To establish a cooperative program of the Department of Agriculture, the Department of Energy, and the Environmental Protection Agency to evaluate the feasibility of using only fuel blended with ethanol to power municipal vehicles.

Requires the Secretaries of Agriculture and Energy and the Administrator of the Environmental Protection Agency to jointly establish a pilot program to award competitive grants to assist local governments in reducing air pollution by covering the costs associated with converting their entire municipal vehicle fleet to an ethanol-blended fuel. Limits the number of grants to five, with preference given to governments that have a recognized air pollution problem in their communities.

Declares that a local government must agree to cooperate in a study to assess the economic and environmental benefits to be gained from exclusive use of ethanol-blended fuel to power municipal vehicles. Requires the Secretaries and the Administrator to report study results to Congress.