BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD SAN DIEGO MARRIOTT DEL MAR GRAND BALLROOM 11966 EL CAMINO REAL SAN DIEGO, CALIFORNIA THURSDAY, MAY 24, 2007 9:00 A.M. TIFFANY C. KRAFT, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Robert Sawyer, Chairperson Ms. Sandra Berg Ms. Dorene D'Adamo Dr. Henry Gong, Jr. Supervisor Jerry Hill Ms. Lydia Kennard Mrs. Barbara Riordan Supervisor Ron Roberts Dr. Daniel Sperling STAFF Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Tom Jennings, Chief Counsel Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Quetin, Ombudsman Ms. Catherine Witherspoon, Executive Officer Ms. Lori Andreoni, Board Secretary Ms. Anaslisa Bevan, Chief, Sustainable Transportation Technology Br., MSCD. Mr. Bart Croes, Chief, Research Division Mr. Bob Fletcher, Chief, Stationary Source Division Ms. Cynthia Garcia, Staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Kurt Karperos, Chief, Air Quality and Transportation Planning Branch, PTSD. Ms. Karen Khamou, Air Pollution Specialist, Air Quality and Transportation Planning Branch, PTSD. Ms. Annmarie Mora, Air Pollution Specialist, Research Division Ms. Silvia Oey, Manager, Liaison Section, PTSD. Mr. Dean Simeroth, Chief, Criteria Pollutants Branch, SSD. ALSO PRESENT Mr. Mark Abramowitz, CA Hydrogen Business Council Mr. Bryon Bliss, Phoenix Motorcars Mr. Kenneth Boshart, Boshart Engineering Mr. Charlie Botsford, Aeorvironment Mr. Alec Brooks, self Mr. Robert Brown, Ford Motors Co. Mr. Robert Cassidy, Nissan Technical Center North American, Inc. Mr. Daniel Davids Mr. Steve Douglas, Alliance of Automobile Manufacturers Mr. Martin Eberhardt, Tesla Motors Mr. Daniel Elliot, Phoenix Motor Cars, Inc. Mr. Ron Freund, EAA Mr. Jay Friedland, EAACC Ms. Danielle Fugere, Bluewater Network PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Karl Heinz Ziwica, BMW of North America Mr. Tom Gage, AC Propulsion Mr. Richard Gillis, Energy Alternative Solutions, Inc. Mr. Christopher Guzy, Ballard Power Systems Mr. Bill Hammons, EV Association of San Diego Mr. Dale Hill, Mobile Energy Solutions Mr. Evan House, Altairnano Technologies Dr. Fritz R. Kalhammer, ZEV Expert Review Panel Member Mr. Dan Kaypaghian, Deutsche Bank Mr. Richard Kelly Mr. Scott Kessler, City of San Diego Mr. Ben Knight, Honda Mr. Bruce M. Kopf, ZEV Expert Review Panel Member Mr. Doug Korthof, Electric Auto Association Mr. William Korthof, Mr. Felex Kramer, CalCars Mr. J. Russell Lemon, EVAOSD Mr. Chung Liu, SC AQMD Mr. Fred Maloney, DaimlerChrysler Mr. Matt Miyasato, Technology Demonstrations Manager, South Coast Air Quality Management District Ms. Kate Miller, Alameda Contra Costa Transit District Mr. Dave Modisette, CA Electric Transportation Coalition PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Eric Neandross, Gladstein Neandross & Associates Ms. Linda Nicholes, Plug-In America Mr. Chris Paine, "Who Killed the Electric Vehicle" Mr. Robert Pedrazza, Altairnano Technologies Mr. Spencer Quong, Union of Concerned Scientists Mr. Vernon P. Roan, Jr., ZEV Expert Review Panel Member Mr. Paul Scott, ISE Ms. Chelsea Sexton, Plug-In America Ms. Irene Stilling, Center for Sustainable Energy Mr. David H. Swan, ZEV Expert Reiew Panel Member Mr. Sven Thesen, PG&E Mr. Glen Tepke, Metropolitan Transportation Commission Ms. Cynthia Verdugo-Peralta, SEETA Mr. Michael P. Walsh, Chairman, ZEV Expert Review Panel Member Mr. Peter Ward, Policy Advisor to Commissioner James Boyd, Vice Chairman of the California Energy Commission Mr. Alan Weverstad, General Motors Mr. V. John White, Center for Electric Efficiency and Renewable Technologies Mr. John Williams, Ovonic Applied Technology Center Mr. Terry Werth, self Ms. Colina Young, self Mr. Tom Young, self Mr. Don Zweifel, SoCal BioFuel Co. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX PAGE Pledge of Allegiance 1 Item 7-5-1 Chairperson Sawyer 4 Executive Officer Witherspoon 4 Staff Presentation 5 Q&A 10 Item 7-5-4 Chairperson Sawyer 12 Executive Officer Witherspoon 15 Staff Presentation 16 Q&A 23 Motion 28 Vote 29 Mr. Lemon 112 Mr. Worth 114 Item 7-5-3 Chairperson Sawyer 30 Executive Officer Witherspoon 30 Staff Presentation 31 Mr. Ward 58 Mr. Scott 73 Mr. Gillis 77 Mr. Abramowitz 79 Mr. Kessler 81 Mr. Botsford 82 Ms. Miller 83 Mr. Tepke 85 Mr. Thesen 87 Mr. Bliss 91 Mr. Gage 94 Mr. Williams 95 Ms. Verdugo-Peralta 97 Ms. Stillings 98 Mr. Zweifel 100 Mr. Hill 102 Mr. Miyasato 105 Motion 112 Vote 112 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX CONTINUED PAGE Item 07-5-2 Chairperson Sawyer 117 Executive Officer Witherspoon 118 Staff Presentation 118 Q&A 129 Motion 135 Vote 135 Item 7-5-5 Chairperson Sawyer 136 Executive Officer 137 Staff Presentation 138 Q&A 178 Mr. Weverstad 229 Mr. Cassidy 233 Mr. Maloney 236 Mr. Brown 238 Mr. Knight 241 Mr. Ziwica 245 Mr. Guzy 248 Mr. Douglas 250 Mr. Modisette 253 Mr. Eberhardt 259 Mr. Gage 261 Mr. Brooks 263 Ms. Sexton 266 Mr. Korthof 268 Mr. Neandross 271 Mr. Botsford 274 Mr. Kaypaghian 275 Ms. Fugere 276 Mr. Quong 281 Mr. Liu 282 Mr. Thesen 283 Mr. White 285 Mr. Kramer 287 Mr. Davids 290 Mr. Elliot 292 Mr. Boshart 296 Mr. Lemon 298 Mr. Hammons 299 Ms. Nicholes 301 Mr. Kelly 303 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Mr. Young 305 Ms. Young 306 Mr. Korthof 308 Mr. Friedland 311 Mr. Freund 313 Mr. Paine 316 Mr. House 318 Mr. Pedrazza 321 Adjournment 324 Reporter's Certificate 325 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON SAWYER: Good morning. The May 24th, 3 2007, public meeting of the Air Resources Board will come 4 to order. 5 All please rise and join me in the Pledge of 6 Allegiance. 7 (Thereupon the Pledge of Allegiance was 8 recited in unison.) 9 CHAIRPERSON SAWYER: Thank you. 10 Will the Clerk of the Board please call the roll? 11 BOARD CLERK ANDREONI: Ms. Berg? 12 BOARD MEMBER BERG: Here. 13 BOARD CLERK ANDREONI: Ms. D'Adamo? 14 BOARD MEMBER D'ADAMO: Here. 15 BOARD CLERK ANDREONI: Dr. Gong? 16 BOARD MEMBER GONG: Here. 17 BOARD CLERK ANDREONI: Supervisor Hill? 18 BOARD MEMBER HILL: Here. 19 BOARD CLERK ANDREONI: Ms. Kennard? 20 BOARD MEMBER KENNARD: Here. 21 BOARD CLERK ANDREONI: Mayor Loveridge? 22 BOARD MEMBER LOVERIDGE: Here. 23 BOARD CLERK ANDREONI: Mrs. Riordan? 24 BOARD MEMBER RIORDAN: Here. 25 BOARD CLERK ANDREONI: Supervisor Roberts? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 Professor Sperling? 2 BOARD MEMBER SPERLING: Here. 3 BOARD CLERK ANDREONI: Chairman Sawyer? 4 CHAIRPERSON SAWYER: Here. 5 BOARD CLERK ANDREONI: Mr. Chairman, we have a 6 quorum. 7 CHAIRPERSON SAWYER: Thank you. 8 I have a few opening remarks. A closed session 9 appears each month as a standing item on our agenda to 10 receive reports on the various greenhouse gas lawsuits in 11 which we are litigants. Since there is nothing to report 12 this month, the closed session notice for today's meeting 13 is canceled. 14 Earlier this week, Secretary Adams, Attorney 15 General Brown, former Assemblywoman Pavley, the Air 16 Resources Board, and Cal/EPA staff and I testified in 17 Washington, D.C., at a federal hearing on our request for 18 a waiver to implement Air Resources Board greenhouse gas 19 standards for motor vehicles. A second waiver hearing 20 will take place in Sacramento next week on May 30th at the 21 Cal/EPA building. We are convinced that California meets 22 all of the legal conditions for a federal waiver, and we 23 are urging U.S. Environmental Protection Agency to grant 24 the waiver without further delay. If they fail to do so, 25 California will bring legal action to protect its PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 interests. 2 As you may have noticed, we have a very heavy 3 calendar this month. Today, we will proceed with Board 4 items and public testimony until 6:00 p.m. if necessary to 5 get through the monthly health update, planned research 6 for the coming fiscal Year, the San Diego State 7 Implementation Plan, proposed allocation for $25 million 8 or alternative fuel projects, and a technological status 9 review of the Zero Emission Vehicle Program. 10 Tomorrow, we will resume at 8:00 a.m. and take up 11 the proposed rule for in-use off-road mobile sources, 12 unless some of today's business is carried over. The 13 Friday hearing will adjourn no later than 4:30 p.m., I 14 understand is the time we need to adjourn when we are 15 required to vacate this room. 16 Anyone who wishes to testify should sign up with 17 the Board Clerk and has the option to include his or her 18 name on the speaker card. Please see the Clerk of the 19 Board for further instructions. 20 Also, speakers, please be aware that the Board 21 will impose a three-minute time limit, as is our usual 22 practice. Please put your testimony into your own words. 23 It is easier for the Board to follow if you go straight to 24 your main points. You do not need to read your written 25 testimony since it will be entered into the record. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 For safety reasons, please note the emergency 2 exits to the right and rear of the room. In the event of 3 a fire alarm, we are required to evacuate this room 4 immediately. When the all-clear signal is given, we will 5 return to the hearing room and resume the hearing. 6 Agenda Item 7-5-1, health update. Today's 7 presentation reports the findings of a study conducted at 8 the University of Washington funded by the National 9 Institute of Environmental Health Sciences on the health 10 effects of fine matter on women. This study found an 11 association between exposure to fine matter and an 12 increase in the risk of having heart attacks and strokes. 13 Ms. Witherspoon, please introduce this item. 14 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 15 Sawyer. And good morning, members of the Board. 16 Scientists previously demonstrated that air 17 pollution is harmful to respiratory and cardiovascular 18 systems. The study to be presented today is especially 19 valuable since it investigates the association between 20 daily cardiovascular mortality in women and exposure to 21 PM2.5. The findings add to the growing body of evidence 22 linking PM2.5 with mortality and shows the risk in 23 post-menopausal women may be higher than in the general 24 population. 25 Ms. Cynthia Garcia will make today's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 presentation. 2 (Thereupon an overhead presentation was 3 presented as follows.) 4 MS. GARCIA: Thank you, Ms. Witherspoon. And 5 good morning, Dr. Sawyer and members of the Board. 6 Today's health update will focus on the results 7 of an important study that evaluates the possible links 8 between long-term exposure to fine particulate matter and 9 air pollution in cardiovascular mortality and disease in 10 women. 11 Before discussing this study, I would like to 12 briefly provide you with some background information. 13 --o0o-- 14 MS. GARCIA: Let me first begin with what we know 15 from the statistics. Cardiovascular disease, which 16 includes coronary heart disease and stroke, is the leading 17 cause of death in the U.S. Almost one in two women die of 18 heart disease or stroke compared with one in 25 women who 19 die of breast cancer. This means that cardiovascular 20 disease kills approximately half a million American women 21 each year nationwide. In addition, some epidemiological 22 studies suggest that increased risk from fine particles 23 may be gender specific, with post-menopausal women being 24 more susceptible. 25 Two of these studies were previously presented to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 the Board on September and December of 2005, the Kunzli et 2 al study on air pollution and atherosclerosis from the 3 University of Southern California, and the Chen et al 4 study on fatal coronary heart disease and air pollution 5 from Loma Linda University. 6 --o0o-- 7 MS. GARCIA: Today, we know that particles are 8 clearly and consistently associated with adverse health 9 impacts. Epidemiologic and experimental investigation 10 supports the association of ambient particulate matter 11 exposure to cardiovascular disease. However, the 12 biological mechanisms for PM health effects are not 13 clearly understood, and less understood are the mechanisms 14 that may be causing the severe gender effects seen 15 nationwide. 16 In addition, women may be more susceptible to 17 coronary disease than men due to lifestyle choices and 18 other factors than increase the risk of vascular disease 19 such as hypertension, diabetes, obesity, and inactivity, 20 all of which are seen more frequently in post-menopausal 21 women than in men. 22 --o0o-- 23 MS. GARCIA: The figure to your left highlights 24 the complex pathways in which particle matter exposure can 25 lead to cardiovascular disease. This possible biological PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 mechanism is currently being investigated by the U.S. 2 EPA's PM center and others. 3 I will now summarize what we learned from the 4 study being highlighted today entitled, "Long-Term 5 Exposure to Air Pollution and Incidences of Cardiovascular 6 Events in Women." 7 The participants of this study were part of a 8 15-year women's health initiative. The scientists 9 analyzed the medical records of about 65,000 10 post-menopausal women in 36 U.S. cities. The average age 11 of the women in this study was 63 years. PM2.5 12 measurements from the year 2000 were used. The closest 13 monitored PM2.5 values were assigned to the participant's 14 home ZIP code. 15 Risk was estimated for the first cardiovascular 16 event confirmed by a review of the medical records. An 17 event consisted of non-fatal and fatal heart attacks, 18 strokes, and arterial or cerebral vascular events. As 19 seen in this graph, the results from the women's study 20 indicate that for each ten micrograms per cubic meter 21 increase in PM2.5, there was a 24 percent increased risk 22 of cardiovascular event. And the risk of dying from heart 23 attack or strokes was increased by 76 percent. 24 The next slide will compare these results to 25 other well-known general population U.S. studies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 --o0o-- 2 MS. GARCIA: This slide shows that the risk of 3 death associated with PM2.5 in the women's health 4 initiative study was larger than that reported in 5 previously well-known general population studies. As 6 mentioned previously, the investigators estimated an 7 overall 76 percent of increased risk of death from heart 8 attack and stroke for the long-term PM2.5 exposure. 9 However, one must note that the confidence bounds are much 10 greater than previous studies likely because of a smaller 11 sample size. Previous general U.S. population studies 12 estimated an increased risk of 13 percent for death for 13 all cardiovascular cause associated to long-term PM2.5 14 exposure in the American Cancer Society study and 90 15 percent in the six city study. 16 The more recent analysis of the six cities by 17 Laden et al resulted in a higher estimated risk for 18 cardiovascular disease of 28 percent, but it is still less 19 of an estimated risk than that for the women's health 20 initiative study. 21 The larger effects size of level PM2.5 in the 22 study could be due to different characteristics of the 23 study population. For example, in this study, only 24 post-menopausal women without diagnosed cardiovascular 25 disease were included, while the previous larger studies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 included men and women who had previously diagnosed 2 cardiovascular disease. 3 --o0o-- 4 MS. GARCIA: What makes the women's health 5 initiative study specifically relevant is that the 6 investigators studied post-menopausal women and found a 7 stronger effect than previously reported of fine 8 particulate matter exposure of premature cardiovascular 9 death, which is one of the leading causes of women's 10 mortality in the U.S. 11 Although the results presented today do not 12 answer why women's risk may be higher, the ARB has funded 13 a study, the California's Teacher Cohort Study, which 14 would further add to our understanding of women's 15 susceptibility to PM2.5. Preliminary results show a high 16 association between PM2.5 and cardiovascular disease. 17 In summary, the study highlighted today supports 18 the Board's regulatory activities and policy decisions 19 that effect the health of California's women. And it 20 provides stronger justification for attaining the air 21 quality standards. 22 This concludes my presentation. I'll be happy to 23 answer any questions. Thank you. 24 CHAIRPERSON SAWYER: Thank you very much. 25 The findings presented indicate the need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 continue the effort to reduce the impact of particulate 2 matter on public health. And in fact, we'll be taking up 3 one such measure tomorrow. 4 Do Board members have questions? Ms. D'Adamo. 5 BOARD MEMBER D'ADAMO: Just like to know the 6 study's definition of long-term exposure. 7 MS. GARCIA: In the study, the definition of 8 long-term exposure is the subjects were recruited in '84 9 to '85, and there was follow-on average for six years. So 10 long-term exposure means the effects that they saw in that 11 period of time. 12 BOARD MEMBER D'ADAMO: Equal to the general 13 population. Then I guess I read it to mean there was some 14 heightened amount of exposure, an increased amount of 15 exposure. It's just they were studied over a longer 16 period of time. 17 MS. GARCIA: That's correct. 18 CHAIRPERSON SAWYER: Dr. Gong. 19 BOARD MEMBER GONG: Thank you, Mr. Chairman. 20 That was a very nice summary of a very important 21 public health publication. 22 Again, just two comments. One is to underscore 23 the public health implications of PM2.5 and perhaps all 24 particle sizes on the population and in this particular 25 study post-menopausal women. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 And the second comment is actually about slide 2 four in which you showed -- they showed 24 percent 3 increase in cardiovascular events. You mention the 76 4 percent increase in deaths from cardiovascular disease 5 showed a wide confidence interval, which it does. But you 6 see here for the 24 percent increase, the confidence 7 interval is small, which I think gives us more confidence 8 as to what's going on. 9 And just from a practical standpoint, I think 10 this is what most physicians are going to be encountering 11 is women with cardiovascular events, acute and chronic. 12 And there's even large literature on women's 13 cardiovascular diseases and how perhaps for the past 14 ten years it's been underdiagnosed, undertreated. And you 15 do have some issues, obviously mortality as a consequence. 16 So it's all tied together, I guess is what I'm trying to 17 get at. Thank you very much. 18 CHAIRPERSON SAWYER: We have no witnesses on this 19 subject. 20 Ms. Witherspoon, does staff have any further 21 comments? 22 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 23 CHAIRPERSON SAWYER: Since this is not a 24 regulatory item, it is not necessary to officially close 25 the record. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 Agenda Item 7-5-4, the proposed Air Pollution 2 Research Plan for fiscal year 2007-2008. The Board's 3 Research Program has been and continues to be an integral 4 part of the Air Resources Board's success in combating air 5 pollution. Solid research provides the foundation for the 6 Board's regulatory and policy decisions. The Research 7 Program has also made many noteworthy contributions to the 8 understanding of health impacts of air pollution, how to 9 reduce personal exposure, and how to control and reduce 10 emissions. 11 The success is due to the leadership and 12 commitment of our Research Screening Committee which 13 unfortunately could not join us today. The disciplines 14 represented by the Committee members reflect the 15 complexity of California's air pollution problem. I 16 appreciate their dedication to the Committee and to the 17 mission of the Air Resources Board. I especially thank 18 Dr. Michael Lipsett for his service on the Committee. Dr. 19 Lipsett resigned after seven years of service. Dr. 20 Lipsett, who provided the Committee with epidemiological 21 and public health expertise, was an invaluable asset. His 22 participation will be missed. We have a resolution to 23 acknowledge and thank him for his membership on the 24 Research Screening Committee, and I will now read that. 25 "Resolution 7-2-9, whereas, after seven years of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 service as an ex officio member of the California Air 2 Resources Board's Research Screening Committee, Dr. 3 Michael Lipsett submitted his resignation; and 4 "Whereas, he was first appointed to the Research 5 Screening Committee in December 1999 by the California Air 6 Resources Board; and 7 "Whereas, he has served the Committee, the Board, 8 and the state of California faithfully; and 9 "Whereas, he has always been at the forefront of 10 acquiring high quality information needed to address 11 important air quality issues through pertinent research; 12 "Whereas, he has been instrumental in the success 13 of the Board's health and exposure research program; and 14 "Whereas, his background in both medicine and law 15 give him a unique perspective in understanding and 16 applying the scientific literature for the purpose of 17 advancing health protective public policy; and 18 "Whereas, his insights and involvement in 19 epidemiological examinations and health effects of air 20 pollution have been invaluable and demonstrated his 21 foresight and committed to protecting the people of 22 California. 23 "And now therefore it be resolved, the members of 24 the Committee do hereby express to Dr. Lipsett their 25 sincere appreciation for his many years of friendly and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 unselfish service as a member of the Research Screening 2 Committee of the California Air Resources Board. 3 "And be it further resolved that a copy of this 4 Resolution should be transmitted to Dr. Michael Lipsett as 5 evidence of our appreciation." 6 Am I correct that should be members of the Board? 7 MS. GARCIA: That will be members of the Board. 8 CHAIRPERSON SAWYER: Please correct that. 9 Do I have a proposal to adopt and second? 10 BOARD MEMBER BERG: So moved. 11 BOARD MEMBER RIORDAN: Second. 12 CHAIRPERSON SAWYER: Thank you. 13 All those in favor please indicate by saying aye. 14 (Ayes) 15 CHAIRPERSON SAWYER: Opposed? 16 The Resolution is adopted in San Diego 17 California, on May 24th, 2007. 18 I would also like to welcome Denise Friedman to 19 our meeting today. And I believe your father is with you; 20 is that correct? Dennis, thank you for joining us. 21 Dr. William F. Friedman, a pediatric 22 cardiologist, was the Board's physician representative who 23 during his tenure played a major role in guiding the Air 24 Resources Board Health Research Program. His commitment 25 to the citizens of California was evident through his PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 personal and professional interest in the Board's health 2 research, especially in studies related to children's 3 health. 4 The Board continues to dedicate our annual health 5 research program to his memory. As of 2006, all of our 6 solicitations and awards for health research proposals 7 bear his name. And our contractors acknowledge Dr. 8 Friedman in their final reports and resulting 9 publications. In that way, the Air Resources Board keeps 10 Dr. Friedman's spirit alive. Thank you, Dennis and your 11 father, for joining us. 12 (Applause) 13 CHAIRPERSON SAWYER: Ms. Witherspoon, would you 14 please introduce this item? 15 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 16 Sawyer. 17 The Air Pollution Research Plan reflects ARB's 18 current priorities and will further our scientific 19 knowledge in health and welfare effects, exposure 20 assessment, technology advancement, and global climate 21 change. Some of the key issues in this year's plan are 22 understanding health impacts from prenatal exposure, 23 strengthening our goods movement emission reduction 24 efforts, and analyzing the potential economic impacts and 25 efficiencies related to climate change regulations and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 emerging greenhouse gas related industries. 2 If approved by the Board, the projects described 3 in plan will be developed into full proposals for review 4 by the Research Screening Committee and brought back to 5 you for approval over the next several months. 6 Annmarie Mora of the Research Division will take 7 us through the proposed 2007-08 research plan. 8 (Thereupon an overhead presentation was 9 presented as follows.) 10 AIR POLLUTION SPECIALIST MORA: Thank you, Ms. 11 Witherspoon. Good morning, Dr. Sawyer and members of the 12 Board. 13 Today, I'm presenting the planned air pollution 14 research for fiscal year 2007-2008. This plan supports 15 the Board's mission to conduct research into the causes of 16 and solutions to air pollution. The plan is comprised of 17 projects that meet the scientific and technical needs of 18 the Board's future regulatory and policy decision. And as 19 mentioned by Ms. Witherspoon, if approved today, these 20 projects will be developed into full proposals for review 21 by the Research Screening Committee and brought to the 22 Board for approval over the next few months. 23 The process for developing the annual plan starts 24 with the general solicitation, inviting and encouraging 25 stakeholders to contribute ideas for project PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 consideration. Typically, members of the public, the 2 academic community, and ARB staff submit the ideas. 3 The evaluation process starts with internal 4 Committees established by the Board's Executive Officer. 5 Proposed projects are examined for relevance to regulatory 6 questions facing the Board and modified as necessary. 7 Other research organizations also provide reviews in order 8 to avoid duplication. RC members then review projects and 9 provide technical comments for the Research Review 10 Committee who's members are the Executive Officer, her 11 three Deputies, and the Chief of the Research Division. 12 The Executive Review Committee reviews all of the 13 proposed projects and establishes project priorities based 14 on the available resources. This year, there were 200 15 submissions. And out of the 200 submissions, the list was 16 narrowed to 21 projects. The RC then reviews the selected 17 projects and recommends the plan to the Board. 18 --o0o-- 19 AIR POLLUTION SPECIALIST MORA: This next slide 20 lists the research categories of the plan. The categories 21 were chosen because they define the natural sequence of 22 air pollution research. Projects identified the impacts 23 of air pollution under health and welfare effects and 24 characterize exposures in the exposure assessment section. 25 Facilitating applications of effective exposure reduction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 strategies is covered under technology advancement and 2 pollution prevention. The global climate change 3 categories not only encompasses all of the three above 4 categories but also contains elements that extend well 5 beyond their individual components. Later in the 6 presentation, I'll list the projects to be funded under 7 each category and highlight one project from each area. 8 --o0o-- 9 AIR POLLUTION SPECIALIST MORA: This figure 10 represents the 21 recommended projects based on ARB's base 11 line research budget. The total budget we're expecting 12 this year is a little over $5.6 million. In addition to 13 the recommended projects, there are five projects in the 14 plan that are recommended if additional funding becomes 15 available. This slide shows the recommended allocation 16 for each section of the plan. 17 --o0o-- 18 AIR POLLUTION SPECIALIST MORA: In the health and 19 welfare effects section, there are six projects. The 20 three projects listed on this slide will focus on the 21 effects of in-vehicle exposure, toxicity of PM, and the 22 effectiveness of wood burning regulations and outreach 23 efforts. 24 These three projects focus on the biological 25 responses to air pollution exposure, specifically asthma PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 exacerbation, and respiratory effects. These projects 2 will provide insight into the reasons for those effects 3 and provide information for future air quality standards 4 setting. 5 --o0o-- 6 AIR POLLUTION SPECIALIST MORA: The project I'll 7 highlight from this section is titled, "In-Vehicle Air 8 Pollution Exposure Assessment of Pregnant Women in the 9 National Children's Study." 10 There are no known perspective cohort studies 11 that are examining the effects of exposure to in-vehicle 12 air pollution during pregnancy on birth outcomes and the 13 occurrence of childhood respiratory disease and allergy. 14 The goal of this project is to collect in-vehicle air 15 pollution data in Orange County, develop and validate 16 models to predict in-vehicle exposure, and apply the 17 models to estimate in-vehicle exposure of over a thousand 18 women from the Orange County of California Vanguard Center 19 National Children's Study. 20 The National Children's Study is an unprecedented 21 national effort that will follow more than 100,000 22 children from before birth until age 21 to examine 23 environmental, genetic, social, and behavioral 24 determinants of health and disease. This project presents 25 a unique opportunity to examine whether exposure to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 in-vehicle air pollution adversely effects birth outcomes 2 and promotes the occurrence of a topic sensitization in 3 childhood respiratory diseases, including asthma. It will 4 guide other epidemiological studies focused on commuters' 5 health outcomes and help inform policy division makers 6 concerning motor vehicle emissions control. 7 --o0o-- 8 AIR POLLUTION SPECIALIST MORA: The next section 9 is exposure assessment. The projects here will address 10 the deposition of metals, update our activity pattern 11 database for use in estimating personal exposure, and 12 provide measurements to improve photochemical models and 13 other tools to support State Implementation Plans. 14 The four projects here will focus on providing a 15 fuel-based emission inventory, forecasting and developing 16 models for goods movement, and conducting additional field 17 work for fumigant pesticides. 18 --o0o-- 19 AIR POLLUTION SPECIALIST MORA: One of the 20 projects proposed in this area is social apportionment of 21 atmospheric dry and wet deposition of mercury and other 22 toxic metals. The inputs of mercury and other toxic 23 metals threaten critical aquatic habitat. In the case of 24 mercury present a probable human health threat. However, 25 an understanding exists how the sources in atmospheric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 processes that control deposition of toxic metals to 2 California watersheds and water bodies. The proposed 3 project will provide a more comprehensive assessment of 4 toxic metal deposition in California supplementing 5 existing measurements that connect to the national mercury 6 deposition network. 7 In addition, the project will provide critical 8 information on the sources of toxic metal deposition in 9 California while providing a new framework for monitoring 10 to support atmospheric source and deposition relationships 11 for future studies and source apportionment efforts. The 12 project is contingent upon the State Water Resources 13 Control Board providing funding. The Water Board is 14 currently considering the request. 15 --o0o-- 16 AIR POLLUTION SPECIALIST MORA: The next section 17 is technology advancement and pollution prevention. The 18 project here on this slide will reconcile PM emission 19 measurement from various techniques with traditional PM 20 mass measurements and continue to increase our 21 understanding of the nature of PM in both size and 22 composition and the importance of these metrics for air 23 quality and health. 24 --o0o-- 25 AIR POLLUTION SPECIALIST MORA: Our last section, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 global climate change, has six recommended projects. 2 These projects focus on creating an inventory for 3 non-refrigerant and air conditioning industrial 4 applications, evaluating health impacts from climate 5 change, and assessing the transport of PM from Asia. We 6 will also sponsor projects that assess the effectiveness 7 and impacts of climate change strategies. These projects 8 focus on identifying the cost effective options for 9 mitigation and tools to characterize life cycle cost. 10 --o0o-- 11 AIR POLLUTION SPECIALIST MORA: This project will 12 provide an economic analysis of current market and 13 prospects for growth in the global economy. A clear 14 definition and quantification of the climate change 15 industry is lacking, along with an idea of where 16 California ranks in the U.S. and global markets in this 17 increasingly important sector. Little has been done to 18 define and quantify the climate change industry in total. 19 Some market analysis has been done in areas such as solar 20 energy, wind power, and fuel sells, but aggregating this 21 information into a clear picture has not been performed. 22 The goal of this project is to define and quantify the 23 climate change industry, forecast future growth scenarios, 24 and characterize California's place in this industry. 25 There is an emerging and potentially very large industry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 up for grabs. Framing the climate change industry and 2 assessing its potential could be very instrumental in 3 developing state and other programs in support of the 4 industry. 5 --o0o-- 6 AIR POLLUTION SPECIALIST MORA: The research that 7 is sponsored by the Board is crucial to the Board's 8 mission. We think the projects outlined here strongly 9 support ARB's mission and future direction and therefore 10 recommend that you approve the planned air pollution 11 research for fiscal year 2007-2008. Thank you for your 12 attention. We'd be happy to answer any questions. 13 CHAIRPERSON SAWYER: Do Board members have any 14 questions? 15 Dr. Gong. 16 BOARD MEMBER GONG: That was a very stimulating 17 array of projects that you have proposed. I think that 18 looking at them individually and as a whole, I think Dr. 19 Friedman would have been very honored and proud of what 20 you've proposed this year. 21 I just have a couple of other comments. I think 22 that again research is important to provide evidence-based 23 direction and policy and advice to the Board. And I 24 applaud the Research Screening Committee, now minus Dr. 25 Lipsett. But nonetheless, I'm sure they'll continue to do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 an excellent job. 2 Could you refresh my memory about previous 3 budgets for the research projects in the past? If you can 4 remember them roughly. It's 5.6 million this year. 5 AIR POLLUTION SPECIALIST MORA: It's a little 6 over $5 million every year. We're usually able to get a 7 couple million dollars in co-sponsorships. You see 8 projects that total about $7 million from previous years. 9 BOARD MEMBER GONG: I believe you said one 10 project is going to be targeted for co-funding. 11 AIR POLLUTION SPECIALIST MORA: We're hoping the 12 State Water Resources Control Board will co-fund. 13 BOARD MEMBER GONG: One other item is 14 environmental justice. In the past, we've had one or two 15 I believe projects on that. And I may have missed it, but 16 do any of these proposed studies involve environmental 17 justice aspects to them at all? 18 AIR POLLUTION SPECIALIST MORA: Most of the 19 projects that are dealing with the asthma and respiratory 20 disease -- actually, almost all of the health projects 21 except for one will be looking at sensitive populations. 22 I'm not sure exactly the areas that they'll be focusing 23 on. So we'll look into that. 24 BOARD MEMBER GONG: Thank you. 25 CHAIRPERSON SAWYER: Professor Sperling. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 PROFESSOR SPERLING: I would like to make a 2 comment. I want to complement the staff in putting 3 together a plan. I'd like to focus on the climate change 4 parts of it. And I've passed on some comments to the 5 staff, but I'd like to state more publicly that I think as 6 ARB moves more into the climate change area, which is a 7 new area for many of us, and developing a better research 8 foundation for it that it reach out more to the research 9 community in California and beyond and think about how to 10 integrate and collaborate with researchers in developing 11 these research initiatives, in developing the research 12 foundation that's going to be needed by the State and by 13 ARB. 14 And just one example is University of California, 15 for instance, has quite a number of different research 16 programs in the climate change -- related to the climate 17 change area. And so I would urge as a way of both 18 extending the limited funding capabilities of ARB and also 19 reaching out to the broader research community that it 20 work more closely with some of these research centers and 21 research institutes in the University of California and 22 elsewhere. And I know they're already thinking about 23 that. But I say this publicly because for those 24 researchers out there in the world and interested in this, 25 I think this would be a good opportunity to collaborate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 more closely with ARB. Thank you. 2 CHAIRPERSON SAWYER: Thank you. 3 Mayor Loveridge. 4 BOARD MEMBER LOVERIDGE: Let me just add a 5 footnote to those comments. I listened to President 6 Robert Dines last night talk about the University of 7 California as the greatest public university in the world 8 and the kind of research that's going on on the ten 9 campuses. And it does seem to be important in what we're 10 doing and in what the State is doing. There is much 11 stronger connection between the University of California 12 and its research and the public policies of California. 13 Just a footnote to his comment. 14 CHAIRPERSON SAWYER: Dr. Gong. 15 BOARD MEMBER GONG: Another footnote. Professor 16 Sperling has reminded me to say also that even though 17 global climate change is being funded, the research for it 18 is being funded, much of this is, shall I say, atmospheric 19 and technical, overly technical for me. 20 But I would like to suggest or recommend that 21 even health effects from global climate change might be 22 considered specifically. Like this year it's on asthma 23 and respiratory health. But just something to keep in 24 mind as well. 25 CHAIRPERSON SAWYER: I would like to add my bit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 on this also. First, I would note that four Board members 2 have academic appointments, which I think is perhaps a bit 3 unusual for a California Board of this sort. 4 Also, the issue of the interaction in the health 5 area between climate change and particles, for example, 6 temperature and particles and if there are studies of that 7 sort going on or need to be conducted, I think it would 8 certainly be an area to consider. 9 Ms. Witherspoon. 10 EXECUTIVE OFFICER WITHERSPOON: I just wanted to 11 comment for the Board's information that the Governor's 12 budget for climate change includes an additional 1.8 13 million for applied research, plus up to $8 million in 14 contract funds to pursue questions related to specific 15 reduction possibilities. So we will have quite a bit more 16 money to play with once the budget is resolved and the 17 Strategic Plan is in order. 18 CHAIRPERSON SAWYER: A reminder to Board members 19 of our policy concerning ex parte communications. While 20 we may communicate off the record with outside persons 21 regarding Board rule making, we must disclose the names of 22 our contacts and the nature of our communications on the 23 record. This requirement applies specifically to 24 communications which take place after the public agenda of 25 the Board hearing has been published. Do Board members PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 need to disclose any communications? Dr. Gong, we'll 2 start with you. 3 BOARD MEMBER GONG: No. 4 BOARD MEMBER BERG: No. 5 BOARD MEMBER D'ADAMO: Mr. Chairman, I'm 6 realizing I did have a conversation with someone that I 7 didn't note the date. So perhaps I could come back. I 8 had a conversation with Roger Isom regarding -- help me 9 out. 10 CHIEF COUNSEL JENNINGS: That's the next item. 11 BOARD MEMBER D'ADAMO: Oh, okay. I have more 12 time. I'm confusing this with another project. 13 CHAIRPERSON SAWYER: I did have a discussion with 14 an unsuccessful applicant. I don't know whether that 15 falls into the area, Dr. Williams associated with the 16 University of California. 17 CHIEF COUNSEL JENNINGS: I think it would fall -- 18 CHAIRPERSON SAWYER: I had an e-mail 19 correspondence with him yesterday. 20 CHIEF COUNSEL JENNINGS: Thank you. 21 CHAIRPERSON SAWYER: Have all Board members had 22 an opportunity to review the proposals? If so, do I hear 23 a motion and second to adopt Resolution 7-1-7? 24 SUPERVISOR HILL: I'll move the Resolution. 25 BOARD MEMBER GONG: Second. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 CHAIRPERSON SAWYER: Professor Sperling, are you 2 going to abstain from part of this? 3 BOARD MEMBER SPERLING: I'm a little confused 4 here. We are talking about just the general plan, not, 5 for instance, the allocation of -- 6 CHAIRPERSON SAWYER: What we'll be doing is 7 approving the proposals as listed in Resolution 7-1-7. 8 BOARD MEMBER SPERLING: And that does not include 9 the $25 million funds? 10 CHAIRPERSON SAWYER: No. That's a separate item. 11 BOARD MEMBER SPERLING: I think I will recuse 12 myself from this plan as well as the 25 million later on 13 because of my affiliation with the University of 14 California Davis and many of the researchers that are 15 putting in the proposals. 16 CHAIRPERSON SAWYER: Fine. Let's note Professor 17 Sperling is recusing himself from the vote and take a 18 voice vote of the rest of the Board. 19 All those in favor indicate by saying aye. 20 (Aye) 21 CHAIRPERSON SAWYER: Opposed. 22 The Resolution is carried. 23 We're going to change the agenda order and take 24 up item 7-5-5 next rather than the item 7-5-2. 7-5-2 is 25 the plan for San Diego attaining the federal eight-hour PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 ozone standard. And we want to do everything we can to 2 have Supervisor Roberts here. He was unable to be here at 3 the beginning of the meeting. So by changing the order, 4 we're hopeful when we do take up the plan, that will be 5 next, that he will be here. Excuse me. 7-5-3, which has 6 to do with the alternative fuels, will be the next item. 7 Agenda Item 7-5-3, staff recommendations for 8 allocating $25 million in alternative fuel incentive 9 funds. State law requires that these funds be encumbered 10 by June 30th, 2007, and fully expended no later than June 11 30th, 2009. 12 Let me say and express my thanks to the staff for 13 putting this program together in a rather short period 14 that when we knew the funds were available between now and 15 a matter of months. So congratulations on doing such a 16 fine job. 17 Ms. Witherspoon, please introduce in item. 18 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 19 Sawyer. 20 Twenty-five million is the largest amount of 21 money the State Legislature has provided at one time to 22 incentivize the use and production of alternative 23 transportation fuels in California. In light of this 24 fact, we worked very closely with the Energy Commission 25 and other State agencies on joint priorities and criteria PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 so we could derive maximum benefit from these funds. 2 Last October, we presented you with proposed 3 concepts for allocating the 25 million. Following your 4 approval of those concepts, staff sent out solicitations 5 in early February with responses due in mid-March. A 6 multi-State agency review group consisting of the Energy 7 Commission, Water Board, Integrated Waste Management 8 Board, Department of Food and Agriculture, and Department 9 of Forestry evaluated over 200 specific proposals totaling 10 more than 160 million in requested funds. 11 Based on the recommendations of this group, we 12 are recommending that you approve 40 specific projects. 13 And the rest of my script is gone, so I will turn it over 14 to Analisa Bevan to make the staff presentation. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 18 Actually you're turning it over to Dean Simeroth to begin, 19 and I'm going to turn it over to Analisa Bevan. 20 Thank you, Ms. Witherspoon. 21 As you heard, a budget bill was approved last 22 June and authorized a one-time allocation of $25 million 23 to incentivize the use of alternative transportation fuels 24 and vehicles in California. The bill directed the ARB to 25 work with the California Energy Commission to develop the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 concepts for spending these moneys. Peter Ward is here 2 today to represent the California Energy Commission. 3 --o0o-- 4 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 5 Budget control language was provided to guide these 6 expenditures. The ARB staff and Energy Commission staff 7 jointly developed expenditure plans, and funds are 8 expected to be allocated this year. Forty proposals, as 9 you heard, are recommended for your approval. 10 Also like to mention this has been truly an ARB 11 staff proposal. We had representatives from 12 Administrative Services Division, Stationary Source 13 Division, Monitoring and Laboratory Division, and Mobile 14 Source Control Division working on this project. 15 --o0o-- 16 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: The 17 budget language specifically focused on incentives for 18 public and private fuel vehicles and fueling stations 19 especially for E85. That's 85 percent ethanol and 15 20 percent gasoline and also specifically the protection of 21 alternative fuels. In addition, it provided grants for 22 alternative fuels research and development. Staff also 23 proposes to compliment these objectives with consumer 24 education and outreach efforts. Key goal of this program 25 is to reduce air pollution and greenhouse gases. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 --o0o-- 2 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: To 3 facilitate the development concepts for solicitation, 4 staff identified a number of guiding principles. Most 5 significant are that and project funded should advance 6 California state knowledge, result in an increase in safe 7 protection and the distribution infrastructure, the result 8 in deployment of the new vehicle technologies, especially 9 plug-in hybrids. 10 --o0o-- 11 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 12 Additionally, these funds are not for long-term research. 13 If the program is to be effective, flexibility was 14 identified as being needed to be able to respond to 15 changing situations, especially to shift moneys between 16 the proposed categories. 17 --o0o-- 18 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Seven 19 categories were identified as shown here: Alternative 20 fuel infrastructure projects, biofuel protection, plug-in 21 hybrid and alternative fuel vehicles, transit bus 22 projects, alternative fuel vehicle incentive programs, 23 consumer education and outreach, and research. 24 --o0o-- 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 Budget language requires the 25 million to be encumbered 2 by June 30th of this year and the funds be fully expended 3 by June 30th, 2009. In addition, staff has to provide 4 reports to the Legislature. 5 As mentioned earlier, ARB and the California 6 Energy Commission and a number of other State agencies 7 have worked together to implement the program. Public 8 workshop was held on September 21st. Staff briefed the 9 Board on proposed concepts for the alternative fuels 10 incentive program last October and we're back today. 11 --o0o-- 12 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 13 Solicitations for proposals were sent out February 9th. 14 We received over 200 responses. The total moneys 15 requested was 160 million. We're only short a little bit. 16 Proposals were reviewed as heard earlier by a multi-State 17 agency review team. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 20 General criteria for the rating included in the 21 solicitation was that criteria. They're summarized here, 22 cost being able to be completed in two years it be 23 alternatives fuels, where the other funding would come 24 from, and completeness of the applications. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 2 Specifically for categories A and B, the infrastructure 3 for distribution and protection, we're looking for small 4 businesses and technical information to support the 5 ability to complete the project in two years. The other 6 categories we also relied upon evaluating the applications 7 for knowledge and experience, the availability of the 8 technology, business parameters and operation. 9 --o0o-- 10 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: As I 11 mentioned, we had over 200 applications. Approximately 12 170 were deemed to be acceptable in that they were 13 complete and on time. And today, we're here to recommend 14 40 projects be funded. 15 --o0o-- 16 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Next 17 I will cover the recommendations. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 20 Starting with the Category A for alternative fueling 21 infrastructure. Fuels are budgeted for the infrastructure 22 for public and private fleets and retail fueling stations, 23 public stations. This includes funds for the underground 24 storage tanks and vapor recovery equipment. We took the 25 approach we wanted new tanks and dispensers and not to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 encourage the attempt to retrofit, which adds technical 2 difficulties that we identified with the Water Resources 3 Control Board. Primary goal of the category is to begin 4 to establish an alternative non-petroleum-based 5 infrastructure in California. 6 --o0o-- 7 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 8 Originally, we had allocated $7 million. We received 38 9 proposals for this category. $26 million was requested. 10 We're recommending ten projects that will provide us with 11 51 stations or fueling facilities. It's $5.4 million is 12 the amount to be recommended for funding. The other 13 moneys are being shifted to other categories. This will 14 include $2.7 million in matched funding. And we also 15 identified three additional projects that if funding 16 became available we could consider funding. 17 --o0o-- 18 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 19 Proposal recommended for funding is Sacramento 20 Metropolitan area. Provide money to the Air Quality 21 Management District in Sacramento for three-and-a-half 22 million dollars to actually administer, select the 23 stations, work out the permitting and other issues, and 24 make sure that we get what we wanted, which was an 25 infrastructure in Sacramento that would allow people to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 purchase E85 on their normal commute routes and provide 2 competition among the stations. Sacramento has some 3 experience in doing this, and we think they will do an 4 excellent job in administering the moneys. 5 We also are recommending funding for some E85 6 stations located along Highway 101 and 405. And this was 7 Community Environmental Council and Cal Start has money 8 already, but their moneys aren't nearly enough to 9 incetivize. Recommending 580,000 to supplement that. 10 This will get us southern California exposure. 11 RTC here in San Diego, a proposal. We're 12 recommending that eight stations be allowed to be 13 incentivizeed in their proposal for approximately 800,000. 14 RTC operates the only retail E85 station in the 15 state. 16 --o0o-- 17 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: We 18 have a retail car look for biodiesel in Orange County, 19 Nicky Petroleum. Modest amount of money. It's an 20 above-ground tank. 21 Retail and fleet electric vehicle recharging 22 stalls in California, we're actually recommending one be 23 funded in the city of Davis. That has ability to do 24 charging at different rates. And it had a special merit 25 to it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 Also for city of Tulare is proposing the city 2 would put in for their flexible fuel vehicles a tank 3 dispenser at a retail station that would also be available 4 to the public. 5 --o0o-- 6 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Also 7 proposing an E85 fuel facility at University of California 8 Davis. This would be an above ground tank for a fleet of 9 FFEs and a CNG update for two new dispensers for the city 10 of San Francisco. 11 --o0o-- 12 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: And 13 also upgrade two new tanks -- two additional tanks in the 14 city of San Francisco for CNG. 15 Finally, Los Angeles County asked for moneys for 16 an underground tank for E85 for their flexible fuel 17 vehicle fleet. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: We 20 had a hard time selecting what to recommend if moneys 21 became available. These are the ones we came up with. 22 Imperial Valley requested moneys for their fleet 23 of flexible fuel vehicles. And they had over 100 vehicles 24 in their fleet. Gas to liquid fuel, Fischer-Tropsch bus 25 demonstration project in southern California, a wholesale PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 bulk distribution for B5 and B20 were the three 2 identified. 3 --o0o-- 4 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Next 5 category is for promotion of biofuel production. 