National Clean Diesel Campaign
          FY 2014 - 2016 STATE CLEAN DIESEL GRANT PROGRAM
                     INFORMATION GUIDE
                         June 28, 2016
x>EPA
United States
Environmental Protection
Agency
Office of Transportation and Air Quality
          EPA-420-B-16-046a
              June 2016

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SUMMARY

EPA's Office of Transportation and Air Quality is soliciting proposals from eligible states and
territories for participation in the fiscal year (FY) 2016 Diesel Emission Reduction Program (DERA),
State Clean Diesel Grant Program.  EPA has approximately $49.5 million available for the FY 2016
DERA Program. In accordance with DERA, EPA makes 30 percent (approximately $14.8 million for
FY 2016) of the annual allocation available to states and territories in the form of assistance
agreements under the State Clean Diesel Grant Program. Funding can support grant, rebate, and loan
programs administered by eligible states or territories that are designed to achieve significant
reductions in diesel emissions.

The State Clean Diesel Grant Program is not a competition; it is an allocation process in which the
eligible states and territories submit their interest to participate to EPA, and EPA awards a specific
allocation by formula, based on the number of states and territories with  approved applications that
participate.

State Clean Diesel Grant Program funding for FY 2016 will be distributed to those states and
territories that participated in FY 2014/2015 as supplemental amendments to their current FY
2014/2015 awards. Those states and territories that did not participate in the FY 2014/2015 State
Clean Diesel  Grant Program will receive FY 2016 funds as a new award, pending successful close-
out of any FY 2013 or older State Clean Diesel Grant Program awards.

Under the State Clean Diesel Grant Program, eligible diesel emission reduction solutions include
verified emission control technologies such as exhaust controls, cleaner fuels, and engine upgrades,
verified idle reduction technologies, verified aerodynamic technologies and low rolling resistance
tires, certified engine repowers, and/or certified vehicle or equipment replacement. Eligible diesel
vehicles, engines and equipment may include buses, Class 5 - Class 8  heavy-duty highway vehicles,
marine engines, locomotives and nonroad engines, equipment or vehicles used in construction,
handling of cargo (including at a port or airport), agriculture, mining or energy production (including
stationary generators and pumps).

This document contains  the FY 2014 - 2016 State Clean Diesel Grant Program information for both
internal and external stakeholders. All public materials for the State Clean Diesel Grant Program are
available at www.epa.gov/cleandiesel/clean-diesel-state-allocations.

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Table of Contents




I.   OVERVIEW	1




II.   STATUATORY AUTHORITY	1




III.  ELIGIBLE APPLICANTS	1




IV.  FY 2016 FUNDING SCHEDULE AND PROCEDURES	2




V.   NOTICE OF INTENT	2




VI.  ALLOCATION OF FUNDS	4




VII. APPLICATION PACKAGE AND SUBMISSION INFORMATION	5




VIII. SCOPE OF WORK	6




IX.  USE OF FUNDS RESTRICTIONS	14




X.   MANDATORY COST-SHARE REQUIREMENT	20




XI.  WAIVER OF PROGRAMMATIC REQUIREMENTS	21




XII. AWARD ADMINISTRATION INFORMATION	21

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  I. OVERVIEW

    Beginning in FY 2014, programmatic requirements from EPA's competitive Clean Diesel Funding
    Assistance Program, specifically RFP# EPA-OAR-OTAQ-14-05, were incorporated into the FY
    2014 State Clean Diesel Grant Program by reference. These programmatic requirements include,
    but are not limited to, mandatory cost share requirements for certain types of projects, and specific
    vehicle, engine and technology eligibility criteria. In FY 2015, a few minor modifications and
    clarifications were included in the FY 2015 State Clean Diesel Grant Program.

    This document, the FY 2014 - 2016 State Clean Diesel Grant Program Information Guide,
    consolidates and streamlines the programmatic requirements applicable to all new and continuing
    State Clean Diesel Grant Program awards receiving FY2016 funding. All projects funded with FY
    2014, 2015 and/or 2016 State Clean Diesel Grant Program funds, must meet all eligibility and
    funding requirements set forth in this program guide.

    This document provides information to EPA Regions and to participating states and territories
    concerning how the Agency intends to exercise its discretion in awarding and managing State Clean
    Diesel Grant Program rebates, grants, and/or loans for FY 2014 - 2016. This guidance is designed to
    provide national policy on these issues. Some of the statutory provisions described in this document
    contain legally binding requirements. However, this document does not substitute for those
    provisions or regulations, nor is it a regulation itself. Thus, it cannot impose legally binding
    requirements on EPA, states, territories or the regulated community, and may not apply to a
    particular situation based upon the circumstances. Any decisions regarding a particular situation will
    be made, based on the statutes and regulations, and EPA decision-makers retain the discretion to
    adopt approaches on a case-by-case basis, that differ from this guidance where appropriate.

 II. STATUATORY AUTHORITY

    Title VII, Subtitle G, Section 793 of the Diesel Emissions Reduction Program (DERA) in the
    Energy Policy Act of 2005 (codified at 42 U.S.C.  16133) authorizes the U.S. Environmental
    Protection Agency (EPA) to support grant, rebate, and loan programs, administered by eligible
    states or territories, which are designed to achieve significant reductions in diesel emissions. This
    program is referred to as the State Clean Diesel Grant Program (the Program).

III. ELIGIBLE APPLICANTS

    Eligibility to apply for and receive funds under the Program is limited to the 50 states, the District of
    Columbia, Puerto Rico, and the Virgin Islands, Guam,  American Samoa, and the Northern Mariana
    Islands. For the purposes of this document, the term "state" will be used to describe the 50 states and
    the District of Columbia, Puerto Rico, Guam, the US Virgin Islands, American Samoa and the
    Commonwealth of the Northern Mariana Islands.

    EPA presumes that the state agency with jurisdiction over air quality will be the lead agency to
    receive these funds. If a state's circumstances dictate that another state agency administer the funds,
    then a letter from the state governor or designee to the Administrator of EPA is required in order to
    certify one state Agency as the recipient of funds who has the legal and administrative authority to
    enter into a grant or cooperative agreement with EPA. Upon receipt, EPA will consider that agency
    the lead agency from that point forward. However, if there is a change, a new Governor's letter to
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    the Administrator must be submitted during the renewal process and the new agency would be
    considered the lead agency for future grants. For fiscal year 2016, the letter to identify an alternate
    lead agency and provide specific contact information should be sent to the following contacts and be
    received on or before May 1, 2016.

    The Honorable Gina McCarthy
    Administrator
    U.S. Environmental Protection Agency
    1200 Pennsylvania Ave, N.W., Mail Code: 1101A
    Washington, DC 20460

    Cc: Jennifer Keller, Director
    Legacy Fleets Incentives and Assessment Center
    U.S. Environmental Protection Agency
    1200 Pennsylvania Ave., N.W., Mail Code: 6406A
    Washington, DC 20460
    Phone: (202)  343-9541, Fax: (202) 343-2803, Email: keller.ienmfer(a),eva.sov

IV. FY 2016 FUNDING SCHEDULE AND PROCEDURES

    The steps below outline the procedure  and schedule for states to participate in the FY 2016 State
    Clean Diesel Grant Program.

    A. February 29, 2016: OTAQ sends all eligible states the FY 2016 Program materials.

    B. March 18, 2016: All participating  states must submit a Notice of Intent to Participate (NOIP) or
       a Notice of Intent to Continue (NOIC), to OTAQ via email (cleandiesel@epa.gov).

    C. March 21, 2016: OTAQ will perform the funding allocation calculation and email the final
       funding allocation table to the EPA Regional Air Division Directors.

    D. March 22, 2016: Regions will inform the states of their final allocation via email and/or hard
       copy.

    E. April 26, 2016: Participating states must submit their application package to www.Grants.gov.

    F. October 1, 2016: Project period for FY 2016 awards begins. Regional offices will finalize the
       FY 2016 Program awards prior to October 1, 2016.

 V. NOTICE  OF INTENT

    States that want to receive FY 2016 State Clean Diesel Grant Program funding must submit a Notice
    of intent to Participate  (NOIP)  or Notice of Intent  to Continue (NOIC).

    A. Notice of Intent to Continue: States with an open FY 2014/2015 Program award must submit a
       Notice of Intent to  Continue. Continuing states will receive FY 2016 funds as a supplemental

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   amendment to the existing award. OTAQ will work with regional staff on the progress of those
   continuing states that have yet to complete all their FY 2014/2015 grant activities.

B. Notice of Intent to Participate: States that do not have an open FY 2014/2015 State Clean
   Diesel Grant Program award must submit a Notice of Intent to Participate.

