BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA, JR. BUILDING CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, FEBRUARY 26, 2004 9:00 A.M. TIFFANY C. KRAFT, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Dr. William Burke Mr. Joseph Calhoun Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Professor Hugh Friedman Dr. William Friedman Supervisor Barbara Patrick Mr. Matthew McKinnon Mrs. Barbara Riordan BOARD MEMBERS EXCUSED Supervisor Ron Roberts STAFF Mr. Tom Cackette, Chief Deputy Executive Officer Ms. Diane Johnston, General Counsel Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Tschogl, Ombudsman Ms. Catherine Witherspoon, Executive Officer Ms. Lori Andreoni, Board Clerk PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED Mr. Toni Andreoni, Manager, Process Evaluation Section Mr. Grant Chin, Program Assistance Section, Stationary Source Division Mr. Bart Croes, P.E., Chief, Research Division Mr. Dan Donohoue, Chief, Emissions Assessment Branch Mr. Paul Henderick, Air Resources Engineer, Retrofit Assessment Branch Ms. Annette Herbert, Chief, Heavy-Duty In-Use Strategies Branch, MSCD Mr. Rod Hill, Air Resources Engineer, Emissions Assessment Branch, Stationary Source Division Mr. Alex Santos, Technical Analysis Section Ms. Peggy Taricco, Manager, Technical Analysis Section Mr. Michael Terris, Staff Counsel Mr. Mike Tollstrup, Chief, Project Assessment Branch Mr. Peter D. Venturini, Chief, SSD Mr. Mike Waugh, Manager, Program Assistance Section Mr. Dane Westerdahl, Health & Exposure Assessment Branch Mr. Todd Wong, Manager, Technical Assessment Section ALSO PRESENT Mr. Paul Able, Schlumberger Mr. Ken Barker, Sully-Miller Contracting Mr. Bruce Bertelsen, Manufacturers of Emission Controls Association Mr. Geoff Boraston, Granite Construction Company PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Mr. Mike Buckantz, Construction Industry Air Coalition Mr. Frank Caponi, County Sanitation Districts of Los Angeles Mr. Robert Digges, American Trucking Association Mr. Sean Edgar, California Refuse Removal Council Ms. Mary Jane Foley, Southern CA Alliance of Publicly Owned Treatment Works Mr. Stan Foster, NORCO Ranch Mr. Tim French, Engine Manufacturers Association Mr. Randal Friedman, U.S. Navy Mr. David Grose, Sacramento Metropolitan Air Quality Management District Ms. BJ Kirwan, Lathan & Watkins Mr. Kevin Hallstrom, Engelhard Corporation Mr. Robert Hassebrock, Weatherford Ms. Janet Hathaway, Natural Resources Defense Council Ms. Staci Heaton, California Trucking Association Ms. Bonnie Holmes-Gen, American Lung Association Mr. Julian Imes, Donaldson Co. Mr. Kimberley Jones, Lubrizol Ms. Kate Larsen, Environmental Defense Mr. Marty Lassen, Johnson Matthey Mr. Martin Ledwitz, SCE Ms. Barbara Lee, CAPCOA PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. John Linnborn, Sully-Miller Contracting Mr. Daniel McGivney, Eastern Municipal Water District Mr. Dave Modisette, CA Electric Transportation Coalition Ms. Sharon Rubalcava, Motion Picture Association of America Mr. Tom Swenson, Cleaire Mr. Sven Thesen, Pacific Gas & Electric Company Mr. James Thomas, Pool Well Services Company Ms. Cindy Tuck, CCEEB Mr. Tom Umenhofer, WSPA Mr. Doug Van Allen, BJ Services Company Ms. Stephanie Williams, California Trucking Association Mr. Bob Wilson, Idle Aire PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Item 04-2-1 Chairperson Lloyd 7 Executive Officer Witherspoon 8 Staff Presentation 8 Item 03-9-2 Chairperson Lloyd 17 Executive Officer Witherspoon 17 Staff Presentation 18 Q&A Mr. Swenson 29 Ms. Rubalcava 31 Ms. Tuck 34 Mr. McGivney 37 Ms. Foley 38 Mr. Ledwitz 40 Ms. Holmes-Gen 43 Ms. Larsen 44 Q&A 45 Vote 51 Item 03-10-2 Chairperson Lloyd 51 Executive Officer Witherspoon 52 Staff Presentation 53 Ombudsman Tschogl 59 Mr. Modisette 60 Mr. Foster 72 Ms. Williams 75 Mr. Digges 95 Ms. Kirwan 113 Mr. Wilson 114 Q&A 118 Vote 128 Item 03-10-3 Chairperson Lloyd 129 Executive Officer Witherspoon 130 Staff Presentation 132 Ms. Heaton 142 Mr. Bertelsen 144 Mr. Hallstrom 144 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX CONTINUED PAGE Mr. Lassen 160 Ms. Jones 173 Mr. Swenson 178 Mr. Imes 180 Mr. Edgar 183 Q&A 191 Vote 201 Item 04-2-2 Chairperson Lloyd 201 Executive Officer Witherspoon 201 Staff Presentation 202 Ombudsman Tschogl 220 Mr. French 222 Ms. Hathaway 224 Ms. Holmes-Gen 231 Mr. Sven Thesen 235 Ms. Rubalcava 239 Ms. Tuck 239 Mr. Thomas 242 Mr. Van Allen 248 Mr. Buckantz 252 Mr. Caponi 253 Mr. McGivney 261 Q&A 264 Vote 268 Item 04-2-3 Chairperson Lloyd 268 Executive Officer Witherspoon 269 Staff Presentation 269 Mr. Buckantz 281 Ms. Lee 284 Mr. Barker 297 Mr. Umenhofer 299 Mr. Thomas 304 Mr. Van Allen 308 Mr. Able 310 Mr. Hassebrock 313 Mr. Linnborn 318 Mr. Boraston 323 Ms. Rubalcava 328 Mr. Thesen 333 Mr. Friedman 337 Ms. Tuck 339 Mr. McGivney 340 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX PAGE Mr. Caponi 343 Mr. Grose 345 Q&A 348 Vote 360 Adjournment 361 Reporter's Certificate 362 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The February 3 26th, 2004, public meeting of the Air Resources Board will 4 now come to order. 5 Mr. Calhoun, would you please lead us in the 6 Pledge of Allegiance. 7 (Thereupon the Pledge of Allegiance was 8 Recited in unison.) 9 CHAIRPERSON LLOYD: Thank you. 10 Would the Clerk of the Board please call the 11 roll. 12 BOARD CLERK ANDREONI: Dr. Burke? 13 BOARD MEMBER BURKE: Present. 14 BOARD CLERK ANDREONI: Mr. Calhoun? 15 BOARD MEMBER CALHOUN: Here. 16 BOARD CLERK ANDREONI: Ms. D'Adamo? 17 BOARD MEMBER D'ADAMO: Here. 18 BOARD CLERK ANDREONI: Supervisor DeSaulnier? 19 CHAIRPERSON LLOYD: He's running about 20 minutes 20 late. He will be here. 21 BOARD CLERK ANDREONI: Okay. 22 Professor Friedman? 23 BOARD MEMBER HUGH FRIEDMAN: Here. 24 BOARD CLERK ANDREONI: Dr. Friedman? 25 BOARD MEMBER WILLIAM FRIEDMAN: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD CLERK ANDREONI: Mr. McKinnon? 2 Supervisor Patrick? 3 SUPERVISOR PATRICK: Here. 4 BOARD CLERK ANDREONI: Ms. Riordan? 5 BOARD MEMBER RIORDAN: Here. 6 BOARD CLERK ANDREONI: Supervisor Roberts? 7 Chairman Lloyd? 8 CHAIRPERSON LLOYD: Here. 9 Thank you very much. Lori has passed her first 10 test. I would like to take this time to introduce Lori 11 Andreoni, the new Clerk of the Board. 12 (Applause) 13 CHAIRPERSON LLOYD: Those red cheeks. 14 The Board members are well aware, we've had a lot 15 of turn over in the Board Clerk position, as some of our 16 Clerks have transferred to other positions at the ARB or 17 left the Board to take care of family obligations. Again, 18 I'm pleased to announce we've made a new permanent 19 appointment of Ms. Lori Andreoni to the Board Clerk 20 position. We didn't have to go far, because some of you 21 will recollect, in fact, she served as the Administrative 22 Assistant to, in fact, our Executive Officer, to 23 Catherine. But although Ms. Witherspoon wasn't entirely 24 happy to see her go, she was pleased for Lori and the 25 Board to have such a capable person in the roll of Board PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 Clerk. 2 So again I would like to congratulate Lori and 3 welcome her aboard. And again, I think you picked 4 probably a lively meeting to start the program. 5 Also like to mention another personnel item which 6 gives me great pleasure, and that is that I wanted to 7 mention the return of Carmen Madia to our Legal Affairs 8 Office. 9 Where is Carmen? 10 Carmen Madia is a Master Sergeant with the U.S. 11 Air Force Reserve and the Intelligence Superintendent for 12 to Worldwide Airlift and Air-Refueling Mission at Travis 13 Air Force Base. After the tragic events of 14 September 11th, Master Sergeant Madia was mobilized under 15 Presidential order and was one of the first reservists 16 sent overseas to provide intelligence to support U.S. and 17 Coalition aircrews flying over Afghanistan during our 18 Operation Enduring Freedom. 19 After a one-year tour of duty, Master Sergeant 20 Madia returned to the ARB's Legal Office where he works as 21 a Senior Legal Analyst. But his return was short lived. 22 Since he was once again activated in February 2003, this 23 time Carmen was assigned to a tactical airlift control 24 team, whose mission was to secure potentially hostile air 25 fields deep in Iraq used for resupply and air evacuation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 missions for U.S. and Coalition ground forces. 2 After two years, he's been released from active 3 duty. We would like to welcome Carmen back to Sacramento 4 and to his family of co-workers here at the Air Resources 5 Board. He is, indeed, a wonderful example of the very 6 best that America has to offer. And again, it's a 7 privilege to have you return as a member of ARB. 8 Congratulations. Thank you. 9 (Applause) 10 CHAIRPERSON LLOYD: Those who want to get more 11 details, I'm sure it's very scary. We think we have a 12 tough job here at the Air Board some days. But looking at 13 what he's gone through, again, it pales in comparison. 14 Just an update, I think, on the regulatory review 15 process and turning to our agenda today, we start by 16 indicating where we stand on the Governor's regulatory 17 review, since it cannot escape anyone's notice that we 18 have five regulatory items on today's Board calendar. 19 As required by the Governor's Executive Order, 20 the ARB has completed its review of all regulations 21 adopted or amended or repealed since January the 6th, 22 1999, and all of our pending rule making in process at the 23 time the Executive Order was issued. We filed our written 24 report with Secretary Tamminen on February 11th. It's 25 been subsequently forwarded to the Governor's Office. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 have been cleared to proceed with all regulatory items on 2 today's calendar. This is what we intend to do. Unless 3 something extraordinary happens during our deliberations, 4 the Board will be voting on all of the proposed rules 5 before it today. 6 However, that being said, there's a clear 7 expectation of the Administration that we will thoroughly 8 evaluate the environmental and economic impacts of the 9 proposals before us, as, in fact, ARB normally does. 10 Also I'd like to comment on another item. Three 11 of the five regulations before the Board's consideration 12 today was presented at prior Board meetings, as many of 13 you will recollect. In addition, the Board heard 14 extensive testimony at the time they were heard. To 15 expedite our hearing today, I have asked staff to briefly 16 recap the proposed rules for the Board's benefit and the 17 audience to summarize the issues that came up in our prior 18 hearings and describe any changes made to the regulations 19 by staff since that time. 20 I would like to ask all the witnesses today to 21 help us by following the same basic approach. If the 22 Board has already heard your testimony on an item, we'd 23 appreciate it very much if your comments today focus on 24 any outstanding issues that are still not resolved. It is 25 not necessary to repeat your prior testimony in its PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 entirety, since the Board members have all reviewed the 2 record from our prior hearings in preparation for today's 3 proceedings. 4 Of course, for the new regulations on the agenda 5 pertaining to portable items, there was no prior 6 testimony, and we will follow our normal procedure. Thank 7 you very much for your cooperation in this regard. As the 8 day progresses, if I find people are repeating, I will 9 probably cut people off in that context. 10 Also like to reflect on the Governor's first 100 11 days in office, because clearly this is a time where we 12 want to reflect on that. And given what I see, again, 13 it's exciting to be part of the new Administration. 14 As I reflect on the Governor's first 100 days in office, 15 I'm struck by how incredibly committed his environmental 16 agenda and environmental action plan is. 17 From the early fight over the bond amendment, 18 which set the pattern and tone in the first days of this 19 administration, Governor Schwarzenegger's letters to 20 President Bush and the EPA Administrator Michael Leavitt 21 on the oxygen waiver, the pending federal off-road diesel 22 standard, and other critical issues, the Governor has 23 demonstrated over and over that he intends to engage 24 directly on major air quality issues and to see them 25 through to the end. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 Even more announcements and initiatives are 2 coming related to children's health, the hydrogen highway, 3 HOV lane access for hybrids, vehicle scrappage, and other 4 vitally-important air quality programs intended to protect 5 public health. We couldn't ask for more support from 6 California's Senior Executive or from the Secretary of 7 CalEPA, Terry Tamminen. And Terry is really an 8 inspirational leader. It's a general pleasure to work 9 under such leadership and commitment. And again, I just 10 wanted to take an opportunity in this forum to express 11 that. 12 On the other hand, we also have a tremendously 13 challenging program set down by the Secretary and by the 14 Governor's action plan. And I would like to again express 15 my appreciation to staff for the outstanding contributions 16 they have made to date in responding to the many, many 17 demands that we put on them. 18 So with that, I would like to look to the first 19 agenda item, which is our usual health update. But I 20 would also like to remind anyone in the audience who 21 wishes to testify on today's agenda items to please sign 22 up with the Clerk of the Board. If they have written 23 testimony, to provide 30 copies of that. 24 First item is 04-2-1, our monthly Public Health 25 Update. And today's update will discuss a recent study PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 conducted by an impressive group of scientists who 2 determine how fine particles impact on death rates. 3 With that, I'd like to turn it over to 4 Ms. Witherspoon to introduce the item. 5 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 6 Lloyd, and good morning, members of the Board. Today's 7 health update highlights an epidemiological study on the 8 associations between long-term fine particle exposure and 9 death rates. This study adds to a convincing body of 10 evidence that air pollution episodes lead to increased 11 respiratory and cardiovascular illness and mortality in 12 people with existing disease. 13 Mr. Dane Westerdahl from the Research Division 14 will present their study findings and their implications. 15 (Thereupon an overhead presentation was 16 presented as follows.) 17 MR. WESTERDAHL: Good morning. I'm here today to 18 bring you some new information on the health -- 19 CHAIRPERSON LLOYD: Is your mic on, Dane? 20 MR. WESTERDAHL: Yes, it is. Let me just move it 21 closer. 22 Good morning. I'm here today to bring you some 23 new information on the health impacts of particles in the 24 air we breathe, especially focusing on how these particles 25 may be causing harm following long-term exposures. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 --o0o-- 2 MR. WESTERDAHL: Over the past several years, 3 you've all heard that particulate matter in the air we 4 breathe can be harmful, especially to people who are at 5 special risk. We see that people with respiratory and 6 cardiovascular disease who experience brief or prolonged 7 exposures to elevated PM are likely to seek hospital 8 admission, suffer symptoms of their disease, even more 9 likely to die than people who are not exposed or who do 10 not have these risk factors. 11 From limited evaluations of prolonged exposures, 12 there's even suggestions that PM exposure may contribute 13 to disease progression. A very important and allusive 14 question remains regarding how PM exposures are linked to 15 these adverse health outcomes. That question basically 16 focuses on what we call the pathophysiological mechanisms 17 that underlie the observations. We need to understand 18 these underlying mechanisms to establish a cause of 19 relationships so we're confident that we are protecting 20 the citizens of California. Unfortunately, 21 epidemiological studies, especially those with long-term 22 exposure consequences, are often not well suited to 23 provide this kind of information, because they may not 24 collect all of the kinds of information we need to 25 establish cause. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 --o0o-- 2 MR. WESTERDAHL: Today's study was performed by a 3 highly-qualified group of epidemiologists and 4 statisticians and investigators with the specific 5 objective in attempting to evaluate health and PM exposure 6 information to determine whether any statistical outcomes 7 suggest mechanisms or pathophysiological pathways and 8 effect. 9 --o0o-- 10 MR. WESTERDAHL: The research protocol -- this 11 research was performed using an existing large 12 epidemiological study database that was assembled by the 13 American Cancer Society. The study group consists of 14 approximately 300- to 500,000 participants from 15 metropolitan areas of the country. The specific numbers 16 varied depending on the availability of air quality data 17 for exposure assignment. 18 Participants were recruited in 1982 and they 19 completed detailed questionnaires to give -- to record 20 information that characterized their health status at the 21 time the study began, as well as to gather information on 22 factors that could influence their health in the future as 23 they aged. Most obviously these factors were smoking 24 history, race, age, sex, educational achievement, body 25 mass index, and occupation. The participants were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 surveyed during the 16-year study period to determine if 2 they were alive. If they were found to be dead, death 3 records were collected on these individuals, and causes of 4 death were obtained from the death records. 5 The investigators of the current study generated 6 PM 2.5 exposure profiles from major cities where the 7 subjects lived. The basic unit were quarterly averages of 8 PM 2.5 that were accumulated into a longer-term exposure 9 base. 10 Now, there were limitations that were imposed by 11 the protocol. While it was a large study performed by 12 excellent investigators, because they had to go back and 13 generate exposure information, that provided them some 14 difficulties. In addition, relying on death data taken by 15 coroners and other public health recording officials from 16 across the nation, it made it a little less uniform 17 database than they would have liked. They discuss that in 18 their paper. 19 --o0o-- 20 MR. WESTERDAHL: Over the 16 years of the 21 American Cancer Society study period, approximately 23 22 percent of the participants died. This presented the 23 investigators the large study group. Of these, 24 surprisingly, 45 percent were from cardiovascular disease, 25 and 8 percent were respiratory disease. Investigators PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 report a clear association of long-term PM exposures with 2 increased risk of death from all cardiovascular disease 3 causes. 4 The largest increased risks were for ischemic 5 heart disease, but other cardiac causes such as 6 dysrhythmia and cardiac arrest also achieved 7 statistically-significant elevated risk levels. 8 Interesting, no increased risks were shown for respiratory 9 causes. In fact, some causes showed an inverse risk in 10 high PM areas. 11 --o0o-- 12 MR. WESTERDAHL: Smoking was found, not 13 surprisingly, as an individual risk factor to produce 14 large impacts an both cardiovascular and respiratory 15 deaths, but an interesting finding was that smokers 16 appeared to be a special risk to cardiovascular-related 17 deaths if they reside in areas of high PM exposure. So 18 basically, the high PM exposure added to -- at least added 19 to the consequences of their smoking. 20 --o0o-- 21 MR. WESTERDAHL: What are the implications and 22 applications of this study? The investigators end the 23 paper with lengthy discussion of how the observations of 24 specific causes of cardiovascular death were associated 25 with long-term PM 2.5 exposures, and that these suggested PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 pathophysiological pathways of effect. 2 The clear association of PM with ischemic heart 3 disease suggests long-term exposures may play a roll in 4 inflammatory and arthrosclerotic mechanistic pathways. 5 Findings of dysrhythmia and cardiac failure suggest 6 alterations of neural and electrical control processes of 7 the heart. 8 The findings that smokers respond even more 9 strongly at a given level of PM exposure than do 10 non-smokers is quite novel and counters traditional wisdom 11 that smokers are somehow less likely to suffer from 12 ambient PM exposures, since they receive such high 13 exposures from their active smoking. 14 Further studies are needed to confirm and clarify 15 the findings of the study, especially studies where actual 16 ascertainment of the physiological status and exposure of 17 individuals is included. Studies with direct measures of 18 such circulating factors in blood or collection and 19 coordinated cardiovascular outcomes should also be 20 considered. 21 Finally, these studies are consistant with 22 earlier studies that served as the basis for the annual PM 23 2.5 standards adopted by the Board in 2002. 24 Thank you. 25 CHAIRPERSON LLOYD: Thank you very much, Dane. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 Dr. Friedman. 2 BOARD MEMBER WILLIAM FRIEDMAN: These studies are 3 really quite interesting, because it means that in 4 response to chronically-high levels of air pollution, that 5 the risk of dying from a heart attack or heart failure or 6 rhythm problem with the heart is really much greater than 7 that from some lung disease. And as everybody knows, 8 traditionally we've always thought that the lung is the 9 essential target organ for all illness relative to air 10 pollution. And this is changing. 11 I'm a cardiologist, and I have sort of an 12 interesting, selfish take on why I think this study is 13 quite important. The number of basic scientists involved 14 in cardiovascular research exceeds by a ratio of about 100 15 to 1 the number of people interested in lung research. So 16 I'm hoping that my colleagues get excited about this 17 observation and really start to focus on some of the 18 authentic causal relationships in this phenomena, which I 19 think is real. 20 And we've been hearing, you know, for the last 21 year bits and pieces of this story of heart disease 22 relative particularly to particulate pollution. And so I 23 think this is going to be a signal to get a lot of people 24 to get interested in augmenting their own studies of 25 cause-effect relationships. So I think this is a very PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 important time for this kind of a study to appear. 2 CHAIRPERSON LLOYD: As I see this again, 3 exacerbated by cigarette smoke. 4 BOARD MEMBER WILLIAM FRIEDMAN: Well, the 5 cigarette smoking thing is quite true. I mean, the 6 presence of cigarette smoking makes everything worse. It 7 raises some interesting questions about past observations 8 and big epidemics when air pollution, you know, was 9 dreadful in certain communities and mortality was high. 10 Probably in those days the number of people smoking was 11 much higher than today. So you have to sort of 12 re-interpret some of those observations from long ago. 13 The other thing that's interesting to me is in 14 the cardiac literature -- in the science that's going on 15 now about heart attack, there's more and more information 16 suggesting that inflammation is a root cause of having a 17 heart attack, not just arteriosclerosis. There's an 18 inflammatory component that's important. And frankly, a 19 lot of what we're hearing about particulates relates to 20 inflammation. The cellular responses that we're learning 21 about with release of cytokines and other intra-cellular 22 substances are the things that happen with inflammation. 