MEETING BEFORE THE CALIFORNIA AIR RESOURCES BOARD BOARD HEARING ROOM 2020 L STREET SACRAMENTO, CALIFORNIA THURSDAY, DECEMBER 10, 1998 8:00 A.M. Vicki L. Ogelvie, C.S.R. License No. 7871 Janet Nicol, C.S.R. License No. 9764 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii MEMBERS PRESENT Barbara Riordan, Chairman Joseph C. Calhoun Mark DeSaulnier John D. Dunlap, III Dr. William Friedman Lynne T. Edgerton Jack C. Parnell Barbara Patrick Sally Rakow Ron Roberts James W. Silva Staff: Michael Kenny, Executive Director Tom Cackette, Chief Deputy Executive Officer Mike Scheible, Deputy Executive Officer Kathleen Walsh, General Counsel Jim Schoning, Ombudsman PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii I N D E X --o0o-- Page Proceedings 1 Call to Order 1 Pledge of Allegiance 1 Roll Call 1 Opening remarks by Chairperson Riordan 1 AGENDA ITEMS: 98-14-1 Public Meeting to Consider the Approval of California's Pleasure Craft Exhaust Emissions Inventory Introductory remarks by Chairperson Riordan 4 Staff Presentation: Mike Kenny 5 Mark Carlock 6 Nancy Steel 11 Public Comment: Bob Wyman 17 Ed Morgan 24 John Paliwoda 46 James Haussener 51 Todd R. Campbell 57 V. John White 59 Russell Anders 61 Russell Long 62 98-14-2 Public Hearing to Consider Adoption of Emission Standards and Test Procedures for New 2001 and Later Spark-Ignition Marine Engines Introductory remarks by Chairperson Riordan 73 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv I N D E X (Continued) --o0o-- Page Staff Presentation: Mike Kenny 74 Aron Livingston 78 Charles Emmett 79 Dan Martinson 110 Nancy Steel 112 Public Comment: Bernie Richter 119 Robert Wyman 130 David Harrison 154 Sue Bucheger 163 Lawrence Keller 168 Ken Bush 171 Fernando Garcia 173 George Hawley 184 Afternoon Session 191 Jim Baetze 191 Laurie Kemper 195 Tom Bingham 199 Tom Fletcher 206 Patrick Walker 212 Bruce Bertelsen 217 Mike Nazemi 222 Carter Fickus 226 Mike Riehl 235 James Haussener 237 Russell Anders 241 Ed Peterson 247 Rodger Stegall 254 Russell Long 254 Krista Clark 262 Jerry Desmond 266 Dave Munro 269 Betsy Oilman 270 Terry Tjaden 273 M'K Veloz 275 John Paliwoda 277 Sherman Walker 279 Craig Jacobsen 281 Steve Carson 281 John Jay 282 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v I N D E X (Continued) --o0o-- Page Public Comment: Jim Contzen 285 Brooke Coleman 286 Robert Lucas 289 V. John White 289 Sheila Gallagher 291 Todd Campbell 293 Joseph Caves 295 Richard Baldwin 298 Mike Schmidt 301 98-14-3 Public Hearing to Consider the Adoption of Regulations for Voluntary Accelerated Light-Duty Vehicle Retirement Enterprises Introductory remarks by Chairperson Riordan 331 Staff Presentation: Mike Kenny 332 Krista Fregoso 333 Bill Lovelace 352 Nancy Steel 354 Public Comment: Dave Smith 357 Chris Kersting 359 Frank Bohanan 363 Jon Owyang 368 Joel Swartz 371 Jun Mendez 373 Charlie Peters 375 Robert Lucas 378 Scott Ross 379 Andrew Nantz 380 Wayne Smith 381 998-14-4 Public Hearing to Consider Amendments to the California Exhaust Standards for On-Road Motorcycles Introductory remarks by Chairperson Riordan 398 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi I N D E X (Continued) --o0o-- Page Staff Presentation: Mike Kenny 398 Floyd Vergara 400 Nancy Steel 417 Public Comment: Tom Hoelter 419 Tim Buche 428 Tom Austin 432 Eric Lundquist 441 John Paliwoda 444 Kathleen Wolf 446 Bruce Bertelsen 449 Stacey Stewart 452 Clifford Fenske 453 Richard Baldwin 455 98-14-5 Public Hearing to Consider Amendments to the California Regulations for New 1997 and Later Off-Road Highway Recreational Vehicles and Engines Introductory remarks by Chairperson Riordan 468 Staff Presentation: Mike Kenny 469 Andrew Spencer 469 Nancy Steel 481 Public Comment: John Paliwoda 490 Dave Oakleaf 493 Bill Dart 495 Jerry Fouts 496 Harold Soens 498 Don Fuller 500 Dana Bell 501 Adjournment 508 Certificate of Reporter 509 Certificate of Reporter 510 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 P R O C E E D I N G S 2 CHAIRMAN RIORDAN: In the interest of this agenda 3 I'm going to ask people to take their seats. 4 I'd like to call the meeting to order. The clock 5 on the back of the wall says 8:00 o'clock. 6 This is a meeting of the State Air Resources 7 Board, and I'd like to welcome all of you today. It's going 8 to be perhaps a long one, so better to be started. 9 And if I might, let me ask you all to rise and 10 join us in the pledge led by our member, Mr. Joseph Calhoun. 11 (Thereupon the Pledge of Allegiance was 12 recited.) 13 CHAIRMAN RIORDAN: Madam Clerk, if you would 14 please call the roll. 15 MS. HUTCHENS: Calhoun. 16 MR. CALHOUN: Here. 17 MS. HUTCHENS: DeSaulnier. 18 (No response.) 19 MS. HUTCHENS: Dunlap. 20 MR. DUNLAP: Here. 21 MS. HUTCHENS: Edgerton. 22 MS. EDGERTON: Here. 23 MS. HUTCHENS: Friedman. 24 (No response.) 25 MS. HUTCHENS: Parnell. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 MR. PARNELL: Here. 2 MS. HUTCHENS: Patrick. 3 SUPERVISOR PATRICK: Here. 4 MS. HUTCHENS: Rakow. 5 MRS. RAKOW: Here. 6 MS. HUTCHENS: Roberts. 7 (No response.) 8 MS. HUTCHENS: Silva. 9 SUPERVISOR SILVA: Here. 10 MS. HUTCHENS: Chairman Riordan. 11 CHAIRMAN RIORDAN: Here. 12 Let me explain to you, now that we have convened, 13 we're going to move the meeting for a brief period of time 14 to the parking lot for a demonstration. The audience is 15 invited to join us. So we're going to be in the -- and I'm 16 turned around with my directions, is that the west side of 17 this building? Just off L Street. So it's a large exhibit 18 and so you can't miss it. 19 We will be back here as a Board and conducting 20 business at 8:30, so those of you have seen the 21 demonstration, you don't need to come out again, but just 22 know that we will be back here at 8:30. 23 So we will move now, Board members, to outside, 24 and I think staff will lead us to the west side of the 25 building. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 MS. EDGERTON: Madam Chairman, let the record 2 reflect, this is Lynn Edgerton speaking. 3 CHAIRMAN RIORDAN: I'm sorry, Ms. Edgerton. 4 MS. EDGERTON: I will not be participating or 5 voting in either of the first two issues on the regulations 6 today. 7 CHAIRMAN RIORDAN: Okay. And we appreciate that 8 announcement early. 9 We will let you know then when we're on the third 10 item of the agenda and bring you back. 11 MS. EDGERTON: I'll be aware of it, as I plan to 12 listen elsewhere in the building. 13 CHAIRMAN RIORDAN: Okay. Let's go then. 14 (Thereupon a short recess was taken.) 15 // 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 CHAIRPERSON RIORDAN: I have a general announcement 2 for those here in the audience, there is going to be a 3 general way that we handle the sign-ups for testimony today a 4 little different than what we normally do. 5 Those persons wishing to speak on any of the Agenda 6 Items for today are asked to sign up at the table that is 7 provided prior to entering this auditorium. 8 There are a number of people out there that will be 9 very happy to show you how to sign up and indicate to you our 10 requirements in terms of written testimony that you might 11 provide to this Board as well as oral testimony. 12 Please fill out those cards as completely as 13 possible, because that requested information has import to us 14 and those who are trying to coordinate and make the meeting 15 go as efficiently as possibly. So, we ask you to do that. 16 This will facilitate, I think, the sign-ups 17 clearly, I think, for all items for the balance of the day, 18 and periodically I am going to remind people, because people 19 will be joining us for items that are not necessarily first 20 on our Agenda but will be later, so I will remind those 21 people. 22 If you do have written testimony, I would just like 23 to remind you that we need 20 copies to be given to the 24 staff out there. 25 I let me move right into the Agenda. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 The first Item on this Agenda today is 98-14-1. It 2 is a Public Meeting to Consider the Approval of California 3 Pleasure Craft Exhaust Commission Inventory. At this point I 4 would like Mr. Kenny to introduce the Item. 5 MR. KENNY: Thank you, Madam Chairman. 6 The Air Resources Board has for many years been 7 required to inventory emissions from off-road mobile sources. 8 Emissions from off-road mobile sources have increased with 9 respect to their on-road counterparts and have, therefore, 10 grown in importance with respect to the overall air quality 11 problems of the State. 12 In response to this trend, staff was charged with 13 updating the statistical model that underlies the off-road 14 inventory estimates. The analysis of the pleasure craft 15 emission inventory is just a portion of the comprehensive 16 update and follows the update of the inventory for small 17 off-road engines and large spark-ignited off-road engines 18 approved by the Board in March and October of this year. 19 In preparing this update to the inventory, staff 20 has gathered the latest information and corresponded with 21 industry representatives. This was a process which we 22 believe resulted in the most accurate inventory available. 23 I would now like to turn the presentation over to 24 Mr. Mark Carlock, from the Mobile Source Control Division, 25 who will provide you with an overview of the staff's findings PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 and present the staff's recommendations. 2 Mark. 3 MR. CARLOCK: Good morning, Madam Chairman and 4 Members of the Board. 5 Today staff will be presenting for your review and 6 approval an update for the exhaust emissions inventory for 7 pleasure craft. This is the third inventory update of an 8 off-road vehicle category submitted to the Board for 9 consideration this year. 10 This updated inventory for pleasure craft was used 11 to develop a regulatory proposal that you will consider 12 following this item. 13 The pleasure craft category consists of all boats 14 with engines used in recreational applications, including 15 vessels with inboard, outboard or sterndrive engines, 16 sailboats with auxiliary engines, inboard jet engines and 17 personal water craft. 18 Personal water craft are more commonly known as the 19 jet skis. 20 Staff uses the 1990 as base year for the off-road 21 emissions inventory, which is also the base year used in the 22 1994 SIP. The updated statewide 1990 pleasure craft 23 inventory is 172 tons per day of reactive organic gases, ROG 24 plus NOx. 25 The revised inventory can be compared to the 1994 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 State Implementation Plan in which pleasure craft were 2 estimated to emit 145 tons per day of ROG plus NOx. 3 It is important to know that the emissions 4 submitted in this table are for an annual average day and do 5 not reflect the highly skewed seasonal usage of pleasure 6 craft, nor do they reflect the phenomenal growth of personal 7 water craft sales which occurred in 1990 and 1997. 8 The Department of Motor Vehicles registration 9 records show that the population of personal water craft has 10 more than doubled, 68,000 to 162,000, in just seven years. 11 The popularity of jet ski type water craft has 12 resulted in increased emissions of about 50 tons per day from 13 the category of vehicles. 14 This slide identifies the equation used and the 15 information needed to estimate the emissions of pleasure 16 craft. 17 The first term is an emission factor expressed as 18 emissions per unit of work done. The units are grams per 19 horsepower hour. 20 The second term is the average maximum rate of 21 horsepower of the engines used. 22 The third term is a load factor which represents 23 how much power is used during typical operation. The final 24 factor is activity which is expressed in the hours of 25 operations per year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 As can be seen, each of these factors are 2 multiplicative, and therefore, modifications to any of these 3 factors has a direct correlation to the resulting emissions. 4 Next, I will try to describe where and how we 5 obtained data to perform the emissions inventory 6 calculations. 7 We used emission rates that were based on test data 8 provided by the National Marine Manufacturers Association, or 9 NMMA. We also estimated the rate in which emissions 10 increased with age and use. 11 These deterioration rates are from data obtained 12 from other types of vehicles which use similar types of 13 engines. 14 Population estimates were obtained from the 15 Department of Motor Vehicles registration records for 16 pleasure craft. Other input data were obtained from NMMA, a 17 survey performed from nationally recognized market research 18 contractor and testing done by ARB staff. 19 Our estimate for growth for other than personal 20 water craft rely solely on historic registration and sales 21 trends seen between 1990 and 1997. 22 However, for personal water craft, staff chose to 23 use a more conservative approach, which sees the rapid growth 24 of sales during the early 1990s will not continue. 25 For example, we assume no growth between 1998 and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 2002 due to uncertainty related to pollution concerns and use 2 restrictions imposed for some lakes and reservoirs; 2003-2006 3 we assume growth will resume at the historic rate due to 4 keyed-up demand. 5 After 2006, we assumed that the market for personal 6 water craft will be saturated and growth will fall to less 7 than two percent a year. 8 This slide shows the actual growth and registration 9 for various pleasure craft from 1990 to 1997. As can be 10 seen, the growth in all categories of water craft are nearly 11 flat or declining, with the exception of personal water 12 craft. 13 Staff provided the methodology and updated 14 inventory for public review and comments by way of mail-out 15 in July of this year. The decision regarding whether or not 16 to have a public workshop on revised inventory was predicated 17 on the response of the mail-out. 18 Only four responses to the mail-out were received, 19 and we decided that it would be more productive and efficient 20 to meet with the respondents individually rather than a 21 larger forum. 22 Most of the questions raised in response to the 23 mail-out required only simple qualifications regarding the 24 methodology. 25 To respond to the issues raised, by end of May we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 held four face-to-face meetings and numerous phone calls and 2 exchanged written information and data by mail, E-mail and 3 fax. These exchanges of information continued after the 4 regulatory staff report was issued. 5 In response to NMMA input, several significant 6 modifications were made to the inventory for personal water 7 craft. For example, the average engine horsepower was 8 reduced from 82 to 62, resulting in the reduction of the size 9 of the inventory. 10 The load factor was also reduced from 0.76 to 0.4, 11 the end resulting in reduction of the inventory. 12 Finally, the hours of use were reduced from 65 13 hours per year to 41. The changes are reflected in the 14 inventory presented to you today for your approval. 15 Despite the modifications previously discussed 16 which reduced the size of the inventory, the manufacturers of 17 water craft still believe that our proposed inventory for 18 personal water craft is too high. 19 In contrast, environmentalists have commented that 20 our proposed inventory under-estimates true emissions. 21 Recently obtained information suggests that the proposed 22 inventory is more likely to be low than high. 23 We have not used this recent information because it 24 has not been subjected to the public review process. 25 Therefore, staff presents the inventory to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 Board today as the best conservative estimate of emissions 2 from water craft currently available. 3 Staff believes that the updated pleasure craft 4 inventory we are presenting today for your approval is based 5 on the best available data, it is adequate to support the 6 proposed regulatory action that follows. 7 We are committed to continually seek new 8 information and make further improvements to the inventory 9 and provide the Board with periodic updates. 10 I will now answer any questions that you may have. 11 CHAIRPERSON RIORDAN: Okay. Prior to any questions 12 from the Board, maybe the Ombudsman's Office could comment on 13 the process. 14 Either Mr. Schoning, or Ms. Steel, whichever of you 15 would like to on behalf of the Ombudsman's Office. 16 MS. STEEL: Thank you, Madam Chair. 17 As you heard from the staff, they did undergo an 18 outreach process with the marine inventory, and on July 9 of 19 this year, they released the draft inventory on the same day 20 as the Marine Outboard and Personal Water Craft Engine 21 Workshop. 22 That workshop did not address the inventory 23 directly, but inventory staff were in attendance at the 24 workshop to answer questions. They requested interested 25 stakeholders to provide data and make comments on that draft PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 inventory. 2 As staff told you, they did receive four letters 3 commenting on that inventory and a fifth comment more 4 recently. Rather than holding a workshop, they did contact 5 those who commented on the inventory, working with them 6 directly. 7 They met with the National Marine Manufacturers 8 Association representatives four times, in July, on September 9 3, October 9, and quite recently on November 12, in addition 10 to some six telephone conversations that they had with the 11 NMMA representatives, and they continued working with 12 interested stakeholders up until just before they released 13 the inventory on November 30. 14 As staff told you, they did make changes to the 15 inventory in response to comments that they received through 16 the public process. 17 The Ombudsman's Office finds that they did conduct 18 an adequate public outreach process. 19 MR. CARLOCK: If I could, we need to correct one of 20 the slides that was presented. 21 The growth factors that are listed here are in 22 error. They should read for 1990 to 1997 the average was 13 23 percent per year. The note growth between 1998 and 2002 is 24 correct, and high growth, 2003 and 2006, should read 13 25 percent per year and a growth rate thereafter should read two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 percent per year. 2 CHAIRPERSON RIORDAN: Thank you very much. 3 We will note that. 4 Let me ask Mr. Kenny if you have final comments 5 before we have questions from the Board and the staff? 6 Let me open it up to our Board for questions at 7 this time of staff prior to those who are going to testify. 8 Are there any questions? 9 Mr. Dunlap, and then Mr. Calhoun. 10 BOARD MEMBER DUNLAP: I will yield to my colleague. 11 I am not the Chairman. 12 I have been advised of that many times. 13 BOARD MEMBER CALHOUN: I would like to ask a couple 14 questions of staff. 15 Mark, I noticed that one of the slides that the 16 industry thinks that the inventory is too low -- too high, 17 and the environmentalists think the inventory is too low, and 18 you tried to hit the happy medium. 19 I do not envy you. You have a very difficult job. 20 I did have one question. 21 When was the inventory that is used in the next 22 item made available to the public? 23 MR. CARLOCK: The inventory that is used in the 24 next item was finalized at the time that regulatory staff 25 sent their mail-out for this item. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 CHAIRPERSON RIORDAN: When would that have been? 2 MR. CROSS: That was 45 days ago. 3 CHAIRPERSON RIORDAN: Mr. Cross, I think you are 4 going to have to give us your name. 5 For the record, please give us your name. 6 MR. CROSS: For the record, I am Bob Cross, Chief 7 of Mobile Source Control Division, and you will see me all 8 day. 9 The inventory was finalized before the release that 10 staff reported, but was officially released in its final, 11 final, final version 45 days before the hearing, which is our 12 required noticing requirement. 13 BOARD MEMBER CALHOUN: Is that inventory the same 14 number that you presented here reflected in the next item? 15 MR. CROSS: Yes. 16 CHAIRPERSON RIORDAN: Mr. Dunlap. 17 BOARD MEMBER DUNLAP: Yes. 18 I was going to ask a question along the same lines 19 as Joe, Bob, you or Tom, one of the things that I think that 20 the staff has done a particularly good job of is during the 21 process, being able to work on the technical issues with the 22 industry, et cetera, and I picked up some grumblings about 23 the fact that we might have rushed this a little bit relative 24 to the inventory and other such supporting information. 25 So, could you guys give me assurance about this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 process? 2 The Ombudsman talked a little bit about that, Nancy 3 did a moment ago. Are we springing new numbers on people in 4 the last couple of days? 5 Is there anything that happened in this area that 6 we need to know about? 7 MR. CROSS: No. 8 We are obviously, because of the intense interest 9 in the item, we have been getting a lot of input as the 10 process has been going on. 11 BOARD MEMBER DUNLAP: Which is not unusual. 12 MR. CROSS: None of the input has changed the 13 numbers significantly either in the staff report analysis 14 that you will see or maybe what you have just seen. 15 I think there is input on load factors and on usage 16 for personal water craft which could cause the inventory to 17 go up a little bit, which we plan to look at next year. 18 But as Mark said in his presentation, that has not 19 gone through any public review process, and therefore, we 20 felt it was inappropriate to spring changes on the Board or 21 on the public, and we have just held it in the number stable 22 pending the new pieces of data. 23 BOARD MEMBER DUNLAP: Just to give the staff the 24 comfort relative to where I am on this, one of the things 25 that Tom and Mike Kenny have impressed upon me over the years PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 is that as we have a technical discussion with those that are 2 going to be regulated, and we are trying to get to the bottom 3 of issues that are surrounding the inventory and emission 4 factors that we do update, and we do improve as we learn 5 things, and that is a good positive thing, and it shows that 6 we are doing what we can to make it right. 7 Do not be defensive about that line of questioning. 8 I just want to make sure that people are not getting 9 surprised today about it, so, Tom, I am taking it that it is 10 consistent with how we have operated in the past. 11 CHAIRPERSON RIORDAN: Mr. Calhoun. 12 BOARD MEMBER CALHOUN: I appreciate what you are 13 saying, John. 14 However, I think that the inventory is so critical, 15 because it serves as the driving force of everything that we 16 do. So, I think we need to put forth and make the effort to 17 try and get the best set of numbers. 18 I do not envy Mark. He has one heck of a job to 19 do, and he always is getting constant input, and some I 20 suppose he will get some new input today, and next week he 21 will get something different, and things will just keep 22 going. 23 CHAIRPERSON RIORDAN: Okay. Are there any other 24 questions for staff? 25 Before we begin our testimony, and we have had PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 several people sign up to speak today, I need to make an 2 introduction, because as you see the Board, and you will 3 recognize that there is one person sitting with us that did 4 not answer roll call, and yet obviously is at the dias, and 5 we have invited to sit with us on the first two items from 6 one of our sister agencies, the State Water Resources Board, 7 Mark Del Piero, and we welcome you and thank you for being 8 here. 9 Obviously these two items are important to you who 10 oversee the quality of water in the State of California. We 11 are delighted to have you, and forgive me for not introducing 12 you earlier. 13 That does not limit your importance, because he is 14 a very important person to represent his Board here today. 15 MR. DEL PIERO: It is quite all right. My Board 16 Members ignore me regularly as well. 17 CHAIRPERSON RIORDAN: Hopefully then you will feel 18 right at home. 19 MR. DEL PIERO: I will hopefully try to provide 20 something to the conversation. 21 CHAIRPERSON RIORDAN: Thank you. I appreciate 22 that. 23 Let me begin on our witness list. 24 Mr. Bob Wyman, who represents the National Marine 25 Manufacturers Association. If you would come forward, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 please, and I know you are going to do a duo here, and I 2 recognize you are going to introduce the next person that 3 signed up to speak, Mr. Morgan. 4 So, Mr. Wyman, again, maybe for the record I will 5 allow you to introduce yourself as well. 6 MR. WYMAN: Thank you very much. 7 It is pleasure to be here today -- maybe I cannot 8 quite say that. 9 It is nice to see you all at any occasion. I sort 10 of hate to start out this way. 11 I've practiced before this Board for over 18 years. 12 I have an enormously high respect for this staff. This staff 13 does the best work in the country, probably in the world. 14 It does an outstanding job, and I have found in 15 almost every case I have appeared before this Board that 16 before we get to you all of the issues have been scrubbed 17 thoroughly so that you can make the policy decisions that you 18 are here to make with confidence that the information before 19 you is not in substantial dispute as to those items which 20 can, with good dialogue, be identified and resolved. 21 Unfortunately, today I cannot tell you that has 22 happened. 23 I do not like to tell you this, but I feel the 24 responsibility to tell you straight out, as I have always 25 been with this Board and with the staff, that the process PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 here, it has been defective, and I will give you some 2 illustrations. 3 Unfortunately, how laudable, it means, and we will 4 talk in the second item about some laudable goals, 5 environmental goals, both air and water quality, but no 6 matter how laudable the end, they do not justify trampling 7 over the means. 8 The means do not justify the end. 9 So, the process matters. It matters, and it is 10 very important. 11 Let me just mention, I'll talk about a couple of 12 things that were mentioned to you earlier. When did the 13 public receive this inventory? 14 I received it a week ago. The mail-out which I 15 believe was 9834, which contained numbers that had never been 16 seen before, did not reach my desk until last week. We did 17 not see it on the web page until last week. 18 I do not know if it was available 30 or 45 days 19 ago. I do not know where it was available, because it was 20 not available to us. 21 I can tell you in the 18 years that I have 22 practiced before this Board, I have never ever had to file a 23 California Public Records Act request to find out the basis 24 of the staff's conclusion. I had to do it here. 25 I did it on October 16, and we did it because, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 despite all the meetings you heard about, and you heard about 2 several, and we had those meetings, we had them because we 3 were desperate, because we knew this issue and next issue 4 drive to the very heart of this industry's business. 5 By the way, I should tell you I am Bob Wyman, of 6 Latham, Watkins, and I represent the National Marine 7 Manufacturers Association, and I apologize for not doing that 8 in the beginning. 9 The marine industry, for reasons I will tell you in 10 the next item, is extraordinarily sensitive and vulnerable to 11 the kinds of issues you are addressing today, so these issues 12 really do matter extraordinary, and that is why we could not 13 wait to find out what the basis was for the staff's decisions 14 and the staff's recommendations. 15 So, we had to file on October 16 a California 16 Public Records Act request to find out what the basis was for 17 their recommendations. 18 But I have to tell you, even though I have boxes 19 and boxes of data, I did not get the basic inventory data 20 that you got today until last week. That is very troubling 21 to me. 22 You will see and hear the staff talk about weekend 23 summer day, and as Mark mentioned in the presentation, the 24 importance of looking at the skewed use of activity from this 25 industry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 Well, we will be the first to acknowledge there is 2 more boating activity in the summer than there is in the 3 winter. We sure wish we could find a way to make it as 4 robust in the winter. That is just life. We do not dispute 5 that. 6 I will tell you I do not have any problem with 7 staff focusing on the unique challenges to non attainment 8 that are posed by emissions in different locations in the 9 basin at different times of year, even at different times of 10 the day. These are all relevant factors to you. 11 But what troubles me is the fact that until three 12 or four weeks ago we did not know that staff was going to use 13 weekend summer day. It was a change in their position. 14 We never had an opportunity to come before the 15 staff and tell them why their numbers might be wrong. 16 We do not know the basis for comparing a weekend 17 summer day to an average summer day or to an average annual 18 day. 19 The basis for that, the data on which they made the 20 comparison was not presented to the public. We still do not 21 know what that is. 22 How are we to comment effectively on the decision 23 you must make as to whether this inventory is adequate? We 24 do not know the answer to those questions. 25 If the staff is going look with the refined PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 resolution, at the factors that deal and contribute to the 2 worst nonattainment days, why are we not able to comment on 3 reactivity, on location of these emissions, all of which are 4 relevant? 5 I am not telling you that you need the perfect 6 information so that it can be the enemy of the good. Clearly 7 it is directionally correct to look at the issues. 8 But let's do it in a way where we have an 9 opportunity to comment fully and effectively under an 10 informed manner so that you could have the benefit of our 11 views on this. 12 Let me just comment briefly on the nature of the 13 meetings that we held, because I want you to get a sense of 14 the frustration that we felt and still feel. 15 We had many meetings. In fact, the meeting in 16 October with the staff was the longest and it was very 17 comprehensive, and that is true on the subject of inventory. 18 What made it comprehensive is that we had with us 19 Ted Morgan, who will speak to you in just a minute, who spent 20 six years developing an inventory with EPA. Of course, they 21 did it themselves, and Ted was an expert from the industry 22 working with them for over 20 years and was able to provide 23 very helpful information to that agency. 24 He also worked with the Department of National 25 Resources, in Wisconsin, not as an employee but as, again, an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 expert, to help them with their inventory, and he, of course, 2 offered the same assistance here. 3 So, at that meeting we spent a lot of time talking 4 about Dr. Morgan's analysis, and staff critiqued it. 5 So, as to regulatory comment on industry's views, 6 there has been lots of that. However, as to ability of the 7 industry to comment on staff's assumption, the input used by 8 the staff, there has been almost nothing. 9 At the July workshop that was referred to, we asked 10 to comment on inventory, and we were directed -- we were 11 told by the staff, and we could be specific if that would be 12 helpful, but I do not see the point, we were specifically 13 told this is not a workshop to discuss inventory. We will do 14 that later. 15 We said we would like a workshop, and we were told 16 we would have one, and there was not just four people in that 17 audience. There were a whole bunch. 18 We expected and counted on there being a workshop 19 on this issue, and there never was one. 20 To distill it down, one cannot have exchange of 21 ideas if one doesn't learn the assumption underlying one 22 party's views. 23 We didn't know that. We still don't know that for 24 many of the items underlying the inventory. 25 All that being said, I want to tell you we are not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 arguing here that the inventory of emissions in this category 2 is so small you should ignore it. It is sizable. 3 It is, by the way, half of what they said it was in 4 June. In June they were telling you on an average day it was 5 312 per day in the State. I believe their number now is 129. 6 That suggested to us a pretty good reason why the 7 staff might have moved to the use of weekend summer day, 8 because it moves the numbers back up. 9 In the next item we will talk to you about why we 10 think those numbers are relevant, not because we are going to 11 argue you should not regulate this category, but because when 12 you make the decision about whether the costs are worth the 13 benefit, you need to know what the benefit is. 14 It makes a difference. 15 Dollars per ton, you cannot calculate if you do not 16 know what the real tons are, and that is what is at stake in 17 this item. 18 I appreciate the opportunity to give these 19 comments. Again, I apologize for having to say this. For me 20 it was a first, and I hope it is the last. 21 I appreciate you giving me the opportunity. I 22 would like now to introduce Dr. Ed Morgan, from Mercury 23 Marine, who has a short presentation. 24 It will not take very long, but it will at least 25 give you, give you an update on where we are and our views of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 the inventory. 2 Thank you. 3 MR. KENNY: Madam Chairman, would you prefer that 4 staff provide a response to Mr. Wyman's -- 5 CHAIRPERSON RIORDAN: I think of this as a duo, and 6 then after I was going to then ask for comments and 7 questions, but I sort of, because there was a relationship 8 between the two speakers, I will take them as one. 9 MR. KENNY: Okay. 10 CHAIRPERSON RIORDAN: I hope that is all right with 11 you, Mr. Morgan, that you be associated with Mr. Wyman. 12 For the record, would you give us your name and who 13 you are associated with. 14 MR. MORGAN: Good morning, everybody. 15 I am Edward Morgan, Ted to my friends, including my 16 friends in the ARB staff, and I am Director of Advanced 17 Engineering in Mercury Marine, in Wisconsin, and I have been 18 employed at Mercury Marine for over 30 years, but today I am 19 speaking on behalf of the marine industry concerning 20 California's pleasure craft exhaust emission inventory. 21 The factors required for calculating past and 22 present emissions inventory are shown in Exhibit 1. In 23 addition to the factors themselves, we think that it is very 24 important to perform a consistency check. 25 This requires the emissions calculated from engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 hours and power factor and power specific emissions should be 2 consistent with emissions calculated from fuel use and fuel 3 specific emissions. Our calculations show very good 4 consistency for the major categories of outboards and 5 personal water crafts. 6 So, we have considerable confidence in the validity 7 of our basic starting points. The additional factors 8 required for calculating future inventories, that are shown 9 in Exhibit 2, the price elasticity has been determined from 10 data by Dr. David Harrison, of National Economic Research 11 Association -- Associates, also known as NERA. 12 His analysis leads to a price elasticity of minus 13 2.3, which is equivalent to, say, that price increase of 10 14 percent will result in a sales decrease of approximately 23 15 percent. 16 NERA has analyzed manufacturers confidential cost 17 estimates to obtain the lowest manufacturing cost of products 18 and has projected future sales, assuming the lowest 19 manufacturing cost for all manufactures, and a price 20 elasticity of minus 2.3. 21 For future projections we have assumed that with no 22 regulations the sales of outboards and PWCs would be flat at 23 the 1997 level. This assumption almost certainly 24 over-estimates future sales, since outboard sales in 1997 had 25 dropped 48 percent from the peak in 1973, and sales from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 first six months of 1998 were 19 percent down from 1997. 2 PWC sales peaked in 1995, dropped 12 percent by 3 1997, and sales for the first six months of 1998 were down 46 4 percent from 1997. 5 Projected future sales and emission inventories 6 have been calculated for year 2010 for five regulatory 7 scenarios: Number one, no regulations; number two, EPA 8 regulations; number three is the NMMA proposal; and number 9 four is the CARB proposal with tiers 1 and 2 only; number 10 five, the CARB proposal with tiers 1, 2 and 3. 11 The change in population each year is equal to the 12 sales minus the scrappage. For several years scrappage of 13 outboards had exceeded the sales, and so the outboard 14 population today is decreasing. 15 This rate of decrease will accelerate in the future 16 as sales decrease due to the higher cost of low emission 17 products. 18 For PWC, the population is still increasing, but 19 this is expected to reverse in the future as the scrape rate 20 of existing machines continues to increase and the sale of 21 new machines goes down, because of the higher cost of low 22 emission products. 23 It's important to recognize that under some 24 conditions sales and populations head in the same direction, 25 but under different conditions, the populations can be headed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 in opposite directions. 2 Projected outboard populations for 2010 are shown 3 in Exhibit 3. 4 CHAIRPERSON RIORDAN: This is Exhibit 3? 5 Yes. 6 MR. MORGAN: Along with ARB staff's estimate where 7 they are available, and I do not have all the estimates for 8 all the scenarios that I am showing, but the one's that we do 9 have, I note that the industry estimate as shown in the 10 cross-hatch bars, and the staff estimates are shown in the 11 full red bars, I note that the industry projections show a 12 steady decline in population with increasing stringency in 13 emission standards. 14 The least, EPA, and most, the most stringent is 15 staff with tiers 1, 2 and 3, exactly as would be expected 16 with the higher cost of product meeting the more stringent 17 standards. 18 By contrast, the ARB staff estimates show a 19 population which is totally independent of the emission 20 standards, a situation which is inconsistent with the concept 21 of price elasticity. 22 The industry and staff's projections for the 2010 23 outboard emission inventory is shown in Exhibit 4. Note that 24 for the EPA scenario the staff estimate of emissions is 25 almost double that of the industry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 This difference is primarily due to the staff's 2 failure to take into account price elasticity effects. 3 Unfortunately, we do not have any staff estimates for all the 4 remaining three scenarios. 5 Also note that there is little difference in 6 emission reductions between NMMA and staff proposals. All 7 three of those are very similar. 8 Projected to PWC populations for 2010, shown in 9 Exhibit 5, again, with ARB staff estimate where available, 10 again, the staff has failed to take any allowance, to make 11 any allowance for the increased cost of low emission products 12 and the price elasticity effect. 13 Projected PWC emissions for 2010 is shown in 14 Exhibit 6, also with ARB staff estimate where available, note 15 this was an EPA scenario, the staff estimate has almost 16 doubled that of industry. 17 This difference is primarily due to differences in 18 estimated populations, but it is also partly due to the 19 difference in power factors. 20 In choosing a power factor for personal water 21 craft, the staff has been influenced by a complex analysis of 22 a SAI survey data. 23 The NMMA estimate of power factor is based on 24 direct measurement of fuel usage and engine hours obtained 25 from a rental operator in Lake Tahoe and should be far more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 accurate than survey data. 2 It is our opinion that the power factor chosen by 3 the ARB staff for personal water craft is too high by a 4 factor of approximately 30 percent. 5 Note also from Exhibit 6 that there is little 6 difference in emission reductions between NMMA and staff 7 proposals. 8 The conclusions to be drawn from the industry 9 calculations of future emission inventory is shown in Exhibit 10 7. 11 Let me just read them. Number one, based on 12 historical trends and the first six months of 1998 sales in 13 California, the ARB staff have over-estimated the 2010 14 emission inventory by a factor of two or more. 15 Number two, the effect of delaying the 16 implementation of tier one from the staff recommendation of 17 2001 to the end of the proposal to 2002 has only a relatively 18 small impact on subsequent emissions. 19 BOARD MEMBER PARNELL: You missed two. 20 That was three. You missed two. 21 MR. MORGAN: I missed two. I am sorry. 22 Somehow or another the electronic -- we have the 23 wrong slide. 24 We eliminated two. I cut it down to three. 25 Number two, again, the effect of delaying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 implementation of what I have now as number two, tier one 2 from the staff's recommendation of 2001 to NMMA proposal of 3 2002 has only relatively small impact on subsequent 4 emissions, and finally, implementation of tier 3 in 2008 has 5 a minor impact on the emissions inventory of 2010, but it 6 will drastically reduce outboard PWC sales. 7 I would like to thank you for your attention and 8 the opportunity to make this presentation today, and I will 9 be happy to attempt to answer any questions you may have. 10 CHAIRPERSON RIORDAN: Thank you, Mr. Morgan. 11 That is what I am going to do. 12 Mr. Wyman. 13 MR. WYMAN: There was just one other point I would 14 like to make before you open everything up. 15 It is going to be very short. You heard earlier 16 that the inventory data on which this proposal was made, it 17 was released 45 days before. 18 You should know the docket, which, of course, 19 indicates what was released 45 days before, does it to our 20 advantage and not include this report. 21 It was, I am told, mailed on December first. It 22 appeared on the website December 2, which is, of course, my 23 statement, and it was actually made available last week. 24 CHAIRPERSON RIORDAN: What I would like to do now 25 is, before we even have the staff respond, because you are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 both up there, are there any questions by the Board Members 2 of these two witnesses? 3 Mr. Parnell, did you wish to ask any questions of 4 the witnesses? 5 BOARD MEMBER PARNELL: No. 6 Of the staff. 7 Do you want to reserve that for later? 8 CHAIRPERSON RIORDAN: No. I am going to invite the 9 witnesses to sit down, and now I am going to ask the staff to 10 respond, and then what I am going to do is then ask the Board 11 to inquiry the staff after their response. 12 MR. KENNY: Actually, if I could respond, and I 13 would like to actually have some staff assistance on this, 14 but I wanted to sort of paint the broad brush and then go 15 into some of the details. 16 Mr. Wyman has made several harsh allegations with 17 regards to the staff's conduct here, and what I wanted to 18 sort of respond to was kind of those things very 19 specifically. 20 He laid out that, for example, that he did not have 21 the inventory data until one week ago. 22 He laid out that we essentially were subjected to 23 PRA request, with the implication being that was necessary 24 for him to obtain information. 25 He laid out that the fact that the weekend summer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 day is something that is brand-new and that he was unaware of 2 in the past. 3 He laid out that he was to be given a workshop and 4 that he was not given a workshop. 5 I will start with the easiest one, which is the 6 Public Records Act request. 7 We routinely receive Public Records Act requests. 8 Mr. Wyman did submit a Public Records Act request, and we 9 responded to that Public Records Act request quite 10 expeditiously, and Ms. Walsh has that Public Records Act 11 request before her today, and she can read that to you to 12 essentially show that we are willing to provide information 13 to anyone at any time as expeditiously as possible. 14 With regard to the fact that the weekend summer day 15 is something that has been suddenly been surprised upon the 16 industry, if one looks on the staff report for this 17 regulatory item, one can see that throughout the staff report 18 we talk about weekend summer days, and there are a number of 19 tables and a number of charts in there in which the weekend 20 summer day terminology is used. 21 So, I find it a little bit hard to understand how 22 there was such a surprise here, which, in fact, that report 23 which was available 45 days before this hearing used that 24 terminology. 25 When one talks about the fact that the inventory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 itself was available only one week ago, there is some merit 2 to what Mr. Wyman is saying, but it is somewhat illusory. 3 The inventory that is associated with the 4 regulatory item is in the staff report that was available 45 5 days ago. The actual inventory report itself as result of 6 continued negotiation was not available until November 30. 7 So, that part of his statement is true, but if you 8 look at the inventory report and compare that to the staff 9 report, which was available 45 days ago, the inventory 10 numbers are the same, and I think that the staff can give 11 some justification and some reasons for why the additional 12 delay occurred as a result of the continuing negotiations 13 with the industry. 14 Then finally there is the issue with regard to the 15 fact that a workshop was promised and that no workshop was 16 provided, and I think on that I will let the staff basically 17 respond very straight forwardly and simply that, in fact, a 18 workshop was not unqualifiedly promised. 19 A workshop was essentially indicated to be 20 available if, in fact, it was determined to be necessary. 21 Instead of going through the process of having, actually 22 having that workshop, however, we met individually with each 23 of the commenters on the inventory. 24 I think with that we will be happy to go into any 25 detail the Board would like. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 CHAIRPERSON RIORDAN: Let's see if we can now bring 2 it back to the Board for questions, and maybe that will lead 3 to some further dialogue if it is necessary. 4 Otherwise, Mr. Kenny, thank you for your response. 5 Mr. Parnell. 6 BOARD MEMBER PARNELL: Mr. Kenny, as usual, has 7 answered many of the questions that I might have had. 8 This is an enormously important issue in that it 9 has a profound affect on what follows for the rest of these 10 next two days, and I, for one, generally listened very 11 closely to the staff based on the notion that they have done 12 their work totally, completely and the best that they 13 possibly can, and I guess one thing that you did not address, 14 or maybe you did and I missed it, is the fact that during 15 this process, I think Mr. Wyman stated that in the process, 16 the factors underlying the inventory were not available, and 17 therefore, they had no opportunity to really respond to those 18 underlying issues. 19 Would you just spend a minute and talk about that? 20 MR. KENNY: There were essentially ongoing 21 discussions between the ARB staff and the industry with 22 regards to those factors, and some of those factors there is 23 agreement on and some of the factors there is disagreement 24 on. 25 I think in terms of the details on that, I am going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 to turn it over to Bob and Mark or even to Tom, and they can 2 talk in more detail than I can. 3 The discussions were essentially ongoing throughout 4 the entire process with regard to those factors. 5 BOARD MEMBER PARNELL: Let me just add to the 6 confusion a bit before you answer, if you would, another 7 thing Mr. Wyman said is that during the workshop, or excuse 8 me, the meeting, or however you characterize the meeting that 9 was held, there was a lot of discussion about inventory that 10 was set forth by the industry but very little discussion in 11 the reverse discussing what the staff had really proposed. 12 Spend some time and talk about that a bit. 13 MR. CACKETTE: I believe the workshop that he is 14 talking about was the deal with the regulatory item, the one 15 that follows, and that is why we did not spend a lot of time 16 on inventory, but the reason for that was that we wanted to 17 have individual meetings of the people that commented. 18 Most of the four people, most of the comments other 19 than NMMA were sort of clarification, what did you do and why 20 did you do that, which we dealt with that on the phone, so we 21 are left with essentially one commenter who had substantive 22 information that we wanted to see, and they wanted to see 23 information we had, so we met with them, and we continued to 24 meet with them even after the staff report went out. 25 I want to point out there was a comment made by Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 Wyman that alluded to why we went to weekend days, and it was 2 because, gee, the inventory was cut in half compared to what 3 it was in the beginning of this process. 4 One of the reasons why it was cut in half was 5 because we listened to NMMA. 6 For example, we had been using, as Mark showed in 7 his slide, an average horsepower for personal water craft, of 8 the jet skis of 82 horsepower, and they presented information 9 that dropped it to 62 horsepower. 10 That is roughly a 25 percent reduction, and that 11 reduced the inventory for that category, which is roughly 12 half of the emissions by 25 percent, and that is what is 13 reflected in the staff report. 14 This is evidence of the dialogue that was going on 15 and how it did respond to what NMMA was interested in and 16 how, in fact, it drove down the inventory closer to what they 17 believe the true inventory is. 18 We had a dialogue on load factors, which is how 19 much of the time do you have a throttle full on versus not 20 full on, and that number dropped from .76 to 0.4, in part due 21 to their input and part due to data that we collected by 22 taking instrumented jet skis out and riding them, too, and 23 again, that has the effect for jet skis of cutting emissions 24 by roughly 40 percent. 25 So, it came down a total of half because of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 response to the input that was going on here. The reason 2 that the staff report on inventory came out so late in the 3 process, on November 30, was because we continued to have 4 dialogues with NMMA, and if, in fact, there had been 5 information presented that was so compelling that the 6 inventory that we had in the staff regulatory proposal would 7 need to have been changed, we wanted to change it before it 8 came to the Board. 9 We did not find that compelling information. It 10 was suggestive information, but we did not end up with an 11 agreement. So, what you saw in the November 30 staff report 12 on inventory merely mimics what was in the staff report on 13 regulations which was to come out a month before that, and 14 there is no new information in there that is not contained in 15 the original staff report on regulations, including the 16 concept of summer weekend day. 17 Many of the issues that Mr. Morgan raised here 18 about what is going to happen are all a function of the 19 regulatory issues, which is really the next item, and so what 20 we focus on in inventory is principally what is the inventory 21 in 1990 and what kind of growth do we think is going to 22 occur, and I understand his comments said that the growth is 23 going to be less than you think it is going to be because you 24 are going to suppress the industry. 25 There is that relationship, but the point about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 what is the way tier one for one year and what is the value 2 of having tier 3, those are regulatory issues that we are 3 going to address in the next item. 4 CHAIRPERSON RIORDAN: Follow-up questions? 5 Mr. Parnell, then Mr. Dunlap. 6 BOARD MEMBER PARNELL: It is not a question. I 7 guess it is more of a statement. 8 It is enormously troubling to me when you sit on 9 this side of the dias and depend on people to give you the 10 kind of input, recognizing the history of Mr. Wyman -- I have 11 not been here for all 18 years, but I have been here too long 12 perhaps, I have been here six years, and he has been very, 13 very fair, in my experience, and now the great disconnect for 14 me is we are saying we did it right, and they are saying we 15 did it wrong. 16 Somebody help me understand. You have gone a long 17 ways toward that, but on the other hand, this is troubling. 18 CHAIRPERSON RIORDAN: Mr. Kenny, and then Mr. 19 Dunlap. 20 MR. KENNY: I think what you are really seeing is 21 essentially a fairly substantial disagreement with regards to 22 the regulatory item, and as a result of that, you are seeing 23 an inability for the two parties to reach consensus, and that 24 has been carrying over to essentially other issues. 25 We think we did do this right. We think we had a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 very open process. We think that, in fact, the dialogue was 2 one in which we made every effort to continually work with 3 the industry. 4 At the same time, what ended up happening is that 5 we did have difficulties getting information from them at 6 times, and the end result is that we have a staff report that 7 was out 45 days in advance, and then as we continued that 8 dialogue, and we did not basically get to a point that we 9 could essentially improve that inventory further from what 10 was out in the staff report, we then put the inventory staff 11 report out, because we wanted to make sure that, in fact, 12 there was that opportunity to continue to go as far into the 13 process as we possibly could to make sure that the 14 information was as accurate as we could possibly get it. 15 But I think Tom's comment about essentially the 16 fact that the ultimate inventory staff report mimics the 17 regulatory staff report is an important one, because what we 18 ended up with was essentially the same staff report came out 19 far in advance of this hearing, as required by the law. 20 MR. CACKETTE: And I think one other important 21 thing to leave with you is, as Mr. Wyman says, and as we 22 certainly agree, the emissions from these sources, these 23 pleasure craft are enormous. 24 They are really big. So, there is no question that 25 the uncertainties in the inventory would make this an item PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 that would not be worthy of your attention, and as I think as 2 you get to the regulatory item, we can help you perhaps see 3 the sensitivity of the assumptions. 4 If, in fact, our growth factor had been half of 5 what it was, for example, we could tell you how much the 6 inventory could come down, and I think what guided us in part 7 is that you could cut the inventory in half, or probably in 8 three-quarters, and it would be worthy doing, and when you 9 see cost effectiveness numbers that we have, you will find 10 that even if we were wrong on the ton side, as Mr. Wyman 11 suggests, this still would result in a cost effective 12 approach. 13 So, if you have questions there, we can do that, 14 and one of the things I would like to suggest, if you want to 15 take just a moment, as part of the public records request on 16 inventory, we responded to in a letter specific to inventory. 17 If Ms. Walsh could just sort of read our response, 18 it will give you a flavor for whether or not the information 19 was available or not and had to be extracted through public 20 records. 21 CHAIRPERSON RIORDAN: I think, if it is very brief, 22 Ms. Walsh. 23 MS. WALSH: I will try to be brief. 24 We take Public Records Act requests very seriously 25 and respond to them as quickly and as fully as we can. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 In this case, Mr. Wyman is correct, he submitted a 2 Public Records Act request mid October, October 16. We 3 responded to that request indicating that we were working 4 hard at pulling together a fairly significant volume of 5 material that was covered by the request. 6 That information was provided to them on October 7 26. On November 4, in an effort to move the process forward 8 as quickly as possible, another letter was sent to Mr. Wyman 9 describing to him the information and much of this 10 information related to inventory. 11 Per Tom's suggestion, I am going to quickly read 12 through this. We had identified documents including a draft 13 baseline inventory finalizing the baseline 1997 inventory 14 which was completed in June 1998, emission reduction 15 scenarios including, Honda's and NMMA proposals documents 16 that were provided by Mr. Ted Morgan, DMV population and 17 growth trend analysis documents, spread sheets used to 18 calculate both usage based on a law dated from the SAI 19 report, results from the PSR database annual average versus 20 summer average versus winter average inventory estimates, 21 fuel consumption estimates for personal water craft and 22 outboards, downloaded from the Internet, and fuel consumption 23 estimates for personal water craft and outboards provided by 24 the manufacturers. 25 Having provided that listing of information to Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 Wyman, we then met, not myself personally, but staff from Air 2 Resources Board met with Mr. Wyman to provide documents and 3 confirm that in a letter, dated November 10. 4 I'm just going to read briefly from that letter. 5 "In addition, the ARB has provided you with all the 6 public records categorized in our November 4, 1998 letter to 7 you," those are the records that I just listed, "with the 8 exception of the Category 3 documents," those being the ones 9 from Mr. Ted Morgan, "and Category 9, fuel consumption 10 estimates identified as trade secret information." 11 The letter goes on to say, "In talking with you 12 yesterday, it is my understanding that you do not desire 13 these two categories of documents." 14 This is a typical response to a Public Records Act 15 request, and we feel that we responded to the Public Records 16 Act request as quickly as possible, getting this information 17 into Mr. Wyman's hands so he would be able to provide us 18 comments. 19 CHAIRPERSON RIORDAN: Mr. Cross, very quickly, I 20 mean really quick. 21 MR. CROSS: In terms of the amount of process that 22 the industry has gotten on the inventory, the mail-out was in 23 July, and so the first draft went out in July, and then they 24 had an opportunity to comment, and we met with everyone who 25 commented. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 Second thing is that July mail-out included the 2 concept of weekend emissions, which finally showed up in the 3 staff report, so it was not invented at the eleventh hour. 4 The third comment is that the inventory then that 5 we're looking at here applies totally to 1990 inventory and 6 growth projections based on the absence of regulations, so 7 the presence of Federal regulations in, as of November, mid 8 November, November 11, the industry and staff had essentially 9 agreed on the inventory. 10 So, the disagreements that you saw from NMMA were 11 primarily focused on things related to the regulatory item, 12 which is the next item on the Agenda. 13 CHAIRPERSON RIORDAN: Thank you very much. 14 Mr. Dunlap. 15 BOARD MEMBER DUNLAP: If I could maybe try, 16 Mr. Parnell brought up some key points, and I know the staff 17 appreciates what it is like sitting up here, and also we 18 probably do not appreciate what it is like sitting down 19 there. 20 One of the things that concerns me relative to 21 process, and I have some assurance and have some comfort 22 based on the explanation that we heard about the fact that 23 even though a workshop was not held there was a significant 24 back-and-forth in this customer-friendly, personal-attention 25 thing going on, and that is great, but the one thing that I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 kind of feel like I need to hold you accountable for as a 2 Board Member is that people have, from the industry, have the 3 impression that a process was going to occur, that a workshop 4 was going to happen, and it did not. 5 I think you need to understand they have the right 6 to stand up and say, hey, you know, we feel like we did not 7 get the full process. 8 So, you kind of, in my view, are guilty of not 9 handling that in a way where they felt that they got that 10 workshop, that process. 11 Now, the other thing, too, you do not need a 12 lecture on this, but for just a moment, Mr. Wyman and his 13 colleagues here are trying to put forward an argument to 14 paint a picture for us to consider in our deliberation, and 15 what they're going to try to do, and I think they have done 16 it in this case, assert that though we might have ended up in 17 the same place, you would have come to the Board with the 18 same recommendation, the same inventory, they feel like the 19 process was insufficient in some ways. 20 So, I mean I do not know if I am looking for any 21 more from you, but just to, again, caution you as you go 22 forward as regulators, there is a lot at stake for people. 23 You guys know this from the years doing it, so it is 24 important not to leave people with the false impression about 25 process, and though I have some comfort with the explanation, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 if you came back and you had individual contact and you were 2 working through the issues, and Tom, as you adjusted 3 downward, and the two examples you cited which benefited 4 them, I think that is a good thing, and I think that is very 5 positive, but again, you know, I just want -- well, maybe it 6 is more directed to you, Mike. 7 MR. CROSS: That went out to the other list of 8 stakeholders, also, not just the marine stakeholders. 9 BOARD MEMBER DUNLAP: But what Mr. Parnell is 10 saying, here is a guy, Bob Wyman, who represents a lot of 11 clients, up here, standing up and taking us to task over 12 process. 13 You know what I mean, that is something you guys 14 could have handled is I guess my point. You could have had 15 the workshop, and you probably should have, not that you 16 would have ended up in any place different. 17 So, Mike, just do your best so we do not have this 18 kind of thing happen down the road, okay? 19 CHAIRPERSON RIORDAN: Mr. Calhoun -- Mr. Wyman, I 20 know you are creeping towards that microphone, but I want to 21 caution you that we could debate this all day. 22 MR. WYMAN: Thirty seconds. 23 CHAIRPERSON RIORDAN: All right. That is good. 24 Well, may we have that in writing? 25 MR. WYMAN: Thirty seconds. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 CHAIRPERSON RIORDAN: Mr. Calhoun has his time. 2 BOARD MEMBER CALHOUN: Ma'am Chair and fellow Board 3 Members, I have talked to staff, and I have also talked to 4 Mr. Wyman, and I saw the sense where, at least I come out on 5 it, that had more time been allocated for this particular 6 issue, these allegations that Mr. Wyman has made and some of 7 the comments that the staff made probably would not have 8 occurred. 9 It is my feeling that we rushed this item, and that 10 is what you see is the result of that, and I just wanted 11 to -- well, at least that is my assessment anyway. 12 CHAIRPERSON RIORDAN: Thank you, Mr. Calhoun. 13 Are there any other questions from any of the Board 14 Members for staff? 15 You have exactly thirty seconds to do this 16 correction. 17 MR. WYMAN: I think this is important that the 18 California Public Records Act response, we have lots of 19 documents, but one thing we did not get either in the 20 California Public Records Act response or our meeting with 21 Mr. Carlock was an answer to, what was your rationale? 22 What was your reasoning? What assumptions did you 23 pick within all the raw data, which is boxes and boxes, some 24 which were received this week. 25 We still did not get the analysis, and that is, of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 course, what is important. We needed to know why they did 2 what they did so we could comment on it. 3 Thank you. 4 CHAIRPERSON RIORDAN: Thank you, Mr. Wyman. 5 All right. Mr. Paliwoda, Mr. John Paliwoda, if you 6 would come forward, please. 7 If you would give us your name and the organization 8 that you represent, please, for the record. 9 Thank you. 10 MR. PALIWODA: Madam Chairman and Members of the 11 Air Resources Board, thank you very much for the opportunity 12 to appear here today and to plead the case on behalf of the 13 California Motorcycle Dealers Association. 14 I'm the Director of Government Relations for the 15 California Motorcycle Dealers Association, or as you will 16 hear today, referred to as CMDA. 17 I just want to take a couple of seconds and 18 indicate that probably among all the presenters here from the 19 industry you are going to see me here the most, because 20 various industry spokesmen represent various industries. 21 Unfortunately, or fortunately, our dealers sell, 22 market and retail the three important issues that you are 23 going to be talking about and deciding our future today on. 24 That is on-road motorcycles, off-road motorcycles and 25 personal water craft. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 That being said, since I became the representative 2 for CMDA two years ago on legislative and regulatory affairs, 3 the one thing that has impressed me the most is accurate 4 emissions inventories, because quite frankly without accurate 5 and compelling emissions inventories, there is little need to 6 regulate industries such as ours, and the process by which 7 the emissions inventory ended up being considered here today 8 and the ramifications for it troubles me very much. 9 We talked somewhat, and I will not rehash the 10 process here that we have ended up here today discussing this 11 inventory, but just a year ago, almost a year ago, this Board 12 verified and approved the inventory for the on-road sources. 13 The off-road sources was not verified, because an 14 off-road model was being prepared, and either totally or 15 piecemeal would be approved by your Board before other of 16 those categories would be regulated, and just to show you the 17 confusion here, last year in the inventory that you did not 18 approve, the data demonstrated for pleasure craft 95 tons of 19 ROG per day. 20 In July, in the staff report, or I should say the 21 inventory assessment that was presented for circulation for 22 comment and to have that to be discussed at a later workshop, 23 which never occurred, you are talking about a staff estimate 24 of 312 tons per day. 25 That is an enormous increase from an estimate which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 was gathered and not acted upon but discussed nearly six 2 months before. 3 I just got a copy of this inventory today. Now I 4 know it was available perhaps beforehand, but I did not get a 5 mail-out. I was one of the four respondents who did not 6 meet, by the way, who was not contacted by the staff to 7 discuss these inventory numbers, and I think the staff 8 recognizes I am very sensitive about the inventory numbers, 9 and again, in quickly glancing through this inventory that 10 was presented today, it looks like we are down to 129 tons, 11 and again, we do appreciate the work that has gone into 12 reducing that inventory from 312 tons to 129 tons. 13 I do feel it is a little disingenuous of whoever 14 spoke for the staff and said, well, even if it's two-thirds 15 or half that total, it is still a lot. You know they're 16 right. It is still a lot, but you have to identify it, 17 accurate tonnage for an accurate amount to go to our second 18 step, the second step here, which is to decide what level of 19 regulation that you are going to have. 20 Do we need your first tier as severe as it is, or 21 do we need it at all or is the second tier appropriate? Is 22 the third tier also appropriate? 23 These are the elements that I think have to be very 24 carefully examined. Again, I did not see that this item was 25 noticed or I would have called over to the staff within the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 45 days and asked for a copy of that inventory so that I 2 could take myself through it as best as possible. 3 That would end my comments. Thank you very much. 4 CHAIRPERSON RIORDAN: Thank you, Mr. Paliwoda. 5 Any questions for this witness? 6 Mr. Dunlap. 7 BOARD MEMBER DUNLAP: One comment. 8 John. Good to see you. It is a pleasure to bump 9 into you from time to time on the issues. 10 Just so I'm clear, I know you have been through 11 this before on inventories, and I certainly respect you 12 there, but you do know that these things evolve, and if we 13 were to wait for it to be perfect, John, there would be a 14 long time between the study and action. 15 Rather than come away from this kind of discussion 16 with this feeling that is a bad thing, perhaps I'll take this 17 moment and try to give you some perspective. 18 The emission inventory work which we are talking 19 about today is very difficult work, particularly in areas 20 where we have not done it before. 21 We found a new source category. We're learning 22 more about it. 23 But we do this better than anybody else, this 24 organization does, I mean, and the fact that it is an 25 evolving process is something you should take comfort in. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 You can impact it, John, through studies, through 2 surveys of your membership and users, et cetera. So, I do 3 not want you to leave the podium feeling that this is a 4 closed process that you cannot touch or impact in some way, 5 because you can, and I just wanted to tell you that. 6 MR. PALIWODA: Well, I realize that, but I am going 7 to have to touch on the impact before the next regulatory 8 item is considered, and that is a little bit short fused, 9 that is the problem here, we didn't have more time before the 10 actions that you would take, which are based on accepting 11 this inventory. 12 Then I guess the discussion would be somewhat 13 different. But I just wanted to point that there is a large 14 swing between these numbers or among these numbers, and our 15 dealers are the one's that are ultimately going to be the big 16 losers here if the standards are set too low, and we end up 17 with product unavailable, and that is going to be my 18 reoccurring theme today. 19 CHAIRPERSON RIORDAN: Thank you, Mr. Paliwoda. 20 Mr. James Haussener, come forward please, and just 21 so we can know, the next speaker, Mr. Todd Campbell, you 22 might cue up to follow Mr. Haussener. 23 Mr. Haussener, if you would give us your name and 24 if you represent anyone for the record, please. 25 MR. HAUSSENER: Madam Chairman, and Members of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 Board, James Haussener. 2 I am a resident of Castro Valley, and I am not 3 representing nobody. 4 I am a boat owner, and I work in the marine 5 industry, and I just want to talk a little bit about my 6 background and then some of the usage numbers that I see 7 which may impact the emissions. 8 I have a ski boat in my driveway, four stroke. I 9 have a PWC that I am making payments on in my garage. I got 10 an auxiliary sail boat that I am partners with my father in 11 the marina, and I got a 50-foot offshore power boat that I am 12 partners with another person, and I got a dingy outboard in 13 my backyard in a pool locker for the dingy, that I do not 14 own. 15 So, I got a lot of engines, a lot of boats, a lot 16 of experience. I think in some of this stuff, so I am a 17 little concerned, anecdotally, in looking at some of your 18 numbers and the usage areas, and I will give you some ideas 19 of what I see that may need to be fuel verified. 20 Table 4, page 10, the DMV numbers, if you add up 21 the total sail boats with auxiliary engines in those three 22 categories, you are roughly 30,000 sail boats out of 814 23 boats registered. 24 To me that seems to be a little off. I would think 25 there is probably more than 30,000 sail boats with auxiliary PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 engines in California, which obviously has a major impact on 2 emissions, because the sail boats are down around 10, based 3 on one of the other tables, whereas other engines are up to 4 93. 5 So that indicates that there may be some problem 6 there. The survey data that SAI did, I worry a little bit as 7 to whether it was really field verified. In other words, 8 what sort of error factor they have. 9 I remember my first science class in college being 10 told one of the first things you got to do in your report is 11 discuss your errors, and I know folks go out, and we like to 12 brag about how many hours we used our boats, because we do 13 not want to admit to our wives or girlfriends that we got 14 this toy that we are not really using, and the usage of the 15 boat, the actual hours the boat is under, or the number of 16 hours that you are down on the boat. 17 MR. DEL PIERO: She believes you. 18 MR. HAUSSENER: So, you need to take a look at it 19 for every hour you are under way you are probably spending 4 20 or 5 hours working on it, and 3 or 4 hours at a boat store 21 buying something and things of that sort. 22 So, did somebody go back and take a look at engine 23 hours? And you say you surveyed last year and were just 24 coming back to you, you indicated that you might have used 25 your PWC for 55 hours. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 How do you know that? 2 I do not know how many PWC have engine hour meters 3 on and how many do not. I know mine does not, so I can tell 4 roughly by how many quarts of oil I go through in the tank. 5 To be honest with you, I have gone through less 6 than half gallon of oil in that tank since I bought the PWC 7 three or four years ago, which to me seems to indicate that I 8 am rather low. 9 But there is no way to verify how many hours that 10 PWC is being used compared to the other boats that do have 11 the outboard -- so, hopefully somebody went out and verified 12 the numbers you have. 13 Getting back to a couple of other things, Table 5, 14 page 15, you got that PWC thing which I have not quite 15 figured out, but it comes out saying the average is 41 hours 16 based on the usage, and you did a little extrapolation, and I 17 will be honest, I am a high school drop out. I had to go 18 back, and so I did not understand things like that, but it 19 talks about all pleasure crafts have a useful life of 16 20 years, except PWCs, which have a useful life of 9 years, and 21 then you show me a table that goes from 0 to 18, which is 19 22 years -- 19 years, when earlier in your page you say it only 23 has a nine-year useful life. 24 Sort of wonder how do you guys plan these numbers 25 in order to get to what I think to start with is probably a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 high number of 41, just for PWC, and then when you take a 2 look at the sterndrive boats, and you're up to 93 for other 3 boats, it seems to me like, well, maybe you need a boat owner 4 involved a little bit in this process instead of a lot of 5 scientists. 6 Taking a look at Table 6, again, page 16, the 7 overall usage of pleasure craft, the numbers to me seem high, 8 and I will admit I am just a boat owner, and I do not know 9 much, but are they just for people that use their boats, 10 think, about 93, 99 hours of boat usage, that is lot of eight 11 hours days. 12 When you go water skiing, how many hours do you 13 really use that boat skiing, and how many hours are spent 14 hanging out in the boat talking and doing that sort of stuff? 15 Maybe three hours, maybe two hours of actual 16 operation in a full day of going to the Delta and water 17 skiing. So when somebody says the average usage is up there, 18 11 or so, full eight hour days, I go, wait a minute, 19 especially on an average. 20 Especially, people talk about number of 21 boats parked in the marina. Only 20 percent of them go out 22 in a given year, let alone any given time, so I got some 23 concerns, and hopefully you will take another look at that. 24 I guess that got a rhetorical comment here, and I 25 am listening back there, and I do not quite understand if the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 emissions you have already have gone down 50 percent from 2 July to now from 312 and 129 tons or whatever it is, can't 3 you just say that the Air Board did a wonderful job, you won 4 the war, let's go home? 5 Thank you. 6 CHAIRPERSON RIORDAN: Thank you, Mr. Haussener. 7 We appreciate your comments. I do not know, staff, 8 do you want to respond in any way? 9 MR. CARLOCK: Sure. I will take on a couple of 10 them. 11 The term useful life is actually, if you read 12 further on, it defines the half-life or 50 percent of the 13 engines fallout of the fleet, therefore, if you have a 14 nine-year half-life, and you have a fleet that spans 18 15 years, I think that one is pretty simple. 16 What Table 5 reflects, on page 15, is that people 17 tend to use newer boats more hours, and people tend to use 18 older boats less hours, and that is what we have reflected 19 here is that you start lying to your wife later after it is 20 already paid for, so you cannot return it. 21 So, the average comes to 41 hours, and we actually 22 believe that 41 hours is in itself low. It is based upon 23 actual engine hours of use, not just time on the boat. 24 That was the specific question asked, and we did do 25 that. We squared the average hours of usage with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 assumption. 2 Also, another question asked is how much fuel did 3 you use when you were running the engine? So, we attempted 4 to balance those two, and we think 41 is the conservative 5 estimate. 6 But the problem is everyone has this data, and we 7 have been receiving data since we put out this information. 8 It depends on whose ax is being ground. 9 For example, some of that information that we're 10 talking about that has not gone through public review, it is 11 even information that we got from the personal water craft 12 industries on their website that suggests that usages is much 13 higher than we suggest in a marketing research project that 14 they ran themselves to show the personal water craft were 15 safe. 16 It is suggested in their documentation that 17 personal water craft are used 77 days per year. That is much 18 higher than the assumption that we're making here and would 19 drive the inventory back up to that inventory that you saw in 20 July. 21 However, again, we think that we're providing the 22 best conservative estimate, and we think it is adequate for 23 the regulatory review. 24 CHAIRPERSON RIORDAN: Thank you very much. 25 Mr. Campbell. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 Yes, sorry, Mrs. Rakow. 2 BOARD MEMBER RAKOW: I'm not quite clear on how the 3 usage is determined, whether it is determined as a 4 combination of survey and fuel consumption or just fuel 5 consumption or just surveys, you know, that you lie to your 6 wife or whatever. 7 MR. CARLOCK: It is both survey and fuel 8 consumption estimates both, questions about fuel consumption 9 and then testing on certain water craft to determine the 10 hourly fuel consumption. 11 BOARD MEMBER RAKOW: Is there any kind of 12 monitoring of fuel consumption where there is a very 13 accurate result? 14 MR. CARLOCK: For the test that we ran, we did 15 monitor fuel consumption on an hourly basis, and we also 16 received information from industry in May on fuel 17 consumption on personal water craft that we believe is 18 consistent with the data that we were collecting in our 19 laboratory. 20 BOARD MEMBER RAKOW: How do other entities monitor 21 the usage of water craft, like Coast Guard or EPA or who 22 knows somebody? 23 MR. CARLOCK: EPA used similar methods as we do. 24 CHAIRPERSON RIORDAN: Okay. Mr. Campbell, if you 25 would come forward and give your name for the record and who PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 you represent. 2 Following Mr. Campbell, we will have Mr. John 3 White. So, if you would cue up, please, I would appreciate 4 that. 5 Mr. Campbell, good morning. 6 MR. CAMPBELL: Good morning, Madam Chairman, good 7 morning, Members of the Board. 8 My name is Todd Campbell. I'm a Policy Associate, 9 with Coalition for Clean Air, and I am here today to -- the 10 Coalition supports staff's proposal to revise the California 11 Pleasure Craft Emissions Inventory with the understanding 12 that staff recognizes that today's proposal is a conservative 13 best estimate. 14 The Coalition has reason to believe that the 15 emissions inventory for reactive organic gases may be 16 significantly higher. However, it is important for the Board 17 to allow staff to develop emission standards and best test 18 procedures based on the proposed inventory set before you 19 today, because it is, in our opinion, the inventory for 20 pleasure craft is at least 19 percent higher than the 21 emissions on the 1994 SIP inventory that is on the books 22 today. 23 As you are also well-aware, reactive organic gas 24 emissions or reductions have been very challenging for the 25 California Air Resources Board and local air districts to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 reduce, forcing staff to work on an inventory within or out 2 moded inventory based on a 1980 study, which will handicap 3 staff's ability to achieve necessary reactive organic gas 4 emissions reductions. 5 Let us not forget that this is a source category 6 that is way over due and is badly in need of regulation. It 7 is, therefore, our position, and we encourage you to pass the 8 revised inventory proposed by staff before you today. 9 Thank you. I am here for any questions. 10 CHAIRPERSON RIORDAN: Are there any questions for 11 this witness? 12 Seeing none, then, thank you very much. 13 Mr. White, if you would come forward please and 14 give us your name and the organization you represent for the 15 record. 16 MR. WHITE: Good morning, Madam Chair and Members. 17 My name is V. John White, and I am here today 18 representing the Sierra Club of California. 19 I want to thank the Board for hearing me. I had 20 not initially intended to speak, but I could not help but 21 reflect on the discussion end of it and try to help you put 22 it in some historical context. 