DOCUMENT ISSUE DATE: FEBRUARY 23, 1995 MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM CALIFORNIA AIR RESOURCES BOARD 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, FEBRUARY 23, 1995 9:30 A.M. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT John Dunlap, Chairman Eugene Boston, M.D. Joseph C. Calhoun Lynne T. Edgerton M. Patricia Hilligoss John Lagarias Jack C. Parnell Barbara Riordan Ron Roberts Barbara Riordan Jim Silva Doug Vagim Staff: Jim Boyd, Executive Officer Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Michael Kenny, Chief Counsel Artavia Edwards, Regulations Coordinator, Office of Legal Affairs Lynn Terry, Acting Chief, Office of Air Quality and Transportation Planning Cynthia Marvin, Staff, Office of Air Quality and Transportation Planning Clark Brink, Public Education and Outreach, Office of External Affairs Bill Lockett, Chief, Office of External Affairs Roberta Hughan, Staff, Transportation Strategies Group Ann Geraghty, Manager, Transportation Strategies Group Bob Jenne, Staff Counsel Dean Simeroth, Chief, Criteria Pollutants Branch Stationary Source Division Susan Brown, California Energy Commission Ron Friesen, Assistant Chief, SSD Tom Jennings, Staff Counsel 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 Opening Remarks by Chairman Dunlap 1 Roll Call 1, 2 Additional Remarks by Chairman Dunlap 2 AGENDA ITEMS: 95-2-1 Public Meeting to Consider a Summary of the Air Resources Board's 1995 Regulatory Rulemaking Calendar Introductory Remarks by Chairman 2 Staff Presentation: Jim Boyd Executive Officer 3 Artavia Edwards Regulations Coordinator Office of Legal Affairs 4 Questions/Comments 11 95-2-2 Public Meeting to Consider Status Report on the State Implementation Plan and the Federal Implementation Plan Introductory Remarks by Chairman Dunlap 19 Staff Presentation: Jim Boyd Executive Officer 20 Lynn Terry Acting Chief, OAQTP 22 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX, continued. . . PAGE AGENDA ITEMS: 95-2-2 Questions/Comments 29 Motion by Parnell to Approve Resolution 95-11 50 Roll Call Vote 50, 51 95-2-3 Public Meeting to Consider Information Report on Status of Air Pollution Control District Implementation of Smoking Vehicle Programs Introductory Remarks by Chairman Dunlap 51 Staff Presentation: Jim Boyd Executive Officer 52 Clark Brink Public Education & Outreach Office of External Affairs 53 Questions/Comments 61 95-2-4 Public Meeting to Consider a Proposed Report to the State Legislature on the Motor Vehicle Registration Fee Program Introductory Remarks by Chairman Dunlap 70 Jim Boyd Executive Officer 72 Roberta Hughan Transportation Strategies Group 73 Questions/Comments 93 Written Comments entered into record by Ms. Hughan 112 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX, continued. . . PAGE AGENDA ITEMS: 95-2-4 Questions/Comments 114 Summation and Statement by Chairman Dunlap 118 Questions/Comments 120 Motion by Lagarias to Approve Staff Recommendation; to delay transmittal of report for 90 days for further additions 129 Discussion 129 Roll Call Vote 130,131 Luncheon Recess 131 Afternoon Session 132 95-2-5 Public Meeting to Consider Update on the Refiners Progress to Comply with Reformulated Gasoline Regulations Introductory Remarks by Chairman Dunlap 132 Statement by Jack Lagarias Chair Phase 2 RFG Advisory Committee 133 Staff Presentation: Jim Boyd Executive Officer 136 Dean Simeroth Chief Criteria Pollutants Branch, SSD 137 Susan Brown California Energy Commission 150 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX, continued. . . PAGE AGENDA ITEMS: 95-2-5 Ron Friesen Assistant Chief Stationary Source Division 154 Questions/Comments 159 PUBLIC COMMENTS: Carolyn Green Ultramar, Inc. 164 Gerald Barnes General Motors 168 Janet Hathaway Natural Resources Defense Council 171 Mary Morgan Santa Fe Pacific Pipelines 176 Jan Speelman Auto-Cal 180 Donald Bea Chevron USA Products Company 184 Mike Kulakowski Texaco Refining & Marketing, Inc. 187 Questions/Comments 190 Summary by Mr. Boyd 191 Questions/Comments 194 (Direction by Chairman) 198 Questions/Comments 198 Adjournment 204 Certificate of Reporter 205 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: I'd like to call the February 4 meeting of the California Air Resources Board to order. 5 I would like to also welcome my new colleagues to 6 the Board, very happy to have a full Board. Supervisor 7 Vagim should be with us shortly. 8 But I'd like to welcome Supervisor Roberts from 9 San Diego --- we're glad to have you -- and Supervisor 10 Silva. It's a pleasure to welcome you today. 11 As some of you may have noted, we have made some 12 changes to the Board meeting announcement. We have some 13 italicized descriptive verbiage underneath every item that 14 you'll see before the Board today, trying to make those 15 meeting announcements more user friendly. 16 We are likely to make some changes over time as 17 well to work towards being more user friendly as time goes 18 on. 19 I'd like to ask the Board Secretary to call the 20 roll. 21 MS. HUTCHENS: Boston? 22 DR. BOSTON: Here. 23 MS. HUTCHENS: Calhoun? 24 MR. CALHOUN: Here. 25 MS. HUTCHENS: Edgerton? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 MS. EDGERTON: Here. 2 MS. HUTCHENS: Hilligoss? 3 MAYOR HILLIGOSS: Here. 4 MS. HUTCHENS: Lagarias? 5 MR. LAGARIAS: Here. 6 MS. HUTCHENS: Parnell? 7 MR. PARNELL: Here. 8 MS. HUTCHENS: Riordan? 9 SUPERVISOR RIORDAN: Here. 10 MS. HUTCHENS: Roberts? 11 SUPERVISOR ROBERTS: Here. 12 MS. HUTCHENS: Silva? 13 SUPERVISOR SILVA: Here. 14 MS. HUTCHENS: Vagim? 15 Chairman Dunlap. 16 CHAIRMAN DUNLAP: Here. 17 I would like to remind those in the audience who 18 would like to present testimony to the Board on any of 19 today's agenda items to please sign up with the Board 20 Secretary. If you have a written statement, please be sure 21 to provide 20 copies also to the Board Secretary. 22 The first item on the agenda today is 95-2-1, 23 which is a public meeting to consider a summary of the Air 24 Resources Board's 1995 regulatory rulemaking calendar. 25 This calendar's being presented today in draft PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 form. It sets forth the Board's anticipated regulatory 2 agenda for 1995. The Board is responsible for interpreting, 3 implementing, and making specific those statutes pertaining 4 to the control of air pollution. 5 This summary is being provided for your planning 6 purposes, not only for Board meetings, but for related 7 activities that require your participation as we move 8 forward on these items. 9 At this point, I'd like to ask Mr. Boyd to 10 introduce the item and begin the staff's presentation. 11 MR. BOYD: Thank you, Chairman Dunlap, and good 12 morning, Board members. And I would like to add the staff's 13 welcome to our two newest Board members. Welcome to both of 14 you. We look forward very definitely to working with you 15 and now working with a full Board once again. 16 And good morning to members of the audience to 17 this first item on our agenda. As the Chairman has 18 indicated, we will be summarizing the 1995 draft regulatory 19 calendar in an effort to give you a brief view of some of 20 the issues that we will be presenting to you throughout this 21 year. 22 We intend to highlight in the presentation the 23 items that we think are most significant. These items will 24 be reviewed for you chronologically by their proposing 25 hearing date as presently listed on the draft calendar. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 I would point out, however, that the Board is 2 allowed flexibility in terms of moving items forward or 3 backward in the schedule as long as they are properly 4 noticed; in other words, as long as we meet the statutory 5 and the administrative noticing requirements for State Board 6 agenda items 7 The draft calendar that you have before you is a 8 product of and a summary of the work that's done in all 9 parts of the organization. But the calendar itself is 10 compiled by our Legal Office, and we've asked them to 11 present the summary to you today, and summarize the 12 document that they have prepared. 13 Copies of the draft calendar are available to the 14 public at the back table as well as copies of the summary 15 that the staff will use for their presentation. 16 With that brief introduction, I'd like to turn the 17 presentation over to Ms. Artavia Edwards, who is our 18 Regulations Coordinator in the Legal Office. 19 If you would, Ms. Edwards. 20 MS. EDWARDS: Thank you, Mr. Boyd. 21 Good morning, Chairman Dunlap and members of the 22 Board. 23 The draft rulemaking calendar, which you have 24 before you, once submitted to the Office of Administrative 25 Law, will be formally published in the California Regulatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 Notice Register. 2 The draft summary of rulemaking was prepared to 3 provide more specific information on the items scheduled to 4 be heard before you. 5 As Mr. Boyd indicated, the Air Resources Board can 6 legally modify its regulatory agenda from that set forth in 7 the draft rulemaking calendar. Such changes might include a 8 change in hearing date or inclusion of a newly previously 9 unscheduled regulatory action which may be required by 10 circumstances not reasonably anticipated when the draft 11 calendar was prepared. 12 Existing law contains no prohibitions on such 13 modifications; nevertheless, the Air Resources Board makes 14 one of the most conscientious efforts in state government to 15 comply with the rulemaking calendar requirements and to 16 function in a accordance with its published schedule. 17 Now, I will peruse through the draft rulemaking 18 summary and highlight the Board's scheduled regulatory 19 activities. 20 In March, 1995, the Board will consider the 21 aerosol paint regulation for consumer products. This 22 proposed regulation would establish volatile organic 23 compound standards for various categories of aerosol paints, 24 and the amendments to the alternative control plan 25 regulation are proposed to allow aerosol paints to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 included in an alternate control plan. 2 The second item scheduled for March is the 3 refueling vapor recovery standards and test procedures. 4 Staff will be proposing adoption of the United States EPA's 5 on-board standards and test procedures as well as proposing 6 modifications to the evaporative test procedures in order to 7 align these procedures with those of the U.S. EPA, and 8 thereby reduce the testing burden on the manufacturers. 9 Moving on to the earlier months of the year, the 10 Board will consider adoption of emission standards for new 11 heavy-duty engines. These regulations would align 12 California emission standards for heavy-duty vehicle engines 13 with those already adopted by the U.S. EPA. 14 It would also provide for optional nonmandatory 15 lower emission standards for heavy-duty engines, so that 16 vehicles equipped with these lower emitting engines could be 17 eligible for incentive programs. 18 Additionally, the Board will consider amendments 19 to the California Clean Air Act fee requirements. These 20 requirements are the annual fees that are imposed upon 21 California businesses that have greater than 500 tons of 22 criteria air pollutants. 23 As we move to the earlier parts of the summer, we 24 will be looking at updating the oxygen content test method. 25 This proposed test method would revise the version of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 current method and is more precise, and has become the 2 industry standard. 3 Also, the Board will consider adoption of 4 standards and test procedures to control emissions under 5 nonfederal test procedure conditions. This regulation is 6 expected to include use of stringent emission standards on a 7 new relatively severe test cycle, along with adoption of 8 measures to control excessive increases in emissions due to 9 air-conditioning usage. 10 Lastly, in the earlier part of the summer, the 11 Board will consider adoption of emission credit standards 12 for retrofitting heavy-duty vehicle engines. This proposal 13 would establish alternative heavy-duty emission standards so 14 voluntary retrofit of heavy-duty vehicles could be eligible 15 for emission reduction credit. 16 (Thereupon, Supervisor Vagim arrived and 17 took his place on the dais.) 18 MS. EDWARDS: Moving on to the middle and later 19 portions of the summer, there's a need to review the 20 amendments to certification procedures for low-emission 21 passenger cars, light-duty trucks, and medium-duty vehicles. 22 The purpose of this rulemaking is to propose 23 regulatory amendments to the certification requirements 24 which will primarily facilitate the implementation of the 25 program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 The Board will also consider the adoption of 2 amendments to the air toxic hot spots fee regulation. This 3 fee regulation is amended annually to reflect changing costs 4 and facility information. These are the fee regulations 5 that are used to support the hot spots toxic air contaminant 6 program. 7 The Board will also consider options of heavy-duty 8 diesel smoke inspection, or Society of Automotive Engineers' 9 procedure. 10 The proposed regulation would adopt an SAE 11 recommended practice for revised smoke meter specifications 12 for use in the Air Resources Board heavy-duty diesel smoke 13 inspection programs. 14 The Board will also revise its recordkeeping 15 requirements for certifying gasoline containing deposit 16 control additives. This action would change the 17 requirements for certifying gasoline containing deposit 18 control additives to conform with the proposed final federal 19 regulations. 20 Moving into the fall, the Board will consider 21 adoption of criteria for defining preempted farm and 22 construction equipment. Staff will develop and propose 23 adoption of regulations instituting the protocol to develop 24 a set of criteria and a protocol by which new equipment 25 types may be classified. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 The Board will also consider minor housekeeping 2 changes to the Phase 2 reformulated gas regulations. If 3 needed, the Board would propose changes to housekeeping 4 practices so that implementation flexibility is improved and 5 enforcement becomes more effective. 6 In the later part of the fall, the Board will 7 consider amendments to Phase 2 gasoline test methods. The 8 updated test methods will permit a more precise 9 determination of regulated components in gasoline and diesel 10 fuel. 11 Also, the Board will consider approval of its 12 addition to the guidelines on the generation and use of 13 mobile source emission reduction credits. The proposed 14 additions would establish guidelines for generating emission 15 reduction credits through the purchase of low-emission 16 heavy-duty vehicles as well as to establish guidelines for 17 other emission reduction credit programs, and would modify 18 emission rates to include the most recent available data. 19 The Board will also, if necessary, review and 20 revise the alternative fuels specifications. The proposed 21 action would provide temporary relief to in-state gas 22 production that does not meet the compressed natural 23 specifications. 24 The Board will also consider the identification of 25 inorganic lead as a toxic air contaminant. Inorganic lead PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 is being proposed for identification under our AB 1807 State 2 air law -- toxics law, because it was not a federal hazard 3 and was not identified in April, 1993, when the Board 4 identified all the federal hazardous air pollutants as toxic 5 air contaminants. 6 Finally, as we move toward the end of the year, 7 the Board will consider approval of revisions to the 8 aftermarket parts regulation applicable to low-emission 9 vehicles equipped with on-board diagnostics II systems. 10 The proposed regulations are intended to delineate 11 the specific requirements that the aftermarket parts 12 industry should meet, so that the effectiveness of the low- 13 emission program and the on-board diagnostics II regulation 14 is not compromised. 15 The Board will also consider adoption of a 16 wintertime Reid vapor pressure standard for gasoline, which 17 would evaluate the need for establishing limits on the Reid 18 vapor pressure of gasoline during the winter months in 19 Southern California. 20 The Board will also consider amendments to the 21 antiperspirant and deodorant regulation. Such modifications 22 will make the regulation more equitable for all 23 antiperspirant and deodorant manufacturers, while preserving 24 the emissions reductions obtained in the original 25 regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 And lastly, the Board will consider revisions to 2 the attainment or nonattainment area designations. This 3 year, we anticipate that this designation review will again 4 show improvement in air quality, reflecting the continued 5 success of our air control program. 6 That concludes the summary of the Air Resources 7 Board's l995 draft rulemaking calendar. 8 CHAIRMAN DUNLAP: Any other comments, Mr. Boyd? 9 MR. BOYD: No further comments, Mr. Chairman. 10 We'd be glad to answer any questions that you or members of 11 the Board may have. 12 CHAIRMAN DUNLAP: Okay. Any questions? 13 Dr. Boston. 14 DR. BOSTON: Mr. Boyd, could you review for me 15 where we're going with the air toxics program a little bit? 16 For instance, I thought we were going to be 17 looking at PM10 and diesel exhaust as a possible toxic air 18 contaminant this year. 19 MR. BOYD: Well, PM10 is what we call a criteria 20 pollutant, and we're not looking at PM10, per se, as a toxic 21 air contaminant. There are toxic constituents that are 22 presumed to be -- that make up in some cases, what might be 23 deemed PM10 particles. But it's one of the criteria 24 pollutants that is guided by the State and federal law 25 driving us to attainment of that standard criteria ambient PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 air quality standard. 2 And the Federal Clean Air Act requires a 1997 SIP, 3 much like we've done the ozone SIP in 1994. So, we're on 4 that track to meet that need. 5 With regard to the toxics, we have shown lead in 6 here. And diesel, as a toxic air contaminant, is something 7 that we've been working on, as you're aware, for a long, 8 long time. 9 And correct me, Mr. Scheible, as to what the 10 schedule here is with regard to its coming before the Board. 11 MR. SCHEIBLE: The schedule that would bring 12 diesel as a toxic air contaminant to the Board is not in 13 1995. It would be sometime in 1996. 14 We went out in the middle of 1994 with an 15 evaluation put together by the Office of Environmental 16 Health Hazard Assessment. It's a very complex assessment of 17 great interest to a number of parties. 18 We had a several-month long comment period. We 19 have received voluminous comments, and we are now evaluating 20 those. We have committed to -- after evaluating and 21 understanding those comments -- putting together a second 22 draft of the assessment and sending it out for another 23 comment period. 24 If that works well, it would go to the SRP for 25 their review and comment in 1995, but it does not look to us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 like we could complete the process in time to bring it to 2 the Board in '95. Therefore, it's not on the regulatory 3 calendar. It is being pursued actively and as a major 4 project by the staff and the Office of Environmental Health 5 Hazard Assessment. 6 DR. BOSTON: Do we have any current studies going 7 on right now that haven't been completed on that yet on the 8 diesel exhaust? Do you know? 9 MR. SCHEIBLE: There are many new studies that 10 were introduced that we have to look at. We are, as a 11 research project, trying to look at the relationship between 12 exhaust from diesels that used the high-sulfur diesel fuel, 13 which all the studies are based on, and the type of 14 constituents in exhaust from the low-sulfur/low-aromatic 15 fuel that's now in use, so that we can kind of make that 16 bridge and say -- what are the benefits? How do you adjust 17 the studies and health effects to reflect the fact that the 18 fuel we have now is cleaner, at least for particulate matter 19 and oxides of nitrogen, and hopefully for toxics also? 20 DR. BOSTON: Well, I'll check with Dr. Holmes 21 later on that, because I am interested in those studies. 22 But I'll check with him later on those studies. 23 MR. CACKETTE: On other thing, Dr. Boston, is the 24 Health Effects Institute, which is funded by EPA and the 25 automobile manufacturers, has its annual meeting I believe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 around April 1st or end of March. And one of the things 2 that they're focusing will be a presentation and compendium 3 of all the latest research on diesel health effects. 4 So, we may see a little bit of new information. 5 But our scientists who are involved in this, of course, who 6 are plugged in at the investigation level I think are aware 7 of all those. But hopefully, publicly, some interpretation 8 may become available at that time. 9 DR. BOSTON: Okay. Thank you. 10 CHAIRMAN DUNLAP: Any other questions? 11 Lynne? 12 MS. EDGERTON: I want to follow up. Maybe I 13 didn't understand your answer, but --- maybe I just wasn't 14 listening carefully enough. 15 What is the next step with the diesel contaminant 16 process, and why again does it have to go out until 1996? I 17 ask this question partly because of what Mr. Boyd said about 18 our need in 1997 to submit a PM10 plan. And obviously the 19 diesel particulates and the PM10 are related. And so, we 20 don't want to get behind -- let me put it in the positive. 21 We do want to get ahead so we aren't in the position we were 22 with the ozone plan where, at the last minute, we had a lot 23 of things we were doing. 24 And some of the people in the public were unhappy 25 that they didn't have more time to respond. So, to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 extent that we can move some of this science a little 2 earlier on this, then it gives a little bit more time to the 3 public to understand our policy decisions. 4 Can you give us specifics of when -- when that's 5 coming back? What's the next thing that's going to happen? 6 MR. BOYD: Ms. Edgerton, it's a two-part question, 7 and I'll let Mike handle part two. But part one is, in my 8 mind, is your combination of the diesel as a toxic air 9 contaminant with the PM10 SIP. 10 And while I appreciate why, in our minds, we can 11 do that, the SIP, of course, is dealing again, as I said 12 before, with PM10 as a criteria pollutant. And there are 13 controls on diesel. And the controls that we have placed on 14 diesel fuel were all aimed at reducing the emissions of the 15 PM10 or less size particle that we're dealing with. 16 The PM10 standard is predicated on the health 17 effects, as you know, of just the particles that size or 18 smaller, notwithstanding any toxic effect of the particles, 19 as Dr. Boston drew out, the toxic air contaminant program -- 20 which travels a different track, of course -- goes through 21 the process of identifying those compounds in California of 22 greatest concern because of their prevalence and exposure of 23 the population. 24 Then, we go through the listing process, and then 25 we try to tie back, having once listed the compounds, tie PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 back to the need for new control measures or the benefits 2 we're already receiving from existing control measures. 3 And, as man of you know, many, many of the 4 criteria pollutant control measures have historically had, 5 as I will call it, spillover benefits to us in the toxics 6 arena. Or other criteria pollutant measures have had other 7 spillover benefits like the acid deposition problem in 8 California -- albeit, there is not a very big problem so far 9 because of all the work we've done on oxides of nitrogen 10 over the years just for ozone, et cetera, et cetera. 11 There's a synergism; there's a combination. But 12 the -- so, I guess they're not totally interdependent. 13 Now, Mr. Scheible can answer the timetable of the 14 many workshops and the reiterations of the analyses and what 15 have you that have taken place or plan to take place that 16 carry the 1807 process, as it's known, well into 1996. 17 MR. SCHEIBLE: I think the basic dilemma is, from 18 a scientific standpoint, doing the risk assessment in the 19 most scientifically correct way is proving very challenging. 20 There is a very large range of risks that you 21 could derive from the studies that are out there and the 22 types of exposures that we think. 23 The public comment period produced a great deal. 24 I think it was a very successful exercise of science at its 25 best, in that we've gotten a voluminous amount of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 information and opinion that will take us some time to go 2 through. 3 And we've made that commitment to all the involved 4 parties to try to take the time that the science needs to 5 resolve the issues, or at least bracket it, so we can say 6 what we know and what we don't know. 7 If the risk assessment comes out towards the high 8 end of the risk, it means that diesel exhaust is a very 9 potent toxic air contaminant and one probably of great 10 concern. If it comes out towards the lower side, then it 11 would be a toxic air contaminant like many others that we 12 have. And it's quite important to us, and I think quite 13 important to the citizens and the industry that's affected 14 to try to get it right. 15 And, unfortunately, it's something that takes a 16 lot of time and resources. In terms of particulate or other 17 things, obviously with the SIP, there is a tremendous effort 18 to address how do we reduce emissions from diesel engines. 19 In all likelihood, that will get substantial reductions in 20 all types of things in the exhaust and will be beneficial 21 from a toxics standpoint. 22 This we'll need to know a few years down the line 23 in terms of, do we have a need out there, because of 24 toxicity, to try to do more. 25 CHAIRMAN DUNLAP: Mr. Lagarias has a comment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 MR. LAGARIAS: I'd like to respond to Ms. 2 Edgerton's comment about diesel exhaust. 3 As I understand it -- and I sat in with the 4 Research Screening Committee earlier this week -- studies 5 have been made on diesel exhaust toxic emissions. But in 6 October of '93, we changed the requirements for the 7 formulation of diesel fuel, so that diesel exhaust has 8 changed as well. And studies have already -- are underway 9 to look at the toxic effect of vapor phase emissions from 10 diesel exhaust. And the current project is being reviewed 11 now to look at the particulate diesel exhaust and its 12 possible toxic emissions. 13 So, studies are currently in process to get t he 14 scientific analysis of the possible impacts of this -- these 15 emissions. 16 CHAIRMAN DUNLAP: Any other questions or comments 17 by my colleagues on the Board? 18 Okay. At this time, it appears that no one has 19 signed up to testify from the audience. Is there anyone 20 that wishes to do so? All right. 21 Mr. Boyd, do you have any written submissions on 22 this item that you'd care to summarize for us? 23 MR. BOYD: No, Mr. Chairman, there were no written 24 submissions. 25 CHAIRMAN DUNLAP: Any other comments from staff? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 MR. BOYD: No further comments. 2 CHAIRMAN DUNLAP: Okay. Then we will officially 3 close the record. Since this is not a regulatory item, 4 it's not necessary really to do so, but we will. There is 5 no resolution at this time. 6 Why don't we move on? I'll give staff a few 7 moments to adjust their seating, and we'll take up the next 8 item. 9 All right. We'll move along. 10 Again, I'd like to remind those in the audience 11 who would like to testify on the next item or any other item 12 that we have before us today to please check in with the 13 Secretary to the Board. 14 The second item on the agenda today, 95-2-2, 15 public meeting to consider a status report on the State 16 Implementation Plan and the Federal Implementation Plan. 17 This item is a timely one, given the events that 18 have taken place this month regarding both the State 19 Implementation Plan and the Federal Plan. 20 The Board received its last status of the SIP in 21 December as a followup to the November submittal of the 21 22 or 23 boxes, as I recall, of information we sent to them. 23 Since that time, much has happened with regard to 24 the FIP and California's efforts to expedite the approval of 25 the State's SIP. Given the importance of this issue, I have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 followed closely as events have unfolded, and I am sure 2 other Board members have as well. 3 The SIP is California's road map for clean air. 4 The FIP can never effectively serve that purpose. The 5 Wilson Administration, our congressional delegation, local 6 leaders, and a broad coalition of industry groups are all in 7 agreement that California must control its destiny in this 8 regard. 9 In our view, a federally imposed plan will never 10 be acceptable to California. 11 Accordingly, the Governor and California's 12 congressional delegation is now pursuing a change in the 13 Clean Air Act to remove the FIP requirement that has been 14 imposed upon California. 15 On the positive side, once the FIP is behind us, 16 we can move ahead with a clean air plan tailored to fit our 17 needs. The SIP represents California's vision of a clean 18 air future, one that is our own, and contributes to the 19 health and well being of all Californians. 20 With those thoughts in mind, I think it's time to 21 hear the status report. I'd like to ask Mr. Boyd to 22 introduce the item and begin the staff's presentation. 23 MR. BOYD: Again, thank you, Mr. Chairman. 24 This is part of what will be, as indicated, a 25 continuous and continuing series of reports on the State PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 Implementation Plan and the interaction with the FIP. As 2 the Board knows extremely well, in 1994, we set out not only 3 to meet the requirements of the Federal Clean Air Act to 4 submit an ozone SIP by the required date of November 15th, 5 1994, but, in effect, really, as you know -- and my 6 apologies to the new Board members for the jargon -- but, in 7 effect, to SIP the FIP. I mean, that was the challenge 8 given us by the Federal Government. And that was the 9 challenge we accepted. 10 And, as you know, and as indicated, we succeeded 11 and we did indeed deliver the most comprehensive ozone plan 12 in the country to the U.S. EPA on time. 13 Although the Board most certainly discharged its 14 responsibilities, California was "FIP'ed" -- if I may -- 15 earlier this month anyway, in fact, on the 14th of February, 16 despite California's extraordinary efforts. 17 Although the SIP accomplishes the same objectives 18 and meets all the reasonable tests for approval, the U.S. 19 EPA did not act on the SIP in time to beat the court's clock 20 for FIP promulgation. And the staff will go through that 21 for you in more detail. 22 However, despite this recent FIP promulgation, we 23 still have the means to eliminate the FIP, although now it's 24 down to taking the course of congressional action, and thus 25 allow the SIP to move forward alone. And the staff also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 will discuss these efforts and their explanation of the 2 situation 3 The other good news, if we can look at all of this 4 as good news to date, the U.S. EPA has publicly called 5 California's SIP, quote, "the best of the lot," and has 6 responded very positively to both the acceptance of the SIP 7 and its measures, and very positively to our appeal to them 8 for timely and effective national emission standards on some 9 sources as you will recall. 10 Full approval of the SIP is expected by us. It's 11 almost forecast now by EPA. Therefore, I believe we are 12 indeed on the road to replacing the FIP, as we always 13 intended, which will return our ability to control our own 14 destiny, or regain and retain our sovereignty. 15 The staff presentation will detail the events that 16 have transpired since we submitted the SIP in November, and 17 describe what we think is apt to happen in the following 18 months to permanently resolve the FIP/SIP conflict. 19 And without any further presentation, I'd like to 20 present to you someone whom you've become very familiar with 21 on this subject, Ms. Lynn Terry, to provide you the detailed 22 presentation. 23 Lynn? 24 MS. TERRY: Thank you, Mr. Boyd. 25 I'll begin with a short overview of my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 presentation. I'll cover four topics today -- first, the 2 progress that has been made in obtaining U.S. EPA approval 3 of the SIP; second, what has happened with the Federal 4 Implementation Plan over the last two months; third, how 5 this SIP and FIP compare in a few key areas; and, lastly, 6 the upcoming actions we anticipate relative to both the FIP 7 and the SIP. 8 Since last November's submittal of the SIP to U.S. 9 EPA, progress has been made towards the goal of SIP 10 approval. The first step in that process is a completeness 11 finding, which I will discuss in a moment. 12 But first, I want to touch on how the California 13 SIP measures up relative to the rest of the nation. At the 14 last SIP update for the Board in December, we discussed 15 California's SIP performance compared to other states. 16 At that time, even U.S. EPA was not entirely clear 17 on the nationwide status. We have followed up and 18 discovered that our first impression was correct. The 19 California SIP is the most comprehensive in the nation. 20 Seven other states with serious or severe areas 21 submitted the required plans. However, only California had 22 six plans due, including the nation's only extreme area plan 23 for the South Coast Air Basin. 