(1) Subject to and consistent with ORS § 468A.803 (8) and with the terms of the Environmental Mitigation Trust Agreement, any moneys received by the State of Oregon pursuant to the agreement that are deposited in the Clean Diesel Engine Fund under ORS § 468A.801 must be expended by the Department of Environmental Quality as follows:

(a) The department shall award grants to owners and operators of school buses to reduce emissions from at least 450 school buses powered by diesel engines operating in this state.

(b) Moneys not expended under paragraph (a) of this subsection must be:

(A) Awarded as grants for the purpose of reducing emissions from diesel engines; or

(B) Utilized by the department as the State of Oregon’s voluntary matching funds under the Diesel Emissions Reduction Act Program in the Energy Policy Act of 2005, 42 U.S.C. § 16133, and for the purpose of awarding grants for reducing diesel particulate matter emissions from diesel engines.

(2)(a) In awarding grants under subsection (1)(a) of this section, the department shall begin by awarding grants to owners and operators of school buses powered by diesel engines that are of the median model year of school buses powered by diesel engines operating in this state, and shall proceed to award grants for school buses powered by diesel engines through the adjoining model years until the requirements of subsection (1)(a) of this section are met. A grant may be awarded under subsection (1)(a) of this section for any school bus powered by a diesel engine within the control of an owner or operator that meets the following conditions:

(A) The school bus has at least three years of remaining useful life;

(B) Use of the school bus has occurred in Oregon during the year preceding the date of the grant; and

(C) For the three years following receipt of a grant award, use of the school bus to which the owner or operator applies the grant will occur in Oregon.

(b) The grant amount per school bus awarded under subsection (1)(a) of this section shall be for:

(A) $50,000 or 30 percent of the cost to purchase a school bus that meets minimum standards adopted by the State Board of Education under ORS § 820.100 for the applicable class or type of school bus, whichever is less; or

(B) Up to 100 percent of the cost to retrofit a school bus with emissions-reducing parts or technology that results in a reduction of diesel particulate matter emissions by at least 85 percent when compared with the baseline emissions for the relevant engine year and application.

(3) In awarding grants pursuant to subsection (1)(b) of this section, the department shall give preference to projects that will:

(a) Support compliance with ORS § 803.591 or with contract specifications or preferences related to emissions standards for diesel engines established by a public body, as defined in ORS § 174.109;

(b) Be carried out by a grant applicant that is a disadvantaged business enterprise, a minority-owned business, a woman-owned business, a veteran-owned business or an emerging small business, as those terms are defined in ORS § 200.005;

(c) Involve the replacement, repower or retrofit of one or more motor vehicles or pieces of equipment that have at least three years of remaining useful life at the time that the grant agreement is executed;

(d) Support the utilization of fuels for which regulated parties may generate credits under the clean fuels program adopted by rule by the Environmental Quality Commission under ORS § 468A.266 (1)(b);

(e) Benefit owners and operators of heavy-duty trucks, if the fleet of the owner or operator includes only one heavy-duty truck and the heavy-duty truck is registered in Multnomah, Clackamas or Washington County;

(f) Benefit small fleets other than as described in paragraph (e) of this subsection;

(g) Involve the retrofit of concrete mixer trucks or trucks that are used for the transportation of aggregate; or

(h) Meet the criteria of any other preferences that the commission may establish by rule, if the department determines that the additional preferences are necessary to ensure that grant awards result in the reduction of emissions from diesel engines.

(4) The commission may adopt rules as necessary to implement the provisions of this section. [2017 c.742 § 10; 2019 c.645 § 2; 2023 c.497 § 23]