23 I think that we all know that inventories are the 24 fundamental building block of air quality planning, but I 25 think we also know that the perfect is often the enemy of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 good, and if you would think back on the imprecision which 2 the emission inventory in the mobile sector which has 3 continued to exist, although it has continued to improve, and 4 ask yourself whether, if the level of specificity and 5 precision that the industry seems to be seeking would have 6 been sought and demanded in every other regulatory action 7 that this Board has taken over the last 30 years, we would 8 not be very far. 9 So, I think that with all due respect to Mr. Wyman, 10 it sounds like the numbers have moved their way, and in the 11 course of staff doing their work, and in response to the 12 input from industry, the changes that have been made which 13 are in the industry's direction, are now becoming an issue of 14 whether or not the process is fair, and I think that speaks 15 for itself. 16 This staff has the best reputation in the United 17 States for process, open and fairness, ability of all parties 18 to visit the assumptions and for industry to come in and say, 19 well, we do not have enough time to see everything that was 20 moved our way, I think it has to simply not be paid much 21 attention to. 22 I would also remind the Board that in its desire to 23 understand the cost of everything that it understand that the 24 value of this regulation is of transcended importance for 25 both to the air quality inventory, which has been under some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 litigation recently for failure to adopt unnecessary emission 2 reduction, I would also point out that in the California 3 Clean Air Act, which I had the privilege of working on with 4 the Legislature, the agreement with industry was to basically 5 follow the tons in the inventory and go after things that 6 were not necessarily our original targets. 7 You know, I find it more entertaining a lot of 8 times to work on refinery emissions reduction strategies, 9 power plants, diesel trucks, but we have to follow the 10 inventory. The inventory tells us to go after coatings, 11 tells us to go after consumer products and to go after lawn 12 mowers, and in this case to finally, after years of delay, 13 bring this very large source of personal water craft and 14 other related activities under the tent, and it is often a 15 process where the folks affected by these regulations have a 16 hard time getting used to the fact of being regulated. 17 That is a normal reaction. They will get used to 18 it. This is a friendly place to do business. This is a very 19 open-minded and progressive institution, lots of good ideas 20 get a chance to be reflected. 21 The fact that the staff was so responsive to the 22 legitimate issues raised, we sometimes wish they would be as 23 responsive to us. 24 Mr. Campbell's point is well taken that the staff 25 as erred on the side of low. We agree with that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 We are not happy completely but urge you to proceed 2 with business at hand, and we will get the inventories better 3 as we go. 4 I am very eager to see all the monitoring that the 5 industry seems willing to offer due to how much the engines 6 are actually used, and if they can provide credible evidence 7 that in fact the use is much less than now assumed, that can 8 be reflected in time. 9 But it is no need to delay and no need to hesitate. 10 Thank you. 11 CHAIRPERSON RIORDAN: Thank you, Mr. White. 12 Mr. Russell Anders. If you could come forward, 13 please, and you're going to be followed by Mr. Russell Long, 14 so if you would. 15 Dr. Anders, if you would come forward, please, and 16 give us your name for the record and who you represent. 17 DR. ANDERS: My name is Russell Anders, and I am 18 here representing myself as a scientist and also, as someone 19 else said, a boat owner. 20 I do believe, however, that my comments should be 21 continued on to the next phase of this hearing, because my 22 studies are related generally to personal water craft, 23 two-cycle engines and their effect on the water environment 24 in which they operate. 25 So, if I could continue that to then, I would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 appreciate it. 2 CHAIRPERSON RIORDAN: Yes, you may indeed, and let 3 me ask, have you signed up for that? 4 DR. ANDERS: Yes, I have. 5 CHAIRPERSON RIORDAN: Then that will be fine. 6 Thank you very much. 7 Our final witness, Mr. Russell Long, if you would 8 come forward, please, and give us your name for the record 9 and organization you represent. 10 MR. LONG: My name is Dr. Russell Long. I am 11 Executive Director of Blue Water Network, in San Francisco. 12 I am going to save the majority of my comments for 13 the next section, but I could not help but come up and 14 address this issue, because of some of the earlier comments 15 that were made regarding staff and inventory, and frankly 16 from our stand point, we have worked closely with staff on 17 this issue. 18 Right from the start, we been talking to them about 19 an inventory, and we have found them extremely responsive. 20 In fact, I was hoping to commend staff over the 21 quality of responsiveness. We have never had that kind of 22 access from EPA, who we have worked with also very 23 extensively in the past on various matters, and I think that 24 the inventory numbers by and large, we think that they are 25 low. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 It is true we think it is significantly higher for 2 personal water craft. 3 For example, just one minor instance of this is 4 that the industry has claimed 41 hours a year or even 30 5 hours a year or something like that for jet skis, personal 6 water craft. When you go to the Personal Watercraft Industry 7 Association Website, it says right there they commissioned a 8 study by Bow Marketing, and Bow Marketing Research said they 9 used 72 days per year. 10 Immediately we started to see some inconsistencies 11 like that. But nonetheless, I think staff has done the right 12 thing by being extremely conservative with the numbers they 13 are using. 14 If these numbers work on a conservative basis like 15 this, and it is cost effective, then they are doing the right 16 thing. 17 This is the appropriate way to proceed for ARB, and 18 I want to commend them for taking that approach. With the 19 understanding, of course, that they will continue to look at 20 those inventory numbers in the future. 21 Thank you very much. 22 CHAIRPERSON RIORDAN: Thank you, Dr. Long. 23 Any questions for this witness? 24 Seeing none, we thank you. That concludes the 25 witnesses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 What I would like to do now is just prior to 2 opening it back for questions of the Board to the staff, I 3 think it is appropriate here maybe to enter the written 4 comments, and then I will allow for a summary by staff, and 5 then we will open it up for your questions. 6 So, if you would enter any written submissions into 7 the record, please. I do not know who will do that. 8 Mark? 9 MR. CARLOCK: We have one letter here from the 10 California Motorcycle Dealers Association, and he did 11 testify, and a written submission from NMMA, who also 12 testified. 13 That is it. 14 CHAIRPERSON RIORDAN: All right. Mr. Kenny, any 15 final comments? 16 MR. KENNY: Very briefly. 17 I think basically one thing that we need to keep in 18 mind is that inventories are never perfect. Inventories do 19 reflect a large number of assumptions, and I think what you 20 have seen from the staff today is an effort to basically have 21 the dialogue with regard to all the assumptions. 22 This has been a multi-month process. What we came 23 up with is essentially an end result which does reflect an 24 immense amount of dialogue and which is the staff's best 25 conservative estimate with regard to what the inventory is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 for the 1994 SIP, and I think that is important, because we 2 are trying to be conservative here in order to provide the 3 benefit of the doubt to the industry as we go forward with 4 the regulatory item. 5 I think had we been less conservative, obviously 6 the inventory could have been higher, but taking that 7 approach, we thought it was sort of the reasonable one and 8 the fair one, and so with that in mind, I would recommend the 9 Board's approval of this inventory. 10 CHAIRPERSON RIORDAN: Okay. Thank you. 11 Mr. Parnell asked for questions. 12 BOARD MEMBER PARNELL: I have three questions I 13 just want to put it on the record. 14 Mr. Kenny, has the process that led to this Item 15 appearing on the Agenda been flawed in any way in your 16 judgment? 17 MR. KENNY: No. 18 BOARD MEMBER PARNELL: Ms. Walsh, has the process 19 that led to the appearance of this Item on this Agenda been 20 flawed in any way? 21 MS. WALSH: No. 22 BOARD MEMBER PARNELL: Ombudsman, I assume your 23 answer is the same? 24 MS. STEEL: That is correct, I would agree that the 25 process has not been flawed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 CHAIRPERSON RIORDAN: Other Members of the Board, 2 any questions at this time for staff? 3 All right. Then I will do the official part of 4 this and officially close the record. I will close it on 5 this Agenda Item, however, the record will be reopened when 6 the 15-day Notice of Public Availability is issued. 7 Written or oral comments received after this 8 hearing date but before the 15-day Notice is issued will not 9 be accepted as a part of the official record on this Agenda 10 Item. 11 When the record is reopened for a 15-day comment 12 period, the public may submit written comments on the 13 proposed changes which will be considered and responded to in 14 the Final Statement Of Reasons for the Regulation. 15 We do have also as part of the formality here at 16 the Board, which is ex parte. Just a reminder to Board 17 Members of our policy concerning ex parte communications, or 18 we may communicate off the record with outside persons 19 regarding Board rulemaking, we must disclose the names of our 20 contacts and the nature of the contents on the record that 21 take place after the Notice of the Board Hearing have been 22 published. 23 Are there any communications which you need to 24 disclose at this time? I will start down there with Mr. 25 Roberts? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 Ms. Patrick? 2 BOARD MEMBER PATRICK: I met with Michael Carol 3 with Latham, Watkins, and his comments about the inventory 4 were consistent with those of the other gentleman from 5 Latham, Watkins. 6 CHAIRPERSON RIORDAN: Mr. Calhoun. 7 BOARD MEMBER CALHOUN: I had a telephone 8 conversation with Dr. Russell Long with the Blue Water 9 Network, and I also talked to Mr. Wyman regarding the 10 inventory, and essentially the statement that they presented 11 here today was the nature of our discussion. 12 CHAIRPERSON RIORDAN: Mr. Dunlap. 13 BOARD MEMBER DUNLAP: Yes. 14 I had two conversations, one with Dr. Long about a 15 month and a half or two ago on several items associated with 16 this work, and I met with Bob Wyman two days ago here in 17 Sacramento, and his concerns were expressed a few moments 18 ago. 19 CHAIRPERSON RIORDAN: Going down the list, I would 20 echo Mr. Dunlap's acknowledgment, I, too, met with Dr. Long 21 and also Mr. Wyman, his associate, Mr. Carol, regarding the 22 issues that were represented today by their testimony. 23 Mr. Parnell? 24 BOARD MEMBER PARNELL: I have none. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 CHAIRPERSON RIORDAN: Mrs. Rakow? 2 BOARD MEMBER RAKOW: Yesterday I met with Mr. Wyman 3 and Mr. Carol representing Latham, Watkins, and Mr. William 4 Rush from Rush Technologies, and they covered the subject 5 matter in their presentation today. 6 CHAIRPERSON RIORDAN: Okay. You have a Resolution 7 that is in front of you. 8 I will allow you to have a moment to look at it. 9 MS. HUTCHENS: This is not a regulatory item. You 10 are only going to be making a motion on this. 11 BOARD MEMBER DUNLAP: I will move the Resolution. 12 MS. HUTCHENS: Just a motion to approve. 13 BOARD MEMBER DUNLAP: I will move approval of the 14 emissions inventory as presented. 15 BOARD MEMBER ROBERTS: Second. 16 CHAIRPERSON RIORDAN: Thank you, Mr. Dunlap. 17 It has been moved by Mr. Dunlap and seconded by 18 Supervisor Roberts. 19 Discussion, is there any discussion on this 20 particular item? 21 Hearing or seeing none, let me ask for a vote, a 22 voice vote. 23 All those in favor of the motion that is before us, 24 signify by saying aye. 25 Opposed, no. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 The motion has carried. 2 Thank you very much. 3 We will now take a moment change staff and continue 4 on with the next item before us. 5 (Thereupon a brief recess was taken.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 CHAIRMAN RIORDAN: Let me ask the audience and my 2 Board members to join us back in our seats so that we can 3 move along. 4 We are on agenda Item 98-14-2. 5 Ladies and gentlemen, just as a matter of business 6 and procedure, again, if you wish to provide testimony we 7 would ask that you sign up at the tables outside the 8 assembly room and people will be happy to help you in that 9 process. 10 We were so good about signing up that I have a 11 list right now that's quite long, and in recognition of that 12 length of list and the numbers of people who wish to testify 13 on this second item that is in front of the Board, I am 14 going to ask for your help in moving this item along in a 15 most efficient way. And I've spoken to some of you directly 16 and some of you I have not, so this is sort of a general 17 statement. 18 A number of people will be testifying and the 19 Board would very much appreciate the lack of repetition in 20 the presentations. If somebody has made the statement 21 before you, if you would simply say I support, and give us 22 the name of the speaker or the organization, we would really 23 appreciate that, particularly some of you who belong to 24 associations where you have spokesmen that are here today. 25 We definitely want to know that you're here, that you're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 supportive of your association and its position, but you 2 don't have to reiterate the position, particularly because 3 of the tremendous numbers of speakers that wish to speak. 4 I am going to try not to have to limit testimony, 5 but it may be important that I do, so I'm going to indicate 6 to you, if you can, rather than read from any particular 7 item, that can be submitted and becomes part of the record. 8 If then you can put it in your own words and sort of 9 summarize it for the Board, we would be very appreciative of 10 that. 11 And so as we move forward and you are listening to 12 the staff presentation, you might be thinking about how you 13 might make your presentation very succinct and direct for 14 the hours that we have in terms of hearing each and every 15 one of you that wishes to speak. 16 So with that, let me say that this item is 17 98-14-2, a public hearing to consider the adoption of 18 emission standards and test procedures for the new 2001 and 19 later spark-ignition marine engines. 20 Presented for us today is a proposal to reduce 21 emissions from the spark-ignition marine engines. At this 22 time I'd like to ask Mr. Kenny to introduce the item. 23 MR. KENNY: Thank you, Madam Chairman and members 24 of the Board. 25 In 1994 the Board approved a State Implementation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 Plan for ozone, referred to as the Ozone SIP. As required 2 by the Clean Air Act, the Ozone SIP provides the overall 3 roadmap to attainment of the health-based federal ozone 4 standard throughout California. 5 Among its provisions, the Ozone SIP includes 6 measures to reduce emissions from various mobile sources. 7 These include cars, heavy-duty trucks and off-road equipment 8 and vehicles. 9 The Ozone SIP also includes federal assignments to 10 control emissions from sources under exclusive or practical 11 federal control, such as airplanes, ships and locomotives. 12 Moreover, the Ozone SIP relies upon the 13 development of advanced or supplemental technology measures, 14 also known as the black box, to provide additional emission 15 reductions needed for attainment in the South Coast Air 16 Basin. 17 The United States Environmental Protection Agency 18 adopted regulations to reduce emissions from spark-ignition 19 marine engines in 1996. These regulations affecting 20 outboard engines and personal water craft are estimated to 21 reduce emissions from this category by 75 percent by 2025 22 nationwide. 23 Although the Ozone SIP relies on the federal rule 24 to reduce emissions from marine engines, California needs 25 greater emission reductions than the federal rule provides PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 and needs them sooner. 2 California, while challenged with cleaning up the 3 worst air quality in the country, is also fortunate to have 4 mild weather and ample recreational opportunities for water 5 craft, making the need for control of emissions from marine 6 engines unique to our state. 7 Furthermore, we have determined that marine engine 8 emissions are much higher than we had believed in 1994. 9 This is especially true on weekends, which coincide with the 10 highest ozone concentrations. 11 Today staff will present a proposal that has the 12 potential to significantly reduce emissions from marine 13 engines, such as outboard engines and personal water craft, 14 beyond those achieved by the federal program. 15 The proposed regulation also presents an unusual 16 opportunity to significantly benefit water quality, as well 17 as air quality. 18 On that note, I would like to welcome Mr. Stan 19 Martinson, chief of the Regulation Branch in the Division of 20 Water Quality for the State Water Resources Control Board, 21 who will be available to also discuss the Water Board staff 22 perspective on this proposal. 23 Staff's proposal goes beyond the federal marine 24 engine rule to achieve greater emission reductions for 25 California in shorter time frames and beginning in shorter PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 terms. 2 The proposed regulations significantly accelerates 3 the federal program while harmonizing as closely as possible 4 to the EPA rule in order to reduce the burden to the 5 manufacturers. 6 Staff has proposed emission standards that are a 7 percentage of the EPA 2006 compliance curve and have 8 incorporated the federal test procedures in-use compliance 9 program and reporting requirements. 10 The proposal also has a provision for 11 environmental labeling. Staff is proposing the 12 establishment of labels which will clearly identify engines 13 on the basis of their emissions performance. 14 The labels will provide consumers with useful 15 information about the relative cleanliness of water craft at 16 the time of purchase. 17 In developing this proposal, the staff has taken 18 into consideration the concerns of affected stakeholders, 19 such as marine engine manufacturers, state water agencies, 20 water utility districts, marine engine dealers and 21 environmental groups in order to develop practical solutions 22 to their respective concerns. 23 For issues on which there is still disagreement, 24 such as the implementation of the Tier 3 standard and the 25 environmental labels, the staff believes our proposal takes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 the approach that is most protective of air quality while 2 minimizing impacts on stakeholders. 3 We will now have a brief statement by staff 4 counsel, Aron Livingston, to clarify the scope of the 5 Board's authority relative to this proposal. 6 Aron. 7 MR. LIVINGSTON: Thank you, Mr. Kenny. 8 Again, I'm Aron Livingston, staff counsel for this 9 item. 10 During the public comment period and through 11 today's hearing on this item, the Board may have heard and 12 will likely hear information regarding current water quality 13 impacts from marine engines and regarding the potential 14 impacts from these engines if the Board adopts the proposed 15 regulations. 16 It is certainly appropriate for the Board to 17 consider such impacts. Indeed, to fulfill ARB's duties 18 under the California Environmental Quality Act, or CEQA, our 19 Board's public hearing procedures require the Board to 20 consider both positive and adverse impacts that may result 21 from proposed regulations. Such consideration is especially 22 warranted when there are known cross-media impacts 23 associated with the category subject to ARB regulation. 24 However, your decision on the regulations proposed 25 for your consideration must be based primarily on the air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 quality benefits of the proposed regulations. If that 2 decision then results in beneficial impacts to other media, 3 such as waters of the state, that would be good news for 4 public health and the environment and would help fulfill a 5 goal of our sister Cal EPA agency. 6 Mike. 7 MR. KENNY: Thank you. 8 Now I'd like to introduce Charles Emmett of the 9 Mobile Source Control Division, who will make the staff 10 presentation. 11 Charles. 12 MR. EMMETT: Thank you, Mr. Kenny. 13 Good morning, Madam Chairman, members of the Air 14 Resources Board, Mr. Del Piero, and ladies and gentlemen. 15 Again, my name is Charles Emmett, and I'll be 16 presenting staff's proposal for the regulation of 17 spark-ignition marine engines. 18 In keeping with the Board's wishes, I will be 19 going rapidly over my presentation. If there's any points 20 you would like me to hold on, please ask at that time. 21 During the course of our presentation, I will take 22 you through the applicability of the proposed regulation, 23 provide background information and present the staff 24 proposal. This will be followed by a discussion of the 25 proposal's technical feasibility, overall air quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 benefits and cost effectiveness and, finally, outstanding 2 issues. 3 The proposal focuses on two main categories. 4 The first category is outboard engines, which 5 consist of both two-stroke and four-stroke technology. 6 Theses engines are used on a very diverse group of boats, 7 from small inflatable dinghies to large 35-foot boats 8 utilizing multiple engines. 9 Two-stroke outboard engines are available between 10 2 and 300 horsepower with conventional technology or 11 advanced fuel injection. 12 Four-stroke engines are available between 2 and 13 130 horsepower, with either standard carburetion or advanced 14 fuel injection. These engines range in price from $450 to 15 over $20,000. 16 The second category consists of personal water 17 craft, commonly known by the trademark Jet Ski name. 18 Personal water craft can carry anywhere between one and four 19 people, are capable of pulling a water skier and are 20 equipped with engines which range in horsepower between 70 21 and 155 horsepower, and can attain speeds of up to 60 miles 22 per hour. Personal water craft commonly range in price from 23 $5,500 to over $9,000. 24 I would like to show a short video on the typical 25 operation of personal water craft. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 (Thereupon a videotape shown.) 2 MR. EMMETT: Also included in this -- is that all? 3 Yeah. 4 Also included in this category are jet boats. 5 They have been included as part of the personal water craft 6 category. Jet boats are a relatively new category of boats 7 and different from traditional boats in that they're 8 relatively small, light-weight and are powered by jet ski 9 type engines. 10 Not part of today's proposal are common in-board 11 and stern-drive boats. Emission control regulations for 12 these applications will be considered in future rulemaking. 13 I will now provide important background 14 information which supports a need for the proposal brought 15 before you today. 16 Please note the two icons of an outboard motor and 17 personal water craft in the corners of the slides. These 18 icons will be used throughout the presentation to indicate 19 which category of water craft is being discussed. 20 Because of the high emission rates associated with 21 water craft engines and the growing population, water craft 22 becomes a significant source of smog-forming emissions. 23 The air quality impact of water craft is 24 significant because a majority of water craft emissions 25 occur in summer at the height of California's ozone season. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 Summer weekend emissions associated with 2 uncontrolled water craft are estimated to be 47 percent 3 greater than those associated with all cars and light trucks 4 in the greater LA area. 5 In addition, because water craft engines exhaust 6 through the water, they have also been linked to water 7 pollution. 8 On an individual engine basis, one way to look at 9 the emissions is to compare the operation of a typical 10 personal water craft through the miles driven by an LEV car. 11 Seven hours of personal water craft operation is equivalent 12 to the emissions from a LEV car driven over 100,000 miles. 13 Now, for a more quantitative perspective. 14 This graph shows the statewide air emissions 15 associated with water craft. As you can see, if left 16 uncontrolled, water craft emissions would exceed 800 tons 17 per day on a weekend summer day. To provide some 18 perspective, 800 tons per day is roughly equivalent to the 19 emission contributions of all gasoline-powered vehicles in 20 the LA basin. 21 The second and third set of bars show the relative 22 difference between US EPA's regulations and staff's 23 proposal. 24 In the year 2020, the proposed regulation will 25 reduce an additional 43 tons per day statewide over the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 current federal program. 2 The last bar depicting the emissions contribution 3 of cars provides a perspective on just how significant the 4 contributions from water craft emissions are. 5 The range of emission levels from current outboard 6 and personal water craft engines is quite large. In the 7 following slides information is provided to explain why this 8 is and what can be done. 9 The current fleet of outboard and personal water 10 craft engines consists mainly of old technology two-stroke 11 designs. This is significant because of the extremely high 12 emissions associated with this technology. 13 Manufacturers have made significant improvements 14 in marine engine technologies and have recently introduced a 15 good selection of advanced, relatively clean fuel-injected 16 two-stroke engines at higher horsepowers. 17 Clean four-stroke outboard engines have been 18 available since the early 1970s, as will be shown later in 19 the presentation. Almost all manufacturers produce a wide 20 range of these engines under 100 horsepower, with one 21 manufacturer, Honda, producing four-stroke engines as high 22 as 130 horsepower. 23 Personal water craft use exclusively conventional 24 two-stroke engines at this time. However, we're aware of at 25 least two manufacturers that plan to introduce the cleaner PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 direct-injection two-stroke models in 1999. 2 There are significant environmental concerns 3 associated with conventional two-stroke engines. First, 4 high horsepower outboard engines can consume as much as 22 5 gallons of fuel per hour. Personal water craft can consume 6 over 14 gallons per hour. 7 This is a concern because 20 to 30 percent of the 8 fuel used in a traditional two-stroke engine is exhausted 9 directly into the environment and burned. This unburned 10 fuel results in high levels of hydrocarbons, as well as 11 particulate matter from the leaking oils emitted into the 12 air. 13 And because the emissions from these engines are 14 exhausted into the water first, they contribute to high 15 levels of MTBE and other fuel-related compounds which have 16 shown up at reservoirs and lakes throughout California. 17 Here is a graphical representation provided to 18 show the operation of a traditional two-stroke engine and 19 why it's associated with high exhaust emissions. 20 I will point out the flow of the intake charge and 21 subsequent combustion gases as we move on. 22 You are looking at a cut-away view of a typical 23 two-stroke engine. At this point the piston is at the very 24 top of its travel and the spark plug would be ready to fire. 25 The piston has just completed an upward stroke, compressing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 a charge of fuel, oil and air above it. The upward stroke 2 also has created vacuum below the piston, which has drawn in 3 gas, oil and air charge for the engine's next cycle. 4 When the spark plug fires, the resulting explosion 5 pushes the piston downward. At this time the bottom of the 6 piston is compressing the intake acids and begins to push 7 them towards the intake transfer ports for the next cycle. 8 As the piston continues down, the exhaust port is 9 gradually exposed, allowing expanding gases to escape. 10 As the piston moves down a little more, it 11 uncovers the intake transfer ports, which allow the fresh 12 air-fuel mixture to begin entering the cylinder. However, 13 because the exhaust port is fully opened at this time, a 14 portion of new gas mixture exits the engine unburned. 15 It is this behavior, commonly known as scavenging, 16 that causes as much as 30 percent of the unburned gas and 17 oil to be deposited into the environment. 18 Controlled two-stroke engines or those equipped 19 with direct fuel injection are cleaner than uncontrolled 20 two-stroke engines, primarily because they not as 21 susceptible to scavenging. This is because fuel is injected 22 into the combustion chamber only after both the transfer and 23 exhaust ports are covered, thus resulting in more thorough 24 combustion. A direct-injected engine would have a fuel 25 injector next to the spark plug in our cut-away example, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 making the fuel injection after the port closing possible. 2 Four-stroke marine engines are similar to the 3 traditional automobile engine, and also much cleaner than 4 two-stroke engines, because they do not encounter the 5 scavenging phenomenon to such an extreme. This is because 6 separate piston strokes are provided for the intake and 7 exhaust portions of the combustion cycle. 8 In an intake stroke, you'll notice that the 9 exhaust valve is closed, trapping incoming fuel and air 10 until the spark's ignition. In the exhaust stroke, the 11 intake valve is closed, so that only combustion gases are 12 leaving the chamber. 13 Oil loss is not a concern either, because the 14 lubrication system is independent of the fuel system. 15 In order to more fully assess the impacts of 16 outboards and personal water craft on both air and water, 17 the Air Resources Board constructed a test facility to 18 evaluate the various water craft technologies. This 19 facility is capable of testing both outboard engines and 20 personal water craft. Samples are taken from the air 21 flowing through the plexiglass enclosure, and water samples 22 are taken directly from the water. 23 To illustrate our test setup, I would like to cut 24 to a short video showing our test facility. 25 (Thereupon a videotape was shown.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 MR. EMMETT: The following slides provide a 2 comparison of three different 90-horsepower outboard 3 engines, each utilizing a different technology. 4 Shown here is a relative comparison of hydrocarbon 5 emissions from a conventional two-stroke engine, a 6 controlled two-stroke and a four-stroke engine. 7 The black stairstep line represents a test cycle 8 we have and corresponds to various speeds of the engine from 9 idle to full throttle operation. The three colored lines 10 represent the emission levels in parts per million. 11 Of importance here is that the emission levels 12 from the four-stroke engine shown in green are over 14 times 13 cleaner than the conventional engine in red and over seven 14 times cleaner than the two-stroke direct-injection engine in 15 blue at full-throttle operation. 16 Similar results were obtained from personal water 17 craft testing, specifically the four-stroke personal water 18 craft was over 16 times cleaner than a conventional 19 two-stroke personal water craft. 20 The impact on water quality was also explored. 21 While staff recognizes that the water pollutant levels 22 obtained in our test facility cannot be used to directly 23 quantify the pollutant levels in water bodies, they are 24 nevertheless indicative of the relative cleanliness of 25 different technologies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 Our data support recent studies which suggests 2 that the water craft do indeed have an adverse impact on 3 water quality. 4 Water quality testing was conducted on the same 5 three engines. In these tests, each engine was operated 6 over a one-hour test cycle, and water samples were analyzed 7 at the end. 8 With regard to MTBE, the conventional two-stroke 9 engine deposited 278 grams of MTBE in the water, that's 10 about a half a pound, in comparison to 33 grams for the 11 controlled two-stroke engine, and one gram for the 12 four-stroke engine. 13 For BTEX, which includes benzene, toluene, 14 ethylbenzene, and xylene, the conventional two-stroke 15 deposited 44 grams of BTEX compounds into the water, in 16 comparison to 11 grams of the controlled two-stroke engine, 17 and 1.1 grams for the four-stroke engine. 18 Also, although benzene is included in the BTEX 19 series, because of its high toxicity it is important that we 20 look at these levels independently. 21 Because of the scales of the previous compounds, 22 benzene levels may look insignificant. However, a benzene 23 level comparison shows that a conventional two-stroke engine 24 emits four grams of benzene into the water, which is four 25 times higher than a controlled two-stroke, and over 13 times PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 higher than a similar four-stroke engine. 2 In the case of the side-by-side comparison of the 3 personal water craft, the four-stroke personal water craft 4 exhibited MTBE levels 12 times lower, BTEX over 14 times 5 lower and benzene five times lower than a conventional 6 two-stroke personal water craft. 7 As previously mentioned, our data do support other 8 studies performed to assess water quality in California. 9 This slide shows the concentration of MTBE found in Lake 10 Perris over a period of a year. As you can see, the levels 11 of MTBE rise during the summer months, with several peaks 12 during major holidays, when boat use is high. 13 This level falls dramatically during the month of 14 October, which coincides at the end of a typical boating 15 season. This is fairly typical for the lakes we have a 16 record for. 17 Here's a list of lakes and reservoirs in 18 California that have recorded significant levels of MTBE, 19 some of which have or are considering action to mitigate 20 this pollutant in the water. 21 Please note that the secondary MTBE standard 22 currently under consideration for taste and odor is five 23 parts per billion, and most of these lakes exceed that 24 level. 25 With that background information in mind, I would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 like to now move on to where we are currently and how our 2 efforts have led to staff proposal. 3 The US EPA adopted regulations to control 4 hydrocarbons and NOx emissions from new outboard engines in 5 1998 and 1999 for personal water craft. 6 Shown here the emission standards which have been 7 adopted by US EPA. The lines on the chart represent HC plus 8 NOx emission levels by horsepower, which manufacturers are 9 required to meet. 10 Because the smaller horsepower engines are 11 generally more difficult to control, EPA believes an 12 emission curve was more appropriate to use than a straight 13 line. 14 To avoid a slide that would be too busy, we have 15 only shown EPA standards for the years 2001 and 2006. There 16 are actually curves corresponding to each year, which get 17 gradually progressively cleaner between 1998 and the year 18 2006. 19 While US EPA should be commended for its action to 20 significantly reduce water craft emissions, the industry has 21 made dramatic progress in improving emissions for new 22 engines. Staff believes that much more can and should be 23 done to meet California's air quality needs. 24 This view is not shared solely by ARB, but with 25 several other regulatory agencies in the state, particularly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 those concerned with water quality. 2 Listed here are some of the agencies staff worked 3 closely with during the development of the proposal. They 4 include the State Water Resources Control Board, Tahoe 5 Regional Planning Agency, regional water quality boards, 6 including East Bay Municipal Utility District and the 7 Metropolitan Water District and the Association of 8 California Water Agencies. 9 This unprecedented cooperation has led to the 10 staff's proposal. 11 As previously indicated, the proposal only applies 12 to outboard and personal water craft engines, but it should 13 also be emphasized that it only applies to new engines. 14 The proposal includes provisions for tiered 15 emission standards, production line testing, in-use 16 compliance, emissions warranty and labeling. 17 To order to harmonize this closely as possible 18 with the federal program, staff is proposing to regulate 19 only the ozone precursor emissions, which consist of 20 hydrocarbons and oxides emissions. Please note the staff's 21 proposed Tier 1 2001 standard is identical to the federal 22 year 2006 standard. 23 The proposed Tier 2 standard would be implemented 24 in the year 2004 and results in additional 20 percent 25 emission reduction from Tier 1. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 The Tier 2 standard was proposed by the National 2 Marine Manufacturers' Association as a technologically 3 feasible and cost-effective measure. 4 The Tier 3 standards are proposed for the 2008 5 model year engines. As you can see, the third tier standard 6 represents a full 65 percent reduction in the federal 7 program and results in the bulk of the emissions associated 8 with the proposed regulations. 9 Now I will focus on the technical feasibility of 10 meeting the proposed standards. 11 First, outboard engines. 12 This chart shows the emission levels of the 13 engines currently certified for sale by the US EPA. As you 14 can see, there is a wide diversity in the emission levels. 15 Two-stroke engines range from a high of 804 grams per 16 kilowatt hour to a low of 20 grams per kilowatt hour. 17 Four-stroke engines range from a high of 58 grams 18 per kilowatt hour to a low of nine grams per kilowatt hour. 19 Shown here is an overview of the federally 20 certified outboards compared to the proposed standards. The 21 red line corresponds to Tier 1, the green line to Tier 2 and 22 the white line to Tier 3. 23 The taller yellow bars are indicative of the 24 hydrocarbon and NOxs emission from conventional two-stroke 25 outboards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 Whereas the shorter blue bars represent new 2 technology engines such as four-stroke engines and 3 direct-injected two strokes, what is significant to note on 4 this graph is that the first improvements applied to marine 5 engines have resulted in dramatic emission reductions over 6 uncontrolled two-stroke engines. 7 These new technology engines can be as much as 95 8 percent cleaner than the carbureted two-stroke counterparts 9 and use up to 30 percent less fuel. 10 On a closer examination of just the new technology 11 engines currently on the market, four-strokes in green, 12 direct-injection in yellow, it is apparent even with a 30 13 percent compliance margin that the majority of the engines 14 are capable of meeting at least the Tier 2 standard today, 15 while several can already meet the Tier 3 standard nine 16 years in advance. 17 The 30 percent compliance margin is typical of 18 that used by manufacturers in other regulated categories. 19 There has also been some concern that there will 20 be a lack of available new technology engines once 21 California's program takes effect. However, as shown here, 22 there is a broad spectrum of currently available 23 four-strokes in the 2 to 130 horsepower range from a variety 24 of manufacturers. 25 In addition to being significantly cleaner than PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 conventional two-stroke engines, four-stroke engines are 2 generally quieter, easier to start and burn roughly 30 3 percent less fuel and do not burn oil. 4 Because of growing public demand, the trend toward 5 four-stroke technology is expected to continue. 6 For the higher horsepower outboards, 7 direct-injected two-stroke engines are currently available. 8 Compared to a conventional two-stroke engine, 9 direct-injection two-strokes have superior performance and 10 are far more fuel efficient. Thus, as with four-stroke 11 engines, public demand for these products is expected to 12 continue to grow. In fact, most manufacturers have 13 indicated to staff that they expect to have direct-injection 14 technology spread across their full product lines within the 15 next couple of years. 16 Actual certification data was demonstrated that 17 the proposed standards are capable of being met now. To 18 meet Tier 1, 2001 standard, manufacturers are expected to 19 continue to produce four-strokes and direct-injected 20 two-stroke engines. 21 Tier 2 2004 compliance will also likely involve 22 the continued production of four-stroke and direct-injected 23 two-stroke engines, with perhaps relatively minor 24 improvements to these new technologies. 25 These improvements could include, for example, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 tighter fuel metering and improved ignition timing. 2 To meet Tier 3 2008 standards, some four-stroke 3 engines on the market today already comply. Staff also 4 expects manufacturers to equip existing direct-injection 5 two-stroke technology with a catalytic convertor. Thus, 6 with the exception of the catalytic convertor, the technical 7 feasibility of meeting all three tiers has already been 8 successfully demonstrated. 9 The ARB considers catalysts to be a viable control 10 technology in the later years of the program. There will be 11 a need to adopt catalysts for the marine environment, but 12 the problems associated in doing so, such as water 13 contamination and heat management, are not considered to be 14 technical show stoppers, especially since the means for 15 minimizing them already exist. 16 Notwithstanding, ARB will conduct a technology 17 review in the year 2005 to assess industry's progress in 18 using catalysts and other possible emission control 19 techniques. 20 I will now address the feasibility of the proposed 21 standards as applied to personal water craft. 22 Much of the technology used for outboard engines 23 is also transferable to personal water craft. Polaris has 24 created a 135 horsepower personal water craft using direct 25 fuel-injection, as has Tiger Shark, with 124 horsepower PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 model. 2 In addition, the company called Maxsym has 3 developed a prototype personal water craft using four-stroke 4 technology. This was the prototype personal water craft 5 which you saw out in the parking lot today. Maxsym is 6 considering licensing its engine technology to existing 7 personal water craft manufacturers or producing it 8 themselves in volume. 9 Another company, California-based Moller 10 International, which specializes in rotary engines, has 11 developed this alternative technology in a manner that 12 combines the emission characteristics of a four-stroke 13 engine with the light weight and performance of a carbureted 14 two-stroke engine. 15 Preliminary data showed this technology is 16 expected to meet the proposed Tier 3 2008 standards and is 17 expected to be in production next year. 18 With many personal water craft manufacturers 19 licensing to use direct fuel-injections in their vessels, it 20 is likely that it will become the main means of meeting both 21 Tier 1 and Tier 2 standards. 22 Direct-injected engines should be further 23 optimized by this time and could be used in conjunction with 24 catalysts to meet the 2008 levels. 25 Also, as four-stroke technology improves, it is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 expected to have a larger impact, especially meeting the 2 Tier 3 2008 standard. 3 On Tuesday, staff was made aware that Yamaha was 4 introducing a high-tech automotive-based catalyst on a 5 personal craft catalyst for next year. Shown here is a 6 picture of the catalyst-equipped engine. Yamaha stated the 7 catalyst reduces the exhaust emissions up to 60 percent over 8 the noncatalyst model. In a press release Yamaha stated the 9 new catalyst system is the most reliable, cost-effective 10 system available today. 11 Staff obtained price quotes from a local dealer. 12 They stated that the new personal water craft with the 13 catalyst would be selling for $200 more than last year's 14 model. 15 The remaining elements of this proposal, 16 production line test, in-use testing, warranty and 17 certification labeling, are in place to ensure that 18 certified marine engines continue to maintain compliance 19 with the standards for their useful life. They are 20 consistent with the enforcement programs implemented for 21 other ARB-related categories, such as lawn and garden 22 equipment and large generators and forklifts. These 23 programs are consistent with existing federal provisions 24 wherever possible, to minimize additional testing burdens on 25 the industry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 Staff is also proposing an environmental labeling 2 provision. This should not be confused with an emission 3 control label, which is typically used for enforcement 4 purposes to designate that a given engine has been certified 5 by the Air Resources Board for sale in California. 6 The environmental label would serve a different 7 purpose, as explained in the next few slides. 8 The purpose of the environmental label program is 9 to promote the purchase of cleaner engines through the use 10 of standardized, permanent and easily recognizable labels. 11 These labels are designed to be somewhat analogous to the 12 Energy Star label used to identify energy efficient 13 electrical appliances, or the federal fuel economy sticker 14 applied to new cars which informs purchasers of a vehicle's 15 fuel economy. 16 There is a second purpose for these environmental 17 labels, namely the establishment of a standardized permanent 18 label, which can be utilized by water agencies to identify 19 low-emission engines for activity restriction programs which 20 may be established to protect water quality. 21 For example, Lake Tahoe and the East Bay Municipal 22 Utility District have each adopted restrictions to their 23 waterways, which would be easier to administer with a 24 standardized label. 25 The label would be affixed permanently on a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 visible location of an outboard engine cowling and in close 2 proximity of a personal water craft's California vessel 3 number. 4 Additionally, the label would be based on a 5 uniform design. 6 The Tier 1 label shown here would be applied to 7 engines whose family emission limits are at or below the 8 Tier 1 emissions standards. From staff's analysis with the 9 current certification data, it appears that nearly all the 10 new technology two-stroke direct-injected engines and all 11 the four-stroke engines currently being marketed would be 12 eligible for the Tier 1 label. 13 The Tier 2 2004 label would be applied to engines 14 whose family emission limits are at or below the Tier 2 15 standards. Current certification data show that a number of 16 new technology two-stroke direct-injection engines and all 17 but one of the four-stroke engines currently being marketed 18 would be eligible for this label. 19 The Tier 3 2008 label would be applied to engines 20 whose family emission limits are at or below the Tier 3 21 standards. A number of four-stroke engines would be 22 eligible for this label, according to current certification 23 data. 24 In addition to the application of the label, the 25 manufacturer would be required to include explanatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 literature to consumers in the form of a hang tag attached 2 to the engine or vessel at time of purchase. The hang tag 3 is intended to explain the environmental label program, 4 specifically discuss the relative emissions benefits of the 5 emission performance of engines with a different label. 6 Currently there are no personal water craft or 7 outboard engines over 130 horsepower which are eligible for 8 the Tier 3 label. 9 To avoid consumer confusion, staff has proposed 10 that the hang tag for personal water craft and larger 11 outboard, over 130 horsepower, would not include the graphic 12 for the Tier 3 label or an explanation of a third tier until 13 2001, when it is more likely that Tier 3 eligible engines 14 will be available. The executive officer would be given the 15 authority to further delay this date if necessary. 16 Note that since the Tier 3 eligible engine exists 17 in the under 130 horsepower outboard engine category, their 18 hang tag would include the graphic and text of the Tier 3 19 label. 20 In the next section of the presentation I will 21 discuss air quality benefits associated with the proposal. 22 First, a look at the emission inventory. 23 Shown here is the emissions contribution in 2010 24 of outboard and personal water craft in absence of the 25 proposed ARB program. The left-hand bar indicates that the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 average over -- indicates the average over the entire year. 2 Outboards and personal water would contribute 94 tons per 3 day statewide in 2010. 4 Of greater significance is the right-hand bar, the 5 342 tons per day. This represents a contribution of these 6 vessels on a weekend summer day. We believe this number is 7 a more realistic representation of their contribution, 8 because the highest usage of outboards and personal water 9 craft engines occur on summer weekend days, and the highest 10 levels of ozone occur. 11 Shown here is the statewide emission reductions 12 associated with the proposal. The reductions are for 13 weekend summer day levels, a period of time when just the 14 water craft are primarily used and when California ozone 15 concentrations are the highest. 16 In 2010 the HC plus NOx emissions from personal 17 water craft and outboard engines will be reduced by 110 tons 18 per day. This is comparable to the reductions associated 19 with the smog check program. 20 The Tier 3 standards dominate the significant 21 emission reductions to be achieved by 2020 at 106 tons per 22 day. As more new engines that comply with the proposed 23 standards replace the high emitting engines in California, 24 future emission reductions will continue to climb to 161 25 tons per day by the year 2020. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 The staff's impact -- the economic impact of 2 staff's proposal was carefully considered as discussed in 3 the following slides. 4 For most outboards the technology for meeting Tier 5 1, Tier 2 and Tier 3 standards is available and on the 6 market today. Outboard engines can range in price from 7 about $1100 for a new three-horsepower outboard model to 8 $17,000 for a new 250-horsepower model. 9 The price increases shown here are the actual 10 average differences in the cost to consumers for the new 11 technologies. As shown, Tiers 1 and 2 range from 250 to 12 $2300, depending on the horsepower. 13 It should be noted that these price increases are 14 for technology changes required to meet the federal 15 standards. This proposal simply requires more of those 16 engines to be sold in California. 17 For Tier 3 there is no price increase indicated 18 for engines under 120 horsepower, because no additional 19 technology is needed beyond that needed to comply with Tier 20 2. The largest horsepower outboards, it would be an 21 additional cost of about $825 to account for the addition of 22 a catalyst. 23 Also shown in the last column is a lifetime fuel 24 savings. As indicated, the advanced engine technologies 25 will result in lifetime fuel savings ranging from $300 for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 the small engines, to over $6,000 for the large engines. 2 These savings will more than offset the cost of the new 3 technology. 4 The proposed regulation is cost effective. The 5 average cost effectiveness of outboard engines to meet the 6 Tier 1 standard is about $1 per pound. Cost effectiveness 7 for Tier 2 and to the Tier 3 are each about $2 per pound. 8 This is similar to the cost effectiveness of the LEV 2 9 program adopted last month. 10 For personal water craft, the cleaner burning 11 technology to meet the Tier 1 and Tier 2 standards will not 12 be on the market until 1999. The staff estimates the 13 product cost to meet Tier 1 standard is about $1100 per 14 water craft. This assumes the conversion of a conventional 15 two-stroke engine to a computer-controlled direct 16 fuel-injected engine or conversion to a four-stroke design. 17 The proposed Tier 2 standard will only be -- the 18 proposed Tier 2 standard will only require minor 19 enhancements to the emission control system, if any. For 20 this reason the cost of this tier has been estimated to be 21 about $200 per water craft. 22 To meet the Tier 3, staff expects to use the 23 catalyst and will continue to use four-stroke engines. 24 Staff estimates that the cost to add a catalyst to those 25 parts would be $550. As with outboards, fuel savings PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 significantly offsets the costs increases estimated here at 2 over a thousand dollars. 3 Based on these costs, the cost effectiveness for 4 personal water craft is shown at about 74 cents per pound 5 for meeting Tier 1 standard, $1.08 per pound for meeting 6 Tier 2 standard, and $1.21 per pound for meeting the Tier 3 7 standards. 8 Several alternatives to the proposed regulations 9 were evaluated. 10 One alternative is to rely on US EPA's control 11 program. Staff determined, however, that the significant 12 emission reductions beyond those required by the national 13 program were cost effective, technologically feasible and 14 necessary to support California's attainment goals in 2010. 15 A second alternative is to adopt the industry's 16 NMMA proposal for Tier 2 emission standards without 17 including Tier 1 or Tier 3 standard. The NMMA proposal, 18 however, does not achieve the significant emissions 19 reductions that will be realized by staff's proposal in both 20 the near and long term. 21 Another alternative is staff's initial proposal. 22 This proposal includes a more stringent Tier 3 standard with 23 a constant value for all engine sizes. Although this would 24 have provided additional emissions benefits, staff 25 determined that using a curve with variable standards was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 appropriate to accommodate the requirements of smaller 2 horsepower engines. 3 A technology review in 2005 is part of today's 4 proposal to further evaluate the feasibility of Tier 3 5 standards prior to the 2008 implementation date. 6 Several major issues arose during the development 7 of this proposal. These include availability, feasibility, 8 labeling and warranty. 9 With regard to product availability, both 10 manufacturers and dealers are concerned with the potential 11 for a shortage of adequate products with the ARB's 12 implementation data of 2001 for the Tier 1 standards. 13 However, as shown previously, a wide range of 14 outboard engines is currently available that comply with the 15 proposed Tier 1 and 2 standards for all horsepower ranges, 16 and many engines under 130 horsepower comply with the Tier 3 17 standards for most engines under 130 horsepower. 18 Although there are no complying personal water 19 craft on the market at this time, staff believes the same 20 technology which is used for outboards will be applied to 21 personal water craft. This includes the use of direct fuel 22 injection and four-stroke technology, as were displayed in 23 the parking lot. 24 Staff is aware of two manufacturers who plan to 25 introduce controlled two-stroke technology engines in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 next year. 2 In the personal water craft market a limited 3 number of engines are capable of meeting a diverse product 4 range. For this reason, manufacturers will likely need only 5 two engine families to cover their entire product line. We 6 believe this is achievable within the allotted time frame. 7 Manufacturers consider the Tier 3 2008 standard to 8 be a difficult challenge. However, because marine engines 9 exist today that comply with the proposed Tier 3 standards 10 and because there are nine years remaining before the 2008 11 implementation date, staff believes that there is sufficient 12 lead time for the development of the remaining engines. 13 In addition, staff will conduct a technology 14 feasibility in 2005. 15 Industry contracted with a consulting firm, NERA, 16 to develop estimates of the costs associated with this 17 proposal. 18 NERA's estimates were considerably higher than 19 staff's calculation. Shown here is a comparison between 20 their estimates and staff estimates, as well as a case study 21 using actual retail price information for engines that 22 currently meet Tier 3 standards. 23 The last column shows that ARB numbers agree more 24 closely with the case study. NERA's analysis depends upon 25 manufacturers' cost projections, which have historically PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 been shown to be high, because they underestimate their 2 ability to invent low-cost solutions to technical challenges 3 in a competitive marketplace. 4 Industry is not in favor of a multi-tiered 5 environmental labeling program. Staff, however, believes 6 that such a program is important because it will likely 7 establish a market-driven introduction of clean water craft. 8 In addition, staff has received multiple letters 9 of support from water agencies requesting the multi-tiered 10 labeling program to mitigate the current water pollution 11 problems. 12 Manufacturers believe that the proposed warranty 13 period is too stringent. However, because the long useful 14 life and potential for excessive emission, staff believes 15 the proposed warranty period of four years or 250 hours is 16 necessary. 17 This warranty program is consistent with other 18 warranty programs, such as those covered by lawn and garden 19 equipment and for forklifts, which the Board adopted just 20 two months ago. 21 Comments received from industry, interested 22 parties and the public resulted in the following changes to 23 the original staff report. 24 Several manufacturers have indicated that the 80 25 percent capture rate for recall would be difficult to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 achieve due to a lack of a formal registration program. 2 Staff acknowledges manufacturers' concerns and proposes to 3 eliminate a mandatory capture rate. 4 Instead, a series of options are provided for 5 manufacturers to mitigate the emissions impact associated 6 with noncomplying situations. 7 In response to manufacturers' concerns about 8 adequate product availability during the initial year of 9 implementation, staff proposes to lift the emission limit 10 cap for the Tier 2 2001 emission standard. This allowance 11 would allow manufacturers to maintain a larger mix of both 12 conventional and advanced technology engines, while still 13 meeting the standard in a flexible manner. 14 To reduce manufacturers' concerns about confusion 15 over the environmental labeling of the existing clean 16 technology engines produced before the Tier 1 emission 17 standard, staff proposed to remove the voluntary clean 18 engine technology label. Instead, manufacturers will be 19 permitted to use a three-tiered labels on all engines that 20 are federally certified before 2001. 21 The final designs for a three-tiered environmental 22 label are still being negotiated through a working group 23 consisting of members of ARB, industry, water district and 24 agencies and environmental groups. 25 Discussions will also continue on the appropriate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 size of the labels for smaller horsepower engines. These 2 formats will be fully addressed in staff's formal 15-day 3 changes documents. 4 Lastly, to provide further clarification to the 5 consumer, staff proposes to require that a nonpermanent 6 label or hang tag display a facsimile of each tier's 7 environmental label, with the applicable one circled with 8 the subject engine or vessel. 9 As mentioned earlier, only Tier 1 and Tier 2 10 labels have to be displayed on the hang tag for outboard 11 engines over 130 horsepower and for all personal water craft 12 until the year 2001. 13 In conclusion, the spark-ignition marine 14 regulation as proposed achieves maximum attainable air and 15 water emission reductions in a manner that is both cost 16 effective and technologically feasible. 17 The existence and advancement of four-stroke and 18 controlled two-stroke engines has demonstrated that the 19 standards are capable of being met today, based on available 20 technology. 21 The other provisions of the proposal provide 22 manufacturers with compliance programs that they already are 23 familiar with federally, without overly burdening them with 24 unnecessary testing. 25 Lastly, the program is consistent with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 provision of other California emissions reduction programs. 2 Therefore, staff is recommending that the Board 3 adopt the proposed regulations. 4 CHAIRMAN RIORDAN: Thank you very much. 5 MR. EMMETT: This concludes my presentation. 6 And I would now like to introduce Dan Martinson, 7 chief of the Water Quality Division of the State Board. He 8 will provide comments on the water quality aspects of this 9 proposal. 10 CHAIRMAN RIORDAN: Thank you. Welcome. 11 MR. MARTINSON: Madam Chair, members of the Air 12 Resources Board, my name is Stan Martinson. I'm chief of 13 the Division of Water Quality at the State Water Resources 14 Control Board. 15 I appreciate this opportunity to participate in 16 this cooperative effort to manage cross-media pollution 17 problems. 18 The State Water Resources Control Board input on 19 applicable water quality laws had been incorporated into the 20 Air Resources Board staff report. Over the past year we've 21 had a number of meetings with staff and we've coordinated 22 our water quality laws with your proposal. 23 So I have some brief comments to just amplify that 24 information. 25 The State Water Resources Control Board fully PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 endorse the Air Resources Board's proposal to control 2 emissions from new spark-ignition marine engines. This 3 action is in concert with agency coordination described in 4 the California Water Code. 5 The proposed regulation also reflects the 6 requirement that state agencies, in carrying out activities 7 that affect water quality, are required to comply with state 8 policy for water quality control as promulgated by the State 9 Water Board. 10 Considering the substantial quantities of gasoline 11 and oil currently estimated to be discharged to the aquatic 12 environment, continued evaluation and monitoring will be 13 necessary to assess the effectiveness of the proposed 14 regulation in dealing with water quality impacts. 15 If the impacts are not minimized, additional 16 action may be necessary to eliminate potential water quality 17 impairments. 18 Again, I want to thank you for this opportunity 19 for participating in this process. 20 CHAIRMAN RIORDAN: Thank you. 21 Mr. Kenny, any other comments before we go -- 22 pardon me. I need to turn my microphone on. Mr. Kenny, do 23 you have any other comments before I go to our ombudsman? 24 MR. KENNY: Nothing further at this time. 25 CHAIRMAN RIORDAN: Let me ask the ombudsman's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 office for an assessment of the process. 2 DR. STEELE: Thank you, Madam Chairman, members of 3 the Board, and Mr. Del Piero. 4 I am Dr. Nancy Steele with the ombudsman's office. 5 Staff has spent the last year meeting with 6 interested and affected stakeholders to craft this proposal 7 before you today. 8 Outreach efforts, while not producing unanimous 9 agreement with staff's proposal, have been extensive both in 10 breadth and depth. 11 In addition to manufacturers, staff met with state 12 and local agencies that focus on water quality issues, 13 environmentalists and trade and consumer association 14 representatives. 15 Staff has recorded at least 38 meetings from March 16 through December and there were many uncounted telephone 17 conversations with the same stakeholders throughout this 18 year. 19 In order to monitor the process followed by staff, 20 I attended many of the meetings that were held. 21 And let me now review the outreach process in a 22 little more detail. 23 Staff held one-on-one introductory meetings and 24 follow-up meetings with all major manufacturers of marine 25 outboard engines and personal water craft. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 The first outreach meeting was held on March 17th 2 of this year with the trade association, National Marine 3 Manufacturers' Association, NMMA, and seven of the 4 manufacturers, Bombardier, Honda, Kawasaki, Mercury Marine, 5 Outboard Marine Corporation, Suzuki and Yamaha. 6 This meeting was followed up by individual 7 confidential manufacturer meetings with these companies, 8 plus Polaris, Tiger Shark, Maxsym, Freedom Motors and BKM. 9 Staff held 20 individual meetings with 10 manufacturers and six joint meetings with several 11 manufacturer representatives and their trade association, 12 NMMA, from March through November. 13 Because this item affects water quality, staff 14 also held several meetings with affected state and local 15 agencies, as you've heard. 16 The state agencies with which staff conferred 17 included the Department of Fish and Game, the Department of 18 Boating and Waterways, the State Water Resources Control 19 Board, Los Angeles Regional Water Quality Control Board, and 20 the Lahonton Regional Water Quality Control Board, which 21 includes Lake Tahoe. 22 Local agencies involved included the City of Santa 23 Monica, the Tahoe Regional Planning Agency, the Metropolitan 24 Water District, East Bay Municipal Utility Water District 25 and Santa Clara Valley Utility District. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 As was mentioned by staff, they conducted an air 2 and water testing program at the El Monte test facility. 3 ARB staff worked closely with both the state and the Los 4 Angeles Regional Water Boards and the Tahoe Regional 5 Planning Agency and with researchers from the University of 6 California at Davis to formulate and refine the water 7 sampling protocol. 8 Staff formed an environmental label working group 9 to address the environment label portion of the proposal, 10 which met four times, July 1, July 24, September 9 and 11 October 15. 12 Members included representatives of the NMMA, the 13 APEX group, which represents marinas, Northern California 14 Marine Association, six of the manufacturers, the 15 Association of California Water Agencies, East Bay Municipal 16 Utility District, Metropolitan Water District, Tahoe 17 Regional Planning Agency, Department of Water Resources, 18 State Water Resources Control Board, Santa Clara Valley 19 Utility District, City of Santa Monica and the Blue Water 20 Network. 21 NMMA also met with ARB staff separately from this 22 group as a whole on November 12th to discuss the 23 environmental labeling. 24 Staff held one public workshop on July 9th in El 25 Monte. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 Through the mailing, over 900 stakeholders were 2 invited and the notice and all related documents were posted 3 on our Internet Web site. 4 32 persons are on record as signing in, although 5 even more attended, representing the Blue Water Network, 6 Sierra Club, Southern California Marine Association, 7 Northern California Marine Association, Personal Water Craft 8 Industry Association, California Motorcycle Dealers' 9 Association, NMMA, the engine and equipment manufacturers I 10 listed earlier, plus Arctic Cat, Sanchin and Info Tech, the 11 State Water Resources Control Board, the Department of 12 Boating and Waterways, US Coast Guard and the Tahoe Regional 13 Planning Agency and, of course, others who didn't sign in. 14 The discussion was lively with many comments from 15 those asking for ARB both to tighten and relax the proposal 16 staff presented at that workshop. 17 Following the public workshop, staff met 18 individually again with some of the manufacturers and met 19 five more times with NMMA and member manufacturers on 20 September 10, October 9 and November 12, 13 and 18. 21 Staff also met following the workshop with the 22 Black Bass Action Committee on December 2nd, and with some 23 of the agency stakeholders, state agency stakeholders. 24 In conclusion, the ombudsman office finds that 25 throughout the development of the proposal, staff has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 conducted extensive outreach and ensured participation by 2 all affected and interested parties. 3 CHAIRMAN RIORDAN: Thank you very much. 4 Now I'm going to open this up for Board questions 5 to staff. 6 And Mr. Del Piero, whatever you'd like to do in 7 terms of joining us in those questions, feel free or make 8 any comments through the staff presentations and witness 9 presentations. 10 MR. DEL PIERO: Madam Chair, as I indicated, it's 11 a pleasure to be here. Some people don't know why I'm here 12 on behalf of the State Water Board. In my prior life I was 13 a county supervisor and I spent 11 years on the Monterey Bay 14 Unified Air Pollution Control District. This is the first 15 time I've been in an air meeting in a long time, however. 16 The issues that our Board is concerned about will, 17 I'm sure, be addressed by those individuals who intend to 18 present testimony today. If they are not, I can assure you, 19 Madam Chair, I will ferret out the information I'm looking 20 for. 21 But thank you very much for affording me the 22 opportunity. 23 CHAIRMAN RIORDAN: Thank you. Thank you. 24 Mr. Parnell, you had questions for staff? 25 MR. PARNELL: I do. And I suppose it should be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 directed to Mr. Kenny. 2 We have before us a letter from Governor Tommy 3 Thompson, for whom I have great respect. George Radanovich, 4 who is one of the congressmen that represents the State of 5 California or district within California. One from Rico 6 Ohler and 18 other signators to the letter. 7 And the common thread that runs throughout the 8 letters seems to suggest that in 1996 when EPA was reaching 9 its decision with respect to this very issue that there was 10 some implied or specific agreement that we were going to 11 harmonize with EPA, which prompted the industry to put forth 12 a great investment. And I think it's productive to cover 13 that up front, so that we don't have to continue to wallow 14 in that as the day goes on. 15 MR. KENNY: Thank you, Mr. Parnell. I agree with 16 you. 17 There was discussions between the industry and 18 US EPA in the '94, '95, '96 time frame with regard to a 19 joint effort by those parties to reduce the emissions in 20 outboard motors and jet skis. 21 We did receive a visit from Mr. Wyman on behalf of 22 the industry in which he met with technical staff and 23 informed the technical staff of what they were planning to 24 do with regard to US EPA, and the effort to achieve emission 25 reductions through their combined efforts. There was one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 meeting to that effect and he did tell us that. 2 At the same time, there has never been a staff 3 commitment that we would not do anything. We were aware of 4 that meeting. We were aware of what Mr. Wyman was 5 attempting to do. We, however, did not participate in 6 meetings between the industry and US EPA. 7 And as we have learned, moreover, the last couple 8 years we have determined that in fact it was important for 9 us to go forward on behalf of California. 10 We do not want to minimize the industry's efforts. 11 We think basically that effort has been very good, and we do 12 not want to minimize or to strand the industry's investment 13 as a result of the approach they took with US EPA, which is 14 why, with regard to the Tier 3 standard that is in issue 15 today. What we have tried to do there is establish a 16 standard that can be met by the industry with their 17 investment already made on fuel-injected two-strokes, but 18 adding to that the addition of a catalyst. 19 So we have tried to maintain their efforts to go 20 forward and maintain their investment and at the same time 21 incentivize other types of industries and other types of 22 technologies to meet our standards. 23 But I think the key thing in response to your 24 question is we did not participate in those negotiations 25 between industry and US EPA, but we were informed of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 fact that they were occurring. 2 MR. PARNELL: Then I take it from that it was an 3 implied agreement more than a specific set of words that 4 were -- 5 MR. KENNY: I wouldn't go so far as to say there 6 was an agreement. I think it was more a situation in which 7 because we were informed and because we did not object, and 8 we also did think that what the industry and EPA were doing 9 was a good thing, that there was an implication that we were 10 comfortable with it. 11 And I think to some extent, probably in 1994 and 12 1995 we probably were comfortable with it. 13 MR. PARNELL: Thank you. 14 CHAIRMAN RIORDAN: Thank you, Mr. Parnell. 15 Other questions for staff at this time? 16 If not, we're going to begin with the list of 17 witnesses. 18 Let me invite first former Assemblyman Bernie 19 Richter to the microphone and welcome you. 20 MR. RICHTER: Thank you very much, Madam Chairman 21 and members of the Board. It's nice to be here. 22 You know, I think the question as to whether or 23 not there is a significant water pollution and air pollution 24 problem posed by two-cycle marine engines, to paraphrase a 25 high government official very much in the news, perhaps it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 really depends on what we mean by the word "is." 2 There's several things that I'm concerned about. 3 First of all, there were extensive hearings held, 4 two hearings that I was involved in in the Legislature in 5 the last session involving the whole question of the Bowen 6 bill, which goes way beyond what you're doing because it 7 literally made retroactive the disuse of engines that 8 were -- that are now in existence. 9 And that was a Draconian measure that created an 10 incredible amount of reaction and literally thousands, and I 11 might say probably tens of thousands of letters and phone 12 calls deluged the Legislature, and nobody would touch that 13 bill with a ten-foot pole after that campaign was 14 effectively waged to inform the Legislature. 15 But there are some things, and in listening here 16 it's obvious that we want to move to engines that don't 17 pollute water and pollute the air in the presentation made. 18 I don't think there's anybody in here who would 19 argue that we ought to move in that direction. 20 The question is how, and that we don't do things 21 that are counterproductive and contradict what we're trying 22 to do. 23 One thing that I'm concerned about, and I throw it 24 out here, and I didn't come to talk about this, but just for 25 an instant I will, and that's labeling. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 And I'm wondering if labeling becomes a method by 2 which this regulatory process accomplishes what the Bowen 3 bill did through literal effective confiscation. 4 In other words, do we go to the point where you 5 can't use a water craft or an engine if it doesn't have a 6 particular label and therefore effectively we've confiscated 7 that engine. That's one concern I have just right off the 8 top. 9 The other concern I have, and before I went into 10 one of those hearings I spent about an hour and a half, and 11 I phoned back to Mercury, who are here. I'm sure they are 12 going to speak for themselves. But I talked to them for 13 about an hour and a half before I went into the hearing, and 14 I determined that they make something, this was like seven, 15 eight months ago, but my recollection is 80, 90 engines that 16 they are moving in the direction of going to fuel-injected 17 two-cycle engines, but that in the time frame that the Bowen 18 bill specified, which is in one version of it similar to 19 what you're proposing here, they simply couldn't meet those 20 time frames and couldn't produce those engines and therefore 21 they would not be able to have on the market and therefore 22 there would not be engines to sell in a whole range of 23 categories. 24 If that's so, then I'm very concerned that we 25 don't have a regulation that doesn't harmonize with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 federal regulation because, of course, how far would you 2 go -- and I was watching the chart here as to what the 3 savings would be on a given engine and I wrote down, I think 4 it was in one case $2500, $1900, $250 for the Tier 2 -- and 5 I'm thinking to myself, how far would you go to save $2300? 6 Would you go to Las Vegas or would you go to Reno or would 7 you go to Oregon to buy your craft and bring it back? 8 And will this create a trade in used engines? 9 You're not banning used engines, so are we going to have 10 people bringing used engines in from out of state and how do 11 you control that? 12 We don't have -- maybe you have some Draconian 13 measure that someone will come up with to how to control 14 that. 15 But the concern that I have is that we don't move 16 in a direction of contradicting what we're trying to do and 17 that we don't do things -- another thing that immediately 18 comes to mind, cost is involved here. Cost is a major 19 factor in all of this. Of course, what we will do by 20 raising cost is keep old polluting engines out there on the 21 water much longer than maybe they would be, unless we 22 eliminate them by labeling them so we can't use them. Maybe 23 you've already covered that in your thinking or the staff is 24 thinking in those terms. 25 But my concern is we don't contradict what we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 trying to do, that we don't have people bringing engines in 2 from other places and that we put out of business or we 3 drastically adversely affect people who are in business here 4 legitimately selling engines. 5 I think that's enough, I've spent enough time 6 making my point. 7 I just would reemphasize to you that there was an 8 unbelievable amount of interest in this one, the hearings 9 were held in the Legislature. 10 And, you know, I got the impression -- I am a 11 Republican -- I got the impression when the bill was first 12 produced that only Republicans were concerned about 13 boatowners' rights, but then I discovered that there were a 14 lot of Democrats that owned boats, and they flooded the 15 Legislature with their letters and phone calls and therefore 16 the bill was stopped. 17 So thank you very much for a chance to present my 18 views. 19 CHAIRMAN RIORDAN: Thank you. 20 Just in response, and I think there is some 21 distinct differences from what the proposed legislation was 22 and what our staff is proposing today, and probably took to 23 heart some of those earlier discussions at those hearings. 24 Mr. Kenny, maybe you can direct to appropriate 25 staff the comment about existing engines, and I think we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 pretty well clarified that, but maybe a comment there. 2 And then what about when the labeling under your 3 proposal is initiated, what does that do to the older 4 engines? 5 MR. CACKETTE: Let me try to answer that for you. 6 A couple of the slides in the presentation I think 7 helped address this question. 8 In the outboard engine category below 130 9 horsepower, we showed that there was a wide number of 10 four-stroke engines which are available right now and 11 they're actually most of them are Tier 3 compliant, but 12 certainly Tier 2 compliant, meaning that they are available 13 now, prior to 2001, and they fill with multiple 14 manufacturers and multiple horsepower numbers, all the way 15 up to hundred some horsepower. 16 We are convinced that just alone what's out there 17 now goes a long way to making product availability in the 18 under-130 horsepower category of outboard motors. 19 There's more engines being introduced all the 20 time. Manufacturers have indicated to us that some of them 21 will introduce complying two-stroke engines in the smaller 22 category. There will be more four-stroke engines and 23 there's some speculation that four-stroke engines will 24 probably go into the higher category. 25 In the largest outboard categories, this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 direct-injection technology, which is essentially Tier 2 2 compliant now, is coming in rapidly. There are new models 3 being introduced in 1999. There's already models that you 4 saw in the parking lot right now. We expect that that full 5 line of those larger two-strokes will also be available by 6 2001. 7 With respect to the jet skis, we were a little bit 8 more concerned there, because there weren't complying models 9 for sale right now, but even since we began this process 10 there's announcements of two direct-injection two-stroke 11 technology engines which are at least Tier 1 compliant being 12 introduced in 1999. 13 And as you saw, there are also some alternative 14 technologies using four-strokes, which manufacturers hope to 15 market to the jet ski manufacturers in that same time frame. 16 So we're very confident that there will be an 17 adequate supply of jet ski type craft with engines. 18 And one of the points the slide made was that 19 unlike the outboard, where they go from two horsepower to 20 225 horsepower, the jet skis have engines which really fall 21 just into a couple of categories. They're generally 60, 70 22 horse, hundred horse, a few of them in the 120 horse 23 categories. 