6 --o0o-- 7 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 8 Originally had allocated $5 million. We received 50 9 proposals for a total of $43 million requested. We're 10 making a recommendation on ten of those proposals. We 11 moved a million dollars from Category A to B because of 12 the merits of these proposals. And also will result in 6 13 to $8 million in matched funding. Typical 30 million 14 gallon biodiesel protection facility is about $30 million. 15 We also identified six additional projects if additional 16 funding becomes available. 17 --o0o-- 18 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 19 Project that's recommended is convert dairy waste into 20 biofuel by Crimson and Byogy Group. And this would be a 21 gasification and anaerobic digestion technology in 22 Bakersfield. Biofuels will be supplied to pipeline as 23 natural gas and the liquids to refineries as hydrocarbon 24 feedstocks. 25 Hilarides Dairy requested funding to use an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 anaerobic lagoon digester in Tulare County to generate 2 methane that would be turned into CNG and provide power 3 for the dairy's four converted milk trucks. 4 --o0o-- 5 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 6 Prometheus Energy requested funding for a project in 7 Orange County. They have a process to flare gas from the 8 landfill to produce LNG for Orange County Transit 9 Authority, 250 transit buses. 10 --o0o-- 11 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 12 Another landfill gas is Altamont by Livermore to produce 13 liquefied natural gas. Blue Sky Bio-Fuels to produce 14 biodiesel from recycled waste vegetable oil and trap 15 grease. Whole Energy Fuels funding to produce biodiesel 16 from waste cooking oil. This could be in the city of 17 Pacifica at the Calera Creek Water Recycling Plant. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Prima 20 Fuels requested funding to produce biodiesel from 21 vegetable oil using commercially available. This would be 22 at the port of Sacramento. 23 New Leaf Biofuels requested funding to produce 24 biodiesel from waste vegetable oils and yellow grease in 25 San Diego. The City of San Diego selected New Leaf's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 project for its Clean Tech Program and has offered land 2 for the project. 3 --o0o-- 4 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: We 5 have Simple Fuels requested funding. This is in eastern 6 Plumas County. And this would be produce biodiesel from 7 waste vegetable, grease, and virgin oil. 8 Renewable Energy requested funding to produce 9 biodiesel from vegetable oils. This would be in Sante Fe 10 Springs at an unnamed shut down oil refinery in Santa Fe 11 Springs. 12 --o0o-- 13 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: I had 14 a past association with that refinery in terms of doing 15 testing programs out there. Nothing to do with the 16 project. 17 Proposals recommended if additional funding is 18 available are summarized in this slide. Biogas from waste 19 water digesters. Biodiesel plants -- two biodiesel 20 plants. A third biodiesel plant and fourth and fifth are 21 also deemed by staff to be meritorious. 22 I should point out I recuse myself from voting on 23 this and let staff do the voting. 24 --o0o-- 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: At PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 this point, I'd like to turn it over to Analise Bevan to 2 make the staff presentation. 3 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 4 CHIEF BEVAN: Thank you, Dean. 5 I'll take over and walk us through the remaining 6 categories of projects: plug-in hybrid demonstration 7 programs, transit bus projects, vehicle incentives, 8 education and outreach, and finally directed research 9 projects. 10 --o0o-- 11 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 12 CHIEF BEVAN: This category of plug-in hybrid proposals 13 was allocated $5 million, and we're recommending projects 14 totaling that amount. Of all the categories, this one 15 received the most proposals with 78. The funds requested 16 by these submissions total $56 million. Staff are 17 recommending seven proposals for funding. And these will 18 leverage $7.5 million in matched funding. Also presented 19 are two additional projects that would be worthy of 20 funding should additional money be available. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: The objective of this category is to support 24 projects that will advance commercialization of electric 25 drive vehicle technologies with an emphasize on plug-in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 hybrid projects. We looked for passengers car and 2 light-duty truck plug-in demos that addressed consumer 3 acceptance, user behavior, question of how much owners 4 will plug-in, and marketability. 5 --o0o-- 6 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 7 CHIEF BEVAN: We were also interested in evaluations of 8 battery technology, certification and test protocols, and 9 charging infrastructure issues. I'll now briefly describe 10 the recommended projects. 11 --o0o-- 12 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 13 CHIEF BEVAN: The first proposal is the California Clean 14 Mobility Partnership. This project is to be carried out 15 by the U.C. Berkeley, U.C. Irvine campuses. It will 16 perform a technical analysis of a variety of advanced 17 technology vehicles including plug-in hybrid, conventional 18 hybrids, and fuel cell vehicles. 19 Within this project, vehicles would be provided 20 to users and instrumented with data collection systems to 21 record usage and performance information for various 22 vehicle types. $1.1 million is allocated to this project. 23 The second project is proposed by Tesla Motors to 24 develop and test a commercial medium power charging 25 station for plug-in electric vehicles. This project PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 supports the ZEV regulation's electric vehicle charging 2 standard by helping to update the technology required by 3 our standard. $561,000 is allocated to this project. 4 The third project recommended for funding is a 5 battery technology evaluation study to be performed by the 6 Electric Power Research Institute and U.C. Davis. This 7 project will bench test a variety of lithium battery 8 chemistries in order to third-party verify the claims made 9 by lifetime and performance by various new technologies 10 coming to market. This project is allocated $344,000. 11 --o0o-- 12 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 13 CHIEF BEVAN: The fourth project recommended for funding 14 is a plug-in hybrid demonstration and consumer education 15 outreach and market research project to be carried out by 16 U.C. Davis' new plug-in hybrid electric vehicle center. 17 This program will place plug-in hybrid conversion vehicles 18 with consumers to gauge their behavior, usage patterns, 19 and impressions for this specific vehicle technology. 20 $1.5 million is allocated to this project. 21 The fifth project recommended for funding 22 provides sponsorship support for only California 23 Universities teams participating in the Society of 24 Automotive Engineers Formula Hybrid competition. 25 University teams will submit proposals to Plug-In America PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 who will select several teams to support as they develop 2 formula racing hybrid electric vehicles for SAE's student 3 composition. $142,000 is allocated for this project. 4 The sixth project recommended for funding would 5 develop a pilot television show highlighting development 6 of electric drive vehicles. This reality/documentary 7 concept would be similar to shows seen on channels such as 8 the Learning Channel, Discovery Channel, and would raise 9 awareness and understanding of electric drive technology 10 by taking a behind-the-scenes look at electric vehicle 11 conversion garages and ground-up electric vehicle 12 developers. $150,000 is allocated to this project. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: The final project recommended for funding in 16 this category is a medium duty plug-in hybrid 17 demonstration to be carried out by Electric Power Research 18 Institute and Eaton. This demonstration of plug-in trucks 19 and shuttle bus is part of an ongoing project and is 20 particularly interesting to staff because of its apparent 21 near-term potential for commercial viability. $1.2 22 million is allocated to this project. 23 --o0o-- 24 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 25 CHIEF BEVAN: Two projects have been identified as worthy PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 of funding if additional money were allocated to this 2 category. The first is a plug-in charging infrastructure 3 and battery technology demonstration by AeroVironment, and 4 the second is an advanced battery testing project by Tesla 5 Motors. 6 --o0o-- 7 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 8 CHIEF BEVAN: I'll turn now to a summary of proposed 9 funding for Category D transit bus projects. 10 --o0o-- 11 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 12 CHIEF BEVAN: $2 million was allocated to this category, 13 and we are proposing projects for funding totaling that 14 amount. Eight proposals were received asking for $9.7 15 million. We choose two projects for funding that will 16 leverage 17 million in matched funds. Two additional 17 projects are listed as backups should additional funding 18 be available. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 21 CHIEF BEVAN: The first project we are recommending for 22 funding is the City of Burbank. This 35-foot ultra 23 light-weight chassis plug-in hybrid bus incorporates and 24 on-board range extending fuel cell and will use a lithium 25 ion energy storage battery. In addition to industry match PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 funding, this project leverages a little over $2 million 2 in federal funding through the Federal Transit Authority's 3 fuel cell bus program. 4 The second project we're recommending for funding 5 supports the Metropolitan Transit Commission's twelve bus 6 demonstration program headed up AC Transit. The program 7 will involve five transit agencies in the San Francisco 8 Bay Area. The $630,000 proposed will go towards creating 9 modular power and drive systems that improve 10 serviceability and transfer to additional bus 11 configurations. It should be noted that this is in total 12 a $37 million program that ARB is also supporting through 13 the hydrogen highway with a little over $2 million in 14 funding. 15 --o0o-- 16 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 17 CHIEF BEVAN: Staff recommends that if additional funding 18 is available, the Metropolitan Transit Commission's 19 project be funded to their full request of $2 million. 20 This would assist this very worthy project in meeting 21 their total project funding target. 22 The other program we're recommending funding if 23 additional money were made available is the proposal from 24 Sunline to redesign an existing hydrogen internal 25 combustion engine and control strategy in an urban transit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 bus. 2 --o0o-- 3 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 4 CHIEF BEVAN: The next category for funding is to 5 establish a vehicle incentive program for the purchase of 6 alternative fuel vehicles, including battery electric, 7 neighborhood electric, and compressed natural gas, plug-in 8 electric, and fuel cell vehicles. The request for grant 9 proposals asked for bids from potential program 10 administrators who would over the course of the next 11 two years issue grants to purchasers of qualified vehicles 12 on behalf of this program. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: Vehicle incentives were allocated $1.5 16 million. We estimate this will provide several hundred 17 grants to vehicle purchasers. We estimate the program 18 will likely be oversubscribed by 2009 based on the 19 estimates of battery electric vehicle sales. We received 20 four proposals from which we selected one administrator. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 23 CHIEF BEVAN: The program administrator we recommend 24 working with to carry out the vehicle incentive program is 25 San Diego Regional Energy Office. Administration of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 program will cost $150,000. This proponent was chosen for 2 their experience administering State grant programs for 3 other agencies and their knowledge of advanced vehicle 4 technologies. Additionally, they propose an innovative 5 approach to the use of matched funding to develop and 6 carry out post-participant surveys. 7 --o0o-- 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: I'll turn now to the last competitively bid 10 category, consumer education and outreach. Our intent 11 with this category is to raise public awareness of 12 alternative fuel and advance technology vehicles and to 13 use education to reach important sectors that will be 14 critical to the mass commercialization of these vehicles. 15 --o0o-- 16 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 17 CHIEF BEVAN: This category was allocated $1.6 million to 18 fund two types of projects, the first being a statewide 19 consumer marketing campaign for one million dollars, and 20 the second to support education programs throughout the 21 state with $600,000. 22 Thirty-six proposals were received asking for 23 $23.3 million. We're recommending that four projects be 24 funded to use the allocated 1.6 million. These programs 25 will leverage about 300,000 in matching funds. We've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 identified one additional project that we recommend if 2 additional money were available for this category. 3 --o0o-- 4 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 5 CHIEF BEVAN: We're recommending to fund Ogilvy Public 6 Relations to carry out a statewide consumer marketing 7 campaign. They will carry out efforts to address barriers 8 to consumer acceptance of clean vehicles and fuels by 9 enhancing our driveclean.ca.gov website promoting our soon 10 to be adopted clean vehicle labeling program and 11 establishing programs that dispel myths with alternative 12 fuel vehicle features and performance. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: Three additional education and outreach 16 programs are recommended for funding. The first is the 17 San Diego Environmental Foundation located at the Regional 18 Transportation Center here in San Diego. This program 19 educates about 10,000 school children each year covering a 20 variety of alternative fuels, science concepts, and 21 technologies. The funding provided will maintain the well 22 established program and will allow low-income schools to 23 participate for free and develop a guide to creating 24 similar programs across the state. 25 The second program we recommend funding is the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 Office of the State Fire Marshal. They proposed to 2 develop a modular training program for alternative fuels 3 that prepares emergency responders to deal with incidents 4 involving alternative fuel vehicles. In some cases, this 5 program will update existing materials. And in some 6 cases, it would establish new materials. We're 7 recommending partial funding of $171,000 rather than the 8 nearly 500,000 they requested in the hopes that this will 9 be enough to get the program started and opportunities to 10 leverage additional resources and co-funding may be found. 11 The third program recommended for funding is the 12 Central Coast Clean Cities Coalition. That's another. 13 This modest $29,000 project will work to market 14 alternative fuel vehicles through activities with local 15 car dealers through ride and drive opportunities and 16 through development of informational materials about 17 alternative fuel vehicles. 18 --o0o-- 19 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 20 CHIEF BEVAN: Staff recommends that if more funding were 21 available for outreach and education that the statewide 22 campaign for alternative fuel education be augmented to 23 widen its scope and its effectiveness. 24 Another recommendation would be to fund the San 25 Diego Unified School District to establish an alternative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 fuel renewable energy education center at their proposed 2 hydrogen station location in northeastern San Diego 3 County. 4 --o0o-- 5 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 6 CHIEF BEVAN: Finally, I'd like to summarize the projects 7 we have developed to address specific issues with the use 8 of alternative fuels from an air quality and regulatory 9 compliance standpoint. This directed research has direct 10 benefit to the commercialization of alternative fuels by 11 helping us to understand the emissions performance or 12 operating characteristics of specific fuels and vehicles 13 so that they can be appropriately treated in our fuels and 14 motor vehicle regulations. 15 --o0o-- 16 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 17 CHIEF BEVAN: $3.3 million was allocated to directed 18 research projects. Nearly all of that funding is 19 allocated to projects that will address our research 20 needs. We have identified six specific projects in this 21 category. 22 --o0o-- 23 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 24 CHIEF BEVAN: The first to address plug-in hybrid 25 certification and test procedures is a project needed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 because of the current test procedures are inadequate for 2 the plug-in hybrids contemplated by automakers. The 3 California Clean Mobility Partnership proposal I talked 4 about earlier included assisting in the development of 5 certification and test procedures for plug-in hybrids. 6 Since this statement of work matched well with our goals, 7 we shifted this element of their proposal to the directed 8 research category of our program. U.C. Irvine will assist 9 ARB in the development of certification procedures, work 10 with automakers. And we'll be procuring example plug-in 11 hybrids for testing at our El Monte laboratories and will 12 coordinate with the Society of Automotive Engineers' 13 process to develop certification test procedures. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: I'll turn this back to Dean to talk about 17 the fuels research. 18 --o0o-- 19 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: Thank 20 you. 21 Air Resources Board staff has been tasked to 22 develop a biodiesel program that includes the development 23 of biodiesel fuel specifications and biodiesel strategies 24 to reduce greenhouse gas emissions and increase protection 25 of biodiesel in California. To support these activities, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 staff is proposing a research study to address the impact 2 of biodiesel use in California to protect our interest to 3 use as a potential biodiesel to result in an increase of 4 oxides of nitrogen while having other value qualities such 5 as the greenhouse gas reductions, particulate matter 6 reductions, and hydrocarbons. 7 Proposing that we provide the University of 8 California and their Center for Environmental Research and 9 Technology a little bit -- almost 1,700,000. This would 10 be a two-phase project. First phase to actually do the 11 testing to quantify the NOx impact, oxides of nitrogen 12 increases potential especially for low level blends. 13 These are the type of blends we expect to be most used in 14 California. And most importantly, for the first time to 15 look at how any increase in oxides of nitrogen might be 16 mitigated. There's at least three different concepts 17 being considered to be evaluated in doing that. That 18 information would allow us to develop specifications to 19 address the air pollution concerns with the use of 20 biodiesel. 21 --o0o-- 22 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: In 23 addition to that, to adopt specifications -- 24 --o0o-- 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 Getting ahead of myself. 2 We have to do a multi-media assessment under the 3 Health and Safety Code requirements. We have already 4 begun that process with the University of California 5 Berkeley and Davis. Additional moneys are needed to 6 finish the project. These are proposed here to be split 7 between the two campuses. U.C. Berkeley will focus on 8 life cycle methodology, motor vehicle emissions, and 9 greenhouse gas issues. U.C. Davis will focus on 10 regulatory impact, particularly on sub-surface and 11 groundwater fate and transport, aquatic toxicology, 12 biodegradation, and human health effects. 13 --o0o-- 14 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: In 15 addition, proposing to move 400,000 from Category A to 16 this category and provide the moneys to Clean Fuel USA to 17 coordinate the design, testing, and development of an E85 18 dispensing equipment and submit the dispensing component 19 of our systems to Underwriters Laboratory for 20 certification. Without this certification, we're not 21 going to be able to have our fueling infrastructure. So 22 that would be money well spent. 23 --o0o-- 24 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: And 25 with that, turn it back to Analisa to complete the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 presentation. 2 --o0o-- 3 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 4 CHIEF BEVAN: So to recap, the $25 million for alternative 5 fuel vehicles is divided as shown here. 5.4 million will 6 go to establish alternative fuel stations primarily E85, 7 but also supporting electric charging stations, CNG, and 8 biodiesel. $6 million will go toward biofuel production 9 in projects ranging from landfill gas LNG to dairy 10 digesters to biodiesel protection. 11 Five million is allocated to plug-in hybrid 12 demonstrations and electric drive technology support. $2 13 million is allocated to transit bus projects that will 14 increase the number of zero emission buses operating in 15 California. 16 1.5 million is allocated to alternative fuel 17 vehicles incentives to support the purchase of electric 18 plug-in hybrid fuel cell and natural gas vehicles. 19 And 1.6 is allocated to public outreach and 20 education to raise awareness about alternative and clean 21 vehicles and to promote their purchase and use. 22 And, finally, 3.2 million is allocated to 23 directed research and testing to help ARB better 24 understand and support alternative fuel vehicles in our 25 regulations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 These recommended allocations total $24.7 2 million. Since we anticipate the vehicle incentives to be 3 oversubscribed, as I mentioned when I was describing that 4 program, we recommend the balance of the $25 million be 5 allocated to the vehicle grants to bring that program up 6 to $1.8 million. 7 --o0o-- 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: As Catherine mentioned, this is the largest 10 single allocation of funds from the State Legislature for 11 funding alternative fuel vehicles programs to date. Our 12 goal with the panel of projects laid out for your approval 13 is to move California closer to mass commercialization of 14 a variety of alternative fuels. We think we'll learn a 15 lot from these programs. And alternative fuel 16 commercialization will benefit from support this program 17 provides. 18 Finally, we would like to request the Board 19 approve the recommendation that have been made by a 20 multi-state agency working group by approving today's 21 Resolution 07-1-6. 22 And before I end, I would like to introduce Mr. 23 Peter Ward, Policy Advisor to Commissioner James Boyd, 24 Vice Chairman of the California Energy Commission, to say 25 a couple words about our partnership. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 MR. WARD: Thank you, Analisa. Dr. Sawyer, 2 Board, thank you for your invitation to address the Board 3 today. It's my pleasure to be here. This was truly a 4 cooperative effort among the many State agencies in 5 co-planning with the Energy Commission and the Air 6 Resources Board staff. Worked well together, even though 7 there are many other pressing things that both agencies 8 are engaged in right now. 9 I definitely want to commend the Air Resources 10 Board and the CEC staff, both staffs, for the Herculean 11 effort to encumber $25 million for the alternative fuels. 12 Alternative fuels meaning the non-petroleum fuels that we 13 need and look forward to in our state and in our nation. 14 This is not an easy thing to do in one year. It requires 15 quite a bit of coordination between the two agencies and 16 the other agencies involved in the evaluation of these 17 projects as well. 18 I can't help but mention as we go into Memorial 19 Day weekend, we always seem to get a price increase for 20 our transportation fuels. And our transportation fuels 21 are a one-source fuel. I'm here to remind everybody of 22 that. We've already gotten our fuel price increases 23 earlier in the spring. So the historic increases in price 24 over Memorial Day which start the summer driving season we 25 have already assimilated, but I am not sure that will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 the end of those increases. 2 I look at the $25 million as Ms. Witherspoon 3 mentioned, and Analisa mentioned this is the largest 4 allocation the State Legislature has made towards 5 alternative fuels development in its history. And of 6 course, we've had this one source fuel problem for 35 7 years. Most of my time at the Energy Commission has been 8 spent in working to develop alternatives to petroleum 9 transportation fuels. I wish we were much more successful 10 than we have been. 11 I do think this is a down payment and only a 12 small down payment on the transition that we need to make 13 to non-petroleum fuel sourcing in the future. The ARB and 14 the Energy Commission both started their partnership long 15 ago, but continued it in the report of AB 2076 which was 16 published in 2003 where we set goals for alternative fuels 17 utilization at about 20 percent in the year 2020. To 18 figure that out, that's about 4.8 billion gallons of 19 additional supply of fuel beyond the petroleum fuel supply 20 in 2020. I don't think we're on a path to get there at 21 this point. 22 The Energy Commission has been engaged also with 23 the Air Resources Board staff on the development of the AB 24 1007 alternative fuels plan. That is the plan that was 25 established by legislation in 2005 to actually chart a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 course to achieve that 20 percent alternative fuels use in 2 2020. And that report is coming to a close at the end of 3 next month. And I think in the future that report will be 4 an excellent guide for us to chart the path to actually 5 increase supply of non-petroleum fuels and due to certain 6 reductions, conservation, and efficiency to reduce our 7 petroleum demand in the state as well. 8 The $25 million is a very, very small down 9 payment as I mentioned. Given the fact that in the May 10 2004 to September 2005 upswing in prices, California 11 consumers were paying over $500 million additional each 12 month for the transportation fuels they were using at that 13 time. And we just got a new figure that in 2006 we 14 increased beyond that an additional $400 million per month 15 is being spent. Our fuels have gone up 11.8 percent since 16 that time. 17 This $25 million is a very, very small down 18 payment in those terms considering the impact that these 19 transportation fuels and their escalating prices -- which 20 are not capped in any way at this point. They will be 21 going up. I'm willing to bet that. But this is a very 22 modest down payment. I'm hoping this is the start and 23 just the start of our transition. With this modest down 24 payment, I think we can achieve quite a bit of good with 25 this. I think it's a broad proposal that both staffs and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 the other agencies have come up and presented to you. And 2 I heartily recommend your support of this recommendation. 3 And I hope there is much, much more to follow. Thank you. 4 CHAIRPERSON SAWYER: Thank you. Mr. Simeroth, 5 Ms. Bevan, and Mr. Ward, thank you very much for your work 6 in developing this program, as I mentioned before, in a 7 relatively short period of time and for presenting it to 8 the Board today. 9 Do any Board members have questions? Supervisor 10 Roberts -- excuse me. Mayor Loveridge. 11 BOARD MEMBER LOVERIDGE: Let me just support your 12 comments and the staff. This was done quickly. Kudos to 13 the State's legislative support in what is before us. And 14 particularly applaud the attention to plug-ins and the 15 number of proposals that were advanced. 16 But I had four quick questions. What is the 17 policy of the Air Resources Board about submission of 18 proposals? Do we publish a list of those that are not 19 funded as well as those that are funded? What is our 20 position on that? 21 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: We 22 didn't publish a list of those that are not funded. We 23 publish a list of those proposed for funding. 24 BOARD MEMBER LOVERIDGE: Is that standard 25 operating procedure to publish only those what have been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 funded? Do we have a policy on that? 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER: This 3 is Bob Fletcher. 4 I would say it is somewhat of our policy even in 5 the Research Program when we do solicitations for 6 proposals, we do get a number of proposals that are gone 7 through. I think those are made available to the Board as 8 part of the package. But I don't believe they're made 9 available to the public. So this is sort of the first 10 time we've done an incentive program like this in this 11 time frame. So I am not sure we've set a policy here. 12 It's just the way that we did it. 13 BOARD MEMBER LOVERIDGE: I just think it may be 14 helpful for Board members to have a quick summary for 15 those that are not funded as well as funded. 16 Second, as the decisions were made on the -- 17 particularly the infrastructure, did it have any 18 connection with pollution levels? Is there any notion as 19 you begin to try to fund particular infrastructure that 20 should be related to where air pollution is bad as opposed 21 to where air pollution is good? Air quality is bad and -- 22 better correct the language. 23 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: 24 Mayor, we didn't specifically focus on that. However, the 25 bulk of the moneys we were looking at getting into the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 areas which would benefit the Sacramento area and the 2 101/405 corridors in the South Coast. And the moneys that 3 went to RTC in San Diego would be mostly for stations 4 outside of San Diego into the Los Angeles/Central Valley 5 area. 6 EXECUTIVE OFFICER WITHERSPOON: Mayor Loveridge, 7 if I might. We launched an E85 campaign a couple of years 8 ago and have been working on theories and strategies to 9 get people to use E85 in the flex-fuel vehicles they 10 already have. So the concept behind those station 11 proposals was to put enough stations in a single 12 metropolitan area -- ideally two majors with ten stations 13 a piece -- so they compete on price and service and the 14 rest of it and we can see what the consumer response was. 15 If we could get them to be aware of their yellow gas caps 16 and seek out E85 for their vehicles. So it isn't so much 17 to drive air pollution down as to figure out what makes 18 people buy the fuel. 19 BOARD MEMBER LOVERIDGE: I guess that leaves the 20 third question. Have we used this at all to concentrate 21 infrastructure to a test case to see if we can measure 22 what choices the people would make? 23 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That was true 24 for the E85. We wanted to get enough stations in one 25 area. And actually it's easier to do in a smaller area PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 than in someplace like Los Angeles where things are so 2 spread out. 3 And again, the major purpose of the money is to 4 incentivize things that aren't happening today to show 5 they can happen to find out what additional problems have 6 to be solved. And the pollution benefits that come from 7 that are not so much from the direct money we are spending 8 now but from learning to do these things and make them 9 much broader. 10 BOARD MEMBER LOVERIDGE: Just kind of a special 11 plea. The U.S. Conference of Mayors has called for CDPG 12 kind of grants to cities across the country. They're 13 looking at a $4 billion call for energy efficiency 14 alternative fuel. It's scattered in some legislative 15 form. I recognize the difficulties finding new funding in 16 D.C. 17 Does the State ever take a position on this kind 18 of request? I mean, it's been supported by the National 19 League of Cities, by the League of California Cities, as 20 well the U.S. Conference of Mayors. And if we want to 21 move this from the laboratory and from illustration to 22 really extensive use, it seems that kind of grant 23 opportunity would help make it happen. 24 EXECUTIVE OFFICER WITHERSPOON: The Governor's 25 Office carefully weighs and debates which asks to make of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 Congress from the Governor Proper. But the Legislature 2 makes several asks its own to the California Delegation. 3 So there are two avenues to pursue a California position 4 in Congress. 5 BOARD MEMBER LOVERIDGE: Maybe informally you can 6 tell me what the Governor's and the Legislature's position 7 has been on this request for the kind of energy. 8 EXECUTIVE OFFICER WITHERSPOON: We'll find out. 9 I'm not aware of a position. 10 CHAIRPERSON SAWYER: Ms. D'Adamo. 11 BOARD MEMBER D'ADAMO: I have a couple of 12 questions on projects on the vehicle incentive program. 13 Is that a consumer program? 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: Yes, it is. 16 BOARD MEMBER D'ADAMO: Would it be regionally 17 based? 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: Statewide. Any purchaser throughout the 20 state would be eligible, both consumer and fleets. 21 BOARD MEMBER D'ADAMO: Do you have any idea based 22 upon the proposal about how many vehicles would be funded? 23 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 24 CHIEF BEVAN: We're estimating several hundred. And it's 25 based on our own estimates of what we know of vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 production and the various categories of compressed 2 natural gas electric vehicle neighborhood electric 3 vehicles. 4 BOARD MEMBER D'ADAMO: Okay. And then under the 5 plug-in category, the television show, is that pilot 6 expected to be just focused on plug-ins or zero emission 7 vehicles in general? 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: I don't know if it's limited to zero 10 emission vehicles. It may include plug-ins. I'll have 11 to -- 12 BOARD MEMBER D'ADAMO: It seems to me that ought 13 to be in the education category. And maybe 150. I know 14 it's not much in the way of funding. But just wondering 15 why you put it in that category instead of using those 16 additional funds within the plug-in category for 17 technologies. 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: They applied through Category C through the 20 plug-in category. And it was a relatively small project 21 with merit towards educating consumers about that specific 22 technology. Whereas, most of the other projects that are 23 funded in the consumer education and outreach are a broad 24 array of alternative fuels. 25 BOARD MEMBER D'ADAMO: And then Mayor Loveridge PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 was touching on additional funding opportunities. But 2 just curious about at the State level what efforts are 3 underway. I see here it was 160 million in requests. If 4 we were to just add those projects that you listed that 5 you would recommend for additional funding, they didn't 6 make the cut, but they seemed to be meritorious, how much 7 in additional funding would that add up to? Do you have a 8 rough estimate? And I'm assuming -- maybe I should ask 9 the question -- if they're on your list category by 10 category that you would recommend additional funding. 11 Does that mean the other projects for whatever reason 12 didn't meet the criteria? 13 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 14 CHIEF BEVAN: Depending on the category, it was very 15 difficult to -- not having enough money in total, it was 16 difficult to make the cut or draw a cut line. But they 17 were all scored, and these were identified in the next 18 project as sort of on the borderline. 19 EXECUTIVE OFFICER WITHERSPOON: We were asked by 20 one Board member to show projects on the bubble in case 21 the Board wished to move any categories around a little 22 bit, but not necessarily to bring forth the entire list of 23 projects. But we have it. And there was a question 24 earlier was it publicly available. Yes, it's public 25 information and can be made available to anyone that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 wishes to see. 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER: My 3 quick map, which I won't swear by, is somewhere around ten 4 million. But a lot of these are related to biomass which 5 the number recommended for funding that were a million 6 dollars apiece and the additional funding of 1.3 for MTC. 7 So there is several projects that were fairly large. 8 BOARD MEMBER D'ADAMO: So I don't know if you are 9 aware of what's going on this year with the legislative 10 proposals. Is there another round of funding expected? 11 EXECUTIVE OFFICER WITHERSPOON: There is not. 12 The funding for this year came from a one-time surplus in 13 the motor vehicle count. And this year that fund 14 condition is very guarded and they're anticipating future 15 deficiencies. So MDA is not being generously distributed. 16 There is legislation pending that creates new fee sources 17 to generate funds for alternative fuel related projects. 18 And the Administration has not taken a position on the 19 proposals. 20 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 21 would also say those are the cream of the crop of the 22 additional funds. So there are likely other projects that 23 could have been funded. This was the top cut. So, you 24 know, we received way more requests than I think we 25 expected to receive. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 BOARD MEMBER D'ADAMO: Well, I wondering too with 2 the time crutch that you were under, if this were an 3 ongoing program, obviously you'd get a lot more, because 4 the word would get out. 5 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Yeah. 6 I think we would have plenty of projects to review. 7 CHAIRPERSON SAWYER: Ms. Berg. 8 BOARD MEMBER BERG: Thank you, Mr. Chairman. 9 I just would like to understand on two projects, 10 one under Category C which was the U.C. Davis 11 demonstration project which seemed to be consumer 12 education and market research based versus the public 13 relations project under Category F. 14 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 15 CHIEF BEVAN: The U.C. Davis project for plug-in hybrid 16 demonstrations is putting vehicles in the hands of 17 consumers and not only educating them about this 18 technology, but also studying their response to it, to 19 further how that technology can be promoted in the future 20 and again being a technology specific project. And I've 21 given you a two or three sentence description of a very 22 large project. So there's quite a bit more analysis and 23 consumer behavior study that will go into this effort. 24 BOARD MEMBER BERG: Then versus the public 25 relation project? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: And the public relations project is an 3 education and outreach component which is to actually go 4 out and educate consumers. We've already done quite a bit 5 of consumer research focus groups on the perception of 6 alternative fuel vehicles. So taking the results of that 7 study and now trying to reduce the barriers to the 8 consumers' perception of alternative fueled vehicles is 9 the goal of the Ogilvy research project -- outreach 10 project. 11 BOARD MEMBER BERG: I guess my concern is that 12 we'll allocated 1.6 million for consumer education. They 13 both feel to be consumer oriented data gathering versus 14 again projects that will further the technology and 15 advancement. And so that would just be my concern. 16 CHAIRPERSON SAWYER: Mr. Cackette. 17 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: I think 18 a big difference is the one at U.C. Davis is a market 19 research program. It's oriented at learning how people 20 might respond to these vehicles, their characteristics, 21 whether they'll plug them in at night or not bother to, 22 how they'll drive them, et cetera. And the other one is 23 the attempt to get to the millions of people in California 24 who might be prospective buyers of alternative fuel 25 vehicles and raise their awareness. So very different PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 focus the only education part of I think the U.C. Davis 2 will be the people who get a few cars they have to drive, 3 and whether maybe their neighbors will see as they're 4 driving these cars around. But the Ogilvy is let's try to 5 get out to everybody that there is an emerging market for 6 alternative fuel vehicles and see if we can increase the 7 public's awareness in general. 8 CHAIRPERSON SAWYER: Are there any other 9 questions? 10 Supervisor Hill. 11 SUPERVISOR HILL: Thank you, Doctor. 12 This is related to the Ecocenter Alternative Fuel 13 Education Program for the San Diego Environmental 14 Foundation. It seems the funding goes to reach 10,000 15 students per year in the San Diego area. My concern is 16 there's some indication that the program will be recreated 17 through a manual to go to other regions of the state. How 18 far reaching will this program go? Is it statewide? What 19 aspect of it will be statewide in terms of its reach? 20 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 21 CHIEF BEVAN: The manual that's being developed as a 22 result of this funding would be made available to other 23 education organizations that may want to start up an 24 education program of this type. But it is primarily a 25 localized effort in terms of the students that are reached PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 and the region that it serves. 2 EXECUTIVE OFFICER WITHERSPOON: Supervisor Hill, 3 the San Diego Regional Transportation Center is a premiere 4 showcase facility that we have cooperated with and funded 5 in small amounts for years. It's losing its primary 6 source of funding in the coming year. And it has been 7 vital in San Diego and vital as a model for how other 8 communities might educate children. So we would hate to 9 see it disappear. And that's why we recommend such a 10 large funding, even though it's located in San Diego only 11 and is not statewide. 12 SUPERVISOR HILL: Has it been replicated 13 elsewhere? 14 EXECUTIVE OFFICER WITHERSPOON: Not yet. The Bay 15 Area would be a good place to replicate it. 16 SUPERVISOR HILL: That's a good idea. That's 17 what I am looking for, is some way we can replicate it and 18 obviously expand on the good work you're doing. 19 EXECUTIVE OFFICER WITHERSPOON: I'm sure 20 Supervisor Roberts would love to give you a tour. It's 21 really phenomenal. 22 SUPERVISOR HILL: Thank you. 23 CHAIRPERSON SAWYER: If there are no other Board 24 questions, we will take a ten-minute break. Following the 25 break, we will begin the public testimony on this with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 Paul Scott, Richard Gillis, and Mark Abramowitz. 2 Also I want to apologize for the two people who 3 requested to speak on the Research Program and were 4 skipped over. We will give you an opportunity to make a 5 statement if you desire to do so following the 6 consideration of this item. 7 (Thereupon a recess was taken.) 8 CHAIRPERSON SAWYER: We'll begin the testimony of 9 the first speaker is Mr. Paul Scott. The three-minute 10 timing is a little different from what we're accustomed to 11 in Sacramento. You will get a green light after two 12 minutes, an orange after two and a half, and a red at 13 three minutes. 14 MR. SCOTT: My name is Paul Scott, but it's Paul 15 B. Scott. I have to distinguish due to another person of 16 similar name that has been a little more vocal than I 17 have. I never before have had to stand before you to make 18 a presentation and regret I have to this time. 19 Do we have the visuals? That's coming. 20 Let me just make some comments. I represent a 21 company named ISE Corporation. We are purveyors of hybrid 22 drive electric vehicles. All our vehicles are electric. 23 We're located about 20 miles to the east of here. So 24 we're a California corporation. We employ Californians. 25 Employ about 90 people. I think we have a worldwide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 reputation for providing quality product. We're 2 negotiating with two overseas entities for fuel cell 3 buses. There will be announcements in the coming months. 4 The numbers are ten or more per site. So we are in the 5 fuel cell bus business. We are in the hybrid bus business 6 even more strongly in the sense that we are providing 7 buses. We've provided buses for Long Beach. Here's the 8 presentation. 9 (Thereupon an overhead presentation was 10 presented as follows.) 11 MR. SCOTT: You can skip to the next page. I've 12 already indicated my name. 13 --o0o-- 14 MR. SCOTT: Here are pictures of some of the 15 buses. The gasoline hybrid buses, I was going to comment, 16 47 of those are located in Long Beach. Just in Long Beach 17 our buses have over four million miles on it. They're on 18 the road every day carrying passengers. The fuel cells 19 busses are located at Sunline Transit and AC Transit. I 20 think in Analisa's presentation you saw a picture of that 21 bus. The hydrogen hybrid bus is a prototype bus. It was 22 delivered over two years ago. Again, day by day carries 23 passengers for Sunline Transit. These are young concepts. 24 The fuel cell bus is a second generation bus. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 MR. SCOTT: Just want to point out that as part 2 of these vehicles we use energy storage, electrical energy 3 storage. The product on the right is using Maxwell ultra 4 capacitors which we integrate into our own product. And a 5 very specific reason for mentioning that as you see as I 6 get to comments. 7 --o0o-- 8 MR. SCOTT: I'm going to focus on a hybrid 9 transit bus that the staff has proposed to fund. It is 10 described as a battery dominant fuel cell hybrid transit 11 bus City of Burbank. Regretfully, I pick on this. 12 First of all, staff is proposing to fund an 13 out-of-state firm. Now, in the presentation you heard 14 from staff, one of the slides indicated that the intent of 15 this program is to advance California's state of 16 knowledge. It's hard for me to see how you do that by 17 funding out-of-state firms. It happens they're funding a 18 start-up firm, as we'll go into more detail, but not built 19 a bus before. Not built a complex bus before, and not 20 built a hybrid drive train. 21 Second point here is that the project description 22 specifically refers to Altairnano. And it's misspelled. 23 That's intentionally copying what's in the program there. 24 Altairnano lithium technology. ISE has an extensive 25 program of battery and energy storage development. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 have spent hundreds of thousands of dollars buying 2 equipment, testing capabilities to 900 volts, 500 amps, 3 and recycle batteries and we include the Altairnano 4 batteries. We have an exclusive agreement for use of that 5 battery for buses. So there may be opportunities to make 6 some agreements here that our Board would have to approve. 7 But basically, we control that technology for buses. And 8 we are developing that for buses which we will supply in 9 the future. We think very highly of the technology. 10 I just want to make a few other points here. 11 Staff proposes to fund a hybrid bus development 12 which is a complex machine by a firm that has never built 13 a hybrid bus. 14 CHAIRPERSON SAWYER: Would you please conclude 15 your remarks? 16 --o0o-- 17 MR. SCOTT: I think the final statement here is 18 that the staff proposal is to fund a bus to use a fuel 19 cell limited warrantee. There are fuel cells available 20 12,000 hours, five years. We suggest that the Board 21 construct reconsideration of this. Thank you. 22 CHAIRPERSON SAWYER: Thank you. 23 Richard Gillis. 24 MR. GILLIS: Thank you very much for the 25 opportunity to speak to you today. I'm a little PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 uncomfortable being here, because I don't like people to 2 sound like sour grapes. And I certainly don't want to 3 sound like that to you today. And I'll do my best not to. 4 First of all, I think the staff and all of the 5 other agencies that were involved in this process should 6 be complimented for the speed with which they acted. 7 However, you may have acted as a detriment. I'm very much 8 concerned about the rating sheets and where we sat within 9 those ratings where we did not have any idea or any 10 opportunity to respond to the results of the ratings 11 before this meeting. We requested them the minute the 12 proposed folks' were put out for funding. But we're told 13 we could not get them for a minimum of ten days, and it 14 could be extended beyond that. 15 So I'm just going to address viability. And I 16 mean no disparagement to anyone. But the facts pretty 17 much are the facts. There are only one or two factories 18 or manufacturers biodiesel facilities in the United States 19 that use multiple feedstock. Many of the people who've 20 received grants or recommended for grants have indicated 21 they will use multiple feedstocks. I'm not quite sure how 22 they can do that without having a viable plant that can 23 handle ASTM standard production consistently. That's one 24 of the issues. I bring it up because we're the only ones 25 in California that we're aware of that own one of those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 plants. And the company that builds them has been doing 2 it for about ten years. 3 Secondly, one need to look at the commodities 4 market at soy costs and prices today with those folks who 5 said they're going to use soy, and you will find out that 6 soy has priced you out of the market high above biodiesel 7 prices that exist now and diesel prices. Soy oil costs 8 more than 34 cents a gallon -- or excuse me -- a pound. 9 It takes 7.5 pounds to make one gallon of biodiesel. It 10 doesn't take a rocket scientist to understand you've 11 already priced yourself out of the market when you haven't 12 processed that oil. That's one thing. 13 Secondly, we only have so much yellow grease 14 recycled vegetable oil available to us. In the country, 15 it's about 6.4 billion pounds. Still takes 7.5 pounds to 16 make a gallon of biodiesel. I have three contracts right 17 now that provide me with 15 million gallons -- that can be 18 turned into 15 million gallons of yellow grease for my 19 plant alone. We were told at the beginning of this 20 process not to say we're producing fuel, and we haven't. 21 We've been testing fuel. But we see people in here who 22 have been awarded grants who are producing fuel. I'm a 23 little confused about that. 24 So I don't want to beleaguer this, but I really 25 do feel that we'd like to request to the Board a revisit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 to the grants. We'd like to know why we weren't in the B 2 squad when we have a plant that's about to become 3 operational and a second one that's being built. 4 So with that, I will say thank you very much. If 5 you have any questions, I'll be glad to answer them. 6 CHAIRPERSON SAWYER: Thank you. 7 Mr. Abramowitz, and then Scott Kessler, Charles 8 Botsford, and Kate Miller. 9 MR. ABRAMOWITZ: Thank you, Mr. Chairman and 10 members of the Board. I'm here on behalf of the 11 California Hydrogen Business Council. And I'd like to 12 congratulate you on a fine group of proposals that you're 13 considering to fund. Our organization was up in 14 Sacramento this week talking to legislators in support of 15 the Governor's $6.5 million hydrogen highway 16 infrastructure funding. As you know, that's having some 17 problems in the Legislature. But it's also critically 18 important to California's clean air future. 19 Aside from the clean air benefits of that, one of 20 the things we talked with legislators about that seemed to 21 really hit home with them was the fact that the incentives 22 that they were providing were helping bring industry, 23 manufacturing, and businesses to California who wanted to 24 participate with California as leaders in hydrogen. And 25 those kind of incentives are bringing companies here. A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 number of companies have moved facilities from other 2 states here because of the kinds of incentives that 3 California is offering. That's the area that you're 4 offering to businesses of these kinds of incentives. 5 So we are a little bit concerned when we learned 6 that a number of the proposals being considered for 7 funding are sending the money outside of California as if 8 there weren't qualified companies here in California or 9 projects good enough to fund here. So we're extremely 10 concerned about that and just wanted to let the Board know 11 about that concern. And suggest that maybe those that are 12 being considered from out of state be re-evaluated and 13 perhaps absent special circumstances that this kind of 14 funding remains here in California. I can tell you that 15 some of the members of our group that we were talking to 16 legislators expressed some concern to some of them, and 17 some of them were quite concerned that we were sending the 18 money out of state. And if you folks haven't heard from 19 them yet, I suspect you will be hearing from some of those 20 legislators. Thank you very much. 21 CHAIRPERSON SAWYER: Thank you. 22 Mr. Kessler. 