   Any state with an open Program award from FY 2008 - 2013 must ensure that the project period
   of the FY 2008 - 2013 award ends by September 30, 2016, in order for the state to receive FY
   2016 funding. This means that vehicles/equipment should be delivered, technologies installed,
   and clean diesel project work completed by September 30, 2016. If the state has already
   obligated but not drawn down funds by the  grant period end date, it will have to make a final
   request for a drawdown payment. If the state is unable to complete all the tasks outlined in the
   work plan and obligate or expend all FY 2008 - 2013 funds by September 30, 2016, the Region
   can close out the FY 2008 - 2013 award and de-obligate the remaining funds so that the state
   can participate in the FY2016 Program.

   Alternatively, if a state with an open Program award from FY 2008 - 2013 is unable to complete
   all the tasks outlined in the work plan and obligate or expend all FY 2008 - 2013  funds by
   September 30, 2016, the state can request an additional no-cost time extension under extenuating
   circumstances. However, a state requesting a no-cost time extension for a currently open FY
   2008 - 2013 Program  award  will not be able to receive FY 2016 Program funding.

C. Voluntary Match Incentive: The NOIC/NOIP must indicate whether or not the state intends to
   voluntarily contribute  funding to the FY 2016 Program project budget. The NOIC/NOIP must
   also indicate the types and sources of cost-share funds.

   If a state provides a voluntary match equal to the base allocation offered by EPA, EPA will
   provide a matching incentive equal  to 50 percent of the base allocation. For example: A state
   legislature has provided $1M per year to the state air agency to fund clean diesel activities in the
   state. If EPA offers a  base allocation of $200,000 to the state, the state could contribute
   $200,000 of the state funding as a voluntary match and the state would receive an additional
   $100,000 in EPA funding as  a matching incentive. The total project budget would then be
   $500,000, not including any mandatory cost-share funds.

   The voluntary cost-share may be satisfied by allowable costs incurred by the state (i.e. in-kind
   contributions), or by cash donations of state funds or private funds.  State matching funds are
   subject to the same terms and conditions as EPA awarded funds. A recipient is legally obligated
   to expend any voluntary cost-share  included in the approved project budget within the project
   period of that award.

   Mandatory cost-share  funds provided by the state and/or eligible third parties cannot count
   towards the state's voluntary matching funds to qualify for the matching incentive. However, if
   a state requires a third-party cost-share contribution above and beyond the mandatory  cost-share
   amount for the implemented  technology, then the "excess' cost-share may be applied towards
   the state voluntary match funds for the purpose of qualifying for the matching incentive. See
   Section X for additional information on mandatory cost-share requirements. Detailed sample

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        budgets representing various mandatory cost-share versus state match scenarios are available at:
        www.epa.gov/cleandiesel/clean-diesel-state-allocations.

    D.  Submission of NOIC/NOIP: The Notice, which is available in a Tillable Word form
        (www.epa.gov/cleandiesel/clean-diesel-state-allocations), can be submitted in one of two ways:
        1) a state can fill out the form electronically or by hand, print and sign the document, scan the
        document, and return the document via email at cleandiesel@epa.gov; or 2) a state can fill out
        the form electronically, digitally sign the document, save the document and return via email at
        cleandiesel@epa.gov. The Notice must be signed by the Environmental Commissioner or other
        authorized official, but does not need to be emailed from this person directly; the Notice can be
        emailed from the programmatic contact at the state.

    E.  Review of NOIC/NOIP: OTAQ will forward the Notices to the appropriate EPA Regional
        Office for review. Regions will inform OTAQ if there are issues regarding the state matching
        amounts (source, etc.), continuing states that have yet to make sufficient progress on their FY
        2014/2015 Program activities, or states that have open Program awards from FY 2008 - 2013.
        Regions will work with the states as necessary to resolve these issues.

VI. ALLOCATION OF FUNDS

    A.  Allocation Formula: EPA has approximately $49.5 million available for the FY 2016 DERA
        Program. In accordance with 42 U.S.C. 16133, subject to the availability of appropriations, EPA
        makes 30 percent (approximately $14.8 million for FY 2016) of the DERA Program's annual
        allocation available to states and territories in the form of assistance agreements under the State
        Clean Diesel Grant Program. This 30 percent is divided: two-thirds is provided as a base
        allocation and one-third is provided as an incentive to match.

        If all 50 states, the District of Columbia, and the five qualifying territories participate in the FY
        2016 program, then the 50 states, the District of Columbia, and Puerto Rico will each receive
        1.887 percent of the two-thirds of the funds set aside for the State Clean Diesel Grant Program as
        a potential base allocation. The remaining territories each qualify for 0.472 percent of the two-
        thirds of the funds set aside for the State Clean Diesel Grant Program as a potential base
        allocation. If fewer than all 50 states, the District of Columbia, and the five qualifying territories
        submit a Notice to Continue/Participate in FY 2016, then the population formula outlined in 42
        U.S.C.  16133(c)(2)(B) will be applied to any unclaimed base funds, and these funds will be
        added to the all participating states' and territories' potential base allocations. In that case,
        OTAQ will perform the allocation calculation using the U.S. Census Bureau  estimated
        population data for 2010, found at www.census.gov/201 Ocensus/.

        Participating states and territories may choose to voluntarily match the EPA award amount. If a
        state or territory provides a state match equal to the base allocation awarded by EPA, EPA will
        provide a matching bonus equal to 50 percent of the base allocation.  See Section V.3 for
        additional information on the voluntary match incentive.

    B.  Allocation Notification: OTAQ will prepare draft formal funding  allocation letters and send
        them to the Regions. Regions should send the formal funding allocation letters to their states and

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        territories via email and follow-up with a hardcopy letter with original signatures. All funding
        allocation letters should be emailed to the states and territories by Tuesday, March 22, 2016.

VII. APPLICATION PACKAGE AND SUBMISSION INFORMATION

     A. Content of Application Package: The application package must include all of the following
        materials:

        1.  Standard Form (SF) 424, Application for Federal Assistance

        2.  Standard Form (SF) 424A, Budget Information

        3.  Standard Form (SF) 424B, Assurances for Non Construction Programs

        4.  Key Contacts Form

        5.  EPA Form 4700-4, Preaward Compliance Review

        6.  Certification Regarding Lobbying (Grants.gov Lobbying Form)

        7.  Project Narrative Attachment Form, with final Work Plan and Budget Narrative
            attached. States must use the template available at www.epa.gov/cleandiesel/clean-diesel-
            state-allocations to prepare their Work Plan and Budget Narrative.

     B. Grants.gov Application Instructions

        1.  Your organization's authorized official representative (AOR) must submit your complete
            application package electronically to EPA through Grants.gov (www.grants.gov) no later
            than Tuesday, April 26, 2016.

        2.  Follow the steps below to download, complete, and submit an application package through
            Grants.gov. The application package contains the required forms listed above.

            a)  Go to Grants.gov and then click on the "Applicants" tab in the horizontal row of blue
               tabs.  A drop down list will appear.

            b)  Click on "Apply for Grants."

            c)  Click on the red button titled, "Get Application Package," on the right hand side of the
               page.

            d)  Search by Funding Opportunity Number: EPA-CEP-01, or by CFDA#: 66.040

            e)  From the list of Opportunity Package(s) currently available, click on the "Select
               Package" corresponding with CFDA#: 66.040.

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             f)  Enter your email or check the box titled, "No, I do not wish to provide my email." Then
                 click on the gray box titled, "Submit".

             g)  You can now access and download Application Instructions as well as the Application
                 Package from this webpage.

             h)  After downloading an application and saving it, you do not need to be online to complete
                 the application.

             i)  Complete the required forms listed above, including uploading and attaching your final
                 Work Plan and Budget Narrative. While filling out the application package, be sure to
                 save frequently by clicking the Save button on the cover page of the application package.

             j)  Click the Check Package for Errors button to ensure all of the required portions of the
                 application package are complete. Address any errors that are identified before
                 submitting.

             k)  Click the Save & Submit button after completing the application package. The Save &
                 Submit button will not be functional until the application is properly completed with no
                 errors and saved.

VIII. SCOPE OF WORK

      Title VII, Subtitle G, Section 793 of the Diesel Emissions Reduction Program (DERA) allows states
      to use funds provided under the State Clean Diesel Grant Program to develop and implement such
      grant, rebate and low-cost revolving loan programs in the  state as are appropriate to meet state needs
      and goals relating to the reduction of diesel emissions,  subject to the following eligibility limitations
      and funding priorities.

      A. Project and Budget Period:  FY 2016 funds will be dispersed as new awards or supplemental
         amendments which have project and budget periods of October 1, 2016 to September 30, 2017.
         All states will need to complete work and close-out any FY 2014-2016 State Clean Diesel
         Program awards by September 30,  2017 in order to be eligible to receive FY 2017 Program
         funding, pending a FY 2017 DERA appropriation.

