The purpose of this memorandum is to convey existing agency policy and highlight provisions in the current Congestion Mitigation and Air Quality Improvement (CMAQ) program guidance document affecting freight projects and diesel engine retrofit programs.

The treatment of freight programs and projects under the CMAQ program is becoming an area of increasing interest, and several sources of confusion have been raised, including the overall eligibility of freight projects. This memo will also serve to transmit the attached FHWA white paper to raise awareness of diesel engine retrofit programs.

Though this memorandum reiterates some aspects of our latest guidance, it does not replace the formal CMAQ guidance document of April 28, 1999. This document and other reference materials can be found on the web at: www.fhwa.dot.gov/environment/cmaq99gm.htm

Freight initiatives may be eligible under the 1999 CMAQ guidance. The treatment of capital improvements and operating assistance for intermodal projects is dealt with directly as guidance in item #13, listed on page 18. This guidance can be applied to truck-to-rail transfer facilities. Freight project eligibility, however, is not limited to intermodal projects. Emissions reductions can be generated directly by projects focusing on the vehicles themselves, through treatment of tailpipe exhaust or application of advanced engine technologies and may thus qualify for CMAQ funding (assuming all other requirements are met). These efforts are addressed under several categories of CMAQ eligibility in the program guidance.

Although freight is not mentioned specifically, the provision for public-private partnerships—strengthened considerably with TEA-21 to allow public (CMAQ) funds to be used for privately owned and operated services—represents another avenue of support for freight and intermodal projects that generate an air quality benefit. Public-private partnerships are discussed as item #4 on page 11 of the guidance. Since most freight services are privately owned, these provisions would likely apply which require an agreement between a public sponsor and a private organization specifying roles and responsibilities. Similarly, sound and creative freight initiatives can be posed as experimental pilot projects, again dependent upon the linkage to an emissions reduction. Experimental pilot projects are item #17 on page 20.

As discussed in the guidance under public-private partnerships, "overmatching," i.e. providing more than 20 percent State/local share of CMAQ funds, is strongly recommended since individual, for-profit agencies will benefit from public expenditures. This approach can be useful when dealing with trucking companies, railroads, terminal operators, and others. Overmatch may add to the attractiveness of the project, making the proposal more competitive.

Basic requirements for CMAQ eligibility apply to freight projects, as well. An air quality benefit must be projected to assure eligibility of the project, and operating assistance is limited to 3 years of support. Projects also must be located within or in close proximity to nonattainment or maintenance areas. This issue was discussed in some detail via our Federal Register notice of January 16, 2002 (67 FR 2278). That notice reaffirmed the previous policy issued in April 1999, confirming that projects must be located within, or in close proximity to, the nonattainment or maintenance area, demonstrate emissions reductions primarily within the nonattainment or maintenance area, and meet other CMAQ eligibility criteria.

While high-speed passenger rail issues prompted the January 16 notice, the policy finding applies throughout the CMAQ program. The provision has particular application to trucks and locomotives that often operate outside of a State's nonattainment or maintenance areas. For example, programs providing auxiliary power units in heavy-duty diesel trucks to reduce extended idling can be deemed eligible if there is some assurance that the vehicle's range of operation will be predominantly in the nonattainment or maintenance area. By contrast, truck-stop electrification programs within nonattainment and maintenance areas can be eligible regardless of where the trucks otherwise operate if an air quality benefit is demonstrated. A list of freight projects already funded under the CMAQ program is attached. We would encourage staff to review the January 16 notice for further treatment of this and other related issues.

Diesel Engine Retrofits

Programs designed to retrofit heavy-duty diesel engines have been of great interest since EPA issued its new regulations requiring tighter standards for these engines. The EPA and California have programs to accelerate the introduction of cleaner technologies since EPA's heavy-duty diesel engine and low-sulfur fuel rule will not be fully implemented until 2007. More importantly, the long-term benefits of fleet conversion will not be completely realized until 2030.

Nitrogen oxides emissions from heavy-duty diesel engines have grown precipitously since 1970. While every other category of on-road emissions, from almost every type of vehicle, has declined over this period, these emissions have increased more than 115 percent. As detailed in the attached white paper, retrofit programs could help bridge the gap between today's heavy-duty diesel truck and the cleaner commercial truck that will result from this fleet conversion.

A heavy-duty diesel engine retrofit can be an eligible CMAQ project. As noted above, a truck would have to operate predominantly within or in close proximity to nonattainment or maintenance areas, and primarily benefit those areas, if CMAQ funds are to be used for the retrofit. If the truck were privately owned, CMAQ funding would be contingent upon meeting the public-private partnership provisions of the guidance. Funds under the program also may be used for school bus programs in nonattainment and maintenance areas to retrofit or replace engines with the latest technologies that reduce emissions.

We encourage staff to review the attached white paper on diesel retrofit and to become familiar with the freight initiatives supported under the CMAQ program. For any questions, please consult with Michael Koontz of my staff at 202-366-2076 or email michael.koontz@fhwa.dot.gov

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