With Air Regulation Looming, San Antonio Could Get a Windfall in Volkswagen Money

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Since settling with a California lawsuit the auto company Volkswagen is paying over $73.5 million to the City of San Antonio.

Scott Ball / Rivard Report

The City of San Antonio is set to receive $61.6 million as part of a federal lawsuit settlement with Volkswagen over an emissions cheating scandal.

More than $73.5 million in funding to improve local air quality is headed for the San Antonio area, with local officials eyeing the funds as their best chance to clean up the air before a critical 2021 deadline.

The San Antonio area will receive the largest share of any urban area of the $209 million in Volkswagen settlement money earmarked for Texas. The money is part of $2.9 billion in funding to state and tribal governments the German carmaker agreed to in a court settlement with federal regulators and the State of California over its recent emissions cheating scandal.

In Bexar, Comal, Guadalupe, and Wilson counties, the proposed money is open to public entities, such as local governments and school districts, and to private businesses and , according to a draft beneficiary agreement by the Texas Commission on Environmental Quality (TCEQ).

The TCEQ, Texas’ environmental regulator, will serve as a beneficiary for the settlement funds and decide which qualifying projects can receive funding.

“We don’t want to hold that money,” said Steve Dayton, a TCEQ technical specialist, at an Alamo Area Council of Governments meeting in August. “We want to give it out, and we want to give it out as quick as we can to good projects.”

TCEQ officials are proposing using the funds to offset a portion of the cost local entities would need to spend to replace or re-power their fleets with newer, cleaner engines. Eligible fleets include medium to heavy trucks, school buses, transit and shuttle buses, forklifts and port cargo hauling equipment, and airport ground support equipment.

Here’s a breakdown of the different levels of funding, depending on type of fuel and whether an entity is public or private:

Electric or hydrogen fuel cell charging equipment: 50 percent for electric, and 25 to 33 percent for hydrogen.

Replacements: 60 percent for all electric replacements, 60 percent for all government-owned replacements, and 25 percent for privately owned diesel or alternative fuel replacements, (though drayage trucks can receive up to 50 percent).

Re-powers: 60 percent for all electric re-powers, 60 percent for government-owned re-powers, and 40 percent for all privately owned diesel or alternative fuel re-powers.

The timing of the funding is especially important for San Antonio. In July, the U.S. Environmental Protection Agency officially declared Bexar County’s air too polluted to meet a federal health standard for ozone.

Bexar County is now under more strict regulatory scrutiny. Large industrial businesses expanding or locating inside county lines must face a stricter and more costly permitting process, and local transportation projects that receive federal funding could see delays of six to 18 months.

Bexar County officially has until Sept. 24, 2021, to clean up its air enough to meet the standard. However, because of specific requirements in the Clean Air Act and the timing of San Antonio’s ozone season, only two years’ worth of air quality data will be counted, said Brian Foster of the TCEQ’s air quality planning division. 

“So you only have roughly two years to get to the end point, instead of three years,” Foster said said at the August meeting. “This is just one of those things about the Clean Air Act.”

Bexar County currently has a three-year ozone average of 72 parts per billion at one of its air monitors, slightly above the federal standard of 70 parts per billion, according to TCEQ data.

“We’re so very close to being in attainment that this funding can make a difference,” said Alamo Area Council of Governments Executive Director Diane Rath.

Ozone forms when two different kinds of pollutants, nitrogen oxides and volatile organic compounds, react in the presence of heat and sunlight. Both of these pollutants are needed to make ozone.

In the San Antonio area, most nitrogen oxide emissions come from vehicles, including cars, trucks, and heavy equipment, said Donna Huff, director of the TCEQ’s air quality division.

“But with the help of the [Volkswagen] money … there are opportunities to change out your on-road and non-road engines to cleaner engines,” Huff said in an August interview.

Besides reducing nitrogen oxide emissions, the funding is meant to help protect the public from exposure to pollution and increase the use of electric and hydrogen fuel-cell vehicles across Texas, TCEQ officials said.

Under the terms of the Volkswagen settlement, the TCEQ could choose to fund up to 100 percent of replacement or re-power projects for government entities instead of 60 percent.

At a public comment session on Monday, Rath asked the TCEQ to consider providing a greater share of funding.

“The City and our partners, as well as the business community, have multiple projects that are basically queued up and will benefit from this funding opportunity,” said City of San Antonio Chief Sustainability officer Doug Melnick said. He asked for the TCEQ to consider covering all costs “in order to expend the funds as quickly as possible and ensure we make progress to get back into attainment.”

Rath said most local governments have already finished their 2019 budgets and will not be able to find additional funding to match the Volkswagen money this year.

Dayton said the TCEQ is proposing a maximum of 60 percent to ensure local entities have a financial stake in their fleet upgrades and combine multiple funding sources. The TCEQ also wants to stretch the funds as far as possible, he said.

Projects will likely be allocated on a first come, first served basis, thought the TCEQ may at some point choose to base its funding on cost-effectiveness at reducing pollution, Dayton said.

The share of funding among Texas cities is also not yet a done deal. Under the current proposal, the San Antonio area would receive 35 percent, Dallas-Fort Worth would receive 14 percent, Houston-Galveston-Brazoria would receive 13 percent, El Paso County would receive 13 percent, and Beaumont-Port Arthur would receive 6 percent.

Another 15 percent would go to electric and hydrogen fuel-cell equipment across the state. Another 4 percent will be allocated to TCEQ administrative costs, though the agency says it plans to use less than that.

The TCEQ is accepting comments on its draft plan until Oct. 8 at vwsettle@tceq.texas.gov.

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