24 So there's only a few engines per manufacturer 25 that need to be made to comply, whereas in the outboards PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 there's a much greater diversity of engines needed. 2 So we're comfortable that the personal water craft 3 will also be able to have a near full, if not full product 4 availability in 2001. And we'll certainly keep our eyes on 5 that as it develops. 6 CHAIRMAN RIORDAN: Thank you for the response. 7 MR. CACKETTE: The label issue is your other -- 8 CHAIRMAN RIORDAN: Yes. 9 MR. CACKETTE: We have proposed the label that 10 goes on the craft itself. After having extensive 11 discussions with the water agencies, it is clear they have a 12 interest in it. It is clear that they wish to use, to us at 13 least, that they wish to use the label as some means of 14 distinguishing the highest emitting from the lowest emitting 15 boats on very sensitive bodies of water that are 16 experiencing pollution problems. 17 We are asking for that label on the boat as 18 opposed to the hang tag, which is oriented at the consumer, 19 because of their interest in this. 20 And I think a number of them are going to testify, 21 and you might want to pursue with them about how they feel 22 about it, but it's our belief that they wish to use the 23 label and they wish to have a multiple-tier label so they 24 can make decisions on how to use craft properly that protect 25 air quality. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 And I would not be surprised if it varies from 2 lake to lake. There's no restrictions on most lakes in 3 California now. There are some proposed or implemented or 4 adopted restrictions that basically say you can't use any 5 two-stroke engine on there. 6 Certainly, this labeling will open up, and the 7 retroactive labeling will open up an ability to allow more 8 engines out there on those really critically sensitive 9 bodies of water. 10 But again, maybe the State Board or these local 11 water agencies are more appropriate to talk to that 12 question. 13 CHAIRMAN RIORDAN: Let's talk about that, Mr. Del 14 Piero. 15 MR. DEL PIERO: Madam Chair, first of all, let me 16 address the issue of labeling, because that's the easiest. 17 The issue of the labeling is a function of the 18 idiosyncrasies of the various water bodies that exist within 19 the State of California and the level of treatment that is 20 applied to those waters prior to their delivery for potable 21 purposes. 22 In order to ensure a reduction, if not outright 23 limitation on contaminants from various craft getting into 24 those water supplies, a number of the local governmental 25 entities, and there are a whole lot of lakes and reservoirs PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 in this state that are not controlled by the State of 2 California, a number of local governmental entities have in 3 fact either adopted regulations or are currently considering 4 the adoption of regulations limiting craft to one extent or 5 another, or sometimes completely outright, primarily because 6 of the grave concern they have about the utilization of MTBE 7 in gasoline and the adverse effect it's having on their 8 water supply and the even greater adverse economic effect 9 it's having on their water treatment costs. 10 And so the reason that water agencies, and you'll 11 hear this from a number of agencies, I'm inclined to think, 12 that will present testimony here today, the reason the water 13 agencies are looking to support the labeling concept is 14 because it affords them effectively a regulatory mechanism 15 on a low level, not a state regulation, but it's a 16 regulatory mechanism on the local level from the standpoint 17 of who is using their boat launches to know whether or not 18 they're allowing someone without the tag may in fact be 19 putting at risk a water supply that is currently served up 20 to hundreds of thousands, if not millions of people. 21 And as I'm sure the State Air Board members know, 22 a number of reservoirs around the State of California 23 historically did not receive a tremendous amount of 24 treatment, because there was not a grave concern about the 25 level of carcinogenic materials that is now obviously PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 apparent in a number of water bodies and the most obvious of 2 which is Lake Tahoe, that being one of only two outstanding 3 national resource waters in the State of California. 4 I have, now that I have addressed that and why, I 5 do have a question however. And you'll forgive me for not 6 being completely familiar with your procedures. 7 But I spent a better part of the morning sitting 8 here listening to economic analyses that we, for a variety 9 of reasons, don't necessarily always hear at Water Board 10 hearings. 11 Normally when you do a cost-benefit analysis, you 12 figure all of the potential factors that are involved in the 13 equation. I didn't hear once about the unbelievable cost 14 that the water agencies are now having to bear trying to get 15 MTBE out of the water supply. 16 And I would really, I ask this in all sincerity, 17 as part of the discussion today I would very much like to 18 hear those people who are going to be making economic 19 arguments, explain to me how the public will be obligated to 20 pay and what the sources of those funds are going to be to 21 cover the increased treatment costs that are necessary to 22 deal with this issue. 23 Thank you. 24 CHAIRMAN RIORDAN: Thank you. Appreciate that. 25 Let me now move forward with our witness list PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 beyond the former assemblyman. 2 Mr. Wyman, I'm going to call you up. You have a 3 group that you are going to shepherd, in other words, six 4 other speakers besides yourself. 5 You and I talked about a requested time. I think 6 if you move this along and well with your group, you can 7 have your requested time. 8 But I caution you, be sure that they all get to 9 speak within your time frame. 10 MR. WYMAN: It's a deal. 11 Thank you very much for letting appear before you 12 again. 13 Let me start with just a couple of preliminary 14 remarks before I get to my slides. 15 First of all, there was a comment in the previous 16 hearing that I think it really warrants a response, and that 17 is that this is obviously an industry that's not familiar 18 with regulation. Therefore, it's coming up here and griping 19 and moaning and this is no different. It's just the 20 evolution. The first time you are here, this is what you 21 hear from them. 22 Please, put that in context. This industry has 23 spent a half a billion dollars. It's the largest investment 24 this industry has ever made in its history in anything. 25 It hasn't avoided regulation. It has just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 completed an investment that's going to allow it to meet EPA 2 standard. 3 Just two years ago, I and the president of the 4 National Marine Manufacturers' Association, and Mary Nichols 5 at EPA, sat on a waterfront in Washington, D.C. and that 6 agency complimented this industry for its initiative and its 7 environmental leadership to develop the direct-injection 8 technology which would allow personal water craft and 9 outboard engine emissions to go down by probably, about, 10 according to your staff report, we agree with this, about 85 11 percent. 12 This is not an industry that has avoided 13 regulation. This is an industry that stood up to its 14 obligations, recognized what it could do, pioneered a new 15 technology and has delivered it to the public, and it 16 deserves that respect. 17 I have to tell you that I've been very upset with 18 the staff because that is soft pedal. Soft pedal when they 19 showed the tank. The tank you saw out there wasn't a tank 20 of a direct-injection, new technology engine, which they say 21 are all on the market. I realize it's not as theatrical to 22 do it that way, but this industry deserved that. We 23 deserved to be treated better. 24 And we certainly are not an industry that has 25 avoided regulation or shied away from difficult issues, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 whether it's water quality or air quality. We're willing to 2 stand up to those obligations. 3 CHAIRMAN RIORDAN: Mr. Wyman, while you're just 4 taking a breath, I need to understand from the audio people 5 just behind you, do you need a moment to do something? Is 6 that what I've been told? 7 THE TECHNICIAN: Madam Chairman, if I could have a 8 five-minute or ten-minute recess so that I can reset the 9 system, we can resume. 10 CHAIRMAN RIORDAN: Can he continue to talk while 11 you do that or do you have to have the whole system -- 12 THE TECHNICIAN: I will have to unplug the entire 13 cabinet, which would turn off all of the audio and so on. 14 CHAIRMAN RIORDAN: We'll accommodate that, because 15 my assumption is you would like to use that audio. 16 MR. WYMAN: It would be nice. 17 CHAIRMAN RIORDAN: And I won't take it from your 18 time either. How generous of me. 19 Let's take, and I mean a very serious, 20 seven-minute break, which means we'll be back here. 21 (Thereupon a short recess was taken.) 22 // 23 // 24 // 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 CHAIRPERSON RIORDAN: Hopefully, and I just need an 2 indication here that we are now able to run the audio, and I 3 see that, so, Mr. Wyman, we will go back to your testimony. 4 MR. WYMAN: I forgot what I was going to say. 5 I am on now. Let me just say that I understand the 6 system would crash after the staff's presentation. When we 7 read the staff report, we had the same sort of reaction. 8 I am sorry. I could not resist. 9 Let me just finish my preliminary remarks. 10 The second point I wanted to make was, as you keep 11 your eye on the ball, and there are so many issues, clearly 12 as you saw in the staff's presentation, there are so many 13 issues here, we thought it was important to whittle these all 14 down to a single issue. 15 That is not to say there are not many, many other 16 issues that we are concerned about. Because of the 17 importance of the issue before you, this issue we are going 18 to raise, we would urge you to keep your eye on this ball, 19 and that is not to debate the question of whether or not 20 something should be done to cleanup conventional two-stroke 21 engines for either air or water quality reasons. 22 There is no debate about that. None at all. 23 The ball on which your eyes and our eyes will rest, 24 should rest, is whether or not tier 2 will adequately address 25 those issues at this time or whether it is appropriate and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 whether the staff has made the appropriate showing that tier 2 3 is where you should go. 3 For us that is the debate. Now, I do not mean to 4 downgrade the importance of lots of other issues that you may 5 hear about today, but we would hope you would keep your eye 6 on that ball, because that is really critical to us. 7 It is about the appropriateness of tier 3, and you, 8 of course, will hear our view that it is not appropriate for 9 this Board to adopt tier 3. 10 The final preliminary point before I get into my 11 presentation would be to refer to staff's frequently made 12 statement that, oh, this is all technology that is currently 13 available. 14 I cannot tell you how many times I saw that in 15 their statement, and it costs almost nothing. 16 Well, if that is true, why don't we just do it 17 tomorrow? 18 It is clearly not the case, and we have enormous 19 disputes on this point over what is feasible, what is 20 affordable, and I will get into that in just a minute, but 21 frankly, you have seen a little bit of over-statement, and we 22 urge you to come back and really test the staff and test us 23 on the issues which will form the basis for your judgment as 24 to whether to go beyond tier 2 to tier 3. 25 Let me start by then giving you a little bit of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 background, and I will just go over this very quickly about 2 the marine industry, if you go to the next slide. 3 This is, I am sure, clear to all of you, but 4 because every time I speak I hear a little buzz -- 5 CHAIRPERSON RIORDAN: I apologize, but I can hear 6 it, too. 7 Your voice is strong enough to overcome it. 8 MR. WYMAN: I thought the line was bugged or 9 something. 10 In any event, let me tell you what we have in 11 recreational marine industry. As you know we sell a 12 discretionary product. 13 Nobody has to buy it. We have a hard time to make 14 people want to buy it. It is a recreational product. 15 If it gets expensive, there are lots of other 16 recreational activities that people can engage in. 17 Therefore, it is not surprising that, as EPA acknowledged 18 when it regulated the industry just two years ago, the price 19 elasticity is about minus 2.3, at least with what the current 20 prices are, that would fluctuate, of course, over the range, 21 but that is an enormously sensitive market to price. 22 So, what you do today will be reflected in price, 23 and as you heard earlier in the inventory discussion, what a 24 huge impact on how many sales occur. There is a wide variety 25 of engines, engine types and applications. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 Perhaps, surprisingly so, relative to industries, 2 like the automotive industry, you obviously are quite 3 familiar with because of the applications, here, there are a 4 wide variety of engine families, many more than other 5 industries typically, and they have to be designed to meet a 6 wide variety of applications and various different load 7 demands that the engines have to go through. 8 They are sold in low volumes, so the industry's 9 ability to spread technology development cost over the engine 10 families that they are designing is extremely limited, and 11 they have extremely limited resources relative to others who 12 are often regulated. 13 Because of these facts, they must produce national 14 engines. They cannot produce a whole lot of engines for 15 California. They cannot produce a line for the rest of the 16 U.S. and a line for Europe. 17 I am going to talk a little bit more about why that 18 problem led us in 1994 and actually throughout the 1992 to 19 1994 period to have discussions with your staff and with some 20 Board Members and ultimately led to your Board making a 21 decision that would allow us to have confidence that this 22 standard would be harmonized, not only here but 23 internationally. 24 I will get back to that in a minute. Go to the 25 next slide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 As you have heard, we have spent about a half a 2 billion dollars in developing new technologies, and these are 3 multiple. These just are not single. 4 They are investments in new direct injection 5 technology to preserve the advantage of the two-stroke 6 engine, which is, as I think you know, a unique power 7 producing product that, for particularly for outboards and 8 personal water craft, have advantages that are difficult to 9 achieve with other approaches. 10 We have also, in addition to converting many 11 engines to the four-stroke design, which is expensive but in 12 many cases is appropriate, we have also experimented, as you 13 heard earlier today, with catalyst. 14 While catalysts are not as efficient in these 15 applications typically as others, and there are enormous 16 challenges with catalysts, as you will hear later today, to 17 make them work with certain applications in the water with 18 concise constraints and so on, we are not telling you today 19 that if you spend enough money you cannot make it work. 20 The question really before you is taking into 21 account the technological challenges and of the cost together 22 where there is something this industry can afford in its 23 market place, and of course, in companion with that whether 24 or not the emission benefits that you will get for that are 25 really warranted. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 I can tell you almost with assurance, because of 2 what has already been done in this industry, that if you do 3 not go to tier 3, you will see two-stroke direct injection, 4 four-stroke technologies and catalyst technologies on our 5 engines. So, the tier 3 decision does not determine the 6 technologies that you will see today. 7 What it will determine is whether we can afford to 8 transfer those technologies to watercraft or whether it is 9 more affordable to use DI or four-stroke or some combination 10 in appropriate niches. 11 Now, as you heard earlier, we have been working for 12 many years, and actually this goes back to the early 1980's 13 with agencies here in this State, traditionally the legal 14 authority was with the air districts. 15 I am not going to get into this today, but I need 16 to say that in our comments, our written comments, you will 17 see that technically speaking they are still where our legal 18 authority resides. 19 But we met with the air districts as they developed 20 their standards. We met with the Air Board. As we were 21 talking with EPA about the need for international uniformity, 22 and I would just like to sort of supplement the comment that 23 you heard from staff about the nature of those discussions 24 that we had with CARB staff and about their response, and I 25 guess I will sort of typify it by introducing the idea that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 you are all familiar with of playing the game Simon says. 2 Simon says, touch your head, and you touch your 3 head. If he says touch your nose, and if you do that, you 4 have lost the game, because you did not say Simon says. 5 Well, this is sort of the way I feel about the 6 staff's response. That because he did not say Simon says, 7 they did not really mean that they would harmonize with EPA. 8 That is, in fact, the case. We have copious notes 9 of many meetings with staff between 1992 and 1994 to discuss 10 these issues. They say they did not collaborate with EPA. 11 I am not going to dispute it. They can 12 characterize it any way they want, but I was in meetings, for 13 example, regarding the control measures for the SIP. There 14 were ARB people present, and they expressed view points, and 15 we expressed view points about our concerns. 16 I can tell you that after our meeting on September 17 23 of 1994, where we talked about every issue you are 18 discussing today, every single one, there is not a single 19 issue today that is being discussed including the increased 20 use of personal water craft, all of those issues were 21 discussed in September of 1994. 22 Everyone at the end of that -- there were about two 23 months of additional discussions with staff in November of 24 1994, two things occurred. First, staff communicated with us 25 that they agreed with our position, and they would recommend PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 to their Board that the SIP measure for this category be 2 harmonized with EPA, and then the second measure was that is 3 exactly what the Board did. 4 Measure M-16 harmonizes with EPA. There was an 5 important reason for that, and that is because this industry 6 was about to make a half a billion dollar investment into 7 direct injection technology, which obviously is still 8 valuable, is not perhaps as efficient economically as an 9 approach we might have taken if we knew then only a few years 10 ago what we know now. 11 I realize that we are not here telling you the 12 future can never advance. I realize from time to time you 13 have to come back and revisit these categories, but I do not 14 think that anything has materially changed here. 15 All of the factors that we were talking about 16 before were before us then, and the Board still made the 17 decision to harmonize, and it will, if it has not done it, it 18 will have a huge impact on this industry. 19 Now, you are aware that there are a number of 20 letters that address this point, so I am not going to go into 21 that, but I will tell you that just as California expects EPA 22 headquarters to harmonize on its regulations and to work 23 together, Governors and legislators from other states expect 24 California to make good on its commitments if it effects 25 their constituents, and that is the whole point of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 letters that were sent to you. 2 We did not hide the ball with them. We gave them 3 the full story, and it is laid out in their letters, and 4 hopefully, it is laid out in our testimony. 5 If you go into the next slide, you will see our 6 position. When we started discussions with the staff this 7 summer, we told the staff that they could hold us to two 8 principles and push us as much as they can within these two 9 principles, and we would be good to our word. 10 The first principle, we would squeeze every ounce 11 of environmental progress out of our investment that we 12 could, and that is why we recommended the 20 percent 13 reduction below the EPA curve, because our experience has 14 shown us that we could do that. 15 So, in June, after surveying all the members, many 16 of them were very concerned about whether in fact they could 17 meet the 20 percent target, the tier 2 target, we still 18 recommended that, because we thought if we pushed as hard as 19 we could, that is what we could meet and that achieves an 85 20 percent reduction from uncontrolled levels. 21 The second principle was that we wanted the staff 22 to harmonize this role in every other respect with EPA's. 23 So, when one certifies engines, when one warrants engines, we 24 do not have two masters to serve, because they're 25 extraordinary costs associated with those differences, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 while I am not spending the time today to talk to you about 2 that, I can assure you they did not do that. 3 They suggested in their slides it is sort of 4 generally the same, but if you ask some of the witnesses that 5 come before you from the industry, you will see the changes 6 in warranty and useful life make an extraordinarily different 7 cost. 8 So, our view is those two principles that staff 9 never agreed to, these are our recommended principles which 10 we wanted to be held to and wanted them to agree to and 11 certainly were not kept to, but I wanted you to know that as 12 early as June we came before you and committed to do the best 13 we could as long as those two principles held up. 14 The final point is, I guess I will just point out 15 here, I think it goes without saying, as I said in the 16 beginning, the 85 percent reduction we have committed to from 17 the uncontrolled levels in our view will address both the air 18 quality and water quality concerns. 19 Now, I have to say in this context on the water 20 quality side, no one has perfect information. Anecdote 21 evidence we have suggests that these levels are -- adequate 22 evidence we have suggests that these levels are adequate to 23 meet the water quality standards, but the industry stands 24 open and ready to look at further evidence to help develop 25 further evidence and to respond to appropriate water quality PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 concerns, just as we would air quality concerns. 2 But I think when you compare tier 2 or tier 3, what 3 you should be asking, I hope, from one of the water agencies 4 is between those two levels, we are talking between 85 5 percent control and 90 percent control, which is the staff's 6 recommendation, that is five percent, that is grams, between 7 those 2 tiers, is there any material difference to water 8 quality? 9 I am not so sure that there is, and in our meetings 10 with the water districts, no one has had that evidence. We 11 are willing to look at it in the future, and we stand ready 12 to do that, and if we are wrong, we will be here again, but I 13 do not think we are. 14 So, I would urge you to focus in on that question 15 on water quality. For us, the third tier is extraordinarily 16 important. 17 While we do not believe there are environmental 18 reasons to go beyond the second tier but there are certainly 19 economic consequences should you choose to do so, and these 20 are extraordinary, and those of you we met with saw a 21 marginal cost curve that goes vertical after a certain degree 22 of reduction, reflecting how costly this measure or any 23 measure would get for these crafts after a certain point, and 24 you will see from Dr. Harrison's testimony in a minute the 25 same curves made relevant to this application, but I wanted PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 you to know that those costs numbers were EPA as of only two 2 years ago where EPA took all these control options into 3 account, and EPA concluded that to go beyond the approach 4 that we were committing to would break this industry's back 5 economically. 6 We have very bad experience in the past with times 7 when that has happened in another context, and we really need 8 to tell you that this is a tread-lightly here, because while 9 in the inventory side, however concerned we may be about it, 10 but of course, we are, you can sort of be wrong a little bit 11 and adjust it, here you cannot put humpty dumpty back 12 together again. 13 You really cannot. Jobs are at stake. Businesses 14 are at stake, and it's extremely important to know, to have 15 confidence in the economic impact that you are being asked to 16 judge when you make this decision. 17 One comment on the fuel savings, by the way, that 18 the staff suggests makes all of this cheap, free, you even 19 make money doing it, the truth of it is those fuel savings 20 will be accomplished with the tier 2 changes. 21 They are not tied to tier 3. There is a stark cost 22 label, a price label to that tier 3 decision, and it is huge. 23 So, what is at stake for us? 24 The next slide, please. 25 Obviously, there is debate about inventory. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 staff will use weekend summer day, and no doubt the number 2 will seem huge. 3 On a summer day, our analysis shows 3 to 6 tons per 4 summer day difference between tier 2 and tier 3. Staff's own 5 staff report shows only a 14 ton per day difference on a 6 summer day between EPA's proposal, which we are going -- we 7 are moving up two years and doing better by 20 percent than 8 theirs. 9 We cannot be far off here. It is something in this 10 ball park. 11 The economic impact in our view is about $15 per 12 pound and about $30,000 per ton, and a huge sales loss due to 13 the price increases, and taking into account price elasticity 14 that EPA and the industry both fully understand and guided 15 our comments to you, if you would go to the next slide, this 16 is all you are going to hear from me. 17 I will not elaborate on it. I just need to say 18 this goes to the question of how much confidence do you have 19 that if you have considered tier 3, that you are doing the 20 right thing? 21 There were lots of meetings. We had more meetings, 22 frankly, because we were having a hard time figuring out what 23 the analysis was. 24 We never got, in our opinion, and this is the last 25 time I am going to say, a spread sheet or an analysis that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 showed us how the staff used the cost data that they got, and 2 we submitted, to come up with their numbers. 3 So, we do not understand where they came from, and 4 that makes me feel real uncomfortable. But so be it, that is 5 where we are. 6 Next slide. Labels. Now, many of you know that I 7 have been one of the strongest proponents in environmental 8 labels. 9 I have traveled, frankly, in other countries as 10 well as here advocating the use of environmental labels, 11 because I believe they can provide terrific information for 12 consumers and for markets to respond to take that factor into 13 account, and we support a single, simple environmental label 14 here as well. 15 But I urge you to take into account some 16 differences that are very important between using labels in 17 this context and other contexts, and you can just use, for 18 example, refrigerators or cars. If you put it, if you are a 19 consumer and you go into a store and you look at the label on 20 the refrigerator, you will see energy cost, or a car you will 21 see emissions, but no matter where it falls on that label, if 22 you buy that refrigerator, or if you buy that car, you can 23 put that refrigerator in your kitchen and use it and buy that 24 car and drive it on the road. 25 If, however, you put out a label that not every PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 craft meets, the consumer does not know that they can use 2 that on every waterway, and in fact, as you know from the 3 whole point of this recommendation from the Water Board and 4 from the agencies, is that precisely the opposite will 5 happen. 6 We do not know where. We do not know when. We do 7 not know how much. 8 But we know, and they are saying, and we have 9 experienced that, if you signal to the consumer that you can 10 not use it, they will not buy it. 11 In response to the Assemblyman's question earlier, 12 or one of the questions I think Madam Chairman you raised, 13 what about the existing engines, the truth is they do not 14 carry this label. They will not be used on some water 15 districts. 16 Now, we are hopeful, obviously, that as we 17 accelerate the turnover of engines that the water district 18 would be able to include a full range of engines, because on 19 the whole, we will have addressed the water quality issue, 20 and we are doing our darndest to get there, but you need to 21 be sensitive to the fact that consumers will react to these 22 signals as they already have. 23 Now, there is a debate about the third tier. Staff 24 says they are not going to require the third tier label until 25 there is available product, but they say they will do it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 probably by 2001. 2 Well, this is sort of like the effect of the luxury 3 tax. The luxury tax only applied to certain boats, but the 4 reaction of the market place was that people significantly 5 reduced their purchasing of all boats. 6 Once the third label is out there, even if it is 7 only applied only to five horsepower engines, for example, 8 and not to 200 horsepower engines, the mere fact that label 9 is out there and stands for what it does and is used by water 10 districts the way it is will chill the purchases of other 11 engines, which ironically are the very engines that you want 12 people to buy. 13 Why would you disincentivize people or discourage 14 people from buying an engine that is 85 percent cleaner just 15 because there is not one that is 90 percent cleaner yet 16 available? 17 In fact, as Dr. Harrison will tell you, the 18 technologies are such, since we are using all three 19 technologies, two-stroke, direct injection, four-stroke and 20 in the future increasingly catalyst, the actual emission 21 performance of all these engines do not fall into big clumps 22 that you can separate with a bright line. 23 They're on a continual, so when you award the third 24 label, I can guarantee you that there is an engine that will 25 be a gram or so higher than that, you have just discouraged PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 the purchase of. 2 Why would you do that? 3 We have recommended a single label where you can 4 say, all right, it is 85 percent cleaner. We know that. 5 We know that the existing two-strokes need to be 6 replaced. Go down to your store as quickly as you can. Buy 7 the new one. 8 We have proposed, as you will hear later, a 9 turn-over program, where the use of the emissions credit 10 program, we could provide a rebate to users of existing 11 engines. 12 If you harness the market, and if you use a label 13 that does not discriminate against clean engines the way 14 multiple labels would, you can get the kind of turn-over and 15 the kind of immediate progress that this problem warrants, 16 but not if you put out the third tier label. 17 The third tier label will cheapen the environmental 18 progress made by all the other engines, and you should not do 19 that. Just to be clear, we have told the water districts 20 that if multiple labels were really critical to them, we will 21 support the tier 1 label as well as the tier 2 label. 22 I am telling you that, in fact, what will happen is 23 the manufacturers will still, for almost all the engines, try 24 to meet tier, 2 because we think that is where the standard 25 should be, and we think that all the engines will be tier 2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 engines for this very reason. 2 The tier 1 label will be cheapened relative to the 3 tier 2 label even. 4 If you go to the next issue, as we have discussed 5 this issue of tier 2 versus tier 3 with the staff, and as you 6 have heard we have discussed it at great length, staff has 7 tried to reassure us, they said, all right, I know you are 8 worried about the third tier, but not to worry. We will not 9 submit the third tier as part of the State Implementation 10 Plan. 11 Our concern is probably obvious to all of you 12 because as Judge of the district court, Central District of 13 California just ruled, and this is consistent by the way in 14 my understanding with Supreme Court rulings in previous 15 years, and I am not commenting, by the way, I do not want 16 anybody to use this statement and then deal with that 17 decision, but it seems to me that given that decision you 18 should adopt it into the State Plan, because you may not ever 19 be able to get it back out. 20 I know there are technical ways to do that but 21 actual experience from all of us has collectively shown it 22 cannot be done. 23 The staff's response that not to worry, we will 24 just hold it and not submit it to the SIP, is not terribly 25 reassuring to us, because we feel that reading the Federal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 and State law, once you have adopted a control measure, 2 particularly after you say about it what was said by the 3 staff in the staff report about how much is needed for the 4 SIP, how can you not need it in the SIP? 5 Obviously, I would love that to be the case, if you 6 act this way, if you adopt this standard, but I just do not 7 see where staff has the authority not to submit something 8 into tier 3. I have concerns about that. 9 What we would rather have you do, and if you go to 10 the next slide, it would well address the issues that we are 11 talking about, is using the approach that harnesses the very 12 best from each type. 13 Drop tier 3. It's too risky to take in terms of 14 the impact on the industry and is too small in terms of its 15 importance environmentally. Adopt a variety of incentive 16 programs that can materially help with these environmental 17 issues, an accelerated turn-over program, which we proposed 18 to EPA and the South Coast District, and we hope will be in 19 place soon, that is where the real environmental target 20 should be, is getting the existing engines turned over. 21 Then either through one or both of the next two, 22 you could really encourage investment in future technologies 23 and greater technology transfers throughout the industry. 24 The first is the universal credit programs. The 25 second is the clean air investment fund, and I will not take PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 a lot of time to go through the details, but it is to say 2 with the clean air investment fund, which President Clinton 3 endorsed in his July 1998 directive, EPA, when they adopted 4 the new air quality standards, a clean air investment fund 5 can be used to provide a pot of gold to those people who 6 bring technologies to you early. 7 It is like a golden carrot. It is terrifically 8 beneficial. It is the kind of thing you should use not only 9 in this industry but generally, and the advantage of doing 10 that is if you were to do that now, between now and 2004, is 11 you would bring to market in a whole manner the types of 12 technologies you would then be able to point to and say, 13 look, here it is, and it has been done, not the way that it 14 has been done today with your demonstration where we are 15 doing it ourselves, but you would know you would see the 16 penetration in the industry, and you would see the 17 manufacturers who were doing it, and it would take you a 18 material step further in making the decision, the kind you 19 are making today. 20 Then we support a 2004 technology review, and 21 frankly, I do not think there is a huge difference between 22 2004 or 2005, which the staff is proposing. 23 I think the key is in our tech review which would, 24 of course, include the issues of its affordablilty as EPA 25 used to make its decision. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 But the key is that you know that information 2 before you put the industry in a tier 3 box, because if tier 3 3 is adopted and it has the sales impact that we are 4 concerned about, then neither goal is served. 5 You do not get the turn-over of engines, because 6 people are not buying them, which you need and we support, 7 and we, of course, lose the very heart and soul of our 8 economy. 9 Yes. 10 CHAIRPERSON RIORDAN: You are not forgetting your 11 colleagues, are you? 12 MR. WYMAN: No. I am not finished, and I apologize 13 for going through all of that, but that, I think, will enable 14 them to tailor their remarks to issues that are uniquely to 15 their purpose. 16 Dr. Harrison will be following to address the 17 economic analysis, and he will be followed by some very 18 select testimony and very brief testimony, probably about 19 three minutes each, from some outboard manufacturers of 20 personal watercraft, and as I see it, Madam Chairman, no one 21 else really in the room knew how much time we really had 22 discussed. 23 I started after the break, I think around noon, a 24 little bit before noon, and I think we will definitely be 25 within the parameters. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 CHAIRPERSON RIORDAN: Do not forget you had two 2 minutes before. 3 I am teasing you. 4 Dr. Harrison, are you next? 5 DR. HARRISON: Good afternoon, Madam Chairman and 6 Board Members. 7 My name is David Harrison. I am currently Vice 8 President at National Economic Research Associates, an 9 international firm of consulting economists, with about 350 10 staff members in non U.S. and U.S. offices and two offices in 11 Europe. 12 Formerly, I was a professor at Harvard's School of 13 Government and on the Senior Staff of the President's Council 14 of Economics Advisors. I have been studying the cost and 15 benefits of air regulations for about 25 years. 16 Today I would like to report on a detailed study 17 that we conducted with the National Marine Manufacturers 18 Association on the economic impacts of the staff's proposed 19 standards. 20 I would also like to explain why the results we 21 obtained were substantially different than those in the staff 22 report. 23 So, this provides an overview of what I would like 24 to cover. I would like to basically go through our study's 25 methodology and results and compare those to the staff report PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 and finally give you my conclusions. 2 Next slide, please. 3 Our methodology consisted of five major steps. We 4 developed first a detailed survey of the manufacturers to 5 develop detailed data. 6 We then use those data, developed spread sheet 7 models. I will go through quickly here, we then used those 8 detailed data models to estimate the costs and emission 9 reduction benefits of the tier 1, tier 2 and tier 3 proposed 10 standards. 11 We then used those data to develop cost 12 effectiveness estimates of each one of the tiers, and 13 finally, we looked at the market impact so we could judge 14 what effects those tiers would have on sales. 15 The next slide shows the detailed survey data that 16 we got from seven manufacturers, comprising 48 engine 17 families. This relates to, of course, engine size, and I 18 will focus really on the fact that we asked them to tell us, 19 to give us information on the feasible emission control 20 technologies, and then for each one of those technologies, we 21 developed detailed data on what the likely capital cost would 22 be, variable cost, warranty cost, dealer costs, and we also 23 asked them to give us their estimates of what the changes in 24 fuel consumption would be, also what the changes in 25 maintenance cost would be, and finally we asked them to tell PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 us what the achievable emission rates would be with their 2 particular technologies applied to individual engine 3 families. 4 The next slide I will not go over but to simply say 5 that we used these data to develop these models that allowed 6 us to predict, using parameters that were equivalent to the 7 one's that were used by EPA, we used those to develop what 8 the emissions characteristics were of individual technologies 9 associated with engine families and also what the costs are, 10 taking into account capital cost, maintenance cost and fuel 11 savings and that allowed us to calculate the marginal cost of 12 each controlled technology. 13 I might add that these costs included taking into 14 account the timing of those costs so that cost, such as fuel 15 savings that were incurred in different years, were 16 discounted appropriately. 17 Next slide, please. 18 When we did our analysis, it became very clear that 19 it did not make sense for every engine family to comply with 20 the various requirements, that it made more sense to think of 21 there being a consolidation. 22 That is that the industry would essentially target 23 various clean technologies in the California market that is 24 cleaner than the EPA requirements. 25 Remember that the tier 1 requirements here are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 equivalent to the EPA final requirements, so as the 2 California requirements are rationed down, the expectation 3 was there was going to be a mix of engines and what personal 4 water craft would not survive basically in the California 5 market. 6 What we did was we used estimates from those, the 7 cost of meeting those in that consolidated group of engine 8 families and selected the minimum cost of meeting the tier 2 9 and tier 3 requirements. 10 Formally what we in essence did was assume that 11 there was this so-called full and perfect averaging and 12 banking and trading, so that there was a way for the industry 13 to find the lowest cost in technology choices taken as a 14 whole. 15 The next slide shows our results, and there are a 16 lot of numbers here. I have a little laser which I was told 17 was illegal in Massachusetts, and hopefully, it is legal 18 here. 19 I am going to use it, and I apologize to the people 20 in the back, to highlight a couple of numbers here. 21 What we did was we estimated the average 22 incremental cost per ton. This is the cost-effectiveness 23 calculation, and we did it for tier 1, and that we got around 24 $560 per ton. 25 I see we have some other technology here that is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 even better. Tier 2, I will leave that technology. That is 2 great, and that is probably legal in Massachusets. 3 Tier 2, the cost per ton are about $10,000 per ton, 4 and tier 3, the cost is around $30,000 per ton. This is 5 essentially what would result from industry meeting the tier 6 2 -- tier 1, tier 2 and tier 3 requirements. 7 The next slide shows a curve that Mr. Wyman was 8 referring to when he referred to the EPA analysis. 9 You recall that he mentioned that EPA analysis 10 talked about material cost, as you ration it down, the 11 national requirement, the cost became very great. 12 I do not have a curve that shows that, but 13 essentially they become very steep as you get beyond the tier 14 1 or 75 percent level. These analyses, if you look at those 15 individual little jogs in the curve, those represent adding a 16 technology to a given engine family, so that maybe adding a 17 four-stroke technology to cut emissions, that might be adding 18 a direct-injection technology, that might be adding a 19 catalyst to a particular engine technology, and what you see 20 is as you make the standard more stringent, you have got to 21 add technologies that are more expensive to engine families 22 that are more expensive. 23 So, if you have a large volume engine, for example, 24 that is relevantly cheap because you can spread the capital 25 cost over a lot of units, if you are going to add that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 technology to an engine that has relatively small production, 2 those costs are going to be much greater. 3 So, this curve, which is equivalent to the result 4 that EPA got when it looked at the issue, reflects those 5 added costs. 6 The next slide gives you a sense, and I guess I 7 will have to use my technology, because I cannot, the next 8 slide shows the effects, and I am going to be very careful 9 with the person sitting underneath there. 10 The next slide shows the change in sales as a 11 result of these costs. Now, Mr. Wyman pointed out this is an 12 industry that faces a very high elasticity. 13 It means when prices go up, sales go down by a 14 substantial amount. We use that price elasticity estimate 15 and our estimate of what the average cost and price increase 16 would be to estimate what the effect would be to estimate 17 what the cost would be on sales. 18 There is one number that I want to point out here. 19 It is the impact of the tier 3 requirement, would be to 20 reduce the sales by about four-fifths, simply because the 21 price increase is so large. 22 Well, those are the estimated economic impacts 23 based on the analysis that we did and the data that was 24 provided to us by the end of May by the member companies. 25 The next slide begins a discussion of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 difference between our results and those of the staff report, 2 in some cases are very different. This shows the tier 1 3 costs, and here there is not very much difference. 4 In fact, we show smaller tier 1 costs than are in 5 the staff report. These are the tier 1 costs, you recall 6 that are equivalent to the final EPA requirements, and here 7 we find that industry was able to use the relatively low cost 8 options, and therefore, the cost per ton is relatively 9 inexpensive. 10 The next slide shows a very different picture. 11 This slide shows estimates of the staff report and the 12 year-end analysis for both tier 2 and tier 3. 13 Now, in the staff report there are separate 14 estimates for outboard and personal water craft for each one 15 of the two tiers. 16 I saw the presentation that they were summarized, 17 but they were not in the staff report, so I provided them 18 here. 19 What you can see is that we have, if you focus on 20 tier 2 first, our estimates of around $10,000 a ton are 21 considerably higher than the staff report, but perhaps not 22 dramatically so. 23 The dramatic differences is in tier 3 where we 24 find, as EPA, found that you would be on the high part of the 25 cost curve by the time you actually get down to tier 3, so in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 contrast you can see, if you look at the staff report, that 2 there is very little change between tier 2 and tier 3 in the 3 outboard and some change in the personal water craft, but 4 still at very low levels. 5 What our data and analysis suggest is that going to 6 the tier 3 would result in costs that are really quite large. 7 The next slide provides some indication of the 8 differences between our results and the staff report. As I 9 think the very excellent presentation of the staff report 10 suggests, that staff report looked at the current price 11 differences. 12 They went out, and they said, let's look and see 13 what a so-called tier 3 engine would sell for, and we will 14 compare that to the uncontrolled engine. So, they look at a 15 four-stroke, and they look at a two-stroke, and they use 16 those price differences to measure the cost of that tier 3 17 engine. 18 The assumption is that that added cost right now is 19 and will remain constant in the future. That is a good 20 estimate of what the cost will be when you have all of the 21 engine families that need to be in compliance with other 22 technologies and other engine families need to be in 23 compliance, the problem is that really ignores the cost 24 availability. 25 One of the things that is very clear in our data, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 which comes on detailed 48 engine families with different 2 technologies, is that there is enormous amount of variability 3 both in costs but also in the emission rates that are 4 achieved with a given technology. 5 So, it really is not a uniform situation. So that 6 the problem with that is that as you projecting to the 7 future, you are using the current so-called 3 tier engines, 8 those are likely to be the least expensive, because those are 9 the one's that were done first the additional control 10 options, are going to be more expensive. 11 The next slide shows that really the implication of 12 this assumption is that you are going to have this relatively 13 low-cost option available as you try to ratchet down and 14 increase the amount of tons that you are producing, and that 15 really is contrary to the results in our data, and it is 16 dramatically different than the result that EPA got, and they 17 had their curve shooting up. 18 The next slide, I think, illustrates what the 19 difficulties with the staff's report analysis is. They are 20 looking at those low-cost options, and as I say, the curve 21 that they have in mind shoots horizontally across, while the 22 data that we have suggests, and the EPA analysis both 23 suggest, that those margin costs are going to be much greater 24 as you ratchet them down. 25 Well, that summarizes our analysis and what we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 understand to be the major differences between our analysis 2 and the staff's report. 3 In conclusion, let me just go to the final slide. 4 I would like to summarize with three conclusions. 5 First, the tier 3 standards that are mentioned in the staff 6 report, I believe, would be very expensive. 7 Secondly, that these expensive tier 3 standards 8 would lead to major reductions in California sales of 9 outboards and personal water craft. 10 Thirdly and finally, these high costs of reduced 11 sales would hit the California consumers and dealers quite 12 hard. 13 Well, thank you very much for your attention, and I 14 will be pleased to answer any questions you may have. 15 CHAIRPERSON RIORDAN: Thank you, Dr. Harrison. 16 I think what we are going to do is ultimately, when 17 the team is concluded, we will have general questions at that 18 time for everybody. 19 So, I would like to move on now and move right 20 along, Mr. Wyman, to the balance of your speakers. 21 MS. BUCHEGER: Thank you, and good afternoon. 22 My name is Sue Bucheger. I am with Mercury Marine, 23 Fond du Lac, Wisconsin. 24 Just quickly, I did submit written testimony which 25 I am not reading through, but I would like to respond to some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 of the things in the staff report that I saw in the 2 presentation today. 3 In the 1998 and 1999 model outboard engines 4 availability that is listed, there are 12 four-stroke 5 outboards listed as being available from Mercury Marine, five 6 of those are not available in model year '98 and '99, and 7 there is one direct-injection listed, also, that is not 8 available and will not be available for model year 1999. 9 The presentation I thought was really great and did 10 a good job of presenting the conventional two-stroke engines, 11 and there has been a lot of hype over that technology, and 12 our dispute is not about eliminating two-stroke engines, as 13 Bob has indicated. 14 In fact, from the graph that shows emission levels, 15 there was 800-plus gram per kilowatt hour engine that is a 16 Mercury Marine engine, it had limited production in the model 17 year 1998, only to accommodate a contract that the company 18 had signed. It was a long-term contract. 19 We informed the company that we were suppling that 20 engine, that we would no longer be able to produce that 21 engine, and it went out of production during the model year. 22 In fact, three engines families went out of 23 production that year, and two went out the year before, so we 24 are moving away from that technology, and we want you to 25 understand that we are doing that as fast as we can. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 There is already a market drive for clean engines, 2 and by forcing faster product introductions, you are forcing 3 our costs up. We have only so many people and so many sales 4 and so much facility space in order to accomplish new product 5 development, and every one of these horsepower engines that 6 you see listed is a full product development project. 7 As you force more models to be introduced each 8 year, our costs go up, and we need to build new facilities, 9 need to hire new staff and ramp up, and that is really our 10 concern. 11 The pace that we are facing with EPA is already 12 more than two times faster than we have historically 13 introduced new product. So, not only did is the final level 14 that has been explained to us a concern but the pace. 15 The price increases that were shown do not fully 16 reflect our costs, because what we are doing right now is we 17 are losing profitability in order to maintain compliance. 18 We have controlled the price of our product, and we 19 are trying to control the cost of our product, and that 20 difference between our cost and our price is our 21 profitability. 22 We have given all of our cost data to staff and 23 that was not acknowledged in any of the staff report. 24 With regard to labeling, the staff accurately 25 depicted our concerns over the appearance and size, and we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 will continue to participate in the development of the label. 2 However, from the beginning, we have indicated that the 3 single, simple label is really our goal, because it is least 4 confusing to consumers. 5 I have been involved in these meetings personally, 6 and I am seeing that the water districts participating have 7 been unable to provide any scientific data that any more than 8 a single label is needed. 9 East Bay Municipal Utility District had implemented 10 a change in their controlled engines to four-stroke, and they 11 were able to maintain their MTBE level below the five par per 12 billion goal over this summer, and in response to the 13 gentleman from the Water Board, the cost for a lot of the 14 MTBE cleanup, as I understand, is for groundwater 15 contamination, which this industry has nothing to do with, 16 and we do agree with control technologies to control any 17 future contamination of water bodies. 18 MR. DEL PIERO: The cost for MTBE cleanup that my 19 Board administers on the most part is groundwater. 20 The reason is because there is no fund for cleanup 21 of surface waters at this point. 22 MS. BUCHEGER: We have not seen an indication that 23 they need to be doing cleanup to control, the technology, we 24 have achieved that control. 25 MR. DEL PIERO: You are welcome to come over to my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 house sometime, and I will be happy to give you a very unique 2 demonstration on how many surface water bodies in this State 3 are contaminated well in excess of 20, which is the health 4 standards. 5 MS. BUCHEGER: Thank you. My next trip out here, I 6 will call you up. 7 I was very alarmed by the color that was shown on 8 the staff presentation, red and yellow, those for the tier 1 9 and tier 2. 10 Those are the international colors for stop and 11 caution. Why would you want to chill the sales of those very 12 clean engines? Stop and caution. 13 We believe that the color and the appearance of 14 that label and the size of that label on the engines needs to 15 be up to the manufacturers' discretion, and we recognize the 16 desire and the need to have some kind of a label, and we 17 acknowledge and agree that we can work with that. 18 But I think that some of those very important 19 issues need further conversation and resolving. 20 Present staff regulations are based on the earlier 21 outboard and PWC inventories, which they acknowledge were too 22 high by a factor of approximately two, but they have not 23 adjusted the regulations in response to that new estimate. 24 We think that the new inventory estimate more than 25 justifies the dropping of tier 3, and we think that tier 3 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 would decimate outboard and PWC sales in California. 2 Thank you. 3 CHAIRPERSON RIORDAN: Thank you very much, and I 4 appreciate your hurrying right along. 5 Next speaker, if you could give us your name and 6 who you represent for the record. 7 MR. KELLER: Yes, good afternoon. 8 My name is Larry Keller. I am with Outboard Marine 9 Corporation. We appreciate this opportunity to provide in 10 supplement the 12 pages of written comments that we submitted 11 on December 2. 12 I have also provided a write-up of my testimony, 13 and I kind of short-changed that a little bit in the interest 14 of time. 15 I am the Senior Managing Engineer of Product 16 Environmental Compliance at OMC, and I have capacity and 17 responsibility to maintain the company's compliance with the 18 Federal Marine Engine Rule, and I would certainly pick-up the 19 responsibility for this CARB rule as well. 20 First off, we would just like to express our 21 support for the NMMA's proposals. We are to support, to 22 adopt the NMMA's proposal and to drop the third tier 23 standard. 24 I have two graphics that I would like to show to 25 just highlight a couple of key points that we would like to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 make. 2 The first figure demonstrates some information that 3 I think was contained in the staff proposal and that is 4 simply this, what we have there is a ray of different 5 technology options available in the industry, and it shows 6 you what horsepower ranges are currently available. 7 You see some big gaps that occur there. Staff's 8 proposal is really relying on the availability of four-stroke 9 engines or catalyst technology to meet the 2008 limits. 10 First of all, four-strokes are not available in 11 more than half of the horsepower ranges within the industry. 12 It was said that at the present time 130 horsepower is the 13 highest horsepower four-stroke that is available. 14 Industry has engines up to and exceeding 250 15 horsepower. The other thing I would like to point out with 16 respect to catalyst is at this time there are no commercially 17 proven catalyst applications on outboards in the industry. 18 We feel like there is an awful lot being banked on 19 for a relatively small benefit for technologies that have not 20 been demonstrated. 21 The second slide I have really attempts to show the 22 relative benefits between the baseline carbureted two-stroke 23 engine, EPA's proposal, NMMA's proposal and finally the ARB 24 proposed 2000 need standards. 25 I guess the message that I would like to leave you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 with is the relatively large reduction that will be occurring 2 as a result of not only EPA regulation but the proposed tier 3 2 standards that we do support, and we can see for this 150 4 horsepower engine example, we see 123 grams per kilowatt hour 5 reduction with a relatively small 21 gram kilowatt reduction 6 that would be offered by tier 3 standard, and we certainly 7 think that if that third tier standard is passed it focuses 8 too much attention on the relatively small differences 9 between these clean engine technologies. 10 We do not think that is appropriate. We do not 11 think that a method that relies on a laboratory test, that it 12 does not take into account, for example, increased fuel 13 efficiencies associated with lighter weight technologies and 14 also does not consider all the environmental impacts 15 associated with things other than hydrocarbon and NOx as an 16 appropriate distinction between the clean engine 17 technologies. 18 I guess that is really the point that I wanted to 19 make. I would ask you, we did submit substantial comments, 20 and hopefully you will handle those. 21 CHAIRPERSON RIORDAN: Yes, and Mr. Keller, I assure 22 you we do have them, and they will be made a part of the 23 record. 24 I appreciate your brevity. 25 All right. Mr. Wyman, your next speaker. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 MR. WYMAN: Just so you will know, there will be 2 one after this, and he will be very brief. 3 MR. BUSH: Good afternoon, Madam Chairman and 4 Members of the Board. 5 My name is Ken Bush. I am presenting the comments 6 for Suzuki Corporation. 7 Suzuki is a leading manufacturer of advanced 8 technologies of marine engines. Suzuki fully supports the 9 comments presented by the NMMA. 10 We would like to amplify NMMA's comments by adding 11 our own perspective on one of our biggest concerns, the 12 emission standards that are being proposed for 2008. 13 Suzuki is currently in the midst of a major effort 14 to convert our line of outboard to new cleaner technologies. 15 Despite the significant challenges we are faced with, our 16 efforts today have resulted in some accomplishments of which 17 we are very, very proud of. 18 In the 1998 model year, Suzuki introduced new 19 advanced technology 60 and 70 horsepower four-stroke 20 outboards. These outboards are based on Suzuki's automotive 21 engines and features, multi-point electronic fuel injection 22 systems, with solid state transistorized emissions. 23 Suzuki's new 60 and 70 horsepower four-strokes have 24 certified emission levels more than 45 percent below the 25 proposed 2006 model-year curve. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 For the 1999 model year, Suzuki introduced new 40 2 and 50 horsepower four-strokes. These outboards are also 3 based on Suzuki's automotive engines and feature a long list 4 of technological innovations, including sequential multiple 5 fuel injection, dual overhead cams and direct-ignition. 6 These outboards have certified emission levels more 7 than 40 percent below the EPA 2006. The new Suzuki 8 four-stroke outboards I have just described utilize the same 9 state of art automotive technology that Suzuki is using in 10 passenger cars and light-duty trucks certified to 11 California's law emission standards. 12 Despite the advanced technology, these four-stroke 13 outboards fall short of complying with the emission standards 14 that CARB staff is proposing for 2008, and they would not 15 qualify for the third tier label. 16 Suzuki believes that the CARB's proposed standard 17 in 2008 of 65 percent below the EPA 2006 model year curve are 18 too stringent. We are disappointed that instead of 19 recognizing what we have achieved with our new four-stroke 20 models, CARB's staff is telling us that we have not done well 21 enough. 22 Suzuki is also concerned about the difficult tasks 23 that lays ahead of us in certifying additional models, 24 including larger horsepower models to CARB standards so we 25 can also have a full model line in California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 I would like to point out that you conduct research 2 to assess the feasibility of using -- not so obvious 3 problems that are unique to the Marine engine applications, I 4 just mentioned these as an example of some of the problems 5 that have to be overcome. 6 One of these is the pounding that the catalyst must 7 be able to withstand as a boat is towed over rough roads on a 8 trailer that does not have a cushy, automotive suspension. 9 Another not so obvious problem that both boats in salt water 10 must breathe salt air for combustion, the salt passes through 11 the engine, but collects on the catalyst substriate, reducing 12 the effectiveness of the catalyst. 13 These and other reasons Suzuki has concluded the 14 catalyst is not a viable emission control technology for 15 Suzuki outboard motors. Finally, the NMMA has proposed 16 emission standards for 2004 that are 20 percent below the EPA 17 2006 model year. 18 Suzuki believes that this proposal provides an 19 aggressive program for reduced emissions from marine engines 20 in California. We urge the Board to drop the proposed tier 3 21 standards. 22 CHAIRPERSON RIORDAN: Thank you very much. 23 The final speaker, Mr. Garcia, if you will give us 24 your name for the record and who you represent. 25 MR. GARCIA: Good afternoon. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 My name is Fernando Garcia. Bombardier Motor 2 Corporation of America employs me as Director of 3 Certification and Regulatory Affairs. 4 From California to Florida, Bombardier is the 5 world's leading personal water craft in sport, jet boat 6 manufacturing, with significant market presence in 7 California. 8 Bombardier markets its water craft products under 9 trademark names. Our knowledge of personal water craft 10 products requirements is par none. 11 Bombardier also manufactures commercial jet 12 aircrafts, high speed TGV railcars and zero emission electric 13 vehicles, recently receiving a CARB Executive Order. 14 Bombardier opposes CARB's marine rule on the 15 following basis. Number one, the proposed 2001 and 2004 16 standards require an unachievable accelerated product 17 development schedule whereby significant product absence will 18 result in unjustified economic damage to marine dealers, 19 servicing outlets and rental operators. 20 These California businesses are largely small size 21 operators. The 2004 and the 2008 standards require different 22 technology commitments than agreed upon during the 1996 U.S. 23 EPA Marine Rule Making. 24 Bombardier has committed fast development resources 25 based on this previous CARB agreement. The technology which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 may combine with the 2008 standards and satisfies the market 2 requirements is yet to be identified and let alone developed. 3 Number three, CARB's proposal contains compliance 4 requirements inconsistent with the national EPA program, 5 whereby a unique California model will be required, an 6 uneconomic option given the low California market volumes. 7 In addition, these inconsistencies offer no 8 significant additional environmental benefit. 9 Number four, CARB has not earnestly considered the 10 marine industry's proposal which commits to clean-burning 11 technologies, being more aggressive than the EPA program and 12 satisfies the Board's SIP requirements. 13 The proposed 2001 and 2004 standards require an 14 unachievable, accelerated development schedule. At this 15 moment, the model year 2000 products are being finalized for 16 production. 17 Model year 2001 products are in final calibration 18 and entering vendor commitments. These products have been 19 designed to corresponding EPA standards. 20 Typically, engine revisions require a two-year lead 21 time. Significant engine modifications require lead times on 22 the order of three to five years. 23 Without reasonable lead time, complete product 24 line-up will be unavailable and significant negative economic 25 damage will occur on our California small businesses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 Essentially, 2001 is tomorrow for us. 2002 is 2 required. 3 The proposed 2004 and 2008 standards require 4 different engine technologies than agreed upon by CARB during 5 the 1996 EPA rules, simply two years ago. This commitment 6 directed engine manufacturers to research and develop 7 clean-burning direct-injection two-cycle technology. 8 Unique two-cycle engine features are essential in a 9 personal water craft application. 10 Power plants must be light weight, extremely 11 compact and capable of being operating in extreme 12 orientations. 13 Any changes in engine technology development must 14 consider a significant time to establish a high level of 15 reliability required by a product which can be operated well 16 offshore and in vast water bodies. 17 In closing, Bombardier offers to the Board the 18 commitment to cleaner California air quality by recommending 19 and supporting the National Marine Manufacturers Association 20 proposal. 21 This proposal requires research and development of 22 highly advanced PWC engine technologies. This proposal 23 accomplishes the CARB 2001 standard and 2002. This is 24 consistent with the 2004 standard. 25 This proposal does not support the 2008 standard as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 this element is clearly a theoretical target with unknown 2 control strategies and unjustified economic burden to 3 California dealers and engine manufacturers alike. 4 CHAIRPERSON RIORDAN: Thank you, Mr. Garcia. 5 That concludes that group, right, Mr. Wyman, and I 6 appreciate -- 7 MR. WYMAN: Yes. 8 I owe you about seven minutes. 9 CHAIRPERSON RIORDAN: I think you do, yes, but that 10 is all right. I will take it out some other time. 11 Let me ask the Board, and you can just stay right 12 there a moment, if there are any questions for this group of 13 speakers? 14 What I would like to do is finish this group, I 15 have one gentleman who needs to leave, hear his testimony and 16 then for the audience's benefit as well as this Board's and 17 staff, we will take a break for lunch, and I will discuss 18 when and where and how we do that, but that is kind of my 19 general idea. 20 So, if there are questions now for this last group 21 of speakers that sort of centered around one issue. 22 BOARD MEMBER DeSAULNIER: Madam Chair, and Mr. 23 Wyman, how many members are in the association? 24 MR. WYMAN: I knew you would ask something like 25 that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 Roughly 1700. 2 BOARD MEMBER DeSAULNIER: Is that the vast majority 3 of manufacturers of these products? 4 MR. WYMAN: I think that it is almost all of it, 85 5 percent. 6 BOARD MEMBER DeSAULNIER: And I take it there are 7 general consensus on the position you have stated? 8 MR. WYMAN: We have heard no objection to our 9 proposal from anyone, no matter where their engines are in 10 terms of performance. 11 CHAIRPERSON RIORDAN: Any questions? 12 Water goes -- let's try water. 13 MR. DEL PIERO: Actually, I have several questions 14 of Mr. Harrison, if he would be kind enough to come back. 15 Mr. Harrison, first of all, I appreciated your 16 presentation, and I thought it was pretty well detailed. 17 You prepared your analysis based on a contract with 18 NMMA; is that correct, sir? 19 DR. HARRISON: That is correct. 20 MR. DEL PIERO: As part of the contract that you 21 entered into, were you obliged to an economic analysis of 22 what the cost was going to be for the incidental cleanup of 23 residual gasoline and MTBE contaminants from the continuation 24 of use of the two-stroke engines? 25 DR. HARRISON: Well, no. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 Our analysis looked at, I do not know anything 2 about that issue at all. 3 MR. DEL PIERO: It was not included in your 4 economic analysis, because I do not want to be asking you 5 questions if it was not part of, you will forgive me, but I 6 was not an economics major. 7 Would it normally be the case that all of the 8 potential cost of an economic activity would be evaluated in 9 order to get a full and complete picture of what the actual 10 societal costs were? 11 DR. HARRISON: Yes, that -- actually what we tried 12 to do, and again there may be skewed in the air emission 13 side, but that is what we tried to do on the air emissions 14 side. 15 So, when we said social cost, it -- what we did was 16 include a cost that was initially borne by the manufacturers, 17 by the dealers and by the operators. 18 MR. DEL PIERO: But not by the water agencies that 19 would have to cleanup the residual? 20 DR. HARRISON: No. 21 I must say, I know nothing about that issue. 22 MR. DEL PIERO: I have no more questions of you. 23 I do have one, actually two questions, maybe only 24 one, of Mr. Wyman. 25 Mr. Wyman, my Board is in the inevitable position PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 of not having mandated MTBE for use in gasoline in California 2 and not being able to set the discharge standards for them. 3 We are the enforcement agency. 4 We just get to make people mad at us. So, I am 5 going to make you mad at me now. 6 Can you explain to me, you made a statement, and I 7 apologize for this, but you made a statement indicating that 8 the difference between tier 2 and tier 3 were only grams. 9 My problem is that I have a public health standard 10 now that I am facing as a result of an order from the 11 Department of Health Services of this State that I have to 12 comply with that limit from a public health standpoint 13 contamination of MTBE in water supply used for potable 14 purposes at 20 parts per billion. 15 It is very difficult for me to go back and have my 16 Board Members feel warm and fuzzy about the idea that only 17 grams will be going in the water supply when we cannot get 18 cleanup levels down to the level that Department of Health 19 Services are saying are the thresholds for potential and 20 general problems with people ingesting that water supply. 21 Will you help me to understand from our standpoint, 22 given the fact that we have no funding to clean this up, how 23 your cost analysis then is justifiable? 24 MR. WYMAN: Sure. 25 I will make two points. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 Can you hear me? 2 First of all, if I were in your shoes, and I think 3 that is what you are asking me to do -- 4 MR. DEL PIERO: No. I am asking you to justify 5 your statement. 6 My shoes are difficult to fill. 7 MR. WYMAN: I appreciate that. 8 I would want to get the fastest turnover I could 9 get from these engines. I would not want to chill the 10 purchase of these new clean engines by a third label or by 11 over pricing them, and I would want that turnover as fast as 12 possible for water quality and air quality purposes, and that 13 is the heart of the issue. 14 You will get more grams out of that water if tier 3 15 is not adopted, because those costs which are extraordinary, 16 which you saw Dr. Harrison's chart, than if it is there, 17 because of the turnover of engines, they will be more 18 affordable in that circumstance. 19 The second point I would like to make is that while 20 I understand and certainly is sort of like the issue we 21 talked about before with weekend summer day, this is one of 22 many factors we deal with non attainment, and we would 23 philosophically, of course, support the idea if you look at 24 all costs, if we are sitting together with you, just look as 25 I sat with many of the water district representatives during PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 a lengthily discussion, we would and did talk about where can 2 we get the best, most affordable, most immediate water 3 quality benefit to those water bodies. 4 What we are saying is not to ignore those costs. 5 We will happy to take them into account, just as staff would 6 if they are quantifiable. There is a way to do it and 7 measurement techniques will do it, but what I think what you 8 will find is that the water, in our judgment, is that the 9 water quality differences using normal operations in most 10 water districts will not be materially different between tier 11 2 or tier 3, which is the issue we are debating. 12 We are not debating the desirability of cleaning up 13 85 percent. We are talking about 5 percent difference in air 14 emissions and what is at stake there, and you saw in Dr. 15 Harrison's slides is the price of engines, and if the price 16 goes up too much, you will have a worse water quality problem 17 than otherwise. 18 MR. DEL PIERO: Mr. Wyman, I understand that this 19 sharing is -- I have been called bt the State Air Resources 20 Board, and they asked us to come in to participate in this 21 because of the inter-jurisdictional problems. 22 I will opine, and I do not expect a response from 23 you, but I will tell you this, having served both in local 24 government as well as on the State Board, at this point it 25 seems to me that the absence of an appropriate labeling PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 program will cause -- well, I think I will not have much to 2 worry about in terms of water contamination, because I think 3 the absence of an appropriate labeling program, given what I 4 have heard from local governments, will result in even 5 greater numbers of out right bans in the use of personal 6 water craft rather than those local agencies risking the 7 potential liability that they are exposed to from their 8 consumers. 9 I do not expect you to respond. That is -- 10 MR. WYMAN: I would just like an opportunity to say 11 something briefly. 12 CHAIRPERSON RIORDAN: Well, we do not want to get 13 into an argument. 14 MR. WYMAN: No. We are not going to get into an 15 argument. 16 I think it is fair to say that any discussions we 17 have on this very difficult issue, because we deal with water 18 quality -- 19 CHAIRPERSON RIORDAN: It is a difficult issue. 20 MR. DEL PIERO: And both of us acknowledge that, 21 Madam Chair. 22 MR. WYMAN: I think what I can say, and I mentioned 23 earlier about, I referred to anecdotal, and I will 24 acknowledge that I cannot tell you today that I have the 25 perfect answer on water quality impacts, I said that when I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 made my testimony, but there was anecdotal evidence during 2 the meetings we held in the preparation for this rule 3 introduced by people who ran water districts that when they 4 changed their rental fleet to emission levels to what we are 5 proposing, they saw the level of MTBE drop significantly 6 below the actual level we were concerned about. 7 That is the best evidence I have heard. That is 8 why our goal is let us get the engines turned over as quickly 9 as possible, and we have committed in the next two years, 10 there is evidence that suggests that five percent difference 11 that we are debating is material from the standpoint to be 12 raised, and we will be there. 13 CHAIRPERSON RIORDAN: And we appreciate that. 14 Are there any other questions that we have for this 15 group of witnesses? 16 Thank you, Mr. Wyman, and thank you to the other 17 speakers for the gentleman that asked to go out of order 18 because of a need to get back. 19 Mr. Hawley, come forward. Please, give us your 20 name for the record. I understand you represent perhaps more 21 than one entity, and if you could give us the names of the 22 two entities. 23 MR. HAWLEY: Yes. My name is George Hawley. 24 I wear a lot of hats today. First of all, I would 25 thank you, Madam Chairman, for allowing me to speak before PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 lunch. The children in Lake County have to sit on Santa's 2 lap this afternoon, and it takes me a while to get there and 3 a while to get the suit on and the makeup, and Mrs. Claus is 4 back there. 5 CHAIRPERSON RIORDAN: Whatever we can do for the 6 season. 7 MR. HAWLEY: Well, it is priority, and it is the 8 holiday season. 9 First of all, and I will begin, my name is George 10 Hawley, and I would like to read a letter from the Greater 11 Lake Board Chamber of Commerce. 12 I will leave the headings off, on behalf of the 13 Greater Lake Board Chamber of Commerce, its membership is 14 approximately 400 individuals and businesses around the 15 County of Lake, we wish to express our concerns regarding the 16 proposed CARB staff recommendations regarding two-cycle new 17 technology engines. 18 We in Lake County are extremely concerned regarding 19 a clean and healthy environment. In addition to these 20 concerns, we are a rural county of approximately 58,000 21 people that are very dependent upon the industry of tourism. 22 Therefore, you can appreciate our need to have you 23 hear our input. After reviewing the letter from the Black 24 Bass Action Committee addressed to you from Carter Fickes, 25 dated December 6, 1998, we would like to follow their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 recommendations to the letter regarding the suggestions of 2 modification to the proposed regulatory actions. 3 Again, on behalf of the Greater Lake Board Chamber 4 of Commerce and the Board of Directors and myself, we feel 5 your acceptance of the BBAC proposal it will be as effective 6 and far less burdensome in the affected small rural 7 community, such as ours, than the proposed current CARB staff 8 recommendation. 9 The letter is signed by Janet L. Conner, Executive 10 Director. 11 CHAIRPERSON RIORDAN: We will make that part of the 12 record. 13 MR. HAWLEY: Yes, ma'am. Thank you very much. 14 The second letter is quite a bit shorter. It is 15 from the Clear Lake Chamber of Commerce. 16 It says, the Clear Lake Chamber of Commerce is in 17 opposition of the CARB regulation concerning two-cycle 18 engines. Hundreds of small businesses in the City of Clear 19 Lake will be effected by the CARB regulations. The City 20 depends on boaters and fishermen for our livelihood. 21 We strongly support the BBAC, Black Bass Action 22 Committee and their endorsement. 23 This letter is signed by the Executive Director 24 from the Clear Lake Chamber of Commerce. 25 The third letter is from the Board of Supervisors PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 of the County of Lake: Dear Board Members, the Lake County 2 Board of Supervisors has just been notified that your Board 3 had further discussion on the transition of two-stroke 4 engines to four-stroke engines in recreational marine 5 vehicles at a meeting scheduled for December tenth and 6 eleventh. 7 We would like to make the California Air Resources 8 Board aware of the view of the Lake County Board of 9 Supervisors who have the responsibility of the economic and 10 environmental health of the largest lake system in 11 California. 12 We support the proposals and encourage the maximum 13 usage of technology to address emission issues in power 14 boats. We are also supportive of proposals that allow the 15 maximum flexibility and adequate time which is essential in 16 order to meet the requirements without adversely affecting 17 the boating industry and recreational use. 18 Sincerely, Dee Louise Tally, Chair. 19 In the interest of time, you have a copy of my own 20 as a small businessman letter, and I will not bother to read 21 it, although I thought it was very good. 22 CHAIRPERSON RIORDAN: We know it was very good. 23 MR. HAWLEY: I would like to make one statement to 24 your guest from the Water Board. 25 We worked with the Santa Clara Valley Water PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 District in hammering out a proposal with them, and the parks 2 and rec in Santa Clara County, to limit the use on the 3 reservoir there. 