23 So there may be a connection between pollution, 24 inflammation, heart disease, all as a result of 25 particulates. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 CHAIRPERSON LLOYD: How would aspirin interact? 2 Would that help to -- 3 BOARD MEMBER WILLIAM FRIEDMAN: Well, I think -- 4 the question is, how does aspirin interact? I think the 5 issue with aspirin has less to do with the inflammatory 6 reductions due to aspirin than to aspirin's affect on 7 disallowing platelets from adhering to one another in 8 clotting. I think that is a far more dominant action of 9 aspirin than in reducing any inflammation. But it can be 10 tested. It hasn't been tested specifically in that 11 regard. 12 CHAIRPERSON LLOYD: Where else can you have a 13 consultation with a world-leading cardiac authority 14 without having a fee? 15 (Laughter) 16 BOARD MEMBER WILLIAM FRIEDMAN: I don't know how 17 much it's going to cost me. 18 CHAIRPERSON LLOYD: Any other questions, 19 colleagues? 20 Thank you very much, indeed. 21 As we move over to the next agenda item, 03-9-2, 22 Proposed Airborne Toxic Control Measure for Stationary 23 Diesel Engines. 24 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd, while 25 staff is setting up and before we begin our deliberation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 on diesel regulatory measures, I'd like to draw the 2 Board's attention to a memorandum from General Counsel 3 regarding the Board's authority to act in this regard. 4 The question came up in November and December where the 5 Board's authority was disputed, and Diane Johnston has 6 prepared for you our Legal staffs' analysis of the 7 authorities that enable you to enact on the five 8 regulations before you today. It's also available in the 9 lobby for members of the audience. 10 CHAIRPERSON LLOYD: Thank you very much. The 11 next Agenda Item is 03-9-2, Proposed Airborne Toxic 12 Control Measure for Stationary Diesel Engines. This item 13 was heard at our December Board meeting and continued to 14 today. I'm sure my fellow Board members will remember our 15 discussion about the proposed requirements for engines 16 located near schools and some of the other features of the 17 rule. Staff has continued to refine its proposal since 18 the last Board meeting and will update us on the progress 19 made to date. 20 So with that, I'd like to turn it over to 21 Ms. Witherspoon to begin the staff presentation. 22 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 23 Lloyd. 24 During the November Board meeting, you heard 25 testimony from several witnesses that was generally PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 supportive of the proposed ATCM. However, a few 2 outstanding concerns were also identified at that time, 3 including the need for additional restrictions near 4 schools, a request to exempt or delay compliance deadlines 5 for remotely-located engines, and issues related to the 6 use of emergency standby diesel engines in demand response 7 programs. 8 In December, staff reported back on how we plan 9 to address these concerns. Today staff will discuss the 10 actual 15-day changes we are proposing to the final rule. 11 Mr. Alex Santos of our Stationary Source Division 12 will now summarize the proposed ATCM for stationary diesel 13 engines. 14 (Thereupon an overhead presentation was 15 presented as follows.) 16 MR. SANTOS: Good morning, Mr. Chairman and 17 members of the Board. Today, I will be presenting for 18 adoption staff's proposed airborne toxic control measure 19 to reduce diesel particulate matter emissions from 20 stationary diesel engines. 21 --o0o-- 22 MR. SANTOS: I would like to start off by briefly 23 recapping the ATCM development process. The proposed ATCM 24 was developed over a two-and-a-half-year period. We held 25 eight public workshops and numerous meetings with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 interested stakeholders. As you know, there were two 2 public meetings held in November and December of last 3 year. 4 At the November Board meeting, staff presented 5 the draft ATCM language, along with proposed changes to 6 the ATCM, that focused mainly on the inclusion of 7 additional language addressing demand response program 8 engines. Although the testimony heard at this November 9 hearing was in favor of adopting the proposed ATCM, there 10 were a few comments raised with aspects of the measure. 11 These comments focus mainly on establishing additional 12 restrictions on the operation of emergency standby engines 13 located near schools, establishing provisions that would 14 exempt or delay compliance for remotely-located engines, 15 and establishing a provision allowing emergency standby 16 diesel engines to continue to participate in demand 17 response programs. 18 Since the December Board meeting, staff has 19 developed draft ATCM language that addresses these 20 comments and shared that language with stakeholders in 21 early February. These changes are included in the 15-day 22 change package before you today. Over the next few 23 slides, I will discuss the objectives in developing the 24 proposed ATCM and the proposed 15-day change package. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 MR. SANTOS: Our goal in developing the proposed 2 ATCM was to establish Best Available Control Technology 3 requirements for stationary diesel engines, while taking 4 into consideration a number of factors, including ambient 5 PM levels, potential for near-source risk, cost of 6 controls, and potential for reducing criteria pollutants, 7 such as NOx and hydrocarbons. 8 --o0o-- 9 MR. SANTOS: The proposed ATCM significantly 10 reduces diesel PM emissions and the associated cancer 11 risks from stationary diesel engines by the strategies 12 listed on this slide. These are: Restricting the 13 non-emergency operation of emergency standby engines by 14 establishing annual hours of operation limits; and 15 establishing diesel PM emission standards that will result 16 in either the retrofit of in-use engines with diesel 17 oxidation catalysts or diesel particulate filters; the 18 replacement of these engines with new engines that meet 19 more stringent exhaust emission standards; or the 20 retirement of stationary diesel fueled engines in favor of 21 cleaner alternative technologies. 22 --o0o-- 23 MR. SANTOS: For some businesses, there will be 24 cost associated with installing after-treatment controls 25 on their engines. We estimated that the cost to install a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 diesel particulate filter is about $38 per horsepower; for 2 a diesel oxidation catalyst it's about $10 per horsepower; 3 and new engines, costs are considerably more. 4 For emergency standby engines, we believe the 5 majority of engine operators will comply with the ATCM by 6 reducing the hours of operation for maintenance and 7 testing, and thereby realizing a cost savings. The cost 8 effectiveness of the proposed ATCM when attributing all 9 the costs to reductions in diesel PM is about $15 per 10 pound of diesel PM reduced. This compares favorably to 11 other regulations approved by the Board. 12 --o0o-- 13 MR. SANTOS: We estimate that with implementation 14 of the ATCM, there will be an 80 percent reduction in 15 diesel PM emissions from those engines covered by the 16 regulation in 2020. This is relative to the 2002 17 baseline. With the reductions in diesel PM, we anticipate 18 health cost savings due to reduced mortality, instances of 19 cancer, PM-related cardiovascular effects, and chronic 20 respiratory symptoms. 21 The potential cancer risks from each stationary 22 emergency standby engine subject to the proposed ATCM is 23 expected to be reduced to 10 per million or less. The 24 cancer risk from each prime engine subject to the proposed 25 ATCM is expected to be reduced by at least 85 percent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 --o0o-- 2 MR. SANTOS: As I mentioned earlier, changes were 3 identified and discussed at the November and December 4 Board meetings. These changes included additional 5 language, modifications to existing language, 6 clarifications, corrections, and other nonsubstantive 7 changes. If approved, all of these changes will be 8 included in the 15-day change package, and as such, will 9 be subject to public review and comment. Over the next 10 few slides, I will discuss the changes in more detail. 11 --o0o-- 12 MR. SANTOS: The original proposed ATCM language 13 restricted operation of emergency standby engines located 14 on school sites. At the November Board meeting, some 15 witnesses testified that they believed the ATCM should 16 establish additional requirements for engines located near 17 school sites. The Board directed staff to develop 18 additional requirements for emergency standby engines 19 located near schools. As a result, ARB staff proposes 20 that owners of emergency standby engines located near 21 schools be permitted to conduct maintenance and testing 22 operations only during non-school hours, unless the engine 23 meets a diesel PM emission rate of 0.01 grams per break 24 horsepower hour. Staff's proposed definitions for school, 25 near school, and school hours are shown on the slide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 --o0o-- 2 MR. SANTOS: Based on comments from CAPCAO, ARB 3 staff is also proposing a revision to be added to the ATCM 4 that will give districts the authority to delay the 5 implementation of the ATCM for remotely-located engines. 6 ARB staff is proposing a remotely-located engine is one 7 that is located at least one mile from any location 8 outside of the facility boundary where people may be 9 exposed to the engine's exhaust. This delay would be 10 until the year 2011. Along with the one mile from any 11 receptor location requirement, the ATCM would also 12 identify minimum risk-based criteria that must be met to 13 qualify for the delay. 14 --o0o-- 15 MR. SANTOS: The ARB staff is also proposing that 16 diesel-fueled emergency standby engines may be used in two 17 types of demand response programs; interruptible service 18 contracts, and the San Diego Gas and Electric Company's 19 rolling blackout reduction program. Both of these engines 20 are emergency programs, and units are only dispatched when 21 blackouts are imminent or already occurring. 22 Engines in these programs are not allowed to be 23 operated for purposes of load shedding in non-emergency 24 situations. Stationary engines enrolled in these programs 25 will be required to meet stringent emissions limits, be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 limited in their hours of operation, and rolling blackout 2 reduction program engines will be dispatched into service, 3 taking into account public health impacts. 4 I also want to point out that no substantive 5 changes have been made to the demand response program 6 language that was originally presented to the Board at the 7 November hearing. 8 --o0o-- 9 MR. SANTOS: The ARB staff is also proposing 10 modifications to the exemption for emergency standby 11 engines used for the safe shutdown of nuclear facilities. 12 The proposed modification to the exemption language would 13 no longer specify that districts may establish additional 14 criteria that must be met before the exemption can be 15 granted. ARB staff believes this criteria as written was 16 too open-ended, not providing specifics as to what the 17 term "additional criteria" may entail. 18 --o0o-- 19 MR. SANTOS: In response to comments, ARB staff 20 is also recommending that a new exemption be added for 21 in-use diesel engines that are used solely to start large 22 natural gas turbine engines. These engines are matched 23 with the turbine and are used to get the turbine blades up 24 to speed before natural gas can be introduced and the 25 turbine can sustain normal operation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 The existing exemption for low-use prime engines 2 would cover turbine starter engines if they operated 20 3 hours or less per year. We recognize that this may not be 4 enough, and are proposing to give each district the 5 authority to allow additional hours on a case-by-case 6 basis. 7 --o0o-- 8 MR. SANTOS: ARB staff is also recommending that 9 language be added to clarify that phased-in compliance 10 over more than one year be based on the number of engines 11 owned within each district. The current ATCM language 12 allows owners of three or more engines statewide to 13 phase-in compliance over several years. This approach is 14 problematic, because there's no mechanism for coordinating 15 compliance amongst more than one district. As a result, 16 ARB staff is proposing language that would clarify that 17 phased-in compliance is applicable to owners of three or 18 more engines located within the same district. 19 --o0o-- 20 MR. SANTOS: As a result of recently received 21 comments, ARB staff is also recommending that language be 22 added and/or modified to address the first three changes 23 listed on the slide. These changes would allow the 24 district to extend the review period for rolling blackout 25 reduction program dispatch protocol. They would clarify PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 that the current exemption for military training engines 2 extends to all branches in the armed forces, and they 3 would allow for emergency use fire pump engines to be used 4 for the training of personnel for a limited number of 5 hours a year, subject to district approval. ARB staff has 6 also committed to clarify how the ATCM requirements apply 7 to the use of emergency standby engines during the 8 maintenance of power transmission and distribution 9 equipment. 10 --o0o-- 11 MR. SANTOS: This concludes my presentation. 12 With that, I'd like to recommend that you approve 13 the proposed ATCM along with the additional changes I 14 discussed today. Furthermore, we ask that you direct 15 staff to work quickly with the districts on implementation 16 of the ATCM. Thank you for this opportunity to discuss 17 our proposal at this time, and we'd be happy to answer any 18 questions that you have. 19 CHAIRPERSON LLOYD: Board members have any 20 questions at this time? 21 Mr. Calhoun. 22 BOARD MEMBER CALHOUN: Yes, sir. I have a 23 question pertaining to the proposal for stationary engines 24 near schools. One of the bullets you have in there states 25 that these engines may not be operated between the hours PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 of 7:30 to 3:30, and the bullet that follows that states 2 that "restriction does not apply if engine emits diesel 3 particulate emissions at a rate of .01 grams per break 4 horsepower hour. Why are you making an exemption for that 5 concentration? 6 TECHNICAL ANALYSIS BRANCH MANAGER TARICCO: An 7 engine at .01 would have minimal risk. There would be no 8 risk basically. So we're giving an incentive to add 9 retrofit controls, if you want to operate during those 10 hours, that you would need to have a very ultralow 11 emitting engine. 12 EXECUTIVE OFFICER WITHERSPOON: Mr. Calhoun, that 13 emissions level represents the application of a diesel 14 particulate filter 90 percent lower than a customary 15 standby engine. 16 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This 17 is Dan Donohoue. Let me try one. With respect to an 18 engine that's at .01 gram per brake horsepower hour PM, 19 you could operate it 1,500 hours a year and get a risk of 20 about 10. So if we're already limiting these things down 21 to a low number of hours, these emergency standbys are not 22 going to operate that amount of time. We would probably 23 be dealing with risk in the .01 range on these, 24 essentially zero risk with respect to types of engines. 25 We think this provision encourages people who would not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 want to restrict their hours to put in the very best 2 technology at fairly considerable costs. 3 CHAIRPERSON LLOYD: On this question on slide 14, 4 you're talking about extending the district's maximum 5 time. What's currently being proposed, and how is it 6 being amended? 7 TECHNICAL ANALYSIS BRANCH MANAGER TARICCO: Right 8 now we have 30 days in there, and it was brought to our 9 attention that that might not be sufficient time to 10 process the information. So we're thinking of allowing 11 30 days or time that is mutually agreed upon by the 12 district and the utility company. 13 CHAIRPERSON LLOYD: You give them a maximum time? 14 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: No. 15 We weren't planning on a maximum. Right now it says 16 30 days or a mutually agreeable between the two of them. 17 If they could get agreement, the 30 days would apply. But 18 practically, you know, I think that the district and the 19 utility company can pretty easily work out something in a 20 reasonable time frame. The district wanted 180 days, and 21 we believe that's too long. 22 CHAIRPERSON LLOYD: I would agree. 23 Before we move on to the testimony there, Madam 24 Ombudsman, will you describe the public process on this 25 regulation since last December. Is there anything you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 want to update us on since that time? 2 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 3 the Board, I believe that staff adequately summarized the 4 continued discussions that they have had with stakeholders 5 since the last time you heard this item. 6 CHAIRPERSON LLOYD: Now I'd like to call up the 7 first three witnesses who would like to testify on this 8 item today. So with that, I'd like to call Tom Swenson, 9 Sharon Rubalcava, and Cindy Tuck. And again, my original 10 comments, please not to duplicate previous testimony. 11 MR. SWENSON: Okay. Good morning, Dr. Lloyd and 12 members of the Board. My name is Tom Swenson. I work for 13 Cleaire Advanced Emission Controls, a California-based 14 diesel retrofit technology manufacturer. 15 Cleaire would like to encourage your Board to 16 strengthen the requirement for backup generators, or bugs, 17 to meet the lowest applicable standard for particulate 18 control. In previous workshops, your Board has heard 19 testimony that very low particulate levels are not 20 possible because of the intermittent and low-load duty 21 cycles experienced by backup generators. 22 Traditional filter applications on backup 23 generators are unable to manage particulate loading, 24 causing unacceptable back pressure only after relatively 25 few starts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 Unlike traditional filter applications, active 2 filter regeneration, similar in concept to a self-cleaning 3 oven, makes it entirely feasible for backup generators to 4 reduce their particulate emissions to .01 gram per break 5 horsepower levels. 6 To meet this need, Cleaire has developed and 7 offers an active regeneration system known as the bug 8 trap. The bug trap combines a lightly-catalyzed 9 particulate filter with a small heating element and a 10 blower along with an electronic control system. If a 11 backup generator is tested under light load, the filter 12 captures the particles, and following the tests, the 13 heating element and blower cook off the particulate, 14 regenerating the filter. If the backup generator is 15 required to operate in an emergency high-load situation, 16 the exhaust heat alone is sufficient to regenerate the 17 filter. 18 Fully functional permitted systems of this type 19 have been installed on backup generators at the Bay Area 20 Air Quality District Management Offices in San Francisco, 21 Stanford University, the County Sanitation District here 22 in Sacramento, and several other sites in Northern 23 California. This practical proven commercially-available 24 technology makes extremely low particulate levels possible 25 from backup generators, while ensuring they continue to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 a reliable source of emergency power. 2 We encourage your Board to provide the highest 3 level of protection of public health by requiring backup 4 generators to meet the lowest practical emission levels. 5 Thank you. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Sharon Rubalcava, Cindy Tuck, Daniel McGivney. 8 MS. RUBALCAVA: Good morning, Board members. My 9 name is Sharon Rubalcava. I'm an attorney with the 10 Weston, Benshoof Law Firm in Los Angeles. I'm here today 11 representing the Motion Picture Association of America, or 12 the MPAA. 13 The Motion Picture Association submitted written 14 comments on this proposal on February 18th, and we are 15 addressing really just one issue, and that is the 16 restriction placed on engines that are operated near 17 schools. We believe the definition of school as it 18 appears in the proposed regulation does not include on 19 site employer-sponsored day care centers or the studio 20 classrooms that are required for young actors. We would 21 simply like clarification of that point to be certain. 22 We also asked that the definition of "school" be 23 modified to exclude areas used as parking lots as well as 24 undeveloped areas. Since the purpose of the restriction 25 is to protect the health of children, and children are not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 present for any appreciable period of time in parking 2 lots, we think parking lots should be excluded from the 3 definition of "school." And that would, of course, count 4 in terms of the distance restriction. 5 We will be asking that this same change be made 6 to the definition of "school" to the extent that it 7 appears in either the registration program or the portable 8 ATCM. We also support the comments of CCEEB, which you 9 will be hearing next, that we don't believe there is a 10 scientific basis for placing special restrictions on 11 engines that are located near schools. The analysis in 12 the staff report showed that the original proposal was 13 protective of the health of all people under 14 state-recognized standards for what constitutes a 15 significant risk. Thank you. 16 CHAIRPERSON LLOYD: Thank you. 17 Staff response. 18 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Yes, 19 Chairman. You know, with respect to the issue of the 20 on-site education facilities at these things, be they day 21 cares or schools, we need to look a little bit further 22 into this issue. This just came up to us yesterday. We 23 don't know how that's set up as far as are these subject 24 to Department of Education requirements? Do they have 25 more than -- are they offering K through 12 and all that? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 We'd like to work a little bit further on that first issue 2 with respect to how are they defined and do they fall 3 under the definition of "school" or not. 4 With respect to the second issue about excluding 5 parking lots, we don't believe that's appropriate. What 6 we've tried to do is to define what is the property -- the 7 improved property on which a school sets. As you know, a 8 lot of times what's happening is parking lots turn into 9 classrooms as we bring in modulars and all that. It just 10 makes it very difficult to define what the area is that 11 you're within 500 feet of. If you draw a circle around 12 any improved area of the school site, we think that's the 13 best approach for implementing this provision. 14 CHAIRPERSON LLOYD: So you will continue to work 15 with Sharon on the first item? 16 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 17 That's right. If we need to have any additional 18 clarification with respect to the regulation and the 19 15-day changes, we can do that. And if based on the 20 information we have, we think it falls outside of the 21 definition of traditionally what we believe the school is, 22 we can certainly clarify that via letter with them on the 23 implementation regulation. 