24 Other states had at most three plans to submit. 25 Also, many states have not completed the modeling work for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 attainment demonstrations and, as a result, have incomplete 2 control strategies. 3 The California 1994 ozone SIP includes attainment 4 demonstrations and the required showing of progress towards 5 attainment for each of the six areas classified as serious, 6 severe, or extreme. 7 These six areas are Sacramento, the San Joaquin 8 Valley, Ventura, San Diego, the Southeast Desert, and the 9 South Coast. 10 The SIP consists of local control strategies, 11 State measures, and national standards for federal sources. 12 The State element of the SIP consists of measures for mobile 13 sources, including enhanced vehicle inspection and 14 maintenance, consumer products, and pesticides. 15 On the good-news front, as Mr. Boyd indicated, the 16 California SIP has evoked a very positive reaction from U.S. 17 EPA. Assistant Administrator Mary Nichols has called the 18 California SIP considerably more advanced than other states 19 and the best of the lot. 20 Region IX Administrator Felicia Marcus has said 21 that U.S.EPA's goal for California is a fully approved State 22 strategy and that the goal is well within sight. 23 As I mentioned earlier, the first step in U.S. 24 EPA's SIP approval process is a finding of completeness. 25 U.S. EPA has up to six months to determine whether a plan is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 complete. 2 On January 30th, the U.S. EPA found many of the 3 State's measures complete. This includes adopted ARB 4 measures for reformulated gasoline, diesel fuel, and 5 consumer products. Also found complete were many of the 6 proposed ARB measures included in the 1994 November SIP. 7 These are mid- and long-term measures to reduce emissions 8 from light, medium, and heavy-duty vehicles, from off-road 9 industrial equipment, and from consumer products. 10 U.S. EPA also found complete the South Coast 11 District's long-term measures for advanced technologies. 12 Completeness findings are still pending for some SIP 13 measures, including vehicle scrappage and pesticides. 14 In 1993, U.S. EPA approved a key component of the 15 SIP, the Board's program for low- and zero-emission 16 vehicles. 17 Following the January, 1995, completeness finding, 18 EPA fully approved several other SIP measures as well. 19 Approval occurred as part of U.S. EPA's February 14th action 20 on the FIP, which I will discuss shortly. 21 The approved SIP measures are previously adopted 22 ARB regulations for consumer products, reformulated 23 gasoline, diesel fuel, and off-road recreational vehicles. 24 Now, let's move to the FIP and what's happened 25 recently in that arena. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 While we all know the outcome of U.S. EPA's 2 February 14th action on the FIP, it was promulgated as 3 required by court order. I'll briefly summarize the court 4 actions that preceded that event. 5 On January 13th, U.S. EPA and the FIP plaintiffs 6 requested that the U.S. District Court grant a two-year 7 delay in implementation of the FIP. 8 The Wilson Administration reacted quickly to 9 clarify that a delay in implementation would have no real 10 impact. What was needed instead was to delay promulgation. 11 On January 25th, ARB filed a motion to intervene 12 in the FIP case and requested a promulgation delay. On 13 January 27th, U.S. EPA responded positively, and indicated 14 it would not oppose California's request. 15 The court, however, did not agree and on February 16 6, denied the State's motion to delay FIP promulgation. The 17 court ruled that the effective date for the FIP would be on 18 hold until February, '97. But it let stand the February, 19 1995 deadline for promulgating the FIP. 20 ARB filed an emergency request with the Court of 21 Appeals to have the district court consider ARB's arguments 22 to delay promulgation of the FIP. This request was denied, 23 thus exhausting California's opportunity to prevent FIP 24 promulgation by the February 14th deadline. 25 With the potential remedies exhausted in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 courts, it became clear that legislative action is the only 2 recourse for eliminating the FIP. On February 9th, Governor 3 Wilson testified before a congressional subcommittee about 4 the need to avoid the duplicative federal regulation of the 5 FIP and the uncertainty it means to California. 6 U.S. EPA indicates it does not oppose a 7 legislative fix to the FIP, eliminating the FIP and allowing 8 approval of the SIP to proceed as a goal we all agree upon. 9 California's congressional delegation also 10 indicated its support for approval of the SIP and 11 eliminating of the FIP mandate. Language to eliminate the 12 FIP has been introduced in Congress. And given the support 13 expressed, we expect a successful outcome. 14 Next, I'll take a few moments to update the Board 15 on how the SIP generally differs from the final FIP 16 promulgated by U.S. EPA on February 14th. Since the text of 17 the FIP is extremely lengthy and has only been available to 18 us for a few days, my comments are preliminary. 19 Nonetheless, I will highlight a few clear 20 differences for you. Also, I will discuss how the final FIP 21 differs from the FIP proposal of last year. 22 This slide shows the previously proposed FIP 23 measures that were dropped by U.S. EPA from the final FIP. 24 These are fees for trucks, trains, ships, boats, and planes; 25 stationary source emission caps for Sacramento and Ventura; PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 limits on numbers of stops for trucks; no-drive days for 2 Sacramento; and infeasible emission standards for trucks and 3 off-road equipment. 4 Now, I'll move to the differences between the FIP 5 and the SIP. As I mentioned, our analysis of the FIP is 6 still underway; however, these are some obvious differences: 7 The FIP includes centralized enhanced I & M as a 8 placeholder for the program adopted by the California 9 Legislature. 10 The FIP also includes stationary source emission 11 caps for the South Coast that are a placeholder, in this 12 case pending EPA's approval of RECLAIM. 13 The FIP contains California-only truck standards, 14 along with a commitment to pursue national truck standards 15 in a rulemaking. 16 The FIP also includes a study of shipping 17 emissions to determine how to provide the emission 18 reductions needed from this category. This differs from the 19 SIP, which included reductions from movement of Southern 20 California shipping lanes farther offshore. 21 And finally, unlike the SIP, the FIP does not 22 rely on any market measures or vehicle scrappage programs. 23 There are many other differences that we are looking at, as 24 well as points we need to clarify with U.S. EPA. We expect 25 to report back to the Board with more details in our next PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 SIP update. 2 To conclude my presentation, I'll mention what we 3 see on the immediate horizon for the SIP and the FIP. In 4 terms of the FIP, congressional action should relieve 5 California of the FIP mandate. 6 On the SIP side, we expect U.S. EPA to find the 7 remainder of the SIP complete by May of this year. This 8 will enable U.S. EPA to move ahead with its formal process 9 for approving the SIP. 10 And finally, a graphic illustration of our 11 approach to this SIP/FIP situation: The SIP is a key to 12 unlocking the FIP and allowing California to move ahead with 13 its own plan for clean air. 14 Thank you. 15 CHAIRMAN DUNLAP: Mr. Boyd, do you have any 16 follow-up comments? 17 MR. BOYD: No, Mr. Chairman, no further comments. 18 We're here to answer questions of the Board. 19 CHAIRMAN DUNLAP: Okay. It appears we have had no 20 one sign up to comment from the audience. If there's anyone 21 that would like to speak, please come forward at this time. 22 MR. LAGARIAS: Mr. Chairman? 23 CHAIRMAN DUNLAP: Sure. Mr. Lagarias. 24 MR. LAGARIAS: I understand that our Executive 25 Officer, Mr. Boyd, is going to Washington next week. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 the mood in Washington is that the Congress has a contract 2 with America, which is going back to the states many of the 3 things the Federal Government has been doing. 4 We've got a former Board member that's now a 5 congressman in Washington. Would you remind him that his 6 program of "contract with California" suggests that maybe 7 the Federal Government ought to give back the states those 8 things that it can do well? 9 MR. BOYD: Mr. Lagarias, I would be glad to convey 10 that message, and I would report to you and other members of 11 the Board that Congressman Bilbray has not forgotten his 12 roots. He has already sung the praises of the Air Board's 13 approach to the program in California and has already 14 recruited one member of our staff, Mr. Venturini, to go back 15 and testify on how risk assessment and risk management is 16 done by your Board to try to set it up as a national model. 17 So, he's not forgetting, but I'll reinforce the 18 message. 19 MR. LAGARIAS: Fine. 20 SUPERVISOR VAGIM: Mr. Chairman? 21 CHAIRMAN DUNLAP: Supervisor Vagim. 22 SUPERVISOR VAGIM: Some clarity on the State being 23 FIP'ed. And under the EPA's lack of action, could you 24 clarify that? 25 MR. BOYD: Well, let me go back quickly. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 Historically, you remember this FIP that was court-mandated 2 is a product -- an artifact, as I always have called it -- 3 of the 1977 amendments. And we all thought the 1990 4 amendments would chapter this out, and we'd get a clean 5 slate of paper. 6 But the court disagreed with that, and we took 7 that argument all the way to the U.S. Supreme Court, and 8 lost some time ago. Or they just rejected it; they didn't 9 even take the case. 10 The Federal Government then had no choice but to 11 proceed to develop a FIP. But the requirements of the '90 12 Act was that we were to do a SIP. And we made the argument 13 that if we're going to do the SIP, you know, it moots the 14 issue out. 15 Ultimately, as we, the Administration, called upon 16 EPA to do something about this, to join us in court, to go 17 to Congress. They invited us to, quote, "SIP the FIP," that 18 is, give us a good State plan and it will, in effect, 19 chapter out, moot out, or what have you, the FIP. But we 20 always knew we had a problem of timing, because they issued 21 a draft FIP in February of 1994. They were given one year 22 to finalize that document, which meant by February 14th of 23 1995. That was their timetable to put out the final 24 document -- to promulgate, as we say, the FIP. 25 And at that time, the timetable that they would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 have to start implementing the measures -- I believe it's 2 within 30 days of the promulgation of that FIP. 3 We've consistently worked with them and others to 4 try to avoid the promulgation itself. And when they 5 recently came to the Administration and said, "We have 6 negotiated an arrangement with the plaintiffs to delay 7 implementing the FIP for up to two years; doesn't that solve 8 your problem," our answer was, "No. It does not. It still 9 have you promulgating the FIP and having two plans out 10 there, in effect, for us to have to deal with when the SIP 11 really, we think, does the job and does it better. 12 They really set up an impossible task for us. And 13 then, when they told us to SIP the FIP, because that would 14 presume they would receive it in November and have it 15 approved by February -- which, in reality, everybody knew 16 was an impossible task, because you could interpret from the 17 existing timetables and procedures that finding a SIP 18 complete and then approving a SIP was a more than a year- 19 long process. 20 Although the challenge was given to them, you have 21 offered us that opportunity to SIP the FIP, you could move 22 rapidly to approve it, maybe take some risks, maybe a little 23 faith -- and although they moved, as indicated in our 24 presentation, reasonably far, and they did give us a letter 25 of approval of several measures, they nonetheless haven't, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 in effect, been able to. And it was an impossible challenge 2 they gave themselves to approve the entire document; thus, 3 not even promulgate the FIP. 4 So, my criticism is one -- that I earlier 5 mentioned -- is that they gave themselves an impossible 6 challenge and they gave us an impossible dream of, in 7 effect, SIP'ing the FIP, unless they pulled out all the 8 stops and said, "We take it on faith. California's never 9 done anything all that wrong anyway. We'll approve it." 10 They didn't. Thus, we tried to delay 11 promulgation, and that's the recent court history that Ms. 12 Terry laid out that we failed to do. So, they have, quote, 13 "promulgated it," but said, "We're going to put it out there 14 and then put it on the shelf for two years, not implement 15 it." 16 And hopefully, "As we move rapidly," quote -- 17 their own words -- "to approve your SIP measures," then 18 eventually they will replace or moot out the need for the 19 FIP. 20 Well, that's the way it'll have to work, unless 21 the Congress comes along and agrees with us and says, "No, 22 we never really intended this to happen. Just eliminate the 23 FIP requirement and, thus, that document, and put in the 24 bottom drawer. And just be governed solely by the SIP and 25 spend all your time trying to prove the SIP, not trying to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 make comparisons between the two documents." 2 A long answer to your short question, Mr. Vagim. 3 SUPERVISOR VAGIM: Okay. I appreciate the 4 refresher of the history. But the question is to what you - 5 - I think you said before. And that is, because EPA didn't 6 act in time, the State in total got FIP'ed. Is that 7 correct? 8 Because there's only five areas that got FIP'ed in 9 the State under the first FIP. 10 MR. BOYD: You're correct. I may have said 11 generically the State, and we did, in the generic sense, get 12 FIP'ed. 13 But the FIP affects only three areas of the State. 14 SUPERVISOR VAGIM: Okay. Now, those areas that 15 were not FIP'ed that are in the -- our SIP, are going to be, 16 well, along the -- they're not going to have promulgation 17 off a federal implementation then, I presume. Those areas 18 that did not -- or that were not covered by the -- 19 MR. BOYD: It's a two-part answer, and I'll let 20 Mike jump in. But let's just say that though other areas 21 are governed by the SIP, because they weren't FIP'ed, 22 however, there are spillover consequences of the FIP that 23 would affect other areas, and Mike can elaborate. 24 MR. SCHEIBLE: A number of measures in the FIP are 25 promulgated on a statewide basis. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 For example, inspection and maintenance is not. 2 That's just in the areas that are the FIP areas. 3 SUPERVISOR VAGIM: Right. 4 MR. SCHEIBLE: The centralized inspection and 5 maintenance. However -- 6 SUPERVISOR VAGIM: No matter which way the wind 7 blows, right? 8 MR. SCHEIBLE: -- rules for motor vehicles, the 9 vehicle portions of the FIP, are statewide. The rule for 10 architectural coating, the rule for pesticides are 11 statewide, because EPA judged that there was the ability for 12 those sources or products to be bought in one area and moved 13 into the FIP area. 14 SUPERVISOR VAGIM: Okay. There seems to be then 15 some refinement of what was discussed before, and that is 16 that the pesticide issue really was applied only to the FIP 17 areas. Now, you're saying it's going to be applied 18 statewide? 19 MR. SCHEIBLE: The federal rules, if EPA did go 20 ahead and implement what they have adopted, would be applied 21 on a statewide basis. 22 SUPERVISOR VAGIM: Not just in the three areas -- 23 MR. SCHEIBLE: Not just in the three areas. 24 SUPERVISOR VAGIM: Okay. 25 MR. SCHEIBLE: That's why all parts of the State PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 have an interest in getting rid of the FIP, besides being 2 altruistic -- 3 SUPERVISOR VAGIM: Right. 4 MR. SCHEIBLE: -- of their neighbors. 5 SUPERVISOR VAGIM: So, I mean, because the FIP, it 6 affects everyone -- 7 MR. SCHEIBLE: That's correct. 8 SUPERVISOR VAGIM: -- in equal proportions, 9 whether you were FIP'ed before or not. 10 MR. SCHEIBLE; Correct. 11 CHAIRMAN DUNLAP: Mr. Parnell. 12 MR. PARNELL: Mr. Boyd, with respect to the 13 language that's been introduced, do you have a sense of how 14 that's moving forward, if it's moving forward, and what time 15 frame? 16 That essentially, if passed by Congress, would 17 moot the whole FIP issue; is that -- 18 MR. BOYD: That's correct, Mr. Parnell. 19 MR. PARNELL: And I guess in view of everything 20 else that's going on back there, a sense of timing is what 21 I'm looking for. 22 MR. BOYD: And I don't have a good answer for you. 23 As you know, the Governor went back to Washington -- a week 24 before last, I believe -- and testified to Congress, the 25 House, about this issue. And it was just after the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 promulgation of the FIP. And Congressman Lewis concurrently 2 then indicated his intent to carry language. Which, in 3 effect, means there are two pieces of legislation, either of 4 which would solve the dilemma. 5 But I do not have a good sense of the timing. I 6 mean they're in the system, and I think people are amassing 7 support at present to move those along. But I have no a 8 good indication of what the timetable will be as of yet. 9 MR. PARNELL: Thanks. 10 CHAIRMAN DUNLAP: Any other questions or comments? 11 Supervisor Vagim. 12 SUPERVISOR VAGIM: Just quickly, Mr. Chairman. 13 We were the only state to make the deadline, as 14 far as I understand, but other states are in now. Right? 15 MR. BOYD: Well, that's a -- we can't quite claim 16 exclusively that we met the November 14th deadline, which is 17 why we've been very careful with the language of today. In 18 checking -- I mean, there's a small county in Arizona that 19 had an ozone problem that got enough material in on the 14th 20 of November that they could say, you know, "We, too, met the 21 deadline." 22 So, no state who had a comprehensive problem or a 23 broad-based problem like California's got, you know, got any 24 comprehensive statewide plan in. And, of course, no state 25 has an extreme area, and that's like Los Angeles. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 nobody got the kind of plan in that we had to get in to 2 describe that area. 3 SUPERVISOR VAGIM: Okay. But the states that had 4 less than extreme, some of them have severe and serious, 5 those who did not meet the deadline, is there any difference 6 in the attitude of EPA towards them versus the ones that met 7 the deadline? 8 In other words, did we rush to just wait? 9 MR. BOYD: Well, we rushed because we had no 10 choice but to accept the invitation to SIP the FIP. I mean, 11 had we failed to meet the deadline, we would be powerless to 12 make the arguments we're making today. We have a plan. 13 Congress should moot out this FIP requirement. And we 14 believe most of you thought that everybody got a clean sheet 15 of paper. 16 The other areas, should they delay long enough, 17 will ultimately face the sanctions of the 1990 Act, which 18 could mean that, some day, they could find themselves in the 19 position of having EPA step up and prepare a federal plan 20 for their area, because they failed to meet the requirement. 21 But many other areas of the country are going 22 through -- as one famous American once said -- "It's deja vu 23 all over again" for some of us. Because many areas of the 24 country are going through agonies that I think we went 25 through 10 or more years ago in terms of modeling outcomes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 and disagreement on whether NOx plays a role in the 2 formation of ozone, and all these things that are so 3 historical here, which is what has delayed, in some cases, 4 their ability to submit a plan. 5 And they will try to wrestle that out with EPA. 6 And hopefully somebody will look at the history of 7 California and not repeat it. But they do stand the 8 possibility of getting sanctioned somebody with a FIP. But 9 we're -- ours is unique and we're several laps ahead. 10 SUPERVISOR VAGIM: Thank you. 11 CHAIRMAN DUNLAP: Ms. Edgerton. 12 MS. EDGERTON: I think the -- in response to that, 13 I think we established once again California's unquestioned 14 leadership with respect to clean air regulation, both from 15 the standpoint of protecting the environment and also doing 16 it in a cost-effective way. 17 I think that's one of the reasons why we probably 18 are more lucky than the other states, going to be more 19 fortunate in getting our entire plan approved. 20 But in that connection, I don't want to spend a 21 lot of today's time on it, because I know that Congress is 22 considering the FIP legislation as well. However, one of 23 the things that is outstanding with respect to the SIP is 24 the list of measures which we targeted as planned, but which 25 have not been submitted as regulations to us and we have not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 approved. Some of them need to be either approved within a 2 year or need to have substitute measures in there. 3 And I am assuming, even though some of them were 4 not on the agenda for the year, that a list of those 5 measures which do need to be developed during the next year 6 has been prepared and submitted to the Chairman, and that 7 those are all coming along in the pipeline. 8 Because there were quite a number of measures, and 9 some of them were even approved as complete or approved by 10 the U.S. EPA, even though they're still just plans for us. 11 So, can you -- I'll just assume that the staff has 12 provided this to the Chairman with a careful understanding 13 of which of these items we promised to do that the EPA has 14 now approved and, therefore, we must do; which of those do 15 we have to do next year. I'm assuming that list is going to 16 the Chairman. 17 Is that correct? 18 MR. BOYD: Well, to be totally honest with you, I 19 don't believe I've given a piece of paper to the Chairman, 20 and I don't want to put him in a position of thinking he has 21 a piece of paper. 22 The SIP -- 23 MS. EDGERTON: He needs a piece of paper. 24 MR. BOYD: The SIP document itself had the many, 25 many tables and schedules of all the various types of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 measures that had been or we committed to prepare over time. 2 With the shifting sands of the EPA policy that's 3 ongoing almost on a daily basis with regard to what 4 constitutes the requirements -- their requirements relative 5 to SIP approval, I think we find ourselves pretty much in 6 the position of having had EPA say -- but with the exception 7 of the two measures, scrappage and pesticides -- that 8 they're virtually prepared to find the State SIP approved 9 and approvable at the end of that process. 10 And although they have not as yet given us the 11 document, you know, the piece of paper that says, "We find 12 your submittal complete," which is hurdle number one, 13 they've already gone beyond in some components and said, 14 "It's not only complete, but this piece is approvable." 15 I believe there's one measure -- Mr. Scheible can 16 jump in and correct me -- and that is the regulation you're 17 dealing with next month. That, I think, is another one that 18 fulfills our commitment, and perhaps the only measure that 19 we need to deal with this calendar year in order to fulfill 20 our total obligation responsibility. But I'll defer to Mr. 21 Scheible. 22 But we've been more or less put on notice that the 23 only potential for unapprovability, as I would interpret 24 their recent letter to me and discussions we've held with 25 them, the only two areas are pesticides and the scrappage PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 program, because they lack enough detail for them to say 2 that we're adequately pursuing a course that would deliver 3 them. 4 Otherwise, our commitments are off into the 5 future, such that we are on course to deliver on those 6 commitments. 7 Mike? 8 MR. SCHEIBLE: Most of the measures in the SIP 9 that are measures that need to be adopted as regulations, 10 and for which we claimed midterm credit, will need to be -- 11 come before the Board in 1996 or early 1997. 12 The federal process is, they have six months in 13 which to find the plan complete, and then it takes 14 approximately a year in which to issue their approval 15 determination -- approval/disapproval. 16 In most cases, where it is not a regulation, if 17 they stick to the past policies, they would give conditional 18 approval. And the conditional approval would be within a 19 year, we owe them the measure converted into a regulation. 20 We took full advantage of that amount of time, 21 which gets to us about mid-1997 to put measures into the SIP 22 and say the tentative date for regulation adoption is in 23 later '96 or in 1997. Because, for many of the measures, we 24 are at the point where we need to go out and run our whole 25 workshop process to develop if, from a measure, we are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 confident the technology will exist to a regulation we're 2 confident will work and has all the details worked out. 3 And EPA has not pulled that trigger yet in terms 4 of the year. We don't expect them to for some period of 5 time. 6 MS. EDGERTON: Thank you. 7 CHAIRMAN DUNLAP: I will, Ms. Edgerton, follow up 8 on your gentle prod to have a meeting with Mr. Boyd where 9 we'll go over these items. 10 Any other questions? 11 SUPERVISOR VAGIM: Did you have a question, Joe? 12 Mr. Chairman, I have one follow-up question. 13 CHAIRMAN DUNLAP: Sure, Supervisor Vagim. 14 SUPERVISOR VAGIM: I noticed that they found 15 complete our long-term South Coast measures, the 16 technological measures that we had put in there, which 17 included a lot of peripheral issues that we introduced as 18 needed measures that the Feds had to come along with if 19 we're going to really meet South Coast attainment. 20 But now I notice that they pulled out of their FIP 21 planes, trains, boats, et cetera. Isn't that now an 22 incongruity that our SIP is basically going to be 23 recommending that those be under control, and they removed 24 them? 25 MR. SCHEIBLE? Well, they've modified the measures PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 for rail -- the rail measure, I think, is very close to what 2 we put into the SIP. 3 SUPERVISOR VAGIM: They've exempted planes. 4 MR. SCHEIBLE: For planes and airports, they 5 modified their proposal from dealing with a bubble that 6 affected aircraft emissions, but kept portions and perhaps 7 expanded them -- we haven't reviewed all the detail -- in 8 terms of electrification and ground operations, get emission 9 reductions there. 10 And they also indicated that they were going to 11 pursue what the SIP recommended, which was to work with 12 basically the national/international authorities to see 13 whether more stringent aircraft standards could be adopted. 14 So, that's in the future. 15 And ships, I think they did a similar thing, in 16 that they took the fee portion of the FIP away, which was 17 universally disliked by all the affected -- directly 18 affected parties. And for ships, for example, they included 19 things like -- or maintained things like lower speeds in 20 port, measures to lower ship emissions when they're 21 berthing, but removed the fee thing. 22 And then a big measure for Ventura that was put 23 into the study category as opposed to a final measure is the 24 movement of the shipping lanes from the channel -- in 25 between the Channel Islands and the coast beyond that. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 I think that's an issue they have to work out with the 2 military over how it affects their operations. 3 SUPERVISOR VAGIM: We put out a lot of challenges, 4 threshold challenges, out to -- for the Feds to -- that they 5 had control over, to bring in controls to those things like 6 big engines and, et cetera. 7 What's the discussion on that? Is that going to 8 be maintained in their discussions as perhaps become a 9 nationwide standard? 10 MR. CACKETTE: Yes. I think one of the 11 distinctions, in looking at the FIP, is that they're not 12 able to commit in the FIP to do these national standards by 13 regulation. The FIP is a compilation of regulations. But 14 on the other hand, EPA has been moving very aggressively to 15 begin the process of establishing the truck, and diesel, and 16 off-road diesel equipment emission standards. 17 They are proposing to have advanced notice of 18 proposed rulemaking this spring, between -- sometime between 19 April and June, which will lay out their national program. 20 And I think we're very impressed with how fast they're 21 moving. 22 SUPERVISOR VAGIM: Okay. And finally, what is 23 being discussed in Congress right now is no more regulation, 24 a regulation moratorium, although they exempted health and 25 safety and law enforcement. Anything going to fall out PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 because of that? 2 MR. CACKETTE: Well, I think it depends on how 3 long that moratorium is. I've heard six months. That 4 probably doesn't go into -- 5 SUPERVISOR VAGIM: Goes to the end of '95 is what 6 they're talking about. 7 MR. CACKETTE: Okay. They did have -- according 8 to our plan, we have believed that they would be adopting 9 two national regulations in '95, which were pleasure craft 10 that's already been proposed and locomotive emission 11 standards, both on a nationwide basis. 12 So, I think those could be subject to a delay. 13 But their implementation date on both of those is somewhat 14 off in the future. 15 SUPERVISOR VAGIM: And our future ones, such as 16 the four gram engines on large engines, on rail engines, 17 those types of things, wouldn't be affected by that 18 moratorium? 19 MR. CACKETTE: Well, again, if it's only to the 20 end of 1995, no, because the adoption date for some of that 21 regulatory activity is probably '97, at the earliest, on the 22 EPA standpoint. 23 SUPERVISOR VAGIM: But it does take the so-called 24 nudging effect away, doesn't it? 25 MR. CACKETTE: Yes. Puts a barrier there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 MR. SCHEIBLE: The final FIP and its discussion of 2 the measures very much indicates for the trucking and for 3 the off-road sources, EPA accepted and promulgated final 4 regs for California vehicles. They say they look at these 5 as interim regulations which, by the time they would come 6 into effect, would have been superseded by national 7 rulemakings that establish the same rules nationwide, and 8 have committed to using their most expedited regulatory 9 mechanism that they have in order to move those along at a 10 national level. 11 What they were unable to do when they promulgated 12 the FIP was actually do nationwide rulemaking, because they 13 have to follow their process for that. 14 CHAIRMAN DUNLAP: Mr. Parnell. 15 MR. PARNELL: Clarification, Doug. On McIntosh's 16 regulatory reform -- the legislation has to be debated in 17 the Senate, of course -- but the language really is December 18 31 or when the contract is complete. 19 So, there's some vagary in when or if this thing 20 is to conclude. And it may well have some effect, unless 21 they ferret out some of these issues dealing with air. 22 SUPERVISOR VAGIM: Right. And my point is, it 23 could cause everything else that we put in our SIP to slide 24 I mean. And I presume we're ready to make that argument to 25 EPA if some of these things that we've put in there from -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 we're asking the Feds to help us bring down emissions in a 2 total, particularly in South Coast -- if, because of their 3 federal act, some of these things can't be done, but -- or 4 they refuse to do them -- we've banked on them to be on our 5 side, hopefully. 6 MR. PARNELL: There is a good list and a bad list 7 floating around that no one has been able to see, except a 8 handful. And air, I suspect, is on the good list of those 9 regulations that will be allowed to go forward. It's my 10 sense. 11 SUPERVISOR VAGIM: Good. Thank you. 12 CHAIRMAN DUNLAP: Mr. Calhoun. 13 MR. CALHOUN: Have we received any specific from 14 the EPA regarding the inclusion of the scrappage program in 15 the SIP? 16 MR. BOYD: There's not been much detailed comment. 17 We've got -- I have received one letter at the end of 18 January, just kind of reporting on progress in reviewing and 19 approving the SIP. And it was in that letter that they 20 indicated a broad degree of approval or approvability. And 21 they just noted that there wasn't enough detail available as 22 of yet with regard to scrappage for them to render an 23 opinion one way or another. 24 And that was kind of a hint. Well, the financing, 25 for instance, it takes financing. The same question as your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 own Board raised of the proponents are still there on the 2 table, and they just echoed those very same types of 3 questions. "We need those questions answered. 4 "We need input on those questions before we could, 5 you know, close down the issue and say you've given us a 6 complete document. These are approvable items." 7 They had that, those general comments, for both 8 scrappage and the pesticide program, which was a voluntary 9 program and lacked some specificity, they felt. 10 And so, both of these are being worked on 11 presently -- pesticide by the Department of Pesticide 12 Regulation and the scrappage program by the -- by all of us, 13 all parties who are members of the group that has embraced 14 that proposal. 15 MR. CALHOUN: Thank you. 16 CHAIRMAN DUNLAP: Okay. Any other questions of 17 staff? Very good. Thank you. 18 Mr. Boyd, can you summarize any of the written 19 comments that the Board has received? Has there been any? 20 MR. BOYD: To my knowledge, we received no written 21 comments, Mr. Dunlap. 