23 MR. KESSLER: Good morning, Chairman Sawyer and 24 Board members and agency staff. My name is Scott Kessler. 25 I'm the Deputy Director of the city of San Diego's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 Economic Development Division in our City Planning and 2 Community Investment Department. I'm here to offer the 3 City of San Diego's support for your staff's funding 4 recommendation as it relates to the F2, Ecocenter 5 Alternative Fuel Education Program which is located at our 6 alternative fuel site on El Cajon Boulevard overpass of 7 the I-15 and also the staff's recommendation for the San 8 Diego Regional Energy Office. 9 I'm also here to offer the City of San Diego's 10 unqualified support for your recommendation for the B8 11 applicant in your small production biofuels start-up 12 category. That company is name is New Leaf Biofuel. And 13 the City of San Diego has been working with New Leaf and 14 supported their venture for more than a year now. 15 We have identified a city-owned parcel for their 16 proposed location. We're currently in the last part of 17 negotiating the land lease. We are expected to forward 18 the lease to the City of San Diego's City Council meeting 19 next month for final approval. The City also supported 20 the company's SBA credit application, and we're currently 21 in the final approval process of New Leaf's application to 22 the City's managed technology fund for approximately half 23 a million dollars. And we expect that loan to be 24 officially approved next week at our loan pool board 25 meeting. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 City of San Diego is also supporting New Leaf's 2 work in obtaining all the necessary regulatory permits 3 from all the appropriate government agencies. 4 And I thank you for your support. Thank you. 5 CHAIRPERSON SAWYER: Thank you. 6 Mr. Botsford. 7 MR. BOTSFORD: Good morning. I'm Charlie 8 Botsford with Aerovironment. Aerovironment manufactures 9 fast charging systems for battery-powered fork trucks and 10 for ground support equipment and also unmanned air 11 vehicles for the U.S. military. 12 First of all, we wish to thank staff and support 13 full funding of PG&E's proposal for electric fueling 14 infrastructure under Category A. Our part in this problem 15 is to supply 250-kilowatt high-voltage charger system that 16 will allow charging of electric vehicles in less than ten 17 minutes. This is the Davis, California station. This is 18 an important step forward in demonstrating a key 19 infrastructure element required to support zero emission 20 vehicles. The ability to fast charge high-voltage battery 21 packs safely in a short period of time will help to extend 22 the range of electric vehicles greatly, thus eliminating a 23 significant objection to their use in everyday 24 applications. 25 Also if additional money does become available, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 we're on the bubble on Category C. We're the first in 2 line. So thank you. If you have any questions. 3 CHAIRPERSON SAWYER: Thank you very much. 4 Ms. Miller, and then Glenn Tepke, Tom Gage, and 5 Bryon Bliss. 6 MS. MILLER: Thank you, Chairman Sawyer, members 7 of the Board. My name is Kate Miller. I'm here today to 8 represent Alameda Contra Costa Transit District. AC 9 Transit is the primary bus mass transit provider in the 10 greater area San Francisco Bay Area easy bay region. AC 11 Transit is a key member of the Bay Area Zero Emission 12 Working Group that includes the Santa Clara Valley Transit 13 Authority, Golden Gate Transit, San Mateo County Transit, 14 the Metropolitan Transportation Commission, the Bay Area 15 Air Quality Management District, and other transit 16 properties in the Bay Area including San Francisco MTA who 17 are interested in pursuing technologies that will improve 18 our quality and reduce greenhouse gases. I'm here today 19 to talk about project D2 under the transit bus projects. 20 I would like to acknowledge the Air Resources 21 Board and its staff on the support and guidance they have 22 provided on this next generation of hydrogen fuel cell 23 buses to meet -- that will allow us to meet the Board's 24 transit fleet rule zero emission bus regulation. 25 The staff proposal for allocating Assembly Bill PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 1811 alternative incentive funds would provide $630,000 2 under the transit bus element of the program to Bay Area 3 operators undergoing the advanced air emission 4 demonstration. The advanced demonstration project is the 5 second demonstration that Bay Area operators have 6 performed. It will consist of twelve new hydrogen 7 electric hybrid zero emission buses and one new hydrogen 8 fueling facility and expansion of existing facility. 9 The Bay Area public transit providers are 10 enthusiastically committed to this critical project which 11 is likely to cost over $40 million. Funding not received 12 from outside funding agencies must come directly from 13 central operating funds which ultimately impacts the 14 number of transit riders we're able to carry. And for AC 15 Transit, every $1 million that is spent on this project 16 equates to 262,000 passenger trips that we could not 17 accommodate. 18 The State's committing a great deal of funds for 19 research and development for clean fuel technologies, but 20 the amount is sufficiently insufficient to address what is 21 a global crisis. And there are many solutions chasing the 22 few funds available. I would just like to say transit is 23 that solution already. The Bay Area operators carry 24 almost a half a billion passengers a year. That's a lot 25 of people not in their cars, not contributing to climate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 change. 2 While I know this Board is already committed to 3 supporting the public transit, I would ask that you give 4 consideration to fund the zero emission bus project for 5 the Metropolitan Transportation Commission and Bay Area 6 operators at a higher level than the $630,000 proposed by 7 staff. There are almost 7 million people in the Bay Area 8 that would receive a direct benefit from this project and 9 from the funding that you provide. Thank you very much. 10 CHAIRPERSON SAWYER: Thank you. 11 Glenn Tepke. 12 MR. TEPKE: Good morning. Thank you for the 13 opportunity to address the Board. I'm Glenn Tepke, 14 Transit Capital Priorities Manager for the Metropolitan 15 Transportation Commission in Oakland. 16 MTC and its partners in the Bay Area Zero 17 Emission Bus Demonstration Project support and appreciate 18 the staff recommendation for 630,000 for the Bay Area 19 project with the recommendation for additional support of 20 up to 1.4 million if funds are available. 21 We also appreciate the additional funding 22 provided by the Board from the hydrogen highway program. 23 As the transportation planning, financing, and 24 coordinating agency for the nine-county Bay Area, MTC 25 submitted the application for this funding on behalf of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 our partners in the project that Kate Miller just listed. 2 I won't repeat them. The funding would support the 3 capital costs of the project including the nine new zero 4 emission buses and the upgrading of AC Transit's three 5 existing vehicles for total cost of around 25 million. 6 Then in addition, the fueling and maintenance of 7 facilities would bring the total cost into the 37 to $40 8 million range. 9 I think one of the strengths of this proposal is 10 that all of the funds go to the capital costs of the 11 project without any administrative overhead. The MTC and 12 the operators are absorbing all of the administrative and 13 operating costs of the project within their existing 14 budgets. 15 More broadly, the Bay Area project is leading the 16 development of commercially viable fuel cell bus 17 technology on behalf of the entire public transit 18 industry. And MTC and the affected operators fully 19 support the goals of the Board's zero emission bus 20 regulation and are committed to implementing a successful 21 demonstration project. Nonetheless, at nearly $40 22 million, the project is a costly one. We have been 23 working with the operators to pull together the funding 24 sources to cover this project. At this point, 25 approximately 23 million has been committed to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 project. And proposals for the remainder are currently 2 under development. 3 Some of the funding sources that we're using for 4 this project, such as national fuel cell bus funds, 5 transportation funds for clean air funds, as well as the 6 funds provided by the Board are dedicated to clean air and 7 technology development projects. However, most of the 8 funding sources that we will use for this project, such as 9 federal surface transportation funds, FTA bus funds, and 10 urbanized area formula funds as well as state Prop. 1B 11 infrastructure bond funds, all of those have much broader 12 uses. And those are really our bread and butter funding 13 sources for meeting the needs for transit capital in the 14 Bay Area for expanding services and for replacing and 15 rehabilitating the existing transit capital assets. 16 So given the challenges that we face in funding 17 the costs of the project, we respectfully request the 18 Board consider increasing the award to the $2 million that 19 was originally requested. Thank you. 20 CHAIRPERSON SAWYER: Thank you very much. 21 We have a little bit of a change in the order. 22 We'll have Sven Thesen next, then Bryon Bliss, then Tom 23 Gage, then John Williams. 24 MR. THESEN: Members of the Board, thank you very 25 much. My name is Sven Thesen. I'm here representing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 PG&E, and hopefully with the presentation. I hope my 2 clock hasn't started. I have to talk real quick. 3 CHAIRPERSON SAWYER: We'll start your clock when 4 the slides have appeared. 5 (Thereupon an overhead presentation was 6 presented as follows.) 7 MR. THESEN: There we go. 8 --o0o-- 9 MR. THESEN: Just want to say thank you to staff 10 and the Board. We got partial funding for our project. 11 Good for the driver. Good for the car. Good for the 12 nation. And talk a little bit about the challenges of 13 gasoline. 14 Transportation is one of the gorillas in the room 15 when we go to address climate change. It comes from 16 places where people don't particularly like us. Its cost 17 is as well -- I hear on the radio it went down a nickle 18 today. But as I drove up here, it was 3.65 a gallon, not 19 to talk about air quality versus electricity. You have 20 many different ways to make electricity with many 21 different ways to make it. The cost is a lot more stable. 22 Significant sources of electricity are carbon free. And 23 recent and upcoming legislation only make it cleaner. In 24 two-and-a-half years, when you plug in, it's going to be 25 20 percent renewable right from there. Two-and-a-half PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 years, 20 percent renewable. And it has a low fuel cost 2 and low infrastructure cost. 3 --o0o-- 4 MR. THESEN: Just want to give a little blurb on 5 PG&E's energy mix at 42 percent on the left is from 6 combined cycle natural gas. That 56 percent is all carbon 7 free between hydro and nuclear. What you're seeing out of 8 the grid is already pretty carbon free. 9 --o0o-- 10 MR. THESEN: What does electricity do for us? 11 When you look at one kilowatt hour worth of energy, what 12 can you do with that? Well, the first thing you can do is 13 run a 1500-watt hairdryer for 40 minutes. Or you could 14 drive an electric car almost three miles or the equivalent 15 energy and gasoline which is about three and a half 16 ounces, you could drive about three quarters a mile. 17 There's a big huge benefit in using electricity as 18 transportation fuel. 19 --o0o-- 20 MR. THESEN: When you look at emissions, 400 21 grams per mile for CO2 on a conventional vehicle. The 22 blue represents California portfolio right now. The 23 yellow represents 100 percent renewables. And you look 24 down to the far right and you see a battery electric 25 vehicle with essentially no CO2 footprint. And of course PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 all the criteria pollutant issues from the tailpipe as 2 well. In the middle, you have a hybrid electric plug-in 3 vehicle at zero miles and then 20 miles and 60 miles 4 getting better. These are plug-in hybrid vehicles. 5 --o0o-- 6 MR. THESEN: So I've talked about how clean it 7 is. It comes from multiple sources. From a cost 8 perspective, it's less than a dollar per gallon equivalent 9 of gasoline. And what's important here is to get people 10 to charge off peak versus on peak rates. And if you're 11 looking at plug-in hybrid, the only infrastructure you 12 need -- and I love this. This is from Jim Woolsey, ex-CIA 13 head -- is the extension cord. 14 --o0o-- 15 MR. THESEN: So what do we see in the future for 16 electric vehicles? This is our vehicle to grid technology 17 that we're investigating right now. This is called valley 18 fill and peak shave. So it will make our operations much 19 more efficient. 20 CHAIRPERSON SAWYER: I need to ask you to 21 conclude. 22 --o0o-- 23 MR. THESEN: Sorry. Our project six, PHEV 24 private charging stations both available to the public and 25 PG&E. Two fast charging stations. What's important here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 is from a $7 million bucket of Category A, we ask for 2 roughly 6.7 percent for electricity. We're the only group 3 asking for electricity. The benefit to California is $1.3 4 million. And we got 175 or 2 percent of the Davis Level 1 5 through 3 charging station. 6 I want to say thank you. If there's any spare 7 change on the floor after everybody else asks for it, we'd 8 like some too. 9 CHAIRPERSON SAWYER: Thank you very much. 10 Mr. Bliss. 11 MR. BLISS: Dr. Sawyer and Board members, it's a 12 pleasure to be with you today. And I mirror what Sven 13 just said as far as thank you for the help and assistance 14 with rapid charge infrastructure, because it plays a key 15 component for Phoenix Motorcars. 16 I am the Vice President of the Sales and 17 Marketing for Phoenix Motorcars. We're preparing to 18 launch and fully commercialize our electric vehicles that 19 are completely battery powered and have a zero emission 20 footprint. Unlike earlier battery powered vehicles, ours 21 has a unique advantage as battery technology has continued 22 to advance to a point where there's a paradigm shift that 23 is occurring, allowing battery electric vehicles to become 24 a fully performance vehicle that is comparable in recharge 25 time and distance to many of the vehicles we drive today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 The Phoenix motorcar has a top speed of 95 miles 2 an hour, a range today of greater than 100 miles per 3 charge. Next year, that will go above 200 miles per 4 charge with the generation two battery pack. And even 5 though it has the ability to plug into our outlet at home 6 and charge overnight five to six hours, the vehicle, 7 because of the battery technology, has to ability to 8 recharge in as little as ten minutes, which is where the 9 rapid charge infrastructure is becoming particularly 10 important. And we see as the vehicles become more 11 available and go nationwide in 2009, the ability to rapid 12 charge in ten minutes allows for full consumer adoption, 13 as you know longer have to use it just as a computer 14 vehicle to work and back. You can use it in any respect 15 you would use your vehicle today. 16 So we thank you for your assistance beginning the 17 process. We're looking forward to continued notification. 18 Today, as far as availability, we're producing 3- to 500 19 units that will be available in California primarily for 20 fleet applications. Of those units, we have over 400 of 21 them spoken for to date. Next year, we're increasing our 22 production to 6,000 before nation-wide consumer launch 23 that will go into the tens of thousands of vehicles making 24 them available to the American consumer. 25 The rapid charge is also of particular interest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 in the fact that the infrastructure is already in place 2 with the need to only put a charger in and allow the 3 consumer the ability to have either a less costly charge 4 in the evening when it's off peak, whereas the charge in 5 the middle of the day would either be more expensive 6 because it's at peak hours or ideally the Altairnano 7 battery can be utilized in stationary application at these 8 sites allowing for charging during off-peak hours in the 9 evenings and then can be used to transfer to vehicles for 10 the ten-minute charge and continue driving capability of 11 the vehicle. 12 We look forward to continued notification and 13 continued support from the California Air Resources Board 14 as this movement continues forward. Thank you. 15 CHAIRPERSON SAWYER: Thank you. 16 Mr. Gage. 17 MR. GAGE: Chairman Sawyer, members of the Board, 18 thank you for having me here. My name is Tom Gage. I'm 19 President of AC Propulsion, and I drove my electric 20 vehicle here today from San Dimas where we build them. 21 It's 100 miles. And it's now charging upstairs in the 22 parking lot, thanks to Marriott who installed an electric 23 vehicle charging station just for this event. And that 24 shows the bang for the bucks that you can get by spending 25 a little bit of money on electric vehicle infrastructure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 The electricity is already there. You only need to extend 2 it out to the curb where the cars can use it. 3 That's why I find it perplexing the allocation of 4 infrastructure funding that went almost 80 percent or more 5 to ethanol and only two or three percent to electric 6 infrastructure. And this is doubly perplexing because 7 ethanol is widely supported with a series of subsidies and 8 incentives. It has a 50 cent per gallon subsidy at the 9 federal level. It's mandated in many markets for use in 10 oxygenating fuel. It's part of the CAFE benefit the 11 automakers enjoy that's worth tens of millions of dollars 12 a year to the automakers for CAFE credit. And it's 13 supported by a tariff from Brazil which is much cheaper 14 and more efficient form of ethanol compared to growing it 15 from corn. 16 Most of the ethanol comes not from California but 17 other areas. So I think in keeping with the California 18 theme of this money, I would request that you please 19 reconsider your allocation of infrastructure funding and 20 spend more on requests such as PG&E's and perhaps cut back 21 on ethanol. Thank you very much. 22 CHAIRPERSON SAWYER: Thank you. 23 John Williams. And then we will have Cynthia 24 Verdugo-Peralta, Irene Stillings, and Don Zweifel. 25 MR. WILLIAMS: Mr. Chairman, Board members, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 ladies and gentlemen, good morning. My name is John 2 Williams. I'm Vice President of Business Development for 3 the Ovonic Applied Technology Center in San Clemente 4 California. 5 As a California technology company involved with 6 hydrogen and plug-in electric vehicles, we're disappointed 7 with staff recommendations C7 and D1 for two reasons. We 8 do not see how these vehicle program provide a path to 9 commercialization technology advancement. And essentially 10 we see them as a duplication of what's occurring in other 11 states. 12 We're also disappointed California funding is 13 being awarded to two out-of-state companies who will be 14 ultimately responsible for building these vehicles. 15 Fueling our disappointment is we have a great 16 team of engineers here in California. And we've also 17 convinced our Board of Directors to invest over $5 million 18 in the state-of-the-art four-wheel-drive hybrid 19 development test cell that would allow our technology 20 center to perform road load simulations in real time 21 emissions measurements in a controlled environment. Given 22 our asset base, we were very excited when we saw the RFPs 23 from CARB. And this has certainly supported our division 24 to invest in California. 25 We submitted three proposals. One for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 development of a plug-in series hybrid hydrogen powered 2 car and a plug-in series hybrid hydrogen powered bus. We 3 believe our proposals are technically sound and 4 appropriate to the CARB objectives to develop plug-in and 5 ZEV-enabling technologies. Unfortunately, staff 6 recommendations proposed to award a bus program to a firm 7 located in Colorado under D1 and a vehicle program to a 8 firm in Michigan in C7. 9 I will say this in support of the CARB staff. 10 They had very little time to do their due diligence. They 11 had a very difficult job. And unfortunately perhaps there 12 wasn't enough change to go around to echo one of my 13 colleagues. 14 And in conclusion, ladies and gentlemen, we 15 believe California is still the right place to do 16 development of advanced vehicles and emission reduction 17 technologies. But we need help. We need to justify our 18 investment decisions consistently as a management team. 19 We hope that you will review the staff's recommendation's 20 in light of our questions and concerns. And we provided 21 and we will recognize the important of funding 22 California-based companies. Thank you for your attention. 23 CHAIRPERSON SAWYER: Thank you. 24 Ms. Verdugo-Peralta. 25 MS. VERDUGO-PERALTA: Good morning, Dr. Sawyer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 and distinguished CARB Board members. Good to see you 2 again. I'm Cynthia Verdugo-Peralta, former South Coast 3 AQMD Governing Board member as well as former Chair of the 4 California Fuel Cell Partnership and one of the original 5 members of the Governor's Hydrogen Highway Advisory Panel. 6 I come here today to applaud CARB and the CEC's 7 overall commitment to alternative fuel incentive programs. 8 However, it concerns me that so little is being dedicated 9 to hydrogen and fuel cell technology. I support all the 10 shorter-term and bridging technologies such as plug-in 11 hybrids and CNG for what is to me obvious reasons, air 12 quality, as well as lowering our dependence on foreign 13 fossil fuels. 14 In addition, these bridging technologies provide 15 us the ability to improve storage technology, battery 16 technology, and better prepare us for the end game of 17 hydrogen fuel cells. However, for hydrogen and fuel cell 18 technology to progress, there needs to be an ongoing and 19 sustained support which would also be in support of the 20 Governor's initiative as well as all of the efforts that 21 he has been making. He will be going to Canada this 22 coming week on a trade mission to discuss exactly that in 23 Vancouver with the BC government. In addition, there's 24 also urgency in the LA basin to create or upgrade five 25 stations -- five hydrogen stations that need to come up to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 700 bar as well as to improve accessibility there. It's 2 very important because of the fact that the OEMs have made 3 the comment that they will be bringing more than 50 4 vehicles by the end of the year. So this is of utmost 5 importance. 6 My other concern is that these awards went to 7 out-of-state companies. I am concerned that we are not 8 supporting economic development within our state. In 9 addition, this was also mentioned at the Governor's Action 10 Plan, the original initiative, and his State of the State 11 in January of '04. Economic development is a very 12 important factor here and should always be considered. 13 I ask that you reconsider the allocation amounts 14 to increase the numbers, the dollars allocated for 15 hydrogen and fuel cell technology and reconsider the many 16 and many qualified companies that are here in our own 17 backyard and to support an increase of economic 18 development here in California. Thank you for your 19 consideration. 20 CHAIRPERSON SAWYER: Thank you. 21 Ms. Stillings. 22 MS. STILLINGS: Good morning. I'm a person with 23 a cold. I'm Irene Stillings. I'm the Executive Director 24 of the former San Diego Regional Energy Office. And I 25 wanted to tell you about recent changes in our office. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 We are a 501(c)(3) nonprofit independent 2 corporation that's committed to the promotion of clean, 3 reliable, renewable, efficient, and sustainable energy 4 practices, technologies, and policies. We have been in 5 existence for ten years. But in the past several years, 6 we have expanded our scope beyond the city and the county 7 of San Diego. And last fall, the Board of Directors of 8 our organization made the decision to change our name to 9 better reflect the work that we've been doing. So in 10 response to Ms. D'Adamo's concern about San Diego Regional 11 Energy Office administering a statewide program, our new 12 name is the California Center for Sustainable Energy. And 13 we are more than capable and have been administering and 14 doing programs and doing work throughout the state. I 15 assure that you we will continue to do so. 16 I would like to support the recommendations of 17 the CARB staff and particularly the funding for the San 18 Diego Environmental Foundation, for the San Diego RTC, and 19 of course for the California Center for Sustainable 20 Energy. This is an area here in San Diego that I have 21 found to have a strong commitment to energy issues and a 22 strong interest and willingness to take action on these 23 issues. We have the cities of San Diego, Chula Vista, and 24 Del Mar who have signed the Mayor's Climate Protection 25 Agreement. We have a county of San Diego that has among PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 all the municipalities in this area done more to create 2 energy efficiency and install renewable energy than I 3 really thought was possible. And this is an area that is 4 really dedicated to creating a more sustainable energy 5 future. And I'm very grateful on behalf of all of us who 6 worked so hard down here that you are recognizing that. 7 In closing, I wanted to inform you that the 8 California Center for Sustainable Energy, formerly known 9 as the San Diego Regional Energy Office, is currently 10 producing an exhibition of alternative energy vehicles. 11 And I invite you to what we call Street Smart San Diego 12 which is being held at the Automotive Museum in Balboa 13 Park. 14 CHAIRPERSON SAWYER: Would you please conclude? 15 MS. STILLINGS: There we have a demonstration of 16 a variety of hydrogen plug-ins and electric vehicles. And 17 we invite you to come visit us and would be pleased to 18 take you on a tour. 19 CHAIRPERSON SAWYER: Thank you very much. 20 Mr. Zweifel and then Dale Hill. 21 MR. ZWEIFEL: First of all, my name is Don 22 Zweifel, and I represent Southern California Biofuels. 23 We're located in Anaheim. 24 May I tell you that we feel that -- and let me 25 specifically address one aspect. And that is that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 biofuels start-up of small production facilities in 2 California really needs more funding. You may say, why. 3 Well, it all boils down to the fact that trap grease -- 4 I'm talking about from restaurants. We have tens of 5 thousands of restaurants throughout California and 6 throughout the United States and in the world for that 7 matter. But a lot of that trap grease you say how much 8 does it amount to. One restaurant in particular that I'm 9 thinking of in San Marcos generates about 1500 to 2,000 10 gallons of trapped grease every week. And I would like to 11 propose that we recycle that grease. 12 Now it's not as easy to recycle SVO, or straight 13 vegetable oil or yellow grease. However, it needs to be 14 recycled. I'll tell you why. Municipalities are 15 suffering terribly. And I'm sure some of you know what 16 I'm talking about. It coats the sewer lines. It severely 17 impacts sewage treatment plants. It severely impacts our 18 landfills. This is not a healthy thing. It hurts our 19 municipalities to the tune of millions of dollars when 20 they have to get out there with their trucks and route out 21 the sewer lines. You may say, well, this isn't a very 22 palatable subject. The problem is it's an ongoing serious 23 thing impact for our municipalities. 24 So what I'm proposing is that our little company 25 would like to recycle trapped grease. And I think there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 are other small biodiesel companies in the state of 2 California that could do the same. I think that we're 3 missing the boat in not adequately funding these small 4 start-up projects. So that's the -- so you see, it's a 5 win-win situation. Municipalities benefit. The landfills 6 will benefit from not having trapped grease in especially 7 our sewage treatment plants. 8 So you see, when you look at the bigger picture, 9 you find out $6 million is all we've allocated for the 10 start up of small production facilities in California. 11 It's not looking at the big picture. 12 That's all I really wanted to say. I want to 13 thank you Supervisors very much for having this hearing. 14 And I look forward to seeing you in Sacramento in July. 15 Thank. Very much. 16 CHAIRPERSON SAWYER: Thank you very much. 17 Mr. Hill, and then we'll have Matt Meosoto. 18 MR. HILL: Dr. Sawyer and Board, I appreciate the 19 opportunity to speak. My name is Dale Hill. I'm a CEO 20 for Mobile Energy Solutions, the proposed manufacturer of 21 the bus for Burbank, California project. And I had not 22 intended to speak this morning until the technical 23 integrity of our company was questioned. And so I feel 24 like I must defend that. 25 The comment was -- well, first of all, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 understand that this funding is to advance clean 2 technology in the state of California. The comment was 3 made that our company has never built a bus before. While 4 Mobile Energy Solutions as such has not, our team did 5 design -- which I headed up, designed and built the 36 6 hybrid electrical buses for the Denver 16th Street mall. 7 These buses are in their seventh year of revenue service. 8 Carried over 130 million passengers in that seven-year 9 period of time at a rate of about 65,000 passengers per 10 day. 11 The bus body itself is composite bus. The 12 technology was developed by Northrop on the LA CMTA ATTV 13 program back in the '90s. My partner headed up the 14 manufacturing on that program. I also worked in Europe 15 with the second largest manufacturer of buses in the world 16 on the Americanization of some of their projects. So I 17 feel like we do have bus experience. That's further 18 validated by the fact that two of the seven bus programs 19 on the national fuel cell bus program we were involved in. 20 It's interesting that General Electric is using 21 our bus to develop a new drive train. So that should give 22 some technical merit to what we're doing. The body for 23 the bus is built by Martin Marietta which is a two billion 24 dollar company. And I think they knew something about the 25 composites. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 The fuel cell for the bus is provided by 2 Hydrogenics. We are working with Hydrogenics 3 representative that lives here in California. They have 4 been involved in four different fuel cell bus programs 5 from around the world: Hawaii, Canada, in Germany and 6 here in the states. And so they will be working with us 7 of the integration of the fuel cell. And we're taking a 8 whole different concept where we're using a small 9 automotive fuel cell to augment a battery dominant system, 10 which everything we talked about here today has promoted 11 plug-in hybrids. So it is a plug-in hybrid fuel cell to 12 recharge the batteries. 13 The next thing that was questioned was our 14 relationship with Altairnano on the batteries. We bid 15 this project with -- I'm a little bit shocked the comment 16 was made because we bid this with their knowledge and with 17 the their input on this. 18 And finally, the question of us being an 19 out-of-state company, we've been in negotiations for the 20 last year with the City of San Jose knowing that we needed 21 a California presence. And we're finalizing the 22 arrangements right now for establishing manufacturing 23 facilities for some other projects, and it would include 24 this project for this in the state of California. So we 25 will by the time this project comes about be a California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 company. Thank you. 2 CHAIRPERSON SAWYER: Thank you. 3 Mr. Miyasato. 4 MR. MIYASATO: Thank you, Chairman Sawyer, 5 distinguished members of the CARB Board. It's a pleasure 6 to speak before you today. I thank you for the 7 opportunity. I am Matt Miyasato, the Technology 8 Demonstrations Manager at the South Coast Air Quality 9 Management District. 10 Our group administers the clean fuels program for 11 the South Coast AQMD where we try to accelerate the 12 development of clean and advanced technologies, 13 particularly in the mobile source arena. And we have a 14 budget of about 10 to 12 million per year. It's with 15 great pleasure that we see the ARB funding 25 million this 16 year. And we're proud to be co-founding, leveraging some 17 of our projects with the ARB, in particular in the plug-in 18 hybrid arena. Specifically, the clean mobility 19 partnership with U.C. Irvine, the evaluation of emerging 20 batteries technology with Epri in U.C. Davis, the plug-in 21 hybrid demonstration and consumer market and education 22 outreach program at U.C. Davis where we hope to use some 23 of our plug-in prototypes for that type of anthropological 24 research. 25 Also, the medium-duty plug-in demonstration where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 our Board has already authorized an award for EPRI and 2 Eaton to develop a bucket truck that's a plug-in hybrid. 3 The battery dominant plug-in fuel Dale just spoke 4 to will be demonstrated at the city of Burbank where you 5 may know we have a funded hydrogen station. We're excited 6 to see greater utilization at that station. Finally, the 7 certification test procedure for plug-in hybrid vehicles 8 at U.C. Irvine. 9 So we're very happy to support the staff 10 recommendation for those programs and look forward to 11 working with the State and all the technology providers on 12 further leveraging both of our limited funds toward 13 cleaning the air. And I would also echo some of the other 14 comments that should funding be -- other funding be found 15 by the State that we would be very happy to discuss or 16 explore options for joint co-funding. Thank you. 17 CHAIRPERSON SAWYER: Thank you very much, Mr. 18 Miyasato. 19 I'd like to commend the South Coast Air Quality 20 Management District for their technology advancement 21 program which has been very substantial. And we certainly 22 would look for opportunities to jointly fund projects. 23 That concludes the public testimony. 24 Do Board members have any questions? I guess I 25 have one. Would you explain to us how out-of-state versus PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 in-state considerations come in to selecting projects? 2 STATIONARY SOURCE DIVISION CHIEF FLETCHER: The 3 criteria that we set up originally initially for the 4 project did not include consideration of in-state and 5 out-of-state. It turned out there's a couple projects 6 that ended up being out-of-state projects. But we did 7 not -- that was not part of the budget control language of 8 the authorization for the funds, and we did not consider 9 that as part of the criteria. 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: So our 11 evaluation was on technical merit, and the technical merit 12 itself resulted in the vast majority of projects that are 13 recommended being from in-state sources. And I guess we 14 just heard that there's a possibility of one that appeared 15 to be out of state and may actually be in state also. 16 CHAIRPERSON SAWYER: Thank you. 17 Does staff have any further comments? Oh, excuse 18 me. Dr. Gong. 19 BOARD MEMBER GONG: No problem. I'm way down 20 here. 21 Along those lines, I was just wondering what 22 percent of the total budget that was allocated went to out 23 of state. Sounds like it's a small number of proposers. 24 So do you have a rough idea? 25 CRITERIA POLLUTANTS BRANCH CHIEF SIMEROTH: It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 would be less than 5 percent as it's turning out, with one 2 company moving into state. 3 BOARD MEMBER GONG: Moving target. Thank you. 4 CHAIRPERSON SAWYER: Professor Hill. 5 SUPERVISOR HILL: Thank you, Doctor. 6 There was a couple of questions raised regarding 7 electricity versus ethanol and the funding there as well 8 as soy oil and the production of soy oil versus the cost 9 of that. Any response from staff? 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, the 11 legislation gave us quite a wide variety of fuels and 12 projects that we were supposed to look at. For example, 13 E85 is explicitly mentioned in the legislation. We know 14 that ethanol is used in vast amounts in California, but as 15 low blends. There's virtually no supply of E85. And we 16 know if we want to use it as an alternative fuel, we need 17 to look at E85 vehicle performance. 18 Biofuel production facilities are mentioned in 19 the law. So the law in our process set up this natural 20 debate over how to split up the funding, and we did it in 21 more or less roughly equal amounts among different fuel 22 types. 23 CHAIRPERSON SAWYER: Ms. Kennard. 24 BOARD MEMBER KENNARD: I just have an observation 25 as opposed to a question. Obviously, there are so many PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 more programs that are deserving of funding then there are 2 funds available. And although I am sure everyone is very 3 sympathetic to those of you who are not in this particular 4 trunch of funding, I can only support staff. I think 5 they've spent an awful lot of -- I can only imagine you 6 spent a lot of time trying to make the evaluation who's in 7 and who's out. And our broader hope is there will be more 8 money down the road for all of these programs to be 9 funded. And so I would support the staff's 10 recommendations. 11 CHAIRPERSON SAWYER: Seeing no further requests 12 for comments from Board members, does staff have any 13 additional comments to make? 14 EXECUTIVE OFFICER WITHERSPOON: No. 15 CHAIRPERSON SAWYER: Since this is not a 16 regulatory item, it is not necessary to officially close 17 the record. 18 Do Board members need to disclose any 19 communications? Dr. Gong? 20 BOARD MEMBER D'ADAMO: I had a conversation on or 21 about -- telephone conversation on or about May 8th with 22 Roger Isom representing the California Cotton Ginners 23 Association. The conversation centered around two issues. 24 One, an applicant that was unsuccessful, a company named 25 Avalon, interested in producing biofuels out of cotton PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 seed feedstock. And the more significant portion of the 2 conversation though really focused on the need for us to 3 include within our criteria regional distribution and also 4 the use of local feedstock. After a conversation with 5 staff, I followed up that same day with Roger Isom. And I 6 felt that both of those issues were adequately considered. 7 CHAIRPERSON SAWYER: Supervisor Hill. 8 SUPERVISOR HILL: On May 7th, I had a 9 conversation with the Councilman Jim Freeland with the 10 City of Pacifica regarding their proposal with whole 11 energy and a description of that project. 12 On May 10th, I met with Mr. Frank Benson of 13 Renewable Energy to discuss other projects, but mentioned 14 the project they have before us today. 15 CHAIRPERSON SAWYER: No. 16 BOARD MEMBER SPERLING: Yeah. I'd like to just 17 take the opportunity, as I mentioned earlier, I'm recusing 18 myself from the discussion, the consideration, and the 19 votes on the allocation of this $25 million for incentives 20 and research. And I do that because of my affiliation 21 with the University of California Davis and a number of 22 the Davis researchers who submitted proposals here. 23 And I wanted to take this moment to also say that 24 I have instructed my colleagues at U.C. Davis in writing 25 I'm not going to be involved in any way with proposals PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 that are submitted to ARB and will limit all my 2 discussions with U.C. Davis researchers about specific ARB 3 funding programs to information that is public knowledge. 4 And I've done that in this case. I was not 5 involved in any way with any of the proposals, and I'll 6 continue to follow these guidelines for future ARB 7 solicitation. 8 I do want to also disclose that I was on the 9 initial Board of Directors of the San Diego Environmental 10 Foundation, which is being considered for a grant but 11 haven't had any contact with it for many years. 12 And lastly, I just want to say that I want to 13 emphasize that I will be working with ARB staff in helping 14 enhance the overall structure of the ARB research and 15 funding programs as I indicated earlier. Thank you. 16 CHAIRPERSON SAWYER: Thank you for that 17 statement. 18 Have Board members had the opportunity to review 19 the proposed Resolution 7-1-6? Do I hear a motion? 20 CHIEF COUNSEL JENNINGS: Dr. Sawyer, my 21 understanding is staff has one slight modification to the 22 Resolution that Analisa Bevan can identify. 23 CHAIRPERSON SAWYER: Yes. Ms. Bevan. 24 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 25 CHIEF BEVAN: As I mentioned in my closing slide, we would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 like to recommend that the balance of the 25 million that 2 is not allocated be assigned to the Vehicle Incentive 3 Grant Program. We identified total allocation of $24.7 4 million, leaving $300,000 left over. 5 BOARD MEMBER RIORDAN: Mr. Chairman, then I would 6 like to move the approval of this Resolution with that 7 small amendment. 8 BOARD MEMBER KENNARD: Second the motion. 9 CHAIRPERSON SAWYER: Okay. I have a motion to 10 approve with the amendment which has been seconded. All 11 those in favor please indicate by saying aye. 12 (Aye) 13 CHAIRPERSON SAWYER: Opposed? 14 Motion is carried. 15 We will now go to Agenda Item 7-5-2 and hear that 16 item, and we will take a lunch break at that time. And 17 then following lunch, we'll take up the agenda item which 18 I sense there are a large number of people here to 19 participate in that is from our ZEV Committee. 20 We have two people who asked to speak on the 21 Research Program, and I apologize that we missed you at 22 that time. If you've been patient and are still here, 23 we'd be pleased to hear your statements at this time. J. 24 Russell Lemon on and Terry Werth. Again, my apologies. 25 That was my error. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 MR. LEMON: My name is J. Russell Lemon. I'm 2 speaking on own behalf. It's a pleasure to address the 3 Board. I just have a couple of general comments that I'd 4 like to address the Board on. 5 One is traditionally miles per gallon has been a 6 measure of vehicle efficiency. But with the advent of all 7 these alternate fuels, it's no longer an equal measure 8 because different fuels have different amounts of energy. 9 For example, when I bought my 1977 Ford, I got 24 miles 10 per gallon around town. This was until they added 11 methyl-tertiary-butyl ether to the gasoline and my mileage 12 dropped to 18 miles per gallon. 13 I put up a web page about ten years ago. And 14 people tell we from California when the fill up in Arizona 15 they get better miles per gallon they say that's because 16 of the different blend between the gasoline. 17 If my car were able to use E85, I would expect to 18 get about 14 miles per gallon. So I would suggest to the 19 Board they use some other measure of vehicle efficiency 20 other than miles per gallon. Perhaps miles per mega BTU 21 or BTU per mile or something like that. 22 One thing is on a second topic, one way to reduce 23 emissions is to conserve energy. And so steps that can be 24 taken to have people actually drive the speed limit and 25 keep their tires inflated would go a long way to reducing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 emissions in California. As you've probably noticed, a 2 good percentage of the traffic drives more than 10 or 20 3 miles an hour over the speed limit. So by enforcing the 4 speed limit and keeping tire pressure, we can reduce 5 emissions. 6 Last quick comment, you made a comment on ozone 7 earlier in this meeting. I thought it was funny because 8 just north of us is the Del Norte Fair. I was looking at 9 the vendor exhibits at the Del Norte Fair, and one of the 10 exhibits was an ozone generator for the home. I asked if 11 it really worked, he turned it on. Sure enough, it did. 12 So again, that comes under the education of the public 13 what is good and what isn't good. And talking on that 14 subject of education, I've noticed a lot of errors in the 15 State text books when it comes to energy of things that 16 are incorrect. Thank you. 17 CHAIRPERSON SAWYER: Thank you. 18 Mr. Werth. 19 MR. WERTH: I thank you for this opportunity to 20 address the Air Resources Board today. I was going to ask 21 you to fund a lot more scientific research and to help the 22 affects of particulates and specifically bring up one 23 study that had been proposed, respiratory health effects 24 related to ultra fine particle concentrations and its 25 properties. Perhaps fund that as one of your primary PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 studies instead of secondary one that might be funded if 2 somebody else drops out. 3 The reason I address this Board is that on my 4 60th birthday this year I was in the Scripps La Jolla 5 Hospital recovering from implant of four stints in my 6 coronary arteries. I attribute this to the increasing 7 amount of ultra fine particles that are in our atmosphere 8 today. These particles are extremely fine, so fine they 9 can pass right through the membrane between the lung and 10 the arteries and go right into your arteries, find 11 someplace where they can stick, and cause injury to the 12 membranes of the outer artery cells. They are extremely 13 hazardous, because, number one, they are insoluable. 14 The things we have done to the particles have 15 turned them from a soluble particle the body can dissolve 16 down over time to something that is totally insoluble. A 17 pure carbon particle cannot be dissolved by our bodies. 18 Whether it is a graphite particle of pure carbon or toe or 19 pitch, in very small particles, all of them are insoluble. 20 And we achieve this by carbonization of the hydrocarbon. 21 In other words, turning it into mostly a pure 22 carbon particle. We know how to do it scientifically. We 23 do it routinely in many industries to produce carbon 24 fibers, one of the great miracles of our age today and in 25 other things. But in those cases, they're under highly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 controlled conditions, and we know what we're doing and 2 we're extending them out to be long fibers where they 3 aren't harmful. As tiny, tiny nanofibers that enter our 4 bodies, get into our heart, and anyplace else in our 5 bodies, and there shove as it were a knife right into the 6 cells, causing it to go necrotic, to die or to bleed as it 7 were -- 8 CHAIRPERSON SAWYER: May I ask you to conclude, 9 please? 10 MR. WERTH: Okay. I would just like to conclude 11 that it is important that we establish scientific 12 categories. And that most important of all, we must 13 change from a micrograms per cubic meter or a parts per 14 million standard to particles per cubic meter standards. 15 One that measures the actual number of particles that 16 we're breathing, not how much mass of particles we're 17 breathing. Thank you. 18 CHAIRPERSON SAWYER: Thank you very much for 19 coming today and for supporting an expansion of our 20 research program. We appreciate that. The subject of 21 ultra fine particles and nano particles is indeed a focus 22 of our health effects research, and we hope to gain a 23 better understanding of their role in air pollution. And 24 I'm pleased that you're able to be here today to talk to 25 us. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 Agenda Item 7-5-2, San Diego's plan for attaining 2 the federal eight-hour ozone standard. Supervisor Roberts 3 had a direct role in approving this plan, since he sits on 4 the Board of the San Diego Air Pollution Control District. 5 Before staff's presentation, Supervisor Roberts, would you 6 like to say a few words? 7 BOARD MEMBER ROBERTS: Well, I would. Thank you. 8 And I hope this isn't in a conflict wearing two hats here. 9 But -- 10 CHAIRPERSON SAWYER: Maybe you can borrow Mayor 11 Loveridge's. 12 BOARD MEMBER ROBERTS: Well, first of all, 13 welcome to San Diego. It's appropriate we're having this 14 item here today. And at yesterday's Board of Supervisors 15 meeting, this was approved. The fact is it contains some 16 very good news with an expectation that San Diego will 17 meet the eight-hour standard sometime in the calendar 2009 18 if I remember correctly. We're on track for that. And I 19 think all of the supervisors and all of the staff -- by 20 the way, I saw both Dick Smith and Ray Fernandez, if they 21 can stand up. These are two of the fellows that are 22 the -- Dick is the outgoing Executive Director, and Ray is 23 the interim as we continue to make progress here. And 24 they're largely responsible for the good news as we become 25 one of the first urban areas around to attain the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 eight-hour standard. So I would encourage you to adopt 2 this and join the Board of Supervisors in continuing to 3 work towards making steady progress in this air basin. 4 CHAIRPERSON SAWYER: Thank you, Supervisor 5 Roberts. 6 Ms. Witherspoon, please introduce this item. 7 EXECUTIVE DIRECTOR WITHERSPOON: Thank you, Dr. 8 Sawyer. 9 At the March and April Board meeting, staff 10 briefed you on State Implementation Planning requirements 11 and the status of SIP development in various regions. The 12 San Diego Plan is the first local SIP element we're 13 presenting for you for action. As Supervisor Roberts 14 already said, this is a through success story. The County 15 has already attained the federal one-hour ozone standard 16 in 2001 and is very close to meeting the more stringent 17 federal eight-hour ozone standard which is the subject of 18 this plan. At this time, I'd like to ask Karen Khamou to 19 give the staff presentation. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 AIR POLLUTION SPECIALIST KHAMOU: Thank you, 23 Ms. Witherspoon. Good afternoon, Dr. Sawyer and members 24 of the Board. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 AIR POLLUTION SPECIALIST KHAMOU: Today we're 2 going to talk about the new federal eight-hour ozone 3 standard and San Diego's classification under the new 4 rule. I will be reporting on ARB staff's analysis of San 5 Diego's State Implementation Plan to attain the new 6 eight-hour ozone standard. 7 --o0o-- 8 AIR POLLUTION SPECIALIST KHAMOU: I will focus on 9 San Diego's air quality with respect to ozone precursor 10 emission trends, ozone concentration, and days over the 11 standard. I will outline U.S. EPA State Implementation 12 Plan framework which sets out the attainment requirements. 13 Staff's analysis of San Diego's attainment demonstration 14 and control strategies concludes the San Diego is making 15 progress in the meeting the eight-hour ozone standard. 16 As Supervisor Roberts just mentioned, the San 17 Diego County Air Pollution Control District adopted the 18 plan yesterday at their Board hearing. Today, we're 19 providing a recommendation for your approval. 20 --o0o-- 21 AIR POLLUTION SPECIALIST KHAMOU: Considerable 22 research conducted over the past 35 years has shown that 23 ozone can lead to inflammation and irritation of the 24 tissues lining human airways. Symptoms and responses to 25 ozone exposure vary widely, even when the amount inhaled PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 and length of exposure is the same. Typical symptoms 2 include cough, chest tightness, and increased asthma 3 symptoms. Ozone in sufficient doses can also compromise 4 the body's ability to fight infections. 5 Medical studies of large populations have found 6 that ozone exposure is associated with an increase in 7 hospital emissions and emergency room visits, particularly 8 for lung problems such as asthma and chronic obstructive 9 pulmonary disease. 10 Several studies have also associated exposure to 11 high ozone levels with increased premature mortality in 12 elderly people with chronic diseases of the lungs and 13 circulatory system. 14 --o0o-- 15 AIR POLLUTION SPECIALIST KHAMOU: In July 1997, 16 U.S. EPA promulgated a new national standard for ozone 17 that provides additional protection from the harmful 18 health effects of this pollutant. The standard is set at 19 .08 parts per million. 20 In April 2004, U.S. EPA finalized Phase I of the 21 ozone implementation the rule. This rule established the 22 classification scheme for non-attainment areas. In 23 November 2005, U.S. EPA issued its Phase 2 rule which 24 outlines the emission controls and planning elements that 25 non-attainment areas must address in their implementation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 plans. 