BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD SAN DIEGO MARRIOTT DEL MAR GRAND BALLROOM 11966 EL CAMINO REAL SAN DIEGO, CALIFORNIA FRIDAY, MAY 25, 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 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 Mr. Tony Brasil, Manager, In-Use Control Measures Section, MSCD Ms. Anaslisa Bevan, Chief, Sustainable Transportation Technology Br., MSCD Ms. Kim Hiroi-Rogowski of the Mobile Source Control Division Mr. Erik White, Chief, Heavy-Duty Diesel In-Use Strategies Branch PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED ALSO PRESENT Mr. Gregg Albright, Caltrans Mr. Brant Ambrose, Downs Equipment Rentals, Inc. Mr. Don Anair, Union of Concerned Scientists Mr. Ralph Ayala, Ayala Boring, Inc. Ms. Ina Bendich, Excel Law Academy Mr. Cash Benton, SCCA Ms. Heather Bernikoff, self Mr. Barry Blanchard, TNT Grading, Inc. Mr. Byron Bliss, Phoenix Motor Cars Mr. Mike Bobeczko, SUKUT Construction Ms. Liza Bolanos Mr. Jim Bourgart, CA Business, Transportation, Housing Agency Dr. Rasto Brenzy, MECA Mr. Tom Brickley, Brickley Environment Mr. Norman "Skip" Brown, Delta Construction Co., Inc. Mr. Mike Buckatz, Justice & Associates Ms. Jazmine Caldwell, Excel Law Academy Mr. Mike Carcioppoco, Hawthorne CAT Mr. Frank Caponi, LA County Sanitation District Ms. Elaine Chang, SC AQMD Mr. Jon Cloud, J. Cloud, Inc. Mr. Kenneth Coat PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Steve Coker, T.C. Construction Mr. Jerry Dalrymple, McClaughlin Engineering Ms. Debbie Day, Engineering & General Contractor Association Mr. Gordon Downs, Downs Equipment Rentals, Inc. Ms. Joyce Downs, Downs Equipment Rentals, Inc. Mr. Scott Erreca, Erreca's, Inc. Mr. Davilla Ervin, Excel Law Academy Mr. Claude Fiske, Steve P. Rados, Inc. Mr. Mark Geller, San Francisco Electric Vehicle Association Ms. Margaret Gordon, WOEIP Mr. Alexander Greiner, M.D., Alergy & Asthma Mr. Bill Haller, Sierra Club, CA Mr. Seth Hammond, Specialty Crane & Rigging Ms. Tara Hass, EUCA Ms. Carey Haughy, Blue Mountain Minerals Ms. Teona Hill, McClymonds High School Mr. Dennis Hogan, Chief Financial Officer, Phoenix Motor Cars Mr. Henry Hogo, SC AQMD Ms. Bonnie Holmes-Gen, American Lung Association Mr. Jan Eric Jansson, Soil Retention Mr. Scott Johnson, Red Mountain Machinery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Tom Jordan, SJV APCD Major Jeremy Jungreis, DoD Installations, California Mr. Andy Katz, Breathe CA Mr. Michael Kelly Mr. Tom Koetters, Carade Pacific Dr. David Kopet Mr. Michael Lewis, Coalition to Build a Cleaner California Mr. Don McIntosh, McCoy and Sons Mr. Richard McCann Mr. John McCelland, American Rental Association Mr. Rick McCourt, SUKUT Mr. Scott Molloy, BIA, San Diego Mr. John Nelson, AGG/EGCA Mr. Thomas Oaks, Solar Hydrogen Company Ms. Kathryn Phillips, Environmental Defense Ms. Tiana Pitman, Excel Law Academy Mr. Tim Pohle, Air Transport Association Mr. Dave Porcher, Camarillo Engineering, Inc. Mr. Ralph Potter, CIT Mr. Guy Prescott, Operating Engineers #3 Ms. Judi Quan, CA Alliance for Jobs Mr. Doug Quentin, CAPCOA Mr. Taylor Rasmussen, CA Rasmussen, Inc. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi APPEARANCES CONTINUED ALSO PRESENT Ms. Jill Rather, Rose Foundation for Communities & the Enforinment and Garth Team Mr. Rick Reinhard, self Mr. Gary Rohman, ECCO Equipment Ms. Linda Rosen, self Mr. Dave Sabaffi, Grantie Construction Mr. Mike Shaw, Perry & Shaw, Inc. Mr. Bob Shepherd, Quinn Power System CAT Mr. John Terry, Teamsters Local 36 Mr. James Thomas, Nabors Well Services, Co. Mr. Brent Tregaskis, Big Bear Mountain Resort Mr. Jeff Ulrich, Director of Engineering, Phoenix Motor Cars Mr. Shawn Veen, representing Assembly Member Lori Saldana Mr. Bruce Wick, CAL PASC PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX PAGE Pledge of Allegiance 1 Item 7-5-5 Mr. Geller 3 Ms. Bernikoff 5 Mr. Hogan 8 Mr. Ulrich 9 Ms. Holmes-Gen 12 Ms. Rosen 17 Mr. Oaks 19 Mr. Bliss 22 Mr. Reihard 25 Q&A 33 Motion 50 Vote 50 Item 7-5-6 Chairperson Sawyer 51 Executive Officer Witherspoon 54 Staff Presentation 56 Ombudsman Quetin 115 Q&A 118 Mr. Veen 137 Mr. Greiner 139 Mr. Kelly 142 Mr. Albright 143 Mr. Bourgart 146 Ms. Chang 149 Mr. Hogo 151 Mr. Jordan 154 Mr. Quetin 155 Mr. Caponi 158 Mr. Jungreis 159 Mr. McCelland 166 Mr. Pohle 168 Mr. Johnson 171 Mr. Thomas 174 Mr. McCann 177 Mr. Ayala 183 Mr. Terry 185 Mr. Bobeczko 186 Mr. Lewis 191 Dr. Kopet 197 Mr. Wick 199 Mr. Nelson 204 Mr. Anair 207 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Mr. Carcioppoco 210 Mr. Downs 215 Mr. Ambrose 217 Ms. Downs 219 Dr. Brezny 223 Ms. Bendich 230 Ms. Pittman 232 Ms. Hill 234 Mr. Ervin 236 Ms. Caldwell 238 Ms. Gordon 240 Ms. Rather 242 Ms. Holmes-Gen 243 Ms. Hass 246 Mr. Shaw 249 Mr. Porcher 252 Mr. Haller 254 Mr. Rohman 258 Mr. McCourt 261 Ms. Quan 267 Mr. Potter 271 Mr. Buckantz 273 Mr. Katz 277 Mr. Brown 279 Ms. Phillips 282 Mr. Sabaffi 285 Mr. McIntosh 290 Mr. Hammond 292 Mr. Shepherd 293 Mr. Prescott 297 Ms. Day 300 Mr. Benton 304 Mr. Coat 308 Mr. Erreca 311 Mr. Cloud 313 Mr. Koetters 316 Ms. Haughy 317 Mr. Brickley 320 Mr. Dalrymple 322 Mr. Rasmussen 324 Ms. Bolanos 325 Mr. Molloy 328 Mr. Tregaskis 330 Mr. Fiske 332 Mr. Blanchard 334 Mr. Jansson 336 Mr. Coker 339 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ix INDEX CONTINUED PAGE Adjournment 348 Reporter's Certificate 349 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON SAWYER: Good morning. The May 25th, 3 2007, public meeting of the Air Resources Board will come 4 to order. 5 All please rise and join 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 Mayor Loveridge? 21 BOARD MEMBER LOVERIDGE: Here. 22 BOARD CLERK ANDREONI: Mrs. Riordan? 23 BOARD MEMBER RIORDAN: Here. 24 BOARD CLERK ANDREONI: Supervisor Roberts? 25 Professor Sperling? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD MEMBER SPERLING: Here. 2 BOARD CLERK ANDREONI: Chairman Sawyer? 3 CHAIRPERSON SAWYER: Here. 4 SECRETARY ANDREONI: Mr. Chairman, we have a 5 quorum. 6 CHAIRPERSON SAWYER: Thank you. 7 Anyone who wishes to testify should sign up with 8 the Board clerk and has the option to include his or her 9 name on the speaker card. Please see the Clerk of the 10 board for further instruction. 11 Also, speakers, please be aware the Board will 12 impose a three-minute limit. Please put your testimony 13 into your own words. It is easier for the Board to follow 14 you if you go straight to your main points. You do not 15 need to read your written testimony since it will be 16 entered into the record. 17 For safety reasons, please note the emergency 18 exits to the right and the rear of the room. In the event 19 of a fire alarm, we are required to evacuate this room 20 immediately. When the "all clear" signal is given, we 21 will return to the hearing room and resume the hearing. 22 Thank you. 23 The first agenda item this morning is a 24 conclusion of an item on business on zero emission 25 vehicles in which we were receiving public testimony PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 yesterday when we adjourned. I anticipate that this will 2 take perhaps a half an hour, and then we will move on to 3 the issue which most of you are here for. 4 The first three witnesses -- and I'm working from 5 yesterday's list, so I realize some of these people may 6 not be here -- are Donald Larson, Mark Geller, and Paul 7 Scott. 8 Is Mr. Larson here? 9 Mr. Geller? 10 MR. GELLER: Good morning, Dr. Sawyer, members of 11 the Board. My name is Mark Geller. I represent the San 12 Francisco Electric Vehicle Association. 13 Many of our members, including myself, drove ZEV 14 mandate battery electric cars, the GM-EV1, Honda EV Plus, 15 and the Ford Think City, until they were confiscated by 16 the auto makers. One really must wonder if the automakers 17 ought not be paying reparations to CARB or to the state 18 for confiscating those vehicles. 19 It was the funeral for the Think City that was -- 20 of my Think City that was depicted in the movie "Who 21 Killed The Electric Car?" And a few of us are lucky 22 enough to still drive Toyota RAV4 EVs, a truly remarkable 23 car. I hope Board members understand that we continue to 24 use these cars, these zero emission, zero petroleum 25 vehicles in our daily lives. Many more of our members are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 wannabe's and would like to have electric or plug-in cars 2 available for them to buy. And we want CARB to succeed 3 with ZEVs in the near term. 4 Thousands of battery ZEVs were on the road in 5 consumers' hands a few short years ago, and they have not 6 been replaced by another ZEV technology. To get more ZEVs 7 on the road, we support the staff interest in battery 8 electric vehicle fuel cell technology neutrality. Battery 9 electrics ought not be penalized as they are now, because 10 they are closer to commercialization and infrastructure 11 ready. There is no reason to extend the deadline for 12 compliance. And we oppose staff recommendation for an 13 extension. 14 Technology neutrality and firm deadlines have 15 worked, and they offer automakers enough flexibility to 16 achieve the results that we and you know are possible. We 17 believe the Board must keep all its options open to 18 incentivize battery electric vehicles and plug-in hybrids, 19 just as the Governor is keeping his personal options open 20 by purchasing an all-electric Tesla roadster. Despite all 21 his ballyhooed hydrogen highway, he's purchasing an 22 all-electric vehicle. 23 It's Up to CARB to get back on the road to ZEV 24 success for the rest of us. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 CHAIRPERSON SAWYER: Thank you very much. 2 Mr. Scott. 3 The next -- 4 MS. BERNIKOFF: Good morning. Paul Scott had to 5 leave last night, so he asked that I read his statement. 6 Is that all right? 7 Fine. And your name is? 8 MS. BERNIKOFF: My name is Heather Bernikoff. 9 I'm a rancher from Mariposa County and former health 10 professional. I also drive an electric Ford Ranger that 11 has nickel that has nickel mella hydride. 12 CHAIRPERSON SAWYER: Fine. Thank you. 13 MS. BERNIKOFF: Thank you very much. And thank 14 you very much, Board, for your service to California 15 citizens. We appreciate the leadership very much. 16 The basis of the expert panel report on the 17 viability of battery electric vehicles rests on erroneous 18 assumptions. The summary states, despite substantial 19 technological progress, prior efforts to introduce full 20 power EVS were unsuccessful due to high manufacturing 21 costs of the battery and limited mass market consumer 22 acceptance due to limited range and long recharge time, 23 and there has been little progress since. 24 Everything in that paragraph is false. And 25 yesterday you heard from battery manufacturers, new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 electric vehicle producers, and electric vehicle drivers, 2 all of whom have refuted those assumptions. So in the 3 interests of time I won't read the rest of Paul's 4 comments, but I will indicate the pieces on consumer 5 acceptance. 6 The assumption in the panel's report of a lack of 7 consumer acceptance is rooted in the facts -- is not 8 rooted in facts but fallacy. Nowhere in the report is 9 there a documentation of a lack of consumer acceptance. 10 On the contrary, every consumer survey shows a strong and 11 growing desire for plug-in cars. A recent poll by Sinovet 12 Motor Research of 3,000 consumers found 64 percent would 13 consider buying a plug-in hybrid electric after they were 14 told what such a car could do, such as plugging in and 15 fueling in your own garage. 16 Considering that 18 million vehicles are sold in 17 the U.S. each year, this representing over ten million 18 vehicles. As Chelsea Sexton said yesterday, we need new 19 market research to complete this report. 20 When we talk about consumer acceptance, I think 21 we have to be clear that the auto manufacturers failed at 22 marketing and allowing consumers to participate in these 23 programs long term. From my own experience, my husband 24 and I, it took us three months in order to get our Ford 25 Ranger from Ford Motor Company. And these are cars that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 had over $9,000 of our taxpayer dollars invested in them 2 and a mandate from you to deploy them. 3 Finally, I just wanted to broaden this discussion 4 to the impacts of your regulatory choices. I haven't seen 5 very much participation from communities of color, low 6 income communities, and people from rural areas. And I 7 have been a member of all three. Your choice for 8 near-term technology battery electric vehicles in the 9 regulatory requirement will impact these communities 10 positively. We're the ones who live next to the freeways, 11 next to massive in-fill construction sites, and have to go 12 22 miles for a bag of groceries. 13 In the small community in which I was raised only 14 one thing has changed, and that's population. There are 15 large numbers of new homes, and with each new home two 16 cars. Over one-third of my nephew's fourth grade class, 17 at an elevation of 2700 feet, has to use an inhaler. When 18 I was a child there was no one in any of those classes 19 that had that. That's an emergency -- from an 20 epidemiological perspective, that's an emergency. Battery 21 electric technology can help address this fueled by a 22 cleaner, greener renewable grid, to which PG&E already 23 testified to. 24 We support the staff's recommendation for at 25 least parity with hydrogen in the mandate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 And I just wanted to say stand strong. And 2 remember that the auto manufacturers flouted the intention 3 of this regulation ones -- 4 CHAIRPERSON SAWYER: I must ask you to conclude 5 please. 6 MS. BERNIKOFF: Okay. 7 -- acted in bad faith, and we really owe them 8 nothing. 9 Thank you so much. 10 CHAIRPERSON SAWYER: Thank you very much. 11 (Applause.) 12 CHAIRPERSON SAWYER: The next three speakers are 13 Dennis Hogan, Dan Zweifel, and Jeff Ulrich. 14 Is Mr. Hogan here? 15 MR. HOGAN: Good morning. My name is Dennis 16 Hogan. I'm Chief Financial Officer for Phoenix Motor 17 Cars. I'm here today to speak about the ZEV credit 18 program as it currently stands. 19 As our Vice President of Sales and Marketing will 20 be mentioning later on today, we are planning to deliver 21 500 vehicles this year, 6,000 vehicles next year, 20,000 22 vehicles the year after that, and more vehicles than 23 20,000 for years thereafter. All of these vehicles will 24 be Type 3 gold certified vehicles. That means that 25 Phoenix Motor Cars alone will be able to go and meet the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 mandate as it currently stands for gold ZEV vehicles. For 2 this reason, we feel that there is really no need to 3 change the regulations, because if a small company like 4 Phoenix is able to do it, why can't the others? 5 Thank you very much. 6 CHAIRPERSON SAWYER: Thank you. 7 Professor Sperling, question? 8 BOARD MEMBER SPERLING: I have a question for the 9 speaker, Mr. Hogan. Just a quick question. 10 Are the sale of credits, ZEV credits part of your 11 business plan? 12 MR. HOGAN: Yes, it is. 13 CHAIRPERSON SAWYER: Thank you. 14 Mr. Zweifel? 15 Mr. Ulrich? 16 And then we'll have Bonnie Holmes-Gen, Jamie 17 Knapp, and Daniel Emmett. 18 MR. ULRICH: Should be a slide up there. 19 (Thereupon an overhead presentation was 20 Presented as follows.) 21 --o0o-- 22 MR. ULRICH: Is there a slide available? 23 Hello. I'm Jeff Ulrich. I'm the Director of 24 Engineering for Phoenix Motor Cars. I'd like to share 25 with you our view of the fast charge infrastructure and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 the shaving of the grid. 2 BEVs are an efficient, cost-effective, and 3 environmentally friendly path for the future of 4 transportation that will help to improve the quality of 5 air in California. The fast charge infrastructure to 6 support the BEV will provide for a more stable electrical 7 grid. 8 Consider the current fuel station as a model for 9 the future energy station. As with the past current 10 station -- gas station, the rapid charge energy station 11 will consist of a charger in place of the familiar gas 12 pump. The BEV will be plugged into this charger in a 13 similar fashion as to the way the internal combustion 14 engine vehicle is connected to the gas pump. 15 Like the gas pump, the charger will be connected 16 to a reservoir of electricity underground or in an outside 17 building. Unlike the gasoline reservoir, there will be no 18 chance for groundwater contamination. 19 These batteries will be charged in the same way 20 that most gas stations are refueled, at night during 21 off-peak electrical usage and at cheaper electrical rates 22 that will help balance the grid. 23 These batteries could be new or they could be 24 recycled from previous vehicle usage. Wrecked vehicles 25 would have their batteries removed. And used batteries PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 will be re-rated at a lower battery rating and they'll 2 be -- begin its next life as a storage system. This will 3 be extending the useful life of all of our batteries. 4 This storage electricity will then be distributed 5 the same way the current gas station dispenses gasoline to 6 the individual vehicles, without using rolling tankers on 7 our roads that continue to emit pollution and pose 8 continuing safety risks. Combining the storage energy 9 with multiple energy stations can balance the grid during 10 peak hours, or in the case of an electrical disruption 11 could provide for an energy source during temporary power 12 outages. 13 From a national security perspective, if enough 14 energy stations were installed, the threat of a terrorist 15 act against a power station could be minimized using the 16 stored energy from the power grid until the power station 17 could be brought back on line. 18 --o0o-- 19 MR. ULRICH: Phoenix has begun to partner with 20 PG&E and will continue to work with other commercial 21 ventures to provide this modern energy station in the 22 upgrading of existing stations in ever-expanding areas. 23 By providing a corridor of fast charge refueling stations 24 like the areas depicted on the slide, motorists would be 25 able to travel from San Francisco to Lake Tahoe, Los PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 Angeles to Las Vegas or Phoenix, all with the ease 2 equivalent to current motorcars but at a greatly reduced 3 rate for the fast charge infrastructure over the cost of a 4 hydrogen refueling station. The BEV would have easy 5 access to this handy, efficient method of refueling just 6 like the gasoline automobile while providing for a clean 7 environment. 8 We ask that you maintain the current ZEV program 9 in its current form in order that we are able to realize 10 all of the goals that we have set before us. Should 11 Phoenix and Altairnano be able to realize its goals, the 12 ARB in turn will be able to return on its goals in the ZEV 13 program. If and when we reach this point, we believe that 14 the -- 15 CHAIRPERSON SAWYER: Would you please conclude. 16 MR. ULRICH: -- charging infrastructure concept 17 will begin to become a reality. 18 Clearly this is a win-win situation, but only one 19 that will be realized with the continuation of the ZEV 20 program in its current form. 21 CHAIRPERSON SAWYER: Thank you. 22 Ms. Holmes-Gen. 23 MS. HOLMES-GEN: Good morning, Chairman Sawyer 24 and Board members. I'm Bonnie Holmes-Gen with the 25 American Lung Association of California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 The Zero Emission Vehicle Program is a vital 2 public health and air quality program and an essential 3 strategy to reduce global warming emissions. And we are 4 here today to urge you to stay the course and not make any 5 premature decisions that could slow the pace of technology 6 advancement and further delay the development of pure zero 7 emission vehicles. 8 As you've heard from the technology panel, this 9 is a dynamic time of technology development. And we do 10 not believe there was a need to open the program at this 11 time. The American Lung Association has been involved in 12 advocating for a strong zero emission vehicle program for 13 many years and through multiple reviews, and there have 14 been tremendous success stories with the program. But 15 there are also far fewer electric vehicles on the road 16 than we ever imagined when this program began. 17 While we appreciate -- each time -- 18 unfortunately, each time the program has been amended, the 19 gold category numbers have diminished. And these 20 reductions in numbers and requirements essentially pull 21 the rug out from under the chain of technology suppliers 22 that are working to meet the demand, in addition to 23 reducing the pressure on the car companies. They're 24 pulling the rug out under these technology suppliers such 25 as the battery manufacturers and the fuel cell companies, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 as you heard from several of these representatives. 2 As you know, each decision that you make on this 3 program sends a tremendous signal around the world that is 4 of tremendous importance. While the American Lung 5 Association strongly supports the range of zero emission 6 vehicle technologies, including plug-ins, we do not think 7 that changes should be made at this time to the program. 8 We firmly believe that the best way to continue to push 9 forward on the whole family of zero emission vehicle 10 technologies is to hold the line, to keep the pressure on, 11 and to show the car companies that you are serious about 12 this commitment that was made 17 years ago. This is not 13 the time to slow down the program or to send week market 14 signals. 15 The review panel has provided you with a lot of 16 reasons for optimism about the pace of technology with the 17 program and about the possibility of near-term 18 advancements. I heard tremendously positive comments from 19 the review panel. I heard comments such as there's much 20 concentrated work going on right now; there's much 21 activity positioned to happen by 2010. This stuff is 22 emerging rapidly. These are extremely positive reviews. 23 The Board should not be making decisions that 24 will squelch investments and progress by reducing the gold 25 category members. And I'd like to point out that with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 regard to the fuel cell numbers and the ramp up there are 2 a range of estimates of how fast the technology will 3 progress. And some players believe that the fuel cell 4 commercialization can proceed much faster than the 2020 to 5 2025 time frame and of course there's also rapid progress 6 on battery technologies. 7 You've heard testimony from the panel also that 8 the greater the numbers, the greater the probability of 9 success in the research and development of these vehicles, 10 and of deployment. The public health crisis of air 11 pollution that is experienced every day in California 12 demands that aggressive action be taken to make the switch 13 to zero polluting technologies. Every zero emission 14 vehicle on the road moves us closer to a zero emission 15 future and a future with less lung damaging smog, lower 16 risk of premature deaths, fewer asthma attacks and 17 hospitalizations -- 18 CHAIRPERSON SAWYER: Please conclude. 19 MS. HOLMES-GEN: -- for heart and lung illnesses 20 and fewer children growing up with abnormal lung 21 development. 22 We urge you to show strong leadership and 23 commitment to the Zero Emission Vehicle Program by not 24 opening up the regulation for review at the time. 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 Jamie Knapp and Daniel Emmett are not here. 2 Would it be possible for me to take an extra minute and a 3 half and give four sentences on their behalf? 4 CHAIRPERSON SAWYER: I think that, just to stick 5 with our rules on handling these, that if you would submit 6 them in writing, we would -- 7 MS. HOLMES-GEN: Okay. Can I just note that we 8 have submitted a letter jointly signed by the American 9 Lung Association, the Coalition for Energy Efficiency and 10 Renewable Technologies, CalPER, the Coalition for Clean 11 Air, and Energy Independence Now, and the Union of 12 Concerned Scientists. 13 CHAIRPERSON SAWYER: Fine. Thank you very much, 14 Ms. Holmes-Gen. 15 The next three speakers are Mike Kane, John Read, 16 and Lisa Rosen. 17 Is Mike Kane here? 18 All right. If not, John Reed? 19 Lisa Rosen? 20 Those of you who are in the room to speak on the 21 ZEV issue, if you could come to the center aisle and be 22 prepared, that would be helpful. 23 Thank you. 24 MS. ROSEN: Mr. Chairman, you called me. 25 CHAIRPERSON SAWYER: Ms. Rosen. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 MS. ROSEN: Good morning, Chairman Sawyer, Board, 2 and members of the staff. Thank you so much for hearing 3 me. It means a great deal to me. 4 I think most of the people who are engaged with 5 discussion about the clean air are pretty much agreed on 6 the goals, but there are tremendous questions about the 7 means of reaching those goals effectively. And I've been 8 an observer and a participant in the process for quite 9 sometime. I very much miss the clean air vehicles that we 10 had personal opportunity to experience and for which I am 11 very grateful. I think they meant a great deal of 12 progress for us in terms of technology and in terms of our 13 approach to the problem. 14 So there are a couple of issues today I would 15 like to address. The first one is fairly simple. It's a 16 linguistic issue that I think colors all of our thinking. 17 Are we talking about fuels or are we talking about energy? 18 If we're just talking about fuels, it very much narrows 19 our approach and our thinking about the problem. I think 20 we really need to think in terms of energy. 21 Secondly, since we're talking about our mission, 22 I think we need to frame most of our discussion that way. 23 And I've heard a great deal of it framed. The reviews by 24 the expert panels certainly give one great hope. And I 25 guess the questions that you're wrestling with now are: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 Do we consider any immediate changes or do we continue on 2 the path that we're on? I think that we have to consider 3 new development for this, as you always have. 4 And in the discussion, the thing I focus on the 5 most and the item that seems to offer the most opportunity 6 is: Do we reconsider any of our activities in light of 7 the possibility of obtaining a plug-in hybrid. And there 8 are a number of new things that have come into place since 9 the original discussion. The original discussion was: 10 Since a plug-in hybrid was not going to be a pure zero 11 emission vehicle, it should never be considered in that 12 same category and it should never be given that kind of 13 reward or carrots. 14 In a few other discussions, one in particular 15 that I'm aware of, the Board wrestled with a question like 16 that and decided like that and decided that the goal of 17 clean air would support an activity such as allowing the 18 high occupancy vehicle stickers to cars that were cleaner. 19 And so they voted for their goal rather than for support 20 of something that was defined purely in terms of their 21 original considerations. So I believe that if you think 22 about the plug-in vehicle in that light, would it support 23 your goal, I hope that it would call for some additional 24 consideration. 25 Basically what I've heard from the speakers is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 either maintain the course or reconsider. And I know from 2 previous experience how disruptive it is every time you 3 stop for reconsideration and how you acquire a whole set 4 of new critics and new problems each time do you so. 5 However, this is a fantastic body in terms of your staff 6 and support and I hope you will do so. 7 Thank you very much. 8 CHAIRPERSON SAWYER: Thank you. 9 Andrea Boccaletti, Thomas Oaks, Kellin Glinder. 10 Are any of those people here? 11 MR. OAKES: Thomas Oaks. 12 Thomas Oaks? 13 MR. OAKS: Yes. 14 CHAIRPERSON SAWYER: Please. 15 MR. OAKS: If you'll put up the slides, please. 16 (Thereupon an overhead presentation was 17 Presented as follows.) 18 MR. OAKS: I'm Thomas Oaks from Solar Hydrogen 19 Company. I'm here to address the issue that we need to 20 have hydrogen made onsite to make hydrogen available for 21 the people that have truly zero emission vehicles, 22 hydrogen fuel cell vehicles. 23 --o0o-- 24 MR. OAKS: We're talking about interval with no 25 fossil fuel. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 --o0o-- 2 MR. OAKS: We're talking about direct photo 3 electrochemical hydrogen generation. This is a solution 4 to the problem. Where we have the tremendous push for 5 electrical consumption -- in California nearly -- most of 6 the electrical -- electricity is generated by burning 7 natural gas or imported from -- and the natural gas is 8 often imported from either foreign countries or other 9 states. 10 --o0o-- 11 MR. OAKS: The solar to wheel. We have the -- I 12 want you to see this one here. What happened? 13 The sun produces hydrogen splitting water in a 14 contained environment, puts into the full cell and to the 15 wheel. And we have no electricity from the fossil fuel 16 services at all to make this happen. 17 --o0o-- 18 MR. OAKS: This is our patented system. The 19 solar is right there in the center. It's splits water, 20 oxygen, hydrogen completely separate from one another. 21 --o0o-- 22 MR. OAKS: The expected deficiency as published 23 by Enrell in Denver, Colorado, is 12.4 percent or higher. 24 And we use no separate traditional electrolyzer which 25 requires electricity from the grid. And we have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 membrane which separates the hydrogen from the oxygen. 2 --o0o-- 3 MR. OAKS: Cost comparisons. We think this could 4 be made for $2.08 a kilogram. Whereas if you use a large 5 reformer -- steam reformer, it's four eighty-six. Or if 6 it's an electrolysis by fossil fuel, you have four 7 thirty-six dollars per kilogram. And this is published by 8 the Energy Information Agency. 9 --o0o-- 10 MR. OAKS: These are environmentally safe. 11 There's no CO2, no NOx. And they can be incorporated into 12 your energy credits. 13 --o0o-- 14 MR. OAKS: I'd like to leave three 15 recommendations: 16 Number one is that 50 percent of the highway 17 stations build on the hydrogen highway become renewable, 18 rather than splitting natural gas to make the hydrogen 19 and/or using utility -- 20 CHAIRPERSON SAWYER: Would you please conclude. 21 MR. OAKS: We want a one-stop permitting office 22 in the State of California. And I urge ARB to work to 23 sponsor renewable energy hydrogen. 24 Thank you very much. 25 CHAIRPERSON SAWYER: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 Is Dr. Glinder here? 2 If not, we then have Byron Bliss and Rick 3 Reinhard. 4 Mr. Bliss. 5 MR. BLISS: Dr. Sawyer, Board members. It's a 6 pleasure to be with you again. I'm going to ask to have a 7 slide presentation, to get pulled up real quick. 8 (Thereupon an overhead presentation was 9 Presented as follows.) 10 --o0o-- 11 MR. BLISS: It's an exciting time from what we're 12 seeing at Phoenix Motor Cars with the interest and 13 enthusiasm both from fleet operators and consumers in 14 adopting and seeking for electrification of 15 transportation, specifically with the performance 16 characteristics of our vehicles and others they see on the 17 horizon. So we're truly here to let you know that things 18 are about to changes and that electrification of 19 transportation is about to happen. 20 I would like to share with you exactly what's 21 happening from a sales perspective as we're looking at 22 delivering vehicles beginning this year with those that 23 are showing interest and our future developments that will 24 take us to a nationwide automobile manufacturer and 25 distributor. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 --o0o-- 2 MR. BLISS: We're focusing primarily in 2007-2008 3 on the fleet application for our vehicles with the 4 airports, ports, utilities, cities, taxi, and 5 transportation fleets, and many others inside of 6 California. We'll be focusing on some other specific 7 states outside for test markets as the year progresses 8 prior to a nationwide consumer available launch in 2009. 9 To date, we are planning and preparing to produce 10 500 vehicle units this year, ramping up production to a 11 6,000 units in 2008, meeting only a portion of the total 12 demand that we're seeing for zero emission vehicles. To 13 date, we have 413 vehicles reserved for a delivery this 14 year and expect to soon be sold out for our 2007 model. 15 --o0o-- 16 MR. BLISS: I wanted to depict a few of the 17 businesses that are purchasing our vehicles this year and 18 show you on a geographic map in northern California. 19 Businesses such as Pacific Gas and Electric, our first 20 announced customer, will be receiving air vehicles 21 deliveries this summer; and others such as Yellow Checker 22 Cab, Clark Pest Control, City of Fresno, as well as 23 prospects that we're in discussions with. And the map, 24 the green areas show you the cities that are -- where 25 those are located. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 --o0o-- 2 MR. BLISS: Give you an idea. For southern 3 California you can see that in the Los Angeles Inland 4 Empire there are numerous cities that are taking advantage 5 of our vehicles. And down in San Diego there's an 6 ever-growing interest in fleets that are also looking at 7 deliveries this year. 8 --o0o-- 9 MR. BLISS: I wanted to show you a return on 10 investment to show -- I mean I think it's no wonder to 11 anyone that there is certainly a cost savings 12 factor/return on investment benefit to zero emission 13 vehicles. This was given to us actually by the City of 14 Fresno. And it shows that only taking into account 15 gasoline savings using a charge or an electric plug-in 16 instead of the gasoline, there's a huge savings, to the 17 thousands of dollars, to those fleets. And so they see at 18 a $45,000 price point we've really had zero resistance in 19 the interest and purchase of the vehicles. 20 --o0o-- 21 MR. BLISS: This map as we look at going 22 nationwide depicts a dealership network. We're in 23 discussions with over 350 dealership locations where will 24 begin to carry our product. 25 So we're looking forward to the future. And I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 thank you for your time. 2 CHAIRPERSON SAWYER: Thank you very much. 3 Mr. Reinhard. 4 MR. REINHARD: Hello, Board. My name is Rick 5 Reinhard. I don't come to you as an employee of any 6 particular company. I come to you today as a native 7 Californian with a respiratory problem. 8 I spent the last 30 years in the automotive 9 industry. My former employer spoke to you yesterday. In 10 fact, that person used to be one of my bosses -- direct 11 bosses. I no longer work for that company. But I haven't 12 been to one of these meetings where I've seen an OEM be 13 applauded by the EV coalition. And that says a lot. 14 I would like to state that I -- I wanted to speak 15 today because I'm a father of five. I work in the 16 automotive industry the last 30 years. The last 10 of it 17 in electric fuel in alternative -- in EV and fuel cell 18 groups. And I've personally driven 250,000 miles with 19 lithium ion technology. 20 I wanted to tell you that I spent seven months as 21 unemployed because I chose not to take my kids out of 22 school to move out of state. And I started in 23 conversations with another -- a top three OEM in the fuel 24 cell area. And they were going to put a facility five 25 miles from my house. I started negotiations with them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 And then another electric vehicle manufacturer approached 2 me and asked me to come to work for them. And I 3 considered the five mile drive to a big three OEM or a 45 4 mile drive to a start-up company. 5 And after the -- two offers came within the same 6 week. I made a choice. Took the decision. I looked at 7 the technology of the electric vehicle company. I knew 8 what the fuel cell industry was like. I've spent the last 9 ten years in it. And I -- on a leap of faith, I took the 10 choice of driving 45 miles a day in L.A. traffic for the 11 opportunity to work with a company that makes electric 12 vehicles. 13 After looking into the battery technology, it was 14 easy to compare to the old technology. I'm familiar with 15 lithium ion fuel technology where -- or lithium ion 16 technology where you have cell information. And I'm 17 familiar how the cell information plays out over 250,000 18 miles of driving. I looked at the technology of what this 19 company had to offer. And I realized it was cell 20 technology -- or cell testing and that that cell testing 21 had a third of what it says it will. It's better than it 22 was ten years ago. 23 So in conclusion, I'd like to say, you know, keep 24 the gold in California by keeping the gold in the ZEV 25 mandate. If an OEM wants to produce an EV, allow them to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 do so. 2 CHAIRPERSON SAWYER: Please conclude. 3 MR. REINHARD: And don't penalize them by making 4 them produce an alternative -- or an ATP ZEV. 5 So in conclusion, just keep the gold in 6 California. 7 Thank you. 8 CHAIRPERSON SAWYER: Thank you very much. 9 Ms. Witherspoon, do you or your staff have any 10 further comments at this time? 11 EXECUTIVE OFFICER WITHERSPOON: No, we'll just 12 wait for the Board instructions on how to proceed. 13 CHAIRPERSON SAWYER: Okay. Since this is not a 14 regulatory item, it is not necessary to officially close 15 the record. However, we do need to take an ex parte 16 statement at this time. 17 Do Board members need to disclose any 18 communications? 19 Dr. Gong. 20 BOARD MEMBER GONG: None. 21 BOARD MEMBER BERG: Mr. Chairman, I have several. 22 Starting on May 10th, I had a meeting with the 23 ZEV Alliance. And there were six people involved, three 24 met at my company and three on a conference call. And 25 I'll give the court reporter all the names. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 I also had on May 10th a meeting with Nissan with 2 John Dunlap, Bob Cassidy, and a senior engineer with 3 Nissan. 4 On May 14th, I had a meeting with the large auto 5 manufacturers from DaimlerChrysler, Ford, and Honda. 6 On May 22nd, I had a follow-up phone call with 7 the ZEV Alliance, which included Jamie Knapp of the ZEV 8 Alliance, Bonnie Holmes-Gen from the American Lung 9 Association, Tom Plenys from the Coalition for Clean Air, 10 and Spencer Quong from the Union of Concerned Scientists. 11 On May 22nd I had a phone call with Dave 12 Modisette from California Electric Transportation 13 Coalition. 14 Then last night after our Board meeting I took 15 time to go out and see the electric cars that were out in 16 front of the hotel. And I spoke with the car companies 17 and owners of the electric cars. And the people included 18 Dennis Hogan, the CFO from Phoenix Motor Car; and Mr. 19 O'Connel from Tesla Motors. And I also spoke with Colina 20 Young, who is one of our speakers. 21 All of my conversations in all of these meetings 22 mirrored their testimony that we heard yesterday and 23 today. 24 Thank you, Mr. Chairman. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 Ms. D'Adamo. 2 BOARD MEMBER D'ADAMO: I too have several. 3 On May 8th, a conference call with the ZEV 4 Alliance. Participants: Bonnie Holmes-Gen, American Lung 5 Association -- Daniel Emmett, Energy Independence Now; 6 Patricia Monahan, Union of Concerned Scientists; John 7 Shears, Center for Energy Efficiency and Renewable 8 Technologies; Jamie Knapp, consultant for the ZEV 9 Alliance. 10 On May 15, conference call with several 11 automakers: Sara Rudy, Ford; Fred Maloney representing 12 DaimlerChrysler; and Jim Ehlman, General Motors. 13 On May 22nd, I had a telephone conversation with 14 Reg Modlin representing Chrysler. 15 On May 23rd, a telephone conversation with Dave 16 Modisette, California Electric Transportation Coalition. 17 On May 23rd, follow-up call with the ZEV 18 Alliance. And all of the participants in that phone call 19 were the same as the one on the phone call on May 8th, 20 with the addition of Danielle Fugere, Friends of the 21 Earth. 22 On May 23rd, I met in Sacramento and again in San 23 Diego with Dean Kato representing Toyota. 24 On May 24th, yesterday, conversation with Bonnie 25 Holmes-Gen, American Lung Association; and John White, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 Center for Electric Efficiency and Renewable Technologies. 2 And then also yesterday I also took a look at the 3 Tesla car and had a conversation with Diarmuid O'Connel. 4 And the conversations were consistent with the 5 testimony that each of these individuals presented 6 yesterday -- oh, and today. Bonnie Holmes-Gen was today. 7 SUPERVISOR HILL: Thank you, Mr. Chair. 8 I too had a number of conversations. 9 On May 10th, a meeting with Toyota in Redwood 10 City. The participants were Mr. N. Kobayashi, Mr. T. 11 Kawai, Mr. Asakura, Mr. Kashine, Mr. Lord, Mr. Abe, and 12 Mr. Kato. 13 On May 21st, a conference call with the ZEV 14 Alliance. Participants were Luke Tonacel, NRDC; Spencer 15 Quong, Union of Concerned Scientists; Bonnie Holmes-Gen, 16 American Lung Association; Danielle Fugere, Blue Water 17 Network; Jamie Knapp, J Knapp Communications; Wendy James, 18 Better World Group; and John Shear, Center for Energy 19 Efficiency and Renewable Technologies. 20 On May 23rd, I had a telephone conversation with 21 Dave Modisette, Executive Director of the California 22 Electric Transportation Coalition. 23 And all conversations were consistent with the 24 testimony presented yesterday and today. 25 CHAIRPERSON SAWYER: On the 8th of May I met with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 a group from Toyota including Mr. Kobayashi, Mr. Kawai, 2 Mr. Asakura, Mr. Abe, Mr. Lord, and Mr. Kato. 3 On the 9th of May, I met with a group from -- 4 primarily from Phoenix Motor Cars and their suppliers, Dan 5 Elliott, Byron Bliss, Ken Boshart, Robert Pedraza, and 6 Eric Neandross. 7 On the 9th of May, I met with Sayed Shahed and 8 Neal Anderson, who represent the Automotive X-Prize. That 9 meeting was sort of related to the ZEV issue. 10 On the 14th of May, I met with John Dunlap, 11 Robert Cassidy, and Hayato Akizuki, also of Nissan. 12 Yesterday, the 25th, I talked with John White, 13 Bonnie Holmes-Gen, Doug Korthof on electric vehicle issues 14 and -- electric and ZEV issues. And I also took a look at 15 the Tesla car. 16 And also on the -- following my meeting on the 17 9th of May, I -- in a separate event, I drove one of the 18 Phoenix vehicles. 19 And our discussions were consistent with what we 20 heard yesterday. 21 BOARD MEMBER RIORDAN: Mr. Chairman, I need to 22 acknowledge on May 10th that I met with John Dunlap, Bob 23 Cassidy, Hayato Akizuki from Nissan. And the discussion 24 that we had very much mirrored yesterday's testimony by 25 these individuals representing Nissan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 BOARD MEMBER SPERLING: I also have a number of 2 meetings. 3 May 8th, met in Davis with a group from Toyota: 4 Mr. Kobayashi, Mr. Kawai, Mr. Asakura, Mr. Kashine, Mr. 5 Lord, Mr. Abe, and Mr. Kato. 6 May 10th, met with the ZEV Alliance. There was 7 some members in attendance and some on a conference call. 8 Jamie Knapp, Danielle Fugere from the Blue Water Network, 9 Patricia Monahan from Union of Concerned Scientists. And 10 on the phone, Wendy James, Better World Group; Tom Plenys, 11 Coalition for Clean Air; and John Shears from Center for 12 Energy Efficiency and renewable technologies. 13 May 14th, met in Berkeley with John Dunlap and 14 Bob -- from Nissan -- Bob Cassidy and Hayato Akizuki. 15 May 14th, met in Berkeley with Fred Maloney and 16 Bill Cravens from DaimlerChryser. 17 May 16th, met in Aptos with Ben Knight and Aki 18 Yasouka of Honda. 19 May 17th, met in Davis with Kathryn Phillips from 20 Environmental Defense; Diane Bailey, NRDC; and Don Anair 21 from Union of Concerned Scientists. 22 And yesterday, among with others, talked with 23 various peoples from Phoenix and Tesla -- I'm not quite 24 sure exactly who -- regarding issues consistent with and 25 of their respective testimony. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 Thank you. 2 CHAIRPERSON SAWYER: Mayor Loveridge. 3 BOARD MEMBER LOVERIDGE: Do this quickly. 4 I met with a number of participants from Toyota 5 on May 11th at South Coast District Office in Diamond Bar. 6 May 14th, there were three representatives of 7 large automakers, DaimlerChrysler, Ford, and Honda in 8 Riverside. 9 And a conference call with the ZEV Alliance on 10 May 21st. 11 I will submit the names to the staff. 12 And assorted conversations yesterday that I can't 13 recall who, where, how. 14 CHAIRPERSON SAWYER: Okay. We do not have a 15 resolution before us and we will not be taking regulatory 16 action at this time. But the plan is for the Board to 17 come back to us with a regulatory proposal in the autumn 18 of this year, this fall. They also have asked that we 19 give them directions based upon their report and our 20 other -- our individual thoughts on the ZEV program. 21 And I would like to start by saying that I 22 believe that the report we have received from the expert 23 panel is excellent and we should be responsive to it, and 24 our response should be very limited adjustments to the ZEV 25 regulations. As I think the staff probably knows by now, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 I have a strong preference for performance-based 2 technology-neutral regulations. 3 I think in this area that our definition of gold 4 should remain strictly as it is, that the strict 5 definition really defines what a ZEV vehicle is. 6 I am pleased to note that, both from the 7 testimony received and the expert panel report, that 8 battery technology is advancing rapidly and has advanced 9 considerably since last considered by this Board. I think 10 this indicates that we should anticipate and encourage the 11 introduction of limited performance BEVs and plug-in 12 hybrid electric vehicles. 13 I also recognize that at some point we need to 14 integrate the ZEV and greenhouse gas climate change 15 programs. I think this is not the time at which that 16 should be done, but we should definitely be planning ahead 17 for the next round of ZEV revisions and make this 18 integration at that time. 19 I know that there are many difficult issues in 20 reconciling all of these with the staff. And they 21 especially have to do with time frames on which various 22 technologies can come in. And I think that we need to pay 23 attention to both the short-term and the long-term 24 technologies. That is, we should have special concern 25 about the fleets in, say, the 2010 range, but we should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 also keep an eye on what we will need to do in the very 2 long term, that is, the 2050 range. 3 Thank you. 4 And I believe that Ms. D'Adamo also has a 5 statement she would like to make. 6 BOARD MEMBER D'ADAMO: Well, thank you, Dr. 7 Sawyer. 8 And it's my understanding that we actually do 9 have a resolution that staff has prepared, Resolution 10 07-1-8, in which I believe staff went over yesterday the 11 various recommendations that would be included in that 12 resolution. And I have prepared a document that the Board 13 I believe has, and staff, entitled "Board Member D'Adamo 14 Recommendations". And there are three point that I would 15 like to go over that would adopt the terms of the 16 resolution but provide for some additional clarification. 17 So point number one would be: In -- well, first 18 of all, I do think we should stay the course. But I 19 don't -- I get the sense that that would not be the result 20 of this hearing. So in light of that, item number one 21 would be: In the event that staff determines that changes 22 are needed in the alternative path in order to address the 23 issues that were raised yesterday by the expert panel and 24 by witnesses and staff regarding timing and quantity 25 issues, staff would be directed to address these issues by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 changing other compliance options. That would be to 2 include battery electric vehicles; ATP ZEVs, including 3 plug-ins; and infrastructure, which would strengthen the 4 program. And staff would also be directed to assure that 5 the program is not backsliding with regard to the 6 recommendations. 7 Secondly, in order to address the issue of 8 transparency that was discussed yesterday, I would suggest 9 that staff be directed to take a broad legal view 10 regarding the disclosure of credits issue in order to 11 achieve a transparent public process. 12 And then, thirdly, that the provision within the 13 resolution regarding intermediate volume manufacturing 14 definition, that we direct staff to delete -- well, 15 actually that we delete the provision in the resolution 16 that would direct staff to consider adjusting those 17 volumes. In other words we would stay the course on the 18 current regulation regarding intermediate volume 19 manufacturers. And I believe that we should do that 20 because these automakers have known for quite some time 21 what would be required of them once they hit those volume 22 numbers. I believe that Bob Cassidy made a good point 23 yesterday representing Nissan, that these are competitors, 24 and it would place the other smaller manufacturers that 25 are over the limit at an unfair disadvantage. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 And I also believe that we have a credit system 2 that we would allow for right now. So for those 3 automakers in this intermediate category that would choose 4 not to develop fuel cells and other technologies within 5 their fleet, they would be able to go out and purchase 6 credits. 7 I also have -- I think we all have a document 8 presented by Mayor Loveridge -- and I don't want to speak 9 for him, but would just like to say, Mayor, that I 10 appreciate the points that you make in this. And I 11 believe that the recommendations that I just outlined, 12 particularly regarding changes in the alternative path in 13 order to provide for other compliance options, that that 14 would be broad enough to encapsulate the recommendations 15 that you make, with the exception of the greenhouse gas 16 issue. I agree with Dr. Sawyer that this is not the time 17 to be merging these two issues. But I think at some point 18 we do need to integrate greenhouse gas into this, but just 19 not at this time. 20 Thank you. 21 CHAIRPERSON SAWYER: Mayor Loveridge? 22 BOARD MEMBER LOVERIDGE: Go ahead. You first. 23 BOARD MEMBER SPERLING: Thank you. 24 I think my sentiments reflect Chairman Sawyer's 25 for the most part. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 UNIDENTIFIED SPEAKER: Speak up, please. 2 BOARD MEMBER SPERLING: I will do so. Thank you. 3 Let me start off by saying that -- I do want to 4 make a comment that the ZEV program -- I believe that the 5 ZEV program of ARB has been highly successful. And, you 6 know, I realize that it hasn't evolved in a way that it 7 was originally intended. But it has played a central role 8 in simulating investments in electric drive technology, 9 which have led to the commercialization of hybrids, to 10 major investments by automakers and other companies in 11 fuel cells and batteries. And, you know -- and I -- 12 having said this, I fully recognize that the program has 13 evolved significantly. 14 And some people think this reflects poorly on 15 ARB. And I say just the opposite. I say it reflects very 16 well on ARB. And I thought this, by the way, before I 17 joined ARB. And it shows that, as new information becomes 18 available, the Board and the staff have been willing and 19 able to make adjustments. And I recognize that some of 20 these adjustments have been rather controversial. But no 21 matter what ARB had done and will do, the result is and 22 was controversial. 23 And I want to say that I found ARB to be one of 24 the most sophisticated scientifically-based government 25 agencies I've ever come across. And so I want to commend PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 the ARB staff and the ARB Board, which I am now proud to 2 be a member of, for its past performance. 3 So having said that, you know, I'm also reluctant 4 to open up the program to further review. But I do find 5 the case for some of these small changes compelling. You 6 know, I realize this puts a large burden on the ARB staff 7 at a time when they have a lot of other new and large 8 responsibilities coming along. So as Chairman Sawyer 9 said, you know, I would urge that the review be as narrow 10 as possible. 11 I do think that the suggested recommendations are 12 appropriate. In fact, I agree that all of those 13 recommendations should be pursued, you know, in as limited 14 a way as possible. 15 The only one -- the only additional change I 16 would suggest would be with respect to the blended plug-in 17 hybrids. I do think that more attention should be given 18 to find a way to give more credit to the blended plug-ins, 19 because they were not even imagined or conceived of in the 20 past, or not very seriously, but yet that is probably what 21 the automakers are most likely to pursue. And so I think 22 we want to be able to reward those efforts. 23 I agree with Board Member D'Adamo about the 24 disclosure of credits. I think that's an important issue 25 to look at in terms of transparency. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 And so I would just, you know, close by saying 2 let's try to keep this to a process of tweaking rather 3 than major overhauls. And I think that will serve 4 everyone's interest. 5 Thank you. 6 CHAIRPERSON SAWYER: Mayor Loveridge. 7 BOARD MEMBER LOVERIDGE: I respect and value the 8 prospectives that our Chair brings to this Board and to 9 what's before us. I support Ms. D'Adamo's recommendations 10 that are -- that she has presented. And I think that Mr. 11 Sperling has identified an area that I would like to put a 12 particular emphasis on. I've distributed a handout 13 earlier to the Chair and the Executive Officer and to 14 members of this Board. 15 But let me just, if I can, by way of emphasis, 16 try to read what is really the second recommendation. The 17 first was the greenhouse gases, which I think need to 18 catch up. But I respect the comment on timing. 19 Second recommendation. And this is to 20 incentivize the plug-in hybrid vehicle technology beyond 21 what is currently in the regulation. The expert panels 22 present very compelling findings in the plug-in 23 technology, namely, the potential for significant direct 24 societal benefit, nearest-term commercialization prospect, 25 and the potential for a chilling effect on battery PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 development if wrong signals are sent. For these reasons, 2 I believe that credit should be given for the blended mode 3 plug-in strategy. 4 I would propose the blended mode be given more 5 credit than either the CNG or hydrogen internal combustion 6 engine vehicles but less credit than the all-electrical 7 range plug-in vehicles. Additional credit could also be 8 given to achieving lower than SU-LEV emissions. Early 9 data seems to indicate that on-wheel companies could 10 optimize the blended plug-in vehicles to do better than 11 SU-LEV. So we should do them an incentive and do that. 12 Then there's the comments on back of the 13 statement about what is taking place in terms of plug-in 14 to hybrids. I think we heard that yesterday both from the 15 panel and from people who spoke to us. It is time we 16 incentivize our plug-in hybrids and figure out how to do 17 it. It seems to me that really is the bridge from where 18 we are now to something else better. 