22 CHAIRMAN DUNLAP: Okay. Very good. Thank you. 23 At this point, we will close the record. My colleagues on 24 the Board will notice that we have a resolution, a proposed 25 resolution before us, 95-11. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 And I trust you've all had a moment to review it. 2 Is there a motion? 3 MR. PARNELL: Mr. Chairman, I move the passing of 4 Resolution 95-11. 5 SUPERVISOR RIORDAN: Second. 6 CHAIRMAN DUNLAP: Very good. Thank you. 7 I have a motion and a second. Madam Secretary, 8 can I get you to call the roll? 9 MS. HUTCHENS: Boston? 10 DR. BOSTON: Yes. 11 MS. HUTCHENS: Calhoun? 12 MR. CALHOUN: Yes. 13 MS. HUTCHENS: Edgerton? 14 MS. EDGERTON: Yes. 15 MS. HUTCHENS: Hilligoss? 16 MAYOR HILLIGOSS: Aye. 17 MS. HUTCHENS: Lagarias? 18 MR. LAGARIAS: Aye. 19 MS. HUTCHENS: Parnell? 20 MR. PARNELL: Aye. 21 MS. HUTCHENS: Riordan? 22 SUPERVISOR RIORDAN: Aye. 23 MS. HUTCHENS: Roberts? 24 SUPERVISOR ROBERTS: Aye. 25 MS. HUTCHENS: Silva? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 SUPERVISOR SILVA: Aye. 2 MS. HUTCHENS: Vagim? 3 SUPERVISOR VAGIM: Aye. 4 MS. HUTCHENS: Chairman Dunlap? 5 CHAIRMAN DUNLAP: Aye. 6 MS. HUTCHENS: Resolution passes 11-0. 7 CHAIRMAN DUNLAP: Very good. Thank you. 8 At this point, why don't we take a moment, again, 9 allow staff to adjust their seating, and we will take the 10 third agenda item. 11 (Thereupon, there was a brief pause 12 while staff prepared for the next agenda 13 item.) 14 CHAIRMAN DUNLAP: We'll resume our meeting. 15 The next agenda item is 95-2-3, public meeting to 16 consider an informational report on the status of air 17 pollution control district implementation of smoking vehicle 18 programs. 19 This item is a presentation on the smoking vehicle 20 programs operated by several local air pollution control 21 districts. 22 I have directed the staff to provide this brief 23 overview as part of my efforts to inform the Board about 24 various programs being carried out by most local air 25 pollution control districts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 I am sure that some of you are already aware of 2 these programs, particularly those established in your 3 districts. But I believe it would be useful to summarize 4 the statewide activity. 5 At this point, I'd like to ask Mr. Boyd to 6 introduce the item and begin the staff's overview. 7 MR. BOYD: Thank you, Mr. Chairman. 8 Well, as indicated by the Chairman, this 9 presentation is one of what I think we'll see is a series of 10 presentations on random months on the efforts of both State 11 and local agencies to, if I may say, reach out and engage 12 the citizens of California in our mutual ongoing efforts to 13 achieve clean air in the State. 14 In State and local organizations' efforts to 15 utilize any and all -- certainly a wide variety of control 16 measures, the smoking vehicle program is one that helps 17 districts and thus the State overall by helping reduce the 18 number of vehicles on the road that could be classified as 19 gross emitters, and also meeting a public need of having 20 that public -- those that spend its dollars on the 21 commodities that they purchase, the dollars include a fee 22 for making those products cleaner, and then they are 23 aggravated by seeing vehicles on the highway that are 24 smoking excessively. And this allows them an opportunity to 25 participate with us in trying to alleviate that problem. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 By definition of some, such vehicles can produce 2 ten times -- or even more than that -- the emissions of the 3 new complying vehicles that so many of the citizens have 4 purchased. 5 And, as you know, of course, the State's I & M 6 program and the now proposed scrappage programs are other 7 types of programs that are ways to reduce the number of so- 8 called gross-emitting vehicles operating in the State. And 9 these involve the citizens in different of ways, but the 10 outreach programs of the districts are a way for the 11 citizens to be directly involved. 12 I've asked the Office of External Affairs, which 13 is supervised by Mr. Lockett, to summarize the various 14 smoking vehicle programs in the local districts. 15 And Mr. Clark Brink of that office will make the 16 presentation. 17 Clark? 18 MR. BRINK: Good morning. Thank you, Jim. And 19 thank you, fellow Board members. 20 Thank you for this opportunity to present this 21 brief overview of the smoking vehicle programs currently 22 implemented in California. 23 Smoking vehicle programs have been adopted by some 24 districts to assist them in identifying and repairing 25 vehicles expressing characteristics typically associated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 with very high excess emissions above and beyond projected 2 normal deterioration rates from certification levels. 3 Several districts recognize that vehicles which 4 emit excessive amounts of smoke or visible emissions are 5 likely to produce significant amounts of hydrocarbons, 6 carbon monoxide, and particulates, or PM10. 7 Therefore, identifying and correcting such 8 vehicles results in the reductions of carbon monoxide, 9 reactive organic gases, and particulate emissions. 10 Additionally, depending upon the specific 11 mechanical defect, reductions in NOx may also be achieved. 12 Currently, five districts have active smoking 13 vehicle programs. One district, the Sacramento Metropolitan 14 Air Quality Management District, has not yet initiated its 15 program, but intends to do so in 1995. 16 As you can see, these programs have been around 17 for 20 years, with the San Diego Air Pollution Control 18 District implementing the first such program in 1975. 19 The primary statutory authority to implement 20 smoking vehicle programs is chaptered in the California 21 Health & Safety Code and the California Motor Vehicle Code. 22 Health & Safety Code Section 41700 requires the regulation 23 of discharges into the air which result in a nuisance, 24 annoyance, or endangerment to the public health and safety. 25 California Motor Vehicle Code Section 27153 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 specifically requires that motor vehicles must be operated 2 in a manner not to result in the escape of excessive smoke, 3 flame, gas, oil, or fuel residue. And Motor Vehicle Code 4 Section 27153.5 specifically authorizes air pollution 5 control officers to enforce all provisions of the Vehicle 6 Code which regulate air pollution emissions. 7 Smoking vehicle programs adopted and implemented 8 by individual districts vary in size and scope. Depending 9 upon these and other variables, including the severity of 10 the air pollution problem within each air basin and the 11 population which resides in its jurisdiction, budget for 12 enforcement of smoking vehicle program provisions range from 13 35,000 to $300,000 per year. 14 Local and regional air quality management 15 districts partner closely with other State agencies to 16 encourage compliance with smoking vehicle regulations; thus 17 reinforcing the serious potential of excessively emitting 18 vehicles to adversely impact human health and safety. 19 The Department of Motor Vehicles plays a critical 20 role in supporting district efforts by providing -- usually 21 through limited access to its computer database -- a mailing 22 address of the registered vehicle owner. 23 This information is then used to mail information 24 regarding the alleged violation and educational material 25 directly to the responsible party. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 Additionally, the Department of Motor Vehicles 2 collects funds, as provided for in Assembly Bills 434 and 3 2766. This funding helps offset costs incurred by the 4 districts, such as receiving and processing complaint 5 information and in the marketing of smoking vehicle programs 6 to the public. 7 The California Highway Patrol has specific 8 citation authority as provided for by Motor Vehicle Code 9 Section 27153. The Highway Patrol can issue a citation, or 10 fix-it ticket, directly at any time excessive emissions are 11 observed. 12 Excessive emissions are defined for this purpose 13 as those being as high or higher than a Ringelman 1, 20 14 percent opacity, and apply to manufactured after 1971. 15 Vehicles older than 1971 or over 24 years of age 16 are subject to a less stringent Ringelman 2, or 40 percent 17 opacity standard. 18 Additionally, if three or more complaints about 19 one vehicle are received by the California Highway Patrol 20 within a 60-day period, a citation can be issued if observed 21 operating in violation of 27153 provisions. 22 Several districts, in prior years, have contracted 23 directly with the Highway Patrol to augment smoking vehicle 24 program district staff activities. 25 This slide summarizes California Highway Patrol PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 citation activity in 1994. As you can see, the records 2 indicate that a total of 5,871 citations were issued during 3 that period. 4 Complaints received by individual districts vary, 5 once again, according to the severity of the problem, the 6 breadth of the program -- including district resources -- 7 and response by the public as a result of program marketing 8 efforts. 9 As you can see, approximately 223,500 complaints 10 were processed by the districts in 1994 alone. 11 Over 1.12 million complaints have been processed 12 since program inception. 13 Please allow me to take a moment to outline the 14 typical complaint procedure process. First, as soon as a 15 complaint is received by the district, it is logged on the 16 appropriate database. Information requested and filed 17 typically includes, but it is not limited to, the license 18 plate number, the name and address of the registered owner, 19 the mailing address if different from residence; the date, 20 time, and location of the alleged violation, the make and 21 model year of the vehicle, the registration expiration date, 22 the VIN -- or vehicle identification number -- and, if 23 known, the fuel type. 24 Second, a letter is sent to the registered owner 25 explaining the alleged violation, citing the relevant Health PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 & Safety Code and Motor Vehicle Code, authority; the date, 2 time, and location where the vehicle was observed, and 3 instructions about how to return the proof of correction 4 form. 5 Many districts also include general information 6 about the health effects and costs of air pollution, as well 7 as common causes of excessive emissions. 8 Once the district receives the proof of 9 correction, a thank you note for responding is usually sent 10 back to the owner. 11 The Highway Patrol has several options to handle 12 complaints. They can issue fix-it tickets, as previously 13 referred to, or citations, or they can refer the complaint 14 to the appropriate district for action. 15 If the Highway Patrol pursues directly, it will 16 forward the proof of correction form to the district for its 17 files. 18 Strong public participation for smoking vehicle 19 programs has encouraged districts to more widely educate 20 residents about the causes and impacts of excessively 21 polluting vehicles. Many avenues of outreach are utilized, 22 including toll free hotlines, radio, newspaper, television, 23 and billboard advertisements, and partnering with other 24 organizations representing both public and private sector 25 entities have also proven highly successful. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 Payroll check inserts, interior and exterior bus 2 signs and bumper stickers, and other promotional items are 3 additional avenues to heighten public awareness. 4 Most individuals are enthusiastic about smoking 5 vehicle programs. While there are exceptions, people 6 generally feel that they are doing their part by operating 7 and maintaining their personal vehicle in compliance with 8 the law. 9 And consequently, they want others to do their 10 part to help clean the air also. 11 San Diego residents, for example, have responded 12 tremendously to a recently public outreach campaign 13 initiated by the San Diego Air Pollution Control District, 14 as evidenced by the dramatic increase in complaints received 15 in 1994. As indicated in previous slides, San Diego has the 16 oldest program, first adopted in 1975. 17 Total complaints received by that district through 18 1993 numbered 3200. In 1994, the program was more visibly 19 marketed, increasing 1994 total complaints received to over 20 12,000, an increase of 7,000 percent expressed as a yearly 21 average. 22 Examples of promotional materials are displayed 23 for your information on the counter behind you. 24 Although today's presentation on smoking vehicle 25 programs operated by local and regional air quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 management districts, I want to briefly mention how the Air 2 Resources Board handles smoking vehicle complaints. 3 Most complaints are usually received via our toll 4 free 800 complaint hotline. Additional information 5 regarding those complaints is obtained from DMV and then 6 forwarded to our Mobile Sources Division, which handles 7 correspondence with the registered owner in a manner similar 8 to that previously outlined. 9 Approximately 1300 complaints were received last 10 year. 11 In summary, the districts who have adopted smoking 12 vehicle programs have regarded them as very successful. By 13 their very nature, they target gross emitters and encourage 14 individuals to take an active role in attaining and 15 maintaining healthful air. 16 To date, over 1,120,000 complaints have been 17 voluntarily submitted by concerned citizens, thus 18 reinforcing that Californians do care about air quality and 19 are willing to take action to help achieve clean air. 20 I hope this information presented to you this 21 morning is helpful. Thank you very much. 22 CHAIRMAN DUNLAP: Thank you, Mr. Brink. 23 Mr. Boyd, any further comments by staff? 24 MR. BOYD: No, Mr. Chairman, other than to just 25 again underscore the fact that this is but one of the many PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 programs that afford the citizens of the State an 2 opportunity to participate in kind of a hands-on way in the 3 California air pollution control program, which is my 4 generic term for the activities of both the State and the 5 local agencies, and I think gives them a little return on 6 their investment and an opportunity to see how they can be 7 champions for clear air, which message I think we need to 8 reinforce a little bit more. Because, in the future, it's 9 going to get a little tougher and we need a little more 10 citizen involvement in the program. 11 CHAIRMAN DUNLAP: Right. Any questions or 12 comments? 13 Mr. Calhoun. 14 MR. CALHOUN: Yes, Mr. Chairman. For the record, 15 I guess I'd like to indicate that this program's been around 16 a lot longer than 20 years. The L.A. County Air Pollution 17 Control District implemented a vehicle inspection program, 18 to my knowledge, starting in 1956 and '57. 19 And the reason why I know about it, I was one of 20 the participants in it. And it was fairly commonplace at 21 that time to see a lot of smoking vehicles around. You 22 don't see very many of them today. That's an indication 23 that the program that has been in effect to control smoking 24 vehicles has been fairly effective. 25 But occasionally, you do see those vehicles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 around. I think it's a very worthwhile program. Thank you. 2 CHAIRMAN DUNLAP: Dr. Boston? 3 DR. BOSTON: Just quickly, could you tell me what 4 the impact of carburetor cleaners are on this program? You 5 see people dumping cans of stuff down the carburetor to 6 clean their carburetors, and smoke comes pouring out the 7 back of the car. 8 What's the impact of that? Do we have any idea? 9 MR. BOYD: Perhaps the one person who could answer 10 that question or attempt to answer it, Mr. Cackette, has 11 left us in the lurch here. But I don't know, Dr. Boston, 12 other than the speculative, subjective opinion that both you 13 and I can render about it. 14 And knowing large numbers of people who use those 15 kinds of products before they run off and get an I & M test, 16 or what have you, there's a perception of doing something 17 good. But I don't know if that's an advertising perception 18 or a real perception. 19 Maybe we can get you some additional information 20 from our -- 21 DR. BOSTON: I'll talk to Mr. Cackette privately. 22 MR. BOYD: -- motor vehicle experts, and get you a 23 memo on the subject and share it with all the Board members. 24 DR. BOSTON: Okay. Thank you. 25 CHAIRMAN DUNLAP: Ms. Edgerton. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 MS. EDGERTON: I understand there's a picture 2 somewhere of Mr. Calhoun in a car with the red light, and 3 would go around and stop everyone who had these smoking 4 vehicles. I think we ought to try to get that and run that 5 in the Clean Air Times. 6 I think that would be the fabulous. I wan to see 7 his picture. 8 MR. BOYD: I want to thank Mr. Calhoun for that 9 history we can add to our history base. I think Mr. Brink 10 ought to interview Mr. Calhoun to get the whole history of 11 this program for our archives for future reference. 12 MR. BRINK: I welcome that opportunity. 13 CHAIRMAN DUNLAP: I have a couple questions and 14 comments. First off, thank you for an excellent overview. 15 I appreciate it very much. 16 There are -- I recall from my days at South Coast, 17 there were memo pads which had the phone number and the 18 information that one would gather in order to report a 19 smoking vehicle. 20 I would appreciate if we could get samples of 21 those, particularly for the Board members who have programs 22 in their areas, so that they may take advantage of that 23 program. 24 MR. BOYD: I believe we neglected to point out to 25 the Board members in our introduction that on the shelf PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 behind you, there are examples -- 2 CHAIRMAN DUNLAP: Some. 3 MR. BOYD: -- of some of the materials used by 4 local districts for your perusal at your leisure. 5 CHAIRMAN DUNLAP: Okay. I didn't notice the South 6 Coast. Perhaps we can get those another way. 7 Secondly, I noticed that there seems to be a 8 correlation between the outreach in advertising and actual 9 call-ins. I mean, awareness obviously increases. 10 Have you, in the course of your discussions and 11 following up with the locals on this program, have they 12 budgeted money? Have they used settlement dollars? How 13 have they gone about funding? 14 Do you have a sense, Mr. Brink, of how they funded 15 these outreach programs? 16 MR. BRINK: The majority of the programs are 17 budgeted at the beginning of the fiscal year. 18 MR. BRINK: Okay. 19 MR. LAGARIAS: Mr. Chairman? 20 CHAIRMAN DUNLAP: Sure, Mr. Lagarias. 21 MR. LAGARIAS: The State of California has pretty 22 much adopted a no-smoking rule for restaurants. Is this 23 really an attempt to get at the drive-in restaurants? 24 (Laughter.) 25 MR. BOYD: I think they became extinct long after PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 this program was started. 2 SUPERVISOR VAGIM: Mr. Chairman? 3 CHAIRMAN DUNLAP: Yes, Supervisor Vagim. 4 SUPERVISOR VAGIM: Thank you. What Joe didn't 5 also add is the fact that he was deputized as a deputy 6 sheriff to be able to do that. And it brings up a point 7 that I think needs to be embellished. 8 If you drive around -- at least I can speak 9 empirically of my community and a lot of the San Joaquin 10 County -- a lot of these vehicles that are smoking terribly 11 are not even licensed. They're not even currently licensed. 12 They have expired license plates. 13 And it seems that much of this is going to be a 14 law enforcement issue, not just an air regulatory agency 15 going after them, but law enforcement's going to have to 16 start participating in this. 17 If these vehicles aren't even going through 18 inspection programs, you're never going to catch them. And 19 they seemingly have been just allowed to be bypassed by the 20 current folks in law enforcement, because they're just busy, 21 I guess, doing other crime work. 22 But the CHP seems to have more than just a 23 contract and they'll stop them. I think they have more of a 24 moral obligation here, as part of a State office, to do it 25 whether they're contracted or not, aren't they? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 I mean, how come they're just waiting to be 2 contracted before they do their job? 3 MR. BOYD: Well, I think you bring up an 4 interesting evolution and a history of this program. It is 5 true, there was a point in time when local air district 6 personnel used to do it. But because of the law enforcement 7 ramifications and because of society's reaction to things 8 being a little more -- people are a little more willing to 9 be a little more abusive or direct in their reaction, the 10 districts no longer do this, but instead police authorities 11 do it. 12 But, as you indicated, because of the workload, 13 the severity of crime, and the crime involved, this is a 14 hoped for, but more than something they can actually carry 15 out. We have tried to stimulate a little more local 16 interest in the vehicle registration or the lack of vehicle 17 registration. And there is a correlation sometimes between 18 people who don't get registration, and thus vehicles that 19 don't get run through I & M programs. 20 We, over the years, have tried to provide some 21 inducement by having legislation that proposed to share 22 revenue sharing, so to speak, and to see that the police and 23 sheriff's departments got some of the money or got some 24 rewards for the efforts, and an excellent point. 25 Actually, I've discussed it with the CHP over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 time, but it's -- they are in quite a dilemma. They do what 2 they can do. They know there has to be a presence. But 3 workload versus severity of crime and what have you has made 4 it very difficult for them -- moral obligation or not -- to 5 have much of -- to have the kind of presence we'd like to 6 see, which is why we've had -- we and the locals have had to 7 contract with them, and have specially marked Highway Patrol 8 cars even that under contract be the ones that carry out 9 this effort. 10 CHAIRMAN DUNLAP: Mr. Boyd, I was going to add a 11 point about training. Do we offer any type of training on 12 the Ringelman scale or anything to the law enforcement? 13 MR. BOYD: Yes, we do. The smoke schools and the 14 enforcement -- 15 CHAIRMAN DUNLAP: Okay. Do we regularly carry -- 16 MR. BOYD: -- to the Highway Patrol, and 17 particularly those who are going to engage in this activity 18 have been long-time participants in our training program. 19 SUPERVISOR VAGIM: But I can tell you for a fact 20 that they'll see these cars and they bypass them. I mean, 21 it's just not something in their bailiwick unless it's 22 reinforced to them and should be part of their package. And 23 it seems to me that that starts at the top. 24 And unless the car's a part of committing a crime 25 or breaking the speed limit, they're typically bypassed by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 even the CHP. They're not looking for these vehicles. 2 The other issue is -- it seems also that the 3 State or I don't even know -- maybe the local agencies, but 4 more the State can add some of these, through their 5 franchise abilities, to get some of the -- for example, 6 "cell" companies to get more involved. We have one cell 7 company that has the star, whatever number, and easy to be 8 able to call that number. 9 But the largest cell company in the State owned by 10 our largest telephone company in the world doesn't want to 11 participate. And the reason why they don't want to 12 participate, they think it's kind of -- I think the word was 13 used -- it's kind of "squealing" on those who may not be 14 suspecting to be squealed on. So, they don't want to be a 15 participant in that process. 16 It seems to me that they ought to be educated that 17 that isn't necessarily a squealing; it's a part of the 18 methods that we can use to clean our air. And I don't know 19 how we can send that message down, but they are a 20 franchisee. And it seems that we have the authority to ask 21 the franchisers of this State to participate in different 22 ways. 23 So, it's one of the things I would like to 24 suggest, Mr. Chairman; that there's a lot of things that can 25 be done without spending money that are already there. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 we have agencies or franchisers who don't want to 2 participate for one reason or another. 3 CHAIRMAN DUNLAP: What I might do to follow up is, 4 Mr. Boyd and I can get together with the staff and look at a 5 few different approaches to enhance the signals that we send 6 out to the locals, and also determine more how we're 7 marketing or doing outreach and education to local law 8 enforcement as well. 9 Good suggestion. Thank you. 10 Any other questions or comments? All right. Very 11 good. 12 MR. BOYD: Mr. Chairman, Mr. Scheible had a point 13 he wanted to make. 14 MR. SCHEIBLE: Just in response to an earlier 15 question from the Board about the funding source. Many of 16 these programs are funded in part or a major part through 17 the vehicle registration fee efforts. Those monies come 18 from the motoring public and they're used to reduce motor 19 vehicle emissions through this mechanism. 20 CHAIRMAN DUNLAP: Okay. Thank you. 21 No one has signed up to speak on this item. So, 22 we will conclude the public testimony at this point. 23 Mr. Boyd, has there been any written submissions 24 on this item? 25 MR. BOYD: None that we're aware of, Mr. Chairman. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 CHAIRMAN DUNLAP: Okay. Then we will close the 2 record at this point. 3 We do not have a resolution, so that will conclude 4 the item. Thank you very much for a fine presentation, and 5 we'll again adjust our seats for a moment before we take up 6 our fourth item this morning. 7 (Thereupon, there was a pause in the 8 proceedings to allow staff to prepare 9 for a presentation.) 10 CHAIRMAN DUNLAP: If I can get you to take your 11 seats, we'll take up the fourth agenda item. 12 I would like to remind those of you in the 13 audience who would like to testify on the next item, 95-2-4, 14 to please sign up with the Board Secretary, so we can give 15 you some time before this Board. 16 The next item on the agenda today is 95-2-4, the 17 public meeting to consider a proposed report to the State 18 Legislature on the motor vehicle registration fee program. 19 This item is a proposed report to the Legislature 20 on the use of the motor vehicle registration fees by the air 21 districts and local agencies. 22 Following the passage of the California Clean Air 23 Act, the Legislature recognized the need to fund motor 24 vehicle and planning efforts related to the Act. The 25 funding mechanism and how the money has been used are the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 subject of this proposed report. 2 As expressed in Assembly Bill 2766, the 3 Legislature adopted this fee program to ensure that 4 districts and other agencies have the necessary funds to 5 carry out their responsibilities for implementing the 6 California Clean Air Act. 7 The funds we will hear about today are to be used 8 to reduce air pollution from motor vehicles and for the 9 planning, as I mentioned, monitoring, enforcement, and 10 technical studies. 11 This Board has seen some of the results of this 12 program, starting with the California Clean Air Act plans 13 that were approved by the Board in 1992. Mr. Boyd mentioned 14 a moment ago about some of the smoking vehicle work that's 15 been done with these funds. 16 In the past two years, many emission reduction 17 projects have also been funded, often through grants to 18 California businesses. Most recently, the funds provided by 19 the vehicle registration fees provide resources that were 20 essential to preparation of the State Implementation Plan. 21 I hope staff will elaborate on the types of 22 projects funded, and I am sure other Board members share my 23 interest. With that in mind, I'll ask Mr. Boyd to kick off 24 the staff presentation. 25 Mr. Boyd. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 MR. BOYD: Thank you again, Mr. Chairman. 2 Well, as you indicated, today's report was 3 developed as required by the State law, which calls for a 4 one-time report on this program. 5 As a bit of background for the Board members, I 6 would note that this report actually was originally due at 7 the end of 1992, but was one of many, many State reports 8 that the Legislature chose to delay for two years when there 9 was an effort to reduce workload on reports to the 10 Legislature in the face of all the other demands made on the 11 Legislature and State agencies. 12 A major benefit of this delay is that the report 13 could address the last three fiscal years, beginning with 14 91-92, and give us maybe a little better view of what the 15 program was capable of doing as the districts became 16 operational in carrying out and using these fees and 17 carrying out the requirements of the law. 18 In preparing the report, the staff surveyed the 19 air districts to determine how the so-called motor vehicle 20 registration fees were used by the districts and other 21 recipient agencies. And I think, as some of you know, air 22 districts use only a portion of these funds for their own 23 programs. A large percentage is distributed through grants, 24 or others are just distributed directly to other agencies 25 for Clean Air Act implementation activities. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 Staff assessed the use of the vehicle registration 2 funds for compliance with the criterion in the State law. 3 And, as the staff will discuss shortly, the criterion was 4 largely met, albeit there wasn't a lot of criteria, and 5 that's one of the things we want to address. 6 So, therefore, we do have recommendations for 7 change based on the experience gained so far, both by the 8 local districts and by your staff in having to review a 9 program such as this. 10 The staff presentation will provide some 11 additional information that has been compiled since the 12 report was printed. And while the new information does not 13 change the recommendations proposed for the Board's 14 consideration, we think it further elaborates and 15 elucidates, and provides information on the program. 16 With that brief introduction, I'll turn the 17 presentation over to Ms. Roberta Hughan of our Office of Air 18 Quality and Transportation Planning. And I'll not embarrass 19 her by giving her extremely detailed resume of experience in 20 the air quality area, but just introduce Ms. Hughan to 21 present the staff report. 22 MS. HUGHAN: Thank you, Mr. Boyd. Good morning, 23 ladies and gentlemen. 24 I'd like to give you some background on the origin 25 of the motor vehicle registration fee program that we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 talking about today. 2 In 1988, the California Clean Air Act was passed 3 by the Legislature and signed by the Governor. In the Act, 4 the role motor vehicles play in contributing to air 5 pollution is recognized, and air districts and other 6 agencies are given new responsibilities for reduction of 7 motor vehicle emissions. 8 In 1990, AB 2766 was signed into law allowing air 9 districts to levy a surcharge on registration fees. This 10 was to ensure that air districts and other agencies had the 11 funds to carry out these new California Clean Air Act 12 responsibilities. 13 In 1991, the Bay Area AQMD was authorized by AB 14 434 to collect the fees. The Sacramento Metropolitan 15 District had been collecting the fees since 1989 under 16 earlier legislation, AB 4355. 17 AB 2766 designated a specific role for ARB. It 18 required ARB to report once to the Legislature on the use of 19 the revenues. ARB was to assess how the monies had been 20 used by the agencies receiving the funds and make 21 conclusions and recommendations as necessary. 22 Originally, the report was due in 1992. 23 Legislation delayed the due date to 1995. Today, staff is 24 submitting the proposed report to you for your 25 consideration. If you approve the report, a final report PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 will be submitted to the Legislature. 2 The statutory requirements in the legislation 3 include the purpose of this new program, how the revenues 4 are to be used, the scope of the program, the special 5 provisions in the South Coast and the Bay Area. 6 The purpose of the program is twofold: to 7 implement the California Clean Air Act through the adoption 8 and implementation of attainment plans, and to reduce 9 specific motor vehicle emissions through transportation 10 control measures, indirect source control measures, air 11 quality monitoring, integration of transportation and air 12 quality plans, and public education and involvement. 13 AB 2766 puts constraints on the use of the 14 revenues. They must be used solely to reduce air pollution 15 from motor vehicles and for related planning, monitoring, 16 enforcement, and technical studies necessary for 17 implementation of the California Clean Air Act. 18 The emission reductions accrued must be used only 19 for attainment purposes. No emission credits are generated 20 for trading or other uses. 21 In this program, reduction of vehicular emissions 22 is primarily accomplished through reduction in vehicle miles 23 traveled, use of low-emission vehicles, or through cleaning 24 up vehicles in use. 25 To help districts meet requirements, ARB published PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 a guidance document that explained the transportation 2 requirements of the Act. In the Bay Area, AB 434 put 3 further constraints on the use of the revenues. Use was 4 limited to seven and later eight types of eligible projects. 