2 --o0o-- 3 AIR POLLUTION SPECIALIST KHAMOU: San Diego 4 County is a coastal plain separated by mountains from the 5 Inland Desert. San Diego County has a total population of 6 3.1 million, most of whom live near the coast. San 7 Diego's high ozone site is Alpine. The monitoring site is 8 located in the foothills east of the city of San Diego and 9 is 2008 above sea level. The site is impacted by 10 emissions from both San Diego and South Coast air basins. 11 --o0o-- 12 AIR POLLUTION SPECIALIST KHAMOU: U.S. EPA 13 classified the San Diego air basin as a basic 14 non-attainment area with an attainment date of June 2009. 15 The basic category refers to an eight-hour ozone 16 non-attainment area who's one-hour ozone design values 17 meet the now revoked one-hour ozone national standard. 18 Basic non-attainment areas must meet the general planning 19 and emission control requirements of sub-part one of the 20 Clean Air Act. Basic non-attainment areas are not subject 21 to the additional more prescriptive requirements of 22 sub-part two established by Congress in 1990 for the 23 former one-hour ozone national standard. 24 --o0o-- 25 AIR POLLUTION SPECIALIST KHAMOU: Air quality in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 San Diego has improved significantly over the last decade 2 as indicated by the decline in measured ozone levels and 3 in the number of days over the eight-hour standard. The 4 design value is a good way to look at changes in ozone 5 levels over time. Technically, the design value is a 6 three-year average of each year's fourth highest daily 7 maximum eight-hour average ozone concentrations. The use 8 of the three-year average helps minimize the year-to-year 9 influence of metrology. 10 San Diego's design value has declined by 15 11 percent in the past ten years. The number of days over 12 the standard is an indication of how frequently the 13 population is exposed to unhealthful air quality. In the 14 past ten years, San Diego's exceedance of the national 15 eight-hour standard has declined by 54 percent. 16 --o0o-- 17 AIR POLLUTION SPECIALIST KHAMOU: This graph 18 illustrates the historical design values in San Diego. I 19 just mentioned San Diego's design values have decreased 20 over the last ten years. If you look at a longer time 21 frame, San Diego's design values have decreased even more, 22 by about 32 percent since 1990. Later in the 23 presentation, I will talk about U.S. EPA's new weight of 24 evidence guidelines. Weight of evidence analysis allows 25 us to use air quality trend information such as this trend PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 to supplement air quality modeling. 2 --o0o-- 3 AIR POLLUTION SPECIALIST KHAMOU: This graph also 4 illustrates San Diego's air quality improvement by showing 5 the declining trend in days over the eight-hour ozone 6 standard. Again, if you look at the longer time frame, 7 San Diego's exceedances have dropped by about 85 percent 8 since 1990. Overall, we see a significant decline 9 overtime. But as you can see, there have been a few 10 blips. Both 1998 and 2006 show an increase in exceedances 11 of the standard. Meteorology played an important part in 12 ozone formation. Both years had a greater number of days 13 with temperatures higher than 90 degrees Fahrenheit which 14 are more conclusive to ozone formation. In 1998, ozone 15 air quality in southern California was impacted by strong 16 La Niña weather conditions which can result in 17 concentrated levels of air pollution. 18 --o0o-- 19 AIR POLLUTION SPECIALIST KHAMOU: San Diego NOx 20 and ROG inventories reflect the region's urban and 21 suburban population and the strong maritime and goods 22 movement sector. The main sources of San Diego's NOx 23 emissions are on-road vehicles, ships, and commercial 24 boats, and off-road equipment. San Diego's ROG inventory 25 is dominated by passenger cars, consumer products, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 architectural coatings, recreational boats, and lawn and 2 garden equipment. 3 --o0o-- 4 AIR POLLUTION SPECIALIST KHAMOU: As we just saw, 5 San Diego's major pollution sources are tied to its large 6 population. San Diego County is experiencing significant 7 growth in population and vehicle use. This graph shows 8 historical trends from 1990 and projects a growth in both 9 population and vehicle miles traveled into 2020. The 10 population of the region is expected to increase by 16 11 percent, from 3.1 million today to over 3.6 million in 12 2020. Vehicle use as measured in vehicle miles traveled 13 is also projected to increase significantly. However, 14 because adopted mobile and stationary source controls, 15 emissions of both NOx and ROG continue to decline into the 16 region's 2009 attainment year and beyond. 17 --o0o-- 18 AIR POLLUTION SPECIALIST KHAMOU: I will now move 19 to the Clean Air Act SIP requirements. Under sub-part one 20 of the Clean Air Act, State Implementation Plans for basic 21 non-attainment areas must include an emissions inventory 22 of ozone precursors, ROG, and NOx, air quality modeling 23 that demonstrates attainment of the eight-hour ozone 24 standard, and evaluation of other evidences to support the 25 photochemical modeling, control strategies capable of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 meeting attainment, and contingency measures in the event 2 that controls fall short of achieving needed reductions. 3 And transportation, conformity, and emission budgets to 4 ensure transportation plans and projects are consistent 5 with and will not hinder attainment. 6 --o0o-- 7 AIR POLLUTION SPECIALIST KHAMOU: U.S. EPA's 8 implementation rules require basic non-attainment areas to 9 conduct photochemical modeling to show attainment. 10 According to U.S. EPA's rounding conventions, a predicted 11 design value of 84 parts per billion or less shows 12 attainment of the eight-hour standard. Also, all 13 non-attainment areas must show clean air for a full 14 calendar year in order to demonstrate attainment of the 15 standard. And since the deadline is in June, which is in 16 the middle of 2009, San Diego must show clean air in 2008. 17 --o0o-- 18 AIR POLLUTION SPECIALIST KHAMOU: U.S. EPA now 19 requires a weight of evidence analysis in recognition of 20 uncertainties that are inherit in photochemical modeling. 21 U.S. EPA's ozone modeling guidance indicates when 22 photochemical modeling projects attainment year 23 concentrations in the range of 82 to 87 parts per billion, 24 the State may conduct further analysis of the model 25 outcomes and consider other evidence such as emissions and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 air quality trends. 2 --o0o-- 3 AIR POLLUTION SPECIALIST KHAMOU: The local 4 district conducted air quality modeling with enhanced 5 meteorological data for San Diego and predicted a 2008 6 design value of 86 parts per billion. As I previously 7 mentioned, according to U.S. EPA's ROG conventions, a 8 design value of 84 parts per billion or less would attain 9 the standard. San Diego's design value of 86 per billion 10 narrowly exceeds the standard. This value also falls 11 within U.S. EPA's range of 82 to 87 parts per billion for 12 the supplemental weight of evidence analysis. I will 13 explain the San Diego supplemental analysis in the next 14 slide. 15 ARB staff also independently modeled an 16 additional San Diego ozone episode and used more general 17 regional meteorology. ARB's modeling generally confirms 18 the direction and magnitudes of the district's findings. 19 --o0o-- 20 AIR POLLUTION SPECIALIST KHAMOU: San Diego 21 district staff also evaluated historical data to 22 demonstrate attainment as recommended by U.S. EPA guidance 23 because of the 86 percent per billion design value shown 24 by photochemical modeling. I will provide you an overview 25 of the weight of evidence analysis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 --o0o-- 2 AIR POLLUTION SPECIALIST KHAMOU: Their modeling 3 analysis correctly concludes that the Alpine side 4 adequately represents high site for ozone predicted in the 5 county. The modeled ozone exposure analysis shows a 6 reduction in overall exposure to ozone in the county. The 7 air quality analysis using statistical regression methods 8 shows the design value will meet the standard by 2008. 9 Emissions of NOx and ROG both continue to decline by 2008 10 and into the future. Additional regression analysis shows 11 the association of ROG and NOx emission reductions with 12 decreases in design value. This analysis also shows 13 attainment by 2008. 14 The district analyzed meteorology of recent years 15 due to record-breaking heat, the design value exceeded the 16 standard in 2006. The district concludes that 2006 17 meteorology was an anomaly and predicts the design value 18 will continue to decrease into the future. 19 U.S. EPA has identified all of the state as 20 having a twelve month ozone season where ozone levels at 21 any time are capable of exceeding the standard. However, 22 since 2001, San Diego has not exceeded the standard before 23 May or after October. ARB staff concludes that together 24 with photochemical modeling the weight of evidence 25 provides comprehensive evidence that San Diego will reach PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 attainment by the 2009 deadline. 2 --o0o-- 3 AIR POLLUTION SPECIALIST KHAMOU: As part of the 4 SIP cycle, the district is required to establish county 5 level on-road motor vehicle emissions transportation 6 conformity budgets for 2008. The emission budgets 7 established in this plan fulfill the requirements of the 8 Clean Air Act and U.S. EPA regulations to ensure the 9 transportation projects will not interfere with progress 10 towards and attainment of the national eight-hour ozone 11 standard. 12 --o0o-- 13 AIR POLLUTION SPECIALIST KHAMOU: Because San 14 Diego was formerly classified as a serious non-attainment 15 area for the national one-hour ozone standard, it has 16 already enacted a comprehensive control program to address 17 ozone precursors ROG and NOx. The combined local, state, 18 and federal emission controls resulted in the district 19 attaining the one-hour standard in 2001 and also 20 substantially reduced eight-hour ozone concentrations. 21 Existing control programs are expected to further 22 reduce the current level of ozone precursors of ROG and 23 NOx by about six and seven percent respectively by the 24 2009 deadline. The district's analysis indicates that 25 these programs will be sufficient to attain the eight-hour PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 standard by 2009, despite the impact the unusually severe 2 2006 ozone season had on the district's design value. 3 Staff agrees with the district's conclusion. San Diego is 4 also in non-attainment under the State ozone standard. 5 Under the State's Health and Safety Code, San Diego will 6 need to review its rule and submit a triennial update by 7 the end of this year. 8 --o0o-- 9 AIR POLLUTION SPECIALIST KHAMOU: ARB staff has 10 reviewed the 2007 San Diego draft eight-hour ozone 11 attainment plan, and we have consulted extensively with 12 district staff during this review. We find the 2007 San 13 Diego draft eight-hour ozone attainment plan meets 14 applicable requirements. Implementation of this plan 15 would reduce ozone levels throughout San Diego, benefit 16 public health, and result in attainment of the eight-hour 17 ozone standard by June 2009. Therefore, we recommend that 18 you adopt the 2007 San Diego eight-hour plan and direct 19 the Executive Officer to submit it to U.S. EPA. Thank 20 you. This concludes staff's presentation. We'd be happy 21 to answer any questions you may have. 22 CHAIRPERSON SAWYER: Thank you very much. 23 Are there any questions from the Board members? 24 Dr. Gong. 25 BOARD MEMBER GONG: That was a very nice PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 presentation, very nice SIP plan. So the comments I have 2 are a little bit elementary perhaps for you. I'd like 3 staff to refresh my memory about design value in English 4 so I can understand. I read the technical explanation 5 months ago. But could you refresh my memory of what 6 design value means since you've used it so frequently? 7 Must be important. 8 AIR QUALITY AND TRANSPORTATION PLANNING BRANCH 9 CHIEF KARPEROS: It's very important. It is simply a 10 measure of the high pollutant level that you're designing 11 your plan around. That's where you gets the phrase design 12 value. 13 In order to account for the year to year 14 variations in meteorology, so when you're looking at 15 design values and looking at trends with design value, you 16 want to see if your control strategy is working, you 17 average essentially data over a number of years. 18 Mathematically, for the design value for the eight-hour 19 standard, you take a high value in year one, high value in 20 year two and three, the fourth high, actually I should 21 have said, average those together, that is your design 22 value. But is essentially a composite an average high 23 value measured over three years. 24 BOARD MEMBER GONG: Thank you. That was mostly 25 in English. I appreciate that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Does the upcoming EPA administrator decision 2 regarding what the next ozone standard be, does that have 3 an impact on the SIPs in California at this moment in 4 time? And that applies to all the SIPS I guess that are 5 coming up. 6 LIAISON SECTION MANAGER OEY: This is Silvia Oey, 7 manager of Southern California Liaison Section. 8 The SIPs that are being developed right now are 9 being developed to address the standards that were adopted 10 by the EPA in the late 1990s. EPA has not yet identified 11 how they will classify areas for the new standard. There 12 is a procedure set in law whereby they identify how they 13 will classify areas. That's like similar to the Phase I 14 regulation that Ms. Khamou alluded to. Then they consult 15 with the state as to their recommended classifications. 16 We have an opportunity to communicate back and forth. And 17 after that, there's a time frame for preparing plans. So 18 at this point, we are meeting the existing standards, and 19 we have some additional time to start planning for that 20 next round of standards. 21 BOARD MEMBER GONG: One last. In your proposal, 22 legal it says here that State law also limits the ARB must 23 submit as an SIP revision not withstanding any other 24 provision of this division of State Implementation Plan 25 should only include revisions necessary to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 requirements of the Clean Air Act, meaning that the 2 California Clean Air Act requirements are not -- cannot be 3 part of this, is that -- 4 CHIEF COUNSEL JENNE: That's correct. 5 BOARD MEMBER GONG: What's the difference? 6 CHIEF COUNSEL JENNE: Well, the State standards 7 have a whole different planning process like the 8 California Clean Air Act for the more stringent state 9 standards. What we would do with this plan is segregate 10 out the portions that are designed to meet the federal 11 standards and only those portions of the plan would go and 12 be part of federal law and go into the SIP. 13 BOARD MEMBER GONG: But we can as a state can go 14 ahead and implement it further actions via the California 15 Clean Air Act. 16 CHIEF COUNSEL JENNE: That's a separate planning 17 effort and entirely separate law. 18 BOARD MEMBER GONG: But we have to keep in pace 19 with the Federal requirements. 20 CHIEF COUNSEL JENNE: Yes. 21 CHIEF COUNSEL JENNINGS: Yes. And State law 22 expressly prohibits ARB from submitting material that's 23 not necessarily in compliance with the federal 24 requirements and only necessary for compliance with the 25 State requirements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 EXECUTIVE OFFICER WITHERSPOON: Dr. Gong, the 2 reason for that is that federally required air pollution 3 measures are subject to citizen suit for enforcement. And 4 so the California Legislature choose not to include that 5 brand of penalty under the State law and did not want to 6 federalize State requirements and subject them to citizen 7 suits. 8 BOARD MEMBER GONG: Thank you. 9 CHAIRPERSON SAWYER: I would like to make the 10 observation that some of these areas such as San Francisco 11 and San Diego may require further reductions as a result 12 of any new federal air quality standard for ozone which we 13 anticipate. 14 On the other hand, they're the beneficiaries of 15 existing State programs in the mobile source area and 16 consumer products area which this Board is responsible for 17 which are geared towards the much more difficult problems 18 in the San Joaquin Valley and the South Coast Air Quality 19 Management District areas. So I assume that we anticipate 20 that what we have in place now, plus I assume that the 21 local district itself has ongoing programs which we get 22 further reductions, will take care of the next round of 23 ozone reduction requirements which we anticipate will be 24 coming. 25 EXECUTIVE OFFICER WITHERSPOON: That's correct. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 For most of the state, we should be able to glide into the 2 next standard with the existing control program. But in 3 the South Coast and San Joaquin Valley, we have to do 4 more. 5 CHAIRPERSON SAWYER: Supervisor Roberts. 6 BOARD MEMBER ROBERTS: I don't know if you have 7 any public testimony on this. 8 CHAIRPERSON SAWYER: There is no request for 9 public testimony. 10 BOARD MEMBER ROBERTS: Well, first of all, I want 11 to thank you for postponing this until I was able to get 12 here. We had a little crisis at the transit district this 13 morning I had to attend to. That's indirectly helping to 14 clean up the air, too. 15 We have a lot of things here we're proud of. And 16 as I think you've seen in the charts, irrespective of 17 where the standards are, all the lines are going in the 18 right direction. And as they keep changing the standards, 19 that's fine. We keep working to improve. Had you been 20 here last Thursday, you would see one of the reasons for 21 our success. And that was we were doing a press 22 conference at PETCO Park where one of the supervisors was 23 out mowing the grass to publicize the lawn mower trade-in 24 program that we had on Saturday which was another success 25 story. And in short order in a couple hours we moved PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 another 400 units of people trading in their old gas-fired 2 lawn mowers for electric rechargeable lawn mowers. So we 3 have a lot of things going on here that we're very proud 4 of that are helping drive those lines down. 5 And I'm appreciative of the staff report. 6 Because I was, in fact, thinking that some of those charts 7 are even more favorable than what we were shown at the 8 Board of Supervisors, and I'll have to bring those back. 9 By the way, Board of Supervisors is the Air Pollution 10 Control District for San Diego. 11 With that, if it's appropriate, I'd like to move 12 approval of the recommendation to forward this on as an 13 amendment to the State SIP. 14 CHAIRPERSON SAWYER: Fine. I would note since 15 this is not a regulatory item, it's not necessary to 16 officially close the record. And we've a motion to 17 approve. Is there a second? 18 BOARD MEMBER LOVERIDGE: Second. 19 CHAIRPERSON SAWYER: All those in favor, please 20 indicate by saying aye. 21 (Ayes) 22 CHAIRPERSON SAWYER: Opposed? 23 Motion is carried. 24 I would make one final comment. I don't want to 25 be negative at all on this very positive area, but with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 one of the effects of climate change and global warming is 2 that we should anticipate more extreme high temperature 3 event episodes in California, and this works in the 4 direction of increasing the ozone. So it's very important 5 that we move ahead not only with the SIP plans, but with 6 our planning on the global warming program as well. 7 We will now take a lunch break. And I suggest 8 about 45 minutes, which means that let's plan on resuming 9 at 1:15. Is that agreeable? Good. We're adjourned until 10 1:15 this afternoon. 11 (Thereupon a lunch recess was taken.) 12 CHAIRPERSON SAWYER: The last agenda item today 13 is 7-5-5, a status report on the zero emission vehicle, 14 ZEV, Program. 15 Since adoption of the ZEV regulation in 1990, 16 staff has provided regular updates on the status of the 17 advanced technologies and the technical and economic 18 feasibility of the program. Today's presentation will be 19 the first update since the Board last amended the ZEV 20 regulation in 2003. This is a non-regulatory item, and no 21 changes to the program will be made today. We are here to 22 listen to the findings of the independent review panel 23 that was assembled at the Board's request and to reflect 24 on whether these findings suggest that any changes to the 25 ZEV regulation are warranted. Staff has prepared its own PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 ZEV status report and is recommending modest changes to 2 the rule, which they will bring back to us later this 3 year. First, we will hear from the expert panel. 4 Ms. Witherspoon, please introduce this item. 5 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 6 Sawyer. 7 The ZEV program is an integral part of the 8 Board's efforts to reduce emissions from passenger cars 9 and light-duty trucks. The ZEV rule seeks to 10 commercialize new vehicle technologies that eliminate not 11 only tailpipe emissions, but also emissions from 12 evaporation and from the deterioration of in-use vehicle 13 emission control systems. 14 Today's status report is in response to the 15 Board's direction in April 2003 that an outside panel of 16 experts be convened to review the technological status of 17 ZEV related cars and componentry and prospects for 18 commercialization. Staff contracted for the leading 19 experts in the field and is grateful to the independent 20 review panel for its effort. We would also like to thank 21 all the major automakers for making themselves available 22 to the Expert Review Panel for interviews, data exchange, 23 and in-depth technical discussions. 24 Several issues are still on the table since the 25 ZEV regulation was last amended in 2003. The most PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 pressing questions are whether the timing and quantities 2 of fuel cell vehicles needs to be modified in any way, 3 whether battery electric vehicles are getting enough 4 credit under the regulations, whether adjustments should 5 be made to encourage plug-in hybrid vehicles, and whether 6 additional credit should be given to neighborhood electric 7 vehicles given their actual demonstrated emission 8 benefits. All other aspects of the rule are working fine 9 in staff's view and are supported by the Independent 10 Review Panel's Assessment. 11 The staff presentation will be made by Analisa 12 Bevan of the Sustainable Transportation Technology Branch 13 who will also introduce the presentation from the Expert 14 Review Panel. Ms. Bevan. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 18 CHIEF BEVAN: Thank you, Ms. Witherspoon. Good afternoon, 19 Chairman Sawyer and members of the Board. This afternoon, 20 I will be walking us through a technology update to the 21 Board on the ZEV Program. 22 --o0o-- 23 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 24 CHIEF BEVAN: This presentation will include a very brief 25 overview of the structure of the ZEV regulation to remind PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 us of the technologies involved and the vehicle volumes 2 required. Then I'll turn the presentation over to Mr. 3 Michael Walsh, Chairman of the ZEV independent expert 4 panel. He and the other panel members will provide an 5 overview of their report on technology status. 6 Immediately following the panel's presentation, I'll 7 return to provide staff's take on what their findings mean 8 to the future imitation of the ZEV program. This will 9 include broad recommendations for actions we think are 10 needed to keep the ZEV program successful. 11 After a few years of implementation, we've also 12 learned a few things about the workings of the regulation 13 that have prompted us to update the Board today on several 14 topics that may need adjustment. I'll brief you on these 15 items and provide our recommendations for regulatory 16 actions. 17 Finally, I will conclude with a summary of topics 18 covered and an overall assessment of the program. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 21 CHIEF BEVAN: In the following slides, I'll cover the 22 broad structure of the regulation. This regulation was 23 first adopted in 1990 as part of the low emission vehicle 24 regulations. The first amendments to the regulation 25 delayed the start of the program to 2003, but began a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 demonstration program of battery electric vehicles through 2 a memorandum of agreement with automakers. 3 In 1998, the partial zero emission vehicle was 4 added as a partial compliance path taking advantage of 5 substantial improvements possible to conventional vehicles 6 and helping to offset the lost air quality benefit of 7 delayed ZEV commercialization. 8 In 1998, as part of the Low Emission Vehicle II 9 regulations, the advanced technology partial ZEVs were 10 added to the regulation in 2001 to encourage production of 11 vehicles that utilize technologies that would enable ZEVs 12 like batteries and electric drive systems found in 13 hybrids. The regulation was last amended in 2003 in 14 response to litigation over our definition of advanced 15 technology PZEVs. This amendment process resulted in an 16 implementation date of 2005 and a bifurcation compliance 17 path. 18 The regulation has evolved over time to address 19 technology progress to take advantage of emission 20 performance improvements and to provide significant 21 flexibility in order to explore a number of possible 22 compliance paths and zero emission vehicle technologies. 23 As such, it's gotten complicated. And the following 24 slides are not meant to be comprehensive, but rather 25 establish a framework for discussion and alert the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 of the technologies that are part of this program. 2 --o0o-- 3 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 4 CHIEF BEVAN: The large automakers subject to the 5 regulation are listed here: DaimlerChrysler, Ford, 6 General Motors, Honda, Nissan, and Toyota. 7 --o0o-- 8 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 9 CHIEF BEVAN: Most folks are familiar with the description 10 of the ZEV regulation as a ten percent requirement to 11 produce zero emission vehicles. And since the start of 12 implementation in 2005, the program has required 13 automakers to produce vehicles in response to that 14 mandate. Starting in 2009 however, the program begins to 15 ramp up. In 2009, the requirement is 11 percent. Within 16 the 11 percent requirement, automakers may use a variety 17 of vehicle technologies to comply. 18 --o0o-- 19 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 20 CHIEF BEVAN: At least 2.5 percent of compliance must come 21 from pure zero emission vehicles. We call this category 22 the gold category. The technologies meeting the gold 23 standard include hydrogen fuel cell vehicles and battery 24 electric vehicles. Because of the credits earned per 25 vehicle between 8 and 40 per car depending on the range PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 and how fast it can refuel, the actual percentage of 2 vehicles required works out to about .8 percent of total 3 production or 14,000 cars per year. 4 automakers can also meet up to 7 percent of their 5 obligation with credits from partial zero emission 6 vehicles or PZEVs. These vehicles meet the super 7 ultra-low vehicle emission standard and have zero 8 evaporative emissions. Also, these cars must have a 9 15-year, 150,000 mile warrantee on their emission systems. 10 PZEVs were added to the program in 1998 in 11 recognition of their air quality benefits and to offset 12 the delay in the commercialization of ZEVs. For 13 simplicity, this category is referred to as bronze. PZEVs 14 earn .2 credits per vehicle, so in reality, a manufacturer 15 must produce 30 percent of their production as PZEVs. 16 A further category of vehicles can be used to 17 offset the gold requirement. Advanced technology partial 18 ZEVs up to 2.5 percent of the ZEV obligation can be met 19 with AT PZEVs. These vehicles are PZEVs with added 20 technology that enables ZEV commercialization. Examples 21 include hybrids that have electric drive systems, 22 batteries, and regenerative breaking, and compressed 23 natural gas cars that use compressed gas storage systems 24 that contribute towards commercialization of hydrogen 25 vehicles. This category is referred to as the silver PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 category. Because the average silver vehicle earns a 2 little more than one half a credit, total production of AT 3 PZEVs is estimated to be about 4 percent. 4 This structure of the regulation is referred to 5 as the base path. It represents the original structure of 6 the regulation. In 2003, the Board amended the regulation 7 to create an alternative path to compliance which I'll 8 describe next. 9 This alternative path was created in order to 10 encourage development and production of fuel cell 11 vehicles. It allows automakers to produce their market 12 share of a specified number of ZEVs over a three-year 13 implementation phase. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 16 CHIEF BEVAN: The vehicles need to be freshly produced. 17 The automaker can't use banked credits to meet the 18 obligation. And the balance of their gold obligation can 19 be met with silver vehicles. This nearly doubles the 20 silver category production for those automakers taking 21 this compliance path. There is no change in this 22 compliance strategy to the bronze category. Automakers 23 still need up to 6 percent of their 11 percent obligation 24 with PZEVs. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 2 CHIEF BEVAN: The alternative path was created in an 3 attempt to establish a ramp up in fuel cell vehicle 4 production that would result in commercialization. It was 5 seen as a steady increase in production that ramped up 6 technology demonstrations to early commercial 7 demonstrations to low volume commercialization and 8 ultimately to vehicle volumes that can take off in the 9 marketplace as commercial products. These phases of 10 development were given three-year windows between 2005 and 11 2017. From the technology demonstration of 250 vehicles, 12 the program grows by a factor of ten to 2,500 between 2009 13 and 2011 where vehicles are placed with customers and 14 market preparation and proof of technology. The program 15 then grows again to 25,000 between 2012 and 2014 where 16 larger pre-commercial placements are made. Then the 17 program doubles to 50,000 between 2015 and 2017. The last 18 phase of the alternative path that is expected to lead to 19 commercial volumes. 20 --o0o-- 21 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 22 CHIEF BEVAN: I'd like to show too how this translates 23 into obligations for automakers. The next part of the 24 table shows estimates of the number of vehicles that need 25 to be produced in each phase by the smallest and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 largest of the six automakers subject to these 2 requirements. There's quite a spread from lowest to 3 highest. From Phase 2, most automakers are looking at 4 several hundred fuel cell vehicles over the three-year 5 period of time. 6 Remembering that the alternative path is an 7 optional compliance path, we may not see this many 8 vehicles in any given phase if one or more automakers 9 chooses to take the base path. An automaker would likely 10 choose the base path if they have sufficient banked 11 considers from early battery electric vehicle placements 12 to meet the requirements without building substantial new 13 volumes of ZEVs. 14 I'll talk next about how the automakers are 15 complying with the ZEV regulation, which should give the 16 Board a sense for how implementation is going so far. 17 --o0o-- 18 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 19 CHIEF BEVAN: In the gold category, automakers are 20 complying with fuel cell vehicles and with banked credits 21 from previous placement of battery electric vehicles 22 vehicle. Although there are automakers that are taking 23 the base path which does not require the production of new 24 fuel cell vehicles, all six large automakers have very 25 active fuel cell vehicle programs and are demonstrating PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 those vehicles in California. Overall, since we began 2 collecting credit data from automakers, 4,530 ZEVs have 3 been placed in California. Of that number, 130 have been 4 fuel cell vehicles. The balance were battery electric 5 vehicles primarily placed prior to 2003. Automakers have 6 also placed about 26,000 neighborhood electric vehicles 7 which also provided credits towards gold category 8 compliance. 9 --o0o-- 10 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 11 CHIEF BEVAN: The silver category is being met primarily 12 with hybrid electric vehicles and some compressed natural 13 gas vehicle placement. To date, about 70,000 silver 14 category vehicles have been delivered to California. 15 Although the total production of silver vehicles exceeds 16 the volume that is needed by automakers, these production 17 numbers are dominated by two automakers. Toyota and Honda 18 have each had ATP or hybrids or compressed natural gas 19 cars in the market for several years now. Those 20 automakers without an AT PZEV offering in the marketplace 21 are those just beginning to market AT PZEVs like Nissan 22 with their Altima hybrid are using banked credits to 23 fulfill this portion of their ZEV obligation. 24 --o0o-- 25 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 CHIEF BEVAN: In the bronze category, automakers are 2 exceeding the production volumes that may be used to 3 comply with the regulation by 40 percent. At this time, 4 38 different models of PZEVs are available to consumers 5 and over half a million PZEVs have been delivered to 6 California. Our work with public opinion surveys and 7 focus groups indicate that often drivers of PZEVs don't 8 even know they have purchased such a clean car. Adoption 9 of this category of vehicles has been fairly transparent. 10 The data that I've presented for compliance with 11 the regulation to date have been aggregated for all the 12 effected manufacturers. I'd like to point out that each 13 manufacturer has taken unique actions towards compliance, 14 some strong in banked battery electric vehicle credits, 15 some with aggressive fuel cell vehicle programs, some with 16 dominating hybrid sales, and some with massive early 17 volumes of PZEVs. When we came to the Board in 2003, it 18 looked like the automakers had enough banked credits to 19 carry them through 2008 without any new production of 20 ZEVs. That prompted the Board to amend the regulation 21 with the creation of the alternative path option that 22 required new vehicles to be produced. 23 As we approached 2008, it appears that the 24 regulation has worked with most of the technologies that 25 can be used to meet the regulation still being produced by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 at least some of the automakers. The exception to this is 2 the full function battery electric vehicle. 3 --o0o-- 4 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 5 CHIEF BEVAN: Another aspect of the ZEV program 6 implementation is the development of infrastructure to 7 support the new vehicle technologies being used to comply 8 with the regulation. The primary focus of infrastructure 9 development for ZEVs is hydrogen. We did not ask the 10 panel to explore infrastructure readiness because we've 11 been actively involved with development of the Governor's 12 hydrogen highway network. 13 Since 2004, ARB has headed up development of a 14 blueprint plan along with an advisory panel made up of 15 automakers, energy companies, researchers, and other 16 involved State agencies to establish hydrogen 17 infrastructure to match deployment of hydrogen vehicles. 18 The plan targets opening 50 to 100 stations to support up 19 to 2,000 vehicles in the 2010 time frame. It also 20 establishes environmental performance targets for the use 21 of hydrogen on a well to wheel basis to ensure that 22 criteria pollutants are not increased, greenhouse gas 23 emissions are reduced, and renewable resources are used to 24 make hydrogen. 25 Implementation of the California hydrogen highway PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 has focused on funding of public stations. In the last 2 two budget years, we have been allocated money to co-fund 3 building stations and procure or supporting demonstrations 4 of hydrogen vehicles and buses. To date, California has 5 24 hydrogen stations with eleven more planned or in 6 development. Unfortunately, most of the 24 stations that 7 exist in California right now are not accessible to all 8 hydrogen vehicle drivers. And many of these stations have 9 limited capacity only serving a small dedicated fleet. So 10 while it appears we are well on our way to meeting the 11 goals established by the Blueprint Plan, the reality is we 12 have a long way to go. 13 The good news is that the efforts of automakers 14 and energy providers are coalescing on specific regions of 15 the state to concentrate efforts. This cooperation 16 facilitated by the California Hydrogen Highway effort and 17 the California Fuel Cell Partnership is helping to 18 prioritize station locations and ensure that stations that 19 are built will meet the needs of the drivers who will use 20 them. A vision for an efficient cluster of stations in 21 southern California is developing that should support roll 22 out of the next generation of fuel cell vehicles. 23 As the Board will likely hear from some of the 24 automakers, it will be challenging to get these stations 25 in place fast enough to support the deployment of vehicles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 planned for the next couple of years. It remains critical 2 that ARB's Hydrogen Highway Network efforts stay engaged 3 in the station funding, siting assistance, placement 4 coordination, and public accessibility efforts. The 5 bottom line, we're making progress, but we're behind 6 schedule compared to the expectations set up by the 7 Hydrogen Highway's Blueprint Plan. 8 --o0o-- 9 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 10 CHIEF BEVAN: As I've touched on previously, the changes 11 the Board made to the ZEV regulation in 2003 were 12 significant. They set a new course for accelerating 13 commercialization of ZEVs. While the Board was quite 14 certain that the initial step for implementation was the 15 right step, it was difficult to predict the long-term pace 16 of technology readiness. As with past regulatory changes, 17 the Board asked that we check in on the status of 18 technology and assess the pace of implementation a few 19 years into the program. Specifically, the Board asked 20 that the staff perform a technology review before the next 21 phase of the alternative path. As with past technology 22 reviews, staff were asked to engage the services of an 23 independent panel of experts. We've done this before with 24 batteries in 1996 and 2000 and with fuel cells in 1998. 25 This method of assessing technology has been valuable. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 The findings of previous expert panels have strongly 2 shaped the direction of the regulation. 3 For this technology review, we took a broad 4 approach asking this new panel of experts to take a 5 comprehensive look at a variety of technologies used to 6 comply with the regulation. We were particularly 7 interested in how the panel saw market penetration of 8 specific technologies taking place. For example, we 9 wanted to know when fuel cell vehicles would be ready for 10 large scale demonstrations, meaning thousands per year 11 across all automakers or ready for pre-commercial 12 placements of tens of thousands per year. And finally, 13 when did the panel foresee commercialization of fuel cell 14 vehicles at hundreds of thousands per year. 15 We asked for a report on fuel cell and battery 16 readiness and other systems that might impact 17 commercialization of fuel cell vehicles, battery electric 18 vehicles, plug-in hybrids, conventional hybrids, and 19 hydrogen internal combustion engine vehicles. We asked 20 the panel cover technical challenges, performance 21 parameters, and cost projections. 22 In choosing our panel, we looked for experts in 23 the fields of batteries, fuel cells, and vehicle 24 integration. This time around, in addition to obtaining 25 specific data on the key technologies used in ZEVs, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 batteries and fuel cells, we want to know how it all fit 2 together and would be implemented into vehicles. So we 3 added an expert in vehicle design and production. 4 --o0o-- 5 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 6 CHIEF BEVAN: In addition to engaging the expert panel, 7 staff held a three-day technical symposium in the fall of 8 2006 aimed at providing a forum for presentation of 9 near-term technology developments. The symposium covered 10 advancements in battery technology, fuel cell technology, 11 hydrogen storage, plug-in hybrid vehicles, vehicle to grid 12 opportunities, and user experiences. This symposium 13 provided additional insights on technology readiness and 14 identified additional sources of information for the panel 15 members. 16 One area we did not ask the panel to investigate 17 as I mentioned was infrastructure. This was because of 18 the recent efforts of the California Hydrogen Highway and 19 its continual assessment of progress. As an addendum to 20 the overall technical review, staff has included the 21 California Hydrogen Highway's 2006 year end report to the 22 Legislature. 23 --o0o-- 24 SUSTAINABLE TRANSPORTATION TECHNOLOGY BRANCH 25 CHIEF BEVAN: With this background established, I will now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 turn the presentation over to Mr. Walsh, Chair of the 2 Expert Review Panel. 3 MR. WALSH: And thank you very much, Ms. Bevan 4 and Dr. Chairman and members of the Board. Good 5 afternoon. It's my pleasure to be here and to present to 6 you the work that we've really focused our efforts on 7 quite extensively over the last year. 8 I'm joined by our other four members of the 9 Expert Panel who really do have tremendous expertise in 10 all aspects of the ZEV technology. But we asked first of 11 all Dr. Kalhammer to take special focus on the battery 12 energy storage technologies. We asked Dr. Vernon Roan to 13 especially focus on hydrogen storage systems and 14 technologies. Dr. David Swan is the expert on the panel 15 focusing on fuel cell systems. And finally, Bruce Kopf 16 has focused on the very important point that is really the 17 key step of integrating these technologies into vehicles. 18 And we'll go through each element of this in our 19 presentations. 20 --o0o-- 21 MR. WALSH: An overview of what we'll present. 22 We'll focus first of all on the objectives that we had 23 given to us by the staff. We'll review the status of the 24 key systems, the vehicle energy storage, hydrogen storage, 25 fuel cells. We'll spend a good deal of time on the status PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 of the vehicle integration. And then we'll conclude with 2 what perhaps was our most difficult task of trying to 3 estimate the market penetration of these technologies and 4 in a time line. 5 --o0o-- 6 MR. WALSH: Our objective was to provide an 7 assessment of the technical and cost status and the 8 prospects of zero emission vehicle technologies and their 9 integration into ZEVs and near ZEVs. Technologies we 10 focused on were battery electric vehicles, fuel cell 11 vehicles, hybrids, plug-in hybrid vehicles, hydrogen 12 combustion engine vehicles, and fuel cell auxiliary power 13 units. 14 Our initial task was to acquire information. And 15 we had meetings and in some cases multiple meetings with 16 all of the major vehicle manufacturers in the world. The 17 manufacturers were very cooperative with us. We signed 18 confidentiality agreements with all the manufacturers, and 19 we based our conclusions on the information that we 20 received, some of which was public and some of which was 21 not. 22 In addition, after our visits and after our 23 meetings with the industry, not just the vehicle 24 manufacturers but the fuel cell providers as well as the 25 battery industry, we followed up with a series of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 questionnaires, and in some cases further follow-up 2 questionnaires to respond to specific issues that we felt 3 we needed more information from. 4 And then finally, and most important part, we did 5 a critical assessment. Each of the experts that you'll 6 hear from looked very carefully at the information, 7 digested it, analyzed it, and tried to use it then to 8 reach our conclusions in terms of the time line. 9 Our first set of slides will focus on the vehicle 10 energy storage. And at this point, I'll turn it over to 11 Dr. Kalhammer. 12 MR. KALHAMMER: Dr. Chairman and members of the 13 Board, good afternoon. 14 --o0o-- 15 MR. KALHAMMER: It's my honor to present the 16 vehicle energy storage systems part of our investigation. 17 And I'd like to introduce that with the simple statement 18 that energy storage is the key enabler of both zero 19 emission and hybrid electric vehicles. There's a strong 20 consensus also at least at this point advanced batteries 21 are the only technologies that promise to meet the 22 requirements for electric on-board energy storage for 23 these vehicles. So our focus has been on advanced 24 batteries. And within the advanced battery arena, we 25 concentrated on nickle metal hydride and lithium iron PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 batteries, because these two technologies or maybe 2 families of technologies have been the focus of extensive 3 development and introduction efforts over the last ten 4 plus years. 5 What I would like to do is now briefly summarize 6 our key findings. I would like to begin with nickle metal 7 hydride batteries. And they are with the high power 8 design of the nickle metal hybrid battery, which is the 9 only advanced battery technology so far that has made it 10 into commercial success in hybrid electric vehicles. This 11 technology is now essentially fully mature. It is 12 produced on a large scale by a number of companies with 13 concentration right now in Japan and some other companies 14 in Europe and this country attempting to get into the 15 game. These batteries meet all the technical and life 16 requirements. And the remaining issue that we still have 17 is that they are expensive. If you look at the numbers, 18 1500 to $2,000 for compact hybrids and about twice as much 19 for a hybrid SUV are still rather large costs have to 20 somehow be recovered. And so that's quite a push to try 21 to reduce costs. But I think the further prospects of 22 cost reduction are not too good. And that's one of the 23 reasons for the strong interest in lithium ion 24 technologies that I'm going to refer to in a moment. 25 There is a considerable interest in a so-called PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 medium power energy nickle metal hybrid because of the 2 emerging interest in plug-in hybrids. This is the kind of 3 technology that would work for plug-in hybrids. This 4 technology has a reasonable chance to meet the very 5 demanding requirements, particularly the very long cycle 6 life needed for plug-in hybrids. However, right now, 7 there is not very much going on in this arena. And I 8 suspect again one of the explanations is that lithium ion 9 batteries promise to go even further for this application, 10 plug-in hybrids. 11 Finally, on nickle metal hydride still, we all 12 know, you know that this technology has proved itself in 13 fully performance battery electric vehicles under the 14 regulation some years ago, very rugged, long life battery. 15 But very little has happened to this technology over the 16 last five years because there really hasn't been much 17 interest by automobile manufacturers and therefore not by 18 battery manufacturers. 19 Prospects for this high energy nickle metal 20 hybrids are not very good. They are marginal or 21 inadequate with respect to specific energy and energy 22 density. And their cost remains as high as it was in the 23 2000s when we last looked at this. And that's inherent 24 because nickle has become extremely expensive so prospects 25 are not particularly good for this technology. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 --o0o-- 2 MR. KALHAMMER: Turn now to the success story of 3 the past five years, lithium ion batteries. Let me just 4 quickly say that lithium ion technology is not one 5 technology but a whole family that is still expanding and 6 broadening with progress in every one of the key issue 7 areas for lithium ion, one of them having been life five 8 years ago, both cycle and counter life, the other issue 9 being safety. 10 We've seen progress both in what I would call 11 conventional lithium ion technology, but the most 12 promising progress through the introduction of new 13 materials into this technology family to improve safety, 14 to extend life, and hopefully eventually reduce costs. 15 Talking now about the automotive applications for 16 lithium ion, the major focus right now is the development 17 of lithium ion technology again for hybrid electric 18 vehicles in the hope to reduce the high cost of nickle 19 metal hybrid. And they are good prospects for that, 20 because we are seeing quite a competition of both 21 developers, of prospective manufacturers, of technologies, 22 and of manufacturing methods. So advances here are still 23 remarkably fast. And I think they're going to eventually 24 see probably within about two years the first introduction 25 of high-powered lithium ion technologies into hybrid PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 electric vehicles with prospects for cost to eventually 2 drop below those of nickle metal hydride. 3 --o0o-- 4 MR. KALHAMMER: There are important advances in 5 so-called medium-power medium-energy lithium ion 6 technologies that are appropriate for application in 7 plug-in hybrid vehicles and possibly also in small full 8 performance electric vehicles. 9 This technology -- or I should say several of 10 these technologies, because they have a bunch of parallel 11 developments going on -- meet performance requirements. 12 Cycle life certainly is adequate for electric vehicle 13 applications and may be good enough for plug-in hybrid 14 applications where about 3,000 cycles -- lifetime cycles 15 will be needed. 16 The panel projected as costs for these 17 technologies about 3500 to $4,000 per battery. And while 18 that is not really low, prospects are that the incremental 19 cost over that over pure hybrid batteries may well get 20 paid back by the energy cost savings as you displace fuel 21 with electricity. There is now a low volume cell 22 production and prototype battery fabrication going on 23 particularly in Asia and Europe. Not as yet really in the 24 United States. Limited fleet demonstrations are underway 25 or planned. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 There is, however, no commitment yet from a 2 battery manufacturer from which you could conclude that 3 this is going to be a commercial product within the 4 foreseeable future. 5 So it's going to be very important. What is 6 going to happen with the emerging interest of automobile 7 manufacturers like General Motors in plug-in hybrids. 8 This could well be the signal that's going to begin to 9 drive the commercialization. This technology in the next 10 few years would be very, very interesting in this arena. 11 --o0o-- 12 MR. KALHAMMER: Finally, the panel also assessed, 13 of course, the high energy versions of lithium ion 14 technology that's appropriate for application in full 15 performance electric vehicles. And we can certainly 16 conclude there is really good potential for meeting the 17 energy, density, and power requirements of full 18 performance electric vehicles, for mid-size and larger 19 ones. Also the conventional technology for these 20 applications does appear to have adequate life, both 21 calendar and cycle life. That's the good news. 22 Not so good news is that the cost still looks 23 pretty high. They are more or less at levels where we 24 projected to be about five years ago in the order of 25 $10,000 for a battery. And that raises the question PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 whether there's a hope that these costs get paid back. So 2 there is not really now any significant effort to develop 3 these kinds of batteries for full performance electric 4 vehicles. 5 There's an interesting note here. There are now 6 a number of both full performance battery electric 7 vehicles and some plug-in hybrid electric vehicles that 8 have batteries with literally from thousands of these 9 small cells that you normally find in your laptop. These 10 are vehicles that are in small numbers on the road now. 11 And again, that's the good news. 12 The not so good news in the view of the panel is 13 that there is really not an inherent potential that such 14 batteries can be less expensive than batteries based on 15 larger cells. So cost is going to be an issue for these. 16 And there's also uncertainty regarding the life of these 17 less small cells and batteries which are not really built 18 for long life. And the computer they need to last three 19 years. But in an electric vehicle, that would have to 20 last a lot longer. 