24 MS. RUBALCAVA: Just for clarification, the 25 schools that we're talking about for the actors are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 temporary. There are state education requirements that 2 education has to be provided to minor actors, and so 3 they're a very limited duration. Thank you. 4 CHAIRPERSON LLOYD: Thank you. 5 Cindy Tuck, Daniel McGivney, and Mary Jane Foley. 6 MS. TUCK: Thank you, Chairman Lloyd and members 7 of the Board. Cindy Tuck with the California Council for 8 Environmental and Economic Balance. 9 I'm pleased to say that CCEEB is neutral on the 10 core provisions of this ATCM. We had a lot of issues to 11 start, but staff worked with us and other stakeholders, 12 and they developed an ATCM that's very effective but also 13 reasonable. 14 We do have significant concerns about the schools 15 provision that's been added since the last Board meeting, 16 and we put those comments in a very detailed letter which 17 the Board has. So I'm not going to go into that in much 18 detail this morning. 19 You know, we do have concerns about the process 20 that we used to develop the 500-feet provision and the 21 basis for it. But I think what I'd like to say this 22 morning is that we have a sense that the Board and staff 23 recognize that the development of distance limitations is 24 a very complex issue. It's sort of a new zone for the 25 Board. In fact, the EJ stakeholders group just this week PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 had an initial discussion about this area. It's very 2 complex. It's important. And I think we have a sense 3 that the Board and staff will be willing to -- as other 4 rules come forward, be willing to look at these issues, 5 have a good stakeholder discussion, and continue to look 6 at the science and what's the best way to develop these 7 provisions. So hopefully that is the case. That's what I 8 wanted to say on that this morning. 9 The third thing is I just want to discuss the 10 process that staff generally had for this ATCM that was 11 superb. We don't usually have eight workshops to go to, 12 but in this case it was definitely appropriate. There 13 were so many issues. There were lots of participants. 14 And that process really yielded a very effective ATCM that 15 the business community could buy into. 16 So with that, I'd close and I'm glad to answer 17 any questions. 18 CHAIRPERSON LLOYD: Thanks for those kind 19 comments, Cindy. 20 Mr. McKinnon, do you have anything to add on 21 that? I know you were obviously Chairing the EJ 22 stakeholders meeting. 23 BOARD MEMBER McKINNON: Not really, Mr. Chairman. 24 I always appreciate working with Cindy. 25 Going back to the last item though, I did want to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 alert staff that the certification of sort of the teaching 2 end of things is done in the Department of Industrial 3 Relations. That's because the teachers have a huge health 4 and safety role in the film industry. If you went looking 5 around the Department of Education, you might not 6 necessarily find the whole picture. 7 But anyway, Cindy, I always appreciate your 8 input. And we had quite a discussion on the distance 9 we're talking about. And certainly, you convinced me that 10 maybe we've gone a little further than we should. But I'm 11 very, very clear that if we're doing additional -- 12 something additional to protect kids at schools, that that 13 shouldn't be a precedent for everything else we do. 14 CHAIRPERSON LLOYD: Any other comments or 15 questions? Comments from staff? 16 EXECUTIVE OFFICER WITHERSPOON: Chairman Lloyd, 17 when you reach the point of your deliberations, in the 18 Resolution we have added a clause for you to address this 19 matter of how precedential was the decision to set a 20 500-foot boundary, and what that clause in the Resolution 21 speaks to is independent and separate consideration of 22 each regulation before you. So we'll be going over the 23 facts. And our thinking and your thinking about these 24 boundaries questions will evolve and may take different 25 forms in different regulations. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 CHAIRPERSON LLOYD: Seems to satisfy what Cindy 2 was after. 3 MS. TUCK: Thank you very much. 4 CHAIRPERSON LLOYD: Daniel McGivney and Mary Jane 5 Foley. 6 MR. MCGIVNEY: Good morning, Mr. Chairman, 7 members of the Board. My name is Dan McGivney. I 8 represent Eastern Municipal Water District in Riverside 9 County. I have testified before you before at previous 10 hearings on this issue. This morning I just have a couple 11 of quick comments. 12 One, since the last hearing that I was at, 13 language has been added on the limitations of operating 14 emergency engines near schools, and we support that 15 language that's contained in it. We also want to make 16 note of our support of the concept of clean engines in 17 that engines that are meeting the most stringent emission 18 standards of below .01 grams per break horsepower hour 19 have no restrictions on operation in their use. And we 20 support that concept both here and in future ATCMs that 21 you'll be hearing about later today. We overall support 22 that approach. 23 Additionally, I wanted to make a comment on the 24 DRP provisions. Due to the Governor's Executive Order, 25 we've had some -- a few months of where these regulations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 have kind of been postponed to today's hearing, and some 2 of the dates in there may be shortened up, the time frame, 3 since this will go to AOL and stuff. What we'd like to 4 request is there are a couple of spots where there was a 5 January 01 of 2005 deadline to retrofit existing engines 6 and interruptible programs. We'd like to request the 7 Board extend that to July 1 to account for the months that 8 have kind of been eaten away, both here to get to this 9 point to adopt the hearing and what may take place when 10 the AOL does their review. 11 With that, those are my comments. And we 12 appreciate staff's efforts. 13 CHAIRPERSON LLOYD: Thank you. 14 Any comment of staff on that? 15 EXECUTIVE OFFICER WITHERSPOON: I think that's 16 fair. We're having to make comparable adjustments in 17 other regulations, and we can add that to the 15-day 18 changes. 19 MR. MCGIVNEY: Thank you. 20 CHAIRPERSON LLOYD: Thank you. 21 MS. FOLEY: Good morning, Chairman Lloyd and 22 members of the Board. My name is Mary Jane Foley, and I'm 23 here today for the Southern California Alliance of POTWs. 24 We have 62 members. Most of our members are wastewater 25 treatment plants. We want to applaud the staff, again, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 for the great work they did on this rule. 2 And I would just like to say one thing about what 3 the role is of a POTW and why they use these engines. I 4 used to be on a Regional Water Quality Control Board for 5 ten years and then the state Board for eight years. And 6 we mandated that wastewater treatment plants have these 7 engines, and especially emergency diesel engines that can 8 operate when we have catastrophes or the electricity goes 9 off. And especially around schools, because you wouldn't 10 want raw sewage backing up into a school. And our main 11 role is just to make sure there are no sewer spills 12 getting into our waterways, backing up into anybody's 13 facilities. 14 So we appreciate it. We appreciate your support 15 of the interruptible service contract. And we gave you 16 testimony on that before because we think it's an 17 incentive to help keep rates low for the lowest common 18 denominator of the public. So affordability is another 19 one of our goals. Thank you very, very much for all the 20 workshops, the great help with the staff. And we're here 21 to answer questions. Thank you very much. 22 CHAIRPERSON LLOYD: Thank you. 23 Any questions? 24 Thank you very much. 25 Ms. Witherspoon, any additional comments from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 staff. 2 EXECUTIVE OFFICER WITHERSPOON: There's more 3 witnesses. There's one more witness, Martin Ledwitz. 4 CHAIRPERSON LLOYD: Sorry, Martin. I didn't have 5 you on the list. 6 MR. LEDWITZ: I was a late addition. I'm Martin 7 Ledwitz, Air Quality Manager for Southern California 8 Edison. And I'll echo everybody else's comments about 9 this was a wonderful working opportunity with the staff. 10 However, a recent experience with the South Coast 11 AQMD development of Rule 1470 shows that some footnotes on 12 some of your tables may lead to some possibly unintended 13 impacts. In the handouts today for this stationary engine 14 rule on pages A-14 and A-16 there are tables listing hours 15 of operation for things like testing and also maintenance. 16 And the problem is in the footnote for compliance 17 testing. This rule in the footnotes says that the testing 18 hours to show compliance with this rule do not count 19 against the persons' operational limits. Because it is 20 that specific, some districts are looking at then, 21 therefore, the testing they require do count against the 22 limits. And in some of the rules that develop off this 23 where they have very limited hours, you're going to take 8 24 or 12 hours of like a 20-hour limit in some cases and, 25 say, okay, now you're down to eight hours a year of actual PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 operation. 2 The solution on both tables is just to put words 3 in that say that "testing for compliance purposes" -- and 4 you could actually say "district and ARB compliance 5 purposes" do not count against the annual operation limit. 6 And that's my request. 7 CHAIRPERSON LLOYD: Comments from staff? 8 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Yes, 9 Dr. Lloyd. We've discussed this issue for some time with 10 respect to CAPCOA. The initial issue that we understood 11 that came up in the South Coast was that the South Coast 12 was planning on establishing some standards -- some limits 13 that were more stringent than certain provisions with 14 respect to ours. And the question South Coast had was, 15 "Well, if we make a standard that's different than in your 16 reg and you have to show compliance with that, does that 17 count against the hours?" And we said no. I mean if 18 you -- within the regulation, compliance is either with 19 respect to the provisions in this regulation or provisions 20 that are at least as stringent that you adopt. 21 I was not aware of the other issue with respect 22 to compliance testing for the purposes of showing, for 23 example, compliance with the NOx regulations or NOx 24 requirements of the district. When we approach that with 25 the district and we can go back and talk to them again, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 they were not in favor with respect to this regulation of 2 providing additional hours in this regulation with respect 3 to that. But we'd be happy to have some additional 4 discussions, particularly based upon the issues that may 5 have come up in this 1470 rule making and look at it 6 again. 7 MR. LEDWITZ: I agree with everything he said. 8 The problem is just one of, if you're trying to limit the 9 hours of -- let's call it unrestricted operation for the 10 commercial purposes of the engine, that should be kept 11 separate from the hours that a regulatory agency are going 12 to demand of an engine. The ARB understands that the 13 local districts seem to be coming from a totally different 14 direction. In other words, they will direct operation 15 that will then force an engine into another category. 16 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Alex 17 just pointed out to me on page 24 of the regulation, we do 18 have a provision that indicates, "The district shall 19 determine the appropriate limit for the number of hours 20 for determining compliance with other district rules and 21 initial start-up testing." So it looks like that 22 provision would cover if they had to do NOx testing. It's 23 up to the district to decide how those hours would or 24 wouldn't be counted. But we'll continue to follow through 25 on this to make sure we close the loop. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 MR. LEDWITZ: One last question, and then I'll 2 get out of your way. I understand that wording, but the 3 question is what the district fell back on at their last 4 workshop was they obviously -- if you're limited to 40 5 hours a year, they can't let you operate more than 40 6 hours a year or you're in violation of the ARB rule. And 7 so they're using your limit as an absolute ceiling. 8 STATIONARY SOURCE DIVISION CHIEF VENTURINI: If I 9 could just belabor this further. I think one thing that 10 is important here is that our ATCM on this case is a 11 stationary source measure. So it will be enforced by the 12 districts. And the districts are allowed to be more 13 stringent. So while Mr. Ledwitz may have some concerns, 14 we cannot tie the districts if they would like to be more 15 stringent. 16 GENERAL COUNSEL JOHNSTON: Mr. Chairman, if I may 17 add, Mr. Venturini is absolutely correct with respect to 18 Health and Safety Code Section 39666, the districts are 19 authorized to adopt more stringent provisions than we have 20 provided in ATCMs. 21 CHAIRPERSON LLOYD: Thank you. We have two 22 additional witnesses, Bonnie Holmes-Gen -- Kate Larsen, 23 Bonnie Holmes-Gen. 24 MS. HOLMES-GEN: Bonnie Holmes-Gen, the American 25 Lung Association of California, and also speaking on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 behalf of the Natural Resources Defense Council. We have 2 testified at previous hearings. You know we're strongly 3 supporting this rule. 4 But I just wanted to emphasize again, we believe 5 the provisions for operating restrictions at and near 6 schools are very reasonable and modest protections that 7 will make a big difference for children. And we think 8 they'll especially make a big difference for children with 9 asthma who are exercising and playing sports near school 10 grounds and on school grounds. So we support the measure 11 and ask you to continue to support those additional 12 provisions. 13 CHAIRPERSON LLOYD: Thank you. The last one, 14 Environmental Defense. 15 MS. LARSEN: Thank you. We are also strongly in 16 support of the measures to protect children in schools. 17 We performed a dispersion analysis for our bugs report, 18 which I'm sure everyone is aware of, and it showed that 19 within 300 meters of schools or of bugs the cancer and PM 20 mortality risk was greater than 10. And so the 300 meters 21 is quite farther than the 500 feet you're proposing for 22 this measure, and we believe that that's quite reasonable. 23 CHAIRPERSON LLOYD: Thank you. 24 Any other comments? 25 EXECUTIVE OFFICER WITHERSPOON: No further PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 comments. 2 CHAIRPERSON LLOYD: Thank you. 3 Yes, please. 4 BOARD MEMBER McKINNON: Question for staff, and 5 I'm sort of mulling over the movie industry questions. 6 I'm real disinclined to exclude parking lots because we've 7 seen schools with buses lined up and all sorts of wild 8 arrangements where people haven't been very thoughtful. 9 But I'm thinking about if we reach the conclusion 10 that what occurs on movie lots is school, and maybe it's 11 in a portable building, you know, all kinds of things, how 12 do we measure the distance? We're certainly -- do we 13 measure the distance from the engine to where the students 14 are being instructed? Or are we basically saying that it 15 can't be on the whole facility? And that's -- if you're 16 talking about something the size of a movie lot, we could 17 be putting ourselves in a position where we're basically 18 excluding them from the whole facility. 19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Mr. 20 McKinnon, I think for me the first question is, are these 21 intermittent operations -- basically we're looking at 22 nine-year exposures on the site. If, in fact, we go 23 through analyses and we really look at our situations 24 where the group of kids are not there, you know, or have 25 the likelihood of being there nine-years, we need to look PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 at that -- nine years. I mean, because basically the risk 2 exposure we're doing is kids on site for nine years. And 3 that's what the exposure is. 4 If we're looking at a situation where these are 5 not -- they don't meet that paradigm, I think we need to 6 look at whether it's appropriate for what we've done. And 7 then once we figure out that, then I think the second 8 thing is, how do you do the distance? And that may be a 9 little bit more challenging with respect to this. But you 10 know, I do think it's something we can come up with. But 11 I do think the basic question is, are these like a school? 12 Is it likely the same kids will be there for nine years? 13 BOARD MEMBER WILLIAM FRIEDMAN: I have a real 14 problem with this. Let's have an insertion of a little 15 common sense. I live in a stable neighborhood that many 16 kids don't stay in the same school for nine years. What 17 we're talking about are collections on a daily basis of X 18 number of children near a source of potential pollution. 19 And this business of all of a sudden amortizing this over 20 nine years disturbs me. 21 With respect to what goes on on movie lots, there 22 may not be constancy in the same group because these 23 little actors change all the time. But if there are 20 24 student close to a source for X period of time and those 25 children change, I don't know where they're going next, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 but they shouldn't be near that source for X period of 2 time, end of story. 3 We have heard that children are uniquely 4 vulnerable, by our own standards, to these toxic air 5 containments. So there's an extra dimension of protection 6 we're supposed to provide for them. And I don't like the 7 notion of inserting an amortization that's a decade long 8 in an equation for distance from a source near kids -- 9 near collections of kids. It just doesn't make any sense 10 to me. 11 EXECUTIVE OFFICER WITHERSPOON: Dr. Friedman, do 12 you think it's rational to distinguish between permanent 13 movie sets, you know, sort of Hollywood lots versus 14 temporary sets where there's a portable trailer brought in 15 and school being provided on location, as opposed to year 16 round? Does that make rational sense to you? 17 BOARD MEMBER WILLIAM FRIEDMAN: I'm not sure. 18 Let's take the same 20 children who are on a set for X 19 number of weeks or months, where do they go next? I mean, 20 you know, it's a continuum in terms of their exposure. If 21 they go to another site next that is too close to an air 22 polluting source, then they're constantly being exposed. 23 They may or may not be. 24 Each of these environments needs to use a 25 common-sense approach to keeping kids -- collections of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 kids away from a source of emissions, period. I mean, if 2 it was your five-year-old or six-year-old, you would not 3 allow for two weeks them being within 100 yards of an 4 emitter. So why don't we just apply a common-sense 5 standard. Just do what you would do for your own child to 6 the collection of kids in the state. 7 EXECUTIVE OFFICER WITHERSPOON: Just as a 8 reminder for the Board, we're not talking about permanent 9 emitters. We're talking about temporary 20-hours a year 10 managing the hours at which those diesel bugs go on so it 11 doesn't coincide with school hours. 12 But I think I hear what you're saying is that 13 movie set or not, they should run outside the hours of 14 whatever it is in the proposal, 7:30 to 3:30. 15 BOARD MEMBER WILLIAM FRIEDMAN: I think so. 16 CHAIRPERSON LLOYD: Mr. McKinnon. 17 BOARD MEMBER McKINNON: I have absolutely no 18 argument against the kids on a movie lot being the 19 appropriate distance away from the source. But I don't 20 want us getting into a quirk where we consider a school -- 21 which the distance should be from the whole school, 22 because the kid's likely to go anywhere in the whole 23 school. But a kid is not necessarily likely to go 24 anywhere in a movie lot. They're going to go wherever 25 they're working on a movie lot or wherever they're going PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 to school. It may be two different locations, and it may 2 be very close. 3 But I don't know if that needs to be resolved 4 this minute, but I don't want us to consider a movie lot 5 the school grounds, because I think that you will put 6 something so onerous on the movie lot that isn't 7 accomplishing what they're trying to accomplish. What 8 they're trying to accomplish is the distance from the 9 emissions and the child. 10 So I agree that it should be done reasonably and 11 thoughtfully. I just am afraid we end up with the movie 12 lot being the school. 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think we 14 need to look at that in the process, because the vast 15 majority of the children and the vast majority of 16 circumstances are going to be an engine that's permanent 17 and a school site that's well-defined and we know where 18 the boundary is. 19 Where you've got these situations where it's a 20 small facility, it's not a traditional school site, we'll 21 have to look at a method of defining the boundaries so 22 it's reasonable. It's not a whole movie lot or military 23 base or something else. We'll say this is the area we 24 normally say the children are going to be here and present 25 when they're at school, and that's the boundary and we go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 out from there. We just have to work on that. I think 2 it's going to be on a percentage basis of a very small 3 percent of the children in the situations. We'll work 4 that out in the 15-day process, if that's acceptable to 5 the Board. 6 CHAIRPERSON LLOYD: Mr. Venturini. 7 STATIONARY SOURCE DIVISION CHIEF VENTURINI: The 8 take away for me was be reasonable, and we're more than 9 happy to work with Ms. Rubalcava to come up with something 10 that will provide appropriate protection for the children 11 but makes sense. 12 CHAIRPERSON LLOYD: Any other comments from the 13 Board? 14 I agree. So there's a commitment there to work 15 on that issue. And again, I don't think we can bring that 16 to closure at this time. I wouldn't ask the staff to 17 summarize that. 18 Again, if there are no more comments, I will 19 close the record on this agenda item. However, the record 20 will be reopened when the 15-day notice of public 21 availability is issued. Written or oral comments received 22 after this hearing date but before the 15-day notice is 23 issued will not be accepted as part of the official record 24 on this agenda item. Once the record is reopened for a 25 15-day comment period, the public may submit written PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 comments on the proposed change which would be considered 2 and responded to in the final statement of reasons for the 3 regulations. 4 To my colleagues, if there are any ex parte 5 communications on this regulation -- any ex parte? Seeing 6 none, then we have a Resolution before us, and that's 7 Resolution Number 03-30 contained in the staff 8 recommendations. And then we have some comments made 9 today, which I think staff was going to look at as part of 10 that. 11 BOARD MEMBER RIORDAN: Mr. Chairman, I'd be happy 12 to move the Resolution 3-30 and add to it the comments 13 that staff will continue to work on the 15-day comment 14 period for some fine tuning. 15 SUPERVISOR PATRICK: Second. 16 CHAIRPERSON LLOYD: Ms. Riordan proposes, 17 seconded by -- we have two seconders. Supervisor Patrick. 