      B. Eligible Diesel  Vehicles, Engines  and Equipment: Projects may include, but are not limited to,
         diesel emission reduction solutions from the following heavy-duty diesel emission source types:
         1.  Buses1'2;
         2.  Medium-duty or heavy-duty trucks3;
      1 For the purposes of the Program, buses include school buses of Type A, B, C and D. To be eligible as a school bus a
      vehicle should meet the definition of a school bus as defined by the National Highway Transportation Safety
      Administration. This definition includes, but is not limited to: 1) A bus that is used for purposes that included carrying
      students to and from school or related events on a regular basis; 2) Be identified with the words "School Bus"; and 3) Be
      painted National School Bus Glossy Yellow.
      2 For the purposes of the Program, buses include and medium and heavy-duty transit buses (see footnote #5, below).
      3 For the purposes of the Program, medium heavy-duty and heavy heavy-duty highway vehicles are defined as Class 5
      through Class 8: Class 5 (16,001 -19,500 Ibs GVWR); Class 6 (19,501 - 26,000 Ibs GVWR); Class 7 (26,001 - 33,000
      Ibs GVWR); Class 8a (33,001 - 60,000 Ibs GVWR); Class 8b (60,001 Ibs GVWR and over).
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   3.  Marine Engines;
   4.  Locomotives; and
   5.  Nonroad engines, equipment or vehicles used in:
       a) Construction;
       b) Handling of cargo (including at a port or airport);
       c) Agriculture;
       d) Mining; or
       e) Energy production (including stationary generators and pumps).

C. Eligible Diesel Emission Reduction Solutions: Projects must include one or more of the
   following diesel emission reduction solutions that utilize a certified engine configuration and/or
   a verified technology.

   A "retrofit" project is defined broadly to include any technology, device, fuel or system that,
   when applied to an existing diesel engine, achieves emission reductions beyond what is currently
   required by EPA regulations at the time of the engine's certification.

   1.  Exhaust Controls: Exhaust Controls include pollution control devices installed in the
       exhaust system (such as oxidation catalysts and particulate matter filters), or systems that
       include crankcase emission control  (like a closed crankcase filtration system). The state may
       fund up to 100% of the cost (labor and equipment) for an eligible verified emission control.
       EPA suggests that each applicant requesting diesel particulate filters datalog the exhaust
       temperature of all vehicles to be considered before the application is submitted, so that there
       is evidence that the fleets can accommodate the technology.

       A list of eligible, EPA verified exhaust control technologies is available at:
       www.epa.gov/verified-diesel-tech/verified-technologies-list-clean-diesel and a list of
       eligible, California Air Resources Board (CARB) verified exhaust control technologies is
       available at: www.arb.ca.gov/diesel/verdev/vt/cvt.htm. The types (e.g. DOC, DPF, etc) of
       exhaust control technologies proposed for funding under this category must exist on one of
       these lists for the specific vehicle/engine application specified in the proposal at the time of
       proposal submission to EPA. If selected for funding, the actual exhaust control technologies
       used by the grant recipient must be  specifically named on EPA or CARB's Verified Exhaust
       Control Technologies lists at the time of acquisition, and used only for the vehicle/engine
       applications specified on the list, in order to be eligible for funding.

   2.  Engine Upgrades: Generally, an engine upgrade involves the removal of parts on an engine
       during a rebuild and replacement with parts that cause the engine to represent an engine
       configuration which is cleaner than the original engine. Some nonroad and marine engines
       are able to be upgraded to reduce their emissions by applying manufacturer upgrades that are
       retrofits currently verified by EPA or CARB as a package of components demonstrated to
       achieve specific levels of emission reductions. Some locomotives and marine engines are
       able to be upgraded through the  application of a certified remanufacture system that is used
       to rebuild the engine to represent a cleaner  engine configuration. Engine upgrades may not
       be available for all engines, and  not all upgrades may achieve an emissions benefit.
       Proposals for upgrades should include a discussion of the availability of engine upgrade
       kits/systems and indicate the pre- and post-project emission standard levels of the engines in
       order to demonstrate that the upgrade will result in an emissions benefit.
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   The state may fund up to 40% of the cost (labor and equipment) of an eligible nonroad,
   locomotive or marine engine upgrade. To be eligible for funding, the upgrade must either be
   a verified retrofit as described above, or a certified remanufacture system that will result in
   an emissions benefit by rebuilding the engine to a cleaner engine configuration. For an
   engine to be eligible for an upgrade, the engine must be currently operating and performing
   its intended function. If a certified remanufacture system for a locomotive includes a full
   engine replacement,  the funding restrictions applicable to engine repowers in Section IX.C
   will apply. In the case of an engine upgrade with a certified remanufacture system applied at
   the time of rebuild (not manufacturer upgrades that are retrofits verified by EPA or CARB),
   funds under this award cannot be used for the entire cost of the  engine rebuild, but only for
   the cost of the certified remanufacture system and associated labor costs for installation.

   A list of eligible, EPA verified engine upgrade technologies is available at:
   www.epa.gov/verified-diesel-tech/verified-technologies-list-clean-diesel. Lists of certified
   remanufacture systems for locomotives and marine engines, and additional information on
   remanufacture systems, are available at: www.epa.gov/otaq/certdata.htm. Engine upgrades
   proposed for funding under this category must exist on one of these lists for the specific
   vehicle/engine application specified in the proposal at the time of proposal submission to
   EPA. If selected for funding, the actual engine upgrades used by the grant recipient must be
   specifically named on EPA's list of certified  remanufacture systems or EPA or CARB's
   Verified Exhaust Control Technologies lists at the time  of acquisition, and used only for the
   vehicle/engine applications specified on the lists, in order to be  eligible for funding.

3. Cleaner Fuels Use:  Cleaner fuels include, but are not limited to, biodiesel, diesel fuel
   additives verified by EPA or CARB, compressed natural gas, propane and other certified
   alternative fuels. EPA will not fund stand-alone cleaner fuel use. For new or expanded use of
   a cleaner fuel, the state may fund the cost differential between the cleaner fuel and
   conventional diesel fuel if that cleaner fuel is used in combination, and on the same vehicle,
   with a new eligible verified exhaust control or an eligible clean  alternative fuel conversion or
   an eligible engine upgrade or an eligible certified engine repower or an eligible certified
   vehicle/equipment replacement, as described in this Section.

4. Verified Idle Reduction Technologies: An idle reduction project is  generally defined as the
   installation of a technology or device that reduces unnecessary idling of diesel vehicles or
   equipment and/or is designed to provide services (such as heat,  air conditioning, and/or
   electricity) to vehicles and equipment that would otherwise require the operation of the main
   drive or auxiliary engine(s) while the vehicle is temporarily parked or remains  stationary.
   The reduction in idling will conserve diesel fuel and must also lower emissions.

   A list of eligible, EPA verified idle reduction technologies is available at:
   www.epa.gov/smartwav/forpartners/technology.htmtftabs-4. The types of idle reduction
   technologies  proposed for funding under this category must exist on this list for the
   vehicle/engine application specified in the proposal at the time of proposal submission to
   EPA. The technology categories include: Auxiliary power units and generator sets, battery
   air conditioning systems, thermal  storage systems, electrified parking spaces (truck stop
   electrification), fuel operated heaters, shore connection  systems and alternative maritime
   power, shore connection systems for locomotives, and automatic shutdown/start-up systems
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   for locomotives. The actual idle reduction technologies used must be specifically named on
   EPA's SmartWay Verified Technologies list at the time of acquisition, and used only for the
   vehicle/engine applications specified on the list, in order to be eligible for funding.

   Please note that technologies for the electrification of engines/vehicles/equipment other than
   those specifically listed on EPA's SmartWay Verified Technologies list, cannot be
   considered verified idle reduction technologies, but may be eligible as a Repower (removal
   of a diesel engine and its replacement with an electric power source, see Section VIII.C.6
   below) or a Replacement (replacement of a diesel powered engine/vehicle/equipment with an
   eligible electric engine/vehicle/equipment, see VII.C.7, below).

   a) Verified Idle Reduction Technologies on Locomotives: The state may fund up to 40%
      of the cost (labor and equipment) of the installation of eligible verified idle reduction
      technologies on locomotives.

   b) Shore Connection Systems and Truck Stop Electrification: The state may fund up to
      25% of the cost (labor and equipment) of eligible shore connection systems and truck
      stop electrification/electrified parking space technologies.

   c) Verified Idle Reduction Technologies on School Buses: The state may fund up to
       100% of the cost (labor and equipment) of verified idle reduction technologies on school
      buses with model year 2006 or older engines that have been previously retrofitted with a
      verified emission control device.

   d) All Other Verified Idle Reduction Technologies: The state may fund up to 100% of the
      cost (labor and equipment) for all other eligible, verified idle reduction technologies,
      only if the technology is combined on the same vehicle with a new eligible verified
      exhaust control funded under the Program, as described in Section VIII.C. 1, above.
      Auxiliary power units (APUs) and generators are not eligible for vehicles with 2007
      model year or newer certified engine configurations on long haul Class 8 vehicles.