19 CHAIRPERSON SAWYER: Ms. Riordan. 20 BOARD MEMBER RIORDAN: Yes. Mr. Chairman, I 21 fully support much of what you have said and many of my 22 colleagues. I would like though to assure us of the 23 opportunity for some flexibility in the future. As this 24 is evolving, obviously some exciting things are happening. 25 And while some of it is not necessarily known by all of us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 today, I do think we need to recognize that we may have 2 some -- certain things may progress to a point where we 3 need to be certain that we can give them extra 4 opportunities within the system. And I think that if that 5 is assured to me, I would be very supportive of what you 6 have said and just the opportunity though to look into the 7 future and say if there are some additional benefits that 8 are developed in a period of time that seems reasonable, 9 that we go back and be able to reward that in our review. 10 CHAIRPERSON SAWYER: Supervisor Hill. 11 SUPERVISOR HILL: Thank you, Doctor. 12 I guess I was so struck yesterday by all of the 13 testimony that -- and the expert testimony on the report 14 and the analysis that was done related to the change that 15 we're seeing and the rapid change of the industry and the 16 success of the battery technology and the vehicles that 17 are moving forward. And that really brings to me -- and a 18 comment I made yesterday -- that there's a very little 19 need to change, as I see it. And I would prefer us not 20 opening this at all. But the tweaking that we do should 21 be at a minimal, and just in the emphasis that we've heard 22 today in the blended plug-ins and maintaining the status 23 as we can. Because with the changing technology, we're 24 going to see so many areas that will allow for greater 25 opportunities in the future. And I don't want to see us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 oversteering, going one way and then three years from now 2 going the other way and trying to emphasize certain things 3 that will in three years from now -- or de-emphasize 4 things that will present a problem. 5 I'm very concerned that we don't backslide at all 6 in the -- especially with the fuel cell issue. And I want 7 to support the transparency issue. I think that we have 8 to be as open as possible with the credits. And if we 9 want this process to be successful, everyone has to be on 10 the same page and we all have to be able to understand 11 exactly where that process is going. 12 So I certainly support the recommendation. 13 CHAIRPERSON SAWYER: Ms. Berg. 14 BOARD MEMBER BERG: Thank you, Mr. Chairman. 15 I too want to echo the success of this program. 16 And this is my first ZEV review. But if you look back, 17 Ms. D'Adamo was sharing with me that the last review there 18 were no plug-ins and very little hybrids -- and no 19 plug-ins but very little hybrids, and that the progress we 20 have made. And when we look back to when this regulation 21 was passed in 1990, the testimony that we heard, that who 22 would have thought we would have been here today with the 23 technology. 24 This, you know, is a painful process because it's 25 much like birth. It takes too long and it's a trial and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 error. And so everybody does want it to go faster. I 2 think we have to remember attitudes like Albert Einstein 3 when asked how did he deal with over 2,000 failures of 4 developing the light bulb. And he said, "It wasn't a 5 failure. I learned 2,000 ways not to do it." And this is 6 a lot like the ZEV program. 7 So I want to be encouraging. I too agree with my 8 colleagues on, that this should be a tweaking of effort, 9 that we want to stay the course. However, we've got to 10 stay the course in a changing, evolving, 11 technology-pushing regulation. 12 And so with that, I am in agreement with what has 13 been said. And I would like to add that we would have 14 another expert report that would be limited on 15 specifically the battery and the energy on storage 16 information that is moving so rapidly; and that we would 17 do that within a two to three year time period. But we 18 wouldn't need to do a full scope review but really keep us 19 up to date as to how this technology is moving forward, so 20 that we could make good policy decisions. 21 And, finally, I absolutely agree with Dr. Hill 22 on -- and Ms. Riordan on flexibility. We have to -- it is 23 such a fine line that you walk and that we walk in looking 24 at the old landscape with new eyes, because what we're 25 trying to do is figure out what is the vision, how is this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 going to pull together to get a zero emissions vehicle. 2 And so as we're trying to keep things going forward and 3 with minor tweaking, we've got to do it in a way, 4 technology neutral, 100 percent in agreement, and 5 performance-based with the flexibility. 6 So that's why it's so tough. And I thank staff 7 very much. I know this has been really difficult. 8 Thank you. 9 CHAIRPERSON SAWYER: Dr. Gong. 10 BOARD MEMBER GONG: Well, I don't have much to 11 add. I think -- one of the interesting processes that I 12 went through with this entire topic is that I started 13 rather confused, because I thought it was very 14 complicated, confused by all the terms. It reminded me of 15 some medical textbooks that I used to read. And it just 16 took a while for this to crystallize. And I'm very happy 17 to report that during the past day or so, it's 18 crystallized even better for me. I think hearing the 19 experts and their wisdom have led me into the same area 20 that my fellow Board members are in right now, that we 21 should probably narrow again the focus of any changes. 22 And hopefully these changes are for improvement, not for 23 weakening of the current mandate. 24 I would just like to add a couple things. I note 25 that it was repeated several times yesterday from several PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 of the speakers about knowing more -- and I think 2 Professor Sperling as well -- that we should have more 3 information about consumerism, why consumers purchase 4 these vehicles, and do more market survey, get that 5 information as well. And that would be useful to the 6 Board. And I agree with that. That drives the engines, 7 so to speak. 8 I would also appreciate updates. We've sort of 9 mentioned previously our progress reports to the Board. 10 And I don't know how -- again, how frequently they should 11 be, whether -- and what level. Should it be an expert 12 panel or should it just be from staff or a combination of 13 both? But as was stated, the new discoveries, new 14 refinements, new inventions, I think the Board should be 15 kept in the loop on that so we can have some feedback as 16 to how things are progressing. And, again, that gets into 17 the flexibility topic that was raised as well. 18 So I again support and highly respect the 19 opinions of my fellow Board members and certainly of the 20 expert committee that was presented yesterday. 21 Thank you. 22 CHAIRPERSON SAWYER: Mayor Loveridge. 23 BOARD MEMBER LOVERIDGE: As you listen to the 24 comments of the Board members, let me just ask: Why is it 25 that we have a resolution before us? Cannot -- it seems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 to me the better approach is to -- you have the panel 2 testimony. You have the public testimony. You have the 3 Board position. And then to return before we adopt a 4 closed resolution. I just ask that as a question. 5 EXECUTIVE OFFICER WITHERSPOON: The reason that 6 staff prepared the resolution was to make explicit the 7 recommendations we had given you and whether you agree 8 with them or not. And so what I've heard is the general 9 consensus from the Board of the specific changes we 10 recommended with the exception of the intermediate volume 11 adjustments. And so that would be the only thing struck 12 from the resolution. And then we were mentally adding, 13 you know, any other statements you're making that are 14 added direction to us. But you're affirming the half 15 dozen recommendations we specifically made. 16 CHAIRPERSON SAWYER: I think that we should 17 probably act on the resolution. But it would be pretty 18 easy to modify it. 19 I would suggest that in the "Be It Resolved" that 20 we start it with the first two items from Ms. D'Adamo, 21 especially the one that has to do with no backsliding, 22 because I think I heard everybody said that that should be 23 the case. Openness, I think that's an important issue and 24 we need to examine how to do that. So I would suggest we 25 insert her items one and two at the beginning of the list PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 of activities. 2 And I'm not quite certain. Item three, you had 3 in mind deleting the last item on page 4? Is that how 4 you'd accomplish that, Ms. D'Adamo? 5 BOARD MEMBER D'ADAMO: Yes. 6 CHAIRPERSON SAWYER: Yeah, I'm comfortable with 7 that as well. We need to -- when you come to us, you need 8 to be prepared to explain to us what's going to happen to 9 these companies that may be coming into this program, 10 because they're definitely smaller. And it might be that 11 you would recommend that how they came into the program 12 would be different from how the big five or six would come 13 into the program. 14 EXECUTIVE OFFICER WITHERSPOON: We'll look at 15 that especially. Many of you talked about flexibility. 16 And so where without totally changing the intermediate 17 volumes we can work with those kinds of phase-in issues, 18 we'll take a look at that. 19 CHAIRPERSON SAWYER: Ms. D'Adamo. 20 BOARD MEMBER D'ADAMO: What I would just say is 21 that my item number one on no backsliding but flexibility 22 on compliance options I think would give you the 23 flexibility on that intermediate category. 24 EXECUTIVE OFFICER WITHERSPOON: Right. We 25 appreciate it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 Might I also point out, Chairman Sawyer, we left 2 the date blank for returning to the Board because -- 3 coming, and there was a question of whether you would 4 recommend a rule change at all. But it would be staff's 5 recommendation before the end of '07 that we come back to 6 you -- 7 CHAIRPERSON SAWYER: That's the appropriate time 8 scale. 9 And I would ask for one other addition, that is, 10 in the third paragraph that starts with "plug-in hybrid 11 electric vehicles," I would insert "including blended mode 12 PHEVs" -- I've heard that from multiple people -- just to 13 make certain that it's there. 14 EXECUTIVE OFFICER WITHERSPOON: And then Mrs. 15 Berg's item -- no, it was Dr. Gong's, about coming back 16 in -- both of you talked about that -- coming back in two 17 to three years with a narrow technical review on batteries 18 and energy storage for -- 19 CHAIRPERSON SAWYER: I think what we've heard is 20 the technology is moving very vapidly. We've had 21 presented by the manufacturers some battery technology, 22 which will be verified during that period of time, 23 hopefully. And we should know about that. 24 EXECUTIVE OFFICER WITHERSPOON: The other thing, 25 Dr. Gong spoke about more regular updates to the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 And a thought that occurred to me was bundling the various 2 announcements that come out in spades with a cover memo 3 from staff indicating what we make of these announcements, 4 you know, as opposed to a full Board proceedings. But 5 just sending you out periodic memorandum from us as an 6 interpretation might be better. 7 That works for you, Doctor -- okay. 8 CHIEF COUNSEL JENNINGS: One additional thought 9 is when you take final action on the resolution -- on the 10 regulations later this year, that would also be an 11 opportunity to decide when you want the next update to 12 occur. 13 CHAIRPERSON SAWYER: Right. 14 Okay. So, again, what we would do next is to 15 approve the resolution with the addition of Ms. D'Adamo's 16 items, plus the specific mention of blended mode plug-in 17 hybrid electric vehicles. 18 By consensus, is that agreeable? 19 Do I have a motion to adopt? 20 BOARD MEMBER SPERLING: I so move. 21 BOARD MEMBER RIORDAN: Second. 22 CHAIRPERSON SAWYER: All those in favor please 23 indicate by saying aye. 24 (Ayes.) 25 CHAIRPERSON SAWYER: Opposed? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 Fine. Very good. 2 And thank you very much, staff. 3 Our expert committee is not here today. But 4 please extend to them especially our appreciation for 5 their hard work and the excellent report which they 6 produced. 7 Okay. Now, we will move on to the item for which 8 the large number of people have come here today to 9 participate in. 10 (Applause.) 11 I would encourage as many of you as possible to 12 fill in the available seats that are in the room just to 13 make the access to the room easier for other people who 14 may come or late arrivals. 15 The next agenda item, 7-5-6, the proposed 16 regulation for in-use off-road diesel vehicles, will now 17 be considered. 18 We are scheduled today to go from now until about 19 4:30 p.m. We must vacate this room. It was a condition 20 of getting access to this facility that we vacated at that 21 time. 22 But before we get to the end of the day, that is, 23 at the end of the meeting today, I will take a few moments 24 to ask for general Board member comments and to take 25 general comments from the public on matters not scheduled PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 for the Board's consideration this month. This is 2 something we regularly do. 3 We announced last week on our website and via our 4 broadcast e-mail system that at the end of today's hearing 5 we will continue the hearing to our July 26th, 2007, Board 6 meeting in Sacramento. We did that to ensure that 7 everyone interested in this item has the opportunity to 8 provide input. 9 This item is complex and controversial. 10 Accordingly, we want Board members to have the opportunity 11 to consider the full range of issues before taking action 12 in July. 13 I will now present a proposal for how we will 14 conduct these hearings. We will try to hear oral comments 15 today from everybody who has come to testify. This may 16 not be possible of course. We want to receive any written 17 testimony you have as well so that our Board members will 18 be able to work through your comments between the two 19 hearings. 20 As is our normal practice, testimony will be 21 limited to three minutes per person. We will accept oral 22 comment at the July 26th hearing, but will limit the 23 testimony to persons who have not previously testified or 24 to persons addressing new issues that may develop during 25 the interim. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 So that Board members may evaluate the issues, we 2 encourage parties to submit additional written comments by 3 Friday, June 29th. We will, however, accept written 4 comments received by the clerk of the Board until noon on 5 July 25th or comments which were presented at the July 6 26th hearing. 7 Do I have the Board's concurrence with this plan? 8 Okay. The off-road in-use diesel vehicle 9 regulation may be the most significant item the Board 10 considers this year. As we hear the facts and issues, we 11 must remember that the two most important obligations of 12 the Board are to protect the public's health through 13 achieving state and national air quality standards for 14 criteria pollutants by the applicable deadlines or sooner, 15 and to reduce exposure to toxic air contaminants to the 16 maximum extent feasible. 17 The proposed regulation is wide ranging. It 18 would effect nearly all of the 180,000 in-use off-road 19 diesel vehicles operated by both public and private fleets 20 in California. It would also require owners of these 21 vehicles to modernize their fleets and to install exhaust 22 retrofits. This regulation effects more people and 23 achieves more emission reductions than any of the diesel 24 air toxic control measures the Board has previously 25 approved. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 The Board will not vote on this item today. 2 Today's discussion will answer questions on this 3 very important regulation that will affect so many 4 stakeholders. 5 Ms. Witherspoon, please introduce the staff 6 presentation. 7 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 8 Sawyer. 9 The proposed regulation for existing off-road 10 diesel vehicles follows the pattern of every diesel air 11 toxic control measure staff has brought to you so far, 12 including the accelerated retirement of older high 13 emitting equipment and the use of retrofit devices where 14 available. 15 But there is one very significant exception in 16 this rule. In addition to reducing diesel particulate 17 matter, the proposed rule seeks to achieve major 18 reductions in oxides of nitrogen in order to meet the 19 pending federal attainment deadlines for ozone and fine 20 particular, or PM2.5. 21 In our previous rules, staff incentivized NOx 22 reductions as much as possible, but did not make those NOx 23 reductions mandatory. It is now necessary to require NOx 24 controls since off-road diesel sources are the single 25 largest contributor to California's existing ozone PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 problem. Attainment cannot be achieved unless NOx and 2 particulate emissions from off-road mobile sources are 3 directly reduced. 4 As Dr. Sawyer already indicated, the proposed 5 regulation is controversial with stakeholders from every 6 end of the spectrum. Environmental groups have submitted 7 written comments saying the rule does not go far enough 8 and should be accelerated. Industry stakeholders feel it 9 goes too far and that the current compliance schedule is 10 too costly. They are asking for a five-year delay to 11 2025. 12 As always, staff has made every effort to build 13 as much flexibility as possible into the requirements in 14 an effort to reduce the overall cost and burden of the 15 regulation. 16 We agree that cleaning up the off-road diesel 17 fleet is challenging and expensive. But these emission 18 reductions are absolutely needed to address public health. 19 Doing less or waiting longer will mean people will 20 breathe -- more people will breathe unhealthy air, suffer 21 adverse health effects, and will also delay attainment of 22 the federal air standards. 23 Staff spent the past two and a half years 24 developing the proposed regulation. Early on, the rule 25 was proposed as a diesel PM control measure only. NOx PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 strategies were incorporated last July when it became 2 evident from our SIP modeling that additional NOx 3 reductions were needed for attainment in the South Coast 4 and the San Joaquin Valley Air Basins to meet the federal 5 standards for ozone and PM2.5. As such, this regulation 6 is now a key element of the state implementation plans 7 that the Board will consider next month in Fresno and in 8 Los Angeles. 9 Ms. Kim Hiroi-Rogowski of the Mobile Source 10 Control Division is going to present the proposed 11 regulation. 12 Kim. 13 (Thereupon an overhead presentation was 14 Presented as follows.) 15 MS. HIROI-ROGOWSKI: Thank you, Ms. Witherspoon. 16 Good morning, Chairman Sawyer and members of the 17 Board. I'll discuss and present staff's proposed in-use 18 off-road diesel vehicle regulation. 19 Are the slides up? 20 There we go. Thank you. 21 --o0o-- 22 MS. HIROI-ROGOWSKI: Here's an outline of what I 23 will present to you today. First, I'll go over the need 24 for emission reductions and provide a summary of the 25 emissions inventory of affected sources -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 UNIDENTIFIED SPEAKERS: Speak up. We can't hear 2 you. 3 MS. HIROI-ROGOWSKI. Sorry. 4 Yes. Is that better? 5 Okay. Thank you. 6 Let me start again. 7 --o0o-- 8 MS. HIROI-ROGOWSKI: Here's an outline of what I 9 will present to you today. First, I'll go over the need 10 for emission reductions and provide a summary of the 11 emissions inventory of effected sources and the health 12 impacts that are occurring today due to those sources. 13 I'll describe which industries and vehicle types the 14 regulation would cover. 15 I'll spend some time explaining the proposed 16 regulation and describe in detail what it would mean for 17 two real fleets. There have been some misunderstandings 18 and exaggerations regarding what the proposed regulation 19 would require. So I want to be sure to go over that. 20 I'll summarize the very significant emission and 21 health benefits expected from the regulation. I'll go 22 over staff's estimate of the cost the regulation would 23 impose and help you understand how staff made that 24 estimate. 25 I'll explain why staff believes the regulation is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 technically feasible. And then I'll give a summary of 2 outstanding issues as well as alternative proposals that 3 industry and air districts have made. I'll go over some 4 minor changes staff is recommending to the proposal in the 5 staff report. And, finally, I'll wrap up with staff's 6 recommendations. 7 --o0o-- 8 MS. HIROI-ROGOWSKI: So, first, let's start with 9 the need for emission reductions. The proposed regulation 10 primarily targets two pollutants: Diesel particulate 11 matter and oxides of nitrogen, or NOx. 12 --o0o-- 13 MS. HIROI-ROGOWSKI: Diesel PM is responsible for 14 70 percent of the known risk from air toxics and causes 15 thousands of deaths each year in California. NOx is a 16 precursor to both ozone and secondary particular matter, 17 both of which are criteria pollutants which have their own 18 health impacts and for which the federal government has 19 established ambient air quality standards and deadlines to 20 attain those standards. 21 --o0o-- 22 MS. HIROI-ROGOWSKI: In the year 2000, this Board 23 adopted the Diesel Risk Reduction Plan which set 24 aggressive goals for reducing diesel PM by 75 percent by 25 2010 and 85 percent by 2020 from year 2000 levels. This PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 proposed regulation is the next in a series of regulations 2 the Board has adopted the implement the Diesel Risk 3 Reduction Plan. However, because of the complexities 4 associated with the development of this proposed 5 regulation, this effort has taken longer than originally 6 envisioned. So that makes it increasingly urgent to adopt 7 this regulation as soon as possible so the significant 8 health benefits it will provide are realized. 9 The scope of this regulation is significant, 10 covering many more vehicles than all the other measures 11 adopted thus far to implement the Diesel Risk Reduction 12 Plan combined. The previous measures adopted by the Board 13 affect less than 60,000 vehicles in total, whereas this 14 proposed regulation affects about 180,000. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: Emissions from off-road 17 vehicles come with significant annual health impacts. In 18 2005, emissions from the off-road diesel vehicles covered 19 by this proposed regulation caused 1100 premature deaths 20 as well as tens of thousands of cases of asthma and other 21 effects. 22 --o0o-- 23 MS. HIROI-ROGOWSKI: Emissions from off-road 24 vehicles covered by the proposed regulation are 25 significant. As these pie charts show, the sources PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 covered by the proposed regulation make up nearly 2 one-fifth of all the NOx and one-fourth of all diesel PM 3 that's emitted statewide from diesel mobile sources. 4 --o0o-- 5 MS. HIROI-ROGOWSKI: Significant NOx reductions 6 are needed to help the state meet federal health-based 7 standards for ambient ozone and fine particulate matter, 8 or PM2.5. These maps show the areas of the state that 9 fail to attain those standards. You can see that most 10 areas of the state, and, in fact, the areas where most 11 people live, are out of attainment with one or both of 12 those standards. To meet these standards and allow 13 Californians to breathe healthy air, federal law requires 14 the state to develop state implementation plans, or SIPs, 15 demonstrating how the standards will be achieved by 16 certain deadlines. 17 --o0o-- 18 MS. HIROI-ROGOWSKI: Next month, the Board will 19 be considering the state's portion of the upcoming South 20 Coast and San Joaquin Valley SIPs. The obligation to 21 demonstrate attainment in these two areas drives the need 22 for the NOx reductions included in the proposed 23 regulation. The post recent air quality modeling shows 24 that these two areas need very large reductions in NOx, on 25 the order of 30 percent to meet the PM2.5 standard and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 50 percent to meet the ozone standard in the South Coast. 2 The attainment deadline for PM2.5 is coming up very soon, 3 in 2015, with reductions needing to be demonstrated by 4 2014. 5 --o0o-- 6 MS. HIROI-ROGOWSKI: I've been talking about the 7 emission reductions needed. Let me now provide some more 8 detail on the industries and vehicles that would be 9 affected by the proposed regulation. 10 I'll also talk about emissions from sources 11 effected by the proposed regulation and how we have 12 improved our estimates of these emissions. I'll also 13 provide an overview of the industries subject to the 14 proposed regulation. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: The proposed regulation 17 would cover a wide variety of vehicles, from construction 18 bulldozers and loaders, to diesel lifts and forklifts, to 19 backhoes and skid steer loaders to ground support 20 equipment like belt loaders, baggage tugs and aircraft 21 pushback tractors. 22 Engine size in these vehicles ranges from as 23 small as 25 horsepower for some small trenchers and 24 mowers, up to 2500 horsepower for the largest mining haul 25 trucks. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 --o0o-- 2 MS. HIROI-ROGOWSKI: In total, the regulation is 3 projected to affect about 180,000 vehicles currently in 4 use today. The most numerous vehicle types covered are 5 tractors and loaders and backhoes, skid steer loaders, 6 runner tired loaders, excavators, and crawler tractors, 7 which are also called bulldozers. 8 It's important to note how many relatively small, 9 short-lived, lower horsepower skid steer loaders there 10 are. Much of the debate concerning the regulation has 11 been dominated by fleets that have longer-lived, higher 12 horsepower vehicles like scrapers and dozers. But there 13 are tens of thousands of relatively short-lived small 14 vehicles like skid steer loaders as well. And compliance 15 costs for such small relatively short-lived vehicles will 16 be much lower. 17 As I will discuss further, staff's analysis takes 18 such differences in vehicles into account. Some comments 19 today make focus on the most expensive, longest-lived 20 vehicles. But our analysis takes into account the whole 21 range of vehicle types covered. 22 --o0o-- 23 MS. HIROI-ROGOWSKI: Due to the increasingly 24 stringent new engine standards adopted by this Board and 25 U.S. EPA, new engines today are markedly cleaner than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 before, and new off-road engines in the future will be 2 cleaner still. However, these standards are complex, with 3 six different engine size categories and PM and NOx 4 emissions standards that change at different times for 5 different engine sizes. This chart shows the new engine 6 emission standards for one engine category, engines 7 between 100 and 174 horsepower. You can see for these 8 engines PM emissions today are less than half those of 9 uncontrolled engines and NOx emissions are less than a 10 third of those of uncontrolled engines, which are shown in 11 the bars on the far left. 12 Uncontrolled engines are called Tier 0. The 13 first emission standards, called Tier 1, took effect in 14 the mid 1990s. 15 The progressively more stringent standards are 16 called Tiers 2 through 4, with Tier 4 being the cleanest. 17 Even the new off-road engines being sold today emit ten 18 times the pollution of the cleanest Tier 4 engines that 19 will be available around 2015, and are significantly 20 dirtier than their on-road counterparts. In fact, 2007 21 model year on-road engines today come equipped with diesel 22 particulate filters. 23 The next slide shows the engine emission standard 24 tier distribution for existing vehicles covered by the 25 proposed regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 --o0o-- 2 MS. HIROI-ROGOWSKI: You can see that in 2005, 3 although emission standards for off-road engines had been 4 in effect for nearly a decade for most engine sizes, over 5 half the fleet still consisted of Tier 0, that is, 6 completely uncontrolled engines. 7 You may hear some commenters say today that they 8 own fleets that are nearly 100 percent Tier 0. Although 9 we believe the statewide population is currently about 10 half Tier 0, we've taken into consideration that fleets 11 vary widely in age and vehicle purchase practices, and our 12 analysis of 200 individual fleets includes some fleets 13 made up of predominantly Tier 0 vehicles. 14 --o0o-- 15 MS. HIROI-ROGOWSKI: Of course, different vehicle 16 types have different expected useful lives. These charts 17 compare emission standard tier distributions for 18 short-lived skid steer loaders which have a typical useful 19 life of 13 years versus long-lived crawler tractors that 20 typically last 29 years or more. The top charts show year 21 2005 and the bottom charts show year 2020. 22 Short-lived vehicles turn over more quickly. 23 This can be seen by looking at the Tier 0 fraction for 24 skid steer loaders, which changes from about 43 percent 25 Tier 0 in 2005 to none at all in 2020. This is opposed to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 long-lived crawler tractors, which are about 65 percent 2 Tier 0 in 2005. In 2020, uncontrolled are Tier 0 crawler 3 tractors will still make up a good portion, nearly 20 4 percent, of the crawler tractors in operation. Also, 5 there are twice as many Tier 4 skid steer loaders in the 6 fleet in 2020 relative to crawler tractors. Understanding 7 and accounting for this effect in our cost and benefits 8 analysis has been an important consideration for staff. 9 Staff put a great deal of effort into getting the 10 best possible estimate of the vehicle population and 11 emissions affected by this regulation so we would 12 accurately estimate costs and benefits. And I'd like to 13 take a few minutes to tell you more about these 14 improvements. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: At the start of our 17 rule-making process a number of stakeholders questioned 18 the validity of our emissions inventory - in particular, 19 the engine tier distribution in vehicle age. Staff 20 gathered all available data on vehicle population, 21 activity, and useful lives through the development of ARB 22 surveys, market research reports, and input from 23 stakeholders, and drafted a series of discussion papers on 24 the emissions inventory for each of the vehicle categories 25 covered by the regulation. These papers were posted on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 our website and discussed at subsequent meetings with 2 stakeholders. 3 Staff also held a day-long inventory work group 4 meeting with stakeholders to discuss the changes. For 5 estimates of equipment population, staff relied on 6 nationwide market surveys that we purchased from market 7 research firms and then scaled to California. California 8 has about 11 percent of the nation's off-road vehicles. 9 I want to clarify here that the response rate at 10 our survey of fleet owners was not intended to be used for 11 population estimates and was inadequate for that purpose. 12 The ARB survey of fleet owners was used to enhance our 13 understanding of fleet idling practices, fleet size, and 14 equipment operating hours. We received survey responses 15 from over 500 fleets with data on over 10,000 vehicles. 16 --o0o-- 17 MS. HIROI-ROGOWSKI: One major change to the 18 original inventory model we made was increasing the useful 19 life for construction and mining vehicles to about twice 20 as long as previously estimated. And we now see good 21 agreement between the vehicle age reflected in the 22 off-road model, which is ARB's emission inventory model 23 for off-road vehicles, and the average age of equipment in 24 the hundreds of fleets for which we have detailed vehicle 25 data. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 For the first time, we also reflect that 2 construction and mining vehicles are used less as they 3 age. 4 Unlike for cars and trucks, there is no 5 registration database that anyone can point to that gives 6 an exact count of the off-road vehicles in use in 7 California today. But staff is confident we have made a 8 reasonable best available estimate of populations, ages, 9 and emissions today and into the future. 10 Let's turn now to the emissions we estimate. 11 --o0o-- 12 MS. HIROI-ROGOWSKI: This chart shows NOx and 13 diesel PM emissions in the absence of the proposed 14 regulation. The blue line is NOx and the orange is PM. 15 Emissions from off-road vehicles have dropped 16 from past levels and are continuing to decline as vehicles 17 are replaced. But because so many lower tier engines last 18 and continue to pollute for such a long time, this decline 19 is not fast enough to satisfy the state's public health or 20 SIP goals, and actions to reduce emissions from these 21 in-use vehicles are critical. 22 We've talked about the types of vehicles covered 23 by the regulation and the magnitude of their emissions. 24 Let's move now to the variety of industries that will be 25 affected by the proposed regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 --o0o-- 2 MS. HIROI-ROGOWSKI: This pie chart shows the 3 variety of fleet types covered by the proposed regulation. 4 About half the vehicles are used in construction, with an 5 additional nearly 15 percent in rental fleets and over 10 6 percent in mining. The remaining affected vehicles are in 7 utility, airlines, landscaping, and other industries, as 8 well as in government fleets. 9 You can see in this pie chart the wide variety of 10 industries affected by the regulation. So while you may 11 hear from many interested construction industry 12 stakeholders today, it's definitely not valid to assume 13 all costs will fall on the construction industry. 14 (Laughter.) 15 --o0o-- 16 MS. HIROI-ROGOWSKI: Okay. As I just mentioned, 17 the industry on which the regulation will have the largest 18 impact is the construction industry. It is therefore 19 worth noting that the industry has been growing, adding 20 about five percent in jobs each year between 2003 and 21 2006. You may hear today that the construction industry 22 cannot afford the regulation because they are experiencing 23 a downturn. And construction jobs have dropped slightly 24 since 2006. But the Department of Finance predicts that 25 growth will resume next year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 Indeed, the past few years have been a period of 2 record growth for the construction industry. Per the May 3 2006 Engineering News Record magazine -- and I quote -- 4 "For many, if not most, large general contractors this is 5 a time like few have ever seen. The economy is strong, 6 the markets vibrant, and there is more than enough work to 7 go around." 8 (Laughter.) 9 MS. HIROI-ROGOWSKI: If ever the construction 10 industry could be asked to invest in clean air, now would 11 be the time. 12 The next chart shows total valuation of 13 residential and nonresidential construction in California. 14 --o0o-- 15 MS. HIROI-ROGOWSKI: As this chart shows, since 16 2005 we've been in the midst of a dip in residential 17 construction, which is represented by the blue middle 18 line, but nonresidential construction has been growing 19 robustly since 2003, as can be seen by the pink bottom 20 line. The black top line is total construction valuation 21 and was $60 billion in 2007. Based on Department of 22 Finance estimates, both residential and nonresidential 23 construction are predicted to grow in the next several 24 years, and total construction valuation is expected to 25 reach over 70 billion by 2009. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 Also, the passage in November of last year of $40 2 billion in infrastructure bonds will mean additional work 3 for many construction firms over the next several fiscal 4 years. 5 --o0o-- 6 MS. HIROI-ROGOWSKI: I've talked about the 7 vehicles and industries that would be affected by the 8 proposed regulation. Now let me explain the proposal and 9 how it was developed. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: The regulation would apply 12 to any mobile, diesel-powered self-propelled off-road 13 vehicle 25 horsepower and up. It does not apply to 14 portable equipment or on-road vehicles. 15 The regulation would impose labeling and 16 reporting requirements beginning in 2009, as well as 17 limits on necessary idling. There would be no fee 18 associated with the reporting. Fleets would also be 19 prohibited from adding the dirtiest vehicles, the Tier 0 20 and uncontrolled vehicles, to their fleets after 2009. 21 The control requirements would begin in 2010 for 22 the largest fleets and phase in over the next decade. The 23 requirements for medium fleets would begin in 2013 and 24 phase in through 2020. And those for small fleets would 25 begin in 2015 and phase in through 2025. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 --o0o-- 2 MS. HIROI-ROGOWSKI: In general, the proposed 3 regulation requires fleets to either meet NOx and PM fleet 4 average targets; or, if they cannot or choose not to, to 5 demonstrate a certain amount of annual progress in 6 reducing emissions. We call this alternative Best 7 Available Control Technology, or BACT, requirements, and 8 they provide a safety valve for fleets that can't afford 9 to meet the proposed fleet average targets by capping the 10 amount of turnover or retrofitting required in any one 11 year. 12 Especially in early years, since the fleet 13 emission targets would not be met by the dirtiest fleets, 14 the BACT requirement provide a way for these fleets to 15 remain in compliance and make steady progress toward lower 16 emissions. 17 Essentially, the regulation is structured such 18 that in any given year fleets only have to do the lesser 19 of either meeting the BACT requirements or meeting the 20 fleet average targets. 21 So let's look more closely at the proposed fleet 22 average targets. 23 --o0o-- 24 MS. HIROI-ROGOWSKI: The top graph shows the 25 diesel PM targets and the bottom one shows the NOx PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 targets. The green lines are where the overall statewide 2 fleet would be in the absence of the regulation and the 3 red are the targets. Keep in mind that although the green 4 line represents the overall statewide fleet, in each year 5 some older fleets are above the line and some younger ones 6 are below. 7 You can see the regulation pushes PM reductions 8 further below the level of normal turnover than NOx. And 9 this is because PM retrofit technology is already 10 available today. 11 The NOx targets begin at the overall statewide 12 fleet average. So in 2020 about half the fleets will meet 13 the NOx fleet average targets without any additional 14 actions. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: Fleets can choose among a 17 number of different options to comply with the regulation, 18 finding the mix of actions that's most cost effective and 19 feasible for their particular situation. Fleets may 20 install PM and/or NOx retrofits by cleaner new or used 21 vehicles, replace old engines with cleaner ones, which we 22 call repowering, and retire the dirtiest vehicles. 23 --o0o-- 24 MS. HIROI-ROGOWSKI: In each year, fleets that do 25 not meet the fleet average targets must meet the BACT PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 requirements. No fleet is ever required to do more than 2 the BACT requirements in any year, and no fleet has to 3 meet the BACT requirements if they already meet the fleet 4 average targets. 5 Fleets that do not meet the PM fleet average 6 targets must apply exhaust retrofits at the rate of 20 7 percent per year. Of course if there are no verified safe 8 retrofits for a fleet, it is not required to retrofit. 9 Fleets that do not meet the NOx fleet average 10 targets must turn over engines at the rate of 8 percent 11 per year in the early years of the regulation and 10 12 percent per year in 2016 and later. If NOx retrofits 13 become available, they may be used in lieu of turnover, 14 and could lower compliance costs. 15 Once fleets meet the fleet average targets, most 16 will be able to do significantly less than the maximum 17 retrofitting and turnover to continue to meet future fleet 18 average targets. 19 --o0o-- 20 MS. HIROI-ROGOWSKI: The regulation imposes 21 stricter provisions on the largest fleets that have the 22 greatest impact on air quality, and less strict provisions 23 on the smallest fleets, who will have the biggest 24 challenge understanding and complying with the proposed 25 regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 Small fleets are defined as those with 1500 or 2 less horsepower that are also small businesses or 3 municipalities. Over two-thirds of the fleets are small 4 but they own only about six percent of the total 5 horsepower. For small fleet, the first fleet average 6 compliance date is 2015. Small fleets are only subject to 7 the PM part of the regulation and do not need to comply at 8 all with the NOx turnover portions. The PM fleet averages 9 for small fleets lag those for medium and large fleets by 10 five years. 11 Medium fleets are those with 1501 to 5,000 12 horsepower. The first fleet average compliance date for 13 medium fleets is 2013. And medium fleets must reduce both 14 PM and NOx emissions. 15 Large fleets are those with more than 5,000 16 horsepower. The fleet average requirements for large 17 fleets take effect in 2010. 18 There are only a few large fleets, only about 13 19 percent of total fleets, but they own over 80 percent of 20 the total horsepower in the state. So focusing on these 21 largest fleets first will achieve a large air quality 22 benefit and allow the reporting and enforcement structure 23 of the regulation to mature before the majority of fleets 24 must comply with the fleet average requirements. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 MS. HIROI-ROGOWSKI: This flow chart illustrates 2 how complies would work each year for large and medium 3 fleets. Each year, such fleets would need to first either 4 meet the NOx fleet average emission target or turn over 5 the required percentage of their horsepower. Then, they 6 would need to either meet the PM fleet average target or 7 apply exhaust retrofits to 20 percent of their horsepower. 8 Small fleets would only do the PM portion 9 starting in 2015, which is shown in the middle box, 10 because they are not subject to the NOx part of the 11 regulation. 12 --o0o-- 13 MS. HIROI-ROGOWSKI: The proposed regulation 14 contains a number of provisions and compliance extensions 15 to give fleets more flexibility and to take care of 16 special situations that have been identified by 17 stakeholders. 18 Low-use vehicles, those used less than 100 hours 19 per year, would be subject only to labeling and reporting 20 requirements. 21 As I'll discuss further on the next slide, fleets 22 operating in federal attainment areas would not be subject 23 to the NOx emissions averages nor engine turnover 24 requirements. 25 Fleet owners would not be penalized if there are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 manufacturer delays in the availability of retrofit, new 2 engines, or new vehicles. 3 Vehicles less than five years old are not 4 required to have exhaust retrofits. 5 No action is required if there is no verified PM 6 retrofit for an engine or if available retrofits cannot be 7 safely installed. 8 The regulation never requires any turnover from 9 small fleets or from public fleets in low population 10 counties. 11 You may hear that the regulation requires 12 turnover to new engines and vehicles and especially to new 13 Tier 4 vehicles. And this is simply not true. If there 14 isn't a suitable engine repower or a used replacement 15 vehicle available, the vehicle is exempt from the turnover 16 requirements. 17 Finally, no vehicle less than ten years old is 18 ever required to be turned over, nor is any vehicles that 19 was recently required to be retrofit. 20 --o0o-- 21 MS. HIROI-ROGOWSKI: This slide shows the 22 counties to which the special attainment area provisions 23 would apply. These counties attain all federal air 24 quality standards and have not been identified as 25 transporting pollution to downwind areas that violate the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 standards. Only fleets that are captive to these 2 counties, this is, that do not operate vehicles outside 3 these counties, are exempt from the NOx part of the rule, 4 including all the turnover requirements. Fleets that 5 operate both inside and outside these counties must 6 continue to meet all the applicable small, medium, and 7 large fleet requirements. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: The proposed regulation also 10 gives special credit for early actions. 11 First, NOx retrofits would count toward meeting 12 the NOx fleet average targets and can be used in lieu of 13 the mandatory BACT turnover requirements. 14 The regulation gives credit for early repowers 15 and turnover. Fleets that have repowered engines in the 16 past would be given credit toward the turnover required 17 under the BACT requirements. 18 Also, fleets that use electric or alternative 19 fuel vehicles in place of diesel vehicles can take credit 20 for that. 21 We've also included some provisions to spur early 22 retrofitting before the first 2010 deadline. Fleets get 23 double credit for any retrofits they install before March 24 1st, 2009. And we're hopeful that this will help build 25 fleets' experience with retrofits and grow the retrofit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 market. 2 Similarly, before 2016, fleets get double credit 3 for electric vehicles. 4 Now, I'd like to explain how enforcement of the 5 regulation would work. 6 --o0o-- 7 MS. HIROI-ROGOWSKI: ARB's enforcement efforts 8 will build on our already robust diesel enforcement 9 program. As proposed, fleets would report their vehicle 10 information to ARB initially in 2009 and then update it 11 annually. Again, there's no fee as part of this 12 reporting. The ARB would issue unique equipment ID 13 numbers which would be displayed prominently on the side 14 of each vehicle. 15 The reporting would allow staff to determine if 16 fleets have met the fleet average targets or complied with 17 the BACT requirements. 18 When ARB inspectors are in the field using the 19 equipment ID number, they'd be able to verify the accuracy 20 of the reported information for the vehicles being 21 inspected. They'll be able to tell if a vehicle doesn't 22 have the right engine or the retrofit claimed. 23 Also, if ARB inspectors find vehicles subject to 24 the regulation that aren't labeled, then that will 25 immediately indicate noncompliance. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 Staff recognizes that enforcement of the 2 regulation will be extremely important to provide a level 3 playing field for fleets who are making a significant 4 financial investment to comply. Because the regulation 5 would affect over 8,000 fleets and so many vehicles -- 6 around 180,000 -- ARB plans to increase enforcement staff 7 to enforce the rule. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: Staff also plans to develop 10 and conduct an extensive ongoing outreach program. This 11 campaign will build on the outreach staff has already done 12 throughout development of the proposed regulation. Staff 13 committed to continue to work with industry groups to 14 inform their members about the regulation. 15 Staff would hold training workshops across the 16 state and invite manufacturers of verified diesel emission 17 control systems to share information about their products 18 with affected fleets. 19 Staff will provide training and educational 20 materials at the workshops and on our website to help 21 fleets understand the choices they will face with respect 22 to finding the most cost-effective path to compliance. 23 Staff will also operate a toll-free number set up to 24 answer questions about the regulation. 25 Staff also plans to develop and provide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 electronic tools for compliance planning that will allow 2 fleets to determine what retrofits are available for their 3 vehicles and to experiment with various possible 4 compliance paths. In addition, staff plans to develop and 5 provide electronic reporting forms that will allow fleets 6 to report their vehicles online and demonstrate how 7 they've met the fleet average or BACT requirements. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: Because the regulation would 10 affect so many stakeholders in so many different 11 industries and agencies, and because it affects such a 12 diverse set of vehicles, the regulation was designed to 13 provide maximum flexibility and is therefore by necessity 14 somewhat complex. And staff has devoted a long time to 15 its development. 16 The first workshops for the regulation were held 17 two and a half years ago, in November of 2004. Staff 18 released the first draft regulatory concepts in July of 19 2005, proposing a PM-focused regulation without any fleet 20 averaging provisions. 21 In January 2006, staff added a fleet average 22 option. 23 In July 2006, staff added provisions specifically 24 targeting NOx reductions. 25 And in December 2006, the first draft of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 regulatory language was released. 2 --o0o-- 3 MS. HIROI-ROGOWSKI: Over the course of 4 regulatory development, staff held 13 public workshops, 5 the final four of which were in total attended by over a 6 thousand people. 7 Staff also held work group meetings to discuss 8 specific topics, such as the survey, emissions inventory, 9 and enforcement. 10 Staff met with fleet owners and stakeholders in 11 over 45 meetings. And staff met with other interested 12 agencies such as Caltrans and California OSHA. 13 And staff send over 376,000 mailings to potential 14 owners of affected vehicles, such as contractors, 15 landfills, recycling facilities, mines, airports, and 16 owners of portable equipment. These mailings included one 17 to every registered contractor in the state. 18 Although we can never guarantee that every 19 affected person knows about the proposal -- some people 20 don't read their mail or participate in industry groups -- 21 staff has truly made every effort to inform the affected 22 public and allow them to participate in regulation 23 development. 24 --o0o-- 25 MS. HIROI-ROGOWSKI: During the course of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 regulation development, staff considered a number of 2 alternative regulation structures. 3 We considered relying on natural turnover to 4 gradually clean the fleet. But that would allow too many 5 emissions to continue for too long and wouldn't meet the 6 Board's public health goals or SIP commitments. 7 We considered proposing a PM-only regulation, 8 either a BACT regulation or a fleet average regulation. 9 But that wouldn't achieve the needed NOx reductions. 10 We considered simply requiring phase out of the 11 dirtiest engines. But that wouldn't give fleets the 12 flexibility to consider retrofits and wouldn't reduce PM 13 emissions as much as our proposal. 14 Similarly, we considered mandatory NOx and PM 15 retrofits. But, again, that wouldn't give fleets the 16 flexibility to consider repowers or accelerating purchase 17 of cleaner vehicles. 18 --o0o-- 19 MS. HIROI-ROGOWSKI: Throughout the work group 20 and workshop process, staff made a number of changes at 21 the request of stakeholders. For example, the idea of a 22 fleet average came from stakeholders who wanted the 23 opportunity to find the most efficient cost-effective way 24 to lower their emissions. 25 Also, staff asked added special provisions giving PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 credit for electric vehicles and alternative fuel 2 vehicles. 3 Staff delayed the initial compliance dates, which 4 were initially set to begin in 2009, as a result of 5 stakeholder concerns, and gave medium fleets three more 6 years to allow them more opportunity to pursue incentive 7 funding. 8 After stakeholders expressed concerns regarding 9 the high cost of accelerated turnover and the preference 10 for doing more turnover once Tier 4 engines are available, 11 staff softened the early year NOx targets and required 12 less turnover in early years. 13 After hearing from a number of fleets that had 14 done early repowers or started moving Tier 0 engines out 15 of their fleets, either on their own or through the Carl 16 Moyer program, staff added a number of provisions to be 17 sure such fleets get credit for that early action. 18 Now that I've discussed what the regulation would 19 require and how it was developed, let me talk more about 20 what the regulation would mean for fleets. 21 --o0o-- 22 MS. HIROI-ROGOWSKI: Each fleet is different, 23 having different ages and types of vehicles. 24 This chart shows the distribution of fleets by 25 average vehicle age. The average age of most fleets is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 between 8 and 16 years. A small percent is very new, less 2 than four years old, and a small percent is very old, four 3 percent are over 20 years old. The regulation will mean 4 different things for fleets that typically operate and 5 purchase newer vehicles versus those who typically operate 6 older vehicles. 7 --o0o-- 8 MS. HIROI-ROGOWSKI: The oldest medium and large 9 fleets will be unable to meet the fleet average targets in 10 2010 and 2013, respectively, and will need to meet the 11 BACT turnover and retrofit requirements, at least in early 12 years. 13 The oldest small fleets will also need to be 14 doing the 20 percent retrofit each year in the first few 15 years beginning in 2015. 16 Middle-aged fleets will initially need to do some 17 retrofitting and turnover but not the maximum amount. 18 The youngest fleets that normally turn over the 19 fastest, like some rental fleets, will likely meet the 20 targets without any additional actions. Some older rental 21 fleets will meet the NOx targets normally but need to do 22 some retrofitting to meet the PM targets. 23 Because some companies may choose to move dirty 24 vehicles out of their fleets and rent instead, the rule 25 may bring rental companies some additional business. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 Now, to give the Board a feel for what the rule 2 would actually require, let me go over two real fleets 3 that shared data with us. These two fleets represent 4 either end of the spectrum of fleet age; the first being a 5 very old fleet and the last being a rather new one. 6 --o0o-- 7 MS. HIROI-ROGOWSKI: The first example fleet is 8 an older earth-moving fleet, with 88 engines totaling 9 nearly 40,000 horsepower. Only about 4 percent of fleets 10 are as old as Example Fleet 1. This fleet consists of 11 high horsepower vehicles, like scrapers, tractors, and 12 dozers. Its average engine horsepower is over 400 13 horsepower. The average vehicle age is 21 years, and 14 normally the fleet turns its vehicles over at only two 15 percent per year. In 2008, this fleet is nearly 90 16 percent Tier 0 and represents a worst-case compliance 17 example. 