21 So again, the next few years are going to be 22 interesting in this arena. What we can see say about the 23 ultimate prospects of lithium ion batteries for full 24 performance electric vehicles is that the developments in 25 the hybrid and plug-in hybrid battery arena are certainly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 going to enhance technology and bring about further 2 advances that might ultimately increase the technical and 3 the cost feasibility of lithium ion batteries for all of 4 these applications. 5 MR. WALSH: Now I'd like to turn to Vernon Roan 6 to talk about hydrogen storage systems. 7 --o0o-- 8 MR. ROAN: Thank you. And good afternoon, 9 everyone. We knew from the beginning that on-board 10 hydrogen storage was a significant problem. I don't think 11 we realized how significant until we had a chance to 12 interview not only the automobile makers but the people 13 who are dealing with the technologies for storing hydrogen 14 on board. 15 One of the problems with on-board hydrogen 16 storage is that this is a relatively new problem. Unlike 17 the development of the fuel cell and batteries which have 18 been going on for a long time, a real intense effort on 19 other than liquid or compressed gas hydrogen storage 20 really only began a couple years ago. The reason for that 21 is that the big interest in fuel cells and a lot of the 22 activities had to do with the initiation of the PNGV 23 program by the Clinton Administration in 1993. All the 24 way through that program, the emphasis was on stored 25 liquid fuels on board the vehicle and using on-board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 reformers to produce hydrogen from the liquid fuel. This 2 eliminated the storage problem, because it was easy enough 3 to store liquid hydrocarbon fuels on board. But it 4 introduced a series of even worse problems in the 5 reformation of these liquid fuels into a usable hydrogen 6 fuel. And this had to do with the cost, with performance, 7 with efficiency. There were a lot of reasons that this 8 was a major problem. 9 Two things happened that changed this and about 10 the same time. One of them was the Department of Energy 11 commissioned a go/no-go panel to look at whether on-board 12 reformation should continue to be a major project or not. 13 The recommendation was it should not. It should be 14 dropped. And there are a lot of reasons for that. 15 The other thing was the initiation of the Freedom 16 Car program by President Bush in 2001. He emphasized 17 hydrogen: Hydrogen program, production of hydrogen, 18 delivery of hydrogen, and the use of hydrogen for fuel 19 cell systems. So the Freedom Car Program, unlike the 20 PNGV, concentrated on using hydrogen as a fuel. That's 21 the background. That tells you why we made much less 22 progress in the area of on-board storage than with 23 hydrogen storage than we have in some of the other 24 technologies. 25 DOE has, in fact, initiated a lot of work fairly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 recently which has led to the establishment of three 2 separate centers of excellence. We're studying the 3 development of new materials and new systems for on-board 4 hydrogen storage. This is all informative years. They've 5 only been going really for a couple of years. So the 6 progress that's being made right now is research progress 7 not the development progress that would lead to a vehicle 8 system. That will come after the screening from the 9 results of the research activities. 10 So at present, the vehicles that are using 11 on-board hydrogen are using either compressed gas or 12 liquid hydrogen. And in fact, only one manufacturer using 13 liquid hydrogen, and that's BMW. All the other 14 manufacturers are using compressed hydrogen gas. And all 15 of them except Honda have chosen to go with 700 bar which 16 is about 10,000 PSI storage pressure, where Honda so far 17 is sticking with 350 bar or about 5,000 PSI. 18 --o0o-- 19 MR. KALHAMMER: The reason for the manufacturers 20 going to 700 bar is to try to get enough hydrogen on board 21 the vehicle to give a 300 mile range. And the capability 22 is there, in fact, for a 300 mile range using this 700 bar 23 storage. The volume is still a lot. If we look at a 60 24 mile per gallon equivalent mileage car, which would take 25 five gallons of gasoline to go 300 miles, we're looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 a storage of 30 to 35 gallons for hydrogen tank that's 2 internal volume. And we would have anywhere from an 3 additional five to 15 gallons of exterior volume. This is 4 the thickness of the wall and the outside layer and so 5 forth. So you're looking at up to around 50 gallons for 6 the overall container size to carry five kilograms of 7 hydrogen, which is equivalent to about five gallons of 8 gasoline. 9 This is a problem, but it's one that can be 10 resolved in reasonable ways. The manufacturers are using 11 some innovative techniques such as forming the hydrogen in 12 long diameter cylinders going where the automobile tunnel 13 would normally be. They've gone to multiple tanks. 14 They've done things like eliminate the oil springs on the 15 rear of vehicles and putting in leaf springs to free up 16 some additional volume where fuel can be stored. So even 17 though it's a stretch, it is possible to carry enough fuel 18 on board to do the 300 miles at this high pressure in 19 particular. 20 The cost, weight, and volume are all big 21 challenges still. Other challenges are such as refilling. 22 When you refill at 10,000 PSI, you generate a lot of heat. 23 The internal structure of these tanks can only withstand 24 temperatures up to about 85 degrees C. So the refill rate 25 has to be limited or the fuel has to be pre-chilled in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 order to fill at a faster rate. So that's a concern. 2 They were talking about a cost of for -- this is five 3 kilograms. By the way, five kilograms is kind of a 4 nominal number. Obviously, you can get by with less if 5 you have a higher equivalent fuel mileage or it would take 6 more if it's lower. But this is in the ballpark. This is 7 kind of where the OEMs are honing in on this. So you're 8 looking at a cost of maybe $1650 or more, a weight of 180 9 pounds or more. This is for the five kilograms using the 10 700 bar pressure. 11 The alternative approaches using both solid and 12 liquid materials that are being funded by the DOE are 13 looking promising. There are materials that have the 14 weight capability or the capability to carry the weight of 15 hydrogen in excess of what you can use with compressed 16 gas. The goal for DOE for hydrogen storage is 6 percent 17 by weight by 2010 and 9 percent by weight by 2015. 18 There aren't any systems yet that are complete 19 and could really be evaluated to the extent that would 20 make any sense or could have any realism other than the 21 compressed gas and the liquid. So hydrogen storage is a 22 problem and appears it will continue to be a problem for a 23 while. 24 MR. WALSH: Thank you. 25 And now ask Davis Swan to give us his overview on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 the fuel cell systems. 2 MR. SWAN: Thank you. It's my pleasure to be 3 here today. 4 --o0o-- 5 MR. SWAN: I'm going to talk about fuel cell 6 systems. And the definition of a fuel cell system is 7 where we take the hydrogen that Vern that just talked 8 about on board the vehicle and turn it into electricity 9 that drives the electric vehicle the fuel cell is in. I 10 have two overheads for my presentation. The first deals 11 with progress made as a result. This slide summarizes the 12 observations that we made as a panel visiting as many 13 suppliers or developers of fuel cell vehicles. The second 14 slide deals with challenges and so on and is the consensus 15 opinion of the expert panel where the technology resides 16 today. 17 On the systems progress, there has been 18 significant technical progress made in fuel cell vehicles. 19 I started working as an engineer on fuel cells in the 20 1980s. And at that time, we were happy to get something 21 to work, something that could light a lightbulb with a 22 great deal of work. While, today, the developers have 23 systems that are very powerful. They fit in cars. 24 They'll start and stop and restart. It's very impressive. 25 A lot of progress since the 1998 report made to CARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 There's been large steps made to solving the many issues. 2 The effort on the part of the automobile 3 companies and developers is impressive. They have many 4 engineers, great labs. They are doing a lot of good 5 science and a lot of good engineering to develop these 6 systems. Their main focus is on cost and life durability. 7 The systems cost too much. They don't last long enough. 8 There's large effort internally for these groups to solve 9 those issues. They have to drive costs down. They have 10 to increase life. They know that and they're doing it. 11 Most developers remain optimistic. But there's 12 great difference in what people believe when they can 13 commercialize this technology. As an engineer, you're 14 often accused of overengineering something. But you know 15 if you take a product that you're developing, you take it 16 to commercialization early, it will fail either due to 17 high cost or the customer won't be happy. If you engineer 18 it longer, generally innovation will result in lower cost 19 and better product. If you come to market late, of 20 course, you may have been superceded by your competition 21 and who may have gotten there earlier. Or you could 22 imagine another technology might come in, establish a 23 foothold, and then you're no longer competitive that you 24 might have been if you had come in earlier. These are 25 issues they're trying to solve. When is the right time? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 When is the right time we haven't overengineered but we 2 have been successful? 3 --o0o-- 4 MR. SWAN: Going to my second slide, the 5 challenge and issues. This is the opinion consensus of 6 the panel. And the first one is that the technology is 7 not achieved with the combination necessary for the 8 performance, cost, and life to be commercialized. These 9 are sometimes conflicting requirements that have to be 10 solved simultaneously. And engineers have to innovate and 11 perhaps invention. Actually, in fact, we believe there is 12 invention necessary to meet all these requirements. You 13 can get life, but it can be at the expense of performance 14 or at the expense of cost and vice versa. 15 The key goals and challenges to this panel we 16 see, one is the platinum catalyst. The catalyst is 17 necessary for the fuel cell to work. And there's issue 18 with cost. Platinum has gone up immensely in the last 19 five years by a factor of four of five. Big changes. 20 There's utilization. That's how the developers counter 21 the cost problem. If you can use less of the catalyst to 22 do the same job, then you're driving the cost down. So 23 you have to focus hard on utilization. And finally, life. 24 So there's three combinations of cost, utilization, and 25 the life have to be solved. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 There's higher operating temperatures. These 2 fuel cells that are being used in these vehicles today 3 operate somewhere below boiling point of water. By moving 4 the temperature up, you gain certain advantages. You 5 drive the cost down, improving performance and do various 6 things to make the vehicle work better. This is another 7 area of concentrations that needs to be solved. 8 Longer component life. A fuel cell system uses 9 unique components. It's not like there's a supplier 10 network out there for water pumps for fuel cells. They 11 have to develop from hydrogen pumps. These components all 12 have to be developed in their own right, and that is a big 13 problem. How to get them developed to the point there's a 14 supplier network for the companies to rely upon to produce 15 these things. And the associated durability of these 16 components. 17 And, finally, I have efficiency here. Efficiency 18 is important. When I started working with fuel cells in 19 the 1980s, our focus was that fuel cells was important 20 because of high efficiency. Yes, indeed, it can be very 21 efficient. But we've seen data that indicates that you 22 can easily make a fuel cell system that isn't efficient 23 and you end up consuming more fuel. That's very 24 important, because the problems that Vernon just described 25 with the fuel storage if you're an efficient system, you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 need less fuel on board. You need a smaller 2 infrastructure to feed it. It takes less time to fill it. 3 So efficiency is very important. Getting these things to 4 operate efficiently under many operating conditions, cold, 5 hot, dynamic operation is a challenge. Thank you. 6 MR. WALSH: Now I think in previous panels, the 7 focus has primarily been on each of three systems that we 8 just talked about. But the staff asked us in this panel 9 to take it one step further and look at the actual 10 integration into vehicles of these systems and of these 11 technologies. And we asked Bruce Kopf to take the lead in 12 doing that. And he will lead us through several slides 13 now for each of the types of vehicles we're talking about 14 where do we stand at the present time. 15 --o0o-- 16 MR. KOPF: Good afternoon. This slide addresses 17 full performance battery electric vehicles. The panel 18 defined these as BEVs with acceleration and top speed 19 adequate for driving on all types of roads, including 20 urban freeways. Some were unsuccessful due to high 21 performance cost and the battery and limited mass market 22 customer acceptance, short driving range. 23 The OEMs had have made little progress since. 24 The battery in this type of vehicle must be larger than 25 that required for the customer's average daily trip PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 length, making the customer's fuel savings payback of the 2 initial cost of the battery difficult to achieve. On the 3 other hand, high fossil fuel prices and less demanding 4 driving conditions in Japan and Europe provide lower 5 battery success. And a few OEMs are developing small 6 full-performance battery electric vehicles with lithium 7 ion batteries for those markets. 8 The panel's consensus opinion is that full 9 performance battery electric vehicles are not likely to 10 become mass market BEVs in the foreseeable future due to 11 the high cost for the battery and limited customer 12 acceptance due to range and recharge time. 13 --o0o-- 14 MR. KOPF: Hybrid electric vehicles have no 15 customer compromises. HEVs appeal to mass market 16 customers who are willing to pay a premium for the 17 vehicles attributes. Costs of electric drive components 18 and systems are being driven down by the success of this 19 technology. But we learned that manufacturing cost is 20 still an issue. 21 We also found that HEV sales volume is highly 22 dependant on the prevailing price of gasoline, making 23 future growth predictions uncertain. 24 Our opinion is that HEVs are providing major 25 support for future mass markets. Our opinion is that HEVs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 are providing major support for future mass market battery 2 and fuel cell ZEVs by continuing to advance electric drive 3 and battery technologies and by increasing mass market 4 customer awareness of electric drive technology and the 5 associated benefits. 6 --o0o-- 7 MR. KOPF: Plug-in hybrid electric vehicles have 8 no expected customer compromises in terms of range, 9 recharge time, and infrastructure, while promising many 10 benefits associated with BEVs to customers and to society 11 at large. 12 Compared to a full performance BEV, the 13 relatively small battery capacity of a plug-in hybrid can 14 be fully discharged daily, maximizing the customer's 15 capability to achieve fuel savings payback of the expected 16 initial vehicle premium for the larger battery. 17 An important issue is that adequate plug-in 18 hybrid definitions and fuel economy and emissions testing 19 standards do not yet exist and need to be agreed upon by 20 all stakeholders. All-electric range, or pure EV mode, 21 has a major impact on cost. An imposition of large EV 22 mode all-electric range could have a significant negative 23 impact on the early success of the technology due to both 24 fixed and manufacturing cost issues. The panel's opinion 25 is that plug-in hybrids have a potential to provide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 significant direct benefits to the environment as well as 2 foster future mass market CEVs by stimulating battery 3 development and conditioning mass market customers to 4 accept plugging in. 5 Fuel cell electric vehicles fueled by sustainable 6 hydrogen are considered the ultimate solution by several 7 OEMs with massive R&D efforts underway. However, 8 simultaneously achieving performance, durability, and cost 9 objectives as David outlined continues to be very 10 difficult. The cost, weight, and volume of adequate 11 on-board vehicle hydrogen storage as well as availability 12 of a hydrogen infrastructure are also major issues facing 13 commercialization. 14 Interestingly, plug-in series hybrid fuel cell 15 EV's with fuel cells operating largely steady state of the 16 potential to simultaneously achieve the performance, cost, 17 and durability objectives. Our opinion is that given the 18 past rate of success and with massive intellectual and 19 financial resources continuing, fuel cell electric 20 vehicles continue to be a promising candidate for future 21 mass market true CEVs. Thank you. 22 --o0o-- 23 MR. WALSH: As indicated, the bottom line 24 question to us was what kind of market penetration is 25 possible in what kind of time frames? And there's a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 saying I've heard in many different forums that the minute 2 you make a forecast, it's immediately obsolete. And so we 3 make these forecasts with great humility and emphasize the 4 point that these are estimates and approximations because 5 there's so many forces at work. We've made these 6 estimates under a business as usual. And that business as 7 usual includes the ZEV mandate. It includes a gradual 8 increase in the price of fuels, but not a national energy 9 catastrophe or anything like that. We also as Ms. Bevan 10 pointed out, we did not consider infrastructure issues. 11 But other than that, we looked at how fast could the 12 technology enter the marketplace. 13 Our first look was at hybrid electric vehicles. 14 And of course, these are already in commercialization. 15 This is the success story I think of the ZEV program. 16 Last year, 252,000 approximately were sold in the 17 United States. Plug-in hybrids, we estimated that they 18 could be in the demonstration stage over the next couple 19 of years and could get to the pre-commercialization stage 20 in the thousands in the 2012 kind of time frame -- 2010 21 kind of time frame and the 10,000s in the 2012 or early 22 commercialization stage. And full commercialization could 23 be as early as about 2015. 24 Fuel cell electric vehicles we think as is 25 mandated by you in the approximate thousands in the 2009 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 time frame. But then we think that it will take several 2 generations of fuel cells before we get to the next stage 3 where tens of thousands of these vehicles could be 4 commercially viable. So we estimate that that could take 5 as far as 2020 before we get to that 10,000 stage. And 6 then full commercialization would be in the 2025 time 7 frame in our estimate. 8 Full performance battery electric vehicles are in 9 the thousands now. And we think could be in the tens of 10 thousands mainly outside of the United States though, 11 mainly in Japan and perhaps a little in Europe in the 2015 12 time frame because of the different driving conditions and 13 speed conditions and so forth that exist. Much less of 14 the kind of freeway driving that we would place on a full 15 performance battery electric here in the United States. 16 And we think full commercialization perhaps in 2030 time 17 frame. 18 --o0o-- 19 MR. WALSH: Looking at hydrogen fueled internal 20 combustion engines vehicles, they're at the demonstration 21 stage we think just about now in the hundreds per year and 22 will achieve pre-commercialization with thousands per year 23 we think in about 2020 kind of time frame. Early 24 commercialization would be five years later than that, and 25 mass commercialization by 2030. If you go one or two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 slides further, we've got this slide. We skipped a few in 2 the interest of time. 3 City electric vehicles are already we feel at 4 pre-commercial vehicles and will achieve early 5 commercialization that's in the tens of thousands by 2010. 6 And mass commercialization we think will then be a slow 7 gradual process up to about 2030. 8 Neighborhood electric vehicles are already also 9 at the pre-commercialization stage and are forecast by us 10 to achieve early commercialization in the next couple of 11 years by 2010. 12 And mass commercialization again will be a 13 gradual increase over the next 30 years or so after that. 14 --o0o-- 15 MR. WALSH: Fuel cell auxiliary power units are 16 estimated to achieve the demonstration stage in the next 17 few years by 2010; pre-commercialization by 2015; and 18 early commercialization then by 2030; and mass 19 commercialization about 20 years after that in the 2050 20 kind of time frame. 21 So with that, I think we'll conclude our 22 presentation. And as the panel has indicated, we think 23 there's been a tremendous amount of progress in the last 24 four or five years, some of which has far exceeded our 25 expectations. And we see there are many challenges ahead PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 and many difficult technological steps that need to be 2 solved. 3 We also conclude there's a tremendous amount of 4 work going on in the industry largely I think in response 5 to your mandate and also in response to the realities of 6 the petroleum situation in the world and climate change 7 and other issues. With that, we'll conclude. Thank you. 8 CHAIRPERSON SAWYER: Thank you very much, Mike, 9 and to all of the panel members for your diligence in 10 carrying out this task force over the past year. We 11 certainly appreciate what you've done. And the report 12 which you have provided to us is an invaluable reference 13 work. 14 I suspect that some of the Board members will 15 have a few questions. Mrs. Riordan. 16 BOARD MEMBER RIORDAN: I'll start and start by 17 saying thank you very much. It is most helpful for us to 18 have your review. And I appreciate the work that you've 19 done and hopefully work that you may do in the future for 20 us. And that leads me to my question. I know it's a 21 question that's perhaps premature. But when would you 22 think we ought to go back and review this again with an 23 expert panel? What would your recommendation be to that? 24 MR. WALSH: We'll all weigh in on that if we'd 25 like, because we didn't wrestle with that as a panel. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 my own view would be probably a five-year cycle is 2 probably a reasonable cycle to allow a generation or two 3 of some of these technologies to continue to evolve. And 4 at that time, it would be probably time to take another 5 look. I don't know if anybody disagrees with that. 6 MR. KALHAMMER: My view is in some of these 7 areas -- and I would include the battery area and also the 8 fuel cell systems area. We are right now in a very 9 dynamic situation with the rapid progress in the 10 technologies and also the emergence of new applications 11 such as plug-in hybrids. That is going to drive a lot of 12 work. There are going to be demonstrations that will show 13 whether there really is a payment on the promise if you 14 will that we've tried to outline. So my sense is that you 15 might think about this as early as three and certainly no 16 later than five years. 17 MR. WALSH: I did note by being here this morning 18 and was very pleased to see in part of your research that 19 you approved this morning you will be looking at lithium 20 ion batteries in four plug-in hybrids I think U.C. Davis 21 if I understood to see if a lot of the claims that are 22 being made in fact bare out. So I think you'll be doing 23 some of this research yourselves in the next very short 24 period of time. 25 MR. ROAN: I agree generally with Fritz. A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 couple of area in particular are pretty dynamic and 2 changes are very likely to take place very quickly. The 3 on-board hydrogen storage is one of these. And that's 4 because there's an awful lot of concentrated work going on 5 right now that has just been underway for a couple of 6 years. And so I think that probably at least updating the 7 work that we've done within I'd say about three years 8 would be probably a reasonable estimate would be pretty 9 important. Because I suspect there are going to be some 10 major changes or at least new technologies available 11 during that time period. 12 MR. SWAN: I agree on the three years. I think 13 what you do forces folks to do the work. And whatever 14 area you're forced to go in, observe that closely. So 15 instead of having a panel going over some many 16 technologies, create sub-panels that focus on what is 17 happening right then quickly you're trying to make 18 decisions on. And then they can perhaps react faster and 19 more focused. That's whatever time scale you're at. 20 Could be one year or as many as three or four, but five 21 seems to a lot to me with the rate things are changing. 22 MR. KOPF: I'm in the three year camp also. If 23 you look at our graph, the bar charts, there's a lot of 24 activity that we're projecting that transition to happen 25 in 2010. And as you'll also look at car companies what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 they've said they're going to do, there's a lot of 2 near-term stuff that's out there. I don't want to leave 3 anybody out, but Honda is going to introduce a new fuel 4 cell car soon. GM is talking about the Volt. They're 5 talking about plug-in Saturn Views. That Japanese 6 companies are talking about full performance battery 7 electric vehicles with lithium ion batteries in Japan. I 8 think there's going to be a lot of interest. 9 If you look back twelve months when we started 10 this project, in my opinion, there's been a tremendous 11 amount of activity on this subject in the world. Not just 12 the auto companies, but also the suppliers, the 13 government. Lots of things have changed. Supreme Court, 14 the CO2 report, I mean, this stuff is emerging rapidly. 15 And so I'm at the three-year point. 16 BOARD MEMBER RIORDAN: Thank you very much. 17 CHAIRPERSON SAWYER: Professor Sperling. 18 BOARD MEMBER SPERLING: I'd like to first thank 19 the panel. I think it's a superb report. I think it's 20 very helpful. And I know four of the five panelists, know 21 their credentials and know them. And I know that they're 22 highly qualified. And I want to make the statement that 23 this really is very a high quality assessment that we've 24 gotten. 25 And in fact, reading it through, there's really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 only one issue that -- one point that I would take issue 2 with. And so I have one question and one comment. Let me 3 start with the comment first and you can react to it. And 4 that is the idea of city electric vehicles. And you know 5 the reality is batteries are still expensive. And you 6 know there is an energy density issue with them. And so 7 the conclusion would be as a full function, full size 8 vehicle, it's probably a ways off. Possibly even a very 9 long ways off before it could be competitive. But a city 10 EV which you did address here and had kind of a luke warm 11 assessment for in the European market but had a pretty 12 pessimistic one for the U.S. market, I would assert that's 13 a judgment about consumer behavior and market assessment. 14 It's not a technical judgment. 15 And I would suggest that there is considerable 16 evidence to suggest that a city EV could be at least 17 moderately successful in the U.S. market. You know, we 18 see car companies starting to sell very small cars. The 19 Versa, the Yaris, so on. 20 We see that car -- we now have households that 21 have fleets of cars. There's I believe the number is well 22 over 40 percent of houses -- 60 percent of households have 23 two or more cars. More than 20 percent of households have 24 three or four cars. So there's a way of thinking about 25 vehicles in a more specialized way than we have in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 past. So this is a market issue. 2 So I would suggest that let's not jump to 3 conclusions about that and even suggest that there is 4 reason to think that could be a substantial market. So 5 that's my comment. I'm going to have a little question. 6 If there's any reaction to that, I'd be interested. 7 MR. WALSH: I think that's a good comment. 8 BOARD MEMBER SPERLING: Good. We're making good 9 progress here. That's was a good answer. Good answer. 10 The other one is a question. This is hydrogen 11 storage. And Dr. Kalhammer said that -- you kind of said 12 that you can imagine it being -- I don't know what the 13 exact word you used. But it's plausible as a means of 14 hydrogen storage in the near term, maybe further. I'd 15 like to hear a little more maybe and anyone else that 16 feels capable of answering it. This brings it to the 17 market issue. And I guess that's the big -- one of my big 18 themes here is that a lot of what we're talking about has 19 as much to do about what consumers want and are willing to 20 pay for as the technical characteristics. And there's no 21 reason to think that future has to be the same as the 22 past. And the consumer market is not homogeneous. It's 23 evolving and it can evolve in different ways. 24 So the hydrogen compressed -- this is a really 25 key question, you know. And the question is how far do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 you think we can go with compressed hydrogen? How far 2 into terms of pre-commercial, commercial, and it still be 3 an acceptable technology before we really need to be 4 looking at some of these solid and liquid storage 5 technologies? 6 MR. ROAN: In the compressed gas, storage does 7 not and will not as far as anyone can project meet any of 8 the major goals for 2015. This is going to be too costly 9 and also going to have -- the energy density is too low. 10 BOARD MEMBER SPERLING: You're referring to the 11 DOE? 12 MR. ROAN: Yeah. And by the way, the only reason 13 DOE is there, their name keeps coming up here, is because 14 they're the ones providing essentially all of the funding 15 that's going into hydrogen storage. And they along with 16 the tech teams from industry have set the targets. And 17 the targets are supposed to be a combination of what would 18 be required for a descent vehicle and what might be 19 accomplished technically. The hydrogen storage using 20 compressed gas doesn't do it. And so if you want -- and 21 again, you're talking about marketing. So this is purely 22 speculation. I'm not speaking for the panel. This is 23 just for myself. I did most of the stuff on the hydrogen 24 storage. 25 I think it would be very, very difficult to have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 a commercialized fuel cell vehicle using compressed 2 hydrogen gas as the storage medium. It's certainly 3 possible. And I think that it would depend a great deal 4 on what the surrounding circumstances were. What is cost 5 of hydrogen? What's the cost of gasoline? What kind of 6 incentives are there and on and on and on. But it's still 7 very difficult. 8 So I really think that everyone is looking for 9 and hoping for some of the research that's underway now 10 using these various different kinds of carbon and hydride 11 material, liquids to come up with a way of storing a 12 greater percentage of hydrogen at a lower cost. 13 BOARD MEMBER SPERLING: Let me just make one 14 comment about that. I think this illustrates very well 15 the dilemma that faces us in this sense, and that is that 16 no one really has an incentive to invest in hydrogen 17 storage right now. The automobile industry, that's not 18 their expertise. That's not a lot of experience. 19 And so a lot of the burden has fallen on DOE as 20 you said. And until -- the real research advances happen 21 when there's private investment. And we haven't seen the 22 private investment. And that's where the question comes 23 to us is if we don't push it, if we don't push forward 24 these goals or expectations for fuel cells, the investment 25 is not going to happen. And if you do, there will be a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 lot more private investment. Because, you know, the 2 national labs do great work, but they don't build 3 technology that's commercial and will be commercial. 4 So, you know, I raise that point because it under 5 lies all of the decisions on all of the whole ZEV program, 6 all of the technologies is this question of how do you 7 inspire, motivate innovation. And because the automotive 8 industry is tremendously innovative, but there are gaps 9 here. And this is one of those big gaps that exist in the 10 industry. 11 MR. ROAN: I agree with you. It is a big gap. 12 We do know that all or pretty much all of the major 13 manufacturers are working on concepts other than 14 compressed gas or liquid storage. What we don't know is 15 how much progress they've really made. Obviously, they 16 didn't feel it was enough to convey it to us. Further, 17 they've already planned at least their first two 18 generations of fuel cell vehicles, and all of them, all of 19 them except BMW, all of them use compressed hydrogen gas. 20 So they obviously still feel there's a ways to go in 21 developing the storage technology. 22 MR. WALSH: Of course, the question you asked us 23 is really the question that you will have to answer is how 24 you shape or modify or continue your ZEV mandate in terms 25 of how you incentivize these kinds of developments. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 That's called passing the buck. 2 CHAIRPERSON SAWYER: Mayor Loveridge. 3 BOARD MEMBER LOVERIDGE: I appreciate the value 4 of the panel as Dr. Sperling identified in terms of 5 understanding the technology and where we are. It's a 6 very effective and thoughtful presentation. 7 But I guess my concern is or at least quick 8 observation is business as usual kind of concept. I think 9 there's some fundamentally different things happening here 10 but effect certainty of the kind of market estimations you 11 made. And you can name them too. We're countdown on a 12 new administration which you assume is going to both in 13 regulations and R&D is going to be different. The global 14 warming, AB 32, this whole quest is something that was not 15 here before. There's a kind of greening of America. As 16 we said, green is now red, white, and blue. And there is 17 a different kind of ideology among cities. Almost like a 18 green prairie fire. 19 This question of national security I think is 20 becoming increasingly important. The question of what 21 incentives are going to be that might be there to 22 encourage consumer behavior, the gas prices. And as you 23 suggest, the kind of competitive dynamic among auto 24 companies. And when one looks at what China is trying to 25 do, it seems to me there's a large number of variables PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 here in play that are different than business as usual 2 variables. So when you put together those charts, it 3 seems to me I'd be more comfortable with ranges rather 4 than a particular years that are identified. 5 MR. WALSH: Good comments. 6 CHAIRPERSON SAWYER: Supervisor Hill. 7 SUPERVISOR HILL: Thank you. I'm struggling with 8 the same comments of Mayor Loveridge. And the difficulty 9 for me as I look -- by the way, thank you. It was an 10 excellent report and actually a pleasure to read. For a 11 layman, that's pretty good. 12 Looking out at some of the projections that you 13 have going out 30 and 40 years in the report and some of 14 the charts that we saw, in taking that and the comments 15 that we should be reviewing this in three years to five 16 years, however more on the three years side with the 17 comment was major changes taking place, in the very 18 aggressive movement in the field, I guess the struggle 19 that I'm faced with is how do we base decisions on what we 20 just heard? And what I read in the report, if we're going 21 to make some changes to our plan and then three years from 22 now things could be completely different, and do we start 23 oversteering in the car going back and forth trying to 24 keep up with the technology and then looking and 25 anticipating the market as it comes forward later on. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 don't know if there's a question in there. 2 But maybe just what would you do? Would you rely 3 on this technology in the report to make decisions and 4 changes, or would you say let's kind of stay the course? 5 MR. WALSH: Well, that is a very hard question 6 and very difficult question. I think what we did as a 7 panel was we tried to gage and give some sense of 8 confidence or lack of confidence in terms of how the 9 technologies are developing. And certainly the further 10 out you go, you know the more pie in sky it is. So I 11 would pay most attention to the short term. 12 But I don't think we can or we certainly tried 13 not to put ourselves in your shoes and to make that policy 14 division. We tried very carefully and consciously 15 discussed amongst ourselves and looked at the guidance 16 that we received from the staff was to just try to do a 17 straight up or down technology review and not get into 18 policy and have that color our judgment. We just tried to 19 give you and tried to summarize it here today where we 20 think the technology is. 21 And the reality of it is as each of the panel 22 members has pointed out that some of the technologies are 23 on a very fast evolution or revolution. And I always like 24 the word that David has used several times in the report 25 and in his comments, there's some invention that's needed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 at certain points. But invention occurs. We don't know 2 when it's going to occur. So we've given you a flavor for 3 that without getting into the policy issue. We tried not 4 to get into the policy issue. Because that's not what we 5 were asked to do. 6 CHAIRPERSON SAWYER: Ms. D'Adamo. 7 BOARD MEMBER D'ADAMO: I have a question. 8 CHAIRPERSON SAWYER: Okay. Okay. Excuse me. 9 Ms. D'Adamo. 10 BOARD MEMBER D'ADAMO: Well, first of all, thank 11 you again. I'd just like to echo the compliments that my 12 other colleagues on the Board gave to the panel. I really 13 do appreciate the information provided and your knowledge 14 and expertise. 15 I'd like to align myself with the comments that 16 Mayor Loveridge made as far as of course that is not -- we 17 recognize that is not your role to project into the future 18 on the market and some of the other things that may drive 19 the future here. But just would like to reiterate some of 20 the things that the Mayor said. We are a very dynamic 21 situation here with a great deal of prospect for change. 22 And we would just like to highlight the odd role that 23 we're in here, because this is a technology forcing 24 regulation. And in some ways while on the one hand it's 25 the responsible and right thing to do to have reviews and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 to hear from experts such as yourselves, but on the other 2 hand it continues to keep the door open, continues to keep 3 the door open, and always to have a questionmark about 4 just how serious we are. And I guess that's what we'll be 5 talking about later today, the policy decisions that we 6 need to make in order to encourage the development and 7 somehow not interfere with that development that might 8 otherwise take place by virtue of our very strong 9 regulations. 10 A couple of questions on lithium ion batteries on 11 cost. I'm looking at the slide vehicle energy storage 12 lithium ion batteries, high power -- the high power HEV 13 role. Potentially lower cost. Can you provide the cost 14 comparison to nickle metal hydride in that application? 15 MR. KALHAMMER: There is a corresponding graph 16 here. Let me explain what this is. This is an attempt -- 17 MR. WALSH: You don't have this. We did this as 18 backup. 19 MR. KALHAMMER: This is a backup. This is an 20 attempt to summarize a lot of cost information of rather 21 different type from different manufacturers. One of the 22 problems when you get into cost is each manufacturer has a 23 different way of costing things if these are not yet 24 commercial products. Because it always involves 25 extrapolation to larger numbers. And these kinds of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 curves are exactly the kind of curves you tried to create 2 if you can in order to understand how costs decrease when 3 you increase production. These are cost learning curves. 4 What's plotted on the vertical axis is simply cost in 5 dollars per kilowatt hour of battery capacity. And to the 6 right, you have the annual production in some rational 7 number. In this case, megawatt hours per year or 8 thousands of kilowatt hours per year. And this is an 9 approximate straight line which helps you to extrapolate 10 cost. 11 But there's still a lot of uncertainty in these 12 extrapolations to really big numbers. And the reason is 13 very simple. No one has produced lithium ion batteries of 14 the type we're talking about for automotive application in 15 these kinds of numbers. So you really have to start 16 conceptualizing fully automated huge plants of the type 17 that don't exist yet. But you can say, well, in consumer 18 products we have these kinds of plans, yes. But these 19 consumer product batteries really do not meet some of the 20 requirements. And so there's a lot of extrapolation, and 21 the cost therefore remains uncertain. 22 Now let me just make one final point. There is 23 kind of an ultimate bottom for the cost of the battery. 24 That's the cost of just the materials. And it so happens 25 that for mass produced batteries of the type that we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 talking about, lithium ion nickle metal hydride, the 2 materials are fairly expensive. So you're not going to 3 get below the cost of the materials. In fact, a really 4 round about way to estimate total costs for these 5 batteries to say, well, they're going to cost somewhere 6 around two, may two-and-a-half times the cost of the 7 material. That's a sanity check you can do. 8 So while these are not costs that we got number 9 for number and analyzed in detail how they came about from 10 manufacturers, they are the aggregation of a lot of data 11 from different manufacturers. So we think that these are 12 not bad guesses. This was done not unlike we did the 13 battery cost estimation five years ago in 2000 I should 14 say. And everyone looks at these numbers which are 15 actually also plotted in these as the open circles. 16 They're quite consistant with today's costs. So I think 17 the confidence in these kinds of cost numbers is actually 18 pretty good. 19 BOARD MEMBER D'ADAMO: If we were to look at two 20 and a half times the cost of the materials, which would be 21 a dream situation, it sounds like -- 22 MR. KALHAMMER: Which would be true only for 23 large production fully automated plant. 24 BOARD MEMBER D'ADAMO: What would that mean in 25 terms of hybrid electric? How would you translate that? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 I see on the nickle metal hydride you have 1300 to 2,000 2 for compact. 3 MR. KALHAMMER: I think I probably trapped myself 4 with this comment. But it allows me to make another 5 comment. The smaller the battery gets, the less good is 6 this assumption. And that's because there are many things 7 that go in a battery: The control system, all the 8 hardware. These kinds of costs do not tend to go down 9 with the size of the battery, but stay up at a certain 10 level. So they eventually dominate the cost. And so for 11 these hybrid small HEV batteries, this is probably not a 12 good approximation. We've carried out a model in the 13 report that show that indeed as you get to small 14 batteries, the cost does not decrease in proportion to 15 size at all. It stays up much higher, which is part of 16 the problem that the current manufacturers still had. 17 BOARD MEMBER D'ADAMO: Okay. And then the last 18 question is on these two charts that you provided on the 19 projections, did you assume nickle metal hybrid or lithium 20 ion? 21 MR. KALHAMMER: That's lithium ion. 22 BOARD MEMBER D'ADAMO: Thank you. 23 CHAIRPERSON SAWYER: I have a question. In your 24 talking with the major manufacturers, what fraction of 25 their drive train R&D do you think they're devoting to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 fuel cell effort? 2 MR. KOPF: Well, I first of all I would suggest 3 you ask them that, because we don't want to speak for 4 them. We would only be able to guess at that. First of 5 all, it depends on the company. Some are investing very 6 heavily. But they have a huge number of conventional 7 power train technologies that they're developing. They're 8 looking at -- because they have all kinds of regulations 9 to meet in terms of emissions and fuel economy, customers 10 want better fuel economy. They have to be competitive 11 with the other manufacturers. Again, I hesitate to guess 12 at that, and I think you could ask them that question. 13 CHAIRPERSON SAWYER: Let me follow up with 14 another question. And that is, do you sense that what I 15 think is a high level of activity in fuel cell R&D is 16 driven by our regulation or primarily by their perception 17 of what the future of the automobile is? 18 MR. WALSH: Well, again, we could speculate a bit 19 about that, and I will. My sense is that a significant 20 part of the work is driven by the ZEV mandate. But it's 21 not only that. And I think that they are looking at the 22 same real world that we all are, a world where petroleum 23 is going to be a problem. Fuel prices are going to be a 24 problem. Climate change, whether it's driven by 25 legislation or just the general public reaction to climate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 change, I think all of these factors are things they are 2 looking at just as we're looking at them. 3 But I think certainly a lot of what has happened 4 in the past I think has been driven by the ZEV mandate. 5 Certainly, I would attribute a lot of the success of 6 hybrids to push from the ZEV mandate. But that's an 7 opinion. That's not a panel viewpoint. I don't know how 8 others feel. 9 CHAIRPERSON SAWYER: Dr. Sperling. 10 BOARD MEMBER SPERLING: I'd like to follow up on 11 that question. The next question is if whatever that 12 amount going into R&D is -- and I'll put out some numbers 13 as a benchmark for anyone to try to contradict me. But 14 you know, I think the general sense outside the automotive 15 industry is there is about $200 million a year going into 16 fuel cell R&D at Toyota, GM, maybe Honda, maybe after this 17 at companies like Nissan. So say -- they can say that's 18 wrong. But assuming something like that, what if that 19 amount of R&D was increased say 50 percent? What effect 20 would that have in terms of accelerating the pace of the 21 development of the technology? In other words, is this a 22 temporal time problem, or is this a resource question in 23 terms of the advancement of the technology in your 24 judgment? 25 MR. KALHAMMER: I'll give you my own personal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 opinion having followed fuel research for a long time and 2 also having participated nine years ago in the fuel cell 3 assessment for the Board. 4 Even then I think it was quite apparent that 5 there was a strong strategic component, particularly on 6 the part of the Japanese companies, in betting on the 7 radical alternate technology and making significant 8 investments even then. And of course, these investments 9 have gone up tremendously as things that have moved from 10 R&D into engineering prototyping and so on. So that's in 11 a sense an answer to the Chairman's question what drives 12 these investments. 13 I think a sense of trying to find alternatives 14 for the future and then the emerging competition between 15 manufacturers cannot be underestimated as a driver here. 16 Now in specific response to your question, if one 17 doubled the R&D investment, my personal feeling is that 18 this would certainly increase the probability of success 19 in licking some of the critical problem. Simply a matter 20 of probability, trying more things. But it would really 21 shorten the process. I'm dubious, because when you have a 22 logical structured complete development process with all 23 its many components -- and Bruce could explain what these 24 all are, which are normally consecutive and cannot really 25 be shortcut. There are times involved. There's testing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 involved. There's re-engineering involved. Throwing 2 necessarily a lot more money at it I don't think is going 3 to radically change the time scale. I think it's going to 4 change the probability of success, and that certainly a 5 worthwhile objective. 6 CHAIRPERSON SAWYER: Okay. Let me make one 7 comment, and we'll move to the testimony part. Now -- 8 EXECUTIVE OFFICER WITHERSPOON: Actually, there's 9 a balance of the staff presentation, because we do have 10 recommendations for you based on our reflection of what 11 the panel finds mean for the existing reg. 12 CHAIRPERSON SAWYER: Excuse me. I'll save my 13 comment. 14 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 15 CHIEF BEVAN: As the Board can tell from the panel's 16 presentation, a great deal of information was collected 17 regarding the status of technologies being used to comply 18 with ZEV regulations. What I'd like to do now is to 19 distill the panel's information into a few key findings 20 that staff believes impact the implementation of the ZEV 21 regulation in the coming years. In particular, I'd like 22 to tie each issue back to where the Board saw potential 23 for policy change -- 24 --o0o-- 25 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 CHIEF BEVAN: -- or concern about the ability of a 2 technology to keep pace with the regulation. 3 --o0o-- 4 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 5 CHIEF BEVAN: The first technology we're going to talk 6 about is the fuel cell. In 2003, the Board was very 7 focused on how to structure the ZEV regulation to 8 accelerate the efforts of the automakers to commercialize 9 the zero emission vehicle technology. Different from the 10 battery EV, automakers seem to see this technology as more 11 than a niche product. Rather, fuel cell vehicles were 12 seen as the ultimate replacement for petroleum-powered 13 internal combustion engine vehicles. 14 As I've mentioned before, the first step of the 15 alternative path implementation was pretty certain as it 16 matched what vehicle manufacturers were planning for their 17 demonstrations. But while the Board in 2003 had estimates 18 from the Department of Energy for technology development 19 target dates and associated volume ramp-ups, we were less 20 certain if those targets would be met or at the pace of 21 volume ramp up would be appropriate once initial 22 demonstrations were underway. 23 Not withstanding this, the Board adopted the 24 ramp-up schedule presented in my overview of the 25 regulation. So the key question for the panel was, is the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 number of fuel cell vehicles required in the alternative 2 path consistent with the current state of technology? 3 --o0o-- 4 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 5 CHIEF BEVAN: As you heard from the panel, technical 6 challenges remain for fuel cells. Two of the key findings 7 staff zeroed in on were the durability of and the fuel 8 cell stack and cost. In particular, the panel reported 9 that stack life was two to three years, which is far lower 10 than the 15 year targets established for 11 commercialization. And the cost for fuel cell stacks are 12 much higher than the target for commercialization, as much 13 as 20 times more than the goals established for market 14 readiness. 15 For all the challenges identified by the panel, 16 as you heard from the panel, much optimism lies with the 17 technology. It remains the primary focus of many 18 automakers' advanced technology development programs with 19 a great deal of resources and research going into solving 20 these issues. So even with the hurdles yet to be 21 overcome, the panel predicts that production of thousands 22 of vehicles worldwide is achievable by 2010. However, the 23 panel also predicts that the level of production should 24 continue at that level through 2020 while the technology 25 is perfected and costs are reduced. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 --o0o-- 2 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 3 CHIEF BEVAN: To illustrate this point, the panel's 4 assessment of ramp up timing for fuel cells is compared to 5 the ramp up requirements for the regulatory alternative 6 path. What we're showing here in this graph is when the 7 panel expects that fuel cell vehicles will be available 8 globally and demonstration volumes of hundreds, 2004 9 through 2008; pre-commercial volumes of thousands, 2009 10 through 2020; low volume commercial volumes of tens of 11 thousands, 2021 through 2025; and mass commercial volumes 12 of hundreds of thousands from 2026 and beyond. 