5.  Verified Aerodynamic Technologies and Verified Low Rolling Resistance Tires:  To
   improve fuel efficiency, long haul Class 8 trucks can be retrofitted with aerodynamic trailer
   fairings or the fairings can be provided as new equipment options. Certain tire models can
   provide a reduction in NOx emissions and fuel savings, relative to the "standard" new tires
   for long haul Class 8 trucks, when used on all axles.

   A list of eligible, EPA verified aerodynamic technologies is available at:
   www.epa.gov/smartway/forpartners/technology.htmtftabs-2, and includes:

   •  gap fairings that reduce the gap between the tractor and the trailer to reduce turbulence;
   •  trailer side skirts that minimize wind under the trailer; and
   •  trailer rear fairings that reduce turbulence and pressure drop  at the rear of the trailer.

   A list of EPA verified low rolling resistance tires is available at:
   www.epa.gov/smartwav/forpartners/technology.htmtftabs-3, and includes both dual tires and
   single wide tires (single wide tires replace the double tire on each end of a drive or trailer

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       axle, in effect turning an "18" wheeler into a "10" wheeler). Low rolling resistance tires can
       be used with lower-weight aluminum wheels to further improve fuel savings, however
       aluminum wheels are not eligible for funding under this RFP.

       The types of aerodynamic technologies and low rolling resistance tires proposed for funding
       under this category must exist on EPA's SmartWay Verified Technologies list for the
       vehicle/engine application  specified in the proposal at the time of proposal submission to
       EPA. If selected for funding, the actual technologies/tires used by the grant recipient must be
       specifically named  on EPA's SmartWay Verified Technologies list at the time of acquisition,
       and used  only for the vehicle/engine applications specified on the list,  in order to be eligible
       for funding.

       The state cannot fund stand-alone aerodynamic technologies or low rolling resistance tires.
       The state may fund up to 100% of the cost (labor and equipment) for verified aerodynamic
       technologies or verified low rolling resistance tires installed on long haul Class 8 trucks, if
       combined on the  same vehicle with the new installation of one or more of the Verified
       Exhaust Controls funded under the Program, as described in Section VIII.C.l, above.

       Note: Low rolling resistance tires are not eligible for funding where these types  of tires have
       already been installed on the truck.

   6.  Certified Engine Repowers: "Repower" refers to replacing an existing engine with a newer,
       cleaner engine that  is certified to a more stringent set of engine emission standards. Repower
       includes,  but is not  limited to, diesel engine replacement with an engine certified for use with
       a clean alternative fuel, diesel engine replacement with an electric power source (grid,
       battery or fuel cell4), and/or the replacement of a nonroad engine with a highway engine.
       The state may fund up to 40% of the cost (labor and equipment) of an  eligible engine
       repower.  All-electric (i.e. zero emission) repowers do not require EPA or CARB
       certification.

       a)  Electric Generator Repower:
         i.   For a repower that involves the replacement of an existing diesel propulsion engine
             with a stationary or auxiliary diesel powered electric generator (genset),  the electric
             generator and the newer, cleaner engine comprising the genset are both eligible costs
             of the repower.
        ii.   Repower of an existing genset involves replacing the existing diesel engine in the
             genset with  a newer, cleaner engine. Only the newer, cleaner engine (labor and
             equipment)  is an eligible cost of the repower.

   7.  Vehicle and Equipment Replacements: Nonroad and highway diesel vehicles  and
       equipment can be replaced under this program with newer, cleaner vehicles and equipment
       that operate on diesel or alternative fuels  and use engines certified by EPA or CARB to meet
       a more stringent set of engine emission standards. Replacement projects can include the
       replacement of diesel vehicles/equipment with newer, cleaner diesel, electric (grid, battery or
4 Hydrogen fuel cells are eligible only for repowers for eligible medium and heavy-duty urban transit buses
and eligible drayage trucks.
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       fuel cell5), hybrid or alternative fuel vehicles/equipment. All-electric (i.e. zero emission)
       vehicles and equipment do not require EPA or CARB certification.  Marine vessels are not
       eligible for full replacement.

       a) Nonroad Diesel Vehicles and Equipment: The state may fund up to 25% of the cost of
          a replacement vehicle or piece of equipment powered by a 2013 model year or newer
          certified nonroad engine. Nonroad engine emission standards are on EPA's website at:
          www.epa.gov/otaq/standards/nonroad/index.htm.
         i.    Electric Generator Replacement: For stationary or auxiliary diesel powered electric
              generator (genset), replacement means the removal of the entire genset and its
              replacement with a newer, cleaner genset. The electric generator in a genset together
              with the newer, cleaner engine is an eligible cost of the replacement.

       b) Highway Diesel Vehicles: The state may fund up to 25% the cost of a newer, cleaner
          medium or heavy-duty vehicle, powered by a 2013 model year or newer certified
          highway heavy-duty engine, (except for drayage vehicles as explained in Section
          VIII.C.7.C, below).

       c) Replacements for Drayage Vehicles: The state may fund up to 50% of the cost of an
          eligible drayage truck powered by a 2010 model year or newer certified heavy-duty
          engine equipped with  a diesel particulate filter (or catalyst equipped in the case of a CNG
          engine).
         i.    Definition of Drayage Truck: A "Drayage Truck" means any Class 8b  in-use on-
              road vehicle with a gross vehicle weight rating (GVWR) of greater than 33,000
              pounds operating on or transgressing through port or intermodal rail yard property for
              the purpose of loading, unloading or transporting cargo, such as containerized, bulk
              or break-bulk goods.
         ii.    Drayage Operating Guidelines: The subgrant recipient will be required to establish
              guidelines to ensure that all drayage trucks purchased with grant funds are operated in
              a manner consistent with the definition of a drayage truck, as defined above.  For an
              example of sample guidelines, see www.epa.gov/sites/production/files/2015-
              10/documents/fyl4-sample-dravage-operating-gui delines.pdf
        iii.    Required/Scheduled Maintenance: The state may fund the required/scheduled
              vehicle maintenance, as specified in the owner's manual, which is necessary  to meet
              the warranty requirements for diesel particulate filters installed on drayage trucks.
              Funding for required maintenance is available for the duration of the project  period.

   8.  Clean Alternative Fuel Conversions: Conventional, original equipment manufacturer
       (OEM) highway diesel vehicles and engines that are altered to operate on alternative fuels
       such as propane, natural gas, alcohol, or electricity are classified as aftermarket clean
       alternative fuel conversions. Clean alternative fuel conversions are accomplished by applying
       a certified or compliant alternative fuel conversion "kit" to an existing highway diesel
       engine. The state may fund up to 40% of the cost (labor and equipment) of an eligible
       certified or compliant clean alternative fuel conversion. Proposals for clean alternative fuel
       conversions should include a discussion of the availability  of conversion systems and
5 Hydrogen fuel cell vehicles and equipment are eligible only as replacements for eligible medium and heavy-
duty urban transit buses, eligible drayage trucks, and eligible forklifts.
                                                                                         11

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       indicate the pre- and post-project emission standard levels of the engines in order to
       demonstrate that the conversion will result in an emissions benefit.

       In the United States, all clean alternative fuel conversions (except pure battery electric) must
       meet applicable EPA standards pursuant to 40 CFR Parts 85 and 86. Lists of certified and
       compliant clean alternative fuel conversion systems, and additional guidance, can be found at
       www.epa.gov/otaq/consumer/fuels/altfuels/altfuels.htm. Vehicles operating in California
       must follow conversion rules issued by CARB.

       Clean alternative fuel conversions must be "dedicated" or "mixed fuel", meaning the engine
       runs only on the alternative fuel, or uses a small amount of diesel mixed with the alternative
       fuel. Dedicated or mixed fuel engines do not have the ability to operate solely on diesel fuel.
       "Dual fuel" or "bi-fuel" conversions, meaning the engine can switch between fuel sources
       and still has the capability of running on 100% diesel, are not eligible for funding.

D. DERA Programmatic Priorities: The principal objective of the assistance to be awarded under
   this program is to achieve significant reductions in diesel emissions in terms of tons of pollution
   produced and reductions in diesel emissions exposure from vehicles, engines and equipment
   operating in areas designated as poor air quality areas. The state's workplan must discuss how
   the state will ensure that projects selected for funding support the programmatic priorities listed
   below. Please note that these are funding priorities, and are not eligibility factors.

