[Federal Register Volume 71, Number 243 (Tuesday, December 19, 2006)]
[Pages 76037-76055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9679]

[[Page 76037]]


Part III

Department of Transportation


Federal Highway Administration


Publication of Interim Guidance on the Congestion Mitigation and Air 
Quality Improvement (CMAQ) Program; Notice

Federal Register / Vol. 71, No. 243 / Tuesday, December 19, 2006 / 

[[Page 76038]]



Federal Highway Administration

[FHWA Docket No. FHWA-2006-26383]

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

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Notice of publication of interim guidance; request for 


SUMMARY: The purpose of this notice is to: (1) Announce the publication 
of interim CMAQ guidance; and (2) solicit public comment on the 
contents of the interim guidance. Sections 1101, 1103 and 1808 of the 
Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU) (Pub. L. 109-59, Aug. 10, 2005) amended 
the Congestion Mitigation and Air Quality Improvement (CMAQ) Program, 
and authorizes $8.6 billion to support the CMAQ program in 2005-2009. 
The interim guidance went into effect October 31, 2006; however, we 
will review all comments submitted to the docket and will modify the 
guidance as necessary or appropriate.

DATES: Comments must be received on or before February 20, 2007.

FOR FURTHER INFORMATION CONTACT: Mike Koontz, Office of Natural and 
Human Environment, (202) 366-2076, [email protected]; or Diane 
Liff (202) 366-6203 or Harold Aikens (202) 366-1373, Office of the 
Chief Counsel, Federal Highway Administration, 400 Seventh Street, SW., 
Washington, DC 20590. Office hours are from 7:45 a.m. to 4:15 p.m., 
Monday through Friday, except Federal holidays.


Electronic Access

    You may submit or retrieve comments online through the U.S. 
Department of Transportation's Document Management System (DMS) at: 
http://dms.dot.gov/submit. The DMS is available 24 hours each day, 365 
days each year. Electronic submission and retrieval help and guidelines 
are available under the help section of the Web site.
    An electronic copy of this notice may be downloaded from the Office 
of the Federal Register's home page at http://www.archives.gov and the 
Government Printing Office's Web site at http://www.access.gpo.gov.
    Anyone is able to search the electronic form of all comments 
received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in a Federal Register published on April 
11, 2000 (70 FR 19477), or you may visit http://dms.dot.gov.
    An electronic version of the interim CMAQ guidance may be 
downloaded from the FHWA Web page at: http://www.fhwa.dot.gov/environment/cmaq06gm.htm. It is also attached for reference below.


    The CMAQ program was created by the Intermodal Surface 
Transportation Efficiency Act of 1991 (ISTEA) (Pub. L. 102-240, Dec. 
18, 1991) and continued under the Transportation Equity Act for the 
21st Century (TEA-21) (Pub. L. 105-178; Oct. 1998). Through 2005, the 
program supported nearly 16,000 transportation projects across the 
country. In the most recent authorization of the Federal-aid highway 
program, Congress amended the CMAQ program, and authorized funding to 
support the CMAQ program in 2005-2009 (sections 1101, 1103 and 1808 of 
the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A 
Legacy for Users (SAFETEA-LU) (Pub. L. 109-59, Aug. 10, 2005). More 
than $8.6 billion are authorized over the five-year program (2005-
2009), with annual authorization amounts increasing each year during 
this period. This interim guidance updates and replaces previous 
program guidance issued in 1999. It focuses primarily on project 
eligibility provisions, and identifies the types of projects that are 
eligible for CMAQ support. It also provides information on how CMAQ 
apportionments are calculated and the geographic areas where CMAQ funds 
can be used, discusses the project selection process and requirements 
for analyzing emissions benefits from potential projects as part of the 
selection process, and examines Federal, State and Metropolitan 
Planning Organization (MPO) program administration responsibilities. 
The interim guidance went into effect October 31, 2006; however, we 
will review all comments submitted to the docket and will modify the 
guidance as necessary or appropriate.
    This interim guidance includes comprehensive discussions and 
direction on a host of new or highlighted areas under SAFETEA-LU, and 
in particular emphasizes diesel engine retrofits and cost-effective 
congestion mitigation activities as priorities for CMAQ expenditures. 
It also provides relative cost-effectiveness data on various eligible 
project types to help inform the CMAQ project selection process.
    We invite the public to submit comments on this interim guidance. 
We plan to issue a final guidance after we have evaluated all the 
comments received on this interim guidance.

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

    Issued on: December 7, 2006.

J. Richard Capka,
Federal Highway Administrator.

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

October 31, 2006.
    The guidance contained in this document is intended to be 
nonbinding, except insofar as it references existing statutory 
requirements, and should not be construed as rules of general 
applicability and legal effect or notices of proposed rulemaking.

I. Introduction

    The CMAQ program was created under the Intermodal Surface 
Transportation Efficiency Act (ISTEA) of 1991, continued under the 
Transportation Equity Act for the 21st Century (TEA-21), and 
reauthorized by the Safe, Accountable, Flexible, Efficient 
Transportation Equity Act: A Legacy for Users (SAFETEA-LU).\1\ Over 
$8.6 billion is authorized over the five-year program (2005-2009), with 
annual authorization amounts increasing each year during this period. 
Through 2005, the program has supported nearly 16,000 transportation 
projects across the country.

    \1\ Pub. L. 109-59, 119 Stat. 1144 (Aug. 10, 2005).

    This guidance replaces the April 1999 version and provides 
information on the CMAQ program, including:
     Authorization levels and apportionment factors specific to 
     Flexibility and transferability provisions available to 
     Geographic area eligibility for CMAQ funds
     Project eligibility information
     Project selection processes
     Program administration
    Appendices 1-3 provide updated statutory language relating to the 
CMAQ program. Appendix 4 illustrates the comparative cost-effectiveness 
of potential CMAQ projects. Appendix 5 provides supplemental 
information on diesel retrofit projects.

[[Page 76039]]

    Information on the current annual apportionment to each State and 
an electronic version of this guidance are available at http://www.fhwa.dot.gov/environment/cmaqpgs/index.htm.

II. Program Purpose

    The purpose of the CMAQ program is to fund transportation projects 
or programs that will contribute to attainment or maintenance of the 
national ambient air quality standards (NAAQS) for ozone, carbon 
monoxide (CO), and particulate matter (PM).
    The CMAQ program supports two important goals of the Department of 
Transportation: Improving air quality and relieving congestion. While 
these goals are not new elements of the program, they are strengthened 
in a new provision added to the CMAQ statute by SAFETEA-LU, 
establishing priority consideration for cost-effective emission 
reduction and congestion mitigation activities when using CMAQ funding.
    Reducing pollution and other adverse environmental effects of 
transportation projects and transportation system inefficiency have 
been long-standing objectives of the Department of Transportation. The 
strategic plans for the Department of Transportation and for the 
Federal Highway Administration both include performance measures 
specifically focused on reducing air pollution from transportation 
facilities. The CMAQ program provides funding for a broad array of 
tools to accomplish these goals. By choosing to fund a CMAQ project, a 
State or local government can improve air quality and make progress 
towards achieving attainment status and ensuring compliance with the 
transportation conformity provisions of the Clean Air Act.
    Reducing congestion is also a key objective of the Department of 
Transportation, and one that has gained increasing attention in the 
past several years. The cost of congestion, which negatively affects 
the U.S. economy, quality of life, and air quality, has risen 
dramatically in the last 25 years despite record levels of 
transportation investment. Some economists estimate that the overall 
cost of congestion to the U.S. economy approaches $200 billion a year. 
As a result, the Secretary of Transportation recently issued a National 
Strategy to Reduce Congestion on America's Transportation Network that 
aims to meaningfully reduce the economic and social costs of congestion 
on our nation's highways and in other transportation facilities. This 
strategy can be found at: http://isddc.dot.gov/OLPFiles/OST/012988.pdf.
    Since congestion relief projects also reduce idling, the negative 
emissions impacts of ``stop and go'' driving, and the number of 
vehicles on the road, they have a corollary benefit of improving air 
quality. Based on their emissions reductions, these types of projects, 
including investments in improved system pricing and operations, are 
eligible for CMAQ funding. The Department believes State and local 
governments can simultaneously reduce the costly impacts of congestion 
while also improving air quality.

III. Authorization Levels Under the SAFETEA-LU

A. Authorization Levels

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

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

B. Equity Bonus

    Similar to the minimum guarantee under the TEA-21, the Equity Bonus 
in SAFETEA-LU provides additional funding beyond the authorized levels 
so that each State receives a minimum percentage of its gas tax 
receipts back in the form of Federal-aid funds.\2\

    \2\ 23 U.S.C. 105 (SAFETEA-LU section 1104).

C. Transferability of CMAQ Funds

    Since transportation and environmental program priorities 
fluctuate, States may choose to transfer a limited portion of their 
CMAQ apportionment to the following Federal-aid highway programs: 
Surface Transportation Program (STP), National Highway System (NHS), 
Highway Bridge Program (HBP), Interstate Maintenance (IM), Recreational 
Trails Program (RTP), and the Highway Safety Improvement Program 
(HSIP). States may transfer CMAQ funds according to the following 
provision: An amount not to exceed 50 percent of the quantity of the 
State's annual apportionment less the amount the State would have 
received if the CMAQ program had been authorized at $1,350,000,000.\3\ 
For example, if the annual national apportionment is $1.75 billion and 
a State receives $10 million more than it would have received if the 
national apportionment had been $1.35 billion, the State can transfer 
up to $5 million to other programs. Any transfer of such funds must 
still be obligated in nonattainment and maintenance areas. The amount 
of transferable funds will differ each year and by State, depending on 
overall authorization levels. Each year, the FHWA will inform States 
how much, if any, CMAQ funding is transferable and will track this 
movement of CMAQ funds.\4\

    \3\ 23 U.S.C. Sec.  126.
    \4\ 23 U.S.C. Sec.  110(c).

    States also may transfer CMAQ funds to other Federal agencies. The 
SAFETEA-LU provides additional flexibility to complete such transfers 
when the receiving Federal agency has entered into an agreement with 
the State to undertake an eligible Federal-aid project.\5\ These 
opportunities apply to projects that have met all CMAQ eligibility 
requirements prior to the transfer.