4 We understand perfectly that the water purveyor's 5 job is to supply all of us in California with clean water and 6 drinkable water. However, we based our decisions on 7 scientific measurements taken on a daily or weekly basis and 8 what periods MTBE levels came up to alarming standards that 9 we understood that the water department would shutdown the 10 reservoir, which eventually happened, as in the staff report, 11 but it was based on science. 12 It had nothing to do with shooting from the hip. 13 In fact, in the UC Davis letter that came out about two weeks 14 ago, the study that was funded, number seven requirement 15 option of best management practice for surface water 16 reservoir following the lead at Santa Clara Valley Water 17 District, we support that. 18 We think it is fair to the citizens of this State 19 and of the counties and the cities. There is one prime 20 concern that does not seem to be addressed here from one 21 direction, and that is the concern about the sticker. 22 We have an individual, one of our members is going 23 to discuss this after lunch, but our concern is not with the 24 water people. We find that the water people know their 25 business. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 They are concerned about their business, and they 2 will do the business at hand. They will also work with us if 3 it's allowable to allow recreational use of reservoirs. 4 Our concern with the sticker is that they take the 5 authority for regulating those reservoirs away from the 6 bodies and take it to the Legislature and mandate it through 7 a new law, such as they were trying to do with the Bowing 8 bill. 9 That is improper and incorrect. That is shooting 10 from the hip. 11 We believe in the science, and we want to work with 12 you, and if any time in the future that we can help negotiate 13 something that will help the residents of California with a 14 water problem, feel free to call one of us from BBAC. 15 Madam Chairman, I thank you very much. I do not 16 think there are going to be any questions of me. 17 CHAIRPERSON RIORDAN: We better check on that. 18 Let's see if they have any questions. Otherwise, 19 you, as Santa Claus, have a very safe trip back for the kids. 20 We thank you for being here. As I look back, I 21 think we have -- 22 MR. HAWLEY: Merry Christmas. 23 CHAIRPERSON RIORDAN: We have five after one. I 24 would like to take half an hour. 25 So, the Board would come back and begin business PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 again at 1:35. 2 So, we will break for that time and be back and 3 reconvene at 1:35. 4 (Thereupon the lunch recess was taken.) 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 CHAIRMAN RIORDAN: If we could take our seats I 2 would really like to get back and start it again. 3 Mr. Baetge, why don't you come forward and as soon 4 as we all kind of quiet down, we're going to accommodate 5 you. 6 If we could be quiet, because Mr. Baetge is going 7 to begin. 8 And for the record, Mr. Baetge, if you would tell 9 us who you represent. 10 MR. BAETGE: Jim Baetge, executive director of the 11 Tahoe Regional Planning Agency. 12 And I'm basically standing here in support of 13 where you're going with both the stepped approach and also 14 the putting the stickers on. 15 As you know, about two years ago we were going 16 through a full environmental assessment on Lake Tahoe, and 17 the reason I say as you know, because we got lots of news 18 coverage on this throughout the country about how we 19 proceeded. 20 During that process we were looking at all impacts 21 on Lake Tahoe, but as we, right around early '97, as we were 22 looking at the data we were getting, we found that certain 23 engines, in this case we were calling them two-cycle 24 carbureted, were putting far more into the lake as far as 25 contaminants than any other engines that we were aware of at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 that time. 2 The significance of that was our board, and this 3 is -- those who don't know, we have a board with a 4 Nevada-California delegation, 14-member board, along with a 5 presidential appointment -- our board decided to pull the 6 two-cycle carbureted or at the moment we're mainly talking 7 two-cycle, we ended up with two-cycle carbureted, but to put 8 that out of full analysis because they thought and they felt 9 very strongly that the impact of these two-cycle engines on 10 Lake Tahoe and, remember, Lake Tahoe, very special water, 11 outside any national resource water, that we could not wait 12 to go through the full environmental analysis before we 13 dealt with the issue. 14 And I sense a little bit in that same situation 15 now, because I think two years when we were looking at it, 16 the data was fairly limited. We had testimony from people 17 around the world on this issue. We had lots and lots of 18 criticism that we were taking a stance too rapidly, because 19 we didn't know enough, there wasn't enough information, the 20 information we did have, according to the testimony, was it 21 was not at Lake Tahoe, you better be Tahoe specific. 22 Anyway, despite all that, our board took the 23 action in June '97 to say we're going to prohibit on Lake 24 Tahoe, starting in June '99, all two-cycle carbureted 25 engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 They also instructed us to go through a lot of 2 research and use to see how we were standing on this issue. 3 And I think this is good news for the community. We have 4 Nevada, California, ARB, everybody came together on this 5 issue. 6 And we do have, and I wish Laurie Kemper from 7 Central Valley, from the Lahonton board, were ahead of me, 8 but she is going to give you some of that information in her 9 testimony when she comes forward. 10 The end result of that survey and what we did, 11 both on use and the contaminants, was to totally, in my 12 mind, support what we did in June '97 with our ordinance. 13 So we are going back to our board this next month 14 with a little bit of refinement, but basically we will go 15 with the June '99 prohibition at Lake Tahoe. 16 And I'm going to just add that we support your 17 approach, because particularly at Lake Tahoe it gives us the 18 tools necessary to solve those problems. 19 And I will be glad to answer questions or anything 20 related to this. 21 CHAIRMAN RIORDAN: Are there any questions for 22 this witness at this time? 23 And what I'd like to do, since you mentioned 24 Laurie Kemper, and we obviously took this witness somewhat 25 out of order, though our order is never firm, to accommodate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 a schedule, it might be helpful just to ask Laurie Kemper to 2 come up and be our next witness, representing the Lahonton 3 region. 4 Laurie, are you here? 5 And that will kind of tie the two together. 6 MS. KEMPER: Thank you, Chairman Riordan, and good 7 afternoon, chairman and members of the Board, and also hello 8 to Mr. Del Piero. I've seen him before. 9 I'm Laurie Kemper and I am the chief of the Lake 10 Tahoe unit for the Lahonton Regional Water Quality Control 11 Board. 12 And for those of you who don't know, we regulate 13 the discharges of wastes to waters of our region, and the 14 Lahonton region covers all the eastern drainages in 15 California from the Oregon border down to the Mojave Desert. 16 Within our region we have two federally designated 17 outstanding national resource waters, Mono Lake and Lake 18 Tahoe. And we have a number of other very high-quality 19 lakes and reservoirs in the eastern Sierra Nevada. 20 Earlier this week my executive officer, Harold 21 Singer, sent a memo to Michael Kenny dated December 8th, 22 fully supporting the Air Board's proposed regulations. And 23 I'm assuming that letter is in your record. 24 I appreciate the efforts made by the Air Board 25 staff over the last two years to participate in a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 cooperative approach to solve a pollution problem that 2 affects both air and water quality, both regionally and 3 nationally. 4 Last year, regional board staff worked closely 5 with Air Board staff and other members of the Lake Tahoe 6 Motorized Water Craft Technical Advisory Group to devise a 7 comprehensive research project to address the water quality 8 impacts of various motorized water craft. 9 The results of the comprehensive work conducted at 10 Lake Tahoe are compiled in a report, and I apologize for the 11 late submittal of it, but you got a copy of it today. It's 12 titled "Lake Tahoe Motorized Water Craft Report, An 13 Integration of Water Quality, Water Craft Use and 14 Ecotoxicology Issues". 15 I'd like to enter this into the record. 16 If you have it in front of and you'd like to take 17 a look, the first couple pages do have the summary and 18 findings. And I just ask you to look at No. 3, No. 6 and 19 No. 10, No. 14 and No. 16, and if you don't have time to 20 look at anything else. 21 This integrated report involves work that was done 22 by the US Geological Survey out of Carson City and UC Davis 23 and the University of Nevada in Reno. And it also involves 24 some work related to water craft use surveys that TRPA 25 funded. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 The state and regional water boards funded the 2 University of Nevada at Reno's study, which was an emissions 3 study on Lake Tahoe to quantify the magnitude of discharge 4 by engine types. 5 We worked closely with the Air Board staff so that 6 the tank testing that they did would complement the in-lake 7 tests. So we looked at it as kind of a three-part study. 8 One would be the tank testing done at the Air Board, the 9 second part is the in-lake enclosure test where we cordoned 10 off 200-by-100 foot lagoon section of Lake Tahoe and we ran 11 three different engine types within that cordoned-off area 12 for 30 minutes, and then we also did some in-lake tests out 13 in the open water of the lake with a grid system that 14 measured horizontal and vertical distribution of gasoline 15 constituents in Lake Tahoe itself from six different engine 16 types. 17 To summarize the key conclusions, our in-lake 18 tests showed comparable results to the Air Board tank test 19 monitoring in 1997. We found maximum concentrations of MTBE 20 in Lake Tahoe at 31 parts per billion. This was an area of 21 personal craft storage area, but in the lake itself, not in 22 a marina. 23 On six occasions we found benzene concentrations 24 exceeding drinking water standards of one part per billion, 25 and benzene is a known human carcinogen. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 The University of Nevada at Reno operated the 2 three types of water craft in this enclosed area of Lake 3 Tahoe, and the carbureted two-stroke personal water craft 4 released 10 to 15 times the amounts of benzene, MTBE, 5 toluene, which is a known reproductive toxicant, and 6 xylenes, as compared to the four-stroke engine. 7 During the 30-minute operating test, the discharge 8 from a single two-stroke carbureted personal water craft 9 violated current or proposed California drinking water 10 standards for MTBE, benzene and xylenes. That was from one 11 boat. 12 In the tests that were conducted out in the lake 13 we measured -- we offered six different types of water 14 craft, different horsepowers and different types of engines, 15 and for each of these types we were able to measure 16 significant differences in the gasoline discharge between 17 the engine types. 18 We were also, for each type of engine, including 19 the four-stroke engine, a single pass through Lake Tahoe we 20 were able to measure increases in all the gasoline 21 constituents in the water of Lake Tahoe. 22 The two-stroke carbureted engines resulted in the 23 largest increases and the four-stroke and two-stroke 24 direct-injection engines discharged substantially less. 25 In conclusion, the discharges to water from marine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 engines are polluting and adversely affecting water of the 2 State of California. 3 I urge you to adopt the proposed regulations 4 before you today to protect water quality of the state. 5 We believe that the three-tier approach provides 6 adequate time for industry to respond and gives regulatory 7 agencies and water agencies the necessary tools to manage 8 and protect water quality without restricting recreational 9 use. 10 The high-quality waters of the State of California 11 not only deserve the protection of your proposed 12 regulations, state policy requires it. 13 CHAIRMAN RIORDAN: Thank you very much. 14 Are there any questions for this witness? 15 Seeing none, we thank you for being here and thank 16 you for certainly going out of order, but I think it's 17 appropriate that the two were represented together. 18 Let me go back to sort of my original list here 19 and indicate that I'm going to call forward about four or 20 five people sort of in order and ask you, because now it's 21 more critical about the timing, and Tom Bingham from Honda, 22 Tom Fletcher from Freedom Motors, Patrick Walker from 23 Maxsym, and Bruce Bertelsen from MECA, to come forward and 24 maybe Mike Nazemi from South Coast Air Quality, sort of be 25 there ready to go. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 Mr. Bingham. 2 MR. BINGHAM: Yes, thank you for the opportunity 3 to talk before you today, and to tell you a little bit about 4 perhaps you're aware Honda Motor Company of course makes 5 automobiles, but we also make a line of four-stroke 6 outboards and small off-road engines and a regulation that 7 was before you here several meetings ago. 8 At this time we make engines beginning at two 9 horsepower through 130 horsepower. They are all 10 four-stroke. 11 In 1972 we introduced our first outboard engine. 12 It was a four-stroke. 13 We have submitted written comments to the Board 14 and I'd like to, rather than go into detail on any of them, 15 talk about just two of the issues. 16 CHAIRMAN RIORDAN: That's fine. 17 MR. BINGHAM: One of them is the environmental 18 label that you're proposing. There are two parts of that 19 that concern us. 20 I guess there are a number of our customers who 21 are out there with outboards dating back into the '70s. I'm 22 sure those outboards are clean and if you dropped a clean 23 label option and substituted it for an option to provide 24 data or information or I believe it's characterized actually 25 as only EPA certification data, so that would be only the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 previous year outboards could be so labeled as clean in some 2 variety. 3 I would like to see us have the option to label 4 any outboard for which we can provide some relevant data 5 indicating that it is some level of clean and deserves to 6 have a label on it. 7 CHAIRMAN RIORDAN: We'll ask staff to respond to 8 that when you finish. It's an appropriate question. 9 MR. BINGHAM: I'm also, I guess, in the 10 demonstration area and on one of the slides here there was 11 an illustration of one of our outboards, and it has on the 12 back of it EPA 2006 as a label we chose to put on to inform 13 our customers of the level of cleanliness or relative level 14 of cleanliness of the engine. 15 Of course, the graphics of that integrated nicely 16 into the rest of the outboard and they're aesthetically 17 pleasing. 18 We hope that what is finally decided in terms of a 19 label design can be equally flexible so that we can use it 20 for engines that we sell in all 50 states. 21 I guess the second issue that I'd like to discuss, 22 leaving the rest to the written comments, is the duality of 23 a warranty that you've established in both years and in 24 hours, and that in order to qualify for the hours category 25 of the warranty time period, an hour meter is needed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 At this time, we find that there just are not 2 reliable hour meters available at a reasonable cost, and 3 even if such a thing were available, because frequently the 4 hour meter is part of the boat on the instrument panel of 5 the boat, it may or may not apply to the boat motor. This 6 may be a replacement motor. The hour meter may have been 7 added long after the motor was installed. 8 Certainly in typical use you don't always have 9 enough money when you have finished buying the boat or the 10 motor to add all the accessories, so those get put in place 11 later. 12 So we don't -- unlike an automobile's odometer 13 which you can probably rely on to a great extent to give you 14 an accurate estimation of the vehicle's use, an hour meter 15 is just not such a device on a boat. 16 I would like to see that decoupled to remove the 17 absolute requirement of a hour meter and see substituted 18 some reasonable determination. 19 You know, certainly if we have a commercial user 20 who is obvious that he has spent three days out of every 21 week for the last two years on the water for ten hours, from 22 either his log or anecdotal information that's available, 23 it's obvious that he's exceeded the hour time period. 24 I think the EPA regulation has written a lot more 25 flexibly on this issue and allow for a case-by-case PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 determination. 2 I think with that I would ask if there are any 3 questions. 4 CHAIRMAN RIORDAN: Mr. Bingham, maybe what we'll 5 do is have staff respond to some of what I think are very 6 good points that you've raised of questions, and so 7 Mr. Cackette and staff. 8 MR. CROSS: Talking to the hour meter issue first, 9 I think we had discussed, this came up with staff obviously 10 a little bit ahead of time, and certainly one of the 11 approaches that we were considering was the allowance of our 12 letting the manufacturers use their own sort of electronic 13 ingenuity to put some sort of recording device on engines 14 which already have electronics on them. In other words, if 15 you have a computer on the engine, you can put an hour meter 16 essentially in the computer without putting an hour meter on 17 the dash or visibly on the engine, and that would provide 18 one source of information which could be used. 19 In the discussion that happened yesterday, we did 20 not talk about the possibility of looking at other avenues 21 like obvious evidence of commercial use, but that seems like 22 a reasonable request and we'll certainly look at it as part 23 of 15-day changes if the Board so desires. 24 The second question is, I'm not sure what you're 25 asking us to do on the label. In other words is it truly a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 graphics issue or are you also concerned about the Tier 3 2 label? In other words do you plan on meeting the Tier 3 3 label before 2001, as we've proposed, or are you just 4 concerned about the graphics? 5 MR. BINGHAM: The proposal that you have on the 6 table would allow us to use any of the labels. But I think 7 there are some questions in front of the Board as to the 8 legitimacy or the need in the case of water quality for 9 three labels. And I don't want to participate in that 10 debate. 11 I think certainly we would like to represent to 12 our customers what it is they're getting. 13 MR. CROSS: Does that mean that if the Tier 3 14 label were available, that you would put it on your engines 15 right away? 16 MR. BINGHAM: If three labels are part of the 17 regulation, we would use the appropriate label. 18 CHAIRMAN RIORDAN: As I understood you, 19 Mr. Bingham, and maybe correct me if I'm wrong, I also 20 thought you were saying there's -- that you've done more 21 graphic work that would even say in a bigger way to a 22 customer that you've met certain standards. Is that correct 23 what I understood? 24 MR. BINGHAM: The motor that we have in the 25 demonstration area out there, that staff has used -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 CHAIRMAN RIORDAN: Yes. 2 MR. BINGHAM: Has a logo on it that says EPA 2006 3 and I guess to some that conveys a meaning that the engine 4 meets the current EPA standards. 5 CHAIRMAN RIORDAN: I would hope that we can be 6 flexible enough. 7 MR. CROSS: That's part of the 15-day additional 8 dialogue on this issue. 9 CHAIRMAN RIORDAN: But if somebody wants to put 10 something in their graphic to even better define where they 11 were, I would encourage that. 12 MR. BINGHAM: I'm sorry. I was much more 13 concerned that the graphic that you would require would 14 detract from that option, that it wouldn't -- it wouldn't be 15 nice enough to look at that I'd want to put it on motors in 16 all 50 states. 17 MR. DEL PIERO: Gussy it up, Kenny. 18 MR. KENNY: Madam Chairman, what I'm understanding 19 the witness to say is that he wants our label to be a lot 20 more aesthetically pleasing and he would like to have some 21 flexibility at the manufacturer level to ensure that in fact 22 that occurs. 23 CHAIRMAN RIORDAN: I see. 24 MR. BINGHAM: One of the subparts of that is the 25 BF2, the two-horsepower motor that we have, I think the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 label is still bigger than the motor is. 2 CHAIRMAN RIORDAN: Yeah. And I think we'll have 3 to work on some refinements, but anything to help you, if 4 you want to use it in a bigger, more graphic way, I think 5 we'd be interested in achieving. 6 MR. CROSS: On the retrospective labeling on the 7 old engines, if we want, if you're willing to provide us 8 with some sort of certification quality data, not complete 9 cert, but certification caliber data on the engine, and 10 manage the distribution of the labels, like you would the 11 labels for the certified engines that you would be 12 retrospectively, I think we can look at that as a 15-day 13 change if it pleases the Board also. 14 CHAIRMAN RIORDAN: Thank you. 15 Supervisor DeSaulnier. 16 SUPERVISOR DeSAULNIER: Given that you seem to be 17 okay with a label for Tier 3, are you able to build an 18 engine for Tier 3 in 2008? 19 MR. BINGHAM: As was mentioned earlier -- 20 SUPERVISOR DeSAULNIER: The engine is more 21 important than the label, I assume, to staff. 22 MR. BINGHAM: Actually my answer to his question 23 is I would use the appropriate label. 24 But to answer you more directly, yes, I think we 25 would. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 But I think we have to recognize, too, that Honda 2 is a bit of a unique player in this market. We have always 3 had four-stroke engines. So compliance with the standard is 4 certainly a different case for us than for the industry as a 5 whole. 6 SUPERVISOR DeSAULNIER: That's why I think it's 7 important, at least for me, that I understand that you are 8 capable, at least you are. 9 MR. BINGHAM: Yes. 10 CHAIRMAN RIORDAN: Any other questions for this 11 witness? 12 Thank you, Mr. Bingham. 13 And Mr. Fletcher, you're next, from Freedom 14 Motors. 15 MR. FLETCHER: Good afternoon, Madam Chairperson 16 and ladies and gentlemen of the Board. My name is Tom 17 Fletcher, and I am general manager of Freedom Motors. 18 We are a new marine engine manufacturer. We are 19 located just up Highway 80 in Davis. 20 And I lost all kinds of light on my notes. I've 21 read this so many times -- 22 CHAIRMAN RIORDAN: We can help you. That's the 23 least we can do for you, give you some light. 24 MR. FLETCHER: We're in the midst of our initial 25 fully-tooled production run of engines which will put them PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 into the market in the middle of next year. And as such we 2 obviously watch these proceedings with great interest. 3 I want to thank you for the opportunity to comment 4 on the proposed regulation and I also want to commend both 5 the Board and the staff on their herculean effort in the 6 last several months in understanding the issues surrounding 7 this proposed regulation and in the understanding of the 8 technologies that will help industry comply. 9 The need to resolve these issues quickly is 10 important to both the consumer and the environment. And the 11 aggressive program laid out by ARB will allow us as 12 manufacturers to focus on getting improvements in the hands 13 of the consumers faster, cleaning up our California 14 waterways sooner. 15 We as a company were introduced to this process 16 towards the end of September when the ARB staff approached 17 us to investigating power plant operations in the marina 18 district. During the last two and a half months, we've made 19 several trips to El Monte and we talked a lot by phone and 20 fax. We spent a lot of time presenting and demonstrating 21 our technology to the staff. 22 Outside you might have seen a personal water craft 23 that we created. This was a demonstrator vehicle that we 24 produced to help us as a test bed in developing our 25 manufacturing process for these engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 By way of summary statement, Freedom Motors fully 2 supports CARB and the proposed new standards for 2001 and 3 later marine engines. We believe that all the proposed 4 standards are easily obtained in the stated time frames and, 5 further, we believe that no technology breakthroughs are 6 necessary to give industry an alternative that meets the 7 requirements of the PWC market in both cost and performance. 8 We believe we're qualified to make such a 9 statement based on our corporate experience, which includes 10 some 50 plus million dollars worth of power sport 11 after-market sales in both power sport industry, the marine 12 industry and the racing industry and in jet skis, race 13 boats, and automobiles. 14 Over $25 million worth of government and private 15 contracts and investments in engine development, part of 16 which was a $900,000 contract we just completed with 17 McClellan Air Force Base to develop a manufacturing plant 18 for this engine, that was completed just this past 19 September, and some 15 years of advanced research and 20 development with NASA, DARPA, GE and Hughes Aircraft, 21 specifically an engine co-development program. 22 In evaluating this proposal, no one disagrees with 23 making the objective of the regional water quality boards 24 the goal, that being that the water shall not contain oils, 25 greases, waxes or other materials in concentrations which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 result in a visible film or coating on the surface of the 2 water. 3 Now, if you were going to take that goal and try 4 to translate it into something quantifiable in terms of 5 emission value, you end up with something that roughly 6 equates to the CARB 2008 levels. 7 If you back off much from there, even the levels 8 proposed for 2004, you just don't get there. 9 While we all agree that's a reasonable objective, 10 obviously industry gets a little bit nervous if there's no 11 clear technology roadmap that allows us to get from where we 12 are to where we need to be. 13 It's logical that we as manufacturers are going to 14 try to determine the minimum amount of modification 15 necessary for compliance. 16 However, the levels proposed for 2008 demand much 17 more than to tweak the technology. Industry, if they're 18 going to meet the proposed levels, has to evaluate all the 19 available relevant technologies. 20 The available technology that was mentioned in the 21 staff report, but not detailed, is the charged-cooled rotary 22 engine. This is a fairly unique power plant in that it has 23 its origins in the power sport industry in the early '70s. 24 It was demonstrated at the time to have both performance and 25 cost comparable to two-stroke engines. Its reliability was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 testified to the fact that there are charge-cooled engines 2 produced some 20-plus years ago with some 2,000-plus hours 3 operation on them, still out there working today without an 4 overhaul. 5 These power plants were never adopted into 6 mainstream use due to the absence of any clear mandate for 7 change. 8 Over the past 13 years, we've been working with 9 this power plant for use in advanced transportation 10 applications. We have improved its power, its reliability 11 and most importantly for this application its emissions. 12 It meets every requirement of the personal water 13 craft industry. 14 We've already made an agreement with a company 15 called Ski Free Water Craft Development Company for the use 16 of our power plant in their product, which is coming to 17 market next year. 18 We have demonstrated our technology in both our 19 own facility and the CARB El Monte test facilities, showing 20 its capability of achieving the proposed 2008 levels without 21 the use of any add-on technologies. 22 Charge-cooled rotary engine is an inherently clean 23 power plant. 24 With the addition of this power plant option, the 25 charge-cooled rotary engine, to the list of the currently PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 available technologies, even CARB 2008 levels are 2 achievable. 3 With our introduction scheduled for mid next year, 4 the time frame to meet the demands of the market and the 5 needs of the environment are very doable. 6 And, finally, with understanding of our product 7 costs, combined with the information in the staff report 8 described in the cost impact of add-on technologies that are 9 necessary to clean up two-stroke engines, we can state 10 unequivocally that we can meet these performance 11 requirements at the cost of current marine production 12 engines. 13 May I answer any questions? 14 CHAIRMAN RIORDAN: Thank you, Mr. Fletcher. 15 And let me ask the Board members if there are any 16 questions of this witness. 17 Mr. Calhoun. 18 MR. CALHOUN: One question. 19 As you know, I've visited your company and saw 20 some of the work that you guys were doing and I was 21 encouraged by it. 22 And as I recall, the ARB staff was going to be 23 testing some of your engines shortly thereafter. 24 MR. FLETCHER: Yes. 25 MR. CALHOUN: But I'd like to go back to the last PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 statement that you made. Will you read the last sentence of 2 your statement. 3 MR. FLETCHER: Finally, with our understanding of 4 product cost, combined with the information in the staff 5 report describing the cost impact of add-on technologies 6 necessary to clean up two-stroke engines, we can state with 7 certainty that this power plant will deliver this 8 performance at a cost that is less than or equal to that of 9 current marine power plants once in full production. 10 MR. CALHOUN: Is it implied in that statement that 11 you feel comfortable that you can make the 2008? 12 MR. FLETCHER: Absolutely. Absolutely. Pretty 13 consistent from all the four-stroke engine manufacturers. 14 MR. CALHOUN: Thank you. 15 CHAIRMAN RIORDAN: Thank you. 16 Any other questions? 17 Thank you, Mr. Fletcher. 18 Mr. Walker, welcome, and if you'd give your name 19 and who you represent for the record, please. 20 MR. WALKER: Madam Chairman, ladies and gentlemen 21 of the Board, my name is Patrick Walker. I'm managing 22 director of Maxsym Engine Technology. 23 Maxsym is a joint venture with European group of 24 companies, one of Europe's largest automotive component 25 suppliers with a turnover of around $2 billion, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 supplying components to over 130 countries worldwide. 2 Maxsym's mission statement is to develop advanced, 3 yet production-feasible solutions to meet power train 4 challenges of the future. 5 And I'd just like today to talk about why we 6 believe four-stroke technology is the best solution to meet 7 the requirements of all the stakeholders present today. And 8 the stakeholders I include in that would be end users, the 9 manufacturers and yourselves as the regulators of air and 10 water environmental impacts. 11 The benefits of four-stroke technology are well 12 established, and I don't intend to dwell on those today. 13 We've heard in the staff presentation about the benefits of 14 fuel consumption, refinement, low cost of ownership, and 15 most importantly emission performance. 16 And you'll see a slide up there demonstrating the 17 emissions, and it's very clear the emission advantages on 18 this is ARB's testing done in El Monte, the red line 19 depicting the carbureted two-stroke performance and the 20 four-stroke performance from our engine. 21 Rather more important from the manufacturer's 22 perspective is the downside that comes from the change to 23 two-stroke to four-stroke. We've heard lots of testimony 24 about cost in particular, which I will deal with in a 25 moment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 The engine you've seen outside we've named it 2 Maxsym Ecotwin. It's a two-cylinder, entirely conventional 3 four-stroke engine. 4 And taking the downside issues one at a time, 5 which are traditionally associated with four-strokes, first 6 of all size. You've seen a two-seats sports outside fit 7 with our engine. We've made no alterations to the hull to 8 make that engine fit. Size was not a problem for us. 9 Secondly, weight, traditional problem with 10 four-strokes. We were actually very surprised that when we 11 took the two-stroke engine out of our benchmark ski and 12 fitted our own engine, the total power train weight actually 13 reduced slightly. So once again, our engine demonstrates 14 that weight need not be a problem when you go to four-stroke 15 technology. 16 Other technical problems include water and gas and 17 oil system problems. There are some special requirements 18 for this market, operating in rough conditions at sea, that 19 sort of thing. Our engine includes some motor sport 20 technology developed in Europe, which we found to be very 21 successful in overcoming all of the problems. 22 Exhaust temperature is another problem which we 23 have found straightforward to overcome using a simple 24 water-jacketed system. We're lucky enough to benefit from 25 significant resources within the group of companies, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 exhaust system development is one of those specialties. 2 Finally, cost. I think probably we'll all agree 3 the most important issue today, relative to four-strokes. 4 We've heard some testimony this morning that 5 talked about some pretty alarming cost hikes due to changing 6 to four-stroke technology, and I think probably the basic 7 underlying reason for that is I guess that the manufacturers 8 who have been making those estimates have been considering 9 using multi-cylinder engines, probably three- or 10 four-cylinder engines, in order to make the necessary power 11 for this market, and probably using a reduction gear in the 12 back of the engine. 13 Our engines uses only two cylinders, as I said 14 earlier, and does not use a gear box, and yet we have still 15 got the performance that's required by the market. 16 The acceleration of our engine after only a short 17 period of development is equal to the benchmark that we 18 chose and the maximum speed is within five miles an hour. 19 We are absolutely confident that we will equal or 20 exceed the performance of the two-stroke with our engine. 21 The chart up here attempts to summarize the Maxsym 22 view of the three technologies. Each axis depicts one of 23 the criteria of importance to this market, and in each case 24 the bigger the number, the better the criteria. 25 So what we're aiming for is basically a circle. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 The perfect engine would circumnavigate that graph. 2 In red you'll see a three-cylinder two-stroke, 3 which goes very well on things like cost, size and power, 4 but of course very badly on the emissions to alter emissions 5 to air, and of course fuel consumption. 6 In pink the direct-injection two-stroke makes a 7 significant improvement over that, but the four-stroke 8 technology shown in green offers major step forward over and 9 above the direct-injection two-stroke engine. 10 As a company we would fully endorse what the ARB 11 is proposing, and, in fact, we would like to suggest that 12 technically it is feasible to go a lot further. 13 The previous speaker mentioned that no 14 technological step changes are required, and we would 15 certainly agree with that. 16 The technology exists today to go a lot further 17 than you're proposing and we believe it's technically 18 feasible, in fact, to bring the tiers forward so the Tier 2 19 could be introduced in 2001 and Tier 3, 35 percent standard 20 could be introduced in 2004. 21 We believe this is the way forward and will 22 benefit all the stakeholders involved in this regulation. 23 Thank you very much. 24 CHAIRMAN RIORDAN: Thank you, Mr. Walker. 25 Are there any questions for this witness by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 Board? 2 We thank you and we know you have come a long way. 3 We appreciate that. 4 Mr. Bertelsen and Mr. Nazemi, and then followed 5 by, I'm going to Don Reighley, Mike Riehl, Carter Fickus and 6 James Haussener, if you would be ready to testify following 7 these two gentlemen. 8 Mr. Bertelsen, good to see you. 9 MR. BERTELSEN: Thank you. Good afternoon, Madam 10 Chairman and members of the Board. For the record my name 11 is Bruce Bertelsen. I'm the executive director of the 12 Manufacturers of Emission Controls Association. 13 And given the number of times I've been before the 14 Board in the last three months, I probably don't need to 15 describe MECA, but for the record I will anyway. 16 CHAIRMAN RIORDAN: That's a good thing. 17 MR. BERTELSEN: MECA is a nonprofit industry 18 association made up of companies that develop and 19 manufacture emission control equipment for motor vehicles 20 and mobile sources. 21 These companies, many of them, are looking at 22 catalyst technology for small-engine application and 23 companies have over 30 years of experience and a proven 24 track record in developing and manufacturing control 25 equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 We're pleased to be here today to testify in 2 support of the proposal. 3 And I will keep my testimony short. We submitted 4 written testimony and we have had discussions with the 5 staff. 6 I also want to state that we appreciate the 7 opportunity to be able to have worked with the staff. We 8 think that as they have done over the years they've done a 9 very conscientious job of looking at the issues. These are 10 certainly tough issues. We think their analysis is very 11 complete and very fair. 12 What I would like to do today is focus on the Tier 13 3 standards, and that is those are the standards where 14 catalyst technology is an option. And I want to stress it 15 is an option. 16 As you heard today, there are several 17 technological pathways to get to the Tier 3 standards, and 18 from our perspective we think that's exciting, because 19 there's nothing like competition in the marketplace to bring 20 out the best of all technologies. 21 With regard to catalyst application on marine 22 engines, as we stated in our testimony and as you've heard 23 from others, it does involve a special challenge and it is a 24 new application and the solution is going to be cooperative 25 efforts and development between the engine manufacturers and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 the control manufacturers to develop a complete system. 2 It's going to take work, but it can be done. In 3 fact, I wouldn't be standing here today if our companies 4 didn't believe that with the proper effort they could 5 achieve that objective. 6 I think that it's fair to note that the efforts of 7 engine manufacturers to date certainly are commendable, and 8 I think certainly the staff and the Board recognizes that. 9 But the issue that you're confronted with today is 10 what is the level of additional control that's necessary to 11 meet the state's clean air objectives and to protect the 12 public health. 13 And while we can all stand up here and give you 14 our point of views, in the end you're the Board that has to 15 make that tough decision. 16 In that regard I would like to say with regard to 17 the Tier 3 standards that we think it's extremely important 18 that those standards be adopted. That standard will create 19 the regulatory incentive for our members, as well as many 20 others with different technologies, to make the necessary R 21 and D investments to bring forward the technologies and 22 control strategies that can achieve even cleaner emission 23 engines. 24 And I think in my experience in the nearly 20 25 years of coming before this Board and watching the evolution PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 of the California program, one thing that's become extremely 2 clear, and that is it is the standards that create the 3 regulatory incentive to give incentive to develop these 4 technologies and the tremendous success story of the Air 5 Resource Board really has been based on that, to set those 6 targets, set those challenges and give the incentive to 7 technology developers to come forward with the products that 8 can meet those goals. 9 The Tier 3 standards do not take effect for ten 10 years. That is an enormous lead time. And, again, we 11 believe very confidently that those standards are, that 12 there are several technology pathways to achieve them. 13 And quite frankly we do not believe that the 14 necessary technology developments will occur, absent a 15 target in place. 16 The staff has suggested a technology review in 17 2005. We think that's certainly appropriate and we support 18 that. 19 I would like to also mention, because there's been 20 a lot of discussion, the issue of labeling. We support the 21 concept of labeling. We'll leave it to the staff and the 22 engine manufacturers to work out the details, but we think 23 it's very important that the consumers be provided 24 information regarding the emission performance of the 25 equipment that they're purchasing. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 We also believe that labeling is a way to create 2 additional incentives to develop and market clean engines. 3 Indeed, we would have liked to have seen the clean 4 engine label retained, because we think it's appropriate to 5 recognize and provide incentives for equipment manufacturers 6 to offer products that go even beyond the Tier 3 standards. 7 So whether that is resurrected today, perhaps in 8 the future, it might be something to look at again, but we 9 think that's a good additional incentive. 10 In closing, I'd like to stress again that we 11 recognize there are challenges in meeting these emission 12 standards. We commend the efforts of the engine 13 manufacturers. We strongly believe that if the Tier 3 14 standards are adopted, it will stimulate the needed 15 technology development and that that development would not 16 otherwise occur. 17 As in the past, our industry stands ready to do 18 our part to achieve the objectives of this Board. And 19 personally we believe that the end result of this effort 20 will be a high-performance and clean marine engine. 21 Thank you very much. 22 CHAIRMAN RIORDAN: Thank you, Mr. Bertelsen. 23 Are there any questions for this witness? 24 Seeing none, we thank you for being here today. 25 MR. BERTELSEN: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 CHAIRMAN RIORDAN: Mr. Nazemi, welcome, and if 2 you'd state your name for the record and who you represent. 3 MR. NAZEMI: Madam Chairman, members of the Board, 4 good afternoon. My name is Mike Nazemi. I'm the manager of 5 transportation research in the Office of Technology 6 Advancement in the South Coast Air Quality Management 7 District. 8 In the interest of time I'm going to cut down on 9 the length of my testimony and then narrow it down to two 10 slides and try raise three issues, the needed emission 11 reductions in South Coast, the weekend issue and the 12 technology issue. 13 This slide basically shows that in the 1997 air 14 quality management plan we forecasted the need for 469 tons 15 of emission reductions in the year 2010 to attain air 16 quality standards. 17 Of this 469, the blue part shows the short-range 18 control measures, things that have been identified, 19 quantified and can be achieved, and that includes M16, which 20 was the APA version of the rule. 21 As you can see, the yellow portion is significant 22 and is what we call the long-term or it's also called the 23 black box where specific control technologies have not been 24 identified. 25 All these emission reductions are needed to meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 the air quality standards that were in effect in 1997. Of 2 course, now we have more stringent standards for ozone and 3 PM 10 and PM 2.5, therefore we need even more emission 4 reductions. 5 The reason I bring this up is that any control 6 measure that can be found that can move a portion of the 7 yellow to the blue would be greatly appreciated and I think 8 this is an opportunity here for you to adopt a regulation 9 that would accomplish that. 10 The second issue I would like to raise is the 11 issue of weekends. There was some discussion earlier this 12 morning about summer weekend emissions and I would like to 13 present to you basically some air quality data. 14 It shows that in this year's ozone season, if you 15 look at the number of ozone standard, look at the days 16 during the week we are 35 percent, weekend 58 percent. So 17 it tells us that we have definitely percentage wise more 18 emission, more exceedances. 19 If you translate that to the daily average maximum 20 concentration, again you see 11.6 pphm versus 13.4. 21 You take these extra ozone concentrations and you 22 add on top of that the fact that people use summer weekend 23 days, spend more time in the outdoors, therefore they're 24 exposed to more ozone concentrations, I think we should have 25 more severe health impacts in those periods of time, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 given that meteorology does not change from the weekday to a 2 weekend, therefore emissions must be a contributing factor 3 to these findings. 4 We see so definitely pleasure crafts are a major 5 contributor to weekend emissions and they should be 6 controlled. 7 The third item I would like to raise is the issue 8 of technology. We think your staff has done an excellent 9 job in identifying technologies, emissions, reductions, 10 costs, et cetera. 11 We believe that the approach that they have taken 12 in this three-tier approach, and in addition to that the 13 scheduling 2006 review period will allow plenty of time for 14 development of these technologies and will allow us to 15 review technologies on time and make any midcourse 16 corrections if needed. 17 Most of these technologies have already been 18 developed for other applications, such as catalytic 19 converters, et cetera. 20 And our office in South Coast Air Quality 21 Management District our job mostly is to advance 22 technologies and in this next few years we aim to shift our 23 gear from on-road to off-road applications and it's in that 24 area that we would like to cooperate with ARB staff in terms 25 of identifying and demonstrating new technologies that would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 eventually achieve all the standards that you will hopefully 2 set today. 3 Putting all this together, we believe that the 4 implementation of this pleasure craft regulation is 5 extremely important for South Coast Air Basin in terms of 6 achieving air quality standards, and we urge you to adopt 7 it. 8 CHAIRMAN RIORDAN: Thank you very much. 9 Appreciate the testimony. 10 Are there any questions? 11 Mr. Calhoun. 12 MR. CALHOUN: Will you put the slide back up. I 13 guess it's still there. It shows that the weekend ozone 14 exceeds the federal standards, 35 percent. And weekend is 15 58 percent. So you are attributing this to the increased 16 usage of personal water craft and other recreational type 17 vehicles? 18 MR. NAZEMI: All kinds of emissions sources on 19 weekends contribute to the difference, and pleasure craft 20 are one of them. There's more mobile source activity, more 21 BMT, but also significantly more emissions from pleasure 22 craft, yes. 23 MR. CALHOUN: I raise this question, I've asked to 24 staff to look into this for some time and am interested that 25 you would show this particular slide today, but we'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 discuss that another time. Thank you. 2 CHAIRMAN RIORDAN: I think this it is interesting, 3 Mr. Calhoun, because you and I travel those freeways and we 4 know there's a definite decrease in automotive traffic on 5 the weekends. So something is causing that shift up. 6 I don't know how many days of exceedances for this 7 the last summer, unfortunately we had a number, so it is a 8 very interesting thing that you don't -- you wouldn't think 9 would be happening, but is. 10 Next speaker is Mr. Reighley. 11 You help me produce your name, but I know you 12 represent the Black Bass Action Committee. 13 MR. FICKUS: You can tell by the shirt, right? 14 CHAIRMAN RIORDAN: Right. 15 MR. FICKUS: My name is Carter Fickus. I'm the 16 development director for the Black Bass Action Committee. I 17 want to thank the Board for letting us speak today on this 18 very important issue. 19 I've heard a lot of testimony today in regards to 20 manufacturers, some trying to get a hold of the marketplace 21 by using this new regulation, some concerning defending 22 their marketplace. 23 I'm here more for the citizen and for the 40,000 24 people that I represent in our organization. 25 One of the things we need to consider is how is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 it, this regulation, going to affect these individuals. 2 Now, I suspect most of us here today at some point 3 in time have been in a boat with our dad and/or grandpas. 4 What's going to happen to those older folks that have those 5 old outboards? What will labeling systems do to them? Will 6 my son be able to go fishing with grampa with his 20 7 horsepower engine that's ten years old? 8 When I spoke with the staff last week, I believe 9 it was December 2nd, we discussed emission standards. One 10 of the things that bothered us, and I'll read from my 11 testimony, which I know you all have a copy of, emission 12 standards, the three tiers of staff's proposal phase-in is 13 of grave concern to us because the staff repeatedly spoken 14 in terms of we think, it may be, we believe. 15 That's not very good salesmanship and that's a 16 definite concern of my people. "We believe" doesn't get it, 17 and "we think" doesn't get it. 18 You're talking about a $11 million industry. You 19 better be certain of what you're going to do and how it's 20 going to affect everybody and especially the consumer. 21 Cost of public agencies and businesses and persons 22 affected. The executive officer's finding as they pertain 23 to cost or savings to government agencies, small business 24 and private parties do not reflect reality in the staff's 25 proposal are to be implemented as outlined. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 The impact of the replacement of outboards in the 2 public fleet will be increased 10 to 15 percent of former 3 engine cost in transitioning to new technology engines. 4 The outboard manufacturers have expressed concern 5 that they will not be able to meet California's demand for 6 new technology into 2001. Less engines will generate less 7 boat sales. This will have a negative impact on the small 8 business located in rural communities near our lakes and 9 reservoirs. 10 Elaborate a moment on that. 11 A lot of boats are sold as a package with an 12 outboard. The larger engines above 130 horsepower are all 13 two-cycle. It's a weight-to-power ratio situation. Certain 14 boats can withstand the horsepower, but they can't withstand 15 the weight. When you put a four-cycle on some of the boats 16 that require the 150, 300 horsepower, you've got too much 17 weight for the boat, number one, and not enough horsepower. 18 In that marketplace currently the only engine available is 19 our two-cycle. 20 The present regulation proposals would also not 21 allow some boatowners a replacement engine for their boats 22 that have blown an engine, leaving the only option the 23 boatowner has at hand is to rebuild his old technology 24 engine, and that's perpetuating another 16-year lifecycle of 25 the old technology engine. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 By CARB's own statistics, six and a half percent 2 of the outboards in the fleet are replaced annually. 3 If the CARB staff proposal is to implement it, and 4 the manufacturers' predictions of a short supply of engines 5 is correct, the result is a lowering of total sales. It 6 then stands to reason that boat sales personnel, support 7 staff of small and large marine business will be affected. 8 This would apply both in the recreational boating industry, 9 currently again valued at $11 million, and also other 10 associated businesses within a given community, i.e., 11 Clearlake, motels, restaurants, gas stations. 12 George Hawley, my Santa Claus cohort up here just 13 before lunch, elaborated on BBAC's proposal. Our proposal, 14 I feel, is a very good compromise for everybody concerned, 15 and especially to the consumer. 16 CARB would require the implementation of the EPA 17 standard on January 1, 2004. CARB would require the 18 emission standards to be increased on January 1, 2004, to 80 19 percent of the EPA 1996 emissions, which increases the 20 California outboard emissions an additional five percent 21 above the remainder of the United States. 22 CARB would require then in June 2003 a series of 23 workshop meetings with the manufacturers, CARB staff and 24 other interested groups to discuss updated and new 25 technology. This new technology could then be phased in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 after January 1, 2005. 2 CARB would not require any further marking and/or 3 tagging on the new technology outboards other than those 4 required through negotiations between US EPA and the 5 manufacturers. 6 Just get back to kind of grampa. What's he going 7 to do with his old engines? 8 CARB would require the dealer be required to 9 explain the fleet of two-cycle outboards with regard to 10 exhaust emissions. A form similar to the truth-in-lending 11 form could be used to confirm this practice between buyer 12 and dealer did happen. 13 CARB would require that any mitigation concerning 14 the new technology outboards which do meet the California 15 emission standards would take place between the affected 16 consumer and the manufacturer. 17 CARB should oversee the process to ensure fairness 18 for both parties. 19 This came up with a meeting with the Board because 20 CARB felt they should be responsible for fining anybody that 21 didn't meet the emissions after the engine was in the market 22 or in the field. We felt instead of CARB getting the money, 23 why not let's make it real and let the consumer go back and 24 nail the manufacturer for producing an engine that isn't 25 meeting the regulations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 The result of implementing these proposals rather 2 than the staff's proposal are as follows. 3 The time line of 2004 for implementation of EPA 4 2006 standards are two years or 25 percent earlier than the 5 remainder of the United States. Raising the US EPA 6 standards from 75 percent to 80 percent in 2004 increases 7 the cleanliness of the outboard engine by five percent over 8 the remainder of the United States. 9 A mechanism is in place to continue to clean up of 10 the two-cycle outboards after 2004 if the technology has 11 further advanced. 12 The projected fleet life is five years, 20 percent 13 quicker than that projected by the US EPA for the remainder 14 of the United States. 15 It is our belief that this alternative proposal 16 will be more effective and far less burdensome on the 17 boating industry, related businesses or citizens. 18 We all want clean air and water. To this concern 19 a creative and beneficial program is outlined above, we feel 20 far exceeds CARB's staff proposal. 21 That ends my testimony, but I would like to 22 testify briefly for Don Reighley, who had to fly to LA. 23 CHAIRMAN RIORDAN: All right. And then is 24 Mr. Riehl here? 25 MR. FICKUS: Who? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 CHAIRMAN RIORDAN: Right behind you. 2 MR. FICKUS: Yes. 3 As I said, Don had to attend some other business 4 down in LA, so I'll read his. 5 Basically everything has been covered in his 6 report and my report. We're trying to touch on the things 7 that haven't been discussed. 8 CHAIRMAN RIORDAN: I appreciate that. 9 MR. FICKUS: The CARB staff report gives improper 10 consideration to the financial impact on individual owners 11 of two-cycle engines that are not designated as new 12 technology. 13 If accepted as written with the intent to restrict 14 the activities of my outboard, either by the actions of this 15 Board or water agency, the result will be the devaluation of 16 my property. This will take place without compensation and 17 thus become a subtle form of confiscation of private 18 property by the government. These type of actions are 19 discriminatory and treat individuals in an unfair manner. 20 When CARB brought cars under smog regulations 21 because they were considered polluters, engines were not 22 pitted against other engines to determine whether they can 23 be used or not. As long as the engine functions to the 24 capacity it was designed they were never to be barred from 25 any road or highway. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 A '57 Chevy was never to be barred from any road 2 or highway. I'm sorry. I missed that. This isn't my 3 writing. 4 A '57 Chevy was never compared to a later year 5 Chevy, nor to restrict its activities. This criteria was 6 its designed capacity. 7 If it met this requirement, it can still be used 8 to this day, even though it would objectively fail the 9 requirements of modern engines. This was done so as not to 10 disturb individuals socially and economically and provide a 11 smooth transition from the old technology to the new. 12 It has worked extremely well with automobiles and 13 will provide the same transition in outboards. 14 I think Don, again, is speaking to the label 15 problem. 16 What are we going to do with the people that have 17 the older engines? 18 CHAIRMAN RIORDAN: While I haven't looked at my 19 stack of letters just recently, if we don't have that file, 20 make it part of the record. 21 MR. FICKUS: You bet. 22 CHAIRMAN RIORDAN: Thank you very much. 23 MRS. RAKOW: I have a question. 24 CHAIRMAN RIORDAN: There's a question. Excuse me. 25 Ms. Rakow. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 MRS. RAKOW: Yes. I wondered if the 2 recommendations that you presented in your letter, were they 3 a unanimous vote of your board? 4 MR. FICKUS: Yes, ma'am. 5 MRS. RAKOW: Thank you. 6 MR. DEL PIERO: Excuse me, sir. Can I ask a 7 question? 8 In terms of the older vehicles, in the event of a 9 transfer of ownership do you have an opinion as to what 10 should happen? 11 MR. FICKUS: I really don't. I haven't thought 12 that through. 13 MR. DEL PIERO: I can have an appreciation for 14 your argument about senior citizens who owned them for a 15 extended period of time. Alternatively when the senior 16 citizen transfers it to an 18 year old, should there be at 17 that point in time some necessity of remediating the 18 technology or retiring the unit? 19 MR. FICKUS: I think it's up to the Board. I 20 think that's something the Board has to consider. 21 MR. DEL PIERO: You don't have a recommendation? 22 MR. FICKUS: I don't at this time have any 23 recommendation. 24 MR. DEL PIERO: Thank you. 25 CHAIRMAN RIORDAN: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 MR. RIEHL: My name is Mike Riehl and I'm one of 2 the directors of Black Bass Action Committee. 3 Madam Chairman and members of the Board, my 4 interest is in the labeling. I said I wouldn't use the 5 comparison with what happened in 1938 when there was also 6 labeling over in Germany, but let's say that that was told 7 that this was going to be for the good of the people. 8 What I will say, however, is that by making any 9 kind of a label you are separating. And all of the existing 10 motors that we have today have the technology that 11 originally started way back about 80 years ago and they were 12 all legally allowed to be used. 13 Now, we need to understand that when the gentleman 14 with his kid drives up to his lake to do some bass fishing, 15 he will take a look at the actions when they say, well, gee, 16 you don't have a star on the back of your boat, I'm sorry, 17 you can't go on that water, is having a right that he had up 18 to that time suddenly become a privilege. And that 19 privilege always costs money. 20 Last week I was very privileged to be at another 21 meeting, in this case it was the Bass-O-Rama over at the 22 Alameda County Fairgrounds, and what we did is we passed out 23 some literature explaining a little bit about our program, 24 which we have, and we also had a petition that each person 25 would be able to sign. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 Madam Chairman, I have 3,140 signatures from 2 people all over, primarily the Northern California area, but 3 in Southern California also, who are very very concerned 4 about how their existing motors are going to be taken. 5 Again, they look at it as another thing that has 6 been put in front of them so they will not be able to have 7 their lifestyle continue. And they're concerned. 8 Now, what our petition stated was very clear, that 9 we do not want to change or modify in any regard any of the 10 EPA 1997 two-cycle introduction dates for cleaner outboards, 11 and that we fully reject a proposed outboard multi-tiered 12 labeling system. 13 It labels people. It separates them. 14 And we fully support the mandates of EPA 15 concerning two-cycle engines instituted in 1997, because we 16 do want clean air and we do want clean water. 17 Mr. Del Piero came out with a very very 18 interesting point, and I'm very pleased that he came out, 19 who is taking care of the water surface of all of our lakes? 20 Who is paying for it? 21 Well, obviously the consumers now are paying for 22 us to clean up something that we didn't have a whole heck of 23 a lot to say about it, and that is this MTBE. 24 And it really distresses me knowing that we, the 25 people, are going to end up footing the bill. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 Again, Mr. Del Piero, I truly appreciate your 2 concern, specifically about where this money is coming from. 3 Thank you very much. 4 CHAIRMAN RIORDAN: Thank you very much. 5 As Mr. Haussener is coming forward, I'm going to 6 ask that Mr. Luman, Dr. Anders, Mr. Peterson and Rod Stegall 7 come forward and queue up. 8 We are going to have to start thinking a little 9 bit more about the time, and I'm going to ask you not to 10 repeat, particularly when you're representing the same 11 organization, the same item. 12 Though I have to admit, Mr. Haussener, I am still 13 thinking about your previous testimony, and what do you have 14 to provide on this particular item that we wives need to be 15 reminded about? 16 MR. HAUSSENER: Certainly. I appreciate that. 17 Start out with some general comments, if I may. 18 Just in the staff presentation I notice they 19 talked about fuel savings and some deduction, but in the 20 staff report, at least the one I got that was mailed to me, 21 they didn't talk about that. It said one little sentence 22 about may be a reduction or savings in that. 23 And hopefully the staff will provide stuff for the 24 rest of us to take a look at later during the 15-day period. 25 Also when staff mentioned stakeholders and not the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 ombudsman, but your actual staff, one of the things they 2 forgot was me, the boatowner. Talked about everybody else 3 except for the guy who actually drives the boat, and that 4 worries me a little bit that we weren't considered part of 5 the stakeholders in this whole situation. 6 Cost of engines, they mention 14 percent. To me 7 14 percent increase in cost, to me that sounds like a lot of 8 money. Staff, quote, 14 percent is a small price increase. 9 You guys must be doing real well up here in 10 Sacramento. Not the rest of the world. 11 I also like staff because of their great 12 comparison. I was listening to the news in San Francisco 13 and this got me, the seven hours to 100,000 mile deal for a 14 car. Well, I haven't seen one of those cars, but I'd like 15 to know what it compares to the average car in the San 16 Francisco Bay Bridge or the average SUV that I followed as I 17 drove up here this morning. Something that those of us who 18 are neophytes can understand, rather than some technological 19 car that's out there situation. 20 The warranty issue. I guess I don't quite 21 understand the 250 hours and how that relates back to your 22 usage numbers that you talked about and how maybe can you 23 explain a little bit as to -- four years I understand. 24 That's easy. 250 hours is that the average outboard that's 25 running at 70 hours per year multiplied out by three or four PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 years, was there some sort of thought or was 250 a great 2 round number? I don't know. 3 MTBE, the cost of cleanup. No doubt somebody is 4 going to have to pay for the cost of cleanup. Why should 5 the boatowners in the future that weren't even putting the 6 MTBE out there I think is a question perhaps that those need 7 to worry about a little, but why necessarily should those 8 who did the most benefit, the air folks and the folks who 9 required MTBE, let's get rid of it, and maybe it will 10 dissipate. It seems to go down pretty low over a long 11 period of time. It may still be there 20 parts per billion 12 or four parts or whatever. I don't understand enough of it. 13 The main issue, the environment sticker. Get rid 14 of it. Staff report says the primary purpose is for 15 comparison shopping. 16 Well, you go buy a vehicle, there's a sticker on 17 that vehicle when you go look at it, there's a sticker on 18 your refrigerator, on your hot water heater, the shopper can 19 still do comparison shopping without having a permanent 20 sticker affixed, if that's the primary reason. 21 It does mention the secondary reason for water 22 folks and, you know, I'm paranoid, I don't really trust the 23 government. The State Water Board did a study not too long 24 ago at marinas and fuel docks, and the Governor told them to 25 go study fuel docks that are on surface water that serve as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 a drinking water surface source. Next thing you know their 2 staff was looking at the entire State of California. A 3 little paranoid about that one. 4 MR. DEL PIERO: That's what we were asked to do by 5 the Legislature. 6 MR. HAUSSENER: No, the Governor's Executive 7 Order, and you look at the staff report and the Executive 8 Order and you compare that, and I wrote a letter to 9 Mr. Petit on it. 10 CHAIRMAN RIORDAN: I think we need to stick to the 11 issue. 12 MR. HAUSSENER: Sure, no problem. 13 It indicates a little paranoia, perhaps as to what 14 this is for. I'm paranoid. 15 The other part is you talk about these water 16 agencies and sensitive areas. In other words, you don't 17 have a sticker, you're not allowed into a sensitive area. 18 I'm not sure what a sensitive area is. It could 19 become the entire State of California to be deemed a 20 sensitive area. 21 San Francisco County has already banned personal 22 water craft from most of the waters of San Francisco, which 23 includes a good portion of San Francisco Bay. 24 Would Orange County ban these throughout Orange 25 County, because they deemed that to be a sensitive area? I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 don't know, but it seems to me like you're doing a taking 2 here, and you need to spend a little bit of time thinking 3 about what you're doing to the consumer. 4 There's a half million outboards, PWCs out there. 5 I don't see you going around requiring the old car people to 6 have a sticker on the back of their car that says, hey, I'm 7 a smog generator, I'm killing you. But it seems that you're 8 doing the same thing to boats. Appreciate it if you 9 wouldn't do that. 10 Thanks. 11 CHAIRMAN RIORDAN: Thank you, Mr. Haussener. 12 Mr. Luman. Mr. Luman here? 13 Dr. Anders. 14 Mr. Peterson? Sorry, Mr. Peterson. You come 15 forward, though. Keep walking closer. 16 Dr. Anders was there in the back and I couldn't 17 see him. 18 DR. ANDERS: Thank you very much. My name is 19 Russell Anders. I'm here as an individual. 20 I have studied the personal water craft issue and 21 the two-cycle issue over the past two years, particularly 22 being prompted by at that time the proposed ban by TRPA on 23 carbureted two-cycle engines. 24 Seems this afternoon we have the 25 anti-establishment alternative idea people who are coming up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 before you, and I'm afraid I'm going to have to fit quite 2 nicely into that mold, because what I'm going to tell you 3 perhaps rocks the foundation of some of the things that have 4 been used as a mantra here against two-cycle engines and has 5 been for the past two or three years. 6 I state unequivocally, after a lot of research 7 into the two-cycle engine issue, that two-cycle engines, 8 with the exception of MTBE, are inert in the waters in which 9 they operate. 10 Let me restate that. With the exception of MTBE, 11 two-cycle engines are inert in the waters in which they 12 operate. 13 I come to that conclusion after reading many many 14 research papers, all of them unrefuted in the scientific 15 community, that states without a doubt that over time the 16 products of exhaust from two-cycle engines completely, 17 completely dissipate from all water systems. 18 This idea that 25 percent of the fuel, and I've 19 heard today 30 percent, of the fuel fed to two-cycle engines 20 ends up in the water, that is absolutely untrue. 21 The studies show that perhaps as much as two and a 22 half percent of the fuel fed to a two-cycle engine winds up 23 in what is called the water column, and that two and a half 24 percent dissipates over a period of time in 30 days to less 25 than half of that, and 11 days later half of each of that is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 reduced also, so that in a period of time there is nothing 2 left in the water from two-cycle engines. 3 The lady from the Lahonton district at Lake Tahoe 4 ran these engines across the lake and then studied them. 5 There's no doubt about it that two-cycle engines produce 6 hydrocarbons in their exhaust that do enter the water 7 column. 8 The question is what do they do when they are 9 there and how long do they stay there? 10 Unequivocally they do not stay there long enough 11 to cause any damage to the aquatic systems in which these 12 engines operate. 13 If I may read directly from some of the reports. 14 Two-cycle motor emissions, quote, do not significantly 15 affect aquatic environmental systems. The exhaust 16 hydrocarbons, quote, remain in the water column for a 17 relatively short period of time, less than a day, under 18 conditions normally encountered in natural water systems 19 before they are removed by natural, physical, chemical 20 and/or biological biooxidation processes. No statistically 21 significant buildup of saturated hydrocarbons was observed 22 in the test areas, the sediments after three years of engine 23 operation. 24 What comes out of a two-cycle engine is not 25 gasoline. It is not fuel. It is not something that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 lubricates the engines. These products that go into 2 two-cycle engines that come out of the exhaust of two-cycle 3 engines have been subjected to very high temperatures, very 4 high pressures and tremendous acceleration velocities, and 5 therefore are not gasoline. 6 To equate what comes out of a two-cycle engine to 7 someone running around the lake or water system dumping 8 gasoline is ludicrous, because it is not that at all. 9 All the chemicals, all the hydrocarbons and 10 gasoline were tagged, run through two-cycle engines. The 11 study, the vaporized products were studied and they are not 12 gasoline. Absolutely, categorically not gasoline. Anybody 13 that tells you differently is wrong. 14 This mantra of pollution from two-cycle engines 15 shows absolutely no understanding of the science that's 16 involved. 17 At Lake Tahoe, for instance, a ten-year study from 18 the Incline Village Utility District has found absolutely no 19 residues of exhaust emissions in the water. That is 20 contrary to what you heard here from the Lahonton district, 21 because they're doing it at the exact time that that boat or 22 engine has passed through the water. 23 As I said before, the question truly is what 24 happens to that in the water over time and while it is there 25 does it cause any damage to the aquatic system. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 As far as the MTBE issue is concerned, let's not 2 dance around that here. There has been done a lot. MTBE 3 should be removed from the gasoline in the State of 4 California. 5 Doing that would solve the problem that the man 6 from the water district has of how much money it's going to 7 cost to clean up, because it won't be there to clean it up. 8 Running a two-cycle engine through the water or 9 any engine through the water and then testing the water 10 behind it to see if there are any discharges is akin to 11 operating your vehicle in the garage, closing the garage 12 door and breathing the air for a half an hour, 45 minutes. 13 CHAIRMAN RIORDAN: Dr. Anders, let me just try to, 14 because I recognize you have -- 15 DR. ANDERS: I know your time restrictions, yes. 16 CHAIRMAN RIORDAN: The conclusion that you reach 17 is, and what would you have the Board do, based on your 18 conclusion? 19 DR. ANDERS: Well, my recommendations? 20 CHAIRMAN RIORDAN: Uh-huh. 21 DR. ANDERS: It goes way back to I should have 22 been here earlier, at least I should have been able to have 23 the benefit of having the research that I've done and the 24 testimony. 25 I frankly don't feel that two-cycle engines are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 producing a problem, at least for the water systems in the 2 State of California. 3 And in Lake Tahoe it has been shown that the air 4 quality portion of the hydrocarbons that two-cycle engines 5 produce are three-tenths of one percent of the amount of 6 hydrocarbons in the air can be attributed to two-cycle 7 engine operations. Three-tenths of one percent. 8 And because of that, and because of a very 9 well-financed, very slick, very well-done campaign of 10 propaganda campaign, they ban two-cycle engine operation in 11 the lake, without truly any real studies, scientific 12 studies. 13 CHAIRMAN RIORDAN: But the bottom line 14 recommendation to us. 15 DR. ANDERS: Bottom line recommendation, two 16 recommendations. 17 One, if the engine manufacturers, if the 18 manufacturers of two-cycle engines feel that they can 19 produce an engine that meet your Tier 2 requirements, I say 20 go for that. I do not think the Tier 3 requirements are 21 necessary, one. 22 Two, remove MTBE from the gasoline in the State of 23 California. 24 CHAIRMAN RIORDAN: Thank you. 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 CHAIRPERSON RIORDAN: I am sorry. 2 BOARD MEMBER ROBERTS: Only because we have heard 3 it more than once now, about the car in the garage as being 4 somehow inappropriate, and as you know we do a lot of testing 5 in a sealed chamber, like an extra tight garage, measuring 6 all the emissions from those autos that are tested, even with 7 the cars at rest, and maybe that some of the people would 8 benefit from seeing the strenuous testing that we do in that 9 enclosed environment, I do not think the testing that they 10 are so critical of is even that exhaustive in terms if they 11 want to compare it. 12 It is far more than a closed garage, just for the 13 record. 14 CHAIRPERSON RIORDAN: That is an important point to 15 put on the record. 16 Mr. Peterson, and you are going to be followed, my 17 hope is you are going to raise some new issues from your 18 organization. 19 MR. PETERSON: I think so, and I think I am going 20 to go a little farther than some of these people have gone, 21 if you would please. 22 I can do that, and I can tell you a little bit 23 about myself. I am the Conservation Director for the 24 California B.A.S.S. Federation. We are part of the largest 25 bass fish organization in the nation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 My organization has three equally important aspects 2 to it, not just fishing but conservation and youth 3 activities. We are truly an environmental group. 4 In August of this year, together with our national 5 organization, we kicked off our outfit for passages 1999 of 6 the Clean Water Act, and its companion bill to the Water Act. 7 On a personal level, every January and February, 8 you will find me down in the dirt or mud on local lakes and 9 rivers finding habitat, in cooperation with DFG and other 10 State agencies or other authoritative bodies, so I get 11 knee-deep in it, if you will, in the physical sense on the 12 clean water and the habitat in the State. 13 We are about to put in place the mechanisms that 14 trample all over the preeminent water legislation that has 15 been passed in our lifetime, and that is the Clean Water Act. 16 In 1972, Congress passed the Federal Water Solution 17 Control Act, also known as the Clean Water Act. It is one of 18 the most important pieces of legislation for our country in 19 the twentieth century. 20 It had two primary goals. The first one was 21 restoration and maintenance of the chemical, physical and 22 biological integrity of our nation's waters. 23 The second one, which is important, is the 24 attainment of water quality which provides for the protection 25 of propagation of fish and wildlife and will provide for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 recreation in and on the water. 2 Let me emphasize that again. The Clean Water Act, 3 one of its major tenents is to provide for recreation in and 4 on the water. 5 Any approach that fundamentally contributes to the 6 exclusion of people from being able to recreate in and on the 7 water is going directly against the Clean Water Act, and this 8 includes the conventional two-stroke engines. 9 I would also like to look at the Federal EPA 10 approach that was taken by working with the industry and the 11 public, they put in place regulations for outboard motors 12 that have led to the introduction ahead of schedule of even 13 more efficient engines. 14 The EPA did not suggest banning other technologies 15 to achieve cleaner air and water. Though, I cannot speak for 16 them, perhaps they saw the wisdom in both elements of the 17 Clean Water Act. 18 Also, the Clean Water Act was principally a 19 regulatory tool without incentives not unlike regulations 20 imposed here today. Now, in the convening 26 years since the 21 passage of the Clean Water Act and according to the Federal 22 EPA, 40 percent of our nation's rivers, lakes and estuaries 23 are still significantly polluted, and that fact brings to the 24 companion legislation, that includes the incentive for 25 private individuals and businesses and saving that habitat to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 help clean the water. 2 I think this supports the approach that both 3 regulatory and unsensitized elements are the best approach to 4 achieve the desirable results of clean air and clean water. 5 Next, I want to briefly touch on a couple of basic 6 economic issues, and I represent fisherman as well as the 7 environmental group. 8 First off, if do you not include all of the 9 stakeholders on the table at one same time, how can you 10 expect to gain the public's trust? 11 I think that is fundamental to what we want to 12 achieve here. We are about in the State to change 13 Administration. 14 Who is to say that next year the rules won't 15 change? Who is to say that the other agencies, what they 16 will do today, some of them are here and have talked in a non 17 binding way about what they support. 18 I am not going to go out and invest the kind of 19 money involved in a new boat and motor used in the new 20 technology if I do not feel confident that I am represented 21 on the table, and I will be able to use my boat and recreate 22 on my local lakes and rivers. 23 I am just not going to spend that kind of money. 24 These things are happening right now. This is not a 25 theoretical argument. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 People are sitting on their old motors. Putting 2 tiered labeling on outboards is not going to clean up this, 3 and I will not go into the tier labeling issue. I think 4 other people have done that effectively. 5 But let me say that this personally includes me. I 6 am sitting on the sidelines, too, Madam Chairman. Again, you 7 actually, I believe, are risk slowing down the transition of 8 new technologies and it does actually risk making the air and 9 water quality worse in the near term if you do not have all 10 the stakeholders at the table, gain their trust and recognize 11 the importance of recreation associated with clean water. 12 Another economic issue is the transition. It was 13 stated yesterday, I believe, by Peter Rooney, the Head of the 14 Cal EPA, that there now has been a broad recognition of the 15 need of MTBE to be removed from gasoline. 16 We certainly have the regulatory mechanisms to 17 expedite that solution, and we can literally require that 18 MTBE be immediately stopped from being added to our gasoline. 19 Are we doing that? No. 20 Why not? 21 I want to suggest that we certainly could do that 22 quicker than developing new technologies, but I feel the 23 effect of such a radical approach -- at the University of 24 California study, in The Sacramento Bee, indicates it was 25 clearly trying to balance environmental and economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 improvements with its environmental improvements with 2 economic effects to achieve the most desirable approach to 3 the problem, and I think that is reasonable, not just trying 4 to immediately implement change like that. 5 Outboard motors affect both air and water quality. 6 They are certainly part of a large economic force in the 7 State, and they contribute to a very significant form of 8 recreation here in California. 9 This describes the stakeholders of the process, the 10 agency of air and water quality, manufacturers and retailers, 11 conservation and recreational organizations and the public, 12 the most important stakeholder in the process. 13 The process that puts all these stakeholders at the 14 table at the same time, gaining consensus has the potential 15 to trade the best scenario for the solution that we want to 16 achieve in clean air and clean water. 