MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD HEARING ROOM CALIFORNIA AIR RESOURCES BOARD 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, JANUARY 25, 1996 9:35 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John D. Dunlap, III, Chairman Eugene A. Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John S. Lagarias Jack C. Parnell Barbara Riordan Ron Roberts James W. Silva Doug Vagim Staff: James Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Michael Kenny, Esq., Chief Counsel Bob Cross, Assistant Chief, Mobile Source Division Michael Carter, Chief, Off-Road Control Regulations Branch, MSD Jackie Lourenco, Mgr., Off-Road Controls Section, MSD Jim Shears, Mgr., On-Road Controls Section, MSD Michelle Shultz Wood, Staff, Off-Road Controls Section, MSD Michael Terris, Esq., Staff Counsel John Holmes, Ph.D., Chief, Research Division Bob Barham, Assistant Chief, Research Division Peter Venturini, Chief, Stationary Source Division Don Ames, Assistant Chief, SSD Genevieve Shiroma, Chief, Air Quality Measures Branch, SSD Janette Brooks, Mgr., Implementation Section, SSD Judith Tracy, Staff Counsel, Office of Legal Affairs Chuck Shulock, Office of Environmental Health Hazard Assessment George Alexeeff, OEHHA Patricia Hutchens, Board Secretary Wendy Grandchamp, Secretary Bill Valdez, Administrative Services Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X PAGE Proceedings 1 Call to Order 1 Pledge of Allegiance 1 Roll Call 1, 2 Chairman's Introduction of Distinguished Guest, Milton Feldstein, APCO, BAAQMD 2 Resolution to Mr. Feldstein presented by Mayor Hilligoss 3 AGENDA ITEMS: 96-1-1 Public Meeting to Consider Progress Toward Complying with the 1999 Utility Engine Regulations Introductory Comments by Chairman Dunlap 6 Staff Presentation: Jim Boyd Executive Officer 8 Michelle Shultz Wood Air Pollution Specialist Off-Road Controls Section, MSD 8 PUBLIC COMMENTS: Jed Mandel EMA/OPEI 21 Questions/Comments 27 Norman Weir Yanmar Diesel America Corp. 28 Questions/Comments 35 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS: 96-1-1 Mac Dunway PPEMA 43 Questions/Comments 50 Continued Comments by Mr. Dunway 50 Questions/Comments 51 Thomas Griswold Homelite 61 Questions/Comments 64 Bruce Bertelsen MECA 67 Lakhbir Singh Suchdev Accompanied by Robert Everts Ryobi 70 Questions/Comments 78 Suggestion by Mr. Calhoun 86 Questions/Comments 87 Direction from Chairman 94 Questions/Comments 96 Suggestion by Mr. Parnell 104 Direction from Chairman 105 Luncheon Recess 107 Afternoon Session 108 96-1-3 Public Meeting to Consider Appointments to the Research Screening Committee Introductory Comments by Chairman Dunlap 108 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX, continued. . . PAGE AGENDA ITEMS: 96-1-3 John Holmes, PH.D. Chief Research Division 109 Motion by Silva to Accept Recommended Appointees 111 Board Action 111 96-1-6 Public Meeting to Consider Research Proposals Introductory Remarks by Chairman Dunlap 111 Questions/Comments 112 Board Action 120, 121 96-1-2 Public Hearing to Consider Amendments to Emission Control Regulations for 1995 and Later Utility and Lawn and Garden Equipment Engines Introductory Remarks by Chairman Dunlap 123 Staff Presentation: Jim Boyd Executive Officer 123 Mike O'Connor Staff On-Road Controls Section MSD 125 Questions/Comments 132 PUBLIC COMMENTS: Robert Wyman Counsel for Briggs and Stratton 135 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX, continued. . . PAGE AGENDA ITEMS: 96-1-2 Peter Hotz Briggs and Stratton 143 Frank McLane McLane Manufacturing Company 152 Questions/Comments 157 Jack Plutte Power Equipment Company 158 Questions/Comments 161 Jed Mandel EMA/OPEI 161 Edward Routery Controlled Volume Technology 161 Questions/Comments 167 Direction to Staff by Chairman 169 Questions/Comments 169 Greg Tomlinson Citizen 173 William Platz Western Propane Gas Association 175 Statement by Chairman Dunlap 175 Closing Statement by Mr. Boyd 176 Written Comments Entered into Record 178 Record Officially Closed on Item 96-1-2 179 Motion by Riordan to Adopt Resolution 96-1 180 Roll Call Vote 180, 181 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX, continued. . . PAGE AGENDA ITEMS: 96-l-4 Public Hearing to Consider Amendments to the Air Toxics Hot Spots Fee Regulation Introductory Remarks by Chairman Dunlap 181 Staff Presentation: Jim Boyd Executive Officer Carla Takemoto Staff Implementation Section, SSD 186 Questions/Comments 192 PUBLIC COMMENTS: Manuel Cunha Nisei Farmers League 192 Benjamin Shaw SCAQMD 195 Questions/Comments 198 David Arrieta WSPA 200 Written Comments Entered Into Record 201 Record Closed on Item 96-1-4, Awaiting 15-day Notice for Public Comments 203 Motion by Roberts to Adopt Resolution 96-2 204 Questions/Comments 204 Roll Call Vote 205 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX, continued. . . PAGE AGENDA ITEMS: 96-1-5 Public Hearing to Consider Amending Variance Provisions of California Cleaner Burning Gasoline Regulations Introductory Remarks by Chairman Dunlap 206 Staff Presentation: Jim Boyd Executive Officer 206 John Courtis Manager Fuels Section, SSD 208 PUBLIC COMMENTS: Steven Smith 76 Products Company 213 Questions/Comments 216 Continued Comments by Mr. Smith 218 Questions/Comments 219 Al Jessel Chevron 222 Questions/Comments 223 Written Comments Entered Into Record 225 Record Closed on Item 96-1-5, to Await Notice of Public Comment Period 226 Motion by Parnell to Adopt Resolution 96-3 227 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ix INDEX, continued. . . PAGE AGENDA ITEMS: 96-1-5 Roll Call Vote 227 Announcement by Chairman 228 Adjournment 228 Certificate of Shorthand Reporter 229 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 --o0o-- 3 CHAIRMAN DUNLAP: Will the January meeting of the 4 California Air Resources Board please come to order. 5 At this point, I'd like to ask Dr. Boston to lead 6 us in the Pledge of Allegiance. Gene? 7 DR. BOSTON: Please join me in the Pledge of 8 Allegiance to our flag. 9 (Thereupon, the Pledge of Allegiance was 10 recited by all in attendance.) 11 CHAIRMAN DUNLAP: Ms. Hutchens, would you please 12 call the roll? 13 MS. HUTCHENS: Boston? 14 DR. BOSTON: Here. 15 MS. HUTCHENS: Calhoun? 16 MR. CALHOUN: Here. 17 MS. HUTCHENS: Edgerton? 18 MS. EDGERTON: Here. 19 MS. HUTCHENS: Hilligoss? 20 MAYOR HILLIGOSS: Here. 21 MS. HUTCHENS: Lagarias? 22 MR. LAGARIAS: Here. 23 MS. HUTCHENS: Parnell? 24 MR. PARNELL: Here. 25 MS. HUTCHENS: Riordan? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 SUPERVISOR RIORDAN: Here. 2 MS. HUTCHENS: Roberts? 3 SUPERVISOR ROBERTS: Here. 4 MS. HUTCHENS: Silva? 5 SUPERVISOR SILVA: Here. 6 MS. HUTCHENS: Vagim? 7 Chairman Dunlap? 8 CHAIRMAN DUNLAP: Here. Thank you. 9 Before we begin today's meeting, I'd like to say 10 that this is indeed a rare occasion. Ladies and gentlemen, 11 we have with us today a leader, a gentlemen in the full 12 sense of the world, who is really I think a clean air 13 legend. 14 He's been part of air pollution control for over 15 40 years. He is an inspiration to me personally, and I'm 16 sure to many others, by his leadership that he's exercised 17 and his many personal talents and traits. 18 It is my privilege on your behalf to call to our 19 podium Milt Feldstein, who is the Air Pollution Control 20 Officer for the Bay Area Air Quality Management District -- 21 is Milt present? -- which is the first large metropolitan 22 area in the nation to achieve attainment of the ozone 23 ambient air quality standard. 24 As our Board member from the Bay Area District 25 Board of Directors, I'd like to ask Mayor Hilligoss to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 please join Milt at our podium, and to read and to present 2 to him a resolution from our Board. 3 Good morning, Milt, and welcome. 4 MR. FELDSTEIN: Good morning, and thank you very 5 much. 6 We're prepared a rather lengthy resolution for the 7 Mayor to read. So, Mayor, go ahead. 8 MAYOR HILLIGOSS: I made everybody promise that if 9 I mispronounce any words, they can't laugh. 10 CHAIRMAN DUNLAP: Okay. We won't. 11 MAYOR HILLIGOSS: Okay. 12 "WHEREAS, Milton Feldstein has vigorously 13 served the Bay Area Air Quality Management 14 District with vision and dedication since 1957, 15 distinguishing himself as Air Pollution Officer 16 since 1970; 17 "WHEREAS, Mr. Feldstein's prodigious and 18 prolific scientific expertise and his managerial 19 skills and prescience secured the District a place 20 in the air pollution history, from a humble 21 beginning with industrial smoke control in 1960, 22 to attainment of the national ambient air 23 quality standard for ozone in 1995; 24 "WHEREAS, Mr. Feldstein has shared his 25 compendious knowledge of air pollution control PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 techniques and analytical methodology not only 2 throughout California but nationally and 3 internationally, vastly benefiting public health; 4 "WHEREAS, Milt's unflinching sense of 5 purpose, combined with a creative ability to 6 embrace the next challenge with new approaches, 7 has made him a leader in the field air 8 pollution control; 9 "WHEREAS, under Mr. Feldstein's unstinting 10 tutelage, the District has led California in 11 adopting innovative and effective controls on 12 sources of volatile organic compounds and toxic 13 air contaminants through its pioneering 14 cooperative workshop process; 15 "WHEREAS, Milt's warmth, accessibility, 16 openmindedness, compassion, benevolence, and 17 ability to bring out the best in people have 18 won him the respect, loyalty, and love of his 19 staff and compatriots, and has turned the 20 regulated community from enemy to ally in 21 the fight against pollution; and 22 "WHEREAS, Milt is retiring from the 23 District after deftly serving numerous policy 24 boards during his 37 years of dedicated public 25 service. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 "NOW, THEREFORE, BE IT RESOLVED, that the 2 Board applauds and honors Mr. Feldstein for his 3 many years as a guiding light in the mission 4 to clean up California's skies and as a strong 5 and worthy partner of the Air Resources Board. 6 "BE IT FURTHER RESOLVED, that the Board 7 congratulates Mr. Feldstein on his prominent 8 role in the Bay Area District's momentous 9 achievements, including attainment of the 10 national ozone standard in the face of doubling 11 of vehicles and population. 12 "BE IT FURTHER RESOLVED, that the Board 13 wishes Milt a happy and active retirement and 14 looks forward to seeing his wit and wisdom set 15 to paper in the near future." 16 And it's signed by the Chairman, John Dunlap, III, 17 and the ten other members of the Board. 18 MR. FELDSTEIN: Thank you. 19 (Thereupon, the audience stood and applauded.) 20 MR. FELDSTEIN: Thank you all very much. I just 21 want to say one little thing. Since my activity at the 22 District, I have had 39 chairpersons and 167 board members. 23 So, I think, if you see me still here, it's a tribute to 24 that perseverance. 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 CHAIRMAN DUNLAP: Thank you, Milt. Milt, can you 2 come around here so we can shake your hand, please? Thank 3 you. Well said. 4 (Thereupon, Mr. Feldstein approached the 5 dais to shake the hand of each Board member.) 6 CHAIRMAN DUNLAP: All right. Well done, Mayor 7 Hilligoss. Thank you. 8 I'd like to remind those of you in the audience 9 who would like to present testimony to the Board on any of 10 today's agenda items to please sign up with the Board 11 Secretary to my left. 12 If you have any written statements, please provide 13 20 copies to her so that we may all have copies here at the 14 Board. 15 Our first item on the agenda today is 96-1-1, a 16 public meeting to consider progress toward complying with 17 the 1999 utility engine regulations. 18 On December 14th, 1990, the Board approved 19 emission control regulations for utility engines which were 20 implemented in 1995. These regulations included a directive 21 to ARB staff to present progress reports to the Board prior 22 to the implementation of the 1999 Tier II standards. 23 The reports were intended to inform the Board of 24 industry's progress in developing technology that allows 25 utility engines to meet the adopted standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 Before us for consideration today is the staff's 2 status report discussing industry's progress to date. 3 At this point, I'd like to ask Mr. Boyd to 4 introduce the item and begin the staff's presentation. Jim? 5 MR. BOYD: Thank you, Chairman Dunlap. Good 6 morning, Board members, and good morning to members of the 7 audience. 8 Let me just add for the staff our congratulations 9 and appreciation to Milt for the years of work that we've 10 had with him and the fun we've had. And just let me say, 11 it's nice to see Jack Lagarias with us here, having 12 recovered his bout with pneumonia, and we're really pleased 13 to see Jack sitting up there. 14 As the Chairman mentioned, the utility engine 15 regulations were put into effect last year. EPA signed the 16 appropriate authorizations in July of last year and, with 17 that, California's first off-road mobile source regulations 18 became enforceable. 19 As a result of these regulations, nearly 200 20 engine families have been certified for sale in California 21 now, and the staff will give you additional background on 22 the id,<,dy in the course of their presentation. 23 We're also going to present a status report 24 discussing industry's progress in meeting the so-called Tier 25 II standards, and to discuss with you the kinds of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 technologies that are being developed to meet these 2 standards. 3 With that, I think I'll turn the presentation over 4 now to Ms. Michelle Shultz Wood, a member of our Mobile 5 Source Division, who will give you the summary of both 6 industry's efforts and the regulation. 7 Ms. Wood, please. 8 MS. SHULTZ WOOD: Thank you. Good morning, 9 Chairman Dunlap and members of the Board. 10 The Board will be presented with two items this 11 morning regarding utility engines. The first is the status 12 report and then the CO reconsideration. 13 To get the ball rolling, I will first present a 14 brief background of the off-road category, the regulatory 15 events that have occurred, and the current compliance 16 results. 17 I will then discuss the status of industry's 18 compliance efforts for the '99 emission standards and 19 conclude with staff's recommendations and our next steps. 20 The CO reconsideration item will follow. 21 In general, small utility equipment is powered by 22 gasoline and some diesel engines less than 25 horsepower. 23 This category primarily consists of two- and four-stroke 24 single cylinder engines. Both the two-stroke and four- 25 stroke engines are carbureted and have either horizontal or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 vertical crankshafts depending on their end-use application. 2 Utility engines are divided into two categories: 3 the lawn and garden category and the general utility 4 category. The lawn and garden category includes equipment 5 such as mowers, trimmers, blowers, and chain saws. The 6 general utility category includes equipment such as pumps, 7 generators, grinders, and compressors. 8 The utility engine categories are further broken 9 up into subcategories -- handheld and non-handheld 10 equipment. 11 Handheld equipment, like chain saws, is typically 12 powered by gasoline fueled two-stroke engines primarily 13 because, unlike most four-stroke designs, two-strokes have 14 multipositional operation capability. 15 Compared to a four-stroke design of equal power, 16 two-strokes are also lighter in weight. As shown, four- 17 strokes are just beginning to become part of the handheld 18 market with Ryobi's four-stroke handheld engine available 19 for sale and licensing. This state-of-the-art engine will 20 be discussed in detail later in the presentation. 21 With regard to non-handheld equipment, like a 22 lawnmower, it is typically powered by either gasoline or 23 diesel fueled four-stroke engines. While their emissions 24 are inherently lower than two-strokes, the potential for 25 significant emission reductions still exists. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 Engines used in utility, lawn and garden equipment 2 were the first off-road category subject to emission control 3 regulations because of the significant emissions impact and 4 due to a court order requiring Board action by January, '91. 5 Consequently, the utility engine regulations were 6 approved by the Board on December 14th, 1990. The utility 7 engine regulations, as originally adopted, applied to 8 engines produced on or after January 1st, 1994. 9 However, upon consideration of a petition filed by 10 industry, the Board delayed implementation for one year, 11 making the regulations applicable to engines produced on or 12 after January 1st, 1995. 13 On July 5, 1995, the Administrator of the U.S. EPA 14 signed the authorization for the utility engine regulations, 15 resulting in the first enforceable California off-road 16 emission control regulations. 17 The utility engine regulations contain a two- 18 tiered approach. The first tier was implemented on January 19 1st, 1995, while the second tier is set to be implemented on 20 January 1st, 1999. 21 Manufacturers were given roughly eight years of 22 leadtime to comply with the '99 standards. Along with the 23 adoption of these standards, the Board directed staff to 24 present industry progress reports prior to their 25 implementation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 The relatively lengthy leadtime prior to 2 implementation of the '99 standards provided a sufficient 3 amount of time for research development efforts. 4 Concurrently, such leadtime also provided the ARB 5 the opportunity to review industry progress and take 6 appropriate action should any significant technological 7 feasibility concerns arise. This is the first of the 8 Board-directed utility engine status reports. 9 Subsequent to California's adoption of utility 10 engine regulations, the U.S. promulgated its 1997 model-year 11 gasoline utility engine program similar to the California 12 1995 program, and is conducting regulatory negotiations to 13 set the federal Phase II utility engine standards. In he 14 near term, California's program is very similar to the U.S. 15 EPA's. 16 The standards are the same, except for 17 particulates, which California has a standard for and the 18 U.S. EPA does not. 19 The only other significant differences are the 20 implementation date and the engines covered by the 21 standards. 22 California's standards cover spark-ignited and 23 compression ignition engines, whereas EPA's only cover 24 spark-ignited engines. 25 The long term is where our standards will most PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 likely differ. The '99 standards are already set for 2 California. However, EPA is still in their regulatory 3 negotiation process for their Phase II standards. 4 Although the U.S. EPA's efforts are positive 5 improvements to the Phase I utility engine control program, 6 early indications are that the proposed Phase II regulation 7 will fall short of California's emission control goals as 8 presented by the State Implementation Plan. 9 However, whereas California standards are based on 10 new engine certification, it looks as though the EPA 11 standards will require in-use compliance. This may be 12 something we will want to incorporate into our regulations 13 at a future date. Manufacturers have expressed their desire 14 to comply with one set of standards and procedures for the 15 U.S. market to reduce costs and complexity. 16 While staff recognizes the importance of a 17 harmonized emission control program for the U.S, as stated 18 before, the federal program is not expected to meet 19 California's air quality goals. 20 Before I discuss the progress achieved toward 21 complying with the '99 standards, I would like to give you a 22 short update on the '95 compliance effort. 23 As of today, 226 utility engine families have been 24 certified to 1995 levels. One manufacturer Briggs and 25 Stratton, has concerns in meeting the '95 non-handheld PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 levels. As previously mentioned, their specific issues will 2 be discussed further in the following agenda item. 3 With the exception of this one particular engine 4 manufacturer, 148 non-handheld engine families and 78 5 handheld engine families have successfully certified to the 6 '95 standards. 7 Seven of the non-handheld engine families are 8 certified with catalysts. It should be noted that, while 9 industry's progress toward lowering the exhaust emission 10 levels is significant, it has been accomplished mostly 11 through the use of simple engine modifications, carburetor 12 enleanment, and engine cooling improvements. 13 Industry's progress toward lowering exhaust 14 emission levels of two- and four-stroke utility engines is 15 significant. This is evident upon a comparison of the 16 uncontrolled emission levels in green, with the controlled 17 average 1995 certification emissions levels in red. A 63 18 percent reduction in CO and a 49 percent reduction in HC 19 plus Nox has been achieved. 20 The blue bar indicates the two-stroke '95 21 standards, which the current average certified emission 22 levels are below at 329 grams per brake horsepower hour of 23 CO and 154 HC plus Nox. 24 Similarly, as seen by the red bar, the four-stroke 25 engine emission levels have dropped to an average of 7.5 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 grams per brake horsepower hour HC plus Nox and 183 CO, 2 representing a 74 percent and 86 percent reduction 3 respectively from the uncontrolled levels shown by the green 4 bar. 5 The '95 standards, displayed in blue, are 6 comfortably above the certified levels. 7 Over the last year, ARB staff met with engine and 8 catalyst manufacturers who shared their progress toward 9 attaining the '99 e mission standards, the technologies they 10 are investigating, and the advantages and disadvantages of 11 each technology. 12 Based on these data, staff believes significant 13 progress toward complying with the '99 standards has been 14 made to date. 15 In 19990, when the Board adopted the utility 16 engine regulations, the staff believed that advanced 17 emission control technologies would be necessary to achieve 18 the '99 standards, with the most likely technology being the 19 catalyst. 20 Since then, industry has indicated that the use of 21 catalysts on utility engines may involve problems with 22 packaging, high exhaust and surface temperatures, and 23 durability of the catalyst because of excessive heat and 24 vibration. 25 However, over the past years, these problems have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 been minimized for most applications. To date, the majority 2 of catalyst successes have been with four-stroke engines, 3 demonstrating 50 to 60 percent emission reductions in HC 4 plus NOx. 5 Additionally, catalysts have endured 300 hour 6 durability tests with no loss of efficiency throughout the 7 testing. Catalyst companies report that they can produce 8 catalysts that fit into existing mufflers at a cost to the 9 manufacturer of $5.00 to $10 per packaged catalyst. 10 This table illustrates a number of handheld test 11 engine results from the U.S. EPA which demonstrate emission 12 reductions from the use of catalysts and fuel injection. As 13 you can see, all four engines meet the HC plus NOx '99 14 standards, and two of the four meet the CO standards. 15 This table illustrates a number of non-handheld 16 test engine results, also from the U.S. EPA, which 17 demonstrate emission reductions from the use of catalysts 18 and air injection. 19 As you can see, all four engines meet the CO '99 20 standards and two of the four meet the HC plus NOx 21 standards. 22 Although catalysts may be the least expensive and 23 most promising technology to use to comply with the '99 24 standards, other technologies have been examined as well. 25 These technologies include substantial attention to changes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 in the fuel delivery system and design of existing engine 2 components. 3 None of these modifications is considered 4 technologically challenging or infeasible. Additionally, 5 two-stroke engine manufacturers contend that it is essential 6 to reduce scavenging losses. 7 In additional to catalysts, the Portable Power 8 Equipment Manufacturers Association has identified enleaned 9 carburetion, fuel injection, and shifting from two-stroke to 10 four-stroke engines as the most feasible technologies for 11 1999 compliance. The staff agrees with this position. 12 One engine manufacturer, Ryobi, has successfully 13 made the switch from two-stroke to four-stroke engines. 14 They have developed a lightweight, four-stroke engine for 15 handheld applications such as weed trimmers and blowers. 16 The Ryobi engine is certified to '95 standards and 17 they believe, with minor adjustments, the engine can meet 18 the '99 standards for handheld equipment. 19 Additionally, this engine technology is available 20 to interested manufacturers as an alternative to producing a 21 complying engine of their own. Based on Ryobi's success, as 22 well as additional data, staff believes four-stroke engines 23 may prove to be the most feasible alternative to two-stroke 24 engines for compliance with the '99 handheld standards for 25 most applications. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 Diesel engine manufacturers have also considered 2 catalysts and engine/fuel system modifications as possible 3 technologies for '99 compliance. 4 Recent test programs conducted by both the U.S. 5 EPA and industry have demonstrated the oxidation catalysts 6 are capable of reducing HC emissions by 30 to 40 percent and 7 PM emissions by 25 to 40 percent. 8 Although oxidation catalysts for small utility 9 diesel engines have not yet achieved commercial viability, 10 they are expected to be available in the future. 11 In addition to catalysts, they are investigating a 12 number of engine modifications to improve the air/fuel 13 mixing, which will in turn decrease HC and PM emissions. 14 Most notably is the method with which the fuel is 15 injected into the engine. Some diesel engine manufacturers 16 have indicated that direct injection is essential for 17 complying with the '99 standards, while others have 18 indicated they will modify the indirect injection system. 19 Other modifications to improve the air/fuel mixing 20 include combustion chamber redesign and exhaust gas 21 recirculation technology. 22 Alternate fuel engines are another option 23 available to small engine manufacturers. A number of engine 24 manufacturers have been successful in producing products 25 that are capable of competing with gasoline-powered PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 equipment that meet the utility engine regulations. 2 There are currently seven engine families 3 certified using liquefied petroleum gas. Their 4 certification values range from about 9 to 4 grams per brake 5 horsepower hour HC plus NOx, and five of the engines meet 6 the 100 gram per brake horsepower hour CO standard easily. 7 One engine manufacturer, Briggs and Stratton, has 8 certified an engine family running on compressed natural 9 gas. An electric motor is another viable alternative to a 10 gasoline. The retail cost of electric utility equipment is 11 roughly 50 to 75 percent of gas equipment of comparable 12 power rating, and they represent a significant share of the 13 sales of utility equipment. 14 Clearly, using an electric motor in place of a 15 gasoline engine reduces exhaust emissions 100 percent. Some 16 examples of electric equipment available are chain saws, 17 string trimmers, blowers, vacuums, edgers, and walk-behind 18 mowers. 19 While industry's progress is promising, 20 manufacturers have concerns over meeting the '99 standards. 21 Some manufacturers are concerned because they need to have 22 designs set and prototypes available to equipment builders 23 this summer for the '99 market. And, at this time, they are 24 unable to meet the '99 standards. 25 For certain applications, the cost of feasible PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 technology may impact the marketability of the product. 2 Finally, certain manufacturers continue to voice 3 concerns about the feasibility of the '99 emission levels. 4 Staff is aware of these concerns and has made a concerted 5 effort to address them and will in the future as well. 6 We realize there is more work to be done over the 7 next two years before manufacturers will be successful in 8 meeting the '99 standards. However, the input staff has 9 received from industry has been generally encouraging. And 10 based on that input, staff believes now is not the time to 11 make changes to the utility regulations. 12 As demonstrated in the past, despite concerns over 13 meeting '95 emission standards, industry has successfully 14 certified 226 gasoline, diesel, LPG, and CNG-powered engines 15 to the '95 standards. 16 Given the advances that industry has made to date, 17 staff expects a similar outcome with the '99 standards. 18 Based on information gathered throughout individual 19 workshops with manufacturers, as well as from the EPA and 20 Society of Automotive Engineering publications, staff 21 believes that the manufacturers are on schedule with their 22 '99 research and development efforts. 23 It is anticipated that the two years remaining 24 should be sufficient time to resolve any remaining 25 obstacles. In light of the tremendous progress shown by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 small utility engine industry, staff recommends that the 2 Board maintain the 1999 standards as originally approved. 3 Maintaining these standards will encourage 4 industry to continue st riving to reach them. The next year 5 will be used to reevaluate industry's work. If, after that 6 evaluation, changes to the regulations are required, staff 7 will return to the Board with that recommendation. 8 In addition, staff recommends that an evaluation 9 of a more comprehensive control program be considered. For 10 example, it is likely that the U.S. EPA will adopt in-use 11 compliance standards and test procedures for their Phase II 12 utility engine rule. It may be in California's best 13 interest to adopt similar provisions. 14 Over the next year, staff will continue to work 15 with industry and follow the U.S. EPA's regulatory 16 negotiations to determine if changes to the emission 17 standards and compliance requirements are needed for 1999. 18 If directed by the Board, staff will return prior 19 to the '99 standards implementation date with another update 20 on industry's progress. 21 This concludes my presentation. We will be 22 pleased to answer any further questions. 23 CHAIRMAN DUNLAP: Any questions of staff at this 24 juncture? We have seven witnesses signed up to provide 25 testimony. Okay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 All right. Then, why don't we get into the 2 witness list. 3 Jed Mandel from EMA/OPEI, followed by Bill Scott 4 from Tecumseh Products, followed by Norman Weir of Yanmar 5 Diesel America Corp. 6 If I could just caution the witnesses, please be 7 efficient in your use of time -- we have a number of items 8 today -- and try not to be redundant. Thank you. 9 Good morning. 10 MR. MANDEL: Good morning, Mr. Chairman. Good 11 morning, members of the Board. I'm Jed Mandel, speaking 12 today on behalf of the Engine Manufacturers Association and 13 the Outdoor Power Equipment Institute -- in particular, the 14 manufacturers of gasoline, diesel, and alternative-fueled 15 non-handheld lawn and garden and general utility engines and 16 equipment. 17 EMA, OPEI, and their members have actively 18 participated in the development of the utility engine 19 regulations since their inception over five years ago. As 20 such, we take great interest in the staff's report to the 21 Board. 22 Much hags occurred over the last five years. The 23 Tier I regulations became effective, EPA adopted comparable 24 Phase I standards for the 1997 model year, and there's an 25 ongoing regulatory negotiation expected to result in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 second phase of federal utility engine standards. 2 At the same time, several open issues remain 3 concerning the feasibility and cost-effectiveness of the 4 Tier II standards, as well as their impact on the California 5 utility engine market as a whole. 6 First, the progress report indicates that a 7 January 1, 1999, implementation date will give manufacturers 8 roughly eight years of leadtime to comply with the Tier II 9 emission standards. Yet, that calculation ignores EPA's 10 delay in authorizing the regulations. As the staff noted, 11 that was just in July of this past year. 12 It is important to remember that the leadtime to 13 date has been used by engine manufacturers to comply with 14 the Tier I standards. Indeed, engine families representing 15 significant sales volume still have not been certified to 16 the Tier I standards. In many instances, manufacturers are 17 just now beginning to work on Tier II standards. 18 The progress report also has not taken into full 19 consideration the extensive financial, facility, and human 20 resources that have been expended to comply with the Tier I 21 standards. Engine manufacturers must be provided both 22 adequate leadtime and a reasonable period of stability in 23 which to recoup the costs of their investment in the Tier I 24 technology; other wise, the costs of the Tier II standards, 25 which are likely to fall solely on Californians, will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 much higher than the progress report suggests. 2 Second, the progress report appears to rely on 3 untested assumptions regarding the emissions reduction 4 capabilities of catalysts and other advanced control 5 technologies. 6 The progress report certainly errs in concluding 7 that industry should have little difficulty in complying 8 with the Tier II emission standards. For example, today's 9 experience with low-efficiency catalysts is not necessarily 10 indicative of what will be needed or what will be feasible 11 for compliance with future standards. 12 While engine manufacturers may be able to achieve 13 the targeted emission reductions in a laboratory setting, 14 that's not enough. They must make products that both comply 15 with the applicable emission requirements and meet the needs 16 of the consumer. 17 EMA, OPEI and their members, and the staff have 18 discussed at length the unique characteristics of utility 19 engines and equipment which complicate, and sometimes 20 prohibit, the transfer of technology to this segment of the 21 market. 22 To the extent emission control technology results 23 in utility equipment that's too heavy, too hot, or that 24 operates unsatisfactorily, consumers will not purchase 25 emission-compliant products, and manufacturers will not be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 able to sell them. 2 In reviewing the Tier II emission standards, the 3 Board must consider both the absolute emission reductions 4 technically obtainable and the practical cost and use 5 limitations associated with the implementation of such 6 technologies. 7 Our concerns about technological feasibility, 8 cost, and customer satisfaction apply to both spark-ignited 9 and compression-ignited engines and equipment. Indeed, we 10 urge the staff and the Board to separate the regulation of 11 gasoline and diesel engines in recognition of the fact that 12 different emission control technologies, costs, and leadtime 13 are involved. 14 Third, the progress report fails to adequately 15 assess the costs of the Tier II standards. For example, the 16 costs associated with the use of catalysts and other 17 advanced emission control technologies have been 18 underestimated. Not only must the base price of a catalyst 19 be considered, but also the costs associated with necessary 20 additional hardware and the installation of the catalyst and 21 other hardware into the equipment. 22 While such additional costs are significant in any 23 context, they are particularly burdensome in the utility 24 engine industry, where engine and equipment manufacturers 25 are not integrated and where consumer demands require that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 certain engines be produced in high volume and at low cost. 2 Those engines represent a huge percentage of the total 3 volume of all non-handheld engines covered by the Tier II 4 rules. 5 What the progress report has described as an 6 additional $10 to $30 increase could result in a significant 7 increase in the actual price of a product. 8 Finally, it is important to recognize the dramatic 9 changes in the regulatory landscape that have occurred since 10 the approval of the Tier II standards. When the Board 11 approved the standards in December, 1990, the revised Clean 12 Air Act was only weeks old. 13 Since that time, EPA has exercised its authority 14 to regulate nonroad engines and has adopted national small 15 engine standards intended to be harmonized with the Air 16 Resources Board's Tier I standards. 