   The term  "project location" refers to the primary area where the affected vehicles/engines
   operate, or the primary area where the emissions benefits of the project will be realized. A list of
   priority counties and areas can be found at: www.epa.gov/sites/production/files/2015-
   10/documents/fyl4-countv-area-list.pdf. These counties and areas were identified as priority
   locations  for the DERA program because they are:
       •   in nonattainment or maintenance of national ambient air quality standards for Ozone
          and/or PM2.5;
       •   areas with toxic air pollutant concerns as identified from the National Air Toxics
          Assessment data;
       •   designated as Federal Class I areas; and/or
       •   accepted to participate in EPA's Ozone Advance or PM Advance Programs.

   In addition, priority should be given to projects located in areas that receive a disproportionate
   quantity of air pollution from diesel fleets, including:
       •  truckstops (e.g. places especially for truckers that are usually by a highway or interstate
         and that include a parking area, fueling services, and other facilities)
       •  ports (e.g. a cities, towns, or other places alongside navigable water with facilities for the
         loading and unloading of cargo from ships; places from which aircraft operate that have
         paved runways and passenger and cargo terminals which include baggage-movement and
         passenger-transit operations; places where foreign goods are inspected by customs officers
         and allowed to pass into and out of a country)
       •  rail yards  (e.g. places at which trains originate or terminate, or at which they are
         distributed or combined)
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       • terminals (e.g. freight or passenger stations at the end of carrier lines, or that serve as
        junctions at any point with other lines, that have facilities for the handling of freight and
        passengers)
       • construction sites (e.g. sites of ongoing large scale commercial, industrial, or heavy civil
        construction)
       • school bus depots/yards (e.g. parking areas and/or garages where school buses are stored
        and maintained, or where school buses queue), distribution centers (e.g. facilities that
        perform consolidation, warehousing, packaging, decomposition and other functions linked
        with handling freight, often in proximity to major transport routes or terminals, and which
        generate large amounts of truck traffic)

E. EPA Strategic Plan Linkage and Anticipated Outputs/Outcomes

   Pursuant to Section 6a of EPA Order  5700.7, "Environmental Results under EPA Assistance
   Agreements," EPA must link proposed assistance agreements with the Agency's Strategic Plan.
   EPA also requires that grant applicants and recipients adequately describe environmental outputs
   and outcomes to be achieved under assistance  agreements (see EPA Order 5700.7,
   Environmental Results under Assistance Agreements, www.epa.gov/sites/production/files/2015-
   03/documents/epa_order_5700_7al.pdf).

   1.  Linkage to EPA Strategic Plan:  All proposals must support progress towards EPA's 2014-
       2018 Strategic Plan Goal 1,  'Addressing Climate Change and Improving Air Quality,'
       Objective 1.2, 'Improve Air Quality,' which states, "achieve and maintain health-and
       welfare-based air pollution standards and reduce risk from toxic air pollutants and indoor air
       contaminants." Specifically, the proposed activities must reduce emissions from diesel fleets,
       thereby reducing local  and regional air pollution of criteria pollutants, air toxics, and
       greenhouse gases.

       Please read EPA's FY  2014-2018 Strategic Plan for more information.

   2.  Outputs: The term "output" means an environmental activity, effort and/or associated work
       product related to an environmental goal and objective that will be produced or provided
       over a period of time or by a specified date. Outputs may be quantitative or qualitative but
       must be measurable during an assistance agreement funding period.

       Expected outputs from the projects to be funded under this Program include, but are not
       limited to:
       •  number of replaced or retrofitted  engines/vehicles/equipment; and/or
       •  hours of idling reduced.

       Other potential outputs may include,  but are not limited to:
       •  engaging local communities with respect to the design and performance of the project;
       •  the project's inclusion in a broader-based environmental or air quality plan;
       •  the implementation of contract specifications requiring the use of cleaner vehicles and
          equipment;
       •  a documented commitment to continue to identify and address air quality issues in the
          affected community;
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              adoption of an idle reduction policy;
              providing support to clean diesel coalitions by sharing information, working with
              interested fleets, and addressing specific geographic needs;
              number of subawards; and/or
              dissemination of project/technology information via list serves, websites, journals and
              outreach events.
           Progress reports and a final report will also be required outputs.
       3.  Outcomes: The term "outcome" means the result, effect or consequence that will occur from
           carrying out an environmental program or activity that is related to an environmental or
           programmatic goal or objective. Outcomes may be qualitative and environmental,
           behavioral, health-related or programmatic in nature, but must also be quantitative. They
           may not necessarily be achievable within an assistance agreement funding period.

           Expected outcomes from the projects to be funded under this Program include, but are not
           limited to:
           •   Tons of pollution reduced over the lifetime of the vehicles/engines/equipment,
              specifically:
              —  fine particulate matter (PIVh.s),
              —  nitrogen oxides (NOX),
              —  greenhouse gases (GHG) such as carbon dioxide (CO2) and black carbon, and/or
              —  volatile organic compounds (VOCs).
           •   net reduction in gallons of diesel fuel used,.
           •   benefits to the communities affected by the project, including improvements to human
              health and the environment, the local economy, social conditions, and the welfare of
              residents in such communities.

           Other potential outcomes may include, but are not limited to:
           •   community engagement and partnership;
           •   improved ambient air quality;
           •   health benefits achieved;
           •   changes in driver behavior regarding idling practices;
           •   an increased understanding of the environmental or economic effectiveness of the
              implemented technology;
           •   increased public awareness of project and results;
           •   widespread adoption of the implemented technology;
           •   demonstration and deployment of zero and near-zero emission vehicles and engines; and
           •   emission reductions along freight transportation corridors.

IX. USE OF FUNDS RESTRICTIONS

    A. Mandated Measures: Pursuant to 42 U.S.C. 16132(d)(2), no funds awarded under the Program
       shall be used to fund the costs of emission reductions that are mandated under federal law. The
       restriction applies when the mandate takes effect (the effective date) for any affected vehicles,
       engines or equipment. This restriction does not apply to a mandate in a State Implementation
       Plan approved by the Administrator under the Clean Air Act. Voluntary or elective emission
                                                                                           14

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   reduction measures shall not be considered "mandated," regardless of whether the reductions are
   included in the State Implementation Plan.

   Specifically, projects involving locomotives and marine engines are not eligible for funding if
   the emission reductions are required by EPA's locomotive and marine rule, "Control of
   Emissions of Air Pollution from Locomotives and Marine Compression-Ignition Engines Less
   than 30 liters per Cylinder." Also, projects involving stationary engines will not be considered
   for funding if the emission reductions proposed for funding are required by EPA's RICE rule,
   "National Emission Standards for Hazardous Air Pollutants (NESHAP) for Stationary
   Reciprocating Internal Combustion Engines (40 CFR Part 63 Subpart ZZZZ). Projects which
   include locomotives and/or marine engines and/or stationary engines must provide the state and
   EPA a clear and concise justification for why/how the proposed emission reduction are not
   subject to the Restriction for Mandated Measures. The justification must clearly demonstrate
   that:

       •  the target engines are exempt from any federal requirements; or
       •  emission reductions funded under the Program will be implemented prior to the effective
          date of any applicable federal requirements; and/or
       •  emission reductions funded under the Program will not be used to satisfy any applicable
          federal requirements, but instead are in excess of (above and beyond) those required by
          the applicable mandate.

   Sufficient information must be provided to support the justification, including maintenance
   records, if applicable. The mandated measures justification must be approved by EPA before any
   grant funds are expended on applicable projects.

B. Normal Attrition: Repowers and replacements that would have occurred through normal
   attrition are considered to be the result of normal fleet turnover and are not eligible for funding
   under this program. Normal attrition is generally defined as a replacement that is scheduled to
   take place within 3 years of the project start  date. Normal attrition is typically defined by the
   vehicle or fleet owner's budget plan, operating plan, standard procedures, or retirement schedule.
   For example, if a school bus  fleet typically retires vehicles after 20 years, a bus that is currently
   in its 18th or 19th year of service is not eligible for replacement. A bus that is currently in its
   17th year of service and has three years of useful life remaining (as defined by the fleet's
   retirement schedule) is eligible for replacement. Therefore, FY 2016 award funds, including
   recipient cost-share, shall not be used for replacements/repowers that would have occurred
   through normal fleet turnover prior to September 30, 2019). Normal attrition does not include
   replacements that must occur due to a state or Local mandate. Any question as to eligibility of a
   vehicle/equipment replacement or repower should be directed to the EPA Project Officer.

