1 MEETING 2 BEFORE THE 3 CALIFORNIA AIR RESOURCES BOARD 4 5 6 7 8 9 10 BOARD ROOM 11 24580 SILVER CLOUD COURT 12 MONTEREY, CALIFORNIA 13 14 15 16 17 18 19 THURSDAY, OCTOBER 25, 2001 20 9:00 A.M. 21 22 23 24 Janet H. Nicol Certified Shorthand Reporter 25 License Number 9764 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii 1 APPEARANCES 2 MEMBERS PRESENT: 3 Alan C. Lloyd, Ph.D., Chairman Joseph C. Calhoun 4 Dee Dee D'Adamo Mark DeSaulnier 5 C. Hugh Friedman William F. Friedman, MD 6 Matt McKinnon Barbara Patrick 7 Barbara Riordan 8 STAFF: 9 Manjit Ahuja, Manager, Emission Control Technology Section 10 Richard Corey, Chief, Research and Economics Studies Branch Michael Kenny, Executive Director 11 Tom Cackette, Chief Deputy Executive Officer Chris Halm, Air Pollution Specialist 12 Diane Johnston, Senior Staff Counsel Bill Loscutoff, Chief, Monitoring and Laboratory Division 13 Laura McKenney, Manager, Vapor Recovery Certification Section 14 Rob Oglesby, Legislative Director Mike Scheible, Deputy Executive Officer 15 Kathleen Tschogl, Ombudsman Lynn Terry, Deputy Executive Officer 16 Greg Ushijima, Air Resources Engineer Richard Vincent, Research Division 17 Kathleen Walsh, General Counsel 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii 1 INDEX 2 PAGE Proceedings 1 3 Call to Order 1 4 Pledge of Allegiance 1 5 Roll Call 1 6 Opening Remarks by Chairman Lloyd 2 7 Remarks by Douglas Quetin, Monterey Bay APCD 2 8 AGENDA ITEMS: 9 1-8-1 Public Hearing to Consider Amendments 10 Adopting More Stringent Emission Standards for 2007 and Subsequent Model Year New 11 Heavy-Duty Diesel Engines 12 Introductory Remarks by Chairman Lloyd 5 13 Staff Presentation Mike Kenny 6 14 Greg Ushijima 7 Kathleen Tschogl 20 15 Public Comments 16 Jed Mandel 23 John Duerr 50 17 Bob Jorgensen 63 Richard Burton 71 18 Louis Browning 75 Paul Weubben 77 19 Question/Comments 85 20 Vote 85 21 --oOo-- 22 01-8-2 Public Meeting to Consider Innovative Clean Air Technology Grants 23 Introductory Remarks by Chairman Lloyd 86 24 (continued) 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv 1 INDEX (continued) 2 PAGE Staff Presentation 3 Mike Kenny 86 Richard Vincent 87 4 Question/Comments 93 5 Vote 96 6 --oOo-- 7 01-8-3 Public Hearing to Consider Amendments to Air Toxics Hot Spots Fee Regulation for 8 Fiscal Year 2001-2002 9 Introductory Remarks by Chairman Lloyd 97 10 Staff Presentation Mike Kenny 97 11 Chris Halm 98 12 Question/Comments 103 13 Vote 106 14 --oOo-- 15 01-8-4 Public Hearing to Consider Adoption and Amendment to the Vapor Recovery Certification 16 and Test Procedure Regulations 17 Introductory Remarks by Chairman Lloyd 106 18 Staff Presentation Mike Kenny 107 19 Kathleen Tschogl 109 Laura McKenney 111 20 Public Comments 21 Rosa Salcedo 126 22 Questions/Comments 128 23 Vote 130 24 --oOo-- (continued) 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v 1 INDEX (continued) 2 PAGE 3 01-8-5 Public Meeting to Consider a Review of Air Quality Legislation for 2001 4 Introductory Remarks by Chairman Lloyd 130 5 Staff Presentation 6 Mike Kenny 130 Rob Oglesby 131 7 Questions/Comments 142 8 9 Open Session to Provide an Opportunity for Members 144 of the Public to Address the Board 10 Adjournment 144 11 Certificate of Reporter 145 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 CHAIRMAN LLOYD: Good morning. 3 Let's get started early and spend time in this 4 beautiful area and spend some time outside. 5 The October 25th, 2001, public meeting of the Air 6 Resources Board will now come to order. 7 Mr. DeSaulnier, will you please lead us in the 8 Pledge of Allegiance. 9 (Pledge of Allegiance recited.) 10 CHAIRMAN LLOYD: Will the clerk of the board 11 please call the roll. 12 MS. KAVAN: Dr. Burke. 13 (No response.) 14 MS. KAVAN: Mr. Calhoun. 15 (No response.) 16 MS. KAVAN: Ms. D'Adamo. 17 BOARD MEMBER D'ADAMO: Here. 18 MS. KAVAN: Supervisor DeSaulnier. 19 BOARD MEMBER DeSAULNIER: Here. 20 MS. KAVAN: Professor Friedman. 21 BOARD MEMBER HUGH FRIEDMAN: Here. 22 MS. KAVAN: Dr. Friedman. 23 BOARD MEMBER WILLIAM FRIEDMAN: Here. 24 MS. KAVAN: Mr. McKinnon. 25 BOARD MEMBER McKINNON: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 MS. KAVAN: Supervisor Patrick. 2 BOARD MEMBER PATRICK: Here. 3 MS. KAVAN: Mrs. Riordan. 4 BOARD MEMBER RIORDAN: Here. 5 MS. KAVAN: Supervisor Roberts. 6 (No response.) 7 MS. KAVAN: Chairman Lloyd. 8 CHAIRMAN LLOYD: Here. 9 Thank you very much. 10 Though we met in Monterey before, this is our 11 first opportunity to meet at the district office, and I hope 12 it won't be the last. 13 Before I start with some of the comments, I'd like 14 to first of all thank Mr. Quetin for his hospitality, for 15 hosting us here, and I'd like to ask that you make some 16 comments. 17 MR. QUETIN: Good morning. I'm Douglas Quetin, 18 the air pollution control officer with the Monterey Bay 19 Unified Air Pollution Control District. 20 Chairman Lloyd, board members, and Mike Kenny and 21 his staff, on behalf of our district board, and especially 22 our chairman, Tony Gualtieri, I'd like to welcome you to our 23 agency and the North Central Coast Air Basin. 24 Although all local districts are grateful for your 25 work, we are especially so. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 In great part because of your efforts to 2 dramatically reduce the motor vehicle emissions and consumer 3 product emissions, and also providing leadership in the 4 stationary source control program, we attained the federal 5 ozone standard in 1990, and are currently non-attainment 6 transitional for the California ozone standard. 7 We've certainly had a successful partnership over 8 the last 30 years. 9 We look forward to the next 30 when we'll be 10 addressing the continuing criteria pollutant emissions 11 control work, incentive programs, energy, fiscal issues, 12 population growth, transport, which is always large on our 13 minds here, environmental justice, transportation issues and 14 toxics. 15 And we're honored to have you here. 16 Thank you. 17 CHAIRMAN LLOYD: Thank you very much. Appreciate 18 it. 19 We have a brief agenda today, and expect to be 20 finished by midafternoon, we hope. We've made predictions 21 before, but haven't come true. 22 To keep things moving, we are going to work 23 through the lunch hour. We'll have lunch brought in. 24 And if we finish before that, so much the better. 25 I think it will also enable board members to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 their flights. 2 There is another motive for doing this, because in 3 fact next Thursday we have an evening meeting at 6:00 4 o'clock in Oakland to consider the Bay Area plan. And I 5 know we're looking forward, maybe that's an exaggeration, 6 but we will be in Oakland next week to consider the Bay Area 7 plan. 8 And want to compliment our colleague, Supervisor 9 DeSaulnier, for the board passing on the plan yesterday. I 10 guess we will see when we open the box what it looks like 11 next week. 12 We will at that time we expect a pretty extensive 13 meeting and the board indeed will have a chance to 14 participate. 15 And then any of you here, since obviously there is 16 an interest in Monterey, we clearly welcome your 17 participation. 18 Then after that also in a couple of weeks we have 19 another regular board meeting, November 15th and 16th in 20 Sacramento. 21 So we in fact have a couple of busy weeks ahead 22 and this fulfills the staff's promise to the board that we 23 may start out the year at a leisurely pace, but by the end 24 of the year we'll be working pretty hard. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 MR. KENNY: You're welcome. 2 CHAIRMAN LLOYD: With that, we'll get on with the 3 first item. 4 I'd like to remind anybody in the audience who 5 wishes to testify to today's agenda to please sign up with 6 the clerk of the board. 7 Also, if you have written statements, please give 8 30 copies, if you can, to the clerk of the board. 9 The first item today is agenda item 01-8-1, 10 proposed emission standards for 2007 and subsequent model 11 year heavy-duty diesel engines. 12 As you know, heavy-duty vehicles play a key role 13 in the transportation of goods and materials, and are 14 vitally important to the economy, particularly here in 15 California. 16 Yet controlling emissions from heavy-duty vehicles 17 is also vitally important from a public health perspective. 18 Despite their relatively small population, diesel 19 trucks contribute significantly to statewide emissions of 20 oxides of nitrogen and particulate matter. 21 In 2010, heavy-duty diesel vehicles are projected 22 to account for approximately 30 percent and 50 percent -- 15 23 percent respectively of on-road mobile source and NOx and 24 particulate emissions. 25 Besides the adverse health effects of ozone and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 particulate, diesel PM has also been identified as a toxic 2 air contaminant. 3 The proposal before us today would reduce 4 emissions from diesel trucks by harmonizing our future-year 5 standards with rulemaking recently finalized by EPA. 6 And I see in the audience, I would recognize after 7 the last board meeting, we appreciate the work with EMA. 8 Mr. Kenny, will you please make the staff 9 presentation. 10 MR. KENNY: Thank you, Mr. Chairman and members of 11 the board. 12 In recent years, significant attention has been 13 focused on aftertreatment-based emission control systems. 14 Consequently, particulate matter filters are now available 15 through diesel particulate matter, while aftertreatment 16 systems for NOx are also rapidly developing. 17 These aftertreatment systems offer the opportunity 18 to achieve substantial emission reductions from heavy-duty 19 diesel engines. 20 CHAIRMAN LLOYD: Is your microphone on, Mike? 21 MR. KENNY: I don't think it's working. I think I 22 have a habit of breaking these. 23 As a result of these developments, the US EPA, as 24 you mentioned, Dr. Lloyd, adopted a rule in January 2001 25 that included the first heavy-duty diesel emission standards PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 based on the capability of aftertreatment technologies. 2 These emission standards require significant 3 reductions of NOx, non-methane hydrocarbons, and particulate 4 matter in engines for 2007 and subsequent model year 5 heavy-duty diesel engines. 6 In California alone, this action will reduce 7 statewide emissions by over 48 tons per day of NOx, ten and 8 a half per day of non-methane hydrocarbons, and almost three 9 tons per day of particulate matter by 2010. 10 The proposal before the board today contains 11 amendments to the existing California emission standards and 12 test procedures that, if adopted, will ensure uniform 13 requirements for heavy-duty diesel engines nationwide. 14 I would now like to turn the presentation over to 15 Greg Ushijima, who will make the staff's findings, and also 16 present the staff's recommendations. 17 MR. USHIJIMA: We're waiting for the -- 18 MR. KENNY: A few minor technical glitches. 19 BOARD MEMBER RIORDAN: There's something in front 20 of us at the dias that says we should leave our microphones 21 on. I don't know if that ensures some capability of sound. 22 You may want to turn your microphones on. I'm not sure how 23 the system works. It may help. 24 MR. USHIJIMA: I think we're ready. 25 Thank you, Mr. Kenny, Chairman Lloyd and members PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 of the board. My name is Gregory Ushijima, and it's my 2 pleasure to be here this morning to present the staff 3 proposal for reduced emission standards for 2007 and 4 subsequent model year new heavy-duty diesel engines. 5 Today's presentation will include the following. 6 Background to the proposal; elements of the 7 proposal itself; comparison of the proposal to the federal 8 rule; emission impacts; costs of the proposal; remaining 9 issues of concern; and conclusions and recommendations. 10 Heavy-duty diesel engines are the primary choice 11 of truckers to transport goods and material throughout the 12 United States, due to its durability and fuel efficiency of 13 the engines. Consequently they are vital to the nation's 14 economy. 15 However, when compared to passenger cars, 16 heavy-duty diesel engines have significantly lagged behind 17 in the use of aftertreatment-based emission control systems. 18 Although these types of engines have been around 19 for many years, only recently has there been significant 20 development in aftertreatment-based emissions control 21 systems. 22 Based on many in-use applications and 23 demonstration projects, we know that PM filters are now 24 available for use, and based on current research and 25 development information, we know that NOx aftertreatment is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 rapidly developing. 2 This chart will show how the heavy-duty diesel NOx 3 and PM emission standards have become increasingly more 4 stringent for the past few years. 5 The first pair of bars shows the NOx and PM 6 emission standards prior to 1990. During this time the ARB 7 was in the very early stages of regulating heavy-duty diesel 8 engines. Complying with these emission standards required 9 only relatively minor modifications. 10 Over the next 16 years, tougher NOx and PM 11 standards have been adopted. 12 By 2002, the NOx emission standard has been 13 reduced by over 60 percent, and the PM emission standard by 14 over 80 percent, compared to the emission standards in 1990. 15 Complying with the 2002 through 2006 emission 16 standards will mostly require further engine modification 17 requirements and likely not require aftertreatment emission 18 control systems. 19 Despite this progress, however, heavy-duty diesel 20 vehicles are still expected to contribute substantially to 21 California's emission inventory. 22 Although heavy-duty diesel vehicles account for a 23 very small percentage of the total vehicle and equipment 24 population in California, approximately one percent, shown 25 in red on the top pie chart, they account for a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 significantly large portion of the projected mobile source 2 NOx and PM emissions in 2010, 28 percent and 16 percent, 3 respectively, again shown in red on the bottom two pie 4 charts. 5 Recognizing the emissions contribution from 6 heavy-duty diesel engines and the current development and 7 availability status of NOx and PM aftertreatment-based 8 emission control systems, the US Environmental Protection 9 Agency recently adopted regulations that reduced emission 10 standards for 2007 and subsequent model year heavy-duty 11 engines. 12 The adopted regulations reduce the NOx emission 13 standard by 90 percent, non-methane hydrocarbon emission 14 standards by 72 percent, and PM emission standards by 90 15 percent. 16 In addition, the US EPA rule also includes 17 revisions to previously adopted supplemental test 18 procedures. These supplemental test procedures will be 19 discussed later in my presentation. 20 With that background in mind, the following slides 21 outline staff's proposal. 22 The staff's proposal applies to both medium-duty 23 and heavy-duty diesel engines for 2007 and subsequent model 24 years. 25 Medium-duty engines are used in vehicles with a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 gross vehicle weight rating of 8501 pounds and greater, up 2 to 14,000 pounds. These engines are used in pickup type 3 vehicles for a variety of applications, such as personal 4 use, commercial use, and any other applications that require 5 towing of extra cargo. 6 Heavy-duty engines are used in vehicles with a 7 gross vehicle weight rating of greater than 14,000 pounds. 8 These engines are typically used in a variety of vehicles, 9 such as intercity delivery trucks, tow trucks, school buses, 10 motorhomes and long-haul trucks. 11 The staff proposal includes three main components. 12 The first component is the reduced emission 13 standards and the phase-in of those standards. The phase-in 14 period begins with the 2007 model year and is fully phased 15 in by the 2010 models. 16 The second component is a revision to the 17 supplemental certification test procedures that were adopted 18 last year. These revisions address compliance concerns with 19 the likely use of aftertreatment-based emission control 20 systems. 21 The third component covers a variety of other 22 provisions to address compliance issues and measuring 23 accuracy to the reduced emission standards. 24 The following slides will discuss components of 25 the proposal in greater detail. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 The reduced emission standards are NOx, NMHC and 2 PM emissions for medium- and heavy-duty diesel engines. 3 The proposal reduces the NOx emission standards 4 from 2.0 grams per brake horsepower hour to 0.2 grams per 5 brake horsepower hour; and NMHC emission standards from 0.5 6 grams per brake horsepower hour to 0.14 grams per brake 7 horsepower hour; and the PM emission standards from 0.1 8 grams per brake horsepower hour to 0.01 grams per brake 9 horsepower hour. 10 These reductions are put into approximately 90 11 percent, 72 percent and 90 percent respectively. 12 In addition to the reduced emission standards, 13 control of crankcase emissions from all diesel engines will 14 also be required. 15 The heavy-duty federal test procedure has been the 16 traditional test procedure used by the US EPA and ARB since 17 1984. This procedure was initially developed using the 18 driving cycle representative of most, but not all, driving 19 conditions at the time. 20 In an effort to account for virtually all driving 21 conditions, the US EPA's 2007 requirements also include a 22 not to exceed and the Euro III European stationary cycle 23 test. 24 The staff's proposal contains these requirements 25 as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 The NTE is a test for operation under taxing 2 conditions, such as highway conditions. This test is 3 applicable to a wide range of temperature and altitude 4 operating conditions. 5 The ESC test is a test for operation under steady 6 state or constant speed conditions. This test runs through 7 13 separate steady state operating modes to verify cruise 8 emissions of extended highway operating conditions. 9 In addition to the stringent emission standards 10 and test procedures, several other provisions are included 11 in staff's proposal. 12 An engine manufacturer may include the federal 13 banking and trading program, rather than allowing the use of 14 ADT credits for vehicles sold within California. These 15 credits may also be used for vehicles sold both in 16 California and nationwide. This ensures that compliance 17 revisions and flexibility are harmonized throughout the 18 nation. 19 Revisions to the exhaust gas sampling and 20 analyzing system specifications are also proposed. 21 Identical to the US EPA rule, revisions will allow for 22 improved emission measurement accuracy and precision. 23 Finally, emission standards are not applicable to 24 urban buses. Urban buses have separate requirements that 25 have already been adopted. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 I will now discuss differences and similarities 2 between today's proposal and the adopted 2007 federal rule. 3 Although California has requirements more 4 stringent than those required federally, the ARB has 5 committed to the harmonization of heavy-duty diesel engines 6 emission standards with US EPA and the engine manufacturers. 7 In the spirit of harmonization, staff's proposal 8 is based on the 2007 federal rule, and thus is virtually 9 identical to that rule. 10 For example, applicability. With the exception of 11 urban transit buses, the proposal is identical to the 2007 12 federal rule in that it applies to both medium-duty and 13 heavy-duty diesel engines with gross vehicle weight ratings 14 of 8501 pounds and greater. 15 The proposal also contains identical compliance 16 options. Consistent with the 2007 federal rule, the 17 proposal allows manufacturers to create in-use emission 18 credits to comply with the emission standards. 19 Further, manufacturers will be allowed to utilize 20 the federal ABT program rather than the California-only 21 program. 22 The proposed test procedures are also identical. 23 This would include the heavy-duty federal test procedures as 24 well as the supplemental test procedures. 25 With regard to differences with the 2007 federal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 rule, the proposed requirements would not apply to urban 2 transit buses, as previously mentioned. 3 The other difference is that no in-use fuel 4 requirements are included by staff in the proposal. In-use 5 fuel requirements are being developed separately by staff 6 and are expected to be brought before this board for 7 consideration next year. 8 I'll now discuss the emission impacts of the 9 proposal. 10 This graph displays current projections of NOx, HC 11 and PM from medium-duty and heavy-duty diesel engines in 12 California between 2000 and 2020. 13 NOx is shown in red, HC is shown in yellow, and PM 14 is shown in green. 15 As you can see from previous regulatory actions, 16 NOx, HC and PM emission from these vehicles are expected to 17 decline from 592, 34 and 19 tons per day in 2000; to 347, 20 18 and 12 tons per day in 2020, respectively. 19 However, when you include the reductions due to 20 staff's proposal, NOx, HC and PM emissions in 2020 are 21 further reduced to 133, 12, and 4 tons per day, 22 respectively. 23 In 2010 these reductions are approximately 49 tons 24 per day of NOx, two tons per day of HC and three tons per 25 day of PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 These 2010 reductions in particular will help us 2 attain our air quality goals outlined in the state 3 implementation plan. 4 For individual basins in 2010, the staff's 5 proposal is expected to achieve reductions shown here. 6 Most notable are the significant NOx reductions of 7 24 and seven and a half tons per day in the South Coast and 8 San Joaquin Valley air basins, respectively. 9 Now I'll discuss costs associated with the 10 proposal with the proposed reduced emission standards. 11 Since the requirements included in the proposal 12 are identical to those in the 2007 federal rule, we based 13 our costs on US EPA estimates. Identical to the US EPA, we 14 made the assumption that aftertreatment-based emission 15 control systems will be installed on vehicles. 16 The average total lifetime cost of compliance 17 presented in this chart are approximately $4,200. This cost 18 is about 2,000 lower for smaller trucks, about 2,000 higher 19 for larger trucks. 20 With these costs, the cost effectiveness for NOx 21 plus HC are only pennies per pound, and for PM a little more 22 than $3 per pound. This compares very favorably to the cost 23 effectiveness of other recently adopted emission reduction 24 measures which can often exceed $5 per pound of NOx plus HC 25 reduced and $17 per pound of PM reduced. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 Next I'll discuss issues which concern engine 2 manufacturers, practicality, feasibility and implementation 3 concerns. 4 One issue of concern raised by industry is that 5 the proposed emission standards have not been demonstrated 6 to be technically feasible. 