18 --o0o-- 19 MS. HIROI-ROGOWSKI: So here are the compliance 20 actions the proposed regulation would require of Example 21 Fleet 1. Because it starts out with such old, long-lived 22 vehicles, this fleet would be doing the BACT turnover 23 until 2020. It would comply by continuing to buy used 24 vehicles, repowering engines, and applying exhaust 25 retrofits. It would need to raise its turnover rate from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 2 percent to about 8 percent annually. 2 The yellow bars show the percent of horsepower 3 retrofit each year, and the red bars show the percent 4 turned over. While the fleet would meet the PM targets in 5 2014 and not have to retrofit any additional vehicles 6 until 2020, it wouldn't meet the NOx fleet average targets 7 until 2020. 8 So after taking these actions, let's see where 9 this fleet ends up in 2020. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: In 2020, this is what the 12 tier distribution, for example, Fleet 1 would look like. 13 It would have eliminated all its vehicles with Tier 0 14 engines and would have moved nearly half its fleet to 15 vehicles with Tier 4 engines. It would still have a 16 sizable amount of vehicles with Tier 2 and 3 engines, and 17 these engines would all need to have PM retrofits. 18 I would like to point out that over half the 19 vehicles at the end of the rule for this example fleet, 20 which started out nearly 90 percent Tier 0, are Tier 1, 2, 21 or 3. Tier 1, 2, and 3 technology is available today. 22 You may hear from some that the technology to meet final 23 compliance with the rule is unavailable now, but that's 24 not true. 25 (Laughter.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 MS. HIROI-ROGOWSKI: Example Fleet 1 is a 2 worst-case fleet because its normal business practice is 3 to operate very old vehicles. Let's now consider an 4 actual younger fleet. 5 --o0o-- 6 MS. HIROI-ROGOWSKI: Example Fleet 2 is a newer 7 general contractor fleet, with 758 engines totaling 8 182,000 horsepower. It includes a wide variety of 9 equipment types, such as tractors, scrapers, pavers, 10 loaders, and backhoes. Its average engine size is smaller 11 than that of example 1, about 240 horsepower. It starts 12 out with an average vehicle age of seven years and 13 normally turns over to new vehicles at a rate of about 7 14 percent of its horsepower per year. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: Here are the compliance 17 actions the proposed regulation would require of Example 18 Fleet 2. It would meet the NOx targets in all years just 19 with its normal turnover. It would retrofit about 20 20 percent of its fleet in 2010 and 2012, and then not have 21 to do any more retrofits until 2020 and 2021. 22 Overall, the fleet would comply simply by 23 installing PM retrofits. 24 --o0o-- 25 MS. HIROI-ROGOWSKI: In 2020, Fleet 2's tier PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 distribution would consist of all Tier 3 and 4 vehicles. 2 Because Fleet 2 normally turns over so quickly, its tier 3 distribution in 2020 looks just as it would without the 4 proposed regulation. But the Tier 3 vehicles would need 5 to have PM retrofits. 6 Now that I've described the proposed regulation 7 and illustrated what it would mean for two fleets, I'd 8 like to take a minute to debunk some of the myths that 9 have been circulating regarding the proposed regulation. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: First, some have claimed and 12 may claim today that the regulation will devastate small 13 businesses. Staff has gone to great lengths to build 14 flexibility and additional time into the regulation for 15 small business fleets. And with this time come additional 16 opportunities for the use of incentive money to comply. 17 Such fleets are not subject to engine replacement 18 requirements and are only subject to a gradual ten-year 19 phase in of PM retrofits starting in 2015. I have had 20 many calls from small business owners about the 21 regulation. And when they recognized the requirements 22 don't start until 2015 and require no engine replacement, 23 they are typically greatly relieved. 24 Many have been led to believe they would have to 25 replace all or most of their existing fleet in the next PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 three years to meet the fleet averages. This is not true. 2 In truth, the safety valve provisions only require that 3 progress be made to clean up the fleet each year, and then 4 only if the technology is available. And fleets never 5 have to do more than the maximum turnover and retrofits. 6 Others have interpreted the turnover requirements 7 in the regulation to mean that they must buy brand new 8 equipment. In truth, the regulation would not require 9 turnover at all if a clean used vehicle or suitable engine 10 repower is not available. 11 Some have worried that compliance will be 12 impossible because PM retrofits will not be available. 13 And in reality, retrofitting is not required if a retrofit 14 is not available. 15 Finally, some have assumed that all existing 16 vehicles would have to be replaced with Tier 4 engines to 17 comply with the regulation. As we've shown, fleets can 18 meet the final fleet emission targets with the majority of 19 the engines being Tier 1, 2, and 3 engines, technology 20 that's available today. If NOx retrofits become 21 available, even fewer Tier 4s would be needed. 22 Overall, staff has made great efforts to provide 23 the maximum flexibility and provide credit for any viable 24 actions fleets take to reduce emissions. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 MS. HIROI-ROGOWSKI: We've talked about the 2 regulation's provisions and what it would mean for real 3 fleets. Let's turn now to the total cost and benefits 4 predicted for the state as a whole. 5 --o0o-- 6 MS. HIROI-ROGOWSKI: This chart shows the diesel 7 PM emission benefits expected from the regulation. The 8 black line is the base line without the regulation and the 9 orange line is with the regulation. You can see that the 10 regulation would exceed significant PM benefits and that 11 it achieves the 2020 goals of the diesel risk reduction 12 plan. The regulation would reduce diesel PM 6.9 tons per 13 day in 2015 and 5.2 tons per day in 2020, which represents 14 a 60 percent and 74 percent reduction below the levels 15 expected without the regulation. 16 --o0o-- 17 MS. HIROI-ROGOWSKI: This chart shows the NOx 18 emission benefits expected. The black line is the 19 baseline without the regulation and the blue line is with 20 the regulation. The regulation would reduce diesel NOx 21 emissions by 30 tons per day in 2015 and 48 tons per day 22 in 2020, which is a 13 percent and 32 percent reduction, 23 respectively, below the levels expected without the 24 proposed regulation. 25 So what do these emission reductions mean for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 public health? 2 --o0o-- 3 MS. HIROI-ROGOWSKI: The proposed regulation is 4 expected to prevent 4,000 premature deaths as well as over 5 a hundred thousand cases of asthma and many other health 6 impacts. Four thousand saved lives is nearly double the 7 total lives saved from all previous in-use diesel control 8 measures combined. 9 Those health benefits translate into dollar 10 savings as well: 18 to $26 billion in health care and 11 premature death costs. 12 The public health impacts of the proposed 13 regulation are immense. 14 --o0o-- 15 MS. HIROI-ROGOWSKI: Just as the overall benefits 16 of the proposed regulation are significant, so are the 17 total costs. Staff estimated the total cost of the 18 proposed regulation to be between three and three and a 19 half billion dollars. These are large numbers. But to 20 put them in perspective, the cost imposed on the 21 construction industry is equivalent to an increase in only 22 .3 percent per year in statewide construction costs. 23 (Laughter.) 24 MS. HIROI-ROGOWSKI: You may hear later today 25 that staff have greatly underestimated these costs, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 that the actual costs are in excess of 13 billion. 2 However, as I'll discuss later, even the industry-paid 3 consultant who came up with the $13 billion dollar number 4 calls that number, quote, "just one potential cost 5 estimate," and acknowledges that it represents a, quote, 6 "bounding" cost estimate when certain assumptions are 7 made. 8 Also, the proposed regulation is within the 9 cost-effectiveness range of previous measures adopted by 10 the Board. 11 --o0o-- 12 MS. HIROI-ROGOWSKI: This chart shows the cost 13 expected from the regulation in each year. You can see 14 how the highest costs occur in the first three years. The 15 yellow bars are retrofit costs, the red are repower, and 16 the blue are accelerated turnover to newer vehicles. 17 Overall, costs are about evenly split between 18 retrofit and repower and accelerated turnover. Note that 19 the number of repowers estimated is fairly small and 20 represents only about two percent of all non-retrofit 21 costs. 22 --o0o-- 23 MS. HIROI-ROGOWSKI: The construction industry 24 has questioned staff's cost analysis and offered their own 25 cost estimate to significantly higher. And because of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 this, I would like to take a few minutes to tell you more 2 about how staff estimated the costs. 3 Staff included costs for the early purchase of 4 new or used vehicles, engine repowers to cleaner engines, 5 and exhaust retrofits. The analysis included expected 6 higher costs for Tier 4 engines and some reduced value of 7 Tier 0 vehicles after the regulation takes effect. Staff 8 also included costs associated with fuel economy loses 9 from retrofits, filter maintenance costs, reporting costs, 10 and vehicle down time. 11 Finally, we believe the staff estimate is 12 somewhat conservative because a number of cost savings, 13 such as for decreased maintenance costs for new vehicles 14 and engines, were not included in staff's analysis. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: The staff's analysis 17 evaluated compliance actions and costs for 200 actual 18 California fleets who provided data regarding each 19 vehicle, including model year, horsepower, and vehicle 20 type. These fleets in total had over 10,000 vehicles. 21 We compared the costs these fleets would face 22 with the regulation as proposed compared to the costs 23 associated with the fleets' current vehicle purchasing 24 practices. The analysis modeled fleets that would 25 normally buy new vehicles as well as those that would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 normally buy used. 2 To estimate statewide costs, we scaled these up 3 to represent all the fleets and vehicles in the state. 4 --o0o-- 5 MS. HIROI-ROGOWSKI: This graph illustrates how 6 crawler tractor prices change with age. To put the graph 7 in context, crawler dozers commonly range anywhere from 50 8 to over 800 horsepower, or about $75,000 to $1.2 million 9 new. 10 However, like cars and trucks, they lose a 11 majority of their value in the first five years. As the 12 graph shows, crawler tractors lose about 50 percent of 13 value after just five years. So buying used, cleaner 14 equipment -- cleaner replacement vehicles is a viable 15 strategy to comply with the regulation. 16 Staff collected over 2000 vehicle prices for 19 17 equipment types to better reflect cost impacts of early 18 vehicle replacements on individual fleets with different 19 equipment types. 20 --o0o-- 21 MS. HIROI-ROGOWSKI: These are the costs staff 22 used for retrofits. They are average Level 3 retrofit 23 costs. As I will discuss later, Level 3 retrofits provide 24 the highest level of PM control. We estimated that about 25 two-thirds of the systems used would be relatively PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 high-priced actively regenerated systems and about 2 one-third would be lower cost passively regenerated 3 systems. 4 These cost estimates were developed from 5 manufacturer quotes for systems sized to various 6 horsepower engines. You may here today that some think we 7 have underestimated retrofit costs. However, these costs 8 are consistent with the hundreds of retrofit quotes 9 submitted by California dealers to ARB this spring as part 10 of the $25 million funding for public agencies to purchase 11 low-polluting construction equipment. Staff believes 12 these values are a good representation of average retrofit 13 costs today. And in the future we expect there will be 14 more retrofit choices available at lower costs. 15 --o0o-- 16 MS. HIROI-ROGOWSKI: As with previous 17 regulations, staff expects much of the costs to be passed 18 through to customers. The customers of construction firms 19 include developers, home builders, government agencies. 20 However, in evaluating a proposed regulation's 21 economic impact, ARB staff has traditionally used a change 22 of greater than 10 percent in a firm's profit or return on 23 equity as a benchmark above which the proposed regulation 24 would be imposing a significant economic impact on the 25 firm. Using this criteria, staff evaluated the various PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 types of industries affected by the proposed regulation 2 and found that 60 to 80 percent of fleets would be 3 expected to be able to comply with the regulation without 4 experiencing more than 10 percent decrease in profits. 5 This analysis assumed that no costs would be 6 passed through to customers. In reality, we expect most 7 fleets will be able to pass at least some costs on to 8 customers. Even industry's own estimates assume that at 9 least half of such costs can be passed through. 10 Staff recognizes that costs for some fleets, 11 particularly the older, high horsepower fleets like we saw 12 in Example fleet One previously, will exceed 10 percent in 13 profits. 14 To remaining profitable, these fleets will have 15 to pass through costs to customers in order to pay for 16 compliance. 17 To offset some of the economic impacts, staff 18 worked to set the compliance dates of the regulation such 19 that there is continued opportunity for small and medium 20 fleets to obtain Moyer incentive funding. 21 Now, let's turn to technological feasibility. 22 --o0o-- 23 MS. HIROI-ROGOWSKI: The Board may hear concerns 24 today that the regulation is not technologically feasible, 25 that there won't be enough vehicles to satisfy the demands PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 of the regulation, or that the retrofits required will not 2 work. We expect there will be a number of viable options 3 for fleets to clean up their emissions. However, at 4 stakeholders' requests, we have structured the regulation 5 to guarantee if the expected technology doesn't become 6 available or there are any unexpected supply limitations, 7 fleet owners would not be penalized. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: Diesel PM retrofits for 10 off-road vehicles are already in use and, in fact, are 11 already required by a number of jurisdictions. 12 Recently adopted in New York City, local law 77 13 requires all vehicles under city contract and all 14 city-owned construction vehicles to install best available 15 PM devices by 2010. Most of those vehicles will be 16 retrofit before our regulation is even proposed to begin. 17 Here in California, they have been required at 18 Los Angeles airport as part of the LAX Community benefits 19 agreement. At LAX, 12 construction vehicles have been 20 retrofit with diesel particulate filters. 21 Nationally, the Mining Safety and Health 22 Administration has required controls on diesel equipment 23 used in coal mines since 2002. 24 Since 2003, diesel particulate filters have been 25 required on all large construction projects in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 Switzerland. 35,000 diesel particulate filters have been 2 retrofit on to construction vehicles in Switzerland and 3 Germany, and some have been in use there for over 4 ten years. 5 In New York, at the Croton drinking water plant 6 project, 25 loaders, excavators, dozers, drill rigs, and 7 off-road trucks have been retrofit with DPFs. 8 So the use of retrofits on off-road and 9 construction vehicles is not unprecedented or new. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: The proposed regulation only 12 requires retrofits if they are verified for the specific 13 engine application by ARB. Verification ensures the 14 devices achieve the advertised emission reductions and are 15 durable. To be verified, manufacturers must want the 16 device itself and warrant against any engine damage caused 17 by the device. 18 PM emission reductions are verified to one of 19 three levels: Level 1 is for devices that achieve 25 20 percent more in reductions, such as oxidation catalysts; 21 Level 2 for those like flow-through filters that achieve 22 50 percent and up; and Level 3 for devices that achieve 85 23 percent or more in reductions. Level 3 devices are 24 typically diesel particulate filters, or DPFs, that 25 capture diesel soot before it can be released to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 atmosphere and then burn it off, that is, regenerate. 2 DPFs can be passively regenerated through the use of a 3 catalyst on the filter substrate or actively regenerated 4 by heating the filter. 5 This regulation does not give credit for the use 6 of Level 1 devices, since significantly more effective 7 devices are available today. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: There are already three 10 Level 3 systems verified by ARB for use in off-road 11 vehicles. All are actively regenerated DPFs, meaning they 12 are not dependent on higher exhaust temperature to work. 13 Staff expects that more systems, including 14 passively regenerated systems, will be verified once the 15 regulation is adopted and there is more of a certain 16 market for the devices. As I'll discuss next, ARB is 17 coordinating a demonstration project to help spur the 18 verification of more devices. 19 --o0o-- 20 MS. HIROI-ROGOWSKI: ARB is coordinating a joint 21 effort with the South Coast air Quality Management 22 District and the MSRC. The South Coast MSRC has committed 23 a million dollars in funding to the off-road showcase 24 demonstration. 25 The goals of the showcase are to achieve early PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 emission reductions and encourage verification of more 2 devices. The showcase has already been announced and 3 manufacturer deadlines for participation are at the end of 4 this month. To date, nine different manufacturers with 5 multiple products have already applied to participate, and 6 numerous fleets, both public and private, have applied. 7 Staff expects retrofits through the showcase to be 8 operating this fall. 9 We expect the showcase to allow manufacturers to 10 gain more experience with off-road retrofits, while 11 simultaneously allowing fleets to gain experience with 12 retrofits before they are required. 13 Staff is confident that the retrofit provisions 14 of the regulation are technologically feasible and has 15 built provisions into the regulation so that it never 16 requires the impossible. That is, retrofits are never 17 required if none are verified or if they can't be safely 18 used. 19 --o0o-- 20 MS. HIROI-ROGOWSKI: While not expected to be 21 widely utilized, one option for fleets to comply with the 22 proposed regulation is repowering with cleaner engines. 23 The Moyer program has already funded about 600 off-road 24 engine repowers in vehicles like scrapers, loaders, 25 compacters, tractors, excavators, and forklifts. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 horsepower of repowered engines funded by the Moyer 2 program has ranged from less than 100 horsepower to 725 3 horsepower. 4 Repower to Tier 1 is relatively straightforward 5 and to Tier 2 is usually possible. Repower to Tier 3 is 6 more complex but often possible. Because of the 7 advantaged emission controls expected to be included in 8 Tier 4 engines, repower to Tier 4 is not expected to be 9 widely feasible. Repowers to on-road certified engines 10 are possible for certain vehicles, but were not modeled in 11 our cost analysis. 12 --o0o-- 13 MS. HIROI-ROGOWSKI: Some stakeholders have 14 raised concerns that the regulation's turnover 15 requirements will overtax the supply of new and used 16 vehicles. It's important to keep in mind that the 17 regulation adds less than 3 percent more turnover per year 18 than would be expected through normal turnover for the 19 statewide fleet as a whole. 20 This 3 percent translates into about 5400 21 replacement engines or vehicles per year in California. 22 The 5400 number is very small, less than 2 23 percent, when compared to the over 320,000 new off-road 24 vehicles sold in the country each year. 25 Also, there are already today over 30,000 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 clean -- meaning Tier 2 or better -- used vehicles for 2 sale on each day in the U.S. So even if the regulation 3 increased the demand for used vehicles in California by 4 several thousand, there are still sufficient quantities 5 available. 6 Finally, if there's no repower or used vehicle 7 available, the regulation's turnover provisions are 8 waived. Again, the regulation never requires the purchase 9 of new vehicles, even if they are available. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: I've gone over how the 12 proposed regulation is designed, it's cost and benefits, 13 and why staff believes it's technologically feasible. I 14 would now like to spend some time discussing three issues 15 the Board may hear about today from stakeholders, and 16 three alternative proposals various stakeholders have 17 suggested. 18 --o0o-- 19 MS. HIROI-ROGOWSKI: The first issues is that 20 some claim that staff has underestimated the cost of job 21 loss expected from the regulation. One industry-paid 22 consultant has released a report claiming that the 23 regulation will cost $13 billion rather than the 3 24 billion. And this $13 billion figure has been widely 25 circulated in the press. However, as I previously stated, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 this $13 billion estimate is an upper bound and the same 2 analysis using different assumptions yielded a cost figure 3 half as much. The same consultant claims the regulation 4 will cause 11,000 to 34,000 jobs in the construction 5 industry to be lost. 6 Allow me to respond to these claims. 7 In order to better understand how these costs 8 were estimated, over the last month staff has repeatedly 9 asked the consultant for a copy of the model used to 10 develop this cost estimate and details of how the 11 calculations were done. But we have not received the 12 requested information. However, we have the consultant's 13 report that includes some of the assumptions, and we 14 suspect we know what some of the key sources of the 15 discrepancy are. 16 --o0o-- 17 MS. HIROI-ROGOWSKI: We evaluated the consultant 18 methodology used to arrive at 13 billion, and it's clear 19 that many key inputs were selected such that they 20 unrealistically inflate the cost estimate. 21 First, the consultant incorrectly assumed that 22 all fleets must do the maximum turnover and retrofitting 23 every year; that is, 8 to 10 percent turnover and 20 24 percent retrofits. In reality, ARB staff analysis of 25 actual individual fleet data from 200 private and public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 fleets, including 25 CIAQC and San Diego EGCA member 2 fleets, indicates that many fleets would likely meet the 3 fleet emission targets in the earlier years of the 4 regulation. Likewise, a vast majority of fleets are 5 estimated to meet fleet targets well before the end of the 6 regulation. Recall that half the fleets meet the NOx 7 targets for 2010 with no additional turnover, and neither 8 of the two example fleets we saw were doing the full 8 9 percent turnover and 20 percent retrofits throughout the 10 whole course of the regulation, even including the worst 11 case, very old example fleet. 12 Second, the consultant analysis ignored the 13 purchase of used equipment as a way to comply. Many 14 fleets purchase used vehicles today, and the purchase of 15 used Tier 2 and newer vehicles will be a major part of how 16 many fleets will comply. 17 Third, the analysis neglected that the vehicles 18 purchased early to comply with the regulation would 19 eventually be added to the fleet in the future, greatly 20 overestimating costs. 21 Fourth, the analysis further exaggerated the cost 22 of PM retrofits that would be required by applying 23 retrofit costs for higher horsepower engines, those 175 to 24 400 horsepower, to the more numerous small engines under 25 150 horsepower. This was further exaggerated by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 arbitrarily assuming that no engines over 150 horsepower 2 would be retrofit. The systems verified in California 3 today generally are most cost effective for engines 4 ranging from 100 to 350 horsepower. And, in fact, 5 hundreds of off-road engines over 150 horsepower have 6 already been retrofit. 7 --o0o-- 8 MS. HIROI-ROGOWSKI: Similarly, staff believes 9 the industry job loss estimate is too high. It's based on 10 a simplistic assumption that a certain number of jobs 11 would be lost per dollar of construction revenue lost. 12 And it incorrectly assumes the entire cost of the 13 regulation would fall on the construction industry alone. 14 Recall that the construction industry owns only half the 15 vehicles affected by the regulation. It also ignored that 16 new jobs would be created to support the retrofit, 17 repower, and equipment turnover elements of the proposed 18 regulation. 19 In contrast, ARB staff in consultation with 20 University of California, Berkeley, researchers assessed 21 the economic impacts of the proposed regulation. Staff 22 used a computable general equilibrium model of the 23 California economy called EDRAM. EDRAM is a peer-reviewed 24 model used by the ARB, the California Energy Commission, 25 and the Department of finance. It was used to underlie PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 the joint ARB/CEC Petroleum Dependency Report to the 2 legislature, which the Board approved in 2003. And more 3 recently, EDRAM was used to support ARB's greenhouse gas 4 emission from motor vehicles staff report for AB 1493, 5 which the Board approved in 2004. It's now being used for 6 the economic analysis of the 2007 SIP. 7 Using this model, staff found that in 2010, the 8 year of the regulation's maximum cost, the proposed 9 regulation would reduce California employment by 10 approximately 1,000 jobs, which on the scale of the 11 state's economy is small, less than 1/100th of a percent 12 of total jobs. Recall that this loss is in the context of 13 the construction industry adding five percent in jobs, or 14 about 50,000 jobs, each year between 2003 and 2006. So 15 really the regulation would just mean fewer jobs added. 16 --o0o-- 17 MS. HIROI-ROGOWSKI: The second issue is that 18 some claim the cost of the regulation on some fleets is 19 too high, can't be passed on to customers, and will drive 20 fleets out of business. 21 Staff's been very cognizant of the potential 22 economic impact of the regulation on business, 23 particularly small business, throughout development of the 24 regulation, and has built in a number of provisions to 25 soften that impact. Let me discuss that further. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 --o0o-- 2 MS. HIROI-ROGOWSKI: From a pure air quality 3 perspective, it would be best to require fleets to 4 immediately turn over to the cleanest engines available 5 and immediately apply exhaust retrofits. However, staff 6 recognized that such a huge investment in such a short 7 time would be financially unbearable by many companies. 8 Staff sought to find a balance between achieving the 9 maximum near-term emission reductions possible without 10 imposing too heavy a financial burden on affected fleets. 11 We structured the regulation to push fleets to 12 make progress toward clean air but at a rate that would be 13 affordable to most. As I have already discussed, while 14 staff believes the financial impact from most fleets will 15 be manageable even if they do not pass any cost on to 16 their customers, other fleets will need to pass some costs 17 on by charging more for their services. Even industry's 18 own consultant that came up with the $13 billion cost 19 estimate recognizes that half the costs are likely to be 20 passed through. 21 The soften the financial impact on small 22 business, staff has given small businesses that are small 23 fleets five more years to begin to comply and exempted 24 them from all turnover requirements. 25 Similarly, medium fleets were given three more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 years to begin to comply, allowing them to pursue 2 incentive funding. 3 Overall, although you'll hear from some today 4 that think we are imposing too high a cost and others that 5 we've not pushed hard enough, staff feels that the 6 proposed regulation strikes the best balance between 7 achieving the maximum air quality benefits, while not 8 pushing further than industry can bear. 9 --o0o-- 10 MS. HIROI-ROGOWSKI: The third issue concerns 11 bonding. Bonds are issued by an insurance company and 12 guarantee to a project owner that a contractor will 13 complete the work as specified in the contract and that 14 the contractor will paid its subcontractors. Bonding is 15 required on public and many large private construction 16 projects. 17 The bonding capacity of an individual contractor 18 is affected by the contractor's working capital, the 19 difference between a contractor's current assets and 20 liabilities. Because the proposed regulation will require 21 contractors to accelerate turnover to newer vehicles and 22 to purchase exhaust retrofits, it will cause some 23 contractors to borrow money at higher levels than they do 24 today, thereby reducing their working capital and reducing 25 their bonding capacity. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 Some stakeholders are concerned that this 2 reduction in bonding capacity could seriously limit the 3 public jobs that some contractors can pursue because they 4 wouldn't be able to obtain their required bonding. While 5 staff recognizes that the regulation could lower some 6 firms' bonding capacity, that effect is mitigated by a 7 number of factors. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: First, many firms do not 10 currently utilize their full bonding capacity. 11 Second, firms that pass a significant portion of 12 costs through to their customers will not have their 13 bonding capacity affected. 14 Third, bonding capacity is based on much more 15 than just working capital. Surety firms that issue these 16 bonds also evaluate firms' reputation, experience, and 17 credit history. So just because a firm has lower working 18 capital, its bonding may not be reduced due to other 19 factors. 20 Finally the bonding issue should not be a problem 21 for small fleets, all of whom are exempt from turnover 22 requirements, and on whom the regulation does not impose 23 any significant costs until 2015. 24 Now that we've talked about the three issues, I'd 25 like to discuss two -- or excuse me -- three alternative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 regulatory proposals that stakeholders have suggested. 2 --o0o-- 3 MS. HIROI-ROGOWSKI: First, many industry 4 representatives and fleets have suggested delaying the 5 regulation by five years. Industry has suggested this 6 would lower the cost and allow implementation to begin 7 after clean Tier 4 engines are available. 8 --o0o-- 9 MS. HIROI-ROGOWSKI: Staff has evaluated this 10 proposal and does not recommend delaying the regulation by 11 five years, because doing so would forfeit enormous 12 emission benefits. As shown on this graph, staff has 13 modeled the industry proposal. And although it would 14 lower costs by half, it would achieve over 80 percent less 15 emission reductions in total. Thus it would prevent many 16 fewer deaths. Also, the industry proposal would mean we 17 do not get emission reductions from the off-road category 18 necessary to meet federal clean air standards. In fact, 19 it would achieve zero emission benefit in 2014, which is a 20 key year for the PM2.5 SIPs. 21 If California fails to adopt a plan that shows 22 attainment of the federal standards on time, the state 23 could face federal sanctions and the loss of 24 transportation funds, including $1.2 billion per year in 25 southern California and 340 million per year in the San PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 Joaquin Valley, as well as the halting of federal 2 transportation projects. 3 --o0o-- 4 MS. HIROI-ROGOWSKI: A number of local air 5 districts, including the South Coast and San Joaquin 6 Valley Air districts, have asked that we strengthen the 7 regulation to achieve more early NOx reductions. They 8 suggest raising the maximum turnover required from 8 9 percent to 15 percent for the dirtiest fleets and 10 tightening the NOx targets, as well as incorporating other 11 elements. 12 --o0o-- 13 MS. HIROI-ROGOWSKI: Staff has evaluated this 14 proposal and determined that while it would achieve modest 15 additional PM2.5 benefits, these benefits would come at a 16 very high price, about an additional $1 billion statewide. 17 And most of this $1 billion cost would be imposed in the 18 first three years, which, as we discussed, is already the 19 period of the proposed regulation's highest costs. Most 20 of the additional cost would fall on the oldest fleets 21 with the greatest number of Tier 0 and 1 vehicles, who 22 will already be bearing a significant portion of the cost 23 of the proposed regulation. Staff feels that this burden 24 would be too great and could be higher than many fleets 25 could bear. Therefore, staff does not recommend PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 strengthening the regulation as the districts propose. 2 --o0o-- 3 MS. HIROI-ROGOWSKI: Because the NOx provisions 4 of the proposed regulation are driven by emission 5 reduction need in the South Coast and San Joaquin Valley, 6 some stakeholders have suggested establishing regional 7 requirements in those air basins. 8 Some have suggested adopting the proposed 9 regulation and then adding additional requirements on top 10 of that for fleets in the South Coast and San Joaquin 11 Valley where additional reductions are needed. 12 Others have suggested eliminating the NOx portion 13 of the regulation for fleets that don't operate in those 14 two basins. 15 In considering a regional NOx strategy, it's been 16 suggested that such region-specific approaches could be 17 structured similarly to the captive attainment area fleet 18 provisions in the proposed regulation. 19 --o0o-- 20 MS. HIROI-ROGOWSKI: Although such a regional 21 approach could have some advantages, targeting NOx 22 reductions where most needed and potentially lowering 23 costs for some fleets, staff did not include it in the 24 proposed regulation because of its many associated 25 challenges. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 First, enforcing such a regional approach would 2 be difficult. It would be hard to prevent fleets that are 3 complying with less strict provisions from entering the 4 South Coast and San Joaquin Valley Air basins. 5 Also, having stricter requirements in South Coast 6 and San Joaquin could encourage fewer fleets to bid for 7 jobs in those regions, thereby potentially isolating those 8 regions and increasing construction costs there. 9 A regional approach would also add complexity. 10 Instead of one uniform state rule with fleet requirements, 11 the rule would become a patchwork of differing 12 requirements. 13 It also could present environment justice 14 concerns and, in fact, could potentially shift NOx 15 pollution away from the South Coast and San Joaquin Valley 16 basins to other regions of the state who also need NOx 17 reductions, just not quite as urgently. In addition, 18 ironically, stricter NOx limits could result in higher 19 diesel PM emissions in the South Coast and San Joaquin 20 Valley than they would see with a uniform statewide rule. 21 In addition, such an approach would not address 22 the fact that other regions of the state transport 23 pollution downwind to South Coast and San Joaquin Valley 24 at times. 25 Finally, such an approach would provide no relief PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 for the many fleets that do operate vehicles in the South 2 Coast and San Joaquin Valley, so it would not address many 3 of the economic concerns industry has with the proposed 4 regulation. 5 That summarizes the major issues and alternatives 6 that have been suggested. I would like to wrap up with a 7 few minor changes to the regulation as originally proposed 8 in the staff report and give staff's recommendation for 9 Board action. 10 --o0o-- 11 MS. HIROI-ROGOWSKI: Since the release of the 12 April 5th staff report, staff has developed a number of 13 changes to make the regulation more flexible and provide 14 clarity. 15 Staff is proposing the option for fleets to count 16 replacement of a lower tier vehicle with a Tier 4 vehicle 17 toward the mandatory retrofit under the BACT requirements 18 so long as the Tier 4 vehicle has a manufacturer installed 19 DPF. 20 Staff is proposing the option for fleets to count 21 gasoline vehicles that replace diesel vehicles in the 22 fleet average. 23 And staff is adjusting the hours-of-use fleet 24 average to ensure equivalent emission reductions. 25 Staff are also proposing additional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 clarifications to the proposed regulation. 2 These changes are included in the Board materials 3 provided and are available to the public on-line and on 4 the table outside this room. 5 --o0o-- 6 MS. HIROI-ROGOWSKI: In closing, staff recommends 7 that the Board adopt the regulation with the proposed 8 minor changes we have discussed. 9 This concludes my presentation. Thank you. 10 (Applause.) 11 CHAIRPERSON SAWYER: Thank you, Hiroi-Rogowski, 12 for carrying this message. 13 Madam Ombudsman, please describe the public 14 participation process that occurred while this item was 15 being developed, and report any concerns or comments you 16 may have to the Board. 17 OMBUDSMAN QUETIN: Thank you. 18 Dr. Sawyer and members of the Board. This 19 regulation has been developed with input from a wide 20 variety of companies and industry: Representatives of the 21 airline, amusement park, cemetery, construction, 22 construction materials, drilling, emission control, engine 23 manufacturing, entertainment, equipment manufacturing and 24 equipment rental, forestry, golf courses, compost, energy 25 services, oil marketing refinery and, finally, the ski PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 industries. 2 Staff began their efforts to develop this rule in 3 the summer of 2004. They held a total of 13 public 4 workshops, as you heard, from November 2004 through March 5 2007. Five of the workshops were held in Sacramento, 6 three in El Monte, two in Fresno, and one each in Los 7 Angeles, San Diego and Riverside. 8 They also held six public work group meetings in 9 Sacramento and El Monte. These were open to the public 10 via call in to teleconference line. 11 Also from December 2004 through March 2007 staff 12 participated in over 45 meetings with stakeholders, fleet 13 owners, and industry groups. 14 On average, 80 to 150 stakeholders attended the 15 work group meetings, and the workshops were attended by 16 approximately 150 to 350 people each. However, as you 17 heard, the final four workshops were attended by over a 18 thousand stakeholders. 19 Attendees included many affected fleet owners as 20 well as representatives of industry associations. Fleet 21 owners included large and small construction firms; rental 22 companies; utilities; landscapers; federal, state, and 23 local government agencies. 24 Early in the process staff sent information and 25 surveys to 79,000 potential owners of vehicles affected by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 the regulation, as well as to over 4,000 mines and solid 2 waste and recycling facilities. 3 Most recently, in February 2007, staff sent a 4 mailing to nearly 3,000 licensed contractors in the state 5 and one to the over 4,000 registered owners to the 6 portable equipment program in the state. 7 In total, our staff sent out over 376,000 8 mailings. 9 The staff report was released for public comment 10 on April 6th, 2007. Notices were posted to the ARB 11 website. Hard copies were made available to the visitor 12 information center at the CAL EPA building and an Internet 13 message was sent to nearly 3,000 subscribers of our list 14 serve. 15 Although the public participation has been 16 significant, there remain many unresolved issues within 17 the affected industries. You will hear from them today as 18 you describe how this regulation will affect their 19 business. 20 Thank you. 21 CHAIRPERSON SAWYER: Thank you very much. 22 The sequence of events is that we will have 23 questions from the Board, and then we will hear from all 24 of you who have come here today. 25 But I think we should take a ten-minute break at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 this time for our court reporter. 2 So we will resume at 10:47. 3 (Thereupon a recess was taken.) 4 CHAIRPERSON SAWYER: We will now resume the 5 hearing. 6 At this point, the Board members have the 7 opportunity to ask questions and to make statements before 8 we begin the public testimony. 9 Do I have any such requests from the Board 10 members? 11 Ms. Berg. 12 BOARD MEMBER BERG: Thank you, staff, for that 13 presentation. I know this is a lot of information. And 14 so I have a couple of questions on the presentation to 15 start out with. And specifically I'd like to go over the 16 example that we have, the compliance example starting with 17 slide 40 and 41. And I would like to know if staff did a 18 cost estimate on this example. 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Yes, Member Berg, we did do cost estimates as part 21 of our assessment. And we looked at both what the fleets 22 would have to do from an internal perspective as well as 23 what the cost impacts of that would be. 24 BOARD MEMBER BERG: And so on this particular 25 example with 88 engines and turning over 8 percent to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 the NOx and 20 percent retrofit to meet the PM, what would 2 be the cost over, let's say, both the lifetime and over 3 the first few years? 4 MS. HIROI-ROGOWSKI: Sorry. We're still 5 conferring with each other to see if we remember the 6 numbers right. 7 This fleet would pay about 140 or $150 per 8 horsepower, which is toward the high end of the range of 9 costs we expect for fleets. And if I recall, the total 10 cost was about $6 million for this fleet. Because I don't 11 have it in my head annually, but we could get that for 12 you. 13 BOARD MEMBER BERG: Yeah, I would like that 14 information, what you can get for me. 15 Also, I need to understand using this example 16 specifically. We have 88 engines totaling 40,000 17 horsepower. So what we're saying is that 8 percent or 352 18 horsepower would be turned over until they meet a fleet 19 averaging for the NOx issue? 20 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 21 Yes, and that's correct. And on slide 41, the 22 next page, we show that that would be by year what they 23 would have to do. And so that stays fairly constant. 24 BOARD MEMBER BERG: Okay. And that's probably 25 about one piece of equipment? If it's a large -- this is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 a large -- this example seems to be larger equipment. 2 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 3 It would be multiple pieces. It should be 4 approximately nine or ten. 5 BOARD MEMBER BERG: Nine or ten pieces of 6 equipment? 7 And then on the 8,000 horsepower to retrofit, the 8 20 percent -- would that be correct, 20 percent on 40,000? 9 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 10 Yes. 11 BOARD MEMBER BERG: Okay. And so how many pieces 12 of equipment would that -- we're looking at nine or ten. 13 That's -- 20 percent of their fleet would be 17 pieces. 14 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 15 Yeah, that's very -- it's in the ballpark. 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: Yeah, that sounds very close to what that 18 particular fleet would be for those first three years. 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Since 20 it's on horsepower, it depends if you retrofit the really 21 big one versus the really small one. But on -- 22 BOARD MEMBER BERG: Well, I was on that same page 23 until we had nine or ten pieces of equipment for 352 24 horsepower. See, that threw me off. I mean we can't have 25 nine or ten pieces of equipment for 352 and then 17 pieces PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 for 8,000. I'm getting a little confused. 2 EXECUTIVE OFFICER WITHERSPOON: No, that was -- 3 I'm sorry. That was nine or ten pieces a year to do the 8 4 percent turnover and then 17 to do the particulate 5 retrofits. 6 BOARD MEMBER BERG: Oh, 3500 at 8 percent? 7 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 8 Yes. 9 BOARD MEMBER BERG: Thank you very much. 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 WHITE: And that's -- the eight or nine is an average. 12 Obviously some pieces may have horsepower a little higher 13 and a little lower. So that exact number may fluctuate 14 each year and that's -- the fleets have the ability to 15 kind of look at what's the best strategy to approach each 16 year on what they would like to either reap -- or turn 17 over or retrofit. So there's some variability in there. 18 But we're kind of talking some averages. 19 BOARD MEMBER BERG: And was this company -- I 20 don't want this inform -- I'm not looking for a number. I 21 want to protect the confidentiality of the company that 22 shared this example with us. 23 But were you also able then to determine, looking 24 at the cost and their income, that fit your profile of 25 about ten percent? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 2 WHITE: No. We did not receive any of the financial 3 information on this company. It was not provided to us. 4 Throughout the process we did make several repeated 5 requests through our workshop process for companies that 6 would be willing to. As you can imagine, it's information 7 that's very closely held. 8 BOARD MEMBER BERG: Absolutely, it's 9 confidential. 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 WHITE: So we were not able to see what these costs would 12 mean relative to either the revenues or the profitability 13 of this company. 14 BOARD MEMBER BERG: Okay. Then also, can you 15 just walk through for me, on purchasing cleaner used 16 equipment. If we go from a Tier 0, let's say, to buy a 17 Tier 1, what is the calculation on how they are going to 18 meet -- in this example that we have on the 8 percent, so 19 it's 3500 horsepower. Then how do you calculate how much 20 credit you get on that 3500 for purchasing an additional 21 piece of equipment or trading a piece of equipment out. 22 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 23 WHITE: The regulation has in it several tables which 24 assign emission factors based on the age and horsepower of 25 the vehicle. And so there are equations. And one of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 tools we've had available throughout the process and will 2 continue to refine and make available is a calculator for 3 fleets to utilize to see how a change between vehicles 4 will impact their fleet average and so that they can look 5 to see what is the best mix of vehicles that they have 6 that they think make sense to replace either because of 7 the age, what they anticipate in buying over the next 8 several years. It will require fleets to be somewhat 9 forward thinking in ways that they may not be used to 10 being today, thinking several business cycles ahead. 11 But there's a -- it gets back to there's a table 12 and there's a tool available to the fleets to see how this 13 change and their vehicle makeup will impact their fleet 14 average. 15 BOARD MEMBER BERG: And we're comfortable on the 16 fleet average? We calculated the fleet average number 17 based on emission inventories that we received? Is that 18 how we calculated where the average is starting? 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: The fleet average is based on the existing vehicle 21 population and the age of that population. And the graph 22 that we had up there looked at where we expect -- what the 23 fleet average is that we've included in the regulation 24 that would go in time. And that was, if you recall, that 25 there were two lines for NOx, and the top one was the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 baseline. And what that is is that's a reflection using 2 the values in the regulation of how that number would 3 define with time on its own through normal attrition. And 4 then the lower line was where it would go in the presence 5 of the regulation. And that the delta is where that 6 benefit -- emission benefit arrives from. 7 BOARD MEMBER BERG: Okay. Thank you. 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 9 WHITE: You're welcome. 10 BOARD MEMBER BERG: Mr. Chairman, I'd like to be 11 able to make a statement right before the public comment 12 begins. 13 CHAIRPERSON SAWYER: Yes, I'll come back to you 14 for that. 15 BOARD MEMBER BERG: Thank you. 16 Ms. D'Adamo. 17 CHAIRPERSON SAWYER: Ms. D'Adamo. 18 BOARD MEMBER D'ADAMO: Thank you. 19 A couple of questions and then a comment. 20 Would the fleet owner be able to switch from the 21 various options year to year, the compliance options? 22 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 23 WHITE: Yes, yes. Fleets always have the option of either 24 meeting the fleet average or doing simply the 25 straightforward turnover requirements. So it is always an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 either/or. They never have to meet both, but they have 2 the ability to use one or the other. We recognize that 3 some fleets -- the fleet average is more complex, and some 4 fleets may find that as just more work than they'd like to 5 do. They'd like a more simpler prescriptive approach: 6 "If I do this, then I am good for a year." So they can do 7 either/or. 8 In any of the options, whether they would like to 9 replace the vehicle with a newer used vehicle, repower the 10 vehicle, put a retrofit on, all those are always available 11 and it will meet either requirement for the fleets to do. 12 BOARD MEMBER D'ADAMO: Okay. And then slide 13 number 27. For someone like me who doesn't operate in a 14 horsepower world, what does this mean in terms of numbers? 15 And I understand that, you know, it depends on the type of 16 equipment that a fleet would have or a business would 17 have. But can you put some numbers on that to make it 18 real? 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Maybe it would be helpful -- I'll ask the other 21 staff, if they can, to provide some -- the types of fleets 22 and the types of equipment that they may have that might 23 fall into this, because it is very difficult because of 24 the variety of horsepower sizes that are being covered by 25 this regulation to really pigeonhole certain types of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 things into these. 2 And so, Tony. 3 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 4 And if I -- yeah, and I think the first part of 5 the question was is regarding the vehicle types. A 6 tractor backhoe that you might see maintaining a road, 7 digging a trench for pipe or for some other purpose I go 8 see at various construction sites is around a hundred 9 horsepower. So a fleet that might have ten of those would 10 be under this 1500 horsepower threshold. 11 A large earthmoving machine can range anywhere 12 from a couple of hundred horsepower, and some have two 13 engines which may be 4- or 500 horsepower each. And so 14 only two or three of those would keep a fleet below this 15 1500 horsepower threshold. 16 And the reason we chose the horsepower 17 definitions was because three very large engines are going 18 to pollute a lot more than three very small engines. And 19 that made more sense to draw the line there as opposed to 20 the number of vehicles. 21 BOARD MEMBER D'ADAMO: Okay. And then on slide 22 16, Improved Emission Inventory. Is this something 23 recent? And if so, was it recently taken into account on 24 the economic model? 25 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 WHITE: No, the emission inventory -- you know, of course 2 it's always something that's being refined as new 3 information becomes available. But it has through -- in 4 and of itself the off-road 2000 model has gone through its 5 own public process in terms of receiving public comments I 6 believe as part of the State Implementation Plan work. 7 And so the inventory numbers that we have used in this 8 regulation are consistent with those numbers and are 9 consistent with the methodology that had gone out for 10 public comment as part of that effort. 11 EXECUTIVE OFFICER WITHERSPOON: Ms. D'Adamo, the 12 assumption about lifetime of vehicles is very much crucial 13 to the cost calculations, and our latest assumptions about 14 that are included in the cost calcs. 15 BOARD MEMBER D'ADAMO: Okay. And then on the 16 issue of the industry analysis on cost. I understand that 17 you didn't have the model. But as you went through it, 18 did you find a need to make any adjustments to the cost 19 estimates that were originally provided in the staff 20 report? 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 22 WHITE: When we looked at the key assumptions that were 23 utilized -- that we believe were utilized as part of the 24 development of that, there wasn't anything in there that 25 we saw that radically changed our approach to how we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 estimated the cost. We saw a number of things that were 2 done that were inconsistent with what the regulation would 3 require. And we saw a number of other things that -- 4 excuse me -- we saw a number of other things that just 5 was -- as you looked at how you would apply the costs, 6 they were not -- we didn't feel that they were reasonable 7 assumptions. And in that cost estimate there was a range 8 from 6 to 13. And what we really don't know is -- the $6 9 billion number it stated was done with the same 10 assumptions we've used. So what we really are struggling 11 to understand is how our number of three to three and a 12 half fits in the context of the six. And what that really 13 suggests to us is there's some very significant underlying 14 assumptions as to what the fleets would do that we just 15 don't understand how those were modeled. So it becomes 16 very difficult to discern what really is the root cause of 17 even the low-end estimate that they've developed. 18 BOARD MEMBER D'ADAMO: Okay. And now for my 19 comment. 