C. Fleet Expansion: Funding under this Program cannot be used for the purchase of vehicles,
   engines, or equipment to expand a fleet. Repower and replacement projects are eligible for
   funding on the condition that the following criteria are satisfied:
   1.  The replacement vehicle, engine, or equipment will  perform the same function and operation
       as the vehicle, engine, or equipment that is being replaced (e.g., an  excavator used to dig
       pipelines would be replaced by an excavator that continues to dig pipelines).


                                                                                       15

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   2.  The replacement vehicle, engine, or equipment will be of the same type and similar gross
       vehicle weight rating or horsepower as the vehicle, engine, or equipment being replaced
       (e.g., a 300 horsepower bulldozer is replaced by a bulldozer of similar horsepower).
       Horsepower increases of more than 25 percent require specific written approval from the
       EPA Project Officer prior to purchase, and the grantee/subgrantee may be required to pay the
       additional  costs associated with the higher horsepower equipment.
   3.  The engine being replaced will be scrapped or rendered permanently disabled within ninety
       (90) days of the replacement, or remanufactured to a certified cleaner emission standard.
       Permanently disabling the engine while retaining possession of the engine is an acceptable
       scrapping method. Cutting a three inch by three inch hole in the engine block (the part of the
       engine containing the cylinders) is the preferred scrapping method. Remanufacturing shall be
       performed by the original engine manufacturer, or by a dealership/distributor that has a
       service program that is sponsored/backed by original engine manufacturer warranties (i.e. the
       new, remanufactured and upgraded engine is warranted by the OEM). Non-road engines
       shall be remanufactured to the cleanest certified emission standard possible. Highway
       engines shall be remanufactured to Model Year (MY) 2007 or newer certified emission
       standards.  Remanufacturing must be completed during the project period. Other acceptable
       scrappage  methods may be considered and will require prior written approval from the EPA
       Project Officer. If scrapped or remanufactured engines are to be sold, program income
       requirements apply.
   4.  The vehicle/equipment being replaced will be scrapped or rendered permanently disabled
       within ninety (90) days of the replacement, or remanufactured to a certified cleaner emission
       standard. Permanently disabling the chassis and disabling or remanufacturing the engine (see
       above) while retaining possession of the vehicle/equipment is an acceptable scrapping
       method. The engine will be scrapped or disabled as described above in E.3. Disabling the
       chassis may be completed by cutting through the frame/frame rails on each side at a point
       located between the front and rear axles. Other acceptable scrappage methods may be
       considered and will require prior written approval from the EPA Project Officer.
       Vehicle/equipment components that are not part of the engine or chassis may be salvaged
       from the unit being replaced (e.g. plow blades, shovels, seats, etc.). If scrapped or
       remanufactured vehicles/equipment or salvaged vehicle/equipment chassis or components
       are to  be sold, program income requirements apply.
   5.  Evidence of appropriate disposal (such as digital photos of the engine tag showing serial
       number, engine family number, and engine model year, and of the destroyed engine block
       and cut frame  rails or other structural components) is required in a final assistance agreement
       report submitted to EPA.
   6.  For tire replacement projects, the original tires should be scrapped according to local or state
       requirements,  or the tires can be salvaged for reuse or retreading.  If salvaged tires are sold,
       program income requirements apply.

D. Federal Matching Funds: No funds awarded under the Program shall be used for matching
   funds for other federal grants unless expressly authorized by statute. Likewise, recipient may not
   use federal funds as cost-share funds for the State Clean Diesel Grant Program, including funds
   received under EPA's National Clean Diesel Emissions Reduction Programs and federal
   Supplemental  Environmental Project (SEP) funds.

E. Expenses Incurred Prior to the Project Period:  Except for eligible pre-award costs as defined
   in 2 CFR  §200.458 and as authorized by 2 CFR §200.309 and 2 CFR §1500.8, no funds awarded
                                                                                       16

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    under the Program shall be used to cover expenses incurred prior to the project period set forth in
    any assistance agreement funded under the Program.  Additionally,  except for eligible pre-award
    costs as defined above, expenses incurred prior to the project period set forth in any assistance
    agreement funded under the Program are not eligible as a cost-share.

 F. Administrative Costs Expense Cap: No more than 15 percent of the state's total project costs
    may be used to cover administrative type costs (e.g. personnel, benefits, travel, and office
    supplies). Total project costs include the federal share as well as any cost-share provided by the
    state. However, Regions have the discretion to allow state matching funds to exceed the 15% cap
    if the state provides justification for unique circumstances. The state's indirect costs are not
    considered as administrative type costs and do not count towards the 15 percent maximum.

G. Formerly Verified Technologies: No funds awarded under the Program shall be used for retrofit
   technologies on EPA's or CARB's, "Formerly Verified Technologies" lists. EPA's formerly
   verified list can be found at: www.epa.gov/verified-diesel-tech/list-formerly-verified-
   technologies-clean-diesel, and CARB's formerly verified lists can be found at:
   www.arb.ca.gov/diesel/verdev/vt/fv 1.htm, www.arb.ca.gov/diesel/verdev/vt/fv2.htm, and
   www. arb. ca. gov/diesel/verdev/vt/fv3. htm.

 H. Emissions Testing: No funds awarded under the Program  shall be used for emissions testing
    and/or air monitoring activities (including the acquisition cost of emissions testing equipment),
    or research and development.

 I.  Fueling Infrastructure: No funds awarded under the Program shall be used for fueling
    infrastructure, such as that used for the production and/or distribution of biodiesel, compressed
    natural gas, liquefied natural gas, and or other fuels.

 J.  Single-Wide Wheels: No funds awarded under the Program shall be used for the purchase of
    single-wide wheels except where a fleet is retrofitting from standard dual tires to SmartWay-
    verified single-wide low rolling resistance tires. In this case, the cost of single-wide wheels
    would be acceptable as additional equipment necessary to use the SmartWay verified
    technology.

 K. Tires and Aerodynamics: No  funds awarded under the Program shall be used for the purchase
    of low rolling resistance tires or advanced aerodynamic technologies if similar technologies have
    previously been installed on the truck or trailer.

 L. Auxiliary Power Units: No  funds awarded under the Program shall be used for the purchase of
    APUs or generators for vehicles with 2007 or newer certified engine configurations on long haul
    Class 8 vehicles.

 M. On-highway Model Year: No funds awarded under the Program shall be used to retrofit,
    repower, convert or replace a transit bus, medium-duty, or heavy-duty highway vehicle with
    engine model year 1990 older,  or to retrofit engine model year 2007 or newer with DOCs or
    DPFs, or retrofit engine model  year 2010 or newer with SCR, or replace engine model  year
    2004-2006 with other than with an all-electric vehicle, or replace, repower or convert engine
    model year 2007 or newer. Refer to Table 1 for further explanation.

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   Table 1: Medium and Heavy-Duty Trucks and Transit Buses Funding Restrictions
Current Engine
Model Year
1991-2003
2004 to 2006
2007 to 2009
20 10 to current
DOC
Yes
Yes
No
No
DPF
Yes
Yes
No
No
SCR
Yes
Yes
Yes
No
Replace
with 2010 or
Newer
(Dray Only)
Yes
No
No
No
Replace
with 2013
or Newer
Yes
No
No
No
Repower or
Conversion of
Engine to
Higher
Certification
Level
Yes
Yes
No
No
Repower,
Replacement
or Conversion
to
All-Electric
(Includes
Dray)
Yes
Yes
No
No
N. School Bus Model Year: No funds awarded under the Program shall be used to retrofit,
   repower, convert or replace a school bus with engine model year 1990 or older, or replace school
   buses with engine model year 2004-2006 other than with an all-electric vehicle, or retrofit,
   replace, repower or convert school buses with engine model year 2007 or newer. Refer to Table
   2 for further explanation.

   Table 2: School Bus Funding Restrictions
Current Engine
Model Year
1991 to 2003
2004 to 2006
2007 to current
DOC
Yes
Yes
No
DOC +
CCV
Yes
Yes
No
DPF
Yes
Yes
No
Replace with
2013 or
Newer
Yes
No
No
Repower or Conversion
of Engine to Higher
Certification Level
Yes
Yes
No
Repower,
Replacement
or Conversion
to All-Electric
Yes
Yes
No
O. Nonroad Useful Life and Operating Hours: No funds awarded under the Program shall be
   used to retrofit, repower, upgrade or replace a nonroad engine or equipment that has less than
   seven years of useful life remaining. A table distinguishing which nonroad engine model years
   EPA has determined to have at least seven years of useful life remaining, based on the type and
   age of vehicle, can be found at www.epa. gov/sites/production/files/2015-10/documents/fy 14-
   nonroad-remaining-useful-life.pdf No funds awarded under the Program shall be used to
   retrofit, repower, replace or upgrade nonroad engines and equipment that operate less than 500
   hours per year.