7 Some engine manufacturers have asserted that 8 technology expected to be necessary to comply with these 9 requirements will not be technically feasible in the 10 required time frame. 11 Specifically, the concern is based on 12 aftertreatment-based emission control technologies likely to 13 be needed to reduce NOx and PM emissions. 14 The two leading technologies likely to be used in 15 the proposed NOx emission standards are selected catalytic 16 reduction, or SCR, and NOx adsorbers. 17 SCR systems are currently in use in Europe for 18 some applications and have also been demonstrated in limited 19 use in this country. 20 Although some technical and practical issues 21 remain before it can be used in wide-scale applications, 22 tests have shown that SCR systems can reduce NOx emissions 23 by 70 percent. 24 For NOx adsorbers, the potential NOx reductions 25 are even higher, on the order of 90 percent. Research and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 demonstrations of NOx adsorber systems are ongoing and show 2 great promise. 3 With regard to PM, the most likely technology to 4 be used is a PM filter or trap. These devices are currently 5 in use and are being demonstrated worldwide in a variety of 6 applications. 7 Tests have shown PM reductions of 90 percent and 8 more. 9 Another issue of concern is that the proposal is 10 based on low sulfur diesel fuel requirements that have not 11 been adopted by the ARB. 12 Staff is currently conducting workshops to develop 13 California low sulfur diesel fuel specifications. 14 A proposal to adopt the California low sulfur 15 diesel fuel is expected to be presented before this board 16 for consideration next year. 17 However, it should be noted that even in the 18 absence of the California low sulfur diesel fuel 19 specifications, the federal low sulfur diesel fuel standards 20 will be in effect by 2006, thereby ensuring the required 21 fuel for any aftertreatment control systems. 22 In addition, the proposal does include test fuel 23 requirements to provide engine manufacturers guidance on 24 certification testing conditions. 25 The final issue of concern is that the transit bus PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 emission standards are not aligned with the emission 2 standards included in this proposal. 3 The revisions to the transit bus emission 4 standards were adopted by this board in February of 2000. 5 The adopted requirements included lower NMHC and 6 CO emission standards and a more aggressive phase-in of the 7 emission standards. 8 These tougher emission standards and phase-in 9 schedule are appropriate because urban buses are 10 particularly operated in highly populated areas, thereby 11 exposing the public to relatively high levels of emissions. 12 Thus, there would be an adverse impact if the 13 emission standards or phase-in schedule were relaxed. 14 Additionally, staff believes that there is 15 sufficient time for development and review of emission 16 control technology prior to implementation of the urban bus 17 standard that begins with the 2007 model year. 18 Finally, our conclusions and recommendations. 19 It is very important that California further 20 reduce emissions from heavy-duty diesel vehicles. Although 21 significant progress has been made over the past decade or 22 so to reduce diesel emissions, clearly there is a lot more 23 that can be done with the use of aftertreatment-based 24 emission control systems. 25 With few exceptions, the proposed requirements are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 identical to those of the federal 2007 rule. This means 2 that only one line of clean engines will be required for 3 engine manufacturers. 4 Additionally, the proposal is technologically 5 feasible and cost effective. 6 Therefore, we would recommend that the board 7 approve this proposal. 8 Thank you. This concludes my presentation. 9 CHAIRMAN LLOYD: Thank you very much. 10 Madam Ombudsman, would you describe the public 11 participation in the rulemaking process and observations you 12 might wish to make. 13 MS. TSCHOGL: Mr. Chairman and members of the 14 board, as you just heard, the amendments staff is proposing 15 simply align California heavy-duty diesel engine regulations 16 with those already adopted by the federal government. 17 Because the federal government has already gone 18 through the process of notifying the public, conduct 19 workshops, and adopt these regulations, staff felt that no 20 additional California-specific workshops were necessary. 21 They did send out a notice in June of this year 22 announcing their intent to modify the regulations and 23 solicit comment. 24 They also made themselves available to answer any 25 questions from stakeholders. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 On September 7th, staff announced this hearing and 2 made the staff report available to the public for formal 3 comments. These notices were sent to more than 850 people 4 representing industry, environmental organizations, and the 5 government. 6 Thank you. 7 CHAIRMAN LLOYD: Thank you very much. 8 The board members have any questions at this time? 9 Yes, Mr. Calhoun. 10 BOARD MEMBER CALHOUN: Mr. Ushijima, I think you 11 mentioned that the -- let me back up. 12 What we're doing here is attempting to harmonize 13 the state standards with the federal standards; is that 14 correct? 15 MR. USHIJIMA: Correct. 16 BOARD MEMBER CALHOUN: And the urban bus standards 17 that the board has adopted is somewhat different from these 18 standards or are they essentially the same? 19 MR. USHIJIMA: It's slightly lower. There's 20 slightly lower MHCN and CO standards. 21 BOARD MEMBER CALHOUN: More stringent? 22 MR. USHIJIMA: Yes, correct. 23 BOARD MEMBER CALHOUN: What is the effective date 24 of those standards? 25 MR. USHIJIMA: Those are effective in 2007. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 BOARD MEMBER CALHOUN: 2007. 2 MR. USHIJIMA: It's the same year, but it's 100 3 percent phase-in. 4 BOARD MEMBER CALHOUN: 100 percent. 5 MR. USHIJIMA: As opposed to the proposal is 6 requesting a 50 percent phase-in in 2007. 7 BOARD MEMBER CALHOUN: There's no phase-in, no 8 initial introduction of the urban bus standards prior to 9 2007? 10 MR. USHIJIMA: There is a slightly higher emission 11 level that's required in, I believe, 2004. 12 BOARD MEMBER CALHOUN: What about the fuel 13 specification for the standards for 2007, would it be the 14 same as the federal on the cert fuel? 15 MR. USHIJIMA: In our proposal? 16 BOARD MEMBER CALHOUN: Yes. 17 MR. USHIJIMA: Yes. It would be. It's the same 18 as federal requirements for certification test fuel. 19 BOARD MEMBER CALHOUN: We're certain at this point 20 of what our in-use fuel requirement might be? 21 MR. USHIJIMA: There may be slight changes in 22 other properties of the fuel, but the sulfur content is 23 going to be the same. 24 BOARD MEMBER CALHOUN: All right. Thank you. 25 CHAIRMAN LLOYD: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 There's no other questions from the board. 2 I'd like to call the first witnesses signed up, 3 and we have so far six signed up. 4 Jed Mandel, John Duerr, Bob Jorgensen, Richard 5 Burton, Louis Browning and Paul Weubben. 6 MR. MANDEL: Good morning, Mr. Chairman, board 7 members. My name is Jed Mandel. I'm here today on behalf 8 of the Engine Manufacturers' Association. 9 Among EMA members are the major manufacturers of 10 heavy-duty truck and bus engines covered in today's 11 proposal. 12 EMA strongly supports harmonization, locally, 13 nationally and internationally. 14 As such, EMA appreciates ARB's efforts to 15 harmonize California's emission standards for heavy-duty 16 on-highway engines with those to be effective nationwide in 17 2007. 18 Unfortunately, we're not as enthusiastic in our 19 support of the proposed harmonization as might be expected, 20 for several key reasons. 21 First, there are some crucial areas in which the 22 proposed ARB regulatory program differs from the EPA 23 program. If those areas are not adequately addressed, they 24 will create significant problems for California, as well as 25 for engine manufacturers and our customers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 Second, the ARB is proposing to harmonize with a 2 federal rule that has significant flaws and which in fact is 3 being challenged. 4 Among the provisions at issue are the feasibility 5 of the not-to-exceed provisions, the accuracy of the 6 measurement procedures, and the appropriateness of forced 7 averaging. 8 While we do support ARB's efforts to harmonize, it 9 would be disingenuous for EMA to support ARB's proposal for 10 2007, since we do not fully support and currently are 11 seeking changes to EPA's final 2007 rule. 12 As such, we urge the ARB to commit by regulatory 13 language, or by binding resolution, to fully harmonize its 14 requirements to be consistent with any changes that 15 ultimately might be implemented by EPA. 16 One significant area in which the two programs are 17 not currently harmonized is with respect to fuels. 18 While the staff report indicates that new diesel 19 fuel sulfur standards are scheduled for adoption next year, 20 we urge the board to formally recognize that the feasibility 21 of the engine emission standards proposed today are 22 contingent on the adoption of the 15 PPM, parts per million, 23 sulfur diesel fuel standard. 24 It is not possible to overstate the importance of 25 a 15 PPM cap on diesel fuel sulfur levels. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 Without ultra-low sulfur fuel, the standards 2 simply are not feasible. 3 We urge the board to take all steps necessary to 4 assure that the appropriate fuel is available before 2007 5 and to recognize that without the fuel the standards are not 6 feasible. 7 Another significant disharmony between the Air 8 Resources Board and EPA requirements for 2007 are in the 9 standards applicable to engines used in urban buses, a 10 favorite subject of this board, I trust. 11 The ARB rule requires all urban bus engines to 12 meet a NOx standard of two-tenths of a gram per brake 13 horsepower hour in 2007 and is not modified by the current 14 rulemaking proposal. 15 In contrast, the EPA rule phases in the new 16 heavy-duty on-highway NOx standard over a period of four 17 years, allowing manufacturers to certify to an average 18 compliance level for the first three years. 19 Under EPA's rule, the extremely stringent 20 heavy-duty on-highway engine standards being phased in 21 through 2010 will require NOx aftertreatment on all 22 heavy-duty engines in 2007, but will allow three additional 23 years for this technology to mature until a level of 24 efficiency is required. 25 As has been recognized by EPA, and as ARB is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 recognizing in today's proposal, 90 percent efficient NOx 2 aftertreatment is not technologically feasible until 2010. 3 It is not feasible any sooner for engines used in 4 urban buses. 5 And any thought that the extremely small urban bus 6 market in California can somehow independently support the 7 development of that technology by 2007 is unrealistic and 8 contrary to the facts. 9 If ARB holds to the 2007 and two-tenths gram NOx 10 requirement for urban buses, California will simply not have 11 engines, either diesel or CNG, for urban buses available to 12 meet the diesel fuel or alternative fuel path of the 13 California program. 14 These concerns are not new. We raised this issue 15 with the staff on numerous occasions during the development 16 of the urban bus program, and up to and through the two sets 17 of 15-day notice periods on that rule. 18 In fact, during the urban bus rulemaking, staff 19 committed to look at the issue of harmonization of the ARB 20 urban bus standards with EPA's heavy-duty engine standards 21 once EPA finalized its rule. 22 The air quality impact of harmonizing with the 23 federal program and the program adopted by ARB or proposed 24 for adoption by ARB for all other heavy-duty engines is 25 probably too small to be measured. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 In fact, given the transit agency's only option 2 for 2007 through 2010 will be to rebuy engines or to defer 3 purchases, it is likely that ARB's failure to harmonize will 4 actually have an adverse air quality impact. 5 Harmonization is not a goal for its own sake, but 6 for the sake of all who are affected by the standard, 7 regulators, manufacturers, end users, and everyone who 8 breathes California's air. 9 Without harmonized urban bus standards, new diesel 10 and alternative fuel engines will not be available in 11 California in 2007. 12 Engine manufacturers want to work with you and 13 your staff to achieve reasonable, cost-effective and 14 attainable regulatory solutions. 15 To that end, we urge the board to harmonize its 16 urban bus standards with the balance of the EPA and ARB 17 heavy-duty on-highway program for 2007 through 2010, and to 18 harmonize its entire heavy-duty on-highway program with that 19 ultimately implemented by EPA for all heavy-duty engines. 20 We have submitted for the record extensive 21 additional written comments, which we know will be included 22 in the record. 23 I Have also provided 30 copies of the letter that 24 I sent to Chairman Lloyd and all members of the board on the 25 16th of October, so it can also be a part of the record. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 And obviously I would be very pleased to answer 2 any questions that the board members might have been. 3 And I do appreciate the opportunity to appear 4 before you. 5 CHAIRMAN LLOYD: Thank you very much, Jed. 6 Any questions? 7 BOARD MEMBER HUGH FRIEDMAN: Question of staff. 8 CHAIRMAN LLOYD: Yes, Professor Friedman. 9 BOARD MEMBER HUGH FRIEDMAN: Not of our speaker, 10 but if I could ask staff to respond to those two points. 11 They were anticipated in the affirmative presentation, but 12 I'd like to hear more on it. 13 MR. KENNY: With regard to Mr. Mandel's first 14 point about the 15 part per million sulfur fuel, as the 15 staff presentation did indicate, the US government has 16 already adopted a 15 part per million sulfur fuel that will 17 be applicable in mid 2006. 18 In fact, if this board did nothing, that standard 19 would be applicable in the State of California. 20 However, we do plan to bring to you within the 21 next year a 15 part per million sulfur standard for diesel 22 fuel, so there will be 15 PPM sulfur fuel in the State of 23 California in 2006 and a half. 24 One other thing that I would add there is that the 25 South Coast actually has adopted a rule that says if this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 board does not act by, I believe 2005, that the South Coast 2 would have 15 part per million sulfur fuel in the South 3 Coast in 2005. 4 And so that issue will be addressed, and actually 5 already has been addressed. 6 BOARD MEMBER HUGH FRIEDMAN: So the record is 7 clear, we are operating on the assumption that by the time 8 these rules kick in, we will have adopted that low sulfur 9 standard? 10 MR. KENNY: That's correct. 11 BOARD MEMBER HUGH FRIEDMAN: How about the other? 12 MR. KENNY: With regard to the second issue on 13 urban buses, I think a little bit of history here is 14 actually fairly appropriate. 15 When we originally began to look at urban buses 16 about two years ago, the original thinking was that we would 17 move urban buses entirely to alternative fuels. 18 At the time we heard a number of concerns and 19 number of criticisms of that particular proposal. 20 And so what we ultimately brought before the board 21 was a dual path approach on urban buses. 22 As the board heard last month, we are hearing at 23 least some concerns with regard to compliance between 2004 24 and 2006 on the urban bus path. 25 And now we're hearing concerns today with regard PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 to compliance in the 2007 time frame. 2 Basically, the concern I have is that what seems 3 to be occurring is that the effort that we made to work with 4 the industry to move away from a single all-fuel approach, 5 we're on a dual path approach, is being to a certain extent 6 ignored. And what has now happen is that there's a request 7 to change the 2007 requirement. 8 There has been at least the argument made that the 9 alternative NOx averaging plan for 2004 to 2006 is 10 unnecessary because buses will not be produced within that 11 time frame, and so although there is at least the issue that 12 we will have different technology for urban buses in the 13 2007 time frame, that technology will be available. 50 14 percent of the regular fleet must have that technology. 15 We are simply trying to expedite it in the urban 16 bus arena, which is what we were originally proposing to the 17 board, and I think the board was originally trying to 18 accomplish when it adopted the urban bus standard. 19 CHAIRMAN LLOYD: Mr. Calhoun. 20 BOARD MEMBER CALHOUN: Why do you say it's being 21 ignored? The idea of having natural gas, why are you saying 22 that's being ignored? 23 MR. KENNY: The reason I say it's being ignored is 24 that what appears to be occurring is that we did -- what 25 this board did do is it offered an alternative NOx path with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 regard to 2004 to 2006. 2 Part of the commitment that we had presumed that 3 was made for that to be accepted by this board is that we 4 would have a working relationship between ourselves, transit 5 agencies and EMA. 6 And we would then see essentially low NOx buses 7 that would be produced in the 2004 to 2006 time frame. 8 What we're now hearing is that there will be no 9 low NOx buses in that 2004 to 2006 time frame. 10 In addition to that, what we're hearing is that 11 there is no need for an alternative NOx plan to be developed 12 because of the fact there will be no bus purchases in that 13 same time frame of those low NOx buses. 14 So I do think that to a certain extent what is 15 happening here is that the standard that the board set out, 16 the alternative compliance path that the board set out, are 17 both being essentially not taken advantage of, and at the 18 same time what's happening is that as we go into the 19 subsequent time frame of 2007, there's now a request that we 20 essentially relax that 2007 requirement. 21 BOARD MEMBER CALHOUN: Do you have any comments? 22 MR. MANDEL: If I might, history is an interesting 23 thing, and there's a record here so we can actually go check 24 on history in the case of the statements that are being 25 made. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 Couple things I'd like to address. 2 First of all, the focus today is on 2007. I'm 3 going to come back in a second on the 2004 through 2007 4 issue. Let's start with 2007, which is the focus of today's 5 hearing. 6 The fact is that when the staff first developed 7 their proposals for urban buses, and as they were thinking 8 about all of the heavy-duty on-highway program, the 9 direction, the intent for 2007 was to harmonize with the 10 federal program. 11 The federal program at that time it was developed 12 along with the concept of the taking the two-tenths gram per 13 brake horsepower hour standard and implementing it on a 14 sales unit basis, 25 percent per year over a four-year 15 period, so that in 2007 under the EPA proposal there would 16 be two-tenths gram engines. 17 Ultimately, EPA realized that that was not 18 technologically feasible, and that was not the rule that 19 they finalized. 20 They finalized the rule that assumed the same 21 emissions benefits as would have been achieved through a 25 22 percent per year phase-in of the two-tenth gram standard, 23 but recognized that aftertreatment technologies of that 24 efficiency would not be available in 2007, would be 25 available by 2010. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 And what EPA allowed and what the staff is 2 recommending to you as a board to adopt today for all other 3 heavy-duty on-highway products is to have an averaging 4 program that allows the emission equivalent of a 25 percent 5 per year phase-in the two-tenth gram standard, but which 6 will in fact be implemented by NOx aftertreatment in 2007 at 7 about a 40 percent efficient basis, and in 2010 with a 90 8 percent efficient aftertreatment technology, and this is for 9 all engines. We're not talking about diesel-fueled engines. 10 All we are talking about is compressed natural gas engines. 11 The idea of somehow being able to accelerate the 12 development of the 90 percent efficient aftertreatment 13 technologies for urban buses in California is simply not 14 realistic or factual in terms of the development programs. 15 I need to remind you that there are about 800 16 urban buses sold in California every year. Half of those 17 sales go to Detroit Diesel and about half of those sales go 18 to Cummins. Of each of those approximately 400 sales they 19 have, about half of them are compressed natural gas and 20 about half of them are diesel. 21 So we're talking about two different development 22 programs for the compressed natural gas engines, for the 23 diesel engines for about 200 sales volume each that those 24 companies would have to try to develop to accelerate 90 25 percent efficient traps to 2007. And I think you'll hear PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 from me and you'll certainly hear from them that it's not 2 going to happen. 3 So again this is not a diesel issue. It's an 4 urban bus issue. 5 If I could take, impose on the board's time just a 6 couple minutes to address the 2004 to 2007 issues. 7 Mike Kenny has made some comments about the 8 industry not taking the opportunity availed to it by this 9 board to move ahead with some flexibility on a program that 10 I thought was very creative that this board adopted. 11 The industry is taking every opportunity. We are 12 working with your staff. I had conversations just recently 13 as yesterday with Nancy Steele to try to find a way to 14 implement the demonstration programs that the board adopted 15 as part of the alternative NOx option. 16 That option was adopted by the board again as with 17 my urging, the urging of engine manufacturers, and I thought 18 with the creative efforts of both your staff and yourselves 19 to come up with that option, because we told you then that 20 the half gram NOx standard that was to otherwise to be 21 implemented in 2004 also was not technologically feasible, 22 also could not be supported by a very small market, but we 23 committed to find another way to get the same emission 24 reductions. 25 So when Mike tells us today that we're all of a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 sudden hearing for the first time the industry can't do 2 something, you're not hearing it for the first time. 3 We have been somewhat almost single messaged on 4 this point since we began working with you to find a way to 5 get reductions from urban buses used in the state. 6 We are continued to be committed to do that. 7 We're on a path to do that. And we will do that working 8 with the staff, with you, with the transit agencies, with 9 the aftertreatment device manufacturers. 10 It will happen, but it will not happen necessarily 11 under the base program, which is why you developed, and I 12 think made available to others, the alternative program. 