US Infrastructure Investment and Jobs Act of 2021 – Assessing the Potential Impact on Electric Vehicles and Electric Vehicle Infrastructure

Mayer Brown - Tax Equity Times

On August 10, 2021, the US Senate voted to pass the Infrastructure Investment and Jobs Act (the “IIJA”). The IIJA would provide a total of $1.2 trillion in federal investment in infrastructure, including an unprecedented level of federal investment in electric vehicles (“EVs”) and electric vehicle charging infrastructure (“EV Charging Infrastructure”) through the creation of new programs and grants and the expansion of existing programs. These measures would be a significant step toward achieving the goal of making half of all new vehicles sold in 2030 zero-emissions vehicles, as outlined in Executive Order 14037. (Please also see our prior Legal Update regarding pending proposals with respect to tax credits available for EVs and EV Charging Infrastructure.)

National Electric Vehicle Formula Program

Under the IIJA, $5 billion would be allocated over a five-year period, beginning in 2022, to carry out a National Electric Vehicle Formula Program (the “EV Program”), which will provide states with funding for the implementation of EV Charging Infrastructure and the creation of an interconnected network to facilitate data collection, access and reliability. Funds provided by the Department of Transportation (“DOT”) under the EV Program are to be used primarily for costs associated with the acquisition, installation, network connection, data sharing and operation and maintenance of eligible EV Charging Infrastructure (funding for operation and maintenance costs will only be provided for five years). Funds will be provided to the states on a proportionate basis calculated in the same manner as is used for allocation of other federal highway formula funds to the states, with 80% of the cost of each project that is funded under the EV Program being covered by such funding and the remaining 20% by the recipient state. States are permitted to use the funds provided under the EV Program to contract with a private entity for the acquisition and installation of EV Charging Infrastructure, and the private entity is permitted to pay the applicable state’s share of the cost of a project funded under the EV Program.

Projects eligible for funding under the EV Program must be (1) directly related to the charging of a vehicle, (2) only for EV Charging Infrastructure that is accessible to the general public or to authorized commercial motor vehicle operators from more than one company and (3) located along a designated alternative fuel corridor. If it is determined that the designated alternative fuel corridors in a state are fully built out, then the state may use EV Program funds for EV Charging Infrastructure on any public road or in other publicly accessible locations, such as parking facilities at public buildings, schools and parks or in publicly accessible parking facilities owned or managed by a private entity.

The secretary of transportation, in coordination with the secretary of energy (and in consultation with relevant stakeholders), must, within 180 days after the IIJA is enacted, develop minimum standards and requirements related to, among other things, the installation, operation or maintenance of EV Charging Infrastructure.

The IIJA does not affect the regulatory authority of the states to determine which businesses are allowed to own and operate direct, point-of-charge EV charging facilities. In some states, there are few regulatory restrictions or exclusive electric franchise considerations applicable to EV charging; in other states, the retail sale of electricity to the general public is a business activity in which only an authorized or franchised utility can engage. State laws governing the subject vary widely.

Grants for Charging and Fueling Infrastructure

The IIJA provides for the establishment of a $2.5 billion five-year grant program beginning in 2022 for the deployment of publicly accessible alternative fuel charging infrastructure including, among others, EV Charging Infrastructure to be installed along designated alternative fuel corridors and in certain publicly accessible locations (the “AF Corridor Program”). The AF Corridor Program will be administered by the DOT and will be available to states, metropolitan planning organizations, local governments and other public-sector entities.

Funds provided under the AF Corridor Program are to be used to contract with private entities for the acquisition and installation of EV, hydrogen fueling, propane fueling or natural gas fueling infrastructure that is directly related to the charging or fueling of a vehicle. Eligible projects must be publicly accessible and must be located along a designated alternative fuel corridor. Funds can also be used to procure operating services from a private entity for the first five years of operation of an eligible project. An eligible entity that receives a grant under the AF Corridor Program is permitted to enter into a cost-sharing agreement with a private entity; however, the eligible entity must use its share of the revenues derived from such agreement for eligible projects under the AF Corridor Program.