P. Nonroad Repower/Replacement: No funds awarded under the Program shall be used to
   repower or replace nonroad Tier 0 (unregulated) engines to a nonroad Tier 1 or lower nonroad
   engine standard or from a Tier 2 nonroad engine standard to a Tier 3 or lower nonroad engine
   standard. Refer to Table 3 for further explanation.
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   Table 3: Nonroad Engine Funding Restrictions
Current Engine Tier
Tier 0 / 1
Tier 2 / 3
Repowered or Replaced 2013 or Newer Certified Engine
TierO
No
No
Tierl
No
No
Tier 2/3
Yes
No
Tier 4
Yes
Yes
All-Electric
Yes
Yes
Q. Locomotive and Marine Operating Hours: No funds awarded under the Program shall be used
   to retrofit, repower, replace, upgrade or install idle reduction technologies on eligible
   locomotives or marine engines that operate less than 1000 hours per year.

R. Marine Repower/Replacement/Upgrade: No funds awarded under the Program shall be used
   to repower, replace or upgrade Tier 3 or Tier 4 marine engines, or to repower or replace marine
   engines from Tier 1 marine engine standard to Tier 1 marine engine standard, or from a Tier 2
   marine engine standard to a Tier 2 or lower marine engine standard. Refer to Table 4 for further
   explanation.

   Table 4: Marine Engines Funding Restrictions
Current Engine
Tier
Unregulated
Tierl
Tier 2
Tier 3 and Tier 4
Repowered or Replaced
New Certified Engine
Tierl
Yes
No
No
No
Tier 2
Yes
Yes
No
No
Tier3
Yes
Yes
Yes
No
Tier 4
Yes
Yes
Yes
No
Certified Engine
Upgrade
(Remanufacture
System)
Yes
Yes
Yes
No
Verified
Engine
Upgrade
Yes
Yes
Yes
No
S. Marine Shore Connection: No funds awarded under the Program shall be used for marine shore
   connection system projects that are expected to be utilized less than 2,000 MW-hr/year.

T. Locomotive Retrofit/Repower/Replacement/Upgrade: No funds awarded under the Program
   shall be used to retrofit unregulated or Tier 0 locomotives with SCR, or to upgrade, repower or
   replace locomotives from: Tier 0+/1 to Tier 0+ or lower; Tier 1+/2 to Tier 1+ or lower; Tier 2 to
   Tier 1+ or lower; or, from Tier 2+ to Tier 2+ or lower. Additionally, no funds awarded under this
   RFP shall be used upgrade, repower or replace line-haul locomotives from Tier 2 to Tier 4, or to
   upgrade, repower or replace line-haul locomotives from Tier 2+ to Tiers 3 and 4. No funds
   awarded under the Program shall be used to install Automatic Engine Start-Stop technologies on
   locomotives currently certified to Tier 0+ or higher. Refer to Table 5 for further explanation.
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      Table 5: Locomotive Engines Funding Restrictions
Current Locomotive Tier
Unregulated and Tier 0
Tier 0+ and Tier 1
Tier 1+
Tier 2
Tier 2+
New Locomotive Tier
Tier 0+
Yes
No
No
No
No
Tier 1+
Yes
Yes
No
No
No
Tier 2+
Yes
Yes
Yes
Yes
No
Tier3
Yes
Yes
Yes
Yes
Yes*
Tier 4
Yes
Yes
Yes
Yes*
Yes*
Verified
Exhaust
Controls
SCR
No
Yes
Yes
Yes
Yes
   * Applies to switcher locomotives only

   Note: Tier 0+, Tier 1+, and Tier 2+. Tier 3, and Tier 4 represent locomotives manufactured or
   remanufactured under the more stringent Tier standards promulgated under the 2008 (current)
   locomotive and marine rule. Tier 0, Tier 1, and Tier 2 represent locomotives originally manufactured
   or remanufactured under the less stringent Tier standards promulgated in 1997.

   U. Locomotive Shore Connection: No funds awarded under the Program shall be used for
      locomotive shore connection system projects that are expected to be utilized less than 1,000
      hours/year.

X. MANDATORY COST-SHARE REQUIREMENT

   Projects involving engine upgrades, certain idle reduction technologies, shore connection systems,
   truck stop electrification technologies, certified engine repowers, clean alternative fuel conversions,
   or certified vehicle/equipment replacements, as defined in Section VIII.C, are subject to the
   following funding limitations and mandatory cost-share requirements.

   Any voluntary matching funds provided by the state to qualify for the matching incentive, count
   towards the "EPA funds and state voluntary matching funds" described below. Further, mandatory
   cost share funds provided by the state and/or eligible third parties cannot count towards the state's
   voluntary matching funds to qualify for the matching incentive. However, if a state requires a third-
   party cost-share contribution above and beyond the mandatory cost-share amount for the elected
   technology, then the "excess"  cost-share may be applied towards the state voluntary match funds for
   the purpose of qualifying for the matching incentive. See Section V.C for additional information on
   the matching incentive.

   A. Engine Upgrades: EPA funds and state voluntary matching funds can cover up to 40% of the
      cost (labor and equipment) of an eligible engine upgrade (i.e. states and/or eligible third parties
      are responsible for cost-sharing at least 60% of the cost of an eligible engine upgrade).

   B. Idle Reduction Technologies on Locomotives: EPA funds and state voluntary matching funds
      can cover up to 40% of the cost (labor and equipment) of an eligible idle reduction technology
      on a locomotive (i.e. states and/or eligible third parties are responsible for cost-sharing at least
      60% of the cost of an eligible idle reduction technology on a locomotive).
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     C. Shore Connection Systems and Truck Stop Electrification Technologies: EPA funds and
        state voluntary matching funds can cover up to 25% of the cost (labor and equipment) of an
        eligible shore connection system or truck stop electrification technology (i.e. states and/or
        eligible third parties are responsible for cost-sharing at least 75% of the cost of an eligible shore
        connection system or truck stop electrification technology).

     D. Certified Engine Repower: EPA funds and state voluntary matching funds can cover up to 40%
        of the cost (labor and equipment) of an eligible engine repower (i.e. states and/or eligible third
        parties are responsible for cost-sharing at least 60% of the cost of an eligible engine repower).

     E. Certified Vehicle/Equipment Replacement:
        1.  Nonroad Diesel Vehicles  and Equipment: EPA funds and state voluntary matching funds
            can  cover up to 25% of the cost of an eligible replacement vehicle or piece of equipment
            powered by a 2013 model  year or newer certified engine (i.e. states and/or eligible third
            parties are responsible for  cost-sharing at least 75% of the cost of an eligible replacement
            vehicle or piece of equipment).
        2.  Highway Diesel Vehicles: EPA funds and state voluntary matching funds can cover up to
            25% of the cost of an eligible replacement vehicle powered by a 2013 model year or newer
            certified engine (i.e. states and/or eligible third parties are responsible for cost-sharing at
            least 75% of the cost of an eligible replacement vehicle or piece of equipment).
        3.  Drayage Vehicle Replacement:  EPA funds and state voluntary matching funds can cover up
            to 50% of the cost of an eligible replacement drayage truck powered by a 2010 model year or
            newer engine equipped with a diesel particulate filter (or diesel oxidation catalyst in the case
            of a CNG engine) (i.e. states and/or eligible third parties are responsible for cost-sharing at
            least 50% of the cost of an eligible replacement drayage vehicle).

     F. Clean Alternative Fuel Conversions: EPA funds and state voluntary matching funds can cover
        up to 40% of the cost (labor and equipment) of an eligible clean alternative fuel conversion (i.e.
        states and/or eligible third parties are responsible for cost-sharing at least 60% of the cost of an
        eligible clean alternative fuel conversion).

 XI. WAIVER OF PROGRAMMATIC REQUIREMENTS

     EPA will consider,  on a case-by-case basis, waiver requests from programmatic requirements.
     Waivers will only be approved for non-statutory and/or non-regulatory requirements. Sufficient
     justification for the waiver must be provided by the state. States must obtain EPA approval for any
     waiver request before conducting  any work or expending any funds on a project involving a waiver
     request. Any questions regarding waivers should be directed to the EPA Project Officer.

XII. AWARD ADMINISTRATION INFORMATION

     A. Terms and Conditions: General administrative and programmatic terms and conditions
        applicable to EPA assistance agreements under this Program may be viewed at:
        www.epa.gov/grants/grant-terms-and-conditions.

     B. Pass-through Entity: As defined at 2 CFR §200.74, refers to a non-Federal entity (i.e. the state)
        that provides a subaward to a subrecipient to carry out part of a Federal program.