13 This compares to the alternative path 14 implementation that requires 2,500 vehicles over a 15 three-year period from 2009 to 2011. This is consistent 16 with the panel's estimate of volume production for that 17 period. However, the alternative path increases by a 18 factor of ten to 25,000 vehicles over the 2012 through 19 2014 period. This jump to 25,000 vehicles is eight years 20 earlier than the panel estimates the technology will be 21 ready for these volumes. We are suggesting that the 22 regulatory requirements of the alt path between 2009 and 23 2015 need attention and re-evaluation. 24 --o0o-- 25 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 CHIEF BEVAN: Specifically, we are recommending that since 2 the panel suggests that volumes of thousands of vehicles 3 are feasible globally in the 2009 time frame that we 4 proceed with phase two of the alternative path. This 5 volume not only takes the technology to the next level of 6 demonstration providing increased numbers of vehicles from 7 which to learn from, but it also serves to prepare the 8 market for greater numbers of vehicles. At this volume, 9 the need for public infrastructure becomes more critical, 10 catalyzing the efforts of the energy companies to 11 establish the network of stations that will ultimately be 12 needed to support the hydrogen vehicle market. 13 On the other hand, we suggest that phase three be 14 delayed. It appears that fuel cell vehicles will not 15 progress past enough in the next four years to bring cost 16 and durability to a level that would warrant the ten-fold 17 increase in production. Placing vehicles of this 18 technological maturity would simply result in a great deal 19 of cost without commensurate benefit. Therefore, we are 20 recommending that through a public workshop process staff 21 develop an interim requirement, a Phase 2b, let's say, 22 that would bridge the program from 2,500 to the order of 23 magnitude increase that would signal technical maturity 24 sufficient to be called pre-commercial. 25 There are a number of ways this could be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 structured, including repeating the 2,500 vehicles in 2 Phase 2 into Phase 2b or creating a new requirement with 3 some larger volume between 2,500 and 25,000. The panel 4 findings point to a need to address this period of 5 implementation. 6 And at the end of the day, we're asking the 7 Board to direct us to figure out the right approach. In 8 doing so, we want to consider the forcing effect this ZEV 9 regulation has and how it will be used to accelerate the 10 development of ZEV technologies. We'll also want to 11 consider how to move the program through the production 12 volumes that take technology from low volume fairly 13 labor-intensive production methods to the higher volume 14 early automated production methods that will be needed to 15 see significant cost savings. 16 --o0o-- 17 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 18 CHIEF BEVAN: To illustrate our recommendation, I will 19 bring back the graphic that showed the regulation ramp up 20 compared to the panel's estimates of volume growth. As 21 shown in the bottom bar of this chart, we are suggesting 22 that Phase 2 be implemented as planned, that an interim 23 step between 2012 and 2014 be developed, and that phase 24 three begin in 2015. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 2 CHIEF BEVAN: I'll turn now to a discussion of battery 3 electric vehicles. The actions that the Board took in 4 2003 to create the alternative path were perceived as 5 dealing a death blow to battery electric vehicles. To 6 address this concern and to provide continuing incentive 7 to produce battery electric vehicles, the Board allowed 8 battery EVs to be used in the alternative path. However, 9 the Board capped their contribution to the alt path 10 requirements at 50 percent to assure that the fledgling 11 fuel cell development process continued. Additionally, 12 the use of battery electric vehicles to substitute for 13 fuel cell vehicles is only allowed with a ratio -- 14 additionally to use battery electric vehicles to 15 substitute for fuel cell vehicles, they must be provided 16 at a ratio of ten to one. Because the role of battery 17 electric vehicles was an issue in 2003, we asked the panel 18 to assess the development of battery EV technology and 19 cost. 20 --o0o-- 21 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 22 CHIEF BEVAN: As you heard from the panel, significant 23 work is going into development of improved batteries for 24 use in vehicles. Lithium and nickle metal hydride 25 technology are receiving the greatest focus. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 take-away from these advancements is that cost remains 2 high and at least for lithium lifetime durability is not 3 yet proven. Although the costs are still high for battery 4 packs, the life cycle cost equation for the use of battery 5 electric vehicles compared to conventional vehicles is 6 starting to look more attractive as gasoline prices have 7 risen. 8 The renewed emergence of start-up automakers 9 saying they can build niche markets for their products 10 indicates there is interest in seeing this technology 11 return to the marketplace. The panel agreed with this 12 position that a market is possible, but volumes will 13 remain niche. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 16 CHIEF BEVAN: Given the progress made in battery 17 technology and the possibility of automakers coming back 18 into the BEV market, staff suggests that there should not 19 be barriers to use of battery electric vehicles in the ZEV 20 regulation. While their ultimate market may be limited, 21 there are after all zero emission vehicles and therefore 22 should not be discriminated against in this regulation. 23 We recommend the cap limiting BEV use in the alternative 24 path be removed. Meaning, that if an automaker wanted to 25 comply fully with new battery electric vehicle production, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 that would be allowed. 2 Additionally, staff would like to examine the 3 ratio used to calculate the number of battery electric 4 vehicles needed to substitute for fuel cell vehicles in 5 the alternative path. In the base path, the credits for 6 BEVS and fuel cell vehicles are approaching each other: 7 Three for a full function battery EV and four for a fuel 8 cell vehicle. Staff thinks it is appropriate to 9 re-evaluate the credit relationship between battery EVs 10 and fuel cell vehicles in both the base path and the 11 alternative path. 12 --o0o-- 13 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 14 CHIEF BEVAN: Now I'll turn to a discussion of silver 15 category vehicle technology starting with plug-in hybrid 16 electric vehicles. 17 Plug-in hybrids were a hot topic in 2003 when the 18 Board was asked to decide if they could earn gold credit. 19 The thinking behind this request was that a hybrid that 20 derived some or most of its energy from the electric grid 21 but drives zero emission miles and would be more readily 22 available for the marketplace than pure BEVs and fuel cell 23 vehicles. However, the Board decided to keep the 24 definition of zero emission vehicles as non-polluting 25 under any and all operating conditions and rejected the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 request to award gold credit to plug-in hybrids. 2 At the same time, however, the Board very much 3 wanted plug-in hybrids to come to market and asked staff 4 to create regulatory incentives to encourage the 5 technology. In response, the ZEV regulation was amended 6 to create generous credit structure for plug-in hybrids in 7 the silver category to encourage their production. 8 In the intervening years, interest in plug-in 9 hybrid vehicles has grown as consumers expressed interest 10 in their ability to operate in a zero emission mode and 11 then reduce use of petroleum and lower greenhouse gas 12 emissions. Several automakers have announced research 13 programs aimed at bringing plug-in hybrids to market and a 14 number of demonstrations are being carried out to test the 15 technology and explore a variety of designs. 16 But proponents of the technology want to know if 17 there is anything more the ZEV regulation can do to 18 accelerate development and bring this technology to 19 market. Again, asking the question, could they be 20 considered for gold credit? 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 23 CHIEF BEVAN: As you heard in the panel presentation, the 24 panel thought highly of plug-in hybrids. They see plug-in 25 hybrids as having potential to provide significant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 benefits for ZEV technology and see them as fostering mass 2 market potential for pure ZEVs. He also found the 3 commercial viability of this vehicle type may be just 4 around the corner with the market readiness coming within 5 the next decade. As with BEVs, the panel identified 6 battery performance and cost as the primary challenges 7 facing successful development of plug-in hybrids, citing 8 the deeper and more frequent discharge cycles experienced 9 by the batteries used in plug-in hybrids as the main 10 challenge compared to conventional hybrids. However, the 11 panel believes these challenges can be overcome by early 12 next decade. 13 --o0o-- 14 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 15 CHIEF BEVAN: Staff continues to recommend against 16 providing gold credit for plug-in hybrids, primarily 17 because they are not zero emission under all driving 18 conditions. Although we agree with the findings of the 19 panel regarding their outstanding potential for fostering 20 ZEV technologies, there remain many unknowns regarding 21 exactly how real-world plug-in hybrids will perform with 22 regard to emissions. We do not yet know how owners will 23 respond to plugging in. For example, will they plug-in 24 every day as the car ages? And as the car ages, will it 25 continue to have as much all-electric range? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 We are also concerned about the delicate balance 2 that exists between the various types of technologies used 3 to comply with the ZEV regulation. Allowing plug-in 4 hybrids to earn gold credit would negatively impact the 5 development of pure zero emission vehicle technologies 6 like fuel cell and battery electric vehicles. Besides, it 7 appears that automakers are moving quickly to try to bring 8 this technology to market even without gold credit. It's 9 clear staff needs to create appropriate certification and 10 test procedures, and there may be adjustments that can be 11 made to the credit structure and definitions of plug-in 12 hybrids. But fundamentally, they are treated correctly in 13 the regulation now. 14 --o0o-- 15 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 16 CHIEF BEVAN: Another technology hailed for its nearly 17 zero emission performance and ZEV enabling component is 18 the hydrogen internal combustion engine vehicle. Along 19 with plug-in hybrids, the Board heard testimony in 2003 20 asking that hydrogen ICE vehicles be given gold credit to 21 spur their commercialization. Like plug-in hybrids, the 22 Board rejected the request for gold credit and endorsed a 23 generous silver credit structure instead. Since 2003, 24 work has continued to demonstrate the performance and 25 emission improvements of ICEs. Given these advancements, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 it was important for us to have the panel take a look at 2 the ZEV enabling capability of hydrogen ICEs as well as 3 assess the market potential of the technology. 4 --o0o-- 5 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 6 CHIEF BEVAN: Since hydrogen ICEs burn hydrogen in an 7 engine much like a gasoline engine, the panel reported 8 there were only minor ZEV enabling benefits of hydrogen 9 ICE. These benefits are primarily in hydrogen storage and 10 infrastructure area. The panel indicated that the 11 technology could be ready to market within the next 12 decade. 13 Although automakers are reporting extremely clean 14 emissions from hydrogen ICE, even at levels arguably below 15 measurable limits, staff finds the technology is not 16 inherently zero emission and could not be guaranteed to be 17 zero emission under any and all operating conditions. So 18 like other technologies that have requested gold credit, 19 we recommend retaining the silver designation for hydrogen 20 ICEs and against providing gold credit for this 21 technology. We also believe that the existing credit 22 structure for hydrogen ICEs is sufficiently generous to 23 support the technology. 24 --o0o-- 25 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 CHIEF BEVAN: At first blush, it would appear there are no 2 outstanding issues surrounding conventional AT PZEVs like 3 the hybrids that are on the market today. They are here. 4 They are selling. They are advancing electric drive 5 technology. What's the question? Certainly, the more 6 batteries and electric drive components built, the better 7 and cheaper they get. But in 2003, automakers commented 8 to the Board that the volume of AT PZEVs that would result 9 from the ZEV regulation in the out years of implementation 10 would exceed the learning value of the technologies. That 11 is to say that the automakers may agree some number of 12 hybrids helps with ZEV technology development. But at 13 some point, there is no more learning. The volumes to be 14 produced are excessive and have limited value for this 15 purpose. 16 Having asked us to conduct this technology 17 review, the Board's 2003 Resolution on the ZEV regulation 18 asked that the review include investigation of this claim. 19 So this is why we are reporting on whether AT PZEVs in the 20 marketplace as much as 11 percent of total production, or 21 170,000 vehicles per year in the 2015 time frame, remains 22 valuable for commercialization of zero emission vehicles. 23 --o0o-- 24 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 25 CHIEF BEVAN: Fundamentally, AT PZEVs are still valuable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 according to the panel. Even at higher volumes, they 2 support learning and development that applies to electric 3 drive systems, batteries and other components that will be 4 used in ZEVS. 5 Additionally, the panel emphasized the role this 6 market plays in reducing costs and improving performance. 7 The advances made in AT PZEVs may be especially valuable 8 for fuel cell vehicles as we see more emphasis on 9 hybridization between batteries and fuel cells to maximize 10 the performance of each. 11 --o0o-- 12 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 13 CHIEF BEVAN: Based on these findings, we're recommending 14 that no changes are necessary. However, having said this, 15 however, if other changes are made to the program that 16 impact the volumes of AT PZEVs, we may ultimately 17 recommend adjustment of this category to keep the 18 regulation as a whole feasible. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 21 CHIEF BEVAN: The final area we asked the panel to report 22 on is the neighborhood electric vehicles, or NEV. NEVs 23 are electric vehicles classified as low speed vehicles by 24 the vehicle code. They are limited to top speeds of 25 25 miles per hour and can only be operated on roads with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 speed limits of 35 miles per hour or less. Because NEVs 2 are ZEVs and because the regulations did not initially 3 foresee the emergence of this vehicle type, automakers had 4 a window of time where NEVs were earning nearly the same 5 credit as full-function battery electric vehicles. 6 California was flooded with relatively low cost NEVs, and 7 ZEV credit accounts were generally aligned with gold NEV 8 credits. 9 The Board backlashed against the unintended turn 10 in the regulation by ramping down credit that NEVs earn to 11 0.15 credits per vehicle and by limiting how these credits 12 can be used to comply with parts of the regulation. This 13 was effective as most of the low cost NEV placements have 14 stopped. However, at least one company has continued with 15 their marketing of NEVs with modest success. We asked the 16 panel to include NEVs in their work to assess the 17 technological viability and application to full function 18 ZEVs. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 21 CHIEF BEVAN: The panel confirmed that a small sustained 22 market has been created, and they concluded that NEVs will 23 continue to be produced with potential for a long-term low 24 volume market. They also found NEVs have minimal 25 technology transfer to full function ZEVs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 The staff was asked in 2003 to study the 2 environmental contribution of NEVs and to recommend if a 3 change in the credit for NEVs was appropriate. Our 4 analysis of the usage patterns and miles driven by these 5 zero emission cars suggest that a moderate increase in the 6 credits is appropriate. 7 We propose to return to the Board with suggested 8 credit levels that better reflect the NEVs actual 9 environmental benefits. Any recommendation for change 10 should ensure that runaway use of NEVs to comply with the 11 regulation is not repeated. 12 --o0o-- 13 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 14 CHIEF BEVAN: This wraps up our findings and 15 recommendations stemming from the technology review. 16 There are several additional items that we would like to 17 make the Board aware of that we believe may need 18 adjustment within the regulation. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 21 CHIEF BEVAN: The first issue is the transition of 22 intermediate volume manufacturers to large volume 23 manufacturers due to increasing sales volumes. The 24 requirements we've been talking about throughout this 25 presentation apply to the six largest automakers. They PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 are defined as large because their annual sales in 2 California exceeds 60,000 passenger cars and light-duty 3 trucks. 4 The next category of auto maker is called 5 intermediate. They have sales between 3,001 and 60,000 6 vehicles. They are also subject to the ZEV regulation, 7 but they may meet their entire obligation with PZEVs. In 8 the last few years, several automakers in the intermediate 9 category have seen sales increases, so they are nearing or 10 exceeding the 60,000 vehicle threshold. Once an 11 automaker's sales exceed the threshold for three years in 12 a row, they become a large automaker. And after a 13 specified lead time, they begin complying with the 14 regulation the way the large automakers do. That means 15 they must begin producing silver and gold vehicles or 16 acquire the appropriate credits. 17 --o0o-- 18 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 19 CHIEF BEVAN: When the definitions of large, intermediate, 20 and small manufacturer were established, the threshold of 21 60,000 was picked because there was a significant gap 22 between the automakers above that volume and those below. 23 What this chart shows is that the gap has continued. 24 Although BMW, Mercedes, and Hyundai are nearing the 60,000 25 vehicle threshold, they are still substantially smaller PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 than the larger six automakers: Toyota, General Motors, 2 Ford, Honda, Chrysler, and Nissan. What this points to is 3 the overall volume of vehicles sold in California has been 4 rising and the relative size of the automakers has not 5 changed greatly. 6 --o0o-- 7 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 8 CHIEF BEVAN: At the root of the issue is the question is 9 their value to adding more automakers to the large 10 category? Does ZEV technology mature faster if the 11 smaller players have to jump into the game? Staff's 12 opinion at that at this time there is limited value to 13 that outcome. Those automakers with something to bring to 14 the effort are doing so on their own. Hyundai and 15 Volkswagon have fuel cell vehicle programs and are members 16 of the California Fuel Cell Partnership, for example. 17 Staff recommends that we examine the implications 18 of adjusting the definition of intermediate manufacturers. 19 This may result in amending the definition to set a higher 20 threshold for transitioning to large. We may look at a 21 definition that includes both California sales, an 22 indication of impact on our market, as well as global 23 sales, a measure of the companies' resources that can be 24 brought to bear on the development of the new technology. 25 We also want to be sure to consider the impacts of not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 adding new players on the existing automakers. 2 --o0o-- 3 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 4 CHIEF BEVAN: A number of states have adopted California's 5 ZEV program. The regulation would require the fixed 6 number of ZEVs required in each phase to be duplicated in 7 each state, except that we have created a provision that 8 allows fuel cell vehicles placed in any ZEV state to count 9 towards compliance in California and vice versa. 10 What that means is that the number of fuel cell 11 vehicles required in each early technology development 12 stage is fixed nationwide rather than duplicated across 13 all ZEV states. This provision referred to as the travel 14 provision sunsets in 2012. 15 --o0o-- 16 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 17 CHIEF BEVAN: Staff is recommending the travel provision 18 be extended to match any delay in the start of phase three 19 in the alternative path depending on the Board's 20 recommendations. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 23 CHIEF BEVAN: Not content with super-ultra-low emissions, 24 car companies have continued to work on improvements to 25 gasoline combustion engines. One automaker has shown us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 their efforts to demonstrate vehicle emissions at 2 one-tenth of the LEV standard. This has raised the issue 3 of how much super-duper ultra-low emission vehicles could 4 be treated under the ZEV regulation. Could they earn gold 5 or at least silver credit to encourage their production? 6 --o0o-- 7 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 8 CHIEF BEVAN: While we are encouraged that automakers are 9 continuing to make improvements to gasoline engine 10 vehicles, we're not recommending providing either silver 11 or gold credit under the ZEV regulation. The silver 12 category is reserved for vehicles utilizing technology 13 that enables pure zero emission vehicles. And the gold 14 category is, as I described before, for vehicles that do 15 not emit under any and all operating conditions. We would 16 like, however, to investigate how to best encourage 17 production of these vehicles with, for example, greater 18 PZEVs credit per vehicle for other regulatory incentives. 19 --o0o-- 20 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 21 CHIEF BEVAN: At this time, I'd like to begin wrapping up 22 my presentation with a short summary of the issues and 23 recommendations we are making here today and to which we 24 look forward to hearing your reaction and direction. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 2 CHIEF BEVAN: To recap the issues we've brought forward 3 today, we are concerned about the pace of the fuel cell 4 ramp-up in the alternative path. And we are suggesting 5 that while Phase 2, 2,500 vehicles between 2009 and 2011, 6 is appropriate, an interim step is needed between Phase 2 7 and 3, with Phase 3 delayed to 2015. 8 For battery electric vehicles, we have raised the 9 question of whether they are treated appropriately in the 10 regulation especially in the alternative path whether use 11 for compliance is capped at 50 percent and a ten-to-one 12 ratio is required for substitution with a fuel cell 13 vehicle. 14 Staff is proposing that we remove the 50 percent 15 cap and consider whether a different credit ratio would be 16 appropriate. We reviewed the question of whether plug-in 17 hybrids should be treated as gold vehicles or if there are 18 other regulatory incentives that can help bring them to 19 market. Staff recommends against gold credit. Staff is 20 committed to developing new certification and test 21 procedures to better evaluate plug-in hybrids. We're also 22 interested in examining the credit structure for plug-in 23 hybrids to see if there is more that we can do for them 24 within the silver category. 25 An examination of hydrogen internal combustion PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 engine vehicles and whether they deserve to earn gold 2 credit because of their nearly zero emission levels has 3 returned a recommendation that they not be given gold 4 credit and that in fact the amount of credit they receive 5 as silver vehicles is sufficient. 6 To the question are AT PZEV volumes too high, we 7 are suggesting they are not. 8 --o0o-- 9 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 10 CHIEF BEVAN: Should NEVs receive more credits? Although 11 the panel found little connection between the technology 12 used in NEVs and those used in full function ZEVs, staff 13 recommends we examine the credits and adjust them upward 14 to reflect the environmental benefit of the zero emission 15 vehicle. 16 Among the issues we brought to your attention 17 that the panel did not cover, we are suggesting the travel 18 provision be extended to the new date for Phase 3 ramp-up 19 on the alternative path. We are suggesting that the 20 definition of intermediate manufacturers be adjusted to 21 reflect the overall growth in the vehicle market, thereby 22 maintaining the gap between the largest automakers and 23 medium-sized automakers. 24 And, finally, we would like to look at how we can 25 encourage the production of vehicles with the emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 significantly better than PZEVs short of giving them gold 2 or silver credits. 3 This wraps up my summary of the issue we've 4 covered. I'll turn now to next steps and conclusions. 5 --o0o-- 6 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 7 CHIEF BEVAN: Having collected all of this information 8 about technology status and what it means to the ZEV 9 regulation, we are seeking your concurrence with our 10 recommendations. Assuming the Board agrees that 11 adjustment is needed to the regulation, staff would 12 develop a straw-man proposal and hold a public workshop to 13 receive comment this summer. 14 Following the workshop, we would develop a 15 proposed set of amendments and present these to the Board 16 in a regulatory hearing this fall. We would also 17 recommend that we plan to hold another technology review 18 sometime well into the next phase of implementation to 19 again check progress and pace of ZEV technology 20 commercialization. 21 --o0o-- 22 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 23 CHIEF BEVAN: Finally, I would like to close with the 24 following conclusions. This technology review has shown 25 that ZEV technologies are viable. The panel's findings PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 indicate ZEVs will reach mass market commercialization. 2 They also have showed us that there are many challenges 3 remaining in the market, and much work still needs to be 4 done to get there, especially in meeting technology 5 performance targets and reducing costs. This is where the 6 ZEV regulation continues to be critical as an accelerator 7 of the technology. Looking at the forecast provided by 8 the panel for when these technologies will be ramped up in 9 volume, we are asking how the ZEV regulation can be used 10 to make it happen faster. 11 Additionally, the ZEV component continues to be a 12 critical component our air quality strategy. 13 Transformation of the vehicle fleet to inherently zero 14 emission technology addresses a wide variety of air 15 quality issues associated with motor vehicles from in-use 16 deteriorations of emission performance to tampering and 17 variations in driving cycles. It's worth continuing the 18 effort to achieve this goal, even as conventional cars get 19 cleaner. 20 The ZEV program compliments our state's 21 greenhouse gas program and low carbon fuel standard 22 initiative. In the future, we may want to take a more 23 integrated approach to the ZEV regulation to incorporate 24 these programs. 25 All of that said, we don't have the perfect rule PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 yet. We believe some regulatory changes are necessary. 2 Consistent with past actions of the Board to adjust this 3 regulation to reflect the technological and economic 4 reality of the vehicle technologies being used, we are 5 proposing to adjust this regulation yet again. One 6 important difference this time, we are adjusting a 7 regulation that has finally been implemented. With three 8 years of implementation under our belts, we can see the 9 family of vehicle technologies that we hoped to encourage 10 are in fact becoming part of our vehicle market. We look 11 forward to hearing your guidance on our recommendations. 12 Thank you. 13 CHAIRPERSON SAWYER: Thank you very much. 14 Do Board members have any questions? 15 Ms. D'Adamo. 16 BOARD MEMBER D'ADAMO: Do we currently allow 17 credits for infrastructure? 18 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 19 CHIEF BEVAN: We do not. 20 BOARD MEMBER D'ADAMO: Have you considered the 21 that as an option, as a compliance option? And would your 22 recommendations include consideration of that? Do you 23 have enough latitude with the recommendations that you 24 have presented? 25 EXECUTIVE OFFICER WITHERSPOON: We can look at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 anything you ask us to look at. 2 BOARD MEMBER D'ADAMO: But it's not on your list. 3 EXECUTIVE OFFICER WITHERSPOON: We looked at it 4 back in 2003 and made a choice at the time not to do it. 5 But if you want us to look at it again, we will. 6 BOARD MEMBER D'ADAMO: And then on slide eight, 7 current gold category status, I'm trying to remember -- 8 I'm feeling my age here. This is the third time I've seen 9 this since I've been on the Board. And I believe part of 10 the problem or one of the reasons we were forced into this 11 alt path, for those of us that weren't thrilled about it, 12 was the credit glut and the banked credits. And as I 13 recall under the base path you could use banked credits, 14 but what about under the alt path? 15 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 16 CHIEF BEVAN: Correct. You can use banked credits under 17 the base path. And on the alternative path you can only 18 use banked credits to meet your silver and bronze portions 19 of the regulation, but not the gold. 20 BOARD MEMBER D'ADAMO: What's left on the 21 banked -- 22 CHIEF COUNSEL JENNINGS: I'd like to clarify that 23 just a moment. You can use the gold credits to meet the 24 gold requirement. But to meet the minimum number of 25 vehicles, the alt path vehicles those had to be fresh PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 vehicles. 2 BOARD MEMBER D'ADAMO: But you could still use 3 banked credits partially under the alt path? 4 CHIEF COUNSEL JENNINGS: As long as you met the 5 alt path requirement for the number of vehicles with fresh 6 vehicles. You can also use banked gold credit vehicles 7 for other compliance with the regulation. 8 BOARD MEMBER D'ADAMO: Within gold or just 9 silver? 10 EXECUTIVE OFFICER WITHERSPOON: Just silver and 11 bronze. So people went on the alt path used their gold 12 credits, their banked ZEV credits to buy down hybrid and 13 PZEV obligation. Because remember, hybrid doubled on the 14 alt fuel path. It got harder to meet the hybrid 15 obligation. 16 BOARD MEMBER D'ADAMO: What's left on the banked 17 credits? 18 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 19 CHIEF BEVAN: Some automakers still have enough banked 20 credits to take them into Phase 2, 2011 time frame. 21 BOARD MEMBER D'ADAMO: Which automakers? 22 SUSTAINABLE TRANSPORTATION TECHNOLOGIES BRANCH 23 CHIEF BEVAN: Let me consult with our attorney for a 24 second. 25 Based on what we think we know about credit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 levels and how manufacturers are complying, understanding 2 that a manufacturer can change which path they're on up 3 until the very end of a phase, we believe that Ford and 4 Toyota are in good position to have enough credits to take 5 them through 2010. 6 BOARD MEMBER D'ADAMO: Okay. This issue of 7 banked credits and also how to figure out what the credits 8 mean, I mean, I know -- I understand why we put the credit 9 system together. Every step of the way we had challenges, 10 and we were trying to figure out how to keep on this path 11 of technology forcing and at the same time somehow 12 accommodate the automakers. But in the end, with each 13 step -- and I wasn't here in 1998. But I was here in 2001 14 and 2003, and we kept whittling away at those numbers. 15 And so sort of the challenge I'm having is trying 16 to figure out if we're going to whittle away again, what 17 is our base line? Is it a base line that we have now from 18 the current reg that's before us? I'd like to go back to 19 what the base line was before, because I wasn't happy 20 about whittling away at that time. 21 And so I guess the challenge I'm having is trying 22 to figure out exactly -- to get my arms around how many 23 numbers that is and if there's anything that you could do 24 to help shed light on what numbers are we actually looking 25 at in light of the fact we have this very complex credit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 system. 2 EXECUTIVE OFFICER WITHERSPOON: Ms. D'Adamo, I'm 3 not sure that genie can ever go back in the bottle. And 4 here's why. The original base line was ten percent ZEVs. 5 And as we moved into a Memorandum of Agreement, it became 6 a very low demonstration volume. As a regulatory matter, 7 it became 2 percent pure gold with a distant 8 implementation date. And then to keep vehicles arriving 9 in the market, we gave them extra credit for early 10 deployment. So what we have on the books in the base path 11 is 2 percent gold requirement. 12 When we split the reg in 2003 into fuel cells 13 versus battery electrics in essence, then we changed the 14 paradigm where we weren't talking percent any more of 15 anything. We were talking about ramp ups to 16 commercialization. So now it's a different paradigm. 17 Anyone who stays on the base path is still subject to 2 18 percent BEV mandate or pure ZEV mandate. And when they 19 run out of credits, they'll face the question most likely 20 in 2012 is that sustainable? Will they continue to make 21 that many battery electrics or fuel cell vehicles, or will 22 they move to the alternative path based on where we are in 23 the deployment of fuel cell vehicles? And what you all 24 have decided as a Board happens between the ratio between 25 batteries and fuel cells in what each technology costs at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 that moment in time. 2 BOARD MEMBER D'ADAMO: I think I understand what 3 you're saying. I guess my frustration here having been 4 through this several times before is that I just don't 5 have enough faith that in three years from now we're not 6 going to be back with again another request to whittle 7 away at these numbers. And so before I would feel 8 comfortable with moving forward on the adjustments, I 9 would need to have some assurance on what those numbers 10 are. 11 And you're saying we can't put the genie back in 12 the bottle. I don't know why not. For those that want to 13 have adjustments, for those automakers that want to have 14 some sort of an adjustment within that alt path, why not 15 consider a hybrid within the alt path so we can get back 16 some of the losses on BEVs or attain some increases? In 17 other words, we've got all these different mixes that 18 staff is proposing. I would suggest that maybe we 19 consider a linkage so if those numbers do get reduced or 20 delayed, they are linked to real progress and higher 21 numbers in some of the other compliance strategies. 22 EXECUTIVE OFFICER WITHERSPOON: That makes 23 perfect sense. And that was exactly what the Board did in 24 2003 when you created the alternative compliance path. 25 You doubled the silver/hybrid obligation as compensation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 for going onto the alternative path. You haven't realized 2 the full benefit of the path, because ZEV credits are 3 paying down that double obligation. But you will realize 4 it shortly. And the panel has said to you there's nothing 5 wrong with the hybrid mandates. They didn't say it quite 6 that point blank. But they said the technology is useful 7 and so we can continue on. If you wish again if there's 8 to be a continuation or a new ramp between Phase 2 and 3 9 to kick up hybrids further still, that can be part of what 10 staff brings back. 11 BOARD MEMBER D'ADAMO: Or BEVs also. 12 EXECUTIVE OFFICER WITHERSPOON: BEVs either by 13 equating the credit, what that does is creates a new 14 opportunity for BEVs to buy off fuel cell obligations. 15 CHAIRPERSON SAWYER: Okay. Let's move to the 16 testimony. The first three speakers are Alan Weverstad, 17 Robert Cassidy, and Fred Maloney. Alan Weverstad. 18 MR. WEVERSTAD: Good afternoon. I'm Al 19 Weverstad, Executive Director of Environment and Energy at 20 General Motors. 21 We appreciate the effort being put into this ZEV 22 review process with the goal of better aligning the ZEV 23 regulations with the technology. We met with the expert 24 panel four times in four different locations and believe 25 all of the meetings were productive. We have reviewed the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 panel report and agree with its conclusion that fuel cells 2 continue to be a promising candidate for a mass market 3 true ZEV. We told the panel why we see so much promise in 4 fuel cell technology. Indeed, much of that optimism stems 5 from achievements made to date, including our 6 demonstration of a 300-mile range on a Chevy Sequel. We 7 will continue to learn about the capability of current 8 fuel cell technology and customer response to that 9 technology through project driveway, a fleet or more than 10 100 Chevy Equinox fuel cells that will be placed later 11 this fall. 12 We also told the panel about the challenges we 13 need to work through to fulfill that promise and agree 14 with the panel that cost, hydrogen storage, and refueling 15 infrastructure continue to be big challenges to 16 commercialization. 17 As a result, we agree with the ARB staff that the 18 four requirements under the alternative path need to be 19 changed. It is important not only to look at the volume 20 of vehicles required, but also the timing, such as the 21 staff did in its suggestion of extending the Phase 2 22 compliance period. The timing must be considered to take 23 into account manufacturers' product plans for their next 24 generation fuel cells as well as the availability of 25 sufficient 700 bar hydrogen refueling to support the fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 cell fleets. 2 Unfortunately, we are faced with the reality of 3 non-existent publicly available 700 bar refueling to date 4 and have had to pursue a path to purchase temporary 700 5 bar refueling to support our Equinox fuel cell vehicle 6 fleet in southern California. Because we are also 7 required to comply with the percentage requirements, it's 8 equally important that the credit for fuel cell vehicle be 9 changed as well. Otherwise, reducing the number of fuel 10 cell vehicles will certainly leave a hole in our ZEV 11 compliance plant. 12 The third fuel cell requirement that needs to be 13 changed is the travel provision with the panel projecting 14 that fuel cell volumes remain in the pre-commercialization 15 phase over the next decade and hydrogen refueling 16 infrastructure lagging in California and non-existent in 17 other states. Therefore, we recommend that the Board 18 direct staff to develop regulatory changes for the fuel 19 cell floor volumes, timing, and credits for fuel cell 20 vehicle, extend the travel provision, and with reviews for 21 beyond 2014 in the future. 22 We'd also like to work with the staff -- 23 CHAIRPERSON SAWYER: Would you please conclude? 24 MR. WEVERSTAD: Okay. I'd like to close by 25 emphasizing these are exciting times. We would like to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 continue to work with the staff on adjusting this 2 regulation to fit the technology and the available timing 3 coinciding with infrastructure that is indeed available. 4 CHAIRPERSON SAWYER: Thank you. For those of you 5 who I cut short, be assured if we've submitted the written 6 testimony, we will review it. 7 Mr. Cassidy -- oh, excuse me. I'm sorry. 8 BOARD MEMBER LOVERIDGE: Quick question. 9 CHAIRPERSON SAWYER: Mayor Loveridge. We have a 10 question for you. 11 MR. WEVERSTAD: I expected more than one 12 question, so this is good. 13 BOARD MEMBER LOVERIDGE: Just do you have any 14 comments of -- I was listening to public broadcasting this 15 weekend, and it says you and Robert Lutz got up and talked 16 about what he saw as short-term kind of future that 17 General Motors is about ready to introduce. Could you 18 make any comment on that? 19 MR. WEVERSTAD: Well, had I had more than the 20 three minutes or could have talked faster, I would have 21 discussed several of those. We have an announced a 22 plug-in View. We have announced a Chevy Volt which is an 23 extended range EV. We at GM are clearly excited about the 24 additional electrification of the automobile. And we are 25 moving in that direction. Hybrid vehicles are an interim PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 step with fuel cells probably being the ultimate step. 2 BOARD MEMBER LOVERIDGE: I remember the applause 3 that came from his announcement his weekend. So thank 4 you. 5 CHAIRPERSON SAWYER: Okay. Mr. Cassidy. 6 MR. CASSIDY: Dr. Sawyer, members of the Board, 7 I'm Bob Cassidy. I was with the Nissan Technical Center. 8 And I'm additionally representing Nissan North America and 9 Nissan Motor Limited Japan. 10 To parallel the review panel, I would like to 11 touch on Nissan's technology that will be used to comply 12 with the ZEV regulation. I might add in the last few 13 months we have met with your staff at varying levels on 14 some of these technical issues. We find this to be very 15 helpful and look forward to doing this in the future. 16 First, we would like to bring to your attention 17 that last month Nissan announced with its partner, NEC 18 Corporation, the formation of the company called AESC, 19 Automotive Energy Supply Corporation. This corporation's 20 task is the commercial sale and development of lithium ion 21 batteries for the automobile industry at large. One of 22 the first vehicles to benefit from this would, in fact, be 23 a Nissan vehicle, a new hybrid using this advanced lithium 24 ion technology battery expected in the 2010 time frame. 25 Additionally, the Nissan Japan has committed to a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 demonstration program for battery electric vehicles in 2 about the same time frame. Again, this is located in the 3 Japan market. I think I would suggest to the Board that 4 we ask the staff to investigate methods to help battery 5 EVs move along. 6 Next, as you may recall, Nissan was the first 7 company to certify the PZEV. I think that we're being 8 associated with the super-duper ULEV. Is that what we're 9 calling it? I'm trying to imagine conveying this to my 10 Japanese colleagues whether that's an accolade in a 11 positive or negative sense. 12 With the creation of the PZEV, Nissan realized 13 that continued reduction of precursory emissions from the 14 tailpipe is certainly necessary. We continue to research, 15 and we were able to develop a prototype vehicle which 16 generates emission that's CO NOx that are in this range of 17 super-duper ULEV. We would ask the staff be allowed to 18 investigate what do we do with new clean technology. This 19 one sort of came from off the normal base. How do we 20 incorporate this into the framework. So we ask that you 21 be allow some flexibility as they move forward. 22 My lights are ticking quickly here. Last, Nissan 23 is committed to fuel cell research. Our major activity is 24 in Japan. We support the California fuel cell 25 partnership. We support that organization in both PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 vehicles and manpower. We concur with the review panel, 2 and we would suggest that we move forward in development 3 type programs. We see a large amount of research that's 4 very necessary so we keep with a small number of vehicles 5 as opposed to the larger number of vehicles proposed in 6 the '09 to '11 time frame. 7 Wrapping up quickly, I would simply ask that you 8 allow your staff flexibility to accommodate both Nissan 9 technologies and the technologies of the other OEMs. 10 Thank you. 11 CHAIRPERSON SAWYER: Thank you. 12 Ms. D'Adamo. 13 BOARD MEMBER D'ADAMO: Just a question that might 14 help on background on the intermediate automaker volumes. 15 Has Nissan always been required to comply with this 16 regulation, or did you ever fall in that category of 17 intermediate? 18 MR. CASSIDY: We've always been the large volume. 19 The smallest of the large volume. 20 BOARD MEMBER D'ADAMO: The smallest of the large. 21 Back when the reg was adopted, what was the volume? 22 MR. CASSIDY: You mean for Nissan? 23 BOARD MEMBER D'ADAMO: Yeah. 24 MR. CASSIDY: It was considerably over that 25 amount. I think they put up the graph. And there's a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 pretty significant difference. I think it's 100,000 or 2 something comes to mind. 3 May I add there's also a competitive issue to 4 this. While we dearly love BMW and our other competitors, 5 we do compete in some other segments. And the ZEV mandate 6 is a pretty intensive resource commitment and we think 7 they should share. 8 BOARD MEMBER D'ADAMO: Oh, okay. 9 CHAIRPERSON SAWYER: Mr. Maloney. And following 10 Mr. Maloney, we'll take a ten-minute break. And then we 11 will have Robert Brown, Ben Knight, and Karl Heinz Ziwica. 12 MR. MALONEY: Good afternoon. I'm Fred Maloney 13 from DaimlerChrysler. Appreciate being able to speak to 14 you today. 15 The review process gives us the opportunity to 16 consider the important objectives of the California ZEV 17 program. The understanding has been that this provision 18 of California LEV program is aimed at pressing the 19 development and integration of zero emission vehicle 20 technology into the marketplace. To the level that 21 technology development can be forced, the program has 22 worked. The program has also worked to clearly define the 23 limitations of this approach. 24 The work of the expert review panel was deep and 25 thorough. And again, along with everybody else, I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 they did an excellent job. 2 We at DaimlerChrysler provided the team with the 3 information they requested and in the belief good 4 decisions can be made from good information. From what we 5 have read in the report, it appears the other companies 6 have the same approach. 7 The report contains a lot of information that 8 must be digested. The report details significant advances 9 in the basic ZEV technologies both batteries and fuel 10 cells. But the report also points out that neither is yet 11 ready for commercialization. Our opinion on this issue is 12 that the credit of these technologies need to be increased 13 for the 2009 and later model years to encourage further 14 investment in these technologies. 15 The staff needs to be given time to fully grasp 16 and understand these and other findings by the panel. We 17 believe that the Air Resources Board should give broad 18 discretion to the staff to consider the implications of 19 the report and to return to you a completely developed 20 regulatory proposal. We would be committed to fully 21 support discussions that would result in such direction. 22 CHAIRPERSON SAWYER: Thank you. 23 Are there any questions? Professor Sperling. 24 BOARD MEMBER SPERLING: 25 Just one very quick one. With the change in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 Chrysler ownership, would you expect that any fuel cell 2 cars coming out of Daimler would be badged as Chrysler's 3 for the purpose of this program? 4 MR. MALONEY: I can't say. 5 BOARD MEMBER SPERLING: Given they retain 20 6 percent ownership. 7 MR. MALONEY: I really don't think that's been 8 fully decided yet exactly what's going to happen there. 9 CHAIRPERSON SAWYER: Thank you very much. We'll 10 take a ten minute break. This one is a strict one. We'll 11 start at 4:00. 12 CHAIRPERSON SAWYER: We will resume, please. 13 Mr. Brown. 14 MR. BROWN: Good afternoon. My name is Robert 15 Brown, and I'm with Ford Motor Company. 16 First of all, we'd like to thank the expert panel 17 for all of their hard work and the quality of the report 18 that was generated as a result of their efforts. 19 Secondly, Ford Motor Company welcomes the 20 opportunity to comment on California's emission low 21 emission vehicle, ZEV program. The ZEV program is a 22 technology-forcing regulation that is needed to be 23 modified on several occasions as was mentioned here today 24 because of the pace of technological development, cost, 25 and realities of the marketplace have not met the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 expectations set by the Air Resources Board. 2 We are here again today based on the feedback 3 from the expert panel with the need to consider changes to 4 the ZEV regulations in order to ensure success of the 5 public relations and further the ARB's goals to drive 6 emissions to zero. 7 Ford has been active in the development of zero 8 emission technologies. We have 30 fuel cell vehicles 9 operating in five different locations. These vehicles are 10 providing real world driving experiences which are being 11 used to further develop this innovative zero emission 12 technology. 13 It is important for us at Ford Motor Company at 14 this stage of the technology development to be nimble and 15 take the lessons learned from a few vehicles and apply 16 them to a few more vehicles. High vehicle volumes 17 required by the ZEV regulations interferes with our desire 18 to be nimble because we must concentrate on the next 19 production mandated program. 20 Ford recently announced our high series drive 21 technology which is the first drivable fuel cell hybrid 22 vehicle with the ability to plug into the grid. Ford 23 needs flexibility to work on and develop these innovative 24 products rather than be mandated to build special volumes 25 of vehicles that may not yet be commercially viable in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 marketplace. 2 In addition to fuel cell vehicles, Ford is 3 involved in other clean technologies. Ford produced the 4 first hybrid sport utility vehicle, the Escape hybrid. We 5 are adding the Ford Fusion and Mercury Milan to our hybrid 6 lineup in 2009. 7 We are actively involved in the U.S. advanced 8 battery consortium to further the development of batteries 9 for electric drive systems. We currently have a hydrogen 10 internal combustion shuttle bus demonstration program that 11 is accumulating mileage in Canada, Florida, and Michigan. 12 This program was not undertaken to satisfy a regulation. 13 It was initiated because Ford believes that hydrogen 14 internal combustion vehicles could provide a transition 15 from today's fossil fuel dominated power trains to a 16 pathway that is powered by renewable fuels which have the 17 potential to be environmental benign. 18 Furthermore, Ford is involved in the development 19 of other clean technologies such as clean diesel and 20 flexible fuel ethanol vehicles. 21 In conclusion, Ford supports the ARB's goal for 22 sustainable zero emission transportation system. We stand 23 ready to work with the ARB to revise the ZEV regulations 24 in light of the state of technology. 25 CHAIRPERSON SAWYER: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 Mr. Knight. 2 MR. KNIGHT: Good afternoon. I have some slides 3 if you can put those up. 4 (Thereupon an overhead presentation was 5 presented as follows.) 6 MR. KNIGHT: We'd like to make some important 7 comments to guide the future success of ZEV. 8 --o0o-- 9 MR. KNIGHT: This slide shows some of the 10 elements of the Honda ZEV program. A huge number of near 11 zero emission PZEVs, three different advanced technology 12 PZEV models, AT PZEVs, and a fuel cell electric program 13 that's made real progress in a number of hurdles. 14 --o0o-- 15 MR. KNIGHT: ZEV has two purposes, and the 16 original purpose was air quality. The unexpected success 17 of PZEVs at 30 percent penetration rate in the market. 18 This is driven by ZEV and are providing greater real world 19 emission benefits then the ten percent pure ZEVs. So 20 we're ahead of ZEV air quality goals, not behind with 21 these near zero emission findings. 22 A five-year research program at U.C. Riverside 23 accurately measuring real world emissions, the PZEVs are 24 shown here under a variety of conditions. So again, this 25 is great news. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 --o0o-- 2 MR. KNIGHT: This slide shows the emission 3 reductions for PZEVs based on CARB's standards. And PZEVs 4 would earn over 0.5 credits rather than 0.2 based on their 5 emission value. 6 And here's our natural gas car AT PZEV, and it 7 actually was designed to and is equivalent of a battery EV 8 when fueled on the southern California electric grid. So 9 that's outstanding news. 10 --o0o-- 11 MR. KNIGHT: ZEV has developed a second purpose, 12 the promotion of advanced technology vehicles. And a 13 mandate which is too technology specific or tries to 14 satisfy everyone will misapply resources. 15 We are competing to commercialize these advanced 16 technologies first and successfully. And the ZEV rule 17 needs to enable this effort. 