17 So, my recommendation is for the Board to call on 18 Governor Wilson and governor-Elect Davis to put together a 19 multi-agency task force to put all the stakeholders to gain 20 the public trust to find the best environmental and economic 21 solution for clean air, clean water and recreation, and to 22 start with the tenents of the Clean Water Act and have a 23 policy that is fundamentally oriented toward inclusion of all 24 outboards. 25 I think these things will lead to the quickest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 transition that we all desire in this environment. 2 CHAIRPERSON RIORDAN: Mr. Peterson, you are going 3 to have to draw it to a close. 4 MR. PETERSON: Last point -- okay. 5 Finally, I would like to add that regardless of 6 what is decided, that the Board and the staff go out into the 7 public to explain their position. 8 I am going to ask you to come to the upcoming trade 9 and boat shows and explain your positions directly to the 10 buying public. 11 This is not a unique concept. The Federal EPA 12 frequently has viewed the various trade shows, and they are 13 perfectly willing to listen and talk about such things as 14 MTBE. 15 CHAIRPERSON RIORDAN: I will assure you that you do 16 not have to go any further, that we will take that under 17 serious consideration. 18 MR. PETERSON: Thank you. 19 CHAIRPERSON RIORDAN: Thank you very much. 20 Mr. Stegall. 21 I ask you not to repeat, then I want to do this, if 22 you would just wait for one minute, while I try to work with 23 Mr. Russell Long, Krista Clark, Maria Tikkanen, Edgar 24 Dymally, if you would kind of cue up, getting ready to speak, 25 and Mr. Desmond, from the Recreational Boaters Association, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 think you are already over there. 2 Thank you, Mr. Stegall. 3 MR. STEGALL: I will be less than one minute. 4 My name is Rodger Stegall. I am the President of 5 the California B.A.S.S. Association, and I support fully what 6 Ed Peterson has stated. Everything that I wanted to go over 7 has been already stated properly. 8 My suggestion is to go after MTBE and get them 9 taken out of our gasoline. We have one less problem to worry 10 about, and then all work together to create nice outboards 11 for everyone to run or fish and have a good time. 12 CHAIRPERSON RIORDAN: Thank you very much. I 13 appreciate that. 14 Okay. Mr. Desmond. Dr. Long, I guess Mr. Desmond 15 is not here. So, you just go right ahead. 16 DR. LONG: Okay. Thank you. 17 My name is Russell Long, and I am Executive 18 Director of Blue Water Network, the coalition of 50 19 environmental, fishing, recreation and public health groups 20 in California. 21 Membership from these organizations totals almost 22 one million members in the State, and I just would like to 23 read for you several of the organizations that are a part of 24 the Coalition, the American Canoe Association, the California 25 League of Conservation Boaters, California Trout, Clean Water PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 Action, Federation of Fly Fishers Southwest, International 2 Rivers Network, Natural Resources Defense Council, San Diego 3 Audubon Society and the Breast Cancer Fund. 4 So, we have a very large constituency that is 5 interested in this issue. On a personal note, I should 6 probably add that I am a former American Cup skipper and care 7 a great deal about the health of our waters. 8 Before I start, I would just like to say there are 9 many groups and organizations that have been extensively 10 involved in working with ARB to draft this regulation. 11 As I said before, we commend the ARB staff for 12 their very diligent efforts, their accessibility to all 13 groups in their exclusive process. In particular, there have 14 been about a half a dozen meetings, conference calls and 15 workshops, which almost all key stakeholders in this 16 regulation attended, and despite ARB's time pressure to draft 17 this real quickly, staff made tremendous efforts to put us 18 all in the same room together, and I am very appreciative 19 about that. 20 In regards to the proposed regulation, I must admit 21 that while it is not as strong as we originally hoped, it is 22 a pretty good start in a number of respects, and I would like 23 to touch on three or four issues that we believe warrant your 24 attention. 25 First and foremost, the 2008 standards, tier 3, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 which on the surface appears to be a significant jump for 2 this Board, is a standard that is only as equivalent to that 3 of today's four-stroke marine engines. 4 That is not that big of a jump. In fact, since 5 four-stroke motors have been on the market for over a quarter 6 of a century in small horsepower sizes, one could argue that 7 a future standard should have gone much farther than what ARB 8 proposed for 2008. 9 Realistically, ARB could have insisted upon a 2008 10 standard that is 90 percent better than EPA, not just 65 11 percent better. 12 Addressing the issue of cost per ton, four-stroke 13 engines already on the market will not have any additional 14 costs on them. Those motors will make the standard ten years 15 hence. 16 As a matter of fact, I heard recently the market 17 share for them and in the past year or so, four-strokes have 18 doubled their market share, and they are roughly 10 percent 19 of the market or just under right now. 20 So, consumers are noticing this is a clean product, 21 and they are headed in that direction. 22 Nonetheless, we are aware that several 23 manufacturers have already committed significant resources, 24 and we have heard from them, from building the new 25 direct-injection motors, and since we do not want to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 accused of turning a blind-eye to industry's financial 2 concerns, we have reluctantly agreed to support ARB's 2008 3 standards, even though it is not as tough as we would like to 4 see it be. 5 We agree to do so for one major reason. The 2008 6 standard provides a long period of time, ten years, for 7 industry to push technology development for new technologies 8 for cleaner motors. 9 These technologies include catalytic converters, 10 like the one we heard about, the one that Yamaha just put on 11 a jet ski and the four-stroke powered or even the rotary 12 powered PWC that are outside that we saw today. 13 We believe these kinds of developments will pave 14 the way for even further emission reductions in the 15 twenty-first century, but without the 2008 standard or with a 16 weaker standard manufacturers will have no incentive to 17 continue the R and D efforts towards development of even 18 cleaner craft. 19 With these considerations in mind, the 2008 20 standard is an absolute crucial element to ARB's proposed 21 regulation. The technology review for this rule is scheduled 22 for the year 2005, which is late enough that ARB will be able 23 to carefully scrutinize the latest advances in engine 24 technology between now and then prior to making any final 25 decisions regarding of further tightening of the future PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 standards. 2 If the technology review is any earlier than 2005, 3 the most promising products may not yet be available for 4 review. So, we ask you to please stay firm on those dates 5 and do not move that up. 6 The second point that we would like to address 7 briefly is the environmental labeling program. 8 This is an extremely important program in our 9 opinion, because it provides water agencies a tool to enforce 10 restrictions in certain classes of high polluting engines on 11 California reservoirs, as we have heard, and it also provides 12 consumers the information they need to select the cleanest 13 engines possible. 14 We need to provide that information to consumers. 15 Our members want it, and we believe all boaters should have 16 that right. 17 How can we deny them from the right to pick the 18 cleanest motor? 19 So, this is a market-driven approach and one that 20 we endorse. We strongly believe that consumers will 21 appreciate getting this information. 22 While I was thinking about it this morning, I 23 realized that since some marine engines pollute far more than 24 a car, picking the cleanest motor is probably the most 25 important environmental decision a boater can make. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 These labels give them the opportunity to do the 2 right thing. 3 One of our colleagues will now provide you with 4 over 700 letters that we have gotten from our members who 5 support this regulation, including both of the above 6 elements, the three tiered labeling program and the 2008 7 standard, and we have the letters there. 8 By the way, the final label has not been decided, 9 and they are still working that out, and we have been trying 10 to contribute some help in terms of graphic design, so we 11 thought we would provide you with a few possible draft labels 12 in just a moment for you to take a look at. 13 The third point -- 14 CHAIRPERSON RIORDAN: Could you make the third 15 point? 16 I hate to do that. Your testimony is excellent, 17 but could you kind of bring it to a conclusion as best you 18 can. 19 DR. LONG: Yes. This is a point that no one has 20 raised yet. 21 We would like to request that ARB slightly tighten 22 the year 2000 tier 2 standard in the 15-day change. The 23 discussions with staff and also reviewing projected engine 24 availability that year, we believe that the standard could be 25 set at levels 12 percent below the proposed level without PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 causing any additional financial burden to the marine 2 industry. 3 This is particularly true with outboards, because 4 there are many, many engines on the market today which 5 already meet the 2004 standards. I think we have a graph 6 somewhere, but the extra tonnage gained by reducing that 7 standard a bit further could be very, very significant, and 8 if you do not mind, I would like to ask staff later when it 9 is appropriate to address that to see if they feel that be 10 done particularly with respect to outboards. 11 A side benefit of this is, environmental labeling 12 program is currently not symmetric. It provides three 13 levels, meeting EPA standards, then 20 percent better than 14 the standard and then 65 percent better than the standard, 15 and the proposed change would make these increments more 16 uniform as follows: Meet EPA, 32 percent better, 65 percent 17 better just makes more sense, but that is a secondary issue. 18 As I have already mentioned, we would like to add, 19 concern about the inventory, and we are happy to know that 20 staff will continue to take a look at those numbers. 21 As a final note, some of you are aware, we are also 22 very concerned about a few other items that have not been 23 brought up today. One of them is particulate matter 24 emissions. 25 Some of these two-stroke engines have been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 determined to release tremendous amounts of particulate 2 matter and to the point it clouds the water in some of the 3 tests that were done. 4 Obviously, particulate matter it is a great source 5 of concern, particularly something that we are all aware from 6 diesel now, and I would urge staff to continue to look at 7 this and make further studies on it. 8 I noted in the report, particulate matter in a jet 9 ski is twenty times greater than a marine four-stroke motor 10 and five times greater than a marine diesel motor. So, 11 please continue to look in that direction. 12 Thank you very much. 13 CHAIRPERSON RIORDAN: Thank you, Dr. Long. 14 Now, we have Krista Clark, and let me ask Krista, 15 come forward, if you would, please. 16 Now, while she is here, and I have some people cued 17 up to speak, I recognize what we have in front of us in terms 18 of an Agenda. It goes far beyond the item that is here 19 before you, and I also want to recognize what is humanly 20 possible to accomplish in the next few hours. 21 So, I made a determination. There are two people 22 in the back. One is Jim Schoning, and Jim should raise his 23 hand. All of you who are still left to speak, I would like 24 you to join Jim outside the assembly hall, and we will try to 25 figure out a way so each and every person could be heard but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 that we could conclude at an hour so we could go on to the 2 next item, because a number of people are waiting for that 3 next item. 4 Bruce, if you would help him. I sort of see a 5 category here of the environmental community and the affected 6 communities. 7 Perhaps you could work with the environmental 8 community, and if you would raise your hand, and if you could 9 all go and meet those people, I would be very grateful. 10 There are a number of you that are still left to 11 speak, and I want to give you some consideration, but I also 12 know what my time limits are. 13 Krista, welcome, and would you identify yourself. 14 MS. CLARK: Thank you. I will hurry. I am six 15 minutes from a parking ticket, so I will be very brief. 16 My name is Krista Clark, with the Association of 17 California Water Agencies. ACWA includes 440 water suppliers 18 in California. Our members deliver over 90 percent of the 19 water in California for use in domestic, agricultural and 20 industrial uses. 21 Some of our members have been mentioned here today, 22 Metropolitan Water District, East Bay MUD, Santa Clara Water 23 District, Contra Costa Water District all are or have already 24 been faced with or are going to be faced with important 25 decisions about the boating restrictions on their reservoirs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 As many people have stated already, we have been 2 participating in a series of meetings affiliated by ARB 3 involving boat manufacturers, environmental groups and a few 4 of the water utilities ourselves. We are very appreciative 5 of ARB's decision to include an engine labeling program. 6 I am strictly going to be speaking about the 7 labeling program today not the emission standards that are 8 set. This program we believe will provide an effective tool 9 to help us control marine emissions and subsequently water 10 quality at some of our reservoirs. 11 As the Board is surely aware, MTBE is turning up in 12 reservoirs throughout the State, and MTBE is very difficult 13 and expensive to treat. 14 Early studies at this point indicate that the 15 primary source is coming from two-stroke engines, primarily 16 the less fuel efficient two-stroke engines. 17 Because of these findings, four of our members, the 18 four I mentioned previously, have taken corrective steps to 19 protect the quality of the drinking water in their 20 reservoirs. 21 East Bay MUD has already adopted a resolution that 22 I am sure you are aware of that phases out the use of all gas 23 powered water craft on one reservoir and makes some serious 24 replacements on a couple others. 25 Santa Clara Valley Water District is modifying time PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 and days of use at some of their reservoirs, and Metropolitan 2 Water District and Contra Costa Water District are both 3 considering not allowing gas powered motor craft at all on 4 two new reservoirs. 5 As you can imagine, these steps that have been 6 taken have not been popular with the recreational community, 7 and we have heard a lot from them, and they have been 8 difficult steps to take. 9 We understand the concern expressed, and we also 10 understand the economic impact that severe restrictions can 11 have on some communities. To the extent it can be done 12 without jeopardizing water quality, we want to minimize these 13 restrictions. 14 Water districts believe that emissions from 15 conventional two-stroke engines that are used today are the 16 major cause of the water quality degradation and that the 17 newly designed two-stroke direct-injection engines and 18 four-strokes are less damaging to water quality. 19 Fortunately, at a crucial time, ARB has proposed 20 the environmental labeling program. This would help our 21 reservoir operators easily distinguish between cleaner 22 engines and dirtier engines. 23 Previously we have been unable to distinguish which 24 engines are cleaner than others. They all tend to look the 25 same, and our only recourse is to get rid of all of them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 We believe this system is a good way of maintaining 2 water quality while still allowing recreational boating on 3 reservoirs. It is our opinion that this system would be most 4 effective if it was multi-tiered. 5 Since we do not know how water quality or emission 6 from boats translate into water quality, we have heard some 7 preliminary studies that have been shown up here, but nothing 8 conclusive, we are going to be forced to do sort of a process 9 of elimination where we start here, move here, move here. 10 Where if we went to a single tier, after that we 11 would be right back to the end again. So, we would advocate 12 a multi-tier system that allows us flexibility of meeting our 13 water quality goals. 14 Other than that, I want to really reinforce, I 15 heard a couple times up here today, that water quality are 16 not required to use this labeling program. This is merely a 17 tool that some may use in meeting the water quality standards 18 should gasoline-related contaminants be found to exceed goals 19 set by the district or the government. 20 I really want to stress that it is not something 21 that is going to be widely implemented or required. Again, 22 we realize that you are not required to include this labeling 23 program or required to consider extensive water quality 24 impact in your water quality regulations. 25 We appreciate the fact that you have done that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 today, and we hope you consider our support. 2 CHAIRPERSON RIORDAN: Thank you very much. 3 The gentleman behind you, is that Mr. Desmond? 4 Mr. Desmond, come forward. I am sorry I skipped 5 right over you. 6 MR. DESMOND: I am sorry I was late. I was putting 7 my quarter into my meter. 8 Just briefly, I am Jerry Desmond, Jr., and I am the 9 Legislative Advocate for Recreational Boaters of California. 10 That is about 190 boating and sailing clubs. 11 We are located throughout the State, and we are 12 active mostly in government affairs, so we have some 13 involvement in the Debra Bowen bill that was mentioned 14 previously with water agencies, probably a perfect follow-up 15 to what Krista was talking about. 16 Just two issues that I wanted to bring to your 17 attention as you wrap things up from the public testimony 18 perspective, first is that boaters are cognizant of the 19 efforts to protect the waterways. 20 Our organization supports the elimination of MTBE 21 from fuel as the best approach to that, and we also endorse 22 the best management practices that are being adopted by the 23 regional water districts as they address this difficult 24 issue. 25 The two points are, one, this will be a significant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 impact on recreational boaters. Although the staff report 2 does accurately state that there is no direct significant 3 impact but it is an indirect cumulative impact that will 4 happen very quickly after the label program is adopted, not 5 only do the report of the slides previously show that a $1900 6 additional cost, a $2300 additional cost that is additional 7 to the assumption and the understanding that we have that 8 boaters will have to go out and purchase these new engines 9 very soon after you adopt the standards. 10 That makes it even more important that the 11 recommendation that we have, which is that if you are to 12 adopt a decal program, it must be understandable by the 13 consumer. 14 The three that we see out there, and we are going 15 to describe today, are confusing and are tied to one 16 particular year, one particular standard by another 17 governmental entity, and it will be very difficult for a 18 consumer to get the information that you really intend to 19 provide. 20 The second is that there must be a program that 21 enables not just the grandfather who has the boat with their 22 child, not just the person who buys the boat from the person 23 who currently owns it, but the boaters are going to use these 24 lakes and reservoirs that are going to have these standards 25 that have a decal on them, there should be a transitional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 program that we believe should be adopted at the same time 2 because of all these other elements. 3 So, our suggestion is that your dedicated staff and 4 your skilled experts in this area develop a program that will 5 facilitate the boaters transitioning to the new equipment. 6 There is and you have worked together with other 7 agencies within government very effectively. There is one 8 that we believe be brought to the table in a more effective 9 fashion, and as our Department of Boating and Waterways that 10 the recreational boating public funds to the tune of $50 11 million of our gas tax monies every year, and we believe they 12 can help work with you to develop that kind of approach. 13 Thank you very much. 14 CHAIRPERSON RIORDAN: Thank you very much. We 15 appreciate that. 16 Maria, is Maria here? 17 They are not here. 18 All right. 19 Mr. Dymally. Is this Mr. Dymally? 20 Okay. Fine. 21 Mr. Dymally must have left, too. 22 Mr. Munro, would you please come forward. 23 We are going to try something new, because we 24 recognize the real effort to help in this timing. We will 25 kind of time from some lights that appear before the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 speakers. We give you three minutes with a one-minute 2 warning. 3 So, please, introduce yourself for the record and 4 who you represent. 5 MR. MUNRO: Thank you. I am Dave Munro. 6 First, I am a boater, and a husband, and a 7 grandfather, maybe pretty soon a great grandfather, but 8 first, I am a boater, and second, I am a marina owner. 9 A new point of view. I am responsible not for a 10 product, but I am responsible for people's free time. 11 People come to see me because they have 12 discretionary income, and they choose to spend their time on 13 their boats on my facilities on our lake. Believe me when I 14 tell you that I am a real practical environmentalist. 15 People would not come see me if we had gasoline 16 sheens and oil slicks and birds that could not fly and fish 17 floating belly up. That is not why people come to our lake. 18 We have over 300 boats in the marina. Most of them 19 outboard-powered. Trust me, we do not have gasoline sheen 20 and oil slicks. It does not look like that. 21 The water is clean enough to drink. I have been 22 drinking it for almost 30 years. I do not think there is too 23 much wrong with me, although I do have to go home and be a 24 large Santa Claus pretty soon. 25 Please, in your considerations, consider people, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 the thing that everybody seemed to have forgotten today, the 2 people who recreate in California, the people that choose to 3 enjoy our outdoors and people that choose to boat. 4 I did not know it until I sat here all day that I 5 was such a bad guy. I own a boat. I rent boats. 6 They all have outboards, and I rent personal water 7 craft, and sin of all sins, I ride a Harley Davidson. 8 Boy, I guess I have to leave California. Well, I 9 hope not, and I hope that all of you will consider that 10 people are important, all people, including those of us who 11 enjoy the outdoors by boating. 12 Do not put a sticker program in. You are going to 13 kill people. You are going to hurt their ability to 14 recreate, and you are going to hurt them financially. 15 Yes, I see the yellow button blinking. 16 Do get rid of MTBE, please, and do allow the 17 industry, all industries to do what they do best and provide 18 new products and phase them in. 19 Thank you. 20 CHAIRPERSON RIORDAN: Thank you very much. 21 Betsy Oilman, followed by Terry Tjadan and M'K 22 Veloz and Richard Dunn, cue up. 23 You can pull that down, and please, introduce 24 yourself and who you represent. 25 MS. OILMAN: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 I am Betsy Oilman. I am the Legislative 2 Representative for Marina Operations Association of America, 3 also known as MOAA. 4 MOAA represents the owners and operators of the 5 nation's 12,000 marinas, including nearly 650 in the State of 6 California. 7 Running a marina business is not easy today. State 8 and local regulations on environmental and labor issues have 9 made it necessary for marina owners to become as expert in 10 government relations as they are in small business operation 11 and marina issues and recreation and entertainment concerns. 12 The average marina is family-owned and operated and 13 employs a little over seven full time employees and about one 14 part-time employee through the whole year. 15 The average marina operates on a very small profit 16 margin and is a rigid, independent business, struggling for 17 survival. 18 Approximately 11 percent of all marina revenues 19 come from sale of boats, and an additional 31.7 percent of 20 revenues comes from slip rentals. Out of these slip rentals, 21 28 percent come from outboard motor powered boats. 22 Additional revenues are gained through boat and PWC 23 rentals. To give you a picture of who our customers are, 24 nearly half are families with children, and the next biggest 25 groups using marinas are retirees. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 Mom and pop marinas are acutely sensitive to 2 changes in the economy, weather, the aquatic environment and 3 the regulatory environment. Last year El Nino took a big 4 bite out of our business because of weather, and the more 5 difficult it is to boat, the more people leave their sport to 6 do something that is easier as far as less preparation. 7 Because their business is so dependent on clean 8 water, I will let you know that the association has been very 9 active in numerous legislative plans to improve water 10 quality. Specifically, which might be of interest to the 11 person on the panel from, who did the water background -- 12 testified before Congress twice in favor of legislation 13 sponsored by Congressman Bill Gray and Senator Feinstein to 14 remove MTBE where the requirements, where Federal -- to be 15 used in gasoline. 16 We have also worked with NMMA and many of the water 17 districts on MTBE, that is management practices, so that we 18 can assure a cleaner tomorrow, but what I really want to 19 focus on today is something that was a great concern to me 20 when NMMA filed its public records -- California Public 21 Records Act statement several months ago. 22 We saw in it a copy of the study which you heard 23 today, but there was very troubling news in it. In it there 24 was a note in the margin next to the impact on small 25 business, there was written in big letters, who cares? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 Well, this was of great concern to the marina 2 operators and to other small businesses in the country. You 3 have already heard how in front of the California Department 4 of Commerce CARB staff did not indicate any economic impact 5 on small businesses. We take issue with this. 6 CHAIRPERSON RIORDAN: Betsy, you can obviously see 7 the red light. Would you make some conclusion? 8 MS. OILMAN: Sure. 9 In response to the question, who cares, I can tell 10 you who cares, 649 California marine operators care, the $11 11 billion marina district cares, members of the California 12 State Legislature, whom you got a letter from today, care and 13 Members of the California Congressional Delegation care and 14 the California Chamber of Commerce cares as well as the 15 Governor of Wisconsin, and I urge you to keep their views in 16 mind. 17 Thank you very much. 18 CHAIRPERSON RIORDAN: Thank you for accommodating 19 our time. 20 Terry Tjaden. 21 MR. TJADEN: Thank you very much. 22 It looked like I was starting out with the red 23 light. There. Thank you. 24 Good afternoon. I am Terry Tjaden, Chief Director 25 of the Southern California Marina Association. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 SCMA includes more than 750 member firms, ranging 2 from one-man service specialist to international 3 corporations. Our dealer members will face the initial 4 impact of higher prices and predictable product shortages if 5 the proposed time frame is attained. 6 There will be a second indirect impact, however, of 7 unpredictable strength on accessory service and supply 8 companies. We consider it a serious flaw in the economic 9 impact study prepared by your staff that the effect on dealer 10 and service firms was not evaluated. 11 Anything that blocks or delays the sale of the boat 12 has an adverse impact down the line on purchases of marine 13 goods and services. 14 It is our fear that the time frame incorporated in 15 the regulations that you consider here today will do just 16 that. Unlike your staff, we see serious consequences for the 17 many small marine businesses in the State and request that 18 you reconsider your proposal. 19 Many of our dealers are family-oriented firms, 20 literally mom and pop operations. These small businesses 21 cannot withstand extended periods of doubt, confusion or 22 erratic supplies. 23 These small firms do, however, add up to an 24 industry in California that contributes $11 billion annually 25 and supports more than 200,000 jobs, and they merit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 consideration by the State regulators. 2 On behalf of our members and all of the other firms 3 serving the seven million boating participants in California, 4 I urge you to reconsider the pending regulations, adopt 5 regulations that reduce emissions and allow the businesses to 6 continue and Californians to enjoy leisure time boating. 7 We support the NMMA position. 8 Thank you. 9 CHAIRPERSON RIORDAN: And I thank you for 10 accommodating the time. 11 M'K Veloz and Richard Dunn to follow. 12 MS. VELOZ: Thank you, Madam Chairman. 13 My name is M'K Veloz. I am here representing the 14 Northern California Marine Association as well as the 15 Coalition, California Coalition to Save Boating, united to 16 save boating, the coalition of groups, individuals and 17 organizations dedicated to preserving recreational boating 18 enjoyment in California. 19 It has been my experience working on regulatory 20 issues, that the most successful regulations are achieved 21 when all the stakeholders work through their differences to 22 achieve reasonable and achievable standards. 23 Our members are troubled that after nine months, 24 such major discrepancies still exist, particularly in the 25 area of inventory and especially in terms of the economic PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 impact. 2 Certainly I represent the northern, the 3 counter-part of Mr. Tjaden's group. Our retailers are 4 currently suffering because of the things out there. 5 I think one thing to really keep in mind here is 6 that there is a win-win situation possible. We all want 7 clean air and clean water. 8 How is the best way to get there? 9 I think we have had some experience in terms of 10 rushing into decisions that come back to haunt us. In terms 11 of our own industry, the 10 percent luxury tax was a prime 12 example. It was only meant to effect a certain class of 13 boats, and it affected boats across the spectrum, and it did 14 not raise the taxes that it was put into place to do. 15 Recently here in California we have had the 16 situation with Lake Davis where they poisoned the fish for a 17 very noble cause, the reason to take away from and introduce 18 species. As a result, that community which relied on boating 19 and recreation economically went in the tank, and then, of 20 course, we have the whole MTBE situation whereas the 21 university of California has reported, it cannot achieve what 22 it set out to achieve. 23 My point here is if you go this fast beyond what 24 the industry can meet, then the results will be a lose-lose 25 for every one my members. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 The retailers are going to lose money and sales, 2 and they will have to layoff staff. You can hear from some 3 of the people that mentioned and have talked to you about 4 antagonized consumers. 5 And will the environment benefit if the consumers 6 out there hang on to their current engines? 7 We will not have the environmental benefit you 8 think. So, reject the staff's proposal and accept NMMA 9 proposal. 10 CHAIRPERSON RIORDAN: Thank you, and thank you for 11 helping us with the time. 12 Mr. Dunn, followed by Mr. Smith, followed by John 13 Paliwoda and Craig Jacobsen from the California State 14 Legislature. 15 So is Mr. Smith here? 16 Okay. Mr. Paliwoda. 17 MR. PALIWODA: Good afternoon, again, John 18 Paliwoda, Government Relations Director for the California 19 Motorcycle Dealers Association. 20 Over half of our members carry and retail personal 21 water craft. We support the marine engine industry proposal 22 of meeting 80 percent of the EPA curve by 2004 and would 23 certainly hope that the Board would adopt that. 24 The staff proposal requiring a personal watercraft 25 standard of meeting the EPA curve in 2001 is simply too much, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 too fast. 2 The third tier personal water craft standard as 3 proposed by your staff, and it relies on four-stroke 4 technology, and we have only seen a couple of those and 5 really in conceptual form introduced out in the parking lot 6 today. 7 I just do not think you should base a regulation 8 based on that technology which may or may not evolve over the 9 next few years. 10 It is clear that the future of this industry is 11 going to be driven by a technology, perhaps more so than a 12 lot of the other issues that you regulate, but it is 13 imperative, however, that the regulations that you approve 14 will not result in a lack of California certifiable products 15 that our members will be able to continue to sell, because 16 essentially we see product unavailability here and 17 dislocations and product availability that are going to hurt 18 an already hurting industry. 19 Lastly, I would like to touch on the labeling a 20 little bit. I am not going to replicate what has been said 21 about the labeling, but there is another issue here. 22 Our members have 1998, minus 1997, 1996 inventory 23 in stock. If you adopt this labeling system, the hundreds, 24 maybe even thousands, of units sitting in our inventory that 25 are legal today, what are you going to do with them? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 Is CARB going to buy them? Are the manufacturers 2 going to take them back? 3 It is a very serious problem, because our members 4 are stuck with paying the flooring on these machines which 5 are moving very, very slowly as it is. 6 Please, adopt the NMMA recommendation, proposal and 7 take another look at this labeling. I would like to the pave 8 the way into the next gentleman, who is going to follow me. 9 He is a California Motorcycle Dealer Association 10 Board Member, Sherman Walker. He is a retailer, and he wants 11 to give you some perspective from his perspective. 12 Thank you. 13 CHAIRPERSON RIORDAN: Mr. Walker. 14 Thank you, Mr. Paliwoda. 15 Mr. Walker, if you would come forward, then Mr. 16 Jacobsen, Mr. Carson, Mr. Moynier, Mr. John Jay, Jim Contzen 17 and Brooke Coleman could kind of line up. 18 Yes, if you would identify yourself for the record. 19 MR. WALKER: Madam Chairman and Members of the 20 Board, I am Sherman Walker. 21 I own and operate two retail stores. My family and 22 employees operate Good Times Kawasaki-Suzuki on Auburn 23 Boulevard, and I operate with my employees down in Fairfield 24 the Kawasaki and Yamaha store, and I will tell you a little 25 bit about what was and what is, and what is to be, I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 you will have to tell me. 2 What was in 1997 -- I forgot to bring the slides. 3 I am sorry. I am going to have to improvise. 4 In 1997, we sold that many water craft. In 1998, 5 we sold that many water craft. 6 That is roughly 300 versus 100. That results in 7 1997, the State of California received approximately $150,000 8 in sales tax from our enterprises. 9 In 1998, $50,000. In 1999, I do not know. 10 In 1997, 30 employees. In 1998, 23 employees. 11 Significant reduction, and is that the Board's 12 fault? No, I think it is the media's fault for all of the 13 attention on everything that has been talked about before it 14 has become fact. 15 If you could make sure that you have the facts and 16 not implement tier 3, then 1999 could maybe be this big and 17 2000 a little bigger. 18 I also want to echo what everybody else is saying, 19 let's get MTBE out of the gasoline. It would make your job 20 and my job a lot easier. 21 CHAIRPERSON RIORDAN: Thank you very much, Mr. 22 Walker. 23 Is Steve Carson in that line? 24 No. 25 Oh, Mr. Jacobsen, excuse me. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 MR. JACOBSEN: Hi. My name is Craig Jacobsen. 2 I am a local dealer in Alameda, California. We 3 have been an outboard dealer selling outboard motors and 4 4four outboard boat lines for approximately 72 years now. 5 What we have been seeing for the last couple years 6 is a definite decrease in the sale of outboard motors from 7 1992 to 1997. We were increasing 15 to 30 percent in sales, 8 and last year our sales went flat, and this year we have 9 dropped about 15 to 20 percent in sales, which is right in 10 line of what they have been talking is impacting with the 11 dealers. 12 I am also a Board Member of MCMA, and I just would 13 like to say for the record, we do support what the NMMA is 14 doing and definitely are against the tiered process. 15 CHAIRPERSON RIORDAN: Okay. Thank you very much. 16 I appreciate your testimony. 17 Next gentleman in line, if you would introduce 18 yourself for the record, please. 19 MR. CARSON: Yes. I am Steve Carson, on the Board 20 of Directors of Hooked on Fishing, no, not on drugs, at 21 Chico. 22 I am also the Outdoor Writer for the Chico 23 Enterprise Record, and on-the-air correspondent to the Los 24 Angeles radio show, Fishing Expeditions, on XTRA radio. 25 I am going to keep it very short. I did this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 morning introduce a document that will be headed, American 2 Sport Fishing Association, 1996, of sport fishing 3 participation and economic impact, and basically I will let 4 you look at the numbers at your leisure. 5 I will not go over them, but the tiered sticker 6 labeling proposal is going to amount to property devaluation 7 and is going to result in a defacto ban, and if not a ban, it 8 is particularly unfair to lower income and low middle income 9 people who customarily buy used and older technology 10 products. 11 The labeling proposal, no matter how it is 12 structured, is going to stigmatize and target those older 13 technology, lower-priced engines and allow the hundreds of 14 public and private water management entities throughout the 15 State to say only three star engines on my lake, and as their 16 options decrease, people simply will not go fishing, and that 17 is going to result in severe economic hardship for the 18 businesses and send an economic ripple throughout the State. 19 I urge the panel to follow the previously agreed 20 upon Federal EPA standards or NMMA standards, allow them to 21 go forward on the time table, and water and air quality will 22 dramatically improve without damaging people's lives. 23 Ban MTBE, not outboard motors. 24 CHAIRPERSON RIORDAN: Thank you very much. 25 Mr. Jay, if you would identify yourself for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 record, please. 2 MR. JAY: My name is John Jay. 3 I am a boat company owner. I sell outboard motors. 4 I've been in the industry since 1972. 5 This is what you will do here, affect my business. 6 Yes, can I prove it, yes. 7 In 1987 was the last time until this year I had 8 ever had to borrow money to make it through the year. This 9 year, based on just what CARB did in Tahoe and the perception 10 of people in the Boat Show at the Cow Palace, my normal 11 January, one of which is one of the only six months my 12 business is profitable, was not because people were 13 uncertain. 14 They did not understand what the rules were and did 15 not buy. Now, that meant that I actually could not say I 16 could get through the year without borrowing money, and that 17 is a long time for me, 1987 to 1998 to do that. 18 That is one thing to consider. It does affect us 19 when you have a small business. It does. 20 There is another thing that you are not 21 considering. That is the warranty that you are talking 22 about. 23 I am the one that is going to pay for that, not the 24 manufacturer, not the consumer. What happens here is real 25 simple. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 The manufacturer does not give us time to fix them. 2 He also does not give us anything for the parts that we put 3 on there to fix them, and the consumer pays nothing. 4 What happens is I have to take a mechanic who would 5 make a certain amount of money on labor on a job and would 6 also make parts money. He will not do that. He will have to 7 fix this motor at a reduced rate in dollars and no profit on 8 the parts. 9 Now, I support the 2004 legislation. The reason 10 for that is because of something that happened right here 11 today. 12 When that machine broke down and everybody had to 13 stop, that is proven technology and it fails. If you force 14 the manufacturers to implement technology two years sooner 15 than they say to, you give us a break, we cannot do it, it is 16 going to break. 17 You know who is going to pay for that? Not you. 18 Not these folks that own boats. Not the manufacturers. 19 To a great extent, it will be me, and I do not 20 think that is fair to anybody. I think a prudent approach 21 will be 2004, because they can do it in a timely manner and 22 do it right. 23 Thank you very much. 24 CHAIRPERSON RIORDAN: Thank you very much, Mr. Jay. 25 Jim Contzen, Brooke Coleman, Robert Lucas, John PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 White, Sheila Gallagher, Todd Campbell and Joseph Caves, if 2 you would come forward. 3 MR. CONTZEN: Yes. My name is Jim Contzen, and I 4 own Hydro Stream Performance Boats. 5 We are a small, custom manufacturer of 6 outboard-only powered boats. Today I listened to a number of 7 statements made about the cost efficiencies in instigating a 8 lot of these programs. 9 I look at the price point of our boats, and when 10 this company started in the 70's, we were selling boats for 11 $6,000 to the average person. 12 Today, we are selling that boat for $30,000, 13 basically the same boat. You guys are saying we are going to 14 add $2300 for the motor. 15 There was a recent article in Power Boat Magazine 16 regarding four-stroke motors and horsepower-to-weight ratios. 17 The problems get into not only do you have to step the motor 18 and the price of the motor up, but as a boat manufacturer, I 19 am going to have to redesign my boats to carry the heavier 20 weights. 21 That factor is a major consideration and what it is 22 going to cost the average boater to go boating. 23 I am against what you are recommending. I am in 24 favor of the National Marine Manufacturers statement. 25 CHAIRPERSON RIORDAN: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 Brooke Coleman. If you would give us your name and 2 who you represent for the record, please. 3 MR. COLEMAN: My name is Brooke Coleman, and I am 4 speaking on behalf of Earth Island Institute, which 5 incorporates a network of more than 30 projects and 6 environment projects world wide. 7 Earth Island Institute strongly supports the 8 proposed regulation, and I would like to address a couple 9 quick key issues. The clamp was put on me out in the 10 hallway, and I will make it quick. 11 In terms of the 2008 tier 3 standard, I do not 12 think it can be emphasized enough that motors in compliance 13 with the 2008 standard are on the market today. 14 We have a living, breathing four-stroke out in the 15 parking lot. We have a handful on the chart that we just 16 submitted to the Board. 17 In terms of long-term feasibility, market wide, 18 fleet wide, no environmental group and no one on this Board 19 has thought that deregulation should be imposed tomorrow. 20 Mr. Wyman joked, however, we feel that ten years is 21 a tremendous amount of time to put this regulation into 22 effect. If the standard is compromised, and particularly the 23 2008 tier 3 standard, we believe that manufacturers will have 24 little incentive during the next few years especially to 25 develop cleaner craft. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 Therefore, Earth Island Institute supports the 2 staff recommendation, and that includes the 2008 standard as 3 a baseline target for the next decade. 4 We believe also, in accordance with Dr. Russell 5 Long's testimony, that the emission goals are moderate given 6 current technology, but we support the standard to 7 accommodate manufacturing cost as stated. 8 Also, we request that the regulation include 9 language specifying that 2005 technology review may result in 10 even tighter standards but not more lenient ones. This will 11 ensure the manufacturers and environmentalists that share the 12 common goals for cleaner and more advanced technology. 13 In terms of the environmental labeling program, and 14 I will shoot through this as well, I am a life-long user of 15 the two-stroke engine. 16 I know the boaters nation wide and particularly 17 outside the State of California are completely unaware that 18 they are contaminating their own resources, and in fact, when 19 we go out and educate boaters, they think I am insane when I 20 tell them about the pollution that is coming out of 21 two-strokes. 22 They must be given the choice to protect their 23 ocean, and they must also be given the choice to protect 24 their drinking water and the fish they eat and the labeling 25 program will give this to them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 Drinking water managers are also facing tough 2 discussions, as we have discussed, 75 percent of California's 3 surface drinking water supplies are all vulnerable to 4 two-stroke pollution. It is counter-productive to water 5 managers to continue to allow this fuel pollution. 6 The labeling program offers managers and impacted 7 districts an excellent and enforceable tool to protect 8 drinking water consumers from MTBE and other toxic compounds. 9 Also, on the enforceability issue, the red and 10 yellow topic, those are visible colors, and conspiracy 11 theories aside, they are chosen for stop and caution for that 12 reason, and they chose the label for that reason. 13 CHAIRPERSON RIORDAN: Notice the red light in front 14 of you. 15 MR. COLEMAN: Very good. 16 The Safe Drinking Water Act Amendments of 1996 17 require community-based assessments and prevention goals and 18 reemphasize the need for public information and involvement. 19 This market-driven program not only compliments 20 this goal but is essential to achieve these goals. 21 Ultimately, what is good for the water is also good for 22 boating, and that comes from Boating Magazine this month. 23 Please consider Earth Island Institute and support. 24 CHAIRPERSON RIORDAN: Thank you. 25 Mr. Lucas, and Mr. White, you are following Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 Lucas. 2 MR. LUCAS: Robert Lucas, representing the 3 California Council for Environmental and Economic Balance. 4 We support the reference today to achieve the cost 5 effective emission reductions. 6 The one additional item that I would like to leave 7 with you is the thought that you consider asking staff to 8 come up with a device program that can accommodate accelerate 9 or retirement of non complying engines. 10 That is another issue. 11 Thank you very much. 12 CHAIRPERSON RIORDAN: Yes. Mrs. Rakow. 13 BOARD MEMBER RAKOW: Were you thinking of some type 14 of credit program? 15 MR. LUCAS: If it is appropriate. 16 We have not run the numbers. We do not know how 17 those calculations would work, but that has come to mind, 18 yes. 19 CHAIRPERSON RIORDAN: Thank you very much. 20 Mr. White. 21 MR. WHITE: Thank you, Madam Chair and Members. 22 My name is V. John White. I am representing the 23 Sierra Club of California today, and I thank you for 24 accommodating us in the short time that you have available. 25 I just do not want to go over any other ground PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 already plowed, but like I said this morning, to put this 2 decision in some historical context, the inventory speaks for 3 itself in terms of the importance and the urgency of this. 4 The lead time for the 2008 standards is generous by 5 standards of what we have imposed on the rest of the mobile 6 source sector. 7 We also have confidence that your staff and your 8 Board in its wisdom that sets standard with that lead time 9 that it has got a feel and an understanding of where the 10 technology is and where the industry is capable of going. 11 I am disappointed, frankly, that the industry has 12 spent so much time and effort attacking these standards, 13 because, in fact, these standards, in our view, could in fact 14 and should be strengthened. 15 But know that you have the confidence to move 16 forward, they are realistic and achievable. The lead time is 17 significant. 18 The weaker averaging and other alternatives are not 19 worth considering. 20 We would urge you to keep a focus on the 21 particulate matter from direct-injection engines and set a 22 separate standard as soon as you can. 23 We also think that the 2004 standard were you to 24 take any action today should be strengthened with respect to 25 the points made by the Blue Water Network, the 12 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 across the Board, a piece can be and should be done and we 2 also think we need to have the carbon monoxide standard 3 included. 4 Those are the points that we would make if we were 5 in a position of trying to take the record as we see it where 6 it should go. 7 On the other hand, we think we understand having 8 been through this with paint manufacturers and the consumer 9 products people the number of other proceedings before this 10 Board that the folks that you hear today with the dire 11 predictions and are well meaning and important to consider 12 and to listen to their views and to have them understand how 13 important this is and have that dialogue, that process to 14 amply, but in the end, they need to have some confidence that 15 you know what you are doing based on your extraordinary track 16 record historically and recently and proceed to add to this 17 item to one that we are moving forward to address for all of 18 the public health and environmental reasons specified. 19 Thank you very much. 20 CHAIRPERSON RIORDAN: Thank you, Mr. White. 21 We appreciate your testimony. 22 Ms. Gallagher. 23 MS. GALLAGHER: Hello, I am Sheila Gallagher, and I 24 am representing the Center for Marine Conservation. 25 The Center for Marine Conservation is a nation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 wide, non-profit organization representing over 120,000 2 members. As spoken just now and just before, the Center for 3 Marine Conservation feels that the tier 3 standard is 4 absolutely necessary. 5 In fact, we actually feel that it should go 6 farther, because the technology is currently out there. We 7 have four-strokes. We have DFI, but I will not go into that. 8 I am also here to talk about particulate matter. 9 We feel that particulate matter should be considered and that 10 the Board should commence a rulemaking on particulate matter, 11 especially since DI motors, if the tier 3 level goes through, 12 DI motors contribute significant amount of particulate 13 matter. 14 The second issue is that I am very concerned about 15 averaging emissions instead of placing an emissions cap for 16 motors. Allowing emission averaging for motor families has 17 been shown by studies to be very ineffective for reducing the 18 discharge of highly toxic unbranded oil as well as MTBE from 19 sturdy two-stroke engines. 20 Averaging will allow much higher levels of air and 21 water pollution than placing emission caps on each individual 22 motor, and so I urge the Board to please move towards placing 23 emissions caps. 24 Thank you. 25 CHAIRPERSON RIORDAN: Thank you very much, Ms. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 Gallagher. 2 Todd Campbell, come forward please, and give us 3 your name and who you represent for the record. 4 MR. CAMPBELL: Good afternoon, Madam Chair and 5 Members of the Board. 6 My name is Todd Campbell, and I am Policy Associate 7 with Coalition for Clean Air. The Coalition would like to 8 extend its support for the staff's proposal to adopt the 9 emission standards and test procedures for the new 2001 and 10 later spark-ignition marine engines. 11 I would like to mention a couple quick 12 observations. California has multiple non attainment zones, 13 one of which is the most serious non attainment zone in the 14 nation, and with tougher Federal standards for NOx and PM on 15 the horizon, we need to take emissions, especially reactive 16 organic gases, seriously. 17 Air regulators are already within the State having 18 a tough time reducing ROG emissions, and marine engines make 19 up at least 141 tons per day. 20 Why should other businesses carry the burden of 21 this industry? 22 It is clear to us and hopefully to you that we all 23 must share a stake in reducing air emission, and let us not 24 forget these engines not only pollute the air we breathe but 25 also contaminate the water that we drink, and it is not just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 an MTBE issue. It is also an issue with Benzene as well 2 which is in new engines as well as other pollutants in our 3 water and as well as ROGs. 4 With those three points I would like to make, the 5 Coalition first and foremost strongly supports the energy and 6 multi-tiered environmental labeling. The Coalition believes 7 that this is of the most important or as reliable resource 8 for consumers to make an informed choice to decide whether or 9 not they want to buy or purchase an engine that is going to 10 be less polluting and less toxic, and I think that is the key 11 for consumers to know. 12 Second, energy savings have been proven, or we 13 believe will be helpful, for consumers especially when they 14 look to buy an engine that is very efficient and may be able 15 to defer some of the costs that may come with incremental 16 cost of additional regulations. 17 Second, the Coalition encourages the Board to 18 include language in the regulations specifying that a future 19 tier 3 technology review may further tighten ARB's final tier 20 3, 2008 standards, near products available today, much like 21 where we had SEV technology approval made by staff showing 22 that we could actually achieve better emissions with SEV. 23 Here we actually have models on the floor right now 24 that are able to make 2008 standards, and I believe that ten 25 years down the road is a clear advantage for this industry to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 meet in ten years. 2 I have not heard of such a lead time. 3 Lastly, it is the Coalition's position that the 4 tier 2, 2004, curve for the 2004 standard could be lowered by 5 another 12 percent. We agree with the Blue Water Network, 6 and we would like to, in the sake of time, like to just agree 7 with their position and extend that bottom line. 8 We believe that the marine engine industry must tow 9 it way and do its fair share in reducing this State's air and 10 water pollution. 11 Thank you. 12 CHAIRPERSON RIORDAN: Thank you very much. 13 Mr. Caves. 14 MR. CAVES: Madam Chair and Members of the Board, 15 Joe Caves. I am representing the Union of Concerned 16 Scientists in support of the proposal. 17 I was also asked to convey the support of the 18 Natural Recourses Defense Council whose representative, Janet 19 Hathaway, could not be here because of illness. 20 I will keep this very brief. I want to hit four 21 very quick points. UCS normally does not get involved in 22 these kinds of issues. As you know, we focus mostly on 23 vehicle technology. 24 The reason we are here today is the same reason I 25 think that you must enact this, and that is the sheer scale PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 of this item is so enormous, 110 tons in 2010, 162 tons in 2 2020, this is larger than almost any of the items that we 3 have seen. 4 You have spent a very difficult year going through 5 industry by industry trying to find cost-effective emission 6 reductions, and it is very clear that this industry is one of 7 the last and largest sources of really unregulated emissions 8 we have out there. 9 Mr. Wyman has come to you today and said, well, 10 enact part of it, but you do not need to enact this last 11 piece, because it is just a tiny little piece here, and that 12 seems like kind of an easy thing to do. 13 I want to point out the scale of that he is trying 14 to portray. It as 5 percent. The way that I look at it from 15 the staff report, it is something on the order of perhaps 18 16 tons in 2010, and 30 tons in 2020. 17 That is larger than almost any component of any of 18 the regulations that have been before you this year. That is 19 an enormous scale, an emission reduction that we need to have 20 if we are going to have a chance to be fair across the board 21 and not impose unfair obligations on other industries. 22 The cost in the technical issues before you on 23 this, while not trivial by any means, are certainly no more 24 significant than we have in the light duty vehicles sector or 25 almost any of the other sectors that you have seen, and your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 staff has proven itself time and time again as better judge 2 of the long-term technical issues and indeed the cost than 3 the industry, not, I think, because industry is not capable 4 of doing it, but because they have that inherent need, and we 5 would all do it. 6 If you were given a questionnaire that said what is 7 it going to cost you and how long is it going to take to do 8 something that you really do not want to do, what kind of 9 answers are you going to send back? What kind of assumptions 10 are going to be built into the analysis that we saw here? 11 I would just ask you to keep that in mind and keep 12 in mind the historical records of your staff on this issue. 13 With the cross-media issues that have been 14 addressed today, I think Mr. Del Piero addressed so 15 eloquently, are the other reasons we have to deal with it. 16 One of the difficulties we have in our 17 environmental regulations in this State is the difficulty of 18 dealing with the impacts that one type of regulation on 19 another media, we have seen it with MTBE most particularly, 20 and but the reality we face in the State is we have got to do 21 something about those two-stroke engines. 22 We have got to do something about the problems that 23 they are causing both to the air and to the water, and this 24 is your opportunity to do it. 25 Finally, I want to mention the labeling which I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 think is a really exciting opportunity, and as much as there 2 is great fear in the industry, an understandable fear, it 3 offers the opportunity for a real consumer pull to this whole 4 program. 5 I think California public wants cleaner 6 recreational vehicles of all kinds. It is an area of 7 technology where they do have some choice, and I think we 8 need to enlist those market forces. 9 It is also the opportunity we have to build a 10 system that could save the recreational boating industry in 11 the State, because quite frankly, given the current situation 12 with MTBE, if there is not an opportunity to make some 13 discrimination, many of their opportunities are going to be 14 gone. 15 Because, literally, the water agencies are going to 16 have to ban recreational boating of all kinds if they have no 17 way to discriminate between the clean and the polluted. 18 CHAIRPERSON RIORDAN: And I think that is a good 19 place to conclude. 20 MR. CAVES: I will thank you very much, and I hope 21 you do adopt it. 22 CHAIRPERSON RIORDAN: And I thank you, excellent 23 point. 24 Next gentleman, please. Is this Mr. Baldwin, from 25 Ventura County's APCD? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 MR. BALDWIN: Madam Chair and Members of the Air 2 Resources Board, I am Dick Baldwin, from Ventura County, Air 3 Pollution Control Officer. 4 I am here to convey the Ventura County Air 5 Pollution Control Board's support for your staff's proposed 6 regulations for gasoline spark ignitions and marine engines 7 sold in California. 8 Our Board urges you to adopt the proposed 9 regulation, and a copy of our Board's Resolution supporting 10 the new marine engine standards was sent to you several weeks 11 ago. 12 Ventura County has the nation's fifth worst air 13 quality. We are classified as a severe non attainment area 14 for the Federal one-hour ozone standard, and we are also non 15 attainment for the Federal eight-hour ozone standard and the 16 State one-hour ozone standard. 17 But we are committed to reducing ozone levels to 18 attain these standards by implementing all feasible and 19 cost-effective emission controls of both reactive organic 20 compounds and oxides of nitrogen. 21 The District already requires sources of Ventura 22 County to install the best available retrofit control 23 technology. Control of gasoline marine engines has been 24 shown to be very cost-effective, especially when compared to 25 many of the control strategies our District is required to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 impose on stationary sources. 2 Consequently, our interest in what you do today is 3 very high. The gasoline of marine engines are a large source 4 of air pollution in Ventura County, emitting 3,000 pounds of 5 ozone into the air everyday. 6 Our efforts to attain the ozone standards in 7 Ventura County include restrictions on much smaller 8 categories, like semi-conductor manufacturing, printing 9 operations and pleasure craft coating operations, whose 10 combined emissions are less than 1400 pounds a day or less 11 than half of the marine engine emissions. 12 Because gasoline marine engines have historically 13 gone unregulated, their air pollution levels have remained 14 extremely high, out of proportion to their numbers and out of 15 step with the other classes of internal combustion engines 16 which have been modernized. 17 Because local air districts are not legally 18 authorized to regulate these engines, we must rely on action 19 by your Board to require emission controls. 20 We have found your staff has minimized the 21 financial impact on the public by proposing a highly flexible 22 average regulatory process that harmonizes with the Federal 23 program. These emission reductions are important, an 24 important part of Ventura County's efforts to meet the new 25 eight-hour Federal ozone standards and State's most stringent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 one-hour ozone standards. 2 California has always been a leader in air 3 pollution control, and your adoption of today's proposal 4 provides an opportunity for you to continue that leadership. 5 The proposed regulation is needed, and its 6 requirements can be met, and therefore, the Ventura County 7 Air Pollution Control Board and I urge you to adopt the 8 regulations as proposed by your staff. 9 CHAIRPERSON RIORDAN: Thank you very much, Mr. 10 Baldwin. Thank you for being here. 11 Mike McGuire, from Sea-Power Marine, are you here? 12 Mike Schmidt. 13 MR. SCHMIDT: I am Mike Schmidt, and I am from 14 Yamaha Motors, and I understand I am last. 15 CHAIRPERSON RIORDAN: You are indeed. 16 MR. SCHMIDT: Real quick, I will take 32 seconds, I 17 promise. 18 We make outboard motors, personal water craft, and 19 as you will find out in about 30 seconds, we also make 20 motorcycles, ATVs and that stuff we all saw demos outside 21 today. 22 We heard from other speakers about available 23 technology. I wanted to spell a little myth. 24 We make a lot of four-strokes, and we have a very 25 extensive outboard line. We have a catalyst, as you know, on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 personal water craft. 2 If it was easy, and we could do it right away, we 3 would have them on all of them. 4 Let me tell you about the catalyst. Unfortunately, 5 the efficiency is not what we would like. It is only 50 6 percent. 7 Guess how much it weighs? It weighs 72 pounds. 8 Guess how much it costs? $600. 9 Anyway, the NMMA proposal gives us an additional 10 one-year lead time for tier 1, which we need, because if we 11 do not get that, our company, honest to God, will not have 12 any PWCs in California in 2001. 13 We support the 2004 NMMA proposal, and we thank 14 you. As Russell Long said, do the right thing. Refine the 15 standard. Give us and the State what we need. 16 Thank you. 17 CHAIRPERSON RIORDAN: Thank you, and it is so good 18 to have the last speaker be so timely. 19 That does conclude the list of witnesses that were 20 signed up. 21 Staff, you need to make part of the record the 22 correspondence that we have had. 23 MS. NOLAN: Thank you, Madam Chair. I am Kathleen 24 Nolan, manager of the Emissions Research Section. 25 The ARB has received over 1600 comments in the form PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 of E-mail and letters. Approximately 950 were in support of 2 the regulatory proposal. 3 I will summarize only those from the commenters 4 that did not provide testimony today. State Senator Debra 5 Bowen supports the regulation and strongly urges ARB to adopt 6 emission and labeling standards as proposed. 7 Assemblymember Darryl Steinberg also supports the 8 option of the emission and labeling standards as proposed. 9 State Senator Raymond Hayes opposes staff's 10 accelerated proposal and suggests that ARB find a reasonable 11 middle ground that would not result in hardship for the 12 industry. 13 We also received two letters signed by a total of 14 24 members of the California Assembly urging the Board 15 Members to reject the staff proposed year 2008 emission 16 standard for recreational marine engines and adopt the 17 industry's proposed 2004 proposal. 18 Governor Thompson of Wisconsin opposes staff's 19 proposed tier 3 standard. 20 The rest of the comment letters can be summarized 21 into the following key points. We received 358 letters and 22 E-mails from boat and PWC owners and anglers. 23 They express concern about being denied access to 24 lakes, oppose the labeling program, and felt they are being 25 unfairly penalized because of the MTBE in gasoline and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 expressed concern about loss of revenue to businesses 2 supporting boating recreation. 3 Also, a letter with 215 signatures from boaters 4 concerned about the effect of staff's proposal on owners of 5 two-stroke outboard engines. 6 The major issues brought up in the 219 letters and 7 E-mails from small businesses were product availability, tier 8 3 feasibility and the income and job losses. 9 In addition, we received a petition with 182 10 signatures opposed to the proposed regulation to the issues 11 previously mentioned. They were concerned about price 12 increases of outboard motors and the proposed regulations may 13 result in a delayed improvement of air and water quality due 14 to reduced sales. 15 We also received a petition with 21 signatures 16 against the proposed regulations. 17 In support, the 950 letters supporting the ARB 18 proposed regulations were principally from the general 19 public. The major benefits they identified include reducing 20 air and water pollution to the environment, the multi-tier 21 environmental labeling program, because it will provide the 22 consumers with high quality information and encouragement of 23 the development of clean technology. 24 Staff did not find any new issues that were not 25 covered in staff's presentation. The Initial Statement of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 Reasons are in response to today's testimony. 2 That concludes staff's summary of comments. 3 CHAIRPERSON RIORDAN: Thank you very much. 4 Mr. Kenny, are there any other items or comments 5 that staff wishes to make at this time? 6 MR. KENNY: If I could make just a couple of quick 7 comments. 8 One of the things we, as the staff, were trying to 9 do, since we carry out our SIP obligations, and in doing that 10 SIP obligation, what we were obviously trying to find are the 11 largest sources of emission reductions that we could achieve. 12 When we looked at this particular category, we saw 13 an inventory which was quite substantial, and it had the 14 potential for a fairly large emissions reductions. At the 15 same time, we were also confronted with the issue of water 16 quality, and although the water quality issues were not our 17 primary focus, they were a focus that we thought needed to be 18 brought before the Board today. 19 Some have argued basically, as you heard today, 20 what the staff should have done is simply to have gone to a 21 four-stroke requirement for the tier 3 standards. 22 We did not think that was a reasonable approach to 23 take. We thought instead that the industry had made some 24 good faith investments with regards to their agreements with 25 the U.S. EPA and that we should make an effort to essentially PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 preserve those investments. 2 So, what we established with regards to tier 3 was 3 a level or a standard that we thought was available for 4 compliance by a whole host of technologies, including those 5 that the industry had made its investments in. 6 The benefit we saw, at least in terms of this 7 overall approach, was a balanced one. We saw an effort here 8 that allowed us to take advantage of all the technologies, 9 and we saw the effort here, which would not essentially 10 strand any particular technology. 11 At the same time, what we wanted to do was make 12 sure that we provided a reasonable amount of time for the 13 different industries to comply, and that is why you see with 14 regards to the tier 3 standard a 10-year lead time. 15 When you look at all of that, we, at the staff, 16 thought that we would provide a very balanced and a very 17 reasonable approach in terms of trying to address one of the 18 largest sources of emissions in the State of California and 19 doing so in a very reasonable and progressive fashion. 20 With that, I have nothing more to add. 21 CHAIRPERSON RIORDAN: Thank you, and we will open 22 it now. 23 Do I have to close the record or can there be 24 questions? 25 Mr. Parnell, and there may be others. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 Mrs. Rakow, who has questions? 2 BOARD MEMBER PARNELL: I will try to be brief in 3 keeping with Bob Wyman's admonition to focus on one issue and 4 whether or not tier 2 will accomplish our goals, and he went 5 on further to say that tier 3 did very, very little in terms 6 of the overall reduction, so I want to do what he suggested, 7 and I want you to expand around what it is that tier 3 will 8 really accomplish for us in terms of tons. 9 MR. KENNY: I will be happy to, and what I would 10 like to do is ask Mr. Cackette to do that. 11 MR. CACKETTE: If I recall Mr. Wyman's testimony, 12 he suggested that the emission reduction that would come from 13 tier 3 would be in the order of three to six tons a day which 14 is relatively small number, although something we would 15 consider significant. 16 I am not sure where he got that number from, but I 17 am going to speculate that it was in 2010, and perhaps from 18 the South Coast only, because our numbers suggest that it is 19 about 12 tons per day in 2010 Statewide, And that is not a 20 real big number, but I point out that 12 tons was derived 21 from only 2008, 2009 and 2010 model year engines. 22 If you go to 2020 when the tier 3 engines would 23 dominate the fleet, the ton per day reductions bump to 47 24 tons per day, and those are on the average summer day, and on 25 the weekends, it would be a 106 tons per day of reduction, so PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 it is a very big number, and the only reason that is it small 2 in some of the calculations is because the standard does not 3 start until 2008, and people traditionally use 2010 as kind 4 of point of measurement, but you need to look beyond that in 5 this case. 6 CHAIRPERSON RIORDAN: Okay. Mrs. Rakow. 7 BOARD MEMBER RAKOW: There is quite a difference in 8 the cost estimate from this staff's cost estimates and Dr. 9 Harrison's, I believe, and we have heard from boat owners and 10 marina boat owners the difficulty of having to buy a new 11 engine and the expense of it for the average person. 12 I wonder if you could comment on the differences 13 that we have heard today on the cost estimates. 14 MR. CACKETTE: Yes. 15 We have struggled in exchanging data with NERA, our 16 information and their information, much of that was not 17 exchanged until the last minute because of, it contained 18 confidential submissions and so forth that had to be dealt 19 with, but the point is we have a pretty good understanding, I 20 think, of what they did. 21 We did not take the same approach. What we tried 22 to boil it down into a pretty simple issue, and that is the 23 increase in price per engine is going to occur in California 24 as a result of the Federal regulations. 25 It will occur nationwide by 2006. It is going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 occur here early, because we are pulling that 2006 standard 2 forward. 3 So, we looked at how much more are people going to 4 have to pay in those early years when our standards are more 5 stringent than what the Federal Government has imposed, but 6 as far as the price per engine increase, that is based on 7 what actual engines today that meet those standards are 8 priced at the market place. 9 We do not really think -- there is not a big 10 dispute over tier 1 and tier 2. If you could accept that, 11 then the only issue left is what does it cost to do tier 3? 12 It is pretty straight forward. At that point we 13 think the fundamental technological approach is to take that 14 tier 2 engine, the one we have actual price data on from the 15 market place today, and add a catalytic converter of about 50 16 percent efficiency to it. 17 That will let you comply with tier 3 standards. 18 So, we went out and we priced what the catalytic converter 19 was typically. 20 It is kind of a $200 item, but we marked it up with 21 all of the research and development, the overhead and dealer 22 profits, and all those kinds of things, warranty costs that 23 go with it, and came out that for a jet ski size vehicle a 24 100 horsepower vehicle would add $550 to the cost. 25 So that is the only cost that we have used that did PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 not come directly from the pricing of the engines in the 2 market place today. I would point out that members of NMMA 3 support the 2004 standard. 4 So, whatever the price for those engines, it is 5 apparently something that they think the industry can bear, 6 because they are supporting it. 7 So, the only issue is that increment in tier 3, and 8 we costed that, and when you divide that into the schedule 9 benefit that I provided in response to Mr. Parnell's 10 question, we came out with a cost-effectiveness that ranges 11 from a couple of dollars a pound for the outboards and about 12 a dollar a pound for the jet skis, which is the 13 cost-effectiveness range that you considered a few weeks ago 14 or about a month ago in the LEV-2 category and is very 15 cost-effective number. 16 Thank you. 17 CHAIRPERSON RIORDAN: Mr. Dunlap -- oh, Supervisor 18 DeSaulnier. 19 BOARD MEMBER DeSAULNIER: Thank you, Mr. 20 Chairman -- Chairwoman and former Chairman. 21 Maybe, Tom, you could respond to the argument that 22 we heard quite frequently that the consequences of our 23 actions might be that older engines would stay in the market 24 longer, and the suggestion by Mr. Lucas that we do some kind 25 of buy-back program or get some kind of incentive program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 MR. CACKETTE: Well, we have been giving some 2 thought to the buy-back program. 3 We did not have one developed for this rulemaking. 4 We think it could compliment it and could be done at a future 5 time. 6 It is either going to depend on selling emission 7 credits, in which case we will have to determine the cost you 8 can get for those credits and whether it pays for the 9 buy-backs, or it would require some kind of pot of money to 10 fund the buy-back, and we know we have been struggling with 11 this on the scrap program, which is the next item that you 12 will be considering tonight, and either way, if a program 13 like that pencils out on paper, we would like to pursue one. 14 We have done something similar to that. It is not 15 a grand scale, but for the weedwhips and lawnmowers, that was 16 discussed in March, so we have a small pot of money that is 17 going towards that. 18 So, we are gaining some experience, and I think 19 that would work out great here. I think that to the extent 20 that there is price elasticity of demand here, you ultimately 21 will have some people holding on to boats a little longer, 22 but ultimately they are going to turn the boats over, and 23 meaning they wear out and something has to be done to them. 24 I think the general change-over that the market 25 place will cause is going to overwhelm any impact that a few PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 people have of holding onto their boats. 2 Thanks. 3 CHAIRPERSON RIORDAN: Mr. Dunlap. 4 BOARD MEMBER DUNLAP: Thank you. 5 MR. CACKETTE: If I could just make one point, 6 there is antidotal evidence that the price elasticity of 7 demand that was referred to may not apply in this situation. 8 We had to wait six weeks to be able to get that 9 middle money engine that you saw in there, because the demand 10 was so high, and the reason I think is there is a pent-up 11 demand in part is because of the uncertainty about use on 12 waterways and that pent-up demand will probably be released 13 if the Board takes action and the water agency decides what 14 they are going to do. 15 Second of all, we pointed out that there is fuel 16 savings with those engines, and I think that people there 17 will be a different reaction because there is an additional 18 benefit that occurs, and as some of the people in the parking 19 lot yesterday, the users said, hey, this is the best running 20 boat engine I have ever had. This is one of the 21 direct-injection two-strokes, so I think there is a benefit 22 that the user will see from just plain performance. 23 So, with all of those, I think the market will 24 probably dance faster than some of the sceptics believe. 25 CHAIRPERSON RIORDAN: Mr. Dunlap. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 BOARD MEMBER DUNLAP: Thank you. I would like to 2 go back just for a couple of minutes or a minute or so and 3 talk about the dealers for a minute, if I could. 4 Over the course of my service on this Board, I have 5 gotten to know some of the folks that sell products like 6 those that we are talking about regulating today, and I have 7 come to appreciate the struggle they have in remaining 8 profitable and having products that will appeal to consumers, 9 and with the certainty in the market place, particularly, it 10 relates to new regulations and what that might mean to them. 11 So, I think there has been a learning process. 12 They have learned about us and what we do and our goals, and 13 I do not think we are butting heads any longer, but I am very 14 concerned about what the market looks like for them, well, to 15 their businesses. 16 So, regardless of whatever actions occurs here 17 today, regardless of what happens when a new Governor is 18 sworn in with this Board, I want to request that this staff 19 pay a lot of attention to those people, because they have the 20 ability to be an inadvertent casualty to regulation, and I 21 just want to make sure they have a seat at the table, because 22 I worry about that. 23 They are good people. They are local community 24 people that are offering goods and services to consumers, and 25 they are here today, and they are concerned. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 You can respond, Mr. Kenny, if you would like. 2 MR. KENNY: We will actually pay very close 3 attention, and I think what you are going to hear later today 4 is essentially a regulatory item that reflects the kind of 5 attention we do pay, and when we see things that do not work 6 as attended, if we are able to come back to you as a Board 7 and to bring you modifications that reflect that, we do. 8 BOARD MEMBER DUNLAP: Okay. 9 The second point, I will try to make this brief as 10 well, as you know we all, as you sit on this Board, we have 11 the opportunity to hear from advocates and have people stand 12 before us and assert certain things and make arguments to 13 this Board that will hopefully impact how we view a staff 14 proposal, and in this case, it is no different with Mr. Wyman 15 and the testimony that he has provided today. 16 We all know he is an able advocate, brought a lot 17 of people here, represents a broad group who have some 18 serious concerns, and if the Board goes on in a few minutes 19 and supports the staff proposal, it is my hope, Mr. Kenny, in 20 particular, and your team, has proven this time and time 21 again that as the clock moves forward as time marches on and 22 if things are not working, if there are technology barriers 23 or issues that emerge that need to be addressed, it takes 24 some courage as staff proposing things like this to come back 25 and say, hey, we have over reached. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 Again, I want kind of some assurance and a 2 commitment here regardless of whatever action we take today, 3 if we cannot get there in this time frame, I do not want this 4 thing to crater. I want you to be big enough to come back 5 and say, hey, we need to deal with this, because there is a 6 lot of money, a lot of people that I think are trying. 7 I did not hear anybody stand up before us today and 8 say they did not want the same goal that we have here. So, 9 again, I would certainly appreciate some assurance that no 10 matter what happens here with the Board's action that you 11 guys are going to be watching this very carefully during 12 reviews and coming back and making sure that the Board, 13 whoever sits here, knows exactly what is going on. 14 CHAIRPERSON RIORDAN: Good point. 15 Yes. 16 BOARD MEMBER PARNELL: We all want to identify with 17 that. 18 CHAIRPERSON RIORDAN: Mr. Calhoun. 