APGA Weekly Update October 27, 2016

10-27-2016 13:18

VW Emissions Scandal Settlement for 2.0 Liter Diesels Approved by U.S. District Judge On October 25, U.S. District Judge Charles Breyer approved the three part settlement regarding Volkswagen’s (VW) 2.0 Liter diesel engines. The settlements are separate but related: the first is between VW and the Department of Justice, the California attorney general’s office, the California Air Resources Board and the Environmental Protection Agency (EPA), the second is between VW and the Federal Trade Commission (FTC), and the third is with vehicle owners. It is important to note that this settlement does not preclude civil or criminal penalties being levied against VW by owners or other interested parties. APGA members may recall that VW was caught using defeat devices on 2 and 3-liter diesel cars and SUVs on close to 600,000 cars sold in the U.S. to allow these vehicles to pass the EPA’s pollution tests. However, the October 25 settlement only covers the 475,000 2.0 liter diesel cars as a separate settlement for the 3-liter vehicles is still being negotiated. The key portions of the settlement according to Jeff Clarke of NGVAmerica are: 1. The $10 billion of settlement money for VW owners 2. VW will invest $2 billion in Zero Emission Vehicles (ZEVs) including refueling infrastructure, consumer education, and other elements. The ZEV fund must be approved by the EPA and the California Air Resources Board (CARB). APGA joined NGVAmerica and other stakeholders in arguing that this standard should be performance-based and not technology-based with an exclusive focus on electric vehicle (EVs). 3. The $2.7 Billion Environmental Mitigation Trust program remains largely unchanged: it relies largely on replacement or the repower of older Class 4 – 8 diesel vehicles with new, cleaner vehicles or engines. It also includes funding for some non-road projects (e.g., vehicles at airports, port facilities). Fifteen percent of the funds can be expended on electric vehicle infrastructure. The court, however, did approve some important changes that are highlighted below. More details on these changes will be provided during the upcoming webinar. Approved Changes The key changes to the proposed $2.7 Billion Environmental Mitigation Trust include: 1) clarifying that the funding percentages (e.g., 25% for a new truck) are “up to” a certain amount so funding could be less but not more than the specified percentage; 2) up to 15% of funds can now be used for administrative expenses; and 3) the qualifying model years for replacement or repower has been extended to also include 2007 – 2009 as well as 1992 – 2006. The final decision also clarifies that qualifying new vehicles or repowered engine must be from the model year the project occurs or the previous model year. The court did not make any change to funding levels for low-NOx engines. State authorities however will have discretion to prioritize funding for the types of projects they believe bet serve their goals and this could include prioritizing funding for natural gas engines and vehicles over other available technologies. APGA will keep members informed with any further information about this settlement and the 3-liter settlement that is being negotiated. If you have any questions on this article, please contact Scott Morrison of APGA’s staff by phone at 202-464-2742 or by email at smorrison@apga.org. Initial 2017 LIHEAP Funds Released by U.S. Department of Health and Human Services The U.S. Department of Health and Human Services (HHS) released approximately $3.009 billion in Fiscal Year 2017 Low Income Home Energy Assistance Program (LIHEAP) funds on October 25, 2016. This funding was provided under the Continuing Appropriations Resolution which the President signed into law on September 29, 2016, funding the government through December 9, 2016. For a state by state breakdown of funds that have been released for FY 2017, please go here. The FY16 LIHEAP funds amounted to $3.39 billion, and this level of funding will be maintained through December 9, 2016, as part of the Continuing Resolution FY 2017 legislation. At this time the House Committee on Labor, Health and Human Services has appropriated $3.49 billion toward FY17 LIHEAP while the Senate Committee on Labor, HHS has appropriated $3.39 billion. We anticipate a final FY2017 number will be agreed on in the lame-duck session following the election. These amounts still fall far short of the full $5.1 billion that has been authorized and that APGA fully supports. APGA believes that fully funding this program at the $5.1 billion level is critical as it meets the basic needs of the most vulnerable in our society. LIHEAP funds are included in the federal budget under HHS and provide assistance to the most vulnerable families and individuals that might not be able to fully pay home heating bills in the winter and cooling bills during the summer. The distribution formula for LIHEAP funds is set by Congress and is based on a state’s current and historic usage of energy funds for low-income individuals and families, temperature, fuel source, number of low-income families, and other factors. If you have any questions about LIHEAP, please contact Todd Brady of APGA staff by phone at 202-464-2742 or by email at tbrady@apga.org. PHMSA Advisory Group To Meet December 7-8 The Pipeline and Hazardous Materials Safety Administration (PHMSA) announced a public meeting of the Gas Pipeline Advisory Committee (GPAC), also known as the Technical Pipeline Safety Standards Committee. The GPAC