17 Further, for more than two years, State and 18 federal regulators, environmentalists, small businesses, and 19 representatives of the affected industries have met in a 20 regulatory negotiation to explore technologies and programs 21 to reduce the emissions from spark-ignited utility engines. 22 As a result, EPA is developing revised exhaust 23 emission standards applicable for an engine's useful life, 24 evaporative emissions, and in-use compliance programs. 25 We are pleased that the progress report PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 acknowledges that staff will work to conform the ARB and EPA 2 programs as much as possible. Without such conformity, 3 engine and equipment manufacturers will likely be required 4 to invest in two entirely different research and development 5 programs without any air quality benefit. 6 Even assuming that such parallel development 7 efforts are possible, the cost would place a dramatic 8 financial burden on the industry, seemingly without 9 justification. That burden ultimately will fall on the 10 citizens of California, who are likely to experience higher 11 prices and substantially fewer product offerings. 12 Significant additional information on the 13 feasibility and cost of the Tier II standards has been 14 developed even since the staff undertook this review, and 15 more such information will become available this year. 16 That data and the next progress report due later 17 this year will be critical to California, the industry, and 18 the consuming public. For diesels, steps should be taken 19 this year to develop a separate regulatory program. 20 EMA and OPEI look forward to working with the 21 Board and the staff as they continue to review the 22 feasibility of the Tier II standards. 23 I'd be pleased to answer any questions that the 24 Board might have. 25 CHAIRMAN DUNLAP: Mr. Calhoun. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 MR. CALHOUN: Mr. Mandel, one of the points you 2 made was that the EPA did not authorize these standards 3 until, I guess, several years after the Board had adopted 4 them. 5 Does this suggest that your member companies only 6 start working on standards after they've been officially 7 approved by the EPA? 8 MR. MANDEL: No. When the Board took its action 9 in December of 1990 -- and even probably before -- engine 10 manufacturers were already focusing their efforts to comply. 11 But, as you know, until there is certainly as to what those 12 standards will be, as to whether they will be enforceable or 13 not, as to whether EPA in this case will authorize them, 14 given the fact that the Clean Air Act -- since the Board's 15 action in December of 1990 -- added a new step in the 16 process. It was not possible for the engine manufacturers 17 to fully know what their responsibilities were going to be. 18 And that uncertainty did cause some concerns in 19 terms of what the program would be and what would be 20 necessary. 21 That was also obviously exacerbated by the fact 22 that -- in terms of the leadtime concerns, by the fact that 23 during this time, engine manufacturers were trying to 24 develop complying programs for both EPA and the Air 25 Resources Board, focusing their efforts there on the two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 Tier I programs and not looking to the future for Tier II. 2 MR. CALHOUN: Thank you. You also mentioned two 3 other things that are significant here. One is leadtime and 4 the idea of separating the standards based on technology. 5 And I'm sure we're going to hear more about that later, and 6 I will get the staff's response to that later on, not at 7 this particular time. 8 Thank you. 9 CHAIRMAN DUNLAP: Very well, Mr. Mandel. Thank 10 you. 11 MR. MANDEL: Thank you very much. Appreciate it. 12 CHAIRMAN DUNLAP: Bill Scott, Tecumseh. 13 MR. SCOTT: (From the audience.) In order not to 14 be repetitive, with EMA/OPEI, we'll pass. 15 CHAIRMAN DUNLAP: Bless you, sir. 16 (Laughter.) 17 CHAIRMAN DUNLAP: Mr. Weir, Norman Weir from 18 Yanmar Diesel America Corp., followed by Mac Dunway, PPEMA, 19 and Thomas Griswold, Homelite. 20 Mr. Weir, I think we have your written comments in 21 our packet. 22 MR. WEIR: Yes, you do. 23 Good morning. I am Norman Weir, Manager of 24 Environmental Technology and Compliance for Yanmar Diesel 25 America Corporation, headquartered in Buffalo Grove, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 Illinois. With me today is Mr. Kazuto Usui, Senior Engineer 2 for the Research and Development Division of our parent 3 company, Yanmar Diesel Engine Company, Ltd., in Osaka, 4 Japan. 5 Yanmar fully supports California's efforts to 6 provide clean air. We appreciate this opportunity to 7 comment on the status off the 1999 Tier II standards for 8 utility, lawn and garden equipment engines. 9 We have been and will work -- continue to work 10 closely with your staff on all issues related to these 11 regulations. Yanmar also supports the statement of the 12 Engine Manufacturers Association regarding diesel engines 13 that was just previously provided. 14 Yanmar manufacturers diesel engines exclusively 15 from four to over 5,000 horsepower, which are used across 16 the wide range of industrial, off-road, and marine 17 applications around the world. 18 These applications include the utility, lawn and 19 garden equipment category under discussion today. Our 20 engines are produced to specifications set by manufacturers 21 of ULGE equipment, OEM manufacturers. 22 Sales of equipment using our engines is just over 23 2,000 units annually in California. Typical applications of 24 our diesel engines include turf care, construction, and 25 agricultural equipment, generators, pumps, and refrigeration PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 units where reliable, low lifetime cost, and long-term 2 service is a requirement. 3 Since 1990, Yanmar has committed substantial 4 resources to research programs intended to identify control 5 technologies that would allow our engines to meet both the 6 Tier I and Tier II standards. We have successfully 7 certified 14 engine families, comprising about 115 different 8 models, to ARB's Tier I standards. 9 In working toward the Tier Ii standards, we have 10 identified improvements that will yield additional 11 reductions in emissions below the Tier I standards. 12 However, despite our extensive research program, we have not 13 been successful in identifying any technology or combination 14 or technologies that will allow our engines to comply with 15 the Tier II standards. 16 When the Tier II standards were adopted, ARB staff 17 projected -- based on data from heavy-duty on-road diesel 18 engines -- that ULGE diesel engines would require engine 19 modifications and oxidation catalysts to achieve the Tier II 20 standards. Yanmar has been extensively examining all 21 applicable technologies. 22 In the area of engine modifications, we have done 23 extensive, innovative work. We have tested engines with 24 varied combinations of redesigned combustion chambers, 25 changes in fuel injector hole sizes and spray angles, higher PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 fuel injection pressures, and injection timing changes. 2 Incorporation of these changes will provide 3 emissions reductions relative to Tier I engines, but will 4 not allow us to achieve compliance with the Tier II 5 standards. We have provided up-to-date information to the 6 ARB staff on this research. 7 Our research on oxidation catalysts also has been 8 shared with staff. The magnitude of particulate reductions 9 from catalysts is nowhere near enough to comply with the 10 Tier Ii standard due to the low exhaust temperatures, which 11 prevent proper functioning of the catalyst. 12 Our preliminary estimate is that oxidation 13 catalysts will average about $200 per engine to install. 14 This cost, when added to the cost of the engine 15 modifications and the cost of OEM equipment redesign, is 16 excessively -- is excessive, given the one- to three- 17 thousand dollar price of our engines. 18 Our investigation of exhaust gas recirculation 19 systems indicates that they will not provide the NOx 20 emission reductions needed to comply with Tier II standards, 21 even in combination with the engine modifications previously 22 discussed. 23 Like catalysts, EGR systems will be quite 24 expensive, as they require a complex electronic control 25 system to regulate flow and prevent excessive engine wear. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 We estimate that EGR systems are likely to cost as much as 2 $400 per engine. 3 Due to the disappointing results and the high cost 4 of catalysts and EGR, Yanmar has been pressing ahead on 5 engine modifications as the most promising approach for low 6 emissions. Our research forecast is that we will be able to 7 achieve reductions of approximately 30 percent in HC and NOx 8 and particulate matter emissions relative to the certified 9 Tier I emissions levels for engines under 10 horsepower. 10 For engines in the 10 to 25 horsepower range, 11 reductions of 40 percent in HC and NOx relative to the Tier 12 I emissions levels should be achievable, but with a small 13 particulate matter increase. 14 Our efforts to reduce PM have achieved somewhat 15 greater percentage reductions, but are likewise being 16 constrained by the well-recognized particulate versus NOx 17 tradeoff characteristics of diesel engines. Please keep in 18 mind that achieving these forecasted reductions, which still 19 fall short of Tier II standards, will require further R & D. 20 The industrywide R & D findings in the staff report are 21 consistent with our results. 22 The ARB staff has indicated that they will review 23 any additional progress made toward compliance with the Tier 24 II standards and return to the Board with a report next 25 year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 The staff's schedule, however, does not appear to 2 address the unique situation facing diesel ULGE engines. 3 Yanmar will -- still needs about two years of further 4 research and development to hit our own forecasted emissions 5 reductions. 6 In addition to that, we need to do the final 7 design, the production line changes, and the certification 8 process, of course. 9 In addition, because diesel ULGE engine and 10 equipment manufacture is not integrated, another 18 months 11 will be required for evaluation and fuel testing of modified 12 engines by equipment manufacturers. These steps total about 13 four to five years, but there are less than three years 14 leadtime left under the current regulation. 15 Yanmar is therefore requesting that the Board 16 direct staff to separate and accelerate its review process 17 for diesel engines, and return to the Board within the next 18 twelve months with revised standards and a revised 19 compliance date that reflect realistically what can be 20 accomplished by diesel engine manufacturers. 21 Yanmar has already presented its recommended 22 revisions to the staff. Our recommendations include the 23 suggestion that the Board implement the terms of the 24 statement of principles that is expected to be negotiated 25 later this year between EPA, industry, and the ARB staff, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 and include national standards for compression-ignition ULGE 2 engines in the future. Yanmar strongly supports a single 3 nationwide standard for diesel ULGE engines. 4 In conclusion, our research and that reported by 5 the ARB staff indicate that, while additional emissions 6 reductions relative to Tier I can be achieved, it is not 7 technologically feasible for diesel engines to comply with 8 the Tier II ULGE standards in the foreseeable future. 9 In combustion and emission control terms, 10 compression-ignition engines differ vastly from spark- 11 ignition engines. We are therefore asking that the Board 12 direct staff to separate diesel from gasoline engines for 13 the ULGE category as it has already done for heavy-duty on- 14 road and off-road diesel engines, and develop revised 15 standards and a revised compliance schedule appropriate for 16 diesels. 17 It is important that action be taken soon. If 18 action is not taken this year, Yanmar will have to begin 19 advising our customers that we cannot supply complying 20 engines for California beginning in 1999. If Yanmar is 21 forced to leave the ULGE market, there will be serious 22 economic consequences, not only for Yanmar but for its OEM 23 customers as well. 24 Our recommendation will not adversely affect 25 California's progress toward clean air. Only about 4,000 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 diesel ULGE engines a year are subject to ARB regulation. 2 Emissions from diesel ULGE engines represent a small 3 fraction of total emissions from the ULGE category based on 4 the staff estimate provided in 1990. 5 Since EPA's preemption of agricultural and 6 construction equipment -- in the construction equipment 7 field, the benefits from CARB regulation of diesel ULGE 8 engines have been reduced substantially, perhaps to about 10 9 percent of what was projected in 1990. 10 Yanmar supports clean air in California, and we 11 are willing to do what is technologically feasible. But the 12 Tier II standards are not feasible. 13 I would bee pleased to answer any questions. 14 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Weir. 15 Just so I'm clear, you're asking that the Board 16 direct the staff to separate diesel from gasoline engines 17 for the ULGE category, come up with some special 18 configuration for that category, right? 19 MR. WEIR: Correct. 20 CHAIRMAN DUNLAP: Okay. Can I get, I guess, an 21 early flavor -- before all the witnesses are run through 22 here -- from staff about your feelings about this request? 23 MR. CROSS: Yeah. I think there were -- we faced 24 this dilemma before with diesel passenger cars in the early 25 1980s, when essentially the technology for controlling PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 gasoline engines moved forward and the diesel car 2 manufacturers ran into the exact same technical barriers, 3 which Yanmar is running into now. 4 But in the area of diesel passenger cars, at that 5 time, the Board concluded that there were -- it wasn't 6 essential that California have diesel passenger cars. In 7 other words, there were gasoline passenger cars which were 8 cleaner and which could do the same job. 9 In the off-highway categories, the Board hasn't 10 reached the same conclusion necessarily; in other words, 11 there aren't gasoline equivalents for some of the off- 12 highway pieces of equipment. And I guess in the utility 13 engine category, the staff is not sure, based on the data 14 yet, whether the diesel engine is directly replaceable with 15 cleaner alternatives or absolutely essential. 16 And it seems to us that the best thing to do would 17 be to include evaluation of that issue and the technical 18 limits of what the diesel can do as part of the year review, 19 which we're suggesting we do anyway. 20 CHAIRMAN DUNLAP: Okay. Mr. Calhoun? 21 Thank you, Bob. 22 MR. CALHOUN: Mr. Mandel and Mr. Weir from Yanmar 23 focused on leadtime, and when it would be appropriate for 24 another progress report. And they suggested maybe sometime 25 during the summer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 MR. CROSS: I think that there's a leadtime issue 2 with virtually all of these groups, and I think Yanmar is 3 the one that's the most vocal. But all of the engine 4 manufacturers are getting into the time window where they 5 have to make decisions about whether or not to implement 6 other rounds of technology. 7 In other words, we heard about the Ryobi engine 8 earlier. If you were going to change handheld category over 9 to predominantly four-stroke engines, you couldn't do it in 10 three years. So, we have the same barrier. We have a 11 technology out there that looks like it can do it in less 12 time than would really be required. 13 And similarly, I think in the non-handheld 14 categories, if it takes redesign of some of the engines 15 beyond what they've already done for Tier I and hanging a 16 catalyst on them -- which it may -- then, again, we're 17 outside the window, I think, of being able to realistically 18 do it in three years. 19 And I think the staff's view at this point is that 20 it would be better to do a good job of evaluating 21 technically where we are and where we want to be, and the 22 timing, and the best way to do it than to do major 23 corrections to subcategories of the whole utility category 24 based on single manufacturer's dilemmas. 25 CHAIRMAN DUNLAP: Joe, if I might, will you yield PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 to me on a point there? 2 MR. CALHOUN: Sure. 3 CHAIRMAN DUNLAP: I don't think there's any 4 question that you want to do it right for the whole program, 5 but the assertions made by Yanmar here are particularly 6 troubling, particularly when you take a look at what might 7 happen -- or the assertions they're making about the 8 marketplace, Bob. So, I'm concerned about that. 9 So, what I would propose to do at this point is 10 maybe continue with the questioning, and then let's continue 11 with the witnesses and come back to that. 12 And then, I'd like to hear more about what you 13 would propose relative to this framework modification, 14 taking into account -- 15 MR. CROSS: How quickly we can do the job. 16 CHAIRMAN DUNLAP: Yes, okay. Go ahead. Joe, I'm 17 sorry. 18 MR. CALHOUN: That's fine. I'm through. 19 CHAIRMAN DUNLAP: Jack and then Gene. 20 MR. LAGARIAS: Mr. Weir, you've suggested or said 21 that the experiments you've run with the diesel engines show 22 that you can get reductions below Tier I, but you can't 23 reach Tier II levels. 24 I'd like to -- 25 MR. WEIR: (Interjecting) We have -- we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 provided test results -- 2 MR. LAGARIAS: Did I open the door? 3 THE WITNESS: -- to the staff last April, 4 demonstrating that -- and you'll see it when it comes up 5 (speaking of overhead demonstration chart). 6 It's sideways. That's fine. 7 If you look at it, toward the lower right-hand 8 corner -- this is a research engine, one of the research 9 engines we are using for studying the reduction of 10 emissions. 11 And the research engine, the Tier I level of that 12 engine is indicated with the double circle there, you can 13 see Tier I. 14 And to get to that, we used technologies 1, 2, and 15 3 of 7 that we've identified as the seven most important to 16 be applied to diesel engines of this category. 17 That got us to Tier I. And since the April 18 meeting, you know, we demonstrated reductions using 19 technology 4 and technology 5. We have shared what those 20 technologies are, and these are the results that -- we have 21 shared that information with the staff. 22 But the -- most importantly, also, since -- since 23 April, our research has continued, and I did meet with the 24 staff as late as last week to further demonstrate additional 25 research efforts that have come about between last May and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 December. 2 And you can see that our curves -- applied 3 technologies 6 and 7 have brought us much closer to our 4 forecast level. But we are still substantially away from 5 the proposed CARB Tier II standard. 6 MR. LAGARIAS: Well, my question really was 7 directed toward the staff. You're suggesting that since you 8 can't get the performance to reach the Tier II levels with 9 your diesel engines, that perhaps the standards ought to be 10 reexamined. 11 And I am asking the staff. Mr. Cross, what is 12 your reasoning now on whether or not diesel engines can meet 13 the Tier II standards in the face of results such as these? 14 MR. CROSS: Well, there's -- I would agree with 15 Mr. Weir that probably within the constraints that we're 16 talking -- in other words, essentially conventional diesel 17 technology, that they're not going to be able to meet the 18 Tier II standards as the Tier II standards sit right now. 19 It doesn't mean that it's infeasible for diesel. 20 In other words, you know what happened with diesel trucks 21 when they put electronics on them. But it means that if 22 you're -- if you're in the frame of reference of saying a 23 little one-cylinder diesel engine with no electronics and 24 limited control capability, I think they're probably not 25 going to be able to meet the Tier II standard within the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 time that we've allocated. 2 And I think that we need to evaluate their dilemma 3 and the dilemmas of other companies which are similar or 4 analogous situations with respect to leadtime and 5 compliance. 6 MR. LAGARIAS: What about the suggestion of 7 separating the diesel engine from the other engine families? 8 MR. CROSS: I think that the -- I think that's 9 sort of -- that's focusing all of our resources on doing a 10 fast revision for one, which is sort of the smallest -- a 11 very, very small part of the market. And I guess I would 12 rather be spending resources on the whole picture. 13 And if there's a need for revision to carry the 14 diesel, then the standards can be done fairly quickly. In 15 other words, we're probably talking about doing it by the 16 end of this calendar year. 17 MR. LAGARIAS: All right. Thank you. 18 CHAIRMAN DUNLAP: Okay. That it? 19 Dr. Boston. 20 DR. BOSTON: Bob, could you give me an idea of 21 just what kind of utility engines we're talking about I can 22 only think of generators for diesel engines. 23 What other type of diesel utility engines are 24 there? 25 MR. CROSS: Their favorite one, pumps, and then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 there are also those light -- the night lights for freeway 2 construction, and the sign boards for freeway construction. 3 Many of those things are diesel powered, because they 4 basically start them and leave them. And they want 5 basically high reliability and fuel efficiency. 6 And so, that's the kind of stuff I think you see 7 the diesel engines in. 8 MR. WEIR: Yeah. And addition to that, you know, 9 one of the big applications would be the refrigeration units 10 that are on the trucks that haul the produce to the markets, 11 their vegetables, their frozen goods, and transport those 12 goods, those containers not only across California, but they 13 get loaded on ships and have to run for 15 to 30 days to get 14 that boat to -- that load of goods to Japan, or to 15 Australia, or wherever in the world. 16 And they have demonstrated that kind of 17 reliability, and people do not hesitate to put those pieces 18 of equipment on those boats and let them run for 30 days to 19 see that that produce does arrive in a marketable shape. 20 DR. BOSTON: I just wanted to make one other 21 comment. Several health agencies have declared that diesel 22 exhaust is a probable human carcinogen. And we currently 23 have studies underway to further investigate this. 24 So, I think changing any standards right now may 25 be premature until we know how those studies come out and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 what we may have to do in that regard. 2 CHAIRMAN DUNLAP: Good point, Dr. Boston. And, of 3 course, there's not closure on that issue. But there's 4 certainly a lot of activity, and we'll learn more in the 5 next few months. 6 MR. WEIR: We are certainly recognizant (sic) of 7 that, also -- 8 CHAIRMAN DUNLAP: Okay. 9 MR. WEIR: -- and are paying very close attention 10 to it ourselves, yes. 11 CHAIRMAN DUNLAP: Well, if I might ask the 12 indulgence of my colleagues on the Board, can we excuse Mr. 13 Weir and get to the other witnesses? And we'll come back. 14 Will you remain close by if we need you? 15 MR. WEIR: I certainly will. 16 CHAIRMAN DUNLAP: Okay. All right. Mac Dunway 17 from PPEMA, Tom Griswold from Homelite, Bruce Bertelsen from 18 MECA, and Mr. Suchdev from Ryobi. 19 And, gentlemen, if we have your written comments, 20 we've had a chance to peruse them, so I'd maybe ask you to 21 avoid going through them word for word, if that's okay. 22 MR. DUNWAY: Good morning, Mr. Chairman and 23 members of the Board, staff. 24 My name is Mac Dunway. I'm here today 25 representing the Portable Power Equipment Manufacturers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 Association. Our members make things such as chain saws, 2 trimmers, brush cutters, and blowers, commonly referred to 3 as handheld engines in the regulations. They are Classes 3, 4 4, and 5 in the regulations. 5 We have addressed the staff report in our written 6 comments, and I will not go through those at all, Mr. 7 Chairman. I do want to summarize a few points that we feel 8 particularly strong on. 9 And I guess the first and kind of the overall, the 10 overarching issue for us is that we have a fundamental 11 disagreement with the report's conclusion that manufacturers 12 are on schedule to meet the Tier II standards, and that the 13 remaining obstacles can be resolved within the time 14 remaining. 15 That conclusion, we believe, is neither warranted 16 by the report itself nor the facts. 17 The report does identify two technologies which 18 will supposedly bring these handheld products into 19 compliance with the Tier II regulations, the first of which 20 is the small four-stroke engine. 21 The conclusion with respect to that engine is 22 based upon the Ryobi four-stroke and the claims for the 23 Ryobi four-stroke. And it is presented as a feasible 24 alternative to two-stroke handheld engines, which are used 25 to power these products. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 I guess, first, it's important to understand that 2 the current four-stroke -- small four-stroke engine does not 3 comply with the 1999 standards, but it doesn't have to, of 4 course. But the claim is made that with minor adjustments 5 to the engines, they can meet the 1999 standards. One of 6 the members of PPEMA has conducted testing and has provided 7 that to the staff, also provided to Ryobi by the way. 8 The problem seems to be, at this point, the CO 9 emission levels are roughly three times what the 1999 10 standards are. In order to bring those CO levels down to 11 the '99 standard, the NOx emissions are almost double the 12 standard. 13 But there are four basic problems that we have 14 with the four-stroke technology, which is the first one 15 that's proposed as the feasible alternative to two-strokes. 16 First of all is the need for multiposition 17 operation for these products. Almost universally true, not 18 completely, but almost universally true that these products 19 require multiposition operation, whether it's sideways, or 20 upside down, or any fashion. And the four-stroke, as 21 currently configured, does not satisfy that need. 22 The second is the low power output of the four- 23 stroke engine compared to a comparable two-stroke engine, 24 roughly 10.5 percent power loss. 25 Thirdly, and the all important power to weight PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 ratio, from that standpoint, there's quite a significant 2 difference. The current four-stroke weighs roughly 52 3 percent more than a comparable two-stroke, and the two- 4 stroke delivers upwards of 70 percent higher power to weight 5 ratio. 6 But the real kicker for us is a marketing issue, 7 and what that change or this proposed change might to. If 8 you look at the price penalty of the four-stroke, it is 9 truly enormous. At best, at best, you're looking at a 50 10 percent price differential, going upwards to over 200 11 percent. 12 You're looking at a trimmer market whose entering 13 price point, which is roughly $69, and the four-stroke 14 engine itself. In any event, the price differential -- 15 actually a cost differential, which naturally translates 16 into a retail price differential. 17 These are major, major concerns for us. This is 18 an extremely price-sensitive market. As I say, the entering 19 price point for trimmers is roughly around $69, and you're 20 looking at price/cost increases that are truly monumental, 21 which we do not believe the market can stand. 22 The second technology that the staff report 23 identifies is catalysts. Remember that we're dealing with 24 handheld products here, and they are identified as the other 25 most likely option for handheld products to meet the Tier II PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 standards. We have major concerns with the use of 2 catalysts, primarily in the heat management area. But they 3 also include catalyst efficiency, durability, and packaging. 4 I must concede that the staff report does admit 5 something that we believe is very, very important. And that 6 is -- and I think each of these words needs to be understood 7 carefully. And I quote, "Less success has been demonstrated 8 in using catalysts on two-stroke engines because the exhaust 9 and skin temperatures produced by the catalyst has been well 10 beyond the allowable forestry temperature limits." Read 11 forest fires into that. 12 The high temperature concern on two-stroke engines 13 is particularly problematic while maintaining compliance 14 with Tier II levels. 15 One of the problems is, because of these 16 temperature limits, and because the Forest Service 17 regulations as well as safety regulations exist with respect 18 to skin temperature of the product itself as well as exhaust 19 temperature, the catalyst can only convert roughly between 20 30 and 40 grams per brake horsepower hour and still stay 21 within the temperature limits -- notwithstanding all the 22 work that's been done in shielding and heat management. 23 The problem, of course, is that the Tier II regulations 24 require a reduction of not 30, 40, or 50, but a reduction of 25 170 and 130 grams of HC per horsepower hour (sic). PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 Right now, we don't see any way to get there. 2 That doesn't mean we're not working on it. We're working on 3 it very, very much. But we don't -- there's a tremendous 4 gap between what you can do and still comply with the 5 Forestry Service regulations which are applicable here in 6 this State, as well as all the other safety regulations, and 7 still convert enough grams of hydrocarbons to get to the 8 Tier II levels. 9 The problem is -- you know, the bottom line is we 10 don't know how to do it. 11 In passing -- not in passing, because this is a 12 particularly problem (sic), this other, on another issue, 13 particularly troublesome matter for us, and that is the 14 particulate matter standard. As I'm sure all of you know, 15 this is the first time -- Tier II is the first time that any 16 particulate matter standard would be applicable to these 17 products. 18 Several years ago, Southwest Research Institute 19 conducted some testing to determine what the baseline 20 particulate matter emissions were for these products. They 21 came back with a report to -- to the Board, to the Board 22 staff that showed that the baseline emissions for PM for 23 handheld products for a typical 25 cc, one horsepower 24 handheld product was 5.2 grams per brake horsepower hour. 25 Now, the Tier II standard is .25 grams per brake horsepower PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 hour. That is over 95 percent reduction. 2 Our problem is we don't know how to get there; we 3 don't know what technology's available to do it, 4 notwithstanding our efforts to find some. And I guess it's 5 particularly telling that the staff report doesn't really 6 address this issue. 7 That standard is unrealistic, in our view, by any 8 measurement you want to apply. 9 Just briefly, we -- although we don't have any 10 specific matters to point to you -- point you to on this 11 other issue, it continues to be of great concern to us. 12 Those are the new fuels that are being introduced, not only 13 here in California, but elsewhere across the country. 14 As the oxygen content, the ethanol content of 15 these fuels increases, we are greatly concerned about the 16 performance of our products. Obviously, there will be some 17 impact on performance. We are confident of that. There 18 also will be some impact on emissions reduction 19 characteristics as well. 20 But all the research we've done thus far has been 21 with fuels that have been available. As we see the new 22 fuels coming into the marketplace, we've got to be conscious 23 of that, and we encourage the staff to also be conscious of 24 that. 25 I'm about to wrap up, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 CHAIRMAN DUNLAP: Oh, no, I was going to ask a 2 question. Have you tried? Have you had access to 3 reformulated gasoline? 4 MR. DUNWAY: Yes, sir, we have had. We've done a 5 fair amount of testing with -- all right. Just say some of 6 our companies have done a fair amount of testing on reform. 7 CHAIRMAN DUNLAP: As has the Board and others. 8 MR. DUNWAY: Correct. Right. And we have a 9 variety of different experiences with it, which we'll be 10 more than happy to share with staff. 11 CHAIRMAN DUNLAP: Sure. 12 MR. DUNWAY: The raw test data. 13 CHAIRMAN DUNLAP: I would encourage trading of 14 information. 15 MR. DUNWAY: More than happy to do so, sir. 16 CHAIRMAN DUNLAP: Okay. Great. 17 MR. DUNWAY: I guess, in conclusion, we've got 18 three years remaining. What we see as the two principal 19 technologies that were identified by staff as being the most 20 feasible, we don't think are appropriate. 21 We're not really that much closer now than we were 22 five years ago, five and a half years ago, when I stood up 23 in San Francisco and testified on behalf of the industry 24 with respect to Tier I, which we support by the way. 25 The bottom line is that we believe that Tier II PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 levels are unrealistic. At the same time, we firmly believe 2 that very substantial reductions off of Tier I are feasible. 3 We're ready to work with staff. We're ready to share all of 4 our data, and we're ready to work towards reasonable, 5 attainable standards and, hopefully, standards that will be 6 as consistent as possible with the EPA Phase II standards, 7 which will be coming along in relatively short order. 8 I'd be happy to answer any questions. 9 CHAIRMAN DUNLAP: Thank you. Mr. Calhoun. 10 MR. CALHOUN: Yes. One of the statements that you 11 made a few moments ago that we're no closer today than we 12 were five years ago, does that mean you haven't done 13 anything in the last five years? 14 MR. DUNWAY: No, sir. I means we've done a 15 tremendous amount. We're not measurably closer. 16 If you look at the technologies that we're 17 concerned with and that we're looking at -- the heat 18 management issue with catalysts I testified personally on, 19 as well as other members did, back in 1990. Staff knows 20 what those problems are. 21 We've been working on shielding, on heat 22 management, tried methods to dissipate that heat so that the 23 skin temperature and exhaust temperatures won't exceed -- if 24 you think about -- the skin temperature requirements are 575 25 degrees Fahrenheit. That's pretty high. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 The exhaust gas temperature requirements are 475 2 degrees Fahrenheit. That's real hot. Now, when you start 3 getting above that, I mean, you've got some real safety 4 issues for the operator as well as some real source of 5 ignition, potential ignition sources. 6 So, no, we have definitely been working. I'm 7 saying, we haven't solved those problems, and we don't see a 8 way to get there yet, because we haven't figured out how to 9 get that catalyst to reduce more than 40 grams per hour and 10 still handle the heat issues. 11 MR. CALHOUN: Is it a question of cost? 12 MR. DUNWAY: We haven't even addressed that yet, 13 except I did mention it in -- with regard to the four-stroke 14 small engine, where the price penalty is enormous. 15 We have cost data, which we shared the conclusions 16 of with staff back in our meeting in November, September, 17 October, something like that, in summary form. We've told 18 them that we will share the backup data with it. It's 19 information that we collected and provided to EPA during the 20 course of the reg. neg. 21 Yes, there is a cost penalty, no question about 22 it. It's more difficult with the small package that you've 23 got that you carry around and perform a task with, we 24 believe -- although not everybody might agree -- than it is 25 with the non-handheld. But, you know, I'm not getting into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 that. They just tell me it's a significant problem for 2 handheld manufacturers. 3 MR. CALHOUN: I'd like to ask the staff to comment 4 on that, regarding that. 5 MR. CROSS: I was going to. Thank you, Joe. 6 We're dealing with a fundamental dilemma with this 7 category, which is basically that the two-stroke engine is 8 more than an order of magnitude dirtier than the four-stroke 9 engine. It has PM emissions. And that problem all along 10 was the creation of a handheld category. 11 In other words, we knew the engine was dirtier. 12 We created the category specially to proceed to allow it to 13 continue, with the understanding that there was nothing else 14 out there that could do the job. 15 The reason that they have all these control 16 problems is because you just can't get the engine-out 17 hydrocarbons down enough so that catalysts work without 18 getting very, very hot or creating excessive exhaust 19 temperatures. 