13 And I think it would be prudent for the board 14 today to also recognize that come 2007 we have a potential 15 problem, one that we would like to work with you now to 16 address by recognizing that the kinds of NOx aftertreatment 17 efficiencies that are anticipated for the urban bus market 18 will not be there until 2010. 19 There will be NOx aftertreatment in 2007. It will 20 be applicable to urban buses, both CNG and diesel, and it 21 can be sold and used in the state. 22 And if there isn't that option made available, our 23 grave fear is that people will not buy buses during that 24 three-year period because there won't be any to buy, and 25 that hurts air quality. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 CHAIRMAN LLOYD: One of the things I think is 2 helpful is that the next item we're discussing we basically 3 feel your pain, but we're basically also covering our bets, 4 and one of the programs that we're funding, we're proposing 5 to the board to fund is to look at introducing hydrogen to 6 natural gas, and we've got every confidence in the fact that 7 we can meet the 2007 NOx standards with that mixture. 8 So we're going to help you there and in some ways 9 I hope we beat you there. But that will maybe stimulate, I 10 guess, the industry to again look at some of the 11 possibilities. 12 MR. MANDEL: We're interested in always in money 13 and interested in the research and interested in trying to 14 be creative. 15 I do think, Mr. Chairman, that we do need to 16 recognize that this is a very small market to be having 17 those kinds of separate research programs where the industry 18 is investing multimillions of dollars. 19 And I'm defining the industry broadly here. We 20 have fuel companies that have work to do. We have 21 aftertreatment manufacturers that have work to do. We have 22 engine manufacturers that have work to do. All focused on 23 getting NOx aftertreatment in the marketplace starting in 24 2007, ultimately phased in at 90 percent efficient in 2010. 25 That is not by any means we're not getting it. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 are committed to do that, to do something different for both 2 CNG and diesel-fueled urban buses. 3 I don't want to be the messenger that gets shot 4 here, but it's not realistic. 5 CHAIRMAN LLOYD: I also understand that you say 6 while it's a small percentage, the footprint is pretty 7 large. So you can see the contribution to air quality, 8 which is obviously the charge of this board, is pretty 9 large, so therefore we have to continue to focus on those 10 areas. 11 MR. MANDEL: And I don't mean to sort of end up 12 appearing to debate the point with you, but I think the 13 footprint for urban buses actually is not as large, those 14 were not the slides we saw. We saw all the heavy-duty 15 on-highway. 16 And our fear is that what is a very important 17 market, because it is used in urban areas, urban buses, 18 because it becomes sort of the bellwether for how programs 19 can develop in this state, this is a very important program. 20 We're very fearful that if the engines are not 21 there for purchase, fleets will simply either pre-buy the 22 engines that are available in 2004 to 2007 time frame, or 23 will delay their purchase for a couple of years. 24 One of the beauties of both CNG and diesel fuel 25 engines of this kind of technologies, they can be maintained PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 and kept longer than they otherwise might be turned over, 2 and we don't think that's a good program for the state. 3 There is no mandate that fleets have to buy engines. 4 CHAIRMAN LLOYD: Ms. D'Adamo and Mr. Calhoun. 5 BOARD MEMBER D'ADAMO: I just want to say that as 6 I recall when this issue was before us, the choice was not 7 between an early or phase-in. It was in my mind anyway a 8 choice between a dual path or CNG. 9 This is a very important issue for this board, and 10 I would just like to really encourage your organization to 11 work with staff in order to meet the deadlines as set out. 12 I understand it's going to be very difficult, but 13 you're saying it's a very small percentage. 14 I think we were convinced at that time that we had 15 the regulation before us that it was a significant enough 16 that it needed to be implemented in a sooner time fashion. 17 I would also like to ask staff if this continues 18 to be an issue to keep us updated and perhaps to go back to 19 the transcripts and pull out some of the testimony relative 20 to these points. 21 MR. MANDEL: I appreciate the comment, and we will 22 obviously do our best to address the challenges put forward 23 to us by the board. 24 In terms of the two paths, again I want to 25 emphasize, and I know that you've heard me today, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 technology concerns we have apply as equally to CNG engines 2 as they do to diesel engines. 3 The 90 percent efficient aftertreatment 4 technologies that will have to be applied to a CNG engine in 5 2007 will also not be there. 6 So this is irrespective of the path. 7 We're concerned just about urban buses. And you 8 will hear me say these same things to you if there were no 9 diesel path, if there were just the CNG path. I would be 10 saying the same thing to you about the importance of the 11 harmonizing with the federal program, which, by the way, was 12 the original intent of the staff when they proposed the 13 urban bus program and adopted standards for 2007. EPA, 14 unfortunately moved, but in recognition of the technology. 15 CHAIRMAN LLOYD: Mr. Calhoun, just bear with me. 16 Would staff agree with the comment you had made, 17 Mr. Mandel made here, recognize EPA and as ARB recognized in 18 the proposals, 90 percent emission NOx aftertreatment is not 19 technologically feasible until 2010? 20 MR. CACKETTE: I think it -- no, I don't think we 21 agree with that. I think the timing is too early to 22 conclude that. 23 There's a couple factors here that make us not 24 want to make the change or propose the change that 25 Mr. Mandel is talking about. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 One is that the technical challenges for natural 2 gas versus diesel are different. I think it's clear that 3 the natural gas engines have a potential for reducing their 4 engine out emissions greater than diesel does. Some of his 5 members are working on that right now. If they're 6 successful, then the amount of catalyst efficiency that's 7 made it on the tailpipe would be different for diesel versus 8 a natural gas engine, and that's exactly what the premise 9 was behind the federal rule of having their phase-in. 10 So the idea that there might not be some 11 competition here between natural gas and diesel on the dual 12 path is, I think, way too early to rule out. 13 Also it's 2002, the standards don't go in effect 14 until 2007. We've got some time to see what's going to 15 happen. 16 There's other technologies like SCR that 17 manufacturers may choose to use in buses because the 18 infrastructure requirements, having a urea supply available 19 are much easier than a centrally fueled urban bus than they 20 are with a truck, so your decision about how early you want 21 to push the technologies or the low standards on transit 22 buses might be different than it would be for trucks. 23 So to say that we should just automatically align 24 with the phase-in that has been decided for based on 25 essentially on the truck market, I think is not appropriate. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 And further another reason why we didn't propose 2 any changes was we think the board set a pretty clear 3 principle that they want transit buses, urban transit buses, 4 to put out an extra effort. They have a standard that went 5 into effect for NOx and for PM ahead of trucks as far back 6 as I can remember, and this is kind of the principle that 7 was involved here. 8 And I think that it's not unreasonable to expect 9 that transit buses can do better sooner than trucks, and 10 notwithstanding the comments that the engines simply aren't 11 going to be there, and that the volumes are small, you know. 12 It's not unheard of that, of the two 13 manufacturers, one might want to take the other 14 manufacturer's market share away by complying with these. 15 And, again, five years in advance is a little 16 early to decide that that kind of healthy competition won't 17 occur. 18 CHAIRMAN LLOYD: Mr. Calhoun. 19 BOARD MEMBER CALHOUN: I listen to you, Jed, and I 20 hear you are very definite when you said this can't be done 21 in 2007, but it will be in 2010. I think it's unfair to ask 22 you this question. 23 What makes you so certain because -- and you know 24 that development program, you're certain you're going to end 25 up. And I think the history would show that in many cases PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 you've outdone yourself, and other cases you've had some 2 relief, and but you seem to be very definite about this. 3 Can you comment on that? 4 MR. MANDEL: It's a very fair question. 5 And sometimes when one stands behind these 6 lecterns they get awfully enthusiastic about their 7 statements. 8 Sometimes when you sit behind that bench you get 9 awfully enthusiastic as well. 10 But, Joe, it's a fair question. 11 The reason I framed my responses as I did is that 12 the market for developing technology is being developed on 13 the one basis of all of heavy-duty on-highway engine 14 production nationwide, and that's why, despite some of my 15 hesitation in doing so, we basically support the board's 16 efforts to harmonize with the federal program. There are 17 tens of thousands of engines that are going to be sold where 18 the technology that's being forced is being forced by a 19 harmonized federal and California rule. 20 For sure will people get there? I'm not going to 21 stand up here and say it by a date certain, because I think 22 that there are some concerns about technology yet to be 23 developed. I mean, this is a classic technology forcing 24 rule. To your credit, to EPA's credit, forcing the use of 25 NOx aftertreatment technologies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 Where I can say with more certainty that something 2 is not going to happen is where there is such a small market 3 with a whole separate development program that would have to 4 be undertaken, where I think you're going to hear in a 5 moment directly sort of from the horse's mouth, the two 6 engine companies that are principally affected, they're not 7 even focused on those programs. They don't have the 8 resources, the manpower, the capital to do that. 9 And, you know, I hear Tom Cackette say this is a 10 great competition between technologies. We're talking about 11 the same engine companies that make both technologies. If 12 the whole marketplace goes to compressed natural gas, it's 13 no skin off their nose of Cummins and Detroit Diesel. 14 They're making those engines. They're the ones that do make 15 them. We're not talking about competition between company A 16 that's in the compressed natural gas business, and company B 17 that's in the diesel business. It's the same companies. 18 And I think as an industry we're trying to, 19 frankly, be forthright with you, and it's not always easy to 20 stand up here and being forthright, but I'm trying to do my 21 best to do so to express a concern we have about the 22 direction of the board's program for 2007 and beyond for 23 those three years with urban buses. 24 Recognizing that if you go back and look at your 25 original intent of the staff's proposal going back now over PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 a year, almost two years, was starting in 2007 for urban 2 buses it would harmonize with the federal program, and 3 federal program is now finalized, phases in the efficiency 4 of the aftertreatment technology, rather than phasing in by 5 some units, numbers, a particular technology. 6 CHAIRMAN LLOYD: Okay. Mr. McKinnon. 7 BOARD MEMBER McKINNON: We're going to have 8 efficient microphone technology by 2010 too. 9 I just, I kind of want to comment that we -- my 10 job is to represent the public in California that breathe 11 the air. 12 And yours ultimately, albeit there are other 13 interests, but ultimately are stockholders in companies that 14 manufacture engines. Okay. 15 And when we look at the bus rules and when we talk 16 about the bus rule, that was an all-CNG rule. That's what 17 was coming down there. 18 And I very strongly opposed going in that 19 direction, because I think there's a place for diesel in our 20 society, and there's a need to clean up diesel, so that the 21 public who I work for, breathes air that's healthy for them 22 and frankly in some cases doesn't have to smell, you know, 23 there's odor issues, there's all kinds of things. 24 So there is a need for us to move forward, but we 25 tried to figure out the compromise, and sort of now what I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 hearing is maybe we shouldn't have done that, maybe we 2 should have had all 400 buses be CNG buses, and maybe that 3 would have been a little better research. 4 So I'm a little discouraged that what I thought we 5 were doing was moderating and moderating in the interests of 6 efficient transportation, transportation that considered 7 that there are some uses CNG doesn't apply to, and we were 8 also trying to be fuel neutral, which helps us control the 9 costs of fuel. 10 So that's my first comment. 11 My second comment is that I really am not 12 impressed by discussions of how the US EPA thought a year 13 ago and how they think this year. 14 And I think that can get so political so fast. I 15 don't want to go there. I'm not impressed with that. 16 I think that there is a need to clean up diesel. 17 I think whatever the US EPA is thinking about, there's a 18 bunch of states that want to clean up diesel, and we've just 19 got to figure out how to get it done. 20 Now, I think we're supposed to be asking 21 questions. 22 Here's my question. And it's really both to staff 23 and to you, Jed. 24 That is, where are we really, one of the essential 25 pieces to this whole discussion is trying to make the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 transition from dirtier diesel to cleaner diesel, something 2 that doesn't do economic harm to our commerce, to our 3 transportation system. 4 And there were two pieces to that. 5 One was harmonizing fuel, and we talked about that 6 a little bit. 7 The other is if you're going to have 8 aftertreatment, do we have aftertreatment being produced at 9 economies of scale that bring the cost down. 10 And sort of where I thought we were headed was 11 trying to move ourselves in a direction where we were doing 12 multiple states or the whole United States and we had Europe 13 was moving along, and that we were going to get in a 14 position where we could make instead of, you know, a few 15 thousand aftertreatment devices, hundreds of thousands or 16 tens of thousands, so you can build factories that made them 17 cheaply and efficiently. 18 How are we on that? I guess that's probably 19 really a general way to take this on, but I want to know 20 where we're at in terms of 2007, 2010. 21 MR. MANDEL: If I can, first of all, I appreciate 22 hearing your concerns about the urban bus program and dual 23 path, and I do know that you were a supporter of the diesel 24 path option, and we appreciate that. 25 And candidly, and I'm really going to speak to all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 the board members, but I think in response to Mr. McKinnon's 2 comment, we were committed to make those, make both paths 3 work, and we are on a path, no pun intended, to make that 4 happen. 5 And I think there is a sense on the board's part 6 that something somehow has happened to not -- for there not 7 to be having progress made, and that's just not the case. 8 The fact is it's a rather difficult challenge for 9 the transit agencies to figure out exactly what they have to 10 do when on the NOx alternative. 11 But they are working on it. We will work with 12 them. We are committed to work with the staff to make that 13 happen. 14 And I want to remind board members that it is the 15 diesel path, it is the fleets on the diesel path that 16 provide extra particulate emissions reductions, extra NOx 17 reductions and a commitment to demonstrate fuel cell 18 technologies that, but for that path, I'm not sure this 19 board would have had. There are many positives that come 20 out of that diesel path. We ought not to lose sight of it. 21 And at the end of the day I do believe that fleets 22 that have chosen that path will in fact be producing lower 23 particulates, lower NOx than otherwise would have been 24 achieved by what I'll call the base program. 25 In terms of where the technology is going at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 present with respect to NOx aftertreatment technology, it is 2 not a question of economies in scales and volumes to get the 3 price down. It is a question of developing the technologies 4 at the efficiencies that will be necessary to meet standards 5 as low as two-tenths of gram NOx and 99 percent reduction in 6 NOx emissions from diesel engines from an unregulated base 7 line. A fairly amazing accomplishment. 8 It is still in the development stage to make sure 9 that there are technologies that will work in a diesel 10 engine, which is a commercial product that has work to do, 11 that has people to move in a bus, that has goods to carry 12 across the state, across the country in a truck. That's 13 where the challenge lies. 14 By the way, on the particulate aftertreatment 15 side, it is much more a sure thing. Give us the fuel, we're 16 prepared to do that. 17 We are also working, as we speak, including 18 working with the staff on retrofit technology. There's a 19 terrific opportunity there, a terrific opportunity to reduce 20 air quality, because we'll turn over the higher emitting 21 older products, engine manufacturers will sell new 22 technology. The state will get the benefit of lower 23 emissions. We're working with the staff to do that. We 24 still have some concerns about the certification procedure. 25 We'll address that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 So a lot of work is being done, but on NOx 2 aftertreatment I don't think we're right in the stage of how 3 we get the volume up in order to get the costs down. I 4 think we're still developing the technology to be as 5 efficient as it has to be. 6 CHAIRMAN LLOYD: Other questions from the board? 7 I know we have -- appreciate it very much, Jed. I 8 know we've got two of your members to testify. 9 MR. MANDEL: And I do appreciate your forbearance 10 in my going on a bit, but I did want to have the opportunity 11 to address you on it, and I appreciate it very much. 12 CHAIRMAN LLOYD: You wax eloquently. I realized 13 how much we missed you last month. 14 MR. MANDEL: Me too. 15 BOARD MEMBER HUGH FRIEDMAN: And I'll hope you 16 will be forthright. There's no need to be forth wrong. 17 MR. MANDEL: Spoken like a true professor. Brings 18 me back to my law school days, Professor Friedman. 19 CHAIRMAN LLOYD: By the way, speaking of the 20 transcript, what I think you might have said about air 21 quality, you meant improving air quality. 22 MR. MANDEL: Thank you. 23 BOARD MEMBER HUGH FRIEDMAN: Reduce emissions. 24 CHAIRMAN LLOYD: I know you are very carefully 25 looking at the transcripts. I wouldn't want you to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 embarrassed when you look back. 2 MR. MANDEL: Thank you for correcting me. 3 CHAIRMAN LLOYD: Yes. 4 Now I have John Duerr and Bob Jorgensen. 5 MR. DUERR: Good morning. I'm John Duerr, manager 6 of regulatory activities at Detroit Diesel Corporation. 7 Detroit Diesel is now a unit of Daimler Chrysler 8 AG, a rather recent development. 9 Detroit Diesel is, however, and has been a major 10 manufacturer of heavy-duty diesel and natural-gas-fueled 11 engines, used in a variety of applications, including 12 highway trucks and urban buses. 13 The proposed rule sets stringent new emission 14 standards for heavy-duty highway truck engines that are 15 scheduled to take effect in 2007. 16 These standards and the surrounding regulatory 17 program are harmonized with federal requirements that were 18 finalized earlier this year. 19 Significantly, this proposal does not apply to 20 urban buses and as a result it leaves in place the 2007 21 urban bus standards adopted by the board in February of 22 2000. 23 These standards are not harmonized with the 24 federal requirements for urban bus engines for the 2007 25 through 2009 model years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 It's this latter point that will be the focus of 2 my comments today. 3 Let me state initially, however, that Detroit 4 Diesel is a member of the Engine Manufacturers' Association, 5 and we do support the comments made earlier by Mr. Mandel. 6 On February 24th, 2000, the board approved the 7 rulemaking package applicable to urban buses. Among the 8 provisions of this rulemaking is a NOx standard of 0.2 grams 9 per brake horsepower hour. This standard applies across the 10 board to diesel and natural-gas-fueled bus engines beginning 11 in 2007. 12 At the time that this rulemaking was being 13 developed, EPA was also in the process of initiating a 14 rulemaking for 2007 and later heavy-duty highway engines. 15 The importance of harmonizing the California bus 16 requirements with the emerging federal requirements was 17 recognized and considered. In, fact the two-tenths gram NOx 18 standard included in the California bus standard was at the 19 time of its inclusion compatible with the initial federal 20 proposal that called for two-tenths gram NOx engines to 21 phase in as a percent of sales beginning in 2007. 22 As it turned out, the federal rulemaking did 23 finalize a two-tenths grams NOx standard in 2007. But in 24 recognition of the fact that the fully developed 25 high-efficiency NOx aftertreatment systems are not likely to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 be available in 2007, EPA allows the NOx standard to phase 2 in over a three-year time period. 3 Under the federal program, manufacturers are 4 allowed to produce 50 percent of their engines meeting the 5 .2 gram standard, while the remaining 50 percent can comply 6 with the 2004, 2.4, 2.5 NOx hydrocarbon standard. 7 It was contemplated, however, that manufacturers 8 would meet the phase-in requirement not by producing engines 9 having two and a half grams or .2 grams of NOx, but rather 10 by producing all their engines at approximately 1.2 grams 11 and using the NOx averaging provisions to achieve the 12 equivalent fleet average NOx emissions. 13 It is expected that manufacturers using this 14 option will deploy NOx aftertreatment on all their engines 15 in 2007, but this initial stage of aftertreatment will be of 16 lower efficiency. 17 During the phase-in period, manufacturers will 18 continue development of the NOx aftertreatment to improve 19 the efficiency with the goal of having highly efficient 20 systems available by 2010 when the phase-in will end and the 21 .2 gram NOx standard will take effect across the board. 