>(6)<ol> [13] <nl> Intelligent Transportation Systems (ITS) Steering 
Committees<ol> [Local IVHS steering committees]. 
(A) Purpose. Federal law encourages the expenditure of federal transportation 
funds to achieve improvements in the efficiency of transportation operations. A 
portion of these funds are specifically designated for the planning and testing 
of Intelligent <nl>Transportation <ol> [Vehicle Highway] Systems [(IVHS)] 
technologies. As part of the development and implementation of these projects, a 
district engineer, in conjunction with local officials, may create a steering 
committee to provide support for <nl> ITS<ol> [IVHS] activities. Advice and 
recommendations expressed by a committee will foster the coordination of state 
and local benefit in the design, maintenance, and operation of <nl> ITS<ol> 
[IVHS] facilities. 
(B) Duties. A committee shall provide advice and recommendations with respect 
to: 
(i) <nl>ITS<ol> [IVHS] project priorities;
(ii) the approval of projects; 
(iii) seeking project funding; 
(iv) coordinating public and private ventures; and 
(v) promoting <nl>ITS<ol> [IVHS] at local, state, and national levels. 
(C) Manner of reporting. A committee shall report its advice and recommendations 
to the local district engineer, or his or her designee.
<nl>(7)<ol> [(14)] Motor Transportation Advisory Committee. 
(A) Purpose. The Motor Transportation Advisory Committee provides a forum for 
communication among state agencies, the trucking industry, motor bus companies 
that do not operate wholly within the limits of any incorporated town or city 
and its suburbs, and the affected public in a cooperative effort to seek 
solutions to common problems, and to support the department's mission to work 
cooperatively to provide safe, effective, and efficient movement of people and 
goods. 
(B) Duties. The Motor Transportation Advisory Committee shall provide advice 
with respect to: 
(i) the issuance of permits for the movement of oversize and overweight vehicles 
and loads; 
(ii) the registration of trucks and motor buses; 
(iii) future truck and motor bus equipment and highway needs;
(iv) coordination of regulatory and enforcement activities of state agencies 
affecting the trucking and motor bus industries. 
(v) truck and motor bus safety; 
(vi) opportunities for one-stop shopping for state services and requirements of 
trucks and motor bus companies; and 
(vii) other issues concerning the department and the trucking and motor bus 
industries. 
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the assistant executive director for motorist services and 
the assistant executive director for multimodal transportation. 
<nl>(8)<ol> [(15)] Bicycle Advisory Committee. 
(A) Purpose. The purpose of the Bicycle Advisory Committee is to advise the 
commission on bicycle issues. By involving representatives of the public, 
including bicyclists, the department helps ensure effective communication with 
the bicycle community, and that the bicyclist's perspective will be considered 
in the development of departmental policies affecting bicycle use including, the 
design, construction and maintenance of highways. 
(B) Duties. The committee shall review and make recommendations on items of 
mutual concern between the department and the bicycling community.
(C) Manner of reporting. The committee shall report its advice and 
recommendations to the commission. 
(D) Creation. The effective date for establishment of the bicycle advisory 
committee will be the same date that the Bicycle Rules Advisory Committee is 
abolished. 
(E) Reimbursement. The department may reimburse a member of the Bicycle Advisory 
Committee for reasonable and necessary travel expenses. Current rules and laws 
governing reimbursement of expenses for state employees shall govern 
reimbursement of expenses for advisory committee members. 
[(16) El Paso District Citizen's Advisory Team (CAT).
(A) Purpose. The purpose of the Citizen's Advisory Team is to provide the 
department with a comprehensive understanding of public perception and 
expectations regarding the department's roles and responsibilities for the El 
Paso area's transportation system. The committee, consisting of department 
staff, local government, and the general public, shall serve the purpose of 
facilitating and achieving effective communication and cooperation with the 
community, creating public awareness, and assisting the department in making 
presentations to decision makers. 
(B) Duties. The committee shall: 
(i) maintain community communication; and 
(ii) review and make recommendations on transportation issues in the El Paso 
area. 
(C) Subcommittees. 
(i) The CAT may appoint subcommittees to work independently on select 
transportation issues. 
(ii) A subcommittee shall report its advice and recommendations to the CAT. 
(D) Manner of reporting. The committee shall report its advice and 
recommendations to the district engineer of the El Paso district. 
<nl>(9)<ol> [(17)] <nl> Partners in Texas Transportation<ol> Safety [Management 
System] Committee.
(A) Purpose. The <nl>Partners in Texas Transportation<ol> Safety [Management 
System] Committee provides advice and makes recommendations to improve 
transportation safety by identifying and evaluating safety issues for 
consideration in transportation strategies, plans, and projects. 
(B) Duties. The committee shall: 
(i) develop and recommend safety goals and objectives for the state through 
consideration of current transportation trends; 
(ii) identify and recommend safety policies, procedures, and processes which 
affect safety-related decisions; and 
(iii) coordinate and communicate transportation issues with other agencies and 
individuals to ensure a functional and productive safety management system. 
(C) Subcommittees. 
(i) The committee may appoint subcommittees to work independently on select 
safety issues. 
(ii) A subcommittee shall report its finding or recommendation to the committee 
chair. 
(D) Manner of reporting. The committee shall report its advice and 
recommendations to the participating agencies and the Director of Traffic 
Operations. 
(E) Duration. The committee is abolished September 1,  <nl>1999<ol> [1997], 
unless continued in existence by affirmative vote of the commission. 
[(18) Transportation Systems Efficiency Advisory Committee. 
(A) Purpose. The Transportation Systems Efficiency Advisory Committee recommends 
specific actions to reduce the costs of constructing, reconstructing, and 
maintaining the state highway system without sacrificing the quality or safety 
of the state highway system and its operation. The recommended actions shall 
reduce costs either through direct cost reduction, or indirectly through 
practices that might lead to longer-term reduction of maintenance costs or the 
extension of expected life cycles of department projects. 
(B) Duties. The committee shall recommend cost-saving actions relating to: 
(i) the acquisition and use of equipment; 
(ii) the quality of roadway material; 
(iii) the design of state highway improvements and the preparation of plans, 
specifications, and estimates; 
(iv) contracting procedures; and 
(v) other actions which would result in a cost-saving to the taxpayers. 
(C) Manner of reporting. The committee shall report its recommendations to the 
executive director who will submit the report with staff recommendations to the 
commission. 
(D) Duration. The committee is abolished upon submittal of its final 
recommendations to the executive director.] 
(b) (No change.) 
(c) Duration. Except as otherwise specified in this subsection, a committee 
created under this section is abolished September 1, <nl> 1999<ol> [1997], 
unless continued in existence by affirmative vote of the commission. 
This agency hereby certifies that the proposal has been reviewed by legal 
counsel and found to be within the agency's legal authority to adopt. 
Issued in Austin, Texas, on June 2, 1997.
TRD-9707102
Bob Jackson
Deputy General Counsel
Texas Department of Transportation
Earliest possible date of adoption: July 10, 1997
For further information, please call: (512) 463-8630