20 I think the real challenge that we're going to 21 have here is the SIP requirements on the one hand and then 22 on the other hand the cost. And for someone like me 23 who -- you know, when I see these numbers, my eyes kind of 24 glaze over. I understand that there are probably a number 25 in the audience that are going to be speaking today on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 issue of cost. And it would be helpful for me if -- as 2 you go through staff's presentation, if you take issue, 3 maybe if we could pull those slides up so that we could at 4 least be talking off the same set of numbers. If 5 witnesses feel that the assumptions were incorrect, tell 6 us, you know, specifically what slide that applies to. 7 And then also on that slide that I had staff pull 8 up earlier, slide number 27, if the witnesses believe if 9 they fall into a certain category based on their analysis, 10 of course that would be helpful for me to kind of get a 11 sense of, in the real world, small, medium, large. 12 Thank you. 13 CHAIRPERSON SAWYER: Supervisor Hill. 14 SUPERVISOR HILL: Thank you, Dr. Sawyer. 15 First, it was an excellent report and quite 16 comprehensive. Thank you for that. 17 This is more of a follow-up to Board Member 18 Berg's comments on the cost of the fleets that were 19 studied and analyzed here. And to me it goes back to even 20 Ms. D'Adamo's concern of the assumptions that have been 21 made and the -- there seems to be a disconnect between the 22 assumptions that we have and that we're using, the staff, 23 and the industry assumptions. And for me, in meeting with 24 some individuals from the industry and -- one individual 25 in particular created a -- from that person's fleet based PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 on the assumptions that he has and the cost of that. 2 What I'd like to see is on the examples that were 3 given here, and perhaps not today in looking at the 4 witness list, and I think we'll be going -- this will be 5 in July for sure -- if we could provide how those 6 assumptions were used and utilized in the fleet examples 7 that you saw and how they could also be used in -- I think 8 you mentioned that there were 200 or so fleets that you 9 looked at or you modeled and you could see some examples 10 throughout that, not just one -- but a breakdown of the 11 actual costs of the equipment taking it year by year, the 12 horsepower breakdown, the vehicles that perhaps were used, 13 so that I can compare those to what the reality is. And 14 perhaps then we could have that information publicly and 15 then challenge the industry to look at that as well and 16 see that we're all on the same page. And that's what 17 seems to be the difficulties, that we're not on the same 18 page. And it does boil down to cost, I think, in the 19 entire thing. 20 So if we could see that in some future time, I'd 21 appreciate it. 22 (Applause.) 23 CHAIRPERSON SAWYER: Dr. Gong. 24 BOARD MEMBER GONG: Just a few points for 25 clarification, for me at least. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Your slide 50 on cumulative health benefits is 2 actually obviously very important for me. And I was just 3 wondering, on the 4,000 fewer premature deaths, these 4 deaths I assume are due to cardiovascular and cancer, is 5 that -- 6 7 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 8 WHITE: Yes. 9 BOARD MEMBER GONG: All cause. 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 WHITE: Yes. They're all causes -- 12 BOARD MEMBER GONG: Okay. But that presumably is 13 the primary reason? 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: Yes. 16 BOARD MEMBER GONG: And I'm glad you pointed out 17 about asthma and low respiratory symptoms, et cetera. 18 And actually just on the following slide, I'm not 19 an economist, but I see the cost from slide 51. You have 20 a total cost of 3 to 3.4 billion. That's based on your 21 economic model that you used. That's the range, is that 22 correct? You used an upper and lower and it comes down to 23 that narrow range, sort of? 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 25 WHITE: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 BOARD MEMBER GONG: I guess a billion isn't 2 narrow, but -- so that's the lower and that's the upper in 3 your particular -- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Correct. 6 BOARD MEMBER GONG: So you used different 7 permutations of your model and you came up with these 8 numbers? 9 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 10 WHITE: That is correct. 11 BOARD MEMBER GONG: All right. 12 Another quick question. I may have missed it. 13 But greenhouse gases, how does this regulation affect 14 greenhouse gas emissions. 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 16 WHITE: The emission inventory of greenhouse gases from 17 these vehicles, if I recall correctly, was not real 18 significant. And although some of the active systems do 19 have a fuel economy penalty which would tend to have minor 20 increases in greenhouse gases, there is going to be a 21 substantial reduction in black carbon emissions. And 22 while there's -- I don't believe there's a methodology 23 right now to quantify that impact, we believe that the 24 overall greenhouse benefit for this -- or impact for this 25 will be neutral or slightly positive for this particular PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 measure in what we've proposed. 2 BOARD MEMBER GONG: It hasn't really been 3 quantitated. It's difficult for this. 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Some of the methodology I think is still being 6 developed. That makes that difficult to quantify. 7 BOARD MEMBER GONG: Okay. 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah. 9 And I think it is close to the range of being neutral to 10 slightly positive, because also the fleet modernization 11 part for NOx control brings more newer engines in, and the 12 newer engines tend to have more -- are more efficient than 13 the older engines are. So that offsets some of the 14 additional costs of fuel used to regenerate filters. But 15 we just didn't think it had a big impact one way or the 16 other. That's why we didn't emphasize it. 17 BOARD MEMBER GONG: Okay. That's fine. Thank 18 you. 19 And the final comment is regarding the SIP, State 20 Implementation Plan, for California. This may be a little 21 redundant, and I heard it mentioned during the very 22 comprehensive presentation. But as I understand it -- and 23 perhaps you can share it with the Board as well about 24 this -- that if California fails to achieve the 2014 25 values that we set for ourselves, the federal government PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 set for ourselves, and we fail, we become nonattainment, 2 you stated that we're going to suffer economic 3 consequences, is that correct? 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Yes, that is in the form of federal sanctions. 6 BOARD MEMBER GONG: Could you repeat those for 7 me? 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 9 WHITE: I believe the numbers if that were to occur were 10 $1.2 billion in the South Coast Air Basin per year and 11 $340 million in the San Joaquin Valley federal highway 12 funds that could be withheld from the state if those areas 13 do not attain the federal standards. Very significant. 14 BOARD MEMBER GONG: That's for the whole state 15 though, isn't it? 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 17 WHITE: No, that's just for those regions. 18 BOARD MEMBER GONG: You just gave me for those 19 regions. 20 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 21 WHITE: Yes. 22 BOARD MEMBER GONG: But it's for the -- there are 23 implications for the entire State of California. 24 EXECUTIVE OFFICER WITHERSPOON: They can impose 25 statewide sanctions. But they tend to impose them on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 regions that are failing to meet the federal standard. 2 CHAIRPERSON SAWYER: Are there any other 3 questions at this time from the Board? 4 All right. Ms. Berg. 5 BOARD MEMBER BERG: Thank you, Mr. Chairman. 6 I just wanted to make a comment -- I asked the 7 Chairman if I could just make a comment to the audience 8 before we started. 9 You are in a really unique position today, 10 because normally we hear testimony and then we vote on the 11 measure at the end of the testimony. Because of the size 12 and the complication of this regulation, we're going to 13 hear testimony today, but we're going to have 60 days 14 before this comes back before us again. That's 60 days 15 for us to be able to take your information and to look at 16 the concerns and come back 60 days from now hopefully with 17 some answers. 18 The key to this though as we look around the room 19 is we have a lot of people in the room. We have a lot of 20 great information that needs to come up to this Board. 21 And speaking personally -- but you've already heard it 22 from the other Board members -- this information is really 23 important to us. We really need to understand. And what 24 you can do to help us is to give us information that is 25 relevant to you that we can take and then interact with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 staff to find out a) where the misunderstandings are, b) 2 what we didn't understand and we need the take a look at 3 and get this information. 4 I'm very sympathetic because I sit on your side 5 most of the time. As a chemical -- president of a 6 chemical manufacturing company, I've been on your side of 7 the fence for 25 years. So I really am interested in what 8 you have to say, along with my fellow Board members. And 9 it would help us if we can get as many people through 10 today and as much information as possible. And to a 11 degree you have control over that. So how much delay we 12 have in between speakers, getting people up and so forth 13 is a lot within your control. And we would really 14 appreciate your help. 15 Thank you, Mr. Chairman. 16 (Applause.) 17 CHAIRPERSON SAWYER: I want to thank you for your 18 patience in listening to our staff presentation and our 19 Board preliminary deliberations this morning. 20 The issue's, as your sign says, a matter of 21 balancing environmental concerns and jobs, your children's 22 health and your ability to provide for your families. And 23 we really do want to hear about that. 24 All right. I will impose a three-minute limit. 25 We have many more speakers than we're going to be able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 accommodate today. So if you speak less than that, we'll 2 hear from more people. 3 We will simply continue the hearing to July in 4 Sacramento. So those who don't get to testify today and 5 can come to Sacramento, we will hear from you there. 6 Those of you who plan to be in Sacramento, you 7 might want to take your name off the list to open it up 8 for somebody who might not be able to go there. 9 So let's begin. 10 The first three speakers, Shawn Veen, Alexander 11 Greiner, and Michael Kelley. 12 Ms. Veen -- Mr. Veen. Excuse me. 13 MR. VEEN: I actually have copies of a letter 14 from Assembly Member Saldana, who I represent here today, 15 if I could pass it around. 16 "Good morning, Dr. Sawyer and fellow Board 17 members. Thank you for the opportunity to express my 18 concerns on the regulation of diesel off-road equipment. 19 I've asked my representative, Shawn Veen, to speak on my 20 behalf. 21 "I'm writing to express support for the 22 California Air Resources Board's proposed diesel off-road 23 equipment regulation to control tailpipe pollution from 24 in-use off-road mobile sources, such as construction 25 equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 "The rule as currently drafted sets achievable 2 goals for pollution control, will protect public health, 3 and will bring the state's most polluted regions closer to 4 meeting federal air quality standards. Additionally, it 5 will contribute to controlling global warming pollution. 6 "Some industry voices have expressed concern 7 about the rule's cost and fairness estimates from both the 8 Air Resources Board and industry, for the costs of 9 implementing the rule are substantially less than the 10 estimated health costs linked to pollution from the 11 targeted sources. 12 "Californians bear as much as $9 billion a year 13 in health costs associated with diesel emissions from 14 off-road mobile sources addressed in the rule. In other 15 words, the benefits of this rule easily outweigh estimated 16 costs. 17 "For more than two years the rule has been under 18 discussion, vetted through many public workshops and other 19 meetings with stakeholders around the state. The rule has 20 been designed to be reasonable and flexible, ensuring 21 industry's ability to comply. 22 "California contains two of the most polluted air 23 basins in the country. Everyone must play a part in 24 reducing California's air pollution if we are ever to 25 reach the goal of clean air for all Californians. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 "Off-road mobile diesel construction equipment 2 generates about a quarter of the toxic diesel particulate 3 matter pollution in the state. CARB's proposed rule gives 4 the construction industry and other owners of off-road 5 mobile sources an opportunity to help solve the state's 6 pressing pollution challenge and protect worker and public 7 health. 8 "We are urge the Board to adopt the rule without 9 delay. 10 "Sincerely, Assembly Member Lori Saldana, the 11 76th District." 12 Thank you. 13 CHAIRPERSON SAWYER: Thank you very much. 14 Dr. Greiner. 15 DR. GREINER: Good morning, ladies and gents. 16 Alex Greiner is my name. I'm a practicing asthma and 17 allergy specialist here in San Diego. I'm also an 18 assistant clinical professor at the Department of Medicine 19 at UCSD. 20 And I felt that the issue being addressed today 21 was important enough to take some time off from clinical 22 practice to volunteer speaking for the ELA. So thank you. 23 I see a lot of respiratory disease in children 24 and adults. And there's no doubt in any mind or anybody 25 who's looked at this that pollution in general plays a big PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 role in exacerbating, causing respiratory and 2 cardiovascular disease. Symptom exacerbates preexisting 3 disease and causes death prematurely. 4 Particularly the problem with older 5 diesel-burning equipment is of the powerful effect that it 6 has on the body. Keep in mind, the State of California 7 has already classified diesel exhaust and more than 40 8 compounds in diesel exhaust as toxic air contaminants. It 9 sounds a lot like cigarette smoke, doesn't it? 10 So what is the burning of diesel by the oil 11 equipment do? It really makes preexisting asthma and 12 allergies worse because it's got some powerful effects on 13 the inflammatory system. You can administer diesel 14 exhaust particles to the lungs of people with asthma and 15 then kind of do lung and bronchial biopsies and washing. 16 So look at the tissue. What happens, it looks like a 17 battle field in there, with immune cells which are thought 18 to cause and drive the asthma suddenly being there in much 19 greater number. Chemicals that are made by them that kind 20 of drive the asthma there and increase dramatically. 21 In the end it's not really the basic science that 22 matters. It's about humans. And so a large variety of 23 groups and studies, hundreds and hundreds, have shown that 24 pollution associated with diesel exhaust cause an 25 exacerbated human disease, lead to premature deaths -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 you've seen some of the data today -- respiratory 2 hospitalizations. And you can actually show an increase 3 in daily mortality and asthma hospitalizations with 4 increase in particulate air pollution that day, asthma 5 exacerbation and bronchitis. What that all translates to, 6 as you know, is loss days of work, loss days of school, 7 diminished productivity, and deaths. 8 Some perspective studies have also shown an 9 association between air pollution stemming from diesel 10 exhaust and lung cancer. 11 Especially I think we need to think about kids. 12 They're developing lungs, which they do until adolescence, 13 and are much more susceptible to damage, just like a young 14 plant. The studies that are shown, decreased lung growth 15 in kids growing up in areas with exposure to high levels 16 of particulate matter and elemental carbon, a component of 17 diesel. 18 Now that asthma is becoming more prevalent in 19 children and adults, it is increasingly important I think 20 to regulate obvious sources of pollution that drive 21 asthma. 22 So I also would like to submit for your review a 23 document summarizing 50 or so studies, many from 24 prestigious journals such as the Newland Journal of 25 Medicine, looking just at adverse effects of particulate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 matter on human disease. 2 So thank you very much. 3 CHAIRPERSON SAWYER: Thank you very much. 4 Dr. Kelley. Then we'll have Gregg Albright, Jim 5 Bourgart, and Elaine Chang. 6 And I would remind everybody about our light 7 system. When the green light comes on, you have one 8 minute left; the orange light, 30 seconds. So that's 9 about the time you should be wrapping up your conclusions. 10 And the red light indicates it's ended. 11 Dr. Kelley. 12 DR. KELLEY: Good morning. My name is Michael 13 Kelley. I'm a family practice physician and the clinical 14 co-chair of the San Diego Asthma Coalition. 15 Over the years I've treated many, many patients 16 with asthma, with chronic obstructive pulmonary disease, 17 with heart attacks and cancer. All of these things are 18 now known to be aggravated or in some instances caused by 19 diesel emissions. But we never know -- physicians don't 20 know which patients are suffering from their choices such 21 as smoking and which are suffering from diesel emissions 22 or radon. We have to trust to the researchers to tell us 23 that a certain proportion of these illnesses are caused by 24 this or that. 25 There aren't many things that physicians can do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 to prevent illness. Immunizations are probably the only 2 clearly preventive tool that we have. Individuals can 3 make choices about lifestyle, about smoking, about their 4 diet, about medications that can help to prevent or limit 5 some illnesses. But neither physicians nor individuals 6 can control the air that they have to breathe. That's 7 where we depend on public health and we depend on various 8 government agencies at all levels to help to protect us. 9 In the 20th century there were many great public 10 health accomplishments, such as making our water safe to 11 drink. The 21st century offers us an even greater 12 challenge. And that's making our air safe to breathe. 13 Thank you. 14 CHAIRPERSON SAWYER: Thank you very much. 15 Mr. Albright. 16 MR. ALBRIGHT: Thank you, Dr. Sawyer and Board 17 members. My name is Gregg Albright, Deputy Director with 18 Caltrans, Department of Transportation. And I also want 19 to thank your staff. They've been extremely responsive to 20 our many, many, many questions we've had and very 21 professional. 22 And Caltrans understands the significance of this 23 regulation, as it will affect accomplishing the federal 24 conformity requirements that we have, that it will 25 significant implications if we don't get there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 Now, the best way Caltrans can help you is to 2 provide information and analysis of the consequences in 3 the area of transportation in the investments we are about 4 to make through the bond and others. We can't do that 5 today. And so we're very happy with the 60-day period 6 here where we commit to work with you to try to determine 7 exactly what the implications are on the California's 8 transportation investments we are making. 9 In the past, we have found that input from the 10 construction industry has been very fruitful and very 11 valuable to us. And so we've learned to listen very 12 carefully when the industry's sharing information with us. 13 As I have already noted, we've been very impressed with 14 the professionalism of your staff. 15 So what we have are these diverse sets of 16 information. And that's where we stand today. We'd like 17 to be able to dig in and to do a serious evaluation that 18 we could substantiate the analysis to turn around and hand 19 back to you our assessment of the consequences of these 20 actions on the development of our transportation 21 infrastructure. Obviously the impacts are on all of the 22 infrastructure investments beyond transportation. So of 23 course we have the schools, the housing, and the levees 24 that are coming up with extra emphasize these coming 25 years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 Now, when the industry says to us that this has 2 an effect, even a modest effect on cost or this has even a 3 modest effect on possibly because of industry capacity 4 perhaps delaying projects, we listen. We listen very 5 carefully. 6 I also real quickly would like to mention, when 7 we see impacts on small businesses, we're very concerned 8 about the impacts on small businesses, as this is 9 important to the administration, as we listen very 10 carefully. 11 So bottom line, we stand ready to create a 12 positive collaborative working environment and we are 13 committed to working over the next 60 days with industry 14 as well as your staff to try to create an environment 15 where you have informed division making. And so I just 16 want to commit that to you right now, that we will do that 17 analysis and we will put that effort into it. 18 But I need to wrap up by saying we recognize the 19 significance of going out of compliance on a large number 20 of levels. So we think that there's a reasonable and 21 responsible approach that will create a positive and 22 healthy California. 23 So I thank you for this short testimony. 24 CHAIRPERSON SAWYER: Thank you very much. And we 25 look forward to receiving Caltrans' analysis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 Mayor Loveridge. 2 BOARD MEMBER LOVERIDGE: Will your report be in 3 writing in advance of the Board meeting in July? 4 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 5 Absolutely. And we'll be working hand in hand 6 with your staff. 7 CHAIRPERSON SAWYER: Thank you. 8 Ms. Chang. 9 Oh, excuse me. I skipped over Mr. Bourgart. 10 Sorry, Elaine. 11 MR. BOURGART: Good morning, Dr. Sawyer and 12 members. My name's Jim Bourgart. I'm the Deputy 13 Secretary for Transportation and Infrastructure of the 14 California Business, Transportation and Housing Agency. 15 I first want to express my gratitude to the ARB 16 staff for the enormous effort that they've expended in 17 crafting this proposal and in responding to our many 18 questions. 19 Our agency understands and endorses the necessity 20 for a rule regarding off-road diesel vehicles and of 21 course the need for this sector to make its contribution 22 to cleaning the air. 23 We also support the implementation of the 24 Governor's strategic growth plan, which calls upon 25 California to make substantial new investments in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 infrastructure in order to make up for past decades of 2 neglect and to accommodate the growth that we know is 3 coming our way in the next several decades. Delivering 4 that infrastructure in a timely and cost-effective manner 5 requires a vibrant construction industry. 6 We've received a great deal of information from 7 the CARB staff and from the construction industry. Much 8 of the information has been divergent, especially 9 regarding composition of the regulated fleet, compliance 10 costs, and availability of technology. Much more needs to 11 be done to reconcile the facts, the assumptions, and the 12 scenarios that are being put forward. 13 We've been encouraging the ongoing effort to have 14 the ARB staff and stakeholders work together to as much as 15 possible both understand and resolve the differences; not 16 just differences of opinion, but differences in the facts 17 being used in order to reach conclusions. This is the 18 best way for us to evaluate how this regulation will 19 impact the delivery of California's strategic growth plan 20 and for this Board to make fully informed decisions. 21 We're mindful of the proposed regulation on 22 off-road construction equipment is bound to have some 23 impact on the construction industry. Differing views 24 regarding the kind and magnitude are what you're going to 25 hear much about today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 We're also very mindful of the fact that the 2 public expects government to deliver on promises made. In 3 November 2006, $43 billion in infrastructure bonds were 4 placed before the voters for approval, of which nearly $20 5 billion were for transportation. Their approval brings 6 with it the responsibility to deliver. 7 The speedy delivery of the bond projects requires 8 the use of substantial amounts of construction equipment. 9 Any negative impacts on project costs or delays due to 10 reduced industry capacity are of concern. When industry 11 capacity is reduced, competition is limited. Of 12 particular concern is the impact of a rule on the ability 13 of small businesses to participate in and effectively 14 compete, or compete at all, in the marketplace. We all 15 share the goals of a healthy environment, enhanced 16 mobility, a prosperous economy and a good quality of life. 17 We will do our part to bring together the stakeholders to 18 help us all understand the difference in their analyses 19 and resolve them. 20 Thank you very much for your attention. 21 (Applause.) 22 CHAIRPERSON SAWYER: Thank you. 23 Ms. Chang. 24 MS. CHANG: Good morning. 25 CHAIRPERSON SAWYER: Then we will have Henry PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 Hogo, Tom Jordan, and Doug Quetin. 2 MS. CHANG: If I can have my slides up. 3 (Thereupon an overhead presentation was 4 Presented as follows.) 5 MS. CHANG: For the record, my name's Elaine 6 Chang, Deputy Executive Officer with the South Coast Air 7 Quality Management District. Thank you for the 8 opportunity to appear before you. This is probably the 9 most important rule making in the context of the 2007 10 AQMP. 11 We do appreciate your staff's effort to bring 12 this complex and difficult regulation before you today. 13 It is not that we always want more. You know, your staff 14 told you our proposal. 15 --o0o-- 16 MS. CHANG: We do have a situation in the South 17 Coast that even though the South Coast residents accounts 18 for 5 percent of the national population, but we do have a 19 disproportionate exposure to PM2.5 and ozone. If you look 20 at the statewide PM2.5 problem, we have more than 80 21 percent of the problem. So we are here asking you to be 22 aggressive and do more for the residents in our region. 23 --o0o-- 24 Much of the discussion center around cost. 25 Whether the cost can be passed on to the consumers or not, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 I think we need to be mindful the public -- the breathing 2 public is bearing the cost with their health. 3 --o0o-- 4 MS. CHANG: We agree with your staff. The 5 off-road equipment is a major source category. The South 6 Coast is sandwiched between heavy-duty trucks and ships. 7 It's true for 2014 and 2023. Yet in the statewide 8 proposed strategy the emission reduction for NOx by 2014 9 is much less for this source category as compared to 10 heavy-duty trucks and ocean vessels. We're looking for 11 more than 30 and 50 percent respectively from heavy-duty 12 trucks and oceangoing vessels. 13 --o0o-- 14 MS. HIROI-ROGOWSKI: We also need to note for you 15 that there's still more than 180 tons of NOx reductions 16 undefined in so called the black box for the AR ozone 17 attainment demonstration by 2024. What's the chance of 18 having a second buy of the source category? This is very 19 important, this rule making at this juncture. 20 --o0o-- 21 MS. CHANG: Later on my colleague, Mr. Hogo, will 22 get into our specific proposal. But our focus is in 23 dealing with the remaining Tier 0 and Tier 1 equipment in 24 2014. And we specifically looking for additional 14 tons 25 of NOx emissions by 2014 and 4 tons by 2023 to meet our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 attainment requirements. 2 Thank you. 3 CHAIRPERSON SAWYER: Thank you very much. 4 Mr. Hogo. 5 MR. HOGO: Good morning, Chairman Sawyer, members 6 of the Board. Henry Hogo with the South Coast Air Quality 7 Management District. 8 And if we can continue with the slides. 9 --o0o-- 10 MR. HOGO: I'd like to spend a little bit of time 11 explaining our proposal and the rationale behind our 12 proposal. 13 If we can go to the next slide please. 14 --o0o-- 15 MR HOGO: We looked at your staff proposal and 16 looked within the framework of the regulatory concept to 17 see if we can enhance it. And when we looked at the 18 findings in the staff proposal that large fleets can have 19 the ability to bear to costs or pass the costs on, we 20 focus in on those large fleets to see if any further 21 reductions could be gained. We looked at the technologies 22 available today, technologies coming on in the future. We 23 believe there are ways to accelerate the turnover of these 24 30-year Tier 0 and Tier 1 engines. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 MR. HOGO: Your staff provided a summary of our 2 proposal. And the details of our proposal is actually in 3 our written comments to you. 4 I just want to highlight that our proposal 5 focused not on all large fleets and we do not focus on 6 small and medium fleets. Only the large fleets that have 7 over 40 percent Tier 0 and Tier 1 equipment in their 8 fleet. And our proposal is to increase the BACT turnover 9 rate to 15 percent and increase the NOx targets. And 10 there's a table that details our NOx targets. 11 --o0o-- 12 MR. HOGO: The resulting emission reductions that 13 we've seen with our proposal is shown here year by year. 14 And it's almost to the fact they're too hard in most of 15 the years, and we do see additional reductions occurring 16 after 2020 compared to the staff proposed. And this will 17 go a long ways in helping to meet that black box 18 commitment that Dr. Chang mentioned. 19 --o0o-- 20 MR. HOGO: Similarly, we see that the PM 21 reductions are very similar to the staff proposal. And we 22 actually agree with staff and support staff's proposal in 23 a PM target and the emission reductions. So we strongly 24 support that portion of the regulation. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 MR. HOGO: I want to mention two issues. And 2 this one has been mentioned. And I'm just going to say 3 that essentially we do see that national sales will go up 4 a little bit, but it won't have a big impact. 5 --o0o-- 6 MR. HOGO: The greater concern is the cost. And 7 we realizes that our proposal will add an additional $400 8 million in costs over the next 16 years. But we believe 9 this could be addressed. 10 And we propose that -- I too would recommend that 11 public funding be made available on a targeted basis for 12 effective fleets, similar to what's being done for 13 agricultural sources, to help alleviate some of these 14 additional costs. 15 In addition, we would like you to consider 16 establishing a low interest loan program possibly with 17 CARB's portion of the funding. 18 CHAIRPERSON SAWYER: Would you please conclude. 19 MR. HOGO: Okay. And actually we would suggest 20 an economic offramp for hardship. And this could be done 21 relative to some criteria that we could work with you. 22 --o0o-- 23 MR. HOGO: In summary, we do need these 24 reductions. And we believe it's technically feasible to 25 have additional reductions. And these costs can be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 addressed. 2 Thank you. 3 CHAIRPERSON SAWYER: Thank you. 4 Mr. Jordan. 5 MR. JORDAN: Mr. Chairman, members of the Board. 6 My name's Tom Jordan. I'm the Special Projects 7 Administrator with the San Joaquin Valley Air Pollution 8 Control District. 9 I'm here to speak in support of the staff's 10 proposal on the PM side of the regulation. We think 11 they've done a good job in that area. But I would also, 12 as with South Coast, suggest that the rule could get 13 additional NOx reductions. 14 The San Joaquin Valley, as your staff mentioned, 15 faces some very significant air quality challenges. We 16 just recently adopted our eight-hour ozone plan, which 17 your Board will be considering next month. In that plan, 18 we show the needed reductions for NOx to bring us into 19 attainment is 75 percent reduction from a 2005 baseline. 20 When you look at our largest NOx sources, mobile 21 sources, on-road and off-road, are the largest categories 22 we have. So if there are available reductions that we do 23 not achieve from those categories, they cannot be made up 24 from the smaller categories that we have left that are 25 available to us. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 Right now this rule gets about a 61 percent 2 reduction. We think with some of the suggestions that 3 have been made by South Coast, that much of that gap could 4 be made up and this category could get the percent 5 reduction that we're shooting for in NOx from all the 6 sources in the San Joaquin Valley. 7 We have proposed that this could be done 8 regionally, that if you looked at serious or worse 9 non-attainment areas, that would be one approach. But we 10 also believe that areas that are transport -- that have 11 transport, the impact to those areas should also be 12 brought in to potential more stringent requirements to get 13 the added NOx reductions, in order to make sure that we're 14 getting at all the sources that contribute to the problems 15 in those areas. 16 So I thank you for your time and consideration of 17 our comments. And we look forward to having you in the 18 valley next month to consider our ozone plan. 19 CHAIRPERSON SAWYER: Thank you. 20 Mr. Quetin. Then we'll have Frank Caponi, Jeremy 21 Jungreis, and John McClelland. 22 MR. QUETIN: Dr. Sawyer, members of the Board. 23 I'm Doug Quetin with the California Air Pollution Control 24 Officers Association. And I'll be very brief. We 25 submitted a letter dated May 3rd. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 As you know, we have 35 air districts in 2 California, ranging from Modoc County of 9,000 population, 3 to the South Coast, which has 40 to 41 percent of 4 California's population. Generally we support the staff 5 proposal. We of course think there should be a more 6 aggressive timeline in those areas of crucial need like 7 San Joaquin Valley and the South Coast Air District. 8 We also appreciate, reflecting the diversity of 9 our membership, the recognition of captive fleets in those 10 areas that are in federal ozone attainment areas. 11 And, lastly, I'd just like to say that we do 12 recognize that this is a very, very large public health 13 regulation. It's also a very large economic impact on 14 those using off-road equipment. Everyone here is for 15 clean air certainly, not only for their families but also 16 at the work site. 17 We strongly urge ARB to reduce the compliance 18 costs by working a lot harder on streamlining and revising 19 its emission equipment verification process. We've looked 20 at various programs in Europe and think we should come a 21 lot closer to especially the program for approving the 22 emission reduction equipment in Switzerland. 23 Lastly, I think on a personal note, if I may, not 24 representing CAPCOA, I strongly agree with the alternative 25 costs that the South Coast Air District presented. In the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 past we've been able to understand that controlled sources 2 do pass on their costs to the public. And in this 3 particular case, they'll also be passed on to the public. 4 But in the meantime there's going to be a lot of small 5 businesses affected as that cost does transfer. And there 6 has to be better answers on our part and the California 7 Air Pollution Control Officers Association and every 8 regulator here, and we need to pay a lot of attention to 9 that. 10 Thank you. 11 BOARD MEMBER LOVERIDGE: Okay. Bob, could I -- 12 (Applause.) 13 CHAIRPERSON SAWYER: Mayor Loveridge has a 14 question. 15 BOARD MEMBER LOVERIDGE: Doug, quick question. 16 I'm always interested in best practices. And you 17 sort of in a tantalizing way identified Switzerland and 18 its permitting process. Obviously Switzerland's not 19 California. But what do they do in Switzerland that they 20 do well that we don't do well here? 21 MR. QUETIN: My understanding is that they 22 approve devices for large categories of engine ranges. 23 And that in particular seemed attractive to us. Where I 24 think the Air Resources Board, it's my understanding, is a 25 lot more careful and particular about how it approves the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 devices we're talking about. 2 BOARD MEMBER LOVERIDGE: Okay. 3 CHAIRPERSON SAWYER: Thank you. 4 Mr. Caponi. 5 MR. CAPONI: Dr. Sawyer and members of the Board. 6 My name is Frank Caponi with Los Angeles County Sanitation 7 Districts. It's a pleasure being here today. 8 The Sanitation Districts, we handle about half 9 the solid waste generated in Los Angeles County and the 10 sewage produced by about 72 cities in L.A. County and 11 11 treatment plants. 12 We have about 250 engines that are impacted by 13 this rule. And in addition to, another 250 vehicles that 14 are impacted by your on-road rule, as well as throw into 15 the mix another 100 or so portable and stationary engines. 16 So we have a lot of equipment that's impacted by ARB 17 rules. So we certainly have concerns about this rule. 18 But what I'd like to focus on today is a little 19 discussion about what we are doing. What we are doing is 20 we have been partners with the ARB and with the South 21 Coast AQMD on demonstration programs. We've done that in 22 the past and we hope to continue that in the future. 23 We've also developed an initial strategy and had it comply 24 with this rule. And that's what we're doing on our part. 25 With the remainder of my precious three minutes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 what I'd like to do is make a request of this Board. And 2 the request I'd like to make is that on your part I'd like 3 to see consistency coming from the Board. We've heard 4 from the South Coast and the San Joaquin Valley about 5 their concerns and we've heard that potentially local 6 districts could ask for their own authority to do a rule 7 making. And what we would like is certainty. 8 I have to go to my management with certainty on 9 how we're going to comply with this regulation. And I can 10 tell you our initial strategy, which only covers, say the 11 first three years of our strategy, is upward of $15 12 million that I have to tell my management that we have to 13 spend. That's only the initial part. There'll be 14 multi-millions beyond that. And the last thing I think we 15 need is the uncertainty of possible dual regulations. 16 Essentially a different regulation from a different 17 authority could really throw a wrench in the works. 18 So what I'm requesting of this Board is that 19 please do not vote for this rule unless industry is 20 certain that we're only going to have one rule to comply 21 with, not more than one rule. 22 Thank you. 23 (Applause.) 24 CHAIRPERSON SAWYER: Major Jungreis. 25 MAJOR JUNGREIS: Yes, sir. Good afternoon. My PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 name is Major Jeremy Jungreis, and I'm here on behalf of 2 DOD installations in California. And we have a lot of 3 vehicles, both off-road and on-road. So we find ourselves 4 coming before you quite a bit. And I just want to say 5 again, like we always do, thank you to the staff and the 6 Board members for working with us to meet the specific DOD 7 uniqueness of our fleets. We really -- our fleets go into 8 combat and they have certain limitations in operating in 9 those kind of austere environments, and we really 10 appreciate that in this rule and in others that you 11 continue to work with us on that, both the tactical fleets 12 and tactical support equipment. 13 Additionally we want to thank you for working 14 with us on San Clemente Island and San Nicolas Island and 15 getting us a work-around for that. 16 One issue we have with the current rule -- and 17 for the most part we're generally neutral on the rule. We 18 think it has potential. But one area where we're somewhat 19 puzzled is the designation of fleets owned by the 20 United States as large. Previously there was a 21 designation as medium sized fleets. There was a change, 22 but there's no explanation in this statement of reasons 23 why that occurred. 24 Just as far as men -- United States is -- well, 25 we're pretty big. We have lots of vehicles and we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 lots of federal agencies. No great shock there. But at 2 least from the military perspective, we have many bases 3 which are very small and in very remote parts of the 4 state. That's why you put military bases there, because 5 it is remote. And each -- there's exceptions to the rule. 6 But for the most part, each military installation does 7 fleet management on its own. There are some regional 8 components. But for the most part, installations are kind 9 of on their own. So there's some very small pockets where 10 budgeting -- you know, as we mention in our written 11 comments, there's a -- federal agencies are somewhat 12 limited and that it takes us -- for large expenditures 13 such as this it takes us five to seven years of a 14 budgeting process. 15 So my suggestion to the Board would be to 16 reconsider putting us back in the medium category, which 17 would give us more time to meet the budgeting deadlines 18 that we have internally. 19 In the alternative, what we would be willing to 20 do if the Board would consider it is to work with staff to 21 take a look at which installations we have and which ones 22 actually -- if we have large installations that do exceed 23 the threshold requirements, which would categorize us as a 24 large fleet, then those would meet the large fleet 25 deadlines. But for ones where they're really small -- and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 I notice that for low-use counties municipalities are 2 treated in that way. They are given additional time to 3 reach compliance because they're in areas that are -- and 4 not a lot of population that will have air impacts. So it 5 would seem to be consistent with that approach taken by 6 staff already. 7 So those are the two approaches we'd suggest. I 8 think they would be very helpful to us. 9 And, finally, I wanted to close by talking about 10 biodiesel policy. There's a definition in the regulation 11 about alternative diesel fuels. But there really is no -- 12 CHAIRPERSON SAWYER: Would you conclude please. 13 MAJOR JUNGREIS: Sir? 14 CHAIRPERSON SAWYER: Would you please conclude. 15 MAJOR JUNGREIS: Yes, sir. 16 CHAIRPERSON SAWYER: Thank you. 17 MAJOR JUNGREIS: I would ask you to consider 18 finishing the biodiesel policy and to looking at biodiesel 19 as a way to reduce greenhouse gases and PM pollution in 20 the state. 21 CHAIRPERSON SAWYER: Thank you very much. 22 Would staff respond to the issue on fleet size. 23 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 24 WHITE: Yes. What the commenter was referring to, when we 25 released our staff proposal for our series of workshops we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 had in December of 2006, we had initially defined large 2 fleets somewhat differently, with an implementation date 3 of 2009, first implementation date, and medium fleets with 4 an implementation date of 2010. Based on comments we 5 received on the ability of government fleets to be able to 6 secure through their budget process and approval process 7 either through a Board of Supervisors or the State 8 Legislature or others, that that time frame was 9 unreasonable for them to meet the implementation date 10 because of those challenges. So what we did was we 11 allowed government fleets -- large government fleets, that 12 would include the State of California's as well as the 13 Federal Government's, to have a 2010 compliance date. 14 What we have -- what the final proposal that is 15 before you today did is -- the compliance date is for all 16 fleet sizes. So now the first compliance date for the 17 largest fleets is in 2010. And so that need for that 18 one-year delay no longer exists because the first 19 compliance date for large fleets is now consistent with 20 the budget process that both the State of California and 21 the Federal Government would need in order to meet that 22 compliance date. So there was no further need to redefine 23 them as medium because that additional year had been 24 provided to them with the revised proposal. 25 CHAIRPERSON SAWYER: It seems like there might be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 other issues though, such as some of these fleets really 2 are isolated, they do their own budgeting, their own 3 maintenance and -- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: How we've approached for fleets that have -- there 6 are many fleets besides just government fleets that have 7 operations in both urban and rural areas. And so the 8 approach we've taken in the proposal is to -- a fleet is 9 defined based on all the horsepower it operates in the 10 state. And the Federal Government is being treated no 11 differently than the State of California is in terms of 12 all of its horsepower is combined under a single entity, 13 whether that the Federal Government, the State of 14 California, a private company that has operations 15 throughout the state. 16 I think it would be very difficult from an 17 enforcement perspective to have companies and fleets have 18 different requirements in different areas and to enforce 19 the fleet average provisions if they had different 20 requirements that varied by region. And it's very 21 consistent with what we've done in our other fleet rules 22 that the Board has approved. We've looked at companies 23 that have operations throughout the state as a single 24 entity and have to comply with the statewide requirements 25 as such. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 CHAIRPERSON SAWYER: There are other government 2 fleets besides the Department of Defense. Forestry, I 3 would think, national parks and the like. And -- 4 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 5 WHITE: Yes, we would -- 6 CHAIRPERSON SAWYER: -- you're lumping all those 7 together? 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 9 WHITE: All those, yes. The combined horsepower of all 10 the federal agencies would have them be a large fleet. 11 Keep in mind though, the large fleet definition 12 begins at 5,000 horsepower. So each -- many of those, I 13 would suspect most of those are probably large fleets on 14 their own. 15 CHAIRPERSON SAWYER: So when it comes to 16 averaging rules and things like that, you're going to put 17 them together too? 18 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 19 I'd like to clarify that we do define their -- 20 what compliance dates and timelines they have based on 21 their total combined horsepower. But we give private and 22 public entities the ability to report separately by 23 separate divisions if they so choose or to report as one 24 single company. So, in other words, a fleet such as the 25 State of California might have different agencies that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 have their own equipment. They can report and comply 2 separately or they can combine their information and 3 report as one. But they would be all meeting the large 4 fleet requirements regardless of how many pieces they had 5 at each agency or at each division. 6 CHAIRPERSON SAWYER: Thank you very much. 7 Mr. McClelland. And then we'll have Tim Pohle, 8 Scott Johnson, and James Thomas. 9 MR. McCLELLAND: Thank you, Dr. Sawyer, members 10 of the Board. I'm John McClelland. I'm Vice President 11 for Government Affairs at the American Rental Association. 12 I want to thank the staff for their openness and 13 being accessible to us throughout this process. 14 We have provided a lot of comments and other 15 information to the staff and to the Board about the 16 economics of the rental industry, what drives our behavior 17 in buying and replacing equipment. And I think that 18 that's all in the record. And I urge you all to look at 19 that as you deliberate this rule over the next 60 days. 20 I want to particularly though touch on something 21 that a previous commenter said that I think is very 22 important to us in a particular aspect of that. We do 23 make an enormous amount of investment in equipment in the 24 rental industry, and our turnover is pretty quick on 25 average. And we will continue to make those investments. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 And the cost is going to go up as the pollution control 2 devices on this equipment that come in from the 3 manufacturers goes up. So we do accept considerable 4 burden here. 5 But one of the things that's really important for 6 our members is the certainty aspect of any regulatory 7 action, whether it be a federal regulation or a state 8 regulation like this one, because our folks are thinking 9 about what they're going to be making purchases in the 10 coming years, and near-term years, in fact. And so that's 11 very, very important to them because there's a lot of 12 money at stake in their own companies' budgets. 13 In addition, some of our members may only operate 14 in a single AQMD in the state, but we also have other 15 members who are going to be operating throughout the 16 state. So the issue about whether or not we have multiple 17 regulations could be very significant for those folks who 18 are operating throughout the states and trying to move 19 equipment in and out and they're reporting as a fleet, as 20 we were just discussing. I mean I'm not absolutely 21 certain how that would work. But the idea that we might 22 have more than one regulation to deal with for some of our 23 members is troubling to me. 24 And, finally, I think that the other piece of 25 this certainty aspect that I'm talking about and concerns PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 us -- and we address this in a letter to Dr. Sawyer on the 2 18th of April -- where we discussed the whole issue of the 3 SIP plan. And we're very concerned that we pass a 4 regulation now and that SIP planning then forces that 5 regulation to be readdressed in a couple years down the 6 road because these requirements and targets aren't going 7 to be made. We really urge you all to come up with a rule 8 now that is going to be a rule basically forever. And so 9 we are not playing kind of the regulatory hokeypokey, as 10 it were. 11 So that's our request. And we appreciate the 12 opportunity to comment to you today. Thank you. 13 CHAIRPERSON SAWYER: Thank you. 14 Mr. Pohle. 15 MR. POHLE: Thank you. My name is Tim Pohle, 16 Assistant General Counsel for Environmental Affairs for 17 the Air Transport Association. We're the principle trade 18 organization of the U.S. scheduled airlines. 19 I'm pleased to be here from Washington DC today 20 to talk to you about this important matter. 21 ATA has a long history despite substantial doubts 22 regarding our authority over ground support equipment of 23 working with ARB to improve air quality. The present 24 regulation is no exception. To be clear, ATA supports 25 ARB's ultimate reductions in PM and NOx. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 We do have serious concerns about the rule as it 2 is currently structured. But we understand the important 3 air quality goals ARB seeks to achieve through this 4 regulation and are committed to doing our part. 5 We also understand that others in the regulated 6 community advocate extension of compliance deadlines. We 7 do not oppose such extensions, as they would allow us to 8 achieve -- pose reductions more efficiently. But our 9 support for an appropriately modified regulation is not 10 contingent upon such extensions. 11 Staff has been charged with unenviable task, 12 extracting emissions reductions from end-users which could 13 have been achieved much more efficiently by regulating 14 OEMs directly. 15 (Applause.) 16 MR. POHLE: ATA greatly appreciates ARB staff's 17 dedication effort and reconsideration of our perspective 18 as it is attack this conundrum. In fact, staff today 19 recommends two changes to the rule resulting from our 20 consultations: Allowing credit for replacement of diesel 21 engines with clean gas engines and acquisition of Tier 4 22 replacements. ATA urges the Board to accept these 23 recommendation. However, even with these changes, ATA 24 cannot support the regulation in its present form. 25 Our central concern is that the proposed rule is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 too complicated. And for the reasons explained in detail 2 in our written comments, fleet owners cannot even know 3 whether compliance plans will succeed, much less budget 4 for and implement those plans. 5 This rule will require our members to spend in 6 excess of $100 million replacing or retrofitting virtually 7 every piece diesel GSE in California. At a minimum, we 8 require assurance that these expenditures will be 9 effective. 10 In our preliminary comments we offer a concept 11 for a simplified approach under which fleet owners would 12 be required to meet reduction targets known well in 13 advance of 2014 and 2020 deadlines. Importantly, this 14 approach not only will be more efficient and economically 15 rational; it will allow fleet owners and ARB to achieve 16 the same or better emissions reductions. 17 Another point I want to stress is the need to 18 maximize credit for existing and new electric equipment. 19 Again, we explain the specific proposals in more detail. 20 But I can't stress enough the importance of incentivizing 21 the acquisition of electric. 22 We stand ready to continue working with ARB staff 23 to further refine this regulation. I look forward to 24 seeing you again in July. I'm confident we can be in a 25 position to support the rule at that time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 Thank you very much. 2 CHAIRPERSON SAWYER: Thank you. 3 (Applause.) 4 Mr. Johnson. 5 MR. JOHNSON: Hello, Dr. Sawyer and Board. I'm 6 Scott Johnson, the Sales Manager for Red Mountain 7 Machinery. 8 We were founded in 1986. We have 120 families to 9 support. 10 I wanted to thank Supervisor Roberts for making 11 it today. As a third generation San Diegan, glad to see 12 you're here. 13 We have about 300 machines, somewheres around 14 80,000 to 90,000 horsepower. And all I'll break it down 15 for you. We have 24 percent Tier 0, 28 percent Tier 1, 38 16 percent Tier 2, and 10 percent Tier 3. And that's after 17 spending several millions of dollars in the last years 18 trying to upgrade our fleet in anticipation where this is 19 headed. 20 Of our machines staying static, with our 300 21 machines, not increasing one machine, in the next four 22 years we'd have to spent $23 million to have Tier 2 and 23 Tier 3 machines to be compliant. This is what we think we 24 need to do to be compliant. 25 We have letters from many contractors that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 participated in CIAQC. We have no confidence at all in 2 the V-dex technology that we're assured that's the way we 3 can solve some of these issues So that's a great concern 4 to us. 5 Some of the earlier testimony provided by staff, 6 they went to great efforts to provide a lot of numbers 7 that we're in disagreement with. Manufacturers do not 8 supply replacement engines for a majority of our fleet - 9 wheel loaders, excavators, motor graders. We bought two 10 brand new 613 Caterpillar scrapers last year that are 11 still Tier 1. So it's the OEMs, it's the manufacturers 12 that we need to get the break from. And you're putting 13 the burden on us. 14 And, yes, we can raise the cost of doing business 15 in California. And what you're going to see is you're 16 going to see houses increase 50 percent. You're going to 17 see your purchasing power buying freeways decrease. We're 18 in the slump in construction right now. If you were to 19 implement these changes, it will probably spiral into a 20 recession. It's terrible timing. 