19 BOARD MEMBER CALHOUN: Madam Chairman and fellow 20 Board Members, we have heard a lot today, but the seemingly 21 common thread that exists is tier 3, that is where the 22 difficulty seems to be. 23 There does not seem to be much difficulty with tier 24 1 and tier 2. It appears as though from listening to some of 25 the testimony that was presented today that maybe tier 1 and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 tier 2 would solve most of the problem. 2 I do not know if that is the case or not. So, I 3 guess what I am going to do is suggest to a little different 4 approach to what staff has proposed, and I would like to 5 propose a little historical context to this. 6 In the early days when the Board proposed standards 7 that there was a lot of uncertainty about, in particular, and 8 has reference now to 0.4 NOx, they required the auto 9 manufacturers to submit progress reports on an annual basis, 10 and the information that was submitted was confidential, and 11 as a result of that, there was no question about where the 12 technology stood. 13 So, today what I would like to suggest is that 14 instead of us doing things the way we have done in the past, 15 we adopt the standards and then later go ahead and change 16 them, what I would like to do is see -- 17 CHAIRPERSON RIORDAN: Mr. Calhoun, oh, excuse me, 18 Mr. Calhoun -- the only thought I had is I need to close the 19 meeting if you are going to make some sort of a motion. 20 Would that be all right? 21 I will come right back to you. I will do what I am 22 supposed to do as to the procedure, and then we will do the 23 ex parte, and then I will come right back. 24 MR. DEL PIERO: Madam Chair, there is one 25 additional thing that needs to take place before you close PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 the hearing to your Board, and that is for me to thank you 2 very much for having had the opportunity to participate. 3 Some people in the audience asked whether or not I 4 had the opportunity to vote today. Let me assure everyone in 5 the audience, I do not, but I wanted to express on behalf of 6 the Statewide Resources Control Board our distinct pleasure 7 and happiness at being afforded the opportunity to 8 participate here today and to be allowed to ask questions. 9 Mr. Kenny and your staff have been the most 10 gracious to us prior to this meeting here today and providing 11 us with information on the matter that will be pending before 12 you. 13 However, at this point in time, inasmuch as you are 14 going to begin your deliberative process, it is appropriate 15 for me to vacate this seat. 16 CHAIRPERSON RIORDAN: And we appreciate that, and 17 we appreciate your taking the time. 18 It has been a full day, but we have welcomed your 19 participation. 20 MR. DEL PIERO: There was nothing going on at the 21 State Water Board other than the Christmas party, so -- 22 CHAIRPERSON RIORDAN: Well, I am sorry you missed 23 one of those Christmas parties, but this is so critical, I 24 think in the interest of clean water I am delighted that you 25 are here, and I wish everyone could have been here from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 Board, and I recognize that is totally impossible, but you 2 are most welcome at any time ever when we are dealing with 3 something that effects water. 4 MR. DEL PIERO: Thank you very much, Madam Chair. 5 It was a pleasure to see Jack Parnell, my old 6 friend from a long long time ago. I have not seen him in 7 years, and it was great to be here, and I want to reassure 8 both Supervisor Roberts and Mr. Dunlap that I did not bring 9 the whole crowd here today intentionally. 10 Thank you very much. 11 CHAIRPERSON RIORDAN: Now, I am holding Mr. Calhoun 12 in abeyance, but I have failed to ask if either of the last 13 two Supervisors on this table have any questions of the 14 staff, and then I am going to close it and go back to Mr. 15 Calhoun. 16 Any questions of staff at this time? 17 BOARD MEMBER PATRICK: I think my only question is 18 regarding the labeling of the motors that are already in 19 existence and what kind of an economic impact that is going 20 to have. 21 MR. CACKETTE: Well, we have proposed a retrofit 22 label which would go back to basically 1998 which is the 23 first year the EPA required certifications, but it is in 24 front of the Board as either the direction or part of the 25 motion, whether you want us to do what was suggested from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 representative from Honda, which is if a manufacturer wishes 2 to submit certification-like data, the same thing they would 3 do in a new engine today that says that that one would meet 4 one of our future standards, that we could allow them to 5 retrofit those engines so that could go back before 1998 and 6 would allow more boats to qualify. 7 If you want to do that, that is certainly doable 8 from our view point. 9 CHAIRPERSON RIORDAN: Then who would be responsible 10 to pay for that? 11 MR. CACKETTE: The manufacturer would be providing, 12 would be paying for the certification, and they would have to 13 run the tests, and they would be providing the label. 14 Whether they would charge for a label or not, I do 15 not know. 16 BOARD MEMBER PATRICK: Right, but if you are 17 talking about retrofitting something -- 18 MR. CACKETTE: Although retrofit is only -- I meant 19 the word in the context that they would provide the dealer 20 with the label with a serial number label which could be put 21 on an existing boat, whether anybody charges $5 to put it on 22 or $5 for the label, that would be the market place to 23 decide. 24 There would be no hardware to retrofit or changing 25 of the existing engines, and some engines would qualify for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 some of these standards and many would not. 2 CHAIRPERSON RIORDAN: Supervisor Roberts, any 3 questions? 4 All right. Let me then officially close the 5 record. I will now close the record on this agenda item. 6 However, the record will be reopened when the 15-day notice 7 of public ability is issued. 8 Written or oral comments received after this 9 hearing date and before the 15-day notice is issued will not 10 be accepted as part of the official record on this Agenda 11 Item. 12 When the record is reopened for a 15-day comment 13 period, the public may submit written comments on the 14 proposed changes which will be considered and responded to in 15 the Final Statement of Reasons for this regulation. 16 Now, there is one more item, the ex parte issue of 17 communicating with people off the record with outside 18 persons, which is perfectly legal, but we do ask that we 19 place the names and on the record. 20 So, are there any communications which any of you 21 need to disclose? 22 Starting with Supervisor Roberts? 23 Supervisor Patrick? 24 BOARD MEMBER PATRICK: The communication that I had 25 with Mike Caroll earlier this week, which I already PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 referenced during the last item. 2 BOARD MEMBER CALHOUN: Yes, on the twelfth, on the 3 second day, I had a telephone conversation with Mr. Russell 4 Long of Blue Water Network, and I also met with on that same 5 day with Bob Wyman and Mr. Caroll, representing the 6 association that he identified here today, and also a Suzuki 7 representative. 8 On the ninth, I am having a little difficulty 9 reading my own writing, on the ninth, which was yesterday, we 10 met with the -- the other item is not one that the Board has 11 heard so far today, and the National Marine Manufacturers 12 Association identified earlier was Bob Wyman and Jeffrey 13 Shelters, and last night we met with representatives from 14 Maxsym and Steve Tanks, EM Jamison, Guy Heathcoat and Patrick 15 Walters, and our discussion was essentially the same as their 16 testimony here today. 17 CHAIRMAN RIORDAN: Yes. Thank you. 18 Mr. Dunlap. 19 BOARD MEMBER DUNLAP: Yes, I met with Russell Long 20 of Blue Water Network in late October, I believe. 21 Bob Wyman on or about the seventh, and with Maxsym 22 also, yesterday, and I failed to mention Maxsym on the 23 inventory side. 24 CHAIRPERSON RIORDAN: You do not need to do that. 25 I was out of step, but that was all right. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 We stated a perfect record. Let me put on the 2 record on November twentieth I met with Russell Long from the 3 Blue Water Network and Lawrence Limbloom's consultant for 4 Debra Bowen's office, December 7, with William Rush, 5 President of Rush Technology, and Robert Wyman with Latham 6 and Watkins. 7 On December 8, I met with Steve Toages, from 8 Unipark, Guy Heathcoat from Maxsym and Ian James from Maxsym, 9 and Patrick Walker from Maxsym, and on December 9, I met with 10 Dr. Harrison, Dr. David Harrison, Mr. Mike Caroll, from 11 Latham and Watkins, and Mr. Bob Wyman, again, from Latham and 12 Watkins. 13 The discussions did not deviate in any way from 14 their presentation that was made to me today as a sitting 15 Board Member. 16 Mrs. Rakow. 17 BOARD MEMBER RAKOW: December 9 I had a telephone 18 call from David Ramey, from Honda, which was covered by the 19 Honda representative's discussion today on the metering 20 situation. 21 On December 9, also, Robert Wyman and Mike Caroll 22 from Latham, Watkins, and William Rush from Rush 23 Technologies, also, yesterday, Patrick Walker, Ian James and 24 Guy Heathcoat, from Maxsym, and Steve Thompson, from Unipark, 25 and the subject was covered as presented today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 CHAIRPERSON RIORDAN: Mr. DeSaulnier. 2 BOARD MEMBER DeSAULNIER: I was visited yesterday, 3 December 9, by Patrick Walker from Maxsym, and Steve Thompson 4 from Unipark International, and the discussion was consistent 5 with Mr. Walker's testimony today. 6 CHAIRPERSON RIORDAN: Thank you. 7 Mr. Calhoun. 8 BOARD MEMBER CALHOUN: I spoke with David Ramey 9 from Honda yesterday. 10 I had a telephone conversation with him, and it was 11 the same as the testimony today. 12 CHAIRPERSON RIORDAN: Fine. Okay. That concludes 13 that part. 14 Now, Mr. Calhoun, I apologize, but I will come back 15 to you. 16 BOARD MEMBER CALHOUN: I would like to propose 17 amendment to the staff's recommendation by saying that I 18 think the proposal that I am going to propose that I will 19 suggest is sort of a win-win situation for every one. 20 I mentioned earlier that in the past when we have 21 had difficult issues to enforce to deal with, I spoke 22 specifically the 0.4 NOx, manufacturers were required to 23 submit progress reports, and each year it was confidential 24 information, and staff knew where the technology was, and 25 once they decided that the technology needed to meet a 0.4 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 NOx standard was indeed available, and they adopted that as a 2 standard. 3 Look where we are today. So, a lot of information 4 came out of that. 5 I can see the same kind of thing happening here. 6 We could get, we could use tier 3 as a research objective, 7 and require periodic reports annually, biannually from the 8 manufacturers with a clear intent that later on if it is 9 proven that its effectiveness is improved and that the 10 technology is there, that that could become the standard. 11 So, with that in mind, I would like to, if it is 12 appropriate, Madam Chairman, to move a suggested amendment to 13 the staff recommendation, and move that the tier 3 that the 14 Board adopt tier 1 and tier 2 as proposed by the staff and 15 amend tier 3 so it will become a research objective with the 16 requirement that periodic reports be submitted to the agency. 17 CHAIRPERSON RIORDAN: Okay. Now, this is a motion 18 that embodies the staff recommendation with a rather 19 significant amendment, and I trust all have heard this, and 20 is there a second to this motion? 21 Let me ask if there is a second? 22 That is important before you can discuss it. 23 Hearing no second, that failed, and Mr. Dunlap, did 24 you have a question? 25 BOARD MEMBER DUNLAP: I would have asked the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 question. 2 CHAIRPERSON RIORDAN: So, now the Chair would 3 entertain, as you know we have embodied a Resolution before 4 us, the staff recommendation, and the Chair would entertain a 5 motion on that. 6 Yes, Supervisor. 7 BOARD MEMBER DeSAULNIER: Madam Chair, I would move 8 the staff's recommendation, including in that the direction, 9 at least, from Mr. Dunlap about the expectation of working 10 with effected community, particularly the business community, 11 and my comments about a buy-back program that you are going 12 to continue to look at and also a discussion from Supervisor 13 Patrick regarding labeling. 14 CHAIRPERSON RIORDAN: Is there a second? 15 BOARD MEMBER RAKOW: Second. 16 CHAIRPERSON RIORDAN: Seconded by Mrs. Rakow. 17 MS. WALSH: Chairman Riordan, let me just confirm 18 or make sure everyone knows that we are talking about 19 Resolution 98-63. 20 BOARD MEMBER DeSAULNIER: Indeed. 21 CHAIRPERSON RIORDAN: Yes. As our Chief Counsel, 22 absolutely, yes, now discussion on the motion? 23 Mrs. Rakow. 24 BOARD MEMBER RAKOW: I have a comment on the 25 labeling, which has been an issue today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 The experience that I have had with consumer 2 products being labeled has been a very positive one for the 3 market, and also there was great fear on some various 4 products that the Energy Commission put labels on. 5 It turned out that time proved that that was an 6 economic positive for that particular consumer product, and I 7 do think that the people who are worried about that labeling 8 situation should know that they are not alone in their 9 initial fears, but the history I have seen is that it worked 10 very well. 11 CHAIRPERSON RIORDAN: Mr. Parnell. 12 BOARD MEMBER PARNELL: I would only say part of the 13 vote I have great sympathy for what Mr. Calhoun put forward 14 in terms of an amendment, but having said that, former 15 Chairman Dunlap's admonition with regard to sensitively, very 16 sensitively looking at the progress of technology, in 2004, 17 or 2005, which is a part of the proposal, is absolutely 18 imperative in my view, so I cannot emphasize that enough. 19 I think the record of the Air Board over time would 20 succinctly state that we have when we find ourselves in error 21 have been willing to turn around and look at things squarely 22 in the face. 23 I think the strength of not going with the 24 amendment and going with the staff proposal merely puts a 25 little emphasis on forcing technology, but having said that, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 a lot of emphasis, let us take a good hard look, and if they 2 just cannot get there, then I hope I am around to come in, 3 and I am sure I will not be on this Board, but I may come 4 around and bother you, to be sensitive to that issue. 5 In fact in 2005, I may not be anywhere. So, with 6 that, I am prepared to vote for the motion. 7 CHAIRPERSON RIORDAN: Are there any other comments? 8 Mr. Dunlap. 9 BOARD MEMBER DUNLAP: One quick comment on 10 labeling, and maybe it is a reaction, and I did not say 11 anything about it as I heard it, but with my experience just 12 as a consumer in seeing labeling was it helped me make a more 13 informed decision. 14 I think intent, I know the staff proposal is to do 15 that for consumers to know what they're buying, but also when 16 I heard our colleagues from the Motorcycle Dealers 17 Association talk about inventory and what they had on their 18 floor and how they had to move it, labeling can be a problem 19 there. 20 So, I want to acknowledge I think that is a real 21 thing. I think, again, and I cannot say it enough, the 22 dealers are good people, and I think they need certainly some 23 sensitivity, and some people on our staff working with them 24 so that we are thinking this thing through. 25 I believe the gentlemen about the number of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 employees and how it shrunk and all of that. So labeling has 2 to be done well, as Mr. Todd or Mr. Long or somebody brought 3 forward some nicely drawn label proposals that were better 4 than ours, Tom. 5 You know we need to, again, do some work there. 6 But I just want to agree about how sensitive that is and how 7 important it is to be done well. 8 CHAIRPERSON RIORDAN: Any other comments? 9 Supervisor Patrick. 10 BOARD MEMBER PATRICK: Yes. I just wanted to add 11 as well that I do sympathize with the motion that Mr. Calhoun 12 made. 13 I just think this is the more appropriate motion, 14 because we need to put in motion a motion that puts in motion 15 the idea that in ten years from now there is going to be 16 expectation on the part of the public as well as this Board. 17 So if you have the technology review, that really 18 looks at it, is this something that is feasible, that it will 19 be the responsibility of the Members of this Board and 20 certainly staff to decide if it is something that we need to 21 do. 22 So, I do have great deal of sympathy for your 23 motion, but I think we were just, I just think this is a 24 better approach to take, and I think they probably were going 25 to both actually get us to the same place. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 CHAIRPERSON RIORDAN: Any further discussion? 2 Mrs. Rakow. 3 BOARD MEMBER RAKOW: Following up on what Mr. 4 Dunlap pointed out about the dealers with the engines sitting 5 on their floors waiting to be sold without a label, there 6 must be some way to work that out besides the Honda engines 7 that will already meet the criteria. 8 What year does the labeling start? 9 Let me ask you that question. 10 MR. CACKETTE: Immediately. 11 If their engines that are on the floor, it will 12 qualify for label, and with evidence, they will get a label. 13 But if they do not, then -- 14 BOARD MEMBER RAKOW: Okay. 15 MR. CACKETTE: Nothing is stopping them from being 16 sold. They just do not get a label. 17 CHAIRPERSON RIORDAN: Any further discussion? 18 Okay. Seeing none, let me ask the secretary to 19 call the roll on this particular item. 20 MS. HUTCHENS: Calhoun. 21 BOARD MEMBER CALHOUN: Aye. 22 MS. HUTCHENS: DeSaulnier. 23 BOARD MEMBER DeSAULNIER: Aye. 24 MS. HUTCHENS: Dunlap. 25 BOARD MEMBER DUNLAP: Aye. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 MS. HUTCHENS: Patrick. 2 BOARD MEMBER PATRICK: Aye. 3 MS. HUTCHENS: Parnell. 4 BOARD MEMBER PARNELL: Aye. 5 MS. HUTCHENS: Rakow. 6 BOARD MEMBER RAKOW: Aye. 7 MS. HUTCHENS: Roberts. 8 BOARD MEMBER ROBERTS: Aye. 9 MS. HUTCHENS: Silva. 10 BOARD MEMBER SILVA: Aye. 11 MS. HUTCHENS: Riordan. 12 CHAIRPERSON RIORDAN: Aye. 13 The motion passes. 14 Let me just express to everyone who has 15 participated in this hearing today, I appreciate your 16 assistance and endurance, may I say, and we look forward to 17 continuing on through until -- what we will do is take a 18 brief break while we change staff, and we are going to move 19 to the next item, and I will ask the Board's indulgence to 20 move right along. 21 Take a break. 22 (Thereupon a brief recess was taken.) 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 CHAIRMAN RIORDAN: Ladies and gentlemen, let me 2 call people back to their seats, because I want to go on 3 with this. I'm going to make every effort to finish the 4 next three items on this agenda with everybody's help. 5 And when I say everybody's help, that means those 6 of you who are signed up to speak, and I'll just make this 7 general announcement, I'm going to hold you to three 8 minutes, because that's how we're going to get through it. 9 And, staff, I'm going to ask you to do your very 10 best to abbreviate your report, and to move this along as 11 quickly as possible for the benefit of everybody. 12 So what I'd like to do is also to indicate to you 13 while you may not see each Board member at his or her seat 14 through the entire part of the testimony, that we have 15 speakers that are in the back and we clearly hear each and 16 every word that you say anywhere we are, so it's not that 17 we're not listening to the testimony physically here, but we 18 are here and we are listening to you. So please don't think 19 that just because we may have left our seat for a moment 20 that we are not listening. 21 This item is the same as before, if you would like 22 to speak, of course, please sign up on the table outside the 23 assembly room. 24 The next item on the agenda is 98-14-3. This is a 25 public hearing to consider the adoption of regulations for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 voluntary accelerated light-duty vehicle retirement 2 enterprises. 3 Mr. Kenny, would you like to introduce this item? 4 MR. KENNY: Thank you, Madam Chairman and members 5 of the Board. 6 One of the measures in the State Implementation 7 Plan that is designed specifically to help achieve the air 8 quality goals in the South Coast Air Basin is Measure M1. 9 Commonly referred to as the M1 program, it calls 10 for the voluntary accelerated retirement of a large number 11 of older, higher-emitting vehicles in the South Coast Air 12 Basin, between 1999 and 2010. 13 Measure M1's air quality goal is a reduction in 14 reactive organic gases and oxides and nitrogen by 25 tons 15 per day collectively in 2010. 16 In 1995 Governor Wilson signed Senate Bill 501 17 which requires the Air Resources Board to adopt regulations 18 governing the implementation of privately operated, 19 voluntary accelerated light-duty vehicle retirement programs 20 in the South Coast Air Basin. 21 SB 501 also requires the regulations to be 22 applicable statewide. Therefore, local air districts that 23 choose to authorize accelerated vehicle retirement programs 24 would be required to use our regulations once adopted for 25 implementing their programs. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 The staff's proposal today presents the proposed 2 regulations for implementing voluntary accelerated 3 light-duty vehicle retirement programs as committed to in 4 the SIP. 5 And I think with that, in order to shorten my 6 testimony -- or excuse me, shorten my opening, I'm just 7 going to turn it over at this point to Krista Fregoso of the 8 Mobile Source Control Division, who will make the staff 9 presentation. 10 MS. FREGOSO: Thank you, Mr. Kenny. 11 Good evening, Madam Chairman and members of the 12 Board. 13 My presentation tonight describes proposed 14 regulations for voluntary accelerated light-duty vehicle 15 retirement enterprises. 16 This presentation will include background 17 information regarding voluntary accelerated vehicle 18 retirement programs, the proposed regulations, including our 19 modifications to the original proposal, major issues, cost 20 and benefits including SIP benefits, and the summary and 21 staff recommendation. 22 I'll begin with background events leading up to 23 this proposal. 24 In 1994 the Board approved the State 25 Implementation Plan for ozone, California's plan for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 attaining the health-based federal ozone standards 2 throughout the State. 3 One of the many strategies in this SIP is Measure 4 M1, which is referred to as the M1 program. 5 Measure M1 calls for the voluntary accelerated 6 retirement of large numbers of older, higher emitting 7 vehicles from 1999 to 2010 to reduce emissions of reactive 8 organic gases and oxides of nitrogen. 9 Measure M1's ultimate goal is to reduce emissions 10 of ROG and NOx collectively by 25 tons per day in 2010. 11 This measures focuses specifically on the South 12 Coast Air Basin because this area faces the greatest 13 challenge in meeting its air quality goals. 14 Senate Bill 501 passed in 1995 requires the ARB to 15 develop and adopt regulations for the implementation of 16 voluntary accelerated light-duty vehicle retirement 17 programs. I'll discuss specific requirements of SB 501 in 18 my next slide. 19 Assembly Bill 208, passed in 1997, eliminated 20 funding for the implementation of a full-scale M1 program in 21 the South Coast Air Basin. 22 I'll later discuss how this impacts our SIP 23 commitments. 24 SB 501 requires the regulations that are adopted 25 by the Board to provide the protocols for the M1 program in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 the South Coast Air Basin, as well as the protocols for 2 other voluntary accelerated vehicle retirement programs 3 throughout California. 4 Local air pollution control districts and air 5 quality management districts that authorize mobile source 6 emission reduction credit generation, either to achieve a 7 direct air quality benefit or to meet local emissions 8 requirements, would be required to use the proposed 9 regulations once adopted. 10 Since the M1 program is currently unfunded, the 11 focus of the staff's proposal is on the local district 12 vehicle retirement programs. 13 SB 501 also requires that accelerated vehicle 14 retirement programs be conducted by qualified, privately 15 operated businesses that purchase eligible vehicles for the 16 purpose of emission reduction credit generation. 17 In staff's proposal these are called voluntary 18 accelerated vehicle retirement enterprises. 19 Perhaps most importantly, SB 501 requires the 20 accelerated vehicle retirement operations covered by the 21 staff's proposal to be voluntary for all parties involved. 22 This includes the districts, the enterprise operators, users 23 of emission reduction credits, and vehicle owners. 24 Before I continue, I want to clarify what is meant 25 when we talk about voluntary accelerated vehicle retirement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 programs. 2 First, as the name implies, these programs are 3 strictly voluntary for the vehicle owners. 4 The goal of these programs is to accelerate the 5 higher-emitting vehicles' natural retirement by paying the 6 vehicle owner to retire that vehicle sooner that would have 7 occurred through normal attrition. 8 Therefore, it is imperative that the vehicle being 9 retired is being operated normally and would not have been 10 retired without the program. 11 Emission reductions then result when the vehicle 12 replacing the retired vehicle is a newer model year using 13 cleaner emission control technology. 14 The resulting emission reductions may be retired 15 to achieve a direct air quality benefit or in some cases 16 they may be used as an alternative compliance option for 17 local emissions requirements. 18 The primary candidate vehicles for retirement 19 programs covered under the staff's proposal are generally 20 older vehicles that emit significantly more relative to 21 newer vehicles. These vehicles may be well maintained, but 22 the fact is they still contribute more emissions than newer 23 vehicles meeting more stringent emission standards. 24 This graph helps illustrate the point that on 25 average older vehicles are higher emitting than newer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 vehicles. Even though older vehicles, older cars, for 2 example those that are 15 years old and older, drive fewer 3 miles and make up only a small portion of the in-use fleet, 4 they still account for a significant portion of the 5 emissions from passenger cars. This is because they are 6 equipped with older, less advanced emission control systems. 7 In summary, while older cars account for a small 8 percent of the vehicle fleet and vehicle miles traveled in 9 California, they are large contributors of emissions of ROG 10 and NOx from passenger cars. 11 The programs covered under the staff's proposal 12 are distinct from the Bureau of Automotive Repair's vehicle 13 retirement program. 14 California SIP sets emission reduction commitments 15 for the Smock Check II program, which includes a vehicle 16 retirement component of its own. In certain cases, vehicles 17 that are not repaired to meet the Smog Check II emissions 18 requirements, mainly vehicles that owners have deemed not 19 cost effective to be repaired, may be eligible for the 20 Bureau of Automotive Repair's vehicle retirement program. 21 The staff has coordinated with the Bureau of 22 Automotive Repair in the development of their program. 23 The emission reductions achieved by programs 24 covered under our proposal must be surplus to the reductions 25 that can be achieved through the Smog Check II program. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 I will further discuss this in a few minutes. 2 The next section of the presentation covers the 3 proposed regulations. 4 The primary responsibility of the local air 5 quality districts that allow accelerated vehicle retirement 6 operations within their jurisdictions is to adopt rules that 7 adhere to the ARB's regulations once adopted. 8 Additionally, the staff proposes that districts 9 continue the direct responsibility for administering vehicle 10 retirement operations within their jurisdictions. 11 State law currently provides districts the 12 authority to adopt mobile source emission reduction credit 13 programs. Several districts already have various mobile 14 source emission reduction credit programs, including 15 voluntary accelerated vehicle retirement. 16 It therefore makes practical sense for districts 17 that have such programs to continue with their direct 18 implementation. 19 Under our proposal, a passenger car or light-duty 20 truck may be eligible for participation if, one, the legal 21 vehicle owner sells it voluntarily to an enterprise 22 operator; two, it has been registered for the previous 24 23 months in the local air district in which the program is 24 taking place; and, three, it has either passed its last smog 25 check test or is now exempt from smog check. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 Additionally, if a vehicle requires a smog check 2 test within 90 days of its sale to an accelerated vehicle 3 retirement enterprise, it will be required to undergo and 4 pass the test. 5 The vehicle will not be eligible for participation 6 if it is operating under a repair cost waiver or an economic 7 hardship extension. 8 This 90-day requirement helps eliminate double 9 counting emission reductions between the Smog Check II 10 program and the accelerated vehicle retirement operations 11 covered under our proposal. 12 Finally, vehicles submitted for participation will 13 be required to undergo a functional and equipment 14 eligibility inspection. The criteria contained in this 15 inspection are based on the requirements for a roadworthy 16 vehicle as contained in the California Vehicle Code and on 17 the experiences of enforcement staff and various operators 18 of current accelerated vehicle retirement programs. 19 The purpose of the inspection is to eliminate from 20 participation those vehicles that are in extremely poor 21 condition and show signs of little or no useful remaining 22 life. 23 In order to generate emission reduction credits, a 24 voluntary accelerated vehicle retirement enterprise operator 25 must meet specific criteria. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 First, an enterprise operator must be an auto 2 dismantler licensed by the Department of Motor Vehicles, or 3 it must have a binding contract with the licensed auto 4 dismantler. 5 Next, the enterprise operator must submit to the 6 local district a vehicle retirement plan demonstrating 7 compliance with all provisions of the regulations once 8 adopted. 9 Additionally, an enterprise operator will be 10 required to perform the vehicle functional and equipment 11 eligibility inspection and ensure that a vehicle meets all 12 registration requirements. 13 This is a modification to our original proposal 14 that required enterprise operators to contract out for 15 vehicle eligibility inspection services. Now they must only 16 do so if they choose not to perform this function or are 17 unable to. This modification reduces costs and 18 administrative requirements for enterprise operators. 19 Enterprise operators will also be required to 20 process applicable paperwork through the Department of Motor 21 Vehicles. The California Vehicle Code already requires all 22 licensed auto dismantlers to adhere to specific procedures. 23 In order to generate emission reduction credits, 24 our proposal requires the enterprise operator to permanently 25 destroy the entire vehicle within 90 days of purchase for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 retirement. This means that vehicle parts and engine 2 components may not be removed for resale and reuse. Under 3 our proposal the only allowable use for any parts from a 4 vehicle retired to generate emission reduction credits will 5 be as a source of scrap metal or other scrap material. I'll 6 discuss this issue in more detail later in my presentation. 7 SB 501 contains a provision requiring the 8 regulations to be sensitive to the concerns of car 9 collectors. 10 Our proposal, while it does require the complete 11 destruction of any vehicle from which emission reduction 12 credits are generated, includes mechanisms to allow members 13 of the public the opportunity to purchase vehicles of 14 interest. 15 These mechanisms were developed through input from 16 car collector groups and current operators of vehicle 17 retirement programs. 18 Of course, emission reduction credits could not be 19 generated for any vehicles purchased through these 20 mechanisms. 21 Additionally, our proposal does -- does not 22 prohibit enterprise operators from offering a consumer more 23 money than what is offered by an accelerated vehicle 24 retirement enterprise. This off-ramp mechanism puts 25 vehicles that have value as a parts vehicle or as a whole PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 vehicle back into an auto dismantler's general stream of 2 vehicles purchased for traditional dismantling activities. 3 Again, no emission reduction credits could be 4 generated for these vehicles. 5 As a supplement to our customary rule development 6 process, the ARB staff invited representatives of various 7 industries, environmental groups and local governments to 8 participate in a technical advisory group. Board Member 9 Joseph Calhoun was the chairman of the TAG. 10 The TAG's sole function was to advise the ARB 11 staff on the appropriate emission reduction calculation 12 methodologies for the purpose of emission credit generation. 13 The TAG held seven meetings in 1996, in which it 14 developed and approved calculation methodologies for both 15 exhaust and evaporative emission reductions resulting from 16 voluntary accelerated vehicle retirement. 17 Calculation methodologies approved by the TAG 18 through a majority vote are included in our proposal. These 19 methodologies with a modification I will discuss later 20 ensure that the emission reductions achievable through 21 accelerated vehicle retirement programs are indeed surplus 22 to the reductions required through the Smog Check II 23 program. 24 The emission reduction credit amount from retiring 25 a vehicle is equal to the difference between the emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 of the vehicle retired and those of the replacement vehicle 2 spread over the expected remaining life of the retired 3 vehicle. 4 The functional and equipment eligibility 5 inspection discussed earlier is designed to ensure that 6 participating vehicles have remaining life. 7 Retiring a vehicle with little or no remaining 8 life will not produce real emission reductions. 9 For remaining vehicle life, which is equal to 10 credit life, the staff proposes the use of three years. 11 Remaining vehicle life is derived from the 12 emission inventory model which in turn is based on DMV 13 registration data. 14 The use of a three-year remaining vehicle life for 15 vehicles 15 years old and older, the types of vehicles that 16 are generally attracted to accelerated vehicle retirement 17 programs, represents a conservative approach to credit 18 generation and is therefore protective of air quality. 19 I must point out that the use of a three-year 20 credit life is not a calculation variable that was discussed 21 by the TAG. This is strictly the staff's proposal. 22 The remainder of the credit calculation variables 23 were discussed and approved by the TAG. 24 For vehicle emission rates, the TAG recommendation 25 relies on average emission rates from the ARB's motor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 vehicle emission inventory model. These are average in-use 2 emission rates for vehicles that have either passed smog 3 check or are exempt from smog check. 4 For the retired vehicle, the emission rate used is 5 the average for that particular model year and the calendar 6 year of the vehicle is retired. 7 For the replacement vehicle, the emission rate 8 used is equal to that of the average fleet vehicle in the 9 calendar year vehicle retirement takes place. 10 Under the TAG's recommendation, emission reduction 11 credits can be generated for ROG, NOx, CO and PM. As I 12 mentioned earlier, the TAG's recommendation is based on the 13 ARB's motor vehicle emission inventory. 14 The modeling approach reduces program costs 15 because testing and measuring the emissions of each 16 individual retired and replacement vehicle, or even a large 17 sample of the vehicles, could add significant cost to 18 program operations. 19 Finally, using the emissions model to quantify 20 emission reductions, ensures that the reductions are surplus 21 to those that can be achieved in the Smog Check II program. 22 The remaining life assumptions with an adjustment 23 based on the ARB's emission model, together with a vehicle 24 functional and equipment eligibility inspection, ensure that 25 retired vehicles do have remaining useful life and are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 capable of generating real reductions. 2 In addition to the other requirements in SB 501 3 that I've already discussed, it also requires the 4 regulations to provide for the implementation of a two-year 5 pilot program in the South Coast Air Basin. 6 The purpose of the pilot program is to assess the 7 efficacy of the regulations in meeting the M1 program's 8 emission reduction commitments, as well as the efficacy of 9 accelerated vehicle retirement programs in general. 10 Emissions data gathered in the pilot program will 11 be used to validate the ARB's emission inventory model or to 12 make adjustments. 13 The staff is committed to thoroughly analyzing the 14 data from the pilot program and returning to the Board with 15 changes, if necessary. 16 The pilot program began operating in September and 17 has already retired approximately 60 vehicles to date. 18 The staff is proposing modifications to its 19 original proposal. These modifications, while preserving 20 the effectiveness of vehicle retirement program, reduce 21 costs for enterprise operators and provide them with greater 22 flexibility in accepting eligible vehicles. 23 These modifications include: 24 Eliminating the requirement for enterprise 25 operators to contract with a third party to perform the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 vehicle eligibility inspection. Under our modified 2 proposal, enterprise operators may now perform this 3 function. Doing so will reduce their cost by about 20 to 25 4 dollars for each vehicle submitted for purchase. 5 Allowing vehicles with a longer lapse in 6 registration, over a 24-month period, to still be eligible 7 for participation. 8 Vehicles must be currently registered at the time 9 of sale to an enterprise operator, reducing the waiting 10 period between the time a vehicle owner makes initial 11 contact with an enterprise operator and the time the vehicle 12 is already sold. This reduced waiting period provides for a 13 more consumer-friendly program. 14 Restructuring advertising requirements for 15 enterprise operators to provide them greater flexibility and 16 potentially reduce their advertising costs. 17 Clarifying credit certification mechanisms to 18 reflect that the local districts are responsible for 19 approving and issuing emission reduction credits to the 20 enterprise operators. 21 Minor modifications to the vehicle functional and 22 equipment eligibility inspection requirements. 23 And, finally, minor administrative and corrective 24 changes. 25 The next section of this presentation deals with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 the major issues. 2 The staff's proposal for prohibition on all parts 3 resale and reuse from vehicles for which emission reduction 4 credits are generated has been the most controversial issue. 5 In addition to the parts resale and reuse issue, I 6 will also briefly discuss the staff's proposal regarding 7 remaining vehicle life. 8 As mentioned earlier in the presentation, the 9 staff is proposing that a vehicle must be permanently 10 destroyed in order to qualify for emission reduction credit 11 generation. 12 No parts from an engine component to a door handle 13 will be allowed to be removed for resale and reuse. This is 14 a major concern for car enthusiasts. They believe that such 15 a policy will deplete the availability of specialized and 16 affordable used parts. 17 Additionally, some car enthusiasts organizations, 18 specifically the Specialty Equipment Market Association, 19 maintain that Health and Safety Code Section 44120 A 20 explicitly provides for the resale and reuse of vehicle 21 components from vehicles that are retired to generate 22 emission reduction credits. 23 The staff maintains that this provision only 24 requires the resale and reuse of vehicle components in 25 accordance with the Vehicle Code and appropriate state PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 guidelines. 2 While the Vehicle Code allows for parts recycling, 3 it does not require it. 4 Furthermore, if the Board adopts the staff's 5 proposal relating to parts recycling, the appropriate State 6 Board guidelines, as referenced in the Health and Safety 7 Code, will prohibit all vehicle parts resale and reuse from 8 vehicles retired to generate emission reduction credits. 9 At least one air district in California has 10 already successfully implemented a no parts resale policy. 11 While the staff's proposal does prohibit the 12 resale and resue of parts from credit-generating vehicles, 13 it does promote environmentally friendly practices by 14 allowing the recycling of vehicle components for their scrap 15 metal value and other scrap material value. 16 These practices are already implemented by auto 17 dismantlers in the course of their normal business 18 operations. 19 Additionally, enterprise operators are free to 20 purchase incoming vehicles for use as parts cars, instead of 21 retiring them for emission reduction credit generation. 22 Whole vehicles can also be purchased by members of 23 the public under certain conditions. 24 The staff's proposal requires total vehicle 25 destruction for several reasons. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 First, parts destruction ensures the most 2 responsible use of public funds. For those vehicle 3 retirement programs that rely on public funds, for example 4 the M1 program, are funded by programs using motor vehicle 5 registration surcharge fees. It is not a judicious use of 6 those funds to allow the resale of parts directly to the 7 consumer. 8 To allow for parts resale and vehicle retirement 9 programs promotes a policy of double dipping whereby 10 enterprise operators may profit twice at the taxpayers' 11 expense, first when the parts from a retired vehicle are 12 sold and second when the emission credits generated from a 13 retired vehicle are sold. 14 Next, the staff believes a no parts resale 15 approach best implements the basic principle of an effective 16 accelerated retirement program, to accelerate fleet turnover 17 to vehicles using cleaner, more advanced emissions control 18 technology. 19 Removing the entire vehicle from service not only 20 eliminates the emissions of the retired vehicle, it also 21 renders that vehicle's parts unavailable for use in keeping 22 another older, more-polluting vehicle on the road longer 23 than would normally occur through natural attrition. 24 Full emission reductions may not be achieved if a 25 vehicle is retired but its parts are used to enable other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 older vehicles to continue operating longer. 2 Will the staff's proposal deplete the used parts 3 supply? The staff believes the answer to this question is 4 no. It is important to keep in mind two facts when 5 evaluating this issue. 6 First, over 700,000 vehicles were scrapped last 7 year in California through natural attrition. These 8 vehicles will provide a significant parts base, as will the 9 millions of other vehicles retired throughout the country as 10 a result of natural attrition. This contrasts sharply with 11 the roughly 7,000 vehicles retired annually in the South 12 Coast Air Basin as a result of accelerated vehicle 13 retirement. The South Coast Air Basin has the highest 14 accelerated vehicle retirement rate in California. 15 Second, licensed auto dismantlers have a 16 sophisticated nationwide parts network used to locate and 17 obtain specialized and affordable parts throughout 18 California and the rest of the country. 19 Therefore, the availability of used parts will not 20 be substantially affected as a result of total vehicle 21 destruction in accelerated vehicle retirement programs. 22 Another major issue is the staff's proposal to use 23 a three-year remaining vehicle life in the emission 24 reduction credit calculation. 25 This is an area of disagreement between various PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 stakeholders. Today you may hear testimony representing 2 both sides of this issue questioning whether the proposed 3 credit life is too long or too short. 4 The staff believes the proposed three-year credit 5 life represents an appropriate, yet conservative value. 6 Now I will discuss the cost and benefits, 7 including the SIP benefits of this proposal. 8 The staff's proposal standardizes the protocols in 9 accelerated vehicle retirement programs that generate 10 emission reduction credits for use in meeting local 11 emissions requirements. These programs may provide 12 businesses and industries the flexibility to choose a 13 cost-effective alternative compliance mechanism. 14 At $1.30 to 3.80 per pound of ozone precursors 15 reduced, accelerated vehicle retirement is very cost 16 effective. 17 If the M1 program is funded, accelerated vehicle 18 retirement has the potential to provide cost-effective SIP 19 benefits. 20 Regarding costs of the staff's proposal, we have 21 estimated that the local districts choosing to authorize 22 emission reduction credit generation from accelerated 23 vehicle retirement may incur additional administrative costs 24 of approximately 15,000 per year per district. 25 This figure is based on the highest vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 retirement rates currently taking place in the South Coast 2 Air Basin. Districts with lower vehicle retirement rates 3 will likely incur lower costs. 4 M1 calls for specified reductions in ozone 5 precursor emissions for each year from 1999 through 2010, 6 culminating in a 25 ton per day reduction in 2010. 7 This table shows the reductions which are 8 essential for ozone attainment in the South Coast Air Basin. 9 These reductions will not be achieved unless 10 funding is obtained for the M1 program. If funding cannot 11 be obtained, the Board may need to consider implementing 12 additional strategies. 13 Can the M1 program achieve its SIP commitment? 14 The answer is not yet, because, as I've said, the M1 program 15 is unfunded. 16 The passage of AB 208 in 1997 eliminated long-term 17 funding for the M1 program. Unless funding is obtained we 18 may need to consider alternative strategies to achieve the 19 SIP reductions shown in the previous slide. 20 Until that time, the staff's proposal lays the 21 framework for the M1 program should adequate funding be 22 obtained. 23 Mr. Lovelace now has an additional modification to 24 present. 25 MR. LOVELACE: Thank you, Krista. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 For the record, I'm Bill Lovelace, Mobile Source 2 Control Division. 3 We have an additional change that does not appear 4 in the staff modifications for this regulation. 5 Ms. Fregoso stated that to avoid double counting 6 between smog check and the credit program, we proposed that 7 if a vehicle were within 90 days of its scheduled smog 8 check, it would have to go through smog check and receive a 9 passing grade before it could be accepted into the program 10 to avoid double counting. 11 We are proposing that the 90-day window be reduced 12 to 60 days. However, to ensure that no vehicle that has 13 failed a smog check is admitted into the program, the 14 records of those vehicles in the 60- to 90-day window will 15 be screened for failures. 16 If a failed vehicle has entered the program, the 17 credit assigned to that vehicle will be invalidated. These 18 would be identified after the fact with BAR's participation. 19 We do not want to limit participation in the 20 program, but of utmost importance is not to provide credits 21 for vehicles that would have been identified as failures in 22 smog check. 23 What I have outlined above satisfies both of those 24 interests. 25 BAR representatives have said that this is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 workable approach. 2 MS. FREGOSO: To conclude today, the staff 3 recommends that the Board adopt the proposed regulations for 4 the implementation of voluntary accelerated vehicle 5 retirement enterprises and adopt the staff's modifications 6 to the original proposal. 7 This concludes our presentation. 8 CHAIRMAN RIORDAN: Thank you very much. 9 Let's have the ombudsman's reports, Dr. Steele. 10 DR. STEELE: Thank you, Madam Chairman, and 11 members of the Board. 12 Development and outreach of this proposal has been 13 in progress since 1996, as required by action of the 14 Legislature, as you heard, through SB 501 signed in 1995, 15 and AB 208 signed in 1997. 16 The initial authorizing bill, SB 501, required 17 ARB, among other things, to develop a rule that is sensitive 18 to the concerns of car collectors and of consumers for whom 19 older cars provide affordable transportation. 20 Let me describe the outreach activities now. 21 The outreach activities include four public 22 workshops that took place in 1996 and '97, seven meetings of 23 the technical advisory group, and five or six meetings of 24 stakeholders who were interested in -- 25 CHAIRMAN RIORDAN: Can you speak up just a little PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 bit, because -- 2 DR. STEELE: -- obtaining funding for the measure. 3 This better? Thank you. 4 In order to locate all interested stakeholders, 5 staff prepared an outreach list from 11 ARB stakeholder 6 lists comprising over 1400 individuals who received the 7 mailings for this item. 8 The first workshop in Sacramento was held on March 9 7th of 1996, and approximately 50 people attended that 10 workshop and participated. 11 Staff discussed the authorizing legislation and 12 ARB plans for implementing the statute. 13 Two workshops were held specifically to focus on 14 issues important to car collectors and other car 15 enthusiasts. Those workshops were held on August 15th of 16 1996 and in the afternoon of March 7th in 1997. 17 The fourth workshop was held in the morning of 18 March 7th in 1997, and focused on district and vehicle 19 scrappage business enterprise issues. 20 About 40 people attended the final workshop and 21 the two workshops for car collectors and car enthusiasts 22 were attended by about 25 to 50 people for the first one and 23 the second one. 24 The technical advisory committee, as you heard, 25 was chaired by Board Member Calhoun. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 I want to tell you the members of that included 2 representatives of the American Automobile Manufacturers' 3 Association, Bureau of Automotive Repair, California Chamber 4 of Commerce, California Service Station and Automotive 5 Repair Association, Sacramento Municipal Air Quality 6 Management District, San Bernardino Association of 7 Governments, Sierra Club, South Coast Air Quality Management 8 District, SEMA, the Speciality Equipment Manufacturers' 9 Association, the Union of Concerned Scientists and Western 10 States Petroleum Association. 11 In 1998 staff monitored input and testimony 12 received by the South Coast Air Quality Management District 13 on their scrappage proposal, which shares many of the same 14 elements with ARB's proposal. 15 And those were the activities for 1998. 16 In conclusion, the ombudsman's office finds that 17 many stakeholders were engaged and did participate in the 18 proposal before you today, including car collectors, and 19 staff conducted an adequate public outreach program. 20 CHAIRMAN RIORDAN: Thank you very much. 21 What I'd like to do is go right into the 22 witnesses, if that's all right with the Board. 23 And let me tell you, it truly is three minutes and 24 we'll use those lights and it's green, yellow and red and 25 you know what they mean. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 You'll get that yellow light, though, at the 2 signal if you've got one minute left. 3 Dave Smith from Western States Petroleum 4 Association, followed by Joe Caves. And then two people, 5 Frank Bohanan and Chris Kersting, and Jon Owyang will be 6 following that. 7 Mr. Smith. 8 MR. SMITH: Thank you, Madam Chairperson, Board 9 members. I'm Dave Smith with Arco Petroleum Products 10 Company. I represent the Western States Petroleum 11 Association today. 12 WSPA is here to commend the Board for adopting 13 these regulations for vehicle retirement rules. We 14 congratulate you specifically on initiating the pilot study, 15 which we have been very supportive of. As you know, WSPA 16 has been supporting vehicle, voluntary vehicle retirement 17 programs since their inception probably in 1990. 18 And we participated in on the M1 development, the 19 SIP and SB 501, as well as serving on the TAG as a member of 20 the TAG. 21 I have the privilege of serving with Mr. Calhoun 22 and Barry Wallerstein on that group, and was pleased with 23 the eventual outcome of that, where we had a majority vote 24 in support of the report. 25 I would only have one comment to the Board to ask PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 you to consider a change to the staff's recommendation and 2 that has to do with the remaining life of the vehicle that 3 is retired. 4 The TAG committee specifically discussed this at 5 great length. This was an issue of contention. And the TAG 6 committee recommended that a way to figure the best way to 7 figure the remaining life of a retired vehicle is to use the 8 average life for that model year, as compared to the staff, 9 which is recommending a fixed three years for any vehicle 10 that's retired. 11 So what they're basically saying is that 12 irregardless of what year the car is, whether it's an '87 or 13 a 1971, you will only give that car three years of remaining 14 life. The TAG didn't think that was reasonable. They 15 concluded that a more reasonable approach would be to use 16 the models that ARB uses to calculate emission benefits and 17 use the average remaining life for the model year of the 18 car. And so it would vary depending on the age of the 19 vehicle. 20 The other thing that the TAG discussed at great 21 length was whether or not this remaining life should be 22 discounted in some way. Are the vehicles that are retired 23 somehow or other different than the vehicles that are not 24 retired. 25 And actually the TAG discussed that at some length PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 and decided that there wasn't any evidence to suggest that. 2 It might be intuitive that one might think that, but there 3 was no data. In fact there was some data available to the 4 TAG that would suggest otherwise. 5 There have been reports or studies done by the 6 State of Illinois in '92. The BAR did a study in '94 and 7 WSPA members have done studies of over 800 vehicles that 8 have been retired looking at the issue of retired life. 9 And we believe all those three studies at least 10 support the idea that the TAG recommendation was, and this 11 data was available to the TAG at the time they made their 12 decision. 13 We have discussed this issue with the staff here 14 just recently, and we would encourage the Board to follow 15 the TAG, the technical advisory group's recommendation 16 concerning remaining life. 17 CHAIRMAN RIORDAN: Thank you, Mr. Smith. 18 Appreciate that. 19 And we'll get a response maybe after the series of 20 speakers and respond. Thank you. 21 Mr. Caves, followed by the two -- is Mr. Caves 22 here? I don't see him. 23 Then Chris Kersting and Frank Bohanan. 24 MR. KERSTING: At this point I guess it's good 25 evening. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 I have to say, I'm little frustrated that we've 2 been limited to a short period to speak on this as we have. 3 We do have lengthy comments on the record with supporting 4 documents, and I urge all to have a look at that and I'll 5 move as fast as I can. 6 The first point that I will make is that South 7 Coast program has now generated information both in the form 8 of Mr. Loman's testimony and a survey that South Coast did, 9 which demonstrates very clearly what actually happens in a 10 scrappage program. 11 The main point I want to make about this is if you 12 offer people five, six, seven hundred dollars for vehicles, 13 the vehicles that are going to show up are not primary-use 14 vehicles with three years remaining life. 15 Demonstrate to me the person who is likely going 16 to bring a vehicle in that has three years remaining life 17 and sell it to you for $600. Isn't it going to happen. 18 It's been demonstrated in both that information from 19 Mr. Loman and in the survey. 20 Nothing in these proposed regulations are going to 21 change the basic market aspect of the scrappage program, 22 that people aren't going to bring good vehicles to this 23 program. You're going to get junk. 24 I want to state that that means that your ultimate 25 credits given under this program are going to be overstated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 I want to say also that the statute calls for a 2 maximization of parts recycling. The staff began to get 3 into that bit. 4 The explanation for why we're going ahead with 5 prohibiting parts recycling to me as an attorney is 6 amazingly circular with no demonstration where in the 7 regulations or where in the guidelines recycling would be 8 prohibited. 9 You can trust that you haven't heard the last of 10 that issue. Look at the statute. It's very clear. 11 And we negotiated that language in the statute for 12 the purpose of making sure that parts would be recyclable 13 out of that program, and it's just beyond me, actually, the 14 staff has come to this conclusion. 15 Point was made that there will be plenty of parts 16 available to keep vehicles, people who rely on affordable 17 transportation, for them to find affordable parts and so 18 forth for repairs. If that's the case, based on 700,000 19 vehicles that are going to be scrapped naturally each year, 20 how is it that preventing recycling of parts off of scrap 21 vehicles under this program is going to make any difference? 22 You can't have it both ways. 23 If there's going to be a large surplus of parts 24 available over here from natural attrition, what good it is 25 going to do to deny collectors the opportunity to go in and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 take a taillight cover here and there? It doesn't make any 2 sense to me. 3 The last thing that I want to say is that we've 4 submitted information in our comments about an alternative 5 program. As you all may be aware, the statute requires that 6 this Board look at cost-effective strategies that are more 7 cost effective than scrappage. 8 I think Mr. Roberts has some experience with the 9 program in San Diego that they have been running. They've 10 got two years' worth of a pilot program going and it has 11 demonstrated that repair and upgrade of vehicles is a 12 viable, proven way to reduce emissions that's actually twice 13 as cost effective, two times -- these aren't my numbers. 14 Look at the Sierra research numbers in our comments, look at 15 the numbers that are coming out of the program down in San 16 Diego County. 17 CHAIRMAN RIORDAN: And in conclusion? 18 MR. KERSTING: In conclusion I just want to urge 19 the Board to take a look again at repairing and upgrade as 20 an alternative for scrappage. I think it's premature to go 21 ahead with this rule. 22 As you all know, this program, we have our 23 programs and the programs under South Coast, have been the 24 subject of lawsuits from CBE and other groups. CBE has 25 submitted comments as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 363 1 I think it's inadvisable for you all to be going 2 ahead and finalizing these regulations. You delayed them 3 for three or four years as it is. 4 That's all I have to say. Thank you. 5 CHAIRMAN RIORDAN: Thank you very much. 6 If you'd identify yourself for the record, please. 7 MR. BOHANAN: Frank Bohanan with SEMA. 8 I'll just get right into it. 9 The August car collector meeting there were about 10 200 people, and all I wanted to say is being heard does not 11 mean being listened to, because most of the things that the 12 car collectors and the other people requested did not show 13 up in the final proposal. 14 The public doesn't want this rule. If you look at 15 who supports this rule, it's not the public. Car collectors 16 say no. People on low incomes, community groups say no. 17 The only people asking for this is staff. Other people may 18 be going along with it, because they have no choice or 19 because it's an easy way to save a few bucks on compliance, 20 but the bottom line is even environmental groups have 21 problems with this because they've asked for 50 percent 22 discounts on credits, because they feel the methodology is 23 so flawed. 24 The questions that the public has, I'll go through 25 as quickly as I can. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 364 1 Number one, does this ensure a net verified 2 emission reduction? No. They don't know what the emissions 3 of the scrap vehicle are. They don't even know if there 4 will be a replacement vehicle. So how can they calculate 5 that there will be net benefit if you don't know the plus 6 and the minus? 7 Is there a proof that scrap vehicles are being 8 driven? No. These vehicles are primarily second, third 9 vehicles. Again, a lot of this data comes from AQMD 10 technical committee survey, so, you know, we're not making 11 this up. It's on record at AQMD. 12 Less than 20 percent of these vehicles are driven 13 more than 15 miles to work. About 87 percent of them said 14 that they didn't need the vehicles and there were financial 15 reasons for getting rid of them, namely, give me money. 16 We've suggested things like using vouchers so you 17 wouldn't have a situation where people are just scrapping 18 cars to get money. 19 Ford is doing a program right now where if you 20 bring in a vehicle you get a voucher. Therefore, you're 21 buying another car, so you know there's a replacement 22 vehicle, you're not guessing at it. 23 Are these vehicles high emitters? They don't 24 know. They're not measuring emissions. All they're using 25 is modeled emissions based on averages. That's unverified PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 365 1 speculation. Prove it to me. 2 Everybody that has seen DRI data, Sierra Research 3 data, University of Denver data, even US EPA data, there's a 4 small group of vehicles that skews the averages. They don't 5 know if they are get the population from that small group or 6 from the other 90 percent that's relatively clean. 7 A new vehicle can be a gross emitter if it's got a 8 cracked hose. They don't know if they're getting gross 9 emitting vehicles. 10 One of the benefits attributed to scrappage in the 11 SIP, I love this one, you got 11 million vehicles attributed 12 to Smog Check II. And that's 112 tons. Do the math. The 13 scrappage program is 75,000 vehicles and you're getting 25 14 tons. Tell me how three percent of the vehicles driven less 15 than half as many miles get one quarter of the credit? Good 16 math. 17 What are the issues associated with trading of 18 emission credits? Well, let's just say hot spots and leave 19 it at that. 20 Does emission credit trading reduce the number of 21 hot spots? No. Ask CBE. 22 Do scrappage groups affect some groups more than 23 others? Yes. Car collectors, people on low incomes. 24 AQMD's data says 66 percent of the people scrapping the 25 vehicles are Hispanic. 80 percent are scrapping vehicles, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 366 1 those scrapping are part of a minority group. 2 We don't like seeing people from certain groups be 3 disadvantaged compared to others. Call it environmental 4 justice. Call it collectors. It's got problems. 5 CHAIRMAN RIORDAN: Mr. Bohanan, red light is on. 6 MR. BOHANAN: Only got two more, real quick. 7 Do these problems cause unintended economic 8 effects? Sure they do. These people can't go out and buy 9 new cars. Less than ten percent will go buy a new car and 10 only 30 percent will spend more than $2,000 to buy a car. 11 So what are they going out and getting? 12 CHAIRMAN RIORDAN: Mr. Bohanan, the bottom line. 13 MR. BOHANAN: The bottom line is the math is 14 flawed. You're not cleaning up the air. You're causing 15 problems with people who need affordable transportation. 16 You're causing problems with collectors. It's not a matter 17 of percentages. People need specific parts for specific 18 vehicles. Those parts being destroyed, buying the whole 19 vehicle is not a solution if you need one part. You can't 20 go buy a vehicle, bring it home, pay for the vehicle, pay 21 for the transportation, and hope to keep it out of your 22 neighbor's sight. That just don't work. 23 Staff isn't cutting it. 24 CHAIRMAN RIORDAN: Thank you, Mr. Bohanan. 25 Following Mr. Bohanan, Jon Owyang, Joel Swartz, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 367 1 Jun Mendez, Charlie Peters. Please queue up and get ready. 2 Ask a question, Mr. Dunlap, while our next speaker 3 is getting ready. 4 MR. DUNLAP: Mr. Cross, if you're not cutting it, 5 I want to know where you're not cutting it at. What, I 6 mean, what's the bottom line? We're talking about some 7 numbers here that he's saying aren't lining up, so what -- 8 MR. CROSS: I'm going to turn it to Mr. Lovelace. 9 MR. DUNLAP: I don't want an elongated discussion 10 about it, but -- 11 MR. CROSS: While we're changing, we can do it 12 very quickly. 13 MR. LOVELACE: There are a couple of things that I 14 think the previous witnesses indicated the dilemma. On the 15 one end the first witness said that basically six years 16 should be the remaining life of the vehicle, and the other 17 hand we've heard several folks say it should be one or two. 18 This is the dilemma. 19 We did not, what shall I say, compromise when we 20 said three years. Yes, it is true that the average 21 remaining life for a vehicle in our emission inventory is 22 six years. We do not -- we do agree with some of these 23 statements that we may not be getting the, quote, average 24 vehicle here. 25 So we believe that the staff position of a 50 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 368 1 percent reduction of that six-year remaining life is a valid 2 number. 3 MR. DUNLAP: If I might paraphrase, you're saying 4 despite its imperfections, this is what you think is a 5 reasoned place we ought to be? 6 MR. CROSS: And I think that to the more extensive 7 list of the comments that Mr. Bohanan made, one of the 8 reasons it took four years was because we were spending a 9 lot of time with all of the stakeholders and we're trying to 10 balance an awful lot of pressure in an awful lot of 11 directions and we think the proposal does that about as well 12 as you can. 13 CHAIRMAN RIORDAN: Thank you. 14 You're going to have to pronounce your last name, 15 because I probably didn't do it very well. Give your name 16 for the record and who you represent. 17 MR. OWYANG: Yes, Madam Chair and Board members, 18 my name is Jon Owyang. I'm president for Market-Based 19 Solutions. We're a company that helps companies use 20 emission credits as an alternative way of compliance with 21 various air quality regulations. 22 We have been doing this for five years. We helped 23 to launch a pilot program in the Bay Area before starting in 24 the South Coast area. 25 I distributed a letter to all of you, and that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 369 1 letter is signed by a number of our clients, and you'll 2 notice as you go through that list that most of those 3 clients are clean industries. And in fact what you find out 4 in many cases using these credits is their only obligation 5 to reduce air quality emissions inside the South Coast Air 6 Basin. Specifically they're using the regulation to offset 7 the emissions associated with their employees ride sharing, 8 going to work. This is mobile to mobile use. These ride 9 share programs predominantly run successful. 10 What they found is that instead they can use 11 emissions credits currently cost effective as a way of 12 offsetting an obligation. 13 In doing so, in general these companies are 14 offsetting three to four times the emissions that they would 15 have under a traditional ride share program. So when we 16 talk about not providing an air quality benefit, I think you 17 need to be very careful in showing these credits in fact are 18 being used as assumed to help foster market-based programs. 19 Before I get to the next slide, one of the things 20 I wanted to point out is that we are very supportive of 21 staff's revised program here. We have been working with 22 staff very extensively for the last few weeks. We have had 23 a number of issues. 24 And the reason I put this slide up is because I 25 really wanted to exemplify to staff why we had to go through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 370 1 each one of our 18 issues painstakingly to make them 2 understand why each one of them were important. 3 What we've done here is basically contrasted the 4 cumulative impact of various policies on the cars that 5 qualify ultimately into these programs. 6 At the top you see what the criteria are for South 7 Coast rule 1610, the currently most-utilized program in the 8 state. 9 What I should point out that this program is most 10 undoubtedly the toughest regulation in the state, 11 undoubtedly in the country. And ARB is basically taking 12 that rule and cranked it down a few notches. 13 We're not saying we disagree with it, but what I 14 wanted to show is that there is a cumulative impact with 15 everything we do. 16 If you look at this slide, the predominance of the 17 impacts are whether or not we have double counted under Smog 18 Check II, whether or not we allow for late registrations, 19 and what period we allow late registrations and no shows. 20 No shows are primarily indicated by people that 21 feel the program is too difficult to participate in. 22 I see your light. Okay. 23 And addressing Frank Bohanan's issues 24 specifically, you can see that a large percentage of the no 25 shows are because people feel that it's easier for them to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 371 1 sell that car, an operating car, to someone in the 2 neighborhood, so it continues to drive. 3 Under the current South Coast program, we only get 4 about 36 percent of the cars. People have actually tried to 5 participate in a program actually can participate. 6 Under ARB's proposal, it's going to drop by about 7 a third. 8 Now, based upon some of the latest modifications, 9 we're a little bit closer and that's why we fully support 10 the recommendation. 11 CHAIRMAN RIORDAN: And I thank you very much and 12 your timing is perfect. 13 Joel Swartz. Give your name for the record, 14 please. 15 MR. SWARTZ: Thank you. My name is Joel Swartz. 16 I'm with Ecology Auto Wrecking. We are a auto dismantler. 17 We are the current dismantling contractor for the ARB's 18 pilot program. We're also the contractor for the Ford 19 program, which other people have mentioned. 20 I'm actually here this evening to make a few brief 21 comments on behalf of not only Ecology Auto, but also 22 Pick-and Pull and Pick-a-Part. 23 Jointly we have probably processed probably 24 two-thirds of the vehicles that are dismantled through 25 normal attrition and other methods in the state in each PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 372 1 year. 2 We also probably account for perhaps 90 percent of 3 the used auto parts sales in the states, so I think we have 4 some impact. 5 We applaud the modifications that staff has 6 approved today. I think they are a step in the right 7 direction for making this a working program. 8 I would like to suggest, however, couple of other 9 areas that need to be addressed. 10 I think one of them is we're aware of staff's 11 concerns about parts resales. I don't want to get into all 12 that. But with specific reference to tires and batteries, 13 these are very generic items, they're not tied to any one 14 specific car. They can in fact be used by many many other 15 cars, including brand new cars. 16 These items are of great import, again, as 17 Mr. Bohanan and others have mentioned, to a significant 18 portion of the community. Many many people who operate 19 these target vehicles that you're after tend to be 20 low-income people, those are the people who represent a 21 substantial part of the customer base for self-service auto 22 dismantlers. 23 If you want to see that, come to any one of our 24 yards on a rainy day and you'll see there's a number of 25 people out there still getting parts, not because they want PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 373 1 to, but because they have to. 2 I think it's counterproductive to deny the sale of 3 batteries and tires. It would also have a direct impact on 4 the cost of operating these programs. 5 And I would like to suggest that there are several 6 items in the eligibility criteria which need to be 7 addressed, namely a great many of these vehicles do operate 8 without things like door panels, without the original hood 9 and trunk latches. These things are not safety related. 10 Even gauges to some extent they would not prohibit the 11 regular use of the vehicles. I think denying participation 12 because of these items, unless you perhaps say, well, if 13 they have two or three of these rather than one, would 14 substantially increase the participation in the program. 15 Thank you. 16 CHAIRMAN RIORDAN: Thank you very much. 17 Jun Mendez. I'm probably not pronouncing that 18 correctly. 19 MR. MENDEZ: Good afternoon Madam Chair, members 20 of the Board. My name is Jun Mendez. I'm with 21 Pick-Your-Part. 22 And currently I'm the vehicle scrapping contractor 23 for the Bay Area Air Quality Management District and the San 24 Joaquin Valley Unified Air Pollution Control District, and 25 also with South Coast Air Quality Management District. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 374 1 I'm standing here today as part of a group effort 2 of self-service dismantlers and scrappers to inform the 3 Board of our views on the proposed regulations for the 4 voluntary accelerated light-duty vehicle retirement. 5 On my part, I would like the Board to be aware of 6 Appendix E1 of the staff report. Specifically, the letter 7 to the State of California, the Spanish Association, to 8 Ms. Betty Fernandez of Department of Consumer Affairs, 9 Bureau of the Automotive Repair, the letters in appendix 10 section 4 A of the report, to reinforce staff's 11 justification on the prohibition of parts resale. 12 The state's major self-service dismantlers, 13 College Auto Wrecking, Pick-and-Pull and Pick-Your-Part 14 strongly disagrees with the message of this letter. 15 Although the three of us are members of the association and 16 are responsible for about two-thirds of all vehicles 17 scrapped in the state every year, not one of us was 18 consulted, even though the three of us are involved in 19 vehicle retirement programs for various air districts. 20 It's true that the program will cause shortage of 21 available parts on the nationwide parts locating network, 22 but it will surely cause shortage of availability of cheap 23 parts in the state or in the air district that gets the 24 bigger share and the retirement of these vehicles in the 25 event of M1 getting funded. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 375 1 As an example of price comparison, a starter, an 2 '81 starter if you buy it from a dealership will cost you 3 about $140. A full-service dismantler which chooses to 4 network will charge you $40 on it. But self-service 5 dismantlers like us will charge you 16 to 17 dollars. 6 And I guess I'd like to make a comment on the one 7 comment Ms. Fregoso said about San Joaquin Valley, that's a 8 completely no parts resale, I think that is not true, 9 because I'm the contractor. We could sell the tires and the 10 batteries and chrome on those vehicles. 11 Thank you very much. 12 CHAIRMAN RIORDAN: Thank you very much. 13 Next is Charlie Peters, followed by Robert Lucas, 14 Scott Ross, Andrew Nantz and Wayne Smith. 15 MR. PETERS: Chairwoman Barbara Riordan, it's been 16 a while. 17 CHAIRMAN RIORDAN: I know it has. 18 MR. PETERS: Good evening. 19 CHAIRMAN RIORDAN: Good evening. 20 Identify yourself for the record. 21 MR. PETERS: Yes. I'm Charlie Peters of Clean Air 22 Performance Professionals and we're a coalition of motorists 23 that is actually worldwide. We won the Hemmings Motor News 24 Hobby Year Award, two years prior to this past year. The 25 gentleman who won that this past year was the Petersen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 376 1 gentleman, the Petersen Museum in Los Angeles is named 2 after, and he owns -- he had several car magazines that went 3 worldwide. 4 I provided, I hope, some documentation as to what 5 our position on this is. 6 We have been very interested in car crushing and 7 we were provided a copy of Senate Bill 501, what became 8 Senate Bill 501, by a WSPA representative before it was even 9 entered into the Legislature. 10 We reported on that in our newsletter in Hemmings 11 Motor News and have been interested in this issue and 12 reported on it steadily over this time. 13 We were certainly not invited into and did not 14 participate in the stakeholders' meeting. 15 We believe that smog check, if it's appropriately 16 managed and appropriately carried out, because right now it 17 gets its job done correctly about 20 percent of the time. 18 The Air Resources Board 1100-car study in 1991 showed about 19 a 20 percent effectiveness. 20 We believe, based on past practices, that that can 21 be increased to an 80 percent effective program, and that 22 would make a very significant reduction in the emissions and 23 would set up a lot of cars to go to scrapyards, a 24 competitive marketplace scrapyard system that would not cost 25 the taxpayers. It would provide parts for the cars that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 377 1 need repairs. And that could be actually effective and 2 measurable. 3 In 1993, in May of '93, the Bureau of Automotive 4 Repair met with a coalition of people which included oil 5 companies, associations, educators, Bureau of Automotive 6 Repair staff, AQM guru of the state government and agreed to 7 start a pilot study to start within 45 days to find out if 8 in fact we can improve the performance of smog check. As of 9 yet we have not seen that come to fruition. 10 Mr. Dunlap has been provided that information. 11 Many people in the room have been provided that information 12 over time. 13 We would petition you, Barbara, and the Air 14 Resources Board to consider that possibility. That's a 15 situation that would provide the public with competitive 16 marketplace systems that would preserve cars, keep them from 17 becoming broken, and make a tremendous environmental impact 18 in the State of California. 19 CHAIRMAN RIORDAN: Thank you, Charlie. 20 Charlie, if you weren't contacted, if you want to 21 provide your card to Dr. Steele right there near you where 22 you're standing, we'll be happy to contact you on any other 23 item that might be of interest to you. I'm sorry we didn't 24 do that before. 25 MR. PETERS: That would be very much appreciated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 378 1 CHAIRMAN RIORDAN: Good. Give her a card, please. 2 Mr. Lucas. 3 MR. LUCAS: Thank you, again. My name is Bob 4 Lucas, representing the California Council for Environmental 5 and Economic Balance. 6 And as I think most of you are aware, CCEEB has 7 long been a proponent of credit programs and market-based 8 solutions to induce emission reductions. 9 And it's particularly true in this case, because 10 this is a working program. 11 Our interest in this regulation is primarily 12 focused on eligibility criteria as it affects currently 13 operating programs. 14 And you might want to take a look at this 15 regulation from that perspective for a moment, because, 16 unlike other regulations where you're building something new 17 from scratch and there isn't an operational history, here 18 these regulations will overlie currently operating programs 19 and will have an impact on how those programs can proceed. 20 We have been working with the staff to reduce the 21 impact on eligibility and therefore the universe of vehicles 22 that can participate in these programs, and we're satisfied 23 at this point that we have, I think, achieved the optimum 24 balance, if you would. 25 We're as concerned as the staff is with double PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 379 1 counting issues and we want to be sure that we resolve those 2 to absolutely the best of our ability and we support the 3 supplemental staff language to that regard. 4 With regard to the proposal before you today as it 5 was presented by staff and as it has been proposed to be 6 amended, CCEEB supports it. 7 Thank you. 8 CHAIRMAN RIORDAN: Thank you very much. 9 Scott Ross, followed by Andrew Nantz, followed by 10 Wayne Smith and finally John White. 11 MR. ROSS: Ladies and gentlemen, I'm Scott Ross, 12 managing editor of Drive Media, Concord, California. 13 And my comments echo those of SEMA and Clean Air 14 Performance Professionals and of the recycling and used 15 parts industry. 16 Basically in a nutshell, this program makes no 17 sense to the collector, to low-income Californians. It 18 constitutes economic racism. 19 And I will, even if the Board does adopt this 20 program as it is proposed, I will suggest to my magazine's 21 250,000 monthly readers and the 1,120,000 visitors to our 22 web site every month, that they contact the California 23 Legislature and support the current level of funding for 24 this program, in other words zero. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 380 1 CHAIRMAN RIORDAN: Mr. Nantz. 2 MR. NANTZ: Good evening. My name is Andy Nantz 3 and I'm the president of the Association of California Car 4 Clubs. 5 Everybody else has spoken in front of me has 6 basically said everything that I really wanted commit to or 7 say, other than to just a couple of things. 8 One, the outlook of the original legislation that 9 collectors should have a consideration towards them doesn't 10 mean the purchase of a complete vehicle. Cities and 11 counties within the State of California have initiated such 12 restrictive light ordinances that we no longer can have 13 parked cars on our property, due to the fact that they'll be 14 removed. 15 So the unaccessibility of having parts to us, 16 i.e., a door handle or a taillight lens, makes it very 17 restrictive on the accessibility of the collector or an 18 enthusiast or a hobbyist to acquire the pieces needed to 19 keep a collector car running, not a commuter car or a daily 20 driver. 21 But we license them as specialty vehicles and we 22 want to maintain them. We want to keep the history going in 23 the State of California. We can easily see it dissipating 24 and disappearing from us in the future. 25 New cars aren't designed to last 20 or 30 years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 381 1 The old cars probably weren't designed to last 20 or 30 2 years either, but they were made out of steel and other 3 substances that don't deteriorate, such as the newer cars. 4 And all the major supporters of this issue at the 5 beginning when they were recognized, most of them were not 6 collectors or enthusiasts. Most of them were either the 7 state chamber of commerce, the new car manufacturers or the 8 oil industry. And most of those people, I don't feel, are 9 looking towards the brighter outlook for the collectors as a 10 major issue in their bottom line. 11 And then just as a side comment, I think an issue 12 of this when you look at a maximized accelerated vehicle 13 retirement program, it's also a combination accelerated 14 vehicles and social reengineering. When you remove the less 15 expensive vehicles from the marketplace it makes it 16 restrictive on what lower-income people can own and operate. 17 I appreciate your time. Thank you. 18 CHAIRMAN RIORDAN: Thank you, Mr. Nantz. 19 Mr. Wayne Smith, followed by John White. 20 MR. SMITH: Thank you, Madam Chairman and other 21 members of the Board. My name is Wayne Smith and I took a 22 day off from work and I came here from San Diego to talk, 23 and I would like to make my first point that I think that 24 given the fact that I've taken this kind of responsibility 25 to get here and speak here, three minutes I don't think my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 382 1 government should limit me to. 2 But I'm a private owner of a car. It's a 1923 3 Ford. I've also got a 1937 flatbed. 4 And it was just about a month ago that I heard 5 about this thing happening today, and I decided to show up. 6 I've got five major points. 7 One, I think the title may be misleading. 8 I think the math is wrong and misleading. 9 I think the logic used may be flawed. 10 And I think that the civil rights of individuals 11 may be compromised. 12 And, yes, I think that I've got another solution. 13 The title. If you will, the Spanish have a 14 saying, a monkey inside of a shiny armored suit is still a 15 monkey. And a rusted piece of junk with fresh paint is 16 still a rusted piece of junk. 17 And I think to have a proposal which scraps 18 vehicles and call it voluntary, I'm scared. I'll be honest 19 with you guys. I'm very scared for my cars, my future cars 20 and other people that might have cars that today we are 21 voluntary, next time we put a little pressure, the next time 22 we put a little more pressure, and the next thing you know 23 it's not voluntary and my cars are gone. 24 It's already been mentioned about the 25 California -- the San Diego County study that admits that is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 383 1 twice as effective to repair and upgrade and put 2 emissions -- I mean, to put catalytic convertors or 3 whatever. 4 I have to admit that your page 375 provides an 5 interesting humorous thing, that one of the criteria is 6 going to be like does the turn signals work. Well, in my 7 '23 roadster, my turn signals work all the time, but if I'm 8 not in the vehicle, it doesn't. 9 My '23 Ford was designed to run, run well, last a 10 long time, and it's been in existence for 70 some odd years. 11 How can anyone announce emissions standards for my 12 vehicle when it wasn't designed originally to have emission 13 standards whatsoever? It was designed to run and work well. 14 And it's worked very well. 15 The civil rights issue has already been talked 16 about, the fact that 80 percent of scrap vehicles belong to 17 minority groups and 66 percent of all scrap cars belonged to 18 Hispanics. 19 I give you a hypothetical. Suppose we have two 20 identical vehicles, both produce pollutants of equal 21 amounts, both qualify for action under State Bill 501. If 22 one car was owned by a poor Latino person in Southeast LA 23 who owns the car to get to work, and the other was just 24 driven the 50-mile course of the Concourse D'Elegance at 25 Pebble Beach, would these cars be on -- would these owners PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 384 1 be treated equally? I think not. 2 Would the civil rights of both be treated equally? 3 I think not. 4 I think that the poor Latino person with his 5 little '70 Pontiac, heaven forbid I drive that thing, but a 6 '70 Pontiac trying to get along, just doesn't have the 7 money, the wherewithal, the fight to propose any kind of 8 proposed scrappage. 9 Solutions. And I have a bunch of them. 10 CHAIRMAN RIORDAN: You know. Let me make an offer 11 to you, Mr. Smith. 12 MR. SMITH: Thank you. 13 CHAIRMAN RIORDAN: Nothing is ever in concrete, 14 and I hope you've submitted some of those solutions. But 15 I'll be happy to have staff meet with you and get some of 16 those ideas. You know, I really respect your coming as far 17 as you did, and I want to make it worth your while. So I'm 18 hoping that maybe I can talk Mrs. Steele into having some 19 time with you. 20 Do you have a little more time after we conclude 21 this item? 22 MR. SMITH: Well, yeah. 23 CHAIRMAN RIORDAN: Good. All right. 24 MR. SMITH: I have a flight at 6:40, but I will 25 stay. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 385 1 CHAIRMAN RIORDAN: I'll give you -- I don't see 2 Mr. White out there. Am I correct in thinking Mr. White 3 isn't here? 4 I'll give you a couple of minutes of Mr. White's 5 time. 6 MR. SMITH: Thank you. 7 I agree we need to reduce pollution. I absolutely 8 totally agree to that. It's a jungle out there, the little 9 black lines. I totally agree with that. 10 But the parts of the car that actually cause 11 pollution is like the rings, the valves, the intake 12 manifold, whatever the hell. 13 It makes no sense at all to scrap the vehicle, the 14 beautiful wooden wheels, the fenders, the door handles. 15 San Diego has come up -- second idea. San Diego 16 has come up with a proposal to retrofit polluting cars with 17 whatever, to the tune of $500 a vehicle, plus $75 a year to 18 the owners. I would have no trouble at all retrofitting my 19 car to do that. 20 Recycling cars and parts is very cost effective 21 and makes parts available, inexpensive, business base, tax 22 revenue for the government. 23 And finally, the last statement here, if you will, 24 and I thank you for indulging me. 25 In 1923 catalytic convertors and other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 386 1 pollution-removing techniques did not exist. I fear that in 2 the future -- and by the way I hope that in the future some 3 other technology might be developed which will permit 4 present polluting cars to run pollution free. 5 But if we crush the vehicles today, they're not 6 going to be there tomorrow, and the historical evidence of 7 engineering of the days gone past will be gone. 8 CHAIRMAN RIORDAN: Okay. Mr. Smith, I think 9 you've used all of Mr. White's time. 10 MR. SMITH: One sentence. 11 CHAIRMAN RIORDAN: So if you don't mind -- one 12 sentence. 13 MR. SMITH: One sentence. 14 CHAIRMAN RIORDAN: One sentence. 15 MR. SMITH: My grandfather told me when you see 16 the last elephant, you've seen the last one when you've seen 17 the last 1923 Ford. 18 Thank you. 19 CHAIRMAN RIORDAN: And then if you'll stay for 20 Mrs. Steel and she will get together with you. 21 That concludes the witness list. 22 Let me ask if staff has any other item for 23 conclusion, letters, do you want to read -- 24 MR. LOVELACE: Madam Chairman, we have a number of 25 letters, some 40 letters opposing the proposal, specifically PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 387 1 regarding the recycling of parts. Some of these were by 2 e-mail, by the way. 3 Some of the -- two of the -- three of the comment 4 letters were on issues that were not addressed by other 5 witnesses. 6 The small manufacturers' representative wanted to 7 use credits generated through these programs to meet some of 8 their emission standards requirements. That's really 9 outside of the scope of this hearing, because it involves 10 the use of the credits, where this, our proposal, addresses 11 the creation of credits. 12 Citizens for a Better Environment had two main 13 comments. They say, quote, can be summarized into two main 14 points. The proposed regulations fail to ensure that 15 emission reductions are real, permanent and quantifiable, 16 and to prevent the type of toxic hot spots and 17 discriminatory impacts that CBE and others have documented 18 in South Coast District rule 1610. 19 And adoption of the VAVR regulations constitutes a 20 project within the meaning of CEQA and ARB has failed to 21 conduct a public environmental review required by CEQA. 22 Finally we have a letter from the Union of 23 Concerned Scientists. They support our proposal to prohibit 24 parts resale and reuse. They recommend that we require 25 on-site inspection. They support our three-year remaining PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 388 1 life for the vehicles. They recommend that we evaluate and 2 report back to the Board on the impacts of this on 3 low-income communities and communities of color. Recommends 4 a thorough ongoing review of the M1 program if and when 5 funded. 6 CHAIRMAN RIORDAN: Thank you. 7 Mr. Kenny, any other item? 8 MR. KENNY: No other items, Madam Chair. 9 CHAIRMAN RIORDAN: Are there any questions of 10 staff at this time by any of the Board members? 11 Let me then -- Mr. Parnell. 12 MR. PARNELL: I'll defer. 13 CHAIRMAN RIORDAN: No. I just want to close the 14 record. 15 MR. PARNELL: In the interest of time, it's 16 curious to me that the technical review panel recommended 17 that you use a different criteria for the determination of 18 useful life, based on the models that we already use, as 19 opposed to straightline three years. I would like to have 20 you expand on that bit. 21 And the folks that are here seem to be concerned 22 that there's not going to be an availability of parts that 23 they may need, in addition to some other concerns, but that 24 seems to be the center focus. 25 It would seem to me, was the number 700,000 cars PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 389 1 that are dismantled every year? That is the correct number? 2 Those parts are available to those folks on a regular basis. 3 Seems to me in the middle of here in the middle of all this 4 conversation somewhat of a disconnect. 5 MR. KENNY: If I might I'm going to turn it over 6 to staff for the first question. 7 But in terms of the second question, there are 8 700,000 cars a year that are dismantled and go through that 9 process. And this process that we're talking about, the 10 voluntary retirement program, is only really addressed about 11 6,000 cars per year. 12 There are opportunities for people to at least see 13 whether they want to -- see, those 6,000 cars are cars that 14 need to be essentially maybe pulled out of the program such 15 that they wouldn't be scrapped. 16 What we're talking about, though, is we're using 17 public monies or we're using private monies to scrap 18 vehicles, and we want to make sure that in fact what happens 19 is that those public or private monies are used for the 20 scrappage of vehicles, really goes to the reduction of 21 emissions. 22 And to the extent that parts would be used to 23 maintain old cars and allow them to continue to run, we see 24 that as essentially counterproductive to what we're trying 25 to do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 390 1 With regard to your first question, I'll turn it 2 over to Mr. Lovelace to answer the three- and six-year 3 distinction. 4 MR. KITOWSKI: Actually, my name is Jack Kitowski. 5 We keep rotating here. 6 With regard to the question on the life, the TAG 7 committee chaired by Mr. Calhoun addressed a large number of 8 issues which related to the calculation methodology. And a 9 lot of them tended to deal with whether we're going to use 10 actual in-use data, whether we're going to do testing, 11 whether we're going to do modeling, and more generically the 12 concept came up that we should use the emissions model that 13 the ARB uses in all of its inventory calculations. 14 It wasn't until really after the TAG finished its 15 work that the issue of credit life got a little, shall I 16 say, a little more discussion occurred on it after the TAG 17 had completed its work, specifically focusing on the credit 18 life. And a couple of things came out of that. 19 As you heard today, one of the things is six-year 20 life in a accelerated retirement program, we're paying a set 21 amount. We are not likely to get the vehicles that have the 22 most remaining vehicle life. 23 This is not going -- very likely not going to be 24 the average vehicle, and so that would lead us to tend to be 25 a little more cautious than normal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 391 1 And the second factor is since M1 is currently 2 unfunded, really what these programs are being used for is 3 credit programs in the districts where they offset 4 stationary source emissions, and that especially commented 5 by the South Coast District, that lends itself to being even 6 more cautious if there are stationary sources that are going 7 to be using these to have higher emissions. 8 So we did decide to pull back from what our 9 inventory model dictates, and we pulled back to more 10 cautious three-year life, which is what it currently is in 11 the credit programs. 12 MR. PARNELL: Okay. 13 CHAIRMAN RIORDAN: Ms. Rakow. 14 FROM THE AUDIENCE: Can I respond to that? 15 CHAIRMAN RIORDAN: I think not. And I appreciate 16 your interest and you were one of the members, but I think 17 we really have to move along. 18 Mrs. Rakow. 19 MRS. RAKOW: A question for staff. 20 I wondered what kinds of discussion might have 21 taken place to reduce the impact on the low-income 22 communities and the environmental justice question in other 23 words. Or has there been in the last couple years 24 particularly? I recognize this wasn't an issue maybe in the 25 TAG committee. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 392 1 MR. CROSS: I'm not sure I can -- I'm going to 2 give you a practical view of it as a person who visits the 3 junk yards that these folks are talking about fairly often. 4 The 700,000 cars that are being scrapped now are 5 in fact many of those are, in fact all of them, many of them 6 are ending up in these pick-a-part or remove-a-part type 7 scrapyard stream. And in other words if you go to these 8 yards now, they're like 1970s to '80 model year cars 9 typically. And those are the cars that produce the parts 10 for the low-income folks through their normal attrition. 11 And in fact if you go to those junk yards, very 12 very rarely do you actually find a collectable car, because 13 I've looked for parts at them. 14 So I think the 700,000 dying through normal 15 attrition are producing the parts that the low-income people 16 need, and that the 6,000 that come through the scrap program 17 with the few cars that are collectable that might come 18 through that are peeled off of that aren't going to have any 19 impact one way or the other. 20 MRS. RAKOW: I wasn't thinking of the parts 21 program. I was thinking of the impact on the community, on 22 the low-income. 23 MR. CROSS: What I'm saying is there's no -- 24 there's no impact. In other words, the normal attrition of 25 cars, the big number, the 700,000 will continue as it always PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 393 1 has and the parts availability through normal attrition of 2 the cars that are dying at about the same age as the ones 3 that the low-income folks are using will also continue. 4 MRS. RAKOW: So you don't think that this program 5 has any environmental justice aspect? 6 MR. CROSS: No. 7 MR. KENNY: Mrs. Rakow, if I might. There have 8 been allegations of environmental justice consequences to 9 programs like this. 10 In particular those kinds of allegations were 11 raised in context of rule 1610 in the South Coast and how 12 the emissions reductions from rule 1610 were reused to 13 compensate for another rule that was applicable to 14 stationary sources. 15 In that context, what we are doing is trying to 16 essentially provide kind of a level of caution that 17 Mr. Kitowski talked about, because what that does is it 18 provides a greater level of certainty that in fact we are 19 getting reductions from these particular types of vehicles. 20 And I think that does at least to some extent 21 alleviate the environmental justice concerns, but not 22 completely. 23 And what we're trying to do there is we actually 24 have a number of programs that we are working with 25 Monitoring Laboratory Division in which we are looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 394 1 different parts of the state and doing fairly intensive 2 monitoring to ensure that in fact we can learn as much as we 3 possibly can about those areas, and then we can make 4 determinations as to what we can do to again further 5 mitigate environmental justice issues. 6 CHAIRMAN RIORDAN: Any other questions? 7 MS. EDGERTON: It is late in the day and I'm not 8 going to take a lot of time. I only want to say for those 9 people who are here who may not have been here in 1994 when 10 we approved the SIP and all the subsequent hearings that 11 we've had on this subject, that one reason why you're not 12 going to hear a lot from me is because I've heard a lot 13 about it over the years, and we've had this issue before us 14 quite a lot. 15 I have just a couple of points to make here. 16 One is just to remind that this is just one part 17 of a very comprehensive and enormous clean air plan, which 18 seeks to provide clean air to all Californians, irrespective 19 of race or income level. And I think the benefits will -- I 20 believe the benefits will be there for all people in 21 California, and that is in fact the public value that we are 22 asked by the Congress and the California Legislature to 23 pursue in this agency. 24 So I'm going to support it. 25 I'm going to thank the staff very much for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 395 1 bringing this to a closure four years later, so that I can 2 leave this Board with M1 filled in. 3 Thank you. 4 CHAIRMAN RIORDAN: Let me do this. Let me close 5 the record. 6 Oh, I'm sorry. Supervisor Roberts. 7 SUPERVISOR ROBERTS: I'll be very brief. 8 I'm sitting here feeling uncomfortable because in 9 the past I've supported both scrappage and repair, and I'm 10 wondering is there any reason -- I know this is an issue in 11 repair, but is there any reason it could be a repair program 12 in this area? There's nothing implicit in what we're doing? 13 MR. KENNY: What we're trying to do really is sort 14 of develop the regulations under SB 501 that would 15 essentially implement our scrappage program. So it really 16 is more of a scrappage program. 17 SUPERVISOR ROBERTS: I understand that, but if for 18 whatever reason we want to initiate a repair program in that 19 area. 20 MR. KENNY: I think we can do that as long as the 21 funding became available. So I think the answer is yes. 22 CHAIRMAN RIORDAN: Let me close the record, if I 23 might. All right. I will now close the record on this 24 agenda item. 25 However, the record will be reopened when the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 396 1 15-day notice of public availability is issued. 2 Written or oral comments received after this 3 hearing, but before the 15-day notice is issued, will not be 4 accepted as a part of the official record on this agenda 5 item. 6 When the record is reopened for a 15-day comment 7 period, the public may submit written comments on the 8 proposed changes, which will be considered and responded to 9 in the final statement of reasons for the regulation. 10 This item does have ex parte requirements. Are 11 there any ex parte communications that any Board members 12 need to disclose? 13 I don't see any, so we can move on. 14 And you have a resolution that's before you. This 15 is resolution 98-64, Board members. 16 SUPERVISOR PATRICK: Motion. 17 CHAIRMAN RIORDAN: Entertain a motion. 18 SUPERVISOR PATRICK: Motion to approve. 19 CHAIRMAN RIORDAN: Yes. 20 SUPERVISOR ROBERTS: Second. 21 CHAIRMAN RIORDAN: Supervisor Patrick made the 22 motion to approve. Supervisor Roberts seconded. 23 Any discussion on the motion? 24 Hearing or seeing none, I'm going to use a voice 25 vote on this. All those in favor signify by saying aye. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 397 1 (Ayes.) 2 CHAIRMAN RIORDAN: Opposed, no. 3 (No response.) 4 CHAIRMAN RIORDAN: The motion is carried. We'll 5 move forward. 6 We'll take a brief moment for the staff to 7 exchange positions and we'll move on to the fourth item, 8 Item 98-14-4. 9 (Thereupon a short recess was taken.) 10 // 11 // 12 // 13 // 14 // 15 // 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 398 1 CHAIRPERSON RIORDAN: Well, we will move to the 2 fourth Item, 98-14-4. 3 Okay. Again, I would like to remind you if you 4 wish to give testimony, I think, the lists are still 5 available out at the tables for you to sign up. 6 The next Item is 98-14-4. This is a public hearing 7 to consider amendments for the California exhaust standards 8 for on-road motorcycles. 9 Mr. Kenny, would you introduce the Item? 10 MR. KENNY: Yes. Excuse me. 11 Thank you, Madam Chairman and Members of the Board. 12 This evening staff will present a proposal for reducing 13 emissions of criteria pollutions from on-road motorcycles. 14 Upon full implementation, the proposal will provide 15 a portion of the emission reductions necessary to achieve our 16 clean air goals in the South Coast Air Basin and throughout 17 the State. 18 The ozone -- State Implementation Plan includes 19 measures to reduce emissions from various State controls that 20 includes cars, heavy-duty trucks and off-road equipment, 21 exclusive or practical Federal controls, such as airplanes, 22 ships and locomotives. 23 It relies on development of advanced and 24 supplemental technology measures to provide additional 25 emissions reductions needed for attainment in the South Coast PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 399 1 Air Basin. 2 The ARB adopted the first on-road motorcycle 3 regulation in 1975 to reduce ozone formula emissions from 4 this category. The regulation established exhaust and 5 evaporative emissions standards for hydrocarbons beginning 6 with the 1978 model year. 7 In 1984, the Board amended the model year 1985 8 hydrocarbon standard to give manufacturers more flexibility. 9 At that time, the Board directed ARB staff to revisit the 10 regulation and propose more stringent standards when 11 catalytic converters and other emissions controls 12 technologies had matured sufficiently so that it would be 13 feasible to apply these technologies to on-road motorcycles. 14 Based on the information evaluated for this 15 rulemaking, the ARB staff believes emission control 16 technologies have reached its feasibility point. Significant 17 progress in controlling emissions from on-road motorcycles 18 has been achieved since 1984, particularly in Europe. 19 However, the ARB motorcycle standards have not kept 20 pace with these developments. In developing the proposal, 21 the staff has taken considerable steps to address and 22 accommodate the concerns of affected stakeholders. 23 This is reflected by the numerous changes which the 24 staff's proposal underwent from the beginning of this 25 rulemaking process to the final proposal before you today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 400 1 The significant changes to the current estimated 2 emissions inventory for on-road motorcycles also reflect the 3 inclusion of much of the data provided by motorcycle industry 4 representatives. 5 Staff's proposal was developed through an extensive 6 public process, involving two workshops and numerous 7 individual meetings, which the staff and the Ombudsman's 8 Office will discuss in more detail. 9 The staff's proposal includes two new standards for 10 on-road motorcycles, which for the first time will limit 11 emissions of both hydrocarbons and nitrogen oxides. 12 The first and second standards are proposed to 13 become effective in five and nine years, respectively, 14 providing stakeholders with adequate time to make the 15 necessary design and marketing changes to meet consumer 16 needs. 17 The proposal also includes provisions for small 18 volume manufacturers to reduce the impacts on these 19 companies, several of which are located in California. 20 To increase flexibility the proposal includes 21 provisions for corporate averaging and early compliance 22 credits to help manufacturers meet the standards, 23 particularly the second tier standards. 24 Floyd Vergara, of the Mobile Source Control 25 Division, will now make the staff presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 401 1 Floyd. 2 MR. VERGARA: Thank you, Mr. Kenny. 3 Is this working? 4 Chairman Riordan and Members of the Board, good 5 evening. My name is Floyd Vergara, and I will present for 6 your consideration the staff's proposed amendments for the 7 on-road motorcycle regulation. 8 I will begin by providing you with some background 9 information, including a review of the updated emissions 10 inventory for this source, and I then will discuss the 11 staff's proposal, what impacts we are projecting, the 12 alternatives we evaluated and the outstanding issues. 13 Finally, I will go over the changes we are making 14 in our proposal, and I will briefly outline the future 15 activities we are planning as follow-up to this rulemaking. 16 As you heard from Mr. Kenny, the ARB adopted the 17 first on-road motorcycle regulation in 1975 and last amended 18 it in 1984. 19 At that time, the Board directed staff to propose 20 more stringent standards when automotive-type emission 21 controls have matured sufficiently for application to on-road 22 motorcycles. 23 In the 14 years since then, the motorcycle 24 standards have lagged advances in emission controls for 25 automobiles and other motor vehicles. As a result, a modern PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 402 1 motorcycle emits about 11 times more smog-forming emissions 2 per mile than a modern car. 3 In our assessment of control technologies for 4 motorcycles, we have found that modern cost-effective 5 controls are feasible for these vehicles. It is, therefore, 6 our belief that the time has come to revisit the on-road 7 motorcycle regulation so that its standards better reflect 8 emission control technologies available today. 9 Because the SIP does not specifically plan for 10 reductions from on-road motorcycles, our proposal represents 11 a new reduction effort aimed at supplementing the SIP. 12 As this graph indicates, large motorcycles with 13 engine displacements of 280 cubic centimeters or greater make 14 up the vast majority of sales for motorized, two-wheeled 15 vehicles in California. 16 Within this group of large motorcycles is the 17 fastest growing sector in the so-called heavyweight motor 18 bike, with engines displacing 700 cubic centimeters or 19 greater. 20 The heavyweights comprise over 80 percent of the 21 yellow slice, and their sales are growing rapidly. 22 Heavyweights are classified under various categories, 23 including sport bikes, custom, terrain and cruiser bikes. 24 Vehicles not affected by this proposal includes 25 smaller motor bikes, typically 150 cubic centimeters or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 403 1 smaller, and mopeds and scooters, those with engines of 50 2 CC's or less. 3 Please also note that the off-road motorcycles are 4 subject to another regulation and are not affected by this 5 proposal. 6 The existing on-road motorcycle emissions inventory 7 shown here for 1990 is based on U.S. EPA assumptions dating 8 back to the 1970's. 9 To update the emissions inventory for this 10 category, staff used a variety of sources, including survey 11 data provided by Motorcycle Industry Council, data obtained 12 from DMV registration, and data from ARB in-use compliance 13 program, the motorcycle certification database and the 14 current surveillance project. 15 The upgraded estimate model using -- in fact, 7 G 16 reflects the full turnover of the fleets since the last Board 17 amendment in 1984, and it also reflects a 25 percent overall 18 decrease in vehicle registrations in the past few years. 19 The upgraded estimate also reflects a 34 percent 20 equipment tampering rate, as suggested by the MIC survey 21 data. 22 Please note that even with these upgrades to the 23 inventory, it is clear that on-road motorcycles represent an 24 important source of Statewide hydrocarbon and NOx emissions. 25 Currently large motorcycles are subject to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 404 1 hydrocarbon only exhaust standards. As noted earlier, these 2 standards were adopted when the Board last amended the 3 regulation in 1984 and took effect beginning with the 1985 4 model year. 5 As you can see, heavyweight motorcycles are 6 currently allowed a higher emissions limit than other large 7 motorcycles. However, our analysis shows that the proposed 8 new standards can be applied to all large motorcycles to 9 better reflect modern emission controls. 10 We are proposing two new exhaust emission limits 11 that would limit NOx emissions for the first time as well as 12 hydrocarbons. 13 The first standard referred to as Tier 1 limit 14 hydrocarbon plus NOx emissions from all new large motorcycles 15 to 1.4 gram per kilometer, as proposed, tier 1 would be 16 effective beginning with the 2004 model year. 17 The second standard, known as tier 2, would further 18 reduce emissions down to 0.8 grams per kilometer, and we are 19 proposing that standard to be effective beginning with the 20 2008 model year. 21 As with the existing regulation, compliance with 22 these two new standards would be on a corporate average 23 basis. Individual engines within a specific family would be 24 allowed to certify at up to 2.5 grams per kilometer 25 hydrocarbon plus NOx, provided the corporate average for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 405 1 entire engine family meets the tier 1 and tier 2 limits. 2 To provide the proper context, this slide compares 3 the current emissions level of new large motorcycles and 4 staff proposed standards as compared with the 2004 and 2008 5 fleet average standards for vehicles. 6 As you can see, our proposed standards will reduce 7 current large motorcycle emission levels. However, as this 8 slide shows, automobile manufacturers will be producing cars 9 significantly cleaner than the tier 2 compliance motorcycles. 10 Before we discuss the technologies needed to meet 11 these standards, let us first review the technologies that 12 are used on current 1998 motorcycles. 13 Most new motorcycles are equipped with carburetors. 14 Relatively few use fuel-injection systems at this time. By 15 comparison, nearly every new car sold in California uses 16 fuel-injection. 17 Furthermore, unlike every new car sold in 18 California comes equipped with a catalyst, only handful of 19 motorcycle engine families currently use catalytic converters 20 to meet the existing standards. 21 Instead, the most common emission control equipment 22 found on current motor bikes is a rudimentary pulse system 23 that introduces air into the exhaust to help combust 24 hydrocarbons that were not burned in the combustion chamber. 25 In developing the tier 1 standard, we began with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 406 1 the premise that an interim standard based on non catalyst 2 technologies is needed to gradually shift the industry toward 3 lower emission levels. 4 Therefore, our approach to developing the tier 1 5 standard focused primarily on reducing engine out emissions 6 and increasing the use of simple pulse air injection to 7 reduce overall emissions. 8 To meet the tier 1 limit, manufacturers would not 9 need to make substantial changes to most of the motor bikes. 10 We project the industry as a whole would need to reduce the 11 emission level by about 25 percent to meet the tier 1 level. 12 This is because approximately 60 percent of the 13 affected motor bikes already certified at or near the 14 proposed tier 1 limit. Many motorcycles would be able to 15 meet the standard with carburetors as the fuel delivery 16 system of choice, while others would need more precise fuel 17 metering provided by electronic fuel injection. 18 As I noted earlier, this standard was designed to 19 be met primarily with non catalyst, readily available 20 technologies, so we do not expect catalyst would be required 21 for most motorcycles under this first standard. 22 Based on our technical assessment and discussions 23 with industry representatives, we project manufacturers will 24 use relatively simple engine modifications and will increase 25 the use of pulse air injection engine modifications, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 407 1 including reducing volumes in the combustion chamber to 2 reduce the trapping of unburned fuel, techniques to reduce 3 oil consumption and increasing valve overlap, among other 4 techniques. 5 Looking beyond tier 1, we recognize that 6 substantial reductions could not be achieved without the 7 increased use of catalytic converters. However, it is our 8 understanding that the removal of catalyst as a misguided 9 attempt to improve performance is prevalent in some sectors, 10 particularly the sport bike market. 11 Therefore, our goal in designing tier 2 was to set 12 a standard that reduces the effects of such tampering by 13 allowing the most tamper-prone part of the market to remain 14 at the non catalyst, tier 1 level, while the remainder would 15 use catalyst. 16 Under our proposal the industry could choose to 17 leave 40 percent of the market comprised of sport bikes at 18 the non catalyst tier 1 level, and then equip the remaining 19 60 percent of motorcycles with catalysts to certify 0.4 gram 20 per kilometer, which we found to be achievable. 21 Production of catalyst and non catalyst bikes under 22 this scenario would result in an overall corporate average of 23 0.8 grams per kilometer. 24 However, this is by no means the only possible 25 scenario, and the regulation gives each manufacturer the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 408 1 flexibility to determine the mix of catalyst and non catalyst 2 motorcycles appropriate for its marketing strategy needs 3 while meeting the tier 2 standard. 4 We project that the tier 2 standard would reduce 5 emissions by about 60 percent compared to current new models, 6 as noted earlier. We project that up to 60 percent of the 7 market would use electronic fuel-injection for precise 8 metering and computer control pulse air to reduce cold start 9 emissions. 10 These techniques would be used in combination with 11 high efficiency, three-way catalyst and feedback control. In 12 addition, we anticipate manufacturers would minimize engine 13 out emissions with increased use of tier 1 type engine 14 modifications. 15 Our discussions with stakeholders indicate that 16 some manufacturers are capable of meeting the tier 2 standard 17 or even lower levels before the 2008 model year. To 18 encourage production of such early or over compliant 19 motorcycles, we are proposing a provision which would 20 effectively multiply the averaging power of these motorcycles 21 sold before 2008. 22 This provision is comprised of multipliers which 23 would apply to each unit of early or over compliant 24 motorcycles sold between 1999 and 2008, the incentives 25 decrease in value as we approach the tier 2 compliance year PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 409 1 of 2008. 2 Credits issued under this provision will make it 3 easier for manufacturers to meet the tier 2 corporate average 4 limit in 2008, as you will see in the next slide. 5 Our proposal essentially gives manufacturers 6 interest on their early compliance investment. The proposal 7 encourages manufacturers to spread out the sales of tier 2 8 complied motorcycles over several years before they are 9 required in 2008. 10 In this example, a manufacturer who sells just 11 under 4100 units stretched out over 5 years will get credited 12 for the equivalent of 5,000 units for use in calculating the 13 2008 corporate average. 14 Note that without the early compliance provision 15 this manufacturer would have been credited only with the 16 1,000 units sold in the year 2008 for calculating the 17 corporate average for that year; therefore, without this 18 provision, manufacturers would have little incentive to 19 introduce compliant motorcycles before they are required. 20 Of course, the multiplier effect is even more 21 dramatic with the sales of motorcycles that are certified at 22 or below 0.4 grams per kilometer. 23 As we conducted our analysis, we determined that 24 some small volume manufacturers may be adversely impacted by 25 the tier 2 standard due to the lack of technical and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 410 1 financial resources. 2 To reduce these impacts, we proposed in the staff 3 report a small volume manufacturer provision which defined 4 such companies as selling no more than 1,000 motorcycles of 5 all classes per year in the State. 6 However, as I will discuss later, we are changing 7 this proposed cutoff to 300 units per year. 8 We are proposing that no new standards apply to 9 these companies until 2008 when the tier 1 standard would 10 take effect. This would give these companies an additional 11 four years to make the transition. 12 We are proposing that no additional requirements 13 apply to this group of companies. Please note that small 14 volume manufacturers represent only about three percent of 15 the market for large motorcycles in California. 16 The proposal will have a positive environmental 17 impact on ozone and particulate matter levels by reducing 18 hydrocarbon and NOx emissions. 19 We identified no adverse environmental impacts. As 20 you can see, we are projecting just under three tons per day 21 Statewide hydrocarbon, NOx reductions upon full turnover of 22 the fleet to tier 2 levels. 23 In our modeling runs, we assumed no change in the 24 34 percent tampering rate suggested by the Motorcycle 25 Industry Council survey data. These benefits should improve PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 411 1 reduced tampering rates. 2 Later in my presentation I will discuss our plans 3 for quantifying and reducing effects of tampering. 4 Small businesses which we evaluated in this 5 analysis include dealers, small volume manufacturers and 6 after-market parts suppliers. 7 We anticipate that dealers will have a full 8 selection of models to sell. This belief is based on the 9 commercial and the technological feasibility of the standards 10 as well as the nine years manufacturers have to meet the 11 second standard. 12 As noted earlier, small volume manufacturers should 13 see no impact from our proposal until 2008, at which point 14 they would experience impacts equivalent to the tier 1 level. 15 Finally, we note that after-market parts suppliers 16 would need to design their products to accommodate catalytic 17 converters by 2008. 18 In our analysis, we looked at a variety of factors, 19 including a variable production cost, fixed-cost, such as 20 support and research and development, and investment cost and 21 dealership cost. 22 We obtained cost figures from manufacturers and 23 part suppliers, then checked the reasonableness of the cost 24 figures using our experience with other mobile sources which 25 use similar equipment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 412 1 Based on our analysis, we project that tier 1 limit 2 would increase the cost of a new motorcycle by about $44 3 relative to a new 1998 motorcycle. By comparison, the 4 average price of a current new bike is $7600. 5 Assuming that the cost of the compliance of the 6 tier 2 standard is amortized only for California sales 7 volume, we project the cost increase per new bike would be 8 $210 relative to new 1998 motorcycle. It will be as low as 9 $110 if a manufacturer chooses to amortize costs over 10 national sales. 11 The worst case estimate yields a cost increase of 12 less then three percent per bike. This is not expected to 13 dampen demand for motorcycles, since a 10 percent cost 14 increase is generally recognized as a level which sales may 15 be adversely impacted. 16 These cost increases translate to a cost 17 effectiveness ranging from about $3 to around $5.40 per pound 18 of hydrocarbon NOx reduced. This is comparable to other 19 regulations that have been adopted. 20 To complete our analysis, we evaluated alternatives 21 to our proposal. Adopting no new standards would not help us 22 in our attainment efforts; therefore, the reduction to be 23 achieved under our proposal would need to be achieved at the 24 expense of some other emission source. 25 This raises an equity issue, particularly given the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 413 1 fact that other mobile sources have been required to apply 2 modern emission controls, while the standards for on-road 3 motorcycles have stagnated over the last 14 years. 4 The second alternative we considered is to adopt 5 more stringent standards. During this rulemaking, we 6 determined emission levels lower than the current proposed 7 tier 2 limit are technologically feasible. 8 However, such lower limits potentially have a 9 significantly greater burden to manufacturers and consumers 10 in terms of cost. 11 This slide shows the emission benefits that we 12 project from the Motorcycle Industry Council's proposal. As 13 noted previously, we project our proposal would reduce 14 emissions by 1.3 tons per day by 2010, which would increase 15 to 2.9 tons per day by 2020 when the fleet is expected to 16 fully turnover to the second tier level. 17 By comparison, we project the MIC's proposal would 18 achieve significantly less reductions, and by 2020 the MIC's 19 proposal would reduce emissions by less than half of the 20 staff's proposal. 21 Despite our diligent efforts, we remain in 22 disagreement with the Motorcycle Industry Council and other 23 stakeholders on several issues. 24 First the MIC believes we have under-estimated 25 costs. Their cost estimates are about doubled the staff's. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 414 1 However, the MIC has not provided sufficiently detailed 2 information to allow us to evaluate the validity of its 3 analysis. 4 Our analysis is documented in the technical staff 5 report, and it is based on the best available data from our 6 discussions with manufacturers and emission control suppliers 7 and from our experience with other mobile source categories 8 that use technology similar to the ones I discussed earlier. 9 The MIC also believes that the benefits from this 10 proposal will be offset by tampering and the migration of non 11 California motorcycles into the State, while we believe there 12 are insufficient data to arrive at the MIC's conclusion. 13 We will be conducting follow-up studies to better 14 quantify whatever effects tampering and migration may have on 15 this regulation. 16 The last issues concern the small volume 17 manufacturer provision. Some manufacturers believe that the 18 current proposed standards, the current proposed sales 19 cut-off of 1,000 units per year is too high, while others 20 believe the cut-off is too low. 21 Definitions using 300 to 3,000 units per year has 22 been suggested. We have re-evaluated our proposal in light 23 of these suggestions and believe it would be appropriate to 24 define small volume at the 300 units per year level. 25 I will discuss this change in our proposal in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 415 1 next slide. 2 Finally, the MIC believes that small volume 3 manufacturers should be subject to the tier 2 limit at some 4 point in the future. 5 We have not yet determined whether it would be 6 feasible at some point to apply the tier 2 limit to small 7 volume manufacturers, but our plan progress review in 2006 8 should provide better information to make the appropriate 9 determination at that time. 10 I will discuss the progress review in a few 11 minutes. 12 To further refine our proposal, we are suggesting 13 some additional changes. First, we are proposing to apply 14 the regulation to both motorcycle manufacturers and to 15 complete engine suppliers. 16 We recently became aware of companies that supply a 17 fairly large number of whole engines to individual small 18 volume companies either as original equipment or as 19 after-market engines. 20 We believe it would be equitable to apply the 21 proposed requirement to these engine suppliers because they 22 compete directly with the original equipment manufacturers. 23 We are also proposing to lower the cut-off for 24 defining small volume manufacturers. This would essentially 25 limit the provisions to those companies that are truly small PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 416 1 in both sales volume and available resources while bringing 2 in some well-financed manufacturers who have the technical 3 resources to meet the proposed standards. 4 Finally, there are some technical changes we are 5 proposing to clarify the small volume manufacturers 6 provision. 7 As a follow-up to this rulemaking, we are planning 8 to conduct a review around the 2006 time frame. The review 9 will enable us to retrospectively look at the success of tier 10 1 compliance motorcycles and then prospectively evaluate 11 manufacturers' efforts to meet the tier 2 limit. 12 Based on the progress review, we will also revisit 13 the small volume manufacturer provisions at that time to 14 determine if it's still needed. 15 Our second plan follow-up is to work closely with 16 the Motorcycle Industry Council and other interested 17 stakeholders to better quantify tampering rates and its 18 effects on emission levels and ways to reduce such tampering. 19 To summarize, this proposal achieves a reasonable 20 balance between the need to achieve all possible reductions 21 and the need to minimize impacts to our stakeholders. The 22 staff's proposal begins to address the inequity of requiring 23 modern control technologies on other mobile sources while the 24 on-road motorcycle standards have lagged behind these 25 developments for the last 14 years. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 417 1 No major technological breakthroughs are required 2 with this proposal. The new standards that achieve 3 reductions through the gradual use over the next nine years 4 of technologies available today and already used on some 5 motorcycles. 6 In designing this proposal, we have taken numerous 7 steps to address concerns raised by stakeholders. From these 8 efforts, we believe we have crafted a proposal which is 9 commercially and technologically feasible. 10 That concludes my presentation. Thank you very 11 much for your time. 12 CHAIRPERSON RIORDAN: Thank you. 13 Board Members are there any questions for the 14 staff? 15 I do not believe there are at this time, and so we 16 will begin with our witness list. 17 Let me invite Tom Hoelter to come forward, followed 18 by Tim Buche and Tom Austin. 19 Tom Hoelter. 20 MS. STEEL: Madam Chair, you forgot the Ombudsman. 21 CHAIRPERSON RIORDAN: Oh, I am sorry. 22 The Ombudsman report. 23 I apologize, Mr. Hoelter. Just one moment. 24 MS. STEEL: I will try to be brief, and I thought 25 that maybe you had other plans for this. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 418 1 So, let me go through this. 2 To develop the exhaust emissions standards for 3 on-road motorcycles, staff held 27 meetings and 2 public 4 workshops throughout 1998 to obtain public input over the one 5 year time frame of the rule development process. 6 Staff contacted the major manufacturers and trade 7 associations and invited them to individual meetings with 8 staff in January and February of this year. All major 9 motorcycle manufacturers were invited and met with staff more 10 than once, BMW, Honda, Kawasaki, Harley Davidson, Suzuki and 11 Yamaha. 12 Smaller volume manufacturers were also invited to 13 meet with staff individually, and Triumph Motorcycles 14 accepted that invitation and did met with staff. 15 In addition to meeting with manufacturers, staff 16 met with -- staff, in addition to meeting with the motorcycle 17 manufacturers, staff met with representatives of the 18 Motorcycle Industry Council, The American Motorcyclist 19 Association and KAH Wolf Consulting, representing small 20 volume and after-market manufacturers and the California 21 Motorcycle Dealers Association. 22 In order to explore small volume and after-market 23 parts manufacturers issues, staff invited some 35 of the 24 smaller manufacturers to a meeting in El Monte, on May 5, 25 which was attended by 11 industry representatives. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 419 1 A follow-up meeting was held last week, on December 2 first. Two workshops were held in El Monte, and the notices 3 were mailed to at least 470 people and were posted on our 4 Internet Website. 5 The first workshop was held on July first and 28 6 people signed in. Following the workshop, staff held three 7 additional meetings with manufacturers for the second 8 workshop, which was on October seventh, 32 people signed in 9 to the second workshop. 10 There was at least one additional meeting following 11 the issuance of the staff report. As I said before, for a 12 total of at least 27 meetings with manufacturers and 13 interested trade and consumer associations. 14 Thus, the Ombudsman Office finds that the outreach 15 process for this item was thorough, complete and designed to 16 obtain input from all interested stakeholders, although as 17 you heard from staff, they are not in complete agreement on 18 all items. 19 CHAIRPERSON RIORDAN: Thank you very much. I am 20 sorry that I went out of order. 21 I guess I got too excited to hear all these 22 witnesses. 23 MR. HOELTER: My name is Tim Hoelter. 24 I am the Vice President of Regulatory Affairs of 25 Harley. On behalf of Harley, I would like to thank you for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 420 1 the opportunity that you are giving us this evening. 2 CHAIRPERSON RIORDAN: Can you speak up or put the 3 microphone a little bit more into --- it does not sound like 4 it is on. 5 Behind you is the technician. 6 MR. HOELTER: Okay. Now that is better. 7 I will not repeat my introduction. 8 As you know, Harley has been working closely with 9 the staff of the Air Resources Board throughout this rapid 10 rulemaking process, and I would like to emphasize the words 11 working closely with. 12 Although we have identified some procedural and 13 substantive issues that we believe must be raised and have 14 done so in a letter to this Board, the substance that I will 15 not repeat in my testimony, we have also worked extremely 16 hard to provide you and your staff with all information that 17 has been requested and to cooperate with the staff to the 18 maximum extent possible in this effort. 19 Since 1909, the center piece of the Harley 20 motorcycle has been the air-cooled, 45-degree angled V-twin 21 cylinder engine. More than anything else, the feeling, clean 22 look of the engine and the classical styling of our 23 motorcycles represent what makes a Harley Davidson motorcycle 24 a Harley. 25 If imitation is the sincerest form of flattery, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 421 1 then Harley should be quite flattered, because there are many 2 companies who are trying to copy the look of our bikes. 3 Harley sells motorcycles worldwide, and we are 4 committed to compliance with regulatory standards, wherever 5 we market and sell our motorcycles, including the State of 6 California. 7 Our ties to California are not limited. Tens of 8 thousands of Californians have joined the Harley's Owners 9 Group. In fact, our commitment to California begins with the 10 53 independent Harley Davidson dealers in California. 11 These dealers are local small business people who 12 employ more than 800 Californians. Our commitment to them 13 and their customers is paramount. 14 Harley Davidson is not opposing the adoption of the 15 rule. However, there are a few things we believe should be 16 mentioned. 17 We understand the staff's thinking for proposing a 18 two-tiered standard that achieves initial reductions in the 19 2004 time frame and additional reductions in the 2008 time 20 frame. 21 Harley submitted information on technological 22 review of the achievable reductions in the 2004 time frame 23 and concluded that the proposed standard of 1.4 was 24 achievable. 25 However, as of today, we have been unable to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 422 1 provide the level of detailed technological review that would 2 allow us to support the 0.8 standard for the 2008 model year. 3 However, we are committed to doing everything we can to meet 4 the 2008 proposed target. 5 If it can be done, it will be done. We are 6 optimistic. 7 Throughout the rule, Harley Davidson worked with 8 CARB in an exchange of ideas and information regarding a 9 technologically achievable role that meets the interest of 10 all Californians. 11 The timing of this process itself, however, limited 12 our ability to completely achieve this goal. When we first 13 learned of the proposed standards and schedule at the 14 beginning of the year, the staff proposal was to have a 0.2 15 gram combined standard for the 2003 model year. 16 Harley began reviewing technology and engine design 17 to determine if it was an achievable standard. 18 Unfortunately, it was not. 19 As we set to work the proposed standard was set to 20 0.4 grams. That also proved too stringent. I think everyone 21 would know acknowledge that both of these levels were too 22 aggressive and not appropriate. 23 However, we spent many hours evaluating them. In 24 the past few months, Harley Davidson has been working closely 25 with the staff to continue the evaluation of proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 423 1 standards and exchanged information regarding certain 2 technology issues. 3 Just a few weeks ago, at the staff's request, we 4 brought a motorcycle out to California for testing by CARB 5 along with two of our engineers to provide assistance. It is 6 that level of cooperation and communication that we would 7 like to see repeated at the early stages of any future 8 process involving CARB review. 9 As this process is drawing to a close, we would 10 like to acknowledge our appreciation for the cooperation and 11 open lines of communication with CARB staff and you, the 12 Board, that has developed over the past few months. 13 Harley Davidson also appreciates CARB's 14 attentiveness and openness with respect to our input. We are 15 particularly appreciative of the access we had to meet with 16 Mr. Dunlap, who was acting as Chair, and with Mr. Calhoun, 17 for traveling to Harley and inspecting our operations. 18 The small manufacturer exception is also extremely 19 important at Harley Davidson. We are not seeking that small 20 manufacturers be treated in any prejudicial way. 21 In fact, we believe that the language in the 22 proposal before you today along with the most current 23 amendments in the staff report represent a fair compromise 24 between competing interests. 25 However, were the proposal to change in this arena PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 424 1 it would adversely alter our position before you today. We 2 feel that the small manufacturers exemption cannot be relaxed 3 without further damaging the entire proposal. 4 As it stands now, small manufacturers have a 5 permanent exemption from the same standard that the rest of 6 the industry must make significant sacrifices to meet. 7 In conclusion, the proposal before this Board taken 8 with the amendments provided with the current staff report 9 presents a challenge for Harley and its dealers, a challenge 10 that we are prepared to do our very best to meet. 11 We are relying on the continued relationship with 12 this Board and its staff to achieve success for all 13 stakeholders. However, if the Board proposes to make changes 14 to the staff's recommendation, we cannot maintain the same 15 position. 16 On all of the issues addressed in the proposal, our 17 efforts to cooperate have yielded what to us is the best 18 compromise to the industry and California citizens. 19 Therefore, I respectfully request that the proposal 20 be adopted with the staff recommended amendments. 21 Thank you very much. 22 CHAIRPERSON RIORDAN: Thank you very much, and I 23 appreciate that. 24 A question of the witness? 25 Ms. Edgerton. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 425 1 BOARD MEMBER EDGERTON: Yes. 2 I want to ask, sir, you have mentioned that you 3 think there should be a true sunset provision to terminate 4 automatically the regulatory advantage to the small 5 manufacturers at a date certain in the future. 6 What date would you think would be appropriate? 7 MR. HOELTER: Well, the way it is now established, 8 there will be review of the appropriateness of the small 9 manufacturers exception, I believe, about in the 2006 time 10 frame, and if people keep an open mind and look at what is 11 available then in terms of technology, I am confident that 12 the Board will decide a few years later that ultimately small 13 manufacturers must meet the same standards that all 14 manufacturers have to meet to provide for the public health 15 and welfare of the citizens of the State. 16 BOARD MEMBER EDGERTON: If I understand you 17 correctly, you would be comfortable with the 2006 true sunset 18 provisions? 19 MR. HOELTER: No, that is not what I said. 20 What I was saying is that in the current staff 21 proposals, as I understand it, there is a review now that is 22 laid out in the proposal that will take place in 23 approximately 2006. 24 As part of that review, the staff has committed 25 with the Board to looking specifically at a sunset provision PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 426 1 or the appropriateness of the current small manufacturer 2 exemptions, and if people are reasonable, I have every 3 confidence that ultimately small manufacturers will be held 4 to the same degree of regulatory compliance as the rest of 5 the industry. 6 BOARD MEMBER EDGERTON: Thank you. 7 I would like to follow-up with staff. 8 I was trying to see if he would prefer. I would 9 prefer a date certain terminating the benefit. 10 Why did you choose to just have a review instead of 11 a terminating preference at the time certain? 12 I do not see the fairness of leaving an 13 indefinitely open door to any segment. 14 MR. KENNY: What we were trying to do is 15 essentially be fair about our approach here, and the small 16 volume manufacturers when you only get 300 units as being a 17 cut point, only total about 3 percent of the market, and to 18 the extent that they have limited resources in many instances 19 and to the extent that we need them to then take advantage of 20 the resources that are then extended by the larger 21 manufacturers to achieve compliance, what we were looking for 22 is a way of essentially allowing the small volume 23 manufacturers to sort of take advantage of the technology 24 advances that are made by the larger manufacturers. 25 BOARD MEMBER EDGERTON: Why would they do that if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 427 1 they do not have any sunset? 2 MR. KENNY: What we will do in 2006 when we do the 3 technology review, we would basically have that as one of the 4 specific issues that we would bring before the Board, and we 5 would ask the Board to make a determination at that time that 6 the small volume manufacturers should potentially comply with 7 that tier 2 standard, probably not in 2008, in fact, if 8 technology warrants it, but probably in some later date. 9 BOARD MEMBER EDGERTON: Well, my concern is that 10 often when there is an open-end like that, and particularly 11 with the small manufacturers, I am concerned that they do not 12 even start on the project because they do not have any 13 certainty that they are going to have to start on the 14 project, and then you can ride up against the door of a 15 project, and they go, oh, I cannot do this now, and then you 16 really have been kind of - you really have not been as 17 proactive as you may be. 18 MR. KENNY: Well, they are going to have to start 19 on the process, because of the fact the tier 1 standards are 20 applicable to them in 2008. 21 So, they have a little bit more time to comply with 22 the tier 1 standards. By doing the technology review before 23 the tier 1 standards are applicable to them, and if we have 24 the opportunity to look and determine whether or not we 25 should actually go one step further, the technology transfer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 428 1 that would have occurred up to that point and time in 2006 as 2 a result of compliance with tier 1 and as a result also 3 anticipated compliance with tier 2 by the larger 4 manufacturers, will give a lot of information in terms of the 5 availability to comply by the small volume manufacturers. 6 BOARD MEMBER EDGERTON: Well, then I will support 7 it with the idea that it will give the staff more 8 information. 9 CHAIRPERSON RIORDAN: Thank you, Ms. Edgerton. 10 And there may be more testimony on it before we 11 conclude. 12 Let me call Tom Austin, and Tim and you are going 13 to have to give me Tim's last name, because I -- 14 MR. BUCHE: Good evening, Madam Chair and Board 15 Members. My name is Tim Buche. I am the President of the 16 Motorcycle Industry Council. 17 MIC members include 27 original equipment 18 motorcycle manufacturers and/or distributors, and 251 19 companies in the business of providing parts and accessories, 20 as well as all the trade businesses which are engaged in 21 publishing, advertising, insurance, financial services, 22 consulting, et cetera. 23 We represent virtually all manufacturers and 24 distributors, except Harley Davidson, which chooses not to 25 join. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 429 1 Our presentation to the Board will be divided into 2 two parts. I will summarize our position and present it, and 3 Tom Austin, of Sierra Research, will then provide additional 4 details regarding the emission analysis and other information 5 that support our conclusion. 6 Sierra Research was retained by the Motorcycle 7 Industry Council to assist in the analysis of emissions 8 inventory issues and to translate confidential submissions 9 from member companies that could be disclosed publicly. 10 Individual member companies may also provide 11 information and testimony to the Board. However, the 12 membership has agreed that the MIC should take a lead role in 13 addressing alternatives to the staff proposal as it applies 14 to large volume manufacturers. 15 Despite manufacturers specific differences and the 16 difficulty associated with meeting the proposed standards, 17 the member companies agree that there are practical problems 18 associated with the standard that forces the widespread use 19 of catalytic converters, and we do not question the 20 technological feasibility of the proposed standards. 21 In fact, I am sure there has been countless times 22 that the Board has heard representatives of an industry come 23 before it and claim that the emissions standards proposed by 24 the staff are not feasible, and the magnitude of the 25 emissions reductions associated with the proposal are not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 430 1 significant. 2 That is not the message I am bringing to you today. 3 Our member companies believe they will be able to comply with 4 the proposal presented in the October 23 staff report. 5 Our concern with the proposal is that it appears to 6 have been designed to force much greater use of the catalytic 7 converters. This creates three fundamental problems that the 8 Board needs to consider first, because of the relatively low 9 production volumes of on-road motorcycles and low mileage 10 accumulation rate, the cost-effectiveness ratio associated 11 with the staff's proposal for 2008 is in the range of $10 per 12 pound. 13 This would make this one of the most expensive 14 motor vehicle emission control measures ever considered by 15 the Board. It is 10 times more expensive per pound to 16 control than the staff's estimate for the recently adopted 17 LEV 2 standards. 18 More detailed information on that will be presented 19 by Mr. Austin highlight the problems with the staff's 20 assumption regarding the cost associated with meeting the 21 proposed 2008 standard. 22 Please note that we are not opposing the proposed 23 interim of 1.4 grams per kilometer in 2004, because it is 24 very close to the alternative proposed by the Motorcycle 25 Industry Council. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 431 1 Our second concern is that the additional emissions 2 controls required to comply with the proposed standards will 3 reduce the practicality of producing vehicles that can be 4 certified on the 50-state basis. 5 Now, under the current standard, many popular 6 models are already different in their California 7 configuration, and some models are not available at all in 8 the State of California. The staff report contains a claim 9 that the more stringent standards will increase the model 10 availability. 11 We are quite certain that the opposite is true. 12 Reduced model availability and an increase in California-only 13 versions of other models will adversely affect the sales and 14 create an incentive for circumventions of the California 15 standards. 16 Finally and most importantly, the benefits that the 17 staff assigns to its proposal will not be realized. In 18 customer service, many catalysts are removed by owners, as 19 will be explained in the second half of our presentation. 20 The emissions from catalyst-equipped motorcycle 21 that has been tampered with will be far higher than emissions 22 from a motorcycle designed to meet a less stringent standard 23 that does not require the use of a catalytic converter. 24 As a result, an alternative standard proposed by 25 MIC will provide virtually identical emissions reductions at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 432 1 a significantly lower cost and with significantly fewer model 2 availability problems. 3 Mr. Austin will now expand on these points, and at 4 the conclusion of his remarks, we will both be available to 5 answer questions that the Board may have. 6 CHAIRPERSON RIORDAN: Thank you, Mr. Buche. 7 Mr. Austin. 8 MR. AUSTIN: Thank you. 9 I would like to refer to a table that is in our 10 written presentation that appears on page 3 of the second 11 section of the MIC comments. I will abbreviate what I have 12 in my full written statement and say that I want to focus my 13 comments on the differences we have with the staff regarding 14 the effectiveness of the 1.2 gram alternative that the 15 Motorcycle Industry Council has proposed and the .8 gram 16 proposal of the staff. 17 We believe that the graph the staff showed is not 18 accurate in terms of what the impact of the 1.2 alternative 19 will be compared to the .8 standard. 20 We also believe that, as Mr. Buche mentioned, the 21 model availability problems are going to be significant, and 22 the staff report essentially concludes there will be no model 23 availability problems, and we believe that model availability 24 problems will be increased. 25 The reason the staff concludes there will be no PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 433 1 model availability problem is they are assuming that all 2 manufacturers will choose to certify the .8 standard on a 3 50-state basis. 4 The current standard is only 1.4 grams hydrocarbon 5 only, and under that standard there are many models that are 6 not certified, and there are a number of very popular models 7 end up being equipped with catalyst in their California 8 configuration, and the tampering rates with those models is 9 especially high, and there are other models that are outright 10 unavailable. 11 The staff report has a rationale for why 50-state 12 certification will be popular, which essentially says 13 correctly that if the manufacturers chose to voluntarily put 14 California controls on nationwide production, the average 15 cost per vehicle would be lower. That is true. 16 But is also true that the total cost to each 17 manufacturer of doing that would be higher, and competitive 18 pressures are going to make it impossible for manufacturers 19 to elect to voluntarily put the California systems on 20 nationwide productions, and that is why we think that the 21 staff proposal overstates the benefits of the catalyst 22 standard, because the migration and tourism is a factor over 23 time, and there will be higher emissions from the 49-state 24 bikes that will come in to California eventually, and we 25 think will account for 14 percent of EMT, and the staff's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 434 1 proposal, the staff's calculations assumes that 49-state EMT 2 will be zero percent in the future. 3 We do not think that is right, and we are convinced 4 there is going to be an increasing model availability 5 problem. 6 I now want to focus your attention on the table on 7 page 3 of the written testimony, labeled table 1, on-road 8 motorcycles emissions on the South Coast Air Basin for 9 calendar year 2020, we chose calendar year 2020 as the focus 10 of our comments here, because, as was discussed previously in 11 an earlier item, it will not be until about 2020 that the 12 effects of this proposal are fully realized. 13 It will take that long to completely turn the fleet 14 over. So, we are focusing on 2020. 15 We are focusing on the South Coast Air Basin. 16 These numbers are different numbers than the staff showed 17 you, because we are focused on tons in the South Coast Air 18 Basin and the staff's numbers were based on tons per day 19 reductions Statewide, and that is one of the differences, but 20 the important points here on this table consistent with the 21 staff's assumptions we also calculate that by 2020 in the 22 South Coast Air Basin the total HC plus NOx emissions from 23 this source will be 3.2 tons per day. 24 That is shown on line 3 of Table 1. 25 The staff's estimate of what will be achieved under PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 435 1 the .8 gram proposal is that those emissions will come down 2 from 3.2 to 2.17. 3 The staff may have estimates of this which are 4 different by hundredths of a ton, and we did the best we 5 could to duplicate what was in the staff report, and we know 6 we were very close coming down to about 2.17. 7 We have done a completely independent estimate of 8 what we think will happen under .8 gram standard, and even 9 though we disagree with many of the staff's assumptions about 10 the effects of tampering and 49-state vehicles and so on, we 11 come up with almost the identical estimate of 2020 emissions 12 in the South Coast Air Basin. 13 Under the staff's proposal, 2.21 tons per day, 14 which is shown on line 5 of our table now, we get into where 15 we have the significant differences between MIC and the 16 staff. 17 Our estimate of the 1.2 gram alternative is 18 different from the staff's estimate. The staff estimates 19 under the 1.2 gram alternative that the total emissions will 20 only come down to 2.8 tons per day in the South Coast Air 21 Basin. 22 Our estimate is emissions will come down to 2.21, 23 identical to what they would be under the .8 standards. The 24 principal reasons for these differences has to do with what 25 the staff assumes what the tampering will be. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 436 1 The staff assumes that even though most of the 2 motorcycles will have catalyst, and catalyst is the primary 3 form of tampering the tampering, with the catalyst bike will 4 result in lower emissions than tampering with a non catalyst 5 equipped bike that is designed to meet a slightly less 6 stringent standard. 7 We have actually taken motorcycles that have 8 emission control systems of the type that the staff assumes 9 most manufacturers will use under the 2008 standard feedback 10 control fuel-injection with three-way catalyst, and we have 11 taken the catalyst off the bikes and measured the emissions, 12 and we have demonstrated and shared this with the staff. 13 The staff's estimates of what the emissions would 14 be of those tampered motorcycles are wrong. The emissions of 15 those tampered motorcycles will be higher than the staff has 16 estimated. 17 It is, to the best of our knowledge, and certainly 18 as of days ago staff has never tested a three-way catalytic 19 equipped motorcycle. 20 Let us look at what the emissions are for a vehicle 21 that has pulse air injection system with no catalyst. The 22 systems are going to be designed to meet an HC plus NOx 23 standard will not have pulse air, they will be running, and 24 when you take the catalyst off, the emissions of the non 25 catalyst bike will be substantially higher than the staff has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 437 1 estimated. 2 On the other hand, the emissions of bikes that 3 would be built under the alternative standard that MIC is 4 proposing at 1.2 grams per kilowatt, we are convinced will 5 have lower emission when they are tampered with. 6 Because the most common form of tampering is 7 replacing the original equipment exhaust system with an 8 after-market exhaust system, that will have essentially no 9 effect on bikes that are designed to meet that standard with 10 improved fuel metering and pulse air. 11 I will not bore you with some of the details on why 12 we are convinced that tampering will remain a very 13 significant problem. 14 The staff at the beginning of this process I think 15 did not believe that tampering was as serious a problem with 16 motorcycles as in fact it is. 17 Many people who ride motorcycles expect to hear the 18 exhaust, because the general public has a perception that the 19 main problem with motorcycles is they are noisy. 20 We have very stringent noise regulations that apply 21 to new motorcycles. They are so stringent that motorcyclists 22 who're used to accept the sound of regular equipment exhaust 23 no longer accept them and modify their original exhaust to 24 make the motorcycle sound the way that they prefer it to 25 sound. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 438 1 The staff is saying there is flexibility for a 2 significant percentage of the fleet and not have catalyst in 3 the future, 40 percent, we are convinced that is not right. 4 We agree to 60 percent of the bikes are likely to have very 5 effective catalyst systems, but when the staff assumes that 6 40 percent can get by without catalyst, we do not agree. 7 The reason for that is that right now in the 8 California market, very popular Harley Davidson models, very 9 popular Kawasaki models, all the BMW models already have 10 catalyst under a 1.4 gram kilometer hydrocarbon only 11 standard. 12 If we tighten that standard up to 1.4 hydrocarbon 13 plus NOx, the 40 percent that do not have to meet a three-way 14 catalyst forcing standard, that is going to require more 15 catalyst not less catalyst, and so we think we are talking 16 more like 80 percent catalyst usage under a .8 standard, and 17 when we take a look at what we firmly believe will happen 18 when the owners replace the exhaust systems with after-market 19 systems, our analysis shows that all of the theoretical 20 benefits of forcing more catalyst go away, and the State, the 21 air breathers would be better off if we stop short of forcing 22 the widespread use of catalyst and encourage the 23 manufacturers to build product that would be clean without 24 having to use as many catalyst. 25 There are catalyst now, and there will be more in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 439 1 the future. But the manufacturers really need the 2 flexibility to put the catalyst on the bikes that are least 3 likely to be tampered with. 4 CHAIRPERSON RIORDAN: Mr. Austin, I have been real 5 generous, because I know you are making some good points, but 6 you need to draw this to a conclusion. 7 MR. AUSTIN: Let me try to summarize quickly the 8 differences that we have with the staff on cost. 9 They are significant. We believe that the cost has 10 been under-estimated by the staff. We think we are talking 11 about something about $330 per bike to meet this standard. 12 Obviously, we are not going to tell you that that 13 will destroy the market. All we are telling you it is going 14 to result in a cost-effective ratio that is really out of 15 line with other mobile source control measures. 16 The final point I would like to make has to do with 17 this issue of how small volume should be treated compared to 18 large volume, which now has changed a lot under the most 19 recent staff proposal. 20 But one of the other advantages of stopping short 21 of forcing catalyst on most bikes is that the small volume 22 manufacturers are capable of meeting 1.2 gram standard that 23 stops short of forcing catalyst technology, and at one point 24 we were in a position where MIC was going to be able to come 25 forward and say we are representing both the small volume PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 440 1 manufacturers and the large volume manufacturers, and we are 2 prepared collectively to meet 1.2 standard. 3 When the staff pushed it to catalyst forcing, that 4 is when MIC was no longer able to represent both groups, and 5 you are faced with this possibility now of the precedent 6 setting action of setting a standard for smaller volume 7 producers, which, as the staff has proposed, would 8 permanently give them a less stringent standard than everyone 9 else is subject to. 10 If that goes away, if you accept MIC's alternative, 11 thank you. 12 I will be happy to answer any questions that you 13 might have. 14 CHAIRPERSON RIORDAN: Thank you, Mr. Austin. 15 I appreciate that. 16 Are there any questions for Mr. Austin at this 17 time? 18 I do not see any. 19 Thank you. 20 Mr. Lindquist, Mr. Paliwoda, Mr. Lombardo and 21 Kathleen Wolf, if you would be ready to testify. 22 Mr. Paliwoda. 23 BOARD MEMBER EDGERTON: I need to ask a staff 24 question. 25 Back on the small volume, one of the points that is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 441 1 in Mr. Austin's testimony and is actually Tim Buche's item 2 number 2 as written up here, is again on this point 3 suggesting that this small volume permanent exemption, which 4 I know you are not intending it to be a permanent exemption, 5 but it would create an incentive for the pulverizations of 6 smaller volume producers. 7 Now we have seen things like that in other areas 8 when up to 300, you do not have to comply, and then all of a 9 sudden somebody has 10 little companies all making 299 10 motorcycles. 11 What is your response to that? 12 MR. KENNY: Actually, what we have seen in the 13 motor vehicles and with regard to refineries that even when 14 we provided for small volume in both the automobile sector 15 and in the refinery sector, we actually saw the small volume 16 manufacturers diminish, and so what we are trying to do is 17 actually provide a mechanism here by which we can maintain 18 the presence of the small volume manufacturers in the market 19 and this is the way we think we can basically encourage that. 20 CHAIRPERSON RIORDAN: Okay. Mr. Lundquist. 21 MR. LUNDQUIST: Madam Chairman, Board Members, 22 staff, survivors in the audience, my name is Eric Lundquist. 23 I am the Senior Legislative Affairs Specialist with 24 the America Motorcycle Association. AMA is a national, non 25 profit organization of motorcyclist enthusiasts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 442 1 We have over 230,000 members nationwide and over 2 30,000 or about 30,000 of our members and their families 3 reside here in California. It is out of respect to the time 4 remaining this evening that we did not ask all of them to 5 come and give testimony as well. 6 CHAIRPERSON RIORDAN: We appreciate that, too. 7 MR. LUNDQUIST: Thank you. 8 You have my testimony before you written. I will 9 not repeat it all, except I would like to emphasize several 10 points that we do make there. 11 As we stated back in July, we would like to restate 12 again the CARB cannot force technology in today's world 13 motorcycle market. California is a mere 10 percent of the 14 United States motorcycle markets, and the United States does 15 not rule the world motorcycle market either. 16 The European union rules category three motorcycles 17 with its 340 million population and single standard rules, 18 and South East Asia and the other emerging nations rule 19 categories one and two. 20 We have been told repeatedly in meetings around the 21 world by representatives from the world motorcycling market 22 that they have absolutely no reservations about withdrawing 23 from the California market any machines that we feel they 24 cannot meet the standard or withdrawing completely themselves 25 from the market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 443 1 We have already seen the impact of a CARB 2 regulation on the off-highway market. That is only example 3 that we have to go on, and as you know that is revisited this 4 evening because the industry essentially abandoned our 5 market. 6 Second point that I would like to emphasize is that 7 the staff cost estimates of $3 to 5.60 a pound are really low 8 balling it, especially when they are compared with a dollar a 9 pound from the LEV, and currently fuel injection is perceived 10 as an added value item of about $800 to $1000. 