5 To be able to levy the fees, a district must be in 6 a State nonattainment area for motor vehicle pollutants -- 7 ozone, PM10, and carbon monoxide. 8 Currently, 33 districts are eligible to 9 participate in the program, and 25 are doing so. The eight 10 not doing so are all rural counties. 11 The maximum that can be levied is $4.00 per 12 vehicle, and districts are collecting from $1.00 to $4.00 13 per year. 13 out of 25 are at the $4.00 level. 14 83.5 million was collected by the DMV and 15 disbursed in fiscal year 1993-94. Almost half of this went 16 to agencies in the South Coast Air Basin. 17 In two air basins, by statute, the revenues are 18 divided among different agencies. In the South Coast, 40 19 percent is subvened to 154 cities and 4 counties based on 20 population to implement emission reduction programs in the 21 California Clean Air Act and the South Coast attainment 22 plan. 23 30 percent goes to the South Coast AQMD to reduce 24 vehicular emissions and implement the Act, 30 percent to the 25 Mobile Source Air Pollution Reduction Review Committee, or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 the MSRC, to be used to fund projects in a basinwide grant 2 program. 3 The district is required to perform biennial 4 compliance audits on the use of the funds by the local 5 governments and MSRC. The district board must approve or 6 disapprove the MSRC workplan, but the cities and counties do 7 not submit their expenditures for district scrutiny prior to 8 expenditure. 9 In the Bay Area, 60 percent is subvened to the Bay 10 Area Air Quality Management District to implement a 11 specified list of emission reduction projects and programs, 12 either as district projects or through grants to other 13 agencies. 14 40 percent goes to the nine county congestion 15 management agencies, or CMAs, also to implement a specified 16 list of projects or programs. The district is required to 17 perform biennial compliance audits on the use of the funds 18 by the CMAs. It also checks on project eligibility prior to 19 expenditures. 20 This report examines the use of the fees by 21 districts and other agencies for three fiscal years -- from 22 1991 to 1994. 23 To determine how the revenues were used, the ARB 24 sent questionnaires to the districts. The district sent us 25 information about how the funds were used internally and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 what projects were funded through grant programs. 2 In the South Coast and the Bay Area, the districts 3 told us how the cities, counties, the MSRC, and the CMAs 4 used their revenues. 5 ARB staff also talked with district staff, 6 including program managers and accountants, and reviewed DMV 7 documents in order to compile this report. We based our 8 assessments on information from annual budgets, workplans, 9 and, in some cases, on existing financial audits. We did 10 not undertake separate financial audits. 11 We found that in the first year of the program, 12 half the funds were used for district internal programs, 13 with that decreasing to 31 percent last year. The remainder 14 went to grant programs or to the local jurisdictions that 15 receive revenues. 16 All the districts but two have grant programs or 17 support activities of other agencies. We examined how the 18 grant programs operated. 19 In addition, the ARB staff participated on the 20 South Coast MSRC and on the San Joaquin Valley Grant 21 Evaluation Committee. 22 ARB staff reviewed the eligibility of each of the 23 district programs and projects relative to the constraints 24 in the law. We had been receiving questions from districts 25 about eligibility issues all along, so staff had PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 considerable experience in this arena. 2 Also,both ARB and the South Coast District had 3 given written guidance on priorities for use of the 4 revenues. 5 We sent the districts emission reduction 6 calculation methodologies that ARB staff had developed. The 7 districts were asked to describe each program that was 8 funded and, where the estimated or actual emission 9 reductions were quantifiable, many did so. 10 The ARB staff did not, however, compare 11 effectiveness of the different projects funded. We hope to 12 be able to do this in the future. 13 After ARB staff compiled the information, we came 14 to certain conclusions and proposed some recommendations I 15 will go into later. 16 First, I want to take you through some of the 17 categories of projects and programs that we assessed. In 18 the questionnaire, the categories included planning and rule 19 development, transportation control measure, or TCM, 20 implementation, capital projects, technical activities, and 21 vehicle emission reductions, or abatement of in-use 22 emissions. 23 In this category, 20 districts used these revenues 24 to develop the California Clean Air Act plans that were due 25 in 1992. In many areas, Federal Clean Air plans were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 developed to meet 1994 SIP requirements. For those areas, 2 the SIP also represents a comprehensive clean air plan 3 update for State purposes. 4 This category also includes development of the 5 TCMs and land-use strategies that are in the plan. 6 Public education is required by the Act. And 18 7 districts undertook education programs. These varied from 8 high school curriculums, to TV spots, to library books, to 9 efforts to reach non-English speakers, and to messages 10 targeted to commuters and to bicyclists. 11 Because of the effects that transportation 12 projects have on air quality -- both good and bad -- it has 13 become very critical and, in fact, required by federal law 14 that air quality plans and transportation plans be jointly 15 developed and implemented. 16 District staff in 14 districts worked with CMAs 17 and regional transportation agencies to coordinate their 18 plans and projects. In the Bay Area, the district is 19 precluded from using these funds for any of these purposes, 20 with the exception of the development and implementation of 21 trip reduction rules or ordinances. 22 TCM implementation covers a wide field. I will 23 give you some examples, but there are many more than can be 24 covered here -- ridesharing programs in other districts and 25 trip-reduction programs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 For instance, San Bernardino County Commuter 2 Services operates 25 vans serving all county worksites. It 3 also does its own rideshare matching, and has increased 4 vehicle -- average vehicle ridership from 1.07 to 1.27 5 people per vehicle. 6 Activities by business transportation management 7 associations are also ridesharing efforts around the State, 8 including in the South Coast cities. TMAs receive cofunding 9 for ride-matching computer systems, for transit marketing, 10 for employee services, for telecommuting, for employer 11 training, and public education. 12 Cofunding of operations for shuttle and vanpool 13 services that provided commute operation for employees -- in 14 the Bay Area, 18 stations are served by shuttles that travel 15 from BART, Caltrain, the Santa Clara County Light Rail to 16 employment sites. This also includes a shuttle service 17 between San Francisco Airport and Caltrain. 18 Cofunding of bus services -- for example, in Santa 19 Barbara, the district subsidized a subscription bus service 20 for residents of Goleta who work in Santa Barbara using 21 clean fuel buses. They were successful in attracting 22 federal ISTEA funds to expand the service next year. 23 Other ways to reduce auto travel, such as 24 telecommunication -- an example is San Diego APCD funded a 25 teleconferencing project to allow attorneys and probation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 officers to interview inmates in custody without making long 2 trips to detention facilities. In other districts, telework 3 facilities were funded. 4 Land-use strategies to reduce emissions in the 5 long term -- 18 districts work with cities and counties in 6 developing air quality elements for their general plans and 7 reviewing CEQA documents and other activities. 8 As part of its indirect source control program, 9 the San Luis Obispo District staff reviewed over 200 10 documents related to new residential and commercial 11 development. 12 In Butte County, the district submitted air 13 quality elements for inclusion in the county general plan 14 and the general plans of six cities. 15 Capital projects consume the largest portion of 16 the funds. Again, I will give you some examples to indicate 17 the variety of projects. 18 Purchase and conversion of over 2400 alternate 19 fuel and electric vehicles, light, medium, and heavy duty, 20 was cofunded over the three-year period. Last year, the 21 MSRC 20 low-emission and electric vehicle projects. These 22 were primarily heavy-duty vehicles, and included everything 23 from cargo handlers, to shuttles and buses, delivery trucks, 24 and trolleys. 25 Emission reductions were calculated and used as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 the primary criteria for project ranking. 2 This included over 200 school and transit buses, a 3 major source of NOx. 4 The Sacramento District is cofunding 95 CNG buses 5 with the Regional Transit District, leveraging $21 million 6 in other funds for their $1 million investment. 7 Electric school bus development was funded in 8 Santa Barbara. Transit improvements, such as bus stops, 9 signage and maps, and park-and-ride projects were also 10 funded in this category. 11 Cofunding of fueling and recharging stations -- 12 access to stations for the alternate fuel vehicles is 13 critical and refueling sites have been made available around 14 the State. 15 Yolo-Solano and Sacramento have funded both 16 methanol and CNG refueling stations. Electric recharging 17 stations for the Orange County Transportation Authority were 18 also funded. 19 Traffic flow improvements, such as signal timing 20 projects, were cofunded by five districts as well as cities. 21 For instance, the San Joaquin Valley District provided 22 matching funds for a major signal timing project in 23 Stockton. 24 The City of Los Angeles has appropriated funds for 25 several multimillion dollar timing projects. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 Rail, bikeway, and pedestrian projects to reduce 2 auto trips -- in the South Coast, a childcare facility at a 3 Los Angeles rail station and transit stations were funded by 4 the MSRC. 5 In Monterey, five bicycle projects, including 6 trails, lockers, and a loan program were funded in three 7 counties last year. In Shasta county, the district cofunded 8 a downtown streetscape project to make the area attractive 9 to walkers. 10 PM10 reduction projects -- PM10 reduction is 11 receiving attention in some areas. In the Kern County APCD, 12 Project Dust is an ongoing program to pave or treat unpaved 13 roads. 14 The Northern Sonoma APCD cofunded a school bus 15 yard paving project last year. 16 Air quality monitoring by districts consume the 17 bulk of the money spent in this category. We believe that 18 districts can use the vehicle registration fee revenues to 19 support monitoring activities in proportion to the influence 20 that vehicles have on their air pollution problem. In 21 general, this is 60 to 65 percent. 22 Other activities funded included computer 23 modeling, enforcement, technical studies, and research that 24 leads to new technology. 25 Most research projects were funded by the South PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 Coast MSRC and the San Joaquin Valley APCD grant programs. 2 For instance, the MRSC has funded a number of R & D projects 3 related to heavy-duty engines. 4 Last year in the Valley, the Board approved 5 cofunding of a PM10 study that is part of a major effort to 6 reduce particulate matter. 7 This category included vehicle scrappage, smoking 8 vehicle programs, and I & M assistance. Four districts -- 9 San Joaquin Valley, San Diego, Santa Barbara, and South 10 Coast funded vehicle scrappage programs, taking almost 4,000 11 older cars off the road. 12 Two other districts, Sacramento and the Bay Area, 13 are planning scrappage programs. 14 As you heard earlier today, smoking vehicle 15 complaint programs were operated by six districts -- South 16 Coast, Ventura, Bay Area, San Joaquin Valley, and San Diego, 17 and Northern Sierra has a modified program. Some districts 18 have also contracted with the Highway Patrol to cite smoking 19 vehicles using these funds. 20 Also, to clean up cars that are in use, Northern 21 Sierra AQMD has a program to aid senior citizens with smog- 22 related engine repairs 23 We have prepared some charts to show in what 24 proportion the districts, the South Coast local governments, 25 and the Bay Area CMAs spend their funds in the categories PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 just discussed. 2 This chart shows the relative amounts spent by the 3 districts both internally and through their grant programs, 4 including the MSRC in the categories just presented. 5 As you see, last year, the largest amount went to 6 capital projects, 42 percent, followed by implementation of 7 TCMs at 19 percent, and planning and rule development at 15 8 percent. The remainder went to technical activities and 9 vehicle emission reduction projects, and to the other 10 program costs category, which includes administration, 11 training, and equipment purchases. 12 As for the South Coast local governments, last 13 year, 46 percent went to TCM implementation. This was 14 primarily for trip reduction programs, including those by 15 transportation management and rideshare organizations that 16 were often directed to local government employees and for 17 support of transit activities and services. 18 The capital projects of 30 percent included signal 19 timing, alternate fuel projects, development of bicycle and 20 pedestrian projects, and telecommunication facilities. 21 13 percent went to planning and rule development, 22 with small percentages to technical activities and vehicle 23 emission abatement projects. 24 Since the Bay Area was limited to seven types of 25 projects, this chart looks very different. The Bay Area's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 precluded from spending revenues on planning or technical 2 activity. The 57 percent spent for TCMs went primarily to 3 implement trip reduction programs and services; as well, 4 shuttle services, telecommunication projects and transit 5 information projects were implemented. 6 The capital projects of 34 percent included 7 alternative fuel vehicle demonstrations, transit bus 8 purchases, and traffic flow improvement. 9 In assessing the emission reduction programs 10 funded, the staff focused on the statutory criteria 11 regarding eligibility. We asked these questions: Did the 12 programs and projects reduce vehicular emissions? Was the 13 money used to implement the California Clean Air Act? 14 Where revenues were divided among agencies, was 15 the distribution as prescribed? 16 In the Bay Area, were the programs or projects 17 limited to those allowed? 18 In our view of the projects, we found the answers 19 to be yes to these questions, with one exception. One small 20 district, Colusa County APCD, reported the use of revenues 21 for California Clean Air Act plan reporting, updating, rule 22 development, and implementation. However, this included 23 development of stationary source rules, toxic control 24 measures, and stationary source permitting activities that 25 are all ineligible uses of the funds. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 Based on our assessment of the use of the 2 revenues, staff has drawn a number of conclusions. I will 3 summarize the most important. 4 First, the districts and other recipient agencies 5 report spending the vast majority of funds according to the 6 law. This including meeting the Act's requirements for 7 development of clean air plans. 8 TCMs have been implemented and other measures 9 implemented to reduce vehicular emissions that were in those 10 plans and the ARB guidance document. 11 Second, we see no need for major changes to the 12 program. There is a direct nexus between use of vehicle 13 registration fees to fund reduction of emissions from motor 14 vehicles. This is particularly important, because air 15 pollution caused by vehicles is now a serious problem, 16 greater than that caused by stationary sources in many 17 areas. 18 We see no need for changes in the eligibility 19 criteria for programs or projects. The flexibility and use 20 of the funds allows district boards to plan and implement 21 projects most effective in their areas, be they urban, 22 suburban, or rural. 23 It also allows for funding of pilot and 24 demonstration projects to test effectiveness, and for R & D 25 projects that advance technology. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 Funding for monitoring programs gives districts 2 the information they need to improve their control 3 strategies. 4 Third, the revenues are needed by the recipients 5 to meet the California Clean Air Act requirements. Without 6 these revenues, smaller districts would have little recourse 7 but to cut or eliminate their mobile source program. 8 Larger districts would have to increase fees from 9 industrial sources or local general fund contributions, or 10 cut back their program. 11 Fourth, there are additional benefits obtained 12 from these revenues. Some of them are congestion relief, 13 reduction of transit agency and fleet operating costs, 14 economic expansion based on the two technologies developed, 15 improved service to the transit-dependent or disabled, 16 matching funds made available for federal and local 17 transportation projects that improve air quality. 18 Fifth, refinements are needed. ARB could work 19 with districts, local agencies, and others to develop and 20 publish effectiveness criteria for funding projects. 21 Assistance by districts to other government agencies could 22 result in the best projects being funded and the revenues 23 being spent in a timely way. 24 Statewide tracking of projects could provide 25 information on the most effective projects, avoid PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 duplication, and provide a basis for comparison of projects. 2 Other conclusions reached by staff were that the 3 variety of programs were funded to improve quality and 4 demonstrate new methods of reducing emissions. Also, the 5 participation of other agencies in air quality improvement 6 was increased. 7 Based on the information in the report and the 8 conclusions reached, the ARB staff is proposing for your 9 consideration several recommendations for legislative and 10 administrative change. Staff has a few modifications and 11 clarifications to add that will follow. 12 The first recommendations relate to the ARB and 13 the districts. 14 Number one, ARB should develop guidelines in 15 consultation with the districts, local agencies, and others. 16 This would lead to maximizing emission reductions through 17 program design and project selection. 18 Next, ARB should be required to report biennially 19 to the State Legislature on the use of the funds. This 20 would replace the requirement to report this one time. The 21 ARB reports would be based on information provided annually 22 to ARB by the districts. 23 Although the Sacramento Metropolitan AQMD has 24 different criteria for use of the funds, the revenues are to 25 be used to reduce motor vehicle emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 To provide a statewide view of the program, the 2 districts should be required to provide ARB with the 3 information on their program as in all other districts, and 4 as they did this year. 5 Next, there should be a mechanism to remedy 6 inappropriate use of funds byy districts. Revenue should be 7 withheld from districts that misuse the funds. 8 Two other recommendations relate to districts and 9 local government agencies. The South Coast AQMD should be 10 required to set criteria for use of funds by cities and 11 counties, and the Bay Area AQMD for the CMAs. This could 12 avoid duplication of district measures, assure support of 13 measures in the attainment plans, encourage 14 multijurisdictional projects, and assure emission 15 reductions. 16 Lastly, the required biennial audit by the South 17 Coast and the Bay Area Districts of the local recipient 18 agencies use of funds should be changed to an annual audit. 19 The ARB staff is proposing some modification to 20 these recommendations. 21 The next biennial ARB report should be due to the 22 Legislature by June, 1997. This should allow districts 23 sufficient time to submit their audited financial statements 24 to ARB along with the other information required by ARB to 25 assess the use of the revenues. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 The required audit of local recipient agencies use 2 of funds should be submitted to ARB by February 1st each 3 year and contain information about the previous fiscal year. 4 This would allow ARB adequate time to include this 5 information in the ARB biennial report. 6 State law should require districts to replace the 7 money in their vehicle registration fee revenue program if 8 the ARB Board makes a finding of misuse of funds. 9 This is a simplified version of what was described 10 in the draft report. 11 Subsequent to publication of the report, ARB has 12 compiled information regarding district administrative 13 costs. Out of the 25 districts in the program, 19 have 14 submitted data demonstrating that the administrative cost 15 cap of five percent was not exceeded. The remaining 16 districts are small districts receiving less than 300,000 17 per year, and are expected to submit the required 18 information shortly. 19 ARB staff recommends that the Board take action to 20 approve the report, including the proposed staff 21 modifications. 22 And before the staff presentation is finished, I 23 would like to acknowledge the cooperation of the districts 24 in providing necessary information. The meetings of the 25 CAPCOA committee set up to work with the vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 registration fee program were particularly helpful as was 2 the input from district staff throughout the State in 3 response to the draft document. 4 That completes the staff presentation, and I'll 5 try to answer any questions you may have. 6 CHAIRMAN DUNLAP: Mr. Boyd, do you have any 7 follow-up comments? 8 MR. BOYD: No, Mr. Chair. I think we're ready for 9 questions for the staff from the Board. 10 CHAIRMAN DUNLAP: Any questions from my colleagues 11 on the Board? 12 MR. LAGARIAS: Mr. Chair? 13 CHAIRMAN DUNLAP: Mr. Lagarias. 14 MR. LAGARIAS: First, I'd like to acknowledge that 15 the presenter, Roberta Hughan, is former Mayor of Gilroy. 16 She served on the Bay Area Air Quality District, and for 17 many years she was a member of our Board. 18 So, Roberta, I see you're on the other side of the 19 fence today. Welcome. 20 And my first question to you, are these funds to 21 the districts meant to be demonstration grants, or are we 22 going to be paying for school buses and alternative fleets 23 for everybody as a result of this bill? 24 MS. HUGHAN: Most districts have taken the 25 position that this money is not to be used for ongoing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 support of services; for instance, to continuously, over the 2 years, fund a bus service. But as far as buying new 3 vehicles, that is a very integral part of the program in 4 almost every district.. 5 And you understand, it's not a full cost. It's 6 usually the matching funds, 11 percent or 20 percent, 7 required by FHWA or FTA for purchase of buses. 8 MR. LAGARIAS: But is this going to continue? Is 9 every school district going to depend on 10 percent or a 10 matching fund from this bill for everytime they purchase new 11 vehicles? 12 MS. HUGHAN: Well, it's basically an incentive to 13 get them to purchase an alternate fuel vehicle. It is not 14 used to purchase a replacement vehicle. 15 MR. LAGARIAS: Thank you. 16 CHAIRMAN DUNLAP: Ms. Edgerton? 17 MS. EDGERTON: That was a wonderful presentation, 18 and I learned a whole lot. And I think the report is 19 excellent as far as it goes. 20 But what it's done is leave me with a number of 21 questions. First, I'd like to ask, if you have the data, 22 what percent of our SIP emission reductions come from the 23 mobile source side, or even altogether comes from TCMs? 24 This is -- how successful have we been with TCMs? 25 I'll give you a chance. I don't want you to have to answer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 immediately; maybe that's kind of tough. But I'll go a 2 little bit farther. 3 If you look at the South Coast expenditures for 4 93-94, we see a 46 percent on TCMs. They have about $39 5 million, I think, of the overall amount. 46 percent is 6 going on TCMs. 7 If you look at the Bay Area, you see for 93-94, 57 8 percent is going on TCMs. I think any legislator who's 9 paying attention would say, "Well, are we getting the bang 10 for our buck from the TCMs? Are we getting the emission 11 reductions from the TCMs?" 12 Maybe it's my memory, but I don't remember seeing 13 very many emission reductions in our State plan from TCMs. 14 Maybe -- I do think you can do a lot better on TCMs. 15 MR. SCHEIBLE: I would say, in the South Coast, 16 for example, transportation measures are targeted to provide 17 in the order of a few percent of the emission reductions 18 required. 19 In terms of looking at this money and when you 20 look at the total expenditure for air pollution control in 21 this State, or someplace like the South Coast, we're talking 22 about multiple billion dollars a year in order -- for the 23 program. So, emission reductions from TCMS are small, but 24 the amount of money here -- it looks large in comparison to 25 the pot that it comes from. In terms of the total PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 expenditure for air quality control, most of which is made 2 by you and I or industries when we buy -- you know, buy 3 goods, or cars, purchase gas, it's relatively small. 4 So, it's in proportion. I think the ongoing 5 debate comes into the relative cost-effectiveness of TCMs 6 versus other direct control measures. 7 I also think that the money was intended, as put 8 forth, to address this area that was the -- let's call it 9 the hole in the program in terms of how do you accomplish 10 these things. The ARB's program and the districts' 11 industrial control programs were basically funded in terms 12 of development and in terms of implementation. This 13 legislation addressed the fact that TCMs hadn't been 14 historically -- or many of these transportation activities 15 had not been funded. 16 MR. LAGARIAS: Mr. Chair? 17 CHAIRMAN DUNLAP: Mr. Lagarias. 18 MR. LAGARIAS: Following up on that, I think the 19 report is excellent in assessing where the money is spent 20 and how it's spent. 21 But in knowing how much pollution is reduced as a 22 result of these actions taken, I'd like to know how many 23 tons per year of pollutants are reduced by these various 24 actions, so we can get an idea of the effectiveness. 25 A lot of this money's going to transportation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 agencies, and they's usually concerned with traffic 2 congestion. We're concerned with how many vehicle miles 3 fewer are traveled as a result of carpooling and all these 4 actions. How much? Is there less congestion? What are the 5 results of the program in terms of how much mileage is 6 reduced and the pollution that is accompanied. 7 That, to my mind, is an assessment of the efficacy 8 and the results of this program. Is it possible to get this 9 sort of information? 10 MS. HUGHAN: We have that information for many of 11 the -- well, I'd say all the capital projects. And we do 12 know how far the bus drives every day and how much cleaner 13 it is. 14 MR. LAGARIAS: And how many fewer trips are taken 15 as a result of that? 16 MS. HUTCHENS: Yes. Some of the transit agencies 17 have that information as well. 18 And then we know with scrappage and I & M, those 19 are -- well, not the I & M assistance in this case, but 20 scrappage and the smoking vehicle programs are also 21 measurable as well as many of the TCM programs where they're 22 operating a service that's obvious. If you have a shuttle 23 bus picking up X-number of people, you know how many cars 24 that takes off the road and how many parking places in a 25 parking lot are full when people get on the bus. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 But you can't do that, as you well know, for the 2 technical studies or monitoring. You can't put a price and 3 number on it, and also on all the requirements to meet plan 4 deadlines and the development of the rules. 5 As you know, on the Board in the Bay Area, 6 developing rules is time-consuming. And it doesn't 7 translate directly, but it translates long term. 8 So, it's sort of half and half. 9 MR. SCHEIBLE: I'd also like to point out that a 10 large number of the projects that do achieve emission 11 reductions have this element of demonstration. We're trying 12 to show that new fuels work and are cleaner, and how are 13 they used, and find out the problems with their use so they 14 can be solved when they go on a larger scale. 15 So, all of those things are -- you can get 16 estimates of the emission reductions. You have to consider 17 a lot more other factors in trying to say what is the total 18 benefit of -- 19 MR. LAGARIAS: Well, I think if you can 20 demonstrate the fact that alternative fuels can be used to 21 municipalities -- the demonstration program I think is a 22 very -- are very positive examples of the use of these 23 funds. I certainly support that. 24 CHAIRMAN DUNLAP: We have a few individuals who 25 have signed up to speak before us. If it's okay with my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 colleagues, why don't we hear from them at this point? 2 Dr. Jim Ortner, I'll ask you to come forward, 3 please. And Ed Romano also signed up. If I could get you 4 to come up and take your seat and follow Dr. Ortner. 5 Good afternoon, Jim. 6 DR. ORTNER: Good afternoon. My name is Jim 7 Ortner, and I'm the Manager of Government Affairs and Air 8 Quality Programs for the Orange County Transportation 9 Authority. 10 And I'm here today representing OCTA, but also as 11 a partner in the Orange County Private Sector Task Force. 12 For those of you who are not familiar with the 13 Task Force, it consists of representatives of major business 14 organizations and individual businesses or companies . And 15 these members work to represent private sector views on air 16 quality issues in the regulatory and legislative arenas. 17 In recent years, this organization has started 18 working with public agencies like OCTA, the County of 19 Orange, and the League of California Cities, Orange County 20 Division, to try and build a unified voice on important air 21 quality issues in Orange County. 22 And today, I'd like to bring out three comments 23 with respect to the report on AB 2766, specifically 24 addressing the issue of funds for local government, because 25 there were some questions raised in the report as to how the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 funds are being used. 2 It's our belief that these funds are important and 3 that CARB should not support diverting these funds to 4 specific implementation strategies in the SIP that are 5 outside the purview of local government. 6 I'd like to add that, in Orange County, for 7 example, local governments are now organizing to use their 8 local share of AB 2766 funds to establish a uniform clean 9 fleet program and hopefully jointly purchase low-emission 10 vehicles for their fleets. And we're aware of a similar 11 effort being organized in Riverside and San Bernardino 12 Counties, which are basically trying to do the same thing, 13 as a partnership between their transportation commissions 14 and local governments. 15 So that diversion of funds to other programs will 16 make local government purchase of clean fuel vehicles more 17 difficult to accomplish. 18 Now, the proposed report does cite the unspent 19 local AB 2766 funds as an important issue. Because of 20 inadequate staff, local governments have been unable to move 21 aggressively in programming these funds. Guidance from CARB 22 as to relative -- relative to appropriate use of these funds 23 can be helpful in accelerating project spending. 24 In the South Coast Air Basin, for example, the 25 focus of reducing mobile source emissions is shifting to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 cleaner vehicles. And with its expertise, CARB guidance in 2 this area could be very helpful to local governments as they 3 start moving towards buying clean -- both light-duty and 4 heavy-duty equipment. 5 Better tracking and a framework for accountability 6 certainly will result in clean air benefits and program 7 credibility. And the framework can be a better strategy 8 than diversion or excessive prescription of preserving local 9 government's ability to comply with mandates, while 10 affecting program credibility. 11 I'm an alternate to the Mobile Source Air Quality 12 Reduction Review Committee. We went through an exercise two 13 years ago in order to improve our credibility and our 14 accountability. And I think it was very successful, in that 15 the South Coast Board did go ahead and approve them. And, 16 in fact, last year's discretionary portion of the program 17 was moved through the Board with very little debate because 18 of the fact that all of the data which was required was 19 there to be reviewed. 20 I'd also like to take this opportunity to comment 21 on financing scrapping of older, high-emitting vehicles. In 22 the South Coast Air Basin, the opportunity exists to proceed 23 with the program without diverting AB 2766 funds available 24 for local governments. 