18 All in favor say aye. 19 (Ayes) 20 CHAIRPERSON LLOYD: Anybody against? 21 Thank you. And again, thank you to staff for 22 bringing a complicated issue. 23 I will take a moment while we change over to the 24 TRUs, transportation refrigeration units. The next Agenda 25 Item is 03-10-2, Proposed Airborne Toxic Control Measure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 For Transportation Refrigeration Units, or TRUs, TRU 2 Generator Sets and Facilities Where TRUs Operate. This 3 item is being continued from the December Board meeting. 4 At this time, I'd like our Executive Officer, 5 Ms. Witherspoon, to introduce the item and begin staff 6 presentation. 7 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 8 Lloyd. 9 As you heard in December, the TRUs that are the 10 subject of this regulation are diesel-powered systems 11 designed to refrigerate temperature-sensitive products. 12 TRUs are located and operated throughout California, 13 including distribution centers, cold storage warehouses, 14 and wherever perishable goods are transported. Many of 15 the facilities where TRUs congregate are located in or 16 near residential neighborhoods where the potential for 17 near-source health risks are a concern. 18 The proposed ATCM will reduce public exposure to 19 diesel PM, potential cancer risk, and other adverse health 20 effects by establishing performance standards for end-use 21 TRUs. During December's meeting, you heard testimony from 22 several witnesses supporting this measure. However, along 23 with this support a few concerns were identified. Today 24 staff will provide some brief background material, address 25 key concerns, and answer any questions you may have about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 the proposed rule. 2 I'd like to have Mr. Rod Hill of our Stationary 3 Source Division provide a summary of the proposed ATCM. 4 Mr. Hill. 5 (Thereupon an overhead presentation was 6 presented as follows.) 7 AIR RESOURCES ENGINEER HILL: Thank you, 8 Ms. Witherspoon. Good morning, Mr. Chairman and members 9 of the Board. 10 As Ms. Witherspoon said, this presentation is a 11 follow-up to the presentation given on December 11th of 12 2003 when staff proposed an airborne toxic control measure 13 for in-use transport refrigeration units and TRU generator 14 sets. 15 --o0o-- 16 AIR RESOURCES ENGINEER HILL: Shown here are the 17 items I'll be discussing today. I'll briefly review what 18 a TRU is. Then I'll briefly discuss the provisions 19 included in the proposed ATCM. I'll review the benefits 20 and costs of the ATCM. And I'll address the key comments 21 that were made at the December Board hearing and since 22 that hearing and discuss staff's responses to those 23 comments. 24 I'd also like to report that we released an 25 amended version of the regulation on February 9th that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 showed the changes we were proposing for the ATCM 2 resulting from comments received. A second 15-day change 3 proposal was posted on the web on February 20th, 2004. 4 Those changes, with your approval, will be included as 5 part of the 15-day change notice that will follow your 6 action today. 7 --o0o-- 8 AIR RESOURCES ENGINEER HILL: TRUs are 9 refrigeration systems powered by a diesel engine. TRUs 10 control the environment of temperature-sensitive products. 11 They're used on insulated trailer vans, truck vans, 12 shipping containers, and rail cars. 13 --o0o-- 14 AIR RESOURCES ENGINEER HILL: Next, I'll discuss 15 the key provisions of the proposed ATCM. Listed here are 16 the key provisions of ATCM. Once again, this ATCM focuses 17 on in-use or existing TRUs. The goal of the ATCM is to 18 use progressively lower in-use performance standards 19 phased in over a compliance schedule starting at the end 20 of 2008 for model year 2001 and older TRU engines. 21 The compliance options all result in emission 22 reductions achieved through accelerated engine and TRU 23 replacements, retrofits of existing engines, or the use of 24 alternative technologies that eliminate the use of TRU 25 diesel engines while at a facility. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 Alternative technologies include electric 2 standby; cryogenic systems; alternative fueled engines 3 like dual fuel injection; alternative diesel-fueled 4 engines like 100 percent biodiesel; refrigeration systems 5 powered by fuel cells; and other systems that eliminate 6 TRU engine operation while at a facility. 7 --o0o-- 8 AIR RESOURCES ENGINEER HILL: Other elements of 9 the ATCM are recordkeeping and reporting; a registration 10 and identification numbering system for all TRUs based in 11 California; an early compliance incentive for 2002 and 12 older units. And we were planning to have technology 13 reviews in 2007 and 2009. 14 --o0o-- 15 AIR RESOURCES ENGINEER HILL: The ATCM would 16 result in significant emission and risk reductions. We 17 estimate that with the implementation of the ATCM, there 18 will be a 65 percent reduction in PM emissions in 2010 19 from TRU and TRU gen set engines, and a 92 percent 20 reduction in 2020 relative to the 2000 baseline. We also 21 believe there will be from 10 percent to 5 percent 22 potential reduction in nitrogen oxide emission, depending 23 on which control options are chosen. In addition, we 24 believe that the process of -- in the process of reducing 25 diesel PM emissions, there will be about a 30 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 reduction in reactive organic gas emissions. 2 --o0o-- 3 AIR RESOURCES ENGINEER HILL: For TRU 4 owner-operators, there will be costs associated with 5 installing after-treatment controls on their engines or 6 replacing an old engine with a compliant engine, or 7 replacing the entire TRU unit. Total cost for 8 implementing the ATCM statewide would range from between 9 5- and $15 million per year and would total between 90- 10 and $160 million over the 13-year life of the program. 11 --o0o-- 12 AIR RESOURCES ENGINEER HILL: The cost 13 effectiveness of the proposed ATCM when attributing all of 14 the costs to reductions in diesel PM is between $10 and 15 $20 per pound of diesel PM reduced. 16 --o0o-- 17 AIR RESOURCES ENGINEER HILL: The key comments 18 that we received are listed here. I'll discuss each of 19 these in more detail in subsequent slides. 20 --o0o-- 21 AIR RESOURCES ENGINEER HILL: Concerns were 22 raised over the economic impacts due to accelerating the 23 replacement of TRU engines and in some cases entire TRUs. 24 Staff believes the proposed ATCM balances the desires of 25 some to use all of the remaining useful life of TRU PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 without imposing any requirements with the desires of 2 others to mandate a total elimination of TRU engine 3 emissions while at a facility. The proposed regulation 4 would reduce the near-source risk that now exists at 5 distribution facilities in a measured, phased approach 6 that offers many compliance options. The ATCM offers 7 considerable flexibility to TRU owner-operators, while at 8 the same time significantly reducing diesel PM emissions. 9 --o0o-- 10 AIR RESOURCES ENGINEER HILL: Several commentors 11 believe the proposed ATCM would violate the interstate 12 commerce clause of the U.S. Constitution by requiring all 13 TRUs that operate in California to comply with the ATCM. 14 Legal counsel has reviewed this concern and is of the 15 opinion that the ATCM will withstand a commerce clause 16 challenge. Copies of legal counsel's overview of this 17 issue and other legal issues related to diesel ATCMs are 18 provided in your Board packet and are also available 19 outside on the table. 20 Several comments raised the issue that the Clean 21 Air Act preempts California from adopting regulations that 22 affect in-use engines. If the ATCM is adopted, ARB will 23 seek an authorization from U.S. EPA to implement the 24 regulation under the Clean Air Act Section 209(e)(2). 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 AIR RESOURCES ENGINEER HILL: For the low 2 emission TRU, in-use performance standards that would 3 apply to 2002 and older model years, several comments 4 suggested that we allow Level 1 retrofits, which give 25 5 to 49 percent PM reduction, in lieu of Level 2 retrofits, 6 which give 50 to 84 percent PM reductions. 7 Staff contacts with several emission control 8 system manufacturers have indicated that Level 2 control 9 systems should be ready in advance of the beginning of the 10 compliance phase in. As mentioned earlier, staff intends 11 to conduct a technology review in 2007, a year before the 12 first compliance date for the low-emission TRU in-use 13 standard. 14 --o0o-- 15 AIR RESOURCES ENGINEER HILL: The comment 16 requested we include a compliance option that allows the 17 use of currently in-use engines that have been certified 18 and comply with applicable low-emission TRU in-use 19 performance standards. We agree. And staff is proposing 20 a change to the ATCM language to allow this. 21 --o0o-- 22 AIR RESOURCES ENGINEER HILL: Several comments 23 suggested the regulation should clarify the enforcement 24 and penalty provisions. Staff is proposing a 15-day 25 change that refers to the appropriate penalty provisions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 included in the Health and Safety Code Sections shown 2 here. 3 --o0o-- 4 AIR RESOURCES ENGINEER HILL: A number of 5 non-substantial changes were also proposed for the 15-day 6 comment period. 7 --o0o-- 8 AIR RESOURCES ENGINEER HILL: Staff recommends 9 the Board approve the proposed ATCM implementation 10 activities 11 and the 15-day changes discussed today. 12 This concludes my presentation. And at this 13 time, we would be happy to answer any questions. 14 CHAIRPERSON LLOYD: Questions from my colleagues 15 on the Board? 16 Madam Ombudsman, you described the public process 17 which was followed during the development of this 18 regulation at the December meeting. Would you like to add 19 anything at this time? 20 OMBUDSMAN TSCHOGL: I do. Mr. Chairman and 21 members of this Board, since the last time you heard this 22 item, as you know, staff continued to work to meet with 23 the stakeholders and to discuss several revisions to the 24 proposed regulations. 25 The California Grocers Association has asked that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 I mention that their absence today is due to a scheduling 2 conflict with their Board. It should not be interpreted 3 as a lack of interest or a statement of support. You will 4 probably hear from individual members of their trade 5 association, however, due to a well-publicized supermarket 6 labor crisis, it may be impossible for them to attend. 7 That concludes my comments. 8 CHAIRPERSON LLOYD: Can I also ask if you are 9 aware two of the people opposing the regulations from the 10 trucking industry, have they been active in the dialogue? 11 OMBUDSMAN TSCHOGL: I don't believe they've been 12 active in the recent dialog on a one-to-one basis, on a 13 person-to-person basis. I do know they submitted written 14 comments. 15 CHAIRPERSON LLOYD: Thank you. I would now like 16 to call up the three witnesses who've signed up to speak 17 on this item. And again, I'd like to remind people who 18 are testifying if they are duplicating previous testimony, 19 please keep that short. Otherwise, we will look for new 20 additions. 21 We have Dave Modisette, Stan Foster, Stephanie 22 Williams. 23 MR. MODISETTE: Thank you, Chairman Lloyd, 24 members of the Board. Dave Modisette with the California 25 Electric Transportation Coalition. We are in support of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 the proposed regulations before you today. There are 2 three issues we did want to bring to your attention. 3 The first issue is with regard to electric 4 standby, which is the voluntary compliance option under 5 the structure of the current regulation. We feel like the 6 requirements on electric standby are going to greatly 7 discourage the use of that option. Under the terms of the 8 proposed regulation, a truck owner or operator that wants 9 to use this option would have to ensure that there were 10 infrastructure at all the facilities that are visited by 11 the truck, not just the facilities they own and control, 12 but facilities that are owned and controlled by others. 13 And we really think this is really unworkable to try to 14 require the truck owner-operator to somehow either install 15 or cause infrastructure to be installed at facilities they 16 don't own or control. 17 We also think it's unnecessary to achieve the 18 emissions reductions that you're seeking. We've actually 19 provided several solutions to the staff in this area, and 20 I think there will be some additional discussion on this. 21 The second issue we wanted to raise is that 22 there's no -- there's nothing in the regulation which 23 either encourages or rewards technologies that can be 24 better than the minimum emission standard in the 25 regulation, particularly with regard to criteria PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 pollutants. There are technologies out there that can do 2 much better than what you're getting under the current 3 emissions standard, yet there's no reward or encouragement 4 for those technologies. It really becomes a de facto bias 5 against those technologies that can provide additional 6 reductions. 7 And because of that, I think we're taking a 8 little different tact. Because the regulation does not 9 provide that kind of encouragement, I think we'd like to 10 take it upon ourselves to see if maybe through incentive 11 programs, either at the local level or the state level, we 12 can try to get incentives that will encourage technologies 13 that can do better than the minimum standard that's 14 established here. In order to do that, we need staff to 15 tell us what the baseline emissions reduction is from this 16 regulation. Once we have that, I think we can work with 17 the districts and maybe work with your Moyer people to try 18 to see if it's worthwhile to get those additional 19 emissions reductions through incentive-based programs. 20 The last issue is just an observation. That is 21 all of the compliance options under this retrofit 22 regulation would be much more cost effective, much less 23 costly if they were included when the TRU is manufactured. 24 That is as part of a new TRU. So one of the things that 25 we would like the Board to consider in the future is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 rule making on new TRUs. 2 And with that, I'm open to questions. 3 CHAIRPERSON LLOYD: Thank you, Dave. Again, I 4 like the thrust of your comments. I think the point is we 5 should be rewarding people who want to help new 6 technologies. I think as we look at rule making, I think 7 we said in the past, if we can capture a family of 8 pollutants, then we're much better off than doing it rule 9 by rule. I think that's great. 10 And the other part obviously is interesting to 11 take a look at what people are currently doing on that. 12 The other one I would say I guess I'm aware of, 13 for example, IdleAire talking about opening -- can you 14 update me on the status of that? How extensive do you 15 think that approach may be? 16 MR. MODISETTE: I don't have the specifics on 17 that. Actually, the IdleAire people were supposed to be 18 here today. I think they haven't arrived yet. Maybe when 19 they get here, they can update you on that. 20 CHAIRPERSON LLOYD: Does staff have any update on 21 that? There's one approach where you can electrify the 22 truck stops -- 23 EXECUTIVE OFFICER WITHERSPOON: Truck stop 24 electrification. 25 CHAIRPERSON LLOYD: Maybe Ms. D'Adamo has a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 question or an update on that. 2 BOARD MEMBER D'ADAMO: No, I'm sorry. I don't 3 have an update on that. I just wanted to echo the 4 Chairman's support in concept with what you're saying. 5 And I know there's been some discussion over the last day 6 and a half. I've been in touch with staff, and I think if 7 there's anything we can do to be creative about this, 8 because it would be interesting to see how things turn out 9 within the next year or so. So I would be supportive of 10 giving the Executive Director some additional authority to 11 take a look at some of these technologies. 12 EXECUTIVE OFFICER WITHERSPOON: What we are going 13 to recommend to you -- because it turns out to be 14 complicated. And rather than figure it all out in the 15 body of the regulation, if you are willing to grant me the 16 discretion and staff the discretion to work out the 17 particulars for individual pilot demonstrations, that's 18 how we suggest we proceed. And then at such a time where 19 we have it well evolved enough to make it part of the 20 actual regulation, we can bring you a rule amendment that 21 does that. But there wouldn't be a barrier in the mean 22 time to testing some of these technologies out. 23 With respect to getting credit for doing better 24 and an incentive program approach, Mr. Modisette is right, 25 the very first building block for that is a protocol to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 define what the baseline emissions are so you can quantify 2 how much better you're doing. We've done that in a lot of 3 different sectors in order to enable mobile source offsets 4 of power plants, for example. And so it's just a work 5 product that we need to spend some time doing so that then 6 people can put forward applications for funding to go 7 above and beyond existing regulations. And we'll work on 8 that, too. 9 BOARD MEMBER D'ADAMO: That would be included in 10 the resolution then. 11 EXECUTIVE OFFICER WITHERSPOON: It doesn't need 12 to be because we'll just do it. 13 BOARD MEMBER D'ADAMO: What's the time frame? 14 CHAIRPERSON LLOYD: End of the month -- 15 EXECUTIVE OFFICER WITHERSPOON: Protocols can 16 take a long time to work out. They're complicated, and we 17 have to have the districts' agreements and sometimes U.S. 18 EPA's, too. I would say that part will probably take 19 several months to work through. But the pilot program can 20 begin as soon as we have a proposal in front of us and 21 work particulars. 22 BOARD MEMBER D'ADAMO: I'd like to thank staff 23 for all your work on this. 24 CHAIRPERSON LLOYD: Professor Friedman. 25 BOARD MEMBER HUGH FRIEDMAN: I'm very supportive PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 of the discussion we just had and the point that's been 2 made. I'm wondering what formally, if anything, do we 3 need to do to give the Executive Officer that discretion. 4 GENERAL COUNSEL JOHNSTON: The form could either 5 take a paragraph in the resolution, or just merely your 6 direction to the Executive Officer to do so. 7 BOARD MEMBER HUGH FRIEDMAN: We would, in 8 adopting this, assuming, we would delegate that authority 9 as described, as discussed, as stated in the record. 10 GENERAL COUNSEL JOHNSTON: Right. 11 CHAIRPERSON LLOYD: I don't want to leave it 12 open-ended. I think we should put a specific period of 13 time. 14 EXECUTIVE OFFICER WITHERSPOON: We have drafted a 15 paragraph for your consideration. 16 CHAIRPERSON LLOYD: What does that say? 17 EXECUTIVE OFFICER WITHERSPOON: Michael, do you 18 have it? 19 CHAIRPERSON LLOYD: We have another question, Mr. 20 Calhoun. Maybe while Michael finds the paragraph, 21 Mr. Calhoun -- 22 BOARD MEMBER CALHOUN: My question is probably 23 directed at the same point. And I think Dave Modisette 24 said there are technologies out there better than what 25 these standards will require. And I'm just wondering if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 our staff is aware of the technology that he's talking 2 about. 3 EXECUTIVE OFFICER WITHERSPOON: He's talking 4 about electricity and cryogenics, too, would fall in that 5 category. The reason they're not part of the base 6 requirement is at the moment they're very expensive. 7 We've built the regulation around the cost of complying 8 through cleaner diesel technology, but we do not in any 9 way want to inhibit the introduction of electricity. 10 That's why we're recommending a pilot project option 11 emission credit protocol be developed. 12 And then his third recommendation is that we 13 bring before you a new TRU engine requirement that would 14 incorporate parallel electrification modules or technology 15 built right into the engine itself. We haven't gone so 16 far as to commit to that. We're still pondering that one. 17 There's less emission reduction return and it's a much 18 longer time scale. I think we would do it after we got 19 through a lot more of our diesel retrofit rules. But 20 certainly, we can put it on the list of possibilities. 21 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: Mr. 22 Calhoun, I'd like to clarify a little bit on that. We 23 have in the regulation provided significant incentives for 24 alternative technologies. What we've done is we've said 25 if you use one of these alternative technologies, electric PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 standby, cryogenic alternative fuel, you then qualify 2 immediately as an ultra-low TRU. So that means you make 3 one change and you've complied with this regulation clear 4 on out. So we have provided some pretty significant 5 incentives. 6 The regulation is set up not to discriminate or 7 to favor any one technology. And so people could come in 8 and say, "I want to use cryo, I want to use electric 9 standby." That's provided for. We have not taken the 10 step of essentially focusing on a single technology and 11 saying, "Everybody, you have to use that." We started 12 this process over two-and-a-half years ago, and we did 13 focus on trying to do electric standby for all 14 applications. As we worked through it with all the 15 stakeholders, there was general agreement that dictating 16 one approach was the wrong way to go. But having a 17 regulation that allowed them to do any approach and 18 providing incentives for some of these much cleaner 19 technologies, which we think we've done, is the best 20 approach to go. 21 BOARD MEMBER CALHOUN: Are we providing 22 incentives in the regs? 23 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: We 24 are providing incentives, in fact, if you have these 25 alternative technologies, if you go with electric standby PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 or if you go with cryogenic, you skip over having to meet 2 the low-emission standard. And you go immediately to the 3 final compliance standard, which is in the 2013 time 4 frame, the other engines would have to do, that is a 5 significant -- we believe that is a significant incentive. 6 BOARD MEMBER CALHOUN: Thank you. 7 STAFF COUNSEL TERRIS: If I may read the 8 Resolution paragraph that's been created. 9 "Be it further resolved that the Board 10 directs the Executive Officer to explore the 11 possibility of entering into pilot demonstration 12 projects on an ad hoc basis with interested 13 stakeholders on application of advanced 14 technologies. Such projects shall be for the 15 purpose of determining whether such technologies 16 will provide equal or greater wealth and welfare 17 benefits in a cost-effective and technologically 18 feasible manner. Such programs should be of 19 limited duration and scope as determined by the 20 Executive Officer. If determined that the pilot 21 demonstration projects are appropriate, the 22 Executive Officer shall also consider whether 23 15-day changes to the regulation are necessary 24 for their implementation." 