20 And that won't change unless you put a whole lot 21 of money into the two-stroke engine in terms of shielding, 22 and cooling, and probably fuel injection, and God knows what 23 all else. 24 The reason that the staff has pointed to the 25 four-stroke engine as an alternative is because it appears PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 that, when you think of all the junk you're going to have to 2 put onto a two-stroke engine to make it really clean, 3 suddenly an uncontrolled four-stroke, which -- if you 4 compare uncontrolled engines -- is already an order of 5 magnitude cleaner, starts looking a lot cheaper. 6 And I think that we have a question here of 7 whether or not there needs to be a paradigm shift. In other 8 words, in a lot of other categories, like motorcycles, for 9 example, and many other categories, the two-stroke engine 10 ultimately couldn't compete. 11 In other words, when you started saying, well, 12 what do you have to do to the two-stroke to make it 13 environmentally acceptable? The manufacturers in those 14 categories concluded that the two-stroke engine wasn't 15 needed, or at least was needed for a smaller group, like 16 competition vehicles or something like that. 17 And I think we're kind of on that same brink with 18 the handheld equipment. And the real questions that I think 19 the staff needs to answer with the industry is how much -- 20 how far can you go with the two-stroke and, if so, at what 21 cost? And then, how much further can you go with a four- 22 stroke and at what cost? And is it worth it to work with 23 the industry to plan some sort of market shift from one 24 technology to the other? 25 And I don't think those are trivial questions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 But I think that the difference -- but that's the big 2 difference between now and 1990. 3 In 1990, we were stuck with two-stroke. And so, 4 all of us were saying, well, what are the limits with two- 5 stroke? And now, in 1996, we're saying, well, you have this 6 paradigm that could happen, and is it worth doing it or not? 7 And I think it's a very big deal for all of us. 8 MR. DUNWAY: It is, and Bob has framed some issues 9 I think that are very important. They're not simple; 10 they're critically important. 11 I just -- we've got to keep a frame of reference 12 that is realistic. We're not dealing with a $5,000, $6,000 13 motorcycle. We're dealing with something that perhaps you 14 do, perhaps you don't occasionally use in trimming your 15 grass around your property or whatever. Very, very low 16 cost; very, very, we think, useful product which performs a 17 real function that is a part of a market that is extremely 18 price sensitive. 19 We have a study that we have offered to give to 20 staff that was done in this regard. 21 So, this market didn't -- this market was 22 virtually nothing until the retail price came down below a 23 hundred dollars. 24 CHAIRMAN DUNLAP: Ms. Edgerton. 25 MS. EDGERTON: Mr. Dunway -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 MR. DUNWAY: Yeah. 2 MS. EDGERTON: -- can you give me a little 3 information about the Portable Power Manufacturers 4 Association -- Equipment Manufacturers? Where are you 5 located and what is your role? It doesn't say. 6 MR. DUNWAY: Okay. Well, I'm the general counsel 7 for the Portable Power Equipment Manufactures Association. 8 I'm located in Washington, D.C. with the law firm of Dunway 9 and Cross. 10 I'm represented the association for about 25 11 years. The association's headquarters is in Bethesda, 12 Maryland, which is a suburb of Washington, which you all 13 probably know. 14 Our members are the manufacturers of this 15 equipment. We do not have 100 percent of the members of the 16 industry, but we do have such well-known names as Polin, 17 Homelite, Stihl, Husqvarna. So, that's who we are. We're 18 the manufacturers of -- and unlike many other aspects of the 19 utility and lawn and garden industry, the manufacturers of 20 PPEMA, the handheld manufacturers, by and large all make 21 their own engines and make the final product. In other 22 words, they're not like most lawn mower manufacturers that 23 will purchase an engine from one of the engine suppliers for 24 their equipment. 25 The PPEMA members, the handheld equipment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 manufacturers manufacture the engine as well as the end 2 product. 3 MS. EDGERTON: Are any of -- how many members do 4 you have? 5 MR. DUNWAY: Don? 6 MR. PURCELL: 18. 7 MR. DUNWAY: 18. 8 MS. EDGERTON: 18. With sales in the nature of 9 what numbers? 10 MR. DUNWAY: Don, do we have a number for the 11 industry? 12 MR. PURCELL: In the United States, annual sales 13 would be in the range of three to three and a half billion, 14 about 10 percent is in the State of California. 15 MR. DUNWAY: If you're thinking total of unit 16 volume for the industry -- 17 CHAIRMAN DUNLAP: Mr. Dunway, just repeat in the 18 mike for our court reporter. 19 MR. DUNWAY: I'm sorry. 20 CHAIRMAN DUNLAP: And also identify your 21 colleague. 22 MR. DUNWAY: This is Don Purcell, who is the 23 President of the Portable Power Equipment Manufacturers 24 Association. 25 (Addressing the court reporter): Did you get PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 everything that he said, or would you like me to repeat? 2 (The reporter signaled she had.) 3 MR. PURCELL: (Still from the audience) Mr. 4 Chairman, last year, we sold approximately 7 million 5 products in the United States, and approximately 10 percent 6 of that comes from the State of California. 7 MS. EDGERTON: And what percentage of that is 8 diesel? 9 MR. DUNWAY: None. All spark-ignited. 10 MS. EDGERTON: All spark-ignited. 11 MR. DUNWAY: Correct. And, you know, for the 12 members of PPEMA, they were all four-stroke -- I mean all 13 two-stroke. Ryobi, which makes the four-stroke engine, is 14 not a member of PPEMA. 15 MS. EDGERTON: Not a member. 16 MR. DUNWAY: Although we'd like to them join. 17 MS. EDGERTON: Are any of your 18 -- do any of 18 your 18 members have manufacturing facilities in California? 19 MR. DUNWAY: Let's see, there used to be one. I 20 don't believe so. I don't believe so. No, no. We sell a 21 lot here, though. 22 MS. EDGERTON: Yeah. So, we're a market for your 23 products. We're not -- 24 MR. DUNWAY: Right. 25 MS. EDGERTON: -- home to any -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 MR. DUNWAY: Correct. 2 MS. EDGERTON: -- of your -- 3 MR. DUNWAY: That's correct. 4 MS. EDGERTON: -- jobs or any other factors. Now, 5 one of the things that was brought up was that there ought 6 to be a standard -- a national standard for the diesel 7 products. 8 Did you agree with the gentleman who was here just 9 a few minutes ago on that? 10 MR. DUNWAY: We have no ax to grind, because we 11 don't make any diesel equipment or diesel engines, but I 12 think his suggestion makes sense. 13 MS. EDGERTON: Well, one of my difficulties is 14 that, coming from Southern California, we cannot achieve 15 some of the -- if we just use the national standards, we 16 cannot achieve the clean air standards that we need to 17 achieve for our citizens if we don't have more strict 18 standards because of our unique weather there. 19 So, that's one reason why, as you know, we at the 20 Air Board have to work to ask you to really stretch, because 21 it has real consequences for all of the people who live 22 there. 23 MR. DUNWAY: I think the staff report may have -- 24 correct me if I'm wrong -- may have said this category, this 25 total category is something like 3 percent; is that right? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 Yes. Three percent. You're not dealing with a whole lot. 2 If you look at the handheld segment of it, you 3 know, nationally, we are less than one percent. We're 4 around .8 of 1 percent (sic). I would guess that we're 5 probably even less than that here in the State of 6 California. 7 MS. EDGERTON: Thank you. 8 CHAIRMAN DUNLAP: Okay. We have a couple more 9 witnesses. Thank you, sir. 10 MR. DUNWAY: Thank you. 11 And if you have any further witnesses (sic), we 12 look forward to working with -- questions, we look forward 13 to working with staff. 14 CHAIRMAN DUNLAP: A question for you, Mr. Dunway. 15 MR. DUNWAY: Sure. 16 CHAIRMAN DUNLAP: Homelite and -- is it Ryobi, are 17 they also -- 18 MR. DUNWAY: (Interjecting) Homelite's a member 19 of PPEMA. 20 CHAIRMAN DUNLAP: Okay. 21 MR. DUNWAY: And Mr. Griswold is here. 22 CHAIRMAN DUNLAP: Are their remarks going to be 23 consistent with yours? 24 MR. DUNWAY: No. Ryobi, I'm sure, is not. 25 CHAIRMAN DUNLAP: Okay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 MR. DUNWAY: And I think Mr. Griswold is going to 2 probably address a slightly different set of issues. 3 CHAIRMAN DUNLAP: Okay. 4 MR. DUNWAY: Thank you. 5 MR. DUNWAY: Mr. Griswold, Mr. Bertelsen, and Mr. 6 Suchdev. I believe you didn't provide written testimony. 7 MR. GRISWOLD: I did not. That's correct. 8 CHAIRMAN DUNLAP: Okay. Sir, there's a growing 9 feeling that I have amongst my Board colleagues that we want 10 to deal with this issue with our staff in a moment. So, any 11 new points would be appreciated, because we've gotten the 12 gist, I think, of the concerns. 13 MR. GRISWOLD: Thank you. I will be brief. 14 My name is Tom Griswold. I am with and counsel to 15 Homelite. We are one of the members of the organization, 16 one of the manufacturers of outdoor power equipment, both 17 two-cycle and four-cycle products, located in the Carolinas. 18 We have about 2,000 employees at that location. 19 First, I want to remark that we do fully endorse 20 and support the comments of the association that Mr. Dunway 21 just provided. There are just briefly, though, a few points 22 that I want to emphasize. 23 First of all, time is short. In terms of a 24 development and production cycle, 1999 is very close. The 25 decisions are being made right now as we speak regarding PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 designs for the products within that horizon. You may say 2 that we knew about Tier II, that we knew that this rule was 3 coming. And, indeed, we did. We do know that it's coming. 4 But I want to tell you that we have not sat 5 passively by. We've examined intensively the technology, 6 the available technology, all of them. And I want to also 7 tell you that the technology is not there. It is not ready. 8 And despite the staff's rosy report, in many cases, it is 9 never going to be there. 10 A second point, and this is unfortunately in 11 anticipation of the next two speakers that you're going to 12 hear. And I can only state this rather bluntly and 13 candidly. The claims that the two next speakers are going 14 to make regarding the technology that they represent are 15 "politely" exaggerated. 16 First of all, in regard to the claims that were 17 made or have been made by Ryobi, and which you will hear 18 from Ryobi, regarding four-cycle engine replacement of 19 two-cycle engines -- and it's throughout the staff's report 20 ad nauseam, too. I mean even the P.R. materials are in that 21 report. 22 This information is misleading, and why? It's due 23 to inherent characteristics, many of which Mr. Dunway has 24 already elaborated to you. I'm not going to go into detail 25 with those once again, but only let me state -- one, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 Ryobi engine that has been focused on, it is at the extreme 2 low end of power for engines of that type. It's not 3 typical. It's atypical. 4 Second of all, the Ryobi engine is already at the 5 high end of the weight for an engine of this power. That 6 goes directly to that power-to-weight factor that Mr. Dunway 7 was addressing. 8 You know, why is that important? Well, these are 9 handheld products. The maneuverability of them, the 10 multipositional use of the product, all of this has to be 11 taken into consideration for this type of power tool. 12 Add to that that the weight is further aggravated 13 by the fact that this engine that we're looking at of 14 Ryobi's is not a heavy-duty sort of engine. It uses a half 15 crankshaft, a tipoff as to why it is not heavy duty. 16 You make it a commercial type of product, you're 17 penalized again, the weight. 18 Third, the all-position capability, use in all 19 different positions -- I won't go into depth with that. 20 And then, fourth of all, the cost. Ryobi claims 21 the four-cycle technology imposes a $10 cost penalty is 22 another fabrication. Even going out and buying comparable 23 products, two-cycle product Ryobi versus their four-cycle, 24 there is an $80 retail price penalty at that level. 25 Finally, I do want to mention one other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 technology. Turning to the catalysts for just a moment 2 because, again, you will hear more about this with the next 3 speaker. 4 Not one manufacturer has brought to us a catalyst 5 and said, "This gets you to the 1999 levels." And more 6 importantly, not one manufacturer has come to us and said, 7 "Here's the packaging that will work for handheld equipment, 8 that provides the temperatures that will not cause forest 9 fires, that protects the operator from burns, that even 10 remotely is usable in a product like a string trimmer." 11 I know they are accustomed to working with 12 organizations, automotive manufacturers, the General Motors, 13 the Ford Motor Companies. We are not of that size. I 14 mentioned at the beginning, we have 2,000 employees. 15 Compare that to companies like GM and their resources. 16 We have to very selectively choose the 17 technologies that we want to focus on. We have to very 18 selectively pursue what we believe is the best technology. 19 And in that vein, we are attempting to do what is doable. 20 Any questions? 21 MS. EDGERTON: I'd like to make a comment. 22 CHAIRMAN DUNLAP: Ms. Edgerton. 23 MS. EDGERTON: I'd just like to say -- I'm 24 listening very carefully and I understand the importance of 25 this issue to you. I would like to comment, though, that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 have a leaf blower of my own sort that works in my yard, 2 which is a rake. And I have one that works in my driveway, 3 which is a broom. And I have a handheld cutter for my 4 hedge. 5 And I was recently over at Sears, and they had for 6 sale electric, zero-emitting lawn mowers. And you can also 7 push them. 8 So, as we figure out what makes sense for 9 California, given the fact that many of our children and 10 adults are suffering from respiratory problems, we have to 11 try to, you know, keep a little common sense in terms of how 12 else we can do some of these things. 13 Thank you. 14 MR. GRISWOLD: May I respond -- 15 MS. EDGERTON: Sure. 16 MR. GRISWOLD: -- to those remarks? Thank you. 17 One, I do take issue with the assertion that any 18 electric tool is zero-emission or zero contributor. If 19 we're plugging it into the wall, that energy has to come 20 from somewhere. The production of it has its consequence as 21 well. 22 If we're talking about battery-powered tools, we 23 have heavy metals to deal with, and we have disposal of 24 those heavy metals. So, I do take issue with that 25 assertion. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 The second is to just point out that, given the 2 customers that we have to work with, the people that use the 3 tools, we have preferences as to how people would like to 4 spend their time. These tools make the work much more 5 efficient. They contribute to the productivity of those 6 people, the desire to apply their spare time to other 7 pursuits, leisure or otherwise. 8 CHAIRMAN DUNLAP: Just an informative comment. 9 Mr. Griswold, it may be kind of a regional thing 10 or a California thing, but our utilities are very heavily 11 controlled for the generation of electric power. And so, 12 there's a sense amongst my colleagues on the Board that we 13 have very clean utilities in our State, probably the 14 cleanest in the -- certainly in the nation. 15 So, I think that's where that flavor came from 16 from Ms. Edgerton. 17 Thank you, sir. 18 MR. GRISWOLD: I appreciate that. 19 MR. CALHOUN: May I ask Mr. -- 20 CHAIRMAN DUNLAP: Yes, Mr. Calhoun. 21 MR. CALHOUN: Mr. Griswold, I understood you to 22 say that not one of these companies have brought to you a 23 catalyst that would do certain things. 24 Are you waiting on these people to bring the 25 technology to you, or are you out seeking the technology? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 MR. GRISWOLD: Certainly not. If we had a couple 2 of hours, I would be glad to bend your ear as to all that we 3 have done -- 4 MR. CALHOUN: I'm just responding to your comment. 5 MR. GRISWOLD: -- and pursued. And, as I said at 6 the very beginning, we have looked at these technologies. 7 We have pursued these technologies. No, we are not waiting 8 passively by for them to bring it to us. 9 We have development programs of our own going on, 10 but we have not yet seen anything that measures up to again 11 the '99 levels. I did not say that we're not able to do 12 better than Tier I, but I do not see us reaching the Tier 13 II. 14 MR. CALHOUN: Thank you. 15 CHAIRMAN DUNLAP: Thank you, sir. 16 Mr. Bertelsen of MECA; Mr. Suchdev, Ryobi. How 17 are our friends from MECA today? 18 MR. BERTELSEN: Oh, very fine. Thank you. Good 19 morning, Mr. Chairman, members of the Board. 20 I'll be very brief. My name is Bruce Bertelsen. 21 I'm Executive Director of the Manufacturers of Emission 22 Controls Association. A number of our member companies have 23 met with the staff to discuss technology and we've submitted 24 written testimony, so I'll just summarize that here. 25 I think the Board is aware that MECA is an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 association of some 30 companies that manufacture emission 2 control equipment for a variety of sources, both mobile and 3 stationary. 4 Many of these companies have focused their 5 attention to developing catalyst technology for small engine 6 application. 7 The first point I'd like to make is -- and I think 8 you've got a sense of this from both the staff and some of 9 the previous folks who've testified. There has been a 10 tremendous amount of effort made and progress is being made. 11 And I really would like to commend the engine manufacturers 12 in particular for what they have accomplished since 1990. 13 Truly, the force that is driving the technology 14 development effort -- and it is considerable, both on the 15 part of engine manufacturers, control manufacturers, 16 companies that are coming up with innovative concepts. What 17 is driving that? The force that is driving it is clearly 18 the California standards and the California regulatory 19 program for utility engines. It's really made a difference 20 in the past and it will continue to. 21 It's clear -- and as we've discussed with the 22 staff -- that there are challenges with applying catalyst 23 technology to various types of utility engines. And 24 frankly, we're optimistic, perhaps more optimistic than some 25 of the testimony you've heard before that these challenges PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 will be addressed. 2 Clearly, our companies would not be involved in 3 spending the resources they are if they didn't think that 4 some solutions couldn't be achieved. 5 I think that the course that the staff has 6 outlined in its report is very appropriate, and that is to 7 continue the evaluation, take a look at it, and see where we 8 are and some of the issues that have been raised here today, 9 if they cannot be completely addressed, if there are some 10 appropriate changes that should be made. 11 I think the concept of looking at an in-use 12 standard as opposed to a certification only standard is 13 certainly something to look at. I think the course that has 14 been set out is appropriate. The concept of coming back in 15 about a year and seeing where we are, and seeing what 16 changes should be made is a very wise and a prudent course. 17 And we certainly endorse that. 18 And again, I wish to express our willingness to 19 continue to work with the staff and the Board in reviewing 20 these issues. 21 And that's basically it. Thank you very much. 22 CHAIRMAN DUNLAP: Thank you, Mr. Bertelsen. I 23 appreciate it. 24 Any questions? Very well. Thank you. 25 MR. BERTELSEN: Thank you very, very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 CHAIRMAN DUNLAP: And our concluding witness, Mr. 2 Suchdev from Ryobi. 3 Good morning, sir. Your testimony has peaked some 4 people's interest this morning. 5 MR. SUCHDEV: Yes, I'm sure. 6 CHAIRMAN DUNLAP: You're arriving with some 7 fanfare. 8 MR. SUCHDEV: If you'll allow me to complete the 9 testimony that I have prepared, I'd appreciate that. But I 10 do have some slides, also. 11 CHAIRMAN DUNLAP: Sure, that would be fine. 12 MR. SUCHDEV: Good morning. My name is Singh 13 Suchdev. I'm the Technology Vice President for Ryobi North 14 America, based in Easley, South Carolina. With me today is 15 Bob Everts, whom I would like to be recognized. He's in the 16 audience here. He's from Ryobi Concepts International based 17 in Chandler, Arizona. 18 Both Mr. Everts and myself have worked for several 19 years on the development and production of the Ryobi four- 20 stroke handheld engine. In fact, Mr. Everts developed the 21 original concept for the Ryobi four-stroke almost a decade 22 ago. 23 We are here today to speak in support of the 1999 24 Tier II utility engine emission standards, specifically as 25 they relate to handheld equipment. And we are here to state PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 unequivocally that Tier II standards for handheld equipment 2 can be met, and that the technology to meet those standards 3 is available today. 4 Here are the facts: 5 The gas-powered Ryobi four-stroke engine was 6 specifically designed to meet California's Tier II emission 7 standards for handheld equipment. 8 Independent lab testing has proven that the Ryobi 9 four-stroke engine is able to meet Tier II standards for 10 handheld equipment. 11 The Ryobi four-stroke is already on the market, 12 having been introduced at retail in 1994. The Ryobi four- 13 stroke is affordably priced, and consumer satisfaction with 14 the engine has been extraordinarily high. 15 Ryobi recently offered to license this technology 16 to other manufacturers, and is currently negotiating such 17 agreements. The Ryobi four-stroke is used to power string 18 trimmers and brush cutters, as well as edger, blower, 19 cultivator, and tree pruner attachments. 20 The Ryobi four-stroke can also be adapted to other 21 applications. 22 Now, let me briefly review these points: 23 The Ryobi four-stroke is a 26 cc, gas-powered, 24 handheld engine that delivers .75 horsepower and weighs just 25 under eight pounds. It is the first four-stroke engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 small enough for handheld utility use. It is used to power 2 a variety of lawn and garden tools, including brush cutters 3 and trimmers, plus edger, blower, cultivator, tree pruner, 4 and snow thrower attachments. 5 It was designed as a more efficient, cleaner 6 alternative to comparable two-stroke engines. For instance, 7 the Ryobi four-stroke produces far fewer exhaust emissions 8 than two-stroke engines. It uses 30 percent less fuel than 9 comparable two-stroke engines, and its flatter torque curve 10 enables it to outperform two-stroke engines of similar size 11 in the lower RPM lugging power. 12 The Ryobi four-stroke is manufactured at Ryobi 13 Outdoor Products, which is based in Chandler, Arizona, near 14 Phoenix. Ryobi is a major producer of consumer lawn and 15 garden products, including two-stroke and four-stroke 16 equipment, electric corded trimmers and blowers, and 17 battery-powered mowers and trimmers. 18 Ryobi now produces nearly 25 percent of all 19 gas-powered trimmers sold in the United States. Ryobi 20 Outdoor Products is one of the four manufacturing facilities 21 operated by Ryobi in the United States. Other Ryobi 22 facilities produce power tools, floor care equipment, and 23 automotive die cast products. In total, Ryobi employs 4,000 24 men and women in the United States. 25 Development work on the Ryobi four-stroke engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 began in 1990, as it became apparent to us and everyone else 2 in the industry that the Air Resources Board and EPA would 3 soon regulate exhaust emissions from lawn and garden 4 equipment. 5 Ryobi invested considerable resources to find the 6 best technologies to meet those regulations. We concluded 7 that a low-weight, high-power, four-stroke engine was the 8 most practical and cost-effective technology to meet Tier II 9 standards for handheld gas-powered equipment. And we put an 10 international team to work on designing such an engine. 11 We also invested in the development of low-cost 12 and battery powered equipment (sic) which, of course, 13 produce no exhaust emissions at all, and improved the 14 emissions performance of all our two-stroke engines to meet 15 Tier I standards. All these cleaner technologies and 16 environmentally friendly products are available today on 17 Ryobi products. 18 Once we began producing the Ryobi four-stroke 19 engine in early 1994, we wanted to verify that it could meet 20 California's Tier II standards of 50 grams of hydrocarbons, 21 130 grams of CO, and four grams per horsepower hour (sic) of 22 NOx. 23 Emissions testing at Ryobi's own lab an 24 independent testing by both EPA and Walbro Engine Management 25 Corporation confirmed that the Ryobi four-stroke can meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 Tier II standards with a lean carburetor setting. The 2 results are shown on the chart. 3 Recently, the EPA results were published in 4 Off-Highway Engineering magazine. This is the December 5 issue (displaying magazine.) 6 And these results also confirm that the Ryobi 7 four-stroke is capable of meeting the Tier II standards. 8 To make sure that there is no misunderstanding 9 about the emissions performance of the Ryobi four-stroke, 10 let me reiterate that the result -- that the test results I 11 have just described were obtained with a lean carburetor 12 setting. The Ryobi four-stroke we are selling today on the 13 market has a richer carburetor setting. It has been 14 certified as meeting only California's Tier I standards. 15 The four-stroke, however, can meet Tier II standards with a 16 lean carburetor setting as demonstrated by independent test 17 agencies. 18 The Ryobi four-stroke was introduced at retail in 19 April of 1994, as a power source for string trimmers and 20 trimmer attachments. It immediately earned the respect of 21 industry observers and regulators. 22 EPA cited it as an example of a cleaner 23 technology. Popular Science magazine awarded it a grand 24 prize in its annual "Best of What's New" competition. It is 25 now widely available at home and garden centers throughout PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 the United States and is competitively priced between $180 2 and $220, which is comparable to the prices for other 3 upscale trimmers. 4 We have carefully monitored consumer response to 5 the Ryobi four-stroke since its 1994 introduction. People 6 who bought and used the four-stroke tell us that they're 7 impressed with its power, easy starting, and no gas and oil 8 mixing. 9 A telephone survey, conducted in 1994, by National 10 Demographics and Lifestyles showed an extraordinarily high 11 98 percent satisfaction rate among four-stroke purchasers. 12 I do have a copy of the -- also the survey here, 13 which I have shared with the staff earlier. 14 On April 10, 1995, Ryobi offered to license its 15 four-stroke technology to other North American companies to 16 enable the industry to more easily move up toward compliance 17 with Tier II standards. 18 As a result of that offer, others in the industry 19 are now beginning to recognize the value of four-stroke 20 technology. For instance, we are now negotiating four- 21 stroke licensing rights with two separate companies for the 22 1998 model year. 23 We also recently signed an agreement with the Toro 24 Company to produce four-stroke trimmers for Toro that will 25 be sold under the Toro brand name this spring. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 The Ryobi four-stroke is currently available on 2 three models of our TrimmerPlus system. TrimmerPlus is a 3 versatile lawn and garden tool with a detachable shaft that 4 accepts various attachments. With TrimmerPlus, the Ryobi 5 four-stroke is used to power brush cutters, trimmers, 6 edgers, blowers, lawn vacuums, cultivators, tree pruners, 7 and snow throwers, and the four-stroke engine performs very 8 well in all these applications. 9 An ongoing improvement program at Ryobi continues 10 to explore ways to broaden the four-stroke engine 11 applications. Recent engineering advances and testing has 12 revealed that the high speed, handheld four-stroke 13 technology can be scaled up to engines as large as three 14 horsepower. 15 Also, the current design can be expanded to 16 include continuous all-position use, making the technology 17 viable for chain saw use. 18 Weight reduction is another area w are working on, 19 and we have already found ways to reduce four-stroke weight 20 significantly. 21 Ryobi plans to quickly invest in weight reduction, 22 and other four-stroke improvements as well, when it becomes 23 clear that California is ready to proceed with 24 implementation of Tier II standards. 25 The Ryobi four-stroke currently retails in a price PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 range of $180 to $220, which is comparable to other premium 2 trimmers. Because we are convinced, based on our analysis, 3 that the four-stroke engine is the most cost-effective 4 gas-powered technology for meeting Tier II standards, we 5 expect the four-stroke production volume to greatly increase 6 as Tier II standards go into effect in 1999. 7 Of course, with greater volume, four-stroke 8 manufacturing costs and retail prices will be significantly 9 reduced. 10 In summary, independent testing by highly 11 respected emissions labs clearly demonstrates that Tier II 12 standards for handheld equipment can be met by four-stroke 13 engine technology that is available today. 14 The development and introduction of the Ryobi 15 four-stroke clearly demonstrates that the technology is 16 quite affordable. The retail experience of the Ryobi 17 four-stroke clearly demonstrates that consumers will readily 18 accept this technology. 19 The ongoing improvement program for the Ryobi 20 four-stroke clearly demonstrates that the four-stroke engine 21 can be used in a very broad range of handheld applications. 22 And not to say the least, the Ryobi four-stroke 23 licensing offer clearly demonstrates that all North American 24 power equipment companies now have access to this technology 25 to meet the Tier II standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 Thank you. If you have any questions, I'll be 2 more than happy to answer them. I'd request my colleague, 3 Mr. Everts, maybe to join me if there are any questions. 4 CHAIRMAN DUNLAP: Please. Have him come forward. 5 I'm sure there'll be a few questions. 6 Mr. Edgerton. 7 MS. EDGERTON: Thank you for your presentation. 8 It was very helpful. 9 I have a point of information. I guess I've 10 already revealed that I shop at Sears. 11 CHAIRMAN DUNLAP: Among other places. 12 MS. EDGERTON: Among other places. I'm trying to 13 cut back on shopping actually. 14 But I saw they have an approved trimmer there, 15 labeled that it meets the California standards in their 16 Craftsman model. Is that your technology? 17 MR. SUCHDEV: Yeah, Sears is marketing our 18 product, and they market it under the Ryobi brand name, not 19 under the Craftsman brand name. 20 MS. EDGERTON: Oh, okay. 21 MR. SUCHDEV: They have branded and sold our 22 battery-powered lawn mowers under the Craftsman brand name. 23 MS. EDGERTON: Great. Yeah, because I noticed in 24 the battery-powered, they had one -- you kept the plug in; 25 so, of course, you have to have a fairly small yard. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 then they had one that would last for an hour of cutting 2 your yard 3 MR. SUCHDEV: Sears also markets under the 4 Craftsman name our 12-volt battery trimmer, also, at the 5 same time. 6 MS. EDGERTON: Or maybe that's what I was 7 thinking. Okay. That's the trimmer. 8 MR. SUCHDEV: That is correct, yeah. 9 MS. EDGERTON: Thank you. 10 CHAIRMAN DUNLAP: All right. Mr. Lagarias, and 11 then Mr. Calhoun. 12 MR. LAGARIAS: Has your engine been certified to 13 meet Tier II standards? 14 MR. SUCHDEV: No, not yet. We have certified to 15 meet Tier I standard. It was not required to certify to 16 Tier II standards yet. 17 MR. LAGARIAS: But you think it can meet it. 18 MR. SUCHDEV: Yeah, it is capable of meeting. 19 That is correct. 20 MR. LAGARIAS: What about the argument that your 21 engine may not be able to operate in all kinds of different 22 positions that some of the handheld equipment is subject to? 23 MR. SUCHDEV: When Ryobi decided to apply this 24 technology to its products, Ryobi concentrated on making 25 this engine available on the kinds of products it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 manufactures, just primarily trimmers and blowers, and some 2 of the yard-care equipment that you saw on the screen there. 3 It was important to us that we introduced this 4 product as quickly as possible so we could start getting 5 some valuable field experience on the acceptance of this 6 technology in the marketplace. 7 As I mentioned earlier during my presentation, we 8 have continued to do development work both here and in Japan 9 to further explore ways of how we could make it a truly 10 all-position use product. 11 Normally, in a trimmer application and the 12 applications that we're using here, it is a limited 13 all-position product. 14 MR. LAGARIAS: So, as it now stands, as I 15 understand it, your four-cycle engine can meet the Tier I 16 standards. 17 MR. SUCHDEV: Yes. 18 MR. LAGARIAS: But it has not demonstrated that it 19 can meet the Tier II standards. 20 MR. SUCHDEV: No. It has been -- it has 21 demonstrated it can meet Tier II standards as all the 22 testing by both independent lab agencies and Ryobi all show 23 that with a leaner carburetor setting. 24 MR. LAGARIAS: What's the experience of the staff 25 in this regard? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 MR. CROSS: We had a chance to look at Ryobi's 2 data, and he's correct. In the lean settings, the engine 3 can meet the Tier II -- the current engine can meet the Tier 4 II standards. 5 And if you looked at HC plus NOx rather than 6 separate HC and NOx, the sum if about half the Tier II 7 standard. In other words, the Tier II standard is 50 HC and 8 4 NOx, and their current engine in lean/lean or even mid/mid 9 settings is in the 20 to 30 range. 10 So, our view is this engine's, as it sits, is 11 comfortable in the range of the Tier II standards. 12 MR. LAGARIAS: All right. And finally, you made 13 frequent reference to your engine as being comparable to the 14 premium or upscale equipment that's on the market. 15 Well, Mercedes is an upscale-equipped car, but you 16 don't see the same things in a Pinto or an Escort. Do you 17 think -- how far down the line do you think a four-cycle 18 engine can apply to handheld equipment? 19 MR. SUCHDEV: As I mentioned, you know, we are 20 introducing new technology. Ryobi had to commit a 21 tremendous amount of resources, both investments in dollars 22 and, you know, in human resources and development costs to 23 accomplish this. 24 And the price points on these trimmers that are 25 sold in the market -- when I mentioned the premium trimmers, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 these units have features that are different that what you 2 would refer to as an OPP price unit. 3 Earlier, Ryobi also markets a very, very large 4 volume -- in the millions of units -- of two-cycle trimmers, 5 also. But we targeted this product more at the higher end 6 of the scale, and offered other features on the product, 7 which is independent of the four-stroke technology. 8 MR. LAGARIAS: Thank you. 9 MR. SUCHDEV: You're welcome. 10 CHAIRMAN DUNLAP: Dr. Boston. 11 DR. BOSTON: You mentioned you're running the 12 engine on a richer carburetor setting now. But if you put a 13 leaner carburetor setting, you can meet the Tier II 14 standards. 15 That implies to me that there must be some 16 problems with the leaner settings, otherwise you'd be doing 17 it right now. Or, if so, why not? Why don't you use the 18 leaner settings now? 19 MR. SUCHDEV: As I said, we were required to 20 certify the product at the current time only to the Tier I 21 standards. To adjust every unit in the factory to the Tier 22 II levels would require more investment on the part of Ryobi 23 in manufacturing technology on the plant floor and more 24 heavy auditing requirements, which would further increase 25 the cost of the unit at this time, which we did not think it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 was appropriate. 