18 Currently, we're pursuing the fuel cell path. 19 It's a high cost path which we think promises greatest 20 benefits automakers should choose. 21 --o0o-- 22 MR. KNIGHT: And some key comments and 23 conclusions. There's great successes with the PZEVs and 24 air quality. Regarding AT PZEVs, the fuel cell path 25 requires a doubling of AT PZEV volumes. Honda is doing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 this, though it's very challenging and resource intensive 2 considering demand. 3 The framework for AT PZEVs should remain flexible 4 with incentives, not mandates, for plug-ins or hydrogen 5 internal combustion. We need batteries lasting ten years, 6 150,000 miles in real world use. And this is further off 7 then some believe. But the credit should reflect both the 8 environmental performance and incentives reflecting their 9 cost. 10 And finally, for pure ZEVs, we don't want to pull 11 our resources away from fuel cell vehicles because someone 12 else likes their own ideas or investment or pursue a low 13 cost compliance path. So a key point is include resources 14 or cost when you consider ratios such that we can maintain 15 this path. And the second, ramping up volume too quickly 16 at the stage can stall progress. Thank you. 17 CHAIRPERSON SAWYER: Thank you. 18 MR. KNIGHT: I welcome any questions from the 19 Board, particularly about our fuel cell progress or 20 environmental benefits or policy related. 21 CHAIRPERSON SAWYER: Ms. Berg. 22 BOARD MEMBER BERG: What could we do or needs to 23 be changed to the program in Honda's view that will allow 24 you to get the greatest number of vehicles to 25 commercialization? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 MR. KNIGHT: Let us concentrate our resources on 2 the fuel cell program for the pure ZEV. And for that, be 3 very careful based on cost with any ratio changes since 4 staff's going to change the cap, proposing to eliminate 5 the cap. 6 But I wanted to say for numbers, I think you 7 should carry over the current 250. So today on the roads, 8 about 100 carry over 250. And the reason is that each OEM 9 has their own idea on a pathway. The most important thing 10 to succeed is pathway. One OEM wants to make iterations 11 and improve the technology. But putting lots of vehicles 12 on the road at an early stage won't be the fastest path 13 for them. 14 Another way we believe more numbers are 15 appropriate for them the way they're working with the 16 supplier, that may make sense or PR may make sense. 17 Another may want to do the lab work and get that membrane 18 or hydrogen storage there. 19 It's not a numbers game. It's a minimum floor. 20 And Honda or any OEMs will exceed that. But be very 21 cautious. It's not a numbers game at this point. It's 22 about technology progress. 23 BOARD MEMBER BERG: Thank you. 24 CHAIRPERSON SAWYER: Mr. Ziwica, and then we will 25 have Christopher Guzy, Steve Douglas, and Dave Modisette. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 MR. ZIWICA: Good afternoon. Thank you for 2 allowing me to speak here, Mr. Chairman and members of the 3 Board. I'm Karl Heinz Ziwica with BMW. And I'm 4 representing our company today here, BMW. 5 I have submitted written comment. And I will in 6 order to stay in time, I will skip the graphics and just 7 make some of the points in my statement. 8 BMW acknowledged for many years the need to 9 divert our dependence on carbon-based energy 10 infrastructure to hydrogen clean infrastructure that holds 11 great promise to a sustainable green mobility future. 12 BMW started working on hydrogen powered vehicles 13 in the late '70s and has since refined its design in six 14 generations of hydrogen vehicles. One major development 15 objective was to keep the environmental footprint as small 16 as possible, and we have made great progress achieving 17 this goal. In November of last year in Los Angeles, BMW 18 introduced its first production hydrogen vehicle, about 19 100 of those hydrogen seven vehicles will be produced this 20 year, and 25 of those vehicles will be operated here at 21 the state of California. The total program costs of that 22 effort was more than roughly half a billion dollars. 23 BMW is also cooperating closely with energy 24 providers here in California and other parts of the world 25 to promote the necessary hydrogen infrastructure. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 We recognize that more work is still to be done 2 to improve hydrogen internal combustion engine drive train 3 efficiency, the lifetime NOx ability and as we heard today 4 the vehicle stoppage systems. We are confident however 5 that we have the opportunity to do this, to improve on 6 efficiency and emissions and the storage capability. 7 With respect to staff's policy recommendation not 8 to include hydrogen ICEs in standards, however, really 9 being hopeful that just like the manufacturers who are 10 embracing other developments, the Board will maintain a 11 balanced policy that provides a proper incentive that 12 could allow us to continue the hydrogen ICE development 13 program. 14 BMW is the market share of three percent in 15 California, 1.7 percent in the U.S., and in worldwide we 16 are 2 percent. That is the resources we have to draw on. 17 We concur with the staff findings. And in the status 18 report, significant gap still exists between large volume, 19 intermediate manufacturers, and believe an adjustment of 20 current requirement is warranted. Thank you. 21 CHAIRPERSON SAWYER: Thank you. 22 Ms. D'Adamo. 23 BOARD MEMBER D'ADAMO: What is your current 24 volume in numbers? 25 MR. ZIWICA: Roughly around 60,000 right now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 BOARD MEMBER D'ADAMO: You mentioned 2 infrastructure. Is that infrastructure -- I apologize for 3 my ignorance. But for the hydrogen ICE, can it be used 4 for fuel cells? 5 MR. ZIWICA: It's the same infrastructure. Only 6 in case of BMW, we are using liquid hydrogen. We still 7 use hydrogen that's -- that would be a vehicle at fuel 8 stationing, however you would need a different interface. 9 BOARD MEMBER D'ADAMO: And could you explain a 10 little bit more about what you have done so far in 11 California with regard to infrastructure? 12 MR. ZIWICA: We have started in 2000 to be bring 13 the first hydrogen vehicle to California. That was the 14 previous generation. That's when we installed our own 15 hydrogen fueling station. As a matter of fact, was the 16 first liquid hydrogen fueling stations here in California. 17 In the mean time, through the Department of Energy 18 program, we are working on a program to install an 19 additional fueling station. And as we speak, we are bring 20 in two additional fueling station, which BMW is funding. 21 But we work together with the manufacturers at designing 22 and developing the equipment. 23 BOARD MEMBER D'ADAMO: Thank you. 24 CHAIRPERSON SAWYER: Thank you. 25 Dr. Guzy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 MR. GUZY: Good afternoon. My name is Chris 2 Guzy. I'm the Chief Technology Officer at Ballard Power 3 Systems in British Columbia. 4 Vehicles powered by Ballard Power cells 5 constitute the largest fleets of operating fuel cell 6 vehicles on the road around the world today. The more 7 than 130 cars and buses using our technology have clocked 8 over 2.7 million miles and 195,000 hours of operating 9 while amassing more than five million passenger rides. 10 We believe that fuel cells and hydrogen are a 11 comprehensive solution in the fight for cleaner air and 12 the reduction of greenhouse gases. We also believe that 13 the technology forcing aspects of your zero emission 14 vehicle program have and will have a lot to do with 15 continued technology development because the levels of 16 effort made to develop technology can be directly aligned 17 to the regulatory pressure. 18 Ballard has made great progress in developing of 19 technology. Between 2003 and 2006, we tripled the 20 lifetime, doubled the power density, have the estimated 21 manufacturing cost, and increased the ability to free 22 start from minus 15 degrees C to minus degrees C. 23 We agree with the panel that only cost and 24 lifetime remain as challenges to overcome to achieve 25 commercialization targets. To achieve effective parody PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 with ICE engines, the high volume cost of fuel cells stack 2 needs to be cut in half and durability needs to double. 3 We believe that this improvement is possible without new 4 fundamental inventions, and we are confident in our plan 5 to demonstrate this technology before the end of 2010. 6 We are also looking at alternative vehicle 7 propulsion system architectures to improve lifetime and 8 lower cost. For example, a highly hybridized or plug-in 9 hybrid system is a less challenging environment for a 10 fuel cell to operate and so could lead to commercially 11 viable fuel cells sooner, because the fuel cell is smaller 12 and durability improves dramatically when the fuel cell 13 can run closer to steady state. 14 The commercialization target for lifetime is 15 5,000 hours. The same technology that lasts on the order 16 of 1,000 hours in our current automotive architectures and 17 applications has a lifetime of about 3,000 hours in our 18 buses and has run more than 6,500 hours without failure in 19 forktruck fuel trials. 20 Volume is a critical factor in both lowering cost 21 and in keeping all the members of the supply chain of 22 components for the technology fully engaged in further 23 development. Because of this, we believe near-term 24 volumes are required and critical in the 2012 to 2014 time 25 frame. These volumes are critical to enable supply-based PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 development, reduce cost, and development of manufacturing 2 capability for higher volume manufacturing. 3 There's also real value in the mandate and 4 specifically higher near-term volumes because it 5 facilitates development of the hydrogen infrastructure 6 like the hydrogen highway, and both vehicles and 7 infrastructure are needed to succeed. 8 We applaud California's efforts to lean on 9 infrastructure development. It's a clear priority for 10 both Governor Schwarzenegger and Premier Campbell who will 11 meet next week in Vancouver. 12 In closing, I'd like to reiterate the ZEV mandate 13 has been critical for fuel cell technology development and 14 needs to be maintained to ensure there's continuing 15 technology development investment, infrastructure 16 development, and supply chain development needed to 17 accelerate bringing this comprehensive solution and to 18 fight for cleaner air and reduction of greenhouse gases to 19 market. 20 CHAIRPERSON SAWYER: Thank you. 21 Steve Douglas. 22 MR. DOUGLAS: Thank you. Steve Douglas with the 23 Alliance of Automobile Manufacturers. Thank you for the 24 opportunity to testify here today. 25 And let me say zero emission vehicles are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 important, but they're not just important to this Board. 2 They're a vital strategy to the automobile manufacturers 3 who began pursuing the goal of zero long before the Board 4 set that goal and/or regulations. 5 A lot of organizations will testify. A lot of 6 organizations will comment on this. But not a single one 7 of them has invested more in zero emission vehicles than 8 the automobile manufacturers. In fact, I think if you 9 combine the investments of all the organizations that will 10 comment on this, including the State of California, they 11 probably wouldn't compare to the investment of a single 12 manufacturer. And that is as it should be. So I only say 13 that to put it into perspective, the concerns and comments 14 of the manufacturers. 15 So with that, the Alliance members provided 16 candid and honest input into the expert review panel and 17 the process and a couple of actions seem obvious from 18 their conclusions. 19 First, changes to the ZEV mandate are 20 unquestionably needed. Second because of the rapid 21 technology development I think you've heard about today, 22 the goal from this year's review should be feasible 23 regulations through the 2014 model year. And this allows 24 the technology review in 2011 so that we have lead time 25 for a 2015 implementation. To accomplish those two goals, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 we recommend the Board provide staff general direction to 2 gather the information and recommend appropriate and 3 necessary changes. 4 I just want to briefly touch on the four 5 technologies under review: Fuel cell vehicles, hybrid 6 electric vehicles, battery electric vehicles, and then 7 plug-ins. 8 Now first fuel cell vehicles. It's clear from 9 the expert report that fuel cell vehicles are very 10 promising, but still very much in the development stages. 11 Their cost is significantly more than even other ZEV type 12 vehicles, and component life is far too short for 13 commercial viability. 14 Recognizing where we are with fuel cell vehicles, 15 four items here. The mandated volumes should be reduced 16 in the 2009 model year and beyond. 17 Second is the Section 177 travel provision, those 18 have to be extended beyond 2011, and the other states 19 recommend that too, I believe. The drop in credit from 40 20 now to 4 in 2011, it's not justified based on where we are 21 with the technology. And the hydrogen infrastructure 22 still needs a lot of work. 23 Second, hybrid electric vehicles, just a couple 24 points there. The costs are still high. And in the 25 coming years, the volume increases substantially. And it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 increases more than what the free market would demand. 2 And we would recommend lower volumes on that. Battery 3 electric vehicles, we recommend the Board direct staff too 4 evaluate -- 5 CHAIRPERSON SAWYER: I must ask you to conclude. 6 MR. DOUGLAS: And finally plug-in hybrids. We 7 see a lot of promise with the plug-in hybrids, but 8 regulatory incentives are the way to go there and would 9 ask that you direct staff to look at the credit volumes 10 that the plug-in hybrids have and perhaps increase those. 11 Thank you. 12 CHAIRPERSON SAWYER: Thank you. 13 David Modisette, and then we will have Martin 14 Eberhardt, Tom Gage, and Alec Brooks. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 MR. MODISETTE: Thank you, Chairman Sawyer and 18 members of the Board. I did have a couple quick slides 19 that I'll use. 20 --o0o-- 21 MR. MODISETTE: I'm with the Electric 22 Transportation Coalition. We did sent a letter to the 23 Board earlier this week with eight specific 24 recommendations. Let me take down those very, very 25 quickly. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 First of all, we do agree with the staff 2 recommendation that there be an examination of additional 3 incentives for plug-in hybrids. We would ask you not to 4 close the door at this time on the possibility of partial 5 gold credits reflecting the all electric range some of 6 these vehicles can achieve. 7 Number two, we also agree with the staff 8 recommendation to allow for more even treatment of battery 9 electric vehicles in relation the fuel cell vehicles. 10 Number three or four are new items. We would 11 urge that the staff examine the impacts of the credit glut 12 which is still very, very substantial and will 13 dramatically effect this program in the future. 14 Number four, the need for regulatory transparency 15 in automaker compliance. 16 Number five, we agree with the staff 17 recommendation with the numbers of AT PZEV or silver 18 vehicles be maintained. 19 Number six, a new item. We would urge that you 20 establish a line of credit trading market for gold, 21 bronze, and silver credit trading. 22 Number seven, we believe you should provide more 23 compliance options to the automakers before you consider 24 reducing the gold volumes. And obviously our first two 25 recommendations would do that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 And then lastly, we would recommend you maintain 2 the definition of immediate volume manufacturers. 3 Next slide. 4 --o0o-- 5 MR. MODISETTE: This is the slide you saw earlier 6 from the independent review panel. What this shows at 7 least in part is the PZEVs can reach mass 8 commercialization much faster than any other ZEV 9 technology. Technology really is on the cusp. So what we 10 need to do are to design appropriate incentives in the ZEV 11 regs for automakers to bring these vehicles to market. 12 As I said, we do support the staff recommendation 13 to examine credit levels for PZEVs, but urge you not to 14 close the door at this time. Remember, this is the 15 beginning of the regulatory proceeding that will start 16 after this. We would urge you not to close the door 17 today, to at least consideration to provide partial gold 18 credits for those portions of the vehicle range that 19 really are pure ZEV. This is a unique technology that 20 does have pure ZEV range and that should be provided 21 credit under the regulations. If you want to decide later 22 on that's a bad idea, that's fine. But we would urge you 23 not to close the door on that concept at the beginning of 24 this process. 25 One possibility is to have a sliding scale of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 credits where maybe for the mild plug-in hybrids, the 2 blended plug-in hybrids, they would only get silver credit 3 range. But as you move up the ladder into stronger and 4 stronger vehicles with true all-electric pure ZEV range, 5 we believe there should be at least consideration in the 6 regulatory proceedings for partial gold credits reflecting 7 that actual ZEV regulation. Thank you very much. 8 CHAIRPERSON SAWYER: Thank you. 9 Professor Sperling. 10 BOARD MEMBER SPERLING: One quick question. 11 Blended PHEVs, the automotive industry when we 12 call PHEVs, that's mostly what they have in mind. Do you 13 have any thoughts on how that should be treated? Let's 14 stick with the staff recommendation that they not be 15 moved -- none of the PHEVs in the gold category but in the 16 silver. Any thoughts on how they should be treated? 17 MR. MODISETTE: There's several different ways to 18 do it. The example I was trying to provide is if you did 19 have a blended plug-in hybrid that had little or let's say 20 no all-electric range, then yes, it would stay in the 21 silver category. It would not get any gold credits. 22 BOARD MEMBER SPERLING: How about credits 23 relative the all-electric range of 10, 20, 30 miles? 24 MR. MODISETTE: Well, if you did have 25 all-electric range, you would get higher credits. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 eventually at some point in our concept you would move up 2 into a partial silver credit category. So for example a 3 plug-in hybrid 20, according to the national 4 transportation model, would displace 38 percent of your 5 daily driving. 38 percent of your daily driving would be 6 in all-electric range, and the remaining 62 percent would 7 not. 8 Wouldn't it make sense to give you a 38 percent 9 gold credit reflecting that pure ZEV range and the rest 10 would be silver credit? The benefit of that is that you 11 really want to encourage automakers to make stronger and 12 stronger plug-in hybrid systems. Again, we're not saying 13 that's the way to do it. All we're saying at this point 14 is that's something that should be decided during the 15 regulatory process and not to close the door to that kind 16 of concept at the beginning of that process. 17 CHAIRPERSON SAWYER: Mayor Loveridge. 18 BOARD MEMBER LOVERIDGE: Tell me what a blind 19 credit trading market is. 20 MR. MODISETTE: Under the current credit trading 21 market, a company that wanted to buy credits has to find 22 the company that has credits. They have to go to them and 23 negotiate privately to purchase those credits. So we've 24 been thinking -- we actually recommended previously that 25 there be a blind credit trading market probably PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 administered by the ARB where if there was a seller of 2 credits, this would be posted on like an electronic 3 billboard. There's a seller of credits, they're asking 4 whatever price. But the identity of the seller would not 5 be disclosed. Plus the identity of the buyer during the 6 negotiations would not be disclosed either. So we kind of 7 thought that kind of blind credit trading market which 8 would facilitate credit trading would be good and actually 9 provide additional compliance options under the 10 regulations. 11 CHAIRPERSON SAWYER: Ms. D'Adammo. 12 BOARD MEMBER D'ADAMO: Just wondering if before 13 opening a door on this blind credit issue and then the 14 other recommendation as to I think you had a sunset of the 15 credits -- in order to deal with the credit issue, could 16 staff comment? It almost seems like there would be legal 17 issues with sunsetting something out that the automakers 18 already have a right to. So just curious about that 19 before considering whether or not we suggest staff look 20 into it. 21 CHIEF COUNSEL JENNINGS: Yes. In terms of taking 22 away credits that have already been accrued, I think there 23 would be a potential vested rights issue. I can't say 24 specifically right now how that would play out. But it 25 would certainly be a concern that the manufacturers losing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 credits would raise. 2 You may recall that when we were at the 2003 3 phase the original staff proposal was to just go with the 4 all-path. One manufacturer was very concerned that that 5 would eliminate them from being able to use the plan that 6 they had developed in 2001. And the base path that we 7 came up with really was there to say that anybody who 8 wanted to comply with the rules as they previously existed 9 could do that. 10 CHAIRPERSON SAWYER: Thank you very much. 11 Mr. Eberhardt. 12 MR. EBERHARDT: Good afternoon, members of the 13 Board. I am Martin Eberhardt, CEO and co-founder of Tesla 14 Motors, Inc., here in California. Tesla will begin 15 shipping highly desirable DOT-compliant electric cars with 16 well over 200 miles driving range later this year. 17 Perhaps you saw one of our cars outside. 18 We have already pre-sold more than 400 cars. Our 19 2008 production will easily exceed a thousand cars, which 20 is exceeding I think the entire worldwide fleet of fuel 21 cell vehicles. Additionally, we will deliver Tesla built 22 battery packs for the newly revived think city car with a 23 standing order for more than a thousand battery packs per 24 year. 25 The Air Resources Board continues to show a bias PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 towards hydrogen fuel cell vehicles and against the less 2 expensive and more efficient battery electric. This bias 3 is clearly seen in the ARB independent panel report. 4 Tesla Motors believes this bias is not justified by 5 science or by the evidence of actual vehicles 6 infrastructure. However, we are actually delighted by the 7 way this bias finds itself implemented in the zero 8 emission mandate. For the result of this is all of our 9 potential EV competitors, all the big car companies, 10 remain mired in non-productive deeply expensive fuel cell 11 programs, keeping them out of the EV marketplace, indeed 12 out of the serious ZEV market entirely. Every year spend 13 on the fuel cell program by GM, Ford, Honda, and the rest 14 is another year for Tesla Motors to build a technology or 15 market lead and the obvious leading technology, battery 16 electric vehicles. 17 We therefore sarcastically and enthusiastically 18 encourage you to maintain the hydrogen bias and keep our 19 competitors in the quagmire. We're on schedule to place 20 more than 15,000 Tesla vehicles on the road by end of the 21 year 2010. I think that makes us a mid-sized car company 22 already. Sarcasm aside, wouldn't it be nice for our 23 environment if we actually had a few competitors. Thank 24 you. 25 CHAIRPERSON SAWYER: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 BOARD MEMBER BERG: What's retail price of your 2 car? 3 MR. EBERHARDT: The retail price of the Tesla 4 Roadster is $92,000. The retail price of the forthcoming 5 White Star will be $50,000. 6 BOARD MEMBER BERG: Thank you. 7 CHAIRPERSON SAWYER: Mr. Gage. 8 MR. GAGE: Good afternoon. 9 The first sentence of the status report on the 10 ZEV program reads and I quote, "The goal of the Air 11 Resources ZEV program to evolve the California passenger 12 car fleet to vehicles with no direct emission." 13 I'm encouraged to read this, because it does show 14 a dedication and commitment to a long term goal of zero 15 emission vehicles. But also I'm disturbed because by this 16 goal it's hard to evaluate the past 17 years of the ZEV 17 program as anything much more than a failure. There are 18 no ZEV vehicles on the road today or being sold. 19 So I think it's worthwhile possibly considering 20 the idea of taking a step back in looking at how the ZEV 21 program could be changed so that 17 years from now after 22 another several rounds of head butting between the auto 23 industry and the Board we actually do have a significant 24 number of ZEVs on California highways. 25 First of all, a much broader approach is needed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 Indirect emissions or direct emissions not a sufficient or 2 adequate goal for a program like this whose goal is to 3 significantly and fundamentally effect the $20 plus cars 4 on California highways. Indirect emissions obviously have 5 to be considered. Energy efficiency on well to wheel 6 basis is critically important, possibly even more 7 important now then emissions from cars. And energy 8 security is probably the most important of all. 9 The panel mentioned how they looked at business 10 as usual scenario. I'm a little bit more apocalyptic in 11 my view of the future over the next few decades. And the 12 reason for is this: In the U.S. we use 400 gallons per 13 person of gasoline per year. In Europe and the Japan, the 14 number is closer to 100. And in the rest of the world 15 it's about 30. This imbalance is not sustainable. And so 16 in the U.S. to avoid disruption, we have to greatly reduce 17 our use of gasoline. If everyone starts driving a Prius 18 tomorrow, we'll still be at 200 gallons per person per 19 year. So I conclude we have to substitute as well as 20 conserve. My view is electricity is the best substitute. 21 The Board should concentrate more on market 22 development. I drive an EV every day. The technology is 23 good enough for me. It's the market that is the problem. 24 Two areas where the Board could have an affect or 25 three: The credit trading scheme is an excellent idea. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 More discussion of what the real range needs of people are 2 would be a good idea. The car makers and the Board seem 3 to agree that 300 miles is a necessity. And the third 4 thing is the gas tax. I can hear the insiders chuckling 5 at my naivete, but our current gas tax structure 6 represents a policy of cheap gas. And such a policy -- 7 CHAIRPERSON SAWYER: I must ask you to conclude, 8 please. 9 MR. GAGE: Such a policy is a risk to our 10 national security. 11 Finally, the Board should find a way to support 12 small companies such as Tesla and some of the other 13 companies that have testified today. Thank you. 14 CHAIRPERSON SAWYER: Thank you very much. 15 Alec Brooks, and then Chelsea Sexton, William 16 Korthof, and Eric Neandross. 17 MR. BROOKS: My name is Alec Brooks. I'm here 18 today representing myself. The views expressed are my 19 own. 20 There's one question CARB didn't address in the 21 staff repot and didn't ask the expert panel to address the 22 question. The question is are vehicles fueled by hydrogen 23 a desirable long-term goal in the first place? The 24 Executive Order by the Governor may make it a state 25 policy, but that doesn't make it a good idea. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 I've been a vocal opponent of hydrogen powered 2 vehicles for five years. The reason I don't like hydrogen 3 for vehicles is principally because of its poor energy 4 efficiency and high greenhouse gas emissions compared to 5 the alternatives. 6 Hydrogen is principally made from natural gas or 7 electricity, both of which work well directly to power a 8 vehicle. there needs to be a compelling reason to incur 9 the energy losses in converting natural gas or electricity 10 to hydrogen rather than just using these sources directly. 11 Making hydrogen from natural gas uses about a third of the 12 energy in the natural gas and in the process. For a given 13 amount of natural gas, it's more efficient to put the 14 natural gas directly into a natural gas hybrid vehicle 15 than to convert it to hydrogen for a fuel cell vehicle. 16 You get more miles of travel using the natural gas 17 directly then converting it to hydrogen. 18 Making hydrogen from electricity is so bad it 19 should be outlawed. Fuel cell vehicles powered by 20 hydrogen made with electricity use four times as much 21 electricity per mile as battery electric vehicles. Many 22 hydrogen proponents explain this away by saying the 23 hydrogen will be produced with renewable energy, as if it 24 didn't matter at all how much electricity it takes to make 25 the hydrogen. But renewable electricity used to make PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 hydrogen is renewable electricity that is not fed to the 2 grid to offset combustion based generation. 3 In comments I submitted to CARB in 2005, I showed 4 how fuel cell vehicles have by far the highest CO2 5 footprint compared to other vehicle alternatives with all 6 the other alternatives evaluated on a level playing field 7 with each alternative incorporating the same amount of 8 renewable energy. CARB has not yet responded formally to 9 my comments. But I have been told by a CARB insider my 10 comments caused a bit of a stir internally and that there 11 was general agreement with my analysis. 12 The staff report contains an amazing statement 13 that demonstrates how far off the track the ZEV program 14 has strayed. In reference to battery electric vehicles in 15 the alternative compliance path, the staff report notes 16 however because they cost much less than fuel cell 17 vehicles, about a tenth, BEVs may only be used to meet up 18 to half the alternative path obligation, and they 19 substitute for fuel cell vehicles on a rate of ten to one. 20 So CARB is saying that one fuel cell vehicle is equally 21 desirable as ten battery electric vehicles. CARB is in 22 effect saying we want our ZEVs to have the highest cost 23 and the highest energy consumption. 24 In closing, I encourage the Board the revisit the 25 question of whether California should actually want PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 hydrogen powered vehicles even in the long term. The 2 alternatives are far better and are available in the near 3 term. Thank you. 4 CHAIRPERSON SAWYER: Thank you. 5 Chelsea Sexton. 6 MS. SEXTON: My name is Chelsea Sexton. I'm from 7 Plug-In America. I appreciate the opportunity to speak 8 not only today but as a stakeholder in the technology 9 review last September. 10 We, too, have noted the overall ARB goal toward 11 getting more zero emission and near zero emission cars on 12 the road sooner than later. To that end, we'd like to see 13 some discussion toward making the overall policy more 14 flexible for the automakers, simpler, and results 15 oriented. 16 We believe fully that we need to start crediting 17 based on benefit, not on cost. To that end, with respect 18 to the gold standard, BEVs and fuel cells ought to be 19 rated the same. They provide the same benefit. They're 20 both zero emission from the tailpipe. Absolutely no 21 reason to rate one higher because it costs more to build. 22 That gives the automakers more flexibility to build what 23 they believe will be popular in the marketplace, and the 24 market the option to determine what it is they want to 25 buy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 With respect to plug-in hybrids, there is a lot 2 of discussion over blended versus dedicated, parallel 3 versus serial. I think that too ought to be simplified 4 into a discussion of capacity rather than rating on all 5 electric range when we know for sure that at least some of 6 the initial plug-in hybrids won't have any. We ought to 7 start talking about them in the function of kilowatt 8 hours, capacity, or some other term that can be discussed 9 across the board and across the technologies. 10 Again, giving the flexibility to the automakers to 11 determine which technology they think will actually work 12 in the marketplace. 13 What's clear is that there is at least one 14 vehicle relatively forthcoming or at least having been 15 announced, the Volt, that will provide all-electric range 16 and will in the case of daily commuting make petroleum use 17 the exception not the rule. And with that in mind, as 18 others have noted, certain of the more robust plug-in 19 hybrids ought to be considered for gold credit. Whether 20 that's a certain number of kilowatt hours, 12 or above or 21 however it's defined, maybe serial instead of parallel, et 22 cetera, that needs to be opened up and defined. 23 One of the things that was -- 24 CHAIRPERSON SAWYER: I need to ask you to 25 conclude, please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 MS. SEXTON: I will make my last point the fact 2 that one of the things most missing from the overall study 3 and report was any sort of market data. Regardless of how 4 you come down on all the past decisions of the mandate, 5 one thing industry and stakeholders agree is that consumer 6 demand needs to play a role. 7 We would encourage over the next several months 8 of meetings and the process of making these decisions that 9 we do some overall, independent, non-industry funded or 10 defined market studies on all of the various technology 11 being discussed and figure out what exactly consumers 12 actually want to buy. Thank you. 13 CHAIRPERSON SAWYER: Thank you. 14 William Korthof. 15 MR. KORTHOF: Thanks. I'm William Korthof, 16 business owner, southern California resident. And I drive 17 a 2002 RAV4 electric car. Last month, my odometer rolled 18 past 100,000 miles, and the car continues to perform and 19 meet my driving needs. This turned out to be an 20 all-around incredible car. Completely trouble free and 21 nearly maintenance free, and cost effective. 22 My company, EE Solar, is a leading residential 23 electric solar contractor in California. In addition to 24 installing solar panels, we are committed to a cleaner 25 California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 This ZEV program matters to us as we actually 2 drive clean air cars every day, eight electric cars, six 3 natural gas vans, and a natural gas sedan. 4 I read the latest technology report, and I noted 5 some problems. The report finds serious obstacles to 6 hydrogen cars. On this point, I agree. But the report 7 understates battery technology. It fails to mention the 8 mass produced lithium batteries used by Telsa and AC 9 Propulsion that power electric sports cars for two to 300 10 miles. The report also omits advances in nickle metal 11 hydride batteries such as the 110 amp hour models from 12 Panasonic that were shown way back in 2001 and delivered 13 10 to 15 percent more capacity than even the batteries in 14 my own RAV4. 15 The report dismisses viable options such as lead 16 acid batteries. When GM improved EV1s with Panasonic lead 17 batteries, the cars delivered 100-plus mile range. Many 18 drivers would choose plug-in cars with lead batteries over 19 more expensive choices. 20 Flaws: The report suggests that it takes a 21 30-kilowatt battery pack to deliver a 75-mile driving 22 range in a compact sedan. That's not exactly true. Using 23 a ten-year old technology, the RAV4 EV that I drive has a 24 EPA range of 50 percent more miles in a SUV package that 25 draws 25 percent more power then a compact car and uses a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 battery pack that's ten percent smaller. 2 Together, the report misrepresents the technical 3 capabilities of plug-in cars by a factor of two. The 4 report's inaccurate and flawed evaluation leads to suspect 5 conclusions of the market potential of battery cars and 6 fuel cell cars. 7 Consumers are more eager for electric cars than 8 ever. Today, five-year-old RAV4 EV cars are reselling for 9 more than what the original price was and more than double 10 the price of new gasoline counterpart cars. Battery 11 electric cars already proved practical and effective, and 12 time has shown us that sometimes it takes regulations to 13 get business to do the right thing. 14 ZEV mandate changes in 2002 allow the car 15 companies to abruptly halt the market. The compromise 16 with the car companies was supposed to lead to many fuel 17 cell cars. Five years ago, Chairman Lloyd insisted that 18 fuel cell cars had tremendous promise despite the concerns 19 from experts like Alec Brooks and Tom Gage. Time and 20 billions of dollars in research have proven Lloyd wrong. 21 Hydrogen faces the same insurmountable laws of 22 physics as ever. In all likelihood, these problems will 23 prevent hydrogen from being a viable fuel for cars five, 24 20 or 100 years from now. This fuel cell pathway is a 25 failure and won't put a sizable number of ZEV cars on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 road. 2 What to do. Now, as your agency considers ZEV 3 mandate changes, I suggest a simple outcome is the key 4 program goal, that California considers -- 5 CHAIRPERSON SAWYER: Please conclude. 6 MR. KORTHOF: -- a selection of ZEV options when 7 they buy a new car. When the program succeeds, there 8 should be a sizable growing effort of ZEV cars every year. 9 Thank you. 10 CHAIRPERSON SAWYER: Thank you. 11 Eric Neandross, and then Charlie Botsford, Dan 12 Kaypaghian, and Danielle Fugere. 13 MR. NEANDROSS: Thank you, Mr. Chairman. Good 14 afternoon. My name is Eric Neandross with Gladstein 15 Neandross and Associates. We're an environmental 16 consulting firm based in Santa Monica that focuses our 17 work on alternative fuel vehicles and refueling 18 infrastructure. I'm here today representing a number of 19 California companies that are involved in the battery 20 electric vehicles market. My comments are going to focus 21 on what we see are timing issues with the report from the 22 panel and the status of the technology today. By those 23 timing issues, I'm referring to the work the expert panel 24 did and where we are think the electric vehicle industry 25 has come and stands today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 It's my understanding the panel completed most of 2 the work in the spring, summer, and fall of 2006 with the 3 report written later in the year for submittal to ARB 4 early this year. Like the report on advanced 5 technologies, by the time it's written and issued, 6 additional advancements will be inevitable. Obviously, 7 this is due to no fault of the panel. This is just the 8 status of the technology. The Board has commented on this 9 several times already today that this is a dynamic 10 situation with tremendous opportunities for investment and 11 further innovation. We appreciate those comments and 12 totally agree. 13 We've seen in the last six to eight months some 14 pretty major announcements from California-based companies 15 which we think is significant. Tesla Motors has announced 16 their two-seat roadster in June of '06 and recently 17 announced a five-passenger sedan at a lower price point. 18 In September of '06, Phoenix Motorcars announced 19 plans for a revolutionary five-passenger full performance 20 BEV sport utility truck that has 130 mile range and the 21 ability to recharge in less than ten minutes. Truly a bar 22 raising technology. 23 In 2008, Phoenix will offer a Phase 2 battery 24 pack that will give between 200 and 250 miles, again with 25 the ten minute or less charge. In the last few months, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 Miles automotive has announced a four-door five-passenger 2 full performance BEV sedan, 150 mile range and a price 3 point of $30,000. So clearly we can see from just a 4 couple of the more recent announcements that there is 5 momentum gaining in the BEV market. And we really 6 attribute this to the ARB and the ZEV program. 7 But unfortunately due to these timing issues we 8 see, not a lot of that information has been included in 9 the report. So my comments today are really to set the 10 stage for some of the other speakers that will be coming 11 after me. We believe it's important for the Board to 12 recognize these timing issues and then to hear from the 13 experts and the California-based manufacturers themselves 14 on the recent technology developments and plans for the 15 future. 16 As you will hear, the companies that I work with 17 believe that the ZEV program is working, that commercially 18 available BEVs that are being developed in California are 19 the result. We don't believe that changes or 20 modifications to the program are required to meet not only 21 the industry's goals, but the goals of the ZEV program. 22 We ask that you maintain the ZEV program as is. As 23 Professor Sperling pointed out, the private investment and 24 innovation we think is following today. Thank you. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 Mr. Botsford. 2 MR. BOTSFORD: Charlie Botsford with 3 Aerovironment. 4 Along with faster charge and unmanned air vehicle 5 manufacturing, we also conduct third-party battery 6 testing. A week ago, May 17th, Aerovironment engineers 7 conducted a battery fast charge demonstration for 8 representatives of ARB. This continued a series of 9 battery tests designed to determine whether an electric 10 vehicle using a 35-kilowatt hour pack of Altairnano 11 batteries could be safely fast charged in ten minutes or 12 less. 13 Last year, we began testing at the battery cell 14 level, then at the module level to gain confidence this 15 battery technology would perform safely as promised. The 16 day before the ARB demonstration, we conducted the first 17 full pack level test using an AB 900 advanced battery 18 charger charging the 35 kilowatt hour pack in less than 19 ten minutes. The next day for the ARB representatives, we 20 conducted the same type of test, thus demonstrating the 21 ten-minute fast charge capability. 22 While this demonstration is a major milestone, EV 23 batteries must also exhibit significant cycle life. So we 24 are continuing testing at the module level to determine 25 potential cycle life under stringent charging and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 discharging conditions representative of an EV. We 2 currently fully charge this Altairnano battery module for 3 ten minutes, discharge for two hours which is roughly 4 equivalent to running an EV for two hours at 60 miles an 5 hour. So far we've accumulated about 50 cycles with the 6 battery still operating at essentially 100 percent of 7 capacity. This cycle capability of the module and pack 8 demonstrates that thousands of cycles we've seen at the 9 cell level as battery technology will prove an excellent 10 solution for EVs and plug-in hybrid EVs. Thank you. 11 CHAIRPERSON SAWYER: Thank you. 12 Mr. Kaypaghian. 13 MR. KAYPAGHIAN: Good afternoon, Mr. Chairman and 14 Board, ladies and gentlemen, It is my pleasure to address 15 you today. My name is Dan Kaypaghian. I work in the 16 finance and investment industry. 17 As a capital provider, banks and investors are 18 motivated in making funds available to alternative energy 19 companies. In Europe, as you know, mandatory carbon 20 emission standards have led to an active secondary market 21 in trading in carbon credits. One would envision that ZEV 22 credits could lead to a similar market here in California 23 and allow financiers and investors to view the ZEV credits 24 as an asset that one could lend against or monitize. 25 For the ZEV credits to have monetary value and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 for the market to develop, it is imperative, one, that the 2 regulations once set are not amended too often or too 3 dramatically. Two, that the enforcement of that 4 enforcement system exists with monetary penalties. And 5 three, that a potential linkage to the other trading 6 emission are regimes exist. 7 So in conclusion, if the intent of the regulation 8 is to allow for trading or monitizing of these credits, 9 financial institutions and investors will be encouraged to 10 monitize, trade, and provide financing to start-ups in 11 California. And to that end, we would like to do our bit 12 to see this market develop into a reality. Thank you for 13 your time and good afternoon. 14 CHAIRPERSON SAWYER: Thank you very much. 15 Ms. Fugere, and then Spencer Quong, Chung Liu, 16 and Sven Thesen. 17 MS. FUGERE: Good afternoon, Chairman Sawyer and 18 members of the Board. My name is Danielle Fugere, and I'm 19 with Bluewater Network, friends of the earth. I wanted to 20 start today by thanking the Board and the staff for your 21 efforts on the ZEV program. As we've heard today, ZEV has 22 successfully spurred significant investment in advanced 23 technology, in advanced vehicle technology, helped bring 24 hybrids to the market, and is leading the way toward full 25 zero emission vehicles. As we've also heard today, this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 is a critical time in history. 2 We're seeing rapid and unprecedented progress in 3 alternative fueled vehicle. We're experiencing security 4 and economic pressure surrounding gasoline and oil. And 5 we're facing one of the world's greatest trips in terms of 6 global warming. 7 With this backdrop, it's important the Board not 8 weaken the obligations of manufacturers to produce zero 9 emission vehicles. Allowing delays will slow the progress 10 and momentum. And certainly there should be much more 11 discussion before deciding any extension should be given, 12 especially with the credit glut that exists and the need 13 to incetivize plug-ins. Plug-in hybrids are an important 14 means of continuing ZEV's momentum. This technology can 15 be commercially viable in the near term and will benefit 16 from hydrogen incentives. We agree focus should be 17 brought to this issue and ask no options be foreclosed 18 with regard to plug-ins at this point in time. 19 We agree credit should be equalized between 20 battery electric vehicles and fuel cells. As we've heard, 21 technology is difficult to predict. So allowing more 22 flexibility makes sense, and we should allow the market to 23 work itself out. 24 Finally, I think we need to look at the credit 25 glut issue and how that impacts the need for extensions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 And the last issue I wanted to raise is I wanted 2 to highlight the fact that the public has been denied 3 access to basic information about credits issued under 4 this program. We were not allowed to know how, when, how 5 many, and on what basis credits were issued. And the 6 basis for keeping this secret from us was trade secret. 7 Well, arguing that credits issued by the state are somehow 8 the intellectual property of the automakers is a huge 9 extension of trade secret concept. Trade secret is a very 10 narrow concept. It's not warranted to say this 11 information is secret. It's not really legal. And it's 12 just not good public policy. If allowed traction, this 13 argument will expand, and you guys will be facing it 14 constantly. Not just in this arena, but every other 15 arena. In addition, as AB 32 moves forward and trading 16 system develops, certainly we need to have public 17 visibility and accountability. And I just wanted to bring 18 that to your attention. So thank you for your 19 consideration of my comments. Bye. 20 CHAIRPERSON SAWYER: Thank you very much. And 21 let me state that it is indeed the goal of this Board to 22 make as much information as possible available to 23 everybody within our agreements of confidentiality. 24 Ms. Witherspoon, would you like to expand on 25 that? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 EXECUTIVE OFFICER WITHERSPOON: I would. Staff 2 has received a public records request on the credit issue, 3 and our legal office is analyzing that and specific 4 statutes in case law that apply to proprietary information 5 to the extent which they do or do not prohibit us from 6 releasing this information and what can be released real 7 time, what is retroactively disclosed, et cetera. And so 8 Mr. Jennings might have a sense of when that analysis will 9 be finished. He would, of course, post it for all parties 10 what our interpretation is so that it's clear to all how 11 we've reached our decision. 12 CHIEF COUNSEL JENNINGS: Yes. We have received 13 the Public Records Act request. We've obtained statements 14 of confidentiality and justifications of confidentiality 15 from the manufacturers. We made an initial determination 16 that they had demonstrated these were trade secrets. But 17 I think we're still interested in trying to share the 18 justifications of trade secret with the entities that have 19 requested the data get their input and analysis. We had a 20 phone conversation, conference call with them a couple 21 months ago, but I think we can continue that process and 22 firm up exactly what our position is. 23 SUPERVISOR HILL: I would hope when we look at 24 that and take that analysis that we take the broad 25 approach and with the goal as the Chair indicated that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 transparency is the ultimate goal in this. I think that's 2 the direction that the Board, speaking for myself, would 3 like to see us go. I think that's clearly the only way in 4 which this issue can be looked at and analyzed. 5 CHIEF COUNSEL JENNINGS: Okay. 6 CHAIRPERSON SAWYER: Mayor Loveridge. 7 BOARD MEMBER LOVERIDGE: I agree with his 8 comment, but I guess I need to understand our current 9 policy when someone asks, we said we can't do it. 10 EXECUTIVE OFFICER WITHERSPOON: We had reached 11 our previous legal decision that it was trade secret 12 protected. We're re-evaluating that judgment and 13 analyzing it as deeply as we can to see if there's any 14 room to share some of this credit information. 15 I also want to make a comment on credit glut 16 generally. It is not related to the staff recommendation 17 to stretch out fuel cell deployment on the alternative 18 compliance path because every fuel cell vehicle on this 19 path has to be a fresh fuel cell vehicle. Prior earned 20 credits cannot be used against the obligation. They may 21 be used against hybrid obligations, the bronze 22 obligations, but not against the fuel cell requirements. 23 And then on the base path only. And you have to use extra 24 gold credits from the base path to pay down silver and 25 bronze on the alt path. But the fuel cell number is just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 flat out that's how man cars we're talking about. Flat 2 out. 3 CHAIRPERSON SAWYER: Mr. Quong. 4 MR. QUONG: Thank you, Chairman, Board. My name 5 is Spencer Quong. I'm a Senior Vehicles Engineer at UCS. 6 As many of you know, we have a considerable amount of 7 hands-on experience with battery, hybrid, and fuel cell 8 vehicles. Given the success of the program, the 700,000 9 commercially available hybrids and half a million partial 10 zero emission vehicles, and the advancements in the fuel 11 cell batteries and automotive technology, plus the need to 12 support component suppliers such as fuel cell stack 13 manufacturers, storage manufacturers, and battery 14 manufacturers, which could all suffer with the two- to 15 three-year delay, UCS encourages the Board not to modify 16 the ZEV mandate including the numbers and the time lines. 17 If the Board chooses to strengthen the mandate, UCS would 18 be willing to provide proposals and comments. 19 One final point. We also support the 20 transparency issue that was just discussed. But the 21 Board -- one comment on that is that precedent set through 22 the ZEV mandate can also effect transparency in other 23 programs which affect air quality and climate. Thank 24 you. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 Mr. Liu. 2 MR. LIU: Good afternoon, Chairman Sawyer, 3 members of the Board. I am Chung Liu with the South Coast 4 Air Quality Management District. 5 ZEV mandate, ARB has major difference -- can make 6 major difference to the auto OEMs how to expand their 7 resource in the technology advancement. And the South 8 Coast AQMD staff beliefs that the mandate should be 9 redesigned to provide more incentive to the ones that need 10 the most help, most critical to us. That's plug-in hybrid 11 technology. And AQMD and ARB work very closely early on 12 in late 1990s starting with U.C. Davis on developing the 13 demonstration prototype and market survey type of things. 14 So we have a lot of years experience on these 15 technologies. 16 And the expert panel actually indicated very 17 clear the next technology needs promotion, needs help with 18 the plug-in high hybrid, and has a very short term results 19 that we can foresee. I can suggest that pretty simple 20 road map here starting with the traditional hybrid we have 21 now. The next step is the plug-in hybrid. Then to the 22 all-electric range. Then to the zero emission vehicle 23 including the battery EV and also the fuel cell vehicle 24 EV. 25 But here if you look at the time schedule in this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 ZEV mandate, all the company kind of reluctant, doesn't 2 want to give you the exact date. When they make an 3 announcement of possible product they're going to have, 4 it's always five years ago ahead of what they tell your 5 staff or the expert panel. So what is the real time line? 6 And actually Mike Walsh said it very well that it's really 7 a business as usual scenario. It's really up to your 8 Board to make some difference on the timelines. And I 9 really want to encourage the Board to think about an early 10 gold plate standards for plug-in so we can move on with 11 the path and really get really clean and zero emission 12 vehicle in the future. Thanks. 