    \5\ 23 U.S.C. Sec.  132(a) (SAFETEA-LU section 1119).

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

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

[[Page 76040]]

bridge, tunnel, ferry boat, and ferry terminal projects). A Section 129 
loan may be used to construct a truck stop electrification facility if 
the facility is located on the Interstate right-of-way.\6\

    \6\ 23 U.S.C. 111(d) (SAFETEA-LU section 1412).

    The SAFETEA-LU establishes a new SIB program under which all States 
are authorized to enter into cooperative agreements with the U.S. DOT 
to establish infrastructure revolving-funds eligible to be capitalized 
with Federal transportation funds.\7\ The key difference between a 
Section 129 loan and a SIB is that a Section 129 loan usually provides 
financing to an individual project and funding a SIB capitalizes a 
financial entity that can assist multiple projects. The two loan 
programs have similar maximum allowable terms established by Federal 

    \7\ 23 U.S.C. 190 (SAFETEA-LU section 1602).

     Both public and private entities are eligible to be 
project sponsors
     Repayments must begin within 5 years of project completion
     Maximum loan term is 30 years after project authorization 
(Section 129) or 30 years after first repayment (SIB)
     Interest rate may be set by State, at or below market 
     Loans can only be made up to 80 percent of eligible 
project costs (Section 129). For SIBs, loans can be made up to 100 
percent of eligible project costs (although when the State first 
creates a SIB, it is required to contribute a non-Federal match of 20 
    These innovative loan programs can increase the efficiency of 
States' transportation investments and significantly leverage Federal 
resources by attracting non-Federal public and private investment, and 
provide greater flexibility to the States by allowing other types of 
project assistance in addition to grant assistance. This type of 
financing is important for new technologies or start-up businesses that 
may have difficulty finding financing in the private capital markets. 
In addition to SIBs and section 129 loans, the FHWA also administers 
the Transportation Infrastructure Finance and Innovation Act (TIFIA) 
program, which provides Federal credit assistance to large-scale 
projects greater than $50 million.
    The following example illustrates how a Section 129 loan could work 
to construct an idle-reduction facility on an Interstate right-of-way. 
A private party intends to build a stationary idle-reduction facility, 
and seeks grant funding for it from the State DOT. The idle reduction 
facility will eventually earn a profit by charging user fees, but since 
the capital costs are high, the private party needs assistance with 
financing the initial construction. Instead of providing an outright 
grant, the State could offer a loan of Federal-aid funds with flexible 
repayment terms. If the facility required $1 million for initial 
construction, the State could make a loan at five percent over fifteen 
years. The State could accelerate the payments if the facility were 
more successful than expected, and delay repayment if the facility 
failed to meet revenue targets. The State could also build in credits 
for additional emissions reductions, providing incentives for 
additional loans or grants to idle reduction projects. More information 
on the DOT's innovative finance program is available at http://www.fhwa.dot.gov/innovativefinance/.

IV. Priority for Use of CMAQ Funds

    The SAFETEA-LU directs States and MPOs to give priority to two 
categories of funding. First, to diesel retrofits, particularly where 
necessary to facilitate contract compliance, and other cost-effective 
emission reduction activities, taking into consideration air quality 
and health effects. Second, priority is to be given to cost-effective 
congestion mitigation activities that provide air quality benefits.\8\ 
Appendix 4 illustrates the comparative cost-effectiveness of several 
potential CMAQ projects. Other projects also may be cost-effective. The 
priority provisions in the statute apply to the portion of CMAQ funds 
derived from the application of Sections 104(b)(2)(B) and 104(b)(2)(C), 
i.e., the CMAQ apportionment formula. They do not apply to areas where 
CMAQ funding has been derived from the minimum apportionment 

    \8\ 23 U.S.C. 149(f)(3) (SAFETEA-LU section 1808(d)).

    Though the SAFETEA-LU establishes these CMAQ investment priorities, 
it also retains State and local agencies' authority in project 
selection. The law maintains the existing roles and authorities of 
public agencies, and substantial shifts in local procedures are not 
required by the SAFETEA-LU.\9\ However, project selection should 
reflect the positive cost-effectiveness relationships highlighted in 
Appendix 4. State and local transportation programs that implement a 
broad array of these cost-effective measures may record a more rapid 
rate of progress toward their clean air goals, since many of these 
endeavors generate immediate benefits. Local procedures that elevate 
the importance of these efforts in project selection--and rate them 
accordingly--may accelerate the drive to air quality attainment.

    \9\ 23 U.S.C. 149(f)(3)(B) (SAFETEA-LU section 1808(d)).

    In addition to the SAFETEA-LU priority on cost-effectiveness, 
Section 176(c) of the Clean Air Act \10\ (CAA) requires that the FHWA 
and FTA ensure timely implementation of transportation control measures 
(TCMs) in applicable State Implementation Plans (SIPs). These and other 
CMAQ-eligible projects identified in approved SIPs must receive funding 

    \10\ 42 U.S.C. 7506 Section 176(c)(2)(B).

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

V. Annual Apportionments of CMAQ Funds to States

A. CMAQ Apportionments

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

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

[[Page 76041]]

                              Table 2.--SAFETEA-LU CMAQ Apportionment Factors \11\
                                            Classification at the time of
                Pollutant                       annual apportionment                  Weighting factor
Ozone (O3) or (CO)......................  Maintenance (these areas had to   1.0.
                                           be previously eligible as
                                           nonattainment areas--See
                                           Section VI.).
Ozone...................................  Subpart 1 (``Basic'')...........  1.0.
Ozone...................................  Marginal........................  1.0.
Ozone...................................  Moderate........................  1.1.
Ozone...................................  Serious.........................  1.2.
Ozone...................................  Severe..........................  1.3.
Ozone...................................  Extreme.........................  1.4.
CO......................................  Nonattainment...................  1.0.
Ozone and CO............................  Ozone nonattainment or            1.2 x O3 factor.
                                           maintenance and CO
                                           nonattainment or maintenance.
All States--minimum apportionment.......  \1/2\ of 1 percent total annual   N/A.
                                           apportionment of CMAQ funds.

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

    \11\ 23 U.S.C. 104(b)(2) (SAFETEA-LU section 1103(d)).

B. Area Designations: Attainment vs. Nonattainment

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

    \12\ 23 U.S.C. 149(c).

    The FHWA Budget Division identifies annual apportionments of CMAQ 
funds as either mandatory or flexible. All funding is considered 
mandatory for states with weighted populations yielding one-half 
percent or more of the authorized funds (based on the table above). 
Annual CMAQ funding apportioned through the application of Sections 
104(b)(2)(B) and 104(b)(2)(C) must be used for projects in 
nonattainment/maintenance areas.
    States with weighted populations yielding at least some apportioned 
value but less than one-half percent of the authorized funds receive 
both mandatory and flexible funds to reach the minimum apportionment. 
For example, if a State's weighted population yields two tenths of one 
percent of the authorized funds, it would receive two tenths of one 
percent of the national funds as mandatory funds, and three tenths of 
one percent as flexible funds. Thus, 40 percent of the State's funds 
would be mandatory and 60 percent would be flexible.
    For States with no areas applicable to the apportionment table, 
their minimum apportionment, one-half percent, is all flexible funding. 
The FHWA reports the breakdown of mandatory and flexible funds by State 
in its fiscal year apportionment tables.

C. Apportionments and State Allocation

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

D. Federal Share and State/Local Match Requirements

    The Federal share for most eligible projects is generally 80 
percent (90 percent for projects on the Interstate System). Activities 
identified in 23 U.S.C. 120(c) (See Appendix 3), including traffic 
control signalization, commuter carpooling and vanpooling, and 
signalization projects to provide priority for transit vehicles, may be 
funded at up to 100 percent Federal share if they meet the conditions 
of that section.
    Although not required for public-private partnerships (PPP) under 
the CMAQ program, State and local officials have the discretion to 
request a higher local match from the private sector partner. For 
example, project sponsors may find that a CMAQ PPP requiring a 50 
percent local match contribution is more appropriate than the standard 
20 percent required under Federal law. In addition, higher local 
matches for these efforts can leverage CMAQ funding and extend the 
program to a greater pool of projects.

VI. Geographic Areas That Are Eligible To Use CMAQ Funds

A. Eligible Areas

    CMAQ funds may be invested in all 8-hour ozone, CO, and PM 
nonattainment and maintenance areas. Funds also may be spent in the few 
remaining1-hour ozone maintenance areas (these counties also have Early 
Action Compacts in place), since the 1-hour standard remains in effect 
for these areas.
    Funds also may be used for projects in proximity to nonattainment 
and maintenance areas if the benefits will be realized primarily within 
the nonattainment or maintenance area. The delineation of an area 
considered ``in proximity'' should be discussed with the FHWA and FTA 
field offices and elevated to headquarters if necessary.

B. Maintenance Areas

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

C. Maintenance Plan Requirement, SAFETEA-LU

    CMAQ funds may be invested in former 1-hour ozone areas that were 
not designated under the 8-hour standard but where the 1-hour standard 
has been revoked. Since these areas are required to file maintenance 
plans, they are considered eligible for CMAQ funding under provisions 
of the SAFETEA-LU.\13\

    \13\ 23 U.S.C. 149(b) (SAFETEA-LU section 1808(a)).

D. Flexible Funds in PM Areas

    While States may use flexible CMAQ funding anywhere and for any 
CMAQ- or STP-eligible project (see V.B. on

[[Page 76042]]

minimum apportionment), the FHWA encourages States and MPOs to evaluate 
the cost-effectiveness and benefits to public health of targeting 
flexible CMAQ funding to projects that reduce PM. Examples of such 
projects include implementing a diesel retrofit or idle reduction 
program, constructing freight/intermodal transfer facilities, traffic 
signalization, or ITS projects that reduce congestion; paving dirt 
roads, and purchasing street sweeping equipment. See Appendix 4 for 
further cost-effectiveness comparisons.