22 DDC's technology development programs are aimed at 23 compliance with EPA's phase-in program using the averaging 24 provisions. 25 As such, we do not foresee having .2 gram NOx PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 natural gas or diesel fuel urban bus engines available in 2 2007. 3 Without a change to include urban bus engines in 4 this rulemaking, there is a very real possibility that we 5 will not be able to supply any engines to our California 6 transit customers during the 2007 through 2009 model years. 7 Please understand that this statement is not made 8 with the intention of coercing the board into relaxing this 9 requirement, but rather is an honest attempt to inform the 10 board of likely consequences if this issue is not addressed. 11 I also hope that the board will not interpret the 12 likely non-availability of .2 gram NOx engines in 2007 as a 13 signal that DDC is curtailing its emission development. I 14 can assure you that this is not the case. 15 We are, however, focusing our emission development 16 resources on meeting the challenging requirements for our 17 larger national truck and urban bus markets. 18 Allocating our resources in this manner is not 19 only necessary from a standpoint of simple economics and 20 commercial considerations, but it also ensures that our 21 efforts will result in the greatest overall reductions in 22 emission inventories. 23 Let me provide a few numbers to lend some 24 perspective to this point. 25 DDC annually sells tens of thousands of engines PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 through the national truck market, and approximately 2,000 2 engines into the national transit market. 3 Since EPA's 2007 rule provides the same standards 4 and implementation schedule for truck and bus engines, the 5 same technologies are expected to be used for both markets. 6 The resources expended to develop and 7 commercialize those technologies can therefore be 8 rationalized over several tens of thousands of anticipated 9 engine sales. 10 By contrast, we sell only a few hundred engines 11 per year to our California transit customers, and these 12 sales are roughly evenly split between natural gas and 13 diesel-fueled engines. 14 Because of the unique California two-tenths gram 15 NOx emission standards, and the differences between diesel 16 and natural gas engines, two separate programs, each riskier 17 and larger in magnitude than the program to meet the 1.2 18 gram NOx standard for the remaining on-highway engines 19 would be needed to meet the unique California bus 20 requirements. 21 The multimillion dollar costs of these two 22 programs would need to be spread over only about one percent 23 of the sales volume available for the other on-highway 24 engines. 25 Clearly, it does not make good business sense or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 environmental sense for us to divert substantial resources 2 to meet unique California bus requirements at the expense of 3 the program aimed at meeting the 50 state requirements for 4 truck engines and the federal bus engine standards. 5 Consistent with this reality, DDC cannot justify, 6 and, therefore, is not planning, any development programs 7 aimed at meeting the unique California bus requirements. 8 The obvious conclusion is that the possibility 9 that we will have engines capable of meeting these 10 requirements in 2007 is quite remote. 11 I cannot and would not presume to speak for other 12 bus engine manufacturers, but I assume that they have the 13 same dilemma, and could very likely reach the same 14 conclusion about how to allocate their development 15 resources. 16 The result could be that, without a rule change, 17 there would be no engine offerings available for California 18 transit customers in the 2007 through 2009 time period. 19 If this is case, all stakeholders will lose. 20 Engine manufacturers will lose engine sales. 21 Transit operators will lose the ability to buy new 22 buses to modernize their fleets and upgrade service to their 23 customers. 24 And ARB will not only not realize the emission 25 benefits that were anticipated, but will also forgo the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 emission benefits that could be obtained by allowing the 2 sale of engines meeting the federal requirements. 3 By revising the proposed rule to include urban bus 4 engines and rescinding the 2007 provisions in the existing 5 bus rule, the board will greatly increase the probability 6 that compliant low emission urban bus engines will be 7 available for purchase by California transit customers in 8 the 2007-2009 phase-in period. 9 DDC encourages the board to take this action in 10 its deliberations today. 11 Thank you. 12 CHAIRMAN LLOYD: Yes. Mr. McKinnon, then 13 Professor Friedman. 14 BOARD MEMBER McKINNON: Does it help Detroit 15 Diesel to just go back to all CNG and bring you up to a 16 larger number of CNG engines? 17 MR. DUERR: I don't believe it does. 18 One of the serious problems that we have with CNG 19 is as we look down the road we know, as you had pointed out, 20 that we need to develop cleaner and cleaner diesel engines. 21 That is the foremost priority for us, but it always raises 22 the dilemma that once that's accomplished, and we have near 23 zero emission diesel engines, where does the market for 24 natural gas engines come from. 25 That market could evaporate unless there are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 economic incentives for people to use natural gas fuel 2 preferentially over diesel fuel, which isn't the current 3 case. 4 BOARD MEMBER McKINNON: Supermarket delivery 5 trucks, I mean there's a number of intercity trucking kind 6 of uses that might work, not necessarily over the road, but 7 I don't know, I mean, I'm not going to claim for a minute to 8 be knowledgeable on marketing for the trucking manufacturing 9 company and the industry, but I am concerned that what we're 10 hearing is that it can't be done, and that the economies of 11 scale or the focus on getting the bus piece of this stuff 12 isn't big enough to be worthwhile, and I think it's fair to 13 tell us that -- by the way, I do remember you all warning us 14 about this, so there's that not an issue with me. 15 But if what we need to do is move it to a large 16 enough -- if it's not big enough, 200 clean diesels from two 17 companies, you know, maybe we need to go to all CNG and 18 maybe we made a mistake. I mean, that's fair enough. 19 MR. DUERR: Well. 20 BOARD MEMBER McKINNON: Go ahead. 21 MR. DUERR: From Detroit Diesel's perspective we 22 recognize that diesel is here and it's going to be here, and 23 from our standpoint we need to keep our eyes on the prize, 24 and that is to produce very low emission diesel engines. 25 And that is -- and that is going to remain our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 first and top priority. By attempting to shift more of the 2 market to natural gas, I think that's actually 3 counterproductive to the strategies that we have in place. 4 CHAIRMAN LLOYD: You'd have to have a name change. 5 BOARD MEMBER HUGH FRIEDMAN: My question is of the 6 staff. 7 Is it true that we adopted the bus standard at a 8 time when the EPA was proposing the same standards we 9 essentially adopted, the 2007? 10 MR. KENNY: Yes, roughly similar time frames. 11 BOARD MEMBER HUGH FRIEDMAN: So I guess in the 12 intervening time, the manufacturers and others have been 13 able to persuade EPA that they should delay it to 2010? 14 MR. KENNY: That's correct. They basically 15 changed the phase-in schedule. 16 BOARD MEMBER HUGH FRIEDMAN: To the extent that 17 our original, that our rule was adopted in light of it, the 18 initial proposal of EPA, and we thought we were harmonizing 19 with what it then appeared likely that EPA would have, and 20 then they haven't, if that was a basic premise or predicate, 21 where did we get the 2007? 22 MR. KENNY: The last part of that I wouldn't agree 23 with. Essentially -- 24 BOARD MEMBER HUGH FRIEDMAN: That's what I'm 25 trying to clarify. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 MR. KENNY: We would like to harmonize where 2 essentially it works in California's interest. 3 To the extent that the fuel was going to be 4 available throughout the country in 2006 and a half, that 5 really was kind of the predicate to utilizing these 6 technologies. 7 So to the extent that fuel is going to continue to 8 be available in 2006 and a half, we want those technologies 9 available for us in California as soon as we possibly can 10 get them. 11 To the extent that EPA had originally proposed a 12 more aggressive approach with regard to 2007, and they 13 currently are implementing with regard to the rule, that was 14 actually more consistent with what we were trying to 15 accomplish and that was something that we had basically 16 indicated we were trying to harmonize with. 17 With regard to agreeing that we will harmonize 18 with anything that EPA does, I would disagree with that. 19 We do not agree to harmonize with anything -- 20 BOARD MEMBER HUGH FRIEDMAN: No, no, no. I'm not 21 trying to take this to something global. 22 But I was thinking at the time we adopted our rule 23 that we took great -- I think I took comfort from the fact 24 that this was pending also at the federal level and that we 25 were harmonizing in a sense with what then we understood PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 would very likely happen. 2 MR. KENNY: That's correct. 3 BOARD MEMBER HUGH FRIEDMAN: We were warned that 4 they would be fighting this at the EPA because they didn't 5 think it was technologically feasible at the time. 6 And so here we are. 7 We don't have before us today, and I think -- but 8 we need to monitor this closely at a minimum. 9 CHAIRMAN LLOYD: I think, Professor, the staff is 10 going to come back to us next spring on the transit bus and 11 give us an update on that and so I think Mr. Cackette's 12 earlier comments we are going to keep fully abreast of 13 technology developments and we feel it's too early to admit 14 defeat. No pun intended on that. 15 MR. KENNY: One point of clarification, though. 16 I think in the context of the urban transit rule, 17 there was a lot of warning about essentially the .5 gram 18 standard that was essentially required originally from '04 19 to '06. And I think that's where the great debate occurred 20 and the engine manufacturers were very forthright about 21 saying that they say no way to that .5 gram standard to be 22 accomplished within that '04 to '06 time frame. 23 I don't think there's quite as much debate about 24 the .2 standard. There was a concern by the engine 25 manufacturers that it was too aggressive with regard to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 technology, but I think the vast majority of the debate 2 really did revolve around the .5 standard and that's where 3 essentially the board provided the flexibility of the 4 alternative compliance staff with regard to NOx averaging. 5 CHAIRMAN LLOYD: I agree. I remember listening 6 back to the engine manufacturers and being again convinced 7 of the tremendous amount of the work going on and tremendous 8 amount of challenge, but it was too early to basically talk 9 about the feasibility in that time period. 10 Supervisor DeSaulnier. 11 BOARD MEMBER DeSAULNIER: I had a question. 12 John, what's the percentage of the market in 13 California for this overall market the Detroit Diesel now 14 has? 15 MR. DUERR: The percentage of trucks or bus? 16 BOARD MEMBER DeSAULNIER: Both. 17 MR. DUERR: We have approximately 50 percent of 18 the bus market we share that with Cummins. For highway 19 trucks we are maybe 30 percent. 20 BOARD MEMBER DeSAULNIER: Is that comparable 21 percentage nationwide? 22 MR. DUERR: Yes. I don't believe it's skewed at 23 all in California. 24 BOARD MEMBER DeSAULNIER: Do you sell product in 25 Europe or another country? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 MR. DUERR: As Daimler Chrysler. Detroit Diesel 2 is prominently a domestic marketer, but we have product that 3 does go overseas. 4 BOARD MEMBER DeSAULNIER: Thank you. 5 CHAIRMAN LLOYD: Any other questions? 6 With that, thank you very much, sir. 7 Next we have Bob Jorgensen from Cummins and 8 Richard Burton from Monterey-Salinas Transit. 9 MR. MANDEL: Mr. Chairman, would you like the 10 record cites? I can tell you exactly what the cites are for 11 the commitment to harmonizing and intent to harmonize with 12 EPA. I have it with me, if you'd like it. 13 CHAIRMAN LLOYD: That's fine. Submit them for the 14 record. 15 MR. MANDEL: In the initial statement of reasons 16 for the urban bus rule, this was as the original package on 17 the urban bus rule, the initial statement of reasons under 18 section H says if the proposed levels are not the emission 19 levels ultimately adopted by the US EPA, staff will consider 20 modifications to the proposed long-term emission standards. 21 In the mail-out, mail-out 99.35 for the urban bus 22 rule, it stays US EPA is expected to adopt equivalent 23 emission standards for heavy-duty engines in vehicles 24 including urban buses for the 2007 model year. That was the 25 intent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 In the final statement of reasons, in comment 2 B-10, it says in the agency response, once the US EPA's 3 rulemaking is finalized, the ARB staff will consider 4 modifications to California's 2007 standards for urban bus 5 engines if necessary. 6 CHAIRMAN LLOYD: They're still considering that, I 7 understand. 8 MR. MANDEL: The staff is still considering it? 9 Let the record show my eyes rolled. 10 CHAIRMAN LLOYD: Thank you. 11 MR. CACKETTE: I just want to comment that I think 12 that's all pretty well consistent with the point I tried to 13 make earlier, which is we think it's too early to throw in 14 the towel, and I guess that's consistent with still 15 considering. We considered it in this rulemaking and 16 decided not to bring it forward as an option to the board, 17 and we think further assessment in the future could give you 18 a better picture of what the real situation is. 19 CHAIRMAN LLOYD: That's exactly my interpretation. 20 MR. JORGENSEN: Being that I'm the third, and 21 following the Engine Manufacturers' Association and 22 following Detroit Diesel, I think a lot of my comments you 23 will have heard. 24 My comments are less than two pages, so if you 25 bear with me, I think we can get to the important question PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 and answer period, which I think we might have some 2 additional questions from another manufacturer of urban bus 3 engines. 4 Cummins manufacturers heavy-duty engines for use 5 in stationary and mobile off-highway equipment, as well as 6 those for on-highway applications, the subject of the 7 proposal before you today. 8 As I mentioned, Cummins is a member of the Engine 9 Manufacturers' Association, and participated in the 10 development of and supports the comments made by the 11 association. 12 The company takes great pride in substantial 13 reductions in emissions that have been made from the engines 14 the company produces. 15 As the staff report outlined, to date hydrocarbon 16 and particulate emissions have been reduced by approximately 17 90 percent, and from the subset of this on-highway 18 application, urban buses, reductions have been even greater, 19 95 percent. 20 By next year Cummins will have reduced oxides of 21 nitrogen by approximately 85 percent from these same 22 engines. 23 While pleased with these improvements, Cummins has 24 committed significant resources to make even greater 25 emission reductions in the future. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 As noted in the staff report, the proposal before 2 you today generally harmonizes with the 2007 rule 3 promulgated by the EPA earlier this year. 4 Harmonization on the emission standards on a 5 national basis is an important concept that Cummins and 6 other engine manufacturers have advocated consistently. 7 Harmonization also benefits Cummins' California 8 customers, the owners and operators of trucks and buses 9 involved in intrastate and interstate commerce, and eases 10 the administrative burden on regulatory agencies. 11 While Cummins strongly supports harmonization of 12 California requirements with those in place nationwide, 13 Cummins cannot support the staff's proposal for 2007. 14 First, because Cummins does not fully support EPA's final 15 2007 rule, and, second, there are provisions within the 16 staff's proposal that does not harmonize with the EPA rule. 17 Cummins' concerns with the EPA final rule have 18 been raised through the filing of a petition in federal 19 court. 20 Chief among the issues raised in the Cummins 21 petition is 2007 rules have not been shown to be feasible. 22 There is a lack of any credible technical evidence that the 23 aftertreatment technology, which will be required to meet 24 the 2007 standards, will be available in that time frame. 25 In addition, Cummins has serious technical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 concerns about the ability of existing and even the newly 2 adopted measurement methods to accurately guide the 3 development of and then support the certification of the 4 technologies needed to meet these stringent standards. 5 Included in Cummins' written comments, which were 6 submitted earlier, are copies of the Cummins written 7 comments to EPA 2007 rule notice of proposed rulemaking, as 8 well as the company statements of issues and the recently 9 filed brief, both filed in federal court. 10 The issues Cummins has raised in federal 11 litigation on EPA final rule apply equally, of course, to 12 the staff's proposed program. 13 And we figure that until these issues have been 14 resolved with EPA, that the ARB should refrain from adopting 15 any program for the 2007 heavy-duty engines and certainly 16 should not adopt the program that has the same faults as the 17 federal rule. 18 If the ARB believes it should not delay the 19 adoption of its own rule, that appropriate language should 20 be included in the rule that commits to harmonize with the 21 rule ultimately implemented and put into effect by the EPA. 22 Cummins' second issue pertains to certain 23 provisions where the staff's proposal does not harmonize 24 with the EPA 2007 rule. 25 Despite the staff's indication that its proposal, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 in quotes, ensures that the requirements for 2007 and 2 subsequent model year heavy-duty diesel engines are 3 identical to those adopted by the US EPA in January 2001, 4 end quotes, they're proposing to maintain the more stringent 5 urban transit bus standards that the board adopted last 6 year. 7 This rule requires transit buses to meet a 0.20 8 NOx standard per brake horsepower hour in 2007. 9 The EPA final rule adopted a phase-in approach 10 and, along with that average, under the EPA rule, 11 manufacturers have the option to certify to an average 12 compliance level of approximately 1.2 in these three years, 13 2007, '8 and '9. 14 The ARB should revise the transit bus NOx standard 15 to harmonize with EPA by allowing the same phase-in for 16 these engines. 17 If not, ARB would end up requiring unique products 18 in California, which likely will not be feasible for Cummins 19 to produce. 20 I handed out written copies, but I do have one 21 more comment I'd like to make prior to, and that's in 22 response to Board Member McKinnon's question to my 23 competitor regarding whether or not it would have been a 24 wise choice to make to only have a natural gas or an 25 alternative fuel provision in the urban bus rule. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 Quite frankly, I think the choice that should have 2 been done is not even to think about what the different 3 paths, but rather to have fuel neutral standards set for 4 urban buses, whatever they might be, and don't designate the 5 technology. 6 And, quite frankly, that's been the historical 7 path that the ARB and other regulatory agencies have taken. 8 They named a standard and whatever technology could meet it 9 was there. 10 And I really do believe that that would have been 11 the appropriate way. It really brings in so many different 12 issues now that you've gotten down the path of saying not 13 only are standards such and such, but here's the technology 14 we want to meet it, and that's natural gas. 15 And I truly believe that that's really not the 16 role of an air pollution control organization. 17 I really think that giving standards is the right 18 approach. 19 And, you know, just to name another issue that 20 came out of that, diesel-powered hybrid electric vehicles. 21 The staff then had -- or the board had to make the decision, 22 well, should they be on the diesel path or on the natural 23 gas path, and, quite frankly, if a hybrid electric vehicle, 24 however powered by diesel or natural gas or anything could 25 meet the defined standards, then you wouldn't be having the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 question before you today, and asking us whether or not 2 dividing our resources between one technology or another, 3 you know, if we should hone in on a certain technology. 4 And you should define what technology that is, 5 because you have this indication in your own mind that 6 that's the most likely to be successful, I think is fraught 7 with a lot of dangerous repercussions about having this 8 sense as to what the ultimate best technology to meet any 9 standard would be. 10 So, quite frankly, I wouldn't suggest that any 11 certain technology should be mandated or single source or 12 suggested. 13 With that, I'll end my comments, and entertain any 14 questions. 15 CHAIRMAN LLOYD: Along that line of thought, Bob, 16 if you can take sulfur out of the equations, it's going to 17 make your job easier? 18 MR. JORGENSEN: You mean the sulfur out of the 19 diesel fuel? 20 CHAIRMAN LLOYD: You've got none in natural gas, 21 so the point is that way we can apply some surety there, you 22 don't have to worry about whether any sulfur, so again you 23 said if we set standards, presumably it would be easier for 24 you to meet those standards if you know that you're going to 25 get a fuel without sulfur. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 MR. JORGENSEN: Absolutely. But of course if you 2 only had a natural gas path, then who cares what the sulfur 3 level of diesel fuel would be. It would be a moot point. 4 BOARD MEMBER McKINNON: That's why we did what we 5 did. 6 MR. JORGENSEN: Quite frankly now having the two 7 paths, the issue that was discussed earlier about the 2004 8 through 2007 is because there's a .5 NOx standard for the 9 diesel path, where at that very same time, natural gas 10 engines can still be at the 2.5 NOx plus non-methane 11 hydrocarbon standard. 12 So, quite frankly, I think that issue would be in 13 question if you were to talk about natural gas engines and, 14 of course, in the 2007 time frame the very topic of this 15 rulemaking it is in question for both diesel and natural gas 16 as to whether or not that standard can be met. The question 17 is no more or less in my opinion applicable to one 18 technology over the other. 