21 And so, in closing, I think you're going to have 22 less affordable housing, small and disadvantaged 23 contractors going out of business, and people with huge 24 resources, maybe Haliburton, whomever, coming in and 25 raping California for their highway and housing costs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 So thank you very much. 2 (Applause.) 3 CHAIRPERSON SAWYER: Supervisor. 4 BOARD MEMBER ROBERTS: Mr, Chairman, could you 5 have -- maybe during the lunch hour or lunch break have 6 one of our staff meet -- just talk to Mr. Johnson and to 7 review these numbers. Because this may be a good case 8 study for us and it may illustrate, you know, something 9 that perhaps isn't clear in terms of, you know, the 10 implementation of this. So I would like it if you could 11 do it. Because 23 million over the next three years would 12 take a lot of resources from any firm. 13 EXECUTIVE OFFICER WITHERSPOON: Supervisor 14 Roberts, we'd be happy to do that. But I think it's more 15 than a specific case study; that the sense we've gotten 16 from the industry generally is that they're quite 17 concerned and even hostile to using particulate retrofit 18 traps. And so the reason the costs go up so high is they 19 want to buy new equipment. But we'll talk to -- 20 BOARD MEMBER ROBERTS: But if that's the case, I 21 want to -- I'd like to know that and to see if we're 22 talking -- you know, if that's the case. And maybe it is 23 and maybe it isn't. But I'd just like -- I'd like you to 24 look into this for me, please. 25 EXECUTIVE OFFICER WITHERSPOON: We'll do that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 CHAIRPERSON SAWYER: Mr. Thomas. 2 MR. THOMAS: James Thomas with Nabors Well 3 Service. 4 I would like to discuss with you this afternoon 5 opportunities to improve the proposed off-road ATCM. I 6 submitted my comments in April. 7 The regulation has a provision in for early 8 retrofits. If you retrofit your equipment, you will 9 actually get a credit. That credit is for NOx. It is not 10 for PM. During our retrofit activities we have seen a 11 reduction in NOx of 71 percent and a reduction in PM of 80 12 percent. We think that that credit ought to be extended 13 to PM. 14 In addition, California Air Resources Board 15 issues an executive order every time it manufacturers a 16 new engine, using a -- having a certified level on the 17 executive order. These emissions are anywhere from 10 to 18 25 percent below the standard. Yet the standard is all 19 that the calculator will use. In the stationary ATCM, in 20 the portable ATCM you can utilize these values. You 21 cannot use them in the off-road. 22 Staff has researched the cost quite a bit here. 23 And so I think what you ought to do is to consider placing 24 a cap on the cost. Give an example. If you look at large 25 fleets -- I am a large fleet. And that large fleet, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 maximum I will have to spend is $180 per horsepower per 2 year. I think that's great. And I think you ought to set 3 a cap there, because I'm currently spending $330 per 4 horsepower. 5 (Applause.) 6 MR. THOMAS: That is strictly a repower of my 7 equipment. That does not include a diesel particulate 8 filter, which is an additional $51 per horsepower. The 9 cost is -- so I would like to make sure that you just go 10 ahead and cap it, and we will not have a cost that's 11 greater than three billion. 12 The next thing I'd like to discuss is -- in the 13 portable ATCM, the regulation was amended several times to 14 allow companies into the program through amnesty. I would 15 ask that the Board and the staff guarantees that we do not 16 allow that to happen here. Either we make the regulations 17 correct the first time or postpone it until everybody 18 understands. 19 This regulation was developed with a competitive 20 disadvantage. Large companies are having to comply five 21 years before other companies. You talk about leveling the 22 playing field? You're talking about passing it on to 23 customers. Large fleets will not be able to pass it on 24 because small fleets will be able to compete. 25 Thank you a lot. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 CHAIRPERSON SAWYER: Thank you. 2 (Applause.) 3 Ms. D'Adamo. 4 BOARD MEMBER D'ADAMO: Just a quirk question of 5 staff on the PM versus NOx credit. 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 7 WHITE: Throughout the process we had a number of comments 8 that we should provide credit for retrofits when the new 9 engines were installed. And we gave that a lot of 10 consideration internally as to whether or not that was -- 11 that made sense to do. And ultimately we decided that the 12 cleaner engines will certainly help the fleets get to the 13 PM fleet average, and that will be fuel retrofits they'll 14 have to do. But that the percent reduction that you would 15 get with a retrofit greatly exceeded the PM benefit by 16 simply installing the cleaner engine. And so we opted to 17 leave the retrofit requirements in place for that. 18 And certainly in terms of -- one of the other 19 considerations we had was what would -- what is the 20 benefit of filters on particles relative to new engines as 21 well? And so we wanted to make sure that we had enough 22 knowledge of that and certainly we know the effectiveness 23 of PM filters. And since even Tier 2 and Tier 3 engines 24 still do not come with particulate filters and won't be 25 available on engines until the 2011 time frame, we felt it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 was very important to continue with the requirements that 2 particulate filters be used for the PM benefits. 3 CHAIRPERSON SAWYER: The next three speakers are 4 Richard McCann, Ralph Ayala, and John Reed. 5 Mr. McCann. 6 MR. McCANN: Thank you, Dr. Sawyer. Thank you, 7 Board members. Thank you for the opportunity to speak 8 before you. I'm Richard McCann. I'm with M Cubed. And 9 we were retained by CIAQC to review the economic impacts 10 on the industry from the proposed regulation. 11 I just want to open with a, say, characterization 12 of the industry first, which is that it -- construction 13 industry is about -- produces about 5 percent of the 14 state's income, has about $36 billion annual payroll. So 15 it's very significant. 16 But on the other hand it's dominated by small 17 firms. About 74 percent have less than ten employees; 97 18 percent have less than $10 million a year in annual 19 revenues. 20 But it also has a large impact on the economy 21 from changes in the output of the industry. According to 22 the U.S. Bureau of Economic Affairs statistics, for every 23 change in a dollar of output for the industry, there's 24 about a $2.40 impact on the rest of the economy. And for 25 a change -- in a million dollar change in output from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 industry there's a change in about 21.5 jobs for each of 2 that million dollars. 3 In looking at the ARB staff analysis, one of the 4 things we really found is that it's highly sensitive to 5 changes in assumptions about things -- about items and 6 various parameters that really aren't documented or 7 empirically based. And I won't have an opportunity to go 8 all the way through all of those issues in the three 9 minutes that I have, but we will respond at a later date 10 to some of those issues. 11 But in particular I want to point out that it's 12 not that you should be -- staff or us as a consultant 13 should be presenting you with one number. We should be 14 presenting you with a range of numbers that represent the 15 uncertainty about the analysis that everybody has in this 16 particular project: The uncertainty about the cost; the 17 uncertainty about the population of vehicle; the 18 characteristics of the vehicles; the type of technologies 19 that will be available. All of those things should be 20 incorporated in a range of uncertainty. And you should be 21 presented with those uncertainties. And it's up to you, 22 not the staff, not me, to decide what are the balancing of 23 risks and benefits. And what you've been presented with 24 right now by the staff is really their assessment of the 25 risks versus the benefits, not the balancing that you as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 appointed Board members should be undertaking. 2 I just want to go on a little bit further to 3 point out there's two additional issues in the Air Board 4 staff that I think that are particularly important. The 5 first one is is that it -- of the 200 fleets that they 6 use, 155 of them are public fleets. This is from the 7 TIACS report. And so that public fleets are actually only 8 5 percent of the horsepower in the state, yet it's over 75 9 percent of their sample dataset. Public fleets actually 10 have a purchasing strategy that relies heavily on buying 11 new vehicles, because they use bidding processes in order 12 to buy those vehicles. That's very different from private 13 fleets. 14 And, finally, one of the other components that 15 really needs to be addressed is the availability of new -- 16 of used vehicles in the marketplace. They have not done 17 an analytical balancing in order to figure out if there's 18 going to be enough Tier 2 and Tier 3 engines really 19 available in the market for future purchase. 20 So I thank you for this opportunity. We'll have 21 more comments in July on this aspect, on review of the 22 staff model, and on the health benefit estimates. 23 Thank you. 24 CHAIRPERSON SAWYER: Thank you. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 CHAIRPERSON SAWYER: Ms. D'Adamo. 2 BOARD MEMBER D'ADAMO: I have a question. 3 Did you prepare the -- or did your group prepare 4 the economic analysis that staff was referring to on the 5 $13 billion? 6 MR. McCANN: Yes, we did. And that number is a 7 draft -- a preliminary number that will be updated for the 8 July hearings. 9 BOARD MEMBER D'ADAMO: Can we get your commitment 10 to sit down with staff and share with them the models and 11 the assumptions that you use? It sounded like -- 12 MR. McCANN: Yes, there's been some -- 13 BOARD MEMBER D'ADAMO: -- they were operating off 14 of -- 15 MR. McCANN: -- we've had discussions -- 16 BOARD MEMBER D'ADAMO: -- not complete 17 information. 18 MR. McCANN: -- ongoing, and there's been some 19 issues about sharing of the models. But we're in those 20 kinds of discussions. 21 BOARD MEMBER D'ADAMO: I think we need to share 22 with you and you need to share with staff so that we're 23 operating off the same set of information. 24 MR. McCANN: Right. 25 CHAIRPERSON SAWYER: Supervisor Hill. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 SUPERVISOR HILL: Thank you. I just wanted to 2 follow up. 3 You will share your information with the staff? 4 MR. McCANN: We will -- yeah, we just received -- 5 the staff model was just released. And we've actually 6 been in discussions for nine months trying to get -- well, 7 actually I should -- take that back. The number that they 8 came up with came up nine months ago. We've been in 9 discussions to try to receive the staff model since 10 December. We got -- 11 SUPERVISOR HILL: Okay. So you have the staff 12 model. But then now you will in turn share -- 13 MR. McCANN: Yes, and now we'll be in discussions 14 with them about sharing our model as well. And it's most 15 likely that we'll be sharing it with them. It may be that 16 we actually end up using the staff's model -- 17 SUPERVISOR HILL: Well, I guess I have -- 18 MR. McCANN: -- in order to do our sensitivity 19 analysis. 20 SUPERVISOR HILL: Why are you concerned about -- 21 I mean you're having discussions or you're thinking about 22 it or you may do it. Why -- what is it in that model that 23 you're not willing to share? 24 MR. McCANN: It has been -- to be honest, it's 25 been an issue of whether the staff has been forthcoming PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 with their data and models. We've had this problem of 2 getting information from them for quite a long time. 3 SUPERVISOR HILL: But how does that affect your 4 information? I would think that before the -- 5 MR. McCANN: There is a negotiation process. 6 SUPERVISOR HILL: Well -- 7 MR. McCANN: I'm not making a commitment right 8 here right now. I'm not in a position to make that 9 commitment. 10 SUPERVISOR HILL: Well, I think for the strength 11 of your position and for the education of this Board, it 12 would be important and I think it would behoove you to be 13 as forthright with the information that you have with the 14 Board -- with the staff and with the Board. 15 MR. McCANN: Yes, and we will be. 16 SUPERVISOR HILL: Okay. I hope so. 17 Thank you. 18 MR. McCANN: Thank you. 19 BOARD MEMBER ROBERTS: Who was the speaker? 20 BOARD MEMBER RIORDAN: We don't have him on our 21 list. 22 CHAIRPERSON SAWYER: Oh, I'm sorry. Mr. 23 McCann -- Richard McCann from -- 24 EXECUTIVE OFFICER WITHERSPOON: Number 55 on the 25 list. He was taken out of order. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 BOARD MEMBER LOVERIDGE: His background? 2 EXECUTIVE OFFICER WITHERSPOON: M Cubed is a 3 consultant -- financial consultant to the industry. 4 CHAIRPERSON SAWYER: Do we use this organization 5 also? Or have we? 6 EXECUTIVE OFFICER WITHERSPOON: We have in the 7 past. 8 CHAIRPERSON SAWYER: Okay. Mr. Ayala. 9 MR. AYALA: Good afternoon. My name is Ralph 10 Ayala. I'm president and owner of Ayala Boring, a 11 construction company, and also a member of Engineering 12 Contractors Association. 13 First of all, I'd like to acknowledge that you, 14 the Board here, and their staff, you guys are faced with a 15 very difficult task. I can't imagine there isn't anybody 16 here that doesn't support improving the quality of our 17 air. 18 (Applause.) 19 Your staff gave us a very thorough presentation 20 on their study and it was very thorough. But the bottom 21 line is cost. I consider myself a medium to small sized 22 contractor. We're union. We pay very good wages -- 23 excellent wages and benefits. Again, the bottom line is 24 cost. 25 When the time comes and you guys pass this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 requirement, I'm sure everyone's going to comply. How 2 they do it is another thing we're going to be dealing 3 with. Most likely we are going to cut back. There'll be 4 layoffs. There's many people in my company that are very 5 dependant on the stability of our company, along with 6 their families. They all own homes. It's going to affect 7 their livelihood as well. 8 I hope before you people finally make a final 9 decision and pass this requirement, you come up with some 10 mechanism that will protect the companies and keep us in 11 business and prevent layoffs. It's really the cost is 12 what we're looking at. When the time comes we're going to 13 find a way to do it and some people may have to close 14 their doors. 15 But that's all I have to say. 16 CHAIRPERSON SAWYER: What size category are you 17 in? 18 MR. AYALA: Company-wise? 19 CHAIRPERSON SAWYER: In terms of the proposed 20 regulation. 21 MR. AYALA: Twelve -- 1200. 22 CHAIRPERSON SAWYER: Small? 23 MR. AYALA: Small. 24 CHAIRPERSON SAWYER: Okay. Thank you. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 CHAIRPERSON SAWYER: Mr. Reed. Then we'll have 2 John Terry, Mike Bobeczko, and Bill Waggener. 3 Mr. Reed. 4 Okay. John Terry. 5 MR. TERRY: Thank you, Board, and good afternoon. 6 My name is John Terry and I work as a 7 construction business agent for Teamsters Local 36 here in 8 San Diego. 9 A large percentage of our members are drivers of 10 various types of trucks -- construction trucks and 11 equipment here in San Diego. We're a local union that's 12 been involved in construction here in San Diego since 13 1946. Our members are employed by many of the 14 construction companies that will be impacted by the 15 proposed regulations the Board will be implementing. 16 All of us understand the need for a cleaner 17 environment. What we are hoping is that the Board will 18 give these companies an ample amount of time to implement 19 these regulations without being financially devastating to 20 these companies and, in turn, to our members. 21 These are good family-owned businesses that have 22 kept our members employed with a good living wage, with 23 benefits, here in San Diego and throughout southern 24 California. 25 We ask you please keep in mind when proposing the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 time frame for these companies to attain compliance, that 2 we need to keep these companies and their trucks and 3 equipment in operation so that all parties employed in 4 this industry continue to maintain an acceptable, livable 5 lifestyle here in southern California. 6 We all hope to work with the Board in 7 implementing these proposed regulations in a timely and 8 financially feasible manner and hope to continue to build 9 San Diego and keep San Diego as one of America's finest 10 cities. 11 Thank you. 12 CHAIRPERSON SAWYER: Thank you very much. 13 (Applause.) 14 CHAIRPERSON SAWYER: Mr. Bobeczko. 15 MR. BOBECZKO: Thank you, Dr. Sawyer, Board 16 members. 17 SUKUT Construction is a large fleet. We've been 18 a leader in reducing pollution on our equipment. We've 19 gotten awards from Engineering News Record magazine as 20 being an international leader for pollution control. 21 I'd like to recommend that this regulation as it 22 goes into effect be simplified and be made equal to all 23 parties concerned. I'd like to see city, county, state, 24 and federal agencies take the leadership role and be in 25 compliance at the same time as private industry. And on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 the private industry side, I think it should be a level 2 field between large, medium, and small, so that we all can 3 compete equally and pass the burdens on to our customers 4 at the same time. 5 Thank you very much. 6 (Applause.) 7 CHAIRPERSON SAWYER: Mrs. Riordan. 8 BOARD MEMBER RIORDAN: I've had a little bit of 9 experience some years back with your company, and I think 10 you were doing a lot of repowering. 11 And my question is to staff: Will they get 12 credit for that for the repowering that they have done 13 back -- we're talking several years, I think. 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: Yes, they will. And to be quite honest with you, 16 the efforts they've made are a big reason why we've -- I 17 think we've included these types of provisions, because 18 they have been very progressive in putting cleaner engines 19 into their existing vehicles. 20 BOARD MEMBER RIORDAN: All right. 21 Okay. I appreciate that. And I know that there 22 is a big difference between the ability of the larger 23 companies, such as this one and some of the other ones 24 that will be testifying today, as opposed to some that we 25 would categorize as medium and small. But I want to say PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 thank you for loading the way. And hopefully we can be as 2 supportive with some of our medium and small size 3 companies as we work through this process. 4 But thank you for what you've done and what you 5 will be doing in the future. 6 MR. BOBECZKO. Okay. Thank you. 7 (Applause.) 8 CHAIRPERSON SAWYER: Mayor. 9 BOARD MEMBER LOVERIDGE: I just ask staff. Is 10 there differences in the rules that's currently drafted 11 between public and private? 12 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 13 WHITE: For the large and medium fleets, no. It's purely 14 based on the horsepower. 15 The only area where public fleets might have a 16 perceived break, if you will, are when they're in 17 low-population counties. And that's a similar exemption 18 that we included here as was in the public fleets on-road 19 rule that the Board approved as well, where special 20 consideration was given for public agency fleets that 21 operate in low-population counties. 22 Municipal fleets -- public municipal fleets, yes. 23 BOARD MEMBER RIORDAN: In those areas that were 24 on the map that were attainment areas. So we're basically 25 talking the very far northern area of California? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 2 WHITE: For the most part the low population counties are 3 in those areas, yes. 4 Yes. And as I'm being corrected, they do still 5 have to meet the PM requirements. All fleets in the state 6 have to meet the PM requirements by the applicable date 7 based on how they are defined. It's purely the NOx 8 element, the turnover requirements that those fleets get a 9 special provision for. 10 UNIDENTIFIED SPEAKER FROM AUDIENCE: Do they get 11 a PM credit? 12 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 13 WHITE: They can earn PM credits just as the private 14 fleets can as well for early retrofits of their vehicles, 15 yes. 16 BOARD MEMBER BERG: If there are private 17 companies in those areas, do they also -- are they also 18 exempt? 19 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 20 WHITE: Maybe we can put up that slide to show that again 21 for the -- no, for the attainment area counties. Fleets 22 that operate exclusively within the attainment counties -- 23 and that was slide number -- 24 BOARD MEMBER BERG: Yeah, I'm looking for it. 25 Sorry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 It's slide number 8 is the federal -- Oh, I'm 2 sorry, that's nonattainment. 3 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 4 WHITE: No, that should be later. 5 BOARD MEMBER ROBERTS: Number 30. 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 7 WHITE: It's slide 30, please. 8 Fleets that operate in any of these -- 9 exclusively within any of these counties in the state, in 10 other words they don't have operations outside of these 11 areas, are exempt from the turnover requirements in the 12 regulation, both public and private, both small -- all 13 small, medium, and large fleets. They only have to meet 14 the PM portion of the regulation. 15 There are separate provisions for low population 16 counties which overlay many of these that are applicable 17 to the public fleets with similar provisions. 18 BOARD MEMBER BERG: Thank you very much. 19 CHAIRPERSON SAWYER: Mike Lewis, who is taking 20 Bill Waggener's place. 21 And following this we're going to take a half 22 hour lunch break. 23 MR. LEWIS: Thank you, Mr. Chairman. 24 And I will say for all of the contractors here, 25 we have lunch available downstairs. And we'd be more than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 happy to have the environmentalists for lunch as well. 2 (Laughter.) 3 MR. LEWIS: So they're welcome to join us. 4 (Applause.) 5 MR. LEWIS: The staff too -- especially staff. 6 I have a letter which I submitted earlier, but 7 I'd like to share it all with you again. This is the 8 Construction Industry Air Quality Coalition's position. 9 It outlines -- this is the cliff notes version for you 10 because it has everything in very simple terms as to where 11 we stand on this issue. 12 I also have -- as you can see, I brought a few 13 friends with me today. But I have another 800 comment 14 cards here from contractors around the state who couldn't 15 be here today and wanted to make sure that you knew that 16 they knew about this proposed rule and that they don't 17 support it in the form it's in today. 18 You want to give those to the clerk. 19 Thanks. 20 Let me just say a few things about the industry. 21 I think -- you heard from Richard McCann that this 22 industry has -- 75 percent of the firms employee 10 or 23 fewer employees; 90 percent of them, 20 or fewer 24 employees. This is an industry that's dominated by 25 hardworking, family-owned companies that have passed that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 on from generation to generation. They employee nearly 2 one million people in the State of California. And make 3 no mistake, that this rule will eliminate thousands of 4 those companies and tens of thousands of those employees. 5 The problem with this rule is that it is 6 unforgiving and inflexible. You can't turn over just 7 7 percent of your horsepower or repower just 19 percent. 8 You have to do the 8 and the 20. And if you can't, the 9 only option to comply is to get rid of equipment. And 10 when you get rid of equipment, you get rid of employees. 11 And when you do that, you shrink your firm, you shrink 12 your ability to do the job, and you shrink the kind of 13 jobs and the amount of work that you can do. And your 14 staff spent very, very little time on that option. But 15 that for most of the guys in this room is the likely 16 compliance option, to get rid of equipment, not to replace 17 it, to repower it, or to retrofit it. 18 No one in California should be proud to say that 19 we are improving the environment by closing down thousands 20 of small family-owned companies and eliminating tens of 21 thousands of skilled, well paid construction jobs. 22 (Applause.) 23 MR. LEWIS: We have a number of issues that we've 24 outlined for you. Cost estimates is one. The V-Dex 25 number is way too low. We're buying them. We know what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 they cost. They're 25- to $50,000 apiece. New equipment 2 was underestimated by your staff. They assumed there'd be 3 a used equipment market. There isn't going to be. There 4 isn't now. They're going to have to buy new. 5 The natural turnover rate has been 6 underestimated. The repowering options are overestimated. 7 There aren't going to be enough engines -- or enough 8 equipment that can actually be repowered. You're going to 9 have to replace. 10 We'd like to see the fleet definitions altered so 11 that small fleets are 2500 horsepower or less and medium 12 are 2501 to 10,000. 13 The manufacturers are not going to be able to 14 supply the 15,000 pieces a year that it's going to take to 15 replace the current fleet at the rate you want to get 16 where you want to be in 2020. 17 The V-dex -- you're going to hear this from 18 others -- are not ready for broad application. This 19 industry is made up of risk takers. But based on what we 20 know about our real experience with those V-dex devices, 21 we're not ready to take the risk on our equipment, our 22 employees, or the financial well being of our firms. 23 So the technology is not available. And if you 24 buy a Tier 3 engine today, regardless of what your staff 25 says, it doesn't meet the 2020 criteria. You have to do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 something to it. You have to do something to every single 2 piece of equipment in your fleet today. So to say that 3 the technology's available is not true, because the one 4 engine that complies isn't going to be available until 5 2015 in those higher horsepowers. And we're unsure 6 then -- 7 CHAIRPERSON SAWYER: Would please conclude. 8 MR. LEWIS: We're unsure then that it will be 9 available. 10 We have a number of other issues that we outlined 11 for you today. You're going to hear more about the 12 economics and the technical from our technical experts. 13 We don't support your staff's Pollyanna-ish, if I 14 may use that word, view of the construction economics and 15 construction practices. We wish they understood this 16 business more. We spent a lot of time trying to educate 17 them about that. We have been working on an alternative. 18 We've not submitted it to the staff, so I don't know what 19 they were addressing in their proposal. 20 We think we can get you to where you want to be. 21 We think we can do it with a lot less hardship and 22 economic impact. And at the proper time when we've got 23 the -- when we've got something that this industry can 24 support, we're going to put it on the table. And we hope 25 that you'll give it a much fairer review than you've given PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 most of the other suggestions we've given to you. 2 So thank you very much. 3 (Applause.) 4 CHAIRPERSON SAWYER: Mrs. Riordan. 5 BOARD MEMBER RIORDAN: Mr. Lewis, can you come 6 back up here. 7 (Laughter.) 8 BOARD MEMBER RIORDAN: You're so popular, I'm 9 thinking they all think your lunch is really going to be 10 good downstairs. 11 (Laughter.) 12 MR. LEWIS: I think it's the free lunch. 13 BOARD MEMBER RIORDAN: Yeah, free lunch. 14 I do have one quick question. In my meeting with 15 you -- and I will, you know, disclose that at the 16 appropriate time -- but in my meeting with you, you talked 17 about a time element that you felt solved some of the 18 issues that your membership had. And I'm just wondering 19 what -- I didn't hear you reiterate that. Is that now not 20 an issue for you? 21 MR. LEWIS: Well, that's very much a part of it. 22 I mean I think the problem is trying to compress 23 everything into three minutes. But the issue is this: 24 When you look at how you get to the 2020 goal, you 25 largely -- we're going to -- as I've said before, 85 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 percent of the fleet in California is Tier 0 and Tier 1 2 equipment; 85 percent of 165,000 pieces. All of that has 3 to be gone essentially by 2020. The only way to make that 4 work, by and large, is replacement. And the manufacturers 5 simply cannot ship, nor can the industry afford to buy, 6 15,000 pieces of new equipment every year for the next 7 ten years. 8 BOARD MEMBER RIORDAN: Okay. But time is still 9 an issue even -- 10 MR. LEWIS: Absolutely it is. 11 BOARD MEMBER RIORDAN: Okay. That's what I 12 wanted to hear. 13 CHAIRPERSON SAWYER: Mayor Loveridge. 14 BOARD MEMBER LOVERIDGE: I know you said it, but 15 tell me again your distinctions you're making between 16 small and medium? What's the difference between your 17 categories and that of staff? 18 MR. LEWIS: Well, based on all the discussions 19 we've had amongst the contractors, we think that those 20 breaks, the 2500 and the 10,000, are far more 21 representative of what would generally have been 22 considered small- and medium-sized businesses in the 23 construction industry, much more so than the 1500 and 24 5,000 that the staff's proposing. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 We're going to take one more speaker to 2 accommodate a travel problem. And then we'll fake our 3 break. 4 Dr. David Kopet, who's number 23 on our list. 5 DR. KOPET: Good afternoon, and thank you for 6 making some time for me. My name is Dr. David Kopet. I 7 am an associate professor at a school of architecture. 8 And I come to you in two different capacities: One as a 9 professional, but one as an asthmatic. 10 And I think it's really important to understand 11 that environmental teratogens, diesel particulate matter, 12 is one of the largest reasons that we've got as much 13 asthmatic rates as we do. And many of these kids are 14 being hospitalized. They are taking lots of medications 15 and such, much of which their families can't afford to 16 purchase for insurance reasons and what have you. 17 But on a professional note here, I really want to 18 encourage you guys here to support the movements that are 19 taking place throughout the United States. 20 Currently, the U.S. Green Building Council, which 21 is the nation's foremost coalition of leaders in every 22 sector of the building industry, are working to promote 23 environmentally profitable healthy and responsible goals. 24 In 2007, the U.S. Green Building Council has launched its 25 pilot program for lead certification for neighborhood PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 developments. That will be going into place within the 2 next couple of years. 3 And one of the things that we need to consider is 4 that heavy-duty combustion engines list among some of the 5 greater offenders of particulate matter, not only airborne 6 but also tracked in through people walking on the streets 7 and bringing that into the interior environment. 8 Ninety-eight percent of this matter that is generated is 9 as small as ten microns, which is small enough to be 10 inhaled into the lung tissue. The vast majority of that 11 98 percent are between 2.5 and .1 microns, which means 12 that they enter into the deepest recesses of the lungs. 13 Diesel exhaust has been named by the World Health 14 Organization as one of the contributors for the epidemics 15 in asthma rates. And the CDC has highlighted it also as 16 one of the components. 17 California's often regarded as a leader within 18 the United States, both in terms of social welfare but 19 also in environmental concerns; therefore, it should not 20 adopt what the construction equipment -- this construction 21 regulation equipment would go against what other leaders 22 within the building and construction industry has taken on 23 as their admissions, which really is the promotion of our 24 environment and the promotion of human life and the 25 quality of that life. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 Thank you. 2 CHAIRPERSON SAWYER: Thank you. 3 The next three speakers after the lunch will be 4 Bruce Wick, John Nelson, and Don Anair. 5 And we will resume at 1:05. 6 (Thereupon a lunch recess was taken.) 7 CHAIRPERSON SAWYER: We will resume the public 8 testimony at this time. 9 Bruce Wick. 10 I trust that most everybody is having that 11 wonderful lunch downstairs. But thank you for cutting it 12 short and coming back. 13 MR. WICK: I'll be all right. I tried to get in 14 line first. 15 Thank you, Dr. Sawyer, Board members. I am the 16 risk manager for CAL PASC, an association of specialty 17 contractors here in California, 550 members, approximately 18 75,000 employees that we work with and for across the 19 state. 20 I'm a little surprised that we could be actually 21 this close to a regulation perhaps being approved and yet 22 have such a factual, I think as Supervisor Roberts said, 23 disconnect between staff and the industry that's going to 24 be majorly affected by this. So my thought -- or my 25 request to the Board is that perhaps you direct staff to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 say -- your staff is very, very bright people, obviously. 2 The construction industry is made up of problem solvers. 3 You don't survive in construction if you don't solve 4 problems. Can we get those groups together to find a 5 consensus? 6 I've been on many regulatory situations with 7 contractors and staff sitting together and saying, "We're 8 going to find consensus. We're going to come to a 9 conclusion." Because if the goal is cleaner air, we want 10 a regulation that the industry accepts and embraces and 11 steps up and really gets behind. And I've seen that over 12 and over again when they're involved enough and to the 13 agree that a consensus is achieved. 14 So thank you very much. 15 (Applause.) 16 CHAIRPERSON SAWYER: Fine. I agree entirely with 17 the message that you carry. And, you know, our 18 instructions to the staff is to get together with this 19 group, get the numbers straightened out, get to something 20 that we can agree on. And we need you to solve the 21 problem. You know, all we do is pass rules. We don't 22 clean anything up. You're the people who clean it up. So 23 we want you on board then. 24 BOARD MEMBER RIORDAN: Mr. Chairman? 25 Mr. Wick, just a quick minute. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 I couldn't agree with you more, and I appreciate 2 your very positive comments. But I did note earlier in 3 the testimony of one of the consultants for the 4 organizations that are here in general a little bit of 5 reticence on their part to really sit down and share. So 6 I think the bosses need to make clear that we're going to 7 share information. We'll do it from our side. You do it 8 from your side. 9 MR. LEWIS: Exactly. And I think -- message 10 well sent. And the goal is, yes, let's get together. But 11 I think people need to feel staff is not just listening 12 but we're going to sit down and wrestle through this so 13 that we come out with a conclusion. 14 Thank you. 15 BOARD MEMBER BERG: Also, Mr. Wick, there's a 16 few things that are outside of our authority. We don't 17 set the federal standards. 18 MR. LEWIS: Correct. 19 BOARD MEMBER BERG: So we both need to realize 20 that the challenge lies with the standards that we need to 21 meet and how to get there. And so if we could realize 22 that we're not adversarial in that area, that would also 23 be helpful. 24 MR. LEWIS: Absolutely. And that's why I 25 mentioned I've been in many regulatory situations where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 construction -- because they're problem solvers by nature. 2 That's -- every job, every project has unexpected 3 challenges. They're used to finding a way. And they will 4 if we can sit down I think together in the same room long 5 enough to get the facts together and say, Let's solve it." 6 Construction is famous for that. 7 BOARD MEMBER BERG: Thank you very much. 8 BOARD MEMBER LOVERIDGE: Bob, could I -- 9 CHAIRPERSON SAWYER: Please. Mayor Loveridge. 10 BOARD MEMBER LOVERIDGE: You indicated that's 11 what we're about, to try to do that. Who's going to host 12 the table? I mean are we -- how do we convert this sort 13 of good intentions to actually face-to-face discussion? 14 CHAIRPERSON SAWYER: Tom. 15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 16 we've been having them. And so -- I'm looking at a list 17 here. We have three, six, nine -- there's been like 10 or 18 12 events when we have exchanged information back and 19 forth. Just that we've never gotten to the bottom line 20 yet in terms of what does their model say. We were late 21 giving them our model, although we gave them all the 22 information much earlier than that. But the model is up 23 on the website and we provided it to them. And the one 24 missing piece is to understand how they came up with their 25 numbers. To do that, we need, you know, their spreadsheet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 or model, and that's what's missing. 2 BOARD MEMBER LOVERIDGE: But did they -- who is 3 around the table in these discussions? Is -- 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Mike 5 Lewis and the CIAQC group plus some other -- AGC and folks 6 like that and the consultant M Cubed, plus all of our 7 staff. 8 BOARD MEMBER LOVERIDGE: Okay. 9 MR. LEWIS: May I make one comment about that? 10 Because, again, my experience -- I've been involved a lot 11 with Cal OSHA, which those are regs that are affecting the 12 health and safety of hundreds of thousands of employees, 13 serious stuff just like this. And when staff in advisory 14 committees sits down and we really work through something, 15 saying, "We're going to talk through it to consensus," we 16 come out with a great regulation, well accepted, that just 17 takes off. It seems to me that where those committees 18 have been not as successful is when staff listens to 19 information but goes back themselves and then comes out 20 with a response. 21 Can we find a way to sit down long enough at the 22 same table to come to a consensus? Construction has shown 23 that, at least in every instance I've seen, they're 24 willing to do that and they'll find a way. They always 25 do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 Thank you. 2 CHAIRPERSON SAWYER: Thank you. 3 (Applause.) 4 CHAIRPERSON SAWYER: John Nelson. 5 MR. NELSON: Good afternoon. I'm John Nelson. 6 I'm president of FCI Construction -- Constructors. We do 7 a lot of the infrastructure work for the State of 8 California. We have probably 600, 800 employees. And so 9 we think we have some words of wisdom here. 10 And I think -- one of the things that I was kind 11 of impressed with, we had Gregg Albert Albright, the 12 Deputy Director of Caltrans, made a statement that they're 13 used to working with us and listening to us as an 14 industry. And I think that's an important point that's 15 been made throughout by some of these past people that 16 have been speaking before me, that we do have the ability 17 to work through these issues, we do have the ability to 18 resolve these issues. We need time. I'm not sure that 19 the numbers that we're looking at from the economic 20 standpoint are close on either side. But obviously 21 there's a disconnect in the dollars. There seems to be a 22 disconnect in the time. There seems to be a disconnect in 23 the technology in the ability to build the equipment 24 that's necessary. 25 And I think the last speaker hit it. We need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 sit down and come to a consensus. And I don't think we 2 can do it through e-mail. We're used to sitting down with 3 our agencies that we work for or the owners that we work 4 for, whether they be agencies or not. We deal with our 5 union reps when we negotiate with them. We're negotiating 6 all the times on issues and coming to a resolve. 7 And I think what he said is -- the previous guy 8 said was that's what we do. We can do it and we can get 9 to resolve. So I would just ask that you give us the 10 ability to have the time to sit down and get resolved. 11 And I think -- somebody asked, I think it was Supervisor 12 Hill asked, would we share that information? I have no 13 clue why there was a hesitation. If it was mine you'd 14 have it on your desk right now, because I think it's 15 important that we open up, both sides, put it down and get 16 it done. And we've got 60 days. Not much time. 17 Thank you. 18 (Applause.) 19 CHAIRPERSON SAWYER: Thank you. 20 Yes, Ms. Berg. 21 BOARD MEMBER BERG: Mr. Nelson. Good afternoon, 22 sir. Do you have any experience with retrofitting or 23 repowering or looking at your equipment and -- that you 24 could share with us? 25 MR. NELSON: I'm not the equipment man. I am PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 not. But I do -- I've been involved in this enough to 2 know that we are really having some disconnects. I think 3 the people that may be speaking here later that have the 4 equipment experience can talk about some of the exhaust 5 systems that may be able to be installed. But if you 6 install them, the warranty on the engine may not be good. 7 You know, each one, the warranty -- 8 BOARD MEMBER BERG: I understand that you're kind 9 of in the same position I am. But if you have people 10 within your organization that have firsthand knowledge, 11 will you make sure they're speaking with staff and so 12 forth, work for us? 13 MR. NELSON: I think definitely we can arrange to 14 have the expertise deal with any one of the issues that we 15 have in front of us. I think that between the 16 manufacturers and the equipment people that -- you had 17 SUKUT up here earlier that you're familiar with. I don't 18 know whether they have 100 pieces of equipment. But they 19 certainly are experts in there. We have other experts 20 sitting here that own 50, 60 pieces of large equipment 21 that have already started retrofitting, as SUKUT has. So 22 people are in the process that understand it and they 23 understand what it takes to get to the goal, you know. 24 And keep in mind, we're certainly interested in meeting 25 these goals. You know, we all live here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 BOARD MEMBER BERG: Sure. 2 MR. NELSON: I've been here all any life. 3 BOARD MEMBER BERG: Okay. Thank you very much, 4 sir. 5 (Applause.) 6 CHAIRPERSON SAWYER: Mr. Anair. And then we'll 7 have Mike Carcioppoco, Gordon Downs, and Brant Ambrose. 8 MR. ANAIR: Good afternoon, Dr. Sawyer and 9 members of the Board. I'm Don Anair. I'm senior vehicles 10 analysts with the Union of Concerned Scientist. 11 I'm also here today representing the coalition 12 for clean air. They were unable to send someone in 13 person. 14 I'd first like to state our strong support for 15 this regulation and for cleaning up the diesel emissions 16 from off-road construction equipment. I've seen numerous 17 regulations adopted over the past four years by this Board 18 to clean up diesel emissions. Each one has been 19 challenged on the premise of unbearable costs, perceived 20 lack of technology, the threat of businesses shutting down 21 and the also of jobs. Despite these threats, these 22 previously adopted rules are being successfully 23 implemented today and the air is cleaner for it. 24 In fact, these regulations have literally 25 affected the air I breathe every day. There are buses PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 passing through my neighborhood that have been retrofitted 2 with diesel particulate traps and there are trash trucks 3 that come and pick up my trash every week that have been 4 retrofitted with similar devices. 5 The regulations that is being proposed today has 6 been developed over the last three years. There's been 7 ample opportunity for sharing of information, and I hope 8 over the next two months that the industry continues to 9 share the information with staff. 10 The rule is 38 pages long for a reason. It 11 contains ample flexibility, exemptions for lots of the 12 issues that are being raised today -- and comments. And I 13 urge you to ask staff about these issues when they are 14 raised, because the rule is highly flexible, there are no 15 requirements for any new -- there are no requirements to 16 purchase new vehicles under this regulation. If a used 17 vehicle is not available, there is no requirement to 18 purchase a new vehicle. 19 Retrofit requirements also have flexibility and 20 exemptions. If there's no retrofit available for a 21 specific piece of equipment, then there's an exemption. I 22 urge you to consider the amount of flexibility that's 23 built into the current proposal and urge you not to weaken 24 it any further. 25 In terms of the fleet sizes, medium fleets have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 six years before they have to meet any implementation 2 period. And that allows the use of incentive fundings 3 from the Carl Moyer program. A hundred forty million 4 dollars a year funding in this program, and that would be 5 available. 6 Small fleets, eight years. They have eight years 7 before they have to do anything to their equipment. And, 8 in fact, the rule doesn't require any NOx requirements. 9 This means these small equipment companies, they only have 10 to retrofit their equipment with a particulate trap. And 11 that's only if it's available for the piece of the 12 equipment they have. And they have eight years to apply 13 for funding for this. That's not included in the staff's 14 economic analysis. It's $3 billion, but some of that 15 money will be public funds. 16 Californians are ready and willing to pay for 17 clean air. This past November they've demonstrated their 18 willingness to do just that by passing a billion dollars 19 in funds just for air quality cleanup. It's time for the 20 construction industry to stand up and do the same. They 21 have three years to share their information. And today we 22 even saw questions about the industry's economic analysis. 23 There's still no commitment of sharing that information 24 with staff. 25 And I believe staff has posted their economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 analysis on the website and have given information to the 2 industry throughout the process. It's been a long 3 process. This isn't -- we haven't just arrived today 4 after a month of development. This has been three years 5 in the making. 6 And, also, I do want to point out quickly that 7 this regulation can go further and it can get more NOx 8 reductions. And I think this Board has to seriously 9 consider the possibility of strengthening the current 10 proposal. There's health-based air quality standards that 11 regions of the state are not meeting. And this rule is 12 critical to meeting those standards. 13 Thank you very much. And I hope for your support 14 on this regulation. 15 CHAIRPERSON SAWYER: Thank you. 16 Mr. Carcioppoco. And please correct my 17 pronunciation -- 18 MR. CARCIOPPOLO: Carcioppolo. 19 Well, I have misspelled it. 20 MR. CARCIOPPOLO: It's probably misspelled on the 21 sheet. 22 It doesn't matter how it's spelled. Don't worry 23 about it. 24 Dr. Sawyer and Board members. I appreciate your 25 time. My name is Mike Carcioppolo. I'm a corporate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 product support sale managers for Hawthorne Machinery. We 2 are the San Diego County Caterpillar dealer. We are the 3 people that everybody in this room's going to come to for 4 solutions. We have sat down with staff on numerous 5 occasions to explain to them, number 1, Caterpillar does 6 meet all EPA federal standards coming off the line with a 7 new machine. But just because that new machine and that 8 new Tier 3 engine is coming off the line, it does not mean 9 that you could take that same engine and put it in a 10 ten-year-old machine. There are a lot of variables 11 involved. There are torque curves, weight ratios, the 12 after-cooling packages. Just because that engine is Tier 13 3 you have to have the entire package to be Tier 3. 14 I'm here to tell you right now currently, repower 15 solutions, there are only seven available of over 300 16 different models working out there today, primarily on the 17 big scraper-sized machines. 18 Other options talking about used equipment. They 19 just had a huge auction up in Riverside. Almost no 20 equipment was over Tier 2. Used equipment is not an 21 option. It won't be because nobody's going to be giving 22 up any of the good equipment. We have taken advantage of 23 the repower money. A lot of people in this room, we've 24 done a lot of repowers over the years. We've repowered to 25 Tier 1. Unfortunately now we need to go to Tier 3. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 we don't have -- as manufacturers and other manufacturers, 2 we don't have the solutions. 3 The other thing is everybody talks about 4 retrofits. Retrofit is something you built on to the 5 engine. Yes, there are some approved by CARB. 6 Unfortunately they're not approved in conjunction with the 7 manufacturers. So if you put it on a Caterpillar machine, 8 engine failure, that is not warrantable. Okay? So 9 everybody keeps talking about -- somebody put up a slide 10 about, you know, the warranty. That's great on a device. 11 But when you lose an engine that costs you $50,000, who's 12 going to pay for it? Those have not been approved yet. 13 Caterpillar's working. They have an emission solutions 14 group come up, repower solutions, retrofit solution. 15 You know, we want clean air too. Don't get me 16 wrong. And we are going to benefit from this. We've 17 talked -- I've had the chance to talk with Supervisor 18 Roberts. We are going to benefit from this. 19 Unfortunately we're going to be doing it with half as many 20 customers, because a lot of the people are not going to be 21 able to afford to meet these stringent standards. 22 All's we're asking for is more time for the 23 customers here that come to us for solutions for us as 24 manufacturers to give them the solutions they want. We're 25 all for this regulation. We're just asking for more time PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 so we could come up with the solutions and make things 2 better and easier. 3 The cost -- the $3 billion cost, where somebody 4 came up with that number astonishes me. We as the 5 manufacturers in OEM don't even know how much it's going 6 to cost to make those repowers. How can somebody just 7 arbitrarily come up with a $3 billion number when we're 8 the ones that are going to be putting those engines in 9 those machines and supplying this product. 10 So I just want you to -- the cost definitely has 11 to be addressed. When we met with San Dag they talked 12 about -- we were so separate on the numbers, the cost 13 numbers -- he said even if we're half way, we're way off 14 on the cost. We just ask you please to take this 15 regulation, we'd be happy to sit down with staff and 16 discuss it further. And just give us some more time and 17 we will get you what you need. 18 Thank you. 19 (Applause.) 20 CHAIRPERSON SAWYER: Thank you. 21 Mr. Downs please. 22 BOARD MEMBER BERG: Mr. Chairman, I just have one 23 question of Mike. 24 Mike, I'm a little bit confused, because the 25 regulation states that if a retrofit or repower is not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 available, therefore they don't have to do it. So can you 2 explain to me how they're going to be put out of business? 3 MR. CARCIOPPOLO: Because who are you going to 4 come to to say that that repower's available? Already we 5 are hearing that there are other manufacturers, other 6 engine builders saying, "Oh, we have a Tier 3." Yes, they 7 have an engine, as do we. But you need a repower 8 solution. Okay? 9 BOARD MEMBER BERG: Okay. Just one minute, just 10 one minute. 11 Staff, can you comment to that, please? I think 12 the point is a valid point, is who is going to decide if 13 technology is available or not available? 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: The regulation has provisions where we can -- the 16 discretion is provided to exempt vehicles in certain 17 application, classes of vehicles for which retrofits or 18 other solutions are not available. All that's required is 19 that the fleets make a demonstration to us that "I cannot 20 find a replacement used vehicle to turn over." And as has 21 been stated, there are no requirements to turn over to 22 new. And that is a demonstration that needs to be made 23 and the fleet would be done with that piece. And it would 24 be an annual process you would have to go through year 25 after year to see if things change in twelve months. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 that would be the demonstration that would need to be -- 2 no, they do not have to demonstrate that there's a repower 3 available, just that they cannot buy a used vehicle that 4 would be cleaner than the one they want to replace. 5 BOARD MEMBER BERG: Okay. Thank you very much. 6 Thank you, sir. 7 MR. CARCIOPPOLO: Okay. Thank you. 8 CHAIRPERSON SAWYER: Mr. Downs. 9 MR. DOWNS: Good afternoon, Dr. Sawyer and Board 10 members. 11 CHAIRPERSON SAWYER: Yeah, would you get closer 12 to the microphone please. 13 MR. DOWNS: Do you hear me now? 14 CHAIRPERSON SAWYER: Yes. 15 MR. DOWNS: Good afternoon, Dr. Sawyer and Board 16 members. My name is Gordon Downs. 17 And we have a little PowerPoint presentation to 18 show. And we would have three speakers. We need to 19 include my wife in this. 20 Now, this is not a Steven Spielberg production, 21 but we tried. We tried our best and practiced two days. 22 (Thereupon an overhead presentation was 23 Presented as follows.) 24 MR. DOWNS: Slide one. Let's go back to slide 25 one. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 My wife and I own Downs Equipment Rentals in 2 Bakersfield and Santa Maria. This is where we were 30 3 years ago, with this old motor grader here. It was one 4 man, one machine. And I was on my way to my very first 5 job 30 years ago next month. It's just an old AD4 motor 6 grader. 7 --o0o-- 8 MR. DOWNS: Okay. And if you can see it, here's 9 where we are today after 30 years of operation and we have 10 55 employees. 11 --o0o-- 12 MR. DOWNS: We have 237 machines affected by this 13 proposed rule. Our equipment is all large diesel-powered 14 heavy earth-moving equipment totaling 44,819 horsepower. 15 So that makes us a large fleet. 16 Downs Equipment Rentals has a fleet typical of 17 the statewide average consisting of 48 percent Tier 0, 36 18 percent Tier 1, 15 percent Tier 2, and 1 percent Tier 3 19 machines. We must use the best available control 20 technology, or BACT, method of compliance. 