25 The alternatives proposed for Rule 1501, which is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 the ridesharing program in the South Coast Air Basin, would 2 establish the concept of equivalency. And one option 3 proposed that would become available for employers is to 4 scrap older vehicles to achieve emission reductions 5 equivalent to the ridesharing program. 6 From the perspective of OCTA and the Private 7 Sector Task Force, this effort accomplishes the dual 8 objectives of focusing the efforts by employers on 9 measurable emission reductions, and allows the scrapping 10 program to expand. 11 Moreover, this employer funding could be used, for 12 example, to match discretionary funding from the AB 2766 13 fund, the MSRC, and the South Coast Air Basin allocates, 14 which could be set aside for a scrapping program in the 15 South Coast Air Basin. 16 An immediate objective which CARB could accomplish 17 is to provide empirical data on the value of a scrapping 18 program. Before gearing up for a large scale statewide 19 program, I think it would be helpful for the local 20 governments to see a clear evaluation of auto and truck 21 scrapping. To date, only a few programs have been operated, 22 and there should be clear answers concerning questions on 23 the number of vehicles eligible, prevention of fraud, et 24 cetera. So, this could be very helpful. 25 Anyway, finally, we're most appreciative of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 lines of communication which we've been able to open up with 2 your Board Chair and members, and I should add the staff. 3 And thank you for considering our views. 4 CHAIRMAN DUNLAP: Thank you. We also have your 5 written comments, Jim, as well. Okay. Sure. Mr. Ortner, 6 could you come back for a moment? 7 DR. ORTNER: Okay. 8 CHAIRMAN DUNLAP: Ms. Edgerton has a question for 9 you. 10 MS. EDGERTON: Dr. Ortner, it's good to have you 11 here. I want to make sure that I understand your comments 12 on scrapping, and I was following along, so I have your 13 written comments. I had read them ahead as well. 14 Your first sentence sounds like you don't think AB 15 2766 funds should be used for scrappage. Is that right? 16 DR. ORTNER: No. I think there was a concern that 17 the local share, the 40 percent, would be taken away from 18 local governments and specifically targeted to scrapping. 19 And what we're saying here is that we can still 20 accomplish that goal, but maintaining the program as it 21 currently operates. 22 MS. EDGERTON: The 40 percent, not the 30 percent 23 that goes for the -- 24 DR. ORTNER: (Interjecting) We're recommending 25 that the local governments be able to keep their 40 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 for, for example, buying clean fuel, heavy-duty equipment 2 for their, you know, for their local use. 3 But there was a fear expressed that there was a 4 movement growing to basically take away those funds from 5 local government. And we just wanted to be put on record 6 saying that those funds should be able to remain available 7 for local government. 8 But, at the same time, we believe that scrappage 9 can be expanded, and see through -- as I said -- through the 10 Reg 15 program the opportunity for employers to get 11 involved, and then through the discretionary funds, maybe to 12 match those funds and expand the program; that we could 13 accomplish a scrappage program in the South Coast Air Basin 14 and still maintain the funds for local government use for 15 their, for example, clean fuel program. 16 MS. EDGERTON: So, if I understand you right, 17 you're saying keep the 40 percent with the local government 18 and the local government will spend part of it on a 19 scrappage program potentially? That is through the 20 rideshare, but is -- 21 DR. ORTNER: (Interjecting) The local governments 22 would have that opportunity open to them. I know, although 23 we don't receive directly the funds, but I know my authority 24 is very interested in looking at that program. 25 We plan to keep our ridesharing program, but to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 take some of the funds we're currently spending if, in fact, 2 the South Coast authorizes an equivalency program, and 3 looking at such programs as scrapping as well as remote 4 sensing, for example. 5 Our major concern was that there would be support 6 coming out of the Board to tell -- to push for a legislative 7 change which would take away the 40 percent from local 8 government. And we just wanted to put on record as opposing 9 that. 10 MS. EDGERTON: Well, I appreciate that. And I 11 just want to understand, because you've been a wonderful 12 contributor to efforts for clean air in the South Coast in 13 many different capacities. 14 Is it correct that if the scrappage program monies 15 that you're discussing were used to be focused into a 16 rideshare plan equivalency, that that would be credited 17 toward emissions reductions, which would not be the same pot 18 that the ARB's SIP emission reductions are? 19 DR. ORTNER: I understand the question that you're 20 raising. 21 MS. EDGERTON: I knew you would. 22 DR. ORTNER: And I can't -- to be honest with you, 23 I can't -- I can't provide an answer to you right now. But, 24 you're right. It does raise the issue of -- if you're 25 taking credit from one program and taking credit from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 other program, are you -- in effect, you're only doing one 2 program, not two programs. 3 And I think the concern we have -- specifically 4 with the ridesharing program in the South Coast -- is that 5 we don't -- we certainly don't see that program working to 6 achieve the level of emission reductions that were 7 anticipated. And we are concerned and we're looking for 8 focusing on direct emission reductions which would come from 9 scrapping. 10 Now, as to the dilemma, in effect, will you have 11 enough emission reductions from say focusing in that area in 12 the statewide program, at this time, I can't answer that. 13 And I think one of the reasons we're asking perhaps for an 14 evaluation of the scrapping program itself is to see, number 15 one, if there are enough vehicles that we could even go out 16 and scrap. That's one thing. 17 And, number two, this dilemma you just raised I 18 think would have to be clarified before the South Coast can 19 go ahead even with their ridesharing program equivalency. 20 It's a valid issue. 21 MS. EDGERTON: Let me ask you one more question 22 just on this, and just following up, Dr. Ortner. Is it also 23 a political issue because of the difficulty of ridesharing, 24 the fact that it's such a hated rule in the South Coast? 25 And therefore, having an equivalency so people can scrap PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 cars so they can get out of having to rideshare is a 2 solution to a politically difficult -- 3 DR. ORTNER: (Interjecting) To be frank, I think 4 the concern, you know, that's expressed to me by, you know, 5 many of the business people in the county is that, right 6 now, the Reg 15 program is the most expensive measure in the 7 South Coast air plan. And it's running about, you know, 160 8 to $200 million a year. And I think it's a valid question 9 to say, could we achieve more effective emission reductions 10 through other strategies that focus directly on the vehicle? 11 That's not to say that ridesharing is bad. And I 12 think what a lot of the companies are saying is that they 13 still plan to keep their ridesharing programs because their 14 employees like it; it's just that the whole process of 15 filing the plans, paying the fees, et cetera, could be put 16 to much better use in cleaning up the air if, in fact, they 17 were given this option for equivalency. 18 MS. EDGERTON: Let me ask you -- I want to give 19 you an opportunity to comment on my earlier question about 20 the effectiveness, the relative effectiveness of this host 21 of five areas you can spend money in -- spend this money in. 22 The staff here at the agency were great at 23 measuring it according to statutory criteria, but I really 24 don't see much in there that sort of says that you can 25 reduce mobile vehicle -- I mean mobile source emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 better by focusing on TCMs, or focusing on capital, or 2 focusing on demonstration projects. 3 I don't see anything in there that makes me feel 4 like we're being wise. I see a lot of -- I like a lot of 5 things, like electric vehicles, I -- electric school buses, 6 I was very much involved in that, and I see that as a 7 tremendously important project. 8 It's one that really I love. Now, people -- the 9 CEC will go -- and the school bus program, they'll go buy 10 electric school buses as well if that's successful. 11 So, I see a lot of wonderful things. But what I 12 don't see is sort of a clear focus -- a little improved 13 focus on how do you get the best use of those dollars. And 14 you know so much about it. 15 What's your -- 16 DR. ORTNER: If you look at the South Coast air 17 quality plan, it was a real shift in the last plan, in that 18 the TCMs were narrowed. In fact, there's really -- there's 19 only one TCM that's actually listed as a TCM in the plan, 20 and that's essentially the regional transportation 21 improvement program, the RTIP. 22 And I think the MSRC, the discretionary program, 23 the work of the Advanced Technology Office, and the district 24 is moving much more towards demonstrating technologies which 25 will move -- clean up vehicles, and then commercializing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 them. And that's why I'm saying in our testimony that I 2 think the cities, now that they've had some time to look at 3 this program, see probably the best use of their funds, at 4 least in Orange county anyway, as starting to use them to 5 start buying, you know, alternative fuel heavy-duty 6 vehicles, for example, for their yards and for picking up 7 the trash, et cetera. 8 But that comes as a result of all of this work 9 that the money was spent. We wouldn't have known this 10 unless we spent the money on it. And I think that's what's 11 important. The research was very important, both to tell us 12 what worked and what didn't work. 13 CHAIRMAN DUNLAP: Thank you, Dr. Ortner. 14 Mr. Romano, Glenn County Air Pollution Control 15 District. 16 Good afternoon. 17 MR. ROMANO: Good afternoon. I hope you don't ask 18 me as difficult questions as you asked Roberta and the 19 gentleman who just left the stand here. I probably won't be 20 able to answer any of them. 21 I just had a couple of concerns, but before I 22 started, I wanted to compliment the ARB staff on working 23 with us in developing a fine report. I just had a couple of 24 comments on the recommendations. I would wonder why the ARB 25 would want to commit to making one of these reports to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 Legislature every two years. 2 It seems rather often to me, and probably not 3 really necessary. And knowing how that Legislature 4 operates, it might better to have the information available 5 for them if they were interested. 6 The other thing I had a concern over was the 7 audits and who was going to determine on the audits how the 8 money was spent. But I understand, if I heard Roberta right 9 earlier, that that wouldn't be determined by the audit firm; 10 it would be determined by the ARB Board? 11 Am I correct on that, that you made that 12 suggestion? 13 MS. HUGHAN: The issue of audits got a little out 14 of hand. We are suggesting that the districts send us -- 15 with all the other information, they send us an audit of 16 their financial statement that they have to do anyway. 17 We're not suggesting in this that additional audits, like 18 our compliance audits, be undertaken by the districts. 19 The compliance part of it would be done by ARB in 20 this report as using the financial audit information along 21 with everything else. 22 We're not suggesting new work for the districts. 23 MR. ROMANO: Okay. I was afraid maybe you were 24 suggesting new work, and that concerned me. 25 That takes care of one of my concerns. The other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 concern, as I looked through here, and when we adopt 2 guidelines, I hope that we work closely together. Because 3 as we tend to develop guidelines that restrict the money, 4 the use of the money more and more, it becomes more 5 difficult for districts to use the money efficiently. 6 If you limit the scope of the use of the money, 7 you reduce the efficiency of using that money. And that 8 concerns me greatly. 9 As the report stated, you know that nine rural 10 districts don't even collect the fees, because the law 11 already restricts the use of the money. And a lot of the 12 "catch" phrases and everything that sounds good for the 13 South Coast, or the Bay Area, or those districts, really 14 don't apply to small districts. 15 So, I would like us, if we move ahead with this, 16 that we think that we need to address how the money's used 17 in rural districts a little differently than in urban 18 districts. 19 And without these funds, it would have been 20 impossible to get the Clean Air Act implemented to the 21 extent that we have so far. So, these funds are important. 22 And if we're going to monitor to see where -- what effect we 23 have down the road, we need these funds to continue to come 24 in to the districts and not being any more restrictive than 25 they already are. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 Thank you. 2 CHAIRMAN DUNLAP: Very good. Thank you. That 3 concludes the public testimony on this Board item. 4 Mr. Boyd, could I have you run through brief 5 summaries of some of the written communications that we 6 received? 7 MR. BOYD: Yes, Mr. Chairman. We have several 8 written communications, and staff will detail those for you 9 now. 10 MS. HUGHAN: We have a letter from Dr. Lents in 11 the South Coast Air Quality Management District supporting 12 the proposed recommendations to the Legislature, and 13 expanding on the role that the district plans to take in 14 assisting local government in making the most effective use 15 of their AB 2766 funds. 16 We have a letter from Wayne Morgan, who's the Air 17 Pollution Control Officer in the North Coast Unified Air 18 Quality Management District. And Mr. Morgan is supporting 19 the report and the recommendations, with the exception that 20 he does not want his district to have to perform any other 21 additional audits, or that we impose any other audit 22 requirements on the district. 23 The Los Angeles -- the letter from the City of Los 24 Angeles is signed by Ronald Deaton, Chief Legislative 25 Analyst, and Lillian Kawasaki, General Manager of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 Environmental Affairs Department. 2 And the city's letter says that they strongly 3 support the majority of the report recommendations, and they 4 object to the recommendation to set additional criteria for 5 expenditure of the funds by local governments, and that they 6 would object if we find that project prioritization relies 7 heavily on quantifiable emission reductions. 8 They make the point that the other activities -- 9 the planning, the monitoring, the rule development, 10 technical studies are also important, even though you can't 11 quantify the emission reductions. 12 A letter from the Monterey Bay Unified Air 13 Pollution Control District, signed by Douglas Quetin, 14 Interim Air Pollution Control Officer, and that letter says 15 that they did meet the five percent administrative cap, and 16 that they request us to make some changes in the amounts 17 that we've shown on their charts on how they expended their 18 funds. 19 The Bay Area Air Quality Management District sent 20 a letter signed by Milton Feldstein, Air Pollution Control 21 Officer. And they agreed with the recommendations, 22 including that heir Board would adopt -- or could adopt 23 criteria for the use of the revenues subvened to the county 24 program managers, because they already do that, and it would 25 augment the current process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 They also suggest that, if we go ahead with a 2 guidance document, that this be done in close cooperation 3 with the air districts and with the California Association 4 of Air Pollution Control Officers, And they made some minor 5 clarifications about the wording. 6 And then the Ventura Air Pollution Control 7 District sent a letter asking for some wording changes in 8 the description of their program. 9 CHAIRMAN DUNLAP: Is that it? 10 MS. HUGHAN: That's it. 11 CHAIRMAN DUNLAP: Okay. Mr. Boyd, do you have any 12 concluding comments? 13 MR. BOYD: No, Mr. Chair. No further comments 14 from the staff. 15 CHAIRMAN DUNLAP: Ms. Edgerton. 16 MS. EDGERTON: I also wanted to bring up -- I 17 noticed that it was mentioned that the staff did not compare 18 the effectiveness of the programs and projects which were 19 funded by the MSRC. 20 Did I understand that correctly? 21 MS. HUGHAN: The MSRC has about -- they have four 22 RFPs or three RFPs in different amounts, different years. 23 And some of those -- all of them require, as far as the 24 scoring process, that you show what the emission reductions 25 are. Or, in the case of public information projects, it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 targeted more to how many people did you reach. 2 And particularly in the alternate fuel arena RFPs, 3 those are based on emission reductions. And those are 4 calculated by MSRC personnel, so that they're compared 5 across the board. And the funding for those projects is 6 based almost entirely on the amount of the emission 7 reductions, plus some other criteria, of course. 8 As far as the TCMs, emission reductions are 9 calculated in the TCM scoring process, and in the research 10 projects, they are as much as that's possible. 11 But at least 50 percent of the score in each of 12 the RFPs is related to emission reductions. 13 MS. EDGERTON: But you didn't look at -- you 14 didn't have any random followup on any of those grant 15 programs? 16 Did you talk to any of the grantees or see how 17 well they were doing? 18 MS. HUGHAN: Well, we get the -- the MSRC gets 19 final reports from every grant recipient at the end of the 20 program. And it tells what they did and, if they -- you 21 know, if they told us we're going to have shuttle riders 22 that ride four miles a day, then they tell us whether that 23 happened. 24 But if you're saying, did we go back and add up 25 all the emission reductions that were promised and all that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 we got, no, that isn't done. 2 MS. EDGERTON: Well, actually, I'm asking which of 3 the projects undertaken seem to be more successful, which 4 seem to deliver more benefits? 5 MS. HUGHAN: Well, they're aimed at slightly 6 different activities. The alternate fuel projects are, you 7 know, fairly easy to deal with and to count. 8 The TCMs taking people off the road is not such an 9 easy thing to keep track of and to get the emission 10 reductions. And, as we said earlier, sometimes public 11 education is difficult to measure, and certainly any 12 planning, or studies, or research programs are very critical 13 to move forward, as you know, with new technologies. And 14 they're not quantifiable. 15 So, you can't compare them straight across the 16 board. And that's why we sent out four RFPs or five RFPs, 17 it's to be able to compare in the different categories. 18 And the San Joaquin Valley Evaluation Committee 19 has also sent out several different RFPs, because we know 20 that certain areas have value, and they should be compared 21 to each other rather than apples and oranges. 22 We think all these things are necessary. 23 MS. EDGERTON: Well, I appreciate that. I do 24 think, though, that when you're talking about granting -- 25 when the State grants money -- just my personal view -- when PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 anybody grants money, that, as you go along, you need to 2 look at the -- you need to try to do the best you can to see 3 what -- how effective your dollars have been in terms -- you 4 know, in terms of reducing the emissions. 5 And I didn't -- and I think that -- I was very 6 encouraged to hear what Dr. Ortner said. I didn't see 7 anything in this report that indicated that there was a 8 change of direction based on being able to look at what had 9 been delivered; that there was more of an understanding that 10 maybe the TCMs were not delivering the benefits that folks 11 had hoped that they would deliver. 12 And I look here on Table 1 of the informal 13 guidance. On page 9, it says, the first priority and second 14 priority -- it's actually page 014 of our overall -- of our 15 Board packet, but page 9, ARB Priorities. I see that TCMs 16 were first priority, "Participation in integrating air 17 quality and transportation systems," first priority. Of 18 course, conformity is important. 19 Indirect source, and on down it's public education 20 programs. And then I see second priority, programs that 21 accelerate the introduction of low-emission vehicles. 22 Second priority, finance feasibility studies and startup 23 costs. Second priority, support of capital expenditures for 24 transportation facilities. 25 Is that something that was -- is this schedule PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 something that the agency, that ARB developed? Where did 2 this priority chart come from? 3 MR. GERAGHTY: I can speak to that, because that 4 were priorities that set right after this program was 5 initiated, and they were based on the fact that the first 6 priority were programs that were not receiving funds from 7 other funding program; whereas, the others either were or 8 were handled in other ways. And that was the basic reason 9 for the priorities that were done at the beginning of the 10 program. 11 CHAIRMAN DUNLAP: If I might interject. At this 12 point, I think we could -- rather than asking staff 13 questions at this point, let me offer and observation and 14 perhaps an approach. 15 I think it's been very beneficial to see the work 16 that staff has done in this report. I sense the 17 coordination has been done very well with locals. I was 18 pleased to hear that Sacramento provided some information 19 when they were required to. We received a letter of 20 letters, we heard from a few witnesses here today that 21 offered insight into how the funding program is working, and 22 how we might ensure that it continues to improve in the 23 future. 24 I believe that it's essential that all of the 25 agencies that receive these funds ensure that they and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 public get the maximum value possible from this program. I 2 think that's a very important issue, and I think something 3 that shouldn't be lost on us. 4 Therefore, I am very supportive of the 5 recommendations that were presented; that more specific 6 guidance be developed; that the Board can help ensure 7 providing technical assistance, et cetera, to ensure the 8 most efficient use of the available dollars. 9 This is so important that I believe that it should 10 be done as soon as possible. I think that we could benefit, 11 and it would be prudent for us to take additional time, 12 probably in the order of two to three months, to actually 13 develop more detailed funding criteria and guidance that can 14 be included directly in the report, to add to the report, 15 and to have criteria that can be endorsed by the Board prior 16 to submitting this to the Legislature. 17 Of course, this effort should be done in a 18 cooperative way, again expressing the point that the staff 19 had made -- working with those who receive the funds to 20 ensure that they are included in the loop and that they 21 don't feel like, you know, we're dictating to them; that 22 it's a cooperative effort, and we're moving forward 23 together. 24 The goal should be to develop as clear and 25 explicit criteria as possible, I believe, although I realize PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 that a final detailed guidance and working out some of the 2 finer points may need to go beyond the two to three month 3 time period that I mentioned. 4 I also think that future assessments of the use of 5 these funds should include an evaluation of how well the 6 guidance was followed as well as a periodic review of the 7 effectiveness of any guidance and funding criteria that was 8 developed as a result of this effort. 9 If the expectations are established well in 10 advance in cooperation with the recipients of these dollars, 11 this should be a workable task for the future periodic 12 reporting that the staff has recommended. 13 Those are my thoughts. And, at this point, 14 perhaps we can bring this issue to a close. And, again, I 15 urge my colleagues to consider a two to three month 16 extension in finalizing this report. 17 SUPERVISOR VAGIM: Well, Mr. Chairman, I support 18 that. But I just have a couple of observations I'd like to 19 make. 20 CHAIRMAN DUNLAP: Sure. 21 SUPERVISOR VAGIM: It's suddenly strangely quiet. 22 But I believe it's important that we spend the time in doing 23 further review or analysis. 24 I do support the fact that these funds are for the 25 purpose of the legislative intent. I am concerned, however, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 that I see a lot of capital projects and with very little 2 participation by those who will have the windfall from the 3 capital projects, and that is those that provide the fuel 4 and those who provide the automobiles, and et cetera. 5 And maybe we need to find ways for, for example, 6 utility companies who want to sell gas, some incentives to 7 up their own investor resources in some of these refueling 8 stations. 9 I don't think to date I see any utility company 10 money in these refueling stations. I see a significant 11 amount of these funds being put in. I'm concerned about, in 12 addition to that, the conversion projects, CNG conversion 13 projects on automobiles. 14 We don't give credits back to the automobile 15 manufacturers for these conversions in the low-emission 16 vehicle program, because they're not what they call -- 17 they're aftermarket conversions. 18 I think we need to work on some of those, so we 19 get incentives from those who are in the other side of the 20 equation, which are participants in the -- in this whole 21 clean air arena. Because of the low-emission vehicle 22 programs, they have to be, and they are alternate fuel 23 providers because they're in that business. Why shouldn't 24 they be participants in an equal pro rata share along with 25 these 2766 funds, since 40 percent of these monies goes into PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 that. 2 I think we need to take a longer-term look at that 3 type of thing, because if those are the things that we're 4 going to get leverage with beyond what we actually receive 5 dollar for dollar here, I think we need to show some 6 incentives that that money's going to be spent that way. 7 There ought to be an equal quid pro quo on the 8 other side of those who aren't actually getting a windfall 9 from this. 10 I don't see any of this, for example, and I never 11 saw public money going in to building gas stations, but it 12 got us here, and now we're trying to get rid of them. 13 Yet, we're spending public money in putting in 14 alternate fuel stations. So, I think we need to have that 15 kind of discussion a little bit on perhaps this money ought 16 to be a little bit more of leveraged funds versus straight 17 allocation at a hundred percent -- a hundred percent buyout 18 of some of these projects. 19 CHAIRMAN DUNLAP: Okay. Good point. Thank you. 20 Mr. Calhoun. 21 MR. CALHOUN: I guess I'd like to support what 22 Supervisor Vagim just mentioned. 23 I'd also like to add some support to what Mr. 24 Lagarias said about the emission control measures, because a 25 great deal of those funds are spent on those measures, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 we ought to find out which ones are the most effective, and 2 give some kind of assessment as to their relative 3 importance, so that can be used with the guidance in 4 subsequent years for deciding which one of those projects 5 that ought to be pursued. 6 And can I ask the staff a question? 7 CHAIRMAN DUNLAP: Sure. 8 MR. CALHOUN: What has been the ARB's role so far 9 in these programs? Maybe you said that earlier. Just 10 participating in these review committees with the local 11 districts, has that been the extent of our participation, or 12 what? 13 MR. BOYD: Mr. Calhoun, yes, we participate in 14 some of the local activities. I think Ms. Hughan could 15 elaborate a little bit on that, because she's been very 16 active in dealing with the local agencies, at least in 17 helping them and sitting with them in some of the project 18 review activities. 19 MS. HUGHAN: I do sit on the San Joaquin Valley 20 Evaluation Committee that rates or ranks the projects that 21 are submitted to their REMOVE program. In fact, I have a 22 pile of 45 programs in my office waiting to be scored. 23 And I also sit on the MSRC Technical Advisory 24 Committee, and that group puts together the RFPs and the 25 ranking and scoring process, and recommends what the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 categories of projects should be focused on for the next 2 year to the MSRC Committee. 3 The MSRC Committee itself is composed of elected 4 officials from the South Coast, with the exception of a 5 member from a ridesharing organization, from ARB, and from 6 the South Coast Board. And I'm Mr. Scheible's alternate on 7 that committee, so I also participate there. 8 We have a lot of interaction in our office with 9 the districts on this issue. 10 In San Francisco, we have a lot of conversations 11 with them about this and with the other districts -- 12 especially some of the smaller districts, who need 13 information about what's eligible and what's not, because 14 their boards want them to take some action or spend some 15 money in the budget. And they need some outside information 16 on whether they're eligible programs or not. 17 So, we do give advice, though we don't give legal 18 advice, per se. 19 So, it's just basically an ongoing process. 20 MR. SCHEIBLE: We also provide technical guidance 21 to the districts in terms of emission reduction credits and 22 how to score them. And clearly, the three largest districts 23 have pretty elaborate, impressive programs to try to guide 24 them in a way that is most beneficial from an emissions 25 standpoint, where that's doable for their projects and where PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 it's not doable for research to have pretty logical criteria 2 over how to judge competing proposals. 3 CHAIRMAN DUNLAP: Right. And you also share 4 information about what you see in other places around the 5 State, and how they're spending the funds and providing 6 technical assistance and information sharing? 7 MR. SCHEIBLE: Yes. And that's one of the things 8 that we recommend that we do more explicitly as part of the 9 report, so that the information that's good and bad that's 10 generated in terms of what projects are being done and 11 worked on gets out. 12 CHAIRMAN DUNLAP: Okay. Very good. Supervisor 13 Vagim. 14 SUPERVISOR VAGIM: Thank you. I just have -- if 15 we are putting this off for further review, I would like to 16 also ask a question of staff. And that is, as mentioned in 17 an earlier report on our SIP, FIP, and SIP the FIP, and all 18 that kind of stuff, the next big threshold for -- to meet 19 the federal standard is the particle pollution, the 20 particulate matter. 21 For example, the Valley is going to be embarking 22 on a major step, which I believe will have spillover to all 23 the other areas of the State and perhaps even the nation, 24 since so little science is known about this thing called 25 PM10 and smaller. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 I'd like staff to look into the -- since this does 2 have a major effect coming out of automobiles will cause -- 3 at least the assumption is it's coming from automobiles, the 4 use of -- the availability of this money to go towards a 5 study like that. I think it's of significant importance. 6 The cost is significant and the money is rare. And if we're 7 ever going to know what this PM10 is and how much we can 8 really depend on science to help us in our regulations, 9 we're going to have to have this type of study. 10 The question, I guess, to staff is exactly what if 11 the district decides to slant money that way, what would be 12 the -- is there sufficient enough room and latitude in this 13 to allow that? 14 MR. BOYD: Mr. Vagim, we'll look into it. My 15 initial reaction is a yes to your question, in terms of is 16 there latitude, is there sufficient latitude within the 17 existing program to allow a district or districts to use 18 these funds to direct them towards -- as a contribution 19 towards the study in question, the study, the PM10 study 20 domain is -- we've gotten used to calling it the San Joaquin 21 Valley study but, as we recently discussed, it's kind of the 22 Central California or greater California study in terms of 23 the domain; it overlaps many jurisdictions. And many of 24 them receive these funds. 25 And I would think that all of the jurisdictions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 touched by this study, at a minimum, could well make some 2 contribution out of this source to that study. And, as you 3 say, it has much broader ramifications, which is why we're 4 trying to raise money from a host of sources. 5 It's a good question. I think that answers some 6 of your question. We can elaborate more on it. I'm not 7 quite sure what we can do within the framework of this 8 report, other than to answer a question like that in the 9 report, that things like this are not ineligible and are 10 appropriate for -- 11 CHAIRMAN DUNLAP: One thing, though, I might just 12 caution us in the spirit of this discussion, I wouldn't want 13 the locals to feel that there's going to be some kind of 14 dictation, that we're going to dictate on a project by 15 project basis what those priorities are. 16 As the Chair, I want to express my support for the 17 flexibility and respect for their decision-making process. 