VII. Project Eligibility Provisions

A. Project Eligibility: General Conditions

    To be eligible for CMAQ funds, a project must be included in the 
MPO's current transportation plan and TIP (or the current STIP in areas 
without an MPO). In nonattainment and maintenance areas, the project 
also must meet the conformity provisions contained in Section 176(c) of 
the Clean Air Act and the transportation conformity rule.\14\ In 
addition, all CMAQ-funded projects need to complete National 
Environmental Policy Act (NEPA) requirements and meet basic eligibility 
requirements for funding under titles 23 and 49 of the United States 

    \14\ 40 CFR parts 51 and 93.

    The following should guide CMAQ eligibility decisions:
1. Capital Investment
    CMAQ funds may be used to establish new or expanded transportation 
projects or programs that reduce emissions, including capital 
investments in transportation infrastructure, congestion relief 
efforts, diesel engine retrofits, or other capital projects.
2. Operating Assistance
    There are several general conditions that must be met for operating 
assistance to be eligible under the CMAQ program.
    a. Operating assistance is limited to new transit services, 
intermodal facilities, and travel demand management strategies 
(including traffic operation centers); and the incremental cost of 
expanding existing transit services.
    b. In using CMAQ funds for operating assistance, the intent is to 
help start up viable new transportation services that can demonstrate 
air quality benefits and eventually cover their costs as much as 
possible. Other funding sources should supplement and ultimately 
replace CMAQ funds for operating assistance, as these projects no 
longer represent additional, net air quality benefits but have become 
part of the baseline transportation network.
    c. Operating assistance includes all costs of providing new 
transportation services, including, but not limited to, labor, fuel, 
administrative costs, and maintenance.
    d. When CMAQ funds are used for operating assistance, non-Federal 
share requirements still apply.
    e. With the focus on start-up costs only, operating assistance 
under the CMAQ program is limited to three years. The provisions in 23 
U.S.C. Sec.  116 place responsibilities for maintenance on States.\15\ 
Since facility maintenance is akin to operations, three years of CMAQ 
assistance provides adequate incentive and flexibility while not 
creating a pattern of excessive or even perpetual support. Exceptions 
are listed below under VII.D.7 Travel Demand Management, VII.D.8 Public 
Education, and VII.D.10 Carpooling and Vanpooling.
3. Emission Reduction

    \15\ 23 U.S.C. 116.

    Air quality improvement is defined by several distinct terms in 23 
U.S.C. Sec.  149. These terms include contribution to attainment, 
reduction in pollution, air quality benefits, and others. For purposes 
of this guidance, the FHWA uses emission reduction to represent this 
group of terms. CMAQ-invested projects or programs must reduce CO, 
ozone precursor (NOX and VOCs), PM, or PM precursor (e.g., 
NOX) emissions from transportation. These reductions must 
contribute to the area's overall clean air strategy and can be 
demonstrated by the assessment that is required under this guidance. 
States and MPOs also may consider the ancillary benefits of eligible 
projects, including greenhouse gas reductions, congestion relief, 
safety, or other elements, when programming CMAQ funds, though such 
benefits do not alone establish eligibility.
4. Planning and Project Development
    Activities in support of eligible projects also may be appropriate 
for CMAQ investments. Studies that are part of the project development 
pipeline (e.g., preliminary engineering) under the National 
Environmental Policy Act (NEPA) are eligible for CMAQ support, as are 
FTA's Alternatives Analyses. General studies that fall outside specific 
project development do not qualify for CMAQ funding. Examples of such 
efforts include major investment studies, commuter preference studies, 
modal market polls or surveys, transit master plans, and others. These 
activities are eligible for Federal planning funds.

B. Projects Ineligible for CMAQ Funding

    The following projects are ineligible for CMAQ funding:
    1. Light-duty vehicle scrappage programs.\16\

    \16\ 23 U.S.C. 149(b).

    2. Projects that add new capacity for SOVs are ineligible for CMAQ 
funding unless construction is limited to high-occupancy vehicle (HOV) 
    3. Routine maintenance and rehabilitation projects (e.g., 
replacement-in-kind of track or other equipment, reconstruction of 
bridges, stations, and other facilities, and repaving or repairing 
roads) are ineligible for CMAQ funding as they only maintain existing 
levels of highway and transit service, and therefore do not reduce 
emissions. Other funding sources, such as STP and FTA's Section 5307 
program, are available for such activities.
    4. Administrative costs of the CMAQ program may not be defrayed 
with program funds, e.g., support for a State's ``CMAQ Project 
Management Office'' is not eligible.
    5. Projects that do not meet the specific eligibility requirements 
of titles 23 and 49 U.S.C. are ineligible for CMAQ funds.
    6. Stand-alone projects to purchase fuel. One exception is listed 
below in Section VII.D.3.

C. Public-Private Partnerships (PPPs)

    In a PPP, a private or non-profit entity's resources replace or 
supplement State or local funds and possibly a portion of the Federal-
aid in a selected project. The PPP elements of the program have been 
refined over the last two transportation reauthorizations, and these 
partnerships have become a critical part of CMAQ.\17\

    \17\ 23 U.S.C. 149(e).

    Partnerships must have a legal, written agreement in place between 
the public agency and the private or non-profit entity before a CMAQ-
funded project may be implemented. These agreements should be developed 
under relevant State contract law and should specify the intended use 
for CMAQ funding; the roles and responsibilities of the participating 
entities; and how the disposition of land, facilities, and equipment 
will be carried out should the original terms of the agreement be 
altered (e.g., due to insolvency, change in ownership, or other changes 
in the structure of the PPP).
    Public funds should not be invested where a strong public benefit 
cannot be

[[Page 76043]]

demonstrated. Consequently, CMAQ funds must be devoted only to PPPs 
that benefit the general public by clearly reducing emissions, not for 
financing marginal projects. Consistent with the planning and project 
selection provisions of the Federal-aid highway program, the FHWA 
considers it essential that all interested parties have full, open, and 
timely access to the project selection process.
    There are several other statutory restrictions and special 
provisions on the use of CMAQ funds in PPPs. Eligible costs under this 
section may not include costs to fund an obligation imposed on private 
sector or non-profit entities under the CAA or any other Federal law. 
However, if the private or non-profit entity is clearly exceeding its 
obligations under Federal law, CMAQ funds may be used for that 
incremental portion of the project.
    Eligible non-monetary activities that satisfy the non-Federal match 
requirements under the partnership provisions include the following:
     Ownership or operation of land, facilities, or other 
physical assets.
     Construction or project management.
     Other forms of participation approved by the U.S. DOT.
    Sharing of total project costs, both capital and operating, is a 
critical element of a successful public-private venture, particularly 
if the private entity is expected to realize profits as part of the 
joint venture. State and local officials are urged to consider a full 
range of cost-sharing options when developing a PPP, including a larger 
State/local match than the usual 20 percent required under Federal law. 
For detailed information on cost principles beyond the scope of this 
guidance, please consult OMB Circular A-87, which focuses on 
determining allowable costs for State, local, and tribal governments; 
and 49 CFR Part 18, which provides direction on administering Federal 
grants to State and local governments.

D. Eligible Projects and Programs

    Eligibility information is provided below. Not all possible 
requests for CMAQ funding are covered--this section provides examples 
of activities eligible for CMAQ funds.
1. Transportation Control Measures (TCMs)
    Most of the TCMs included in Section 108 of the CAA, listed below, 
are eligible for CMAQ funding. One CAA TCM, programs to encourage 
removal of pre-1980 light-duty vehicles, is specifically excluded from 
CMAQ eligibility.\18\

    \18\ 23 U.S.C. 149(1)(A).

    i. Programs for improved public transit;
    ii. Restriction of certain roads or lanes to, or construction of 
such roads or lanes for use by, passenger buses or HOV;
    iii. Employer-based transportation management plans, including 
    iv. Trip-reduction ordinances;
    v. Traffic flow improvement programs that reduce emissions; 
ii.fringe and transportation corridor parking facilities serving 
multiple-occupancy vehicle programs or transit service;
    vii. Programs to limit or restrict vehicle use in downtown areas or 
other areas of emission concentration particularly during periods of 
peak use;
    viii. Programs for the provision of all forms of high-occupancy, 
shared-ride services;
     ix. Programs to limit portions of road surfaces or certain 
sections of the metropolitan area to the use of non-motorized vehicles 
or pedestrian use, both as to time and place;
    x. Programs for secure bicycle storage facilities and other 
facilities, including bicycle lanes, for the convenience and protection 
of bicyclists, in both public and private areas;
    xi. Programs to control extended idling of vehicles;
    xii. Reducing emissions from extreme cold-start conditions;
    xiii. Employer-sponsored programs to permit flexible work 
    xiv. Programs and ordinances to facilitate non-automobile travel, 
provision and utilization of mass transit, and to generally reduce the 
need for SOV travel, as part of transportation planning and development 
efforts of a locality, including programs and ordinances applicable to 
new shopping centers, special events, and other centers of vehicle 
activity; and
    xv. Programs for new construction and major reconstructions of 
paths, tracks, or areas solely for the use by pedestrian or other non-
motorized means of transportation when economically feasible and in the 
public interest.
2. Extreme Low-Temperature Cold Start Programs
    Projects intended to reduce emissions from extreme cold-start 
conditions are eligible for CMAQ funding. Such projects include 
retrofitting vehicles and fleets with water and oil heaters and 
installing electrical outlets and equipment in publicly-owned garages 
or fleet storage facilities (See Section VII.C. for a possible 
expansion to privately-owned equipment and facilities).

3. Alternative Fuels and Vehicles


    With the exception of Missouri, Iowa, Minnesota, Wisconsin, 
Illinois, Indiana, and Ohio, fuel costs are not an eligible expense as 
a stand-alone project. Only these seven states may use CMAQ funds to 
purchase alternative fuels as defined in section 301 of the 1992 Energy 
Policy Act (natural gas, ethanol, etc.) or biodiesel, assuming such 
projects meet other applicable eligibility requirements noted in 
Section VII.B. above.
    Establishing publicly-owned fueling facilities and other 
infrastructure needed to fuel alternative-fuel vehicles is an eligible 
expense, unless privately-owned fueling stations are in place and 
reasonably accessible. Additionally, CMAQ funds may support converting 
a private fueling facility to support alternative fuels through a 
public-private partnership agreement (See Section VII.C.).