25 CHAIRPERSON LLOYD: How long does she have to do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 that? 2 EXECUTIVE OFFICER WITHERSPOON: We have an 3 initial analysis to do about whether there's anything in 4 the regulation, even after you adopt that language, that 5 would prohibit me from approving a pilot demonstration 6 project. But in terms of how long do I have to prove any 7 single pilot project, I think it will be 8 application-dependant on how much specificity people have 9 when they come in, what more information we need about how 10 they're going to -- 11 CHAIRPERSON LLOYD: I was just interested in -- 12 EXECUTIVE OFFICER WITHERSPOON: I would start 13 immediately on accepting them. 14 CHAIRPERSON LLOYD: I just want a day, within 60 15 days or something we should be able to get back. That's 16 what I was looking for was something there. 17 EXECUTIVE OFFICER WITHERSPOON: If you authorize 18 it, he can come forward, and we'll start talking about the 19 protocol for a demonstration project. 20 GENERAL COUNSEL JOHNSTON: Mr. Chairman, if I may 21 add. The determination -- about we can have some more 22 discussion among staff. But the determination about 23 whether a 15-day notice for those changes would be 24 necessary or not would be done before the issuance of the 25 15-day notice for the regulation modifications. So we'd PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 know fairly soon whether we could do it as an Executive 2 Officer Executive Order process, or whether we'd need to 3 include something within the regulations to authorize 4 this. 5 CHAIRPERSON LLOYD: Okay. 6 MR. MODISETTE: Maybe just to clarify, there are 7 two issues here, and maybe they're getting a little 8 intertwined. The first issue is whether or not there are 9 disincentives in the regulation for electric standby. And 10 I think that we had some very good discussions with staff 11 this last week. And I think staff says, "Well, we'd like 12 to take some additional time to look at that." We need to 13 evaluate some of the suggestions that we've made, and 14 those may be workable. And we may come back to the Board 15 at some point in the future and suggest some changes. 16 But in the meantime, until staff makes that 17 determination and comes back to you, there are probably a 18 very, very small number of projects that are in the 19 pipeline today. And you'll hear from one of them right 20 after me. But there are some people that are moving 21 forward today with electric standby projects, and they 22 can't afford to wait for a year for that staff 23 determination. I think they would like to have some 24 certainty soon so that they can either move forward with 25 the project or decide not to do that. So I think we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 looking for two things. One is this longer determination 2 as to whether or not there is some disincentive in the 3 regulation. And then secondly, in the meantime, to give 4 authority to the Executive Director to approve these 5 individual projects on a case-by-case basis. And we 6 strongly support that. 7 CHAIRPERSON LLOYD: The other thing as well is 8 talking about multi-pollutants electrification, you've 9 also got -- noise is also big asset, reductions. 10 Thank you very much. 11 MR. MODISETTE: Thank you. 12 CHAIRPERSON LLOYD: Stan Foster, Stephanie 13 Williams, Robert Digges. 14 MR. FOSTER: Good morning. My name is Stan 15 Foster and I'm the Marketing Manager for NORCO Ranch and 16 Eggs West located in Norco, California. We are an egg 17 processor and distributor in Southern California, and we 18 operate more than 85 semi-trailers with TRUs. We have 19 three home-based facilities; three in Riverside and San 20 Bernardino Counties where we operate our egg processing 21 plants and our food distribution centers. We have been 22 trying to do the right thing and work with different 23 agencies in developing alternatives to TRUs for the future 24 commitments. 25 Riverside County Supervisors in response to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 citizen complaint about pollution and noise from regional 2 warehouses have set aside federal SEAMAC grant funds in 3 1999 to start pilot projects with electrical standby TRUs. 4 In 2002, we received a commitment from the Riverside 5 County for 466,000 in Federal SEAMAC funds and 114,000 6 from the Moyer program to retrofit 38 semi-TRUs and 7 install an electric infrastructure at 36 bays at our 8 facilities. We received a conceptual approval from the 9 U.S. Department of Transportation for this project. 10 In December, after two years and nearly $100,000 11 spent on developmental money, the U.S. Department of 12 Transportation Highways Agency took the SEAMAC funds away. 13 They said that while they consider the project a 14 worthwhile transportation project, that because the U.S. 15 EPA and other interagencies call it "non-road," the 16 project is ineligible. 17 In spite of the setback, we are willing to seek 18 new funds to match with the Moyer. Our concern is this, 19 under the proposed rules, our project even though it 20 reduces large quantities of NOx, PM, and ROG in a mix 21 residential neighborhood, we would still not be compliant. 22 The rule requires that electric standby facilities be 23 provided at all distribution points or wherever we stop 24 the trucks to make deliveries. 25 We don't own these markets, these distributes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 points. It is hard for us to control infrastructure 2 development at these locations. And if there was 3 availability for infrastructure support at delivery 4 points, then the question becomes, who is going to pay for 5 the electrical usage at these distribution points? 6 Our solution is this. We understand the staff is 7 proposing the 12-month period to address the disincentive 8 for electric standby that is proposed. We have 116,000 in 9 the Moyer funding and are persuing other funds. However, 10 our concern is that the project will get delayed or 11 abandoned. 12 We request the Board to solve this and allow our 13 project to go forward with less restrictions on the pilot 14 project. We request that ARB Executive Director be 15 directed to negotiate a few projects to move forward. We 16 believe we would make a good site for this pilot project 17 and to be able to develop the databases to do a complete 18 analysis. If we must put electric infrastructure in 19 places we don't own as the rule now asks, then we would 20 probably abandon this project. Thank you. 21 CHAIRPERSON LLOYD: Thank you very much. 22 Ms. D'Adamo. 23 BOARD MEMBER D'ADAMO: I would just like to 24 applaud your company for the efforts, and hope if this 25 works out and actually comes to fruition regarding a pilot PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 program, if you could report back to us on the success. 2 I'm curious to hear about, just as a practical matter, how 3 it all works out for you. Good luck. 4 CHAIRPERSON LLOYD: What is staff response? 5 EXECUTIVE OFFICER WITHERSPOON: Well, this is 6 exactly the kind of instance for which we've proposed the 7 resolution language so we could look at possibilities for 8 a pilot approval, because it would not comport with the 9 regulation we recommend. 10 CHAIRPERSON LLOYD: Okay. Thank you very much. 11 MR. FOSTER: Thank you very much? 12 CHAIRPERSON LLOYD: Stephanie William, Roberts 13 Digges, and BJ Kirwan. 14 MS. WILLIAMS: Good morning. My name is 15 Stephanie Williams. I'm Senior Vice President of the 16 California Trucking Association. I'd like to make a few 17 comments on the legal opinion before I start my testimony. 18 I'm very disappointed this came out three days before this 19 hearing. We've been asking for this for a year. We have 20 not been very engaged in the TRU process, and this 21 particular rule has grave consequences on our industry, 22 especially our unionized carriers. 23 On page 3 of this opinion, the last sentence 24 says, "or the required installation of vehicular control 25 retro measures." That is taken from the statute, and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 word "new" is left out. The whole issue is new motor 2 vehicles ARB has authority for. Existing motor vehicles, 3 they don't. There's a statute that says how you have to 4 regulate existing motor vehicles in retrofit. That it was 5 fast and loose dropped like that is wrong. It's just 6 wrong. It's a misprint. 7 Down at the end of the page, the prohibition of 8 Section 43600 which says you have to go to statute to do 9 retrofit. It says it's been superceded by delegations. 10 That's only if you take the word "new" out, if you drop 11 the word. So that's wrong. If the "new" word is in the 12 statute. It's not in this legal opinion. It's in the 13 statute. 14 CHAIRPERSON LLOYD: Can we just -- before you get 15 on to the other stuff, any other legal issues that we can 16 get a response from? 17 MS. WILLIAMS: I have a list of six things. 18 Maybe we should do this another time. 19 CHAIRPERSON LLOYD: Go through the six, and we 20 can have our legal counsel respond to those. 21 MS. WILLIAMS: Okay. 22 GENERAL COUNSEL JOHNSTON: Would I be allowed to 23 respond to each of the legal issues as they come up, 24 rather than trying to keep track of them? 25 CHAIRPERSON LLOYD: I'll turn to my lawyer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 friends. 2 MS. WILLIAMS: Why don't we say this has some 3 problems, and we should have a meeting about it. For a 4 year we've been asking for this legal opinion. It comes 5 out, you drop the words from the statutes. Come on. This 6 is not how it's done. 7 GENERAL COUNSEL JOHNSTON: May I read the 8 statute, please? 9 BOARD MEMBER HUGH FRIEDMAN: Let me just -- 10 MS. WILLIAMS: I have a page of it on -- 11 BOARD MEMBER HUGH FRIEDMAN: Excuse me, 12 Stephanie, please. May I just interrupt you as a point of 13 privilege and courtesy. It would be much more helpful to 14 me, as one member, on these legal questions -- and you're 15 making a record, and you're making a public statement -- 16 to allow our counsel to respond to each of those points as 17 you raise them so that we can keep it straight. She can 18 keep it straight. So you can hear the answer, if there is 19 one. Would you have any problem with that? 20 MS. WILLIAMS: No. I just wish this could have 21 gotten out earlier so we don't have to do it here. But I 22 work for a Board, and my Board would expect me to put this 23 in the record. 24 BOARD MEMBER HUGH FRIEDMAN: And your point is a 25 word has been deleted, the word "new," from the analysis PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 and from quoting a statute. And that should be a simple 2 matter to resolve, so let's hear it. 3 GENERAL COUNSEL JOHNSTON: Well, first of all, if 4 the Board will allow me, I'd like to provide a background 5 for the legal opinion that you received and is available 6 to the public now. 7 That legal analysis, of those elements except for 8 the elements that are specific to the commerce clause 9 analysis, are available and are taken from other documents 10 that are part of the public record. They are taken from 11 various legal analyses that are in the staff reports for 12 various of the ATCMs that have been available to the 13 public. So apart from the commerce clause analysis, none 14 of these arguments should be of any surprise to the public 15 or to the Board itself. 16 In regard to the specific issue about whether we 17 dropped the word "new," if the Board will indulge me, I'd 18 like to read the entire statute so the Board may have a 19 context for this comment. 20 This is taken from Health and Safety Code Section 21 39667. "Based on its determination pursuant to 39662, the 22 State Board shall consider the adoption of revisions" -- 23 CHAIRPERSON LLOYD: Diane, hold a minute, please. 24 BOARD MEMBER HUGH FRIEDMAN: What's coming up? 25 MS. WILLIAMS: That's the slide she's reading to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 you. I just put it up for you. Those are the words right 2 out of the statute. 3 GENERAL COUNSEL JOHNSTON: Thank you. 4 MS. WILLIAMS: You're welcome. 5 GENERAL COUNSEL JOHNSTON: If I can start again. 6 "Based on its determination pursuant to 7 Section 39662, the State Board shall consider the 8 adoption of revisions in the emission standards 9 for vehicular sources and regulations specifying 10 the content of motor vehicle fuel to achieve the 11 maximum possible reductions in public exposure to 12 toxic air contaminants, except for regulations 13 effecting new motor vehicles, which shall be 14 based upon the most advanced technology feasible 15 for the model year. 16 "Regulations developed pursuant to this 17 section shall be based on the utilization of the 18 best available control technologies or more 19 effective control measures, unless the State 20 Board determines based on an assessment of risk 21 that alternative levels of emission reduction is 22 appropriate or necessary to prevent an 23 endangerment of public health. Those regulations 24 shall include, but are not limited to, the 25 modification, removal, or substitution of vehicle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 fuel, vehicle fuel components, or fuel additives, 2 or the required installation of vehicular control 3 measures on new motor vehicles." 4 The correct interpretation of this statute is 5 that it applies to emissions from both new and -- new 6 vehicular sources and used vehicular sources, but the 7 statute provides certain criteria that relate solely to 8 new vehicular sources. So it's applicable to both, but 9 when we are considering new vehicular sources, there are 10 additional considerations that the Legislature has imposed 11 on the Board. It does not limit it to new vehicular 12 sources, but merely provides additional considerations 13 when we consider these for new vehicular sources. 14 MS. WILLIAMS: The second one, the prohibition of 15 Section 43600 which supercedes the regulations on 16 retrofit, that they must be done by statute. Where is the 17 supercedes? I didn't see that statute repealed. 18 GENERAL COUNSEL JOHNSTON: Under the rules of 19 statutory construction, statutes which are later enacted 20 must be taken into consideration. And to the extent that 21 the provisions are not consistant with earlier statutes, 22 those provisions supercede previously enacted statutes. 23 This is a rule of statutory construction. 24 STAFF COUNSEL TERRIS: If I could add an 25 elemental aspect of this argument under 43600 is that it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 applies only to motor vehicles. TRU engines are non-road 2 sources and not motor vehicles. And therefore, the 3 authority, basically, just goes to ATCM provisions and to 4 43031. 5 GENERAL COUNSEL JOHNSTON: Thank you, Michael. 6 That's absolutely correct. 7 MS. WILLIAMS: This legal opinion applies to 8 every -- every one of these is a different rule. And we 9 have to get this knocked out because this is very 10 important to our member. You're talking about putting 11 California carriers out of business. Just plain old 12 putting California carriers out of business. 13 The next one in the legal opinion is they neither 14 set standards for engine output, tailpipe emissions, nor 15 set evaporative emissions standards. When he gave his 16 talk today, he said "standards" 15 times. Are these 17 standards or are they not standards? 18 GENERAL COUNSEL JOHNSTON: These are standards, 19 but as Mr. Terris mentioned, they are standards for 20 off-road engines. 21 MS. WILLIAMS: They neither set standards for 22 engine output, or tailpipe emissions, nor do they set 23 evaporative emission standards. He said "standards" 15 24 times. 25 GENERAL COUNSEL JOHNSTON: That discussion does PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 not relate to TRU. 2 MS. WILLIAMS: It's part of this. I read it from 3 your legal opinion. 4 GENERAL COUNSEL JOHNSTON: That discussion 5 relates to another ATCM, not to the TRU ATCM. 6 MS. WILLIAMS: It says first the ATCMs do not set 7 standards for new motor vehicles. It's right here on page 8 6, paragraph 2 I'm reading -- 9 GENERAL COUNSEL JOHNSTON: The TRU is not a 10 standard for motor vehicles. It is a standard for 11 off-road engines. 12 MS. WILLIAMS: They don't set standards. So 13 we're not setting standards? 14 GENERAL COUNSEL JOHNSTON: We are setting 15 standards for off-road engines, not for motor vehicles 16 engines. 17 MS. WILLIAMS: Page 7, "Congress, in fashioning 18 the waiver for preemption, made a determination that 19 intestate commerce would not be disrupted by California 20 having exclusive authority among the states." There's no 21 case law, no case. Just a statement. What's that based 22 on? 23 GENERAL COUNSEL JOHNSTON: It's based on ample 24 case law, because this is a general opinion for the public 25 and for the members of the Board. It is not a legal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 brief, we did not include case citations. We have plenty 2 of them. 3 MS. WILLIAMS: Can I get them, please? 4 GENERAL COUNSEL JOHNSTON: You can consult your 5 own attorney for such case cites. 6 MS. WILLIAMS: We can't find any. 7 GENERAL COUNSEL JOHNSTON: Well, I'm sorry then. 8 MS. WILLIAMS: Alan, could you come to the Board 9 and present this to my members instead of me on March 10 17th? Because I'm going to have to go before 108 truckers 11 and explain all this. 12 CHAIRPERSON LLOYD: I'm sure we can provide some 13 examples. 14 GENERAL COUNSEL JOHNSTON: If the Board would 15 like me to, I will. 16 CHAIRPERSON LLOYD: Yes, please. 17 MS. WILLIAMS: Last, page 9, "The staff 18 understands that engine manufacturers are claiming that 19 TRU engines manufacturers as early as 2004 model year will 20 be able to meet the 2008 standard" That gives you legal 21 lead time. That's fast and loose and not fair to us. 22 GENERAL COUNSEL JOHNSTON: Could you state that 23 again? I'm -- 24 MS. WILLIAMS: Page 9 of your opinion. It's like 25 three quarters of the way down, like the second to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 last sentence. "The staff understands that engine 2 manufacturers are claiming that TRU engines manufacturers 3 as early as the 2004 model year will be able to meet the 4 2008 standard." That places the four-year lead time -- 5 makes it legal for California to do this based on 6 four-years lead time. 7 GENERAL COUNSEL JOHNSTON: I'm not aware of any 8 lead time that applies to off-road engines. 9 MS. WILLIAMS: Why do you think they'll be here 10 in 2004? "Staff understands," I mean why? 11 GENERAL COUNSEL JOHNSTON: I'll defer to our 12 program staff. It's not really a legal counsel. 13 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: This 14 is Dan Donohoue. 15 Based upon the process that we've gone through 16 and all of the work we've had in this, and due to the fact 17 some of the changes that we've been recommending in the 18 test procedure to handle specific TRU engines, we believe 19 this is a true statement and this is what's been 20 represented to us. 21 MS. WILLIAMS: Can we get background information, 22 some kind of proof? Maybe the engine manufacturers who 23 are here could say something. Tim, you're here. 24 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: We 25 can provide additional information we've received that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 leads us towards this conclusion. 2 MS. WILLIAMS: Could we get that? 3 CHAIRPERSON LLOYD: Reasonable request. 4 MS. WILLIAMS: Thank you. I'd like to move 5 ahead. 6 (Thereupon an overhead presentation was 7 presented as follows.) 8 MS. WILLIAMS: As I said this is a very important 9 rule. We are not opposed to retrofit. We just want to 10 stay in business. We want to be able to have California 11 trucks, hauling California freight, and we can't keep 12 what's left of our union carriers in business. And as you 13 can see, they're not being represented here today. Those 14 grocery stores not to make a hearing like this has 15 serious, serious cost implementations on their fleets -- 16 serious cost implementations. They're fighting for health 17 insurance right now. So their costs need to be looked at. 18 --o0o-- 19 MS. WILLIAMS: Just to let you know, as we do in 20 every hearing today the diesel fuel prices in California 21 $2.01; $1.94 in Los Angeles; $1.93 in San Francisco. 22 We're paying 18 cents a gallon more than our competitors 23 in Phoenix, 17 cents a gallon more than our competitors in 24 Los Vegas, and 43 cents more than our competitors from 25 San Francisco to Portland. As can you see, nobody is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 going to be buying fuel here. 2 --o0o-- 3 MS. WILLIAMS: You understand our position. I'm 4 not going to go over and belabor this. A lot of this is 5 preempted by federal law. It will end up in court. It 6 will be overturned. California carriers will go out of 7 business. It's very serious. We know this. 8 We believe you lack authority over interstate 9 trucks. ATA's here and will explain that issue to you. 10 The technology forcing regulations seriously 11 underestimate the cost. You can't expect to retrofit 12 something that costs more than the value of what you're 13 retrofitting. 14 And the reporting requirements need to be taken 15 out. We have labor staff. We don't have non-labor staff. 16 We don't have people that can put reports together. This 17 would require more employees to be put at these 18 facilities. It's serious change in how we do things when 19 you buy a truck. This changes the ownership requirements, 20 drastic change. It needs to be done in a way -- it's not 21 that retrofit doesn't need to be done. It's a good idea. 22 There's a way to do it that doesn't cause havoc, that 23 doesn't bring 500 people -- because we've been there in 24 '93. We don't want to see that happen again. It's not 25 productive for the Air Resources Board. It's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 productive for us. 2 We don't want to cause trailers to be purchased 3 in other states. That takes away from revenue that's 4 brought into our state. We don't want registrations to be 5 moved to other states. We don't want the interstate 6 international borders to change in how trucks coming over 7 from the other side -- and I'm sure South Coast 8 understands that. The amicus briefs for the NAFTA case 9 are due in three weeks, and that's a very serious threat 10 to California. 11 --o0o-- 12 MS. WILLIAMS: The regulatory authority that's 13 been talked about here is the Tanner Bill. Tanner passed 14 this Bill 2728 in 1993, and that section is -- and the 15 rest of the bill -- and I have the entire file here for 16 anybody who would like to see the history. Tanner, 17 herself, put in as the legislative -- the reason for the 18 bill -- and I'll quote this right from her sheet that she 19 turned in to legislative counsel. 20 "The California amendments 1990 for the Clean 21 Air Act enacted the substantially new hazardous 22 air pollution program at the federal level. This 23 bill makes the administration of the State toxics 24 air contaminant program consistent with the 25 federal HAP program. That's what this bill did. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 That's what the author said. That's what's in 2 the history. That's what's at the capital." 3 This section right here says, "The Board shall 4 consider the adoption of revisions of emission standards 5 from vehicle sources," because that's what California has 6 the authority to do under the Federal Clean Air Act, adopt 7 new emissions standard for vehicles and specifies fuel 8 content. Those are the two things they can do; new 9 vehicles and fuel content. 10 Those regulations may include, but are not 11 limited to, anything you can think of for new vehicles and 12 fuel. And requiring the installation of vehicle control 13 measures for a new motor vehicles means California can 14 have its own engine standard, because it's a new motor 15 vehicle. They can specify when it's new, right off the 16 lot, what it can look like. Not used. 17 The regulatory authority prohibiting the rule is 18 43600, and it says specifically that they can't. The 19 installation of certified devices on used motor vehicles 20 shall be amended except by statute. Have to go to 21 statute. 