18 SUPERVISOR VAGIM: Yeah. 19 CHAIRMAN DUNLAP: So -- 20 SUPERVISOR VAGIM: Mr. Chairman, my intent is not 21 to categorize or lock into place any particular sets of 22 funding for anything but to also be able to show that the 23 broader range of these funds can be used for important 24 things. 25 CHAIRMAN DUNLAP: Right. And flexibility works PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 both ways. 2 SUPERVISOR VAGIM: Right. 3 CHAIRMAN DUNLAP: I understand. Very good. Is 4 there any other comments, questions? Mr. Calhoun, I 5 apologize for cutting you off. 6 MR. CALHOUN: No, that's fine. 7 CHAIRMAN DUNLAP: Okay. 8 MR. LAGARIAS: Mr. Chair? 9 CHAIRMAN DUNLAP: Yes. 10 MR. LAGARIAS: In view of the comments that we've 11 heard from the Board -- and I'm very supportive of the 12 report that we've prepared today -- I think it might be 13 appropriate to delay for 90 days the issuance of this report 14 to firm up the fact-finding and the recommendations of the 15 report to reflect the considerations that we've presented 16 today that include, for example, the actual air quality 17 benefits -- now, I know we can't go back and do all of them, 18 but at least an assessment of some of the air quality 19 benefits of a few of these programs to demonstrate indeed 20 how well these are doing. 21 I know the Bay Area has already submitted some 22 information in this regard to look at the economic benefits 23 that accrue from this. 24 To indicate again what some of these TCM measures 25 have done in terms of their objectives of vehicle miles PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 traveled reductions, trip reductions, traffic congestion 2 reductions in the report, so that the Legislature can 3 understand exactly where this -- where the benefits from 4 this report is coming from and enhance accountability and 5 uniformity as discussed previously. 6 So, I would recommend that we delay this report 7 for 90 days to allow the staff a chance to firm up the 8 report; in other words, supplement it with the comments 9 we've had today. 10 CHAIRMAN DUNLAP: Excellent. Is there a second? 11 MS. EDGERTON: Second. 12 CHAIRMAN DUNLAP: Very good. And would you 13 accept, if possible, it could include some indication of 14 what would be most useful in the future, so there would be 15 some discussion of the fact that the localities had this -- 16 had determined that some -- for example, the history. Now, 17 they've decided that working on the TCMs is not such a great 18 plan, so they're already shifting. Some discussion that 19 would reflect, where possible, the more current approach. 20 MR. LAGARIAS: Well, the assessment and 21 recommendations of the staff on these various programs, I 22 think, would cover them. 23 MS. EDGERTON: So far, it's not reflected. It's 24 more historical in here. It's not indicating what -- unless 25 I didn't read it carefully enough perhaps -- it's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 indicating that there's a change of direction; that Dr. 2 Ortner mentioned. 3 So, if there is a changed direction, it might be 4 good to footnote it or whatever else. But anyway, I second 5 it. 6 CHAIRMAN DUNLAP: Very good. Any other discussion 7 on the Board? Okay. 8 Madam Secretary, may I have you call the roll, 9 please. 10 MS. HUTCHENS: Boston? 11 DR. BOSTON: Yes. 12 MS. HUTCHENS: Calhoun? 13 MR. CALHOUN: Aye. 14 MS. HUTCHENS: Edgerton? 15 MS. EDGERTON: Aye. 16 MS. HUTCHENS: Hilligoss? 17 MAYOR HILLIGOSS: Aye. 18 MS. HUTCHENS: Lagarias? 19 MR. LAGARIAS: Aye. 20 MS. HUTCHENS: Parnell? 21 Roberts? 22 SUPERVISOR ROBERTS: Aye. 23 MS. HUTCHENS: Silva? 24 SUPERVISOR SILVA: Yes. 25 MS. HUTCHENS: Vagim? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 SUPERVISOR VAGIM: Aye. 2 MS. HUTCHENS: Chairman Dunlap. 3 CHAIRMAN DUNLAP: Aye. 4 MS. HUTCHENS: Passes 9-0. 5 CHAIRMAN DUNLAP: Very good. Thank you. 6 At this point, I'd like to propose that we that we 7 take a one-hour break for lunch, and reconvene about quarter 8 till or thereabouts. 9 Thank you. 10 (Thereupon, the luncheon recess was 11 taken.) 12 --o0o-- 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 AFTERNOON SESSION 2 --o0o-- 3 CHAIRMAN DUNLAP: If you'll take your seats, we'll 4 take up our fifth agenda item today. 5 Again, I'd like to remind those of you in the 6 audience who wish to testify, to please sign up with the 7 Board Secretary so that we might recognize you and have you 8 come forward. 9 The next item on the agenda today is 95-2-5, 10 public meeting to consider an update on the refiners 11 progress to comply with reformulated gasoline regulations. 12 This item is an informational report on the implementation 13 of the Phase 2 reformulated gasoline regs. 14 This is the second status report to this Board. 15 The first report was presented lst June. Staff will 16 continue to provide us with status reports at approximately 17 six-month intervals. 18 The presentation will include some information on 19 why the ARB adopted these regulations, a review of the 20 reformulated gasoline program, and a progress report on 21 efforts to implement the program. Also, after the staff 22 presentation, several members of the Phase 2 Reformulated 23 Gasoline Advisory Committee to provide their perspectives on 24 the implementation efforts to date. 25 Before I turn the presentation over to staff, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 would like to ask Jack Lagarias, who now serves as Chair of 2 the Advisory Committee, to provide us with his thoughts on 3 the progress that has been made to date. Jack? 4 MR. LAGARIAS: Thank you, Mr. Chairman. 5 The Phase 2 RFG fuel program is critical to ARB's 6 overall motor vehicle control strategy, because this new 7 fuel will reduce emissions from all existing vehicles 8 without waiting for them to be phased out or to rely on 9 attrition and/or buyback. 10 In addition, car manufacturers are relying on it 11 to more readily meet the low-emission and clean-car vehicle 12 requirements. 13 Over the next five years, this measure will 14 provide California with its greatest single source of 15 emission reductions at costs that compare favorably with 16 other control measures. 17 I think I should point out that this regulation 18 provides extensive provisions for compliance flexibility. 19 Refiners have the option of a number of testing options to 20 establish equivalent or alternative specifications. 21 Also, last June, the Board adopted a regulatory 22 provision to allow for a compliance option, a predictive 23 model. Refiners can use an approved model to set 24 alternative limits equivalent to flat or average 25 specifications for their RFG. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 Last June, this Board also approved a phase-in 2 period for distribution. The refiners have until March 1st, 3 1996 for production compliance. However, provisions were 4 adopted to allow terminals until April 15th to comply and 5 gasoline stations until June 1st, 1996. This phase-in 6 period should allow enough flexibility to prevent potential 7 supply disruptions. 8 From our experiences with the introduction of 9 reformulated diesel fuel in October, 1993, we know that 10 regulating new fuel specifications will require careful 11 planning. 12 Therefore, last June, under Chairwoman Jacqueline 13 Schafer, the ARB formed an advisory committee to identify, 14 address, and prevent possible start-up problems with the 15 Phase 2 RFG. 16 Joe Calhoun has agreed to serve as Chairman of the 17 Advisory Committee with me. 18 The Advisory Committee has approximately 75 19 members -- representatives from the oil industry, car 20 manufacturers, business associations, environmental groups, 21 and federal, State, and local governments -- to advise the 22 Air Resources Board on the implementation of the Phase 2 23 regulation, and to assure its smooth transition. 24 The Advisory Committee has set up three 25 subcommittees to work on specific technical and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 implementation issues. 2 The Performance Subcommittee under Dean Simeroth 3 addresses issues related to the performance and 4 compatibility of Phase 2 RFG with motor vehicles and 5 equipment. It has advised the staff on the development of 6 test programs, like the on-road vehicle test program, which 7 has been initiated this month and will run until August of 8 this year. 9 In addition, the subcommittee has several 10 companies who are carrying out their own test programs. 11 These companies are primarily using extended bench test 12 programs and will be of great value in complementing the on- 13 road performance test program. 14 The second committee, the Transition Subcommittee, 15 working with the California Energy Commission and the ARB 16 staff, is evaluating the future supply and demand of Phase 2 17 RFG and the progress of refiners to supply and comply with 18 the Phase 2 RFG regulation. 19 The Public Education Subcommittee has developed a 20 newsletter and fact sheets on the key components of the 21 Phase 2 RFG program. There are fact sheets in the back of 22 the room. It is working on the development of a public 23 outreach strategy and the use of a public relations expert 24 to inform the public of the RFG program and its 25 significance. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 The subcommittee works closely with the other 2 subcommittees to see that the key issues are communicated to 3 the public. 4 Now, I've been impressed with the efforts of the 5 Advisory Committee and its subcommittees in working with ARB 6 and the California Energy Commission staffs. These 7 committees have truly been a partnership between the private 8 and public sectors to ensure the successful implementation 9 of the Phase 2 RFG regulation. 10 In adopting this measure, the Board has acted 11 prudently. We've provided industry with the flexibility 12 they need to implement this regulation efficiently, and it 13 is technically sound, cost-effective, and will reduce 14 harmful air pollutants. 15 The introduction of California RFG will lead to 16 significant improvement in air quality. 17 Thank you, Mr. Chairman. 18 CHAIRMAN DUNLAP: Thank you, Jack, for those 19 comments of your ],"D,!, on the Committee. I also want to 20 thank Joe Calhoun for offering to serve as the Vice Chair of 21 the Committee, and look forward to his inclusion in the fine 22 work that's going on there. 23 Now, I'd like to ask Mr. Boyd to introduce the 24 item and begin the staff's presentation. 25 MR. BOYD: Thank you, Mr. Chairman. Well, as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 indicated in the introduction today, we want to provide you 2 with what is the second update on efforts to ensure the 3 smooth and orderly transition to Phase 2 reformulated 4 gasoline in California, as you heard, beginning next March 5 and phasing through to June. 6 The staff's going to report on the refiners 7 progress in producing reformulated gasoline and, as you 8 heard, on the efforts of the Advisory Committee and its 9 subcommittees. 10 We hope this presentation will provide the Board 11 with an overall description of this rather critical 12 component of the State Implementation Plan, as Mr. Lagarias 13 pointed out, the importance of reformulated gasoline to the 14 whole low-emission vehicle program. 15 Mr. Dean Simeroth of the Stationary Source 16 Division, whom you heard was chairing the Performance 17 Subcommittee, will begin the staff presentation. And 18 following his presentation, Ms. Susan Brown of the Energy 19 Commission will summarize the activities of the Transition 20 Subcommittee. And finally, Mr. Ron Friesen of our 21 Stationary Source Division will update the Board on the 22 activities of the Outreach Committee. 23 With that, I'll ask Mr. Simeroth to begin. 24 MR. SIMEROTH: Thank you, Mr. Boyd. 25 Good afternoon, Chairman Dunlap and members of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 Board. 2 Last June, we provided the Board with the first 3 update on the implementation of the Phase 2 reformulated 4 gasoline regulations. This is the second update on progress 5 towards implementing the Phase 2 reformulated gasoline, or 6 RFG, requirements. Subsequent updates will be provided 7 about every six months. 8 California has a long history of setting 9 requirements for the composition of motor vehicle fuels, 10 especially gasoline. 11 Today, we will review why we have requirements for 12 fuels, what the specifications are, and their benefits. 13 Special emphasis will be placed on California's 14 reformulated gasoline programs. As a point of interest, a 15 brief summary will be given of the federal reformulated 16 gasoline program, which is being implemented in Southern 17 California today. 18 Finally, the presentation will end with a summary 19 of the activities that are ongoing to ensure a smooth 20 transition to Phase 2 reformulated gasoline. 21 I'll start with some background information on air 22 quality and emissions. 23 As you know, California has a more severe air 24 pollution problem than the rest of the nation. 25 Seventy-five percent of the nation's person days PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 exposure to occurrences of zone above the federal air 2 quality standard are in California. 3 As can be seen from the green and pink portions of 4 the pie chart, emissions from motor vehicles constitute a 5 major part of the State's volatile organic compounds and 6 oxides of nitrogen emissions inventory. 7 Vehicles and their fuel are the source of over 8 half of the VOC and NOx emissions. 9 The Board's strategy is to address vehicles and 10 fuels as a system to seek the combination of cleaner fuels 11 and motor vehicle controls that get maximum emission 12 reductions at the lowest cost. 13 More specifically, why are fuels such a major 14 element? Basically, because emission reductions are 15 immediate and there is no need to wait for fleet turnover, 16 and clean fuels are needed by vehicle manufacturers to meet 17 increasingly stringent emission standards. 18 As you can see on this slide, hopefully, the Board 19 has had a long history of setting vehicle fuel 20 specifications. In response to the California Clean Air Act 21 amendments and subsequently the Federal Clean Air Act 22 amendments, the Board adopted what is generally referred to 23 as the reformulated gasoline and reformulated diesel 24 regulations. Our most recent regulatory activities include 25 adoption of Phase 1 reformulated gasoline in 1990, adoption PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 of Phase 2 RFG and wintertime oxygenate requirements in 2 1991. We established commercial and certification 3 specifications for alternative fuels, such as compressed 4 natural gas, in 1992. 5 And, as Mr. Lagarias mentioned, we approved the 6 Phase 2 predictive model requirements in June of 1994. 7 At this point, I will now review our reformulated 8 gasoline program. 9 We approached the development of the RFG program 10 in two phases. The first phase is to require what could be 11 done with minimal refinery modifications and accomplished n 12 the near term. The second phase is to set comprehensive 13 specifications to maximize reductions of criteria and toxic 14 pollutants. These regulations require significant refinery 15 modifications, which result in refiners needing a leadtime 16 of approximately five years. 17 The Phase 2 regulations were implemented on 18 January 1st, 1994. They reduced the volatility of gasoline 19 slightly, required deposit control additives in all 20 gasoline, eliminated leaded gasoline for on-road vehicles, 21 which also brought all on-road gasoline under the sulfur, 22 manganese, and phosphorous specifications. 23 The major benefit from Phase 1 is reduction of 24 volatile organic compounds emissions by over 200 tons per 25 day. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 The cost of Phase 1 is approximately 1 to 2 cents 2 per gallon. 3 In developing the Phase 2 reformulated gasoline 4 specifications, we chose to look at gasoline as a system. 5 This resulted in Phase 2 reformulated gasoline as having the 6 most comprehensive set of specifications in the world. 7 We set specifications for eight properties 8 identified here. 9 An important component of the Phase 2 RFG program 10 is the oxygen requirement. The Federal Clean Air Act 11 amendments mandated a similar oxygen program to be 12 implemented in carbon monoxide nonattainment areas. 13 California's program was adopted by the Board at 14 the same time as the Board adopted their Phase 2 15 reformulated gasoline specifications. 16 The wintertime oxygen program for carbon monoxide 17 reduction was implemented in November, 1992. The oxygen 18 specifications achieved a 10 percent reduction in carbon 19 monoxide emissions at a cost of about 3 cents per gallon. 20 This provision will become part of the Phase 2 reformulated 21 gasoline regulations when they're implemented in 1996. 22 Shown here are the average California fuel, as 23 produced today, compared to the basic specifications of the 24 Phase 2 reformulated gasoline to be implemented in 1996. 25 As Mr. Lagarias mentioned, last June, the Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 modified the implementation dates to provide more time for 2 facilities downstream of refineries to comply. The 3 implementation date for refineries was not changed. 4 Based on our experience from implementing the 5 reformulated diesel regulations, we allowed additional time 6 for terminals and downstream facilities. 7 The terminals are allowed until April 15th, 1996. 8 and all other facilities until June 1st, 1996. 9 The purpose for the additional time is to prevent 10 potential supply and distribution issues. Also, the small 11 refiners have two additional years for four of the 12 properties. 13 Now, we turn to the emission benefits and costs of 14 the Phase 2 reformulated gasoline program. 15 Emissions of ozone precursors -- volatile organic 16 compounds and oxides of nitrogen -- from on-road gasoline 17 vehicles will be reduced, on average, over the first four 18 years by over 280 tons per day. 19 Toxic emissions on a mass basis from gasoline 20 vehicles will be reduced approximately 30 percent. 21 Staff estimated the capital cost originally to be 22 $3 to $6 billion. Today, staff believes the capital cost to 23 be approximately 4 to $5 billion, with an annualized cost of 24 approximately $2 billion per year. 25 This equates to about a half cent per mile PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 increase in the cost of operating a vehicle We are 2 currently evaluating our cost figures. This includes 3 evaluating the impact on cost from the regulatory revisions 4 made last June by the Board that provided more flexibility 5 to refiners. Also, we expect that compliance costs will be 6 reduced. 7 In terms of cost-effectiveness, Phase 2 8 reformulated gasoline will cost about $4.00 per pound, which 9 compares favorably to other control measures. 10 Turning to the federal program, the Federal Clean 11 Air Act amendments of 1990 requires EPA to establish their 12 own reformulated gasoline program. 13 the federal RFG program has been implemented in 14 nine major metropolitan areas, including Southern 15 California. Other areas have opted in. 16 The program is to be implemented in two phases. 17 Phase 1, implemented January 1st of this year, is to achieve 18 a 15 percent reduction in volatile organic compounds and 19 toxics from a prescribed fleet and baseline gasoline. 20 Phase EPA reformulated gasoline is to achieve 21 approximately an additional 10 percent reduction in the year 22 2000. 23 The EPA reformulated gasoline programs are based 24 on a combination of fuel specifications and emission 25 performance standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 EPA set the general standards shown on this slide 2 for Phase 1 federal RFG. 3 Today, about one-third of the gasoline in the 4 United States is subject to the federal requirements. 5 The Air Resources Board's Phase 2 reformulated 6 gasoline requirements, which take effect in 1996, will allow 7 California's refiners to meet and/or exceed the EPA's Phase 8 1 and Phase 2 emission reduction requirements. 9 You've heard a summary of the rationale for 10 development and adoption of the RFG program. Now, I will 11 brief you on the status of activities that have been 12 occurring and are being initiated to ensure a smooth 13 transition to Phase 2 reformulated gasoline. 14 I will start first with what we've been doing to 15 assist with the implementation of the specifications. We 16 have been very active in working with refiners, local air 17 districts, and other agencies to assist in expediting the 18 CEQA process and obtaining the necessary permits. 19 Through the efforts of the Air Resources Board, 20 permitting agencies, and the refiners, two refiners -- Shell 21 and ARCO -- were able to comply with CEQA and obtain 22 necessary permits in approximately one year. 23 Overall, 12 of the 13 major refineries in 24 California have met all CEQA requirements. In addition, two 25 small refiners have completed their CEQA process and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 obtained necessary air permits. The remaining small refiner 2 is in the initial stages of the CEQA process. 3 We will continue to monitor the refiners progress 4 closely until they are through the permitting process. 5 The Phase 2 regulations require refiners to 6 prepare compliance plans. As a mechanism, these compliance 7 plans are required as a mechanism to allow us to monitor 8 refiners progress towards compliance. 9 In addition, we have used this information, along 10 with California Energy Commission information, to assess the 11 supply/demand balance for complying fuel in 1996 and beyond. 12 You'll hear more about this later. 13 We have received four updates since March 1993. 14 The most recent update was in December of 1994. 15 Now, I'd like to discuss our other efforts to 16 implement the Phase 2 reformulated gasoline regulation. 17 As Mr. Lagarias mentioned, last June, the Board 18 formed a committee to advise the Board on the implementation 19 of the Phase 2 RFG regulations. The committee was formed to 20 assist with the smooth transition to Phase 2 RFG in March, 21 1996. The advisory committee is comprised of approximately 22 75 members from a wide range of organizations identified 23 here. 24 As Mr. Lagarias also mentioned, three 25 subcommittees were formed to address the specific PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 implementation issues associated with Phase 2 reformulated 2 gasoline. Specifically, a subcommittee was formed to advise 3 the Board on the design of performance and compatibility 4 test programs. A subcommittee was formed to consider 5 transition issues such as forecasting supply/demand 6 balances,monitoring federal reformulated gasoline 7 implementation, and evaluating compliance issues. 8 Finally, a subcommittee was formed to help develop 9 and implement strategies to inform the public about the 10 benefits and impacts of Phase 2 reformulated gasoline. 11 I serve as the discussion leader of the 12 Performance Subcommittee, and will give you a short 13 presentation on its activities. 14 Susan Brown, to my right, a Deputy Division Chief 15 with the California Energy Commission, is the discussion 16 leader for the Transition Subcommittee. 17 Susan will follow my presentation with a brief 18 presentation on the Transition Subcommittee activities. 19 After Susan's presentation, Ron Friesen, the Assistant 20 Division Chief of the Stationary Source Division, to my 21 left, and discussion leader for the Public Education 22 Subcommittee, will give a brief presentation on the Public 23 Education Subcommittee's activities. 24 As I mentioned, the Performance Subcommittee was 25 formed to advise the Board on the design of performance and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 compatibility test programs. In addition, this subcommittee 2 helps facilitate and coordinate the resources needed to 3 implement the test programs. 4 The performance subcommittee has approximately 50 5 members and has met five times since it was formed last 6 July. 7 The subcommittee reviewed and approved the on-road 8 and off-road test program protocols and the specifications 9 for the test fuel. 10 The subcommittee advised Board in the development 11 of criteria for contracting with a party to produce the test 12 fuel. I would like to mention that Shell Oil has paid for 13 the bulk of the test fuel and Texaco is distributing the 14 test fuel. Powerine, a small refiner, has paid for the 15 specialty fuels that will be used by General Motors and Ford 16 in their bench test programs. 17 The subcommittee advised the Board in the 18 identification and selection of the vehicle fleets. I'd 19 like to mention at this time that the Public Education 20 Subcommittee "Fact Sheet No. 2," which you have in your 21 packet today, which is available outside the door today, 22 provides more detail on the performance test programs. 23 As a result of these efforts, the on-road 24 performance test program is being initiated this month -- in 25 fact, Monday morning -- with completion of the program PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 planned for August of this year. 2 Shown here are the fleets participating in our on- 3 road test program. They total in excess of 1200 light-duty 4 vehicles, approximately 600 medium-duty vehicles, and about 5 20 heavy-duty vehicles. 6 Generally, the fleets are about evenly split 7 between test and control fuels. 8 In addition to this program, a number of 9 individual companies are conducting their own test programs. 10 These individual company programs are designed to complement 11 the Board's efforts. 12 General Motors will conduct a bench test program 13 for material compatibility. Ford will do a bench test 14 program to look at lubricity issues. Chevron is also doing 15 an independent test program using a Phase 2 reformulated 16 gasoline with an employee fleet for test vehicles. 17 For off-road and nonvehicle gasoline-powered 18 engines, we have initiated over 13 test programs 19 encompassing equipment from a wide range of categories 20 identified here. 21 For utility engines, Tecumseh and Briggs & 22 Stratton have conducted a field test program of their line 23 of engines. Also, we are working with the University of 24 California at Davis and the Portable Power Equipment 25 Manufacturers Association to do additional tests. For the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 category of agricultural equipment, we are working with U.C. 2 Davis and Cal Poly San Luis Obispo. 3 I would like to mention that Chevron is providing 4 fuel storage tanks to support these university programs. 5 For construction equipment, we are working with 6 Cal State University at Fresno and Caltrans. 7 For marine engines, two programs are proposed: 8 one with Oronite/OMC and the other with Oronite/Mercury 9 Marine. 10 For motorcycles, we have Harley Davidsons that are 11 part of the police fleet in the City of Sacramento test 12 program. We are also working with Honda to develop a test 13 program. 14 To evaluate snowmobiles, we are working with the 15 International Snowmobile Industry Association. 16 As I mentioned, Tecumseh has completed its test 17 program. Tecumseh found no reliability or durability 18 concerns related to the Use of Phase 2 reformulated 19 gasoline. Phase 2 reformulated gasoline did not affect the 20 starting characteristics or running quality of the engines. 21 And Phase 2 reformulated gasoline did not affect operability 22 of the equipment when switched from conventional fuel to 23 Phase 2 reformulated gasoline. 24 I'd now like to introduce Susan Brown of the 25 California Energy Commission, who will discuss the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 Transition Subcommittee activities. 2 MS. BROWN: Mr. Chairman, Vice Chair Lagarias, and 3 members of the Board, I'm very pleased to be here this 4 afternoon to update you on the activities of the Transition 5 Subcommittee. And, as has been previously mentioned by Mr. 6 Lagarias, our committee is primarily concerned with 7 evaluating industry's ability to produce California Phase 2 8 reformulated gasoline in sufficient quantities to meet the 9 forecasted demand when the regulations go into effect in 10 March of 1996. 11 Next slide, please. 12 I'm going to be briefly discussing some of the 13 topics that our committee has been grappling with to date. 14 There are many other topics on our agenda, which I'll 15 reserve for a future briefing. 16 The first of these is the -- what we feel is a 17 very successful transition that occurred to federal Phase 1 18 EPA reformulated gasoline that was complete in January of 19 this year. And second, I'm going to comment on our best 20 estimates of the California Phase 2 RFG, the supplies and a 21 demand balance. And lastly, I'm going to comment briefly on 22 compliance and enforcement issues. 23 Next slide, please. 24 With respect to the federal EPA program, from a 25 price and supply standpoint, the transition to federal EPA PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 gasoline in Southern California went extremely smoothly. In 2 fact, from a price standpoint, we saw only a one to two cent 3 difference in the price of Phase 1 reformulated gasoline in 4 Los Angeles when compared to conventional oxygenated 5 gasoline in San Francisco. And the wholesale prices were a 6 good indicator of what was going on in the market. 7 There were no reported mechanical problems at 8 refineries, and only minor concerns -- well, actually, 9 should not say minor. There was some concern expressed on 10 the part of the pipeline companies about the need for 11 segregated storage, which is necessary because of the large 12 number of gasoline products that are now being produced to 13 meet the requirements. 14 Probably the most common complaint from the 15 industry respondents to our survey was the excessive federal 16 reporting requirements. So, as far as -- again, as far as 17 supply and demand, we had absolutely no issue and the 18 transition went extremely smoothly around the first of the 19 year. 20 I'm next going to talk a little bit about some of 21 the work our committee has been doing to evaluate the 22 production capability of the refiners to meet the needs of 23 California in 1996. 24 Our subcommittee has analyzed and collected a 25 considerable amount of technical data from a number of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 sources. For example, we have reviewed the compliance plans 2 filed by the refiners with the Air Resources Board. 3 We've evaluated historical information, 4 confidential information available to the Energy Commission 5 under the Petroleum Industry Reporting Act. We've also 6 consulted with other agencies, such as the Board of 7 Equalization that maintains records on gasoline sales. And 8 we've been in constant contact with refiners and other 9 affected industries throughout this whole process. 10 So, the information that I'm going to be talking 11 about today is basically an aggregate based on our analysis 12 of the company-specific plans to produce reformulated 13 gasoline. 14 Next slide, please. 15 This slide shows two things: First, the yellow 16 line shows the historical demand for gasoline. It's kind of 17 hard to read, I think, on this screen. But basically, the 18 demand line shows -- the demand line is indicated on the 19 chart, and it's based on historical information, but also a 20 forecast of what the gasoline demand will be in 1996 and 21 beyond. 22 We assumed a two percent growth rate in gasoline 23 demand for our analysis, which we consider to be a high- 24 demand case. We compared that against the information that 25 we were evaluating on production capability at refineries. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 So, this slide shows both the demand, line and the 2 shaded box represents the total aggregated maximum 3 production capability at the State's refineries. 4 Based on our analysis to date and barring 5 unforeseen problems at refineries, we expect there to be 6 more than a sufficient supply to meet the forecasted demand 7 for Phase 2 RFG in the period 1996 and beyond. 8 Next slide, please. 9 So, briefly, based on our analysis to date and 10 based on the best information we have at this time, we 11 expect a sufficient degree of gasoline production in 1996 to 12 meet the -- even the high-demand case. 13 However, I would caution that the gasoline market 14 in California is extremely dynamic. Market conditions are 15 continually changing. We are concerned about unforeseen 16 events. 17 At the direction of Mr. Lagarias, we are looking 18 at contingency plans -- what I like to call "what if" 19 scenarios. So, we'll be prepared. Because, even though we 20 believe that, based on the numbers, the supplies will be 21 sufficient in 1996 and beyond, I don't think we can afford 22 to be complacent. So, our committee is very concerned and 23 we'll continue to monitor gasoline, price, supply and demand 24 in the months ahead. 25 So, that concludes my brief presentation. And I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 going to turn the microphone over to Ron Friesen, who's 2 going to report next on the public information -- Public 3 Education Subcommittee activities. 4 MR. FRIESEN: Thank you, Susan. 5 Chairman Dunlap and members of the Board, I will 6 be discussing the efforts of the Public Education 7 Subcommittee, which has met four times since it was formed 8 last July. 9 The Public Education Subcommittee has 10 approximately 30 members representing affected industry, 11 government agencies, and environmental organizations. 12 The mission of this subcommittee is to advise the 13 Air Resources Board on the development and implementation of 14 strategies to provide accurate and consistent information 15 about Phase 2 reformulated gasoline to the general public, 16 businesses, and other government agencies. 