19 CHAIRMAN LLOYD: I don't think we -- we don't have 20 the time to debate that dual path again. I think as Jed 21 pointed out, clearly we did get benefits also from the 22 diesel path, which we would not get in some other areas. 23 Any questions from the colleagues here? 24 I think you indicated, Bob, your testimony is 25 consistent with the others, that I think you heard the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 answers and questions, you heard the answers. 2 Very much appreciate it. 3 Next we have Richard Burton from the transit 4 district there and appreciate you coming. 5 MR. BURTON: Good morning, Chairman, members of 6 the board. Thank you for being here today. Welcome to 7 Monterey. 8 Certainly appreciate you being here. It makes my 9 drive much easier. I don't have to go to Sacramento or El 10 Monte to see you. 11 Just a few things that have occurred to me here. 12 So far what's happened this morning is your board 13 certainly established policy, the CARB staff implements and 14 informs you and us, the engine manufacturers certainly play 15 a role in what goes on, and we're here -- we're the end 16 user. We are striving to implement and we're striving to 17 find the technology, we're striving to find the funding. 18 So if you all are a little bit confused about this 19 question, conflicting statements, you can imagine what the 20 end user level is like trying to interpret and be sure we're 21 doing the right thing. 22 That having been said, I want to comment about the 23 items before you are we think it makes sense as well to 24 harmonize the CARB with the EPA requirements. 25 At our level it makes it easier to implement. It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 allows more time to plan and execute and assemble the 2 funding. And funding is the real issue for smaller transit 3 systems. 4 I had a chance to talk to the board in September 5 in Sacramento, and I want to continue to make the point that 6 there are distinctions, there are problems with rural and 7 small systems trying to assemble the funding and assemble 8 the funding in the time frame that's being required by your 9 board. 10 It's certainly been hammered home, I think the 11 time needs to occur as well for the technology to develop. 12 We think as well the rule should apply to everyone 13 and not just public transit buses, but school buses, tour 14 trucks, trucks, stationary uses, marine applications. 15 In so doing then, again, as you've heard today, we 16 think the market will develop. It will attract interest in 17 making the California heavy-duty diesel market a viable, not 18 only for engine manufacturers, but emission control 19 manufacturers. 20 Lastly, I'd like to say that rather than establish 21 an across-the-board statewide rule, we think it makes sense 22 to allow provisions for rural areas, for attainment areas, 23 for small and rural transmit systems. 24 I think what needs to be considered in that study 25 is the emissions in the air district. For instance, in our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 district we are less than one percent of the total emissions 2 from buses of all kinds, so if we were to convert to an 3 alternative fuel across the board, that does not have 4 significant impact on air quality impact on our district. I 5 realize statewide there's some considerations. 6 I'd like to say as well we appreciate the fact 7 that Dr. Nancy Steele is slated to come to our California 8 Transit Association Annual Conference, which is in San Jose 9 November 7th through 9th. 10 Again, part of the outreach from the CARB staff, 11 as well as our opportunity to find out firsthand and some of 12 the things we don't understand. 13 I would certainly encourage your board, if you 14 have the time and opportunity, to see firsthand what it is 15 the transit systems in California are doing to implement the 16 transit rule. 17 Just a couple things on what's been said here 18 today. 19 It occurred to me as I was listening to this that 20 natural gas some years ago was seen as the answer for our 21 application, transit bus. 22 We did last winter see our costs per gallon of 23 natural gas go from 65 cents a gallon to over $2 a gallon. 24 It's since come back down until this past month to get it 25 back down to 89 cents, but it's tough to budget for those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 kind of things. 2 It was envisioned to be a unlimited supply. We're 3 finding that's not necessarily the case. It appears to be 4 that all the electrical generating stations that being are 5 built to meet California's energy needs are going to be 6 fired by natural gas. 7 So the issue of supply and demand will drive the 8 costs and have a direct impact on us. 9 I wanted to comment as well on the perception by 10 your board that transit systems, the electric and diesel 11 path are not meeting CARB expectations, as well as the 12 statement made here that public transit can do better 13 sooner. 14 Transit systems are not staffed, financed or 15 equipped to be R and D activities. 16 Our mission is to put reliable, safe, affordable 17 service on the street. 18 And we have been operating natural-gas-powered 19 buses now for five and a half years. We have real-world 20 experience with them. We find that they are not proven 21 technology. They break down more frequently than diesel 22 buses and they are more expensive, specifically 18 percent 23 higher to operate. 24 So I would encourage you to consider to continue 25 to allow and consider the dual fuel path and be fuel neutral PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 as we implement the rules. 2 Thank you. 3 CHAIRMAN LLOYD: Natural gas buses you utilize, do 4 they use technology provided by two of the manufacturers we 5 discussed today? 6 MR. BURTON: I can tell you we have eight buses 7 powered Detroit Diesel natural gas engines. We have nine 8 buses powered by Cummins natural gas engines. We have big 9 problems with both. 10 CHAIRMAN LLOYD: Questions from the colleagues? 11 Thank you very much. 12 MR. BURTON: Thank you. 13 CHAIRMAN LLOYD: Louise Brown. Louis Browning, 14 sorry. 15 MR. BROWNING: Actually, Louis Browning from 16 Arthur D. Little. I'm here representing the California 17 Electric Transportation Coalition. 18 The California Electric Transportation Coalition 19 of California applauds the ARB for adopting more stringent 20 emission standards for heavy-duty diesel engines. 21 However, very -- several very low or zero emission 22 technologies which are in existence today, as well as some 23 that are close to commercialization, are excluded from this 24 regulation, as well as the averaging, banking and trading 25 portion of the regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 Battery electric heavy-duty vehicles, fuel cells 2 and hybrid electric vehicles could easily meet these new 3 stringent emission standards. 4 Since they do not represent engine families, but 5 rather the vehicle power trains, they've not been considered 6 as part of the technology to meet these standards. 7 In addition, they are not eligible to receive 8 credits from either of the early adoption or the reduced 9 family emission levels. 10 Obviously, several issues arise for technologies 11 for these electro technologies, such as what test cycle to 12 use, and who should receive the credit. 13 Cal ETC believes that these issues will take time 14 to resolve, but they are not insurmountable, and they can 15 provide incentives to commercialize these electro 16 technologies. 17 Cal ETC suggests that the proposed emission 18 standards be adopted as is, but in the future that ARB staff 19 include electro technologies as an option to meet these 20 standards, and to work on mechanisms to provide credits for 21 those electro technologies. 22 Although we are raising this issue today with the 23 2007 heavy-duty diesel emission regulations, we believe ARB 24 should include electro technologies as an additional option 25 to meeting other regulations based on engine families. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 Cal ETC is pleased to provide any support needed 2 to have ARB include these technologies and the average 3 banking and trading portion of the 2007 emission standards, 4 as well as any other emission-based regulations. 5 Thank you. 6 CHAIRMAN LLOYD: Thank you. 7 Of course, as you know, we put that into some of 8 the programs there in the transit, so we have a 9 demonstration of zero emission technologies. So I 10 appreciate your interest there. We look forward to 11 continued support of the Cal ETC. We want to make sure that 12 the demonstration programs that we have there are giving the 13 electro technologies a shot that will actually come to 14 fruition. 15 So thank you very much. Thank you. 16 Paul Wuebben 17 MR. WEUBBEN: Good morning, Mr. Chairman, members 18 of the board. I'm Paul Weubben, of the South Coast Air 19 Quality Management District. 20 And the district greatly appreciates the 21 opportunity to present our comments this morning. 22 This is certainly an important milestone in the 23 ARB's air pollution control efforts, and we strongly support 24 the adoption of the proposed standards before you today. 25 Heavy-duty truck diesel vehicles do contribute a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 very disproportionate amount of the emissions in the South 2 Coast air basin and statewide, as you've heard. 3 In the South Coast air basin, we've violated the 4 ozone standard 36 days this year, so the diesel emission 5 reductions of hydrocarbon and NOx are going to be very 6 important in that regard. 7 These vehicles obviously also contribute very 8 significantly to toxic emissions and the particulate matter 9 emissions and that's important to us because we found that 10 70 percent of the airborne toxic cancer risk in the South 11 Coast air basin is directly associated with exposure to 12 diesel particulate. 13 So we think that that's also an important 14 discussion, because of the environmental justice concerns 15 that relate to inner city neighborhoods having a 16 disproportionate amount of truck traffic in those areas. 17 We'd also like to put your consideration in 18 another context, namely that the engine manufacturers, of 19 course, that are affected by this rulemaking have been 20 subject to simply the most extensive and expansive air 21 pollution control related consent decree ever implemented. 22 So we certainly believe that these standards have 23 to be structured to ensure that that experience that drove 24 those consent decrees is not repeated. 25 I'd like to focus our comments really on four PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 specific areas. Diesel fuel quality, particulate matter 2 standards, the not-to-exceed certification criteria that are 3 included in this, and also the transit bus standards which 4 were being discussed. 5 On the first point, unlike the board's historic 6 low emission vehicle clean fuels program that you adopted 7 initially in 1990 for the light-duty portion of the fleet, 8 the action of course today does not include low sulfur 9 diesel fuel specifications that are in fact needed to ensure 10 the long-term compliance with these standards. 11 Of course, the retail availability of low sulfur 12 diesel fuel is essential to protect the hardware investments 13 which engine operators are going to incur as they purchase 14 new engines. 15 And as you, I'm sure, know, in September of last 16 year the South Coast District board did adopt, as Mr. Kenny 17 mentioned, these fuel standards for the South Coast air 18 basin, the low sulfur diesel fuel. Those take effect, as 19 you may know, initially as early as January 2005 and no 20 later than July 1st, 2006. 21 And, of course, no similar statewide standards are 22 in place, so we would like to suggest that to help address 23 that issue we just simply recommended that you consider 24 adopting diesel fuel specifications, low sulfur diesel 25 specification as soon as possible. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 On the second point regarding the particulate 2 matter standards, we think that there is an issue there 3 about the degree of stringency that on a per-mile basis 4 heavy-duty trucks are the single highest vehicular source of 5 toxic emissions that operate in urban environments, and we 6 do think that all technologically feasible measures should 7 be pursued to reduce toxic emission risks. 8 And in that regard we would therefore recommend 9 that the board establish a stretch goal or a target, if you 10 will, that would essentially establish an equivalency or a 11 target that would be set originally on a PM comparison basis 12 to what's achievable on natural gas engines. 13 That level is .005 grams, .005 per brake 14 horsepower hour PM, and we think that that type of long-term 15 target could be established, not necessarily as particularly 16 as a standard, but as a target, and then perhaps 12 to 18 17 months later there could be a formal consideration, a 18 formalizing that type of a standard based on any fuel coming 19 forward and being able to achieve such levels. 20 The third area that we'd like to address is the 21 not-to-exceed, so-called NTE, values. We think that this is 22 important, especially in light of the federal litigation, 23 which was referenced by the EMA representative. 24 The staff, as you may know, are proposing that 25 this NTE cap be increased, and we'd like to suggest that it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 be kept at a minimum 1.25. There are some concerns. I 2 appreciate, in terms of your ability to perhaps adjust that 3 record or that NTE value today, but we would just generally 4 urge that you consider maintaining at the minimum point 5 possible that value because maintaining that level is 6 critical to ensuring the durability and compliance with your 7 standards. 8 On the last point I would like to address is 9 regarding the transit bus issue. We strongly agree with 10 your staff that there is ample time to consider this whole 11 question in the future if that's necessary. 12 It is not appropriate, in our judgment, to relax 13 the transit standards or their time table. In fact, natural 14 gas buses have outperformed diesel technology in terms of 15 the emissions since 19 -- since 1994, at least. 16 So I think simply stated there really is no 17 justification to impede the market momentum of natural gas 18 buses in order and in some sense to give diesel engines more 19 time. 20 So we would urge that you, as suggested by your 21 staff, hold that issue at abeyance. 22 In summary, we strongly support the actions before 23 you today and their adoption, and appreciate the opportunity 24 to be here today and give these comments. 25 And I'd be happy to answer any questions that you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 have. 2 CHAIRMAN LLOYD: Thank you very much, Paul. 3 Questions? 4 Mr. Calhoun. 5 BOARD MEMBER CALHOUN: Paul, you mentioned the 6 fact that the South Coast District, the overall standard, 7 that they exceeded the standard? 8 MR. WEUBBEN: That's correct 9 BOARD MEMBER CALHOUN: Were most of those 10 exceedences on the weekend? 11 MR. WEUBBEN: I believe the predominant number are 12 disproportionately on the weekend, but they do still occur 13 during the week as well, but there does certainly appear to 14 be a continuing weekend effect, perhaps about 10 percent 15 more than expected of the non-compliance would be in the 16 weekend period. 17 BOARD MEMBER CALHOUN: Thank you. 18 CHAIRMAN LLOYD: That's 35 days? 19 MR. WEUBBEN: 36 days a year so far. 20 CHAIRMAN LLOYD: Question I'd like to ask staff 21 and Paul. I thought in the resolution it implied that it 22 assumes that low sulfur diesel would be available. 23 I think I asked that question of Mr. Mandel. 24 Is that implied in there as well? The way I read 25 it, I don't know if it's necessarily coming back to us, but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 it's also implied in there that clearly this technology does 2 depend on the availability. 3 MR. KENNY: Our clear assumption is that low 4 sulfur diesel would be available. 5 CHAIRMAN LLOYD: That's what I thought. 6 Paul, on the worst case, we get to 2005 and we 7 don't have any rule at the federal level or state level, how 8 will you enforce your standard? 9 MR. WEUBBEN: Our rule would be implemented as of 10 January 1st, 2005, or we would intend to enforce it similar 11 to the criteria that the ARB has established for your 12 existing low aromatic and current diesel fuel requirements. 13 So the basis of enforcement would be the same, but there now 14 would be an additional sulfur -- 15 CHAIRMAN LLOYD: Would this be for vehicles 16 operating in the South Coast or buying fuel in the South 17 Coast? 18 MR. WEUBBEN: It would actually be on production 19 and supply of fuel, and that onus would fall directly on the 20 fuel producers and suppliers. So it wouldn't fall directly 21 on the users. 22 But I would also point out that our rule covers 23 both stationary and mobile sources, so basically there is no 24 exemption in sources. In fact, we have an earlier 25 obligation under that rule in starting in 2004 for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 stationary sources in the purchase of fuel. 2 CHAIRMAN LLOYD: People could cluster supplies 3 around the border of the South Coast? 4 MR. WEUBBEN: Yes, indeed. In fact, that's one 5 reason why we certainly see the importance of that 6 interstate and the intrastate traffic impacting on our 7 areas. 8 CHAIRMAN LLOYD: Thank you very much. 9 Any other comments? 10 Mr. Kenny? 11 MR. KENNY: No. 12 CHAIRMAN LLOYD: Since all the testimony, written 13 submissions, and staff comments for this item have been 14 entered into the record, and the board has not granted an 15 extension of the comment period, I'm officially closing the 16 record on this portion of the agenda, item 01-8-1. 17 Written or oral comments received after the 18 comment period has been closed will not be accepted as part 19 of the official record on the agenda item. 20 And just my colleagues here, since this is a 21 policy item, regulatory item, if you have any ex parte 22 communications with outside parties involving the item, we 23 can mention at this time. 24 Seeing none, I would like to see if there's any 25 discussion in connection with the resolution that came PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 before us? 2 BOARD MEMBER CALHOUN: Mr. Chairman, I think we've 3 heard a lot of concern expressed by the major engine 4 manufacturers today, and lot of optimism on the staff's 5 part. 6 And I believe, contrary to the impression I got 7 from Jed Mandel, that they're probably optimistic too. 8 They're working hard, I'm sure of that. 9 I think sometime between now and 2007 we ought to 10 take a good look at where the status of the technology is 11 and make some sort of decision at that time. 12 CHAIRMAN LLOYD: I thoroughly agree with that. I 13 thought in the discussion we had here that that was going to 14 be implied, that clearly we need to be monitoring very 15 clearly, that we're going to see something on the transit 16 bus rule early next year, and we clearly need to be kept 17 informed of this. 18 So I think that's embedded in what we have here, 19 or at least implied is the intent is there. 20 Other comments from the board? 21 BOARD MEMBER PATRICK: I don't have a comment. 22 I would just move resolution 01-38. 23 BOARD MEMBER D'ADAMO: Second. 24 CHAIRMAN LLOYD: All in favor say aye. 25 (Ayes.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 CHAIRMAN LLOYD: Any opposition? 2 Seeing none. 3 And I think what you heard clearly here, I think 4 that while we remain optimistic, we also want to be 5 realistic too. And I think also perhaps in terms of what 6 the EMA is saying. 7 So thank you very much. 8 Thank you, staff. 9 We're going to take a five minute break for the 10 court reporter to take a break, and then we'll continue with 11 the next item. 12 (Thereupon a short recess was taken.) 13 CHAIRMAN LLOYD: The next item on the agenda today 14 is 01-8-2, proposed awards under the innovative clean air 15 technologies or ICAT grant program. 16 This is the eighth year of the ICAT program, which 17 supports the demonstration of technologies that have a high 18 potential to provide emission reductions and for helping 19 California's economy by becoming fully commercialized. 20 Mr. Kenny, will you please begin staff's 21 presentation. 22 MR. KENNY: Thank you, Dr. Lloyd, members of the 23 board. 24 I think what I'll do is just simply turn it over 25 to Richard. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 MR. COREY: And I'll pass it to Rich Vincent, who 2 is going to make the presentation. 3 MR. VINCENT: Good morning, Mr. Chairman and board 4 members. I'll begin with a short review of ICAT, and give 5 of examples of commercial successes following ICAT grants. 6 Then I'll report briefly on two ICAT-funded 7 projects that were before the board recently. 8 Finally, I will present the staff's 9 recommendations for new grants to eight projects that we 10 have selected from recent applications. 11 ICAT supports field demonstrations of market-ready 12 technical innovations that will control air pollution or 13 otherwise support ARB's programs and that have economic 14 value to the state. 15 ICAT is directed at technologies that are past the 16 R and D stage, but not yet commercial. 17 To enter commercialization, technology owners 18 often need to make practical demonstrations, but they have 19 trouble finding funds for those demonstrations. 20 Therefore, ICAT was created to identify promising 21 technologies and co-fund up to half the budgets of those 22 demonstration projects. 23 The program began in 1994, and we have assisted 24 about 20 new technologies and applications related to air 25 pollution control of California. They span a wide range. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 Of these 20 technologies supported by ICAT that 2 become commercial, their owners have projected over $200 3 million in annual sales, which correspond to income tax 4 revenues in California of $12 million per year. 5 The owners estimate that over 300 jobs have been 6 and will be created in the state. 7 Two examples of commercial success directly 8 credited to ICAT are Adhesive Coatings Company and Westport 9 Innovations. 10 ADCO, a small company who received -- a small 11 California company, received an ICAT grant to develop and 12 demonstrate a zero VOC coating for metals. That 13 demonstration led to a business partnership with a large 14 manufacturer of resins. ADCo was thereby able to build 15 production facilities that now produces and sells a line of 16 zero VOC coatings. 17 Westport was a small R and D company with a new 18 fuel injector to improve the performance of the natural gas 19 engines, but no means to demonstrate the commercial utility. 20 Their successful ICAT project at UC Berkeley with 21 a joint venture with Cummins Engine Company, the world's 22 largest engine manufacturer, that joint venture has led to 23 major contracts for natural gas vehicles. 24 Also, Westport is working with Ford Motor Company 25 to design light-duty natural gas vehicles, and it has won PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 major R and D contracts from the Department of Energy. 