22 So when you look at the history of this, the 23 precedence, it's been used twice. This great system of 24 taking the blame of a failure off of the Air Resources 25 Board and putting it on the Legislature has been used PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 twice. First, in the codes following, which have also not 2 been repealed, 436011, "The Board shall certify exhaust 3 devices for 1955 through 1965 model years." We go in. 4 These model year vehicles were certified, and they were 5 going to have to put retrofit devices on them. 6 And then Health and Safety Code 43602 says what 7 the emission standard was going to look like. There's 8 going to be 350 parts per million hydrocarbon, 2 percent 9 carbon monoxide, 1800 parts per million nitrogen. Look at 10 the bottom, if you look at this star, CARB is requiring 11 multiple engines for diesel trucks. That means you buy a 12 truck, seven years. You've got to buy a new one. Seven 13 years for the trailers. This statute says the Board may 14 not require the installation of more than one device on 15 any motor vehicle. Specifically states you can't do it. 16 And it's for good reason. 17 --o0o-- 18 MS. WILLIAMS: Next, they put in this statute 19 what it shall cost. It shall not cost more than $85. 20 Shall not require maintenance more than 12,000 miles for 21 operation. And the maintenance shall not include the 22 parts of cost and labor. It shall equal or exceed the 23 performance. It put a balance how it was done so that you 24 couldn't have people running around trying to sell you 25 snake oil and leaving the trucking industry completely PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 vulnerable, not knowing what to buy, what will fit on 2 their truck, and causing havoc for goods movement in the 3 state. 4 --o0o-- 5 MS. WILLIAMS: It was done again for 1966 and 6 through '70 model years, same thing. Except for the costs 7 are different. The operation is higher. This has been 8 done by statute and done very successfully. 9 --o0o-- 10 MS. WILLIAMS: If you look at the history of 11 retrofit regulations, you can see the emission standards 12 in my first column. And I've included not only the first 13 year of cars that were retrofitted, '55 through '65, the 14 second year, '66 through '70. I put the Reefer Rule in 15 here and the proposed garbage rules and all the other ones 16 coming down. You can see the emission standards. 17 The only thing that's similar with what CARB is 18 doing and what was done by statute is the emission 19 standards were set on new motor vehicles, which is not 20 allowed under the Clean Air Act. 21 The other part that protects us -- protects 22 companies that want to move freight, the cost caps, the 23 maintenance caps, none. There is none. This is counter 24 to what's been done in statute in the past. It is not a 25 good idea. We can go to the Legislature together and say PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 fill in these boxes and do it, and we can do it in a way 2 that will end up having retrofit now, instead of 15 years 3 later when they decide if California can undo intestate 4 commerce. 5 That's what we're looking at here. That's a way 6 to do this that doesn't have to go after the trucking 7 industry and put us on the defensive. I think it's a 8 better thing for the Air Resources Board to do. We're not 9 opposed to retrofit. We're opposed to being put at a 10 competitive disadvantage and going out of business. 11 I'm going skip this slide because there's 12 somebody smarter than me here on this issue here, and I 13 think I'll defer to him. 14 --o0o-- 15 MS. WILLIAMS: The TRU rule is a mandatory 16 scrappage rule. And it's going to cause an absolute 17 economic disaster. And carriers don't know. They don't 18 believe that things like this are really going to happen 19 until the day they're required to do something, and that's 20 when things go haywire. It's not the way to regulate the 21 trucking industry, one in twelve jobs in California. 22 --o0o-- 23 MS. WILLIAMS: The costs -- enormous costs, the 24 cost are more than the actual value of what they're trying 25 to retrofit. The cost analysis is questionable. All PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 these rules supposedly are going to have no impact on 2 companies that are picketing for health insurance right 3 now. And we know that there's going to be to be an impact 4 and a cost impact. You don't have to have a fleet of 5 union drivers if you're Safeway. You can have a fleet of 6 owner-operators. You don't have to have a fleet. There's 7 lots of ways to move freight. This is moving people out 8 of fleets and into owner-operators. 9 --o0o-- 10 MS. WILLIAMS: In conclusion, we ask you do not 11 adopt this rule. Stop. Think about this. This legal 12 opinion is fast and loose. It's straight for the courts. 13 But you know what else it is? It's straight after the 14 truckers. There's some words in here that specifically 15 say they're going to systematically attack. That's what 16 you're doing. You're systematically attacking my members 17 and the rest of the trucking industry. And there's a way 18 to do it that isn't systematically attacking. We will go 19 with you to the Legislature and pass a statute that says 20 we will retrofit these vehicles, and it will look like 21 this. Allow us to do that. Thank you. 22 CHAIRPERSON LLOYD: Thank you. 23 Any question from my colleagues on the Board? 24 Mr. McKinnon. 25 BOARD MEMBER McKINNON: Stephanie, I've got to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 tell you that given sort of the heightened way that you're 2 discussing this, I just find it remarkable that -- those 3 that lobbied for the grocery store workers have my cell 4 phone number, my home number, know how to get ahold of me. 5 Those that lobby for the mechanics have my cell phone 6 number, my home number, know how to get ahold of me. 7 Those that lobby for the drivers, the unionized drivers, 8 have my cell phone number, my home number, know how to get 9 ahold of me. You certainly have lots of my numbers to get 10 ahold of me. 11 And lots of allusions were made to the impact on 12 labor and who was going to be union or not union and 13 whether or not people were going to have jobs. I care 14 about all of that deeply. But I have great difficulty 15 coming to a meeting the day we're going to vote and hear 16 this at a heightend level that you're talking about it 17 when there were all sorts of other ways to get to it. I 18 would prefer to do it together. Okay. I would prefer 19 that. But to come to a meeting and to throw the workers 20 and a terrible, terrible strike that's going on and all 21 those things into this, I've got to tell you I have a real 22 hard time. I haven't heard from any of the 23 above-mentioned people; right? 24 MS. WILLIAMS: Their letter was just read into 25 the record. They couldn't be here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 BOARD MEMBER McKINNON: It was read into the 2 letter today. And what was read into the record was that 3 from the -- 4 MS. WILLIAMS: Grocery Association. 5 BOARD MEMBER McKINNON: The Grocery Association 6 is not the people who you were alluding to I should be 7 concerned about. It's not the teamsters. It's not the 8 UFCW. It's not the machinists. I haven't heard from any 9 of them. 10 MS. WILLIAMS: No one knows this is happening. 11 We have filed eight sets of comments. They are warranty 12 comments, TRU, waste rules. We're getting carpal tunnel 13 from filing all these comments. They divide them into all 14 these sections. It's like divide and conquer. I've never 15 filed -- in time I've worked for CTA in 15 years, I have 16 filed more comments in the last six months than I filed 17 for ARB over those years. We're being split and divided. 18 And you can talk to the staff. They will tell 19 you, we want to go to court and get this done. If you're 20 going to do it in court, you're going to do it in court. 21 I'm telling you there's a better way to do it. It places 22 us in a situation where we have to fight. And Matt, you 23 know the drivers of these companies don't know this rule 24 is going through and it might impact their job some day. 25 If you have to have a union driver driving a truck that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 has to be turned over every seven years or you can use an 2 owner-operator, what is the company going to do? They're 3 going to outsource. 4 BOARD MEMBER McKINNON: What have companies been 5 doing? 6 MS. WILLIAMS: Outsourcing. 7 BOARD MEMBER McKINNON: Anyway, it is not 8 appropriate to walk in on the day of a vote when something 9 is brewing for months and raise the level of it and insert 10 strikes and workers, and I care about that a lot. Okay. 11 But I'm not -- you know that's sort of my life's work. 12 And I sort of find it insulting to have it put to such a 13 high tenor sort of at the last day and you're supposed to 14 vote different because it went to a high tenor. The 15 teamsters and the machinists and the UFCW are fully 16 capable of talking to me about their concerns. They do it 17 all the time. 18 MS. WILLIAMS: I don't think they're aware of 19 what's going on here today. I don't think they're aware 20 of the rule. A lot of people aren't. There are five 21 people testifying on the rules that bans TRUs. 22 BOARD MEMBER McKINNON: Thank you. 23 CHAIRPERSON LLOYD: Thank you. Robert Digges, BJ 24 Kirwan, and Bob Wilson. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 presented as follows.) 2 MR. DIGGES: Good morning. My name is Bob 3 Digges. I'm here today representing American Trucking 4 Association and our intestate motor carrier members. I'm 5 an attorney for ATA, but I don't want to turn this into a 6 legal argument. I'm here to simply explain to you the 7 nature of the burden these regulations would impose on 8 many of our interstate members and to explain to you why 9 we feel, in general, that would violate the commerce 10 clause. 11 And again, I haven't had much opportunity other 12 than this morning to look at the legal letter that was 13 handed out. So you'll have to bear with me. But I think 14 that letter shows, at least add minimum, some basic 15 misunderstandings of how the trucking industry really 16 operates. And because of that it sort of down plays 17 burdens on intestate trucking that really are there, and 18 it's sort of ignores those burdens. 19 So I'd like to begin by giving you just a very 20 brief overview of the trucking industry to try to set up 21 the comments I'm going to make about the commerce clause 22 violations. 23 --o0o-- 24 MR. DIGGES: The interstate trucking industry is 25 massive. In 2003, there were 650,000 motor carriers that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 were registered with the DOT to operate in interstate 2 commerce. These carriers operated about 24 million 3 commercial vehicles; 2.4 million tractors, or what we call 4 heavy trucks, class A tractors; and nearly 5 million 5 trailers. And we don't have statistics on how many of 6 those are refrigerated units, but we believe a significant 7 portion of them are refrigerated units. And truly, 8 trucking is now involved in nationwide operations. Thanks 9 to interstate deregulation in 1982 and thanks to the 10 commerce clause, virtually every motor carrier out there 11 is involved to one degree or another in interstate 12 commerce. 13 --o0o-- 14 MR. DIGGES: Almost all of these truckers that 15 are involved in interstate commerce are engaged in what we 16 call truckload movements, and that simply means moving 17 fright directly from the shipper to the receiver in a full 18 truckload quantity. And I'm sure you heard the phrase LTL 19 carriers. Even they are now engaged in truckload 20 movements to some degree. 21 And the business model for these truckload 22 movements is what we refer to as a trip chain. And that 23 simply means that a trucker is dispatched to pick up a 24 load at a shipper's facility. It takes the load to a 25 receiver. It's then dispatched to the next shipper's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 facility, so on, so forth, in a series of pick ups and 2 drops off. The way that works is a driver is out with his 3 equipment, at least his tractor, for up to two weeks or 4 maybe even longer simply moving from shipper to shipper to 5 receiver and so on. So it's important to note that the 6 driver and/or the motor carrier don't know in advance 7 where that particular truck is going to go. 8 Now there are some dedicated operation, of 9 course. But in a lot of these operations, they simply 10 route them by way of sophisticated load assignment to the 11 most convenient -- the next load that is most convenient 12 for them to pick up. So when they are beginning their 13 assignments, they don't know what customers they're going 14 to service. They don't know what shippers they're going 15 to service. They don't know what routes these trucks are 16 going to be taking. All of this means simply the truckers 17 must be very flexible in order to service their customers. 18 And in order to do that, they have to have equipment that 19 is permitted in all of the states, and that is legal to 20 run in all of the states. 21 So what this really means for a motor carrier 22 that's operating refrigerated units is that if they want 23 to be able to service customers and shippers and receivers 24 in California, then they're going to have to comply with 25 the transport refrigeration unit regulation. And as you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 know, if this is adopted, they'll only be able to service 2 California customers and shippers, even if they only enter 3 the state occasionally, if they have equipment that's 4 already been adjusted to meet the regulation. And that 5 doesn't matter whether they're only coming into the state 6 once or they come in the state every day. It may turn out 7 although they anticipate some California operations, they 8 have a unit that virtually is never in the state or that 9 never actually enters the state while the regulation is in 10 place. 11 --o0o-- 12 MR. DIGGES: So given these operational realities 13 of the trucking industry, I want to then discuss very 14 briefly with you why we think that would burden interstate 15 commerce and violate the commerce clause. 16 --o0o-- 17 MR. DIGGES: The first reason is the equipment, 18 as you know, must be permanently altered. A trucker 19 simply can't decide to adjust and to replace the TRU or to 20 retrofit the TRU with respect to its California 21 operations. So once the equipment is altered, it's 22 altered for all operations. This means that the TRU 23 regulation has what we call extraterritorial reach, and we 24 believe that's an impermissible extraterritorial reach. 25 It controls operations that are outside the boundaries of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 the state of California. 2 The practical effect is -- and take a carrier 3 from my home state of Virginia. If the carrier is 4 operating significantly in Virginia and most of its 5 business pattern is in the East Coast or operating between 6 Maine and California, but occasionally it sends its trucks 7 into this Midwest and further into California, if a load 8 opportunity develops, what happens is that the carrier 9 must comply with the California regulation while it's 10 operating on the East Coast, while it's operating from 11 Virginia to Florida, while it's operating in the Midwest. 12 Because once it's chosen to make its equipment available 13 to operate in California to meet those customers' needs, 14 it then has to use the same equipment all over the 15 country. And therefore, in effect, the California 16 regulation is regulating the activity of that equipment 17 while it's wholly outside the state of California. 18 We have in our comments referred the Board to a 19 case by the United States Supreme Court called the 20 Southern Pacific Case. That's a 1945 case, but I think 21 it's very instructive, and I would ask the Board and legal 22 counsel to look more closely at it. It involved a Texas 23 case in which the State of Texas limited train length 24 regulation. And the Supreme Court struck that down and 25 said it was impermissible because they were really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 controlling operations outside the state, that it was not 2 feasible and practical effect for you to have a different 3 train length for Texas from an interstate train and the 4 length of that train in other states. So the bottom line 5 was that they were controlling the activities when they 6 were outside the state of Texas. 7 The court also said that this was an obstruction 8 to national policy, and that if when you were imposing 9 these kinds of regulations on interstate commerce, they 10 should be done, if at all, by the Congress. 11 We think the refrigeration unit regulation does 12 exactly the same thing. It controls the operations of a 13 motor carrier when they are outside the state of 14 California. If my home state of Virginia carrier wants to 15 service California, it has to comply with the regulations 16 the other 90 percent of the time it's operating in 17 Virginia or Florida or any other state. So again, we 18 believe this has an immaterial permissible reach outside 19 of the state of California and that violates the commerce 20 clause. 21 --o0o-- 22 MR. DIGGES: We also believe that there's a 23 separate but related violation of the commerce clause. 24 It's what's referred to as an undue burden on interstate 25 commerce, and the commerce clause forbids undue burdens on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 interstate commerce. And the way it determines whether or 2 not a burden is undue is that it applies a balancing test 3 known as the pike test. It simply looks at the level of 4 burden on interstate commerce versus the benefits of the 5 regulation to the state that's imposing that regulation. 6 And in this instance, we believe that the level 7 of burden on interstate commerce is extreme. As the Board 8 or as the staff itself has acknowledged, you have a 9 situation in which an interstate carrier may be forced to 10 pay as much as $20,000 per unit to either retrofit or 11 replace the refrigeration units. You add to that annual 12 maintenance costs which would be as high as $6,000 per 13 unit according to the staff. And remember, this is a cost 14 that the Virginia-based carrier is going to incur, even 15 though they have very little operation in the state of 16 California. 17 --o0o-- 18 MR. DIGGES: If you compare that to the benefits 19 for the state of California, we think you need to compare 20 that on an individualized carrier basis. So if you look 21 at the benefits to California, if a carrier has no 22 operations, as it turns out, in the state of California, 23 it has incurred all of these costs and there's no benefit 24 to the state of California. There's no benefit if the 25 truck never runs in the state of California. If the truck PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 only runs very occasionally in the state of California, 2 then again, there is a very diminimous benefit to the 3 state of California. 4 The math we've done showed that according to the 5 staff that there is 5 one-thousandths of a pound of 6 reduction in particulate matter if -- per hour of 7 operation. So a truck that even runs 100 hours in 8 California, 2 percent of its time or less, is only going 9 to have a half a pound reduction in particulate matter. 10 So again, this is -- when you apply the balancing test, 11 the burden on interstate commerce far exceeds the value to 12 the state. 13 Again, I think when I looked at the letter this 14 morning quickly at what the staff was saying, I think the 15 problem is they don't understand the trucking industry. 16 They believe the trucking industry can compartmentalize 17 their units. They believe that the trucking industry can 18 send only particular trucks in the state of California. 19 That's simply not true. It's a highly-competitive 20 business. 21 The trucking industry must be flexible. They 22 must be able send the closest truck. If they get a call 23 to pick up a load of refrigerated stuff of goods in 24 Sacramento, they can't afford to not send that truck 25 that's located in Washington and rather send a truck PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 that's located in Missouri. They have to be able to send 2 their closest vehicle in order to effectively compete. 3 That's just the realities of the situation. 4 I'd like to close by mentioning -- and we hadn't 5 really analyzed this issue to any great degree, but there 6 is an overriding view of the Letter of Memorandum that 7 somehow Congress has allowed any burden on interstate 8 commerce in this area by allowing the state of California 9 to -- under Section 209 to be able, with EPA approval, to 10 avoid preemption. 11 The bottom line is, we haven't done a lot of 12 research on that area because it really never occurred to 13 us, because we don't think this is a legitimate argument. 14 I have done a lot of research in the past on the legal 15 analysis of when the commerce clause protection are 16 eliminated, and the Supreme Court has said in every case 17 it must being unmistakably clear and it must be expressly 18 stated. 19 There's nothing in this memo or anything we've 20 ever seen about Section 209 in which the Congress says 21 they intended to eliminate the commerce clause's 22 protections with respect to these kinds of activities. 23 It's a far different measure to eliminate preemption than 24 it is to eliminate the protections of the commerce clause. 25 You can eliminate preemption and allow California to do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 things that would not violate the commerce clause. 2 I believe that's the end of my presentation, but 3 I'd be happy to address any questions that you have. 4 CHAIRPERSON LLOYD: You didn't address your last 5 comment on the last slide. 6 MR. DIGGES: I'm sorry? 7 CHAIRPERSON LLOYD: You didn't address your last 8 comment on your last slide. 9 MR. DIGGES: If I go back, I'll see what that 10 was. What that simply means is that the court, if you're 11 bringing a challenge of these under the pike test, they 12 will look and see whether there are lesser burdensome 13 alternatives available to accomplish the goals of the 14 state that's making the regulations. 15 Here, I don't believe there's been much analysis 16 as to other alternatives. I've seen in the record some 17 discussion about regulations that are focused solely on 18 the facilities where most of the problem arises with 19 respect to the operation of these TRUs. There are other 20 issues that could be looked into. But we believe at this 21 point the regulation broadly of the entire interstate 22 trucking industry, even a truck that may venture into the 23 state of California only one time or very few times, is 24 clearly not the least burdensome alternative to accomplish 25 your purpose. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 CHAIRPERSON LLOYD: Thank you. 2 Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Probably the only thing I 4 would add, in the interest of time, we've already had a 5 hearing on this, and I appreciate your comments. But just 6 want to make sure that the record is clear on this. And I 7 know that this memo draws from the staff report. Is it 8 incorporated sufficiently in the staff report? I don't 9 think it's going to be beneficial to go through this point 10 by point. I'm well aware of other regulations that have 11 withstood the test, trucking standards, length of or 12 number of trailers that are not in violation of the 13 commerce clause. So I just want to make sure that our 14 record is clear on our authority without having to go back 15 point by point and take up a lot of time here. 16 GENERAL COUNSEL JOHNSTON: I think our record is 17 clear. If the Board would like Mr. Terris to address some 18 of the issues raised by Mr. Digges, we can do that. 19 However, I believe the record both in the staff report and 20 in our responses in the final Statement of Reasons will 21 provide all the requisite authority to the Board to adopt 22 this regulation, if you chose to do so. 23 CHAIRPERSON LLOYD: Thank you. 24 Professor Friedman. 