17 In my presentation today, I would like to discuss 18 the items identified on this slide. And also, you have a 19 package before you that includes products that the Air 20 Resources Board and Public Education Subcommittee members 21 have developed and are the subject of my discussion. 22 I'd like to begin by discussing our efforts to 23 develop an outreach strategy. Our objective is to develop a 24 program that provides consistent and accurate information to 25 the general public on the benefits and impacts of Phase 2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 reformulated gasoline in the most coherent and effective 2 ways. 3 To meet this objective, we've been working to 4 identify various audiences, to identify messages that we 5 want to convey to these audiences, and to outline potential 6 outreach options. 7 A real key to assuring that we develop an 8 effective program is to obtain expert advice and assistance 9 through a public relations consultant. I will be discussing 10 that in a few minutes. 11 Also, we are still developing our outreach 12 strategy, and we have already developed fact sheets and 13 newsletters to provide consistent and accurate information 14 as we decided it was a very important and very immediate 15 need. 16 The first two issues of our newsletters, 17 "California RFG Forum," have already been released. We have 18 included in our newsletters the following information. We 19 tried to provide the chronological coverage of key events 20 that have occurred, some of the decisions that have already 21 been made on the test program, and various issues. We were 22 also trying to update key audiences, such as the Advisory 23 Committee and subcommittees, as well as document various 24 implementation as they occur. 25 At this point, our target audiences have been the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 Advisory Committee, subcommittees and their various 2 constituents, trade associations, as well as the State 3 Legislature, to mention just a few. 4 We've already distributed several thousand copies 5 of our newsletter to these audiences. 6 We plan to have regular articles in the newsletter 7 to include various discussions that have occurred at the 8 Advisory Committee, columns on the activities of the three 9 subcommittees -- the Performance, the Transition, and the 10 Public Education Subcommittees -- and relevant articles from 11 various members of the Advisory Committee and others 12 knowledgeable about reformulated gasoline. 13 In our second issue, which is also in the package 14 before you, we included an article from Dr. George Sverdrup 15 of the Battele Institute concerning the Federal Express 16 clean fleet study, which used a Phase 2 like reformulated 17 gasoline as well as other fuels, and this study showed 18 virtually no problems with the use of Phase 2 reformulated 19 gasoline to date. 20 An article was also provided in the transition to 21 federal Phase 1 gasoline in that issue. 22 In our initial meetings with the Committee 23 members, it was determined that fact sheets would be a 24 useful tool to communicate accurate and consistent 25 information about Phase 2 reformulated gasoline. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 So, you have before you, also, the first two 2 California RFG fact sheets. The first fact sheet, 3 "California RFG, an Overview," was developed at the request 4 of the various members who wanted a basic fact sheet about 5 the program that could be incorporated into their 6 association newsletters. For example, in the May and June 7 issue of Motorland magazine, they plan to discuss the 8 program using the fact sheets that we have published so far. 9 The second fact sheet will be a summary of the 10 Phase 2 reformulated gasoline testing program. And we plan 11 to publish additional fact sheets on such titles as the 12 difference between federal Phase 1 and California Phase 2 13 reformulated gasoline, an historical perspective regarding 14 factors that affect gasoline prices and pricing, as well as 15 the environmental and economic benefits of Phase 2 16 reformulated gasoline. 17 Like the newsletter, we've distributed several 18 thousand copies of these fact sheets. 19 I want to mention that one of our highest 20 priorities is to secure the services of a public relations 21 firm to provide us in the Public Education Subcommittee with 22 expert guidance and advice. 23 The decision to pursue this type of service was 24 based on input from subcommittee members as well as the ARB 25 staff who felt that professional assistance was needed to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 develop a successful outreach program of this magnitude that 2 will affect literally millions of Californians. 3 We have completed the process for selecting a 4 contractor and we hope to issue a public relations contract 5 in March. 6 With respect to our future efforts, we're working 7 hand in hand with the other two subcommittees, as 8 information is developed, to disseminate accurate and 9 consistent information as quickly as possible. And with the 10 help of a public relations professional, we expect to expand 11 our outreach efforts to assure that the general public is 12 well-informed in advance of the introduction of Phase 2 13 reformulated gasoline. 14 And, of course, in the meantime, we will continue 15 to publish our newsletter and fact sheets as information is 16 developed by the various subcommittees. 17 That completes my part of the presentation. I 18 just wanted to, as long as I have the mike, give you a wrap- 19 up of the overall presentation this afternoon. 20 To summarize, you've heard that vehicles are major 21 contributors to California's air quality problems; that 22 vehicles and fuel programs are an integral part of our 23 efforts to reduce air emissions. The program will result in 24 significant and immediate emissions reductions. 25 The reformulated fuel program is cost-effective PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 when compared to other strategies. These emissions 2 reductions are critical for complying with State and Federal 3 Clean Air Act requirements. 4 You also heard that the refiners are on schedule 5 and have made significant capital investments for Phase 2 6 reformulated gasoline. 7 The ARB staff is committed to an ongoing effort to 8 ensure a smooth transition to Phase 2 reformulated gasoline 9 through the efforts of the Advisory Committee and its three 10 subcommittees. 11 And I'd like to just conclude the overall staff 12 presentation by mentioning again that we plan to continue to 13 present biannual updates to you on the activities of the 14 subcommittees. 15 CHAIRMAN DUNLAP: Mr. Boyd, anything to add? 16 MR. BOYD: Just to point out -- I think Mr. 17 Friesen made reference to it, but all the Board members have 18 been provided with a very weighty and comprehensive binder 19 here with background information on this very important 20 program for your reference and future use. 21 No further comments, Mr. Chair. 22 CHAIRMAN DUNLAP: Thank you. Any questions of the 23 Board to staff or staff from the Energy Commission? 24 SUPERVISOR VAGIM: Mr. Chairman? 25 CHAIRMAN DUNLAP: Mr. Vagim. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 SUPERVISOR VAGIM: Thank you. At the risk of 2 stepping in quicksand, let me ask about the federal standard 3 and the California reform fuel, and the use of ethanol 4 versus methanol. 5 I presume the Fed that came out in -- the first of 6 this year, is ethanol based to get us oxygen, et cetera? 7 MR. SIMEROTH: Supervisor Vagim, the federal 8 program is similar to ours, in that they're oxygenate 9 neutral. They have an oxygen requirement. The refiners 10 have the choice of either ethanol, methyl tertiary, butyl 11 ether, or any of a number of other oxygenates to meet the 12 oxygen requirement. 13 SUPERVISOR VAGIM: But currently, doesn't their 14 reg require ethanol, or is that in the past? There was some 15 heated discussion. 16 MR. SCHEIBLE: No. EPA, subsequent to 17 establishing its initial reformulated gas requirements, 18 passed what's called the renewable oxygenate requirement, 19 which would have required in 1995, 15 percent of the 20 oxygenate to come from renewable sources, which ethanol is 21 the primary source, and 30 percent. That rule was 22 challenged by the American Petroleum Institute, and the 23 court stayed the rule. And it's currently being heard this 24 month, I believe. 25 MR. KENNY: Last week. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 MR. SCHEIBLE: Last week. So, that had no effect 2 on the fuel produced to date. 3 SUPERVISOR VAGIM: Okay. And the level of ethanol 4 currently in the areas that are being required to sell the 5 federal standard fuel is what? 6 MR. SIMEROTH: It's very small, Supervisor Vagim. 7 Probably in the order of five percent of the total gasoline. 8 The remainder being primarily methyl tertiary butyl ether. 9 SUPERVISOR VAGIM: I notice that our standard 10 Reform 2 and the federal standard are very close, except in 11 that one area. 1.8 to 2.2 in the oxygen versus the 2.0. 12 That is -- other than that, are they identical? 13 MR. SIMEROTH: Supervisor Vagim, no, they're not 14 identical. EPA's Phase 2 program basically is a 15 prescriptive, somewhat along the line of ours, at least for 16 the next couple of years, and then it goes over to a 17 performance type approach in 1998. For the first couple 18 years, it's a Reid vapor pressure standard of 7.2 psi; our 19 current Phase 1 standard is 7.8. Our future Phase 2 is 7.0. 20 So, they're sort of in between where we are now and where 21 we're going. 22 They require 1 percent benzene, which is basically 23 the same as ours. They require the 2 percent oxygen, which 24 is the approximately the same as ours, except their range is 25 1.5 to 2.7, where our range is 1.8 to 2.2. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 They require a 15 percent reduction in toxics, 2 which is primarily achieved through the 1 percent benzene 3 standard, and then through some reduction in the aromatics, 4 where we specify a maximum aromatic content. 5 They do not address sulfur, the distillation 6 temperature, olefins, and our other specifications in their 7 Phase 1. 8 And their Phase 2, they have a performance 9 requirement that basically through implementation of a 10 complex model, which is somewhat analogous to our predictive 11 model, that requires a reduction -- total reduction now of 12 VOCs of approximately 27 percent; toxics, somewhere around 13 the mid-20s; oxides of nitrogen, around 4 percent. 14 Looking at what we expect fuels to look like, 15 which would meet the year 2000 specification, taking those 16 fuels and comparing it to our specifications, our 17 specifications would exceed their fuel. 18 SUPERVISOR VAGIM: So, our Phase 2 will exceed 19 theirs by the year 2000? 20 MR. SIMEROTH: Based upon our analysis at this 21 time, unless something changes. 22 SUPERVISOR VAGIM: And when our Phase 2 fuel is in 23 effect and there's supplies of Phase 1 federal, I presume 24 the dilution won't have an effect when you're mixing the 25 fuels? If you have a supply of Fed 1 fuel, and you fill up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 with State reform 2, what happens? 2 MR. SIMEROTH: Basically, nothing should happen. 3 It's one reason we have the phase-in for the refiners to 4 start producing March 1st, and service stations don't have 5 to comply till June 1st. So, you can simply get our Phase 2 6 fuel coming through the distribution system, diluting it 7 down till you comply with our Phase 2, and no extraordinary 8 actions will be required of the downstream distributors of 9 gasoline. 10 SUPERVISOR VAGIM: So, if I have a 10,000 gallon 11 tank in my service station and I have 2,000 gallons left of 12 fed, and I fill it up with 8,000 gallons of Reform 2, it 13 shouldn't hurt? 14 MR. SIMEROTH: It should not hurt. 15 SUPERVISOR VAGIM: So, my pistons won't rot out? 16 MR. SIMEROTH: Well, that's why we're doing this 17 relatively expensive test program to make sure. But the mix 18 of the two would be no worse than full compliance with our 19 Phase 2. 20 SUPERVISOR VAGIM: Thank you. Thank you, Mr. 21 Chairman. 22 CHAIRMAN DUNLAP: Okay. Any other questions 23 before we move into the witnesses? Comments? 24 Okay. Very good. I'd like to call -- we have an 25 order sheet for -- a witness list, I guess. PETERS SHORTHAND REPORTING CORPRATION (916) 362-2345 164 1 I'd like to call the first two forward. Carolyn 2 Green, the RFG Task Force Subcommittee, and Gerald Barnes to 3 come forward please. 4 Thank you. Good afternoon, Carolyn. 5 MS. GREEN: Good afternoon, Chairman Dunlap and 6 members of the Board. 7 I'm Carolyn Green. I'm the Director of Government 8 and Public Affairs for Ultramar, Inc., which is an 9 independent oil refiner/marketer here in California. 10 I'm going to be addressing you on some of my 11 observations about the task force process. And that is, as 12 Ultramar is a member of the task force itself, we also sit 13 on the Transition and Public Education Subcommittees. And 14 like a number of the industry-based participants -- and 15 that's not necessarily just the refining industry, but the 16 suppliers, the fleet operators, et cetera -- we've had 17 rather mixed feelings about the whole task force process. 18 We strongly support ARB's early action to identify 19 and resolve potential implementation issues so that you can 20 provide industry with some certainty that this regulation, 21 which has caused the refiners to spend billions of dollars, 22 and we're already spending that money. We need the 23 certainty that that won't be in vain, so that our investment 24 will be returned to us, because we've got some regulatory 25 certainty and that this program will take place on time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 We particularly have been concerned about supply 2 and public education issues. We certainly don't want to see 3 a repeat of the diesel issues that happened earlier, and we 4 applaud the effort of the Air Resources Board to include a 5 broad range of interests in the implementation process. 6 Our main trepidation in being involved in this 7 process really was and continues to be our fear of potential 8 antitrust violations as we discuss issues of supply, or 9 pricing, or whatever. And I must compliment your staff and 10 the participants in the process for being very, very careful 11 that we don't get into questions about what individual 12 companies are doing or what individual pricing decisions 13 there might be, et cetera. 14 If that happens, Ultramar cannot participate. I 15 would have to leave the room to make sure that I protect my 16 company's interest in any kind of antitrust consideration. 17 So, we're very sensitive to that. So far, we've been very 18 pleased at how the discussions have gone along. All of the 19 information has been based on publicly available aggregated 20 data that everybody can talk about. And we hope that that 21 continues. 22 The real work of the task force is taking place in 23 those subcommittees. We've been pleased with the progress 24 to date. As Susan has mentioned, there have been surveys 25 that have gone out to the refiners to find out what's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 happening with them. We've been able, as refiners, to 2 respond in a confidential manner so that proprietary 3 information is protected. 4 The information that you receive and that's 5 reflected in your RFG Forums, the newsletter, is aggregate 6 information and we're very comfortable with that. 7 The Public Information task force has been moving 8 along. It's certainly been one of the most active efforts 9 that I've been involved in. I certainly haven't seen as 10 many documents produced by a process in as short a period of 11 time as that task force has produced them. 12 We have been, however, disappointed by the lack of 13 participation from the environmental community and the 14 general community-based organizations. There have only been 15 a couple of environmental organizations that have been 16 involved on an ongoing basis, and I think that that is a 17 real lack. I'm not sure why. Maybe it's because they think 18 they have higher priorities. But frankly, for the future of 19 our fuels program in California, I don't think there is any 20 more important issue. 21 If we don't make this program work, I don't think 22 we're going to get another chance. 23 Just a couple of parting thoughts from my 24 perspective. One is, certainly, I hope the message that 25 you're hearing from the presentations by your staff and from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 other comments, to stay the course. Don't pull the rug out 2 from under us at the last minute on a program that cost this 3 much money, that we've invested this much time and effort 4 in. If you talk about regulatory arbitrariness, that would 5 be it. I think we would really do a disservice to both the 6 regulatory community and air quality in California. 7 Secondly, consider allocating more dollars for 8 public outreach. The public needs and demands a thorough 9 airing of the issues surrounding implementation of this 10 program. They need to be prepared for what's coming, and 11 they need to know what they're going to get from their 12 investment. And in California, which is probably the most 13 sophisticated media market in the country, we need to be 14 prepared to get the message out to people in a way that 15 they're willing to accept. 16 And finally, particularly in light of some of the 17 discussions recently of MTBE, and methanol, et cetera, I 18 think you need to e prepared to have a thorough airing of 19 some of the health issues. You've done a lot of homework in 20 that area. Don't sit on the sidelines and assume that, 21 because this is a federal issue right now, EPA's going to 22 address it and California doesn't need to. 23 Californians look to the Air Resources Board as 24 their expert on air quality and health-related issues, and 25 you need to weigh in, and this is the time to do it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 Thank you. 2 CHAIRMAN DUNLAP: Thank you very much, Carolyn. 3 Gerald Barnes who will be followed by Janet 4 Hathaway. 5 MR. BARNES: Thank you, Mr. Chairman and members 6 of the Board. Thank you for this opportunity to give you an 7 automaker's perspective on the test programs and the 8 Advisory Committee activities. 9 I think a little bit of history -- about late 10 summer of 1993, kind of an ad hoc group of automobile and 11 oil companies got together to review the transition to Phase 12 2 gasoline here in the State of California. 13 We recognized that many tests had been done, both 14 laboratory and vehicle tests on various elements of the 15 Phase 2 gasoline, and that these tests had indicated that 16 there were no major problems that would be experienced when 17 the transition was made. 18 But none of these laboratory or controlled tests 19 are really a substitute for a broad field test. And so, we 20 felt that that need was evident and that we needed to move 21 forward. 22 When we spoke about this with the Air Resources 23 Board staff, it turned out that there had been -- 24 coincidental with our discussions, internal to the staff -- 25 a similar set of discussions, and that led then to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 formation of the Advisory Committee and the various 2 subcommittees addressing this transition. 3 I think that we've identified a number of issues, 4 both those related to vehicle performance, like the 5 lubricity issue that Mr. Simeroth mentioned, corrosion, 6 materials compatibility, and so forth, as well as consumer 7 issues, like the reaction to the reduced energy content and 8 the impact on fuel economy, supply and demand, and so on. 9 And I believe that the activities of the various 10 subcommittees that are going forward will address those 11 concerns and will help us make that transition. 12 Mr. Simeroth mentioned two programs I'll briefly 13 describe. One was the General Motors bench test evaluation 14 of several fuels that are representative of the Phase 2 15 formulations we expect to find in the field. 16 Our focus in this series of bench tests is on the 17 relative differences and the impact of those gasolines and 18 current gasolines on plastics and elastomers that are found 19 in fuel systems. And we've identified essentially 20 representative materials of high-volume use in older and in 21 current and future vehicles to the extent we can, and are 22 going to include those then in our test programs in doing a 23 variety of physical and chemical tests on various samples 24 throughout the program. 25 I think the other test that Mr. Simeroth mentioned PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 was Ford Motor Company will investigate another aspect of 2 these newer gasolines, and that is the relative lubricity of 3 Phase 2 gasolines. They're going to evaluate this using a 4 comparative wear rate test with various metal on metal 5 surfaces. This is a critical design parameter for modern 6 fuel systems for such high tolerance components like fuel 7 injectors and for the high surface stress excesses 8 encountered in fuel pumps. 9 A test of these surrogate materials instead of 10 actual components means that in both cases an interpretation 11 will be needed to relate the test results to what we would 12 expect to find in the field. And that will be part of the 13 final report that we'll provide through the subcommittees. 14 Both organizations have started these test 15 processes and material samples have been obtained. Some of 16 the test fuels have already been delivered to the respective 17 test laboratories, and the others we expect to be there 18 shortly. 19 Our goal is to try and finalize these tests about 20 halfway through the vehicle test program so that the results 21 can be used as a guide in the evaluation of the vehicle 22 test. 23 Earlier, I alluded, I think, to the numbers of 24 tests that have been run. And literally, there have been 25 thousands of bench dynamometer and vehicle tests for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 reformulated gasoline and the Phase 2 gasolines. 2 We haven't seen major concerns, but I think the 3 efforts that are underway with the subcommittee test 4 programs and the educational efforts that are underway will 5 help make the transition to Phase 2 gasoline a smooth one, 6 and help us achieve the environmental benefits that Mr. 7 Lagarias so accurately described in his introduction. 8 Thank you. 9 CHAIRMAN DUNLAP: Thank you, Mr. Barnes. Ms. 10 Hathaway from Natural Resources Defense Council, who will be 11 followed by Mary Morgan from the Santa Fe Pacific Pipelines. 12 Good afternoon. 13 MS. HATHAWAY: Good afternoon. Thank you, 14 Chairman Dunlap. 15 And thanks very much for giving me the opportunity 16 to discuss with you the Advisory Committee's Public 17 Education Subcommittee. 18 Natural Resources Defense Council obviously agrees 19 with Ms. Green's point that environmental groups have a 20 responsibility here to work with the affected businesses in 21 implementing the best possible program for reformulated 22 gasoline, and we're taking that responsibility very 23 seriously. And among the things that we want to address to 24 the Board is a very real concern that the public may bolt 25 and may undermine programs simply because of the failure to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 convey the information that is available to technical 2 experts. 3 It's one of our concerns about how currently the 4 federal program is working out, that where the public has 5 not been included in a very detailed debate and discussion 6 about the benefits of the reformulated fuel, when the public 7 starts to see cost increases -- even relatively small cost 8 increases -- they can suddenly attribute any number of 9 problems -- headaches, dizziness, whatever they might have 10 otherwise experienced and never thought of fuels -- 11 suddenly, they're going to attribute that to a new fuel. 12 It's very, very dangerous for us to expect that 13 the public will understand that this is an essential 14 component of our compliance with the Clean Air Act unless we 15 explain that, and explain how beneficial it is and how cost- 16 effective it is. 17 It is the case that reformulated gasoline is going 18 to necessarily engender some debate. There will be those 19 who will want to see one form of oxygenate prevail over 20 another form of oxygenate. So, there's going to be many 21 different interests in a debate that occurs. But any effort 22 to try to stifle debate will be regarded as absolutely 23 unacceptable by the public. 24 I think that the more we foster discussion early 25 on, the more likely we'll have a very successful program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 So, the NRDC would very much encourage an opportunity to 2 actually expand the public education outreach opportunities 3 on reformulated gasoline. We believe that the Air Resources 4 Board has tremendous credibility in this area, and 5 information that is provided under the auspices of the Air 6 Resources Board and through information of technical experts 7 who are serving on this Advisory Committee will be very well 8 received by the public. 9 But, if we wait until there are people who have 10 questions, until there are people who attribute illnesses or 11 problems to a fuel and then try to respond, it will much 12 less likely that we'll be successful. 13 So, just to step back a second, one great thing 14 that has happened is the decision to hire a public relations 15 expert to help us work through this complicated business of 16 informing the public about a fuel, about its merits, about 17 its cost, without necessarily having a public that really 18 wants to hear a lot about fuels. 19 So, that takes us into a realm that most of us are 20 not familiar with. I'm an attorney. Many of the people 21 here are not public relations experts. It's very advisable 22 for us to start now talking to people who have helped to 23 generate campaigns to get information to the public. 24 So, I'm really pleased about that. However, the 25 budget for our consultant is extremely small in public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 relations terms I guess. And we're going to need to use 2 that very, very carefully in order to maximize our 3 opportunities. 4 Among the things we're going to need to do is 5 really take advantage of the expertise of the people who are 6 on the Advisory Committee. With 75 institutions represented 7 and very different experts at their facilities, we may be 8 able to really bring a lot of people to bear in answering 9 questions the public might have. 10 We're going to need to try to use what's called in 11 the business "free media." It's not really free, because it 12 requires people who have a lot of information and expertise 13 to make themselves available, but it certainly is a lot less 14 costly than to try to buy full page advertisements in the 15 New York Times or anything like that. 16 It consists of trying to get teams of people from 17 different perspectives -- maybe an environmental group 18 teamed up with some of the oil company representatives 19 teamed up with some of the engine manufacturers -- to go by 20 and visit editorial boards and explain what is the RFG 21 program, why is it there? What can it do? What does it 22 cost? Really give them all the information that we have 23 available to us. 24 It will be very important to make such people 25 available to talk shows; radio talk shows are not usually PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 something that people in the public arenas, official 2 governmental arenas, rely on. And yet, it's where a lot of 3 people get information. 4 So, it's a real opportunity for us. 5 We can write op eds together, and we need to do 6 that; letters to the editors. We're really going to have to 7 talk to the whole scale of people who write information that 8 the public reads. And because all these things are complex 9 and we really only have essentially less than a year to get 10 all this together, I just want to encourage, you know, 11 helping us as much as possible to maximize the resources for 12 public education. 13 I truly believe that without the reformulated 14 gasoline program going forward successfully, the other very 15 essential programs that are soon to also be deployed by the 16 Air Resources Board will be in jeopardy. And I think that 17 would be most unfortunate for us all, and NRDC is certainly 18 committed to doing our utmost to make whatever resources we 19 have available to make this a success. 20 So, I wanted to thank you for, first, the program; 21 and also this very great opportunity to work together with 22 industry and all of the officials that care to see this be a 23 success. 24 Thanks. 25 CHAIRMAN DUNLAP: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 Mary Morgan, followed by Jan Speelman. 2 Good afternoon. 3 MS. MORGAN: Good afternoon, Chairman Dunlap and 4 members of the Board. 5 I'm Mary Morgan. I'm the Director of Products 6 Movement for Santa Fe Pacific Pipelines, and I want to thank 7 you for the opportunity to speak to you today. 8 First of all, just a little background. Santa Fe 9 Pacific is a common carrier, and we provide pipeline 10 transportation services as well as bulk terminal services 11 throughout the State of California. 12 So, we fill a little bit different niche than most 13 of the other people that are participating on the Advisory 14 Committee and the subcommittees. And we really appreciate 15 this opportunity to participate in both of these, and 16 particularly the Transition Subcommittee affords us a forum 17 where we can discuss many of the issues that are facing us, 18 and a chance to learn both from industry and from our 19 governmental partners in this effort. 20 And this cooperation is really greatly 21 appreciated, because when everyone's involved, we're able to 22 feel assured that we're going to be able to get the 23 information that we need to be prepared for the 24 implementation of CARB Phase 2 gasoline. 25 And another aspect is that then we're able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 benefit from learning about some of the issues that are 2 faced by people that are our customers, both refiners and 3 marketers, and the issues that are being faced again by our 4 partners in government, both in the ARB and the Energy 5 Commission. 6 Participating in the subcommittee is giving me the 7 feeling that we have a chance to resolve these issues before 8 the last minute and to give us a degree of confidence in the 9 experience that we're going to face. 10 Recently, we have participated in the 11 implementation of the federal reformulated gasoline program. 12 And I think some of the things we went through there is an 13 example of the things we would like to avoid in the 14 implementation of CARB reformulated gasoline. 15 In the federal experience, even after months and 16 months of hard work and painstaking efforts working with the 17 EPA and with people that were our customers, we made every 18 effort to understand the regulations and to be prepared to 19 comply with them. But even after the compliance date, we 20 still had a number of uncertainties as to whether or not 21 what we were doing really met with that the EPA's 22 expectations were. 23 We still don't know today. We won't know until we 24 get into perhaps a compliance or violation situation. 25 We probably -- I know in my office -- have about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 4,000 pages of regulations, information, questions and 2 answers from the EPA trying to just interpret what we're 3 trying to do. And that's been the biggest problem that we 4 had. It wasn't having the quality fuel on hand or being 5 able to move it, it was, you know, are we complying with 6 these millions of tiny details that they've required. 7 Another thing that we're very pleased about in the 8 participation of the subcommittee is that we've been given 9 an opportunity to provide information and education on the 10 distribution system. Again, if the fuel's there, we have to 11 have a way to get it to the places where people need it. 12 Without that, we can experience some other difficulties. 13 So, again, we've been able to give information on 14 how the distribution system works, what some of our 15 limitations and challenges are, and what some of the impacts 16 of these changing regulations are. 17 And one thing that we really appreciate has been 18 the interest of the ARB and the Energy Commission staff, 19 their willingness to become educated on these issues. I 20 think they really have shown a lot of enthusiasm for 21 learning about it, and we very much appreciate that, because 22 we don't want to be the link in the chain that isn't ready 23 when we're ready to bring out the CARB Phase 2 gasoline. We 24 want to be able to handle that. 25 And one other important role that we're able to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 play is that we provide information and education to many of 2 our customers who are not refiners, are not major companies. 3 We have at least 60 customers that are a part of the 4 distribution system in California -- various traders, 5 marketers. Some of them are very small companies that don't 6 have a governmental affairs department or something that 7 they can send people to these meetings and so on. 8 And so, in this category, they rely on us to 9 provide information on what the regulations are and what 10 they're going to have to do to comply. 11 And so, by participating on the subcommittee, we 12 can act as a conduit to get this information out to these 13 many companies that will be participating in the transition 14 and hopefully help them to prepare and be prepared for what 15 is going to be going on, because I think preparation plays a 16 real key role in keeping from overreacting or perhaps 17 panicking when there's some small glitch in things. And 18 we've seen what that can do to prices. 