11 This will undoubtedly drop with some higher use, 12 however, but the staff presumption $67.50 is probably very 13 much low balling it. 14 We also believe that the three-way cat estimate of 15 $30.21 is another low ball. We need cosmetic remedies and 16 safety remedies that you do not need in automobiles and that 17 you do not see in cars. 18 We would very much appreciate if CARB and 19 Motorcycle Industry Council would cease talking about vehicle 20 tampering and problems. We would prefer to see them known as 21 owner-modifications, and as all of you know, there are no 22 problems, only opportunities. 23 Motorcyclists are not your typical vehicle owner. 24 If it does not do what we want it to do, we will modify it. 25 In order, therefore, for you to achieve your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 444 1 stringent staff recommendations, this will require a very 2 heavy enforcement component. This then further will push the 3 cost estimate for compliance way up through the roof. 4 In conclusion, we, therefore, respectively request 5 a alternative standard of 1.3 grams kilometer combined 6 hydrocarbon and NOx, and this is well within line with the 7 European union second tier recommendation and very much in 8 line with what else is going on elsewhere in the world with 9 regards to emissions regulations. 10 CHAIRPERSON RIORDAN: Thank you very much. 11 Mr. Paliwoda and Mr. Lombardo, Kathleen Wolf and 12 then Bruce Bertelsen, if you would please cue up, too. 13 MR. PALIWODA: Madam Chairman, I would ask your 14 indulgence. 15 My presentation is a little bit longer than three 16 minutes, and my colleague, Mr. Lombardo, asked if he could 17 yield to me. 18 CHAIRPERSON RIORDAN: Absolutely. 19 MR. PALIWODA: I am John Paliwoda, from California 20 Motorcycle Dealers Association, and quite frankly, when we 21 heard about this regulation, the Association responded, we 22 question really the need for any change in on-road motorcycle 23 regulations. 24 The fact that they had not been changed since 1984 25 does not necessarily cast in stone that they have to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 445 1 changed for change sake, and what would I say something like 2 that since 1988 California delivered motorcycles for already 3 three and a half to five times cleaner than those delivered 4 in the rest of the United States and a lot of the world. 5 Let us look at the numbers. The staff gave you a 6 portrayal and picture that on-road motorcycles pollute seven 7 times more than automobiles. That is a picture of an 8 individual motorcycle and an individual car. 9 The real picture is the numbers. Out of 22 million 10 motor vehicles on California roads last year, 392,000 of them 11 were on-road motorcycles. According to the DMV, that 12 constitutes two percent of the motor vehicle population are 13 on-road motorcycles, and they emit, by the staff's own 14 previous figures, which have been lowered, that they emit 10 15 tons of ROG per day, at 1600 tons totally for all motor 16 vehicle sources. 17 Do the math. It is almost a half of one percent. 18 I think you have to visualize that figure versus an 19 individual comparison of vehicles. 20 That being said, over the months, the MIC and the 21 industry has had serious, well-developed counter-proposals 22 and a lot of dialogue with the staff about this. Basically 23 they have come to the conclusion that they can accept the 24 staff recommendation, 1.4 grams per kilometer NOx and HC, and 25 the problem remains in the second tier. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 446 1 I would ask you to consider the MIC proposal for 2 the second tier being raised to 1.2 grams per kilometer for 3 the technical reasons that they went through. 4 I will not rehash them. They are not necessary. 5 They are much better at that then I. 6 Now, why is the CMDA, why are the motorcycle 7 dealers even interested or why are they sensitive to this 8 situation? 9 It is the same potential and it is a real potential 10 that we face with the personal water craft regulations that 11 we have just gone through, and the experience we have had 12 with the off-road motorcycles, that indeed if a standard is 13 set too low, there is a very good possibility, and in that 14 case, manufacturers abandon the California market place to a 15 great extent, and it could be even worse with the on-road 16 motorcycles. 17 So, I would ask you to approve and consider very 18 seriously approving and approve the MIC proposal rather than 19 the staff proposal. 20 Thank you very much. 21 CHAIRPERSON RIORDAN: Thank you very much, Mr. 22 Paliwado. 23 Are there any questions for this witness? 24 I do not see any, and I thank you very much. 25 Kathleen Wolf, and Bruce Bertelsen, if you are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 447 1 available next, I would appreciate you coming up, and Stacey 2 Stewart follows Mr. Bertelson. 3 MS. WOLF: My name is Kathleen Wolf. I am an 4 independent consultant with 30 small volume motorcycle 5 manufacturers. 6 I will not waste your time by reading the names 7 into the record, or though if you prefer, I will do so. 8 Seven of those companies are California companies. Eleven of 9 them are members of the Motorcycle Industry Council, as I am 10 myself. 11 Small manufacturers as you have already been told 12 make up less than three percent of the California market. So 13 that means that the large manufacturers have between the time 14 the staff report was published at 1,000 units as a small 15 volume exemption have convinced the staff that it is unfair 16 for the small volume manufacturers to be cut off at 1,000. 17 Okay. The small volume manufacturers have 18 absolutely no access to any of the incentives provided, no 19 corporate averaging whatsoever. Most of these companies make 20 what is in effect one motorcycle that applies even to what 21 might be thought to be the medium smalls, such as say Ducati. 22 There will be problems of model availability. Each 23 manufacturer with whom I work currently complies with the 24 California standards. It is a matter of costs. 25 It costs $70,000 for emission testing for an engine PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 448 1 family. If they have to do it twice, and they will have to 2 do it twice, because they will not build California 3 motorcycles or they will not build 50-state motorcycles any 4 longer, although now almost all of them do. 5 They build a 49-state bike, and they will have to 6 make the decisions as to whether to remain in the California 7 market. 8 Mr. Ryden told me during a meeting on the first of 9 December that he would not tell me that what decision was 10 going to be made with regard to small manufacturers, and he 11 also told me he really had no obligations to consider 12 manufacturers which were not resident in California. 13 Well, the President of KTA Motorcycle told me this 14 morning that he just wrote his check for $50,000 for 15 California taxes, so he is in Ohio, and he deeply resents 16 this sort of thing. 17 It is also extremely unlikely that a very large 18 number of manufacturers will suddenly spring up for making 19 299 motorcycles. I go through with startups all the time, 20 the absolute hell that it is to certify motorcycles when you 21 do not have a large compliance staff. 22 They have me and one supremely harassed individual 23 who also does about 42 other things. So, no, that is not 24 going to happen. 25 I send potential motorcycle startups back into the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 449 1 weeds with cold cloths on their heads regularly, because it 2 is so difficult to do this. 3 I implore you to make a motion to increase the 4 small volume exemptions to 1,000, or alternatively agree with 5 Mr. Austin for the 1.2, and we will work like 60 to meet that 6 regulation. 7 We are not just hanging about doing nothing. We 8 are working within rather small resources to make these 9 changes and to comply with these regulations, and we are your 10 citizens, and seven of these companies exist in the State of 11 California entirely, providing jobs, and if the small guys 12 have to move out of California and not build motorcycles for 13 California, that is dealers and other small business people, 14 and I realize that this is not supposed to be a place for 15 emotion, but when Mr. Vergara says there will be no impact 16 until 2008, we have to start getting ready now, and we are. 17 So, again, I ask you for that thousand unit 18 exemption, because there is no corporate averaging, and there 19 is no banking and trading or any of that other stuff that the 20 large manufacturers have access to. 21 Thank you. 22 CHAIRPERSON RIORDAN: And we appreciate that 23 testimony, and thank you very much. 24 Bruce Bertelsen, if you would come forward, and 25 Stacey Stewart, and Clifford Finske, you will be following PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 450 1 Mr. Stewart. 2 MR. BERTELSEN: Good evening, and it is almost to 3 the point where I could say good morning, East Coast time. 4 CHAIRPERSON RIORDAN: Don't say that quite yet. 5 MR. BERTELSEN: For the record, I am Bruce 6 Bertelsen, Executive Director of the Manufacturers of 7 Emission Control Association. 8 We have provided written testimony, and I had 9 extensive conversation with the staff, so I will be very, 10 very brief. 11 MECA supports the proposal before the Board today. 12 We believe it is both technologically feasible and cost 13 effective. We believe that the staff has done an excellent 14 job at analyzing the issues, and the discussion is very 15 thorough and very fair. 16 Catalyst technology as suggested by the staff and 17 also by some of the previous folks who have testified will 18 likely play a role in complying with the proposed tier 2 19 standards. 20 That approach is going to involve a systems 21 approach with both an optimized engine and a catalyst match 22 for that system. 23 It is going to take work. We recognize that, but 24 we very strongly believe that can be done, and the tier 2 25 standard implementation, implementation of the tier 2 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 451 1 standard will provide the necessary regulatory incentive to 2 complete that development work. 3 I wanted to make a couple of additional comments 4 regarding the proposal. We support the elements of the 5 program that provide the manufacturers additional flexibility 6 for complying with these requirements, such things as 7 combining the hydrocarbon and NOx standard, the corporate 8 average approach and two tier approach, extra credit of early 9 introduction of clean products, all of those things we think 10 will help facilitate compliance with this proposed program. 11 I did want to make a few comments regarding the 12 tampering issue. Our design objectives working with the 13 engine manufacturers will be to have an engine catalyst 14 system that achieves the necessary emission reductions and at 15 the same time preserves the high performance of the 16 motorcycle. 17 That is a design objective on our part, and one I 18 am sure we share with the engine manufacturers. It is our 19 anticipation that a properly optimized system should not 20 adversely affect performance, therefore, the challenge will 21 be to educate the consuming public that there is no reason to 22 tamper with the motorcycle equipment. 23 I recognize that as a challenge and some beliefs 24 are held very firmly, but I think we can make progress in 25 that area. I sincerely do. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 452 1 I think that the product will make that story 2 easier to tell. We also will be working with the motorcycle 3 manufacturers to make the equipment as tamper-proof as 4 possible. 5 These are challenges we recognize. But again, we 6 have some time, and I am very confident that we can meet 7 those objectives. 8 With that, I will conclude. 9 CHAIRPERSON RIORDAN: We appreciate your testimony, 10 Mr. Bertelsen, and hopefully you will go back to eastern 11 standard time, but not now. 12 Mrs. Rakow has a question. 13 BOARD MEMBER RAKOW: Do you have any comments on 14 the small volume manufacturers? 15 There was not anything in your submission? 16 MR. BERTELSEN: No, we do not. 17 CHAIRPERSON RIORDAN: Okay. Mr. Stacey Steward and 18 then Mr. Fenske, and finally and the last speaker will be 19 Richard Baldwin. 20 Yes, if you would identify yourself for the record, 21 please. 22 MR. STEWART: My name is Stacey Stewart, and I am a 23 Senior Design Engineer with Polaris Industries, Victory 24 Motorcycles. 25 I will be very brief. I agree wholeheartedly with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 453 1 Kathleen Wolf's comments, especially with regards to small 2 volume manufacturers. 3 Small volume manufactures need the increase in 4 California sales limit in order to generate sufficient sales 5 volume to pay for the staff and the development time and the 6 technology required by more stringent emission standards. 7 Lowering the small volume manufacturers definition 8 to 300 will be excessively burdensome on small manufacturers 9 and will inhibit the entry of new manufacturers into the 10 market. 11 I urge the Board to reconsider the small volume 12 manufacturer sales limit. 13 CHAIRPERSON RIORDAN: Thank you. 14 In other words, you are not in that category as the 15 staff defined, is that what you are saying? 16 MR. STEWART: That, I don't know that for sure. 17 CHAIRPERSON RIORDAN: Thank you very much. 18 Next speaker, and if would you identify yourself 19 for the record, please, and if you are representing someone. 20 MR. FENSKE: My name is Clifford Fenske. 21 I am with California Motorcycle Company, I am the 22 CEO and owner of the company. 23 I have been doing things wrong my whole life, I 24 guess. I am here to do it again. 25 For example, I was married with my wife when I was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 454 1 18, and my wife was 17, and believe it or not, we are still 2 happily married. 3 I moved to California, which was another mistake, 4 from Minnesota and left Corporate America and started my own 5 CPA firm. I know I do not look like one. 6 I was a CPA for 20 years and looked like most of 7 you normal people here for 20 years, wore a suit and tie and 8 that sort of thing. 9 Then I decided I do not like this anymore, and I 10 decided to take my hobby, I have been riding motorcycles 11 since I have been 15 years old, and I decided to take that 12 hobby and see what I could do with it. 13 Well, what I did with it, in '96 I began this 14 company, and with my partner, Ray Sotelo, and six employees, 15 we do not have a staff of people to tell if we can hire or 16 not, so we hire people like Kathleen Wolf and other experts 17 that hopefully guide us down the right path to get through 18 all these compliances. 19 After our first year, we had the six employees I 20 told you about, we did 1 million in sales. Second year, 3.3. 21 Third year, we did 7.7. 22 Fourth year, we did 13, and we had 70 employees at 23 this time. We project in two years we will hit a 100 24 million, and we will have over 300 employees, and may some of 25 the people in the audience know, I have been awarded the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 455 1 Indian Franchise out of the Colorado Bankruptcy Court, so 2 that is not a jest, we will do that very easily. 3 Therefore, it probably makes no difference to me at 4 this point any longer about the small exemption, but I 5 believe in competition, and I believe competition keeps us on 6 our feet, and I want these people to come up after me, and I 7 want them to chase me, and I want them to keep me on my feet, 8 and I want them to keep me competitive, and if you guys put 9 these regulations in, then there will be no small 10 competitors. 11 There will be no small companies. There will be no 12 people like me starting up and bringing this kind of economic 13 growth to this State. If you make it too hard to comply, 14 then simply take my marbles and leave. 15 I mean, I won't have any other choice. In other 16 words, I do not want you slamming the door behind me. I want 17 you to keep it open for these people and to be able to 18 continue to grow. That is the corporate opinion. 19 How would you like to hear from a biker about 20 tampering? You make it that it doesn't run and doesn't sound 21 right, the only freedom left in this country is economic 22 growth, and thank goodness, I am no longer poor. 23 I will take that, I am not mechanical, I cannot 24 turn a wrench, any of that stuff, but I will take my finger 25 and I will point to my mechanic and say, you make that thing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 456 1 run better, and you make it sound better, because I have been 2 riding Honda's most of my life and almost got killed with 3 these things because they are so quiet nobody hears you 4 coming, and loud pipes save lives. 5 CHAIRPERSON RIORDAN: Yes. 6 Mr. Baldwin, I am going to tell your Board that you 7 have absolute, incredible endurance to remain here the entire 8 day. 9 MR. BALDWIN: They told me to be here, and I am not 10 going to turn him down. 11 Chair Riordan and Members of the Air Resources 12 Board, I am Dick Baldwin, with Ventura County, Air Pollution 13 Control Officer. 14 I'm here to convey Ventura County Air Pollution 15 Control Board's support for strengthening the exhaust 16 standards for on-road motorcycles sold in California as 17 proposed by your staff. 18 Our Board urges you to adopt the proposed 19 regulations. A copy of our Board's Resolution supporting the 20 new motorcycle standards was sent to you several weeks ago. 21 Ventura County has the nation's fifth worst air 22 quality. We are classified has a severe non attainment area 23 for ozone for federal one-hour ozone standard, and we are non 24 attainment for the Federal eight-hour ozone standard, and 25 also the State one-hour ozone standard. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 457 1 We are committed to ozone levels to attain these 2 standards by implementing all feasible and cost-effective 3 emission controls on both reactive organic compounds and 4 oxides of nitrogen. 5 As mandated by State law, the Ventura County orders 6 stationary sources, such as stationary engines, gas turbines 7 and coating operations to conform to your Board's adopted 8 recommendation for best available retrofit control technology 9 which have costs up to and in some cases exceeding in Ventura 10 County $12 per pound of pollutant reduced. 11 Just think about that $12 per hour to pollute and 12 reduce for stationery sources. In comparison, the ARB staff 13 estimates, and their estimates have been historically proven 14 to be extremely accurate, that motorcycle controls is much 15 more cost-effective, ranging from $3 to $5.60 per pound 16 reduced. 17 Consequently, we are extremely interested in what 18 you do today. In 1984, your Board directed staff to revisit 19 the on-road standards, the motorcycle standards once emission 20 control technology had matured to the point to become 21 feasible to reduce emission control standards. 22 Your staff, which has been the driving force in 23 advancement in control technologies in mobile sources 24 worldwide has found that emission standards for motorcycle 25 technology, your staff recommends, and we concur, that it is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 458 1 appropriate at this time to revise the standards reflecting 2 the use of these reasonably available technologies. 3 These emission reductions are an important part of 4 Ventura County's efforts to meet the new eight-hour ozone, 5 the Federal ozone standard and to meet the State's stringent 6 ozone standard. 7 California has always been a leader in air 8 pollution control, and this has been especially true for 9 motor vehicle control, and your adoption of today's proposal 10 provides an opportunity for you to continue that leadership. 11 The proposed regulation is needed, and its 12 requirements can be met. Therefore, Ventura County Air 13 Pollution Control Board and I urge your Board to adopt the 14 regulations as proposed by your staff. 15 Thank you. 16 CHAIRPERSON RIORDAN: Thank you, Mr. Baldwin, very 17 much. 18 Let me ask the staff to summarize the written 19 comments that we have received from the people that could not 20 be here. 21 MR. VERGARA: Yes. Hi. This is Floyd Vergara, and 22 we have 39 letters from private citizens and motorcyclists 23 with fairly common themes. 24 They raise concerns about costs, the technical 25 justification for the standards and the contributions of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 459 1 motorcycles to the overall emissions inventory, impacts on 2 after-market parts, and they raise the question of whether we 3 should regulate other sources, such as diesel trucks and 4 factories, and we believe that our presentation in our 5 proposal have already addressed the issues raised in these 6 comment letters. 7 We also had a comment letter from S and S Cycle, 8 which also questions the cost-effectiveness of the proposal, 9 and again we believe that the presentation has addressed this 10 concern and that the proposal is technologically feasible and 11 cost-effective. 12 One last item, we got a support letter from one 13 private citizen that basically supports our proposal, and 14 that is it. 15 CHAIRPERSON RIORDAN: Thank you very much. 16 Let me close the record. I will now close the 17 record on this Agenda Item. 18 However, the record will be reopened when the 19 15-day notice of public availability is issued. Written or 20 oral comments received after this hearing date or before the 21 15-day notice is issued will not be accepted as a part of the 22 official record on this Agenda Item. 23 When the record is reopened for a 15-day comment 24 period, the public may submit written comments to proposed 25 changes which will be considered and responded to for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 460 1 Final Statement of Reasons for regulations. 2 This is an ex parte item. 3 Are there any people that have anything to 4 disclose? 5 None. 6 I believe it would be appropriate if anybody had 7 any questions of staff, I really sort of zipped right over 8 that, and I did not mean to. 9 So, we will take this time now to ask of staff, any 10 questions that you may have. 11 Mr. Parnell. 12 BOARD MEMBER PARNELL: I hesitate to push this 13 button at this hour, but I am struck with the proposal that 14 even the small manufacturers if they could, if we could live 15 with the 1.2 gram per kilogram would preclude their needing 16 any special treatment, and I am listening to the Sierra 17 Research Report which tends to come to some numbers here that 18 equate to what the staff comes to ultimately, and you have 19 not really commented on that. 20 Could you do that? 21 MR. KENNY: With regards to the small volume of 22 1.2, we are proposing actually for the small volume 23 manufacturers is 1.4. 24 BOARD MEMBER PARNELL: I understand that. 25 Do not misunderstand me. What I think I heard them PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 461 1 say is if we could leave the standard at 1.2, that they would 2 need no special treatment, and I heard also the Sierra 3 Research people also say that if you leave the standard at 4 1.2 as opposed to 1.4 that in their numbers or their 5 calculations they come to approximately the same bottom line 6 result as we do on the staff, and nobody has addressed that. 7 MR. KENNY: I think the thing we are trying to do 8 is recognize that the larger volume manufacturers are 97 9 percent of the market and the small volume manufacturers is 3 10 percent of the market, and so with our proposal what happens 11 is that both the large and the small volume manufacturers are 12 initially subject to 1. 4 standard, and the timing of that 13 application is different. 14 If you are a large volume manufacturer, it is 2004. 15 If you are a small manufacturer, however, it is not until 16 2008. But then what happens is the small volume 17 manufacturers get to retain that 1.4, they do not even have 18 to go down to a 1.2, because we recognize they are only 3 19 percent of the market, and we recognize they need some 20 additional benefit. 21 But there is a lot of emission reduction that are 22 associated with the larger volume manufacturers who are at 97 23 percent of the market, and so we need the standard basically 24 to drop down with regards to those manufacturers so that we 25 can get that larger emission reduction benefit. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 462 1 One of the things that I thought was interesting in 2 the terms of the testimony was the fact the manufacturer that 3 is probably going to have the most difficult time of 4 compliance, Harley Davidson, because of the design of their 5 engine, is also the one manufacturer who did not stand up and 6 oppose what we were talking about here today, and I found 7 that surprising, because I would have thought to the extent 8 that manufacturers could make it, it is constantly logical to 9 believe that it is easier for the other manufacturers to make 10 it, so I am not sure if I answered the question right. 11 BOARD MEMBER PARNELL: I am not either. 12 You are an attorney, and I think that is your job. 13 MR. KENNY: I think I was complemented. 14 CHAIRPERSON RIORDAN: Mr. Dunlap, do you have a 15 question? 16 Are you going to clap? 17 BOARD MEMBER DUNLAP: Sure, I am going to try, but 18 Jack, he promised when we hired him that he would not 19 practice law. 20 All right, and I am certainly among the same wave 21 length. We are all tired and whatnot, but the question that 22 I have is that seemed to me that this tweaking of the 23 standard, Tom, and this idea about the small manufacturer 24 raising that number to where is was a little easier for them 25 to deal with, what reaction do you have? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 463 1 It seems to me that I know every pound is 2 important, and I have been singing that tune, too, for a long 3 time, but is there anything that can be done here? 4 MR. CACKETTE: Well, let me give you two 5 perspectives. 6 One is a little bit confusing to me. We proposed 7 the standard for the small volume manufacturers at 1.4, and I 8 just heard the small volume manufacturers come in and say we 9 would like to be regulated at 1.2. 10 I do not get it. Why do they want to be regulated 11 to a more stringent standard? That is what they said they 12 would be glad to go with the MIC proposal, and ours is 13 actually 20 percent higher than that. 14 There is no tier 2 numbers for small manufacturers. 15 They do not go to tier 2. 16 BOARD MEMBER DUNLAP: Come forward for me if you 17 would please. 18 Let us get this straight. 19 CHAIRPERSON RIORDAN: You are going to have to come 20 to the microphone. 21 Because I just gave away the speaker slip, remind 22 me of your name. 23 MS. WOLF: I am Kathleen Wolf. 24 That is not what I said. What I said and what I 25 mean is -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 464 1 BOARD MEMBER DUNLAP: Do not tell us what you said 2 but tell us what you want. 3 MS. WOLF: Okay. What I want is I want a small 4 volume manufacturer exception of 1,000, according to the 5 rules that you currently set out. 6 BOARD MEMBER DUNLAP: Okay. Stop. 7 What do we currently have? 8 300. Okay. 9 MS. WOLF: There are a large number, although Mr. 10 Fenske is one of slightly bigger small volume manufacturers 11 who still do not have anything approaching. 12 BOARD MEMBER DUNLAP: For example, you name a 13 couple. 14 MS. WOLF: California Motorcycle Company, Ducati, 15 Triumph, the representatives of trials that elected to stay 16 home rather than come and testify because he figured the deal 17 was already done. 18 So, if you regulated it to where tier 2 standard is 19 1.2, it is possible that these small manufacturers could meet 20 that, perhaps not by 2008 but perhaps a year or two later, 21 that is what I mean. 22 BOARD MEMBER DUNLAP: Okay. Staff, what we are 23 missing is the 1.4 now, and that is all they have to do. 24 MR. CACKETTE: What we are confused at is why do 25 you want to meet a more stringent standard? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 465 1 MS. WOLF: Because many of the small manufacturers 2 or you just cut them out of the small volume numbers by going 3 to 300, you just cut most of these little guys out. 4 MR. KENNY: What the little guys we were talking 5 about were Ducati and Triumph, and I fail to understand how 6 Ducati and Triumph are small volume manufacturers. 7 We are talking about international companies there. 8 CHAIRPERSON RIORDAN: Yes. Let us talk about that 9 because they are -- no, we are not going to have a debate. 10 Thank you, Mrs. Wolf. I do think it is important 11 that those of us not in the motorcycle business have not a 12 sense of some of these, but Triumph has to be big, am I 13 right? 14 MR. CACKETTE: We can comment on that. 15 Mr. Ryden has the slide. 16 MR. RYDEN: I checked out the Dunn and Bradstreet 17 on Ducati and Triumph, and Triumph has worldwide sales of 18 about $41 million. 19 They are by no means a small manufacturer. They 20 have 300 employees. Ducati is even larger. They have about 21 $250 million in worldwide sales and 800 to 1000 employees 22 worldwide. 23 CHAIRPERSON RIORDAN: And I think that is the 24 perspective that we have to keep in this discussion of small 25 versus small. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 466 1 MR. RYDEN: The other issue of equity, too, is 2 because Ducati and Triumph compete in the models and the 3 markets that the Hondas and BMWs and the Kawasakis and 4 everybody else is required to comply, and honestly then, we 5 are mucking with the market place, and that is not an 6 appropriate spot to put us, and I think I understand that 7 now. 8 CHAIRPERSON RIORDAN: Yes. 9 Questions? 10 Mrs. Rakow. 11 BOARD MEMBER RAKOW: One question. 12 What is the number of vehicles, for instance, 13 Triumph produces not motorcycles because 41 million could 14 mean -- 15 MR. RYDEN: I do know that they give us that number 16 in confidence, but what I can tell you is that -- 17 BOARD MEMBER RAKOW: Is it over a thousand? 18 MR. RYDEN: It is not, and the shift essentially 19 from 1000 down to 300 primarily effects Ducati and Triumph, 20 because the other person that testified, at least in 21 California sales, that person that reports to us still 22 qualifies that person as a small manufacturer because he 23 measured in California sales. 24 CHAIRPERSON RIORDAN: Okay. Any other questions? 25 All right. There is a Resolution before us. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 467 1 Have you had a chance to look at that, and the 2 Chair will entertain a motion. 3 BOARD MEMBER DUNLAP: Resolution 98-65. 4 CHAIRPERSON RIORDAN: Right, which contains the 5 staff's recommendations. 6 What is the Board's pleasure? 7 BOARD MEMBER EDGERTON: I move it. 8 CHAIRPERSON RIORDAN: It has been moved by Ms. 9 Edgerton. 10 Is there a second to the motion? 11 BOARD MEMBER DUNLAP: Second. 12 CHAIRPERSON RIORDAN: Mr. Dunlap seconds the 13 motion. 14 Is there any further discussion by the Board? 15 Hearing no further discussion, I will ask for a 16 voice vote. 17 All of those in favor of the motion to approve the 18 Resolution 98-65, signify by saying aye. 19 Opposed, no. 20 Motion carries. 21 Thank you very much. 22 We are going to move right long to the next item, 23 which is 98-14-5, as soon as we change staff. 24 (Thereupon a brief recess was taken.) 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 468 1 CHAIRMAN RIORDAN: There are a number of you who 2 represent the same association. Would you agree to one 3 speaker and then acknowledging the others who support you? 4 FROM THE AUDIENCE: We're all from the same 5 association, but we represent different districts in the 6 State of California. 7 CHAIRMAN RIORDAN: All right. Okay. In deference 8 then to the recognition that the organization represents 9 different areas, brevity would be the most appreciated thing 10 that I can think of for this audience, this staff and this 11 Board, because we have to come back tomorrow and do a whole 12 nother day. So I am very, I guess almost begging you to 13 limit your comments, and I'm going to make the staff do the 14 same thing. 15 Staff, please if you can possibly put this in your 16 own words in a brief abbreviated way, I know that's really 17 tough, and I should have told you maybe earlier, but see 18 what you can do. You're all so bright. I've often said 19 you'd probably do much better off the top of your head. 20 SUPERVISOR DeSAULNIER: This will be in proportion 21 to their brevity. 22 CHAIRMAN RIORDAN: Thank you. And after all my 23 talking, here I am. 24 I have to open up this record and indicate that 25 this is Item 98-14-5, a public hearing to consider PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 469 1 amendments to California regulations for new 1997 and later 2 off-highway recreational vehicles. 3 And, Mr. Kenny, would you introduce this item. 4 MR. KENNY: Thank you, Madam Chairman and members 5 of the Board. 6 In 1994, this Board adopted regulations for the 7 control of off-highway recreational vehicles. Those 8 regulations went into effect in 1997. 9 It was anticipated that in fact there would be 10 subsequent product available to comply with the regulations 11 in 1997. In fact, it turned out that product was not 12 available, there was a substantial disconnect with regard to 13 the market. 14 What we are proposing to you today is a way to 15 remedy that disconnect with the market by allowing 16 non-certified vehicles into the State of California for use 17 during the non-ozone season. 18 With that, I'll turn it over to Mr. Spencer to 19 make the staff recommendation. 20 MR. SPENCER: Thank you, Mr. Kenny. 21 Chairman Riordan and members of the Board, good 22 evening. 23 Today I shall present the staff's proposal, which 24 seeks to amend the off-highway recreational vehicle 25 regulations that were adopted in 1994. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 470 1 While those initial regulations adopted emissions 2 standards for off-road motorcycles, all-terrain vehicles, 3 golf carts, go-carts and other specialty vehicles, the 4 proposed amendments presented to you today are aimed 5 principally at off-road motorcycles. 6 Before discussing the specifics of the staff's 7 proposal, I would first like to present some images of the 8 vehicles at issue. The following images depict these 9 off-road vehicles in a variety of applications. 10 Okay. Just flip through the images. They're used 11 in different types of racing events and they're also used 12 primarily for recreational riding for families. There's a 13 father and son shot there. 14 You can move on. 15 In order to explain the reasoning behind the 16 staff's proposal to amend these regulations, I would like to 17 present some background information first and follow that up 18 with some recent events that have led staff to want to 19 propose these amendments. We'll also go briefly into the 20 economic and air quality impacts of these amendments. 21 As previously stated, the Board adopted the 22 off-highway regulations in 1994. Among other requirements, 23 the regulations implemented emission standards for new 24 off-road motorcycles of 1.2 grams per kilometer for 25 hydrocarbon, and 15 grams per kilometer for carbon monoxide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 471 1 These were the first emission standards required 2 of these off-highway vehicles, and they continue to be 3 unique requirements as the US EPA has yet to adopt similar 4 measures nationwide. 5 At the time of the adoption of the off-highway 6 regulations, it was anticipated that initially the 7 manufacturers would develop cleaner operating four-stroke 8 powered off-road motorcycles. These vehicles would 9 facilitate the desirable process of replacing higher 10 polluting two-stroke models with more environmentally 11 responsible models. 12 However, since the requirements of the regulations 13 were performance standards, advanced design two-stroke 14 powered models were also a recognized possibility. 15 From the time of the adoption of the off-highway 16 regulations, manufacturers had three years of lead time to 17 meet the standards. 18 At the '94 Board hearing, the manufacturers 19 generally supported these regulations, as testimony given at 20 that time focused primarily on just obtaining an extension 21 for some of the smaller motorcycles, which the Board did 22 grant for those with engines that are 90 cubic centimeters 23 or less. 24 Since the off-highway regulations were also going 25 to limit registration and thus riding to only complying PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 472 1 vehicles, it was envisioned that this potential usage 2 restriction would be an added incentive for the 3 manufacturers to provide this variety of complying models. 4 Such was the outlook in early 1994. 5 More recently, however, some unexpected and 6 unintended situations have arisen. These have prompted 7 staff to consider and now propose amending the off-highway 8 regulations. 9 During 1996 with the implementation date of the 10 off-highway regulations approaching, staff became aware of 11 concerns that were voiced by dealer and user groups. 12 Of primary concern of the dealers was that there 13 would not be significant numbers of California-certified 14 models for them to sell. 15 Also there was confusion about how the regulations 16 would affect competition motorcycles because, although under 17 state law they are exempted from emission control 18 regulations, their usage nevertheless would be impacted by 19 the regulations once they were registered for recreational 20 use. 21 Thus, clarification was needed to explain these 22 usage restrictions that were called for in the regulations. 23 In order to address these concerns, a working 24 committee was formed in 1997 with the first meeting taking 25 place April 1st, and several meetings following since. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 473 1 Besides ARB, there were representatives from the 2 various segments involved with these vehicles. The 3 representatives included people from the public land 4 agencies where they are ridden, the Department of Motor 5 Vehicles where they are registered, the user groups, 6 dealers, motorcycle manufacturers and other related 7 motorcycle industries. 8 The primary goal of the working committee was to 9 enable these impacted groups and staff to work together to 10 develop administrative solutions that would provide relief 11 to their problems while maintaining necessary emission 12 reductions. 13 Over the course of these several meetings, staff 14 have come to these following conclusions. 15 There have been disappointingly few off-road 16 motorcycles actually certified to California's emissions 17 standards. To date only ten models have accomplished this 18 task, and of these ten models, five are from Honda. 19 This puts many dealers at a disadvantage if they 20 do not carry or are unable to obtain one of these certified 21 brands. 22 The sales data supplied from these manufacturers 23 have shown that the sales trends have not wavered in light 24 of the implementation of the off-highway regulations. The 25 anticipated change in the market from two-stroke to cleaner PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 474 1 four-stroke has not materialized. 2 There remains an approximate 60 percent to 40 3 percent ratio of noncomplying two-strokes outselling the 4 complying four-strokes. 5 The lack of California certified off-road 6 motorcycles, however, is not the only reason explaining why 7 the sales trends have not changed. 8 It's become apparent that many users prefer to 9 ride two-stroke motorcycles over the four-stroke 10 motorcycles, and that's not just for competition events, but 11 for recreational purposes as well. 12 However, to use them on public land, registration 13 is required, and field observations from these public land 14 riding areas have found that the new two-stroke motorcycles 15 are displaying the off-highway registration, which should be 16 reserved only for the complying vehicles. 17 There's also been a noticeable increase in 18 out-of-state registered two-stroke motorcycles. This 19 scenario has made it apparent that the implementation to 20 date was not without problems. 21 This also means, unfortunately, that the emission 22 reductions that were originally envisioned are not being 23 realized either. 24 ARB staff has also found that practice is a 25 necessary component for users that are involved in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 475 1 competitive events. During the working committee's 2 discussions, attempts were made to develop a workable system 3 that would provide practice opportunities for the impacted 4 competitors. 5 At the same time, there was also a conscious 6 effort to development a workable solution to address the 7 impact felt by many dealers because of the off-highway 8 regulations. 9 To address the recent findings and concerns, the 10 staff's proposal focuses on the system whereby 11 non-emissions-compliant motorcycles can be used at certain 12 locations and during certain times of the year when air 13 quality would not be jeopardized. 14 As is already the case, off-road motorcycles that 15 comply with California's emission standards would continue 16 to have unlimited use at the public OHV or off-highway 17 vehicle parks. 18 For non-emission-compliant motorcycles, their 19 usage would be limited, but it would be much broader than 20 with the existing regulations now. 21 Under the proposed regulations, each off-highway 22 vehicle park in the state would have a designated riding 23 season for the non-emission-compliant motorcycles. These 24 riding seasons would be defined based primarily on whether 25 the park lies within a state ozone attainment region. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 476 1 If it is within a ozone attainment region, the 2 non-emissions-compliant motorcycles would have year-round 3 riding opportunities. 4 If the park is located within a ozone 5 non-attainment region, non-emission-compliant motorcycle 6 usage would be limited to those times of the year when ozone 7 exceedances are not expected to occur. 8 As shown here, this map highlights the various OHV 9 riding areas throughout the state. The color-coded OHV 10 areas signify the riding seasons as applicable to the 11 non-emissions-compliant vehicles. 12 The locations marked with green circles represent 13 OHV areas that are in attainment and would offer year-round 14 riding. 15 The blue squares indicate OHV areas with riding 16 seasons that last between seven and eight months. These 17 months are typically during the fall, winter and spring 18 seasons, not summer. 19 The red triangles are OHV areas with riding 20 seasons ranging from two to six months. For the most part 21 the riding seasons within these areas take place during the 22 winter months and in some instances late fall or early 23 spring. 24 The black diamond-shaped locations would prohibit 25 usage year-round. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 477 1 And again, though, it should be emphasized that 2 the usage restrictions only apply to the operation of 3 non-emission-compliant motorcycles in recreational use 4 settings. These restrictions do not apply to nor are they 5 intended to impact emissions-compliant motorcycles or 6 sanctioned competition events. 7 There are three necessary components for the 8 successful implementation of this proposal. They are 9 certification, registration and enforcement. 10 With regards to certification, ARB has the 11 responsibility for certification of both emissions-compliant 12 and non-emission-compliant vehicles. 13 For emissions-compliant vehicles, the existing 14 certification requirements would remain unchanged. 15 For the non-emissions-compliant motorcycles the 16 procedure would consist of administrative requirements only, 17 that is no emission testing requirements. 18 One of the main elements of the proposal involves 19 the proper coding within the vehicle identification number. 20 In order for the correct registration to be issued under the 21 proposal, certified non-emissions-compliant vehicles must be 22 properly coded as explained in the next slide. 23 DMV has the responsibility of registering these 24 vehicles. Upon registration, an identifier is issued in the 25 form of a sticker that is affixed to the vehicles. These PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 478 1 vehicles and these stickers, rather, are used as an 2 identifier to allow access to the public OHV areas. 3 The existing identifier is commonly referred to as 4 the OHV green stricter. 5 The staff's proposal builds upon this existing 6 system of registration. 7 In addition to the existing OHV green sticker for 8 which new emissions-compliant vehicles and all pre-1997 9 models are eligible, the staff proposes establishing an OHV 10 red sticker for new non-emission-compliant vehicles. This 11 new sticker would cost the same as the existing sticker and 12 would remain valid for an equal length of time as well. 13 Its main function is to serve as a basis for 14 enforcement at the OHV areas. 15 DMV has indicated pending the Board approval they 16 would be ready to issue the red sticker in early 1999. 17 Enforcement at the various OHV areas is the 18 responsibility of the particular land agency with 19 jurisdiction. Virtually all of the OHV riding areas fall 20 under one of three different land agencies. These are the 21 California Department of Parks and Recreation, the United 22 States Bureau of Lands Management or the United States 23 Forest Service. 24 The staff's proposal builds upon the existing 25 system of enforcement. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 479 1 Currently, enforcement personnel for the various 2 public land agencies inspect vehicles for possession of a 3 valid OHV green sticker, as well as other safety 4 requirements such as a spark arrestor in the tailpipe. 5 Under the staff's proposal, enforcement personnel 6 would follow the same procedures, except that vehicles with 7 the OHV red sticker would have to adhere to the limited 8 riding seasons that were discussed earlier. 9 The staff's proposal would have the following 10 impacts. 11 Implementation of the staff's proposal will affect 12 emissions attainment and non-attainment areas differently. 13 In areas that are already in attainment for ozone, 14 there is the potential for modest increases in emissions due 15 to the operation of the non-emissions-compliant motorcycles, 16 but nothing of such a magnitude as to jeopardize the 17 region's attainment status. 18 In regions classified as non-attainment for ozone 19 there is also the potential for modest increases in 20 emissions, but these increases would occur only during the 21 months when ozone is not a problem. 22 The benefits in the staff's proposal occurs in 23 non-attainment regions during the months when the ozone 24 standards may be exceeded. At these times, noncomplying 25 vehicles could not be operated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 480 1 In the short term, riding will be reduced due to 2 the shortage of complying motorcycles and this will increase 3 the emissions benefits compared to the original regulation. 4 In the long term as a full line of 5 emission-compliant motorcycles becomes available, the 6 emissions benefits originally expected in 1994 will be 7 achieved. 8 Staff believes the proposal will benefit the 9 dealers economically because they will be able to sell 10 non-emissions-compliant motorcycles that could be considered 11 and legally ridden until the shortage of emissions-compliant 12 motorcycles ends. 13 In summation, the staff believes that the proposed 14 amendments to the off-highway regulations provide needed 15 flexibility and benefits to users and dealers. 16 Furthermore, the proposed approach will provide 17 greater assurance of realizing the emissions reductions 18 envisioned when the Board adopted the off-road motorcycle 19 standards in 1994. 20 In light of the information presented tonight, we 21 recommend the Board adopt the proposed amendments to the 22 off-highway regulations. 23 Upon approval, the staff is prepared to work 24 together with the land agencies, the dealers and user groups 25 in order to disseminate the information pertaining to this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 481 1 item. 2 This concludes the staff's presentation. 3 If the Board has any questions about the proposal, 4 staff is ready to respond. 5 Thank you. 6 CHAIRMAN RIORDAN: Thank you very much. 7 And I'd like to ask the ombudsman, before we ask 8 questions, to comment and then we will open it up for 9 questions. 10 DR. STEELE: Thank you, Madam Chairman and members 11 of the Board. 12 I am going to try to be really brief and just give 13 you the essentials. 14 I think staff gave you some of the background on 15 how the process worked and they talked about the 16 recreational OHV working committee that was formed in 1997. 17 So let me just tell you who is a member of that committee, 18 how many times they met, and give you our judgment. 19 The members of that committee were the OHV 20 manufacturers, Suzuki, Yamaha, Honda and Kawasaki; the 21 associations, the American Motorcyclist Association, 22 American Trails Association, California Motorcycle Dealers 23 Association, California Off-Road Vehicle Association, 24 Motorcycle Industry Council, KH Wolf Consulting; and state 25 agencies, the Department of Motor Vehicles, the Department PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 482 1 of Parks and Rec, the Department of Recreation; and federal 2 agencies, US Bureau of Land Management and US Forest 3 Service. 4 Since April 1st of 1997 that group has met as a 5 whole nine times, three times in September of this year. 6 And members of that group met individually or in 7 smaller subgroups with staff eight times from May or March 8 through August, after staff introduced their latest -- their 9 new proposal which is before you now. 10 And I should mention that the ombudsman's office 11 was a member of that committee and participated in those 12 meetings. We observed extensive and inclusive outreach and 13 involvement with stakeholders, and see that the proposal has 14 been responsive to concerns raised by those stakeholders. 15 And, lastly, staff mentioned the outreach 16 materials that are going to be prepared in and disseminated 17 to dealers for members. The Public Information Office and 18 Ombudsman's Office are participating in putting together 19 those materials. 20 CHAIRMAN RIORDAN: Very good. Thank you. 21 Let me open it to any questions of staff at this 22 time. 23 Ms. Edgerton. 24 MS. EDGERTON: Yes. During the briefing that I 25 obtained before this meeting, I expressed to staff -- I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 483 1 glad to wait. 2 MR. CACKETTE: I'm sorry. 3 MS. EDGERTON: It's okay, just if you don't hear 4 the question, you can't really answer it. 5 During the briefings that I received from you all, 6 we covered a number of these points that had been covered in 7 this very excellent presentation here, and one of them that 8 concerned me was that it appears that some of the 9 out-of-state and some of the other motorcycles that you're 10 seeing that are noncompliant have fraudulent certifications 11 on them. Is that what you meant to say? 12 MR. CACKETTE: I don't think we meant to say 13 necessarily fraudulent, but there's been some problems in 14 DMV issuing certificates to motorcycles that shouldn't get 15 them, or green stickers to ones that shouldn't. And that's 16 being taken care of now and they've computerized that system 17 and that new system of green and red labels will go in place 18 and will provide the mechanism for the land managers to do 19 the right kind of enforcement. So that should stop. 20 MS. EDGERTON: That's good. I wasn't quite clear 21 and there were improperly -- should have been improperly 22 certified bikes, but I didn't realize -- I wasn't aware of 23 why they were improperly certified. 24 You know, I confess, there are a number of things 25 about this proposal that I'm uncomfortable with. I'd just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 484 1 like to say that the thing that would probably take care of 2 most of it for me would be some sort of sunset clause, maybe 3 three years, on the red stickers. Would this -- what's your 4 opinion on doing that? 5 MR. CACKETTE: We've met with the -- well, I think 6 the answer, my opinion is that is if there was to be a 7 sunset that would be way too early. 8 We met with the manufacturers to find out why 9 aren't they producing complying product, and they've 10 indicated that they are planning on -- they have asked -- 11 typically Japanese manufacturers, but they have asked the 12 companies to develop product for the California market, and 13 they have indicated some willingness to do so, but it's 14 going to be a number of years before that happens. 15 So I think we'd have to have some assurance that 16 there's a full model availability or near full model 17 availability of complying models before this issue kind of 18 goes away. 19 MS. EDGERTON: I guess, you know, this may sound 20 like heresy, but why do we have to have that many models? 21 There are certain things that maybe we're not going to have 22 in California in order to have clean air. 23 CHAIRMAN RIORDAN: Let's have some of the 24 testimony and perhaps that will give you some time to think 25 about that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 485 1 Mr. Dunlap 2 MR. DUNLAP: If I could, Ms. Edgerton, did you 3 catch, and I meant it sincerely, did you catch earlier my 4 comments about the dealers, for example? Let me -- 5 MS. EDGERTON: Maybe you can repeat them. 6 MR. DUNLAP: Let me weave a story for you for a 7 moment. I know there's some dealers that can do this better 8 than I. 9 But you have some folks that years ago did some 10 analysis in the marketplace and they invested, just like you 11 would with a car dealer or whatever it would be, and they 12 invested for the long term and built the building or leased 13 one long term and had a market and sold product and they 14 sold motorcycles, on-road, off-road, jet skis, personal 15 water craft, whatever you call them, and they employed 16 people and they contribute to the economy. 17 And then the regulations come in for all the right 18 reasons, for social reasons, to protect public health, and 19 then we start mucking around in it and then people see their 20 business declining and the product offering declining. 21 And then people, this is a discretionary purchase 22 for people, so they decide to recreate in other ways. 23 And these guys get harmed. These people get 24 harmed. 25 So one of the things I've learned, and I know you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 486 1 know this as well, that you have great respect for people's 2 livelihood and for consumer choice and the like. 3 So this is kind of a newer area for them, as some 4 witnesses have pointed out today, and we in this case, 5 staff's mentioned that, I don't know if they clearly covered 6 it, we've overreached. So what we're trying to do in this 7 case is make it right. 8 And this is about, in my view, this particular 9 action is not just symbolism, it's important because we're 10 admitting that we -- there were some inadvertent, 11 unintentional consequences and what we're trying to do is 12 fix that, and take care of some people that are worthy of us 13 doing that. 14 CHAIRMAN RIORDAN: Without jeopardizing -- 15 MR. DUNLAP: The goal. 16 CHAIRMAN RIORDAN: The goal. 17 MR. DUNLAP: Right. So it's just about being 18 honorable people. 19 And so the comment about -- 20 MS. EDGERTON: That means I'm going to vote 21 against it. 22 MR. DUNLAP: Maybe so. 23 MS. EDGERTON: It's going to be personal. 24 MR. DUNLAP: And that's your prerogative. 25 But the point is what has impressed me about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 487 1 particularly the off-road group, and I met with them many 2 many times, they worked me over. I wish you could have been 3 there a couple times, with me there. They're people that 4 care about the sport. They've done a lot to improve, not 5 only the public perception of what they do, but they're 6 giving a lot back. 7 And so I'm convinced this is a group that's worthy 8 of this kind of move on our part. I'm personally convinced 9 and I've seen that. 10 MS. EDGERTON: Thank you for your clarification. 11 CHAIRMAN RIORDAN: Mr. Kenny, and then I'm going 12 to call Mr. Paliwoda. 13 MRS. RAKOW: I have a question for the staff, 14 before you do that. 15 CHAIRMAN RIORDAN: Sure. 16 Just a minute. I think Mr. Kenny wanted to make a 17 response, then I'll have you, Ms. Rakow. 18 MR. KENNY: If I could have just one minute. 19 When this Board actually originally heard this 20 item back in 1994 and the staff brought it to you, we 21 brought it to you with certain premises in mind, that in 22 fact the manufacturers would provide certain products. 23 It turned out they didn't. 24 And that was essentially a premise that was very 25 important to the original regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 488 1 It was, as Mr. Dunlap said, incumbent upon us to 2 basically come back to you. And what we wanted to do was 3 come back to you with something that was in essence 4 emissions neutral. 5 Instead what we've actually come back to you with 6 is something that is in effect emissions positive. We are 7 getting emissions benefits in the South Coast as a result of 8 a very creative solution between ourselves, the Department 9 of Motor Vehicles and the Department of Parks and Recs, as 10 well as the stakeholders involved here, that we really think 11 is very very good for both sort of the honor of this Board 12 and for also the environment as a whole. 13 So with that in mind, actually, I do urge the 14 Board's adoption of this matter. 15 CHAIRMAN RIORDAN: Mrs. Rakow. 16 MRS. RAKOW: Just a question about the enforcement 17 process and the riding seasons for the noncompliant 18 vehicles. 19 Have you had in-depth discussions with like the 20 Bureau of Land Management and the Forest Service? I know 21 the Bureau of Land Management has about one person for every 22 hundred thousand acres. 23 MR. CROSS: I had the honor of chairing those nine 24 meetings that were mentioned, and I can assure you that the 25 land managers were very much in attendance there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 489 1 MRS. RAKOW: And they agreed that they could 2 enforce these regulations? 3 MR. CROSS: Yes. And we went through a number of 4 iterations before we ended up with the solution. It was a 5 very very tough problem and that's why it took so many 6 meetings and so much work, and I think that's why it's 7 important to recognize that we've got the DMV, the state 8 land managers, the federal land managers, all these folks, 9 and you can imagine what it was like in a roomful of all 10 these people. I mean, it's different. 11 CHAIRMAN RIORDAN: Challenging. Challenging. 12 MR. CROSS: But all these folks have basically 13 come together and said we can live with it. 14 MRS. RAKOW: They could go and see whether it's 15 the right label. 16 MR. CROSS: Yeah. The land managers are agreeing 17 or willing to do that. They have rangers checking for 18 registration on motorcycles anyway and if it's the wrong 19 time for the wrong sticker -- 20 MRS. RAKOW: The last time I dealt with the Bureau 21 of Land Management they were -- which was quite a few years 22 ago and maybe their budget has been vastly increased, they 23 were saying that they couldn't check on something down in 24 the desert. 25 MR. CROSS: You're right. They don't have a lot PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 490 1 of enforcement folks, but they're -- part of this is, quite 2 honestly, part of it is going to have to be an honor system. 3 But the point is some of the parks are very 4 tightly managed. The state parks, they can enforce it well. 5 On federal and open lands, I think that it's basically a 6 situation where if the rangers sees the person -- 7 MRS. RAKOW: Then they'll do something. 8 And I was also looking at the map and the 9 year-round areas are not exactly population centers in 10 California. Don't do too much riding up in the mountains of 11 the Klamath region. 12 CHAIRMAN RIORDAN: Mr. Paliwoda. It's so late, 13 and I don't know why I want to give you another name, but I 14 do. 15 MR. PALIWODA: I'm going to be reasonably brief, 16 because I know there's a new ER tonight and I know everybody 17 wants to get home to see it. 18 At any rate, John Paliwoda, California Motorcycle 19 Dealers Association. 20 Since the CMDA has the dubious honor or not of 21 being the catalyst in bringing to the attention of the CARB 22 staff the severe financial impacts of the off-road 23 regulations to the motorcycle dealers of California, the 24 majority of whom belong to CMDA, we're going to ask for your 25 support for this proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 491 1 We had started out proposing much more aggressive 2 regulation cutbacks or curtails, but after months of 3 negotiation with the staff, both in El Monte and Sacramento, 4 the final proposal is one that will begin to bring much of 5 the lost off-road motorcycle and ATV business back that has 6 affected our members over the last two years. 7 We want to go out of our way to especially thank 8 the efforts of former-Chairman John Dunlap who used his good 9 offices and personally came to recognize the hardships that 10 this regulation had caused among our dealers, because it 11 didn't work out the way it was supposed to. It didn't work 12 out the way it was sold. It didn't work out the way it was 13 projected. 14 And it didn't work out in ways that lack of 15 product availability, customer confusion, consumer 16 skepticism on at least a 32 percent reduction in a pretty 17 extensive survey by our dealers on the average income among 18 our members. 19 The impact, of course, was much greater on dealers 20 who depended mostly on the off-road business. 21 Now, during the qualification period for each 22 off-road site, recreational area or site, we felt that the 23 staff's assessment for a number of the sites was too 24 stringent, based on the subjective meteorological 25 determinations resulting in some usage seasons that were too PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 492 1 restrictive. 2 However, we feel that the staff proposal should be 3 adopted and that we should collectively monitor the sites' 4 ambient ozone levels attributable to the off-road motorcycle 5 and ATV use. If the levels are less than expected, these 6 sites' riding seasons should be reappraised and perhaps 7 extended. But that's a process. That will be an ongoing 8 process. 9 CHAIRMAN RIORDAN: That's a review that needs to 10 happen as time goes on. 11 MR. PALIWODA: I would also like to thank the 12 staff for coming up with an innovative way to try to bring 13 back this off-road business, not just for the dealers, but 14 for the users too, and that I think for the most part some 15 of these questions about enforcement and legality are going 16 to be taken care of, because folks can buy motorcycles, 17 off-road motorcycles, and use them legally and certainly be 18 satisfied with the process. 19 So we believe that this compromise will allow a 20 greater selection of vehicles for consumers to purchase and 21 responsibly use. This compromise may not satisfy everybody 22 at first and not all dealers, but it will begin to rebuild 23 the off-road motorcycle and ATV inventories for our dealers. 24 And I believe it's going to satisfy most people. 25 And most importantly it is going to maintain the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 493 1 air quality standards that you folks insist on and have been 2 mandated to meet. 3 Thank you very much. 4 Any questions? 5 CHAIRMAN RIORDAN: I have one. Are you speaking 6 for Mr. Lombardo? 7 MR. PALIWODA: Yes, I am. 8 CHAIRMAN RIORDAN: Mr. Sherman Walker, if you 9 would come forward and Mr. Dave Oakleaf. 10 MR. PALIWODA: He was a dealer, and he left. 11 CHAIRMAN RIORDAN: All right. You spoke for both 12 of them. 13 Mr. Oakleaf, Mr. Dart, Mr. Fouts, Mr. Soens come 14 forward. 15 Introduce yourself, please, for the record. 16 MR. OAKLEAF: My name is Dave Oakleaf and I'm 17 representing District 37 of the AMA. That's the -- 18 CHAIRMAN RIORDAN: Where is that? 19 MR. OAKLEAF: AMA, American Motorcyclists' 20 Association, is broken into three districts. 36 is Northern 21 California; 37 is middle of California, San Bernardino 22 County, Riverside, Kern; and District 30 is the southern. 23 I'm only going to make a couple points because 24 there's a few more people and I don't want to steal all 25 their fire. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 494 1 I'd like to say, Madam Chairman and Chairman 2 Riordan and the rest of the remaining supervisors, that you 3 have remarkable endurance and attention span, at least I 4 hope so. 5 CHAIRMAN RIORDAN: We're trying. 6 MR. OAKLEAF: You're doing excellent. 7 A month ago today was one of the hardest races in 8 North America, the Baja Thousand, and with a few more hours, 9 you could have ridden that race. Ensenada to La Paz. 10 CHAIRMAN RIORDAN: I've heard about that race. I 11 don't know. 12 MR. OAKLEAF: It probably would have been a lot 13 more fun, too. 14 Only a couple of points. 15 We would like to see, as I said I represent the 16 competition, the off-road or off-highway competition rider. 17 The monitoring stations, we call them the 18 smog-sniffing stations, that they were using in -- also 19 thank staff for all their help. 20 As you know, we'd like to see those maybe not 21 right next to the freeways sometime, but if we can move one 22 out in the areas where we ride and get a more accurate 23 picture of the emission in the area where we ride, would be 24 something that we could look forward to in the future. 25 Also as the air improves, 20 years ago it was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 495 1 pretty bad, ten years it wasn't as bad as it was 20 years 2 ago, and today you're saying it's better than it was ten 3 years ago. So as it improves, we would like to see the 4 seasons expand and maybe the areas also, the seasons get a 5 little longer and the area is expanded. 6 We have a big problem with product availability 7 and that's been discussed thoroughly, but as a competition 8 rider we went from over a hundred motorcycles that were 9 available for competition, down to less than ten. So that's 10 why they're doing what they're doing, and it's very 11 important. 12 I hope you support it. 13 Thank you. 14 CHAIRMAN RIORDAN: Thank you. 15 Next, if you would introduce yourself for the 16 record, please. 17 MR. DART: Yes. Bill Dart with the AMA District 18 36 in Northern California. I certainly appreciate the 19 chairman and the Board members' patience today. It's been a 20 long day and hopefully we'll be done soon. 21 But anyway, again, most of the points have been 22 covered here, but we would like to make sure that we do have 23 an opportunity to review data long-term and because there 24 are a lot of these sites that are quite some distance from 25 the monitoring stations. There's some debate about a couple PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 496 1 of the sites. 2 But otherwise we are very very pleased. 3 We thank former-Chairman Dunlap and all the staff 4 members that worked so diligently and earnestly with us to 5 resolve this situation. 6 And we think this is an equitable solution. We 7 urge your support. 8 Thank you. 9 CHAIRMAN RIORDAN: Thank you very much. 10 Mr. Fouts. 11 MR. FOUTS: Good evening. Thank you very much for 12 seeing me here tonight, Madam Chairman and Board. 13 I'm Jerry Fouts. I'm the president of District 14 36, the Northern California AMA group. 15 First off, I'd like to say thank you very much to 16 the staff. Boy, I tell you what, when we first started this 17 thing it was a very difficult task because their numbers, we 18 didn't agree with their numbers and we didn't agree with the 19 philosophy and the way they were going and somehow we all 20 sat down with Bill Dart and some of the other guys and we 21 thought out of the box. 22 For a bunch of guys wearing ties, I didn't expect 23 that to happen, to be honest with you. 24 And they thought out of the box and they come up 25 with some real good ideas and they came out with a workable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 497 1 solution. And it's a solution I think everybody can live 2 with. Nobody is tickled to death with it, but you know 3 what, that's what compromise is all about. 4 And they put together a workable solution and 5 somebody thought it was positive. It allows the district -- 6 the dealers to continue to sell product and generate tax 7 revenues. It allows enthusiasts like myself to go riding 8 and enjoy the out-of-doors and the critters and the water 9 and all the other fun things that we do. And it allows the 10 safety of our clean air. 11 And believe it or not, we want clean air too. 12 And another thing I think to keep in mind is I'm a 13 taxpayer and I hope we're all taxpayers here. 14 CHAIRMAN RIORDAN: So far we are. 15 MR. FOUTS: We're all taxpayers and to get the 16 biggest bang for our buck as taxpayers I'm hoping to heck we 17 can put this thing to bed, because I don't want to see the 18 taxpayers have to pay for this to be rehashed over and over 19 and over again. 20 We want an agreement to put it to bed to finalize 21 this thing, so that we can go on, so that you can go on and 22 deal with other issues. We can go on and do new issues. 23 And thank you again for your time. 24 CHAIRMAN RIORDAN: Thank you. 25 MR. FOUTS: I've only got one additional comment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 498 1 I'm looking at Mr. Dunlap there, and I have to 2 make a comment. It's kind of funny, because he made a neat, 3 real neat interview in Cycle News, which is a motorcycling 4 paper, about a year ago. Real interesting interview that 5 made a lot of folks mad, including my son, but anyway -- 6 he's an avid motorcycle guy. 7 CHAIRMAN RIORDAN: What did he say? 8 MR. FOUTS: Well, I'll tell you. I'm hoping we 9 can put this issue to bed, so that I can finally take his 10 picture off the dartboard of my garage. 11 Thank you very much for your time and patience. 12 CHAIRMAN RIORDAN: Thank you. 13 Mr. Soens. 14 MR. SOENS: Yes, Harold Soens, District 38 AMA, 15 extreme southeastern division. 16 Madam Chair, Board members, staff, I really 17 appreciate you, staff, especially you, Andrew, for keeping 18 me in touch. 19 It's been a long hard battle. We've lost some. 20 We've won some. But this is the program that has to be this 21 way. 22 We just ride, so I'm in favor of it. 23 There's 87 riding areas on here. Unfortunately, 24 two of them that are not allowed to be ridden in at all are 25 in my district, approximately 30 miles apart. One is in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 499 1 Cleveland National Forest, the other one is in BLM country, 2 the high desert area. 3 I'd just like to relook at this and see if we can 4 get some kind of time, any kind of time, a month, an hour, 5 any time that I can take back to my constituents and tell 6 them we've won something and have this revisited. 7 We would like to have it monitored, because it's a 8 clean air, it really is, but without monitoring we don't 9 know and staff says it's not good. 10 But we'll take our chances with the monitoring. 11 Thank you. 12 CHAIRMAN RIORDAN: Mr. Soens, what you can do is 13 I'll have staff work with you and review that and maybe 14 there is something -- 15 MR. SOENS: I've already been talking to them. 16 CHAIRMAN RIORDAN: Okay. Great. 17 Mr. Don Fuller, next on the list. 18 And the final speaker is Dana Bell. 19 MR. KENNY: Madam Chairman, if I can make a quick 20 comment. 21 CHAIRMAN RIORDAN: Yes. 22 MR. KENNY: With regard to Mr. Soens' request, we 23 can actually sit down with him and look at that and then if 24 it's appropriate, we can make the modification during the 25 15-day change period, if the Board is comfortable with that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 500 1 CHAIRMAN RIORDAN: I think that would be fine. He 2 only wanted to look at two areas. 3 What you need to do is be sure before you leave 4 tonight, Mr. Kenny's staff here, you've got to get your 5 business card so they can contact you. 6 You've got it? You know him very well. Okay. 7 MR. SOENS: They don't need my card? 8 CHAIRMAN RIORDAN: No. 9 Mr. Fuller. 10 MR. FULLER: I'm Don Fuller from Department of 11 Parks and Recreation, State Parks, Off-Highway Vehicle 12 Division. 13 I want to thank the staff for all of their hard 14 work, all nine meetings of them in Southern California and 15 beautiful El Monte of course. 16 And I have to agree with all of the other 17 speakers. It's been a very difficult process. A compromise 18 means both sides are not satisfied. We reluctantly support 19 what's happening right here. 20 And as far as enforcement goes, the state parks 21 are prepared to enforce this as soon as DMV will get their 22 red stickers out. 23 And also Nancy Steele is going to prepare some 24 kind of public education form for us with those in mind. 25 Once the public is educated, red stickers are out, we'll be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 501 1 prepared to enforce this. 2 And BLM and US Forest Service has said that they 3 will follow our lead on this. 4 CHAIRMAN RIORDAN: Great. It just occurred to me 5 that the two associations that have testified here today 6 need to be very helpful in getting that education 7 information to the membership, and so that is a key 8 component that I want everybody to work on. And, obviously, 9 we'll do our part, but the association could be so helpful 10 in that regard. 11 Very good. Thank you. 12 And Dana Bell, if you would identify yourself and 13 who you represent. 14 MS. BELL: My name is Dana Bell. I'm the Western 15 States representative for the American Motorcyclists 16 Association. I'm also a native Southern Californian and 17 I've raised four children out in the California desert in 18 OHV recreation. 19 What has made this, I really don't think we should 20 call this a compromise. This has been a collaboration. 21 This has been the public working with the state trying to 22 find a way to save a very wonderful sport and yet address 23 the air quality that's very necessary here in California. 24 And I would like to thank the staff. I'd like to 25 thank all of the people who worked on that group, because it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 502 1 was a very difficult issue we were working with. 2 One of the things now is if we can finally have a 3 decision, then these groups can continue to work together 4 and we can notify those people who participated in 5 off-highway recreation in this state of what the regulation 6 is and what they need to do to comply with it. 7 And with this work group what has been good is 8 that we've had the Forest Service, we've had the Bureau of 9 Land Management, we've had the state, we've had all major 10 OHV recreation groups in California involved. And with that 11 group we can now reach out to the entire state and make sure 12 that there is compliance. 13 So we have a very valuable state program. We fund 14 ourselves. We spend it on environmental work and 15 enforcement. We do tremendous volunteer work around the 16 state. And we work very closely with our agencies. This is 17 a program worth saving. 18 And I again thank the Board for your patience all 19 day and for the staff for working with us. 20 Thank you. 21 CHAIRMAN RIORDAN: Thank you for your testimony. 22 That closes the witness list. 23 Let me ask the staff to comment on the written 24 submission, people who could not be here. 25 Very briefly, Mr. Parnell said. I know they'll be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 503 1 brief. 2 MR. PARNELL: Very briefly. 3 MS. LOURENCO: I'm Jackie Lourenco, manager of the 4 Off-Road Control Section. 5 We received about 40 letters from users and the 6 San Diego Off-Road Coalition Group. The vast majority of 7 them are supportive of our proposal. A few of them 8 certainly wanted some extensions in the riding seasons. 9 Couple of people just don't want any standards at 10 all. 11 And one wants us to enforce our standards and no 12 riding seasons. 13 And also the Motorcycle Industry Council has 14 submitted comments in support of our proposal. 15 And that's it. 16 CHAIRMAN RIORDAN: Thank you, Jackie. 17 Let me close the record now on this agenda item. 18 However, the record will be reopened when the 19 15-day notice of public availability is issued. 20 Written or oral comments received after this 21 hearing date, but before the 15-day notice is issued will 22 not be accepted as part of the official record on this 23 agenda item. 24 When the record is reopened for a 15-day comment 25 period, the public may submit written comments on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 504 1 proposed changes, which will be considered and responded to 2 in the final statement of reason for the regulation. 3 This item carries with it the ex parte 4 declaration. 5 Is there anyone that has anything to declare? 6 No. 7 Are there any questions of staff at this time? 8 Seeing none, there is a resolution before us. 9 MS. EDGERTON: How about comments? 10 CHAIRMAN RIORDAN: We can have comments or we can 11 put a resolution on and a discussion, whichever. 12 MR. DUNLAP: I move adoption -- 13 CHAIRMAN RIORDAN: 98-66. 14 MR. DUNLAP: -- of resolution 98-66. 15 MR. PARNELL: Second. 16 CHAIRMAN RIORDAN: Moved by Member Dunlap, 17 seconded by Member Parnell. 18 Discussion? 19 Ms. Edgerton. 20 MS. EDGERTON: Thank you. 21 I'd like to compliment staff on the working toward 22 a compromise. I know it's difficult. 23 I'd like to affirm all the individuals who 24 appeared here. I'm sure you're wonderful people. I can 25 tell. And you have a good time and you're -- I think PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 505 1 motorcyclists are wonderful people. 2 I think Mr. Dunlap is a wonderful person. 3 But I remain, quite honestly, troubled by this 4 proposal, and I'm troubled by it because I just don't see 5 that it makes sense, just not something I see as within the 6 purview of the Air Resources Board to be passing regulations 7 to try to bring back more bikes into California parks, and 8 especially to make a special effort to bring back the ones 9 that are the dirtiest. 10 It doesn't, personally it just doesn't seem to me 11 to be consistent with cleaning the air in California and 12 protecting our precious resources, because it seems to me 13 that if the motorcyclists want to ride, we'd really 14 appreciate it if they'd ride the green sticker bikes, the 15 really clean ones. 16 So I can't vote for it, although I think you're 17 all wonderful people. 18 Thank you. 19 CHAIRMAN RIORDAN: Thank you, Ms. Edgerton. 20 Any other comments? 21 Supervisor Patrick. 22 SUPERVISOR PATRICK: Yes. I would just like to 23 make a comment. 24 I don't think that this Board is about decimating 25 an industry. I don't think that any of us feel comfortable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 506 1 doing that. 2 And I think one of the reasons why we can put in 3 the very stringent regulations that we do is that we know 4 that we have the ability to go back and look at the effect 5 that our proposals have on the people of the State of 6 California. 7 And when I hear people saying words like 8 equitable, creative, workable, out of the box, positive, 9 compromise, collaboration, I'm in favor of it. 10 MRS. RAKOW: Even though they wear ties. 11 SUPERVISOR PATRICK: Even though they were wearing 12 ties when they said it, yes. 13 CHAIRMAN RIORDAN: Any other comments? 14 The motion is before us. All those in favor of 15 the motion signify by saying aye. 16 (Ayes.) 17 CHAIRMAN RIORDAN: Opposed, no. 18 MS. EDGERTON: No. 19 CHAIRMAN RIORDAN: The motion is carried. Pardon 20 me, one no. 21 MS. EDGERTON: You better believe it. 22 MR. DUNLAP: And if I can say one thing. 23 CHAIRMAN RIORDAN: Yes. 24 The motion does carry. 25 MR. DUNLAP: I know he would be never be looking PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 507 1 for this kind of recognition, but I'd like to acknowledge 2 Rob Oglesby, our legislative director, who is pacing in the 3 back of the room like an expectant father on this item. 4 Rob facilitated the dialogue with this industry on 5 my behalf and the Board's behalf, and in early going in 6 particular and then worked quite well with Tom and Jackie 7 and others on the technical team. I just want to 8 acknowledge his efforts. 9 Would never want it in the record to suggest the 10 legislative director was meddling in the technical issues 11 where he was not, but he was looking at preserving the air 12 quality benefits and ensuring that reasonable issues were 13 dealt with properly, so I want to acknowledge him and thank 14 him for that work. 15 CHAIRMAN RIORDAN: Yes. In fact, I really 16 appreciate the fact that we've concluded this day's work on 17 such a pleasant note. It is so nice to do that. So I 18 congratulate all of you. 19 There are two items that we are going to carry 20 over for tomorrow. Those were the research proposals and 21 the ICAT augmentation. 22 This concludes our work for today, and I don't 23 believe there is any further business that we haven't yet 24 dealt with that's not continued. 25 So we're going to adjourn for this evening, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 508 1 commence tomorrow morning at a time certain called 8:30 a.m. 2 (Thereupon the meeting was adjourned 3 at 9:00 p.m.) 4 // 5 // 6 // 7 // 8 // 9 // 10 // 11 // 12 // 13 // 14 // 15 // 16 // 17 // 18 // 19 // 20 // 21 // 22 // 23 // 24 // 25 // PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 509 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 20th day of December 1998. 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 510 1 CERTIFICATE OF SHORTHAND REPORTER 2 3 I, VICKI L. OGELVIE, a Certified Shorthand 4 Reporter of the State of California, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, Vicki L. 7 OGELVIE, a Certified Shorthand Reporter of the State of 8 California, and thereafter transcribed into typewriting. 9 I further certify that I am not of counsel or 10 attorney for any of the parties to said hearing nor in any 11 way interested in the outcome of said hearing. 12 IN WITNESS WHEREOF, I have hereunto set my hand 13 this twentieth day of December, 1998. 14 15 16 VICKI L. OGELVIE 17 Certified Shorthand Reporter License No. 7871 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345