25 BOARD MEMBER HUGH FRIEDMAN: First of all, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 think that you have some interesting points, obvious 2 points, that there is no U.S. Supreme Court decision on 3 this issue. And if the Supremes haven't spoken to this 4 issue, there's always a question. And there's got to 5 be -- that is to say, it's not all together free from 6 doubt that we do have clearly and escapably the authority 7 to do this. 8 But we've been in this position before. There is 9 a fairly sounding-reasoned opinion we've been given by 10 counsel. It's addressed, I think, all the points, salient 11 points, you've raised, and it makes a case. And clearly, 12 our responsibility has not been to adjudicate this here on 13 the legal question of authority and whether it 14 ultimately -- or it does or does not violate the commerce 15 clause, but to do our best as we struggle with reducing 16 pollution, and in this case a toxic air contaminant that 17 comes provably from these units. 18 And this regulation or this proposal was not 19 aimed at vehicles as such. It's aimed at the non-vehicle 20 component that's polluting, and it's not aimed at trucks 21 that don't come into the state that don't operate here. 22 And I think I feel we just have to let the courts sort it 23 out. And I don't think it's something that we can decide 24 or should decide, if there were some way to figure out an 25 alternative. And I'm sure that the truckers who want PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 flexibility, but hopefully those who are doing a lot of 2 business in California, can make sure that the trucks they 3 send into the California -- assuming this is regulation is 4 validated. We get the exemption we need from the EPA 5 administrator under the Clean Area Act and so forth -- 6 will be operating much more cleanly for the benefit of our 7 citizens. And hopefully, they can keep their polluting 8 trucks out of California and still operate. 9 If you're right, and you may be -- if you're 10 right, I hope there's a way to find out quickly or through 11 some expedited process, or there's some other way that can 12 be worked out in the interim. But I don't think we 13 have -- our responsibility here is to clean up the air, 14 and we're under the gun. We're falling short everywhere 15 we look under the federal standards. And seems to me we 16 don't have much choice. 17 CHAIRPERSON LLOYD: I agree with that point, and 18 I think that's the issue. Because more and more we're 19 going to hear people rightly concerned with the impact 20 we're having, and we've got to curtail pollution, as we 21 saw down with Dr. Burke and the challenge he's got down at 22 South Coast. Everybody really has to pitch in, and it's 23 going hurt. It's not easy at all. But it's something we 24 have to look at. I think both our lawyers here would say 25 we certainly can't sort that out here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 MR. DIGGES: As I said, I didn't expect this to 2 be a legal argument or you to deal with it in that 3 fashion. I just think you should be aware of the real 4 facts. You should be aware of the real impacts. And 5 there are definitely a right way and a wrong way to do it 6 under the commerce clause, and you should take that into 7 consideration. 8 CHAIRPERSON LLOYD: That's what I was looking for 9 when you indicated you've got some alternatives. Do you 10 have a right way of doing it? 11 MR. DIGGES: I think in large respect, the 12 federal government -- and, of course, we will have our say 13 with EPA at the time this goes before EPA, if there's an 14 effort. And I understand there will be an effort. I 15 think the EPA regulations sort of do occupy the field, and 16 properly so. And we will explain to them the commerce 17 clause burden. 18 But again, if these things can be tailored so 19 they don't effected interstate carriers that are only 20 marginally in this state, that they are -- somehow the 21 focus is shifted to the in-state facilities or whatever, 22 it would be a closer call in my view of whether or not -- 23 again, the interest my carriers would be what's going to 24 be substantially protected, whether those other carriers 25 and facilities would have a continuing problem. And after PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 all, remember, they do operate outside of California. But 2 I guess it becomes more an issue of the competitive affect 3 you have on your own local businesses, whether you impose 4 regulations on them, at the same time not imposing them on 5 interstate commerce because you're prohibited from doing 6 so. 7 CHAIRPERSON LLOYD: As you indicate, you 8 represent your constituents. Our constituents are all the 9 breathers of California. So we have a certain obligation. 10 When you talk about working with EPA, we have real 11 concerns that ATA is lobbying to delay the 2007 standards. 12 So we don't have the same confidence you maybe have, 13 unless you can assure us that, in fact, you're going to 14 work hardly to make sure those standards are implemented 15 on time. 16 MR. DIGGES: As long as the technology is there. 17 CHAIRPERSON LLOYD: Professor Friedman. 18 BOARD MEMBER HUGH FRIEDMAN: Your latter 19 comments -- your last comments trigger another question I 20 have for staff. Could it be at all productive to continue 21 to pursue in a 15-day period or whatever, assuming we 22 adopt this, some kind of diminimous out or carve out or 23 exception? I don't know how that would be enforced. I 24 don't know how that could be monitored. But where an 25 out-of-state truck is just incidentally doing a load or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 pick up, what would be the burden here? And I don't know 2 if you can answer that now. 3 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: 4 Professor Friedman, in the original version we did have 5 some low-use exemption requirements on that. And 6 basically, you know, throughout the process it became 7 difficult to figure out how to do the enforceability of 8 that and how to monitor that. 9 We have set up overall within the regulation that 10 we will come back and look at this both in 2007 and 2008. 11 We committed in our previous comments that we will 12 continue to follow what's happening with respect to 13 technology. And if, in fact, there is -- as we gather 14 more data, if, in fact, there is some way to structure 15 that, we're certainly willing to look at that. 16 The one thing I would like to point out is what 17 we have done is we've dovetailed this regulation with the 18 federal standards that come into the Tier 4 standards. So 19 if somebody is purchasing a TRU in 2008 anywhere in the 20 U.S., it will meet the requirements of this regulation. 21 The other thing I need to point out is on those 22 long-haul trucks, our analysis shows these tend to have to 23 be replaced every five years. Our regulation -- the 24 trailers with the TRU need to be replaced every five 25 years. We're giving seven years. So if, in fact, they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 really are doing long-haul, they are going to be 2 purchasing these new vehicles two years before the 3 seven-year cycle we set up. 4 So we've really looked at a lot of these issues 5 that have been raised, looked at them with the engine 6 manufacturers, with the equipment providers, with all the 7 people that have participated in the numerous workshops 8 we've had. We think we've got a good proposal, but we're 9 going to follow up really closely. And we will come back 10 to you whenever we need to to identify if there is other 11 ways to do this to do it better, cheaper, faster. 12 BOARD MEMBER CALHOUN: Mr. Chairman. 13 CHAIRPERSON LLOYD: Yes. 14 BOARD MEMBER CALHOUN: I think one of the things 15 Ms. Stephanie Williams mentioned when she testified was 16 that the people who are affected by this regulation are 17 not aware of it. And my question then is, how long has 18 this proposal been out on the street? 19 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: We 20 have been working on this proposal for approximately three 21 years. We have held two public consultation meetings, 22 five workshops, nine TRU working group meetings, four TRU 23 electrification work group meetings, 25 tours, numerous 24 contacts. We published information in the trade journals. 25 We have opened up our conferences to video conferencing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 and conference calls. We've done about all we figure we 2 can do on this. 3 PROCESS EVALUATION SECTION MANAGER ANDREONI: 4 This is Tony Andreoni. We also included all of outreach 5 as far as the Internet access goes. 6 BOARD MEMBER CALHOUN: Does that include the 7 Trucking Association? 8 PROCESS EVALUATION SECTION MANAGER ANDREONI: ATA 9 and California Truckers Association was also made 10 available. 11 CHAIRPERSON LLOYD: Presumably their 12 representatives here have a network of getting in touch 13 with their members. 14 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: In 15 addition, all the public workshops were simultaneous web 16 cast, and we had a list serve that goes out to -- I don't 17 remember how many but -- 18 CHAIRPERSON LLOYD: Thank you very much. 19 BJ Kirwan and Bob Wilson. 20 MS. KIRWAN: Mr. Chairman, members of the Board, 21 my name is BJ Kirwan. I'm another attorney. I'm with 22 Latham & Watkins in Los Angeles. I'm here representing 23 Thermo King. Thermo King, as you know, manufacturers 24 cryogenic and diesel TRUs. 25 I want to thank staff for continuing to work with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 Thermo King, and for making additional amendments to the 2 definition section recently, and just tell you that Thermo 3 King supports the rule adoption. I had one question, 4 though. This conversations about this pilot project, 5 would that be available to TRUs -- I'm sorry, to cryogenic 6 as well? And how do we stay in touch about that? 7 CHAIRPERSON LLOYD: The nodding was a yes. 8 EXECUTIVE OFFICER WITHERSPOON: Yes. 9 CHAIRPERSON LLOYD: For the record. 10 STATIONARY SOURCE DIVISION CHIEF DONOHOUE: We'd 11 be happy the discuss with Ms. Kirwan and her clients any 12 opportunities they may have. 13 CHAIRPERSON LLOYD: Thank you. 14 MS. KIRWAN: Are you the contact, Peter? Thank 15 you. 16 CHAIRPERSON LLOYD: Thank you very much. Bob 17 Wilson, Idle Aire, was referred to earlier. And maybe 18 some of your technology will address some of the concerns 19 as well. 20 MR. WILSON: Okay. Run the video. That's great. 21 (Thereupon a video presentation was played.) 22 MR. WILSON: We also have Power Point slides as 23 well. 24 (Thereupon an overhead presentation was 25 presented as follows.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 CHAIRPERSON LLOYD: How many installations do you 2 have in California? 3 MR. WILSON: We have four at the present time. 4 We are gearing up for a substantial roll out in South 5 Coast this year in response to their Rule 1634 completion 6 that has just come to pass. 7 Can you find the Power Point show? 8 Well, Idle Aire is neutral with respect to this 9 rule. We have more to say on other rules that are coming 10 up in the next few months. 11 One thing we want to go on record to say is that 12 we support voluntary mechanisms for emission reduction 13 whenever they're feasible and appropriate. As you can see 14 from the video, we're a commercialized technology. We're 15 already in the marketplace. And we're an alternative that 16 can provide resolution to a lot of the issues that have 17 been discussed here today about this TRU rule. The ATA 18 representative spoke earlier concerning the desire for 19 less burdensome alternatives, and we believe we are just 20 one of those alternatives. 21 --o0o-- 22 MR. WILSON: This is a picture of an Idle Aire 23 installation and operation. You saw some of that on the 24 video, so I won't talk about that anymore. 25 The video also demonstrated a driver plugging in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 his Reefer system into the electric power setup for reefer 2 power. That technology is already deployed and in use in 3 the state of New York, and our thrust system is 4 predesigned to provide the electric power to run 5 electrified TRUs. 6 MR. WILSON: --o0o-- 7 MR. WILSON: Idle Aire is shore power. We 8 provide 110 power both inside and outside the cab of the 9 truck, and we also have the capability of delivering the 10 higher voltage power that is necessary to run the TRUs. 11 Of course, at the present time, the TRU population is not 12 electric capable. And that, of course, is why Idle Aire 13 is neutral on this rule at this time. 14 --o0o-- 15 MR. WILSON: I want to talk to you just for a 16 moment about some of the accomplishments we've already 17 achieved in a very short period of time. Most of the 18 things you see on this screen up here have happened in the 19 last six months. We have to date delivered 1.3 million 20 hours of service which converts into about 1.3 million 21 gallons of diesel fuel conserved. We have 100,000 trucks 22 under contract, 300 fleets under contract to use the Idle 23 Aire system. Four hundred-travel centers have come to us 24 and are out there waiting to get this installed, because 25 they think it's going to be really good for them and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 industry. We also delivered service to 100,000 drivers. 2 Once again, keep in mind how rapidly this is coming to 3 pass. Most of this has happened in the last six months. 4 One of the things that's really extraordinary 5 about Idle Aire is the detailed documentation we can 6 provide concerning system use. Looking across what we've 7 done to date, primarily in the year of 2003, we've reduced 8 11,000 tons of emissions. 9 --o0o-- 10 MR. WILSON: One of the first targets for Idle 11 Aire -- I'm going to get back to TRUs very quickly. We 12 will be installing our systems at travel centers, although 13 these are potential locations where electric-powered TRUs 14 could be served. I don't have a map of South Coast. But 15 as a result of the 1634 developments, we are scheduling 16 some very rapid roll out now in South Coast. We want to 17 thank you very much for the roll you played in this. It's 18 an excellent example of an incentive mechanism set up to 19 get private enterprise to solve a pollution problem. 20 --o0o-- 21 MR. WILSON: Highway rest areas are another good 22 location where Idle Aire systems and electric-powered TRUs 23 could be serviced. 24 --o0o-- 25 MR. WILSON: Also at distribution centers are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 another good location. And Idle Aire has developed 2 systems for delivering electric power. And as we said 3 before, provides an auditable data trail so if you're ever 4 wanting to know how much service has been provided, how 5 much power has been used, what your emission trade offs 6 have been, that data trail is part of our accounting 7 system and is readily available. 8 In summary, I think while Idle Aire is neutral on 9 this rule, we would like to make the point that we believe 10 CARB should reward technologies that go above and beyond 11 the minimum rule requirements. In the state of 12 California, Idle Aire's activity at the travel centers 13 reduces criterion emissions by 98.5 to 99 and some change 14 percent. That's a really an exceptional rate of emission 15 reduction and very difficult to reach by any other 16 technology. We also provide these emission reductions not 17 just for PM, which is the primary target for these TRU 18 discussions, but we also provide reductions for NOx, 19 hydrocarbons, carbon monoxide and, of course, CO2. And 20 I'd be happy answer any questions. 21 CHAIRPERSON LLOYD: What's the typical price of 22 installation of your unit? 23 MR. WILSON: Typical installation price is 24 $10,000 per unit. That is what we are working with in 25 terms of a cost share when we're working with government PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 entities. 2 CHAIRPERSON LLOYD: What do you mean by per unit? 3 Is that other per outlet? 4 MR. WILSON: Let me see if I understand what your 5 question is. 6 CHAIRPERSON LLOYD: Just a truck stop, when you 7 want to move into a truck stop and set this up. 8 MR. WILSON: Right. Idle Aire will work in 9 partnership with government entities to install this 10 system. There are costs for installing an ATE unit is 11 about $10,000 a unit. At least that is the amount of cost 12 share we are working on with CARB at the present time. 13 CHAIRPERSON LLOYD: Was that 10,000 or 2,000? 14 MR. WILSON: 10,000. 15 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd and 16 members of the Board, we've found this technology so 17 promising that we put a substantial amount of our own 18 resources into it. The Air Resources Board contributed a 19 million dollars to the installation of three different 20 truck stops, and so the price per slot is considerable. 21 I don't think it's accurate to say it's fully 22 commercialized yet. It does depend on the availability of 23 substantial subsidies at the moment. Hopefully, as it 24 becomes more popular with the truckers and there is a way 25 to carry the cost of installation in price of the service PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 itself, it can be rapidly deployed. 2 We have added it to the three-state initiative 3 with Washington and Oregon to see if between the three 4 states we can create similar incentives. But the reason 5 you're not seeing this as the proposal for how to handle 6 the entire TRU situation is that we don't have the money 7 to put into it. So we need a mixture of incentives and 8 regulatory approaches to bring about the emission 9 reductions. 10 MR. WILSON: Let me respond to that comment. 11 This Idle Aire truck stop electrification system that has 12 the ability to provide services for a number of trucks 13 during a single day. And over the course of a year, a 14 single unit might provide services for hundreds of trucks. 15 So it's difficult -- it's not an apples and oranges 16 comparison to compare retrofitting a single vehicle and 17 put a unit on a truck versus putting this stationary 18 system in place which provides services for a host of 19 trucks. 20 And likewise, if you look at the emission 21 reductions we're achieving and also our cost 22 effectiveness, despite the fact we do have some higher 23 capital costs, our cost effectiveness ends up being much 24 better. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 Any other questions from the Board? I guess I 2 will now close the record on this agenda item. However, 3 the record will be reopened when the 15-day notice of 4 public availability is issued. Written or oral comments 5 received after the hearing date but before the 15-day 6 notice is issued will not be accepted as part of the 7 official record on this agenda item. When the record is 8 reopened for a 15-day comment period, the public may 9 submit written comments on the proposed changes which will 10 be responded to in the final statement of reasons for the 11 rule. 12 Any ex partes on this? 13 Mr. McKinnon. 14 BOARD MEMBER McKINNON: I had a meeting on Monday 15 at 2:00 p.m. with Dave Modisette at 801 K Street, my 16 office regarding this subject that was addressed about 17 flexibility being given to the Executive Officer to work 18 on pilot projects that would seek to advance the aims of 19 this rule. 20 I also about ten minutes ago had a conversation 21 with Barry Broad from the Teamsters Union. It's sort of 22 remarkable. I knew he hadn't lost my phone number. And 23 actually, he made no argument on the rule making. And in 24 fact, he indicated that he was pretty much unaware of it 25 and indicated that they want to work together with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 Trucking Association. So I'm inclined to not be 2 influenced by somebody that hasn't had a chance to look at 3 it yet. Anyway, that's it. 4 CHAIRPERSON LLOYD: Professor Friedman. 5 BOARD MEMBER HUGH FRIEDMAN: I had a brief 6 meeting yesterday afternoon with Mr. Modisette, and he 7 raised the same points to me then that he raised here at 8 the hearing publicly about the potential for these rules 9 to be a disincentive for using electric. I think that's 10 unwitting. And I understand that we've got sort of a 11 solution giving the Executive Officer the delegated 12 authority. 13 CHAIRPERSON LLOYD: Ms. D'Adamo. 14 BOARD MEMBER D'ADAMO: Yes. I had a conference 15 call with Dave Modisette on the 24th, and he raised the 16 three points that he raised at the hearing today. 17 CHAIRPERSON LLOYD: Thank you. Now, staff, maybe 18 you could recount some of the issues that we suggested you 19 could work with some of the stakeholders there, so we 20 could include that in the resolution. 21 STATIONARY SOURCE DIVISION CHIEF VENTURINI: In 22 addition to the 15-day items that staff went through, I 23 think the most significant thing was the item that was 24 just discussed, which is looking at these pilot projects 25 to see how we can work with these people to advance the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 incentives and incentivize or work on some of these 2 alternative technologies that have come up. 3 CHAIRPERSON LLOYD: Ms. Johnston. 4 GENERAL COUNSEL JOHNSTON: The resolution that 5 you will have before you will reflect direction to the 6 Executive Officer to consider any pilot projects and 7 determine whether, you know, criteria for those can be -- 8 are appropriate in an Executive Order or whether those 9 would have to be incorporated within 15-day changes within 10 the regulation. 11 CHAIRPERSON LLOYD: We would leave the legal 12 issue between CTA and ATA to play out with you on the 13 legal side. 14 EXECUTIVE OFFICER WITHERSPOON: Yes, sir. 15 CHAIRPERSON LLOYD: Professor Friedman. 16 BOARD MEMBER HUGH FRIEDMAN: I think I remember 17 at one point Ms. Williams was going to be provided with 18 some information. 19 EXECUTIVE OFFICER WITHERSPOON: That's right. We 20 were going to give her some examples. 21 BOARD MEMBER HUGH FRIEDMAN: You were going to 22 provide whatever case -- 23 GENERAL COUNSEL JOHNSTON: We will provide her 24 with a list of cases that we relied. 25 EMISSIONS ASSESSMENT BRANCH CHIEF DONOHOUE: And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 we will provide her information with respect to engines 2 currently being able to meet the standards we were talking 3 about. 4 CHAIRPERSON LLOYD: Does that need to go into the 5 resolution? That's fine. Okay. Any other comments? 6 BOARD MEMBER BURKE: Mr. Chairman. 7 CHAIRPERSON LLOYD: Yes, Dr. Burke. 8 BOARD MEMBER BURKE: I have a growing concern, 9 not with this particular issue, but with the issue of the 10 attitude of letting the courts make the decision. If we 11 are going to let the courts make all the decisions what we 12 ought to do is -- 13 BOARD MEMBER HUGH FRIEDMAN: Can you use the mic. 14 I'm sorry. 15 BOARD MEMBER BURKE: If we're going to let the 16 courts make all the decisions, what we ought to do is 17 expand the courts and eliminate institutions like this. 18 You know, we have -- we're charged with responsibility. 19 And for us to go at it with an attitude of well, you know, 20 this is going to end up in court. Let the court make the 21 decision. I understand that. South Coast probably has 22 more cases in court than any other district in the state. 