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C. Subaward: As defined at 2 CFR §200.92, means an award provided by a pass-through entity to
   a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-
   through entity. It does not include payments to a contractor or payments to an individual that is a
   beneficiary of a Federal program. A subaward may be provided through any form of legal
   agreement, including an agreement that the pass-through entity considers a contract. If the
   recipient chooses to pass funds from this assistance agreement to other entities, the recipient
   must comply with applicable provisions of 2 CFR Part 200, the National Term and Condition for
   Subawards, and the EPA Subaward Policy (Grants Policy Issuance 16-01), both of which may be
   found at https://wcms.epa.gov/grants/epa-subaward-policy.

   Subrecipients only receive reimbursement for their actual direct or approved indirect costs such
   that they do not "profit" from the transaction and subrecipients are subject to the same Federal
   requirements as the pass-through entity. There is no requirement in the applicable regulations or
   these guidelines for pass-through entities to compete subawards, but pass-through entities may
   choose to conduct competition for  subawards based on their own policies. Please note that
   sometimes a pass-through entity or subrecipient may use the term 'contract' to characterize a
   subaward. Therefore, it is important to examine the substance of the agreement to determine if
   the transaction is a subaward or a procurement contract per the terms and conditions of the EPA
   assistance agreement.

   Recipients must obtain the written  approval of EPA's Award official for any  subawards that are
   not described in the approved work plan in accordance with 2 CFR §200.38 or prior to awarding
   a subaward to an individual if the EPA-approved work plan does not include a description of
   subawards to individuals.

D. Subawards to For-Profit Entities: A for-profit company may be awarded a subgrant when
   doing so is consistent with applicable regulations and policies. The EPA Subaward Policy
   Section 7(c) states, "For-profit organizations and individual consultants, with very few
   exceptions, are contractors rather than subrecipients under the standards in 2 CFR §200.330 and
   EPA's guidance; they are typically ineligible for subawards from pass-through entities. As
   provided in the National Term and Condition for Subawards, EPA's Award Official must
   approve subawards to these entities on the basis of either precise descriptions of the subawards
   in the EPA approved budget and work plan or on a transaction by transaction basis. See
   Appendix A:  Distinctions Between Subrecipients and Contractors for additional guidance." For
   example, it would be appropriate to provide a subaward to a private school bus  company so that
   the company  may implement a diesel emission reduction school bus replacement program (i.e.
   the for-profit firm is not providing  goods and services to the pass-through entity); it would NOT
   be appropriate to provide a subaward to a private school bus company so that the company may
   provide transportation services to the recipient (i.e. the for-profit firm is providing goods and
   services to the pass-through entity).

E. Funding to Other State Agencies: EPA's general policy, based on the definitions of the terms
   "Non-federal entity" (2 CFR §200.69), "Pass-through entity (2 CFR §200.74) "Recipient" (2
   CFR §200.86) and "State" (2 CFR §200.90), is that the state itself is the legal entity that receives
   EPA funds even if one particular component of the state is named in the assistance agreement as
   the recipient.  Transfers of EPA funds between state agencies to perform a particular financial
   assistance agreement would, therefore, be governed by state law.  Additionally, 2 CFR §200.417
   "Interagency  Services" contemplates situations in which one agency provides services to another
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   agency within the same unit of government as a direct cost of performing the EPA assistance
   agreement.

   If utilizing interagency service agreements between state agencies under 2 CFR §200.417, the
   expenditures the state agency makes to carry out the Interagency Service Agreement should be
   shown in the corresponding direct cost categories (Personnel, Travel, Contractual etc.).  If state
   law characterizes agreements under which one state agency provides services to another state
   agency as a procurement contract then the costs would be placed in the contractual category. In
   interagency service situations, 2 CFR §200.417 provides the state may charge a pro-rated share
   of indirect costs for the service, or 10% of the ". . .direct salary and wage cost of providing the
   service (excluding overtime, shift premiums,  and fringe benefits) may be used in lieu of
   determining the actual indirect costs of the service." Centralized services included in central
   service cost allocation plans subject to Appendix V of 2 CFR Part 200 are accounted for
   separately.

   There may be  situations in which state law provides that state agencies or instrumentalities are
   legally separate for the purposes of financial transactions between them or when state financial
   management policies for Federal assistance agreements require separate instruments for
   accounting purposes (e.g. due to differences in indirect cost rates). In those situations, a state
   may characterize funding transfers as subawards. Note, however, that if one state agency
   provides a subaward to another state agency the state agency acting as the pass-through entity
   must comply with applicable provisions of 2 CFR Part 200 (including 2 CFR §200.331), the
   National Term and Condition for Subawards, and the EPA Subaward Policy unless EPA
   provides an exception. The aggregate cost estimates for subawards to other state agencies or
   instrumentalities should be included as line items in the "Other" budget category.

F. In-Kind Assistance: The state may purchase equipment through blanket purchase agreements or
   some other mechanism that ensures a low price for the item. The state may then provide the
   equipment in lieu of money as in-kind assistance through a subaward.

G. Rebates: Recipients and subrecipients may implement rebate programs and issue rebates to
   program beneficiaries (who are not employees, contractors, or subrecipients of the pass-through
   entity) that purchase eligible equipment and/or vehicles as described in Section VIII of this
   program guide, and not exceeding the "EPA funds  and state voluntary matching funds"  share of
   costs as defined in Section X of this document.  Rebates should be classified as participant
   support costs rather than subawards as required by  2 CFR§ 200.75 and 2 CFR §200.92 and
   included as line items in the "Other" budget category.

H. Contract: As defined at 2 CFR §200.22, means a legal instrument by which a non-Federal
   entity purchases property or services needed to carry out the project or program under a Federal
   award. The term as used in this part does not include a legal instrument, even if the non-Federal
   entity considers it a contract, when the substance of the transaction meets the definition of a
   Federal award or subaward (see §200.92  Subaward).

I.  Procurements: When procuring property and services under a Federal award, a state must
   follow the same policies and procedures it uses for procurements from its non-Federal funds.
   The state will comply with §200.322 Procurement of Recovered Materials, and ensure that every
   purchase order or other contract includes any clauses required by section §200.326 Contract
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   provisions. All other non-Federal entities, including subrecipients of a state (other than another
   state agency), will follow §§200.318 General Procurement Standards through 200.326 Contract
   Provisions.

J. Performance Partnership Grants: Funds awarded under this program are not eligible for
   inclusion with the state's Performance Partnership Grants.

K. State Notification: Executive Order 12372, Intergovernmental Review of Federal Programs,
   may be applicable to awards resulting from this announcement. Recipients may be required to
   provide a copy of their application to their State Point of Contact (SPOC) for review, pursuant to
   EO 12372. This review is not required with the initial application, and not all states require  such
   a review. A listing of State Point of Contacts (SPOC) may be viewed at:
   www.whitehouse.gov/omb/grants  spoc. For application purposes, applicants may choose to not
   respond to question #19 on the SF 424 form; EPA will provide additional guidance to Recipients
   during the award  process.

L. Public Notification: Not later than 60 days after the date of the award of a subaward, rebate, or
   loan by a state, the state shall publish the following on the Web site of the state:

   1.  For subawards, rebates, and loans provided to the owner of a diesel vehicle or fleet, the  total
       number and dollar amount of subawards, rebates, or loans provided, as well as a breakdown
       of the technologies funded through the sub grants, rebates, or loans; and
   2.  For other subawards, rebates, and loans, a description of each application for which the
       subaward, rebate, or loan is provided.

M. Reporting Requirements:  Quarterly programmatic progress reports and a detailed final
   programmatic report will be required. Additional administrative and financial reporting may be
   required per the terms and conditions of the award.

   1.  Quarterly Reports: Quarterly reports summarizing technical progress, planned activities for
       the next quarter and a summary of expenditures are required.  The schedule for submission of
       quarterly reports  will be established by EPA, after the grants are awarded. A template for
       quarterly reports  is available at www.epa.gov/cleandiesel/clean-diesel-state-allocations.

   2.  Final Reports: The final report must include: summary of the project or activity, emissions
       benefits and other outputs and outcomes achieved, and costs of the project or activity
       addition, the final report shall discuss the problems,  successes, and lessons learned from the
       project or activity that could help overcome structural, organizational or technical obstacles
       to implementing  a similar project elsewhere. Award recipients may be provided with
       additional information and guidance on reporting performance measures and project progress
       after award. A template for the final report is available at www.epa.gov/cleandiesel/clean-
       diesel-state-allocations. The final report shall be submitted to EPA within 90 calendar days
       of the completion of the period of performance. However, in order to facilitate awarding
       funds the following fiscal year, it is recommended that the report be completed well before
       90 days.
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