Non-transit Vehicles

    CMAQ funds may be used to purchase publicly-owned alternative fuel 
vehicles, including passenger vehicles, refuse trucks, street cleaners, 
and others. Costs associated with converting fleets to run on 
alternative fuels are also eligible. When private vehicles are 
purchased, only the cost difference between the alternative fuel 
vehicles and comparable conventional fuel vehicles is eligible. Such 
vehicles should be fueled by one of the alternative fuels identified in 
section 301 of the 1992 Energy Policy Act or biodiesel.

Hybrid Vehicles

    Although not defined by the Energy Policy Act of 1992 as 
alternative fuel vehicles, certain hybrid vehicles that have lower 
emissions rates than their non-hybrid counterparts may be eligible for 
CMAQ investment. Hybrid passenger vehicles must meet EPA's low 
emissions and energy efficiency requirements for certification under 
the HOV exception provisions of the SAFETEA-LU to be eligible for CMAQ 

    \19\ 23 U.S.C. 166(e) (SAFETEA-LU section 1121(a)). The required 
rulemaking is under development by EPA and is expected to list Tier 
2/Bin 5--the average of the Tier 2 tailpipe emission standards--as 
the minimum level for low-emission certification under the HOV 

    Projects involving heavier vehicles, including refuse haulers and 
delivery trucks, also may be appropriate for program support. 
Eligibility should be based on a comparison of the emissions

[[Page 76044]]

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

    \20\ 23 U.S.C. 149(b)(6) (SAFETEA-LU section 1808(b)(4)).

5. Transit Improvements
    Many transit projects are eligible for CMAQ funds. The general 
guideline for determining eligibility is whether the project increases 
capacity and would likely result in an increase in transit ridership 
and a potential reduction in congestion. As with other types of CMAQ 
projects, there should be a quantified estimate of the project's 
emissions benefits accompanying the proposal.
    The FTA administers most transit projects. Once the FTA determines 
a project eligible, CMAQ funds will be transferred from the FHWA to the 
FTA, and the project will be administered according to the requirements 
of the FTA's Urbanized Area Formula Grant Program.\21\ Certain types of 
transit projects for which the FTA lacks statutory authority, such as 
diesel retrofit equipment for public school bus fleets, are 
administered by the FHWA.

    \21\ 49 U.S.C. 5307.

a. Facilities
    New transit facilities (e.g., lines, stations, terminals, transfer 
facilities) are eligible if they are associated with new or enhanced 
mass transit service. Routine maintenance or rehabilitation of existing 
facilities is not eligible, as it does not reduce emissions. However, 
rehabilitation of a facility may be eligible if the vast majority of 
the project involves physical improvements that will increase capacity. 
In such cases there should be supporting documentation showing an 
increase in transit ridership that is more than minimal. If the vast 
majority of the project involves capacity enhancements, other elements 
involving refurbishment and replacement-in-kind also are eligible.
b. Vehicles and Equipment
    New transit vehicles (bus, rail, or van) to expand the fleet or 
replace existing vehicles are eligible. Transit agencies are encouraged 
to purchase vehicles that are most cost-effective in reducing 
emissions. Diesel engine retrofits, such as replacement engines and 
exhaust after-treatment devices, are eligible if certified or verified 
by the EPA or California Air Resources Board (CARB). Routine preventive 
maintenance for vehicles is not eligible as it only returns the 
vehicles to baseline conditions. Besides diesel engine retrofits, other 
transit equipment may be eligible if it represents a major system-wide 
upgrade that will significantly improve speed or reliability of transit 
service, such as advanced signal and communications systems.

[[Page 76045]]

c. Fuel
    Fuel, whether conventional or alternative fuel, is an eligible 
expense only as part of a project providing operating assistance for 
new or expanded transit service under the CMAQ program. This includes 
fuels and fuel additives considered diesel retrofit technologies by the 
EPA or CARB. See Section VII.D.3 for statutory exceptions for certain 
states regarding the purchase of alternative fuel with CMAQ funds.
d. Operating Assistance
    Operating assistance to introduce new transit service or expand 
existing service is eligible. It may be a new type of service, service 
to a new geographic area, or an expansion of existing service providing 
additional hours of service or reduced headways. For a service 
expansion, only the operating costs of the new increment of service are 
eligible. Eligible operating costs include labor, fuel, maintenance, 
and related expenses. Operating assistance may be CMAQ-funded for a 
maximum of three years. The intent is to support the demonstration of 
new services that may prove successful enough to sustain with other 
funding sources, and to free up CMAQ funds to generate new air quality 
    It is not appropriate to use CMAQ funds for operating assistance 
for New Start projects because these projects require dedicated, stable 
sources of funding for their operation. Relying on CMAQ funds for the 
initial operating costs of these projects is contrary to the need to 
establish permanent State and local funding sources to cover operating 
and maintenance costs.
e. Transit Fare Subsidies
    CMAQ funds may be used to subsidize regular transit fares in an 
effort to prevent the NAAQS from being exceeded, but only under the 
following conditions: The reduced or free fare must be part of a 
comprehensive area-wide program to prevent the NAAQS from being 
exceeded. ``Ozone Action'' programs vary in scope around the country, 
but they generally include actions that individuals and employers can 
take and they are aimed at all major sources of air pollution, not just 
transportation. The subsidized fare must be available to the general 
public and may not be limited to specific groups. It may only be 
offered during periods of elevated pollution when the threat of 
exceeding the NAAQS is greatest; it is not intended for the entire 
high-ozone season. Finally, the fare subsidy proposal must demonstrate 
that the responsible local agencies will combine the reduced or free 
fare with a robust marketing program to inform SOV drivers of other 
transportation options. The subsidy is not subject to the three-year 
limit for operating assistance.
6. Bicycle and Pedestrian Facilities and Programs
    Bicycle and pedestrian facilities and programs are included as a 
TCM in section 108(f)(1)(A) of the CAA. The following are eligible 
     Constructing bicycle and pedestrian facilities (paths, 
bike racks, support facilities, etc.) that are not exclusively 
recreational and reduce vehicle trips.
     Non-construction outreach related to safe bicycle use.
     Establishing and funding State bicycle/pedestrian 
coordinator positions for promoting and facilitating nonmotorized 
transportation modes through public education, safety programs, etc. 
(Limited to one full-time position per State).\22\

    \22\ 23 U.S.C. 217(d).

7. Travel Demand Management
    Travel demand management (TDM) encompasses a diverse set of 
activities that focus on physical assets and services that provide 
real-time information on network performance and support better 
decision-making for travelers choosing modes, times, routes, and 
locations. Such projects can help ease congestion and reduce SOV use--
contributing to mobility, while enhancing air quality and saving energy 
resources. Similar to ITS and Value Pricing, today's TDM programs seek 
to optimize the performance of local and regional transportation 
networks. The following activities are eligible if they are explicitly 
aimed at reducing SOV travel and associated emissions:
     Fringe parking
     Traveler information services
     Shuttle services
     Guaranteed ride home programs
     Market research and planning in support of TDM 
     Carpools, vanpools (see item 10 below)
     Traffic calming measures
     Parking pricing
     Variable road pricing
     Employer-based commuter choice programs
    CMAQ funds may support capital expenses and up to three years of 
operating assistance to administer and manage new or expanded TDM 
    Marketing and outreach efforts to expand use of TDM measures may be 
funded indefinitely, but only if they are broken out as distinct line 
items (See Section VII.D.8. below).
    Eligible telecommuting activities include planning, preparing 
technical and feasibility studies, and training. Construction of 
telecommuting centers and computer and office equipment purchases are 
not eligible for CMAQ funds.
8. Public Education and Outreach Activities
    The goal of CMAQ-funded public education and outreach activities is 
to educate the public, community leaders, and potential project 
sponsors about connections among trip making and transportation mode 
choices, traffic congestion, and air quality. Public education and 
outreach can help communities reduce emissions and congestion by 
inducing drivers to change their transportation choices. More 
important, an informed public is likely to support larger regional 
measures necessary to reduce congestion and meet CAA requirements.
    A wide range of public education and outreach activities is 
eligible for CMAQ funding, including activities that promote new or 
existing transportation services, developing messages and advertising 
materials (including market research, focus groups, and creative), 
placing messages and materials, evaluating message and material 
dissemination and public awareness, technical assistance, programs that 
promote the Tax Code provision related to commute benefits,\23\ transit 
``store'' operations, and any other activities that help forward less-
polluting transportation options.

    \23\ Section 132(f) of the Internal Revenue Code allows 
employers to pay their employees, in 2006, up to $105 per month for 
transit and vanpool expenses and up to $205 per month for qualified 
parking. 26 U.S.C. 132(f). Each of these benefits is subject to 
annual increases based on changes to the Consumer Price Index. 26 
U.S.C. 1(f)(3). Alternately, employers may allow employees to use 
their pre-tax income to purchase these commuter benefits. Employers 
may also provide a combination of these employer-paid and employee 
paid tax-free benefits. For more information, please visit http://www.commuterchoice.com/.