2 It was extremely important to us to have this 3 technology testing in the marketplace as to how it would 4 work or what the consumer acceptance would be. 5 We have already taken a quantum leap in the 6 reduction of emission levels from where the two-cycles were. 7 DR. BOSTON: The leaner setting implies to me 8 putting in a smaller jet or something. It doesn't sound 9 like there's a lot of tuning involved. 10 MR. SUCHDEV: No. The current engines that we 11 sell have fully adjustable carburetors on them. And they 12 have limiter caps on them so they meet the California 13 requirements for full-proof/tamper-proof carburetion 14 systems. 15 DR. BOSTON: So, screw them down. 16 (Laughter.) 17 MR. SUCHDEV: Yes, and that's what you can 18 demonstrate. That's what the agencies have done. They've 19 taken the trimmer, they've leaned it out, and they can 20 demonstrate the capability. 21 DR. BOSTON: So, I don't understand why you don't 22 do it. 23 MR. SUCHDEV: Because, as I said, there'd be 24 additional cost involved in the factory to do that all the 25 time. And the price point at the retail level would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 significantly affected. 2 Bob, you have a comment on that? 3 MR. EVERTS: Well, I think we've demonstrated here 4 that there is technology that's available and, with some 5 refinement, can meet the Tier II standards on an everyday 6 basis. I think the first models that we introduced, as Mr. 7 Suchdev said, were to test the periphery parts of the 8 technology -- would the public accept four-cycle technology? 9 Would they accept the other idiosyncracies of this 10 particular product. 11 That's what we wanted to prove to ourselves first. 12 The way you can prove that is out in the marketplace. And 13 we've been doing that since 1994. 14 We're very confident what we've learned between 15 the time we introduced this till today that we won't have 16 any problem to meet the '94 -- the Tier II standards. 17 I think we've demonstrated our good will. We've 18 demonstrated tremendous advancement to this point that you 19 would have to have some confidence that we would continue on 20 that advancement. 21 CHAIRMAN DUNLAP: Sir, could you state your name 22 and title for the court reporter for the record, please. 23 MR. EVERTS: My name is Robert Everts. I'm the 24 former owner of the Inertia Dynamics Corporation. Ryobi 25 purchased Inertia Dynamics approximately nine years ago. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 And I'm now presently employed as a consultant to Ryobi. 2 CHAIRMAN DUNLAP: Okay. Thank you. 3 MR. CALHOUN: I'd like to pursue the same line of 4 questioning that Dr. Boston had. 5 CHAIRMAN DUNLAP: Sure. 6 MR. SUCHDEV: Can I make one more comment to, you 7 know, Dr. Boston's -- 8 CHAIRMAN DUNLAP: Sure, go ahead. 9 MR. SUCHDEV: We have already shared with the 10 staff that, if this was 1999 today, how we would meet those 11 Tier II standards. So, they have that information available 12 right now. 13 SUPERVISOR SILVA: Go ahead, Mr. Calhoun. 14 MR. CALHOUN: You mentioned that you'd lean the 15 air/fuel mixture. What about the performance of this engine 16 when you lean it out? 17 MR. SUCHDEV: In the current applications in which 18 Ryobi offers its product line, the performance is very well 19 accepted in the marketplace. 20 MR. CALHOUN: Do you have engines operating today, 21 not necessarily in the public's hands, but of your own that 22 you're operating under very lean conditions? 23 MR. SUCHDEV: Yes, we have. Yes. 24 One of the key elements that I would like to 25 state, and this might be a little bit of a technical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 discussion -- two-stroke engines, you can run them on only 2 to a certain level of enleanment, because you mix fuel and 3 oil together. And when you lean it out, the lubrication 4 system can break down. 5 On a four-stroke, you can run them with a leaner 6 setting. That is what happens in all the four-stroke 7 technology and automotive, also, you do run them at a leaner 8 setting with fuel injection and things of that nature, 9 because the lubrication is independent of the carburetor 10 settings. 11 MR. CALHOUN: Okay. Mr. Chairman and members of 12 the Board, I think we've listened to a lot of mixed 13 testimony today. Ryobi says that they can do it, and there 14 are other companies that have not met these standards. And 15 obviously, there are some concern -- there's a concern about 16 leadtime. There's also a concern about whether the 17 standards are appropriate based on the technologies and 18 whether or not you ought to separate and have separate 19 standards for gasoline- and diesel-powered engines. 20 And Mr. Cross, I think, made a very good 21 suggestion a few moments ago, that we not have sort of a 22 kneejerk reaction to this testimony that we've received. 23 Perhaps it would be worthwhile for the staff to go back and 24 make a thorough evaluation of where we stand today and come 25 back perhaps sometime this summer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 I'm assuming that this can be done within -- maybe 2 within the next six months. I don't know if that's 3 appropriate or not. But I guess I'd like to get some 4 indication from the staff if that would be appropriate or 5 not, because we have gotten testimony that time is of the 6 essence. And if there is a need to make any changes, we 7 need to do that. 8 CHAIRMAN DUNLAP: I think that's a reasonable 9 approach to take, Mr. Calhoun. 10 If I may, Joe, can I get you to yield to Mr. 11 Parnell? 12 MR. CALHOUN: Sure. 13 CHAIRMAN DUNLAP: He's been chomping at the bit 14 over here to ask a question. And I'll come right back to 15 you, Joe. 16 MR. PARNELL: Well, I concur with what Joe said. 17 But I'm concerned. Some things have been said with respect 18 to the leaning of this engine. And when you lean the 19 engine, obviously, you no doubt give up some horsepower in 20 the process. 21 And, as you look at those two coupled together, 22 and in view of other testimony where they talked about the 23 ratio of weight and horsepower output, and the applicability 24 to other uses, I wonder if we're not kidding ourselves in 25 assuming that your engine running lean would suffice for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 some of the applications. 2 And you were quick to say trimmers and some of the 3 other lighter uses. I'm not suggesting that I'm a mechanic 4 or a technician in any way, but some of the things that have 5 been said in this debate concern me and, therefore, I really 6 support Mr. Calhoun's suggestion that we -- we take a good, 7 hard look at a lot of these things and come back to the 8 Board sooner rather than later, so that we can make 9 substantive decisions and give guidance -- 10 MR. SUCHDEV: (Interjecting) Mr. Parnell, may I 11 make a comment? 12 As I mentioned earlier, Ryobi's main product line 13 today is trimmers. And, as I mentioned, you know, we make 14 nearly 25 percent of all the trimmers that are sold in North 15 America here. 16 The trimmer -- the four-stroke engine used in the 17 trimmer application was designed for the trimmer 18 application, so it would have adequate power for that. As I 19 mentioned, we continue to look at other applications, which 20 means you could look at possible increasing the cc 21 displacement. You could look at the possibility of, you 22 know, changing carburetion so that you could have different 23 power levels available. 24 And our ongoing test program and searching for new 25 application has indicated that this technology is applicable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 to higher horsepower engines and also the lighter-weight 2 engines. There's so much technology available out there to 3 reduce the weight of the engine, we want to be sure that 4 after all the resources and the investment that Ryobi has 5 spent that we had a successful product in the marketplace 6 that. That was important to us. 7 So, we could not go out there and cut out the 8 weight to the bare bones, you know, to prove that the power 9 to weight ratio's okay for other applications, also. 10 CHAIRMAN DUNLAP: Understood. If I may, I would 11 excuse you. Thank you very much for some compelling 12 testimony. Appreciate it. 13 I'd like to have the Board discuss this now at 14 this point. 15 SUPERVISOR ROBERTS: Mr. Chairman, I wanted to ask 16 a question before he left the mike. 17 CHAIRMAN DUNLAP: Go ahead. One last one, 18 Supervisor Roberts. 19 SUPERVISOR ROBERTS: You had cited in a couple of 20 instances the 25 percent of the market for trimmers. What 21 part of that is in this four-stroke engine that you've been 22 discussing? 23 MR. SUCHDEV: There are no other four-stroke 24 trimmers available at this time. 25 SUPERVISOR ROBERTS: Are all the trimmers that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 you're selling the four-stroke engine? 2 MR. SUCHDEV: No. 3 SUPERVISOR ROBERTS: And then, that's the question 4 I'm asking. What percentage of that 25 percent of the 5 market share is in -- 6 MR. SUCHDEV: (Interjecting) Based on our current 7 production, the four-stroke engine trimmers contribute about 8 approximately 5 to 10 percent of our total volume. 9 SUPERVISOR ROBERTS: Of your total volume. So, 10 it's a very small part of that 25 percent? 11 MR. SUCHDEV: That is correct, yes. 12 SUPERVISOR ROBERTS: And what is the average cost 13 differential between the four-stroke versus those other 14 products that you have on the market? 15 MR. SUCHDEV: It is again -- as I said, there are 16 plenty products on the marketplace that are available that 17 are in the same price range. 18 SUPERVISOR ROBERTS: No. I'm asking about the 19 rest of your line, the two-stroke. 20 MR. SUCHDEV: This is the top of our line. 21 SUPERVISOR ROBERTS: What is the differential 22 between maybe the average of those other units? 23 MR. SUCHDEV: It is difficult to compare, because, 24 as I mentioned earlier, they have more features offered on 25 this project. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 SUPERVISOR ROBERTS: What's the range then of 2 those -- 3 MR. SUCHDEV: A comparable trimmer would retail 4 probably in the -- right now currently in about the $129 5 range. And a trimmer in this range will fall about $180 to 6 $200 at the upper level. 7 SUPERVISOR ROBERTS: So, maybe the $80 8 differential that we were given is maybe accurate? 9 MR. SUCHDEV: It could be looked at that way, yes. 10 CHAIRMAN DUNLAP: Ms. Edgerton. 11 MS. EDGERTON: You have your plant in Arizona. 12 Where else do you manufacture your products? 13 MR. SUCHDEV: All of our trimmers and the four- 14 stroke products are manufactured in Chandler, Arizona. We 15 have other plants in the United States that manufacture 16 power tools. The power tools are manufactured in Pickens 17 and Anderson, South Carolina. 18 We make floor care equipment. The floor care 19 equipment is also manufactured in Anderson. In addition, we 20 supply to the automotive industry with dye castings besides 21 our own internal use, also. And there we have plants -- 22 some plants in Pickens and some in Shelbyville, Indiana. 23 MS. EDGERTON: But none in California? 24 MR. SUCHDEV: No. Currently, we do not have any 25 plants in California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 MS. EDGERTON: Thank you. 2 MR. SUCHDEV: Thank you. 3 SUPERVISOR ROBERTS: Mr. Chairman? 4 CHAIRMAN DUNLAP: Sure. 5 SUPERVISOR ROBERTS: Can I just ask one question 6 of staff? 7 CHAIRMAN DUNLAP: Sure. We'll excuse the 8 witnesses, then. We have nothing more for the witness. 9 MR. EVERTS: Excuse me. Could I make one parting 10 statement? 11 I think there's a little misunderstanding on this 12 horsepower situation. And the horsepower characteristics of 13 a four-cycle are considerably different than a two-cycle. 14 This engine was originally designed for one 15 horsepower, and we detuned it to set it to three-quarters of 16 a horsepower because it was just inadequate to produce a 17 horsepower that wasn't controllable. It was too much 18 horsepower. 19 And the thing is the torque curve's a much, much 20 broader range than a two-cycle. We found out in consumer 21 reports that it's a very user friendly type of a power 22 development curve that this engine produces. So that's the 23 reason for this .75 horsepower, not that we can't do it. 24 CHAIRMAN DUNLAP: So then, you would disagree with 25 the characterization -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 MR. EVERTS: (Interjecting) I would 2 wholeheartedly -- 3 CHAIRMAN DUNLAP: -- that the four-cycle is 4 inadequate. 5 6 MR. EVERTS: -- disagree with that. 7 CHAIRMAN DUNLAP: Okay. Very good. Thank you. 8 SUPERVISOR ROBERTS: Thank you. 9 CHAIRMAN DUNLAP: Okay. Now, Mr. Calhoun, my 10 apologies for interrupting you. You were on a roll a moment 11 ago. So, please continue. 12 MR. CALHOUN: What I'm suggesting, Mr. Chairman, 13 is that we have the staff come back after -- sometime in 14 late summer. Maybe we should get some reaction from the 15 staff as to when it would be -- when they think they could 16 complete a thorough evaluation. 17 Bob also mentioned the fact that perhaps a 18 paradigm shift, you know, going from two to four-strokes 19 would be an appropriate thing. At least that's something 20 the Board should consider. 21 But I think we do need a thorough evaluation. I 22 guess I'd like to ask the staff how long you think it's 23 going to take to do that? 24 MR. CROSS: It depends on whether we're suggesting 25 a status report or a regulatory proposal. I think our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 original estimate of the end of this calendar year, if we 2 want to include regulations, is probably as early as 3 reasonable. 4 If the Board wants a status report, probably late 5 summer I would think. 6 CHAIRMAN DUNLAP: Okay. If I may, here's what -- 7 I get the sense from Mr. Calhoun and my colleagues on the 8 Board, Mr. Boyd, is that there seems to me some special 9 attention that's needed in some of these engine categories. 10 Diesel is one. The trimming issue we just heard about, and 11 what not. 12 So, we certainly, as a Board, understand the 13 technology forcing nature of setting a target and people 14 working to develop it, and it takes years. And there are 15 breakthroughs we may not be able to see on the horizon today 16 that may emerge. 17 You know, we don't in any way want to get in the 18 way or discourage that development process from emerging. 19 But, at some point, there needs to be a readjustment if 20 that's warranted. And I'm hearing you say, Mr. Cross, that 21 it may be in several of these areas. 22 We would like to get a sense back from you all 23 soon, maybe this summer or fall, whatever can work schedule- 24 wise, Mr. Boyd, given the demands on your and your team's 25 time, but certainly before the end of this year. Get back PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 to us with yet a new sense about how the progress is going. 2 There's been some frustration that's been 3 expressed here by some of those that manufacture these 4 engines about their ability to make the progress that we 5 seek. And given the economic considerations involved here, 6 we need to be sensitive to that. 7 That isn't to say that we should, you know, give 8 them an out too early, but we should have a thorough 9 assessment done in each of these categories, so that we 10 know, as a Board, how things are going in realtime. 11 I'm a bit troubled personally about the depth of 12 concern expressed by those today. It's a little more than I 13 anticipated in reading the staff report. 14 And one of the things, also, Mr. Boyd, that we 15 take a certain amount of solace in is the staff being 16 even-handed in their evaluations. And that's important for 17 us. It's important for the credibility of this Board. 18 So, I'm troubled to hear that we may have painted 19 an overly rosy picture in the staff report. So, obviously, 20 be cognizant of that, because, you know, the industry folks 21 have read it and think it is overly rosy. 22 So, with Mr. Calhoun's concurrence -- because he's 23 the inspiration for this summary on my part -- I would ask 24 that by fall you come back to us with an assessment in these 25 categories of engines -- how the progress is going category PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 by category. 2 Mr. Cross, you suggested perhaps a framework shift 3 in some way. We heard from the diesel engine folks that 4 maybe they need to be put into a different category and the 5 like. 6 So, is that something, Jim, that's doable 7 schedule-wise? 8 Mr. Calhoun, is that consistent with your 9 thinking? 10 MR. CALHOUN: That's fine. 11 CHAIRMAN DUNLAP: And, Mr. Parnell? 12 MR. BOYD: Mr. Chairman, your use of the word fall 13 fits my thinking as well, that we can bring a progress 14 report back in the fall -- 15 CHAIRMAN DUNLAP: Okay. 16 MR. BOYD: -- and continue on the track towards 17 probable regulatory action at the end of the year. 18 CHAIRMAN DUNLAP: Okay. Mr. Lagarias and then Ms. 19 Edgerton. 20 MR. LAGARIAS: I'd like to add a few words to your 21 comments, which I thoroughly support. 22 The discussions we've heard today, that progress 23 has definitely been made; that while Tier I has been made, 24 that improvements can be made that exceed Tier I, but do not 25 reach Tier II levels. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 And when we passed this regulation in 1990, EPA 2 was not in the picture at that time. And they've since 3 entered into the picture and have set their own Tier I 4 equivalent levels. I think, to the extent possible, we 5 should try to mesh with EPA's program to the extent that's 6 feasible. But since they've had a long history of delays, 7 if they don't come aboard soon enough, we're going to still 8 have to act on our own. 9 But, if we can coordinate our efforts with EPA's 10 efforts, if it might mean relaxing our schedule, or our Tier 11 II standards, or changing, modifying them, we should at 12 least consider that. 13 I think in your discussion, we should look at the 14 Tier II standards and see, if indeed they are feasible now 15 that we've had this first report on the progress, to 16 determine if those levels are achievable and the time frame 17 again. 18 Because if it turns out that we can only get 70 or 19 80 percent of the difference, we may have to consider that. 20 But if we can get a hundred percent, we're certainly going 21 to work toward achieving that. So, I think including the 22 review of the standards is appropriate as well. 23 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Lagarias. 24 Ms. Edgerton. 25 MS. EDGERTON: Well, I'd just like to say I'm a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 little perplexed. I don't really understand what is being 2 proposed here. 3 I don't understand Mr. Calhoun's concern. So, I'd 4 just like to have a little more clarification before we go 5 forward. 6 It seems to me that what we've heard is that the 7 staff has reviewed a particular company's efforts, and that 8 Ryobi in three years says that they can get to where our 9 standards have asked them to get, and that industry -- there 10 are other competitors who feel that they can't get there. 11 Maybe they didn't put as much capital into it. 12 I'm not being critical. I think that each company 13 can make its own decisions, obviously, as to what makes 14 sense for your company. But I would have to say that I look 15 at it as one company appears to have very clearly gone after 16 the California market and tried to help us out in Southern 17 California, and the others have not had that success. 18 I'm very troubled about the precedent that we set 19 if we aren't supportive and resolute in our standards when 20 we have companies that do invest in meeting these 21 technologies. 22 And if we listen to what we heard today -- and I 23 assume the staff -- I was fortunate enough to be briefed -- 24 they feel that the Ryobi is -- what they say they can do 25 they can do. I'm not saying they can do everything. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 they have tested that. This is not a tabula rasa. This is 2 not something that we haven't looked at. 3 I mean, if they come back to us and they say, 4 "This can be done," and we say, "What we heard was it can't 5 be done," there's a big disconnect for me. And I don't want 6 to put people out of business, but I also don't think our -- 7 I don't think we're supposed to get in there and affect 8 competitive issues. I think we're supposed to set 9 standards. And if someone meets them, I think we've got to 10 stay with the people who do. 11 CHAIRMAN DUNLAP: Let me remind you of a couple of 12 things. 13 First of all, we're just not talking about the 14 trimmer category. We're talking about the diesel engine 15 category as well and the cheap engines. Also, we need to be 16 concerned about the economic impacts of the actions of this 17 Board. 18 We also need to be cognizant of the fact that we 19 have had a staff report brought to us. I'm assuming it's 20 like most of them. It's fine. It's a thorough piece of 21 work. But we have people here, credible people, 22 representing associations and the like that have a dispute 23 with our findings and with the staff's recommendations. 24 That causes us concern. 25 I want to make sure that we get complete, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 accurate, thorough information. 2 And so, I'm not suggesting -- and let me be very 3 clear -- that there's some kind of rollback on these Tier II 4 goals at all. But I want to have a more thorough 5 understanding. I want to have this worked out better 6 between those that have to comply with these requirements, 7 make the product, and with our technical staff, so that we 8 get a more complete picture. 9 I, too, and hear it right from the Chairman, make 10 no mistake about it, we want to get clean air for California 11 as expeditiously as possible. We don't want to de-position 12 people, or bankrupt them, or hurt them economically. But we 13 do have a responsibility to get all of the facts. And 14 that's what this is about, Ms. Edgerton. It is not about 15 some kind of rollback. 16 So, if I or Joe have led you to that conclusion, 17 that's not certainly where I wanted to lead you to. 18 MS. EDGERTON: Well, so long as it's not about a 19 rollback, I could support that. 20 CHAIRMAN DUNLAP: Okay. It's about information. 21 Yes, Mr. Boyd. 22 MR. BOYD: I'd like to say a word to try to help 23 Ms. Edgerton feel good about where we're going anyway. 24 The comment was made that staff has a fairly rosy 25 view. I would just say that, historically, that's been our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 view, and thank God history's been on our side. 2 So, we will continue to push technology and have 3 an honest -- but if it's viewed as a rosy view, so be it. 4 Mr. Lagarias has been a long time and knows the dilemmas we 5 have when we start coordinating with U.S. EPA, it often 6 becomes a drag on our ability to do. And yet, we always 7 have recognized the need to harmonize for economic reasons 8 standards between the State of California and the Federal 9 Government. 10 But it is that same Federal Government that is 11 holding our feet to the fire with regard to a certain SIP 12 that we submitted in 1994. 13 So, your staff will continue to remind the Board 14 of the allegiance to the SIP and the potential shortfalls 15 that we may find ourselves in. 16 So, when we -- you know, it was our intention 17 always at the end of this year, in bringing a regulatory 18 recommendation, it would be a progress report and a 19 recommendation, and we'll continue to do that. We'll 20 advance our work -- 21 CHAIRMAN DUNLAP: Okay. 22 MR. BOYD: -- on the progress report as best we 23 can to make sure the Board has a chance to deliver and sort 24 out, you know, the future. 25 CHAIRMAN DUNLAP: Okay. Very good. Thank you, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 Mr. Boyd. 2 Supervisor Roberts, a last comment, and then we'll 3 move on. 4 SUPERVISOR ROBERTS: Mr. Chairman, just a quick 5 comment -- 6 CHAIRMAN DUNLAP: Sure. 7 SUPERVISOR ROBERTS: -- and one last question. 8 First of all, I agree with what you say. I think 9 that what we'd like to do is make sure that we maximize the 10 improvement in the air quality. But when I hear about cost 11 differentials in the range of $80 over the kinds of costs 12 we're talking about, those are enormous -- really enormous 13 differences. 14 And so, I want to be -- I need this additional 15 information. 16 CHAIRMAN DUNLAP: Right. 17 SUPERVISOR ROBERTS: One thing that's not clear to 18 me, and I hate to ask such a naive question, but what is the 19 role of reformulated gas in these tests that are going on? 20 Are these tests done with reformulated gas? And, 21 if so, does that have any bearing on the test results? 22 MR. CROSS: To be honest, I'm not sure whether 23 they're using reform or not. 24 SUPERVISOR ROBERTS: So, I'm not the only one in 25 this room that didn't know. I feel comfortable then. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 MR. CROSS: But the differences between the 2 technologies that we're talking about are far bigger than 3 the difference between conventional gas and reform. 4 SUPERVISOR ROBERTS: I understand. They're not 5 going to get there -- 6 MR. CROSS: Right. 7 SUPERVISOR ROBERTS: -- but I'm still curious as 8 to what that does to them and how far they're -- 9 MR. CROSS: Many of our certified engines are 10 certified on reform. So, the industry's fully aware of 11 using it. It's just that, when we get to some of the 12 specific data that we're talking about here, I'm just not 13 sure which ones -- 14 SUPERVISOR ROBERTS: Maybe there could be some 15 clarity on that. 16 MR. CROSS: Oh, of course. 17 SUPERVISOR ROBERTS: I'm impressed with what we 18 know about the Ryobi engine. We went out of our way to test 19 drive the electric car. Maybe I've got to get one of these 20 and test drive it, too. 21 CHAIRMAN DUNLAP: That may be able to be arranged. 22 SUPERVISOR RIORDAN: Wait a minute. I volunteer. 23 CHAIRMAN DUNLAP: Oh, yes, Supervisor Riordan, 24 also. 25 SUPERVISOR RIORDAN: I volunteered for that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 We'll both test it. 2 CHAIRMAN DUNLAP: Since they're not marketing the 3 electric car in San Bernardino County, we may need the 4 trimmer here for the Supervisor. 5 Mr. Parnell. 6 MR. PARNELL: I just wanted to say one other 7 thing. And with all due respect to Ms. Edgerton's comments, 8 Mr. Calhoun's, yours, Mr. Chairman, and Mr. Roberts', it 9 seems to me that one of the things that we need to do is we 10 analyze further what it is we should actually do. And, as 11 you come back with another report, it would be interesting 12 to me to see -- I heard in the testimony -- particularly in 13 Mr. Dunway's testimony -- that we don't see any way humanly 14 possible to get to Tier II standards, but we can make 15 improvements over what we've currently certified to. 16 I'd like to know what it is they can do and what 17 component they can't do, and what that means in terms of 18 emissions versus cost of this paradigm shift we're all 19 talking about. 20 That's easy to say and pretty difficult to do. 21 So, I'd like to see some specifics in that regard. 22 CHAIRMAN DUNLAP: Good point. If I may -- Mr. 23 Calhoun, if we don't tie this up, we're going to be here 24 till midnight tonight. 25 MR. CALHOUN: Two seconds. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 CHAIRMAN DUNLAP: Okay. Go ahead. 2 MR. CALHOUN: This is a progress report we've 3 received here from the staff. And it was not -- my comments 4 were not intended to suggest that we were rolling back any 5 standards. And maybe there is a disconnect, Ms. Edgerton, 6 but I'll try to connect it for you. 7 I think the staff has made a good suggestion, and 8 that is that we do a thorough evaluation and come back with 9 another progress report and tell us where we are and what 10 ought to be done. 11 And so, that was in the vein in which my statement 12 was made. 13 CHAIRMAN DUNLAP: Okay. 14 MR. CALHOUN: Thank you. 15 CHAIRMAN DUNLAP: Very good. Thank you. All 16 right. Mr. Boyd, let me try to summarize this for you. 17 Please put together a schedule for a report back 18 to the Board -- I'll say in the September-October time frame 19 ideally; if you can do it earlier, please do so, but not 20 much later than that -- that outlines the issues that have 21 been covered today about a continuing evaluation of progress 22 in meeting the Tier II standards, fully understanding -- I 23 certainly need to have a better understanding of the U.S. 24 EPA role in kind of coming together with our program here. 25 Make sure that's covered. And, also, ask Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 Cross and his team to sit down with the folks that have 2 testified and others today to get perhaps a more complete 3 understanding of the playing field, at least understand 4 where they're coming from about their assertion that we may 5 have painted a rosy picture today, and get back to the 6 Board. 7 And, also, I think Mr. Parnell made a very key 8 point about talking to those people that have raised concern 9 about maybe how far they can get, perhaps maybe falling 10 short of Tier II, and at what cost, so that we can 11 understand what it takes to get to the goal that Ms. 12 Edgerton expressed so clearly, which is, you know, those 13 clean air standards, which is why we're all here. 14 Okay? And thank you. I know it's tough for staff 15 to sit there and listen to people comment on your work. But 16 I appreciate the thoroughness of your work, despite there 17 wasn't complete agreement with everything you had to say. 18 So, with that, I'd to adjourn for a lunch break. 19 The Board's going to take a quick item in closed session. 20 And we'll plan on coming back about 1:15 or so, for the 21 audience. Okay? 22 Thank you. 23 MR. KENNY: Mr. Chairman, we need to identify 24 specifically the closed session purpose. 25 CHAIRMAN DUNLAP: Okay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 MR. KENNY: And I can do that. 2 CHAIRMAN DUNLAP: Yes. Mr. Kenny, would you take 3 a moment to do this? 4 MR. KENNY: The Board is recessing the closed 5 session pursuant to Government Code Section 11126(a) for the 6 purpose of reviewing appointments to the Research Screening 7 Committee. 8 CHAIRMAN DUNLAP: Okay. Very good. 9 (Thereupon, the luncheon recess was taken.) 10 --o0o-- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 AFTERNOON SESSION 2 --o0o-- 3 CHAIRMAN DUNLAP: I'd like to get started again. 4 I apologize for being tardy by a few minutes. 5 What I would like to do -- and alert the Board 6 Secretary to this. I'd like to take Item 3 up now, so we'll 7 take that up briefly, and then we'll go back to our regular 8 order, which is Board Item 96-1-3, which is the Research 9 Screening Committee item. 10 As you know, the statute creating the Board also 11 authorized the Board to appoint a Research Screening 12 Committee to advise the Board on its extramural research 13 activities. 14 The committee has nine members total, each 15 representing a scientific or technical discipline that is 16 relevant to review and advise on an air quality research 17 program. 18 We have been privileged over the years to have a 19 host of eminent scientists serve on this committee. As you 20 know, the workload is significant and the pay symbolic at 21 best. Their input has been invaluable to the Board over the 22 years. 23 We find ourselves in a difficult position 24 workload-wise of having a large number of vacancies that 25 need to be filled in order that the committee can do its PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 work and our research program can keep moving forward. 2 A slate of six excellent, extremely qualified 3 candidates have been assembled for the Board's consideration 4 today. We all had an opportunity to review the candidates' 5 credentials and resumes over lunch. And I'd like to invite 6 Board members to make comments or ask questions of staff. 7 And following any discussion, I'm ready to receive a motion 8 to appoint these individuals to the Research Screening 9 Committee. 10 But before we get into that, I guess, Mr. Boyd, 11 I'd ask you and your team to disclose the names and 12 generally the affiliations. 13 MR. BOYD: I've asked Dr. Holmes to read into the 14 record the names and affiliations of the six people who have 15 been recommended. 16 DR. HOLMES: Thank you, Mr. Boyd. 17 Chairman Dunlap, members of the Board, as the 18 Chairman said, we have for your consideration today six 19 names who are, we believe, eligible and willing to serve the 20 Board as members of the Research Screening Committee. I'll 21 go through them quickly for you. 22 Dr. Anthony F. Fucaloro is the Vice President and 23 Dean of Faculty, as well as a Professor of Chemistry at 24 Claremont McKenna College. 25 Dr. James Higdon, Associate Professor of Physics, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 also at Claremont McKenna College. 2 Dr. Kent Hoekman, who is a chemist, an expert on 3 fuels at the Chevron Research and Technology Laboratories in 4 Northern California. 5 Dr. James Ortner, who is a transportation planning 6 expert currently with the Orange County Transportation 7 Authority. He's also worked in the field of transportation 8 for a number of other public agencies over the years. 9 The fifth name we have for you is Dr. Sherwood 10 Rowland, who's Professor of Chemistry and occupies the Bren 11 Chair of Chemistry at the University of California, Irvine. 12 Dr. Rowland, as many of you know, is the 1995 Nobel Laureate 13 in Chemistry, a very distinguished scientist. And we're 14 indeed fortunate to have him willing to serve you and the 15 State as a member of your Research Screening Committee. 16 And finally, Timothy Taylor, Esq., who's an 17 attorney and an expert in architecture and urban planning. 18 He is here in Sacramento, and currently serves as Chair 19 Emeritus of the California Bar Association's Environmental 20 Law Section. 21 CHAIRMAN DUNLAP: Okay. Very good. I'd like to 22 invite my Board member colleagues to make any comments, if 23 they have any, at this time, or I'd certainly entertain a 24 motion to approve those six extremely qualified candidates 25 that have been assembled for the Research Screening PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 Committee. 2 Mr. Silva. 3 SUPERVISOR SILVA: I would like to make the motion 4 to accept this list. I think this is a very impressive 5 list, and I think that the Air Resources Board will be well 6 served to have these distinguished individuals serve. 7 CHAIRMAN DUNLAP: Okay. Very well. Is there a 8 second? 9 MR. LAGARIAS: Second. 10 CHAIRMAN DUNLAP: Okay. Mr. Lagarias seconds. 11 Any discussion? 12 Thank you. Ms. Hutchens, could I ask you to call 13 the roll, or do we do a voice vote? 14 What would you recommend? 15 MS. HUTCHENS: Voice vote. 16 MR. BOYD: Voice vote. 17 CHAIRMAN DUNLAP: Voice vote would be fine? All 18 those in favor, say aye? 19 (Ayes.) 20 Any opposed? All right. Thank you very much. 21 My colleague Mr. Lagarias has asked that we take 22 up the research item next. So, I hope the audience will 23 further indulge the Chair, and we'll take up the last item 24 on the agenda, which is the public meeting to consider 25 research proposals, 96-1-6. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 Bear with me a moment. Have all the members of 2 the Board had an opportunity to review these proposals? Are 3 there any additional concerns or comments by members of the 4 Board? 5 Mr. Roberts, you had a concern about overhead 6 rates. You wanted to talk to staff about that perhaps? 7 SUPERVISOR ROBERTS: There was one of the 8 proposals, Mr. Chairman, that caught my attention along the 9 lines of when we last visited some similar proposals. 10 CHAIRMAN DUNLAP: Okay. Mr. Boyd, if I may pick 11 up the torch from Mr. Roberts. It is an ongoing concern of 12 this Board that we get the best value we can in our research 13 work with the people's money. 14 And one of the things that makes any appointed or 15 elected official concerned is that overhead rates be within 16 reasonable bounds. And it seems that one of these research 17 proposals by an outstanding research institution seems to be 18 a bit high. 19 So, I wonder if you could comment. I believe it's 20 the project involving Cal Tech? 21 MR. BOYD: I'll have Dr. Holmes speak. Just let 22 me address the general issue of overhead rates. 23 We have heeded the Board's concern in this area 24 for quite some time, and we hope we're very diligent in 25 raising questions about and being concerned about so-called PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 overhead rates. And I believe we have been. 2 As you know, we're probably the only government 3 agency to negotiate a special rate with the University of 4 California system, a sister agency. And so, we have been 5 able to save our program some money in that particular 6 arena. 7 When we look at project costs, we look closely at 8 all costs, and in particular are sensitive to the overhead 9 rate, and would be certainly reluctant to bring to you any 10 proposal that didn't, on its total merit, meet our needs and 11 thus allow us to recommend it to you. 12 I'll have Dr. Holmes address this one. But, 13 usually, it's the net total cost of a project, in spite of 14 what seems like an incremental piece of the program being a 15 little high, that still is the lowest, or the best cost, or 16 the lowest fee, or what have you. 17 But that being kind of a general framework, Dr. 18 Holmes, would you address this specific project? 