(a) A district shall determine the projects eligible for grants within that district. Those projects may include, but are not limited to, any of the following:

1. (1) Purchase of a new very-low-emission covered vehicle or covered engine to replace an older heavy-duty diesel vehicle or engine.
2. (2) Purchase and use of PM emission-reducing add-on equipment for a covered vehicle.
3. (3) Implementation of a practical, low-emission retrofit technology, repower option, advanced technology, or low sulfur diesel or alternative fuel mixture for a covered engine.

(b) In determining eligible projects, the district shall consider whether the project will have the following effects:

1. (1) Reduce onroad PM emissions to the maximum extent feasible on a timely and cost-effective basis at the marine terminal or port and within the surrounding communities.
2. (2) Meet environmental justice goals and objectives set by the state and local air pollution control agencies, including, but not limited to, districts.
3. (3) Benefit small businesses, giving particular emphasis to independent minority owners and operators.
4. (4) Assist in meeting the 0.01 gr-bhph emission standards adopted by the federal Environmental Protection Agency for 2007 and later model year diesel heavy-duty engines and vehicles (40 C.F.R. Sec. 86.007-11).

(d) Each district shall allocate grant funds in the following manner:

1. (1) Covered engines and covered vehicles that are manufactured prior to 1994 shall receive 50 percent of the funds to purchase pre-existing engines or vehicles that are certified by the state board to have been manufactured after 1993. If the replacement engine or vehicle is not equipped with a PM retrofit device verified by the state board, those funds shall be utilized to purchase a PM retrofit device that is verified by the state board and to offset incremental costs incurred during the first year of utilizing low-sulfur diesel fuel with not more than 15 parts per million sulfur. The total cost to offset the incremental costs may not exceed 10 percent of the cost of the retrofit control device.
2. (2) The remaining 50 percent of the funds shall be used to fund the purchase of engines or vehicles, including, but not limited to, engines that are certified to be cleaner than existing exhaust emission standards, and the repower or retrofit of existing engines to meet the 0.01 gr-bhph PM emission standard. A new engine purchased pursuant to this section may operate on any fuel source if that fuel source is certified by the state board. If a new engine does not meet the 0.01 gr-bhph PM emission standards, a portion of these funds shall be utilized to purchase a PM retrofit device that is verified by the state board and to offset the incremental costs incurred during the first year of utilizing low-sulfur diesel fuel with not more than 15 parts per million sulfur to achieve the 0.01 gr-bhph PM emission standard. The total cost to offset the incremental costs shall not exceed 10 percent of the cost of the retrofit control device.