    Using CMAQ funds, communities have disseminated many transportation 
and air quality public education messages, including maintain your 
vehicle; curb SOV travel by trip chaining, telecommuting and using 
alternate modes; fuel properly; observe speed limits; don't idle your 
vehicle for long durations; eliminate ``jack-rabbit'' starts and stops, 
and others.
    The It All Adds Up to Cleaner Air public education messages and 
materials (regarding vehicle maintenance, proper fueling, trip

[[Page 76046]]

chaining, and alternate modes) have been successful in raising 
awareness, garnering funds and in-kind support, and building coalitions 
of diverse groups across the country. These commercial-quality 
materials, which were developed in response to requests by state and 
local transportation and air agencies, are free and communities are 
encouraged to use and build on them. More information is available at 
    The Best Workplaces for CommutersSM program provides national 
recognition to employers offering commuter benefits that meet the EPA's 
National Standard of Excellence. Development of materials and public 
education messages promoting Best Workplaces for CommutersSM 
and employer provided commuter benefits may be eligible for funding. 
More information is available at http://www.bwc.gov/.
    Long-term public education and outreach can be effective in raising 
awareness that can lead to changes in travel behavior and ongoing 
emissions reductions; therefore, these activities may be funded 
9. Transportation Management Associations
    Transportation Management Associations (TMAs) are groups of 
citizens, firms, or employers that organize to address the 
transportation issues in their immediate locale by promoting rideshare 
programs, transit, shuttles, or other measures. TMAs can play a useful 
role in brokering transportation services to private employers.
    CMAQ funds may be used to establish TMAs provided that they reduce 
emissions. Eligible expenses include TMA start-up costs and up to three 
years of operating assistance. Eligibility of specific TMA activities 
is addressed throughout this guidance.
10. Carpooling and Vanpooling
    Eligible activities can be divided into two types of costs: 
Marketing (which applies to both carpools and vanpools) and vehicle 
(which applies to vanpools only).
    a. Carpool/vanpool marketing covers existing, expanded, and new 
activities designed to increase the use of carpools and vanpools, and 
includes purchase and use of computerized matching software and 
outreach to employers. Guaranteed ride home programs are also 
considered marketing tools. Marketing costs may be funded indefinitely.
    b. Vanpool vehicle capital costs include purchasing or leasing vans 
for use in vanpools. Eligible operating costs, limited to three years, 
include empty-seat subsidies, maintenance, insurance, administration, 
and other related expenses.
    CMAQ funds should not be used to buy or lease vans that would 
directly compete with or impede private sector initiatives. States and 
MPOs should consult with the private sector prior to using CMAQ funds 
to purchase vans, and if private firms have definite plans to provide 
adequate vanpool service, CMAQ funds should not be used to supplant 
that service.
    Carpooling and vanpooling activities may be funded with up to 100% 
federal funding, with certain limitations.\24\

    \24\ 23 U.S.C. 120(c)

11. Freight/Intermodal
    Projects and programs targeting freight capital costs--rolling 
stock or ground infrastructure--are eligible provided that air quality 
benefits can be demonstrated. Freight projects that reduce emissions 
fall generally into two categories: Primary efforts that target 
emissions directly or secondary projects that reduce net emissions.
    Successful primary projects could include new diesel engine 
technology or retrofits of vehicles or engines. Eligibility is not 
confined to highway projects, but also applies to nonroad mobile 
freight projects, such as rail.\25\ See Section VII.D.12. below on 
diesel retrofit technology--examples of primary freight projects--and 
for information on EPA's guidance and model rule for emissions 
reduction credit in the SIP and conformity processes.

    \25\ 23 U.S.C. 149(b)(3)

    Secondary projects reduce emissions through shifts in or additions 
to infrastructure. Support for an intermodal container transfer 
facility may be eligible if the project demonstrates reduced diesel 
engine emissions when balancing the drop in truck VMT against the 
increase in locomotive or other non-highway activity. Intermodal 
facilities, such as inland transshipment ports or on-dock rail, may 
generate substantial emissions reductions through the decrease in miles 
traveled for pre-1986 heavy-duty diesel trucks. This secondary, 
indirect effect on truck traffic and the ensuing drop in diesel 
emissions help demonstrate eligibility.
    The transportation function of these freight/intermodal projects 
should be emphasized. Marginal projects that support freight operations 
in a very tangential manner are not eligible for CMAQ funding. 
Warehouse handling equipment, for example, is not an eligible 
investment of program funds. However, equipment that provides a 
transportation function or directly supports this function is eligible, 
such as railyard switch locomotives or shunters.
12. Diesel Engine Retrofits & Other Advanced Truck Technologies
    The SAFETEA-LU places a new emphasis on diesel engine retrofits and 
the various types of projects that fall under this broad category.\26\ 
These efforts are defined as vehicle replacement, repowering (replacing 
an engine with a cleaner engine), rebuilding an engine, or other 
technologies determined by the EPA as appropriate for reducing 
emissions from diesel engines.\27\ This latter point, highlighting 
developing technologies, establishes a degree of flexibility and a need 
for periodic adjustment in the definition by the EPA. The legislation 
defines retrofit projects as applicable to both on-road motor vehicles 
and nonroad construction equipment; the latter must be used in Title 23 
projects based in nonattainment or maintenance areas for either PM or 

    \26\ 23 U.S.C. 149(b)(f) (SAFETEA-LU section 1808(d)).
    \27\ 23 U.S.C. 149(f)(2) (SAFETEA-LU section 1808(d)).

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

    \28\ Reimbursement of costs for full-vehicle replacement may be 
limited to those elements that lead to emission reductions.

    CMAQ funds may be used to purchase and install emission control 
equipment on school buses. (Such projects, generally, should be 
administered by FHWA; see VII.D.5, Transit Improvements, above.)
    Refueling is not eligible as a stand-alone project, and is eligible 
only if it is required to support the installation of emissions control 
equipment, repowering, rebuilding, or other retrofits of non-road 
engines. For example, ultra-low sulfur diesel (ULSD) may be purchased 
as part of a project to install diesel particulate filters on nonroad

[[Page 76047]]

construction equipment because these devices need ULSD to function 
properly. Costs associated with ULSD are eligible for CMAQ funding only 
until the standards are effective and the fuel becomes commonly 
available through the regional supply and logistics chain, effectively 
rendering ULSD the only diesel fuel distributed. Eligible costs are 
limited to the difference between standard nonroad diesel fuel and 
    In addition to equipment and technology, outreach activities that 
provide information exchange and technical assistance to diesel owners 
and operators on retrofit options are eligible investments. Please see 
Appendix 5 for more detail on diesel retrofits and the various 
strategies available in this developing air quality field.
    The FHWA acknowledges that diesel retrofit projects may include 
nonroad mobile source endeavors, which traditionally have been outside 
the Federal-aid process. However, the SAFETEA-LU clarifies CMAQ 
eligibility for nonroad diesel retrofit projects. Areas that fund these 
projects are not required to take credit for the projects in the 
transportation conformity process. For areas that want to take credit, 
the EPA developed guidance for estimating diesel retrofit emission 
reductions and for applying the credit in the SIP and transportation 
conformity processes. The guidance can be found at http://www.epa.gov/otaq/stateresources/transconf/policy.htm#retrofit.
    In addition to retrofit projects, upgrading long-haul heavy-duty 
diesel trucks with advanced technologies, such as idle reduction 
devices, cab and trailer aerodynamic fixtures, and single-wide or other 
efficient tires, has been demonstrated by the EPA's Smart Way Transport 
Partnership Program to reduce NOX emissions and save fuel. 
These strategies also are eligible for CMAQ support. Such projects 
funded directly by CMAQ that involve the private sector must be part of 
a Public-Private Partnership, as discussed in Section VII.C.
13. Idle Reduction
    Idle reduction projects that reduce emissions and are located 
within, or in proximity to and primarily benefiting, a nonattainment or 
maintenance area are eligible for CMAQ investment (The geographic 
requirement mainly applies to off-board projects, i.e. truck stop 
electrification (TSE) efforts). However, if CMAQ funding is used for an 
on-board project (i.e., auxiliary power units, direct fired heaters, 
etc.) the vehicle--usually a heavy-duty truck--must travel within, or 
in proximity to and primarily benefiting, a nonattainment or 
maintenance area.
    There have been several instances where operating assistance funds 
have been requested for TSE services. CMAQ funding to date for TSE 
projects has been limited to capital costs (i.e., deployment of TSE 
infrastructure). Operating assistance for TSE projects is not an 
eligible activity under the CMAQ program because TSE projects generate 
their own revenue stream and therefore should be able to cover all 
operating expenses from the accumulated revenue. See Section III.D for 
information on innovative financing opportunities available for these 
    The SAFETEA-LU also permits electrification or other idling 
reduction facilities and equipment to be constructed or located on 
rights-of-way of the Interstate system.\29\ Prior to the enactment of 
the SAFETEA-LU, this activity was prohibited.

    \29\ 23 U.S.C. 111(d) (SAFETEA-LU section 1412).

    The EPA issued guidance in January 2004 on methods for calculating 
emissions reduction credits in SIPs and in the transportation 
conformity process for long-haul truck idle reduction projects. The 
guidance can be found at http://www.epa.gov/smartway/idlingimpacts.htm.
14. Training
    The SAFETEA-LU provides that States and MPOs may use Federal-aid 
funds to support training and educational development for the 
transportation workforce.\30\ The FHWA encourages State and local 
officials to weigh the air quality benefits of such training against 
other cost-effective strategies detailed elsewhere in this guidance 
before using CMAQ funds for this purpose. Training funded with CMAQ 
dollars must be directly related to implementing air quality 
improvements and be approved in advance by the FHWA Division office.

    \30\ 23 U.S.C. 504(e) (SAFETEA-LU section 5204(e)).