19 CHAIRMAN DUNLAP: Okay. Dr. Holmes, please. 20 DR. HOLMES: Thank you, Mr. Boyd. 21 Mr. Chairman, members of the Board, as Mr. Boyd 22 says, we have long been concerned about this I know, and 23 Supervisor Robert's points are well taken indeed. 24 In this particular case, the proposed work is to 25 be done by Cal Tech with partial funding from the South PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 Coast Air Quality Management District to the tune of 2 $50,000. 3 Some of the work has already been done, and the 4 initial work being the collection of samples that was done 5 under an earlier contract with the South Coast District. 6 The overhead rate is very difficult to negotiate. 7 We have been successful in some cases. We've tried many 8 times with Cal Tech. And up through as late as yesterday 9 afternoon, we were still unsuccessful. Staff spoke with the 10 principal investigator in this proposal, Dr. Glenn Cass. 11 Dr. Cass, in turn, spoke with the Dean of the school, got 12 absolutely nowhere with him. 13 What I can commit to doing to the Board is to try 14 to go to a higher level, to a vice president or even the 15 president of the institution and see what, if anything, they 16 are willing to do with for the Board. 17 CHAIRMAN DUNLAP: Dr. Holmes, but, in your 18 opinion, following up on Mr. Boyd's opening comment, this is 19 a good value overall when you look at the overall scope of 20 the research and the price we're getting it for; is that 21 correct? 22 DR. HOLMES: Yes. 23 CHAIRMAN DUNLAP: Okay. But we have -- 24 MR. BOYD: It's good value because we're really 25 piggybacking on ongoing work, work done by others, by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 combining efforts and resources. 2 CHAIRMAN DUNLAP: Cost sharing. 3 MR. BOYD: And the cost sharing. We're really 4 getting a significant bang for the buck. We're familiar 5 with this issue. As Dr. Holmes says, the University has a 6 dilemma. 7 Another criterion that this Board established 8 years ago that, as a minimum, the overhead rate applied by 9 any contractor on one of our contracts has to have been 10 approved by a federal audit agency or they don't pass our 11 screen. That is the case with this particular contractor 12 and the rate being used here. 13 Their dilemma -- I mean it's their problem, not 14 ours, but it comes our problem -- is that this is the rate 15 that they're approved to use and the rate that they have 16 demonstrated to the Federal Government is an appropriate 17 rate for contracts in this arena. 18 And this is the rate that governs the tremendous 19 amount of work that Cal Tech does for the Federal 20 Government. 21 CHAIRMAN DUNLAP: Understood. 22 MR. BOYD: And they have a precedent and 23 perception problem in giving us a break. 24 The University of California had the same problem; 25 however, because they are part of our State Government, they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 were able to rationalize it down to give us a flat ten 2 percent rate. 3 CHAIRMAN DUNLAP: The price tag in this one's in 4 the neighborhood of $150,000? 5 DR. HOLMES: $154,000, Mr. Chairman. Of that, the 6 Board would provide $104,000 -- 7 CHAIRMAN DUNLAP: Okay. 8 DR. HOLMES: -- and the District 50,000. 9 CHAIRMAN DUNLAP: Okay. Mr. Lagarias had a 10 comment. 11 MR. LAGARIAS: I've noticed over the years, that 12 there is no standard definition of what constitutes 13 overhead. Sometimes it includes rental space, and sometimes 14 it includes secretaries, and other things that may be direct 15 charged in a different proposal. 16 So, it's often difficult just by looking at an 17 overhead and direct charge to know what all is being done. 18 And, in this case, if there was a fee, it would be part of 19 that overhead item. 20 So, I don't think that's disproportionate. 21 In the past, I've been concerned about cost 22 sharing, and I think the Department has done an excellent 23 has done an excellent job in obtaining cooperative cost- 24 sharing on many of the studies that go beyond the interest 25 of the State of California alone. And I think we should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 continue down that way. 2 CHAIRMAN DUNLAP: Okay. And in this case, it 3 seems, Supervisor Roberts, it's staff's assessment this is 4 good value. Mr. Lagarias shares that in this case. 5 But I, too, am troubled by the size. It's fully 6 one-third of the budget of the proposal. 7 Yes, Supervisor Roberts. 8 SUPERVISOR ROBERTS: Mr. Chairman, I think that, 9 in this particular instance, this is -- it's worth going 10 ahead with. 11 CHAIRMAN DUNLAP: Okay. 12 SUPERVISOR ROBERTS: But the point that, I guess, 13 I didn't want to lose sight of, and I had some discussion 14 with staff, that the differential between what we pay when 15 the University of California is doing work, irrespective of 16 the campus, and this kind of an overhead is pretty 17 significant. This becomes a little easier to swallow, 18 because there's somebody else throwing in $50,000, if you 19 will, to this effort. 20 But it's a disproportionate amount of money that's 21 going to the overhead, which suggests to me that, to the 22 fullest extent possible, we ought to be using the various 23 University of California campuses where we're just simply 24 going to get more for our money with respect to the dollars 25 actually going into the -- into the work effort rather than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 into the overhead of the institution. 2 MR. LAGARIAS: I suppose if Cal Tech had a 3 football team that could bring in revenues, their overhead 4 would go down. 5 (Laughter.) 6 SUPERVISOR ROBERTS: Well, I think you'd find that 7 that doesn't produce revenue. But if they could make that 8 effort, I'd like to see it. 9 CHAIRMAN DUNLAP: Let me remind my colleague that 10 Cal Tech does have a football team, because I was in the 11 State Athletic Conference with them in college. 12 Okay. We again, Jim and staff, we want you to 13 know that we're concerned about. Supervisor Roberts has 14 spoken up on this item on the overhead issue several times 15 in the past, and I imagine will continue to do so. 16 So, please encourage those that we're considering 17 doing contract research work with to keep their overhead 18 rates as low as possible if they wish to continue or to do 19 business with the California Air Resources Board. 20 MR. BOYD: Let me assure the Chairman that we do 21 use you as a club in these negotiations with -- 22 CHAIRMAN DUNLAP: Please mention the Supervisor by 23 name. 24 (Laughter.) 25 MR. BOYD: And let me assure the Supervisor that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 we do have a policy of giving priority to the University of 2 California system, not because of the overhead rate, but 3 because they're a sister agency, and there are some State 4 provisos that we do just that. And we have historically 5 done that. I don't want to take too much time, but just 6 that Cal Tech and Dr. Cass are just world famous in certain 7 disciplines and areas, and this is -- this is something 8 where I think we're getting our money's worth in spades in 9 this particular instance. 10 SUPERVISOR ROBERTS: Yes, and I didn't mean to 11 call into question that, you know, this -- this appears to 12 be the right decision in this case. It still leaves me with 13 a concern when I see such a tremendous discrepancy. 14 MR. BOYD: No, I didn't mean to take exception 15 with you. I just wanted to make the point that we were 16 willing to subject ourselves to this discussion, because of 17 the particular project and the particular skills of the 18 individuals relative to the project. 19 CHAIRMAN DUNLAP: Very well. With that -- 20 DR. HOLMES: Mr. Chairman? 21 CHAIRMAN DUNLAP: Yes, Dr. Holmes. 22 DR. HOLMES: There's one other thing I need to 23 mention there. In some of the Board books that went out, 24 there is an error in the resolution for Item No. 4. The 25 correct amount -- and you have this in your binders, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 think. The correct amount is $229,754. I apologize for the 2 clerical error. 3 CHAIRMAN DUNLAP: Okay. Right. I think that's 4 been pointed out to several of us. 5 Okay. With that, if there isn't any more 6 discussion on these research proposals, we have in our Board 7 book Resolution -- several resolutions, I guess. Is that 8 right? 9 DR. HOLMES: There's six, Mr. Chairman. 10 CHAIRMAN DUNLAP: 96-4, 96-5, 96-6, 96-7, 96-8, 11 and 96-9. And will the Board Secretary please call the roll 12 on them collectively. 13 Yes, we have a motion and a second to approve the 14 resolutions. I take it, approve the -- 15 MR. BOYD: Research resolutions. 16 CHAIRMAN DUNLAP: -- research resolutions, I'm 17 sorry. Is that your motion, Supervisor Silva? 18 SUPERVISOR SILVA: Yes, it is. 19 CHAIRMAN DUNLAP: And it's the motion of the 20 seconder, yes? 21 MR. LAGARIAS: Yes. 22 CHAIRMAN DUNLAP: Okay. Very good. 23 MS. HUTCHENS: Boston? 24 DR. BOSTON: Yes. 25 MS. HUTCHENS: Calhoun? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 MR. CALHOUN: aye. 2 MS. HUTCHENS: Edgerton? 3 MS. EDGERTON: Aye. 4 MS. HUTCHENS: Hilligoss? 5 MAYOR HILLIGOSS: Aye. 6 MS. HUTCHENS: Lagarias? 7 MR. LAGARIAS: Aye. 8 MS. HUTCHENS: Parnell? 9 MR. PARNELL: Aye. 10 MS. HUTCHENS: Riordan? 11 SUPERVISOR RIORDAN: Aye. 12 MS. HUTCHENS: Roberts? 13 SUPERVISOR ROBERTS: Aye. 14 MS. HUTCHENS: Silva? 15 SUPERVISOR SILVA: Aye. 16 MS. HUTCHENS: Vagim? 17 SUPERVISOR VAGIM: Aye. 18 MS. HUTCHENS: Chairman Dunlap. 19 CHAIRMAN DUNLAP: Aye. 20 MS. HUTCHENS: Passes 11-0. 21 CHAIRMAN DUNLAP: Very well. Thank you. Dr. 22 Holmes, thank you very much. 23 Okay. Which brings us back to our agenda. We'll 24 go back to 96-1-2. But before we do that, Supervisor 25 Riordan has some special guests to announce. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 SUPERVISOR RIORDAN: Mr. Chairman, if I might, I 2 would like to introduce a number of students to the Board, 3 and to the staff, and to the audience. These are students 4 from the University of Redlands. And they are here on a 5 week's visit to Sacramento. 6 They've been visiting a number of the legislative 7 offices. They've observed government in action. And 8 they're here to join us this afternoon to watch the Air 9 Resources Board. 10 And it becomes somewhat important for all of you 11 to recognize that this is indeed the alma mater of our 12 Chairman, Mr. Dunlap, and it is also my alma mater. And so, 13 I'm very pleased to welcome them here. And to some of our 14 staff members, like Jim Schoning, it's his alma mater. 15 So, we welcome the University of Redlands, and we 16 thank their professor, Dr. Margie Lloyd, for bringing them. 17 And we hope that you find this an interesting afternoon. I 18 hope that you've been given an agenda. And when you leave, 19 there's a great deal of literature near the back door of the 20 hearing room, and I hope you will take some of that 21 literature, because it's our way of communicating the need 22 for cleaner air to a number of the residents of California, 23 of which many of you are members and residents. 24 And we hope that you will feel free to ask later 25 any questions of us after the meeting if you're still here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 We'd be very happy to respond to any questions you might 2 have. 3 CHAIRMAN DUNLAP: Thank you, Supervisor. And 4 welcome. 5 Okay. Again, I'd like to remind those in the 6 audience who wish to present testimony to the Board on any 7 of today's agenda items to please sign up with the Board's 8 Secretary to my left, and provide her with any written 9 statements that you may have, 20 copies, please. 10 The second item on the agenda today, as I said, is 11 96-1-2, a public hearing to consider amendments to the 12 emission control regulations for 1995 and later utility and 13 lawn and garden equipment engines. 14 We have before us a petition for the Board to 15 amend the emission control regulations for 1995, and later 16 utility equipment engines. 17 Under consideration and review today are 18 amendments to revise the emission standards for Class I and 19 II category utility engines in response to that petition 20 from industry. 21 And, at this point, I would like to ask Mr. Boyd 22 to introduce the item and begin the staff's presentation. 23 MR. BOYD: Thank you, Mr. Chairman, and let me add 24 my welcome to the students from Redlands. Even though I'm a 25 U.C. Berkeley graduate, I can be charitable to Redlands. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 don't have a football team, either. 2 (Laughter.) 3 MR. BOYD: The regulation for utility and lawn and 4 garden equipment engines that we refer to as utility 5 engines, as you heard earlier in the day, was originally 6 approved by the Board on December 14th, 1990, and was 7 formally adopted or put into effect in March of 1992. 8 These regulations include exhaust emission 9 standards and provisions for emission test procedures, for 10 labeling, for the warranty, and establish the compliance 11 programs. 12 Among these many things, the regulations, as 13 initially adopted, established a carbon monoxide emission 14 standard of 300 grams per brake horsepower hour for so- 15 called Class I and Class II engines. 16 In July this past year, the Briggs and Stratton 17 Corporation petitioned the ARB to modify the carbon monoxide 18 standard, as I said, of 300 grams per brake horsepower hour 19 for the Class I and II categories to a figure of 350 grams 20 per brake horsepower hour on the grounds of, as they state, 21 technical difficulties in achieving the 300 gram per brake 22 horsepower hour carbon monoxide standard. 23 The petition to us contended that unless the 24 standard is modified, approximately 60 percent of the lawn 25 mower engines normally provided for sale in California would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 no longer be available. 2 It was alleged that this would cause severe and 3 adverse effects on a number of small businesses which sell 4 and utilize these engines. 5 After an extensive and thorough review of the 6 situation, we concur with the industry on this issue, and we 7 propose that the Class I and II utility engine carbon 8 monoxide standard indeed be amended from 300 grams per brake 9 horsepower hour to 350 grams per brake horsepower hour. 10 So, with that, I'd like to introduce Mr. Mike 11 O'Connor of the Mobile Source Division, who will now make 12 staff's detailed presentation. 13 MR. O'CONNOR: Thank you, Mr. Boyd. 14 Chairman Dunlap and members of the Board, good 15 afternoon. The previous staff presentation outlined the 16 significant progress which has been achieved by the utility 17 engine industry. Staff is confident that the utility engine 18 manufacturers will continue in their effort to meet the 1999 19 emission standards. 20 Additionally, as presented, most utility engine 21 manufacturers have met the current 1995 emission standards. 22 However, as staff works with industry, difficulties meeting 23 the emission standards are brought to our attention. 24 One such difficulty which surfaced recently 25 involves the stringency of the current carbon monoxide, or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 CO, standard for Class I and II utility engines. Two engine 2 models that represent the major portion of the engines used 3 primarily for low cost, high-volume walk-behind lawn mowers 4 have yet to be certified due to the stringency of the 5 standard. 6 To address this issue, staff is proposing to adopt 7 amendments to revise the current CO standard for non- 8 handheld utility engines from 300 grams per brake horsepower 9 hour to 350 grams per brake horsepower hour. 10 In July, 1995, the Briggs and Stratton Corporation 11 submitted a petition to the Air Resources Board requesting 12 that the CO standard for non-handheld utility engines be 13 amended from 300 grams to 350 grams. This proposed 14 amendment would be effective for the 1996 through 1998 15 calendar years. 16 In the petition, Briggs and Stratton cited 17 technical difficulties in achieving acceptable performance 18 from two of their largest volume engine models when 19 calibrated to the 300 gram CO standard. 20 Briggs and Stratton is seeking this amendment in 21 order to certify these two large volume engine models, and 22 thus prevent potentially unacceptable engine performance, 23 which could lead to excessive warranty claims and costs. 24 The Briggs and Stratton engine models 9 and 12 are 25 low-cost, simple utility engines used in walk-behind lawn PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 mowers and other lawn and garden equipment. Lawn mowers 2 with the Model 9 have sold for as low as $100 in some retail 3 stores. 4 Sixty percent of California utility engines used 5 for lawn mowers are represented by these two engine models. 6 During product development, Briggs and Stratton found that 7 an unacceptable number of engines exhibited poor performance 8 when calibrated to the 300 gram CO standard. 9 Consequently, these engine models were not 10 certified in California for 1995. Presently, Briggs and 11 Stratton is selling pre-controlled Models 9 and 12 in 12 California, because these engines were produced prior to 13 July, 1995, when the U.S. EPA granted the ARB authorization 14 to enforce the 1995 emission standards. 15 When this supply of engines is exhausted early in 16 1996, Briggs and Stratton asserts that the California market 17 will no longer have the current volume of low-cost utility 18 engines. 19 Consequently, they predict a negative economic 20 impact affecting a number of business segments. Briggs and 21 Stratton would incur large engine sales reductions. 22 California lawn and garden equipment manufacturers, which 23 use the Models 9 and 12 in their equipment, will be forced 24 to choose alternative engines and make equipment design 25 changes to accommodate these alternative engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 This would increase the cost of the equipment, 2 which would ultimately be passed on to the consumer. If 3 business is reduced, the petition contends that employment 4 reductions may follow. 5 Furthermore, Briggs and Stratton believes a 6 negative air quality impact may also result if the Models 9 7 and 12 are not available. If, for example, consumers 8 shopping for lawn mowers realize that the $100 lawn mower is 9 not available, then they may choose to delay their purchase. 10 This would postpone the air quality benefits expected from 11 retiring older, uncontrolled lawn mowers, since they would 12 otherwise be replaced with new law mowers. 13 New lawn mowers which would meet the 1995 14 standards would emit approximately 70 percent less HC plus 15 NOx and 46 percent less CO, even with the proposed 350 gram 16 CO standard. 17 Staff assessed the Briggs and Stratton petition 18 and concurs with most of their points in supporting the CO 19 standard amendment. 20 It should be noted that staff does not agree with 21 Briggs and Stratton's position that the 300 gram CO standard 22 is infeasible for low-cost utility engines such as the 23 Models 9 and 12, especially since catalyst technology is 24 becoming available. 25 However, staff acknowledges that the 1995 emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 standards, as adopted in December, 1990, were not predicated 2 on catalyst technology. Based on the information provided 3 by Briggs and Stratton, staff recognizes their significant 4 technical effort in trying to meet the 300 gram CO standard. 5 In addition, it is noted that Briggs and Stratton 6 was successful in achieving the 1995 HC plus NOx standard 7 with the Models 9 and 12. Briggs and Stratton's arguments 8 outlining the potential negative economic impact of 9 unavailable Models 9 and 12 are plausible, although staff 10 cannot comment on the potential magnitude of the economic 11 impact without conducting extensive marketing research 12 studies. 13 Concerning the air quality impact, staff concludes 14 that it would be likely that some consumers and lawn care 15 businesses would retain the older, uncontrolled lawn mowers 16 in use and therefore slow the turnover rate to lawn mowers 17 meeting 1995 standards. 18 This slowed turnover rate would have a negative 19 impact on the State's ozone attainment progress. Staff has 20 determined that the air quality impact of relaxing the 300 21 gram CO standard to 350 grams could range from five tons per 22 day to 22 tons per day over the entire State in 1998. The 23 minimum impact estimate is based only on the two Briggs and 24 Stratton Models 9 and 12 certifying to 350 grams with all 25 remaining engine brands and models meeting the 300 gram PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 level. 2 The maximum impact is based on all Class I and II 3 utility engines certifying at the 350 gram level. 4 This impact is less than 0.2 percent of the total 5 on-road CO inventory statewide. To better visualize this 6 extremely small impact, the 22 tons per day inventory 7 increase is compared to the CO inventory levels of the 8 primary mobile source categories. 9 The CO impact cannot really be depicted on the 10 graph when compared to these categories. This minor loss in 11 CO reduction is not predicted to hinder California's 12 progress in achieving the national ambient air quality 13 standards for CO attainment. 14 The monthly maximum CO concentration levels are 15 shown for a typical monitoring station in the South Coast 16 Air Basin. As can be seen, in 1994, the ambient CO standard 17 was exceeded only in January and in December. Since lawn 18 mowers are mostly used in the spring and summer months when 19 the ambient CO levels are well below the ambient CO 20 standard, the minor impact of this proposed CO amendment 21 would have no significant effect on the good CO attainment 22 progress. 23 CO attainment is scheduled to be achieved by the 24 year 2000. 25 Besides having no effect on CO attainment, by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 allowing utility engine manufacturers to certify to the 2 proposed 350 gram CO standard, while maintaining the tight 3 1995 HC plus NOx standards, ozone attainment would remain on 4 schedule. 5 Ozone is the more challenging air quality problem 6 in California. 7 There is one minor issue to note. Although 8 numerically equivalent, the proposed 350 gram CO standard 9 would not be equivalent in stringency to the federal 350 10 gram CO standard, which is scheduled to be implemented in 11 the 1997 model year. The proposed CO standard is considered 12 to be more lenient than the federal standard, since 13 California allows the use of reformulated gasoline for 14 certification. Reformulated gasoline has shown up to a 50 15 gram reduction relative to nonreformulated gasoline in 16 utility engines. 17 The U.S. EPA presently does not allow the use of 18 reformulated gasoline for certification, since this fuel is 19 not available in most States. When the U.S. EPA set the 350 20 gram standard, they assumed that the emissions data provided 21 by Briggs and Stratton in the rulemaking process was based 22 on using the standard nonreformulated gasoline test fuel. 23 In fact, the data was generated with California's 24 reformulated gasoline, which the U.S. EPA has since 25 recognized. Consequently, the U.S. EPA has indicated that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 they will consider the issue, review all data, and possibly 2 initiate a rulemaking to raise the CO standard by the amount 3 of the emission offset that would be caused by using 4 nonreformulated gasoline test fuel. 5 Irrespective of the U.S. EPA's action, in the 6 aggregate and considering the Air Resources Board's 1999 7 emission standards, California emission standards for 8 utility engines are more stringent than the federal emission 9 standards. 10 In conclusion, staff supports the Briggs and 11 Stratton petition requesting that the Air Resources Board 12 amend the current non-handheld CO standard of 300 grams to 13 350 grams. There is justifiable concern for the potential 14 adverse economic impact of retaining the 300 gram CO 15 standard for these classes and the possible subsequent 16 reduction in engine model availability. 17 The environmental impact due to the amending of 18 the 1995 CO standard for non-handheld utility engines is 19 minor. It would not prevent California from CO attainment. 20 This concludes my presentation. 21 We will be happy to answer your questions. 22 CHAIRMAN DUNLAP: Okay. Any questions of staff? 23 Dr. Boston. 24 DR. BOSTON: Yes. Staff, would this rule change 25 apply to all companies or only to Briggs and Stratton, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 have other companies met the standard as that Model 9 and 12 2 similar engines? 3 MR. O'CONNOR: This particular rule would apply to 4 all companies. 5 DR. BOSTON: And what would that do for the 1999 6 standards? Does Briggs and Stratton still think they can 7 meet the 1999? 8 MR. O'CONNOR: Well, this is a totally separate 9 issue from '99 standards. 10 DR. BOSTON: Why? 11 MR. O'CONNOR: Well, I mean the petition itself 12 does not mention the '99 standards as an issue. 13 DR. BOSTON: So, that means that '99 standard 14 still applies? 15 MR. O'CONNOR: That's correct. 16 MR. CACKETTE: Dr. Boston, I think it's the 17 general belief that these engines, which are called L-head 18 engines -- which are fairly antiquated technology -- will be 19 replaced by the '99 model year. So, this is an interim 20 issue. And there are other engines that do meet the CO 21 standard. This was one that was unique to what happened to 22 be the largest selling lawn mower engine, two largest 23 selling lawn mower engines sold, and the ones that happened 24 to be right at the bottom of the price point category. 25 DR. BOSTON: They're two-stroke engines? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 MR. CACKETTE: No, they're four-stroke engines. 2 DR. BOSTON: They're four-stroke. 3 MR. CACKETTE: They're considerably cleaner on a 4 per-hour basis than anything we were talking about this 5 morning by a factor of probably 10 on hydrocarbons at least. 6 DR. BOSTON: Okay. 7 MR. CACKETTE: I think the thing that, you know, 8 that made it a less difficult situation decision for the 9 staff at least was the fact that these tend to be the stuff 10 that you and I might buy and not the professionals would 11 use. They tend to use the bigger, higher horsepower engines 12 and more durable overhead valve engines. I don't mow my 13 grass too often in December and January when we have the 14 limited CO season. 15 So, these do comply with the hydrocarbon and NOx 16 standards, which is what our greater concern is during the 17 summer, spring, and fall months. 18 CHAIRMAN DUNLAP: Mr. Calhoun. 19 MR. CALHOUN: Did the petition that we received 20 include any data using reformulated gasoline? 21 MR. SHEARS: I believe it was all based on RFG. 22 CHAIRMAN DUNLAP: Okay. 23 CHAIRMAN DUNLAP: And -- go ahead, Bob, you want 24 to say something? 25 MR. CROSS: I think that the -- if you'll recall PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 in the staff presentation, the development data that Briggs 2 supplied to EPA was based on RFG. I think that once they 3 understood that the California standards were linked to RFG 4 fuel, they did the bulk of their development on that fuel. 5 MR. CALHOUN: Okay. 6 MR. CROSS: So, the frame of reference that we're 7 in is reformulated gasoline. 8 MR. CALHOUN: Okay. All right. Thank you. 9 CHAIRMAN DUNLAP: Okay. Any other questions of 10 staff before we go to our witness list? 11 Okay. Very good. I'm going to call several at 12 once. I'd ask you to queue up so we can be efficient in our 13 use of time. 14 Robert Wyman with Latham & Watkins, followed by 15 Peter Hotz, Briggs and Stratton Corp; and Frank McLane with 16 McLane. 17 We'll ask you, Mr. Wyman, to go first. 18 Again, I would ask those witnesses that are going 19 to share with us their perspective, please be judicious in 20 your use of time and avoid being redundant. Thank you. 21 Hi, Bob. 22 MR. WYMAN: Good afternoon, Mr. Chairman, members 23 of the Board. It's a pleasure to be here this afternoon. I 24 should say that it was with some surprise that I heard you 25 consider the research proposals this afternoon, because a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 few months ago when I was sitting in my doctor's office, he 2 asked if I'd be willing to let him take a blood sample for 3 Dr. Cass' new study on allergens from road dust. 4 And I'm happy to see that the work that I 5 contributed to is going to be pursued by your Board. 6 (Laughter.) 7 MR. WYMAN: I'm curious what the findings will 8 show. Hopefully nothing that will be too much bad news for 9 me. But I certainly respect Dr. Cass, and it was an 10 interesting coincidence. 11 Thank you for the opportunity to speak before you 12 today. My name is Bob Wyman. I'm a partner with the law 13 firm of Latham & Watkins, which is headquartered in Los 14 Angeles, and I'm here today appearing on behalf of Briggs 15 and Stratton, one of the many petitioners in this matter. 16 The only slide that I have is one that hopefully 17 will be up any second here. And the purpose of this is to 18 show you the range of petitioners who joined us in our 19 request to you today. 20 As you can see, this is a broad spectrum of 21 companies, everywhere from the engine manufacturer -- in 22 this case, Briggs and Stratton -- to original equipment 23 manufacturers, the lawn mower manufacturers. There are 24 several on this list. They are California companies. They 25 employ California employees -- to training and retail -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 excuse me -- training and repair companies, to landscaping 2 service providers. 3 This is a broad network of people who rely on the 4 access to Briggs and Stratton engines. You will not 5 fortunately have to hear from all of them today, but we do 6 have with us a couple of people from different parts of this 7 distribution network who are here, have a significant 8 investment in California, in both cases family owned 9 companies. And I think you'll be interested to hear their 10 point of view in brief testimony before you this afternoon. 11 Unless there's some questions on the slide, that's 12 all we need on this slide. So, if I could have the lights 13 back on. 14 My testimony actually will be fairly brief. I 15 think the staff's presentation is outstanding and really 16 puts the issues quite well. And our purpose today is just 17 to make sure that you hear enough about the technical 18 difficulties that we encountered and the potential adverse 19 economic impact, so that it gives full flavor to what the 20 staff has already reported to you. 21 And there are just a couple of issues that I would 22 like to hit. You know, of course, that our request before 23 you this afternoon is that you modify the CO standard from 24 300 to 350 grams per brake horsepower hour. 25 And to put that in proper perspective, I wanted to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 make sure the Board understands that this is in the context 2 of what we view as a terrific success. 3 Tier I, as you heard this morning, has resulted in 4 some extraordinary reductions in emissions from the 5 pollutant of greatest concern to you, the secondary 6 pollutant of ozone. And one of the primary reasons why we 7 are before you today is to make sure, while obviously we are 8 concerned about our business interests and that of our 9 customers and distributors, the other benefit of approving 10 the staff's recommendation is getting quickly into the hands 11 of the consumers in this State the cleaner engines that were 12 produced as a result of your standard in 1990, the Tier I 13 standard. 14 And viewed in that context of extraordinary 15 reductions in hydrocarbon and NOx and extraordinary 16 reductions in CO, although not as extraordinary as you might 17 have hoped at the beginning, this is a success story and not 18 otherwise. 19 I'd like then just to -- before I introduce the 20 witnesses -- simply make a comment on two points. One is on 21 the harmonization of the standard with the EPA standard. As 22 you've heard, EPA was given the same data from Briggs and 23 Stratton that we have given to your staff. And EPA's 24 conclusion was the same as your staff's recommendation, 25 except that there was a miscommunication, and we'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 certainly accept blame for this -- although it wasn't 2 intentional -- as to the nature of the test fuel. 3 And the impact of that discrepancy is that EPA now 4 will need to go back and once again adjust their standard to 5 harmonize it with your action today. 6 This week, your staff and I and others in the 7 public received a letter from EPA confirming that it is 8 their current intention to do that. And to me, that's very 9 important that your Board know that should you take this 10 action today, in the very near term, the action you would 11 take and the action that EPA is likely to take would be the 12 same, so that their Phase I and your tier I would, in fact, 13 be identical. 14 I think that's important, because I know it's 15 important to you to keep an eye on what EPA is doing and to 16 harmonize those to the extent possible in either direction. 17 So, if you have questions about that, I'd be happy 18 to address it further. We've had extensive discussions with 19 EPA, and I'm quite confident that they will end up in the 20 same position. 21 The second issue I'd like to raise before 22 introducing witnesses is on the question of technologies. 23 There was a great deal of debate this morning about new 24 technologies. And, of course, that is your goal and ours in 25 part as well to accelerate the introduction of new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 technologies, be it catalysts, be it alternative fuels, be 2 it new engine design. 3 These are advances that Briggs and Stratton is as 4 enthusiastic about as you, subject only, of course, to the 5 assurance that it does not impede the performance of its 6 product and therefore the quality of its label and, of 7 course, the price, so that it can remain in the markets in 8 which it currently participates. 9 You will hear I think later today, judging from 10 the witness list, from two or three individuals who have 11 good ideas, technologies, to offer. And while we cannot 12 today -- at least now -- tell you in each case whether they 13 have good ideas or bad ideas, or whether they may be good 14 ideas but for other applications, I can tell you that Briggs 15 and Stratton certainly stands ready to evaluate fully any 16 technicality that is based on sound engineering principles 17 and where we have some assurance from the person with the 18 idea that we can protect the confidentiality of the data 19 that is being shared with us and not get into any difficulty 20 in terms of protecting their proprietary interest. 21 We expect -- I know with at least one of the 22 witnesses -- to work cooperatively with them in the future. 23 And, of course, as we work on Tier II, which we will 24 continue to work towards, we give you our commitment that we 25 will share our data with your staff in the months and years PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 ahead, so that you can know in a near-term basis what 2 conclusions we are reaching and get a better idea of the 3 likelihood of succeeding on your Tier II objectives within 4 the context of business needs and consumer needs. 5 I will also tell you, as you heard this morning, 6 that in many cases Briggs and Stratton has, in fact, 7 introduced those technologies in appropriate markets. They 8 have, as I think you heard this morning, some engines that 9 have catalysts on them. They have engines, stationary ones, 10 that use compressed natural gas. 11 So, I think that's pretty good evidence that where 12 it's possible Briggs will introduce these technologies into 13 the marketplace, subject to the criteria that I mentioned at 14 the outset. 15 We very much appreciate the time to present the 16 evidence we're about to present to you this afternoon. I 17 will not take further time, except to ask you that if, at 18 the end of our presentation -- for which we have three more 19 witnesses -- if there are questions that are unanswered, I 20 would like to come back up and briefly make sure that we 21 have completed our testimony. 22 With that, I would like to introduce to you three 23 individuals. Let me introduce them each now, and then 24 they'll come up one after the other to make it more 25 efficient. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 The first is a gentleman by the name of Peter 2 Hotz. Pete is a managing engineer at Briggs and Stratton 3 Corporation. He is the individual who, among others, has 4 worked very closely with your staff to help them in reaching 5 today's recommendation to you. And he will address to you 6 the technical basis for the staff's recommendation and our 7 request. 