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Environmental Mitigation Trust

In March 2017, the Court appointed Wilmington Trust, N.A. as Trustee of the EMT, and in October 2017, the Court approved two Trust Agreements for Beneficiaries:  one for the 50 states, the District of Columbia, and the Commonwealth of Puerto Rico (“State Trust Agreement”), and one for the separate allocation for federally recognized Indian tribes in the U.S. The State of Tennessee (“the State”) officially became a beneficiary of the EMT on January 29, 2018, allowing the State to fund Eligible Mitigation Actions (EMAs), as defined in the First Partial Consent Decree and State Trust Agreement, that comply with the State’s Beneficiary Mitigation Plan (BMP).

The State’s initial allocation under the State Trust is $45,759,914.40. To date, Volkswagen has funded two-thirds of the State EMT. The Trust will be fully funded in November 2018. 

The framework for the Environmental Mitigation Trust (EMT) can be found in Appendix D to the First Partial Consent Decree and Section 1 of the Second Partial Consent Decree. The EMT is established by the State Beneficiary Trust Agreement and the Tribal Beneficiary Trust Agreement (note that these Agreements supersede the proposed Trust Agreement referenced in Appendix D to the First Partial Consent Decree).

The purpose of the EMT is to execute environmental mitigation projects that reduce emissions of nitrogen oxides (NOx) (that reduce emissions of nitrogen oxides (NOx) (State Trust Agreement at p. 1, “Purpose and Recitals”). Appendix D-2 of the State Trust Agreement lists 10 specific EMA categories and various EMA administrative expenditures that are eligible for EMT funding. (All terms that are both bolded and italicized in this section are defined in Appendix D-2 of the State Trust Agreement.) Eligible projects under these EMA categories include replacing or Repowering older diesel engines with new diesel, Alternate Fueled (e.g., compressed natural gas (CNG), propane, diesel-electric hybrid), or All-Electric engines (including installation of associated charging infrastructure); replacing older diesel vehicles, vessels, and equipment with new diesel, Alternate Fueled, or All-Electric vehicles, vessels, and equipment (including installation of associated charging infrastructure); and installing charging infrastructure for light duty All-Electric vehicles. In addition, a Beneficiary may use EMT funds for non-federal voluntary match for projects eligible under the Diesel Emission Reduction Act (“DERA”) program of the Energy Policy Act of 2005.

Nine of the 10 EMA categories have separate sub-categories for Non-Government Owned and Government Owned projects.  For Non-Government Owned, the percentage of the cost of an EMA that can be funded by the EMT is dictated by the sub-category of the EMA (i.e., replacement with a new diesel vehicle versus replacement with a new All-Electric vehicle). For Government Owned, up to 100% of the cost of an EMA can be funded with EMT funds, regardless of the sub-category. All eligible engines, vehicles, vessels, and equipment must be Scrapped.  

The EMA categories are as follows:

1. Large Trucks:  Class 8 Local Freight Trucks and Port Drayage Trucks;

2. Buses:  Class 4-8 School Bus, Shuttle Bus, or Transit Bus;

3. Freight Switchers;

4. Ferries and Tugs;

5. Ocean Going Vessel Shorepower;

6. Medium Trucks:  Class 4-7 Local Freight Trucks;

7. Airport Ground Support Equipment;

8. Forklifts and Port Cargo Handling Equipment;

9. Light Duty Zero Emission Vehicle Supply Equipment; and

10. Diesel Emission Reduction Act (DERA) Option.

Paragraph 4.1 of the State Trust Agreement states that the BMP must explain the process by which the Beneficiary shall seek and consider public input on its BMP and summarize how the Beneficiary plans to use its allocation, specifically addressing the following: 

1. the process by which the Beneficiary will seek and consider public input regarding its BMP;

2. the Beneficiary’s overall goal for the use of the funds;

3. the EMA categories the Beneficiary anticipates will be appropriate to achieve the stated goals;

4. a preliminary assessment of the percentages of funds anticipated to be used for each EMA category;

5. a general description of the expected ranges of emission benefits the Beneficiary estimates would be realized by implementation of the EMAs identified in the BMP;

6. a description of how the Beneficiary will consider the potential beneficial impact of the selected EMAs on air quality in areas that bear a disproportionate share of the air pollution burden within the Beneficiary’s jurisdiction.

Paragraph 4.1 also states that the BMP is “intended to provide the public with insight into a Beneficiary’s high-level vision for use of the mitigation funds and information about the specific uses for which funding is expected to be requested.” The State Trust Agreement notes that the BMP “need only provide the level of detail reasonably ascertainable at the time of submission.” The State Trust Agreement further provides that the BMP is not binding on any Beneficiary, and it does not create rights in any person to claim an entitlement of any kind. As such, Beneficiaries have the flexibility to adjust their goals and specific spending plans at their discretion. If Beneficiaries elect to make adjustments, they must provide the Trustee with updates to their BMP.

Learn more about the BMP on the State's BMP webpage. Click here to stay apprised of the State’s ongoing VW Settlement efforts and announcements.

The following Quick Reference documents are easily navigable resources on topics related to the EMT:
  • Quick Reference - Appendix D-2 (Revised Trust Agreement) -  The Trustee may only disburse funds for EMAs, and for the EMA Administrative Expenditures specified in Appendix D-2 to the State Trust Agreement. To view the comprehensive list of EMAs and EMA Administrative Expenditures, please refer to this Quick Reference.
  • Quick Reference - Elements of a Beneficiary Mitigation Plan - Beneficiaries of the EMT must submit a BMP at least 30 days prior to submitting the first funding request. To view the elements that are required within the BMP, please refer to this Quick Reference.
  • Quick Reference - Elements of a Funding Request - In addition to preparing the BMP, Beneficiaries are responsible for submitting requests for EMA funding by filing with the Trustee a Beneficiary Eligible Mitigation Action Certification form (funding request). To view the elements that are required within a funding request, please refer to this Quick Reference. 

In March 2017, the Court appointed Wilmington Trust, N.A. as Trustee of the EMT. The Trustee has established and will maintain a public-facing website, accessible at https://www.vwenvironmentalmitigationtrust.com, for the full life of the Trust. The State Trust Agreement details the elements that must be made available by the Trustee on this website, which shall include items such as the Notice of Beneficiary Designation, semi-annual reports, audits, funding requests and determinations with regard to such funding requests, Trust Administration Costs, and an accounting of all Trust Assets.

TDEC hosted several Volkswagen Diesel Settlement Public Information Sessions across the state. These meetings provided an overview an overview of the VW Settlement, the EMT, TDEC’s process for developing a BMP for Tennessee, and the types of EMAs that can be funded by Tennessee’s EMT allocation. Click here for a list of all Q&A from the TDEC Volkswagen Diesel Settlement Public Information Sessions. Click here to view TDEC’s Volkswagen Diesel Settlement Public Information Webinar recording (published December 22, 2017).