15. Inspection/Maintenance (I/M) Programs
    Funds under the CMAQ program may be used to establish either 
publicly or privately owned I/M facilities. Eligible activities include 
construction of facilities, purchase of equipment, I/M program 
development, and one-time start-up activities, such as updating quality 
assurance software or developing a mechanic training curriculum. The I/
M program must constitute new or additional efforts, existing funding 
(including inspection fees) should not be displaced, and operating 
expenses are eligible for a maximum of three years.
    Privately Owned I/M Facilities
    In States that rely on privately owned I/M facilities, State or 
local I/M program-related administrative costs may be funded under the 
CMAQ program as in States that use public I/M facilities. However, CMAQ 
support to establish I/M facilities at privately owned stations, such 
as service stations that own the equipment and conduct emission test-
and-repair services, requires a public-private partnership (See Section 
    The establishment of ``portable'' I/M programs, including remote 
sensing, is also eligible under the CMAQ program, provided that they 
are public services, reduce emissions, and do not conflict with 
statutory I/M requirements or EPA regulations.
16. Experimental Pilot Projects
    State and local organizations traditionally have experimented with 
various types of transportation services to better meet the travel 
needs of their constituents. These ``experimental'' projects may show 
promise in reducing emissions, but do not yet have supporting data. The 
FHWA has supported and funded some of these projects as demonstrations 
to determine their benefits and costs. These experimental pilots are 
not intended to bypass the definition of basic project eligibility but 
seek to better define the projects' future role in strategies to reduce 
    For a project or program to qualify as an experimental pilot, it 
must be defined as a transportation project and be expected to reduce 
emissions by decreasing vehicle miles traveled (VMT), fuel consumption, 
congestion, or by other factors. The FHWA encourages States and MPOs to 
creatively address their air quality problems and to experiment with 
new services, innovative financing arrangements, public-private 
partnerships, and complementary approaches that use transportation 
strategies to reach clean air goals. The CMAQ program may be used to 
support a well-conceived project even if the proposal may not fully 
meet the eligibility criteria of this guidance.
    Given the untried nature of these pilot projects, before-and-after 
studies are required to determine actual project impacts on air quality 
as measured by net emissions reduced. These assessments should document 
the project's immediate impacts in addition to long-term benefits. A 
schedule for completing the study must be a part of

[[Page 76048]]

the project agreement. Completed studies must be submitted to the FHWA 
Division office within three years of implementation of the project or 
one year after the project's completion, whichever is sooner.

VIII. Project Selection Process--General Conditions

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

A. Air Quality Analysis

1. Quantitative Analyses
    Quantified emissions benefits (i.e., emissions reductions) and 
disbenefits (i.e., emissions increases) should be included in all 
project proposals, except where it is not possible to quantify 
emissions benefits (see Qualitative Assessment, below). Benefits and 
disbenefits should be included for all pollutants for which the area is 
in nonattainment or maintenance status. Benefits should be listed in a 
consistent fashion (i.e., kg/day) across projects to allow accurate 
comparison during the project selection process.
    State and local transportation and air quality agencies conduct 
CMAQ-project air quality analyses with different approaches, analytical 
capabilities, and technical expertise. The SAFETEA-LU encourages State 
DOTs and MPOs to consult with State and local air quality agencies 
about the estimated emission reductions from CMAQ proposals.\31\ 
However, while no single method is specified, every effort must be 
taken to ensure that determinations of air quality benefits are 
credible and based on a reproducible and logical analytical procedure.

    \31\ 23 U.S.C. 149(e) (SAFETEA-LU section 1808(e)).

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

IX. Program Administration

A. Project Selection--MPO and State Responsibilities

    CMAQ projects are selected by the State or the MPO. MPOs, State 
DOTs, and transit agencies should develop CMAQ project selection 
processes in accordance with the metropolitan and/or statewide planning 
process. The selection process should involve State and/or local 
transportation and air quality agencies.
    The CMAQ project selection process should be transparent, in 
writing, and publicly available. The process should identify the 
agencies involved in rating proposed projects, clarify how projects are 
rated, and name the committee or group responsible for making the final 
recommendation to the MPO board or other approving body. The selection 
process should also clearly identify the basis for rating projects, 
including emissions benefits, cost effectiveness, and any other 
ancillary selection factors such as congestion relief, greenhouse gas 
reductions, safety, system preservation, access to opportunity, 
sustainable development and freight, reduced SOV reliance, multi-modal 
benefits, and others. At a minimum, projects must be identified by year 
and proposed funding source.
    Close coordination is necessary between the State and MPO to ensure 
that CMAQ funds are used appropriately and to maximize their 
effectiveness in meeting the CAA requirements.
    States and MPOs must fulfill this responsibility so that 
nonattainment and maintenance areas are able to make good-faith efforts 
to attain and maintain the NAAQS by the prescribed deadlines. State 
DOTs and MPOs should consult with State and local air quality agencies 
to develop an appropriate project list of CMAQ programming priorities 
that will have the greatest impact on air quality. In developing this 
list, MPOs and States should evaluate the cost-effectiveness of the 
projects and give priority consideration to those that will create the 
greatest emissions reductions for the least cost. The SAFETEA-LU calls 
out diesel retrofits as one type of cost-effective project to which 
priority consideration shall be given. The EPA has conducted an 
extensive study on the cost-effectiveness of diesel retrofits in 
reducing PM emissions.\32\ The National Academy of Science's 
Transportation Research Board has evaluated the cost-effectiveness of 
other CMAQ eligible projects, with a focus on NOX and HC 
reductions. Information on the cost-effectiveness of CMAQ-eligible 
projects is presented in Appendix 4, which can be used as a guidepost 
in evaluating the cost-effectiveness of different types of projects 
under consideration by an MPO or State. However, cost-effectiveness 
ultimately will depend on local conditions and project specific factors 
that affect emission reductions and costs.

    \32\ More information is available at http://www.epa.gov/cleandiesel/publications.htm.

B. Federal Agency Responsibilities and Coordination

1. Program Administration
    The FHWA Division offices and the FTA Regional offices are 
responsible for administering the CMAQ program. The FHWA transfers 
funds to the FTA to administer CMAQ-funded transit projects. In cases 
where the FTA lacks statutory authority, (e.g., school bus fleets) the 
FHWA will administer the transit project. For projects that involve 
transit and non-transit elements, such as park-and-ride lots and 
intermodal passenger projects, the administering agency is decided on a 
case-by-case basis. All other projects are administered by the FHWA.

[[Page 76049]]

2. Eligibility Determinations
    The administering agency makes the final determination on CMAQ 
eligibility. The FHWA, FTA, and EPA field offices should establish and 
maintain a consultation and coordination process to review CMAQ funding 
proposals as needed. The consultation process should provide for timely 
review and handling of CMAQ funding proposals. The FHWA and FTA 
headquarters offices are available to consult with their field offices 
on eligibility determinations as needed.
3. Tracking Mandatory/Flexible Funds
    The FHWA Division office is responsible for tracking obligation of 
mandatory and flexible CMAQ funds in appropriate areas (See Section 

C. Annual Reports

    States are required to prepare annual reports detailing how CMAQ 
funds have been invested.\33\ CMAQ reporting is not only useful for the 
FHWA, the FTA, and the general public, but maintenance of a cumulative 
database of all CMAQ projects is required by the SAFETEA-LU. In 
addition, the annual reports will be key in developing the CMAQ 
Evaluation and Assessment, a major research effort designed to gauge 
the impact of the program, and also required by the statute.\34\

    \33\ The FHWA is in the process of acquiring the required 
clearance pursuant to the Paperwork Reduction Act from the Office of 
Management and Budget to collect this data.
    \34\ 23 U.S.C. 149(h) (SAFETEA-LU section 1808(f)).

    CMAQ annual reports must be submitted through the web-based CMAQ 
Tracking System. More information on the CMAQ system is available at 
    The FHWA Division offices, State DOTs, and MPOs should develop a 
process for entering and approving the data in a timely manner. This 
report should be approved by the FHWA Division office by the first day 
of March following the end of the previous Federal fiscal year 
(September 30) and cover all CMAQ obligations for that fiscal year. 
Thus, State DOTs and MPOs need to report the data early enough that the 
Division office has time to review and comment on the report. The 
report as entered into the CMAQ Tracking System should include:
    1. A list of projects funded under CMAQ, in seven main project 
     Transit: facilities, vehicles, and equipment, operating 
assistance for new transit service, etc. Include all transit projects 
whether administered by the FTA or the FHWA.
     Shared Ride: vanpool and carpool programs and parking for 
shared-ride services.
     Traffic Flow Improvements: traffic management and control 
services, signalization projects, ITS projects, intersection 
improvements, and construction or dedication of HOV lanes.
     Demand Management: trip reduction programs, transportation 
management plans, flexible work schedule programs, vehicle restriction 
     Pedestrian/Bicycle: bikeways, storage facilities, 
promotional activities.
     I/M and other TCMs: projects not covered by the above 
     STP/CMAQ: projects funded with flexible funds.
    For reporting purposes, obligations for all CMAQ-eligible phases 
(beginning with the NEPA process) should be reported for the project 
they support.
    2. The amount of CMAQ funds obligated or deobligated for each 
project during the federal fiscal year. Enter deobligations as a 
negative number. (Do not include Advance Construct funds, as these are 
not obligations of federal CMAQ funds. Such projects should be reported 
later when converted to CMAQ funds.)
    3. Emissions benefits (and disbenefits) for each project developed 
from project-level analyses. Report projected emissions benefits 
expected to occur in the first year that a project is fully 
operational, in kilograms reduced per day. Benefits should be reported 
the first time a project is entered into the system, and only then to 
avoid double counting of benefits. (Because funds may be obligated for 
a project over several years, an individual CMAQ project may show up in 
reports for multiple years.) Additionally, address all pollutants for 
which the area is in nonattainment or maintenance status. Do not enter 
emissions benefits for deobligations or projects funded with flexible 
funds (STP/CMAQ).
    4. Public-private partnerships and experimental pilot projects 
should be identified in the system. Transmit electronic versions of 
completed before-and-after studies for experimental pilot projects to 
the Division offices (See Section VII.D.16., Experimental Pilot 
    5. Other required information: MPO, nonattainment/maintenance area, 
project description.
    6. Optional information: TIP, State and/or FMIS project numbers--
highly recommended. Other optional information includes: greenhouse gas 
emission reductions, safety, congestion relief, and other ancillary 