2 Two ICAT-funded projects were completed recently. 3 Both demonstrated new ways to control and prevent NOx from 4 industrial furnaces, sources for which standard NOx controls 5 have generally not been practical. 6 Both projects met their project goal. The 7 grantees gave seminars at ARB after their projects as part 8 of the chairman's seminar series, and their reports are on 9 our ICAT Web site. 10 The first project applied to BOC gases a LoTOx 11 process to a battery melting furnace in City of Industry in 12 South Coast. 13 This type of source cannot be treated with 14 controls such as selective catalytic reduction. In LoTOx, 15 ozone is generated and injected into the flue gas in 16 proportion to the instantaneous NOx content. The ozone 17 oxidizes the NOx to form nitric acid, which is easily 18 removed with an aqueous filter. The degree of NOx removal 19 is tunable by controlling the amount ozone injected. 20 In this furnace, the LoTOx application achieved 95 21 percent NOx control. 22 The second recent project was also at a furnace in 23 the South Coast in Southgate. It applied a technology that 24 provides NOx control and is modest, simple and inexpensive. 25 A special valve pulses the fuel flow to the coal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 furnace burners. The resulting pattern of rich and lean 2 fuel air mixtures at the burners reduces the formation of 3 NOx, compared to the steady fuel flow, and it saves fuel. 4 Under some operating conditions in the project, 5 NOx emissions were cut in half, and three percent of the 6 fuel was saved. 7 Today we are recommending eight new projects for 8 grants totalling $1.3 million. They involve a wide range of 9 source types, including ARB programs, including EV's and 10 diesel PM. 11 The ICAT funds would provide about 30 percent of 12 the total funding for all the projects together. 13 These eight projects were selected from an initial 14 group of 48 applications, because of their qualities with 15 respect to our criteria on the slide. We evaluated the 16 quality of each technology, potential emission reduction in 17 California, the potential for commercial application, the 18 economic benefit to California, the quality of the 19 demonstration project that ICAT would support, and the 20 ability of the applicant to provide the required co-funding. 21 Our staff received reviews from other divisions, 22 from the Energy Commission, and the South Coast AQMD, and 23 from academic reviewers. 24 The next few slides describe the projects. 25 Conserval Systems would retrofit several crop PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 drying sheds in the Central Valley with solar dryers, 2 reducing NOx from burning natural gas. The technology has 3 over a thousand potential applications in crop dryers in 4 California. For a typical installation, the estimated 5 avoidance of NOx emissions is 180 pounds per year. Other 6 drying operations other than crop drying are possible also. 7 Rypos Incorporated would demonstrate an active PM 8 trap for stationary diesel engines. The trap is regenerated 9 electrically with only a modest current draw. The 10 technology works even at low exhaust temperatures and 11 regardless of the sulfur content in the diesel fuel. Rypos 12 will retrofit four engines of different sizes and different 13 uses in the state. 14 The Gas Technology Institute, or GTI, will 15 demonstrate the transfer of low NOx burner technology to 16 furnaces equipped with radiant tube burners, a source class 17 for which combustion modifications so far have not been 18 effective. The demonstration would be on a radiant tube 19 furnace in a steel plant in Fontana. 20 There are two other stationary source projects, 21 one by IonEdge and another by Gregg Industries. 22 IonEdge would demonstrate metal plating by vapor 23 deposition. The process plates chrome, nickel and other 24 metals onto commercial products without emissions of 25 chromium 6 and other toxic air contaminants. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 demonstration would occur mainly in Anaheim in a production 2 plant of electronic parts. 3 Gregg Industries in El Monte would demonstrate a 4 new system for controlling odors and benzene emissions from 5 metal casting operations. It promises to provide a solution 6 for odor complaints by foundries. Next month the South 7 Coast staff will propose to its board to match the ICAT 8 funds in support of this project. 9 Also there are three mobile source projects. 10 UC Davis Institution for Transportation Studies 11 would augment an existing project to demonstrate hydrogen 12 technologies in public transit. A bus would be equipped 13 with a 30 percent to 70 percent mixture of hydrogen and 14 natural gas to achieve the board's very low NOx limit that 15 will take effect in 2007. 16 The bus's performance will be monitored in transit 17 service in Yolo County. This technology would provide an 18 impetus for developing hydrogen infrastructure in advance of 19 the deployment of all hydrogen systems such as fuel cells. 20 In the second project, the Sacramento Municipal 21 Utility District would demonstrate the advanced battery 22 technology in a school bus. The technology has features of 23 cost, safety from charging that are well suited for school 24 bus service and heavy-duty engines in general. The 25 demonstration would be in Napa. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 Finally, AC Propulsion would demonstrate the use 2 of a hybrid electric vehicle to feed power to the electric 3 utility while the vehicle is parked and fueled with natural 4 gas provided at the charging station. If commercialized, 5 this technology would allow the value of power produced to 6 offset the capital cost of hybrid vehicles and thus improve 7 the attractiveness of EV-related vehicle technology to 8 potential buyers. 9 The board of the South Coast District has approved 10 $180,000 in support of this project. 11 In summary, ICAT has a record of supporting sound 12 projects for useful new technologies that provide economic 13 rewards, and we are proposing today eight new projects that 14 span a wide range of sources, pollutants and ARB's 15 interests. 16 That concludes the presentation, and I would be 17 happy to answer your questions. 18 CHAIRMAN LLOYD: Thank you very much. 19 Let me ask a question. 20 Of course, product very close to my heart is new 21 technology, but what is -- how successful have we been in 22 getting money translated into successful programs? 23 MR. AHUJA: Manjit Ahuja. 24 Dr. Lloyd, until now, the board has approved a 25 total of 21 projects for this program. Of those 21 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 projects, seven projects are still ongoing. Of the 2 remaining 14 projects, two projects were terminated before 3 they were completed prior to completion. 4 One of those projects was to reduce NOx emissions 5 from cement kilns and we could not find a host site, so we 6 cancelled that project. 7 The second project that was cancelled before it 8 was completed was Sorbent Technologies. They were able to 9 obtain some funding from some private sources, so they 10 didn't need our money. And out of the total 150 K, $4,000 11 was spent on the project. 12 Of the remaining 12 projects, six companies have 13 already made sales, commercial sales. 14 Three of the companies are trying to make -- plan 15 to sell their products, their products are on the Web, and 16 they're trying to very actively sell their products. 17 Of the remaining three companies, one is just very 18 new, just completed, and the other two, they are struggling. 19 So I would say overall it's a very good success 20 rate. 21 CHAIRMAN LLOYD: Very impressive. 22 Comments? 23 BOARD MEMBER RIORDAN: May I ask just a question. 24 Prior to this, have we granted any money to other 25 state agencies or sister agencies as we are doing in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 recommendation today? 2 MR. AHUJA: You mean other -- 3 BOARD MEMBER RIORDAN: Well, you have UC Davis and 4 SMUD down here. 5 MR. AHUJA: This is the first time UC Davis is 6 getting any money from ICAT and the first time SMUD is 7 getting any money. In fact, prior to this we have not given 8 any money to any public agency. 9 CHAIRMAN LLOYD: Again, I understand it goes to 10 private companies -- 11 MR. AHUJA: It's that -- 12 CHAIRMAN LLOYD: UC Davis is the host, but they 13 have people working with them. 14 MR. AHUJA: There's a private company, NLG, that 15 is doing the demonstration work. 16 CHAIRMAN LLOYD: I know I'm familiar with that 17 company, so I'm really excited about that. 18 BOARD MEMBER RIORDAN: So there is a private 19 company. 20 I'm thinking of in terms of generating new 21 business, new jobs for California, if you don't have a 22 private company involved and you simply are adding to -- 23 it's almost like a research. 24 MR. AHUJA: That's a very good point. In fact in 25 the past we have received proposals from Southern California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 Edison, and because of the very fact that you mention that 2 it did not have the commercial component or a commercial 3 partner, they were not recommended to the board for funding. 4 The reason this is being proposed is because 5 there's an element of a company that will stand to benefit 6 and make profit and has therefore incentive to go forward. 7 BOARD MEMBER RIORDAN: Good. 8 CHAIRMAN LLOYD: Looks like some excellent 9 excellent projects in this span and variety of technologies. 10 Compliment staff in making these selections. 11 Professor Friedman. 12 BOARD MEMBER HUGH FRIEDMAN: I was going to move 13 this. Do we need -- is this something we have to disclose? 14 CHAIRMAN LLOYD: Sorry. It's not a regulatory 15 item. However, we do have a resolution before the board, so 16 we do need to take a moment to review that. 17 And then we have resolution numbers 01-39 to 18 01-46. I'm looking for a motion and a second. 19 BOARD MEMBER HUGH FRIEDMAN: I'll move. 20 BOARD MEMBER WILLIAM FRIEDMAN: Second. 21 CHAIRMAN LLOYD: Motion and seconded. 22 All in favor say aye. 23 (Ayes.) 24 CHAIRMAN LLOYD: No one opposing, so it's 25 unanimous. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 Thank you. 2 The next item on the agenda today is 01-8-3, 3 proposed amendments to the air toxics hot spots fee 4 regulation for fiscal year 2001-2002. 5 The Air Toxics Hot Spots Program is the foundation 6 in our effort to identify and assess air toxic emissions 7 statewide. 8 The ARB works closely with the Office of 9 Environmental Health Hazard Assessment and local air 10 districts to implement this program. 11 This program includes an annual fee schedule to 12 recover state and local costs from sources of toxic 13 emissions. 14 Consistent with state law, staff is proposing a 15 fee regulation that is based on the relative health risk 16 posed by each facility subject to this fee regulation. 17 Mr. Kenny, would you like to introduce this item? 18 MR. KENNY: Yes, thank you, Mr. Chairman and 19 members of the board. 20 Staff is proposing the fees for all facility 21 categories stay at the same level as last year. 22 The proposed amendments use the same method for 23 allocating fees as was used for the past four years. 24 We are also proposing to streamline the process 25 for administering the fee program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 If the board approves these proposals, it will no 2 longer be necessary for the board to reauthorize this fee 3 regulation on an annual basis as long as the fees remain at 4 or below current levels. 5 This will enable us to redirect staff resources 6 now used to annually amend the fee regulation and to focus 7 them on the public health objectives of the program. 8 With that introduction, I'll ask Mr. Chris Halm to 9 make a presentation. 10 Chris. 11 MR. HALM: Thank you, Mr. Kenny. 12 Good morning, Chairman Lloyd and members of the 13 board. 14 We are here today to present the staff's 15 recommendation for amending the air toxics hot spots fee 16 regulation for fiscal year 2001-2002. 17 Each year for the past 13 years we have come 18 before the board to present amendments to the fee 19 regulation. 20 If the board approves the amendments being 21 proposed today, it will no longer be necessary for the board 22 to reauthorize this fee program on an annual basis. 23 The purpose of the Air Toxics Hot Spots Program is 24 to have facilities report the nature and extent of their air 25 toxic emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 The district then prioritizes those facilities by 2 risk, and then works with the facility to reduce those 3 risks. 4 In addition to meeting the requirements of the 5 legislation, the Hot Spots Program also assists in the 6 implementation of our community health program. 7 The fee regulation recovers state costs that are 8 necessary to implement the Air Toxics Hot Spots Program. 9 The fee regulation also recovers district costs 10 and establishes fees for five districts that do not have 11 their own locally adopted fee regulation. 12 The fee regulation does not recover district costs 13 for the remaining districts that adopt their own fee 14 regulation. 15 We are proposing to keep state facility fee rates 16 the same as the last four fiscal years. The original staff 17 proposal for state fees in the staff report was 18 approximately $880,000. This amount has been revised to 19 reflect additional information provided by districts 20 subsequent to the publication of the staff report and has 21 been adjusted upward to approximately $946,000. We have 22 provided you with a copy with these modifications. 23 This document is also available on the table at 24 the entrance to this room. 25 60 percent of the fees support the Office of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 Environmental Health Hazard Assessment to update the risk 2 assessment guidelines and assist districts with exposure 3 assessments. 4 40 percent of the fees support ARB in implementing 5 the regulation and are used to collect and validate toxic 6 air pollutant emission data. 7 For future fiscal years, we are proposing some 8 changes to streamline the fee program. Most importantly we 9 are proposing to convert the annual fee update to an 10 administrative process that we'll discuss in a moment. 11 We are also proposing a new process for recovering 12 district program costs for those districts that do not have 13 a locally adopted fee regulation. 14 To keep information on the fee program available 15 to the public, information on the fee regulation will be 16 summarized in an annual status report. 17 As I mentioned earlier, the staff has proposed 18 amendments to the fee regulation every year for the past 13 19 years. This year the staff is proposing to streamline the 20 fee program by requesting that the board adopt the current 21 fee formula and delegate the authority to assess fees based 22 on that formula to the executive officer of the ARB. 23 The fees for each fee category have remained 24 stable over the last few years and the staff does not 25 anticipate any major changes in the way the fees are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 currently calculated or collected. 2 Because the fee program now is a stable process, 3 the staff believes that minor year-to-year adjustments in 4 state program costs no longer require the board's annual 5 review and approval. 6 This proposal will maintain the fees for each fee 7 category at current levels for the foreseeable future. If 8 it becomes necessary to make changes to the fee regulation, 9 the staff will return to the board to amend the regulation. 10 This proposal frees staff resources to focus on 11 risk reduction, the goal of the Hot Spots Program. 12 Because we're proposing to convert the annual 13 update of the fee program to an administrative process, 14 there would no longer be a process of continuing to adopt 15 fee schedules for districts on an annual basis. 16 After extensive consultation with the affected 17 districts, we came up with proposal that would allow those 18 districts that do not adopt their own fee regulation to 19 continue to be included in our state fee regulation. 20 The provision sets a maximum fee for district 21 costs and requires districts using this option to provide 22 the ARB with information to substantiate the fees collected. 23 This information will be reviewed in the annual 24 status report. 25 Districts with program costs above the maximum fee PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 rate would have to adopt their own fee regulation. 2 This change in process still allows all districts 3 to continue to adopt their own local fee regulations. 4 Much like the staff report does for the current 5 fiscal year, the annual status report for future fiscal 6 years will summarize the district and state costs for each 7 district. 8 In addition, the status report will describe how 9 the funds are being used by the state, along with 10 documentation of district costs for those districts that 11 choose not to adopt their own regulation. 12 This report will provide a complete summary of the 13 hot spots fees and will be made available to the public and 14 government agencies soon after the fees have been 15 determined. 16 We will include sufficient detail so that any 17 facility in the state can see how their fees are being used 18 to reduce the public exposure to air toxics in California. 19 The ARB staff recommends that the board adopt the 20 staff's proposal for amending the fee regulation for fiscal 21 year 2001-2002, including those changes for future fiscal 22 years. 23 That concludes my presentation and the staff's 24 proposal. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 CHAIRMAN LLOYD: Thank you. 2 BOARD MEMBER WILLIAM FRIEDMAN: I'm for anything 3 that reduces the necessity for us to review things on a 4 yearly basis when it's very straightforward. 5 Do I get a copy as a board member of this annual 6 status report? I don't know that I ever remember seeing it 7 and I just, as a courtesy -- 8 MR. KENNY: Actually in the past it hasn't 9 existed. We have always come to the board with regard to 10 the fee proposals on hot spots reg. 11 BOARD MEMBER WILLIAM FRIEDMAN: I really just want 12 to make sure that if we vote on anything that we really do 13 need to see on the same basis as you notify the public, 14 notify the board members, and that would be suitable for me. 15 MR. KENNY: Dr. Friedman, we would provide it to 16 you and to all board members. 17 CHAIRMAN LLOYD: One thing I appreciate looking at 18 this issue for risk reduction, I just wonder if you have any 19 personal experience with potential source of emissions that 20 we do have looking at toxic exposure from gas-fired pits, 21 which may be -- well, but maybe particularly those enclosed 22 by gazebos. 23 (Laughter.) 24 BOARD MEMBER RIORDAN: This must be an inside 25 joke. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 CHAIRMAN LLOYD: It is a concern I have, because 2 you have potential of mixing with the ethanol. 3 MR. HALM: We'll look into it. Thank you. 4 (Laughter.) 5 BOARD MEMBER RIORDAN: Mr. Chairman, I was briefed 6 by staff, and I very appreciate the fact they continue to 7 work with those districts like mine that still do not adopt 8 their own fees. And I don't know what the history of that 9 is. I assume it's probably to point to the state and say, 10 oh, they did it to us, or something. 11 But I recognize they work very hard to try to 12 accommodate those few districts that don't adopt their own, 13 and I want to thank them for that. 14 And like Dr. Friedman, I'm delighted that we avoid 15 a board hearing and have simply a report. 16 This is an important phase of our work, but we are 17 doing such a good job that I think we don't necessarily need 18 a hearing on the matter. 19 I'm very supportive of the resolution and would be 20 happy to move approval at the time it's appropriate. 21 CHAIRMAN LLOYD: I think Professor Friedman. 22 BOARD MEMBER HUGH FRIEDMAN: Just a quick 23 question. I assume the districts are completely content 24 with this change in process or procedure? No objection? 25 MR. HALM: Yes, sir, they are. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 BOARD MEMBER HUGH FRIEDMAN: I'll second that 2 motion. 3 BOARD MEMBER RIORDAN: They have worked with all 4 of them. 5 MR. KENNY: I think the one quick thing to comment 6 on this is as in the past, actually in the early '90s, the 7 hot spots fee regulation was actually kind of an annual and 8 fairly contentious board hearing, and the fees that were 9 associated with the regulation at that point in time 10 were substantially higher than we are talking about 11 today. 12 What has occurred over the last few years is that 13 we have actually brought the fees down and the 14 contentiousness has really disappeared over the last three 15 or four years. So we are at a point where we think that in 16 order to just simply take advantage of the economy of time 17 and things like that that the board establish a formula and 18 implement that formula and if the formula needs changing 19 we'll bring it back to you. 20 CHAIRMAN LLOYD: Yes. We have no public testimony 21 at this time, so I officially close the record on this 22 agenda item. 23 However, the record will be reopened when the 24 15-day notice of public availability is issued. 25 The written or oral comments received after this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 hearing date, but before the 15-day notice is issued, will 2 not be accepted as part of the official record on this 3 agenda item. 4 When the record is reopened for a 15-day comment 5 period, the public may submit written comments and proposed 6 changes, which will be considered and responded to in a 7 final statement of reasons for the regulation. 8 Any ex parte communication from my colleagues? 9 Seeing none, we have a -- 10 BOARD MEMBER RIORDAN: Resolution. 11 CHAIRMAN LLOYD: Resolution. 12 BOARD MEMBER RIORDAN: I'll move approval of 13 resolution 01-47. 14 CHAIRMAN LLOYD: Second? 15 BOARD MEMBER HUGH FRIEDMAN: Second. 16 All in favor say aye. 17 (Ayes.) 18 CHAIRMAN LLOYD: Anyone against? No. Unanimous. 19 Thank you very much indeed. 20 Thank you, staff. 21 Next item on the agenda today is 01-8-4, proposed 22 amendments to vapor recovery certification and test 23 procedures. 24 Vapor recovery is one of California's air earliest 25 air pollution control programs. Vapor recovery at gas PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 stations began in a few local air districts in the early 2 1970s. Then, in 1975, state law established a vapor 3 recovery certification program at the state level to be 4 administered by ARB. 5 In December of that year, ARB adopted the first 6 set of certification and test procedures for vapor recovery 7 systems at gasoline dispensing stations. 8 All of these procedures are regularly updated to 9 keep up with new technology. The most recent revision was 10 the enhanced vapor recovery regulations approved by this 11 board in March of last year. 12 I understand the staff considers the proposed new 13 and modified certification and test procedures as a further 14 enhancement of the vapor recovery certification program. 15 Some of these changes were also developed to address the 16 needs and concerns of local air districts. 