8 We also have with us two other gentlemen who 9 really are extraordinary, and we are very grateful for them 10 appearing today. One is Mr. Frank McLane. Mr. McLane is 11 the chairman and founder of a company that is celebrating 12 its fiftieth year here in California in business. He is the 13 founder and chairman of the McLane Manufacturing Company, 14 which is the largest producer of gasoline-powered lawn 15 mowers and edgers in California. 16 We also have with us today Mr. Jack Plutte. Of 17 course, Mr. Plutte has reminded me that his most important 18 characteristic is as an Eagle Scout. But he also has 19 something to add to us on the subject today. He also is 20 with a California family owned company that has been here, 21 in this case, for 80 years. They provide service to the 22 users of Briggs and Stratton engines, both in training 23 people as to how to service these engines, but also in 24 repair. 25 And I think both of these individuals will give PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 you a good flavor of why we are concerned about the impacts 2 that could occur if the petition were not granted. 3 So, let me then ask Mr. Pete Hotz if he could take 4 you through some of the technical issues. And, again, thank 5 you for the opportunity to appear before you today. 6 CHAIRMAN DUNLAP: Thank you, Mr. Wyman. 7 Please, bring them forward. Welcome Mr. Hotz. 8 MR. HOTZ: Thank you very much. I guess I'm not 9 as tall as Mr. Wyman here. (Remarking on microphone 10 placement.) 11 Okay. Good afternoon, Mr. Chairman and members of 12 the Board. My name is Pete Hotz. I'm a managing engineer 13 with Briggs and Stratton Corporation. 14 This is my first opportunity to testify at an Air 15 Resources Board hearing. Although I'm an engineer by 16 training, I will attempt to be brief. 17 Before I begin, I'd like to join Bob in thanking 18 the Mobile Source Division staff for their help and support 19 in considering our petition. Briggs and Stratton is 20 relatively new to mobile source emissions regulations and to 21 the California regulatory process. 22 We want to do our part to help California meet its 23 air quality goals and to continue to do business in 24 California. The staff has devoted a great deal of time and 25 effort in helping us to meet both objectives. We very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 appreciate their efforts and look forward to our continued 2 cooperation. 3 As Bob's indicated, I'm a managing engineer with 4 Briggs and Stratton Corporation. Briggs and Stratton is 5 part of a large network of companies who manufacture engines 6 for use on equipment in the California market. Our engines, 7 along with those of our competitors, enter the distribution 8 system as shown in this chart. 9 There are over a hundred California-based OEM 10 manufacturers who buy engines for use on equipment such as 11 lawn mowers, edgers, trimmers, and a variety of other 12 equipment. Those OEMs, as well as OEMs outside of 13 California, sell their products to thousands of 14 distributors, retailers, dealers, rental centers throughout 15 California. 16 These businesses then sell equipment to 17 residential and commercial customers. It is estimated that 18 each year, California buys in excess of three-quarters of a 19 million pieces of equipment using engines subject to this 20 regulation. More than half of these purchases consist of 21 equipment priced at under $200 -- the primary application of 22 this being walk-behind lawn mowers. 23 Firms from every part of the distribution system 24 are participating in this petition. People from two of 25 these businesses are signed up to testify today, and will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 also be able to explain what is at stake for them. 2 I'd now like to show you why this petition is so 3 important to Briggs and Stratton. 4 We are the largest producer of engines sold in 5 California. In a good year, we will sell over 400,000 6 engines to our OEMs and distributors in California. Most of 7 the sales are in two engine models -- the Quantum and the 8 Classic engines. 9 As the chart shows, these two engines account for 10 approximately 6 million engine sales per year worldwide. If 11 you survey the price of lawn mowers available for mass 12 merchandisers, it quickly becomes clear that engines we sell 13 for walk-behind lawn mowers generally cost below $100. 14 Historically, these engines have represented about 15 60 percent of all engines subject to this regulation that 16 are sold in California. 17 Briggs and Stratton was an early supporter of the 18 current California standards which the Board adopted in 19 1990. Although we have probably spent more money on 20 research and development and new capital investment to meet 21 the current standards than any other company, we have thus 22 far been unable to meet the CO standard. 23 I would like to take the time to explain our 24 difficulty in meeting the standard and why a change to the 25 standard would serve both the public's interest in clean air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 and Briggs and Stratton's need to keep ourselves and our 2 customers in business here. 3 While we've been unsuccessful in meeting the 300 4 gram per horsepower standard, the chart shows we have 5 nonetheless made significant emission reductions with the 6 Tier I engines over previously uncontrolled engines. 7 We are not alone, however, in our inability to 8 meet the CO standard. We estimate that the industry has 9 certified substantially less than 50 percent of the total 10 volume of California sales in the year prior to the 11 regulation going into effect. 12 The 1990 Air Resources Board -- in 1990, the Air 13 Resources Board determined that the control measures shown 14 in the following slide in red should be considered by 15 manufacturers in order to meet the Tier I standards. Briggs 16 and Stratton has tried each of these control measures and 17 additional control measures shown on the chart. 18 Those measures that have been shown to be 19 effective in reducing emissions have been implemented. In 20 our efforts to reduce emissions, we've spent approximately 21 four and a half million in capital improvements on the 22 Quantum and Classic engines alone, which, as I stated 23 earlier, are the largest volume sales engines in California. 24 Our efforts to reduce emission levels on the 25 Quantum in particular has paid off as we are now able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 certify this engine well under the 12 gram standard. As you 2 can see from our petition, the problem we are dealing with 3 is the CO standard. 4 In order to reduce CO emissions, we are forced to 5 reduce the fuel to the engine. Fuel systems on these 6 engines are simple designs using carburetors instead of 7 complex fuel injection and electronic controls. Due to the 8 simple design, the fuel systems on these -- due to the 9 simple design of the fuel systems on these engines, reducing 10 CO has caused several problems. 11 First, as the engines are enleaned or fuel is 12 reduced, the HC and NOx tends to decline until a minimum 13 point is reached, at which point further enleanment starts 14 to cause an increase in HC and NOx emissions as shown on 15 this chart. 16 I think the key on the chart is to look at the 17 fact that the bigger the number the leaner the engine. So, 18 as you go to the smaller number on the left, you're actually 19 getting richer, and you can see the resulting CO curve. 20 On this slide, there is an optimal point at which 21 the carburetor can be calibrated in order to achieve the 22 lowest HC and NOx level. And that would be the point where 23 the two intersect or close to where they intersect in the 24 bowl of the HC and NOx curve. 25 Second, the enleaned engines exhibit performance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 problems when picking up load and when starting in cold 2 temperatures. This is exhibited in the following chart. 3 What this chart depicts is the same engine with three 4 different carburetor values -- 322 grams per brake 5 horsepower hour, 275, and 225. 6 And what you see there is, as a load is applied to 7 those engines -- in the first case, with the 322 gram per 8 horsepower engine, the engine picks up the load -- picks up 9 the load and takes off, and the speed comes back up. 10 In the second case, you'll see that the engine 11 tends to stumble. That's where the jagged line is, and then 12 it finally picks up the load. 13 In the third case, the engine stalled and had to 14 be restarted, and then came back. 15 As you can see, enleanment will cause the engine 16 to stumble, then die as you further enlean the carburetor. 17 Unlike automobiles, utility equipment must operate under a 18 wide range of load conditions at nearly full speed at all 19 times. Much of this equipment is started and run at very 20 light loads until power is required to do work. 21 In many cases, loads are applied instantaneously. 22 These are the most difficult operating conditions that lean 23 engines encounter. This is why it's possible to run the 24 engines at a very lean condition on a dynamometer, and even 25 certify the engines under the J-1088 test, but to be unable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 to sell the engine due to unacceptable performance on the 2 customer's piece of equipment. 3 Briggs and Stratton is very cautious when it comes 4 to acceptable customer performance. Our surveys indicate 5 that Briggs and Stratton's name has a very high brand 6 recognition, much higher than any of our competitors. 7 Unlike any of our competitors, we make nothing but engines. 8 In terms of revenue, we are one of the smallest 9 companies building engines in the United States, yet we 10 produce more engines than anyone else in the world. If we 11 have a dissatisfied customer, the competitive nature of our 12 markets that we compete in generally require us to buy back 13 the engine. 14 As shown in this slide, even if the unit is taken 15 in for repair, our warranty data indicate that anything 16 other than a minor adjustment generally approaches the cost 17 of the engine. Even if only a small portion of our 18 customers would return the product, the financial cost, 19 along with the damage to our reputation, would be 20 significant. 21 Our survival depends on small engines. We have 22 nothing else. As I've shown you previously, Briggs and 23 Stratton is working very hard to find solutions to this 24 problem. One of the key technologies that the staff report 25 focused heavily on is catalytic converters. We have already PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 released a small number of catalyst equipped engines -- 2 engines equipped with catalytic converters. 3 These engines are part of a test program to assess 4 the safety and durability of the catalytic converter. The 5 information gained from this limited program will be used as 6 part of our strategy for the second phase of emission 7 standards both in California and nationally. 8 As the staff noted in their report, there's no 9 manufacturer that has begun to produce a mass market engine 10 that uses catalytic converters. We believe that catalytic 11 converters are not ready for application on utility engines 12 at this time. The temperatures of the catalysts are higher 13 than we feel are acceptable for the conditions that they may 14 encounter. 15 The chart shows the higher operating temperatures 16 that catalytic converters create. Those temperatures 17 require changes in everything from the metal alloy of the 18 engine blocks to the size, location, and thermal 19 characteristics of the muffler, and parts of the lawn mower 20 near the muffler. 21 We are also concerned about the durability and the 22 cost of converters that we have been able to evaluate. they 23 are not a solution to the problem we face in Tier I. 24 Indeed, there was no expectation in 1990, that converters 25 would be required for Tier I. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 This slide indicates the staff's agreement that 2 catalysts were not intended for Tier I. Unfortunately, many 3 of the technologies that are used in automotive to control 4 fuel and combustion are too expensive for today's small 5 engines and are thus not appropriate for use at this time. 6 Better designed engines like those being produced 7 to meet the Tier I standards exhibit much more durable 8 performance over the life of the engine. Further engine 9 improvements will be required before catalysts are 10 appropriate for these markets. 11 The new standard that we are proposing is 350 12 grams per brake horsepower hour. The 350 gram limit will 13 put us in the acceptable performance range. It will also 14 put us well below the limit set by the 1990 standard for HC 15 plus NOx. 16 The 350 gram standard is the lowest achievable 17 limit for these engines without additional expensive control 18 measures. 19 The proposed standard would allow Briggs and 20 Stratton to provide a continuing supply of engines to the 21 California market. The staff report states the importance 22 of not delaying the turnover of old engines, and further 23 notes, the resulting HC and NOx reductions are critical to 24 ozone attainment. 25 In conclusion, we believe the petition will ensure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 California gets the critical reductions in ozone precursor 2 emissions on schedule set by the Board in 1990. It also 3 ensures that the Tier 1 regulations allow Briggs and 4 Stratton and its customers to provide a continuous supply of 5 reasonably priced products to the California market. 6 Finally, it gives Briggs and Stratton the 7 flexibility it needs to ensure that each of our engine 8 models are at or near the lowest HC and NOx control that we 9 can achieve prior to the start of the Tier II program. 10 Thank you very much for your time, and I'd be 11 happy to answer any questions you may have. 12 CHAIRMAN DUNLAP: Thank you, Mr. Hotz. Any 13 questions of our witness? 14 Okay. We'll proceed. Mr. Wyman, next? Who's 15 next up? Mr. McLane. 16 MR. WYMAN: Thank you, yes. We have Mr. Frank 17 McLane. 18 CHAIRMAN DUNLAP: Okay. Good afternoon, sir. 19 MR. McLANE: Good afternoon. My name is Frank 20 McLane. I'm the chairman and founder of McLane 21 Manufacturing. We started in business in Compton 50 years 22 ago in January. In fact, I saw my retail sales slip that 23 had that date on it. I still have it in my drawer. So, 24 we've grown from a two-man operation, to now we're employing 25 between 300 and 350 employees. We have another plant out in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 Palm Springs, where we manufacture all our plastic products. 2 We are very unique. We are one of the few 3 manufacturers of lawn mowers and edgers that I know of in 4 the United States that makes 90 percent of their parts. We 5 make our own wheels, even make the set screws that goes in 6 the equipment. We started out that way, and we've continued 7 that way, where most normal manufacturers are more or less 8 assemblers. They buy most everything outside and put it 9 together. 10 But we're different that way. The only thing we 11 depend on is buying engines from Briggs and Stratton. 12 Without them, we're shut down. We're out of business. So, 13 it's very important to us that we do continue to get 14 engines. And if we had to buy from some other tooling 15 that's tooled around the Briggs and Stratton engine, we'd 16 have to make changes if we used somebody's other engine. 17 And not only that, the public we found over all 18 the years -- Briggs and Stratton is much more acceptable, 19 easy to sell, and service is better. It's just -- the 20 public wants it. And we want to use something that the 21 public's going to buy, because we've got to sell it. 22 We sell to Sears, Sam's, Home Depot, Home Base, 23 Price/Costco -- some of our customers. 24 It used to be that lawn mowers were sold through 25 independent lawn mower shops. But that is changing. It's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 going now to the mass merchandisers. We still have 2 distributors. We even sell in Tokyo and Europe some, not 3 big, but we are competitive. 4 And if the price of engines goes up, we lose that 5 competitive position. So, it's very important. 6 We also make mowers for Sears under the Craftsman 7 name and have for years. 8 CHAIRMAN DUNLAP: That will please Ms. Edgerton. 9 (Laughter.) 10 CHAIRMAN DUNLAP: Because we all know that's where 11 she shops, because she told 400 people that this morning. 12 MS. EDGERTON: And also they're built in 13 California. 14 MR. McLANE: Well, in 1990, I went to the South 15 Coast Air Quality meeting. I had heard about it, and I 16 wanted to sit in and see what was going on. And I just sat 17 through the meeting. Then, I made my mind up that I was 18 going to build a battery-powered lawn mower, which I did. 19 I started on it right after that. I spent $2 20 million tooling and designing. We made a very successful 21 battery-powered lawn mower, and we still have it, and we 22 still sell a few. But I was very disappointed, because our 23 sales are like one or two a day, just practically nothing. 24 Home Depot was good enough to test it in their 25 stores, and a good percentage of them came back. And the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 main reason they came back is the customers were not 2 satisfied; it didn't run long enough. 3 We were -- with the 65 amp/hour battery, we were 4 getting about 40 minutes on an average -- sometimes more, 5 sometimes less. 6 It's good enough for a small lawn, but not quite 7 enough. Now, I still have a lot of faith in a battery- 8 powered, but the technology for a good battery's still, in 9 my opinion, not there yet. 10 The time is going to come, and the battery-powered 11 mower has a lot of advantages. But you have -- you got to 12 stay in business, you got to make money, and right now 13 that's not the way to go, because I sure lost a bundle on 14 it. But we haven't given up. 15 I have one at home. I live in the Palm Springs 16 area, Bermuda Dunes. My gardener uses it once a week. I 17 tell him I only want my lawn cut with this lawn mower. I 18 don't cut it myself. I'd rather play golf if I have a 19 little time off. 20 But he's been running it now for a year. He likes 21 it. But just the other day he says, "You know, I think we 22 need a new battery. It's not finishing the lawn now." As 23 the batteries get old, they seem to lose some. The battery 24 manufacturer says the battery's good for five years. Well, 25 it probably is, but not a hundred percent. I think they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 lose. 2 Right now, I'm making another change. I'm adding 3 two batteries. In the test that we run with that, we're 4 able to get an hour 40 minutes running, which is good. But 5 now you're adding more weight, you're adding more cost. So, 6 the cost of the battery power -- and we furnish a six-amp 7 charger, automatic charger that goes with it. Our cost is 8 higher than a gasoline engine. 9 And the public will not pay the difference. 10 They're not used to it. If you had the money to advertise 11 it on TV, I'm sure we could sell a lot more. But it's going 12 to be a slow process. 13 In the meantime, I urge you to approve Briggs and 14 Stratton's engine, they're new, improved one. Our customers 15 plan a year in advance, like Sam's, Home Depot. Because 16 they make up their mind for the whole year if they're going 17 to buy a product. They don't like to change. 18 And we're committed to service these customers. 19 And if we run out of engines, we're out of business. And, 20 like I say, the reason we have so many people -- we still 21 make over 50,000 edgers and mowers a year, and we also make 22 a putting green mower, too, for putting greens, which is a 23 small volume, but it all helps. 24 At least most of the people in the Paramount area 25 are minority people, I'd say a good percentage of them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 Some of them don't even speak English. But they're good 2 workers, and we've trained them. Because we have punch 3 presses up to 500 ton, automatic screw machines. 4 We have C & C machines. We do our own heat 5 treating, high-frequency heat treating, no pollution 6 whatsoever. 7 We even make our own set screws So, all I can say 8 is thank you for the opportunity. I'll be glad to answer 9 any questions. 10 CHAIRMAN DUNLAP: Okay. Thank you, Mr. McLane. 11 Any questions? Supervisor Roberts. 12 SUPERVISOR ROBERTS: Well, I just had to comment. 13 I don't think Mr. McLane's aware of it, but I think his 14 testimony was maybe insightful for our meeting on electric 15 cars coming up in March. And your experiences are worth 16 noting, because they parallel very closely some other things 17 we're learning about those same batteries. 18 MR. McLANE: Oh, thank you. Yes, I had an open 19 house in our Palm Springs plant, which is -- our building is 20 84,000 square feet -- so, it's a pretty good size -- where 21 we do most of our injection moldings for our catchers and a 22 lot of other small parts. And people from the South Coast 23 Air District were down there to our opening. And they got 24 to run my electric mower. 25 They liked it. They said, "Gee, we wish we could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 help you, but we have no money to subsidize anything." 2 And I said, "Well, we can't afford it." 3 However, we do have a sign on the freeway, a 4 billboard, stating the battery powered lawn mowers. 5 So, we still have not given up on them. But right 6 now, we need your help with Briggs and Stratton. 7 CHAIRMAN DUNLAP: Okay. 8 MR. McLANE: Thank you very much. 9 CHAIRMAN DUNLAP: Thank you. Appreciate it, Mr. 10 McLane. 11 Mr. Plutte, is that who's next? Bob Wyman, Mr. 12 Plutte's next? 13 MR. WYMAN: Yes. Mr. Jack Plutte. Thank you. 14 CHAIRMAN DUNLAP: Okay. 15 Good afternoon. 16 MR. PLUTTE: Good afternoon, Mr. Chairman and 17 members of the Board, and members of the staff. 18 It's just an aside, but Mr. McLane gave me my 19 first job in the industry 35 years ago, and I thought he was 20 old then. 21 (Laughter.) 22 MR. PLUTTE: He is a remarkable individual. Thank 23 you for giving me the opportunity to speak this afternoon. 24 I will be very brief. 25 My name is Jack Plutte, and I'm president of Power PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 Research Company, a California Corporation doing business as 2 Power Equipment Company. We have headquarters and a 3 warehouse in Carpenteria just south of Santa Barbara, and we 4 maintain a sales office and a customer service center in the 5 City of La Verne. 6 We are a small, third-generation family owned 7 California business employing about 25, 26, 27 people. 8 We've been business for over 80 years. And we've had a 9 relationship with Briggs and Stratton for over 65 years. 10 As a central warehouse distributor, our primary 11 function is to provide aftermarket sales and service for 12 Briggs and Stratton products in a very carefully defined 13 geographic area of responsibility, a very specific area. 14 In any given year, our sales of Briggs and 15 Stratton products represent 85 percent to 90 percent of our 16 total gross revenues. And that's pretty well split equally 17 between replacement engine parts and replacement engines. 18 The 12 cubic inch Quantum in an IC, or industrial 19 commercial, version has been our number one seller engine 20 for the past six or seven years. As a matter of fact, we 21 sell three times as many of that engine as we do our number 22 two engine. It's primary use in the rotary lawn mower 23 market as a replacement engine for commercial cutters. Our 24 second biggest selling engine in the replacement market is 25 the 9 cubic inch horizontal engine, something that Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 McLane uses extensively, because that engine primarily goes 2 on lawn edgers and front throw reel mowers, and it also has 3 widespread popularity as a beginning price point unit for 4 the industrial/commercial manufacturers. And you might see 5 those as the beginning price point for small air 6 compressors, pressure washers, and the like. 7 The two engines combined represent 45 to 50 8 percent of our aftermarket engine sales. If Briggs and 9 Stratton was unable to supply us with those two product 10 categories, we would have an immediate, significant, and 11 devastating effect on our bottom line. And I could 12 certainly see our company being forced to downsize somewhat. 13 And the reason is simply that there is no replacement engine 14 in that horsepower range at a price point that the end users 15 would find to be acceptable. 16 On the other hand, if Briggs and Stratton, because 17 of a modified carbon monoxide standard is able to continue 18 to supply us with that engine, the benefit to us would be 19 immediate, not only to us but to the 300 servicing dealers 20 in Southern California who rely on us to continue to supply 21 them regularly with aftermarket repair parts and replacement 22 engines for repowering. 23 Thank you again for allowing me to speak today. 24 CHAIRMAN DUNLAP: Thank you, sir. Any questions 25 of Mr. Plutte? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 Okay. Very good. Mr. Wyman, did you have any 2 closing comments? 3 MR. WYMAN: Mr. Chairman, I have no closing 4 comments. I think you have heard a pretty broad range of 5 testimony. I would merely ask that -- we will be here in 6 the audience. If you hear anything in the next few 7 witnesses that you feel warrants a comment from Briggs and 8 Stratton, we certainly would be pleased to come back up and 9 briefly address them. 10 CHAIRMAN DUNLAP: Okay. 11 MR. WYMAN: But thank you for your time, and we 12 urge you to approve the staff's recommendation. Thank you. 13 CHAIRMAN DUNLAP: Well done. Thank you. 14 Okay. Jed Mandel from EMA/OPEI, whom we heard 15 from earlier; Edward Routery, Controlled Volume Technology; 16 Greg Tomlinson, who's representing himself as a citizen; and 17 William Platz with the Western Propane Gas Association. 18 Hello. 19 MR. MANDEL: Mr. Chairman, members of the Board, 20 back for a second time today. I'm not sure why you deserve 21 this. But I'm going to be extraordinarily brief. 22 Speaking on behalf of the Engine Manufacturers 23 Association and the Outdoor Power Equipment Institute, my 24 only purpose here today is to let you know that EMA and OPEI 25 support the Briggs and Stratton petition and that of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 other California-based businesses, and we urge you to accept 2 the staff's recommendation. 3 CHAIRMAN DUNLAP: Well done. Any questions? 4 (Laughter.) 5 MR. MANDEL: Briggs and Stratton is a member of 6 both EMA and of OPEI. 7 CHAIRMAN DUNLAP: Okay. Thank you. We may have 8 you back for a third time if you're like that. 9 (Laughter.) 10 CHAIRMAN DUNLAP: Edward Routery. Good afternoon, 11 sir. From Controlled Volume Technology. 12 MR. ROUTERY: Good afternoon, Chairman, Board 13 members, and staff. 14 As you can tell, I'm a little nervous. I haven't 15 done this before. I have an awful lot to say, and I'm going 16 to try to make it as small or as compact as I can. 17 CHAIRMAN DUNLAP: Okay. 18 MR. ROUTERY: I heard today that technology isn't 19 available to provide clean burning engines with reduced 20 carbon monoxide, nitrous, and hydrocarbons. However, I've 21 had available to anyone who wanted to look at it since 1990, 22 a process by which any existing engine can be modified to 23 reduce carbon monoxide, nitrous, and hydrocarbons. 24 I have an entire folder of manufacturers I sent 25 off this information to, showing a J-1088. They gave all of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 the requirements by J-1088 clear back in 1990. 2 All of them came back unsigned. Nobody was 3 interested in signing a nondisclosure form. The 4 technology's there. Not just myself. There are other 5 people out there who can do it. You heard from Ryobi today. 6 Ryobi took it on themselves and bore the brunt of a great 7 deal in order to prove that it was a marketable product. 8 I myself have spent a little over a million and a 9 half dollars in the last two years, as a private individual, 10 a corporation, but as an individual -- I don't manufacture 11 anything -- In proving what we proved in 1990, and making it 12 a commercially viable product. 13 It's a very inexpensive product. It doesn't put 14 anybody out of business. It can modify existing engines and 15 doesn't have to Briggs and Stratton. It can be anybody that 16 makes an engine. 17 We have successfully modified 260 Tecumseh engines 18 that we purchased retail. That's how much we wanted to show 19 what it was we could do. 20 We have recently tested the Briggs and Stratton 21 engine, the 9000 engine. We started out at a test with 22 Automotive Testing Labs, and we tested on a baseline test, 23 their engine. And under the test that we performed, which 24 was not a J-1088, or a 13 mode, or a 9 mode test, but both 25 tests were identical. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 The original engine produced 50 grams per brake 2 horsepower hour of hydrocarbon, 260 of carbon monoxide, and 3 .3 of nitrous. 4 On that same engine with just our modification, no 5 carburetor changes, no exhaust changes, no tuning, nothing-- 6 we were just trying to prove that what we did worked -- we 7 dropped the hydrocarbons to 8. We dropped the carbon 8 monoxide to 4, and we dropped -- we didn't drop the nitrous. 9 We took the nitrous up to, I believe it was .45, a very 10 small increase in the nitrous in order to drop out 22 tons a 11 day of carbon monoxide that's dropping into our skies. 12 We've done a lot of research. We've spoken with a 13 lot of people -- the American Heart Association, American 14 Lung Association, Dr. Kleinman of the University here in 15 Irvine. If I can have the time, I'll read you articles that 16 they've actually sent to me. I've spoken with them 17 personally. 18 Carbon monoxide's a killer. I have relatives, I 19 have relations who have had to suffer because of carbon 20 monoxide. And adding 22 tons of it into the air is not 21 something I want to see my grandkids or anybody else have to 22 put up with. 23 If I truthfully believed that Briggs and Stratton 24 was going to have to pull their units out of this area, 25 because it was going to cost them too much money, I wouldn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 be here right now. 2 I'm here because the ability to run a clean engine 3 is there. CARB has seen some of my results. The EPA has 4 seen my results. I can tell you that we have reduced carbon 5 monoxide as much as 96 percent on a two-cycle engine. I can 6 show you that back in 1973, 13 mode tests were done on a 7 Briggs and Stratton engine, the same one they're talking 8 about right now. At the same time, a test was done on the 9 Tecumseh engine that we've tested. 10 The carbon monoxide coming out of the Briggs and 11 Stratton engine at that time in a 13 mode test was 290. 12 That's 1973. They've spent $22 million in order to have to 13 go up in carbon monoxide? I don't think so. 14 And I'm not picking on Briggs and Stratton. A lot 15 of it's communications, getting what we know -- not just 16 myself, but anybody who has worked on this problem -- to 17 those people who actually have to know, the engineers who 18 are in charge. 19 We have been stopped 99 times out of 100 by the 20 attorneys who won't let the engineers hear what we have to 21 say because it doesn't fit in with what the attorneys have 22 decided has to be done by that manufacturing facility. 23 We've spoken to a lot of engineers, and they want 24 what we have. They want to talk to us. And when it comes 25 down to talking to us, well, we can't give you a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 nondisclosure. 2 Now, recently, we've had conversation with three 3 rather large companies. In fact, the recently only really 4 started in December. We have two disclosure forms right 5 now. I think if you were to give us some time, both 6 companies that we have signed disclosure forms with -- and 7 we are in the midst of speaking with a third -- I think if 8 we were to have another six months of time where they 9 actually had a test -- do the testing themselves of our 10 product, and a life test, everything they wanted to do, 11 you'd find you'd be able to go down to maybe 100 and not 12 have a problem with carbon monoxide. I've told you I've 13 gone below that. 14 But I'm trying to get the world a break and say, 15 okay, let's go to 100 instead of 300. Let's reduce it by 16 two-thirds. 17 If you'd like, I have records from or copies of 18 letters from Southwestern Research that identify the fact 19 that we clean up the particulate matter in diesels; that we 20 can reduce carbon monoxide, and that what we do is not 21 something that's strange or calls for rare earths, or 22 catalytic converters, or anything else. 23 What's called for is combustion, just combustion, 24 clean, complete combustion. 25 We provide that ability on any engine that's out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 there. I don't know if you want me to read any of the paper 2 work I've brought from the American Heart Association or 3 from Dr. Kleinman. I'm sure you're all aware of what carbon 4 monoxide does to people. 5 CHAIRMAN DUNLAP: Well, if I may, as I'm sure you 6 know, sir, our primary focus here at the Board is to protect 7 human exposure to air pollution. So, we certainly share 8 your sense of urgency, and protection of public health is a 9 priority. 10 So, I think your emphasis in that area is on track 11 with our mission. In this case, I think we have an item 12 before us that the staff is recommending that we consider 13 making some changes to a regulatory program. But we're well 14 aware of the health implications of our decisions, and I 15 appreciate your emphasis on those points. 16 MR. ROUTERY: I'm a little more shaken up, a 17 little more involved right now. My granddaughter ended up 18 in the hospital last night with lung problems, all coming 19 from this smog that we're allowing to go into the air. And 20 it hurts me, because I know how to clean it up. A lot of 21 people know how to clean it up. 22 A lot of people know the results I've gotten. The 23 J-1088 I got back in 1990 was well below what CARB asked 24 for. I've now -- you know, we started like Edison, with 25 bamboo with filament. And we got better, and better, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 better. We've spent a lot of money, a lot of time. 2 I understand that Briggs and Stratton needs to be 3 able to decide what they're going to bring into the country 4 (sic). But they've already said there are enough engines 5 here to last them until nineteen-ninety -- what is it, 1996? 6 We're already in here. 7 Give me six months, give me time to be able to 8 present the product to anybody who will listen, anybody who 9 will sign a disclosure agreement. I mean that's not just 10 here. That's Mexico. That's anyplace. 11 CHAIRMAN DUNLAP: Supervisor Roberts. 12 SUPERVISOR ROBERTS: Well, it strikes me that this 13 is very relevant to what we were talking about this morning. 14 And I don't know to what extent staff is familiar with this, 15 but I almost think it would have been better to be in on the 16 earlier hearing for you to make this presentation, 17 especially given what we've assigned them to do over the 18 next several months, and to see what options there are out 19 there for correcting a much larger problem. 20 MR. ROUTERY: There was a mixup. I signed up for 21 this morning. 22 SUPERVISOR ROBERTS: Did you? 23 MR. ROUTERY: Yes. But there was a mixup. 24 SUPERVISOR ROBERTS: Well, I wonder if we can get 25 staff to -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 CHAIRMAN DUNLAP: Sure. I think it's a reasonable 2 request, Supervisor. 3 MR. CROSS: We're already aware of his product in 4 talking to him, and we've seen some of the test data, and 5 we've also federal test data of the product. 6 CHAIRMAN DUNLAP: Well, let me go a step further, 7 Bob. I'd like for you to personally meet with this 8 gentleman and sort through his issues, and see if we can 9 find a way to accommodate his concerns and certainly his 10 experience into the deliberations as you go forward with 11 your staff report. 12 MR. CROSS: Fair enough. Okay. 13 CHAIRMAN DUNLAP: Okay. 14 Ms. Edgerton. 15 MS. EDGERTON: I just wanted to clarify with the 16 staff a point that you have made in your briefing to me and 17 in the briefing book, and that is that this -- am I correct 18 that, in your opinion, this modification would have no 19 effect on CO attainment? 20 MR. CROSS: That's true. Because basically the 21 whole chunk of CO that we're talking about will have no 22 effect on CO attainment. It was the point that was made 23 earlier about -- we're in attainment during the lawn mowing 24 season, if you will. We're very slightly out of attainment 25 during the non-lawn-mowing season, and that we expect the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 large reductions that we need to get in to attainment during 2 the non-lawn-mowing season to occur anyway. 3 In other words, the reductions that are happening 4 on passenger cars as the LEV standards are being phased in 5 will take care of it. 6 So, it's a -- you know, it's a small issue -- 7 SUPERVISOR ROBERTS: Well, in our air -- 8 MR. CROSS: -- in terms of timing. 