will meet December 7-8 to discuss the proposed rulemaking on the safety of gas transmission and gathering pipelines. The committee is composed of industry, government, and public members who advise PHMSA on the reasonableness, practicality, technical feasibility and cost effectiveness of its regulations. Rich Worsinger of Rocky Mount, NC represents public gas on the GPAC. The meetings will be held in a hotel in the Washington, DC area yet to be determined. GPAC meetings are open to the public. PHMSA also announced that the GPAC will hold two additional meetings in the Washington area February 7-9, 2017 and February 28-March 2 to continue reviewing this very major rulemaking. For questions on this article, please contact John Erickson of APGA staff by phone at 202-464-0834 or by email at jerickson@apga.org. Benchmarking Data for 2015 Now Available Now that the Energy Information Administration’s (EIA) Form 176 Annual Report of Natural Gas Supply and Disposition results for 2015 has been released, APGA has updated its online benchmarking program with the latest data from the Pipeline and Hazardous Materials Safety Administration (PHMSA) and Energy Information Administration (EIA). The benchmarking program allows APGA members to compare themselves against peers in over 100 different metrics, including operational, financial, customer and more. This year, new benchmarks have been added on cost, gas purchased and operating costs. Data for the benchmarks is taken from publicly-available data published by the Pipeline and Hazardous Materials Safety Administration’s Distribution Annual Reports (Form 7100.1-1) and EIA Form 176, supplemented by data from APGA surveys. Members can compare themselves with the average of over 1,500 distribution systems in the database or to a self-selected peer group of systems. For example, a member could choose to compare just with other systems in the same state, or other municipal systems in the state, or with other APGA member municipal systems in the state. The benchmarking program can be found under the Resources tab at www.apga.org or at benchmark.apga.org. For questions on this article, please contact John Erickson of APGA staff by phone at 202-464-0834 or by email at jerickson@apga.org. Action on Political Subdivision Definition Most Likely Delayed to Next Administration As you may recall, the IRS has released proposed regulation that would establish a new definition of the term “political subdivision” for tax-exempt purposes. This regulation is significant as an entity that is not a “political subdivision” cannot issue tax-exempt bonds and many public has systems have utilized tax-exempt financing for investments in infrastructure as well as for natural gas prepays (the long-term purchase of natural gas). In reported remarks to the National Association of Bond Lawyers' Bond Attorneys' Workshop, Treasury associate tax legislative counsel John Cross "We may consider re-proposing the project after receiving over 100 comment letters." He also stated that he expects to see the incoming leadership of administration to decide how to move forward or consider that project. The current political subdivision test requires that an entity possesses at least one of the three “sovereign powers” – the power of eminent domain, the power to tax, or the power to regulate. The proposed regulation would add two new tests in the determination of whether an entity is a “political subdivision” and all three tests (the two new tests and the original one) must be met for an entity to qualify as a “political subdivision.” The two new tests are a governmental or public purpose test and a governmental control test. Under the governmental or public purpose test, an entity must be set up for a public purpose and continually operate “in a manner that provides a significant public benefit with no more than an incidental private benefit.” The term “incidental private benefit” is not defined in the regulation. If the IRS makes a determination that entity provides more than an incidental private benefit, the entity is no longer considered a political subdivision and its bonds become taxable. The second new test is governmental control and under this test “control” must be exercised either by a state or local governmental unit or by an electorate. In addition, to meet this test a state or local governmental unit must have all three of the sovereign powers identified above and act either through its governing body or through its duly authorized elected or appointed officials. On May 23, APGA filed comments with the IRS in response to the proposed regulation. In its comments, APGA expressed opposition to the proposed rule and urged the IRS to withdraw it. APGA also testified at a June 6th public hearing on this issue where it voiced similar sentiments. If you have any questions on this article, please contact Dave Schryver of APGA’s staff by phone at 202-464-2742 or by email at dschryver@apga.org. EIA Reports Storage Increase of 73 Bcf to Put Working Gas Storage at 3,909 Bcf Here is the weekly EIA Summary Report issued on Thursday, October 27, 2016, which reports the week’s storage report highlights for Friday, October 21, 2016. A 73 Bcf increase has been reported. Working gas in storage was 3,909 Bcf as of Friday, October 21, 2016, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 52 Bcf higher than last year at this time and 182 Bcf above the five-year average of 3,727 Bcf. At 3,909 Bcf, total working gas is above the five-year historical range.

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