(a) The commission shall establish criteria for prioritizing qualifying vehicles eligible to receive grants under this chapter. The commission shall review and revise the criteria as appropriate.
(b) To be eligible for a grant under the program:
(1) the use of the qualifying vehicle must be projected to result in a reduction in emissions of nitrogen oxides of at least 25 percent as compared to the motor vehicle or engine being replaced, based on:
(A) the baseline emission level set by the commission under Subsection (g); and
(B) the certified emission rate of the qualifying vehicle; and
(2) the qualifying vehicle must:
(A) replace a heavy-duty or medium-duty motor vehicle that:
(i) is an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;
(ii) satisfies any minimum average annual mileage or fuel usage requirements established by the commission;
(iii) satisfies any minimum percentage of annual usage requirements established by the commission; and
(iv) is in operating condition and has at least two years of remaining useful life, as determined in accordance with criteria established by the commission;
(B) replace a heavy-duty or medium-duty motor vehicle that:
(i) is owned by the applicant;
(ii) is an on-road vehicle that has been:
(a) owned, leased, or otherwise commercially financed and operated in Texas as a fleet vehicle for at least the two years immediately preceding the submission of a grant application; and
(b) registered in a county located in the clean transportation zone for at least the two years immediately preceding the submission of a grant application; and
(iii) otherwise satisfies the mileage, usage, and useful life requirements established under Paragraph (A) as determined by documentation associated with the vehicle; or
(C) be a heavy-duty or medium-duty motor vehicle repowered with a natural gas engine that:
(i) is installed in an on-road vehicle that has been owned, leased, or otherwise commercially financed and registered and operated by the applicant in Texas for at least the two years immediately preceding the submission of a grant application;
(ii) satisfies any minimum average annual mileage or fuel usage requirements established by the commission;
(iii) satisfies any minimum percentage of annual usage requirements established by the commission; and
(iv) is installed in an on-road vehicle that, at the time of the vehicle’s repowering, was in operating condition and had at least two years of remaining useful life, as determined in accordance with criteria established by the commission.

(c) As a condition of receiving a grant, the qualifying vehicle must be continuously owned, leased, or otherwise commercially financed and registered and operated in the state by the grant recipient until the earlier of the fourth anniversary of the activity start date established by the commission or the date the vehicle has been in operation for 400,000 miles after the activity start date established by the commission. Not less than 75 percent of the annual use of the qualifying vehicle, either mileage or fuel use as determined by the commission, must occur in the clean transportation zone.
(c-1) For purposes of Subsection (c), the commission shall establish the activity start date based on the date the commission accepts verification of the disposition of the vehicle or engine.
(d) The commission shall include and enforce the usage provisions in the grant contracts. The commission shall monitor compliance with the ownership, leasing, and usage requirements, including submission of reports on at least an annual basis, or more frequently as determined by the commission.
(e) The commission by contract may require the return of all or a portion of grant funds for a grant recipient’s noncompliance with the usage and percentage of use requirements under this section.
(f) A heavy-duty or medium-duty motor vehicle replaced under this program must be rendered permanently inoperable by crushing the vehicle, by making a hole in the engine block and permanently destroying the frame of the vehicle, or by another method approved by the commission, or be permanently removed from operation in this state. The commission shall establish criteria for ensuring the permanent destruction or permanent removal of the engine or vehicle. The commission shall enforce the destruction and removal requirements. For purposes of this subsection, “permanent removal” means the permanent export of the vehicle or engine to a destination outside of the United States, Canada, or the United Mexican States.
(g) The commission shall establish baseline emission levels for emissions of nitrogen oxides for on-road heavy-duty or medium-duty motor vehicles being replaced or repowered by using the emission certification for the engine or vehicle being replaced. The commission may consider deterioration of the emission performance of the engine of the vehicle being replaced in establishing the baseline emission level. The commission may consider and establish baseline emission rates for additional pollutants of concern.
(h) Mileage or fuel use requirements established by the commission under Subsection (b)(2)(A)(ii) may differ by vehicle weight categories and type of use.
(i) The executive director may waive the requirements of Subsection (b)(2)(A)(i) or (B)(ii) on a finding of good cause, which may include short lapses in registration or operation due to economic conditions, seasonal work, or other circumstances.