9 SUPERVISOR ROBERTS: In our air basin, we mow the 10 lawn all year. So, I'm not sure how that works. Your 11 analysis may be for some areas -- 12 MS. EDGERTON: It grows faster in the summer. 13 Well, in the spring. 14 MR. CROSS: It's the frequency of mowing, also. 15 But I think also it's the thing -- maybe I don't want to go 16 too much further. 17 But I think the staff presentation went over the 18 CO issue pretty well. 19 CHAIRMAN DUNLAP: All right. 20 MR. ROUTERY: May I ask a question about that? 21 CHAIRMAN DUNLAP: Sure. 22 MR. ROUTERY: My granddaughter's four-years old. 23 Try to explain to her that 22 tons of carbon monoxide that 24 was added on is what's causing her problem or not causing 25 her problem isn't going to help. And it isn't the 22 tons PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 that I'm complaining about. 2 I'm complaining because the ability, the 3 technology is there. It's there for two-cycle. It's there 4 for four-cycle. It doesn't take that much. 5 Just let me show it and let people sign a 6 disclosure so we can do it. 7 CHAIRMAN DUNLAP: Right. Understood. Good point, 8 sir. Any other questions of the witness? 9 MR. CALHOUN: I don't have another question of the 10 witness. I think that the Board's going to be hearing a 11 progress report here sometime within the next -- 12 CHAIRMAN DUNLAP: Right. Six months or so. 13 MR. CALHOUN: -- sometime this summer. And it 14 seems to me that it would be appropriate to have the 15 evaluation of your technology included as part of that 16 progress report. 17 MR. ROUTERY: Yes, sir. I would appreciate it. 18 MR. CALHOUN: Okay. Well, Mr. Cross has agreed to 19 meet with you. So, hopefully, we can satisfy some of your 20 concerns. 21 MR. ROUTERY: Well, if you can put off your change 22 to 350 till then, it would sure help. That's only 22 tons a 23 day I know, but they hurt. 24 CHAIRMAN DUNLAP: Well, at this point, I think I'd 25 be content, Supervisor Roberts, if that's the spirit in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 which you offered your suggestion, as well, with a meeting, 2 Bob, within the next month, a month and a half with this 3 gentleman. I would appreciate it. 4 MR. CROSS: Fair enough. 5 CHAIRMAN DUNLAP: Ron, does that work with you? 6 SUPERVISOR ROBERTS: That's what I was suggesting, 7 Mr. Chairman, because I'd like to see that evaluation there. 8 I think that there's something there that goes beyond this 9 particular item and, hopefully, there might be something in 10 that. 11 MR. CROSS: We've done an evaluation in 12 preparation for this item, but it was preliminary, because 13 it was done fairly quickly. We already have looked at test 14 data on his device, and the results are somewhat mixed. But 15 I think before we get any data before you, it would be 16 preferable to spend some time with him and understand 17 exactly what he's doing and what the conditions were of some 18 of these tests. 19 CHAIRMAN DUNLAP: Okay. Any other questions for 20 the witness? Mr. Routery, thank you. 21 MR. ROUTERY: Thank you. 22 Ms. Edgerton. 23 MS. EDGERTON: I just wanted to make a comment, 24 and that is that for those of you who haven't been here 25 before, the staff is continually reviewing the options for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 improving the air and today is not a go/no go turning point. 2 We're meeting every month -- well, except for occasionally 3 we don't, but -- and this is not the last opportunity to 4 present new technology by any means. We're doing it 5 constantly. I just wanted to remind you of that. 6 CHAIRMAN DUNLAP: Okay. Thank you. 7 Mr. Tomlinson and William Platz. 8 MR. TOMLINSON: Hi, my name is Greg Tomlinson, and 9 I just wanted -- I'm speaking to you as a private citizen. 10 I'm not in any way affiliated with the engine 11 industry or any of the companies here today. I have always 12 had an interest in clean air. I follow these industries 13 closely. I'll be also extremely brief in my comments. 14 I'm a business person by background, and the last 15 thing that I want to see is companies forced unnecessarily 16 out of business. Although the thing that concerns me about 17 today's proposal is the length of time lines that are 18 potentially being considered, in that companies, you know, 19 such as Briggs and Stratton, have known about alternative 20 technologies for a number of years. And there's a company 21 on the East Coast called Sonex Research, which did testing 22 with Briggs and Stratton in 1985. 23 They also tested a 150 cc non-Briggs and Stratton 24 two-stroke motorcycle -- motor scooter type of engine, and 25 that -- those results were later certified by the Southwest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 Research Institute. The results showed 50 to 80 percent 2 reductions in carbon monoxide, lower fuel consumption, and 3 reductions in emissions across the board. 4 So, I would just hope that the Board encourages 5 these companies and staff in order to more -- and to very 6 diligently pursue alternative technologies and alternative 7 companies, because I believe that clean air will only happen 8 through the impetus of the Board, although I think there's a 9 market value in clean air as well. Because I believe that a 10 clean burning lawn mower versus a dirty lawn mower, if 11 marketed correctly, would sell for probably minimal 12 additional cost. 13 And that's the -- well, just my comments. And in 14 light of full disclosure, I do own stock in that company, 15 although I am a very minor -- and I am in no way affiliated 16 with them in any direct way. And they have not asked me to 17 come today, or in any way encouraged. I'm here strictly on 18 my own volition. 19 Thank you. 20 CHAIRMAN DUNLAP: Thank you. I appreciate your 21 time and effort you put in to coming here today. 22 Any questions of the witness before we lose him? 23 Okay. Thank you again. 24 Mr. Platz from Western Propane Gas Association. 25 And I believe, sir, we have your written testimony. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 MR. PLATZ: Yes. 2 CHAIRMAN DUNLAP: Is that correct? 3 MR. PLATZ: Yes, and I will be brief, because you 4 do have the written testimony and that was important for me 5 to get it into the record. 6 I would just like to state that we don't think, 7 looking at the petition that Briggs and Stratton brought 8 before you, that they took a look at all the potential 9 alternatives that they may have in which to bring their CO 10 levels down to their engines -- with their engines. 11 Certainly, staff's data show that the use of propane to 12 power these engines brings the CO levels well below even the 13 1999 standards. And we just feel that, although we can't 14 really logically oppose the petition, because we don't feel 15 that it's probably a significant increase in CO. 16 We do think that staff and the Board ought to 17 encourage these people to pursue all avenues that are 18 available to them as opposed to just saying, well, look, you 19 know, we tried all this stuff. We spent $22 million. We 20 can't make it work. 21 And that pretty much limits my comments. 22 CHAIRMAN DUNLAP: Okay. Thank you. I appreciate. 23 Any questions of the witness? 24 Okay. Very good. Does anyone else wish to 25 testify on this item from the audience? All right. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 Do any of the Board members have any questions of 2 staff? I guess a comment I would make, it is unusual -- and 3 certainly in my experience as Chair in the last 13 months to 4 have staff come in with a recommendation like this on their 5 own, which they have done. And I want to recognize their 6 willingness to bring this thorny issue forward, because they 7 know all too well -- Mr. Boyd stresses it all of the time -- 8 how important it is for us to keep on track for attainment 9 of the clean air goals that we've set -- that have been set 10 for us. And I want to commend staff for coming forward with 11 this issue, because I know it's not -- certainly not been a 12 consistent experience that you've had. 13 And it took some courage to do that. And it's 14 interesting to see some of the testimony and how it's lined 15 up to staff in this case. So, Mr. Boyd, why don't you take 16 a minute or two and summarize perhaps the big picture. And 17 then we'll get into a Board discussion on this item. 18 MR. BOYD: Thank you, Mr. Chairman. 19 I'll be very, very brief, and I appreciate your 20 recognition of how this is, albeit not difficult, because 21 we historically have had a reputation for being hard and 22 tough in driving technology; but, at the same time, always 23 maintained that if it's proven to our satisfaction that it 24 can't be done economically and feasibly, then we are willing 25 to change. And we recognize that this does cost us some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 carbon monoxide. But it doesn't cost us such that we will 2 exceed the standards anywhere. 3 And I don't pass off lightly the testimony of the 4 latter gentleman who pointed out the advanced technology. I 5 don't want to get into a big discussion of it. I just hope 6 that people in the audience who manufacture these engines 7 listened closely to this fact. Some of the gentlemen are on 8 a slippery slope of getting -- cracking into the door, and 9 there's only so far we can go in the free market. We're 10 fuel neutral. There's truly infrastructure problems, and 11 there's technology problems. 12 But I just remind the audience that we are aware 13 of most of these technologies. That is why we push people 14 rather hard sometimes about exploring alternative 15 technologies, and we have been and will continue to discuss, 16 for instance, with Mr. Routery, his product. And then, he's 17 on the slippery slope of -- in the private sector -- getting 18 in the door and getting it considered. And it sounds like 19 maybe he's cracked that door open. And we wish him well 20 and wish him luck, and I hope it's as good as he says it is, 21 because it will become far more attractive to folks. 22 And I also would like to salute Mr. McLane and his 23 electric lawn mower efforts. I'm aware of his efforts. I 24 just wish we'd saluted him sooner. I'll just let him know 25 that I wish I'd have kept the McLane lawn edger that I had, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 because it lasted over 20 years, and I finally retired it. 2 It was probably terribly dirty when I did. It was probably 3 a real antique. But, nonetheless, I've joined Ms. Edgerton 4 in my home, and everything's electric. 5 So, nonetheless, Mr. Chairman, we do recommend 6 this slight modification to the standard. And we don't do 7 it lightly, but we do it, recognizing the technical reality 8 of the situation. 9 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Boyd. 10 Well said. 11 For the record, I'd like staff to summarize any 12 written comments that we've received. Do we have any? 13 Yes. We have two comment letters, one from Latham 14 & Watkins, representing Briggs and Stratton. And Mr. Wyman 15 has pretty much summarized their support of the staff's 16 recommendation already. 17 The other is from the Propane Vehicle Council, and 18 they're essentially not challenging the staff's 19 recommendation. They just want to bring to the Board's 20 attention that there are possibly alternative solutions. 21 One would be for Briggs and Stratton to consider. One would 22 a heated carburetor to better vaporize the fuel mixture. 23 And another would be to consider their operating the engines 24 on propane. 25 MR. CALHOUN: Who was that letter from? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 MR. CARTER: The Propane Vehicle Council. They're 2 located in Irvine, California. Specifically, it's from 3 Robert E. Myers. 4 CHAIRMAN DUNLAP: Okay. Is that it? 5 MR. CARTER: Yes. 6 CHAIRMAN DUNLAP: All right. Any questions or 7 comments of staff, Board member discussion? 8 MS. RIORDAN: Mr. Chairman, if I might, it seems 9 that we pretty well summarized through the staff what is 10 contained here in the resolution. And at such a time when 11 people have had an opportunity to read it, I'd be happy to 12 move it. 13 CHAIRMAN DUNLAP: Okay. Very well. Thank you. 14 Since we have heard the testimony, have written 15 submissions and staff comments for this item, and they've 16 been entered into the record, I'm officially closing the 17 record on this portion of Agenda Item 96-1-2, written or 18 oral comments received after the comment period has been 19 closed will not be accepted as part of the official record 20 on this agenda item. 21 Also, a reminder to my colleagues to the Board 22 about ex parte communications. While we may communicate off 23 the record with outside persons regarding Board rulemaking, 24 we must disclose the names of our contacts and the nature of 25 the contents on the record. This requirement applies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 specifically to communications which take place after notice 2 of the Board hearing has been published. 3 Are there any communications which need to be 4 disclosed? Okay. 5 Now, as Supervisor Riordan mentioned, we have 6 before us Resolution 96-1, which contains the staff 7 recommendation. Do I have a motion and a second to adopt 8 this staff proposal? 9 SUPERVISOR RIORDAN: I would so move, Mr. 10 Chairman. 11 CHAIRMAN DUNLAP: All right. Is there a second? 12 DR. BOSTON: I'll second it. 13 CHAIRMAN DUNLAP: Dr. Boston. Thank you. I have 14 a motion and a second. Is there any further discussion by 15 the Board? 16 All right. With that, will the Board Secretary 17 please call the roll on Resolution 96-1? 18 MS. HUTCHENS: Boston? 19 DR. BOSTON: Yes. 20 MS. HUTCHENS: Calhoun? 21 MR. CALHOUN: Aye. 22 MS. HUTCHENS: Edgerton? 23 MS. EDGERTON: Aye. 24 MS. HUTCHENS: Hilligoss? 25 MAYOR HILLIGOSS: Aye. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 MS. HUTCHENS: Parnell? 2 MR. PARNELL: Aye. 3 MS. HUTCHENS: Riordan? 4 SUPERVISOR RIORDAN: Aye. 5 MS. HUTCHENS: Roberts? 6 SUPERVISOR ROBERTS: Aye. 7 MS. HUTCHENS: Silva? 8 CHAIRMAN DUNLAP: He stepped away. 9 MS. HUTCHENS: Vagim? 10 SUPERVISOR VAGIM: Aye. 11 MS. HUTCHENS: And Chairman Dunlap. 12 CHAIRMAN DUNLAP: Aye. 13 MS. HUTCHENS: Passes 9-0. 14 CHAIRMAN DUNLAP: Very well. Thank you. 15 All right. The next item on the agenda today is 16 96-1-3, which is a public meeting -- we've already covered 17 that. Excuse me. 18 I got caught in my own trap. 96-1-4, toxic hot 19 spots. Here we go. 96-1-4, public hearing to consider 20 amendments to the air toxics hot spots fee regulation. 21 These are amendments to the air toxics hot spots 22 fee regulation for fiscal year 95-96. The Hot Spots Act 23 requires California industries to inventory toxic air 24 emissions, to notify the public of potentially significant 25 health risks, and to reduce significant risk emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 The Act also places program implementation and 2 management responsibilities on local air districts, the 3 Office of Environmental Health Hazard Assessment, and our 4 Board. 5 The law requires that the cost to the State and 6 local districts to implement and maintain the hot spots 7 program be recovered by assessing fees on facilities. And 8 the State fee regulation is designed to generate the revenue 9 to cover the State's costs as well as those from districts. 10 the proposed fee regulation before us today also recovers 11 costs for the 12 districts whose fee schedules we are 12 adopting. 13 At this point, I'd like to ask Mr. Boyd to 14 introduce the item. Jim? 15 MR. BOYD: Thank you, Mr. Chairman. 16 We're at a point in this program where we can say 17 to you that much has been accomplished as was envisioned in 18 the earlier legislation. As we have done in the past with 19 this evaluation, we've looked at our program needs, and 20 we've evaluated where we should focus our efforts in the 21 future. 22 And, as a result of this evaluation, we are 23 presenting to you a two-phased proposal to both reduce costs 24 and to streamline further the program. Phase I of the 25 proposal deals with the fee regulation for fiscal year 95- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 96, lowering all fees and eliminating fees for many lower 2 risk facilities. 3 Phase II affects fiscal year 1996-97, and is still 4 being developed. It will streamline reporting requirements 5 for facilities and amend the fee regulation concurrently. 6 The focus of today's hearing is on Phase I. And 7 Phase II of the proposal will be presented to you sometime 8 this summer. 9 This approach that we're proposing today and that 10 we're walking on in the future will not the change the 11 protection afforded the public's health. Program activities 12 will be downsized and costs reduced, but in a manner that 13 will retain the essential program and necessary program 14 elements. 15 Our goal with today's proposal is to equitably 16 allocate and recover the costs that our air pollution 17 control districts, the Air Resources Board, the State Office 18 of Environmental Health Hazard Assessment all incur in 19 carrying out the air toxics hot spots program. The proposal 20 that we bring you today identifies the dollar amount each 21 air pollutant control district is to remit to the State to 22 recover its costs. Also, the proposal establishes fee 23 schedules for those 12 districts that have requested to be 24 included in our State regulation. 25 The 22 remaining districts have chosen to adopt PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 their own methods for assessing fees. 2 Now, in developing this proposal, we have focused 3 on downsizing the program as rapidly as feasible, while 4 maintaining its most important aspects. Working closely 5 with interested parties, we developed the two-phase proposal 6 that I mentioned for providing exemption from fees and other 7 program requirements. 8 Phase I will be discussed in some detail today 9 and, as I indicated, will lower State fees for all 10 facilities remaining in the program, and eliminate fees for 11 many of the lower risk facilities in the fiscal year in 12 question, 95-6. 13 Under Phase II, we expect and are hopeful that we 14 will see substantial additional streamlining of the program 15 by providing additional exemptions for identified low risk 16 facilities and by reducing reporting requirements in the 17 program. 18 Today, we're proposing fee exemptions based on 19 three criteria relating to potential risk. And, as you will 20 hear shortly in the staff presentation, these exemptions, 21 combined with a lower State fee associated with each fee 22 category, will significantly reduce the cost of the program. 23 The resulting reduction in State revenues from this 24 streamlining effort will not result in additional cost being 25 passed along to the remaining facilities. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 The State revenues for the program in fiscal year 2 95-96 will be down over one-third to $2.65 million. The 3 Office of Environmental Health Hazard Assessment's cost is 4 $1.4 million. The Air Resources Board's cost is $1.2 5 million. This is about a $1.6 million, or 37 percent, 6 decrease compared to just last year's program, and a 52 7 percent reduction from the program's peak costs of two years 8 ago. 9 This year, district and State program total costs 10 are reduced to about $8.55 million, a 23 percent reduction 11 compared to just last year. 12 And I might note the district costs account for 13 about 70 percent of total costs, or about 6 million, and the 14 remaining 30 percent is the State's portion. 15 As in previous years, our goal has been to develop 16 a proposal that is both equitable for our California 17 businesses, workable for our multiple districts, and 18 continues to protect the public's health consistent with the 19 law that guides us. 20 We held six public workshops and have had numerous 21 meetings with air districts, affected industry, and 22 environmental groups as we developed today's proposal over 23 the course of many, many months. 24 With that introduction I want to now call upon Ms. 25 Carla Takemoto of the Stationary Source Division to present PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 the proposed amendments to the regulation. She'll be giving 2 you the short version of our presentation in deference to 3 the hour. But I think many of you recognize this has been a 4 very extensive and controversial program for a number of 5 years. And the short version presentation doesn't reflect 6 the incredible amount of work that's gone into bringing this 7 program proposal to you this year, while maintaining all the 8 criteria that I said we laid out for ourselves. 9 With that, Ms. Takemoto, if you'll please make the 10 presentation. 11 CHAIRMAN DUNLAP: Would you pause just for a 12 moment for the court reporter? 13 (Thereupon, there was a pause in the 14 proceedings to allow the court reporter 15 to replenish her stenograph paper.) 16 CHAIRMAN DUNLAP: Okay. Very well. 17 MR. BOYD: Mr. Chairman, I might just point out 18 that the slide package you have in front of you is the long 19 version, so you'll have to skip ahead to catch some of the 20 slides. 21 CHAIRMAN DUNLAP: Okay. Thanks. 22 MS. TAKEMOTO: Thank you, Mr. Boyd. 23 Good afternoon, Mr. Chairman and members of the 24 Board. This afternoon, I'll be presenting the staff's 25 proposal to amend the air toxics hot spots fee regulation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 for fiscal year 1995-96. 2 As required by the Health & Safety Code, the ARB 3 must adopt a regulation that recovers the State's 4 anticipated costs for the hot spots program. The State's 5 costs are divided between the OEHHA and the ARB. The 6 regulation allocates a portion of the State's costs to each 7 district and establishes fee schedules for some districts. 8 Districts also have costs to implement the 9 program. Each district may recover costs in a hot spots fee 10 rule they adopt or may request to be included in the State's 11 fee regulation. If a district adopts its own fee rule, it 12 does not have to use the same fee basis as is used in the 13 State's regulation. 14 After adoption of the State's regulation, 15 districts are required to bill the facilities in their 16 district. 17 We are proposing a two-phased approach to further 18 streamline the air toxic hot spots program. Phase I of the 19 proposal is the amendments to the fee regulation for fiscal 20 year 1995-96. Included in the proposed amendments are fee 21 exemptions and program reductions. 22 The second phase of the streamlining effort has 23 already begun and will be completed for fiscal year 1996-97. 24 In Phase II, we will propose amendments to the emission 25 inventory criteria and guidelines regulation to further PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 refine the reporting requirements and amend the fee 2 regulation for fiscal year 1996-97 at the same time. 3 These amendments will be presented to the Board in 4 early summer. 5 We have carefully evaluated mandated program tasks 6 and resource needs, given that the program is nearing full 7 implementation. As a result, we believe we can take these 8 streamlining steps while continuing to protect public 9 health. 10 We are proposing exemptions from fees for 34 11 percent of the core facilities. The other facilities that 12 do not qualify for an exemption will pay a State cost that 13 is 19 percent lower than last year if they are in the same 14 program category. 15 In Phase II, we will propose additional fee 16 exemptions and streamlining. 17 This year, the ARB and OEHHA are downsizing their 18 programs and reducing costs. For fiscal year 1995-96, we 19 are proposing a State cost of about $2.65 million. As in 20 past years, a five percent contingency is added to this 21 amount. 22 the proposed amount represents a 37 percent 23 reduction compared to last year, and is 52 percent lower 24 than the State's costs two years ago. The total program 25 cost, which includes the 34 districts and the State, is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 about $8.55 million. This is 23 percent lower than last 2 fiscal year. 3 Our primary proposal for Phase I is fee exemptions 4 for low-risk facilities. A facility could qualify for an 5 exemption from fees in three ways. A facility could be 6 exempt based on prioritization score, risk assessment 7 results, or de minimis throughputs for certain facility 8 types. 9 Through our work with the air districts, OEHHA, 10 and affected industries, we developed conservative fee 11 exemptions that are roughly equivalent to a health risk of 12 one per 1 million persons. Our intent is to quickly exempt 13 facilities from paying fees that clearly do not constitute 14 or contribute to an air toxic hot spot. 15 When these exemptions are applied, about one-third 16 of the core facilities will not pay a State fee. 17 Industrywide facilities, businesses such as gasoline 18 stations, auto body repair shops, and dry cleaners, as in 19 past years, will pay a State fee of $15. 20 We are proposing a number of other amendments to 21 the fee regulation. We are proposing to add a fee-for- 22 service provision for review of risk assessments submitted 23 to the State. The way this would work is the risk 24 assessment facility would continue to pay the core cost as 25 do other facilities. However, OEHHA's risk assessment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 review costs for that facility would be assessed on a per 2 hour basis. 3 To help ensure consistent facility counts among 4 the districts, are proposing two amendments. One proposal 5 is to require the districts to provide additional 6 documentation to support facility counts. The other 7 proposal is to add a definition for a State industrywide 8 facility. 9 Other miscellaneous amendments are proposed to 10 revise Code references, increase the time allowed to recover 11 shortfalls, update district toxics inventories, or to add or 12 expand definitions of the program categories. 13 Since the staff report was published, we have been 14 continuing to work with interested parties on additional 15 exemptions. We are now proposing a de minimis level for 16 hospitals and veterinary clinics with ethylene oxide 17 sterilizers. 18 Because of this additional exemption, we have 19 received facility count updates from almost all districts. 20 As a result of these additional facility count changes, we 21 will reduce the State's costs from the $2.8 million proposed 22 in the staff report to $2.65 million. 23 In 1993, we presented a program reduction plan to 24 the Board that would reduce the State's cost from the peak 25 level in 1993, by about 40 percent within five years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 Each year, we have been reducing the program 2 according to this plan and our costs have been reduced in 3 kind. The upper line on this graph presents our 1993 4 program reduction plan. The bottom line shows how we have 5 cut our costs each year since the baseline in 1993. The 6 lower line also shows that each year we have exceeded our 7 planned program reduction and have reduced the State's 8 program cost by over 52 percent compared to the baseline in 9 1993. 10 This year, facility fees, which include State and 11 district costs combined, are being adopted for 12 districts. 12 Compared to last year, on average, fees are reduced about 16 13 percent. Over 97 percent of facilities that do not quality 14 for an exemption will pay a reduced facility fee. The other 15 22 districts will be adopting their own fee rules. 16 I'd like to close by briefly recapping our 17 proposal. Compared to last year, over 34 percent of the 18 core facilities will not pay a State fee. Facilities that 19 don't quality for an exemption will realize a 19 percent 20 reduction in their State fee. 21 We are reducing State costs to about $2.65 22 million, which is over 37 percent lower than last year, and 23 over 52 percent from our cost two years ago. 24 Lastly, we want to reiterate our commitment to 25 continue to look for opportunities to streamline the program PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 while ensuring that it remains an effective one. 2 That concludes my presentation on the staff's 3 proposal to amend the hot spots fee regulation for fiscal 4 year 1995-96. We'd be happy to answer any questions you may 5 have. 6 CHAIRMAN DUNLAP: Thank you. Any questions of 7 staff? Certainly, Supervisor Roberts had to notice some 8 reductions in costs for the program. 9 SUPERVISOR ROBERTS: I wanted to applaud -- I 10 didn't want to interrupt her, but I -- 11 (Laughter.) 12 CHAIRMAN DUNLAP: Mr. Boyd, that's as close as 13 you're going to get to a compliment on cost reduction from 14 Mr. Roberts this afternoon. 15 Okay. We'll get to our witness list. Manuel 16 Cunha from the Nisei Farmers, followed by Bonnie Holmes from 17 the Sierra Club, then Ben Shaw from the South Coast 18 District, and David Arrieta from WSPA. 19 Good afternoon, Manuel. Good to see you. 20 MR. CUNHA: Good afternoon, Board members, staff. 21 Thank you very much to allow the agriculture industry as 22 well as well as the Nisei Farmers League an opportunity to 23 comment here for a few seconds. 24 First, I'd like to acknowledge Genevieve Shiroma 25 for her hard work and her staff's dedication to have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 industry probably meet more times than I've ever seen. 2 mean it's great. I thought our PM10 regulation in the San 3 Joaquin Valley doing that 52 times in three years was a lot. 4 But Genevieve's getting real close to that. And we want to 5 thank the staff very much for their efforts of us coming 6 together -- industry and agencies -- working on probably one 7 of the most hardest things, and that is to reduce cost. 8 And based on cost, it's to look at the entire 9 program, what was it designed for, and its end result. What 10 is it to prove? 11 And we think the staff has done an excellent job 12 of working with us industry. I think this shows that we 13 don't need legislation to bring out a bunch of changes in 14 rules or environmental issues if we work together. I think 15 we can do that without having to put the burden on the 16 legislation and using that method of resolving our programs 17 with the environment or other regulations. 18 We support the staff's proposal on Phase I, 19 reducing the cost, taking out those sources -- which I'm 20 very happy with, because that takes care of many of my small 21 businesses -- dehydrators and those type of folks that 22 really are not considered a toxic hot spot source, but yet 23 they fell into the program and did their reporting and those 24 requirements that were required under that regulation. 25 Now those folks are going to be happy. They are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 happy that they can get out of one other system of 2 government work. When one goes, another comes in, but they 3 appreciate the effort of not having to pay this fee as well 4 as looking forward to the reporting requirement being less 5 and less as the year goes along. 6 And so, we appreciate that effort on the Phase I 7 approach. I would like to speak real quickly. It's not due 8 until you mentioned the Phase II (sic), but in the Phase II, 9 again we have that relationship where the Air Board staff -- 10 we just had a conference call, where I think we had, it 11 sounded like, 30, 40 people. Because when everybody starts 12 to jump off the line, you hear all these noises, and you 13 know that there's a lot of people on the line. 14 But, again, looking at streamlining, cutting costs 15 for those sources that do not show a risk to the environment 16 or to society, of making those industries with the 17 technology they are developing to be out of these programs I 18 think is a positive thing for streamlining and also cutting 19 the bureaucracy of the government system that we have. 20 I think California is one of those States that has 21 an opportunity to develop regulations. I don't know, but 22 somehow we do. Again, I want to just say thank you, 23 Genevieve, your staff. We support your recommendation for 24 Phase I. We look strongly of continuing on Phase II, and I 25 would hope the Board -- that they would support the staff's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 recommendation today on this toxic hot spots. 2 Thank you again. 3 CHAIRMAN DUNLAP: Thank you. Any questions of our 4 witness before he flees back to the safety of the seats? 5 No? Okay. Thank you for your comments. Appreciate it. 6 That's a testament to the staff working with affected 7 parties. Good job, Genevieve. 8 Okay. Ms. Holmes. Bonnie Holmes here? 9 MR. VENTURINI: Mr. Chairman, I understand that 10 Ms. Holmes has left, and we will summarize her statement 11 when we do that at the end. 12 CHAIRMAN DUNLAP: Okay. For the written comment 13 period? All right. 14 Benjamin Shaw from the South Coast Air District. 15 MR. SHAW: I have a strong voice anyway. 16 (Remarking on the microphone not in place.) 17 Members of the Board and staff, -- 18 (Thereupon, the reporter requested the 19 witness use the microphone.) 20 CHAIRMAN DUNLAP: You need it. Thank you. 21 MR. SHAW: Thank you for giving me the opportunity 22 to talk on this issue today. 23 First, I should begin by saying that the AQMD, 24 South Coast, supports the fee rule. We support it, because 25 it has a lot of very good things in it, I think, that we all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 applaud in this day and age, and that is some streamlining, 2 looking at what really makes sense, that kind of thing. 3 But I think you need to realize it's creating some 4 real problems for what constitutes 50 percent of the job of 5 this regulation, which is the South Coast Air Basin. We 6 have about 50 percent of the major sources and about 60 7 percent of the industrywide -- the smaller businesses that 8 are handled as industries. 9 The problem comes from the fact that we still have 10 about a third of the work to do. And with this fee 11 regulation coming seven months into a fiscal year, I'm faced 12 with the problem of a $700,000 cut in a program that I can't 13 afford to reduce staff if I'm to complete it in any kind of 14 a reasonable timely manner. 15 I already feel it's taken us longer than we would 16 have liked. It was a much bigger program than most of us 17 suspected at the onset. 18 Our dilemma is that we see it as a very valuable 19 program. It's one of the most effective toxic programs 20 we've had in the South Coast. And I'd like to tell you why. 21 Prior to this program, I would go to public 22 schools and the teachers, the parents, even sometimes the 23 older class would ask me, you know, are we being impacted 24 adversely by the many industries that seem to surround our 25 school? And, frankly, I didn't have a good answer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 I could do air monitoring for toxics for a few 2 days. That's very expensive. It's not conclusive. But 3 this program has allowed me now to go in there and say we've 4 looked at all these businesses. We know what's happening. 5 And frankly, most of the businesses, once they knew what the 6 impacts of their business were on this surrounding community 7 actually did a facility-wide review of their toxic impact. 8 they voluntarily reduced the few parts of their process that 9 were driving their risk. 10 So, it's turned out to not to be a hot spots 11 program, more like a cold spots or lukewarm spots at best, 12 which I think is very good news for the public. 13 Because of the magnitude of this program, 14 originally I think OEHHA estimated less than 100 health risk 15 assessments statewide. We've had 350 so far, roughly, and 16 we have another 250 to go. With that kind of workload, it's 17 a lot bigger program than anybody thought it would be. And 18 it has taken us longer to get through it. 19 We've done some -- just like CARB has talked about 20 a lot of their streamlining efforts, we've done some things 21 that we never thought we could do in order to streamline and 22 speed up our program. But it takes resources. And this 23 program is handled as a separate entity in terms of 24 budgeting within our district. 25 This type of a loss halfway through the year means PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 that here I'm faced with, frankly, cutting back a little bit 2 on staff and essentially eliminating all our contracts, 3 which were some of our get-ahead streamlining efforts we 4 were focused on. 5 I would hope that you take that into 6 consideration, not so much this year. We think we can get 7 through this fee rule. We're supporting it. But when you 8 look at Phase II, please consider what happens in a 9 metropolitan that has your highest concentration of people, 10 your highest concentration of sources, and about 60 percent 11 of your toxic emissions. There's still about a third of the 12 work to go. And so, we need to consider that when we look 13 at the fee reg next year, because that does drive the 14 resources we have to complete the program. 15 Thank you. 16 CHAIRMAN DUNLAP: Any questions for Mr. Shaw? 17 Lynne, do you have any questions on -- 18 MS. EDGERTON: I wanted to ask the staff, to what 19 extent have you had this conversation with Mr. Shaw? And 20 can you give us a little more information on the effect of 21 the proposed changes and what you're thinking in terms of 22 Phase II, please? 