21 --o0o-- 22 MR. DOWNS: I would like to focus your attention 23 on page 3 and 4 of the overview and staff recommendation, 24 which is the first section of the rule. This section is 25 important because it represents to you, the CARB Board, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 and to equipment owners what the CARB staff believes the 2 cost of compliance to the rule will be. 3 In the last paragraph on page 3 it states, 4 "Annual costs for a typical fleet would range from $8 to 5 $9 per horsepower per year." In other words, staff is 6 stating with certainty to the CARB Board and the public 7 and the equipment owners that the cost of compliance for a 8 typical fleet -- which we are a typical fleet -- is no 9 more than 8- to $9 per year -- per horsepower per year. 10 Excuse me. 11 --o0o-- 12 MR. DOWNS: Furthermore, on page 4, paragraph two 13 it says, "Overall, most affected businesses could absorb 14 the cost of the proposed regulation with no significant 15 adverse impacts on their profitability." If the maximum 16 cost was capped at no more than $9 per horsepower per 17 year, the cost would be a hardship but doable. 18 Next speaker. 19 MR. AMBROSE: Okay. I want to thank the Board 20 for this opportunity to speak. My name is Brant Ambrose 21 and I'm the general manager of Downs Equipment Rentals. 22 And I'm here to demonstrate to you the cost of the 23 proposed rule to our company as a typical fleet as defined 24 on page 18 of the rule within the first five years of this 25 rule. Using the highest CARB staff-stated industry cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 per horsepower per year for compliance on our typical 2 fleet, the costs would be roughly $400,000 per year or 3 about $2 million in the first five years of the rule. A 4 hardship but manageable. 5 However, as you know, the cost for compliance by 6 our company from our Cat dealer and reviewed on 7 April 18th, 2007, by the CARB staff comes in two parts: A 8 NOx repower or turnover requirement and a PM2.5 retrofit 9 requirement. 10 The eight percent annual repowers for NOx 11 according to the quotations that we've received from the 12 Cat dealer are $328 per horsepower on average for Tier 3 13 engines and equal for our company over $1.1 million per 14 year. Add to that the 20 percent annual retrofit with 15 V-dex that cost $146 per horsepower on average, and that 16 equals $1.3 million per year. This totals over $2.4 17 million per year for each of the first five years. 18 --o0o-- 19 MR. AMBROSE: And after that, our costs will be 20 about $2 million a year as projected on the spreadsheet 21 provided by the CARB staff members Elizabeth Yara and Jeff 22 Wilson. This is a cost of over $55 per horsepower per 23 year, an actual cost over six times than the $9 per 24 horsepower per year CARB staff has stated on page 3 of the 25 rule. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 And let's not forget in all this that this is a 2 Tier 4 rule, a technology that will not be totally 3 available until 2014. 4 Our projected cost is $12.4 million in the first 5 five years alone, not the $2 million as stated in the 6 rule. 7 Another option, which is difficult to explain in 8 three minutes, is to shrink our business each year until 9 we've sold all of our Tier 0 machines. And even that 10 option costs a net $1.7 million a year while shrinking our 11 business approximately 20 percent over five years. 12 Thank you for your time. And the next speaker is 13 Joyce Downs. 14 (Applause.) 15 MS. DOWNS: Thank you, Board and Chairman for 16 listening to us today. My name is Joyce Downs, as was 17 stated. I am the wife of Gordon Downs, son of Brant 18 Ambrose, and vice president of Downs Equipment Rentals. 19 --o0o-- 20 MS. DOWNS: I want to appeal to you on behalf of 21 our small business and on behalf of the entire industry. 22 In the last year which we had completed income 23 tax returns, our very best year for revenue and profit, we 24 had after tax incomes of a little over $1 million. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 MS. DOWNS: All of those after-tax profits were 2 used to make down payments and principal on late model and 3 lower emission equipment. 4 The rule as written will cost our company $2.4 5 million a year. That is $1.4 million a year more than we 6 made in our very best year. 7 --o0o-- 8 MS. DOWNS: As a lifelong resident of California, 9 a wife, a mother, and a grandmother, I can assure you we 10 want to work with CARB to improve our air quality. That 11 is important to us. But as can you see, as a small 12 business owner like ours, we cannot afford to bear the 13 entire burden of this rule as is now written. That is why 14 we are relieved that you have chosen to set this rule 15 aside for further study until July. Perhaps this will 16 give you time to consider various funding options to aid 17 this industry. 18 So what is the solution? 19 --o0o-- 20 MS. DOWNS: We truly believe that for this rule 21 to be feasible the cost to owners must be capped at the 22 level CARB staff projects it to be, that level of $9 per 23 horsepower per year maximum. 24 Our company and the industry as a whole needs 25 funding similar to the Carl Moyer program for any amount PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 over the $9 per horsepower per year. Along with this 2 funding we ask for a postponement of several years to 3 allow Tier 4 technology to solve a portion of this 4 problem. In that way, our small business and the entire 5 industry will be able to create a cleaner air and future 6 for all Californians. 7 I thank you for this opportunity to present the 8 problems and the solution to this regulation as we see 9 them. 10 Thank you. 11 (Applause.) 12 CHAIRPERSON SAWYER: Let me congratulate the 13 three of you on your presentation. I trust you run your 14 business as effectively as you do your presentation. 15 (Applause.) 16 CHAIRPERSON SAWYER: Supervisor Hill I think has 17 a question. 18 SUPERVISOR HILL: Thank you. 19 It's a question, I guess -- I met with Mr. and 20 Mrs. Downs a couple of -- about a month ago, I guess. And 21 I was very impressed with the presentation that he made to 22 me, which is similar to the presentation he made this 23 afternoon, and impressed with the numbers and the 24 commitment that he has made and his family has made to, 25 number one, their business but, secondarily, to this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 issue. He's done his homework and did it quite 2 extensively. 3 And I was wondering over the next couple of 4 months, as the staff is working on this and as I know 5 another gentleman is going to be working with the staff, 6 if maybe Mr. Downs could present his information and we 7 could use that perhaps as a model to see how this rule 8 will affect his business, because I think it's perhaps 9 typical of many of the businesses that we're dealing with. 10 And that you could work closely with the staff, if the 11 staff's agreeable, and use that as kind of an example and 12 maybe come up with some solutions working together this 13 way. 14 MR. DOWNS: I will volunteer myself and my family 15 to meet with staff any time, any place. 16 SUPERVISOR HILL: Great. Thank you. 17 MR. DOWNS: Thank you. 18 (Applause.) 19 BOARD MEMBER BERG: Mr. Chairman? 20 CHAIRPERSON SAWYER: Yes, Ms. Berg. 21 BOARD MEMBER BERG: Supervisor Hill, just to let 22 you know, that I also met with the Downs. I have taken 23 their information. I also have discussed it with Erik 24 White and Tom Cackette, and they've gotten some additional 25 information back to me. Because there's always financial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 models, and what companies are comfortable doing debt-wise 2 and paying things and so forth. Mr. Downs has been so 3 accommodating and being willing to look at his whole 4 business. And so I've made a commitment to look at it 5 from a financial point of view from business person to 6 business person also and to work with staff as an example 7 of maybe other people in this room. So we have done that. 8 Great suggestion. 9 Thank you. 10 CHAIRPERSON SAWYER: Our next three speakers are 11 Rasto Brezny, Ina Bendich, and Tiana Pittman. 12 DR. BREZNY: Thank you, Chairman Sawyer, members 13 of the Board. That's certainly a tough act to follow. 14 My name is Dr. Rasto Brezny. I'm the Deputy 15 Director for the Manufacturers of Emission Controls 16 Association. 17 MECA's pleased to provide testimony today in 18 support of ARB's proposed in-use off-road diesel vehicle 19 standards. We believe that the proposal presents a fair 20 and balanced approach and flexible approach that will 21 achieve significant PM and NOx reductions in a 22 cost-effective manner. 23 MECA is a nonprofit association of the world's 24 leading manufacturers of emission controls technology. 25 Our members have over 30 years of experience in developing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 and manufacturing emission control devices for a wide 2 variety of vehicles, including gasoline, diesel, on-road 3 and off-road applications. 4 An important opportunity exists to significantly 5 reduce emissions from the existing in-use off-road diesel 6 fleet by taking advantage of the same types of retrofit 7 technologies that have been developed and successfully 8 applied to on-road vehicles. 9 The use of exhaust control technology on off-road 10 vehicles is not new. For over 30 years, off-road diesel 11 engines used in the construction, mining, and materials 12 handling industries have been fitted with emission control 13 devices as original equipment or retrofit. 14 Off-road applications pose specific engineering 15 challenges and special requirements. The proper 16 integration of emission control technology on off-road 17 equipment must consider safety, durability, and 18 performance. 19 Our industry considers safety such as surface 20 temperatures, driver viability an important component of 21 every design and installation. 22 The durability of retrofit devices has been 23 demonstrated on over 50,000 installations of diesel 24 particulate filters on off-road equipment worldwide, some 25 in operation for over 15,000 hours under severe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 conditions. These have included active and passive DPF 2 systems as well as combinations with NOx control 3 technologies. 4 Adoption of the regulation as proposed will 5 provide manufacturers with a level of certainty in the 6 market for off-road diesel retrofits that can better 7 direct the resources towards continued development and 8 verification of appropriate technologies specifically 9 designed for off-road applications. 10 For the overall success of the proposed rule, 11 MECA strongly believes that ARB's retrofit verification 12 program must also be resourced and streamlined. The 13 current process is slow and resource intensive, and 14 current staffing level is in adequate. Additional 15 qualified resources with a working knowledge and the 16 latest NOx control technologies, such as SCR, are 17 necessary in order to handle the diversity of the 18 applications and the complexity of technologies that are 19 being developed to achieve both PM and NOx reductions. 20 BOARD MEMBER RIORDAN: Dr. Brezny, I'm sorry but 21 the time is drawing to a close. Can you conclude your 22 testimony? 23 DR. BREZNY: Yeah. In closing, we commend the 24 Air Resources Board for demonstrating true leadership in 25 developing this innovative regulatory program. We also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 thank staff for working closely with all stakeholders in 2 the process. And, finally, our industry pledges its 3 continued support and commitment to working with all 4 stakeholders to ensure the technology's available that 5 will achieve the emission reductions outlined in this 6 proposal. 7 Thank you. 8 BOARD MEMBER RIORDAN: Dr. Brezny, thank you very 9 much. And would you indicate to your membership they are 10 a key component to the success of a program like this. So 11 we appropriate your testimony. 12 DR. BREZNY: Thank you. 13 BOARD MEMBER RIORDAN: Are there any questions? 14 Ms. D'Adamo. 15 BOARD MEMBER D'ADAMO: Thank you. 16 I sort of started off today thinking that the 17 challenge for me personally is trying to get to the bottom 18 of these huge cost differences. But it seems to me as the 19 day has progressed that in large part it has to do with 20 the choice of compliance relative to this very issue of 21 traps. And so perhaps if staff could help to describe 22 what that challenge is. Is it that they're just -- that 23 this industry is not used to traps? Is there something 24 different about this industry as compared to some of the 25 other industries that we've already regulated that have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 used traps with great success? And is that the source of 2 this gap on the economics analysis? 3 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 4 WHITE: There's a number of questions. Let me make sure I 5 get them all. 6 I think there's a great level -- a great deal of 7 uncertainty on the industry's side about the durability 8 and robustness of the particulate filters. And it's not 9 without a lot of investigation both in the U.S. and abroad 10 about how they've been applied and where they've been 11 applied, the type of applications. And I think there's a 12 great body of evidences to demonstrate that they are quite 13 durable and technically feasible for off-road 14 applications. 15 But we certainly have been mindful that it's not 16 a technology that the U.S. industry in particular, the 17 California industry is used to dealing with. And we've 18 taken a number of steps, in the showcase, for instance, in 19 the South Coast Air Basin I think is a great example of 20 our intent to partner with industry, both the end-users as 21 well as the suppliers to bring them together there to try 22 to alleviate a lot of the concerns that are out there. 23 From a technical perspective and the engines that 24 these are going on, I don't think there is a technical 25 issue about whether they will work. The active systems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 don't necessarily care about the duty cycle. They will 2 work on any vehicle. There are issues with safety that 3 have been brought up through the process. We've been very 4 cognizant of that and have tried to structure safety 5 requirements provisions into the regulation. So that 6 certainly we are never requiring retrofits where they're 7 not safe. 8 And so we do agree with industry that there are 9 certain applications that will be challenging in off-road 10 vehicles. Smaller horsepower engines in some smaller 11 vehicles will be a challenge. And so we've tried to bring 12 all of that together in how we laid this out. 13 Getting to the question about cost, certainly 14 when we look at what the $3 billion represents, about half 15 of those are for the retrofits. I mean they represent a 16 significant portion of the overall cost that the 17 regulation brings with it. And many of those costs are 18 borne in the first year. 19 We have the -- and it might -- I don't know if it 20 would be useful to put up the chart which kind of shows by 21 year the cost; you know, we see that most of the retrofit 22 cost. Because we're talking about the existing dirty 23 engines, and those are the ones that are going to get 24 retrofit first. They provide much of the PM benefit that 25 we get in the early years. So a lot of the cost comes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 from the requirements for the retrofits, and the turnover 2 is spread out over a longer period of time. 3 So I think that gets to most of the questions you 4 had. 5 EXECUTIVE OFFICER WITHERSPOON: Well, just to sum 6 up, that if you are nervous about traps, if you are 7 unwilling to use traps and assume that you're going to 8 have to buy new equipment instead, then you're looking at 9 a fourfold, fivefold, you know, increase in cost instead 10 of using that technology. And as Erik indicated, we've 11 done everything to reassure the industry the technology 12 will meet their needs and ours so they don't have to go to 13 the replacement alternative. But if that's the choice 14 they make, it will cost them pore to comply. 15 BOARD MEMBER D'ADAMO: So that's basically where 16 the big gap comes from? 17 EXECUTIVE OFFICER WITHERSPOON: It's where the 18 biggest gap comes from. 19 BOARD MEMBER RIORDAN: Let me just offer though 20 the one thing that I did hear in his testimony that we 21 need to take to heart and, that is, whether or not we have 22 adequate staff for verification. And are we using our 23 resources appropriately? And you don't need to answer 24 that. But just keep that in the back of your mind to 25 assist them to ultimately assist those who are, you know, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 having to retrofit their equipment. 2 Ina Bendich, would you come forward, please. 3 And Tiana Pittman, why don't you come right up 4 front so you'll be ready to speak next, and Teona Hill 5 following. 6 MS. BENDICH: Boy, this is tough with bifocals. 7 BOARD MEMBER RIORDAN: I know. I know the 8 feeling. 9 MS. BENDICH: Good afternoon, Dr. Sawyer and 10 members of the Air Resources Board. Thank you for the 11 opportunity to talk to you today. My name is Ina Bendich, 12 and I am a teacher and director of the Law and Government 13 Academy at Excel High School at the McClymonds Educational 14 Complex in west Oakland. 15 I grew up believing that public service was the 16 most noble calling. Elected and appointed officials had a 17 responsibility to protect the public interest even when 18 that meant considering the point of view of people that 19 they were unlikely to encounter in their daily life. For 20 example, when the Supreme Court ruled on Brown versus 21 Board of Education, the justices were all male, white, 22 highly educated, and some were born in southern states 23 where Jim Crow laws dominated African-American life. 24 Their decision was made based on what the governing law, 25 the U.S. Constitution in that case, demanded. But perhaps PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 more importantly, they made a decision to do the right 2 thing even though they had little or nothing in common 3 with the plaintiffs. 4 Your Board has embraced the pursuit of 5 environmental justice and the eradication of environmental 6 racism. 7 As a director of the Law and Government Academy, 8 one of my goals is to instill this idea of justice in my 9 students. However, their daily experience as residents of 10 west Oakland leads them to believe that justice is 11 unattainable. They walk past new housing developments 12 that their parents can't afford to rent or buy. They 13 experience high rates of asthma and other illnesses 14 related to the heavy machinery and industry present in 15 their neighborhood. They know that this does not exist in 16 the wealthier areas of Oakland. They see the 17 contradiction. 18 What they have learned is that government 19 represents those who are present at the decision-making 20 table. They know that in order for their voices to be 21 heard, they must be where the decisions are made. 22 The mission of the Air Resources Board -- and I 23 quote -- is "to promote and protect public health, 24 welfare, and ecological resources through effective 25 reduction of air pollutants, while recognizing and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 considering effects on the economy." As a director of the 2 Law and Government Academy, I have taught my students that 3 word order is important. It is clear from this mission 4 statement that the primary mission of the Board is to 5 protect public health and the environment. 6 West Oakland residents have suffered the 7 ill-effects of diesel pollution for a very long time. I 8 am counting on you to show my students that their health 9 and welfare is paramount in your decision-making process. 10 And I'd also like to mention that as a 11 card-carrying member and the union rep on my campus, we 12 are incredibly sensitive to the economic issues. They're 13 very complex. And we understand that jobs are at issue, 14 that industry making a conversion is at issue, and it's 15 huge. However, health should be the primary concern, and 16 we hope that you make the decision to institute this rule. 17 Thank you. 18 (Applause.) 19 MS. PITTMAN: Hi. My name is Tiana Pittman. 20 Good morning, everybody -- or afternoon. 21 I'm a junior at Excel High School at the Law and 22 Government Academy at McClymonds Educational Complex. And 23 I would like to take a moment to talk about why McClymonds 24 students care about diesel pollution, including pollution 25 from diesel construction equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 Everyone here knows that when diesel fuel burns 2 it creates emissions that makes people sick. That's why 3 seven years ago the Air Resources Board determined that 4 diesel particulate was a toxic air contaminant. 5 For the year 2005 according to in the Union of 6 Concerned Scientists, the estimated impacts of diesel 7 pollution in California included 3,000 premature deaths, 8 250 cases of lung cancer, 10,000 asthma attacks and 9 respiratory illnesses, and increased global warming, more 10 than 2,000 cases of acute bronchitis and more than 300,000 11 school absences. 12 Students at McClymonds believe that it is time to 13 change all that. We think that it is time to stop making 14 people sick just because they live or work or go to school 15 near construction sites. We ask you to adopt the 16 strongest, toughest, cleanest off-road vehicle rule 17 possible. We wish you could adopt it today. But since 18 you can't, we just ask you to adopt it as soon as 19 possible. And every day that you wait, people get more 20 sick and more people have heart attracts, strokes, and 21 asthma attacks, and more people die early who shouldn't 22 and more people miss school or work. 23 Thank you. 24 CHAIRPERSON SAWYER: Thank you very much. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 CHAIRPERSON SAWYER: Are you Davilla? 2 MS. HILL: No, Teona -- Teona Hill. 3 CHAIRPERSON SAWYER: You're Teona. 4 MS. HILL: Yes. 5 CHAIRPERSON SAWYER: And the previous speaker's 6 name was? 7 MS. HILL: Tiana Pittman. 8 CHAIRPERSON SAWYER: Oh, Tiana and Teona. Okay, 9 got it. I'm back on schedule here now. 10 Thank you very much, Teona Hill. 11 MS. HILL: Teona Hill, yes. 12 CHAIRPERSON SAWYER: And then we'll have -- we're 13 having Davilla Ervin and Jazmine Caldwell and Margaret 14 Gordon, just to give some more. 15 Please go ahead. 16 MS. Hill: Good evening, everybody. My name is 17 Teona Hill and I'm currently a junior in the Law and 18 Government Academy at Excel High School in the McClymonds 19 Educational Complex in west Oakland. 20 I am here today to talk about asthma, because 21 biodiesel -- because diesel pollution is such a major 22 factor in asthma in California and because asthma is such 23 an important problem in my school, in my community, and in 24 my city. Oakland is located in Alameda County. 25 Asthma hospitalization rates in Alameda County PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 exceeds California rates in every demographic group study, 2 whether the breakdown was by age, race, or other factors. 3 In fact, Alameda County rates of asthma hospitalization 4 are the second highest among the state's 58 counties. 5 From 2001 to 2002, 1,084 asthma hospitalizations occurred 6 in Alameda County. The rate was 356 per 100,000, two 7 times the California rate and well above the national goal 8 for reducing asthma hospitalizations. Rates of 9 hospitalization for asthma among children under five where 10 the highest is in west Oakland, where I live, and in north 11 Oakland and east Oakland, exceeding the county average 12 rate by two or more times. 13 In 2005, 2,299 student -- sixth graders at 14 14 schools in the Oakland Unified School District were given 15 a self-administered asthma questionnaire. 18.1 percent of 16 those sixth grade students have been diagnosed as having 17 asthma at some point in time in their lives and 17 percent 18 said they currently had asthma. 19 At the middle school on the McClymonds campus 20 over 35 percent of the sixth graders completely -- I mean 21 completed the questionnaire -- that completed the 22 questionnaire said that they currently had asthma, just so 23 that I could have a better sense of what it means to those 24 students -- or just so that you can have a better sense of 25 what it means to those students. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 For all 390 students who reported they currently 2 had asthma, 24.6 percent needed emergency care for asthma 3 in the year, 56 percent had difficulty sleeping because of 4 the asthma in the past year, 68 percent had used inhalers 5 in the past year, and 45.4 experienced activity 6 limitations in the past year. 7 Diesel pollution is a major factor in asthma in 8 California. Construction equipment is one of the 9 important sources of diesel emissions. I see construction 10 equipment all the time in Oakland. There are crews out 11 working on the roads and building new buildings. Please 12 adopt a good strong rule that will ensure that 13 construction is not adding to the asthma problem in 14 Oakland. 15 Thank you. 16 (Applause.) 17 CHAIRPERSON SAWYER: Thank you very much. 18 Davilla Ervin. 19 MR. ERVIN: Good afternoon, Dr. Sawyer and 20 members of the Air Resources Board. Thank you ones again 21 for the opportunity to speak to you guys today. My name's 22 Davilla Ervin and I'm a senior at Excel College 23 Preparatory High School and the Law and Government 24 Academy. 25 My purpose here today is to talk a little bit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 about the impact of construction in west Oakland. As I am 2 sure that you are aware, the recent repair of the 3 MacArthur maze has been a particularly intensive 4 construction program. You might say that the impact was 5 small given that the repairs were completed in less than 6 one month. However, this is not the only construction 7 project that is underway in my community. 8 There have been numerous housing projects 9 conducted over the past two years and others are in the 10 works, including planned development for the old train 11 station in west Oakland. There is a very controversial 12 redevelopment project proposed within a mile of my high 13 school. I am not advocating for a moratorium on these 14 construction projects. West Oakland residents will 15 hopefully benefit from this. 16 However, more often than not those people who 17 live in low income communities suffer the ill-effects of 18 exposure to diesel particulate emissions that are part and 19 parcel of construction projects, but can't afford to 20 purchase the new homes that become available. 21 What I'm asking of you today is to move as 22 quickly as possible to approve the off-road vehicle rule 23 that your staff has proposed. I wish it were tougher. 24 But the most important thing is to make progress in 25 reducing construction pollution. The residence of West PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 Oakland can't afford to wait and deserve the very best 2 pollution protection. 3 Thank you. 4 CHAIRPERSON SAWYER: Thank you very much. 5 (Applause.) 6 Thank you very much. 7 Ms. Caldwell. 8 MS. CALDWELL: Good afternoon, Dr. Sawyer and 9 members of the Air Resources Board. Thank you once again 10 for the opportunity to talk to you this afternoon. My 11 name is Jazmine Caldwell, and I am a senior at the Law and 12 Government Academy and Excel High School located at 13 McClymonds Educational Complex in west Oakland. 14 I'm here today to discuss how diesel pollution 15 from construction equipment is a major factor for asthma 16 in California. I have asthma and I can tell you it's a 17 real problem. When I have an asthma attack I feel like 18 I'm lightheaded and then dizzy and I panic -- I have a 19 panic attack at the same time. Asthma means that I need 20 to use an inhaler two or three times every day. And the 21 medicine that I have to use is nasty stuff. It doesn't 22 make sense. And asthma means that I have to be careful 23 when I run or perform any physical activities before I 24 lose breathe. 25 I first realized I had asthma when I was six PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 years olds. Since then I had asthma attacks, but I've 2 always been able to manage them. 3 Asthma is an epidemic at west Oakland. In 2005 4 and 2006 students serving at Kingsmen Middle School, often 5 located at McClymonds Educational Complex, has the highest 6 asthma risk of any other middle school in Oakland, with 7 35.7 percent of the students reporting a lifetime 8 diagnosis of asthma. 9 I have friends whose asthma is so bad that they 10 have been in and out of the hospital. One friend has been 11 to the hospital more than 50 times because of her asthma 12 attacks. She is not able to participate in sports and has 13 trouble sleeping and managing her weight. Nobody should 14 have to feel that way -- the way she does. 15 Members of the Board, you have a chance to do 16 something that will keep a lot of people from feeling 17 hopeless and breathless. You have a chance to adopt a 18 good strong off-road vehicle -- that rule that can cut 19 diesel pollution and diesel -- asthma by as much as 20 20 percent. Please be quick to adopt the toughest, strongest 21 rule possible. 22 Thank you for your time. 23 CHAIRPERSON SAWYER: Thank you very much. 24 (Applause.) 25 CHAIRPERSON SAWYER: I would like to make a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 comment to the teacher of this group, Ms. Bendich. We 2 thank you very much for bringing your students. We think 3 it's very important that the public learn the 4 participation process in hearings such as this where we 5 have greatly divided groups with very different ideas 6 about what direction we should go in, but were able to 7 exchange information and hopefully come to resolutions in 8 a civil process. 9 Thank you so much for bringing your students. 10 (Applause.) 11 CHAIRPERSON SAWYER: You probably know that I'm 12 an Oakland resident also. 13 Margaret Gordon. And then we will have Jill 14 Rather, Bonnie Holmes-Gen, and Tara Hass. 15 Margaret. 16 MS. GORDON: Good afternoon, Dr. Sawyer and staff 17 from ARB. 18 I'll make this really brief, because I'm sitting 19 in the back -- and I have a comment to make to the grown 20 adult men who have been very disrespectful to the students 21 that's coming from west Oakland and speaking from their 22 heart and their experience. Give them the same respect 23 that you have given your fellow industry people. 24 (Applause.) 25 MS. GORDON: Give them the same respect that they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 gave you. While you were speaking, they were quiet, they 2 were respectful. Give them the same respect. There's a 3 lot of chatter in the back. These are -- you're supposed 4 to be adults in here, supposed to be adults in here. 5 Please give them the same respect. 6 And, see, as an adult who can stand up for 7 herself, if you're acting a fool behind my back, see me 8 outside. I would like to see you outside, then you can 9 talk to me. Okay? And I am west Oakland resident. I am 10 with the West Oakland Environmental Indicators Project. 11 And I ain't scared of you all. 12 I have a son that's an operation engineer. I'm 13 not going to give you his name because I feel as though 14 that just the behavior I have seen here, there would be 15 retaliation against him. 16 I am a union -- I am very pro-union, very 17 pro-union. But I do not see pro-union being supportive of 18 what's happening in communities like west Oakland. Okay? 19 And not to continue on with my motherly views and 20 support of environmental justice and public health, I 21 would like to say I have asthma. I have five 22 grandchildren that have asthma. And I have a father who 23 has asthma. Okay? All I'm asking for is to have the 24 right to breathe clean air at all times. 25 Industry has the right to make money. I have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 right to have clean air. 2 Thank you. 3 (Applause.) 4 CHAIRPERSON SAWYER: Thank you. 5 Ms. Rather. 6 MS. RATHER: Good afternoon, Dr. Sawyer and 7 members of the Board. Thanks again for the opportunity to 8 talk with you today. My name is Jill Rather, and I am the 9 program director for the Rose Foundation for Communities 10 and the Environment, which is also in Oakland. And over 11 the past three years we've been working with schools in 12 Alameda and Contra Costa County to help students learn 13 about civic engagement, including participating in 14 proceedings like this. And so I really appreciate your 15 welcoming the students. 16 In part, I wanted to speak on behalf of students 17 from schools that aren't represented here today. And in 18 connection with my card, I submitted some letters in 19 support of the proposed rule that came from students from 20 a number of other schools in Alameda and Contra Costa 21 County. 22 Our goal in working with students is to help them 23 become more effective citizens, including becoming active 24 participants in democracy and committed and informed 25 voters when they grow up. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 As was mentioned earlier, last year California's 2 voters approved about $43 billion in infrastructure bonds, 3 including $20 billion in transportation bonds to reduce 4 pollution and relieve congestion. I don't for a minute 5 believe that the voters intended that the projects to 6 relieve congestion would increase pollution while they 7 were being constructed to the extent that they will if 8 this rule is not adopted. We don't want to expose people 9 to uncontrolled diesel emissions when there are -- other 10 alternatives are available. 11 The students who came here from Oakland to speak 12 to you today live in a community that's surrounded by 13 freeways. We ask that you move swiftly to approve the 14 toughest rule feasible to protect these young people's 15 health when construction on those freeways occurs. 16 Thank you. 17 CHAIRPERSON SAWYER: Thank you. 18 (Applause.) 19 CHAIRPERSON SAWYER: Ms. Holmes-Gen. 20 You're Ms. Hass? 21 MS. HASS: I am. 22 CHAIRPERSON SAWYER: You're next after this. 23 Thank you. 24 MS. HOLMES-GEN: Good afternoon. I'm Bonnie 25 Holmes-Gen, the Assistant Vice President for Government PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 Relations with the American Lung Association of 2 California. And I'm here today to urge you to adopt a 3 strong rule -- the strongest possible rule to cut soot 4 from construction equipment and other off-road equipment, 5 and to consider strengthening amendments to further reduce 6 the nitrogen oxide emissions, the smog-forming emissions, 7 including a requirement to increase the turnover of the 8 engines. 9 And of course we are strongly supporting this 10 regulation because it will clean up the air, help us meet 11 our state and federal commitments, save thousands of 12 lives, reduce asthma attacks and other lung illnesses, 13 reduce hospitalizations and emergency room visits. And I 14 am so pleased you've been able to hear from the affected 15 community, from these students from west Oakland who have 16 given you a real picture of what they're experiencing. 17 We urge you not to be swayed by the inflated cost 18 projections of the construction industry. You've heard a 19 lot of exaggerations and mischaracterizations of impacts 20 that will occur. And you know that you always hear these 21 kinds of inflated cost projections before a major rule 22 like this is adopted. And after it's adopted, in 23 actuality the costs are far less than projected by the 24 industry beforehand. This has been a pattern. 25 Your staff has done excellent work. And we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 believe this is a very reasonable regulation. And more 2 than that, it's a regulation that's necessary and urgent 3 to address public health impacts. Your job is to do 4 what's best for public health. And today public health 5 demands that you move forward as quickly as possible and 6 adopt this regulation. 7 This rule is cost effective and fair. It has 8 been through an exhaustive review process. As you know, 9 three years having workshops, extensive opportunities for 10 industry input. And there have been so many revisions to 11 this regulation to address industry concerns. This is not 12 a last-minute regulation, a last-minute hit on the 13 industry by any means. This has been thoroughly, 14 thoroughly workshopped and reviewed. 15 The health benefits are estimated at 18- to $26 16 billion, far more -- five or six times more than the cost 17 of this regulation. Health benefits alone are more than 18 worth it. 19 There are cleaner equipment options and retrofits 20 that are proven and available now to meet this regulatory 21 requirement. 22 And I wanted to note that we submitted a letter 23 from the health network for clean air. And this letter is 24 from eight major health organization at the state and 25 local level, which calls on you to adopt the strongest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 regulation possible and to protect the health of 2 Californians by cleaning up existing construction 3 equipment through pollution control retrofits, cleaner 4 fuels, and replacement of equipment. And the signatories 5 include the California Thoracic Society; the American 6 Cancer Society; the California Nurses Association; 7 American Academy of Pediatrics, California Division; 8 Medical Advocates for Healthy Air in Fresno; Regional 9 Asset Management and Prevention Initiative; San Francisco 10 Medical Society; and Physicians for Social Responsibility, 11 Los Angeles. 12 And just in closing, would say that the cost of 13 this regulation by your own staff estimates is less than 14 one half of one percent of the total annual construction 15 revenue that was generated in California in a single year, 16 2005. 17 We urge you, move forward and adopt this 18 regulation. Do not weaken the regulation. 19 Thank you for the time. 20 CHAIRPERSON SAWYER: Thank you. 21 Ms. Hass. And then we'll have Mike Shaw, David 22 Porcher, and David Schmid. 23 MS. HASS: Okay. Now it's my turn. 24 CHAIRPERSON SAWYER: Yes. 25 MS. HASS: Good afternoon. My name is Tara Hass PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 and I'm the Director of Government Relations for the 2 Engineering and Utility Contractors Association. We are 3 an all-union signatory contractors association and we 4 represent about 200 union signatory firms and another 200 5 or so suppliers and affiliates in the western 6 United States. 7 And I just was struck by what one of the students 8 said actually about the maze collapse in Oakland. And I 9 thought, you know, that's a really good example of our 10 industry at our best, bringing to the public what they 11 need in a time efficient manner. 12 But what you can't help but hear about on the 13 news is how much money the contractor is making. And I'm 14 wondering if possibly that profit margin is what the CARB 15 staff has based their financial statistics on, because 16 clearly my experience in almost a decade in this industry 17 is that profit margins for most contracting companies are 18 between 3 and 5 percent. What's going on at the maze is 19 not typical of what happens here. And I've actually seen 20 some multi-million dollar bids being lost from some of our 21 contractor companies by just a few hundred bucks. So it's 22 a fiercely competitive market that we're dealing with out 23 here. 24 Let me be clear. You've heard from a lot of 25 different people today from both sides. Some people are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 screaming from the rooftops that it's going to crush our 2 industry, and others are saying that, you know, we're out 3 there killing people. I just want to come from a voice of 4 reason. We are the same people that coach your soccer 5 teams and breathe the same air and all that kind of stuff. 6 We don't want to be the people that are contributing to 7 premature deaths or asthma attacks or anything. We want 8 to do our part. The people in this room want to do their 9 part. We're not saying that we don't want to comply with 10 this rule. We're not saying that we absolutely can't. 11 All we're asking for is a little bit more time 12 for the technology to become more available and more 13 affordable so that we can comply with the regulation 14 better. I think if you look at it from any other angle 15 you're creating an industry of scoff laws, which is a term 16 I know most of you like to use. And we don't want to be 17 in that position. We want to be able to comply. We want 18 to do our part. 19 The contractors in this room, the fleet owners in 20 this room are here because they believe that this is going 21 to have a significant impact on them personally. And I 22 would have to say that what they've been doing, for an 23 example that Tom gave of almost 30 years, is doing what 24 they do best: Providing a service to the public. And 25 they've been doing what they do best with the equipment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 that they have been provided with through their equipment 2 manufacturers. They're being given -- they're buying what 3 they're being given out there, yet they're having to 4 absorb a disproportionate amount of repercussions by this 5 rule for something that they didn't do. 6 So I just wanted to stress that we're asking for 7 more time. It's not an impossible request. I think it 8 can be complied with. We don't want to contribute to 9 asthma or premature deaths either. We want to do our 10 part. We breathe the same air. So I just please ask that 11 you look at our consideration more closely. 12 Thank you. 13 (Applause.) 14 CHAIRPERSON SAWYER: Thank you. 15 Mr. Shaw. 16 MR. SHAW: Good afternoon, Dr. Sawyer, Board. I 17 appreciate the opportunity to speak. My name is Mike 18 Shaw. I'm a resident of San Diego County. I've get a 19 wife and three kids. And I want cleaner air for my family 20 and I want cleaner air for my community. That's why I 21 absolutely fully support the goals of this regulation. 22 And that's why I've also put a lot of money and a lot of 23 my personal time towards reaching those goals. 24 I'm also an employer. My partner and I own a San 25 Diego-based grading operation. We regularly employee PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 about 175 operating engineers. Our revenue comes entirely 2 from the use of the largest of these off-road diesel 3 equipment. 4 On a volunteer basis, since 2002 our company's 5 replaced 44 engines using the Moyer program. It's been at 6 a cost of just under $6 million. The last 23 engines that 7 we've done this year are all Tier 3 engines. And we've 8 done the calculations. I think that in the next six to 9 seven years it's going to cost us at least another 15- to 10 $17 million to comply. That's after we've spent the 11 almost $6 million dollars up to now to do this. 12 And just to make something else clear, we get no 13 PM credits for any of the repowers we've done including 14 the scraper that cost us $364,000 that came out last week. 15 We get no PM credits. 16 I've been active for two years with CIAQC to help 17 try to craft these regulations from the industry side. 18 I've been active locally because I think we need to do 19 outreach and educate our industry so we could be prepared 20 for this. And I thought this would put our company in a 21 pretty good position to comply with this. 22 It doesn't. There's a number of reasons. The 23 first is primarily the time frame and the economics. We 24 just can't afford the huge capital outlay in the 25 compressed time schedule that's required even if the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 technology and the solutions were available. We've 2 already lost a very large portion of our equipment equity 3 because of this regulation. It's already happened. This 4 is the same equity that we'd need to pay the bills for the 5 repowers and the replacements that we need to comply with 6 this thing. 7 We know that your staff does not have a good 8 handle on what it takes to do our business. They don't 9 understand the financing. They don't understand the 10 bonding. They don't understand how the equity works in 11 this. That's another issue. 12 The third issue -- I think this is a very 13 important issue -- is that we're in a very risky business. 14 And a part of that risk I think is going to be elevated by 15 the fact that we're looking at penalties if we don't 16 comply to this very complex regulation. I have not been 17 able to get a straight answer from your staff on what 18 these penalties are. I think it is an obligation as a 19 part of this regulation you provide very precise 20 information to the industry and what these penalties are 21 going to be. I know under the PERP regulation there have 22 been many -- you know, there fines that have been -- or 23 the penalties have been in the multi-million dollar range. 24 So we need to understand that so we can understand how 25 that risk will relate to how we do our business. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 I don't think there's any question in my mind 2 that our company if we survive this will be much smaller 3 at the end of the day. I'm not really sure that we're 4 going to survive it. 5 Thank you. 6 (Applause.) 7 CHAIRPERSON SAWYER: Mr. Porcher. 8 MR. PORCHER: Good afternoon. My name is Dave 9 Porcher. I represent the 200 employees and families at 10 Camarillo Engineering. 11 We have 112 tractors at 41,000 horsepower. We 12 are and have been proactive in the pursuant of clean air 13 technology. To date we have repowered 27 of our Tier 0 14 engines. 15 We have tried to show Air Resources Board staff 16 that their cost modeling for emissions reductions is 17 unrealistic for repowers as well as retrofits. In our 18 data we showed that the real costs are in some cases 19 double what the state's data says they should be. We've 20 tried to show the serious safety issues of the current PM 21 devices posed, including installation and viability 22 concerns. We have given ARB staff timelined analysis of 23 the devaluation of Tier 0 equipment over the last year and 24 a half. We have given ARB staff a letter from our 25 financial institution declining to finance the DPF units. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 We have supplied data to show the difficulty that 2 Camarillo Engineering is having in securing current Carl 3 Moyer money for a variety of reasons. 4 It is my opinion that the Air Resources Board 5 staff in their eagerness to accelerate the implementation 6 of the rule has chosen either to ignore or marginalize the 7 data that our company has provided. The State of 8 California and the construction industry need more time to 9 work out the obstacles that have to be overcome. We need 10 to work out a sensible timeline to allow the technology 11 time to improve, financial institutions time to get on 12 Board to help contractors finance the devices, and, most 13 importantly, time to work out the serious safety issues 14 posed from the placement of these devices on our tractors. 15 On page 10 of the notice of public hearing to 16 consider adoption of proposed regulation for in-use 17 off-road diesel vehicles, it states, "Overall, most 18 effected businesses will be able to absorb or pass on the 19 cost of the proposed regulation with no significant 20 adverse impacts." This analysis is based on ARB staff 21 estimates. 22 We have shown that the rule in the first year 23 alone will take 58.08 percent of our net profit to meet 24 the PM target. To meet the PM and NOx target without 25 repower credit we'd use up 66.628 percent of our net PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 profit. I would say that that is a significant adverse 2 impact. The DPFs alone have been quoted at over $1 3 million to do 20 percent of our fleet horsepower to meet 4 year 2010 PM target. 5 I would like to stress that we have shared all 6 our data. 7 In closing, please read all the material that our 8 company and others have provided to you and postpone 9 making a final decision until these obstacles can be 10 overcome. 11 Thank you for the opportunity to speak. 12 (Applause.) 13 CHAIRPERSON SAWYER: Thank you. 14 Mr. Schmid. And then we'll have Bill Haller, 15 Gary Rohman, and Rick McCourt. 16 Mr. Schmid. 17 MR. HALLER: I'm not -- 18 CHAIRPERSON SAWYER: Oh, you're not Mr. Schmid. 19 Excuse me. 20 Mr. Haller. 21 If when your name is coming up, if you could come 22 closer to the microphone, we could save some time and get 23 more people in. 24 Mr. Haller is not here or is here? 25 MR. Haller: I am here, sir. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 CHAIRPERSON SAWYER: Okay. Good. 2 MR. HALLER: Mr. Chair, I'm clocking in I think 3 at two oh nine. 4 My name is Bill Haller. I'm a volunteer with the 5 Sierra Club - California. I'm also Co-chair of Sierra 6 Club - California Air Quality Committee, representing more 7 than 200,000 statewide club members who believe that every 8 individual and every industry in this great state has an 9 equal responsibility to protect the health and well being 10 of all living and growing things. 11 Being a parent of -- oh, I'm going to be the most 12 hated man in just three minutes. Being a parent of a 13 three year old and a six year old, I have just started 14 hearing the phrase from my children that many of the more 15 advanced parents of older children are now painfully 16 familiar with. And that phrase is, "Do I have to?" And 17 it doesn't matter what you ask your kids to do. That is 18 the primary response to every parental request - "Do I 19 have to?" And of course our response to that question is 20 always, "Yes, you have to." And after a few moments' 21 consideration our kids come back with, "But what I if I 22 don't want to?" Which leads to our closing parental 23 argument, which is usually, "It doesn't matter whether you 24 want to or not. You have to. Now go do it." 25 And that's where the compliance phase of running PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 our family is supposed to kick in. But it doesn't because 2 then our kids make these big sad eyes at us and their 3 lower lip starts to quiver and we hear, "But, daddy, I 4 can't." Oh, I know. And my response is, "You can't put 5 your dish in the sink or you don't want to?" "You can't 6 put your crayons back in the box or you just don't want 7 to?" 8 Well, thank goodness our kids don't have lawyers 9 and lobbyists on staff. Because if they did, they'd never 10 clean their rooms. We'd have to go through years of 11 hearings and workshops just to get them to pick up their 12 underwear off the floor. 13 And today the construction industry is presenting 14 a mind-numbing amount of testimony in opposition to these 15 very reasonable, very fair, and well supported off-road 16 diesel regulations. However, we're hearing statistics and 17 personal testimony that is absent any sorrow, remorse, or 18 barely even, except for the young gal, even mention of the 19 deadliest byproduct of this industry, which is 20 underdeveloped lungs in children, double-digit childhood 21 asthma, cardiovascular disease, and hundreds of thousands 22 of lost days of productivity for all Californians. 23 And where are the industry PowerPoints with a 24 solution to the health care crisis? Bring those on. 25 That's not their concern. No, they want sympathy over how PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 much it's going to cost them to comply. And I'm not sure 2 this is the right forum for that. Wouldn't the right 3 venue for a sympathy vote be a pediatrics ward in any San 4 Joaquin Valley hospital? 5 I'm not suggesting that if the -- I'm only 6 suggesting that if the opposition can get those kids and 7 their families to agree to a five-year delay, then I'm all 8 for it. Until then, in my ears most every line of 9 testimony from the opposition will only echo the words "we 10 can't" and "we won't." 11 CHAIRPERSON SAWYER: I must ask you to conclude 12 please. 13 MR. HALLER: To which the ARB in order to still 14 meet federal and state air quality attainment levels has 15 to reply, "But you have to." 16 CHAIRPERSON SAWYER: Thank you. 17 Mr. Rohman. 18 (Applause.) 19 BOARD MEMBER BERG: Mr. Chairman, may I just make 20 a comment? 21 CHAIRPERSON SAWYER: Yes. 22 BOARD MEMBER BERG: Ladies and gentlemen in the 23 audience, we are not going to tolerate booing. This Board 24 is responsible for listening to all sides. I have 25 reactions to various speakers from both sides that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 inappropriate. Please stop it. 2 CHAIRPERSON SAWYER: Thank you, Ms. Berg. 3 Mr. McCourt. 4 MR. ROHMAN: No, Gary Rohman. I think I'm 5 supposed -- 6 CHAIRPERSON SAWYER: I'm Sorry. Mr. Rohman. 7 MR. ROHMAN: Thank you, Dr. Sawyer and Board 8 members. My name is Gary Rohman. I'm a vice president of 9 ECCO Equipment Corporation. We were founded in 1962 and 10 currently have over 700 pieces of heavy construction 11 equipment in our fleet. We work throughout the State of 12 California. 13 In the year 2000 we made a commitment to make 14 improvements to our fleet as far as emissions. In 2000, 15 ECCO's fleet consisted of 90 percent unregulated or Tier 0 16 engines and 10 percent Tier 1. 17 But today, we have 33 percent unregulated or Tier 18 0 engines, 54 percent Tier 1's, 12 percent Tier 2's, and 1 19 percent Tier 3's. To achieve these significant 20 improvements came at a cost of $63 million. 21 ECCO was recently required to install a 22 particulate filter on a 430 horsepower 988 loader. And I 23 have a photo here and I'd like -- if some of you can see 24 it, I'd like to reference that. These devices cost us 25 $54,000, not 30,000 as reported earlier by your staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 today. The installation was so poorly -- 2 SUPERVISOR HILL: We can't see. 3 MR. ROHMAN: The installation was so poorly 4 performed by the manufacturer that the Cat dealership will 5 not release this machine back to us due to many safety 6 concerns. In fact, next Tuesday Caterpillar, CARB, and 7 others will meet to review this installation. 8 I have to say when I first saw that on our 9 machine when I walked into the Cat dealership, it reminded 10 me of something of a movie, "Back to the Future." And I 11 mean I can't believe that we're going to be forced to 12 operate that on a daily basis in a rental atmosphere. 13 I have personally worked with staff for over 14 two years and have dedicated countless hours of 15 researching and helping to develop solutions. And if 16 there was a perfect plan to resolve this issue, I wished 17 it would have surfaced. But the bottom line is the 18 construction industry wants cleaner air, CARB wants 19 cleaner air. The environmental community is commanding 20 cleaner air, the environmental community is demanding 21 cleaner air, and I personally want cleaner air and have 22 dedicated much of my time to try to find solutions. 23 But with all of the work that has been put into 24 this rule by all the parties, the only effective solution 25 boils down to two things: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 We need time for technology to exist. We don't 2 have it now. And right now we have to -- if we buy 3 something, we have to touch it again and again and again. 4 And it's just band-aid fixes until we get to the final 5 Tier 4 solutions. 6 And we need a funding mechanism to help offset 7 these costs. 8 And in closing, I want to plead to you, the 9 Board, please do not allow this regulation to be what -- 10 based on what might develop in the years to come. There 11 is no way for any company to forecast a real and effective 12 business plan based on what might happen in the years to 13 come. 14 Thank you. 15 (Applause.) 