17 Mr. Kenny, would you like to start the staff 18 presentation. 19 MR. KENNY: Yes, thank you, Mr. Chairman and 20 members of the board. 21 The proposed amendments will clarify the 22 requirements of the enhanced vapor recovery program and will 23 provide local districts with the tools they need to conduct 24 compliance tests more quickly and efficient. 25 The districts have been using test procedures that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 were developed to meet the needs of the certification 2 program. 3 These procedures require testing that, while 4 appropriate during certification, are burdensome when 5 implemented to determine the compliance of in-use vapor 6 recovery systems at dispensing facilities. 7 We have developed compliance test procedures that 8 eliminate requirements for multiple tests of the same 9 component to determine the compliance status. 10 This is the first of several compliance tests the 11 staff plans to develop to further facilitate district 12 compliance testing programs. 13 Staff is also requesting the board delegate the 14 authority to approve compliance versions of adopting test 15 procedures that are being developed in cooperation with the 16 local districts. 17 This would simplify and expedite the process for 18 approval and implementation of compliance test procedures. 19 The new and revised procedures that we propose for 20 adoption today represent the work of the ARB staff who 21 certify and test vapor recovery systems, as well as the 22 efforts of many other interested parties. These include 23 businesses that manufacturer such systems, the companies 24 that buy and use these systems, and the local air districts 25 that have primary authority for permitting and ensuring PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 in-use compliance of vapor recovery systems in gasoline 2 dispensing facilities. 3 At this time I'd like to turn the presentation 4 over to Laura McKenney. 5 MS. McKENNEY: Thank you, Mr. Kenny. 6 Good afternoon, Chairman Lloyd and members of the 7 board. 8 CHAIRMAN LLOYD: Do you need a little time? 9 Maybe while you're waiting, can I ask Madam 10 Ombudsman if you have any -- please describe the public 11 process and see if you have any comments you want to share 12 with us at this time. 13 MS. TSCHOGL: Sure. 14 CHAIRMAN LLOYD: If that's legally okay. 15 MS. WALSH: That is. 16 MS. TSCHOGL: Mr. Chairman and members of the 17 board, staff began the process of this item in February of 18 this year. 19 On June 20th, they conducted a public workshop in 20 Sacramento to discuss the proposed changes to the 21 regulation. 22 Staff noticed the workshop by posting a link to 23 our Web site and by sending an e-mail message to over 400 24 people or organizations on the vapor recovery list serve. 25 They also mailed hard copies of the announcement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 to an additional 375 interested parties. 2 50 people attended this workshop, representing 3 industry, trade associations, air districts and the 4 environmental community. 5 In addition to this public workshop, staff 6 participated in two meetings of the CAPCOA Vapor Recovery 7 Committee, the first in July and the second in October of 8 this year. 9 Throughout the process, staff had numerous 10 informal discussions with industry, trade associations, air 11 districts and other interested parties to discuss the 12 proposed amendments. 13 Many of the suggestions the staff received are 14 incorporated into the document before you now. 15 Finally, on August 28th, staff announced this 16 hearing. 17 Following this hearing's announcement, they 18 released the staff report by making it available in our 19 public information office. 20 Shortly thereafter, staff sent electronic notice 21 of the report's availability on our Web site and mailed 22 copies to the people and organizations I mentioned a moment 23 ago. 24 That concludes my remarks. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 CHAIRMAN LLOYD: Thank you very much. 2 Another moment? Okay. You have an estimate of 3 how long? 4 MR. CACKETTE: Depends on what your definition of 5 plug and play is. 6 Usually means call 1-800 right away. 7 CHAIRMAN LLOYD: Well, you can see from where we 8 are it looks as though we will be through by 1:00. 9 MR. KENNY: I think so. 10 CHAIRMAN LLOYD: I guess we all have copies. We 11 have we have paper copies. 12 (Pause in proceedings.) 13 MS. McKENNEY Thank you. 14 Today I will present the certification and test 15 procedures that we propose for amendment and the new 16 procedures we propose for adoption. 17 The potential emissions from the fueling of 18 service station storage tanks are significant. When these 19 systems function in actual use as efficiently as they do in 20 certification testing, with 95 percent efficiency, they 21 recover at least 410 tons of hydrocarbon vapors each day. 22 As you can see, the loss of even one percent of 23 the efficiency of these systems represents a significant 24 increase in emissions. 25 In addition, this is the only emission control PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 technology that is routinely used by the public. 2 This equipment is not handled gently and must be 3 very robust. 4 The enhanced vapor recovery regulations, or EVR, 5 as it is known, were approved by this board last year and 6 became effective on April 1st of this year. 7 In adopting these regulations, the board made the 8 most comprehensive changes to the vapor recovery program in 9 a quarter of a century. 10 The intent of EVR is to obtain additional emission 11 reductions and to increase the reliability of in-use vapor 12 recovery systems. 13 Today I will present proposals that deal with two 14 types of gasoline transfer which takes place at service 15 stations. These are characterized as phase 1 and phase 2. 16 The animated video will demonstrate how these 17 work. 18 Phase 1 vapor recovery systems recover vapors 19 generated by refueling service station underground storage 20 tanks. The vapors are displaced from a storage tank into 21 the cargo tank truck and eventually into the vapor recovery 22 system of the loading terminal. 23 Phase 2 vapor recovery systems recover the vapors 24 displaced from fueling vehicles. 25 On July 1st, a portion of the regulation that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 addresses phase 1 systems came into effect. 2 However, existing stations are not affected until 3 2005. 4 The efficiency required for certification to the 5 EVR standards of phase 1 systems was increased from 95 to 98 6 percent. Only those systems that are certified to the EVR 7 standards can be installed in new facilities after July 1st 8 of this year. 9 Testing of phase 1 systems to the EVR standards 10 and specifications prompted the development of additional 11 specifications and test procedures. 12 I'll go into more detail later, but for now I'd 13 like to point out the basic components of phase 1 vapor 14 recovery systems. 15 This is the drop tube. Its function is to carry 16 the gasoline delivered by the cargo tank into the storage 17 tank with a minimum of splashing and agitation. 18 The drop tube is installed in a riser pipe. 19 A spill containment box is installed to ensure 20 that any spilled gasoline does not find its way into the 21 environment. 22 Spill boxes are often equipped with drain valves 23 that allow spills to be drained directly into the storage 24 tank. 25 Adaptors are threaded onto the riser pipes. These PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 provide a means for the cargo tank delivery elbows and hoses 2 to be affixed to the storage tank. These adaptors are 3 required to have dust caps when not in use during fuel 4 delivery. 5 Here we have examples of vapor recovery product, 6 of vapor recovery, and product adaptors. These have been 7 manufactured to a variety of slightly different 8 specifications for years, and this has caused problems 9 because some combinations of adaptors with delivery elbows 10 or dust caps do not fit well together. 11 Staff worked with the manufacturers to identify 12 cam and groove specifications for product and vapor recovery 13 adaptors. These specifications are proposed for adoption 14 into the certification procedure CP-201. 15 Product and vapor adaptors have been difficult to 16 keep leak tight. When the cargo tank delivery driver 17 prepares to deliver fuel to the station, he or she clamps 18 the delivery elbow and hoses onto the product and vapor 19 adaptors. 20 After the fuel has been delivered, the driver 21 empties the hose by walking it towards the storage tank. 22 This drains any remaining fuel from the hose, but the 23 delivery elbow and hose can act as a large wrench on the 24 adaptors and can loosen them or overtighten them, damaging 25 gaskets. Adaptors that have swivels so they can be rotated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 were developed to address this problem. 2 Here we see a cargo tank delivery driver 3 demonstrating how easily an EVR rotatable adaptor swivels 4 with the delivery elbow connected. 5 During the past year, we have been evaluating and 6 testing phase 1 systems, and have identified the need for 7 additional specifications and test procedures. 8 During the initial testing of adaptors, staff 9 discovered that some rotated easily and others did not. 10 The. 11 EVR regulations did not specify the maximum 12 allowable torque required to rotate adaptors. Working with 13 the manufacturers, we developed a maximum torque 14 specification of 108 pound inches and a test method for 15 determining the torque necessary to rotate the adaptor. The 16 static torque test procedure is proposed for adoption and 17 the torque specification is proposed as modification to the 18 certification procedures CP-201. 19 Spill containment boxes are installed that 20 captures fuel spilled during fuel delivery or testing. Many 21 of these have the drain valves that allow spilled fuel to 22 drain into the underground storage tank. 23 As shown here, this particular configuration of 24 the drain valves allows vapor to escape from the storage 25 tank when the drain values leak. In addition, fuel could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 not be drained from the box until pressure in the storage 2 tank was relieved. 3 Both of these caused emissions. 4 A new configuration of the drain valve eliminates 5 these problems. As you can see here, the drain valve is now 6 isolated from the vapor space of the storage tank, thereby 7 minimizing the emissions that occur if the drain valves 8 leak. 9 It also makes it possible to test the integrity of 10 the drain valve without pressurizing the entire vapor space 11 of the storage tank. 12 Two test procedures, or TPs, are proposed for 13 adoption. 14 201.1C was developed to test systems that have a 15 new drain valve configuration with straight drop tubes. 16 201.1D, which was formerly numbered 201.20, is 17 proposed for modification to allow quantification of the 18 drain valve leak rate separately from the overfill drop tube 19 prevention device. 20 Now that we've talked about phase 1 procedures, 21 let's talk about the phase 2 systems. 22 As you can see, an unobstructed vapor path from 23 the vehicle to the storage tank is necessary for phase 2 24 systems to operate properly. 25 Some systems, such as balance systems, are more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 sensitive than others to obstructions in the vapor return 2 line. 3 The dynamic back pressure test procedure was 4 developed over 20 years ago, and has been used to verify 5 that the vapor return line is free of obstructions. 6 TP-201.4 is proposed for amendment to expand its 7 applicability to include additional methods for measuring 8 back pressure and to improve clarity. 9 A common obstruction in the vapor return line is 10 liquid that can accumulate in the vapor path of hoses, 11 particularly with some hose configurations. 12 In order to keep the vapor path clear, devices 13 have been developed to remove the liquid and inject it into 14 the stream of dispensed gasoline. 15 Districts have expressed concern about the 16 frequency with which they find liquid in the vapor hoses. 17 The certification procedure, TP 201.6, does not 18 lend itself to compliance testing of these devices because 19 it requires repetitive testing. 20 At CAPCOA's request, we developed a compliance 21 version of this test. 22 In addition to eliminating the requirement for 23 testing at more than one dispensing rate, this procedure 24 also reduces the amount of gasoline that must be dispensed 25 in order to perform the test from ten gallons to seven and a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 half, thereby additionally reducing the emissions caused by 2 conducting the test. 3 The amendments to the certification procedure that 4 we've discussed are summarized here. 5 In addition to the amendments presented earlier, 6 there's a clarification of how the average daily pressure in 7 storage tanks is computed. This has been a source of 8 confusion which should be remedied by this amendment. 9 The amendments to D-200 vapor recovery definitions 10 include new definitions and clarification of existing 11 definitions. 12 The proposed new and amended procedures will 13 result in some potential improvement in air quality, 14 facilitated by improved certification testing and testing of 15 in-use gasoline dispensing facilities. 16 The economic impact is negligible. 17 You have before you four 15-day changes proposed 18 by staff. 19 Section 94153 of title 17 of the California Code 20 of Regulations incorrectly implies that test procedure 21 TP-201.4 is applicable for aboveground tanks. No such 22 restriction on its use was intended. 23 In the staff report, the title pages of test 24 procedure 201.1B and 201.1C incorrectly state that the 25 procedure is applicable for compliance determination. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 Staff is proposing to amend 201.1B to include an 2 inadvertently omitted procedure to verify rotation of the 3 adaptor. 4 Staff is also proposing to amend 201.1C to 5 increase the time allowed for the drop tube to pressurize 6 from 90 to 180 seconds. This will make the procedure 7 consistent with 201.1D, which contains the same 8 requirement. 9 Staff recommends that the board adopt the 10 regulations that reference these new and amended procedures. 11 That concludes my presentation. 12 CHAIRMAN LLOYD: Thank you very much. 13 Questions from the board? 14 BOARD MEMBER WILLIAM FRIEDMAN: Just a quick 15 question. 16 How often are these tests done? 17 MS. McKENNEY: They're done fairly frequently 18 during certification. 19 For in-use facilities there are a few, like the 20 leaf decay tests, that are required in the certification 21 documents annually. 22 But generally speaking the frequency is determined 23 by the districts who permit these stations. 24 BOARD MEMBER WILLIAM FRIEDMAN: But certification 25 occurs at least annually? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 MS. McKENNEY: No. Leak decay is one test 2 procedure. 3 Certification occurs, is done once by the state, 4 and then testing of in-use facilities is conducted by the 5 districts that permit them. 6 BOARD MEMBER WILLIAM FRIEDMAN: Is it possible to 7 get the certificate and never have another test done? 8 MS. McKENNEY: Actually what we do is we test a 9 representative system in an operating service station and 10 conduct extensive testing on it. 11 When we're satisfied that it's performing 12 adequately, we issue an executive order that contains the 13 specifications, and in some cases test procedures that 14 should be used to verify that systems installed in other 15 facilities will operate similarly. 16 BOARD MEMBER WILLIAM FRIEDMAN: I know. I get 17 that. 18 But I'm just -- I want to know what happens after 19 that? I mean, supposing that there's wear and tear and this 20 and that or whatever, and it's never -- the place is never 21 revisited. How do we know that? 22 MR. LOSCUTOFF: As Laura pointed out, most of the 23 districts have at least an annual testing requirement, 24 sometimes more frequently. So at least on an annual basis I 25 think most of the systems are testified. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 There's also provision in our EVR regs that were 2 adopted last year that come into effect in about three or 3 four years, depending it's phased in, but it's called 4 in-station diagnostics, and this is something that we're 5 looking as a continuous monitoring of the system's 6 performance and we're continuing to develop that working 7 with the districts, CAPCOA and the other stakeholders to try 8 and get that into place as quickly as possible. 9 MS. JOHNSTON: Diane Johnston on legal staff. 10 I would also like to point out that under the EVR 11 provisions that were adopted in effect on April 1 of this 12 year, we have before you for your review certifications so 13 that if any issues come up with vapor recovery systems that 14 we're alerted to either by the station owners or the 15 districts or that we discover through our own ongoing 16 compliance testing, the certifications will be reviewed and 17 additional testing will be done to determine that systems 18 continue to comply with the certification requirements. 19 CHAIRMAN LLOYD: Ms. D'Adamo. 20 BOARD MEMBER D'ADAMO: Yes. I'd like to know how 21 staff would compare the effectiveness of the EVR system 22 fueling for a vehicle as compared to the portable containers 23 that we adopted, I think it's about a year and a half, for 24 lawn mowers. 25 MR. LOSCUTOFF: Okay. In terms of the vapors that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 we are recovering with the no-spill gas can rule, that was 2 approximately 70 percent effective. 3 Whereas the EVR systems, if they're functioning 4 correctly, are 95 percent efficient. 5 And the phase 1 is actually 98 percent efficient. 6 So in terms of relevance, if that's what your question is -- 7 BOARD MEMBER D'ADAMO: Yes. And then the next 8 question would be is would there be any value in taking the 9 portable recovery systems further so that they can be as 10 effective or more effective? 11 MR. LOSCUTOFF: That's something -- 12 BOARD MEMBER D'ADAMO: Anything that you learned 13 from this exercise that could be transferred to the 14 portable? 15 MR. LOSCUTOFF: Not directly to the portable. 16 This is a little bit different. 17 However, we are at some point in time would like 18 to look at the one interface that is not controlled is when 19 you're actually filling the can up, when you take off the 20 nozzle, a portable can and filling it, there is no vapor 21 recovery in that particular activity, and at some point in 22 time it will probably be something that we want to look at. 23 CHAIRMAN LLOYD: On that line, if in fact we're 24 able to capture that additional 30 percent, 25 or 30 25 percent, how would that help us out with the 26 tons in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 Bay Area? 2 Maybe you don't have to answer now. 3 MR. KENNY: It would help, essentially, because 4 we're talking about 30 percent efficiency that we could 5 actually recapture and it's all VOCs and that's what we're 6 looking for in the Bay Area. 7 The difficulty here is that on this particular 8 phase 1 phase 2 program we are looking at technology. 9 With regard to the gas can program, we're relying 10 really upon almost low-technology approaches in order to 11 keep the cost of the gas cans down. 12 (Loud sound in room.) 13 BOARD MEMBER WILLIAM FRIEDMAN: Just emphasizing 14 your point. 15 MR. KENNY: Thank you. 16 BOARD MEMBER McKINNON: I just bought a gas can. 17 MR. KENNY: I'm done. 18 BOARD MEMBER DeSAULNIER: You have gazebo gas 19 there too. 20 (Laughter.) 21 MR. CACKETTE: One other thing is on cars, of 22 course, we have the spot on the side of your car that's the 23 filler neck is all standardized, and so the vapor recovery 24 systems mate up very nicely with that, whereas on portable 25 gas cans, we're putting that into whatever kind of tank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 happens to be there. 2 There's not been any effort yet at least to 3 standardize lawn mower or weed whip gas tanks, although we 4 are coming back to you with a proposal to control the 5 evaporative emissions from lawn mowers, and to some degree 6 from the other equipment like weed whips later at the end of 7 next year. 8 And that's the evaporation that occurs while it's 9 sitting in your shed or when you're out mowing. 10 BOARD MEMBER D'ADAMO: Would you look at the other 11 issue as well? Would there be enough time to do both 12 issues? 13 MR. CACKETTE: Probably not in that time frame. I 14 think it's probably a big issue in terms of standardizing 15 everything and safety issues and whether the fill would be 16 appropriate and enough in the tanks, things like that. 17 But we can certainly take a look at it, but I 18 doubt if we can bring a proposal back. 19 CHAIRMAN LLOYD: Just got a note from Mr. Mandel. 20 He thinks it's enough time. 21 MR. CACKETTE: Also on Dr. Friedman's comment 22 about the frequency of audits, two points. 23 One is when we have -- we have done audits of 24 service station compliance, so to speak, whether the gas 25 stations are in compliance with this 95 percent requirement. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 We found that it is in direct proportion to how frequently 2 the districts do inspect them. If you inspect them every 3 six months it's better than every year, and if you don't 4 inspect them at all, the efficiency drops down to something 5 like 60 or 70 percent, which has a huge impact on emissions. 6 So because of that, the districts are very focused 7 on the source gas stations of doing fairly frequent audits, 8 and we have been working with them to find parts that aren't 9 working correctly and systems that weren't installed 10 properly and improving our certifications so that they match 11 up better in the real world. 12 And out of that came this concept of ISD or the 13 in-station diagnostics where the critical parameters in the 14 future, the station can basically do self-testing 15 themselves, just like our cars do. It's the OBD, the 16 on-board diagnostics of gas stations. 17 So we think the combination of that will bring us 18 closer and closer to achieving that ultimate 95 percent 19 efficiency. 20 CHAIRMAN LLOYD: Mr. Calhoun. 21 BOARD MEMBER CALHOUN: When does that system go 22 into effect? 23 MR. CACKETTE: I want to give you a single answer, 24 but there isn't one. 25 MR. LOSCUTOFF: It's phased in according to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 amount of throughput. We're phasing in the largest 2 throughput stations, 300,000 gallons per month and greater, 3 beginning in 2004. 4 MS. McKENNEY It's three. 5 CHAIRMAN LLOYD: We have one witness signed up. 6 Rosa Salcedo from CAPCOA. 7 MS. SALCEDO: Good afternoon, Mr. Chairman and 8 members of the board. My name is Rosa Salcedo. I'm with 9 San Diego County Air Pollution Control District and a member 10 of the CAPCOA Vapor Recovery Committee. 11 I am here today to express CAPCOA's support for 12 the proposed amendments to the vapor recovery system 13 certification and the test procedures. 