Appendix 1: 23 U.S.C. 149

SAFETEA-LU Changes in Underlined Italics

    Sec.  149. Congestion mitigation and air quality improvement 
    (a) Establishment.--The Secretary shall establish and implement a 
congestion mitigation and air quality improvement program in accordance 
with this section.
    (b) Eligible Projects.--Except as provided in subsection (c), a 
State may obligate funds apportioned to it under section 104 (b)(2) for 
the congestion mitigation and air quality improvement program only for 
a transportation project or program if the project or program is for an 
area in the State that is or was designated as a nonattainment area for 
ozone, carbon monoxide, or particulate matter under section 107(d) of 
the Clean Air Act (42 U.S.C. 7407 (d)) and classified pursuant to 
section 181(a), 186(a), 188(a), or 188(b) of the Clean Air Act (42 
U.S.C. 7511 (a), 7512 (a), 7513 (a), or 7513 (b)) or is or was 
designated as a nonattainment area under such section 107 (d) after 
December 31, 1997, or is required to prepare, and file with the 
Administrator of the Environmental Protection Agency, maintenance plans 
under the Clean Air Act (42 U.S.C. 7401 et seq.) and--
    (1)(A)(i) if the Secretary, after consultation with the 
Administrator determines, on the basis of information published by the 
Environmental Protection Agency pursuant to section 108(f)(1)(A) of the 
Clean Air Act (other than clause (xvi)) that the project or program is 
likely to contribute to--
    (I) the attainment of a national ambient air quality standard; or
    (II) the maintenance of a national ambient air quality standard in 
a maintenance area; and
    (ii) a high level of effectiveness in reducing air pollution, in 
cases of projects or programs where sufficient information is available 
in the database established pursuant to subsection (h) to determine the 
relative effectiveness of such projects or programs; or,
    (B) in any case in which such information is not available, if the 
Secretary, after such consultation, determines that the project or 
program is part of a program, method, or strategy described in such 
section 108(f)(1)(A); 
    (2) if the project or program is included in a State implementation 
plan that has been approved pursuant to the Clean Air Act and the 
project will have air quality benefits;

[[Page 76050]]

    (3) the Secretary, after consultation with the Administrator of the 
Environmental Protection Agency, determines that the project or program 
is likely to contribute to the attainment of a national ambient air 
quality standard, whether through reductions in vehicle miles traveled, 
fuel consumption, or through other factors;
    (4) to establish or operate a traffic monitoring, management, and 
control facility or program if the Secretary, after consultation with 
the Administrator of the Environmental Protection Agency, determines 
that the facility or program, including advanced truck stop 
electrification systems, is likely to contribute to the attainment of a 
national ambient air quality standard; (removed ``or'')
    (5) if the program or project improves traffic flow, including 
projects to improve signalization, construct high occupancy vehicle 
lanes, improve intersections, improve transportation systems management 
and operations that mitigate congestion and improve air quality, and 
implement intelligent transportation system strategies and such other 
projects that are eligible for assistance under this section on the day 
before the date of enactment of this paragraph;
    (6) if the project or program involves the purchase of integrated, 
interoperable emergency communications equipment; or
    (7) if the project or program is for--
    (A) the purchase of diesel retrofits that are--
    (i) for motor vehicles (as defined in section 216 of the Clean Air 
Act (42 U.S.C. 7550)); or
    (ii) published in the list under subsection (f)(2) for non-road 
vehicles and non-road engines (as defined in section 216 of the Clean 
Air Act (42 U.S.C. 7550)) that are used in construction projects that 
    (I) located in nonattainment or maintenance areas for ozone, 
PM10, or PM2.5 (as defined under the Clean Air 
Act (42 U.S.C. 7401 et seq.)); and
    (II) funded, in whole or in part, under this title; or
    (B) the conduct of outreach activities that are designed to provide 
information and technical assistance to the owners and operators of 
diesel equipment and vehicles regarding the purchase and installation 
of diesel retrofits.
    No funds may be provided under this section for a project which 
will result in the construction of new capacity available to single 
occupant vehicles unless the project consists of a high occupancy 
vehicle facility available to single occupant vehicles only at other 
than peak travel times. In areas of a State which are nonattainment for 
ozone or carbon monoxide, or both, and for PM-10 resulting from 
transportation activities, the State may obligate such funds for any 
project or program under paragraph (1) or (2) without regard to any 
limitation of the Department of Transportation relating to the type of 
ambient air quality standard such project or program addresses.
    (c) States Receiving Minimum Apportionment.--
    (1) States without a nonattainment area.--If a State does not have, 
and never has had, a nonattainment area designated under the Clean Air 
Act (42 U.S.C. 7401 et seq.), the State may use funds apportioned to 
the State under section 104 (b)(2) for any project in the State that--
    (A) would otherwise be eligible under this section as if the 
project were carried out in a nonattainment or maintenance area; or
    (B) is eligible under the surface transportation program under 
section 133.
    (2) States with a nonattainment area.--If a State has a 
nonattainment area or maintenance area and receives funds under section 
104 (b)(2)(D) above the amount of funds that the State would have 
received based on its nonattainment and maintenance area population 
under subparagraphs (B) and (C) of section 104 (b)(2), the State may 
use that portion of the funds not based on its nonattainment and 
maintenance area population under subparagraphs (B) and (C) of section 
104 (b)(2) for any project in the State that--
    (A) would otherwise be eligible under this section as if the 
project were carried out in a nonattainment or maintenance area; or
    (B) is eligible under the surface transportation program under 
section 133.
    (d) Applicability of Planning Requirements.--Programming and 
expenditure of funds for projects under this section shall be 
consistent with the requirements of sections 134 and 135 of this title.
    (e) Partnerships With Nongovernmental Entities.--
    (1) In general.--Notwithstanding any other provision of this title 
and in accordance with this subsection, a metropolitan planning 
organization, State transportation department, or other project sponsor 
may enter into an agreement with any public, private, or nonprofit 
entity to cooperatively implement any project carried out under this 
    (2) Forms of participation by entities.--Participation by an entity 
under paragraph (1) may consist of--
    (A) ownership or operation of any land, facility, vehicle, or other 
physical asset associated with the project;
    (B) cost sharing of any project expense;
    (C) carrying out of administration, construction management, 
project management, project operation, or any other management or 
operational duty associated with the project; and
    (D) any other form of participation approved by the Secretary.
    (3) Allocation to entities.--A State may allocate funds apportioned 
under section 104 (b)(2) to an entity described in paragraph (1).
    (4) Alternative fuel projects.--In the case of a project that will 
provide for the use of alternative fuels by privately owned vehicles or 
vehicle fleets, activities eligible for funding under this subsection--
    (A) may include the costs of vehicle refueling infrastructure, 
including infrastructure that would support the development, 
production, and use of emerging technologies that reduce emissions of 
air pollutants from motor vehicles, and other capital investments 
associated with the project;
    (B) shall include only the incremental cost of an alternative 
fueled vehicle, as compared to a conventionally fueled vehicle, that 
would otherwise be borne by a private party; and
    (C) shall apply other governmental financial purchase contributions 
in the calculation of net incremental cost.
    (5) Prohibition on federal participation with respect to required 
activities.--A Federal participation payment under this subsection may 
not be made to an entity to fund an obligation imposed under the Clean 
Air Act (42 U.S.C. 7401 et seq.) or any other Federal law.
    (f) Cost-Effective Emission Reduction Guidance.--
    (1) Definitions.--In this subsection, the following definitions 
    (A) Administrator.--The term `Administrator' means the 
Administrator of the Environmental Protection Agency.
    (B) Diesel retrofit.--The term `diesel retrofit' means a 
replacement, repowering, rebuilding, after treatment, or other 
technology, as determined by the Administrator.
    (2) Emission reduction guidance.--The Administrator, in 
consultation with the Secretary, shall publish a list of diesel 
retrofit technologies and supporting technical information for--
    (A) diesel emission reduction technologies certified or verified by 

[[Page 76051]]

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

SAFETEA-LU Section 1808: Additional Provisions

    The following provisions were included in the SAFETEA-LU Section 
1808. These provisions do not amend 23 U.S.C. and therefore sunset when 
the SAFETEA-LU expires. To avoid confusion, they are presented here 
separate from the rest of the statutory text.
    (g) Flexibility in the State of Montana.--The State of Montana may 
use funds apportioned under section 104(b)(2) of title 23, United 
States Code, for the operation of public transit activities that serve 
a nonattainment or maintenance area.
    (h) Availability of Funds for State of Michigan.--The State of 
Michigan may use funds apportioned under section 104(b)(2) of such 
title for the operation and maintenance of intelligent transportation 
system strategies that serve a nonattainment or maintenance area.
    (i) Availability of Funds for the State of Maine.--The State of 
Maine may use funds apportioned under section 104(b)(2) of such title 
to support, through September 30, 2009, the operation of passenger rail 
service between Boston, Massachusetts, and Portland, Maine.
    (j) Availability of Funds for Oregon.--The State of Oregon may use 
funds apportioned on or before September 30, 2009, under section 
104(b)(2) of such title to support the operation of additional 
passenger rail service between Eugene and Portland.
    (k) Availability of Funds for Certain Other States.7mdash;The 
States of Missouri, Iowa, Minnesota, Wisconsin, Illinois, Indiana, and 
Ohio may use funds apportioned under section 104(b)(2) of such title to 
purchase alternative fuel (as defined in section 301 of the Energy 
Policy Act of 1992 (42 U.S.C. 13211)) or biodiesel.