16 BOARD MEMBER RIORDAN: I have a question. 17 CHAIRPERSON SAWYER: Thank you. 18 Mrs. Riordan, your question. 19 BOARD MEMBER RIORDAN: I apologize. If you said 20 this, I didn't pick it up. 21 I know you now have it in a Caterpillar facility. 22 But who made the adjustments there, you know, the 23 retrofit? 24 MR. DOWNS: It's a Huse filter, and it was 25 installed by people from Huse. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 BOARD MEMBER RIORDAN: People from Huse. In the 2 Caterpillar facility? 3 MR. ROHMAN: It was -- they just installed it at 4 the Caterpillar facility. Caterpillar mechanics or 5 personnel did not have anything to do with this. 6 BOARD MEMBER RIORDAN: Okay. Thank you. 7 CHAIRPERSON SAWYER: Thank you. 8 MR. ROHMAN: Thank you. 9 CHAIRPERSON SAWYER: Mr. McCourt. And then we'll 10 have Judy Quan, Ralph Potter, and Mike Buckantz. 11 MR. McCOURT: Good afternoon. My name is Rick 12 McCourt. I'm Safety and Compliance Director for SUKUT 13 Construction. 14 You heard earlier from our Marketing Director, 15 Michael Bobeczko, about our world-class performance and 16 our recognition. And that's become a real source of pride 17 at SUKUT and we've been an industry leader. 18 We were very lucky in that we got one of those 19 applications where we could get a repower solution. And 20 so we went on that in a big way. Today we've got over 130 21 engines repowered. Many are Tier 2 and Tier 3. I think 22 we have one of the biggest Tier 3 fleets in the state. 23 If you look at our total fleet, we've got over 70 24 percent of our machines with certified engines, Tier 1 or 25 greater. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 Now, with that performance it would seem that in 2 year 2010 when we kick off the regulation, we'd be able to 3 at least comply out the gate. That's not the case using 4 the CARB calculator. 5 The situation -- or the question was asked by Ms. 6 Riordan earlier: Is it true that we would get carry-over 7 credits for particulate? We do not get any particulate 8 carry-over credits because we've repowered. And I'd like 9 to make that point very clear. That's only if you 10 retrofit. 11 We've dedicated millions and millions of dollars 12 to repower. We've saved the state big, big reductions in 13 both NOx and PM, but we're only getting the NOx credit in 14 the rule. We see V-dex as our very last solution because 15 they do not give you NOx reductions. And we don't want to 16 continue in this cycle to touch and we retouch the 17 equipment. 18 Our strategy right now is to take our fleet, the 19 remaining Tier 0's, and either retire them, where 20 appropriate, or repower them. But we want to go forward 21 with the best technology. 22 Then as Tier 1's need to be rebuilt, we'll update 23 those to Tier 3 or Tier 4 if Tier 4 is available in the 24 future. Tier 4 for our horsepowers is not available until 25 2014. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 This is going to be a tough regulation. It 2 really is. And we're scratching our head trying to figure 3 out how we're going to meet the requirements. We consider 4 ourselves world class in this. We're kind of like the A 5 student. And we're going to the test and failing the 6 test. 7 So I echo the comments previously. I think the 8 discussions need to continue with staff. I personally 9 have spent many, many hours, multiple meetings with staff 10 meeting on this. We'll continue to do that until we come 11 to some consensus. But let's do something that's 12 reasonable. There's big logistics and big financial 13 impact concerns here. A lot is at stake. 14 Thank you. 15 (Applause.) 16 CHAIRPERSON SAWYER: Thank you. 17 Mrs. Riordan. 18 Yeah, Mr. Chairman. 19 BOARD MEMBER RIORDAN: Ms. Witherspoon, I'm sort 20 of having trouble. And I need to understand what it is 21 that might be done if we've repowered -- and I understand 22 you're after both PM and NOx. But it would seem to me 23 that there's got to be something that we could work out. 24 I just don't know. Because that -- repowering is a major 25 big investment. You know, we know the that. You know, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 just -- I don't know. 2 And then we have the problem here of this, quote, 3 retrofit -- I guess is a retrofit -- and it's not working. 4 I just have some problems. 5 EXECUTIVE OFFICER WITHERSPOON: Mrs. Riordan and 6 other Board members, this rule did start off as a classic 7 diesel air toxic control measure seeking 85 percent 8 control from all existing diesel engines, which in prior 9 regulations has meant the application of retrofit traps or 10 the purchase of equipment that's new that comes with a 11 trap on it. 12 What a lot of the speakers are referring to is as 13 you go from zero to one to two the three to four in tiers, 14 the particulate emissions change. Tier 4 comes with a 15 trap. Before you get there, at zero you're at .6 or more 16 grams, at Tier 1 you're at .4, at Tier 2 and 3 you're at 17 .15, and at Tier 4 you're at .02 with a trap. So the 18 question is if someone has repowered or purchased a used 19 engine or a new engine at Tier 2 or Tier 3, should that 20 count as progress towards having a trap? It's not 85 21 percent reduction. It's not the maximum feasible 22 reduction, which is another requirement of law for toxic 23 air contaminant control measures. But it is forward 24 progress. 25 And so staff had been weighing that and concluded PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 that we needed to follow the pattern of previous rules and 2 go all the way to the trap endpoint. 3 And there is a separate issue about the 4 particular chemical mix and size distribution of the 5 particles in a Tier 2-Tier 3 .15 emissions rate, whether 6 there are more ultrafines in that set of emissions, 7 because now there's the introduction of some NOx control 8 and what that's doing, the way the engine's working, and 9 whether those particles are more harmful than the ones 10 previous. So it's not a simple issue. We have made it 11 harder by laying NOx averaging on top and other costs with 12 NOx averaging. And if you want us to, we'll go look at 13 this again. But, you know, staff is pretty comfortable 14 recommending traps as the ultimate endpoint of what's the 15 most desirable public health outcome. 16 BOARD MEMBER RIORDAN: Thank you. 17 CHAIRPERSON SAWYER: Ms. D'Adamo, yes. 18 BOARD MEMBER D'ADAMO: Just to follow up. There 19 is an exemption when there are safety concerns. And 20 looking at this, it seems that it would fall within that 21 exemption. 22 EXECUTIVE OFFICER WITHERSPOON: Well, certainly 23 if viability is obscured, if it changes the center of 24 gravity, you know, a number -- if it causes heat in close 25 proximity to the driver, all those sorts of things would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 be safety considerations. 2 BOARD MEMBER D'ADAMO: What if it's just 3 ramshackle? I mean if it -- not necessarily safety 4 concern but, you know, just -- 5 EXECUTIVE OFFICER WITHERSPOON: It's funky 6 looking? 7 BOARD MEMBER D'ADAMO: No, just in terms of, 8 maybe not necessarily -- say, more durability. 9 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: This is 10 one of the early installations, I believe, from this 11 company. And I'm not going to try to defend whether it 12 looks great or not or whether it's safe or not. But 13 obviously if it continued, they wouldn't be in business. 14 So I think, you know, there's going to be some shakeout 15 here in installations. And some of the early ones might 16 have problems. But we've gotten past that in, you know, 17 buses and trash trucks. 18 And, you know, there were problems with brackets 19 breaking and things not working quite right there. But 20 the fundamental technology has been proven as working in 21 providing the 85 to 95 percent reduction. And I think 22 these are problems that are real but they'll be overcome. 23 BOARD MEMBER D'ADAMO: So we did go through 24 similar growing pains with -- 25 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 there's the issue here of the placement on the top of a 2 piece of equipment where you've got viability and where 3 other things could be near it that might get knocked or 4 create a safety hazard, which is a little different than 5 on trucks because they're basically buried under the frame 6 of the chassis somewhere. 7 So it's new challenges. But, yeah, there were 8 problems, you know, where things vibrated too much and the 9 brackets weren't strong enough and things like that. But, 10 you know, we've now got thousands and thousands under our 11 belt and they're not -- brackets aren't breaking anymore 12 and they're not having problems with them. So it's -- you 13 know, I think it is an inevitable bit of learning that 14 will go on here, but the model that we've seen happen on 15 trucks looks pretty good. So we expect that it will come 16 out this way before we get to the need for large numbers 17 of retrofits in the 2010 time frame. 18 BOARD MEMBER D'ADAMO: Thank you. 19 CHAIRPERSON SAWYER: Ms. Quan. 20 MS. QUAN: Good afternoon, Mr. Chair and members 21 of the Board. My name's Judi Quan, and I'm here today 22 representing 1500 contractors and 50,000 union members who 23 work in California's heavy construction industry that make 24 up the California Alliance for Jobs. 25 Last year the California Alliance for jobs led PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 the bipartisan campaign effort that helped secure the 2 passage of the historic $37 billion infrastructure bond 3 package. 4 During this campaign we heard one resounding 5 message from Californians: It's time to rebuild our 6 state's aging infrastructure and get California moving 7 again. 8 The successful passage of Proposition 1B will 9 generate close to $19.7 billion to fund transportation and 10 air quality projects throughout the state. The first 4.5 11 billion was recently allocated by the California 12 Transportation Commission in the form of a list of 71 13 transportation projects aimed at relieving congestion and 14 improving safety on our state highway system. 15 One criteria these projects had to meet in order 16 to receive project funding was near-term deliverability. 17 But because the pending off-road diesel regulation targets 18 the construction industry, if passed it will directly 19 place these projects in jeopardy on their ability to stay 20 on time and on budget. 21 A coalition analysis demonstrated that 22 regulations would increase costs for infrastructure bond 23 projects by 5 percent. 24 So here's some new cost examples to statewide 25 transportation projects if the currently proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 regulation is passed: 2 In Los Angeles, an additional 47 million will be 3 needed to complete the construction of the Route 405 4 carpool lanes; in San Diego, an additional 22 million to 5 build the new managed lanes on Intestate 15; in the Bay 6 Area, close do 21 million more to construct a fourth bore 7 at the Caldecott Tunnel; and in the Sacramento region, 8 more than 16 million in new money to build the Lincoln 9 Bybass. 10 The big picture price tag has the potential to 11 increase overall costs for the infrastructure bonds by 2.1 12 billion. Directing this much funding away from new 13 construction projects could result in the elimination of 14 over 40,000 construction jobs in California. These are 15 good paying, full benefit jobs that contribute to our 16 economy and ensures the healthy sustainability of 17 California families and future generations. 18 California has a $37 billion public mandate to 19 get transportation moving throughout the state. Let's 20 work together to ensure jobs are protected and that 21 everyone breathes clean air. 22 Thank you. 23 (Applause.) 24 BOARD MEMBER BERG: Mr. Chairman, I have a 25 question of the speaker. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 Ms. Quan. 2 CHAIRPERSON SAWYER: Please just interrupt if you 3 have a question while the speaker's still there, because I 4 may not see you, and we could speed things up. Don't 5 hesitate to do that. 6 BOARD MEMBER BERG: Okay. Thank you, Mr. 7 Chairman. 8 These near-term contracts, do they have 9 completion dates? 10 MS. QUAN: They do. 11 BOARD MEMBER BERG: And what is the first 12 completion dates? 13 MS. QUAN: Well, there's 71 projects. And they 14 were based -- the money was allocated to those projects 15 based on their ability to deliver those -- 16 BOARD MEMBER BERG: And when are the completion 17 dates? 18 MS. QUAN: Well, there are various ones 19 throughout the state. There's 71 -- 20 BOARD MEMBER BERG: But from when to when you 21 don't have the information? 22 MS. QUAN: Well, it depends on the project. It's 23 a three year out, five year out, seven year out. It 24 depends. 25 BOARD MEMBER BERG: Okay. Three to seven years? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 MS. QUAN: Well, I'm not quite sure there's 71 2 different projects. 3 BOARD MEMBER BERG: Okay. Thank you. 4 EXECUTIVE OFFICER WITHERSPOON: Mrs. Berg, the 5 first 4.5 billion authorized by the CTC all has a 2012 6 completion date, as I understand it. 7 BOARD MEMBER BERG: Thank you very much. 8 CHAIRPERSON SAWYER: Mr. Potter. 9 MR. POTTER: Yes. Good afternoon, Dr. Sawyer and 10 CARB staff. 11 I've been asked to speak about the financial 12 elements. I've been with CIT for 32 years financing 13 contractors. It's an industrial financial organization. 14 Unless you're going to give them the money, 15 they're going to have to get it someplace. And they're 16 going to have to get it likely from debt. And the problem 17 that happens when you get debt is you have a limited 18 capacity. 19 I have finance contractors, rental yards and 20 dealers, and they all have a debt capacity, a limit on how 21 much they can borrow. 22 Contractors generally can have about 2 1/2 to 1 23 to 5 to 1 leverage. You go much beyond that and you have 24 to prove that you've get some other meat on the bones, 25 some hidden equity. Well, where does that hidden equity PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 come from? It comes from the stuff that you've already 2 owned, that you paid for for the most part that's been 3 depreciated. 4 Well, what's happening here is the equipment 5 that's being retired early is a lot of value on the books 6 that doesn't show up on the books because it's been 7 depreciated off. That equipment is going to depreciate 8 perhaps 50 percent, 25 percent, to zero, we don't know. 9 But that's money that they were counting on in order to 10 provide down payments for equipment that they're going to 11 need, also to carry them through tough times. If the 12 contractors take a lot of risks, they have to bid on jobs. 13 If it gets difficult, they can count on that machinery to 14 be there to provide either funds through sale of the 15 equipment, either we can loan them money because that 16 equipment has value, and it helps them get cash when they 17 need cash. 18 They need to have cash flow in order to pay for 19 all of this. That's depreciation, profit. And right now 20 we're in the middle of a downswing in the industry. You 21 can't add to debt when you're in a downturn. And this is 22 a very cyclical industry. The industry is trying to 23 manage this in an environment where they -- the 24 profitability has to be there. Otherwise, how are they 25 going to do it? The contractor cannot just add the money PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 from nowhere. It just has to be earned. And the problem 2 is is that the state is not really stepping up as much as 3 much as they're going to have to. 4 The industry only can -- if they add too much 5 debt, they're not going to be able to bond jobs. That was 6 mentioned earlier. But what they were talking about is 7 there should be people talking about the bonding element. 8 But without the working capital, the companies are not 9 going to get the bonding that they need. The working 10 capital means if you continually add debt, your working 11 capital's going to decline. As your working capital 12 declines, your bonding will decline. You'll be unable to 13 bid on the projects you're supposed to bid on. And you 14 need those projects in order to pay for the money -- get 15 the money that you need to buy the equipment. It's all 16 integratedly linked. 17 Thank you. 18 CHAIRPERSON SAWYER: Thank you. 19 (Applause.) 20 Mr. Buckantz. Then we'll have Andy Katz, Skip 21 Brown, and Kathryn Phillips. 22 MR. BUCKANTZ: Hello. My name is Mike Buckantz 23 and I'm president of the environmental consulting firm, 24 Justice & Associates. I'm one of the paid industry 25 consultants Kim warned you about this morning. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 I'm also a member of the Construction Industry 2 Air Quality Coalition. And we'll probably be part of the 3 group responding to the canned questions that your staff 4 provided you with today. 5 We helped construction companies ranging from the 6 smallest, with one to two employees, to the largest firms 7 in the nation. We helped them comply with environmental 8 regulations like the one you're considering today. 9 I've been actively involved in the development of 10 this process since late 2004, longer than many of the ARB 11 staff you're hearing from today. 12 Despite our best efforts and our client's best 13 efforts, we're not able to support the staff proposal. 14 This is due in no small part to the incredibly complex 15 nature of the regulation and the confusing language it 16 contains. 17 The staff proposal is replete with exemptions and 18 credits, a credit for NOx but not for particulate. 19 Special provisions, compliance extensions, formulas, and 20 BACT requirements that make it virtually impossible for 21 contractors of any size to assess its impact on their 22 businesses. My personal favorite is the section called 23 "Compliance after the final compliance date." 24 (Laughter.) 25 In short, the regulated community can't figure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 out this regulation. The regulation seeks to achieve two 2 simple goals: Reduction of particulate emissions. That's 3 number one. And, number two, reduce NOx emissions. 4 Staff's taken these simple goals and blurred them with 5 these sets of -- with three sets of equations that take up 6 about a half a page each of the regulation, three tables 7 of emission targets that take up about a half a page each 8 that support these equations, and two pages of emission 9 factors that also support the equations but are located no 10 where near them in the regulation. There are nearly eight 11 pages dedicated to credits, exemptions, specialty 12 provisions, and compliance extensions. So you can 13 understand the reasons for their confusion. 14 Please keep in mind that these same contractors 15 are subject to the stationary, portable, and upcoming 16 on-road measures. Each of these measures has unique 17 requirements resulting in further confusion and a growing 18 cumulative economic burden to the folks that built our 19 roads, bridges, buildings, and homes. 20 The single simple solution relies in the Tier 4 21 engine technologies that will allow contractors to deal 22 with each piece of equipment only once, while 23 simultaneously reducing both NOx and particulate. 24 Contrary to some of the misleading comments by the staff 25 this morning, these engines are not available for purchase PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 at this time. 2 As president of an employee-owned growing 3 environmental consulting firm, frankly I'm not sure 4 whether to thank staff for dropping an incredible growth 5 opportunity in my lap or to curse them for driving my 6 clients out of the state or out of business. Since it's 7 staff's policy to export older but still useful equipment 8 to Arizona and other states, I'm going to consider opening 9 an office there because they may be needing me. 10 I urge you to send the staff back to craft an 11 easy-to-understand, plain English, economically viable 12 regulation. 13 And I thank you for your time and your 14 consideration. 15 (Applause.) 16 CHAIRPERSON SAWYER: I think I need to make a 17 comment on the last testimony. And I hope his consulting 18 fees are reasonable. 19 (Laughter.) 20 CHAIRPERSON SAWYER: But the complexity of the 21 regulation is largely the result of the request and the 22 desire of the industry to have flexibility. And to put 23 that flexibility in and to still have an enforceable 24 regulation leads to complexity. 25 So I think it's inappropriate to complain that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 the rules are complex when they're put in there 2 specifically to provide flexibility. 3 Mr. Katz. 4 MR. KATZ: Thank you, Dr. Sawyer and members of 5 the Air Resources Board and staff. 6 I want to thank you for proposing this regulation 7 and proceeding over this long period of time, three years, 8 to develop a regulation. And the reasons why Californians 9 need this regulation is to protect lung health. My name's 10 Andy Katz. I'm from Breathe California. 11 This regulation would prevent 4,000 premature 12 deaths, 840,000 hospital admissions from respiratory 13 causes, and 110 cases of asthma. These health costs 14 amount to 18- to $26 billion in health costs. We talk 15 about the cost of implementing this regulation, which your 16 staff have estimated at $3.5 billion. But for the 17 communities that have to deal with asthma, cancer risk, 18 and various other respiratory and cardiovascular health 19 conditions, we're paying with our health. 20 And so that's why there's new technology that's 21 available to control diesel emissions. Sure, they're not 22 already fully stocked, there aren't enough for every 23 upgrade today. But that's why if you look at the history 24 of implementing new regulations, the catalytic converter, 25 other types of products that have come on the market like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 Cleair, these products were not mass produced until they 2 got the right signal. They got the signal from the 3 regulators that said, "It's time to put these into place. 4 And we're going to signal that these should be put into 5 place by instituting a regulation or incentives that 6 encourage the manufacturers of these emission control 7 technologies to get to work and make them available and 8 make them affordable." 9 So the prototypes are there. In fact they've 10 already been tested by your staff and verified that it's 11 time to put them into use. 12 So it's time to respect everyone's right to clean 13 air and healthy lungs. Communities are struggling with 14 outrageous rates of asthma and cancer risk. If you look 15 at communities like eastern San Francisco, west Oakland, 16 many parts of Los Angeles and the Central Valley, you have 17 double the asthma rates of the rest of the state. 18 Diesel is also 80 percent of the cancer risk 19 that's in the air. And construction equipment, as the 20 second largest source in California, is 20 percent of 21 diesel emissions. So this regulation can cut 15 percent 22 of the diesel that's emitted in California. 23 California needs to be able to come into 24 compliance with federal standards. The new EPA regulation 25 on PM2.5, it sets a very, very high bar. And I know that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 if California doesn't want to lose its federal highway 2 funding, regulations like this are pretty essential to 3 being able to comply in time. And that's why air 4 districts are here supporting this in addition to the 5 public health needs. 6 You can say that this rule does not even go far 7 enough. It's 13 years to comply, 18 years for small 8 fleets. But the problem is today and the technology is 9 here today. This is a compromise, with flexibility built 10 in for an average fleet standard so that you don't have to 11 do it all at once. It's on an average. And it 12 accommodates small fleets by having an extra five years 13 for accommodating small fleets. 14 Please protect public health and pass this 15 regulation as soon as possible. 16 Thank you. 17 CHAIRPERSON SAWYER: Thank you. 18 Mr. Brown. 19 MR. BROWN: Good afternoon. My name is Skip 20 Brown with Delta Construction Company. The business 21 started in 1943 by my father. I've run it for the past 43 22 years. 23 I have four children, five grandchildren. And 24 based upon the behavior of some of the older 25 grandchildren, I may be about to become a great PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 grandfather. I'm not worried about that. 2 (Laughter.) 3 MR. BROWN: So I'm very concerned about clean air 4 in California. I live here. 5 We have 21 pieces of equipment representing 2100 6 horsepower. I have one crew. They run this equipment on 7 a rotating basis. I'm a medium-sized contractor about to 8 become small. I'm going to cut my one crew down to a half 9 a crew. I'm not too sure. 10 The proposed regulation discriminates against the 11 medium-sized contractors, in my particular instance, 12 against the older and established businesses because we 13 have acquired a lot of assets and equipment that we still 14 use. We get rid of the stuff that doesn't work anymore. 15 But if we're only using it 2- to 400 hours a year, we 16 can't afford to replace it with the new equipment. 17 It also discriminates against contractors in 18 northern California. We work a nine-month season in 19 northern California. Down here in southern California 20 they work 12. A usage of a medium-sized contractor in 21 northern California could be in the 12- to 1500 hours a 22 year. Down here it's 1800 to 2,000. Small contractors, 23 2- to 500 hours a year is what you can expect. 24 The small fleet limit is set too low at 1500 25 horsepower. I'm going to have to get rid of some of my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 horsepower. And which pieces go? I don't know, because 2 I'm not clairvoyant. I don't know when I'm going to get a 3 job requiring what piece of equipment that I have. But I 4 know that if I don't have that piece of equipment, I won't 5 be able to bid that job. Which, by the way, is kind of 6 moot anyway because you've reduced my equity considerably 7 by making all this Tier 0 equipment -- which my equipment, 8 60 percent is Tier 0 -- you've reduced the value to 9 basically nothing. It has no market value now. Nobody 10 wants to buy it because they know it's a pig in a poke. 11 I can ship it to -- just about to the state line 12 of Nevada for the $10 a horsepower. Hopefully there's 13 somebody there to pick it up and haul it off. 14 We don't know what kind of work we're going to 15 get. We have to bid it and then we have to run it and 16 then we have to make a profit. We don't use computer 17 models generated by those on high to try to figure out how 18 this works. Basically, we need a payroll. 19 And so looking at this regulation, the hours -- 20 or the horsepower allow us -- at a hundred hours a year is 21 not adequate for the small contractor. It won't work. 22 And on an individual piece-by-piece basis it isn't going 23 to work because I don't which of my equipment is going to 24 work 300 hours and which one's going to work 150 hours. 25 And so I don't know which one to designate as small. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 What we need is we need a fleet average for our 2 lower usage where we can multiply all the horsepower by 3 the number of hours we use it. 4 You also -- you treat the 25 horsepower motor the 5 same as a 100 horsepower. My God. 6 All right. The red light's on. That means I'm 7 done halfway through. I'll see you in Sacramento. Maybe 8 I'll get a chance to talk to you again. 9 You need to work with industry. Industry's here. 10 I'd like to see this business go for its 65th year. Right 11 now it's pretty unstable at this point. 12 Thank you very much. 13 (Applause.) 14 CHAIRPERSON SAWYER: Ms. Phillips. And then 15 we'll have Dave Sabaffi, Don McIntosh, and Chris Hammer. 16 MS. PHILLIPS: Thank you, Chairman and Board 17 members. I'm Kathryn Phillips with Environmental Defense. 18 I've been working on construction -- clean construction 19 equipment issues for a while now, but this rule since its 20 beginning, and simultaneously on some clean construction 21 efforts over at the Legislature. 22 Based on my experience with the industry and with 23 the rule and with what we've been doing over at the 24 Legislature, I'd like to make a few comments about the 25 voracity of the industry's willingness to comply with this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 regulation. 2 I've attended just about every workshop you've 3 had in Sacramento. I know there've been others in other 4 parts of the state. I wasn't able to make it to those. 5 But I do know that there have been lots and lots of 6 meetings where there have been lots and lots of members of 7 the industry, including friends of mine, who are people I 8 regard as friends. And there have been one or two or 9 three environmentalists in the room. 10 There has been lots of opportunity in public 11 venues for comment from the industry. I also know there 12 have been private meetings. Industry has told me when 13 CARB is going to be flying -- you know, CARB staff is 14 flying down to meet with CIAQC staff and that sort of 15 thing. There's been no shortage of opportunities for 16 CIAQC or industry members to come forward with data. 17 I have personally encouraged industry members to 18 organize small meetings among environmentalists. We've 19 brought some industry members together with us to 20 understand better what's going on. There's been a lot of 21 outreach. There's probably been more on this, more 22 conversation going between industry and environmentalists 23 and industry and staff on a sort of personal level than 24 you would find in just about any other rule making, at 25 least any other rule making I've followed in the last five PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 years or so. 2 So, again, you know, to wait until the last 3 minute -- in fact, what they've done is waited until two 4 weeks before the last -- before the hearing to present a 5 report, an analysis of the economic impacts and release it 6 on a Friday afternoon makes me question how intent the 7 industry representatives, especially the trade 8 associations like CIAQC and the AGC, really are on 9 stopping the rule or delaying the rule and how intent they 10 really are on making sure there's a rule that works. I 11 don't think this last-minute development has been helpful. 12 On the cost claims -- I would also like to point 13 out that just last week AGC worked with environmentalists 14 to come up with a budget compromise on an issue. And part 15 of that was $20 million in Moyer fund for a budget trailer 16 bill. When it got to the hearing, the industry 17 representatives and the Caltrans both testified against 18 it. So they've had an opportunity just in the last week 19 to show support for additional Moyer money. And it was 20 tied to getting zero -- you know, getting the uncontrolled 21 equipment off of -- on funded sites. 22 CHAIRPERSON SAWYER: I must ask you to conclude 23 please. 24 MS. PHILLIPS: One more thing -- and I hope 25 you'll give me just a little bit more time since we've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 been sort of outnumbered by industry today. We did ask a 2 professor of construction technology from Purdue 3 University, a consultant, to analyze very quickly over the 4 weekend the industry's report on costs. We've asked him 5 to put together a quick memo. I submitted that. We're 6 asking him to do a deeper look. We didn't have a lot of 7 time for him to do more than a cursory look. I think 8 you'll see in that that some of the cost claims that 9 you've made today -- 10 CHAIRPERSON SAWYER: I really must ask you to 11 conclude, out of fairness. 12 MS. PHILLIPS: Okay. Thank you for your time on 13 this. And we'll submit more written comments. And look 14 forward to the meeting on the 26th. 15 Thank you. 16 CHAIRPERSON SAWYER: Thank you. 17 Dave Sabaffi. 18 MR. SABAFFI: Yes, sir. 19 Good afternoon, Dr. Sawyer and members of the 20 Board. My name's Dave Sabaffi. I work with Granite 21 Construction Company and represent Granite Construction 22 Company today. 23 Those of you that don't know our company, we've 24 been in California since 1922. We're a California-based 25 company. We operate nationally, but California remains PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 the heart of our business and extremely important to us. 2 We employee 3,000 people in the State of 3 California. We have over a thousand pieces of equipment 4 affected by this regulation. And we're just under 200,000 5 horsepower. 6 We operate in an environmentally conscious 7 manner. And safety and environmental issues are always 8 our top priority. 9 We do construction work as well as mine 10 aggregates and process aggregate material. 11 We also want clean air. We also support the 12 goals of this regulation. We have read the 340 plus pages 13 of support documents. I know most of the staff 14 personally. We've attended all the work groups and 15 workshops. 16 However, we're concerned that the rule as 17 presented today will not achieve the emissions reductions 18 that are needed for all of us. 19 There's several -- there's three main areas I 20 want to touch on today, but we have submitted our comments 21 and support information and our comment letter. 22 One area we're concerned about is we support the 23 rest of the industry and the comments that talked about 24 the compressed time frame. Really not start talking -- 25 we're not suggesting the latest in five years. We're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 talking about extending it five years. There's additional 2 details in our letter, and that would be more consistent 3 with the 2000 diesel risk reduction plan goals. 4 Second concern are the V-dex retrofits. This is 5 another picture that I have on the podium over there -- 6 the easel. That is, again, a Huse unit. There's a couple 7 of important things there. In fact, to you it might look 8 great. There's two filters on that engine -- or on that 9 machine. If the horsepower is over 500 horsepower, 10 there's going to be three. 11 And I don't know what you see, but what I see is 12 a concern for fire, trip hazards, maintenance, and a lack 13 of engineering. What we really need -- and it's stated 14 best by a letter submitted by Volvo -- we need an 15 engineered system compatible with the equipment that it's 16 going on. We're very concerned about that. 17 And, lastly, we're concerned about the lack of a 18 good enforcement plan built into the regulation. I know 19 that it's there, but it's not a good plan. We are very 20 concerned that we're going to comply and others won't, and 21 we won't achieve -- you won't achieve the reductions 22 needed. 23 And I'm out of time. Three minutes is really 24 fast. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 CHAIRPERSON SAWYER: Thank you. 2 (Applause.) 3 CHAIRPERSON SAWYER: Ms. Riordan. 4 BOARD MEMBER RIORDAN: This is a question for 5 staff. 6 Have you been able to see this piece of 7 equipment? I mean I know Mr. Cross is over there looking 8 at it right now. I mean actually physically has it been 9 offered as a -- kind of a -- 10 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 11 WHITE: No, we haven't. And actually that -- my 12 understanding is that installation was done at a 13 dealership near Sacramento. And actually my understanding 14 as well is that installation was performed by employees of 15 the dealership itself that actually did that. And I think 16 some of the -- my understanding was some of the concerns 17 that were raised have been alleviated in terms of the 18 installation of some heat shields and some other things. 19 BOARD MEMBER RIORDAN: What I'm going to suggest 20 is that if -- and I bet Granite would offer this if it's 21 still available. I don't know where it is in the state. 22 But, you know, you really ought to invite the staff out to 23 look at it and have a discussion -- 24 MR. SABAFFI: I never said that was our machine, 25 and it's not. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 BOARD MEMBER RIORDAN: Oh, it's not. 2 MR. SABAFFI: But that's an installation that was 3 done when -- I look at it because I -- 4 BOARD MEMBER RIORDAN: Can you make that 5 available? 6 MR. SABAFFI: I'm sure we can make it available 7 to staff. We both know the people that did it. And the 8 dealer in this case did it in conjunction with Huse. But 9 it's not an engineered system. 10 BOARD MEMBER RIORDAN: Yeah. But what it is is I 11 believe they need to have firsthand opportunities to look 12 at it. And, I'm sorry, I thought you were representing 13 that that was a piece of your equipment. And -- 14 MR. SABAFFI: I might have led you down that 15 path, but I didn't say that. 16 BOARD MEMBER RIORDAN: Okay. That was my 17 assumption, and I apologize. 18 However, if you make that available to them, I 19 think it would be helpful to have somebody just go out and 20 kind of look at it, see what -- 21 MR. SABAFFI: Erik, can you and I work on that? 22 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 23 WHITE: Yes, we sure can. 24 MR. SABAFFI: Okay. 25 CHAIRPERSON SAWYER: Mr. McIntosh. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 MR. McINTOSH: Dr. Sawyer, Board members. My 2 name is Don McIntosh. I am President of A.L. McIntosh 3 Company, a third generation small by SBE standards grading 4 contractor in southern California. 5 We have been in business over 52 years and have 6 33 employees. We currently have 43 pieces of 7 diesel-powered equipment totaling 6400 horsepower. 8 I'd like to share my cost data with you. 9 We have six machines that have repower solutions. 10 The cost to repower these machines would cost us $1.1 11 million. Equipping our fleet with diesel particulate 12 filters that are currently on the market would cost us 13 $1.2 million. Replacing our fleet with good used 14 high-tier equipment or new would be $11.1 million. 15 Under the proposed rule, for the first four years 16 our costs to repower and install DPFs would be $500,000 17 per year. Subsequent years would require replacing 18 existing functioning equipment with new machines along 19 with installation of DPFs. The cost of doing so would be 20 $1.2 million per year in our case. And this is running it 21 through the staff's calculator. 22 In 2006 our combined equipment purchases, which 23 were three brand new machines, and our after-tax profit 24 totaled $258,202, well short of funding any of the 25 previous scenarios. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 The only remaining option that I have for my 2 company is to retire four or five machines to meet the 3 rules and two or three employees per year until we can 4 reach compliance. 5 The cost given by the CARB staff do not reflect 6 real world. Our cost of compliance would be $9 million 7 for a 6400 horsepower fleet. That's $1400 per horsepower. 8 I appreciate -- I and my employees appreciate the 9 opportunity to be heard today and hope we can work 10 together to craft a rule that is workable and helps 11 protect our environment. 12 Thank you. 13 (Applause.) 14 CHAIRPERSON SAWYER: Thank you. 15 Mr. Hammer. Following Mr. Hammer we will take a 16 ten-minute break and then we will have Seth Hammond, Guy 17 Prescott, and Debbie Day. 18 Mr. Hammer? 19 We'll take the break now. Ten minutes. Back 20 here at 3:17. 21 (Thereupon a recess was taken.) 22 CHAIRPERSON SAWYER: If we could please resume. 23 Is Mr. Hammer here or has he left? 24 Then Seth Hammond, you're on. 25 MR. HAMMOND: I'm on. I get to talk quickly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 while everybody's taking their seats. 2 You guys all know me. I'm the crane guy. You 3 know, there's the cable guy and then there's the crane 4 guy. And I've spoken before with you and I'm here again 5 representing the crane guys from the south and the crane 6 guys from the north. And I just want to briefly -- I 7 don't want to take up a lot of your time because there's a 8 lot more important people that need to talk besides 9 myself. 10 But as you know, I own Specialty Crane and 11 Rigging in Santa Barbara. And in fact I met Mrs. Riordan 12 and Dr. Sawyer in Santa Barbara at the local AQMD meeting. 13 We had a great conversation. And I appreciate you guys 14 coming all the way down and talking it over. And 15 interested to know that Sawyer's got a little bit of Santa 16 Barbara history going on there. 17 But at any rate, I just wanted to remind you 18 that -- of course we have a proposal in to CARB staff to 19 try and work out something with the uniqueness of the 20 mobile cranes, and that we turned that proposal in in 21 March. And we haven't really heard anything yet. We're 22 looking forward to meeting with Mr. Fletcher here 23 reasonably soon on the issue. And we want to keep that 24 going, because this regulation that you're getting ready 25 to pass for the off-road also affects our cranes too. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 Remember, that our cranes are affected by all three of 2 these rules, the PERP rule, the on-road rule, and the 3 off-road rule. So it's really important for the mobile 4 crane guys and -- or all the crane guys to get some 5 consideration on this, because all those infrastructures 6 that need to be repaired -- I mean every time you drive by 7 an overpass or every time you drive by a new freeway 8 you'll see a crane there. And if you're like me, after a 9 while your neck gets sore looking at them. They're all 10 over the place. 11 So it's a very important thing. I'm sure that 12 our cranes were up there putting that highway collapse in 13 Oakland back together. And it's really important that you 14 consider the uniqueness of the crane and take that into 15 consideration. 16 And I thank you for your time. 17 CHAIRPERSON SAWYER: Thank you very much. 18 (Applause.) 19 Mr. Shepherd. 20 Mr. Prescott. Or is this Mr. Shepherd? 21 MR SHEPHERD: Good afternoon, Dr. Sawyer, Board 22 members. I'm Bob Shepherd with Quinn Company, a 23 California Caterpillar dealership. 24 Like Mike Carcioppolo, who got up here earlier -- 25 he's with Hawthorne -- since 2001, Quinn, the Caterpillar PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 corporate and its dealers have successfully worked on many 2 repowers for well over a hundred of our legacy and 3 existing machines, replacing the engines with cleaner 4 certified engines. About 2,000 of these have been done 5 nationwide, most of those in California. And many of the 6 customers in this room have also done their own. As I 7 say, that's the good news. 8 If you see the staff report, there are about 9 160,000, maybe more, machines that have to be done. If 10 you look at how many repowers have been done, it 11 represents less than 2 percent of the total. And I do 12 emphasize over the last six years it's been less than 2 13 percent. 14 A large portion of these were Tier 1, done using 15 Moyer funding and done voluntarily using customer capital 16 invested to protect their machine assets while at the same 17 time improve California's emissions. 18 Unfortunately, these taxpayer dollars and 19 customer capital were wasted on these early efforts 20 because under the proposed regulation Tier 1 and Tier 2 21 are not acceptable in meeting the end goals of PM and NOx 22 targets. This will be costly. As an example, a Tier 3 23 repower for one large scraper runs about a quarter of a 24 million dollars. New machine, in excess of a million 25 dollars. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 Currently about 3 percent of Caterpillars legacy 2 machines can be repowered to Tier 3 due to configuration 3 complexity including large cooling systems, drive train 4 compatibility, space constraints and, most importantly, 5 safety in the installation. CARB even admits in their 6 staff report that Tier 4 repowers likely will not occur. 7 Thus, for the other 97 percent of the legacy 8 machines -- I use the term "legacy" -- the existing 9 machines the only option is to purchase new or, if 10 feasible, install yet-to-be-field-proven after-treatment 11 devices. As you already heard a lot about the 12 after-treatment, we were involved in a 2001 joint project 13 with CARB, South Coast, CIAQC to test the feasibility of 14 DPFs on this equipment. At that time it was rife with 15 problems of installation, safety, and durability. In the 16 last couple of weeks, not that picture but the other 17 picture that was showing, that was done in our shop by, as 18 you heard earlier, Huse. This is a technology verified by 19 CARB. 20 This one that you do see in the picture there, 21 that was done at another dealership, was started by Huse. 22 But because of the quality concerns that Caterpillar has 23 and how things go out of their shop, the people at that 24 dealership corrected what they saw. 25 So you could see over the last six years since PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 that 2001 study, many issues still exist with the safety 2 retrofitting this after-treatment. 3 There's an unfortunate consequence also with the 4 far-reaching targets of this regulation. People are 5 holding off on their higher tier engines until higher tier 6 engines are available. 7 As you can see, this has hampered the progress of 8 the tremendous emissions reductions we've seen over the 9 last six years with normal attrition and repowers of the 10 equipment. 11 In closing, Quinn Caterpillar, we are dedicated 12 to supporting our customers with solutions to improve the 13 emissions of the fleet. However, I stress the original 18 14 years must go back into the regulation to allow targets to 15 be met cost effectively and allow the manufacturers to 16 safely design systems and technologies the meet the goals. 17 The funding must be available through this process. 18 And, finally, staff should consider the natural 19 turnover of 2 to 3 percent per year instead of the 20 unrealistic 8 to 10 percent, and similarly the same thing 21 with the after-treatment, so that these people in this 22 room can meet this regulation within the scope of the 23 contractors' reinvestment capital. 24 I thank you. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 CHAIRPERSON SAWYER: Thank you. 2 Guy Prescott. And then we'll have Debbie Day, 3 Daniel Sanchez, and Cash Benton. 4 MR. PRESCOTT: Dr. Sawyer and members of the 5 Board. My name's Guy Prescott. I'm the Director of 6 Safety for Operating Engineers Local Union No. 3. We 7 represent over 40,000 men and women who operate this heavy 8 equipment in northern California. 9 As the safety director for this great 10 organization, I am very pleased with the goals that have 11 been set forward here for the health of our membership. 12 The safety and health of our members is of the utmost 13 importance to operating engineers. 14 However, the path that has been set forth to 15 achieve these goals will be way too costly so this 16 industry and specifically to our membership. We estimate 17 that there will be a loss of over 30,000 jobs and over one 18 and a half billion, with a B, dollars in payroll annually 19 from the proposal as it stands now from the staff. This 20 is unacceptable to us. 21 Our men and women who operate this equipment have 22 spent over four years in journeyman -- in apprentice 23 programs. They have been journeymen for years. They have 24 gone back to -- and learned new laser systems, GPS 25 systems. They are skilled craftsmen. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 The staff says that these jobs could be replaced 2 by sending these people to industry to build these 3 filters. That is an insult to the craftsmanship of our 4 membership that we do not appreciate. 5 Secondly, these filters are already being built 6 overseas. Why would they start a manufacturing process 7 here in California? 8 The jobs will be lost. History will repeat 9 itself. If we look through history, when the EPA placed 10 regulations requiring double tanks -- double level tanks 11 on underground fuel installations, when that regulation 12 went into effect, the night before that there were 13 thousands of independent gas stations in this state. The 14 next day there was about a handful. And only the big 15 three or four were left pumping gas. 16 In the construction industry, we are made of mom 17 and pop operations, small and medium-size businesses who 18 employ 15, 20, 25 people. As proposed by the staff, they 19 will disappear. History will repeat itself. 20 We have seen what the lack of competition has 21 done to the price of gasoline. Supply and demand will be 22 a loss. And the same changes will happen to the 23 construction industry, to the cost of housing, to our 24 schools and our infrastructure, a price that the working 25 men and women of this state cannot afford. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 Additionally, we are concerned of the safety of 2 our membership. We will not lose safety in the name of 3 health. We will lose if that is the case. Currently as 4 proposed by the staff, your executive officer is the sole 5 call if these installations are safe or not. We need 6 safety professionals to be in charge of this, people who 7 know the construction industry, who know the OSHA rules 8 and regulation, who know what it does take to be safe. 9 These filters, both of these pictures that have 10 been shown up here, in both cases in my professional 11 opinion -- and I'm a 25-year-plus professional in safety 12 and health -- are unsafe. They will cause further death 13 in the construction industry, fire in the equipment, burns 14 to the operators. Currently we have between 5- and 600 15 fatalities every year in this industry from struck-by 16 industries. We will have more struck-by fatalities with 17 this equipment. 18 CHAIRPERSON SAWYER: I must ask you to conclude 19 please. 20 MR. PRESCOTT: To conclude, we would also request 21 an exemption for nonprofit training institutes so the Job 22 Corps notice can continue to train the members of 23 tomorrow. And in conclusion, this is a very big, a very 24 bitter pill that you are asking this industry to swallow. 25 We are only asking for a glass of water. Five more years, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 exemption for those nonprofit industries, and safety first 2 is what makes that glass of water. 3 Thank you. 4 (Applause.) 5 CHAIRPERSON SAWYER: Ms. Day. 6 MS. DAY: Thank you, Chairman Sawyer and Board 7 members. My name is Debbie Day, and I'm the Executive 8 Director of the Engineering and General Contractors 9 Association here in San Diego. 10 I want to talk to you about outreach. Staff 11 reported here today on their extensive outreach efforts. 12 I propose the efforts have been less than successful. 13 Industry associations across the state have 14 worked for many months to educate their members to the 15 effects of the coming regulations. Associations in 16 concert with the Construction Industry Air Quality 17 Coalition, or CIAQC, have been largely responsible for the 18 robust attendance at all of the CARB public workshops. 19 CIAQC has distributed by two separate mailings 20 informational brochures to over 90,000 contractors 21 throughout the state. 22 Eighty-five percent of all construction companies 23 are small businesses with fewer than 20 employees. Only 24 30 percent of all construction companies belong to 25 industry associations, and we cannot reach them all. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 There are many thousands of companies, large and small, 2 that will be affected by the regulations but don't yet 3 even know they are coming. 4 As you know, the notification given the industry 5 on the regulations for portable engines was dismal. As a 6 result, the registration period was extended. 7 On the issue of the off-road equipment, the one 8 and only workshop that CARB had in San Diego was the one 9 we, the construction industry, had to ask for. There was 10 standing room only. 11 In San Diego, as in industry, we've spent over a 12 hundred thousand dollars during the last year on outreach 13 and education efforts alone. The industry has stepped up 14 to the challenge. And we hope CARB will do as much. 15 Extending your vote to July 26th will give you that 16 opportunity. Please don't waste it. 17 (Applause.) 18 CHAIRPERSON SAWYER: Thank you. And I -- 19 BOARD MEMBER BERG: Ms. Day. 20 CHAIRPERSON SAWYER: I would say that we do look 21 to your organizations to help in the outreach program. We 22 realize that's a very difficult thing to do because 23 industry is so diverse and spread around the state. So 24 thank you for your assistance. 25 MS. DAY: Thank you. But I hope you recognize -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 I mean we -- there's not a week that goes by that we don't 2 get calls, and I'm sure they're all over the state, from 3 people, members who say, "I talked to a business today. 4 They have no idea this is coming." And these are people 5 that operate not out in the hinterlands. These are right 6 in the cities. And we truly are doing our best, but we 7 need your help. 8 BOARD MEMBER BERG: Now, do these contractors 9 have contractors licenses? 10 MS. DAY: Oh, yeah, absolutely. 11 BOARD MEMBER BERG: And we're working staff off 12 of a contractor license address list. I mean that's all 13 public record. 14 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 15 WHITE: That's correct. And actually, as we noted in 16 February, I think we sent out over 300,000 postcards to 17 all the licensed contractors regardless of trade, 18 regardless of whether we thought they would be subject to 19 the regulation or not, to try to ensure that we did not 20 miss anybody as best we could. We have really strived to 21 get the word out. And we certainly have appreciated the 22 efforts of industry. And we'll continue these efforts as 23 we move forward because education is so critical for this. 24 BOARD MEMBER BERG: So I do echo also the 25 Chairman. Thank you very much for your help. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 MS. DAY: I might say that -- you know, as I 2 said, we in San Diego had to ask for the meeting down 3 there. We have a huge industry here with many, many 4 thousands of contractor companies, many, many, many 5 thousands of employees that depend on those companies. 6 And to have to ask -- for as big as San Diego is, to have 7 to ask for that -- and it was not on the agenda to come to 8 San Diego at all -- I think is really a shame. 9 BOARD MEMBER BERG: Well, you know, Ms. Day, I 10 don't know -- when are we partners versus when is staff 11 guilty of not thinking of, you know, coming to every city, 12 every area? I mean we appreciate that you asked and we 13 did come. And so that's where I think the partnership is. 14 So I do thank you. 15 MS. DAY: We certainly do want to work together, 16 and I think we've proven that. We are working and have 17 been and want to accomplish the same things. 18 BOARD MEMBER BERG: And I would agree. Thank 19 you. 20 MS. DAY: Okay. Thank you. 21 (Applause.) 22 CHAIRPERSON SAWYER: Mr. Sanchez. 23 Daniel Sanchez. 24 Mr. Benton. Then we'll have Scott Erreca, John 25 Hakel, and Paul Von Berg. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 MR. BENTON: Paul's not here. 2 Dr. Sawyer, Paul's not here. 3 CHAIRPERSON SAWYER: Okay. Kenneth Coat will be 4 the next one. 5 MR. BENTON: Real quick just to touch on Sandra's 6 comment a few moments ago about partnership. Just for a 7 future reference, it's probably not a good idea to have a 8 meeting on the Friday before Memorial Day weekend, just to 9 touch on that. 10 (Laughter.) 11 BOARD MEMBER BERG: And still too many people 12 showed up. 13 MR. BENTON: You know, Labor Day's coming up. 14 Let's think about those things. 