23 MR. VENTURINI: Ms. Edgerton, let me begin. One 24 of things that may be a little confusing is we're 25 considering the State costs associated with the program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 And the South Coast will be considering -- their Board will 2 be considering what appropriate costs they will have for 3 their program. 4 There was extensive discussions over the last -- 5 over a year on this program to arrive at the point where we 6 are today in the program. And, you know, the program 7 basically, a couple years ago, did reach a peak where a lot 8 of the work had been completed. And actually, we're seeing 9 some of the benefits of some of that work in the 10 information, which has allowed us today to propose to you 11 some of the exemptions, fee exemptions, for facilities 12 because now we have information to make those proposals. 13 And in the Phase II process, we'll be continuing 14 to look for additional opportunities where we can streamline 15 the program without sacrificing the core benefits and the 16 important aspects of the program. 17 One of the things that is being done to deal with 18 the risk assessment reviews, which the Office of 19 Environmental Health Hazard Assessment reviews, is that will 20 become a fee-for-service type of program, so that 250 risk 21 assessment that Mr. Shaw mentioned will be done on a fee- 22 for-service basis. This has been in the works for a couple 23 of years. 24 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Shaw. 25 Mr. Arrieta from WSPA. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 MR. ARRIETA: Good afternoon, Board and staff. My 2 name is David Arrieta. I'm representing the Western States 3 Petroleum Association. 4 We're here to support the Phase I program that the 5 staff has recommended as a good interim measure towards 6 bringing the program to what we feel the ultimate is, the 7 maintenance mode situation, because the program has matured 8 significantly. I think the South Coast has just explained 9 that the situation is much, much better understood than it 10 was a few years ago. 11 I think the program is definitely ready to be put 12 into the maintenance mode situation. And in that regard, we 13 would like to see the program costs moved to a direct fee 14 for service as much as possible. I think the program, Phase 15 I, is moving in that direction. I think it can move even 16 further in that direction. And, secondly, on the Phase II 17 element, I think there is plenty of room for further 18 streamlining of the inventory guidelines and criteria 19 regulations. 20 We'll be hopefully working with the staff on how 21 to do that, how to work on that. And then the other thing 22 that we would like to do is to focus the program on the 23 truly significant facilities, which is kind of tied to the 24 fee-for-service concept, and come up with an appropriate 25 cut-off fee where facilities -- the criteria for where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 facilities drop out of the program. We would definitely 2 look forward to having that a part of the process focused on 3 the right kinds of facilities. 4 And the staff has been very, very open to working 5 with all of industry, and we really appreciate that. And we 6 look forward to the Phase Ii part and hope that you adopt 7 the program as was presented today. 8 Thank you. 9 CHAIRMAN DUNLAP: Thank you, Mr. Arrieta. Any 10 questions of David? Ron, did you have one? 11 SUPERVISOR ROBERTS: No. Was that the last 12 witness? 13 CHAIRMAN DUNLAP: Yes, the last witness. Anyone 14 else wish to speak on this item? 15 That's it for the witness list. Okay. Mr. 16 Venturini, will you be summarizing the written comments that 17 the Board's received on this item? 18 MR. VENTURINI: Ms. Shiroma will be doing that. 19 MS. SHIROMA: Yes, I'll be doing that for you 20 today. 21 CHAIRMAN DUNLAP: Well, you mentioned Bonnie 22 Holmes, so I was coming back to you. 23 MS. SHIROMA: Right. And you have her written 24 testimony. She had to leave early. Just in summary, she 25 expresses that the Sierra Club supports the program as a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 vital program. She expresses concerns regarding the ability 2 of the program to fully assess cumulative effects and the 3 reduction impacts on a district by district level. 4 In particular, during Phase II, she urges that the 5 Air Resources Board not only look at streamlining but also 6 work to strengthen the program. And she provides several 7 examples for us to consider during Phase II. 8 And then we've also received a number of comment 9 letters. We received a letter from Northwestern, 10 Incorporated, a manufacturer of architectural woodwork in 11 the South Coast Air Quality Management District. 12 Northwestern does not comment directly on today's 13 fee regulation proposal, but rather calls for a review of 14 the program to remove burdensome requirements and evaluate 15 effectiveness. 16 We received six support letters. These letters 17 are from the League of Women Voters, the California Air 18 Pollution Control Officers Association, the Air Pollution 19 Control Officer of the Lake County Air Quality Management 20 District, the Chair of the Lake County Air Quality 21 Management District Board, the Air Pollution Officer of 22 Glenn County Air District, and the Tritac CASA organizations 23 representing 90 percent of the publicly owned treatment 24 works in California. 25 The Lake County letter requested clarification on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 district adoption of fee rules. We provided that in our 2 presentation today. The letter also asked for a fee 3 exemption for cottage businesses. We contacted Lake County 4 and let the officer there know that the district is adopting 5 its own rule and, as such, current law allows him to include 6 appropriate exemptions that address local concerns. 7 The letters from CAPCOA, Glenn County, Tritac, and 8 the two letters from Lake County provided suggestions to 9 consider as we carry out streamlining in the Phase II part 10 of the program. 11 And then we received a number of facility count 12 updates from the various air districts. 13 CHAIRMAN DUNLAP: Okay. Mr. Boyd, any final 14 comments? 15 MR. BOYD: No, Mr. Chairman, other than to point 16 out that this hearing today is a far cry from similar 17 hearings in the past years. And it's a welcome relief and a 18 pleasure for all of us to have found such harmony with the 19 community at large. 20 CHAIRMAN DUNLAP: Duly noted. Okay. I'll now 21 close the record on this agenda item. However, the record 22 will be reopened when the 15-day notice of public 23 availability is issued. Written or oral comments received 24 after this hearing date but before the 15-day notice is 25 issued will not be accepted as part of the official record PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 on this agenda item. 2 The public may submit written comments on the 3 proposed changes, which will be considered and responded to 4 in the final statement of reasons for the regulation. 5 Just a reminder to the Board again about the 6 policy concerning ex parte communications. Is there 7 anything that needs to be disclosed? 8 Okay. We have before us a resolution, 96-2. And 9 why don't we pause for a moment to review it, and then the 10 Chair will entertain a motion and a second to adopt the 11 staff proposal. 12 SUPERVISOR ROBERTS: I'd like to make that motion, 13 Mr. Chairman. 14 CHAIRMAN DUNLAP: Okay. Is there a second? 15 MAYOR HILLIGOSS: Second. 16 SUPERVISOR VAGIM: Second. 17 CHAIRMAN DUNLAP: Mayor Hilligoss. Okay. Do we 18 need to have any discussion at this point? 19 SUPERVISOR ROBERTS: Well, Mr. Boyd acknowledged 20 that this was a relief. I think it's a relief in many ways. 21 And I do want to compliment you and the staff for working 22 through this and coming up with an excellent Phase I. And 23 we'll be looking forward to Phase II. 24 MR. BOYD: Thank you. We appreciate that. 25 CHAIRMAN DUNLAP: Okay. I have a motion and a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 second. There is no need for any further discussion. Will 2 the Board Secretary please call the roll for Resolution 96- 3 2, please. 4 MS. HUTCHENS: Boston? 5 DR. BOSTON: Yes. 6 MS. HUTCHENS: Calhoun? 7 MR. CALHOUN: Aye. 8 MS. HUTCHENS: Edgerton? 9 MS. EDGERTON: Yes. 10 MS. HUTCHENS: Hilligoss? 11 MAYOR HILLIGOSS: Aye. 12 MS. HUTCHENS: Parnell? 13 MR. PARNELL: Aye. 14 MS. HUTCHENS: Riordan? 15 SUPERVISOR RIORDAN: Aye. 16 MS. HUTCHENS: Roberts? 17 SUPERVISOR ROBERTS: Aye. 18 MS. HUTCHENS: Silva? 19 SUPERVISOR SILVA: Aye. 20 MS. HUTCHENS: Vagim? 21 SUPERVISOR VAGIM: Aye. 22 MS. HUTCHENS: Chairman Dunlap. 23 CHAIRMAN DUNLAP: Aye. 24 MS. HUTCHENS: Passes 10-0. 25 CHAIRMAN DUNLAP: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 The last item on the agenda today is 96-1-5, a 2 public hearing to consider amending the variance provisions 3 of the California cleaner burning gasoline regulations. 4 This is the consideration of proposed amendments 5 to the variance provisions of the Board's cleaner burning 6 gasoline program. Many of the amendments are needed to 7 comply with the recently enacted Senate Bill 709. They 8 include guidelines for the procedures and criteria by which 9 variance applications will be evaluated. 10 Other amendments in response to the bill relate to 11 conditions that should be added to a variance, including a 12 proposed fee that would be levied on every gallon of 13 gasoline produced under a variance. 14 The amendments are being proposed in response to 15 concerns that variances be granted only when truly 16 necessary, and that variances do not work to the detriment 17 of companies who remain in compliance with the reformulated 18 gasoline regulations. 19 At this point, I'd like to ask Mr. Boyd to 20 introduce this brief staff report so that we may move on to 21 conclusion of this meeting. Mr. Boyd. 22 MR. BOYD: Thank you, Chairman Dunlap. 23 When the Board approved the -- as it was known 24 then, reformulated gasoline, now known as cleaner burning 25 gasoline regulations in 1991, the Board included a variance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 provision in Section 2271 of these regulations. 2 This provision allowed and allows the Executive 3 Officer to grant a temporary variance from the gasoline 4 standards if, among a host of conditions, the requesting 5 company needs the variance for reasons that are beyond its 6 control. 7 There's been considerable concern within the 8 refining industry, both about how the ARB would evaluate 9 variance applications under the gasoline regulations and 10 about how variances might be structured. 11 The basis for this concern is the significant 12 capital investment that refiners have made in order to 13 comply with the standards. A refiner who has committed this 14 capital is naturally concerned about a variance provision 15 that creates a potential for another party to sell 16 noncomplying gasoline within California. 17 Recently enacted legislation, Senate Bill 709, 18 requires the Board to adopt guidelines for evaluating 19 applications for variance from the reformulated gasoline 20 regulations and for including conditions in these variances. 21 Also, it requires the Executive Officer consider 22 the potential economic effect of a variance on the 23 recipient's competitors who comply with the regulations. 24 Perhaps the most important feature of Senate Bill 709 is the 25 clarification of the Board's authority to require a variance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 fee on noncomplying gasoline. 2 In the previous variances, such as from the diesel 3 fuel standards, we've already found that the variance fees 4 mutually negotiated with the recipients were very useful in 5 ensuring expeditious compliance and in preventing inequities 6 for complying companies. 7 Senate Bill 709 made this tool available for 8 variances from these, the gasoline standards. By and large, 9 the requirements of the bill mirror guidance on variances 10 that the staff had already developed via the public workshop 11 process. 12 We have used elements of those guidelines as the 13 core of the amendments that we are proposing for you here 14 today. 15 And with that, I would now like to introduce -- no 16 stranger to you -- Mr. Dean Simeroth, Chief of the Criteria 17 Pollutants Branch in the Stationary Source Division, who 18 will explain our proposal to you. Dean? 19 MR. SIMEROTH: Thank you, Mr. Boyd. I'm going to 20 turn it over to John Courtis, who's Manager of the Fuels 21 Section to make the abbreviated presentation. 22 MR. BOYD: Good. 23 MR. COURTIS: Thank you, Mr. Simeroth. 24 Mr. Chairman and members of the Board, I'm here 25 today to discuss proposed amendments to variance provisions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 in California RFG regulations. Those amendments are to 2 satisfy requirements of SB 709, which was passed by the 3 Legislature in 1995, and became effective on January 1st of 4 1996. 5 We have a small delay because of a problem with 6 the slides. 7 As you remember, California RFG regulations, which 8 were adopted in 1991, include limits of eight properties of 9 gasoline, including compliance dates. Section 2271 of the 10 regulations, also adopted in 1991, contains variance 11 provisions as a means of providing temporary and limited 12 relief from the limits. 13 Section 2271 authorizes the Executive Officer to 14 grant a variance from any of the eight property limits in 15 the California RFG regulations. After a public hearing, a 16 variance may be granted to a party who temporarily cannot 17 comply for reasons that are beyond the party's reasonable 18 control. 19 A variance will normally contain conditions to 20 protect the public interest by restricting the term of the 21 variance and the degree of noncompliance. 22 If the applicant's situation demands emergency 23 relief, an emergency hearing can be held with short notice. 24 As I mentioned before, SB 709 became effective on 25 January 1st of 1996. It requires the Board to adopt PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 regulations that control the consideration of variances. We 2 believe that thae proposed amendments would satisfy 3 requirements of SB 709. 4 The staff has carefully considered how best to 5 implement SB 709. In recent months, we have had many 6 discussions with interested and two public workshops. 7 The result has been that draft amendments were 8 developed. We believe that the proposal that we developed 9 establishes a level playing field. WE also believe that 10 market approaches should be explored and the variance should 11 be viewed as a last resort. 12 You have in front of you staff's suggested changes 13 to the original proposal, which includes minor modifications 14 to clarify the originally proposed language. 15 We are proposing, as required by SB 709, several 16 factors to consider regarding hardship for reasons beyond 17 the applicant's control. These factors relate to the 18 applicant's prior diligence, the existence of temporary 19 hardship, and addressing potential alternatives to a 20 variance. 21 It is required by SB 709 the Executive Officer 22 would be required to consider the diligence of efforts to 23 achieve and maintain compliance. For a variance from 24 initial compliance in March of 1996, the applicant would 25 have to provide evidence of its timely capital expenditures, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 efforts to obtain permits, and progress in following its 2 compliance plans. 3 In the case of a variance sought due to a 4 breakdown, the applicant would have to show that the problem 5 occurred despite the use of process designs, methods of 6 operation, and levels of oversight, and maintenance that are 7 standard in the refining industry. 8 In order to demonstrate hardship, the applicant 9 would be required to quantify its own hardship by comparing 10 the economics of operation without a variance with economics 11 of operation after compliance is achieved. 12 The applicant would also be allowed to present 13 evidence of economic hardship for its customers or the 14 public. 15 Under the proposed amendments, the applicant would 16 have to show that it pursued alternatives and could not 17 obtain complying gasoline or appropriate gasoline 18 blendstocks from other companies, and that it could not use 19 the predictive model to mitigate the extent of noncompliance 20 without a variance. 21 SB 709 authorizes fees on variance gasoline. The 22 staff is proposing a fee of 15 cents per gallon to be paid 23 on every gallon of gasoline produced under the variance. 24 The 15 cents is at the upper end of the cost range that we 25 have estimated for producing complying gasoline. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 Thus, a fee of this size should suffice to protect 2 the investments of those who do not receive variances and 3 would encourage refiners to seek variances only as a last 4 resort. 5 SB 709 also requires a fee schedule for recovering 6 the ARB's costs. We have estimated a variance application 7 would cost about $6,700. Accordingly, the staff proposes a 8 fee of $6,700 to accompany an ordinary application for a 9 variance. 10 For an emergency variance, the application fee 11 would be $2500. 12 Regarding the duration of variances, the 13 amendments would allow a maximum of 120 days, as specified 14 by SB 709, and they would require that the 90-day extension 15 only after a new variance hearing. 16 We also propose to change the current maximum of 17 up to 45 days for an emergency variance. 18 Also, in response to SB 709, the amendments would 19 standardize the estimation of emission effects of variances 20 by making the predictive models primarily the basis of the 21 calculations. 22 The approval of the proposed amendments is a 23 two-step process. The first step is the adoption as an 24 emergency regulation, as required by SB 709, which ensures 25 utility by March 1st of 1996. And the second step would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 the submittal to OAL through the normal postapproval 2 process. 3 In summary, the proposed amendments contain 4 elements that are required by SB 709, and it would ensure 5 uniform and equitable handling of variances. We recommend, 6 therefore, that the Board approve the proposed amendments as 7 they exist in the copy that the staff provided to you. 8 This completes my presentation. I'll be ready to 9 answer any questions. Thank you. 10 CHAIRMAN DUNLAP: Any questions of staff at the 11 conclusion of their presentation? 12 All right. With that, why don't we hop into the 13 witness list. We have Steve Smith from 76 Products Company. 14 Go ahead, Steve. 15 MR. SMITH: Thank you. Good afternoon, Mr. Chair 16 and members of the Board. My name is Steve Smith, and I'm 17 the Senior Fuels Planning Engineer for 76 Products Company, 18 which is an operating group of Unocal. 19 We've actively participated in the development of 20 SB 709, and in the various workshops over the past year, and 21 appreciate the opportunity to provide comments. 22 I had some longer testimony, but in the essence of 23 time, I've tried to pare it down quite a bit here. 24 Over recent months, we've strongly advocated two 25 main points. One, staff made the point pretty clearly that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 companies that do not invest the necessary capital in a 2 timely manner to produce cleaner burning gasoline by March 3 1st should not be eligible for variances. 4 And secondly, that refiners that have invested the 5 necessary capital and successfully met the March 1st 6 deadline will undoubtedly encounter unexpected circumstances 7 down the road after March 1st where variances are needed and 8 appropriate. 9 The variance provisions and fees, therefore, 10 should be flexible enough so that CARB can tailor solutions 11 to fit the circumstances. This is very important to ensure 12 that there's an adequate supply of CARB gasoline on the 13 market for sale. 14 Let me speak first in a little more detail on 15 initial compliance by March 1st, which is coming up upon us. 16 The December 8th staff report provides many good assurances 17 that variances will not be available to refiners who've not 18 adequately planned and spent the huge amount of capital 19 needed to produce cleaner burning gasoline by March 1st. In 20 fact, to quote the staff report, it states that, "Gasoline 21 producers who have expended significant capital on cleaner 22 burning gasoline compliance. . ." let me rephrase that. 23 In fact, it states that, "The variance policy will 24 assure gasoline producers who have expended significant 25 capital on cleaner burning gasoline compliance that other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 parties will not be able to use variances as means to 2 minimize unfairly their own expenditures." 3 So, we feel the staff report is real solid on this 4 point. 5 We do have some minor concerns with language in 6 the proposed regulations, specifically Section E-3. And 7 we've pointed these comments out in our written comments. 8 But I think, at this point, I'll just say that we have 9 confidence in the ARB; that they will consider only 10 variances for initial compliance where refiners have 11 properly planned and spent the necessary capital. 12 Moving on to a separate topic, let me now discuss 13 the per gallon fee. Unocal has generally opposed the fixed 14 15 cent per gallon variance fee. We like the fact that it's 15 high, but we're not sure that we like the fact that it's 16 variable -- or that it's fixed, excuse me. 17 We like the fact that it's high. We're not sure 18 we like the fact that it's fixed. 19 Instead, we support a variable fee that would be 20 based on the extent to which the variance fuel exceeds the 21 CARB specifications. This variable fee option has been 22 discussed in earlier workshops in some detail, and we feel 23 that it's really the best approach because the fees can be 24 tailored to fit the specific situation. 25 Perhaps more important, though, a variable fee PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 would provide environmental and economic equity. For 2 example, where the noncomplying fuel is dirtier and has a 3 greater environmental impact, the fee would be greater. 4 Similarly, where a variance yields an economic benefit to a 5 company, the fee would be greater. 6 We are confident that a fair variable fee 7 structure can be developed with fees high enough -- so, we 8 still support the high fees, with fees high enough to still 9 strongly discourage variance applications. 10 CHAIRMAN DUNLAP: Mr. Smith, on that point, if I 11 may. What do you think's an appropriate number per gallon? 12 I mean, what should it be? 13 MR. SMITH: We don't oppose the 15 cent per gallon 14 number as the starting point. We see that perhaps as the 15 number to start from, with maybe some variability. 16 CHAIRMAN DUNLAP: Depending on individual 17 circumstances. 18 MR. SMITH: Plus or minus, depending upon the 19 circumstances. 20 CHAIRMAN DUNLAP: Okay. All right. 21 MR. SMITH: That's an option. 22 CHAIRMAN DUNLAP: Okay. Understood. Thank you. 23 MR. SMITH: Sure. We also feel that a fairly 24 simple fee structure could be designed something along the 25 lines of what I just described. Plus, we also have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 confidence in CARB that they could fairly administer a 2 variable fee structure fairly, still with the same stringent 3 set of findings that Mr. Courtis laid out, and avoid giving 4 companies unfair advantage over competitors. 5 I have a few examples of why we think a variable 6 fee structure's the best. And let me just stop for one 7 short one. 8 Let's say, for purposes of a case, that Refiner A 9 has a minor equipment breakdown that forces it to request a 10 variance for sulfur content of 45 parts per million versus 11 the regulatory flat limit of 40. So, they're just slightly 12 higher. 13 Refiner B, though, has a major breakdown that 14 forces it to request a variance for sulfur of 90 parts per 15 million versus the limit of 40. 16 Refiner A's gasoline -- or Refiner B's gasoline is 17 twice as dirty as Refiner A's. Yet both will pay the same 18 15 cent per gallon fee. This does not seem fair to Refiner 19 A and it also does not really seem fair to the California 20 public, because it does not really provide environmental 21 equity between the two companies. 22 We believe the penalty should match the situation. 23 And the fixed fee does not allow this. 24 So, to summarize this point without other 25 examples, which I have some other examples, the fixed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 variance fees don't fit all situations. A fixed fee will 2 always be either too high or too low to offset the 3 environmental and economic consequences of a variance. 4 We're confident that a variable fee structure 5 could be designed that would be fair to all parties. 6 Moving on to a third point, I'd like to comment on 7 flexibility in the regulation in general. We've 8 consistently argued that the regulation should provide CARB 9 with enough flexibility to tailor variance conditions to 10 realistically resolve future unexpected situations. We 11 can't guess what those all are at this point in time, but 12 certainly those will happen. So, we're concerned that the 13 regulation may be written so rigidly that even when a 14 variance is appropriate, the ARB may not be able to issue 15 one. 16 As written, it may only allow variances for a few 17 narrowly defined situations and shut out circumstances that 18 would otherwise deserve strong consideration. 19 Specifically, we're concerned with language in 20 Section E that implies perhaps, if we're reading it 21 correctly, that variances will only be considered for either 22 initial compliance or refinery breakdowns. 23 And speaking with staff today, they assure me that 24 those two situations are really only provided as examples, 25 and that other unexpected situations besides initial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 compliance and refinery breakdowns will be considered for 2 variances. Again, we can't predict what those are, but 3 certainly situations will come up. 4 And I do have an example if you're interested. 5 Lastly, we've talked with staff a little bit this 6 morning, and we'd like to suggest perhaps that language be 7 added to the regulation that perhaps describes how the 8 rolling 90-180 day averaging for properties will work during 9 a variance. 10 It was suggested in staff's November workshop that 11 the averaging clock be stopped for a gasoline property under 12 variance -- during the variance period. And we've provided 13 an example in our written comments. 14 Staff advises me today that they're receptive to 15 that, and perhaps instead of writing that into regulation as 16 hard coded regulatory language, that that would be handled 17 in the conditions of a variance as it's given. 18 And we're acceptable to that as long as that's the 19 basic understanding. 20 So, those are my comments today. And I'd be open 21 to any questions. 22 CHAIRMAN DUNLAP: Okay. Thank you, Mr. Smith. 23 Any questions? 24 MS. EDGERTON: What's the example? 25 CHAIRMAN DUNLAP: Pardon? He said if we wanted to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 hear his example, Ms. Edgerton. Do you wish to hear his 2 example? 3 MS. EDGERTON: I did, yes. 4 CHAIRMAN DUNLAP: Okay. 5 (Laughter.) 6 CHAIRMAN DUNLAP: Mr. Smith, would you show us 7 your example, please, for Ms. Edgerton? 8 MR. SMITH: This is the other circumstance? The 9 other situation besides a refiner breakdown. All right. 10 Let me find it. 11 All right. We kind of had to stretch on this one 12 a little bit. But here's an example. I'll try and keep 13 this short. 14 A refiner has five tanks that it uses for blending 15 gasoline, a fairly small refinery. Although unlikely, 16 assume that a blendstock with a high aromatic content is 17 mistakenly added to all five tanks, and that they're near 18 full. 19 As a result, all five tanks have an aromatic 20 content exceeding the cap limits. Marketing areas supplied 21 by the tanks will experience short-term runouts if the 22 gasoline is not shipped and replacement product is not 23 available on the open market -- a short-term situation. 24 Also, it's very difficult to reblend the material, 25 because the tanks are already full. There's no place to put PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 it. 2 The situation's not really a breakdown condition, 3 because there was a mistake made along the way. And perhaps 4 it was not totally beyond the applicant's reasonable 5 control. 6 However, the reality of the situation is that 7 marketing areas will experience runouts if an emergency 8 variance is not granted, and the refiner needs to move this 9 material out of tankage to get back to normal business. 10 A variance for this noncomplying fuel may really 11 be the best option that -- and this is a quote from the 12 regulation -- "that can reasonably be implemented and will 13 achieve compliance as expeditiously as possible." 14 That's an example. In other words, the refiner's 15 sort of trapped. He's got full tanks, off spec fuel, can't 16 move it, can't sell it, runouts. What do you do? 17 That raises a lot of questions, but that 18 potentially could be a candidate for a variance, and wasn't 19 a breakdown. 20 DR. BOSTON: It's like malpractice I think. 21 (Laughter.) 22 MR. SMITH: Well, there's mistakes made there for 23 sure. 24 CHAIRMAN DUNLAP: All right. Thank you. Ms. 25 Edgerton, does that satisfy your curiosity? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 MS. EDGERTON: Yes. 2 CHAIRMAN DUNLAP: Thank you. Mr. Jessel from 3 Chevron. 4 Sir, you are our last witness. You're standing 5 between us and some airline flights I believe. 6 MR. JESSEL: I am proud to be your last witness. 7 CHAIRMAN DUNLAP: All right. 8 MR. JESSEL: And I will do it justice. I will try 9 to be -- 10 CHAIRMAN DUNLAP: It's my understanding we have 11 written testimony from you. 12 MR. JESSEL: Yeah, there's written testimony. And 13 the only reason I signed up was in case I needed to comment 14 perhaps on the previous testimony. And I'm going to do that 15 just very briefly. 16 First of all, we certainly support the intent of 17 this SB 709. We think your staff has done a very good job 18 of implementing those provisions, and they worked 19 constructively with affected parties. 20 However, we remain unswayed by the Unocal 21 statement. We've been -- as long as Unocal's has been 22 arguing for flexible fees, we've been in arguing 23 inflexibility, and we continue to believe that that is the 24 right way to go here. 25 The main reason for having a fee the size that it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 is and the fixed nature of it is to do exactly what wasn't 2 done during some of the diesel variances, when Chevron and a 3 number of other companies got very upset by the process that 4 ensued in some of those proceedings. 5 And the main failing of those proceedings was that 6 the structure did not drive a potential variance applicant 7 back to the market to solve the problem. 8 We think that a high fixed fee is just what is 9 needed in order to drive an applicant back to the market and 10 avoid having to come to ARB for a solution to a problem, 11 which frankly the industry has been able to handle for many, 12 many years, typically with its own devices and the backup of 13 the marketplace. 14 So, we believe that the provisions need to be 15 tough, but fair. The fee does need to be fixed and it needs 16 to be high. And we continue to support the staff proposal. 17 And that's the extent of my comments. 18 CHAIRMAN DUNLAP: Thank you, Mr. Jessel. I 19 appreciate it. Any questions of our witness? 20 Mr. Parnell. 21 MR. PARNELL: Perhaps you answered this. Maybe 22 it's incumbent upon me to be quiet, but I'm not going to. 23 Unocal's characterization of the apparent 24 strictness of the variance regulation at the onset, having a 25 concern that it might be too strict to accommodate other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 situations; to wit, the example that was given. Do you 2 share those concerns at all? 3 MR. JESSEL: Not really. Our view is that coming 4 to ARB for a variance is an absolute last resort. It should 5 never become a decision that one could make by balancing 6 other options against it. It's got to be the last and only 7 option that you've got. 8 And I think that's what we have here in this 9 proposal. 10 CHAIRMAN DUNLAP: Okay. Thank you. Appreciate 11 your insight. 12 Okay. That concludes the public testimony. Is 13 there anyone else that wishes to testify on this item? 14 All right. With that, Mr. Venturini, are you to 15 summarize the written comments? 16 MR. VENTURINI: Mr. Simeroth will summarize 17 several letters. 18 (Laughter.) 19 CHAIRMAN DUNLAP: That is the last time. 20 (Laughter.) 21 CHAIRMAN DUNLAP: That's the last time, Peter, I'm 22 going to ask you to do it, because you've been over two or 23 three today. 24 Mr. Simeroth. 25 MR. SIMEROTH: Thank you, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 CHAIRMAN DUNLAP: He looks at me expectantly. And 2 so, I fall for it. 3 MR. SIMEROTH: We just received a letter from 4 Ultramar supporting the staff proposal. We have received a 5 letter dated January 10th from Texaco expressing a concern 6 on the acceptance of confidential information at the 7 variance hearing. 8 We have since talked to Texaco, and the proposed 9 changes you have before dated January 25th we've been told 10 address their concerns. 11 Mobil Oil sent us a letter generally supporting 12 the presentation, and they also expressed some of the 13 concerns of the Texaco representative, and the proposed 14 changes address any other concern they may have. 15 The letter from Chevron you've already mentioned. 16 We have a letter on file from Unocal whose representative is 17 here. 18 CHAIRMAN DUNLAP: Okay. 19 All right. Mr. Boyd, I'm assuming -- 20 MR. SIMEROTH: I'm sorry, the letter from Ultramar 21 is supporting. 22 CHAIRMAN DUNLAP: Okay. I think you mentioned 23 that. 24 Mr. Boyd, I'm assuming there's nothing else to 25 add? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 MR. BOYD: No, Mr. Chairman. 2 CHAIRMAN DUNLAP: That's a correct assumption on 3 my part. Okay. I will now close the record on this item. 4 However, the record will be reopened when the 15-day notice 5 of public availability is issued. Written or oral comments 6 received after this hearing date but before the 15-day 7 notice is issued will not be accepted as part of the 8 official record on this item. 9 When the record is reopened for a 15-day comment 10 period, the public may submit written comments on the 11 proposed changes, which will be considered and responded to 12 in the final statement of reasons for the regulation. 13 Are there any ex parte communications which need 14 to be disclosed at this juncture? 15 Okay. We have before a resolution that we've had 16 for a few moments, Resolution 96-3. And I know it's been 17 read and considered. And I believe there's a need for a 18 motion. Do I have one? 19 MR. PARNELL: Move the resolution. 20 SUPERVISOR RIORDAN: Second. 21 CHAIRMAN DUNLAP: Okay. Mr. Parnell, Supervisor 22 Riordan seconds the item. Any need for discussion? 23 All right. With that, I'll ask the Board 24 Secretary to please the call for a vote on Resolution 96-3. 25 MS. HUTCHENS: Boston? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 DR. BOSTON: Yes. 2 MS. HUTCHENS: Calhoun? 3 MR. CALHOUN: Aye. 4 MS. HUTCHENS: Edgerton? 5 MS. EDGERTON: Yes. 6 MS. HUTCHENS: Hilligoss? 7 MAYOR HILLIGOSS: Aye. 8 MS. HUTCHENS: Parnell? 9 MR. PARNELL: Yes. 10 MS. HUTCHENS: Riordan? 11 SUPERVISOR RIORDAN: Aye. 12 MS. HUTCHENS: Roberts? 13 SUPERVISOR ROBERTS: Aye. 14 MS. HUTCHENS: Silva? 15 SUPERVISOR SILVA: Aye. 16 MS. HUTCHENS: Vagim? 17 SUPERVISOR VAGIM: Aye. 18 MS. HUTCHENS: Chairman Dunlap. 19 CHAIRMAN DUNLAP: Aye. 20 MS. HUTCHENS: Passes 10-0. 21 CHAIRMAN DUNLAP: All right. 22 Mr. Boyd, is there any other business that the 23 Board should take up at its January meeting? 24 MR. BOYD: No, sir. 25 CHAIRMAN DUNLAP: All right. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 I would like to point out to the audience, as well 2 as my colleagues on the Board, we do not have a meeting in 3 February. 4 However, we will find a reason to give you plenty 5 to review or read. So we'll keep you certainly in the loop. 6 With that, I would like to adjourn this, the 7 January meeting of the California Air Resources Board. 8 (Thereupon, the meeting was adjourned 9 at 4:15 p.m.) 10 --o0o-- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 4 I, Nadine J. Parks, a shorthand reporter of the 5 State of California, do hereby certify that I am a 6 disinterested person herein; that the foregoing meeting was 7 reported by me in shorthand writing, and thereafter 8 transcribed into typewriting. 9 I further certify that I am not of counsel or 10 attorney for any of the parties to said meeting, nor am I 11 interested in the outcome of said meeting. 12 In witness whereof, I have hereunto set my hand 13 this 4th day of February , 1996. 14 15 16 Nadine J. Parks 17 Shorthand Reporter 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345