    (2) Congestion mitigation and air quality improvement program.--
    (A) In general.--For the congestion mitigation and air quality 
improvement program, in the ratio that--
    (i) the total of all weighted nonattainment and maintenance area 
populations in each State; bears to
    (ii) the total of all weighted nonattainment and maintenance area 
populations in all States.
    (B) Calculation of weighted nonattainment and maintenance area 
population.--Subject to subparagraph (C), for the purpose of 
subparagraph (A), the weighted nonattainment and maintenance area 
population shall be calculated by multiplying the population of each 
area in a State that was a nonattainment area or maintenance area as 
described in section 149(b) for ozone or carbon monoxide by a factor 
    (i) 1.0 if, at the time of apportionment, the area is a maintenance 
    (ii) 1.0 if, at the time of the apportionment, the area is 
classified as a marginal ozone nonattainment area under subpart 2 of 
part D of title I of the Clean Air Act (42 U.S.C. 7511 et seq.);
    (iii) 1.1 if, at the time of the apportionment, the area is 
classified as a moderate ozone nonattainment area under such subpart;
    (iv) 1.2 if, at the time of the apportionment, the area is 
classified as a serious ozone nonattainment area under such subpart;
    (v) 1.3 if, at the time of the apportionment, the area is 
classified as a severe ozone nonattainment area under such subpart;
    (vi) 1.4 if, at the time of the apportionment, the area is 
classified as an extreme ozone nonattainment area under such subpart;
    (vii) 1.0 if, at the time of the apportionment, the area is not a 
nonattainment or maintenance area as described in section 149(b) for 
ozone, but is classified under subpart 3 of part D of title I of such 
Act (42 U.S.C. 7512 et seq. as a nonattainment area described in 
section 149(b) for carbon monoxide; or
    (viii) 1.0 if, at the time of apportionment, an area is designated 
as nonattainment for ozone under subpart

[[Page 76052]]

1 of part D of title I of such Act (42 U.S.C. 7512 et seq.).
    (C) Additional Adjustment for Carbon Monoxide Areas.--If, in 
addition to being designated as a nonattainment or maintenance are for 
ozone as described in section 149(b), any county within the area was 
also classified under subpart 3 of part D of title I of the Clean Air 
Act (42 U.S.C. 7512 et seq.) as a nonattainment or maintenance area 
described in section 149(b) for carbon monoxide, the weighted 
nonattainment or maintenance area population of the county, as 
determined under clauses (i) through (vi) or clause (viii) of 
subparagraph (B), shall be further multiplied by a factor of 1.2.
    (D) Minimum apportionment.--Notwithstanding any other provision of 
this paragraph, each State shall receive a minimum of \1/2\ of 1 
percent of the funds apportioned under this paragraph.
    (E) Determinations of population.--In determining population 
figures for the purposes of this paragraph, the Secretary shall use the 
latest available annual estimates prepared by the Secretary of 


    The Federal share payable on account of any project for traffic 
control signalization, traffic circles (also known as 'roundabouts'), 
safety rest areas, pavement marking, commuter carpooling and 
vanpooling, rail-highway crossing closure, or installation of traffic 
signs, traffic lights, guardrails, impact attenuators, concrete barrier 
endtreatments, breakaway utility poles, or priority control systems for 
emergency vehicles or transit vehicles at signalized intersections may 
amount to 100 percent of the cost of construction of such projects; 
except that not more than 10 percent of all sums apportioned for all 
the Federal-aid systems for any fiscal year in accordance with section 
104 of this title shall be used under this subsection.


    While the SAFETEA-LU maintains the existing roles and authorities 
of public agencies in project selection, the law also indicates that 
priority for CMAQ funding should be given to cost-effective emission 
reduction and congestion mitigation measures.\35\ The SAFETEA-LU 
specifically highlights diesel retrofits as a priority cost-effective 

    \35\ 23 U.S.C. 149(f).

    In 2002, the National Academy of Sciences' (NAS) Transportation 
Research Board (TRB) published a study, in response to a congressional 
request that assessed the cost-effectiveness of various CMAQ-eligible 
strategies to reduce congestion and emissions. The study measured the 
cost-effectiveness of projects based on cost per ton of emissions (HC 
and NOX) reduced. In preparing the assessment, TRB gave 
NOX reductions four times the weight of HC reductions. The 
findings, shown in Figures A and D, are reported as the median values 
for each category analyzed. The cost information has been adjusted to 
2005 dollars to account for inflation.
    It is important to note that while the NAS study reflects the best 
available data at the time of its completion, there are limitations 
inherent in such an assessment. The data presented are based on a 
select sampling of projects that may not completely capture the 
potential cost effectiveness of other techniques of implementing 
particular strategies. Therefore, the median cost should be coupled 
with the cost range to better portray a project's potential cost-
    The NAS study did not consider advanced truck stop electrification 
(TSE) projects or diesel engine retrofit projects. Cost-effectiveness 
data for TSE projects were obtained from the EPA Office of 
Transportation and Air Quality. The cost-effectiveness of various 
diesel engine retrofit technologies, highlighted in the SAFETEA-LU as a 
priority CMAQ funding item, are illustrated in Figures B and C and are 
based on the cost (estimated 2007 dollars) per ton of PM reduced.
    While most of the technologies are presented in terms of tons of 
NOX reduced, diesel engine retrofits are presented in terms 
of tons of PM reduced. A direct comparison is therefore not 
appropriate, as the health effects and emissions inventories differ 
between the two pollutants. It costs more to reduce a ton of PM than it 
does to reduce a ton of NOX. However, the health benefits of 
reducing a ton of PM are significantly greater than the benefits of 
reducing an equal amount of NOX.

      Figure A: NOX/HC Cost-Effectiveness of Various Project Types
                                  Median cost  (2005   Cost range  (2005
            Strategy               dollars)/ton  of    dollars)/ton  of
                                    NOX/HC  reduced     NOX/HC  reduced
I/M.............................               2,155         2,041-6,577
Regional Rideshare..............               8,392        1,361-18,144
Charges and Fees................              11,680          907-56,020
Vanpool Programs................              11,907       5,897-100,926
Misc. TDM.......................              14,175        2,608-37,649
Conventional Fuel Bus                         18,257       12,474-45,247
Alternative-Fuel Vehicles.......              20,185        4,536-35,834
Traffic Signalization...........              22,793       6,804-145,152
Employer Trip Reduction.........              25,742       6,464-199,017
Conventional Service Upgrades...              27,896       4,309-136,193
Park-and-Ride Lots..............              48,762        9,752-80,174
Modal Subsidies and Vouchers....              52,844         907-534,114
New Transit Capital Systems/                  75,298       9,639-533,887
Bike/Pedestrian.................              95,369       4,763-390,890
Shuttles, Feeder, Paratransit...              99,225      13,948-223,398
Freeway Management..............             116,122       2,608-616,783
Alternative-Fuel Buses..........             143,338       7,598-644,772
HOV Lanes.......................             199,811       6,464-381,931

[[Page 76053]]

Telework........................             285,541   15,082-9,329,418
Source: TRB Special Report 264--The Congestion Mitigation and Air
  Quality Improvement Program: Assessing 10 Years of Experience, Chapter
  4, 2002.

Advanced Truck Stop Electrification.           1,696        1,416-1,976
Source: Environmental Protection Agency, Office of Transportation & Air
  Quality (Measured in dollars/ton of NOX reduced), 2006.

    In March, 2006, the EPA released a report, Diesel Retrofit 
Technology: An Analysis of the Cost-Effectiveness of Reducing 
Particulate Matter Emissions from Heavy-Duty Diesel Engines Through 
Retrofits, that analyzed diesel oxidation catalysts (DOC) and catalyzed 
diesel particulate filters (CDPF). These technologies are assessed in 
dollars per ton of PM reduced, unlike the information in Figure A and 
D, which is measured in tons of NOX/HC reduced. The EPA did 
not provide median values, instead providing a cost-effectiveness 

                         Figure B: PM Cost-Effectiveness in Diesel Retrofit Applications
                                                                                               Range of $/ton of
                                                                                                  PM reduced
                    Vehicle                                  Retrofit technology                (Estimated 2007
                                                                                                  dollars) *
School Bus.....................................  DOC........................................       12,000-49,100
                                                 CDPF.......................................       12,400-50,500
Class 6 & 7 Truck..............................  DOC........................................       27,600-67,900
                                                 CDPF.......................................       28,400-69,900
Class 8b Truck.................................  DOC........................................       11,100-40,600
                                                 CDPF.......................................      12,100-44,100
* The cost per ton of PM reduced will depend on a variety of factors including the age and activity levels of
  the vehicles or equipment.

                        Figure C: PM Cost-Effectiveness in Nonroad Retrofit Applications
                                                                                               Range of $/ton of
                                                                                                  PM reduced
                   Equipment                                 Retrofit technology                (Estimated 2007
                                                                                                  dollars) *
Off-highway trucks.............................  DOC........................................       17,200-43,500
                                                 CDPF.......................................       14,300-36,300
Loaders/Backhoes/Tractors......................  DOC........................................       13,800-25,100
                                                 CDPF.......................................       11,500-20,900
Excavators.....................................  DOC........................................       17,800-49,600
                                                 CDPF.......................................       14,800-41,300
Skid Steer Loaders.............................  DOC........................................       11,600-25,900
                                                 CDPF.......................................        9,700-21,600
Generator Sets.................................  DOC........................................       15,500-36,900
                                                 CDPF.......................................       12,900-30,800
250 hp Bulldozer...............................  DOC........................................       18,100-49,700
                                                 CDPF.......................................                N/A
* The cost per ton of PM reduced will depend on a variety of factors including the age and activity levels of
  the vehicles or equipment.

[[Page 76054]]


    States and MPOs are encouraged to consider the information 
presented in this Appendix during their CMAQ project selection and 
prioritization process.
    Those seeking further information on the cost-effectiveness of CMAQ 
projects should consult TRB Special Report 264--The Congestion 
Mitigation and Air Quality Improvement Program: Assessing 10 Years of 
Experience, Chapter 4.


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

Emissions Control Technologies

    The EPA and the California Air Resources Board (CARB) have retrofit 
technology verification programs that evaluate the performance of 
advanced emissions control technologies and engine rebuild kits. CMAQ-
funded diesel retrofit projects must use retrofit technologies that are 
verified under the EPA's Voluntary Diesel Retrofit Program or CARB. A 
list of EPA-verified technologies is available at http://www.epa.gov/otaq/retrofit/retroverifiedlist.htm. CARB's verification 
program can be found at http://www.arb.ca.gov/diesel/verdev/home/home.htm.


    Refueling is eligible only when combined with an overall diesel 
retrofit project for which the cleaner fuel is required. For example, 
ultra-low sulfur diesel (ULSD) may be purchased as part of a project to 
install diesel particulate filters on highway construction equipment 
only because these devices require ULSD to function properly.
    Fuel-related technologies identified in EPA's list of retrofit 
strategies are eligible only until standards for such

[[Page 76055]]

clean fuel are effective. For example, ULSD is eligible for CMAQ only 
until the standard is effective. For on-road use, ULSD is mandated for 
use in October 2006. According to EPA's regulatory development 
calendar, low sulfur diesel (500 ppm of sulfur) will be required for 
nonroad use in 2007, while ULSD (15 ppm of sulfur) will be required for 
nonroad use in 2010.

Vehicle/Equipment Replacement Projects

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

Repower or Engine Replacement Projects

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

[FR Doc. 06-9679 Filed 12-18-06; 8:45 am]