15 All right. Real quick. Two more things I wanted 16 to touch on. My name is Cash Benton and I represent 17 Southern California Contractors Association. We have 18 roughly about 300 of our contractors and affiliates. We 19 are an all-union association. 20 Some of the big problems that I'm seeing here -- 21 and I'm sure Dr. Gong here can address these. We've 22 talked a lot about asthma, breathing problems and things. 23 And I too was diagnosed with asthma. And the funny thing 24 about that was, when I dropped 35 pounds, the asthma went 25 away. Just one of those things again. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 I'd like to know what these asthma studies and 2 things that we have out there -- I grew up with parents 3 that smoke. I don't know if anybody else did. But that 4 was kind of a big thing as well. But, anyway -- I 5 digress. 6 Dr. Sawyer and members of the Board. My name is 7 Cash Benton. And as I stated earlier, I represent 8 Southern California Contractors Association, many of whom 9 are here in the audience today or have left. 10 I would like to talk a little bit -- a little on 11 the discussion of regulating the in-use off-road diesel 12 construction equipment. More specifically, the timetable. 13 We've talked a lot about the time and why those five years 14 are important. 15 As you heard the staff presentation, the ultimate 16 goals of the regulation will require a large proportion of 17 the fleet to be Tier 4 and equipped machines. While this 18 is a fine idea, the current technology and impending 19 technology cannot make this into fruition. For, you see, 20 the first one of these engines in off-road horsepower 21 levels under the proposed rule won't even be available 22 till 2011. And the last group won't roll out of Peoria 23 and other plants until 2015. 24 Part of the problem in the diversity of the 25 construction equipment fleet, the Coalition has tried PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 numerous times to inform you that we have far 2 underestimated California as a whole's fleet. You've been 3 misguided by the 160,000 in the number, quite simply. 4 While much less, the understanding that the 5 technology simply is not available. We cannot state it to 6 you any other way. It's not there. It does not exist 7 here in the states for us to get through a plant, through 8 Cat, anywhere in that form. 9 For NOx reduction there are a half a dozen 10 different approaches, of which I have labeled and 11 available for you folks. An additional six approaches are 12 being investigated for particulate reduction. Again, when 13 looking at the timetable, staff has not looked to see that 14 some of these solutions will require fuel additives for 15 which there are no current delivery or infrastructure 16 available, through our discussions from manufacturers who 17 are saying they most likely will have it and they will 18 also most likely have difficulty in meeting anticipated 19 demand for these new machines. And when they are 20 available, they are going to cost a lot more than the 21 current approaches being presented. I feel it is 22 important to make sure that we are all on the same page. 23 And in closing I'd like to point out something. 24 Today as we are all stuck on the 5 Freeway, I'd like you 25 to remember that the folks that build those roads are here PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 today. And the decisions that you have impact those 2 roads. The asthma, the cancer, the things of that nature, 3 they all require hospitals, of which these folks build. 4 CHAIRPERSON SAWYER: Would you please conclude. 5 MR. BENTON: Okay. So it's just something to 6 think about. 7 Thank you. 8 CHAIRPERSON SAWYER: Thank you. 9 (Applause.) 10 BOARD MEMBER GONG: Mr. Chairman? 11 CHAIRPERSON SAWYER: Mr. Hakel. 12 Excuse me. Yes, Dr. Gong. 13 BOARD MEMBER GONG: I just wanted to comment on 14 Mr. Benton's comment about asthma and obesity I believe. 15 I think we can all afford to lose weight, including 16 myself. And indeed there are cases of asthmatics getting 17 better when they lose weight. But certainly in my own 18 practice and in the literature there's plenty of lean 19 asthmatics. And I'll just leave it at that. 20 The other point is that diesel exhaust has been 21 shown both epidemiologically and also in human studies, 22 animal models, to certainly be, shall we say, a cause of 23 asthma in some situations as well as an exacerbater of 24 allergic disease. And I think that's pretty well accepted 25 scientifically. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 CHAIRPERSON SAWYER: Ms. Berg. 2 No. 3 MR. BENTON: I did have a comment on it that came 4 from the Harvard Medical Journal, and that there is a 5 direct relationship between childhood obesity and asthma. 6 BOARD MEMBER GONG: No debate about that. I'm 7 just saying there are other reasons why people have asthma 8 too. 9 MR. BENTON: I'd agree. 10 CHAIRPERSON SAWYER: Mr. Hakel. 11 UNIDENTIFIED SPEAKER FROM AUDIENCE: He'll be in 12 July. 13 CHAIRPERSON SAWYER: Okay. Mr. Coat. And then 14 we'll have John Cloud, Philip Vermeulen, and Tom Koetters. 15 Please identify yourself. 16 MR. COAT: I'm Kenneth Coat. 17 CHAIRPERSON SAWYER: Okay. Go ahead, please. 18 MR. COAT: It works for me. 19 I founded a company called Inland Surety about 12 20 years ago. My entire life I've been in the surety 21 business. And all of these regulations were kind of numb 22 to the surety industry until we started really doing the 23 math and seeing what was really going to happen. 24 And this Board is faced with some very tricky 25 questions, because all of a sudden we're looking at a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 state and a governor that would like to build some things 2 and a state that agreed to borrow the money. Now we're 3 coming up with rules. And, you know, candidly I believe 4 these rules should have been in effect ten years ago so 5 this room wouldn't be sitting here saying, "Well, how do 6 we buy these things?" If we'd done this ten years ago, 7 that's the equipment that would have been available. And 8 maybe if we dealt with the manufacturers earlier in the 9 process, we wouldn't look at the poor business people here 10 that have to say -- the reason they're here spending their 11 day here is because it will blow up their business. I 12 don't think these people are spending their day here 13 because they think they want to do nothing. They're here 14 because this is important. This is going to ruin many of 15 these people. 16 When staff talked about bonding capacity 17 reductions -- well, they don't use it. Well, I don't 18 think their intent for any unused bonding capacity -- 19 provided they understood how it really comes about in the 20 first place, I don't think they meant for that to be eaten 21 up with the CARB requirements. How are we going to attack 22 these bonding measures, I mean the new -- the new state 23 infrastructure bonds, how are we going to go after that 24 work when we can't use our equipment? I mean the fact is 25 that's a little of what we're saying. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 And we also have a billion dollars coming to 2 southern California for storm and sewer improvements for 3 water improvement. We need to use the same equipment. We 4 can't get this done this way. And I wanted to make -- 5 we've talked about great big numbers. And, you know, Mark 6 Twain said there's lies, damn lies, and statistics. And 7 we've had a great example of that, because we've seen huge 8 numbers and that's -- I'm glad you're taking extra time to 9 short through what the hell those numbers really mean, 10 because it's very difficult. And I think you've seen -- 11 you know, you've seen so much, you know the truth lies 12 somewhere through there. 13 A quick example is let's take a contractor that 14 owns a 1992 300 horsepower excavator. That machine 15 according to staff is now only worth -- you know, would be 16 worth $3,000 less under the new regs. The machine's worth 17 about $75,000 maybe. Well, it's really worth hardly 18 anything, especially if other places adopt these regs, 19 this thing's worth nothing. But you've got to replace it 20 with a $750,000 machine. And somehow in there that's 21 where sureties are going to be looking at this and saying, 22 "You know what. You don't have the capacity. I don't 23 care what your character is, I don't care how good a guy 24 you are. The numbers don't make sense." We're asking 25 these guys to spend a lot of money to improve equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 And they got to make decisions about equipment and 2 families and employees, for regulations that should have 3 been dealt with ten years ago with the manufacturers, not 4 with the contractors today. 5 Thank you. 6 (Applause.) 7 CHAIRPERSON SAWYER: Thank you. 8 Tom Erreca, please. And excuse me for skipping 9 over you. 10 MR. ERRECA: No, that's quite all right. I'm 11 used to getting skipped over. 12 Dr. Sawyer and the Board. I've heard -- I've 13 been here since 6:30 and I've heard everybody talk. I've 14 met with staff. I do believe in my heart of hearts there 15 is a disconnection between what takes our business to run 16 and what staff believes takes our business to run. 17 And Ms. D'Adamo said she couldn't understand the 18 numbers. Well, let me -- maybe I can put it to you in a 19 perspective all of us can appreciate. 20 You have a house. Maybe you acquire two houses 21 along the way or three houses so your kids can have a 22 house or you can have some supplemental income. A board 23 comes along and says, "You know, we've got this new green 24 technology of building new buildings. And for you to keep 25 those houses, you've got to retrofit those buildings." So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 now I'm going to come to you as Caterpillar's come to me 2 and said, "Your 657 scraper that you bought in 2001 for a 3 million five will now cost you $350,000 to get to this 4 compliance." That's 24 percent of the purchase price. 5 If you take your home at a half a million dollars 6 and amortize it out over 15 years -- because that's 7 probably what you'd get on a rental home -- amortize it 8 out over 15 years and every 5 years add 25 percent of the 9 purchase price back in. At the end of ten years that 10 house will cost you a ton of money. You will only have 11 $79,000 of equity and you will have put over $300,000 into 12 the machine -- into that house, not counting the retrofit 13 that I've asked you to come do. 14 There is not one person in this room or walks on 15 the face of this planet that doesn't want clean air. I 16 have a business that does $50 million a year. The best 17 year I've ever done since 1955 is 5.6 percent to the 18 bottom line. I'll show you every damn tax return I've 19 got. It started with my grandfather. It's with myself 20 and my nephew now. It's a fourth generation company. We 21 live and we'll die here in San Diego. 22 The bottom line is, for me to retrofit -- which I 23 started in '99 and took a hundred pieces of equipment and 24 now have 10 percent Tier 0 and 90 percent Tier 1 -- for me 25 to retrofit and get to 2010 it's $2.8 million a year PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 starting next year. It's $3.9 million the following year 2 and $4.7 million the following year. 3 If I only make 5 percent of my best year and do 4 $50 million, I'm making two and a half million dollars a 5 year and I'm going to the bank to borrow more money so I 6 can keep operating. 7 Econ 101 when I went to San Diego State in 1970, 8 the bottom line was if you don't make money, get rid of 9 it. I'm faced with that issue. So is this industry. 10 All we're asking is show us a way we can do it 11 financially so we're here to do it. If not, you're 12 throwing the baby out with the bath water. 13 (Applause.) 14 CHAIRPERSON SAWYER: Mr. Cloud. 15 MR. CLOUD: Good afternoon, Dr. Sawyer and staff. 16 My name is John Cloud. And sitting here today I've 17 probably changed what I was going to say at least 15 18 times. But let me get started here. 19 My name's John Cloud. I'm a part owner in a 20 family-owned business. My brothers and father and I own a 21 construction materials recycling business. We recycle 22 approximately 300,000 tons of construction material a 23 year, concrete, asphalt, and rock products. To put that 24 in perspective, that's roughly about 14,000 truckloads of 25 material a year. We have 20 employees and we operate 15 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 pieces of equipment. 2 From the staff's rules here, our 15 pieces of 3 equipment, of which I always thought we were a small 4 business, actually makes us -- we have a large fleet 5 because we do operate in a quarry style situation, so we 6 need to move large quantities of material in a short 7 amount of time. So our 15 pieces of equipment put us over 8 the 5,000 horsepower limit. 9 Scott Erreca was talking about his business. On 10 an annual basis we do about $3 million a year in business. 11 One piece of financial analysis that I saw that the staff 12 actually got right is our industry does average about 5 13 percent a year. So on my 5 percent profit margin on a 14 good year, with no hiccups, without any tractors breaking 15 or running into anybody, we make about $150,000 a year. 16 Those T-backs that you see on that tractor -- on 17 that 988 that was up there, we had to install two of those 18 two years ago on our crushing operation. Unexpected 19 costs, of after-installation costs, is $65,000. You take 20 our $150,000 profit, unexpectedly the 65,000 goes out of 21 it. It doesn't leave much left over. 22 As I said, the regulation at 5,000 horsepower 23 really puts us in a bad place. And it's going to cost us 24 roughly 170- to $225,000 a year to comply. So when you 25 look at our profit margin, as Scott said, we're going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 the bank to borrow money to stay in business. 2 Earlier Ms. Berg asked about the misunderstanding 3 of our numbers of the industry versus those of the state. 4 Frankly, I believe the genesis of the misunderstanding is 5 rooted in the staff's mandate. The staff was mandated to 6 get this done. And you want to know what - come hell or 7 high water, come damn the facts, they're getting it done. 8 And they're jamming it down our throats. And it kind of 9 reminds me a little bit of the U.S. Senate in this 10 immigration bill. They've just got to get it done and 11 forget what the people really want. 12 If you take a look at the numbers, I don't know 13 if you notice, but Mr. Downs' compliance numbers, Steve 14 Johnson's compliance numbers from Red Mountain Material, 15 Mr. Mike Shaw and Scott Erreca's compliance numbers are 16 all within the same realm. They're really -- when you 17 look at their fleets, they all match each other. I don't 18 think they got together and talked about it. 19 I think the one thing you can take out of their 20 numbers is they are real-world people working real-world 21 jobs. We're not bureaucrats sitting behind a desk pushing 22 a computer model. 23 CHAIRPERSON SAWYER: Would you please conclude. 24 MR. CLOUD: I'm done. Thanks. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 (Applause.) 2 CHAIRPERSON SAWYER: Mr. Vermeulen. 3 UNIDENTIFIED SPEAKER FROM AUDIENCE: He's not 4 here. 5 CHAIRPERSON SAWYER: Okay. Mr. Koetters. And 6 then we'll have Carey Haughy, Tom Brickley, and Jerry 7 McClaughlin. 8 MR. KOETTERS: Thank you, Dr. Sawyer and Board. 9 My same is Tom Koetters. I am from Carde Pacific in Santa 10 Fe Springs. We employee 20 people. The major thrust of 11 our business is the bare rental of about 40 off-road 12 hydraulic rough terrain cranes to the construction 13 industry in California. And we've been doing so for over 14 40 years. 15 And now we're not qualified to speak for the 16 broader range of diesel-powered equipment. But we are 17 definitely qualified to speak for the companies in our 18 niche of the industry, which represents a whole lot of 19 cranes. 20 Our experience and our records over many years 21 confirm to us, number one, that hydraulic rough terrain 22 cranes average about 6- to 800 hours of operation every 23 year. They're often idle for days or weeks at a time. 24 And of course they're not able to drive themselves from 25 job site to job site. Now, we combine that with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 strict policy of our founder that his fleet be kept in 2 pristine condition, and the net result is that the useful 3 life of these cranes is a long, long time. 4 For a small company like ours, to replace these 5 cranes with newer while they are still comparatively young 6 or if we can possibly shoehorn a replacement engine in 7 there to make it comply, it would have a staggering 8 financial impact that may well necessitate drastic 9 downsizing not only our fleet but also of our staff, our 10 long-time employees who take care of them. 11 Now, we all want clean air. The biggest help for 12 a company like ours would be to ease up on the front-end 13 of the Draconian schedule that you're proposing, thereby 14 giving us a more viable time frame to absorb the hit and 15 giving us a better chance to spread out our costs so that 16 we can sustain our company and the livelihood of our 17 employees. 18 Thank you. 19 CHAIRPERSON SAWYER: Thank you. 20 Mr. Haughy. Ms. Haughy. 21 MRS. HAUGHY: Mrs. Haughy. 22 CHAIRPERSON SAWYER: Mrs. Haughy. 23 MRS. HAUGHY: Hi. My name is Carey Haughy. I am 24 President of Blue Mountain Minerals, a limestone quarry in 25 Tuolumne County. Thanks for listening to our concerns PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 today. I have a handout that goes along with my 2 presentation and it's been submitted. 3 We are a small mine in a small county with big 4 equipment. We are classified therefore as a large fleet. 5 We used to be a medium fleet until the last revision of 6 the regulations. But we have an important economic 7 contribution to Central California, as we supply many 8 diverse industries, such as farmers, ranchers, glass 9 manufacturing plants, roofing and concrete plants, and 10 provide limestone to reduce sulfur emissions in power 11 plants. 12 Blue Mountain Minerals serves companies that 13 supply products used by millions of Californians every 14 day. 15 We want to continue to supply our customers, but 16 we have deep concerns about being able to raise prices 17 enough to see us through these proposed regulations. We 18 don't set prices by bids that can change with every job. 19 We have long-term contracts, five or ten years, with only 20 small escalation factors built in. 21 See, we don't fit the model used to develop these 22 proposed regulations. First, our average horsepower per 23 machine is three times larger than the model. Bigger 24 equipment costs more, a lot more. Our cost estimates to 25 comply are nearly five times what your staff estimates is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 typical. 2 Second, we're in a county whose error is 3 nonattainment solely due to transported pollution from the 4 Central Valley. The concept of captive attainment areas 5 in the regulations I feel has it backwards. The rural 6 downwind counties who don't contribute any pollutants to 7 extreme nonattainment areas should get the NOx exemption, 8 not the upwind counties whose NOx emissions only add to 9 the problem. 10 So what's the answer? Extend the definition of 11 captive attainment areas to include those small rural 12 counties as recommended by the California Air Pollution 13 Control Officers Association, or CAPCOA, in their comment 14 letter sent to your Board. And modify the definition of a 15 small fleet to include fleets with 9,000 horsepower or 16 less operated within a single low population county, 17 similar to the public fleet's exemption. 18 These two changes would give us five more years 19 to continue our policy of buying slightly used equipment 20 in good condition and avoid replacing with costly brand 21 new or very new equipment. And we would realize a 22 substantial savings of about one-third over compliance 23 costs as a large fleet. While at the same time our 24 fleet's 67 percent target reduction in PM emissions would 25 still be met in the ten-year time frame. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 In closing, I ask that you consider our 2 modifications because one size doesn't fit all. 3 Thank you. 4 CHAIRPERSON SAWYER: Thank you. 5 (Applause.) 6 BOARD MEMBER RIORDAN: Mr. Chairman? 7 CHAIRPERSON SAWYER: Mrs. Riordan. 8 BOARD MEMBER RIORDAN: Just to staff. 9 Have we thought about the areas that she's 10 speaking of? 11 EXECUTIVE OFFICER WITHERSPOON: I think her 12 proposal makes a lot of sense. We had a lot of discussion 13 about the maps and how to define you should or shouldn't 14 have to meet the NOx fleet average. So we'll definitely 15 look at that. 16 BOARD MEMBER RIORDAN: Okay. Good. 17 CHAIRPERSON SAWYER: Mr. Brickley. 18 MR. BRICKLEY: Good afternoon. My name is Tom 19 Brickley. I represent two family-owned businesses: One, 20 Brickley Environmental founded in 1980; the other, 21 Environmental Contractors Transportation, Inc., founded in 22 2000. We are based in San Bernardino, employee 23 approximately 80 hard-working folks, the majority of which 24 are minorities. We are a specialty contractor providing 25 hazardous waste remediation, transportation, and disposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 Approximately 75 percent of our work is as a 2 subcontractor for heavy highway and general contractors, 3 many of which are here in this room. This rule as 4 proposed will severely affect their ability to prosper and 5 to hire us. In turn, we will not be able to continue to 6 hire and train and employ hazardous material workers, 7 truck drivers, and the necessary support staff, again the 8 majority which are minorities, including approximately 20 9 women. 10 Several of our current employees have become 11 first-time homeowners and a few have even moved on to own 12 their own companies. 13 As entry level construction workers earning a 14 prevailing wage, our employees do earn in excess of 15 $50,000 per year. For the past several years our company 16 has been able to provide full medical coverage, profit 17 sharing, and a retirement savings plan for all of our 18 employees. 19 I implore you to please consider the negative 20 impact this proposed rule will have on the construction 21 industry, small and medium specialty contractors like 22 myself, and most of our employees. 23 Thank you for your time and consideration. 24 CHAIRPERSON SAWYER: Thank you. 25 (Applause.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 Mr. McClaughlin. And then we'll have Angelique 2 Crumley, Luis Lechuga, and Harvey Beigle. 3 Mr. McClaughlin. 4 MR. DALRYMPLE: It's actually Mr. Dalrymple. 5 They got the name wrong. McClaughlin is the company. 6 CHAIRPERSON SAWYER: Oh, okay. 7 MR. DALRYMPLE: Jerry Dalrymple representing 8 McClaughlin Engineering. We're a mid-sized contractor 9 locally here, have about 50 pieces of equipment affected 10 by this rule. 11 And we've been proactive over the years upgrading 12 our fleet through the Moyer program. But with the 13 proposed timetable of the rule, it puts an extreme burden 14 on us in the first few years of the implementation, to the 15 point that we'll have to drastically cut back the fleet 16 size in order to meet the requirements. That involves 17 cutting back the fleet and laying off valued employees. 18 Everybody in this room wants clean air. I've 19 lived here for 18 years. When I moved here from Colorado, 20 the air made me sick. When I would drive into the L.A. 21 Basin I would literally get sick. And I've seen a 22 tremendous improvement in the air quality in the time I've 23 lived here. And that's thanks to the rules put into 24 effect. And I'm grateful for that every day. 25 CHAIRPERSON SAWYER: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 MR. DALRYMPLE: All that we're asking is for a 2 fair implementation of a rule. There was federal 3 guidelines. The Federal government has dealt with the 4 equipment manufacturers from clear back in the nineties 5 and had many drawn-out battles over the timetable of being 6 able to implement the effective technology to bring these 7 clean air engines to market. And it's been quite a 8 stretch on the manufacturing end. And what you're asking 9 as a state is to accelerate what the manufacturers already 10 have a problem with. You're asking for particle levels 11 that aren't practical in our industry. 12 A lot of the gains in diesel technology has 13 really been obtained in over-the-road trucks that work in 14 a totally different environment than ours. The longevity 15 and reliability of our engines and our off-road 16 environment where they beat and bash around over rough 17 terrain day in and day out in all extremes of weather, 18 dust, dirt, and a variety of instances, it's much harder 19 to obtain than it is in a controlled environment on the 20 highway. 21 I think we've heard a lot of people here today 22 with extreme views on both sides of the rule. We all want 23 clean air. And we just want to have an implementation of 24 it that doesn't risk putting us out of business. It could 25 get to the point where many of us have to close our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 businesses down and move out of state. 2 So I would like to wrap that up by asking that 3 you consider that and consider financial aid and financing 4 for the implementation of this. Because we're not going 5 to be able to do it alone. So some consideration would be 6 helpful. 7 Thank you. 8 CHAIRPERSON SAWYER: Thank you. 9 (Applause.) 10 CHAIRPERSON SAWYER: Ms. Crumley. 11 Mr. Lechuga. 12 Mr. Beigel. 13 Okay. The next three are Bruno Dietl, Taylor 14 Rasmussen, Blaine Bacher, Glen Detloff. 15 Please sound off if you're here. 16 MR. RASMUSSEN: Hello there. I'm Taylor 17 Rasmussen. 18 Thank you for the opportunity for giving us all a 19 chance to voice our opinion. I'm a third generation dirt 20 mover and a small start-up business owner. And these new 21 regulations that you're proposing and the upcoming 22 recession that our industry's about to face is making me 23 seriously consider not owning my own business but finding 24 another route of making money. 25 But there's not much I can say that hasn't been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 said already. I'm really glad I came down here to see 2 this. I've been hearing lots of interesting stories from 3 our industry and getting a lot of facts from your staff. 4 And I just want to ask you to take into 5 consideration the things that people have said here, and 6 let you know that these are real life stories and 7 practical applications of what you guys are asking us to 8 do. 9 So thank you for your time. 10 CHAIRPERSON SAWYER: Fine. Thank you for coming. 11 (Applause.) 12 CHAIRPERSON SAWYER: Liza Bolanos. 13 MS. BOLANOS: Good afternoon, Chair and members. 14 My name is Liza Bolanos. I am the coordinator for the 15 Central Valley Air Quality Coalition. We are a coalition 16 of over 70 different organizations and 150 residence of 17 the San Joaquin Valley. 18 And today we've heard a lot about the bottom 19 line. I would like to talk today about the bottom line 20 for the San Joaquin Valley and its residence. 21 Today residents of the San Joaquin Valley are 22 living in a state of emergency. One in five children 23 suffer from asthma. In the City of Fresno, where I 24 reside, it's one in four. Poverty in the San Joaquin 25 Valley is so prevalent that we've often been referred to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 as the Appalachia of the West. We have over 755,000 2 children and residents in our valley that at one time or 3 another lack basic health insurance. A big number 4 considering our population of 3.3 million. 5 Every day we see new cases of adult onset asthma, 6 and families are spending more time in the emergency rooms 7 than they are on playgrounds. 8 Six of the cities in our valley are in the top 14 9 list of cities with the worst ozone levels in the state. 10 Future of the valley is looking bleak. On April 11 30th of this year, the San Joaquin Valley Air Pollution 12 Control District approved their eight-hour ozone plan, 13 which calls for a reclassification from severe to extreme, 14 and allows for an 11-year extension to clean our air from 15 harmful ozone. 16 This Board will be considering the proposed 17 eight-hour ozone in the coming weeks. Community members 18 and advocates alike welcome you to the valley and look 19 forward to your visit. 20 It has been stated that industry will suffer from 21 the adoption of this rule. I find this hard to believe 22 when we consider that by 2015 the San Joaquin Valley will 23 double its population. The current population growth, 24 along with future growth, will guarantee demand for 25 infrastructure and housing, as we've most recently seen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 with the passage of the $37 billion in bonds. 2 Unfortunately, with the construction equipment comes ozone 3 and particulate matter pollution. 4 The community crisis will continue in coming 5 decades unless we act today. It is of the utmost 6 importance that all sectors of society, including 7 industry, take the necessary steps to ensure that the 8 health of our community and our future is secure. 9 Resident of the valley despite economic hardships have 10 done their part of cleaning their air by the "check before 11 you burn" rule and continue to this day to pay over $3 12 billion a year annually on health-related costs associated 13 with nonattainment in our valley. 14 The proposed regulatory action before you today 15 is one of the most crucial tools to reach attainment of 16 clean air standards in the San Joaquin Valley for 17 particulate matter and ozone. We respectfully request 18 that the Board adopt and strengthen the proposed 19 regulation for in-use off-road diesel vehicles without 20 delay. We cannot afford to wait any longer. Our lives 21 depend on it. 22 On a personal note, it is shocking to hear today 23 that after a lengthy three-year development process 24 Caltrans, a public agency which we have entrusted, would 25 wait until the last minute to begin a conversation with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 another public agency. To delay this process any longer 2 is unacceptable and makes me question whether or not we'll 3 be able to reach the Governor's goal of cleaning air 4 pollution in the next -- by 50 percent in the next coming 5 years. 6 Thank you. 7 CHAIRPERSON SAWYER: Thank you very much. 8 (Applause.) 9 Glen Detloff, Mark Turvey, Scott Molloy. 10 Then John Pagano, Brent Tregaskis, and Claude 11 Fiske. 12 MR. MOLLOY: Good afternoon. My name is Scott 13 Molloy. I'm with the Building Industry Association of San 14 Diego County. We represent about 165,000 men and women 15 working here in San Diego in the construction industry. 16 And I want to start off by saying that we were 17 actually very supportive of the overall goal of these 18 regulations. Our concern is really with the rate at which 19 the goals need to be achieved. And I think that's really 20 the heart of this discussion today is how quickly we're 21 able to achieve this. 22 Based on the economic impact figures that we've 23 seen presented to us, we are alarmed, very alarmed at the 24 potential cost increase to our industry, cost increases to 25 housing, to offices, to business growth, to roads, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 schools, parks -- everything essentially associated with 2 economic growth in the state. And that's one of the 3 biggest concerns we have with the analysis that CARB staff 4 has presented. It really just looks at the direct impacts 5 to the construction industry. It doesn't look at the 6 ripple effect to the overall economy. And so in your 7 analysis, if you're able to update it, we'd really like to 8 look at that. 9 The other issue we have is really just, you know, 10 how far can we go in this state before people can't afford 11 housing and we cause our economy to collapse because we 12 can't simply build housing for the growing population. 13 And it's not just job growth. It's population growth. 14 And if we can't build housing, then we're going to start 15 losing industries and our economy is going to start to 16 decline. Then how are we going to achieve all these other 17 objectives that we have with the environment, having 18 people buy hybrid cars, having people install solar 19 panels, building our transit system, improving our 20 infrastructure so that we can relieve traffic congestion. 21 So there's a lot of potential effects of this, 22 negative effects to our economy, to our environment that 23 we feel really haven't been looked at. And we're really 24 counting on you. And I really appreciate the 25 thoughtfulness with which you guys have been considering PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 the issues that have been raised today. But we're really 2 counting on you to strike a balance, which we do not 3 believe has been reached at this point. 4 So thank you very much. 5 CHAIRPERSON SAWYER: Thank you. 6 (Applause.) 7 CHAIRPERSON SAWYER: John Pagano, Brent 8 Tregaskis. 9 MR. TREGASKIS: Good afternoon, Dr. Sawyer and 10 the Board. My name's Brent Tregaskis. I'm the General 11 Manager at Bear Mountain and Snow Summit, the ski industry 12 here in local Big Bear Lake, California. So kind of a 13 different industry. 14 (Applause.) 15 MR. TREGASKIS: But we too have some concerns. 16 And today really I'm not just speaking for myself, but I'm 17 speaking on behalf of the California Ski Industry 18 Association, which is about 20 different resorts 19 statewide. And we probably employee 25,000 people as an 20 industry, you know, or seasonal industry, do a lot of 21 business in a short time. But we do have a lot of 22 earthmoving equipment that works in the summer and a lot 23 of snowcats and whatnot that fit into this same category. 24 So even though we're in a different industry than 25 the construction industry, we appreciate the chance to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 talk to you today. 2 We've submitted a letter last month that I 3 believe you have. And I'm just going to kind of outline 4 some of our concerns as I go through this. But our 5 industry has long been a supporter of the legislative and 6 administrative initiatives and challenges to mitigate 7 climate change. We are early supporters of both AB 1058 8 and AB 32. Our resorts run on low carbon diets. We buy 9 green power. Some of us are running our fleets on 10 biodiesel. We support car pooling and mass 11 transportation. We recycle aggressively. And we really 12 do see ourselves as green. You know, we make our living 13 on the environment and are very sensitive to the 14 environment and we want to continue to do so. 15 During the process of getting the standard engine 16 emission regulations worked out the California Ski 17 Industry worked very well with ARB and we did a great job 18 and feel we ended up with a great compromise between both 19 of us. And we're hoping to continue our talks with you 20 and do the same here, recognizing that we have a very 21 unique situation. Most of our resorts are above 7,000 22 feet. Some of them go over 10,000 feet. And a lot of the 23 way that things are calculated, it's really done at under 24 5,000 feet. So we have a really unusual business and kind 25 of want some consideration there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 So, unfortunately, we find ourselves frustrated 2 with this process on the off-road regulations. Our skiers 3 are committed to purchasing Tier 3 engines. And if we 4 could in all our snowcats, I'd buy them tomorrow. I spend 5 about $250,000 on just one machine, runs less than a 6 thousand hours a year. And if I could buy them tomorrow, 7 we'd start that process immediately. 8 But I have some concerns on the technical 9 consultants and working with them and to see if we can 10 really get to the level three V-dex that you're requiring 11 in this regulation. 12 So I have a couple -- 13 CHAIRPERSON SAWYER: Would you please conclude. 14 MR. TREGASKIS: Okay. We're already out of time. 15 Sorry. 16 We just look forward to continue to work with 17 you. We have a couple issues. If you can at least take 18 the time to read the letter that we've submitted, that 19 would be terrific. And we'll see you in July. 20 Thank you very much. 21 CHAIRPERSON SAWYER: Good. And I certainly will 22 think snow with you. 23 Claude Fiske. And then we'll have Paul Von Berg, 24 Barry Blanchard, and Jan Eric Jansson. 25 MR. FISKE: Good afternoon. I didn't really come PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 prepared to talk this afternoon but listening to all of 2 the comments. 3 I've been raised in California. I grew up in the 4 San Fernando Valley in the sixties. And at that time the 5 air quality was vastly inferior to what it is now. You 6 guys have done an excellent job and have improved things 7 tremendously. 8 We all want clean air. But we also do not want 9 to become unemployed. The young lady before me was 10 talking about the San Joaquin Valley as Appalachia. Well, 11 the way this program is now structured, you're going to 12 get more Appalachia all over the state. 13 A lot of contractors are going to wait until the 14 Tier 4 engines are available. Voluntarily the company 15 I've been working for for 20 years has been very 16 progressive. Not nearly as progressive as SUKUT perhaps. 17 But we've accomplished a lot of improvement in our fleet 18 and have reduced our emissions significantly. 19 If you let the contractors work voluntarily and 20 go the way they were instead of waiting for Tier 4 engines 21 to become available, a lot of good improvements will occur 22 naturally. And I would encourage you to work with the 23 industry so that we can accomplish the goal without going 24 bankrupt. 25 Many people have said that this industry is mom PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 and pops. There's a lot of small contractors out there. 2 What you're basically going to be doing is confiscating 3 their wealth and their retirements. And if that's what's 4 going to happen, we really need to think about financing. 5 That's the key to this whole thing, is coming up with a 6 financial answer that will benefit everybody. 7 Thank you. 8 CHAIRPERSON SAWYER: Thank you. 9 Paul Von Berg. 10 Barry Blanchard. 11 MR. BLANCHARD: My name is Barry Blanchard. I 12 run TnT Grading. We're a contractor in San Diego. We've 13 got 70 some employees. We have a little over a hundred 14 pieces of equipment. 15 I, like the man before, grew up in the sixties, 16 grew up in Whittier. The air there was terrible. Third 17 grade you'd go out and could hardly breathe. You can 18 breathe pretty good there now. 19 But I have a little problem with this "sky is 20 falling" technique. Doctor, you know, no offense, I've 21 got asthma too. I've had 40 years standing in the dirt in 22 the middle of the diesel, in the middle of the dust, 23 everything blowing over your head. Well, maybe I'm not 24 susceptible to diesel or maybe it's just a good excuse on 25 somebody's part, you know, the sky is falling, all the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 kids are dying. I'm not dead yet. I'm 57 years old and 2 I'm not dead and I still go out there every day. 3 I just don't like that reference. Well, maybe 4 there is something to that. But I did the same thing in 5 Coalinga. We did a prison job up there. And, "oh, the 6 asbestos in the air." Don't know anybody up there that 7 died because of it. I think there's a lot of Chicken 8 Little, sky is falling, and I just don't like it. There's 9 a reality. And I think this whole thing comes down to 10 reality also. 11 The guy from Sierra Club, he made mention in -- I 12 thought I was saying it, with the parent telling the 13 daughter to go put the dishes in the sink and, "oh, they 14 don't fit." You know, that was the excuse. I think 15 that's our excuse. And the Board is the parent, we're the 16 kids. We're being told to do something that doesn't fit. 17 When we had cars, PCV valves, catalytic 18 converters, who did that? Did the car owners go put 19 catalytic converters in? No. We had to put PCV valves in 20 that cost us $35. We're get way, way passed that. It 21 would have nice if sometime a long time ago somebody 22 decided that they would have the manufacturers figure 23 something out. Now we're in the middle of being dumb 24 grading contractors and we're trying to design stuff. 25 I've looked at the Huse. We've got about a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 hundred pieces. We've repowered six of them, so a little 2 better than 5 percent. We've gone with the Tier 3. We're 3 putting Detroit motors in Caterpillar scrapers -- they 4 just happen to fit -- because at the time we could get two 5 or three from them and not from Cat. 6 But I'd like to do things once. Right now we 7 can't do it once. Probably one thing, if they could just 8 keep it simple, find a fix, give us some help, and it's a 9 done deal. Right now I know there's a lot of 10 recommendations, but there's nothing specifically that we 11 can do. And when it's all said and done, if you'd just 12 get a little book, it's got about ten pages, sell it in 13 Barnes and Noble, call it "Emissions for Dummies," we'd be 14 glad to look at it and glad to do it. It's just -- it's 15 not as simple as it can be. I'd like to get it simple. 16 Thank you. 17 (Applause.) 18 CHAIRPERSON SAWYER: Mr. Jansson. 19 MR. JANSSON: Good afternoon. My name is Jan 20 Eric Jansson. I'm a Swedish immigrant. I have a small 21 contracting company and a concrete plant where we make 22 concrete blocks. I have 80 employees and 25 iron. 23 Europe where I come from start to have a 24 regulation in the late '60, early '70s. And I just 25 couldn't stand it as an entrepreneur, so I emigrated to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 United States. 2 Now, in every field in Washington, in workers' 3 comp, in Medicare, same movie as in Europe 30 years ago. 4 Politicians promise creates regulation, create staff, 5 create regulation. Less people working, lower standard of 6 living. 7 If you want to do something, create incentives, 8 avoid regulation. If you need to regulate, keep it to a 9 minimum. Make it simple to understand, make it firm, and 10 make it a very long time so people can plan when it's 11 implemented. 12 I'm an entrepreneur. I've been that since 1969. 13 And I have the similarity with kids, as was said before. 14 We don't get the paycheck. We take a lot of risks. When 15 we buy a machine we have a loan for five years, a 16 commitment. You have sleepless nights and you have all 17 kinds of stuff. Maybe you would have starved even here in 18 the last recession in the early nineties. 19 I had $100,000 in payment at some point. I'm 20 down to 30 now. I have equipment that works very well. 21 It's going to give me a buffer in this recession we're 22 coming in because I don't have payment on everything. And 23 if I sit for a while, I can still survive. 24 As Scott Erreca said, the equipment becomes like 25 a house, or a stock, if you will, in the stock market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 But if you create regulation you'd make a market meltdown. 2 And I'm back to zero 20 years ago, with a value collapse. 3 Conclusion. I support clean air. And keep it 4 simple. Get rid of stuff and sit down with the parties. 5 Extend the implementation so we can deal with that -- 6 entrepreneurs can deal with this if they know what the 7 rules are. 8 Ten years -- yes, this regulation is late. I 9 understand that as a European. Americans are energy pigs. 10 I know that too. 11 (Laughter.) 12 MR. JANSSON: But we need ten years, just like in 13 equipment. Because you have equipment, you use it for 14 five years and you pay it and then you make your living 15 from it. It's impossible to extend the business -- expand 16 the business if you have to go to the bank all the time. 17 CHAIRPERSON SAWYER: Would you conclude please. 18 MR. KATZ: I will. 19 Don't kill the American entrepreneurial spirit, 20 the backbone of this country. I've seen the difference. 21 We will all be staff with very low standard of living and 22 working for the government. 23 Thank you. 24 (Applause.) 25 CHAIRPERSON SAWYER: Amazingly we have one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 remaining person who has signed up to speak today. And 2 that is Steve Coker. Is he here? 3 Mr. Coker gets the ultimate word. 4 MR. COKER: Good afternoon, Dr. Sawyer and staff. 5 My name is Steve Coker. I'm the vice president of an 6 underground company in San Diego County called T.C. 7 Construction. We employ over 550 employees. And we do 8 about a hundred million dollars plus of sewer water and 9 storm drain underground paving and things for the City and 10 the County of San Diego. We also work in Riverside 11 County. 12 The majority of our fleet is Tier 0 and Tier 1. 13 We're a very large contractor in this business. And we 14 feel that we're being unjustly called a large business and 15 not given the same amount of time as a small business or a 16 medium fleet. 17 We've offered the staff to come into our office, 18 open our books, and review our costs to see how we can 19 comply with this. And no one's came. Actually they did 20 come and look at our fleet, look at our numbers. But we 21 haven't heard anything back from them. 22 Today I did offer them to come look at our books 23 and help us out to see where we can comply. And I hope 24 they do so. 25 We're in the same boat as Downey and the rest of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 these guys, FCI and some of these others. We don't make 2 the profits to comply with these needs -- your guys' 3 wants, I should say. But we do agree with the Clean Air 4 Act and we do want to try to comply and do as we can. But 5 we do think that the staff needs to put your foot down on 6 the OEMs, mandate some dates to get this equipment 7 available to the contractors so we can all make this work. 8 And I hope you do something about that. 9 Thanks. 10 (Applause.) 11 CHAIRPERSON SAWYER: Thank you very much. 12 Supervisor Roberts. 13 BOARD MEMBER ROBERTS: Thank you, Mr. Chairman. 14 I wanted to make some quick comments. And I've 15 been sitting and listening all day. 16 I think as some of the people in the room at 17 least know my background's in construction and I worked 18 locally in the construction industry for many, many years 19 and represented the BIA and other organizations. So I 20 have a background. 21 I also belong to the group that carries these. 22 And I have patiently listened to some of the most 23 preposterous comments here today. 24 When I hear people get up and dismiss asthma as 25 just got to lose a little weight, it just infuriates me. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 I work with kids that can't lose weight and seniors who 2 can't lose weight. I hope there's a wake-up call here, 3 because we are going to do something about this issue. 4 And it's not just about asthma. 5 Diesel is a toxic contaminant. That means it 6 causes cancer and a whole lot of other things. It's not 7 just about asthma. It's about a whole lot of health 8 issues in this state. 9 Some of you have given excellent testimony. I 10 think it was the Downs family and their company that gives 11 us some insight into what the problem is and how we can 12 get to a solution. Others have their heads buried in the 13 sand. 14 And I hope that you use the time effectively, 15 because in July I'm looking forward to adopting a 16 regulation. 17 I hope we take the last speaker up on his offer 18 to look at his operation. And I hope that our staff will 19 work as diligently as possible to get us a solution that's 20 workable. I want to see something adopted. I don't want 21 to wait and I don't want to postpone this for five years. 22 There's too much at stake here. I want to see us get 23 started. 24 The only reason why we're here now is because 25 you're the last major segment in the state. We've PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 regulated most of the other areas. And you're very 2 fortunate that we're just getting to it now. But I think 3 what you've got to do is you've got to get realistic and 4 work with our staff and get some recommendations that are 5 going to work. And there's too much of the testimony 6 today that I found far less than compelling. There is 7 going to be some economic impact. We don't want to put 8 you out of business. So help us understand the issues, 9 because there is going to be a regulation. 10 CHAIRPERSON SAWYER: Thank you, Supervisor 11 Roberts. 12 We will continue public testimony at our July 13 25th meeting. This rule will come early in the day. It 14 may not be the first item, but it will be on the 25th. 15 Those of you who choose to come to Sacramento -- 16 EXECUTIVE OFFICER WITHERSPOON: Dr. Sawyer, it's 17 26, 27. 18 CHAIRPERSON SAWYER: Excuse me, 26, 27, Thursday. 19 Those of you who choose to come to Sacramento, if 20 you testified here today, we will not recognize you to 21 testify in Sacramento unless substantial new issues are 22 raised which you want to comment on. If you did not 23 testify today, you're quite welcome to come to Sacramento 24 and to testify at that time. 25 Do I hear a motion and a second to continue PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 consideration of this item until our July 26th, 2007, 2 meeting in Sacramento at the CAL EPA Building? 3 BOARD MEMBER BERG: So moved. 4 CHAIRPERSON SAWYER: Second? 5 SUPERVISOR HILL: Second. 6 CHAIRPERSON SAWYER: All in favor say aye. 7 (Ayes.) 8 CHAIRPERSON SAWYER: Opposed? 9 So be it. 10 The record will remain open as ascribed until the 11 beginning of this item. 12 We have no requests for public comments at this 13 time. But we'll accept comments from Board members. 14 Supervisor Hill. 15 SUPERVISOR HILL: Thank you. 16 CHAIRPERSON SAWYER: On any item. 17 SUPERVISOR HILL: Well, thank you. This is 18 regarding the previous item that we were discussing. 19 Just a couple of questions for staff and maybe 20 some assistance before July. 21 One, there was a comment made by a member of the 22 public in the testimony that the public fleet -- or of the 23 200 fleets that were surveyed or looked at, 155 of them 24 were public fleets. And if that's the case, you know, 25 maybe we could get some information. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 Is that true? 2 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 3 I believe that they were at least a hundred that 4 were public fleets of those. I'm not certain if it's 155. 5 SUPERVISOR HILL: Okay. Then I guess what I'd 6 like to know is if that's reflective of the private 7 fleets -- and, you know, perhaps we can get that 8 information before July -- if that is reflective of the 9 fleets in general or if there's some special circumstance 10 or something that would be attributed differently to one 11 or the other? 12 IN-USE CONTROL MEASURES SECTION MANAGER BRASIL: 13 I can say that I did look at the data. And of 14 the newest companies that we had, five of them -- the top 15 five were private companies and the oldest five were the 16 public fleets. And otherwise it appeared to be fairly 17 interspersed. 18 Well, we can provide something with more detail. 19 SUPERVISOR HILL: Okay. That'd be great. Thank 20 you. 21 The other question is, I know there's I believe 22 in the -- and this is from one of the letters that came in 23 and I remember reading it -- that there was -- there's no 24 sunsetting of the low use exemption for older equipment by 25 2015. There's no sunset at all, is that correct, on low PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 use? 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 3 WHITE: Yes, that is correct. 4 SUPERVISOR HILL: That's correct. Well, perhaps 5 we could look at sunsetting that or if there's a -- and 6 what effect that would may have on the -- 7 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 8 WHITE: Yes, we can. 9 SUPERVISOR HILL: Thank you. 10 And then there was -- also in some of the -- one 11 of the communications we received actually from the 12 Department of the Navy and Department of Transportation 13 regarding the labeling, there seemed to be an issue of how 14 the labeling of the equipment would be handled and the 15 concern -- and that may have changed into something since 16 then -- but the concern that the label may come off or may 17 be destroyed and how we could verify that equipment. And 18 they had some suggestions and language in the letter that 19 they have. And if you could look at that and kind of 20 report on that, I'd appreciate it. 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH CHIEF 22 WHITE: We will look at those. 23 SUPERVISOR HILL: Thank you. 24 Thank you, Mr. Chairman. 25 CHAIRPERSON SAWYER: Are there any other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 requests? 2 BOARD MEMBER RIORDAN: Yes. 3 CHAIRPERSON SAWYER: Mrs. Riordan. 4 BOARD MEMBER RIORDAN: I have a request. And 5 that would be as we advertise the July hearing that we 6 make clear to those who are going to be attending what our 7 position is on speaking -- if there are changes, how the 8 speakers can direct their comments to the changes. I'm 9 not really clear about those who are going to be 10 considered for public comment and, et cetera. And I think 11 it will help us to guide our, you know, visitors and 12 everybody else who's going to be interested in this 13 particular item so that they clearly know what we want to 14 have happen. 15 CHIEF COUNSEL JENNINGS: I think that's a good 16 idea. I think it's going to be a somewhat dynamic 17 situation because we won't know exactly what new 18 development there might be. But maybe even a couple days 19 before the hearing we could give some guidance on the 20 website, you know, list serve as what might be considered 21 new development. 22 EXECUTIVE OFFICER WITHERSPOON: Yeah, I agree it 23 will be dynamic. Because as one of the witnesses spoke 24 about outreach, I thought about whether we should repeat 25 our 300,000 piece mailer just to be sure we reached PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 everyone, which would provide many more witnesses 2 potentially in Sacramento. 3 But we will certainly express what you've 4 expressed today, that repetitive testimony is definitely 5 discouraged. New individual wishing to talk or those 6 wishing to address new issues can do so. 7 CHAIRPERSON SAWYER: Ms. D'Adamo. 8 BOARD MEMBER D'ADAMO: On another matter. I've 9 Just been thinking about this for a while. Feeling bad 10 about all the trees that we cut down to handle this 11 massive paperwork. And just wondering if staff has 12 thought or could give some consideration to going 13 electronic. I notice many times that documents will be 14 shipped to me and then I see the same document again or 15 even multiple copies of the same e-mail. You know, just 16 any way we can reduce the paperwork or preferably to go 17 electronic. 18 CHAIRPERSON SAWYER: I endorse that. 19 BOARD MEMBER RIORDAN: Well, I assume we recycle 20 all this. 21 CHAIRPERSON SAWYER: Ms. Berg. 22 Okay. Do I have a motion for adjournment? 23 BOARD MEMBER BERG: So moved. 24 CHAIRPERSON SAWYER: Second? 25 BOARD MEMBER D'ADAMO: Second. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 CHAIRPERSON SAWYER: All those in favor of 2 adjourning indicate by saying aye. 3 (Ayes.) 4 The May 25th, 2007, Air Resources Board meeting 5 is adjourned. 6 Thank you all very much. 7 (Thereupon the California Air Resources Board 8 adjourned at 4:35 p.m.) 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 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 8th 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