13 CHAIRPERSON SAWYER: Thank you very much. 14 Mr. Thesen, and John White, Felex Kramer, and 15 Daniel Davids 16 MR. THESEN: Sven Thesen on behalf of PG&E. 17 Like to reiterate Dave Modisette from Cal ETC's 18 eight points and attention to two of them. One is a 19 daylighting of compliance, and it's the need to see who's 20 in and out and where we are. And as a regulated entity 21 particularly in regard to the fleet rules and as a 22 stationary source regulated entity that has to submit 23 documents every six months and then a plant manager has to 24 sign a document every year to certify compliance, I 25 believe that we can certainly help Ms. Witherspoon design PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 a program of compliance if that's what they needed. 2 In regard to the second point is a credit trading 3 program. Beginning in 1990, under the new revised Clean 4 Air Act that put in place sulfur dioxide trading program 5 that I believe the Dr. Sperling or Dr. Ferryl at the 6 international low carbon fuel standards spoke about how 7 successful that had been in meeting the requirements in a 8 very cost effective manner. So if we can put something 9 like that together, it would address all these cost 10 issues. Not only that, but it would allow people like 11 Board Member D'Adamo, when you talked about 12 infrastructure, say utility could build charging stations 13 or hydrogen refueling station and gain credit that way and 14 interject that into the market. 15 Both AB 32, which PG&E was proud to support in 16 part because it had a credit trading program, and the low 17 carbon fuel standard have all been designed to use market 18 forces to reduce cost and achieve the same goal. So we 19 would very strongly suggest that you look at implementing 20 something like this and such the players -- actually just 21 like on the stock exchange you wouldn't know who you're 22 buying from and selling from until that biennial or every 23 six months compliance period went through. 24 And finally, I'd like to acknowledge what the 25 Board has said. And that is things are changing very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 quickly. Eleven months ago, PG&E got their first plug-in 2 hybrid. Last month, we were the first utility to 3 demonstrate vehicle to grid technology that it works. 4 Last week, you heard about Phoenix and their fast charge 5 for their vehicles. And we plan to get four of those 6 vehicles this summer to put in working as a utility 7 working vehicle. We're not going to demonstrate them or 8 test their emissions which they don't have. We're going 9 to put those vehicles through their paces as a utility 10 would to see if they really work. And we sure hope they 11 would, because there's so many things we need to address 12 here. Thank you. 13 CHAIRPERSON SAWYER: Thank you. 14 Mr. White. 15 MR. WHITE: Thank you, Mr. Chairman and members. 16 I'm John White. I'm with the Center for Energy Efficiency 17 and Renewable Technologies. And I've been with this Board 18 throughout the process of deliberation on these rules over 19 the years, and I share Ms. D'Adamo's sense of both 20 accomplishment and lessons learned. 21 I think first of all I want to say that I think 22 that we are headed, as Dr. Loveridge said, into a time 23 where much more is going to be possible than what you 24 perhaps had been thinking. And my general suggestion to 25 the Board is to not lose faith and to keep the pressure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 on. 2 I think there's no reason to make significant 3 changes at this point in time. I think we are going to 4 see some conversion of events in technologies. Frankly, 5 wish the expert panel had consulted a little more broadly 6 with the NGO community and with some of the other 7 non-traditional suppliers. Because I think we're in a 8 period of great change. I also think it's important that 9 we look at the opportunities for synergy between the 10 technologies between the plug-ins, the battery 11 technologies, and the opportunities for the fuel cells. 12 What we have to remember with all of these 13 technologies is that we're trying to displace air 14 emissions and to reduce or eliminate combustion. So we 15 have to care where both the electricity comes from, when 16 and where the hydrogen comes from. Both of those 17 technologies are going to need our vigilance if we're 18 going to get them to be as green as they need to be. 19 I also think the challenge of AB 32 is going to 20 require much more than the trading schemes that the 21 previous speaker mentioned. We're going to need a 22 combination of a hybrid, if you will, of direct emission 23 reduction programs like this one along with opportunities 24 to find some opportunities to make it cost less. 25 I think the lesson we've learned from this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 experience with ZEV is that as long as we stay open and 2 keep talking, we're going to be able to make the necessary 3 adjustments. I don't think the time has arrived for 4 adjustments to be needed. We have time to revise in the 5 face of improvements. And I sense we are seeing great 6 progress, and we need to look at the market more broadly. 7 We're not necessary by building vehicles just for the 8 Autobahn. We're building city cars and neighborhood cars. 9 I think there's lots of opportunities to make the program 10 work successfully and I urge you to stay the course. 11 CHAIRPERSON SAWYER: Thank you. 12 Mr. Kramer. 13 MR. KRAMER: Mr. Chairman, Board members. I am 14 the founder of California Cars Initiative. 15 We believe the Board is now uniquely positioned 16 to speed their commercialization of plug-in hybrids. In 17 the category of other incentives that the staff discussed, 18 actions even in the next months could be critical. If 19 left on their own, an unknown number of years from now, 20 one or more car makers may begin to produce some 21 quantities of plug-in hybrids. Why not sooner? They're 22 waiting for affordable 40-mile range life of vehicle 23 batteries. The key is to stop making perfect the enemy of 24 the good. 25 Today, we're in a slow Pearl Harbor on climate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 change and energy dependence. In 1942, we geared up war 2 production without waiting for perfect planes and tanks. 3 How can California catalyze worldwide change? In Silicon 4 Valley, over and over expensive unfinished Version 1.0 5 products evolve into best selling best Version 2 and 6 Version 3 products. Working with others, ARB can take car 7 makers building good enough plug-in hybrids Version 1.0 8 plug-in hybrids like the battery plug-in hybrid I put 9 25,000 miles on. They can start with line extensions with 10 demonstration fleets of hundreds of cars and then 11 thousands. 12 On March 12th, GM held an advanced technology 13 briefing. Chief Engineer Nick Zielinski for the Volt said 14 batteries could not be considered a maintenance part. 15 When GM took my question, I asked Beth Lowry, Vice 16 President for Energy and Environment, if GM had considered 17 the possibility that legislators, government regulators, 18 and fleet owners could come together to support GM's 19 production of PHEVs with a 75,000 mile five-year warrantee 20 supplemented by third-party warranties on the first 21 thousand cars, thereby eliminating risk factors to buyers 22 and sellers. Lowry said the third-party warrantee was an 23 interesting concept, but said it would be difficult to put 24 into place. When I asked point blank if GM had discussed 25 with any government official either warrantees or easing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 regulatory requirements, she said no. A week after this, 2 ARB information officer Karen Caesar says it's likely 3 possible plug-in hybrids can be certified in California 4 without the ten-year warrantee if a car company does not 5 want to use the vehicle towards ZEV regulation compliance. 6 The ARB is working with automakers to figure out how to 7 bring them to market. 8 Here's the opportunity, especially for GM who say 9 they're going to be first, but for any of them. The ARB 10 can communicate to car makers that it could suspend its 11 battery lifetime regulations for demonstration fleets that 12 do not receive credits. Just the battery. Not the entire 13 emission system. Alternatively, it can work with all 14 interested parties to fashion a third-party extended 15 warrantee program. 16 Based on our discussions, we believe leading 17 battery suppliers might offer 50 to 75,000 miles four to 18 five-year warranties for a limited number of cars for 19 demonstration fleets. To reduce the cost of the 20 warrantees, utilities have indicated they may pay for 80 21 percent good batteries to go into the basement of downtown 22 buildings. Federal and State legislators can modify 23 legislation for government incentives and pay for battery 24 warranties. We believe that the ARB proactively 25 reiterating its flexibility could affect car makers to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 develop plans. 2 And longer version of the statement has been 3 submitted, and I have copies in the back. Thank you very 4 much. 5 CHAIRPERSON SAWYER: Thank you very much. 6 Mayor Loveridge. 7 BOARD MEMBER LOVERIDGE: Conceptually, has staff 8 addressed this question of potential or possible 9 incentives for plug-in hybrids? 10 EXECUTIVE OFFICER WITHERSPOON: Well, we 11 addressed it in the staff presentation that we would look 12 at ways, first making sure we had a certification for 13 plug-in hybrids and to consider possible increases to the 14 credits. Right now, they get 20 credits more than a 15 conventional hybrid vehicle in the silver category. And 16 so the question is would making that credit more lavish 17 change the rate of deployment. And you've been asked over 18 the course of this afternoon to consider partial ZEV, to 19 pull the battery out, as this gentleman just talked about, 20 and other ways of doing it. And staff is resisting 21 playing with gold. But if you have a different view, then 22 you should tell us as we draw to a close. 23 CHAIRPERSON SAWYER: Mr. Davids, and then Daniel 24 Elliott, Kenneth Boshart, and Russell Lemon. 25 MR. DAVIDS: Thank you. My name is Daniel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 Davids. I'm from Seattle, Washington, and I own and 2 operate a RAV4 EV in Washington. And I want to thank the 3 California Air Resources Board and the previous members 4 and current members who had anything to do with creating 5 the environment so such a wonderful vehicle could be 6 manufactured. It is definitely a full performance 7 electric vehicle. 8 My car is one of about a dozen ZEV California 9 vehicles that have migrated to California -- to Washington 10 where there's a growing interest in EV technology. Such 11 an interest that just in the last month alone there have 12 been two major conferences in Washington dealing with EVs 13 and plug-in hybrids. We're home to a start-up company 14 which is focused on vehicle to grid software. We have 15 half a dozen or so plug-in hybrids Priuses that have been 16 converted, including one with lithium ion batteries. 17 An interesting factor, the Prius is out selling 18 the Camry. We also have an EV1 at Western Washington 19 University which is on display with my RAV4 EV at one of 20 the conferences last week, and it will be fully 21 operational despite efforts by GM to prevent it from being 22 so. 23 The study, which I went through in detail, I have 24 two main problems with it. First, I believe the net 25 present value calculations on the one page Appendix I fail PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 to include the significant avoided service and maintenance 2 expenses involved when operating an EV. In the case of a 3 RAV4 EV, Southern California Edison reported at a 4 conference last week that out of operating 262 RAV4 EVs in 5 their fleet, their total maintenance cost per year for 6 each of those EVs is less than $200. I would suggest that 7 the calculations involving that present value being 8 expanded and redone to take in account the total life 9 cycle of cost of ownership of such a vehicle. 10 Second, it's repeated in the study that there is 11 or would be limited customer acceptance of EVs due to 12 range and charging issues. I would agree with 13 Dr. Sperling that this is a conclusion based on behavioral 14 facts that are not in evidence and certainly beyond the 15 scope of the technical analysis of this report. 16 I strongly suggest and support research into the 17 financial, marketing, ownership, and behavioral aspects 18 involved in driving EVs. It's a completely different 19 paradigm. 20 In summary, I look forward to the Air Resources 21 Board reclaiming its leadership role in creating a market 22 for EV proliferation. Thank you. 23 CHAIRPERSON SAWYER: Thank you. 24 Mr. Elliot. 25 MR. ELLIOT: I have a slide presentation. I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 Daniel Elliot, CEO of Phoenix Motor Cars. And I am here 2 today to talk to you about battery electric vehicles. 3 (Thereupon an overhead presentation was 4 presented as follows.) 5 MR. ELLIOT: Phoenix Motor Cars was founded in 6 2001 with the purpose of research, development, and 7 ultimately production of a viable no-compromise electric 8 vehicle. 9 What you see here is a pickup truck. Sport 10 utility truck, zero emission, battery electric, currently 11 130-mile range. We're working on the 250-mile range 12 version. You can drive this vehicle. It's in the parking 13 today. It drove itself here. And I welcome you to come 14 out and drive it any time you want. We have several of 15 these driving around. We're utilizing the Altairnano -- 16 --o0o-- 17 MR. ELLIOT: -- battery technology that's been 18 spoken about here today. 19 This vehicle does have the capability to recharge 20 in less than ten minutes on commercial infrastructure that 21 we're working with PG&E to install currently in the Bay 22 Area. The vehicle has the ability to charge with an 23 on-board charger in your garage or home. 24 This truck we're working on our DTO 25 certification. We'll be completed in June 2007 for that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 And we intend to submit for Type 3 because we can recharge 2 in less than ten minutes. And we have a range of over 100 3 miles, we intend to submit for a Type 3 certification to 4 CARB in July 2007. 5 The vehicle comes with all the standard safety 6 and comfort and convenience equipment you would see on any 7 other vehicle. There's no compromise. Long useful life, 8 extended range, rapid charge times, power to weight ratio 9 is very good, safety. And it's a real vehicle available 10 today. 11 Financial, we're selling these vehicles for 12 $45,000 at retail price. There is a CARB ZEV rebate 13 that's been talked about recently. 14 Maintenance costs, the ROI. Maintenance costs 15 are lower, so the ROI on this vehicle is very good. And 16 the cost of goods can be driven down. But we need help of 17 the current ZEV mandate. The ZEV credits, there's been 18 much talked about a trading system for the credits. There 19 have been private transactions as I understand it between 20 automotive manufacturers for these credits. And we're 21 looking to utilize these credits and this system -- 22 --o0o-- 23 MR. ELLIOT: -- to drive cost out of this as we 24 ramp up for our production. And it should be noted in 25 2009 we will be fully capable of supporting the company, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 supporting the sale of these vehicles profitably without 2 any support from government. 3 --o0o-- 4 MR. ELLIOT: So what we're saying is full 5 performance battery electric vehicles are not 2015 for low 6 volume commercialization. And in 2030 from mass volume 7 commercialization. We're saying Phoenix Motor Cars can 8 meet the low volume commercialization on our own in 2009 9 with the other California OEMs that you heard from today, 10 Tesla -- Miles wasn't here today. But those in 11 combination will be able to support that. 12 --o0o-- 13 MR. ELLIOT: Really what we're talking about is 14 going from this -- 15 --o0o-- 16 MR. ELLIOT: -- to this. And now is the time to 17 do it. 18 --o0o-- 19 MR. ELLIOT: In summary, the fleets is where 20 we're targeting. They have a daunting task. They like 21 our vehicles. We're moving in that way. We provide a 22 real vehicle with a real solution. And even the President 23 recognizes it. 24 --o0o-- 25 MR. ELLIOT: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 CHAIRPERSON SAWYER: Thank you very much. 2 Mr. Boshart. 3 (Thereupon an overhead presentation was 4 presented as follows.) 5 MR. BOSHART: My name is Ken Boshart. I'm the 6 President of the Boshart Engineering. I also have some 7 slides to share today. 8 --o0o-- 9 --o0o-- 10 MR. BOSHART: As I said, I'm President of the 11 Boshart Engineering. We're located in Ontario, 12 California. We are a registered small business in 13 California. We specialize on emission regulatory 14 compliance. We also participate in alternative fuel 15 system integration into vehicles. And we also are a low 16 volume vehicle manufacturer supporting Phoenix Motor Cars 17 as well as some of our low speed electric vehicles. 18 --o0o-- 19 MR. BOSHART: Just want to touch on a couple 20 things in terms of the jobs for vehicle manufacturing in 21 California. I know historically General Motors has been 22 here. Ford has been here, Chrysler, all three of them in 23 southern California with major manufacturing facilities 24 that are no longer here. The only major manufacturer here 25 today is General Motors, Toyota in Fremont in a joint PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 venture producing trucks. 2 --o0o-- 3 MR. BOSHART: Out of the companies that you've 4 seen here today that intend to produce the vehicles 5 Phoenix Motor Car, Boshart Engineering, Altairnano 6 batteries will be assembled in Southern California for 7 utilization in Phoenix Motor Cars. Tesla Motors has 8 previously spoken today. We've spoken of Miles 9 Automotive. ZAP is here. They're not a manufacturer 10 here, but they are an electric vehicle company that has 11 been promoted significantly because of the ZEV mandate. 12 And we all have major suppliers here in California 13 supporting our manufacturing and sales. 14 --o0o-- 15 MR. BOSHART: What I want to also emphasize here 16 is the cost of the ZEV mandate for alternative path to 17 produce 250 vehicles is $250 million. Utilizing the 18 Phoenix Motor Cars path, the cost of that is one-fifth, 19 $50 million. And then as you go into 20 pre-commercialization and then low volume 21 commercialization, this advantage continues for Phoenix 22 Motor Cars and their approach to meeting the ZEV mandate. 23 --o0o-- 24 MR. BOSHART: What I was want to point out is I 25 believe the projected or planned extension of this period PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 of time really indicates a significant doubt in the 2 viability of fuel cell electric vehicles. And that's not 3 needed based upon the previous slide indicating that 4 Phoenix Motor Cars can comply with the number of vehicles 5 that are needed for the ZEV program. 6 --o0o-- 7 MR. BOSHART: In conclusion, I'd like to say that 8 the ZEV mandate and zero emission vehicle manufacturing 9 will create thousands of jobs for California. The 10 technology with the alternao battery is here and now and 11 available. 12 CHAIRPERSON SAWYER: Would you please conclude? 13 MR. BOSHART: It's more cost effective than the 14 fuel cells, and it enables break-through battery electric 15 technology for development in California versus somewhere 16 ELSE in the world. And we request that CARB maintain 17 credits under ZEV program as is. Thank you. 18 CHAIRPERSON SAWYER: Thank you very much. 19 Mr. Lemon, and then Bill Hammons, Linda Nicholes 20 and Richard Kelly. 21 MR. LEMON: Hello. My name is Russell Lemon. 22 It's a pleasure to address the Board. And I also enjoy 23 the comments from the panel, which is one of the more 24 technically accurate reports I've heard this year. 25 If my monthly drive carpool to the monthly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 meeting of the Electric Vehicle Association of San Diego 2 at the Regional Transportation Center down in San Diego, a 3 distance of 30 miles, I drive with Kevin, and his RAV4 EV 4 consumes less than eight kilowatt hours of energy. That's 5 less than four cents a mile. 6 For my own needs around town, most of my vehicle 7 needs could be met with a neighborhood electric vehicle, 8 except for the fact that I am surrounded by El Camino and 9 Santa Fe, all of which have speed limits over 45 miles an 10 hour. Therefore, I would like to encourage the Board in 11 their use of city vehicle -- a city vehicle with a range 12 of 30 miles would meet over 90 percent of my vehicle 13 needs. So I would like to consider a city electric 14 vehicle as an alternative as a second vehicle for most of 15 the needs of many of the drivers in southern California. 16 Thank you. 17 CHAIRPERSON SAWYER: Thank you very much. 18 Mr. Hammons. 19 MR. HAMMONS: Good afternoon, Dr. Sawyer, 20 distinguished Board, and staff. 21 We enjoy the representations of Supervisor Ron 22 Roberts in San Diego throughout the year. It's good to 23 have you here and appreciate you having a meeting in San 24 Diego. 25 My name is Bill Hammons. I represent Electric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 Vehicle Association of San Diego. And I am representing 2 50 of our members. We put together a card that we would 3 like to leave with you. 4 My comments are neutral. We have benefited from 5 CARB's decisions in the '90s, and we would like to benefit 6 with CARB moving on. 7 I likewise appreciate some of the comments from 8 Dr. Sperling regarding city cars. I concur with you that 9 things work in Europe and in Asia just like they work 10 here. It's my understanding there's 161 choices for 11 vehicle transportation over 45 miles per gallon in Europe. 12 And we do not have that here. We would like to have that 13 here. 14 Some manufacturers that are doing business in 15 Europe are distributing vehicles with other things in 16 Europe that aren't available here. For one example would 17 be an electric remote button on the hybrid in Europe or in 18 Asia. You can get in a Prius and push an electric mode 19 button and go down to the store or take the children to 20 school and come home in the electric mode. And in 21 California you start the hybrid and it starts running 22 before you pull out of the garage. That wouldn't help us 23 with fuel. 24 I also appreciate the comments regarding credit. 25 I appreciate the fact that you're looking into credits. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 think when someone crushes a perfectly good car or ships 2 it back over to the Netherlands, they get the credit under 3 falls pretenses. And I think we ought to credit 4 withdrawing some credits from that standpoint. 5 Thank you for your time. 6 CHAIRPERSON SAWYER: Thank you very much. 7 Ms. Nicholes. 8 MR. NICHOLES: Hi. My name is Linda Nicholes, 9 and I drove down from Orange County in my RAV4 EV to read 10 this statement from the Sierra Club. 11 "The Sierra Club urges California Air Resources 12 Board to seize the opportunity to have today to reopen the 13 zero emission vehicle regulations for revision. 14 "The ZEV regulations were a success until 2003 15 and weakened. Before 2003, the ZEV regs put more than 16 5,000 zero emission battery electric vehicles on the road. 17 Since 2003, the auto companies were allowed to destroy 18 most of those vehicles, and they have produced a mere 134 19 hydrogen fuel cell vehicles, some gasoline dependent 20 hybrids, and no new plug-in vehicles. 21 "Sierra Club California agrees with CARB staff's 22 recommendation that the ZEV regulations be revised this 23 year. A number of innovative ideas on how they should be 24 revised are being discussed outside of CARB. These 25 include establishing technological neutrality rather than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 the current rules that favor hydrogen fuel cell vehicles 2 and lead to abandonment of EV vehicles. Simplifying the 3 regulations to avoid the alphabet soup of vehicle classes 4 that qualify for credits. Adhering to a strong time line 5 for delivery of vehicles, to market that's based on the 6 technology that would be ready soonest instead of pushing 7 the deadline further out. To accommodate wishful thinking 8 about hydrogen cars. 9 "Climate experts say we have ten years to start 10 drastically reducing our carbon emissions to avoid the 11 worse effects of global warming. While the ZEV 12 regulations address only criteria pollutants, CARB also 13 has been charged with responsibility of regulating 14 greenhouse gases. Here's a chance to build a time line 15 that will address both. 16 "Another idea is to make the ZEV regs 17 lawsuit-proof by removing gasoline dependent vehicles from 18 the credit system. One way this might be accomplished is 19 to rewrite the credit system based on the vehicle's 20 kilowatt hours of potential zero emission driving and 21 leaving it to the market to produce the vehicles that best 22 meet these parameters. 23 "The Sierra Club is not advocating for any one of 24 these ideas over others at this point. The first step 25 though is to agree that the ZEV regulations should be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 revised. We urge the Board to ask the CARB staff to 2 explore some of these ideas for improving the regulations 3 and to recommend changes to the ZEV Regulations." 4 Thank you. 5 CHAIRPERSON SAWYER: Thank you very much. 6 Do we have a copy of that letter? Do we have a 7 copy of the letter that she was referring to that she has 8 reading from the Sierra Club? 9 MS. NICHOLES: I will get it to you. 10 CHAIRPERSON SAWYER: You'll submit it to us. 11 Richard Kelly, Tom Young, Colina Young, and Doug 12 Korthof. 13 MR. KELLY: Chairman Sawyer, members of the 14 Board, my name is Richard Kelly. I live in Huntington 15 Beach. I'm not a legislative expert. I don't work for 16 any company that has any stake in these proceeding at all. 17 In fact, I only make a modest analyst salary. I am, 18 however, a ZEV driver, a zero emission vehicle driver. 19 And well I heard several times today that the ZEV program 20 is a technology forcing regulation, I believe more 21 accurately the purpose of this regulation was to have ZEV 22 miles driven on the road. And I am the type of person 23 that drives those miles. I drive a '97 S10 pickup that 24 uses the Cobra system nickle metal hydride batteries that 25 are listed in this report. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 We drove down here in a caravan of RAV4 Toyotas 2 that use the Panasonic batteries also listed in this 3 report. 4 Now I'm not standing up here merely to be 5 self-congratulatory. I, however, feel that due to 6 general misunderstand by the public, these points demand 7 emphasis. I have driven to work every day since late 2003 8 using zero emission miles using one of these battery 9 electric vehicles with battery technology that is not good 10 enough. 11 We drove down to this meeting from Orange County 12 over 80 miles on zero emission miles with charge to spare 13 using again five-year-old battery technology. I sincerely 14 thank CARB legislation for this, because I got to 15 experience such wonderful vehicles. However, due to 16 changes especially in 2003, neither of these vehicles is 17 available today. 18 Now, I've heard by an expert today that full 19 power battery electric vehicles are not likely to become 20 mass market zero emission vehicles due to high cost for 21 the battery and limited customer acceptance. I also later 22 heard the Board ask one of the expert presenters if fuel 23 vehicle research needed another 50 percent funds added. I 24 have never heard the same offer being offered for battery 25 research. And I'd like to suggest a fraction of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 money be sent for battery research. 2 As for the second issue, customer acceptance, I 3 can cut out the middle man, the automakers, the poling 4 companies. I am the customer. What I'd like to see is 5 another battery electric vehicle being produced by 6 automakers. I'm an analyst. I can decide what I want for 7 myself, what I want to buy to meet my goals. I don't want 8 a 700-bar storage tank under my car. I don't want to have 9 to go to a gas station to pay for fuel that is more 10 expensive than the electricity I use. I want to be able 11 to drive at least partially on the solar power produced by 12 the solar panels on my roof. 13 My question is with the most funds going to 14 hydrogen, with deadlines possibly being pushed back with 15 manufacturers like Ford and Toyota which were recently 16 mentioned sitting on a glut of credit not needing to 17 participate until 2012, I wonder simply when will I be 18 able to buy another battery electric vehicle for my 19 family. Thank you. 20 CHAIRPERSON SAWYER: Thank you. 21 Mr. Young. 22 MR. YOUNG: Chairman and Board, thank you very 23 much. I know it's a long day, and you guys are very 24 patient. And I appreciate the opportunity to tell a 25 little story. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 I am primarily here before you to encourage your 2 boldness on the zero emission mandate. I believe it's 3 because of that that I was able to obtain a RAV4 EV. In 4 fact, on July 4th, 2002, my wife and I took the liberty on 5 a Toyota RAV4 EV and thereby achieved independence from 6 petroleum. 7 The car, as you all know, mine goes 70 miles an 8 hour. It's got anti-lock brakes and nickle metal hydride 9 batteries. And we've had it for five years of reliable 10 service. Reliable service, those numbers they gave you 11 about the fleet of southern California Edison or whoever 12 has the fleet of RAV4s, $200 of many cars, that's what 13 we're experiencing, no maintenance. 14 So all I'm here to say is be bold. I can't buy 15 this car. I can't tell anyone elsewhere when they see my 16 car where they can go buy this car. And I believe that it 17 was possible for me to buy that car because of your 18 boldness back in the original zero emission vehicle 19 mandate. And I encourage you to be bold again and keep up 20 that kind of approach. Thank you. 21 CHAIRPERSON SAWYER: Thank you very much. 22 Ms. Young. 23 MS. YOUNG: Thank you, Chairman and staff and 24 Board. 25 I did not expect to be doing this today. I saw PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 in the little slip it says testimony. I'm not here as an 2 expert. I'm not here as a company representing anything 3 except my love for my RAV4 EV that I've had, as you 4 already heard from my husband, since 2002. It has 5 worked -- I'm the primary user of it. I travel my mother 6 back and forth every day. The majority of my driving is 7 stop and go, stop and go, which you all know is awful for 8 the environment. And that is my biggest love of the car 9 is that it truly is environment friendly. 10 I love this Board. This is my first Board 11 meeting that I've gone to. I appreciate your emphasis on 12 cleaning the air and health issues. 13 And I just wanted to say -- reiterate what my 14 husband just said to keep plugging and keep pushing. I 15 was disappointed in 2003 when it felt like hybrids were 16 getting an upper hand and you were just kind of you know 17 cutting back of your efforts. But I just urge you to 18 please keep fighting for this. 19 I would love to see -- and I've already been 20 heartened by the development of electric cars that are 21 being developed and coming to the market again. And I 22 thank you board for your efforts. And to push. Thank 23 you. 24 CHAIRPERSON SAWYER: Thank you very much for 25 coming to speak to us today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 Doug Korthof. 2 MR. KORTHOF: I want to point out -- Doug Korthof 3 from Seal Beach -- I drove here 90 miles in a nickle metal 4 hydride battery EV. 5 I want to point out that the only people standing 6 with staff are the industry folks. Everybody else if 7 there's a public workshop is going to be on the other 8 side. We want -- the general public wants the Air 9 Resources Board to stand strong, insist that the ZEV 10 mandate be kept and even strengthen and brought forward. 11 BEVs are here now. 12 It's been four years since the Auto Alliance 13 conned the Air Resources Board into killing the battery 14 electric car program. They claimed batteries were too 15 expensive and no one wanted an electric car. The Auto 16 Alliance promised if the ten percent requirement were 17 removed from 2003 to 2018 that they would produce lots -- 18 scads of hydrogen fuel cell vehicles cheaper than battery 19 electric cars that would refuel in ten minutes. Now, four 20 years later, despite crushing most of the EV fleet under 21 -- this devilish deal. It was a devil's deal, a loser. 22 Only 93 fuel cell cars remain on California roads. And 23 there are still more battery electric cars then there ever 24 will be fuel cells in the next seven, ten, fifteen years. 25 Under this bad bargain, we lost ground. Staff's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 recommendation would have you conclude that the only 2 reasonable alternative is to postpone fuel cell cars for 3 another five years, 2023, perhaps to 2030. Perhaps to 4 2050. You must not let the auto alliance weasel out of 5 its promises under which EVs were killed. A lot of 6 damage, a lot of pain. 7 In reality, as we stated four years ago, fuel 8 cell cars are a dead end. Once you give up and remove the 9 goal posts, you will never stop moving them. 10 Admit fuel cell cars are not going to happen, not 11 in five years, not in 50 years. Substantial issues still 12 exist as long as the laws of nature hold. 13 The one substantive issue with BEVs might be the 14 limited range on a charge. But General Motors has 15 explained another kind of plug-in hybrid, the serial 16 plug-in hybrid configuration can travel all speed ranges 17 on traction electric power the same as a real electric car 18 that has a range extending small internal combustion. 19 GM points out 80 percent of our driving is done 20 in the first 40 miles. There's no range limitation. For 21 occasional longer trips, the small range extender only 22 provides electric for the wheels. General Motors claims 23 they can't do this until they get lithium batteries. But 24 my four-year-old battery electric car can, and one has 25 been converted into such a serial configuration hybrid PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 simply by adding a long ranging trailer to it or putting a 2 range extending extra battery pack in it. We can do this 3 because we own the cars and we can modify them. If we can 4 do this and we can make a 100 mile plug-in serial hybrid, 5 General Motors can't. They say they can't do it. Tell 6 me, is General Motors a liar? Are they here all the time 7 saying the ZEV mandate can't work, that battery electric 8 cars don't work? Why are they saying this? We know they 9 can because we've done it. 10 CARB must force production of the serial plug-in 11 hybrid. CARB must insist that General Motors -- we don't 12 care how you do it. Make us a plug-in serial hybrid with 13 a 40-mile range -- 14 CHAIRPERSON SAWYER: Would you please conclude? 15 MR. KORTHOF: -- of Chevron or make them with 16 lithium ion or acid batteries, but get us a 40-mile hybrid 17 serial plug-in hybrid. And people are watching you. 18 These are reports from all over the world of people that 19 are watching you, and these are letters from people saying 20 keep the ZEV mandate. And you're going to get copies of 21 every single one of them faxed to you, mailed to you, and 22 read to you all the time up until this workshop and 23 beyond. 24 CHAIRPERSON SAWYER: Thank you. Because of the 25 hour and the substantial number of people who still wish PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 to testify and the desire of the Board to have time to 2 discuss its instructions to the staff, we are going to 3 take three more testimonies and then continue the public 4 testimony to the tomorrow morning's -- to the beginning of 5 tomorrow morning's session. I apologize that we cannot 6 accommodate everybody who came. And if there's anybody 7 who cannot come back tomorrow, especially to you. 8 But at this time, the next three speakers will be 9 Jay Friedland, Ron Freund, and Chris Paine. 10 And at that time, we will suspend or recess and 11 continue until tomorrow morning at 8:00. 12 Mr. Friedland. 13 MR. FRIEDLAND: Thank you, Chairman Sawyer and 14 members of the Board and staff. 15 First, I'll try to keep my comments as short as 16 possible in light of the hour. 17 I just wanted to say that really we believe that 18 the ZEV mandate is a really significant thing, and 19 significant progress really has been made. There are -- 20 zero emission vehicles exist, and that is the most 21 important thing. 22 Unfortunately, in 2003, we really -- since 2003, 23 we've really back slid. And there are many, many less. 24 Probably there were 5,000 vehicles on the road in 2003. 25 Now there are less than a thousand. That's a big issue. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 So we think the key issue is getting zero emission 2 vehicles on the road and we think you do too. 3 So we'd like to suggest a couple of things. One, 4 why not consider a fundamental simplification where we go 5 about sunsetting the alternate path by, say, 2011 or 2012. 6 The idea behind this really be to say the original base 7 path worked. And beyond that, what you really, really get 8 is you'd stop worrying about this whole issue of 9 technology and neutrality, because you'd be technology 10 neutral. You just try to get zero emission vehicles on 11 the road. And that would be the goal. It also would 12 allow folks that have automakers, OEMs, who have products 13 in process to complete whatever credits they have and then 14 sunset it out. So we think that's a significant 15 alternative that should be considered. 16 I think the other thing is as Felex Kramer 17 mentioned that a significant barrier to entry is the 18 current battery warrantee regulation. And we believe that 19 why not find out what consumers really want in terms of 20 that regulation. Let's do a little bit of market research 21 and then match the warranty to what's appropriate for the 22 consumers. And if the consumers are concerned again 23 something like a third-party battery warrantee might make 24 all the sense in the world. And that would really give us 25 the chance to do that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 So, finally, I'll just say as CARB starts to 2 implement -- works on the ZEV mandate and as well AB 32 3 looking at overall greenhouse gases, the wells to wheels 4 efficiency is really going to become the driving factor. 5 We want to encourage you to get ZEVs on the road and to 6 think about the impact of global warming gases and AB 32. 7 Thank you very much. 8 CHAIRPERSON SAWYER: Thank you. 9 Mr. Freund. 10 MR. FREUND: Thank you, Dr. Sawyer and members of 11 the Board and staff. 12 The Electric Auto Association, a California 13 nonprofit, has been in existence for 40 years. Same 14 length of time as CARB. Our former Governor Ronald Reagan 15 made this pronouncement in 1967. That's the same year we 16 started having our meetings. 17 California Code of Regulations Title 13, Section 18 1900 and 1962 clearly stipulates our ever increasing 19 population as well as our growing number of motor 20 vehicles, regulating conditions for clean air is up to 21 you. 22 Per our name, our members basically advocate and 23 educate the public all about highly efficient 24 transportation alternatives to liquid fueled internal 25 combustion engine driven cars. With a majority of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 membership being in California, we endorse the CARB 2 charter to protect the health while promoting economic 3 growth. 4 CARB has come a long way with oxygenated fuels 5 and catalytics, and the ZEV regulation as well as 6 technology has come a long way since that time. 7 In the 2003 supplement to the Final Statement of 8 Reasons, ZEV regulations, CARB stated expected hydrogen 9 vehicle fuel cell vehicle range and performance was to 10 increase substantially as progress is made. Four years 11 later, there is significantly less full power battery 12 electric vehicles on the road than any time in the past 13 nine years, and an insignificant number of fuel cell 14 vehicles have been deployed. While admittedly tough 15 hurdles thwart bringing these fuel cell vehicles to 16 consumers, further delay seems to be your operational 17 approach. 18 As a technological expert representing Electrical 19 Auto Association, I state confidentially that a parallel 20 path needs to be driven, not an alternate path to 21 compliance. 22 Hundreds of our members are already driving pure 23 battery electric vehicles over the last five years with a 24 total of 7.1 million ZEV miles driven. We've experienced 25 high reliability and minimal costs. And yet there are no PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 more available. Our cars use ten-year-old mature 2 technology. Nearly a dozen EVs drove here today, 3 including one outside for display, 101,000 miles, 4 uneventful miles. 5 This just proves that the nickle metal hydride 6 technology is old, but it works. And as it also has been 7 seen by the Southern California Edison tests that they did 8 in 2003 with the accelerated life testing. The technology 9 is here now, and it works. Why wait for something that's 10 been over the horizon and repeatedly being promised when 11 for less money automakers could achieve your goals to 12 effect clean air now. 13 CARB is not only standing still wondering which 14 path to create, but it's gone backwards since 2003 in our 15 opinion. 16 As Ms. D'Adamo mentioned, simplify the 17 conformance requirements. Encourage the manufacturing for 18 battery electric vehicles and put more ZEVs on the road 19 today. In a further four years, we could begin to see a 20 difference instead of hoping for technological 21 breakthrough that's another generation away. Simple 22 solutions are here today. And make no doubt about it, 23 they really do work. We drive them. Let's use them 24 instead of banking on a promise that's not moving forward. 25 Thanks. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 CHAIRPERSON SAWYER: Thank you very much. 2 Mr. Paine. 3 MR. PAINE: Thank you, Dr. Sawyer and members of 4 the Board and expert panel. 5 I'm Chris Paine and director of the film, "Who 6 Killed The Electric Car." 7 I must admit that spending the day in the CARB 8 meeting wasn't my first choice for my birthday. But I'm 9 the guy who spent a year working to turn a CARB meeting 10 into a Hollywood movie. So in some ways, being here makes 11 kind of a divine sense. 12 I'd just like to say that what happens here at 13 CARB is more important than most of what Hollywood does in 14 an entire year. You protect one of the most important 15 planetary resources we have, one that is unprotected by 16 the free market. One in which we all depend. 17 Industry watches what happens here to guard its 18 business interests. And other states watch it to gauge 19 their courage. I'd say the whole world watches. We're 20 thankful for CARB and its accomplishments since I was a 21 boy. 22 But there is still time to learn from CARB's 23 errors. Scrapping the electric car program in 2003, a 24 program that put thousands of cars, electric cars, on the 25 road in favor of a technology that barely had a prototype PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 was a mistake. We spent three years making a film about 2 the story. And I remain convinced that buckled under 3 undue industry pressure. 4 I don't envy your job. But if CARB hadn't caved 5 in that case, we'd have thousands of EVs on the road today 6 in California and other states who are following your 7 lead. As it is, we are still waiting for hydrogen fuel 8 cell cars, and now they want us to wait longer. 9 It's time for CARB to reject a notion there is no 10 mass market for battery electric. The auto industry and 11 the oil industry, as our film documents -- and believe me, 12 we paid a lot of lawyers and front line producers to look 13 at all the facts of this case. Hired PR firms to 14 manipulate the data on these issues in the '90s. 15 Consumers were interested in electric cars then. 16 And today with fuel prices and global warming and people 17 seeing these cars actually work, I can tell you there 18 would be a lot more demand. 19 So I know I'm running out of time here because 20 I'm terrible at timing speeches. But I'd like to say that 21 if CARB continues to gamble on hydrogen fuel cell, then 22 ZEVs must be treated on a one-to-one basis with the 23 battery electric car. Let's make sure the playing field 24 is even. This goes for ZEV credits. This goes for 25 wishful thinking on breakthroughs. This goes for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 hydrogen highway versus everyone's garage where there's 2 already a plug. 3 I don't pretend to speak for Hollywood. But I 4 can speak for the thousands of people who have e-mailed us 5 in the wake of our film and inconvenient truth. People 6 want CARB to be strong. You're our government. Stand up 7 to these lawsuits, and we'll try support you. Detroit is 8 out of line on this. Reward car makers like even GM for 9 their Volt when they make plug-in cars a reality. It is 10 time the get ZEVs on the road and for our society to get 11 marching in a difficult time. Thank you very much. 12 CHAIRPERSON SAWYER: Thank you, Mr. Paine. And I 13 want to note that you certainly raised the visibility and 14 this issue with the public, and I think overall that's a 15 good thing to do. 16 I'm going to make an exception to what I just 17 told you and except the request of two people, two 18 additional people to testify before we break today. These 19 are the representatives from Altairnano Technologies who 20 want to return to their homes in Pennsylvania this 21 evening, Evan House and Robert Pedrazza. 22 (Thereupon an overhead presentation was 23 presented as follows.) 24 MR. HOUSE: Thank you, Mr. Chairman. You won't 25 be getting a call from my wife now. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 --o0o-- 2 MR. HOUSE: Good afternoon. My name is Evan 3 House. I'm the Director of Advanced Materials and Power 4 Systems Battery Business Unit at Altairnano. Altairnano 5 has developed a battery system that enables mass 6 production of gold standard battery electric vehicles 7 within the next two years. California accordingly is not 8 10 to 15 years or more away from seeing advanced battery 9 technology lead the way for practical zero emission 10 battery vehicles. Furthermore, our rapid developments are 11 directly attributable to the existence and maintenance of 12 the ZEV consider program. 13 Our battery systems enables practical battery 14 electric vehicles due to its unique performance 15 characteristics as outlined in this slide on the screen 16 right now. Battery cycle life is greater than 25,000 17 cycles. The battery can be fully recharged in less than 18 ten minutes. This feature was recently observed by 19 representatives of the ARB at our third party tester, 20 Aeronvironment. 21 The system operates over a temperature range of 22 minus 40 degrees up to 160 degrees F. There is little 23 chance of catastrophic failure of the battery whether it's 24 heated, crashed, substantially overcharged, or punctured. 25 It exhibits power densities that are greater than normal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 lithium ion batteries. 2 We have partnered with Phoenix Motors Cars of 3 Ontario, California to bring a battery electric vehicle to 4 market. Outside this Board meeting, outside the hotel, 5 one can observe the fruits of our joint labor, the battery 6 electric vehicle that meets or exceeds the Board's high 7 expectations, a range of over 100 miles on a single 8 charge, speeds of 95 miles an hour carrying five 9 passengers, acceleration from zero to 60 miles per hour in 10 ten seconds -- 11 --o0o-- 12 MR. HOUSE: -- and it's a source of power with an 13 expected lifetime greater than 500,000 miles as evidenced 14 in our testing on EV cells in our labs. The complete 15 battery system -- 16 --o0o-- 17 MR. HOUSE: -- can recharge in less than ten 18 minutes or less. Here's evidence of a complete full 19 battery recharge in ten minutes and less than ten minutes 20 identical to the battery in our vehicle out front. We can 21 operate the vehicle safely in the hottest of heats in 22 Death Valley or the coldest winters in the Sierras. It's 23 a battery pack that possesses inherent safety, thus 24 minimizing the potential for energy for anyone unfortunate 25 enough to experience an auto accident. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 Altairnano and Phoenix really want to express to 2 the people in California today is thank you. We could not 3 have done this without you. The ZEV credit was created 4 because California understands that innovation is 5 expensive -- 6 CHAIRPERSON SAWYER: Could you please conclude? 7 MR. HOUSE: And so today I stand before you to 8 deliver this message. We have listened to the people of 9 California. We have delivered a technology that enables 10 near-term BEV mass production. We invite the Board to 11 closely scrutinize our technology claims and either 12 substantiate or discredit them. 13 And we make one additional request to the Board. 14 While you are examining our technology, please do not make 15 any changes to the ZEV credit program that serves to 16 diminish the availability of the credits. 17 CHAIRPERSON SAWYER: Thank you. 18 Mr. Pedrazza. 19 MR. PEDRAZZA: Thank you, Chair, for extending 20 the courtesy of letting us speak. Good afternoon. My 21 name is Robert Pedrazza. And I am the Vice President of 22 Strategies and Business Development for Altairnano 23 Technology, an advanced material and speciality chemicals 24 company based in Reno, Nevada. 25 Altairnano spent over $25 million in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 development of this breakthrough lithium titian battery 2 technology. This technology can be integrated into common 3 lithium ion battery design and existing manufacturing 4 platforms to create an entirely new class of lithium 5 batteries. For the first time, the capability exists to 6 enable full performance battery electric vehicles which 7 are suitable for mass production. 8 As a small public enterprise with limited 9 resources including capital and scientific personnel, we 10 must carefully craft our strategy and execute with high 11 precision the commercialization of this environmentally 12 clean lithium battery vehicle technology. If the Board 13 makes changes to the ZEV credit program which either 14 diminishes or dilutes the value of the type of the gold 15 ZEV credits, it will have a profoundly negative impact on 16 a vital revenue stream that is critically necessary for 17 Phoenix Motor Cars to commercially introduce our lithium 18 battery technology. Without this additional revenue 19 stream, it is highly unlikely that Phoenix Motor Cars will 20 be able to purchase our batteries. 21 This will likely force us to change direction and 22 commercialize our technology in applications other than 23 full performance battery electric vehicles. It is 24 estimated that the stationary power market which leverages 25 all of the attributes of our technology is 10 to 25 times PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 larger than the automotive market. The economic value 2 that our energy storage and power delivery technology can 3 create in the stationary power market far exceeds the 4 economic value it creates in motive application. 5 If Altairnano is forced to change our 6 commercialization path, it is a very real possibility that 7 the introduction of environmentally clean and enabling 8 technology in a full performance battery electric vehicle 9 could be delayed by many years. A change in the ZEV 10 program effectively disenables the mass introduction of 11 full performance battery electric vehicles in the state of 12 California. 13 I respectfully disagree with the expert panel 14 finding that the cost for innovative lithium battery 15 technology will not fall in the near term. We intimately 16 understand the path to significant cost reductions in our 17 technology that can be realized only if the ZEV program 18 remains unchanged. These cost reductions will make the 19 technology affordable for all Californians. 20 In summary, I respectfully request that the Board 21 not make any changes to the ZEV credit program. The ZEV 22 program is driving innovation, attracting private capital, 23 and working to spur the introduction and mass 24 commercialization of clean technologies. Thank you. 25 CHAIRPERSON SAWYER: Thank you. I want to thank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 everybody in the room for their patience in the very long 2 day, especially our staff. Do I have a motion to adjourn 3 until 8:00 tomorrow? 4 BOARD MEMBER BERG: So moved. 5 BOARD MEMBER D'ADAMO: Second. 6 CHAIRPERSON SAWYER: All those in favor? 7 (Ayes) 8 CHAIRPERSON SAWYER: Adjourned. 9 (Thereupon the California Air Resources Board 10 adjourned at 6:02 p.m.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 CERTIFICATE OF REPORTER 2 I, TIFFANY C. KRAFT, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 8 State of California, and thereafter transcribed into 9 typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said hearing nor in any 12 way interested in the outcome of said hearing. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 7th day of June, 2006. 15 16 17 18 19 20 21 22 23 TIFFANY C. KRAFT, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345