14 ARB staff has worked with CAPCOA's Vapor Recovery 15 Committee throughout the process of developing this 16 procedures and has considered and addressed many of the 17 concerns and requests. 18 The initial implementation of EVR over the last 19 seven months has raised a number of issues. 20 CAPCOA appreciates ARB's efforts to address these 21 issues. 22 For example, the main test procedures will address 23 CAPCOA's concerns for clarity and consistency by having 24 standard test procedures referenced in the new EVR executive 25 orders. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 The proposed revisions to existing test procedures 2 demonstrate ARB's agreement with CAPCOA that air districts 3 need tools to ensure ongoing compliance. 4 The revisions provide real-world field test 5 methods, which are not limited to in-use at ideal test 6 sites. 7 As you know, test procedures evolve and they need 8 to be periodically evaluated and improved. 9 Although some of the details in the test 10 procedures have not been resolved to everyone's 11 satisfaction, such as not testing stations for liquid 12 blockage as found under TP-201.4, CAPCOA believes that its 13 major concerns have been addressed by ARB in collaboration 14 with the districts and a consensus has been reached. 15 As the districts implement these test procedures 16 and EVR, undoubtedly we will identify further needed 17 improvement that can only be known when the procedures are 18 actually put in use. 19 CAPCOA expects that ARB will consider such 20 improvements and continue working with the districts to 21 develop a vapor recovery program that works for all of us. 22 CAPCOA would also like to request the 23 certification procedures, CP-201, be revised to redefine 24 phase 1 system specific components to include spill 25 containment docks, drain valve, drain valve configuration, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 product and vapor adaptor and drop tube overfill prevention 2 devices. 3 This will address issues that came up during the 4 first round of EVR phase 1 certification testing and will 5 help ensure a better program. 6 CAPCOA would like to formally thank ARB staff for 7 working with us throughout this process and the board for 8 providing this direction. 9 We look forward to continued collaborative effort 10 to address any outstanding and future issues. 11 For example, ARB's working with several districts 12 to develop an improved vapor recovery system pressure 13 integrity test, which we hope to be able to support before 14 the board in the near future. 15 Thank you very much for your time. 16 CHAIRMAN LLOYD: Thank you very much. 17 Questions? 18 Mr. Kenny, you have anything? 19 That concludes the public testimony. Any further 20 comments? 21 MR. KENNY: No comments. 22 BOARD MEMBER HUGH FRIEDMAN: Just one. 23 CHAIRMAN LLOYD: Yes. 24 BOARD MEMBER HUGH FRIEDMAN: Question of staff. 25 The request that CP-201 be in definition be expanded to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 include those other items, was that taken into account? 2 Define phase 1 systems to expand to include those 3 components. 4 MR. LOSCUTOFF: This is something that we have 5 introduced at a workshop earlier about a month ago and it's 6 something we appreciate the suggestion that CAPCOA is 7 making. We'd like to consider including that to a 15-day 8 change notice, and making sure that the other stakeholders 9 would have an opportunity to look at it. But, yes, we would 10 be supportive of trying to incorporate that. 11 CHAIRMAN LLOYD: Thank you. 12 I will now close the record on this agenda item. 13 However, the record will be reopened when a 15-day 14 notice of public availability is issued. 15 Written or oral comments received after this 16 hearing date, but before the 15-day notice is issued, will 17 not be accepted prior to the official record on this agenda 18 item. 19 When the record is reopened for a 15-day comment 20 period, the public may submit written comments on the 21 proposed changes, which will be considered and responded to 22 in the final statement of reasons for the regulation. 23 Any ex parte communications from my colleagues on 24 this item? 25 Seeing none, then we have got a resolution before PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 us. Resolution 01-48 contains the staff recommendations. 2 BOARD MEMBER HUGH FRIEDMAN: So move. 3 BOARD MEMBER WILLIAM FRIEDMAN: Second. 4 CHAIRMAN LLOYD: Proposed and seconded. 5 All in favor say aye. 6 (Ayes.) 7 CHAIRMAN LLOYD: Seeing nobody against, it's a 8 unanimous vote. 9 Thank you very much. 10 We now move into the last item. 11 (Pause in proceedings.) 12 CHAIRMAN LLOYD: Final item on agenda today is 13 01-8-5, public meeting to consider a review of the air 14 quality legislation for 2001. 15 From my vantage point the just-passed legislative 16 session was overshadowed by the energy crisis. 17 I am pleased that today we have ARB's legislative 18 director, Mr. Rob Oglesby, here to put the Legislature's 19 action into perspective for us and to give us a firsthand 20 account of the action he saw this past year, as well as of 21 the changes in store for next year. 22 Mr. Kenny, will you continue the staff 23 presentation. 24 MR. KENNY: It's a pleasure to introduce Rob. 25 Rob, go ahead. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 MR. OGLESBY: Mr. Chairman, members of the board 2 and Mr. Kenny, thank you. 3 I always look forward to this annual opportunity 4 to appear before you to provide a rundown of recent 5 legislative highlights. 6 First I'd like to acknowledge the support the 7 legislative office receives from the excellent program staff 8 at the ARB. Time after time, the legislative office relies 9 on ARB staff to come through on short notice with the 10 analysis, data and program history that are the tools of our 11 trade. We appreciate their consistent support and 12 professionalism. 13 Now I'll begin the brief overview of this year's 14 legislative session. 15 The Legislature recessed for the remainder of the 16 year on September 14th, and the deadline for the Governor to 17 sign or veto bills was midnight on October 14. 18 This year was the first of California's two-year 19 legislative session, and any bills that are still alive 20 remain eligible for consideration when the Legislature 21 returns January 7th. 22 First the raw data. 23 There were more than 3,300 new bills introduced 24 this past year, of which 128 had a potential impact on air 25 quality. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 Of these, 24 bills became law, and most of these 2 new laws will take effect on January 1. 3 Clearly the energy crisis dominated the attention 4 of the Legislature this year. Last month you received a 5 report on California's electricity situation and the effects 6 the energy crisis had on air quality. 7 I'll focus on the legislative response to this 8 situation. 9 As we are all painfully aware, early this year 10 sharp spikes in energy prices and rolling blackouts 11 triggered two, and very nearly three, special sessions of 12 the Legislature. 13 The first extraordinary session was called on 14 January 3rd. The session was adjourned in May so the clock 15 could start on legislation creating a California Power 16 Authority, encouraging immediate conservation, and 17 authorizing a bond sale to repay the state for energy 18 purchased during the most extreme period of the crisis. 19 Since work on many of the bills in the first 20 session had not been completed, a second session was 21 convened by the Governor on May 14th. 22 The Legislature recessed on September 14th without 23 adjourning the second extraordinary session, and as a result 24 second special session bills remain alive and could be acted 25 upon when the Legislature returns on January 7th. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 During the special sessions, there were hundreds 2 of bills introduced to address the energy crisis. Most of 3 these bills can be categorized into five main areas. 4 Demand and reduction strategies, including 5 conservation measures and energy efficiency bills. 6 Increased generation, including expedited siting 7 of new power plants, allowing existing power plants to 8 operate more hours and bringing alternative power sources 9 back online. 10 And utility financial issues, including actions to 11 stabilize electricity rates and reduce natural gas prices 12 and standby charges. 13 We had blackout issues, including improving 14 blackout preparedness, creating rolling blackout exemptions 15 and addressing criminal activity and public safety. 16 And finally electrical marketplace reform, 17 including actions to investigate and reform the wholesale 18 retail marketplace. 19 Swift action was taken on major legislation, 20 expediting power plant siting, creating a new power 21 authority, and encouraging conservation, but conflicting 22 views on how to improve the financial condition of some 23 utilities prevented a legislative solution to this issue. 24 The Governor nearly recalled the Legislature for a 25 third session that would have been focused on the financial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 integrity of energy providers, but recent PUC, Public 2 Utility Commission, action eliminated the need. 3 The bills that the Air Resources Board most 4 closely followed dealt directly with our program and mainly 5 related to increased generation capacity. 6 I'm happy to report that even in this crisis 7 environment, the bottom line for air quality was maintained. 8 Although power plant siting was expedited, it was not at the 9 expense of air quality. 10 And as you heard last month, provisions for 11 upgrading existing power plants yielded net air quality 12 benefits of about a 24 percent reduction in new power plant 13 NOx emission this past summer, compared to the summer of 14 2000. 15 The principal legislative vehicle for new power 16 plant approval and emission control retrofitting of existing 17 power plants was Senator Byron Sher's SB 28X. 18 Among its many provisions, SB 28X authorizes ARB 19 to adopt a program for retrofitting existing electrical 20 generating facilities, amends the pollution control 21 equipment installation schedules for re-powering power 22 plants, allows power plant applicants to pay mitigation fees 23 to local air districts in lieu of offsets under certain 24 conditions, extends the deadline for initial operation of 25 simple cycle peaking plans, and provides a ten-year waiver PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 of standby charges for clean distributed generation units. 2 The bill also has various other fiscal and nonair 3 quality provisions intended to expedite power plant siting. 4 Perhaps the most significant threat to our air 5 quality were proposals to lift restrictions on the use of 6 diesel backup generators. 7 Diesel backup generators are the dirtiest option 8 for generating electricity in California. Diesel generators 9 emit up to 300 times more smog-forming emission than clean 10 natural gas-powered plants and produce considerable amounts 11 of toxic emissions. 12 For example, just 1,000 megawatts of diesel 13 generation produces the same amount of NOx emission as the 14 entire electrical grid. 15 If load shedding program customers run diesel 16 generators, the residents living next to those generators 17 will have a consistently higher risk of exposure to these 18 harmful emissions. 19 Many bills to relax air quality controls on diesel 20 generators were introduced, but as summer wore on, it became 21 apparent that new generation capacity, conservation and 22 favorable weather made widespread use of these units 23 unnecessary. 24 Ultimately, legislative efforts to override local 25 air district authority to control backup generators fizzled. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 On the contrary, instead of overriding local air 2 district restrictions on diesel generators, new legislation 3 will give districts a better handle on generators that could 4 be used in connection with interruptable service agreements. 5 Under those agreements, major utility customers 6 agree to reduce electricity consumption at times of high 7 demand in exchange for these lower electricity rates. 8 Air districts were concerned that these agreements 9 may induce some utility customers to count on diesel 10 generators for their off-grid energy without being aware of 11 air pollution consequences. 12 AB 621 by Assemblymember Ellen Corbett requires 13 air districts to be notified of parties to these agreements 14 so the district can advise the customer of the applicable 15 air quality rules. 16 Now I'd like to turn to the 2001-02 state budget, 17 soon to be known as the good old days. 18 As you know, recent budget projections for the 19 '02-03 budget are very troubling, and state agencies are 20 currently planning to do some serious belt tightening for 21 the upcoming budget cycle. 22 State revenues are down by 1.1 billion through 23 September and revenue projections following the September 24 11th attack on the World Trade Center are even more 25 pessimistic. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 But back to the state budget of happier times. 2 The 2001-02 state budget was very good for air quality. 3 Strong revenues allowed continued investment in air quality 4 programs that reduce emissions from diesel engines, mitigate 5 emissions from peaker power plants, encourage alternatives 6 to open field burning of rice straw and invest in zero 7 emission vehicle technology. 8 The ARB received a total of $48 million 9 apportioned equally to three programs related to diesel 10 emissions. 11 $16 million was appropriated for the purchase of 12 new clean school buses or for the retrofit of diesel school 13 buses under the ARB's lower emission school bus program. 14 This builds on the $50 million investment in this program 15 from last year's budget. 16 An additional 16 million was appropriated to the 17 Carl Moyer program, which provides grants to offset the 18 incremental cost of diesel engine upgrades. 19 As you know, this program is very popular and 20 successful, with demand running at about three times the 21 amount of available funds. 22 This appropriation brings the total funding 23 provided to that program to 114 million since its inception 24 in 1998. 25 Let me add as a footnote that the Governor also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 approved Assemblyman Keeley's AB 1602, which is the $2.6 2 billion clean air, water and park bond proposal that will 3 appear on the March 2002 ballot. 4 That proposal, if approved by the voters, would 5 allocate an additional $50 million to the Carl Moyer 6 program. 7 Finally, a third appropriation of 16 million was 8 provided to mitigate emissions from diesel backup generators 9 that are operated due to the state electricity crisis. Ten 10 percent of these funds are allocated to air districts for 11 the implementation, monitoring and enforcement of programs 12 related to the state electricity crisis, the rest for 13 mitigation. 14 As part of the Governor's early response to the 15 energy crisis, the Governor issued an executive order on 16 February 8 directing ARB to establish an emissions offset 17 bank to mitigate the emissions from new peaker units that 18 were needed to head off projected summer blackouts. 19 68 million was appropriated from emergency funds 20 for a temporary, that is three years, emission reduction 21 credits for these summer peakers. 22 This year's budget also added $1 million to ARB's 23 rice straw demonstration grant fund. This supplements last 24 year's $5 appropriation to the ARB grant program, and two 25 million appropriated to the Department of Food and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 Agriculture for their agriculture biomass utilization 2 account. 3 The Governor approved Senator Costa's AB 64XX that 4 reallocates 3.5 million to support the expansion of the 5 agricultural biomass to energy incentive grant program. 6 ARB's zero emission vehicle incentive program 7 received $20 million for consumer and fleet purchases of 8 ZEVs. 9 This builds on last year's $18 million 10 appropriation that funded ARB's ZEV incentive grant program 11 which was created by Assemblyman Lowenthal's AB 2061. 12 Now I'd like to shift from the budget to highlight 13 a bill that provided significant policy implementation 14 related to environmental justice. This year marked the 15 incorporation of environmental justice goals as a specific 16 element of several programs administered by the ARB. 17 The formalization of this policy first appeared as 18 budget control language for the new funds appropriated in 19 the diesel emission reduction and ZEV program administered 20 by the ARB, but the budget control language was really part 21 of the ongoing policy discussion that became embodied in 22 Assemblyman Firebaugh's AB 1390. 23 AB 1390 is intended to focus future appropriations 24 for state air quality programs more directly to communities 25 that suffer from the greatest exposure to poor air quality. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 The 2001-02 budget allocated at least half of the 2 $48 million general fund appropriation to the diesel 3 emission reduction program to low income and minority 4 communities that are disproportionately affected by air 5 contaminants. 6 The bill AB 1390 extends this mandate for five 7 years. AB 1390 would make mandatory targeting applicable 8 only to air districts with a population of one million or 9 more. 10 The bill encourages a similar manner of targeting 11 by smaller air districts. This is because in rural areas, 12 emission sources are often not adjacent to low income or 13 minority populations, yet these pollution sources contribute 14 to the regional unhealthy air that should be mitigated. 15 SB 1390 also includes provisions relating to ARB's 16 zero emission vehicle program. One of the criticisms of the 17 ZEV incentive program is that relatively high-income vehicle 18 purchasers are the principal beneficiaries. 19 AB 1390 declares state policy that any future 20 appropriations intended to provide incentives for the 21 purchase of zero emission vehicles should also be 22 accompanied by a concurrent appropriation for emission 23 reduction programs designed to benefit environmental justice 24 communities. 25 The bill also addresses ZEV equity issues in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 current budget year by ensuring half of the 20 million 2 appropriated this year for ZEV incentives is dedicated to 3 fleet purchases of ZEVs operated in low-income and minority 4 communities. 5 This is intended to distribute the zero emission 6 vehicle benefits directly to these communities. 7 Postal vehicle fleets operating in low-income 8 neighborhoods might be an example of this type of 9 allocation. 10 In closing, I'd like to mention a few other 11 legislative office high lights. 12 Perhaps the most noteworthy is the supporting role 13 the office played for Dr. Burke's successful confirmation by 14 the state Senate. It was certainly a pleasure working with 15 Dr. Burke and the confirmation went very smoothly. 16 The legislative office also provided assistance to 17 the Governor's appointee to the South Coast Board, 18 Ms. Cynthia Verdugo-Peralta. Ms. Verdugo-Peralta was also 19 easily confirmed by the Senate. 20 The legislative office participated in several 21 special or interim hearings. 22 This year the Legislature held special 23 fact-finding hearings on environmental justice, diesel 24 emissions at ports, and the electric power supply problems 25 confronting the state. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 And finally our annual report. The document 2 provided to you today tells the legislative story for all 3 the air quality related bills we identified and tracked in 4 2001. 5 For audience members, let me note that several 6 copies of this summary are available at the sign-in table 7 where you entered the room. Help yourself. There's plenty. 8 I appreciate the board's interest in the 9 legislative program, and if you have any questions about my 10 presentation I'd be happy to answer them. 11 Also, please do not hesitate to contact me at any 12 time with any legislative questions or concerns you may 13 have. 14 CHAIRMAN LLOYD: Before I take any questions or 15 comments, I'd like to make a personal one. 16 Thank you for your leadership and your personal 17 efforts and with your staff the good job you did and 18 continue to do and for your work I know over working with 19 the Governor's office in the last days I know how long you 20 worked. I really appreciate very very much. 21 MR. OGLESBY: Thank you very much. 22 CHAIRMAN LLOYD: Mr. McKinnon. 23 BOARD MEMBER McKINNON: I won't go into total 24 detail on this, but I think, Rob, you and your organization 25 faced a problem, one of the most complex difficult years to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 face, with some interesting politics and changes and budget 2 of the state and all sorts of things happening during the 3 year, and to make it through, get things done, I think was a 4 accomplishment. Tough tough year to be out there working. 5 MR. OGLESBY: Thank you. 6 CHAIRMAN LLOYD: Yes. And of course I think we 7 also had an editorial in The-LA-Times which was highly 8 complimentary of the legislation. 9 Ms. D'Adamo. 10 BOARD MEMBER D'ADAMO: I concur with the previous 11 comments. You've done an excellent job. 12 And I just wanted to also point out that this year 13 especially, it felt that I was much better informed going 14 through this, than in previous years, and I think it in part 15 has something to do with some of the presentations that we 16 received on the energy situation, and I found that to be 17 quite helpful as well. 18 CHAIRMAN LLOYD: Thank you. Thank you very much 19 indeed. Again, thank you all. 20 I guess on the energy stuff I think Mike also 21 played a good role, Mike Kenny. 22 BOARD MEMBER HUGH FRIEDMAN: Let's have a round of 23 applause. 24 (Applause.) 25 CHAIRMAN LLOYD: Well done. Good job. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 I guess since we don't have any witnesses, this is 2 not a regulatory item, I'd like to officially close the 3 record on this particular item. 4 Also stating that we have no public comments, I 5 would like to officially bring to an end the October 25th 6 meeting of the Air Resources Board. 7 Again, thank you all very much. Look forward to 8 seeing you in Oakland on next Thursday, actually, starting 9 at 6:00 o'clock. 10 (Thereupon the meeting was adjourned 11 at 12:45 PM) 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 I, JANET H. NICOL, a Certified Shorthand Reporter 4 of the State of California, do hereby certify that I am a 5 disinterested person herein; that I reported the foregoing 6 meeting in shorthand writing; that I thereafter caused my 7 shorthand writing to be transcribed into typewriting. 8 I further certify that I am not of counsel or 9 attorney for any of the parties to said meeting, or in any 10 way interested in the outcome of said meeting. 11 IN WITNESS WHEREOF, I have hereunto set my hand 12 this 1st day of November 2001. 13 14 15 16 Janet H. Nicol 17 Certified Shorthand Reporter License Number 9764 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345