19 And so, we look forward also in the upcoming 20 months. We have some issues that we know that we will be 21 able to sort out through the subcommittee. We have issues 22 such as what will the specifications be for the product that 23 will be moving through the pipeline. We have what's known 24 as a fungible system, where the product from a major and a 25 small refiner can be mixed in the system. And so, there are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 some issues we need to work on there. 2 Things such as test methods, tolerances -- I know 3 we'll be working on those. Our quality oversight program 4 that helps to assure the ARB that the product moving through 5 the system is on spec, and that they have a way, you know, 6 to feel assured of that. 7 And so, we cooperate with them prior, you know, to 8 go over what our specifications are and to help them 9 understand our sampling and testing programs that we have. 10 Other things that we're working on are issues such 11 as ethanol blending, transmix blending, and what we can do 12 to handle, if we are faced with a situation where we have 13 some off-specification product, what are our avenues to 14 handle things like that? 15 And again, we're really confident that our work 16 that we're doing on the subcommittee is going to enhance our 17 preparedness for the implementation of CARB Phase 2 and help 18 make way for a smooth transition. 19 So, again, we're just very pleased to get to 20 participate and form relationships with other people in the 21 industry and in government. And I just want to thank you 22 for the opportunity to speak today. 23 CHAIRMAN DUNLAP: Thank you very much. Jan 24 Speelman, followed by Donald Bea. 25 MS. SPEELMAN: Good afternoon, Mr. Chairman and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 Board members. As you said, I'm Jan Speelman. I represent 2 the Automotive Trade Organizations of California, which is a 3 nonprofit trade association that represents the gas 4 stations; in other words, it's the people that meet the 5 street, where the product meets the public. It's where we 6 need to head off what happened in the federal RFG. 7 As Susan mentioned, the transition from a supply 8 perspective with federal RFG went very smoothly. However, 9 where it didn't go smoothly was after January 1 -- I'm sure 10 all of you have seen everything from Day One and all the way 11 till yesterday morning on "Good Morning America." There was 12 the health scare with MTBE. MTBE is used significantly in 13 California's gasoline. 14 And we need to be prepared on the Public Education 15 Committee to deal with that. And what I have found in 16 working with this committee is I've been able to share with 17 them what happened in the federal RFG transition through an 18 education -- or I should say a lack of education, and how 19 best to avoid that by getting information to those people on 20 the street. 21 The dealers who pump the product into the cars, 22 when federal RFG was introduced, were unable to answer the 23 concerns, answer the questions that were brought to them 24 from a performance standpoint, such as, "Am I going to have 25 lost gas mileage with this product?" PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 Now, many of the oil companies did provide flyers 2 or brochures to their dealers to try to instruct in what wa 3 happening. But these are small businesses that are overrun 4 with mail, with pieces of information. They're in highly 5 regulated industry, as all of you know. They are in the 6 repair, convenience store, and gasoline industry. They are 7 not able to take in all the information that they get in a 8 week. So, getting a piece of paper once or twice across 9 their desk that explains this new gasoline where in reality, 10 they still have to pump it, they still have to repair the 11 cars, they still have to sell the Twinkies; it's not sinking 12 in. 13 And so, I believe on the Public Education 14 Committee, what we need to do is have the backing of the 15 Board and those on the other committees to provide the 16 information in a number of different ways, not just in the 17 written word. We've got to get across, as Janet said 18 previously, in all the different media, and that's what we 19 hope to do on the Public Education. Everyone else has done 20 this. I'm going to do it also. 21 I'd like to congratulate the -- the subcommittees 22 themselves have worked beautifully together. There's been 23 an interchange of ideas and information that is unparalleled 24 in any committee work that I have ever been involved in. 25 And so, congratulations. A lot of that goes to the staff of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 CEC as well as ARB staff, because they have been willing to 2 bring us all together, to share the information back and 3 forth. 4 We've been able to take information from the 5 Performance Subcommittee, apply it in Transition, apply it 6 in Public Education, and back and forth. 7 In my particular case, I've been able to share 8 some information from the street, if you will, the dealers 9 on the street, with the Performance and with the Transition 10 Subcommittees that has been useful in them researching 11 additional issues. 12 So, I would like to congratulate them. And thank 13 you for this opportunity, and I hope that in all issues such 14 as this, you know, we can greet it with this kind of 15 cooperative effort in this task force or Advisory Committee 16 capacity. Thank you very much. 17 CHAIRMAN DUNLAP: Very good. Thank you. 18 Donald Bea -- can I have your name? Am I saying 19 it properly? 20 MR. BEA: Bea (pronouncing "bee") 21 CHAIRMAN DUNLAP: Bea? 22 MR. BEA: Bea. 23 CHAIRMAN DUNLAP: Okay. Followed by Mike 24 Kulakowski from Texaco. 25 MR. BEA: Mine's much easier than Mike's. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 CHAIRMAN DUNLAP: Yes. 2 (Laughter.) 3 CHAIRMAN DUNLAP: Welcome. 4 Is our court reporter okay? You're doing fine? 5 Okay. Thank you. 6 MR. BEA: Chairman Dunlap, ladies and gentlemen of 7 the Board, my name is Donald Bea. I'm the Gasoline Issue 8 Manager for Chevron USA Products Company. 9 I also head up a multifunctional team to ensure 10 compliance and a smooth transition to both the federal 11 reformulated gasoline programs and California Phase 2 12 gasoline program. 13 Chevron is the largest refiner in the State and 14 one of the major marketers. We are spending about $1 15 billion to upgrade our two California refineries to comply 16 with the Phase 2 California regulations. 17 While we've had some permitting difficulties at 18 our El Segundo refinery, we anticipate we'll have all 19 necessary units onstream in time to comply with the Phase 2 20 gasoline requirements. 21 As you know -- as you heard earlier today, 22 actually, several times, the federal RFG has been required 23 in Southern California since the December 1st. We have been 24 able to meet our RFG regulations, even though we had an 25 unplanned shutdown of our hydrocracker unit at our El PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 Segundo refinery in early January. 2 While it was possible for us to continue to 3 produce some RFG, it would have been difficult, if not 4 impossible, to produce California Phase 2 gasoline. This 5 argues for the need for a properly structured variance 6 provision that would provide the necessary flexibility to 7 get through a temporary major upset like our El Segundo 8 plant shutdown with minimum market disruption. 9 We urge CARB staff to move forward expeditiously 10 preparing a properly structured variance provision. We are 11 committed to ensuring a smooth introduction of the 12 California Phase 2 gasoline. 13 We, like others, have had a painful experience 14 with low aromatics diesel introduction and are not 15 interested in repeating that experience with Phase 2 16 gasoline. 17 We are pleased that CARB formed the RFG Advisory 18 Committee to address the introduction problems that could be 19 associated with a major compositional change in gasoline. 20 We're particularly pleased with the effort that 21 CARB and the Energy Commission has devoted to making the 22 Advisory Committee a real contributor to the smooth 23 transition to the Phase 2 gasoline program. 24 We have devoted our effort to the Performance 25 Subcommittee, since we are concerned that a small percentage PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 of older, high-mileage vehicles might experience 2 compatibility problems with Phase 2 gasoline. 3 We are pleased this issue is being addressed early 4 and not after the fact. We believe the program the 5 Performance Subcommittee has laid out will provide 6 significant input on whether there are compatibility or 7 other problems associated with Phase 2 gasoline. 8 However, we do have some concerns with the test 9 program as developed. We wish the test program used a 10 consistent conventional fuel rather than allowing 11 participants to use a normal supply. We're concerned this 12 might lead to a bias in results, and participants might be 13 able to easily determine which fuel they're using. 14 We're also concerned that a physical comparison 15 may occur, since the conventional fuel will not be a 16 consistent composition. 17 In addition, we wish the test was more 18 representative of the vehicle population as a whole, but we 19 realize this is difficult to do. 20 As Dean Simeroth mentioned earlier, we are testing 21 our own Phase 2 gasoline with a fleet of our employee 22 vehicles in our Richmond laboratory. This program has a 23 wider range of vehicle populations than the Performance 24 Subcommittee's program and could fill in some data gaps. 25 In closing, I would like to again compliment the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 Board on getting the Advisory Committee going, but don't 2 stop now. We have a hard year ahead of us. 3 Thank you. And I'd be pleased to answer any 4 questions if there are any. 5 CHAIRMAN DUNLAP: Thank you. I appreciate those 6 wise words. 7 Mr. Kulakowski from Texaco. Good afternoon. 8 MR. KULAKOWSKI: Good afternoon, Chairman Dunlap 9 and members of the Board. 10 My name is Mike Kulakowski. I'm a staff engineer 11 with Texaco Refining and Marketing, Incorporated. We're 12 headquartered in Los Angeles. 13 By way of personal background, I've been involved 14 with fuel reformulation at both the State and federal levels 15 for nearly ten years. I participated in the development of 16 the CARB Phase 2 gasoline regulations and I also represent 17 Texaco on the Performance and Compatibility Subcommittee. 18 Texaco has a long history of involvement in CARB's 19 fuel regulations. Just a couple of examples -- We were the 20 principal advocate of an alternative certification protocol 21 in your reformulated diesel regulation. It has proven to be 22 very, very effective. I understand that at least 80 percent 23 or, on average, 80 percent of the diesel fuel sold in the 24 State today is certified through that protocol. 25 We have very strongly supported CARB during the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 dark days of the diesel implementation in late 1993, and we 2 led the industry efforts to get a flexible predictive model, 3 which culminated in a rulemaking last year. 4 And we are participating in the Advisory Committee 5 activities, except for those of the Transition Subcommittee, 6 and we are finalizing a proposal to do some cooperative 7 fleet testing with the staff, using the fleet at our 8 Bakersfield refinery. 9 Texaco status on CARB Phase 2 compliance -- we 10 have two refineries in the State of California, one's in 11 Bakersfield, the other's in Los Angeles. We are making the 12 investments in our refinery system and expect to be on and 13 in compliance on March 1st. 14 We are also evaluating the benefits of the 15 recently adopted predictive model. And we believe that that 16 will add quite a bit of flexibility to the options to 17 complying with the Phase 2 rule. 18 Finally, we're remaining involved with CARB staff 19 and with the Western States Petroleum Association as we move 20 towards the final compliance date. 21 We've come a long ways since the very long hearing 22 in November of 1991, when these regulations were adopted. 23 But I'm really afraid that we may have only now gotten to 24 the steepest part of the hill. There are several remaining 25 issues that need to be addressed. And I'll expand on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 three of them briefly. 2 First, there's a number of issues related to how 3 the federal reformulated gasoline rules and the State 4 reformulated gasoline rules are enforced. Some of these may 5 seem like very small details, like the fact that the Federal 6 Government and the State recognize different test methods to 7 test a certain parameter of gasoline. But when you're in 8 the lucky situation that the refiners in Los Angeles are of 9 having to comply with both sets of regulations, these small 10 details can mean a lot and hamper flexibility. 11 We've been working cooperatively with the staff to 12 try to find ways out of these overlap situations. In fact, 13 we met with them on the 17th of this month. We will 14 continue to require the support of the staff and the Board 15 as they move forward with EPA to address these overlaps. 16 Second, we must complete the Advisory Committee 17 work and we must complete it in time to evaluate its results 18 and determine what type of implications they have for the 19 implementation of the gasoline regulations in March. 20 We don't really want any last minute surprises. 21 Third, and probably most important, to some extent 22 seconding what Chevron just said, we believe that there has 23 to be a workable variance procedure in place to ensure a 24 smooth transition of Phase 2 gasoline. 25 This variance procedure must be equitable and it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 must be structured so as not to reward those who have 2 delayed compliance with economic windfalls. 3 It must be universally applied to all fuel 4 producers and, third, it must include a variance fee to 5 prevent economic windfalls to those who have delayed 6 compliance. We believe that the cost estimates of 12 to 17 7 cents per gallon are a good starting point when we start 8 discussing variance fees. 9 In closing, we really appreciate the cooperative 10 attitude of the CARB staff in the Phase 2 implementation 11 issues and in the regulatory process over all. And we look 12 forward to continued cooperation and a smooth implementation 13 of the Phase 2 program. 14 Thank you. I'd be happy to answer any questions. 15 CHAIRMAN DUNLAP: Are there any questions at this 16 point? Thank you. 17 I guess that concludes the public testimony 18 portion. 19 For the record, I would like staff to summarize 20 any written comments we've received, if any. 21 MR. BOYD: Mr. Chairman, we have no written 22 comments. 23 CHAIRMAN DUNLAP: All right. Does staff have any 24 further comments or any response to anything that's been 25 said by the previous speakers? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 MS. BROWN: Only to say I think our work is cut 2 out for us. 3 CHAIRMAN DUNLAP: It seems that way. 4 MR. BOYD: Mr. Chairman, a couple of comments 5 following on the comments that many of the speakers made, 6 but Carolyn Green and Janet Hathaway stick in mind, as they 7 were early on the list, relative to public education. I 8 think we all recognize the value of that. 9 I think there were a lot of good ideas expressed. 10 I do believe that there were good suggestions about visiting 11 editorial boards and what have you. I do think we -- since 12 the public has little faith in any one of us any more, these 13 days, let's put it that way, I think any such visits have to 14 be a group, you know, representatives of a good cross- 15 section of folks, not just the regulators, or the regulated 16 community, or industry alone, or what have you. I know 17 that'll tax Ms. Hathaway and the environmental community. I 18 know they have a tough time, but I think they have to be 19 part of that team or we'll have a tough time being taken 20 seriously sometimes by some folks. 21 So, it's going to take this partnership teamwork 22 approach in so many of these areas. We've learned painful 23 lessons from the diesel experience. There are lessons being 24 learned every single day over the last few weeks with the 25 federal RFG situation. A lot of them had to do with, quote, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 marketing, public outreach, public information. And even 2 some of the defenses we've been using in California, I feel 3 fortunate that, although quite prepared and, in fact, armed 4 to the teeth after the ABC "Day One" program to respond to 5 Press inquiry, there was very little Press inquiry in 6 California, but there was extensive Press play on that 7 subject throughout the nation. 8 And it hasn't calmed down. Now, I have been 9 communicating with you Board members and writing about our 10 views of the safety and health of MTBE, and we are not going 11 to let EPA just try to convince us that it's good stuff. 12 Although, frankly, we believe that on our own; nonetheless, 13 they are in it pretty deep right now and in full retreat on 14 any comments they made in the past about the health effects 15 of MTBE, and are already indicating they will engaging in 16 new studies of the health effects to try to defend against 17 the outcry that we've heard in the country. And I think a 18 lot of it is predicated on lack of information or 19 misinformation. 20 Here in California, we have felt fairly 21 comfortable in protecting our public from any adverse health 22 effects of MTBE, should they exist, because we have Phase 2 23 vapor recovery throughout the State of California, both for 24 ozone and then ultimately for toxics protection. 25 However, in Milwaukee, which is going absolutely PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 crazy right now on this subject, I understand they have 2 Phase 2 vapor recovery, but it's not been marketed to their 3 public at all as a safety feature. Of course, they've had 4 some very significant price increases and some pretty wild 5 allegations about mechanical damage to engines and what have 6 you. 7 So, it's an issue totally out of control. But I 8 think it has a lot to do with how easy it is for rumor to 9 take over and misunderstanding. 10 So, I take to heart some of the comments that were 11 made today about the need for public education. And I just 12 want to ensure the Board that we'll look at that some more. 13 And, as Mr. Lagarias, the Chair of the Committee, knows, he 14 and I last time talked a lot about the "what if" strategies 15 that the group needs to provide, even though we feel 16 comfortable, the need for the Advisory Group to help us with 17 a lot of "what if" this, that, and the other happens. 18 And I know the group is working on that. So, I 19 would just close with those comments and observations. 20 CHAIRMAN DUNLAP: It sounds to me like there's a 21 lot of good work going on and we're starting relatively 22 early in the process. I'm certainly very interested in 23 knowing more about what's going on the public education 24 area. I took to heart Ms. Green's comments earlier about 25 the need to avail ourselves of every opportunity to get a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 message out in advance of there being some form of crisis or 2 misinformation. 3 So, I'm very interested in that. I'd also like to 4 commend the staff and those that have testified, served as 5 witnesses today, for a fine presentation. 6 Ms. Edgerton. 7 MS. EDGERTON: This is a question for Mr. Lagarias 8 and Mr. Calhoun with respect to the Advisory Committee. 9 The variance issue, as I understand it, which was 10 brought up by Chevron and by Texaco, is a result of the fact 11 that the California refineries do not intend to build excess 12 capacity to produce RFG 2, California reformulated gas 2. 13 And so, when those refineries have a difficulty, as they 14 will inevitably have, then there will be a shortage of fuel 15 and -- of RFG 2 and, therefore, there needs to be a 16 mechanism early on in place for ensuring that that be filled 17 in with even nonconforming fuel, but at a higher price. 18 Has your Committee been dealing with that? Is 19 that variance something that -- have I stated it correctly? 20 Where does that stand? 21 MR. JENNINGS: Could I bring up one issue? And 22 that is that Carolyn Green commented on the sensitivity to 23 the antitrust issues that we had to have in the Transition 24 Subcommittee. 25 And what we ended up doing is concluding that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 Transition Subcommittee can provide the very, very useful 2 role in coming up with as accurate as possible projections 3 of supply and demand, and listening to comments from the 4 subcommittee members about the accuracy of that data and how 5 to gather the data better, and to make that data available 6 to the industry and everybody else, and thinking that that 7 will enable the market to work as well as possible. And 8 that's the kind of activity that I think would be encouraged 9 under our antitrust laws. 10 There is a concern, however, of a group of 11 industry participants sitting down and talking about how 12 they are going to deal with possible supply shortages. And 13 because of that, it's our sense that, although the variance 14 issue is very, very important, that's not an issue that 15 should be specifically addressed by the Transition 16 Committee, and we should deal with that with more one-to-one 17 interactions with staff and with the Board. 18 MR. LAGARIAS: I'd like to add -- the variance is 19 a process for permitting an organization a temporary respite 20 to come into compliance. It's not an alternative instead 21 of. It's just strictly a temporary correction to address 22 malfunctions. So, as a strategy, I don't think it's an 23 issue that we address. We certainly have been, under Susan 24 Brown's Committee, looking at the availability and what 25 if we lose something, how sensitive is our supply to -- our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 distribution to our supply concerns? 2 MS. EDGERTON: Then perhaps I should ask the staff 3 whether the staff who works with the variance procedure, or 4 is there one that exists to deal with this? 5 As I understand what Chevron and Texaco and other 6 companies have talked about, they're not talking about 7 having something that makes it easy for them to be at odds. 8 They're talking about something with a big fee on it that 9 will be a penalty that no company in their right mind would 10 really want to do -- want to have to struggle with. 11 But it would be a level playing field, so 12 everybody knows what happens if you go down, or if you 13 maybe fall short, to not make as much effort as the other 14 person. What -- that makes sense to me. What is the status 15 of that? Maybe it doesn't make sense to anybody else, but 16 it makes sense to me. 17 MR. BOYD: Well, Ms. Edgerton, the staff is 18 cognizant of the problems that you raise and the staff is 19 working on guidance and guidelines. And there are plenty of 20 analogs in this area. I do have to make one observation and 21 an historical comment here, though, that today is maybe 22 close to a major turning point to have one of the major oil 23 companies ask publicly for a variance process for RFG. 24 Because, as many of you, and certainly as the staff knows, 25 in past years, after the development of this regulation and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 following on the heels of the diesel situation, the word 2 variance was -- well, I think it was a word that major oil 3 companies couldn't even utter. The word wouldn't cross 4 their lips. 5 Or, if they thought we were even considering the 6 idea of a variance, it was deemed to be putting the entire 7 regulation in jeopardy, and putting in jeopardy the 8 investment they made of so much money. 9 Now, this is a product of the diesel situation, 10 and the use of variances in the diesel situation, and the 11 fact that many majors felt that it was misused by the Air 12 Resources Board to ensure adequate supply to disbenefit to 13 the majors and the benefit of minors or small refiners. 14 Now, of course, staff doesn't agree with the fact that there 15 was any misuse. We think we were painfully judicious in the 16 use. But, nonetheless, that was used as a -- as a talking 17 point, or something to talk around, with regard to putting 18 in jeopardy the entire RFG program and the investment that 19 was being made. 20 So, however quietly, your staff historically 21 recognizes the value and validity of these things, and has 22 been considering it. We have tried to telegraph the message 23 that there'll be no wholesale issuance of variances to 24 people if they're -- you know, for any obvious avoidance of 25 having to do what they had to do. But there are always PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 unanticipated contingencies that have to be dealt with. 2 And, as I say, it's being worked on. 3 CHAIRMAN DUNLAP: Mr. Boyd, as this issue 4 develops, and as you become more clear as to what the 5 options are, would you find the proper way to inform us on 6 the Board as to options and where we could go with that? 7 MR. BOYD: Be glad to. 8 CHAIRMAN DUNLAP: Okay. I think that'll hold us 9 for now. 10 Supervisor Vagim. 11 SUPERVISOR VAGIM: Thank you, Mr. Chairman. 12 The issue of the consultant. I heard an utterance 13 here about hiring a consultant to bring this all together 14 and tell the public how great this is going to be. 15 Is there anything laid out in the specs; RFP is 16 out? 17 MR. FRIESEN: Yes. The RFP was sent out and we 18 actually had the bid openings, and have made a 19 recommendation on the selection of a contractor. We're just 20 in the final stages now of completing the contract. We 21 expect to have the consultant -- and the consultant that was 22 chosen was Novak Communications -- on board about the middle 23 of March. 24 SUPERVISOR VAGIM: And the RFP had a lot of 25 respondents? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 MR. FRIESEN: Yes. We had eight respondents. 2 SUPERVISOR VAGIM: And it asked for a complete PR 3 campaign, or was the RFP very deliberate on -- 4 MR. FRIESEN: The RFP is, as was mentioned by some 5 of the testimony, is not a lot of money. It's for a hundred 6 thousand dollars. And what we're hoping, at least 7 initially, to do is to get some expert advice and some 8 consultation as we develop strategy for reaching out. 9 We believe that there'll be a lot more financial 10 needs as we go down the road, as we identify specific things 11 we need to do, programs that we need to implement. And 12 we've been given some indication by some of the members that 13 some of the companies are willing to help participate in 14 that effort. 15 MR. BOYD: Supervisor Vagim, we were very 16 deliberate in seeking a consultant only to give advice and 17 counsel and guidance to the staff, to the committee, and not 18 to conduct the campaign. 19 SUPERVISOR VAGIM: Well, that's good. Because my 20 next question was going to be, I hope the consultant has 21 some ideas of who, first of all, is sitting on this side of 22 the dais. And all of a sudden PR campaigns spring up in our 23 communities, and we know nothing about it. It would be 24 interesting to know that beforehand. 25 Number two, the price or cost per gallon, is the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 federal Phase 1, which is in effect right now, about the 2 same price you're going to see on California Reform 2? 3 MR. SIMEROTH: Supervisor Vagim, in terms of the 4 price that was quoted, price differentials actually Ms. 5 Brown quoted, is not expected to be what the California 6 Phase 2 -- usually, we talk about it in terms of the cost of 7 production rather than the retail price, because the retail 8 price is influenced by so many different factors that it's 9 hard for us to project. And also, it tends to get us into 10 problems with the antitrust if we get to talking about 11 price. 12 SUPERVISOR VAGIM: Well, let me talk about price. 13 (Laughter.) 14 SUPERVISOR VAGIM: In Southern California right 15 now, you can find anywhere from $1.21 to $1.35 at the self- 16 pump place. 17 MR. SIMEROTH: Yes. 18 SUPERVISOR VAGIM: 87 octane. Reform 2 will be 19 higher? 20 MR. SIMEROTH: Cost of product of Reform 2 is 21 higher than the cost of production of EPA Phase 1. 22 SUPERVISOR VAGIM: Okay. Just on that, we cannot 23 project -- conclude where that's going to be. 24 Now, in the Central Valley, we kind of have a 25 windfall right now. All the fuel that would have gone to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 Southern California is flooding the rest of California. So 2 now, I pay $1.01 a gallon. 3 MR. SIMEROTH: It's a good price. 4 (Laughter.) 5 SUPERVISOR VAGIM: So, when Phase 2 hits, we're 6 going to have a huge differential. 7 So, I think you've got a -- from my perspective, 8 sitting in the middle of it, you've got a huge selling job 9 to do to folk, from a dollar-one to, you know, average 10 probably as high in some places as $1.10, as low as $1.01, 11 $1.03, $1.04, all over the place. If that thing jumps up to 12 whatever higher than what you're seeing in Southern 13 California for fed Phase 1, I may be out of town. 14 (Laughter.) 15 MR. JENNINGS: It's important to remember that the 16 Phase 2 gasoline regulation applies statewide. 17 There will be -- 18 SUPERVISOR VAGIM: Yeah, I'll tell the folks 19 paying that at the pump, you just paid 15 cents more a 20 gallon for your gas because. We're going to have a harder 21 thing to sell to people that have that big a differential 22 than the folk that are already paying $1.26, $1.35. 23 MS. BROWN: I just wanted to add that I think that 24 most of us on the committees are aware of the -- that there 25 will be an increase in price, because the Phase 2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 reformulated fuel is costlier to produce. It is going to be 2 introduced statewide. The numbers I cited were comparing -- 3 we had anticipated a nickel a gallon increase, for example, 4 in the federal RFG that didn't materialize, because market 5 conditions dampened the price, and there was an oversupply 6 of EPA Phase 1 gasoline nationwide, because -- largely 7 because 28 counties nationwide opted out. And there was 8 actually overproduction of it. So, we had only a one or two 9 cent per gallon different on the wholesale price between Los 10 Angeles and conventional oxygenated in Northern California. 11 The situation will be different next year, because 12 we have a statewide regulation, a statewide requirement that 13 all the fuel be reformulated. 14 And part of the activities of Ron Friesen's Public 15 Education Outreach is to inform the public that the fuel 16 will be costlier, but the benefits are significant in terms 17 of public health and air quality. 18 That's the challenge I think we face, is to get 19 that word out, because you're talking about 23 million 20 motorists that are going to be paying more for gasoline. 21 CHAIRMAN DUNLAP: If I might interject a point. I 22 think you raised some very valid and important points. It's 23 something that the Board should watch very closely. I would 24 rather avoid speculating on potential price increases and, 25 you know, how people might react to that. And I'd rather PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 focus on the fact that we, the Board, has been given some 2 valuable information. 3 We've heard about some committees and the very 4 good work that's going on, and we've heard some people that 5 have some expertise in this area present to us. I think 6 we've asked Mr. Boyd to get back and provide us with regular 7 updates. He's made a commitment to do that. 8 I would rather watch this closely. And, 9 Supervisor Vagim, it would give me great pleasure to have 10 you involved in tracking that in step with me and our 11 colleagues on the Board to make sure that we get a chance to 12 get those issues of import considered early. 13 And I certainly am sensitive to those issues. But 14 I'd like to avoid speculating because, you know, in the role 15 we play, we have to be a bit careful and sensitive to that. 16 Any other questions or comments of staff or our 17 presenters today? 18 Okay. Mr. Boyd, I would like to sit down with you 19 and go over a regularly reporting schedule so that we can 20 make sure we're informed and perhaps more frequently than 21 anticipated earlier. 22 MR. BOYD: Be glad to. 23 CHAIRMAN DUNLAP: Okay. Are there any further 24 items that we need to discuss today, or you suggest that we 25 deal with today? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 MR. BOYD: Mr. Chairman, there's no further 2 business from the staff to the Board. 3 CHAIRMAN DUNLAP: Okay. With that, the February 4 meeting of the California Air Resources Board will stand 5 adjourned. 6 (Thereupon, the meeting was adjourned 7 at 3:45 p.m.) 8 --o0o-- 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 CERTIFICATE OF SHORTHAND REPORTER I, Nadine J. Parks, a shorthand reporter of the State of California, do hereby certify that I am a disinterested person herein; that the foregoing meeting was reported by me in shorthand writing, and thereafter transcribed into typewriting. I further certify that I am not of counsel or attorney for any of the parties to said meeting, nor am I interested in the outcome of said meeting. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of March, 1995. Nadine J. Parks Shorthand Reporter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 Please select one of the following: A ... July 21-22,1994 Part 1 B ... July 21-22,1994 Part 2 C ... August 5, 1994 D ... November 9, 1994 E ... November 10, 1994 F ... November 15, 1994 G ... November 29, 1994 H ... December 9, 1994 I ... December 22, 1994 J ... January 26, 1995 K ... February 23, 1995 L ... March 23, 1995 M ... 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