Community Grants

Fifty percent (50%) of the amount made available under the AF Corridor Program in each year is reserved for community grants (not to exceed $15 million each). Unlike other grants provided under the AF Corridor Program, projects funded by community grants are not required to be located along a designated alternative fuel corridor and can instead be located on any public road; in publicly accessible locations, such as public buildings; or in publicly accessible parking facilities owned or managed by private entities. An eligible entity that receives a community grant is permitted to contract with a private entity for the acquisition, construction, installation, maintenance or operation of the project however, the private entity will be required to pay the eligible entity’s share of the total project cost. Five percent (5%) of the funds provided may also be used by the grant recipient to fund educational and community engagement programs about the use of zero-emission vehicles through partnerships with schools, community organizations and vehicle dealerships. The DOT is also permitted to use a maximum of 1% of the allocated funds to provide technical assistance to eligible entities. Rural areas, low to moderate-income neighborhoods and communities with a low ratio of private parking spaces to households or a high ratio of multiunit buildings to single family homes will be prioritized in the provision of community grants.

Neither the AF Corridor Program nor community grants are proposed to be available to support “captive” EV charging facilities that are not accessible to the general public.

Port Infrastructure Development Program

Under the IIJA, $2.25 billion would be allocated to the Port Infrastructure Development Program administered by the DOT. Eligible projects under the program would be expanded to include projects that reduce or eliminate port-related criteria pollutant or greenhouse gas emissions, including projects for EV charge or hydrogen refueling infrastructure for drayage, and medium or heavy duty trucks and locomotives that service the port and related grid upgrades. Most recently, grants under this program were authorized by the National Defense Authorization Act for Fiscal Year 2021 and the Consolidated Appropriations Act, 2021. These acts authorized and appropriated $230 million for the 2021 Port Infrastructure Development Program to make grants to improve facilities within, or outside of and directly related to operations or an intermodal connection of, coastal seaports, inland river ports, and Great Lakes ports. At least $205 million of the appropriated funds must be for grants to coastal seaports or Great Lakes ports. These grants are awarded as discretionary grants on a competitive basis for projects that will improve the safety, efficiency or reliability of the movement of goods into, out of, around or within a port.

Clean School Bus Program

The IIJA would introduce a $5 billion five-year program administered by the Environmental Protection Agency to replace existing school buses, in part, with zero-emission school buses. Under the program, grants and rebates would be provided to award contracts to eligible contractors to provide rebates for the replacement of existing school buses with zero-emission school buses. Fifty percent (50%) of the program funds would be allocated to the replacement of existing school buses with zero-emission school buses, and the other 50% would be allocated to the replacement of existing school buses with clean and zero-emission school buses. The amount received by all eligible entities in a state under the program may not exceed 10% of the available funds.

State EV Implementation

In addition to the programs discussed above, the IIJA would also amend the Public Utility Regulatory Policies Act of 1978 (“PURPA”) to require states to consider measures to promote increased electrification of transportation, including through establishing rates that (1) promote affordability and accessibility to EV charging options, (2) improve the customer experience with EV charging, (3) accelerate third-party investment in EV charging and (4) recover (presumably through charges to EV owners and/or in the rates of utilities that provide EV charging service or that energize non-utility EV charging stations) the marginal costs of delivering electricity to EVs and EV Charging Infrastructure. In those states that limit the ownership or control of EV Charging Infrastructure to franchised utilities or regulated power providers, state legislative or rulemaking activity to implement the IIJA may be necessary, although the IIJA’s PURPA directives require only state consideration and do not dictate the EV power sales results that a state might adopt. Other states, such as California, do not treat EV charging as a regulated utility activity, and those states might not find it necessary to reconsider their utility regulatory structure as a result of the IIJA.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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