23 But, you know, my attitude is not based on what happens 24 here because we don't do that often. But it's carrying 25 over from my responsibilities there and finding it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 increasingly more prevalent as a philosophy to let the 2 courts decide it. 3 And so when Stephanie -- and I agree with Matt, 4 you know, eleventh hour and 59 minutes is not the time. 5 But if there's a way that you can do it and not let the 6 courts reflect what may or may not be our judgment, that 7 seems to me to be always the best possible way to approach 8 these things. It may not be possible in this case. But 9 it's just something that I, more and more as I grow older 10 and experience this more, try to effect. 11 CHAIRPERSON LLOYD: I thought we were going 12 ahead. 13 EXECUTIVE OFFICER WITHERSPOON: Well, I think the 14 comment is broader than that. We do seek consensus every 15 time we bring a regulation before you, and we work very 16 hard to eliminate strong conflict that would lead to 17 litigation after the Board decides. We often are unable 18 to make everybody happy, but not so displeased they're 19 going to sue over it. And you'll see an example next 20 month when we come before you with chip reflash of how 21 we're trying to balance a conflict issue over a prior 22 settlement with the possibility of voluntary compliance 23 instead of a regulation, and that will be interesting when 24 you hear it. 25 I think with the regulation before you right this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 moment, we were unable to eliminate those fundamental 2 conflicts over whether this Board has authority or not for 3 retrofits. And we, your staff, believe that you do and 4 that you should adopt the regulation. And we expect we 5 will be sued over it, and the court will have to 6 intervene. Not because we want that outcome, but because 7 we were unable to come to a consensus with the parties 8 that this is both legal and necessary and done in the 9 appropriate way. But we try very hard to get there, and 10 we're just not there. 11 CHAIRPERSON LLOYD: Professor Friedman. 12 BOARD MEMBER HUGH FRIEDMAN: Yeah. I just want 13 to -- if I wasn't clear, I want to be clear that I agree 14 exactly with what Dr. Burke said. My comments were 15 intended to convey that I recognize that it may have to be 16 decided by a court if there is litigation. But I think we 17 should go ahead. I think that's our responsibility. I 18 wish there were a way -- and maybe there still is -- to 19 avoid that. I do think that they have legitimate 20 concerns, you know. The world is not black and white. We 21 know that. But I think our responsibility is clear. 22 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 23 SUPERVISOR DeSAULNIER: I hesitate to get into 24 the discussion, but I'm going to anyway. I would like to 25 congratulate staff. And while I am no big supporter, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 except present company, of attorneys, I hope they will 2 take this in a proper way. 3 I think all of us would like to see less 4 litigation, but it takes two parties to avoid that. From 5 when where I'm sitting, at least, you've had three years 6 to work on this. With all due respect to Stephanie and 7 her organization, it's not unusual, in my almost seven 8 years on the Board, for us to find ourselves in this 9 position. So I think you've done a good job. 10 And you know, I didn't want to get divorced 12 11 years ago, but my wife had enough of my charming 12 personality so I had to deal with that. Sometimes you 13 can't afford disagreements. 14 (Laughter) 15 CHAIRPERSON LLOYD: Mr. McKinnon. 16 BOARD MEMBER McKINNON: And now a truly charming 17 personality. 18 (Laughter) 19 SUPERVISOR DeSAULNIER: You haven't known me the 20 way she has, and nor will you. 21 (Laughter) 22 BOARD MEMBER McKINNON: I just sort of want to 23 take it back to what we're doing here, and that is that 24 our state has a responsibility. And I think staff has 25 done well at working on this responsibility to set PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 standards for air quality. We're talking about very old 2 diesel technology that's very dirty. We're talking about 3 moving through an extended period of change, an extended 4 period of time, quite a bit of change. And that's a good 5 thing. 6 I actually have some sympathy for some of the 7 arguments that Stephanie was making. And I think that 8 from what I understand that the Teamsters and Stephanie 9 will be talking, and there may be some opportunity to do 10 this a different way. 11 But for the time being, what we have before us 12 today is a regulation will help protect Californians. And 13 I believe our state has the right to set standards that 14 affect the health of its citizens. 15 And thank you, Mr. Chairman. This's it. 16 CHAIRPERSON LLOYD: Thank you very much. 17 Now I guess we're ready for a vote. And we've 18 got the resolution here with the additions we made. So 19 I'm looking for a -- 20 BOARD MEMBER D'ADAMO: So moved. 21 BOARD MEMBER WILLIAM FRIEDMAN: Second. 22 CHAIRPERSON LLOYD: We have a proposal and 23 seconder. All in favor say aye. 24 (Ayes) 25 CHAIRPERSON LLOYD: Anybody against? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 Seeing none, unanimous. 2 Thank you, again. 3 Thank you, staff, and we look forward to seeing 4 how this progresses. 5 I guess the court reporter will need a break. 6 I'm looking towards my colleagues. Do we -- I think lunch 7 is probably there. Do you want to take a break or do we 8 want to do another straight forward one? Let's take a 9 break until maybe 1:00, or we can make it quarter of. 10 Quarter to 1:00 by the clock. Thank you. 11 (Thereupon a lunch recess was taken.) 12 CHAIRPERSON LLOYD: The next agenda item today is 13 03-10-3, Proposed Amendments to the Diesel Emission 14 Control Strategy Verification Procedures. This item was 15 presented by staff at the December hearing last year. 16 The verification procedures are the backbone of 17 our efforts to reduce diesel emissions. They help assure 18 that cleanup devices installed on existing diesel engines 19 will work reliably and will reduce emissions in the real 20 world. 21 As you'll recall, not all stakeholders were happy 22 with staff's proposed change to the verification 23 procedures last year. Accordingly, we asked staff to take 24 another crack at it and try to address concerns during the 25 period they were reviewing the economic impact of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 regulations, per the Governor's direction. And I 2 understand that significant progress has been made. And 3 thank you, staff, for that effort. 4 With that, I'd like to turn it over to Ms. 5 Witherspoon to introduce the item and begin the staff 6 presentation. 7 EXECUTIVE OFFICER WITHERSPOON: Thank you, 8 Chairman Lloyd and members of the Board. 9 At the December hearing, we identified two 10 important provisions of the diesel verification procedure 11 that needed to be modified. The first was a three-year 12 delay for the NO2 limit that would have otherwise taken 13 effect on January 1st of this year. Formal Board action 14 to delay this requirement is needed to prevent the 15 deverification of most of the diesel retrofits devices now 16 being installed on diesel engines. You've already taken 17 administrative action to delay enforcement of the January 18 1 deadline. Staff is proposing that you make that 19 official with today's regulatory proceeding. 20 The second provision we are proposing to modify 21 is the warranty requirements for retrofit devices. In 22 December, you heard testimony from several parties that 23 ARB's existing warranty requirements do not meet their 24 needs. Truck operators feel that the existing warranty 25 for five years or 150,000 miles is too short for line haul PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 trucks that can accumulate 150,000 miles in as little as 2 one year. 3 The filter manufacturers testified, by contrast, 4 that the existing warranty provisions were to expansive 5 and create too much financial risk. They were 6 particularly concerned about the required warranty for 7 consequential damage to the engine or vehicle that could 8 be attributed to the retrofit device. 9 Staff proposed to reduce this requirement to 10 engine damage only, since the risk of damage to vehicles 11 is exceedingly low. But even that proposal did not fully 12 satisfy all the device manufacturers. The Board asked us 13 to keep working on this issue to see if we could find a 14 better compromise during the time we were conducting our 15 retrospective regulatory review. 16 After meeting several times with all the parties, 17 we've developed a revised warranty proposal which 18 addresses I think most, but not all, of the concerns of 19 each stakeholder. Staff is now proposing a two-year 20 mileage-based warranty for long-haul trucks to address 21 CTA's concern about unduly short coverage. CTA remains 22 concerned about other aspects of the regulation but I 23 believe will say that this is overall an improvement. 24 For the device manufacturers, staff has retained 25 the proposed change to the consequential damage clause PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 and, in addition, is proposing clarifications to the 2 burden of proof language to make it more neutral. These 3 changes are acceptable to all of the retrofit device 4 suppliers. However, two of the five manufacturers say 5 they will remain outside the California market unless all 6 references to consequential engine damage are removed from 7 the regulation. 8 In summary, we've improved the proposed 9 regulatory changes since the last public hearing on the 10 item, but have still not found a solution that makes 11 everyone completely happy. 12 I'd now like to turn the presentation over to 13 Mr. Paul Henderick of the Mobile Source Control Division. 14 (Thereupon an overhead presentation was 15 presented as follows.) 16 AIR RESOURCES ENGINEER HENDERICK: Thank you. 17 Good afternoon, Dr. Lloyd and members of the Board. 18 The proposed amendments to the verification 19 procedure that are before you today have not changed 20 significantly since December, except for those that relate 21 to the warranty requirements. The emphasis of this 22 presentation will, therefore, be on the proposed changes 23 to the warranty. 24 --o0o-- 25 AIR RESOURCES ENGINEER HENDERICK: As you know, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 the verification procedure supports the diesel risk 2 reduction plan by providing a method for evaluating the 3 performance of diesel emission control strategies. The 4 procedures were adopted by Board in May of 2002 and became 5 effective in June of 2003. It ensures that a product 6 achieves real and durable reductions of diesel particulate 7 matter and oxides of nitrogen and includes warranty 8 coverage requirements. 9 Staff proposed a number of amendments to the 10 procedure last December, but the Board was unable to vote 11 at that time. You did, however, temporarily suspend 12 implementation of the 20 percent nitrogen dioxide emission 13 limit, which otherwise would have been effective on 14 January 1st, 2004. Staff's proposal mainly deals with the 15 NO2 limit and the warranty requirements. The other minor 16 amendments have not changed since December, and so I will 17 not discuss them further. Although the proposed NO2 limit 18 amendment has not changed either, I will briefly review it 19 because of its importance. I will then update you on the 20 proposed changes to the warranty. 21 --o0o-- 22 AIR RESOURCES ENGINEER HENDERICK: As described 23 in December, staff has proposed that the effective date of 24 the 20 percent NO2 emission limit be delayed by three 25 years to January 1st, 2007. The primary reason for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 proposed delay is that there are currently no verified 2 particulate filters that can meet the limit. Without the 3 delay, therefore, California would not have any verified 4 filters available. 5 Air quality modeling conducted by staff last year 6 showed that there will be no adverse air quality impacts 7 in 2007 as a result of the proposed delay. To the 8 contrary, the delay will allow us to continue installing 9 filters that achieve significant diesel PM reductions. 10 Additionally, a delay will give manufacturers more time 11 for product development aimed at reducing NO2 emissions. 12 Having reviewed the NO2 proposal, I will now turn your 13 attention to the warranty proposal. 14 --o0o-- 15 AIR RESOURCES ENGINEER HENDERICK: The retrofit 16 warranty was the most debated part of staff's proposal at 17 the December hearing. Under the current regulation, 18 retrofit manufacturers must provide a warranty that covers 19 the product itself, as well as any damages the product may 20 cause to the owner's engine and vehicle or equipment. 21 In December, staff proposed no change to the 22 current warranty periods or the coverage of engine damage. 23 However, staff proposed that vehicle or equipment damage 24 be removed from the required coverage. Retrofit 25 manufacturers and end users had differing perspectives on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 this proposal. 2 --o0o-- 3 AIR RESOURCES ENGINEER HENDERICK: Retrofit 4 manufacturers supported staff's proposal, but some felt it 5 did not go far enough. A number of them expressed 6 concerns that the potential warranty liability was still 7 too great for them to sell products in California. They 8 indicated that the cost of disproving inaccurate and 9 spurious warranty claims could be high, to say nothing of 10 the cost of actually replacing engines in vehicles. 11 These manufacturers requested, therefore, that 12 the explicit warranty liability be limited to replacement 13 of the retrofit device and not include the engine or 14 vehicle. Also, they stated that the current warranty 15 period provided sufficient consumer protection and that 16 any extension of coverage should be market driven and not 17 mandated. 18 The trucking industry had a different 19 perspective. It held the position that the mandated 20 retrofit warranty period should match commercial new 21 engine warranties, which are typically two to three years 22 and sometimes include unlimited mileage. The trucking 23 industry also wanted the warranty to retain coverage of 24 both engine and vehicle damage caused by retrofit. 25 At the conclusion of the December hearing, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 Board directed staff to continue working with the various 2 stakeholders on this issue before returning to the Board 3 this month. 4 --o0o-- 5 AIR RESOURCES ENGINEER HENDERICK: Per that 6 direction, staff and the stakeholders have engaged in 7 meetings and phone calls and have determined three 8 revisions that would be appropriate. 9 First, to help address end-user concerns with 10 high-mileage trucks, staff proposes that the warranty 11 period be modified to provide two-year unlimited miles 12 coverage for heavy, heavy-duty trucks that are typically 13 driven 100,000 miles or more per year. Retrofit 14 manufacturers were concerned about having to offer this 15 coverage for older trucks that are more likely to have 16 mechanical problems. 17 In order to address this, the proposed amendment 18 limits the extended coverage to trucks with less than 19 300,000 miles on the odometer at time of retrofit 20 installation. The 300,000 mile figure was determined by 21 examining average mile figures for high-usage, long-haul 22 trucks from a variety of sources and assuming a two-year 23 age at retrofit. 24 --o0o-- 25 AIR RESOURCES ENGINEER HENDERICK: Secondly, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 staff proposes that the warranty language be modified 2 somewhat to explicitly allow manufacturers to provide 3 examples of situations that may result in the denial of 4 warranty coverage. Explicitly allowing the inclusion of 5 additional language would further inform the end user and 6 therefore help to reduce the number of inappropriate 7 warranty claims that are filed. This language would have 8 to be approved by staff as appropriate and could not be 9 used to undo or negate any other requirements. 10 --o0o-- 11 AIR RESOURCES ENGINEER HENDERICK: The final 12 proposed change to the warranty is to reduce the mandated 13 burden of proof placed on the retrofit manufacturer when 14 it chooses to deny an inappropriate warranty claim. 15 Instead of requiring the manufacturer to demonstrate that 16 a failure was caused by abuse or neglect, the revised 17 language shown here simply indicates that if abuse or 18 neglect was the cause of the failure, that failure may be 19 excluded from coverage. Staff's proposal entails removing 20 the text that is indicated in red and stricken out. 21 Several retrofit manufacturers have indicated they approve 22 of this change. 23 --o0o-- 24 AIR RESOURCES ENGINEER HENDERICK: Combined, the 25 three revisions just noted have helped stakeholders to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 reach agreement on some of the positions they disagreed 2 upon in December. The positions changed since December 3 are shown here in red. Although the California Trucking 4 Association and the California Refuse Removal Council 5 still want to retain warranty coverage of the vehicle, the 6 addition of two-years unlimited miles coverage for 7 high-mileage trucks has addressed one of the trucking 8 industry's major concerns. 9 The revised language concerning examples of 10 instances where coverage may be denied and the burden of 11 proof for denying coverage have encouraged manufacturers 12 to accept the greater coverage for high-mileage trucks. 13 While three manufacturers are now willing to accept the 14 revised proposal, two manufacturers continue to express 15 reluctance to participate because engine damage is still 16 included. I expect that the stakeholders represented in 17 the table will further elaborate on their respective 18 positions in their testimony today. 19 --o0o-- 20 AIR RESOURCES ENGINEER HENDERICK: In summary, 21 since December we have developed additional amendments 22 that all stakeholders feel improve the regulation. 23 Although we are not able to get a consensus on every 24 point, we, nevertheless, recommend that the Board adopt 25 our proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 The next step will be for staff to work with 2 stakeholders to further study how best to control NO2 3 emissions. Staff will report back to the Board with any 4 conclusions and, if necessary, propose changes to the NO2 5 limit in time to allow retrofit manufacturers to meet the 6 proposed 2007 compliance deadline. 7 Thank you for your consideration of this item. 8 We'd be happy to answer any questions at this time. 9 CHAIRPERSON LLOYD: Thank you. 10 Mr. Calhoun. 11 BOARD MEMBER CALHOUN: Let's go to revised 12 warranty proposal Number 2. Will you explain to me what 13 that means? 14 GENERAL COUNSEL JOHNSTON: It's slide 7. 15 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 16 HEBERT: Okay. Basically, we have an explicit warranty 17 statement that the manufacturers have to have in their 18 owners manuals. At the end of that explicit statement, 19 we're going to allow them to put in specific examples in 20 the case that a warranty may be denied, such as ignoring 21 back pressure monitors, improper maintenance issues of 22 neglect, those types of things, actual examples to help 23 educate the owners to what may result in exclusion of 24 warranty. 25 BOARD MEMBER CALHOUN: Will this come before the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 staff before it can go -- 2 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 3 HEBERT: That's correct. We have to approve all the 4 language. That's correct. 5 BOARD MEMBER CALHOUN: Let's go to proposal 6 Number 3. I guess some of the words were stricken from 7 the -- can you read that one for me? 8 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 9 HEBERT: Read it for you? 10 BOARD MEMBER CALHOUN: Yes. 11 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 12 HEBERT: "The repair or replacement of any 13 warranted part otherwise eligible for warranty 14 coverage may be excluded from such warranty 15 coverage if the diesel emission control strategy, 16 vehicle, or engine has been abused, neglected, or 17 improperly maintained, and that such abuse, 18 neglect, or improper maintenance was the direct 19 cause of the need for the repair or replacement 20 of the part." 21 BOARD MEMBER WILLIAM FRIEDMAN: That doesn't make 22 any sense. You mean the diesel emission control strategy 23 has been abused? 24 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 25 HEBERT: Yes. Or the vehicle or the engine. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That's 2 a word we're using where there's a large collection of 3 everything from a trap to an alternative fuel to various 4 other things. It's properly not a very good word for it, 5 but it means the retrofit emission control device, I guess 6 is a more illustrative word. 7 BOARD MEMBER WILLIAM FRIEDMAN: That certainly 8 is a better way to say it. 9 GENERAL COUNSEL JOHNSTON: If I may offer, in 10 this context, "strategy," I think, has been defined as a 11 range of either technologies or fuel or things like that. 12 So it's kind of a term of art in this particular 13 regulation. 14 BOARD MEMBER WILLIAM FRIEDMAN: Then it should 15 be at least plural, "strategies." 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Let us 17 look at it and see if to the average person whether 18 "strategy" -- what it means in the dictionary versus what 19 it means in the regulations. See if we can find a more 20 commonly-used word. 21 CHAIRPERSON LLOYD: Good suggestion. 22 Any other questions? 23 Madam Ombudsman, you've provided us with details 24 on the development of this regulation in December. Are 25 there any additional comments you'd like to share with us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 at this time? 2 OMBUDSMAN TSCHOGL: No. I believe that the staff 3 adequately summarized their continued interactions with 4 stakeholders since the last time you heard this item. 5 CHAIRPERSON LLOYD: Thank you. With that, I'd 6 like to call up the first three witnesses, again, with the 7 suggestion that, please, don't duplicate previous 8 testimony, but focus on the changes that have been made at 9 this time. We have Staci Heaton, Bruce Bertelsen, Kevin 10 Hallstrom. 11 MS. HEATON: Good afternoon, Chairman Lloyd, 12 members of the Board. My name is Staci Heaton. I'm the 13 Director of Environmental Affairs for the California 14 Trucking Association. And before I say anything, I know 15 our position says opposed, but we're moving towards 16 neutral now. We're a lot closer than we were previously. 17 I would like to thank staff on a great job they have done 18 in reaching out to us and working with all the 19 stakeholders on this issue. 20 As you know, we've had a very, very strong 21 position, very strong feelings on this retrofit 22 verification procedure for a long time so to finally make 23 some progress we feel is really great. And specifically, 24 I'd like to thank Catherine Witherspoon and Annette Hebert 25 for working with CTA on this matter. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 We are very supportive of the warranty, the 2 changes in the warranty requirements, particularly the 3 change to a two-year unlimited mileage warranty for 4 long-haul trucks. That's been the greatest concern with 5 the retrofit warranty throughout this situation. And we 6 are supportive of all three of the changes that have been 7 mentioned here today. 8 What keeps us on the opposed side, of course, is 9 the exclusion of vehicle damage in the warranty 10 requirements. We are shrouded in a lot of uncertainty 11 with this still. And where our members know what happens 12 with truck engines when we put them in our trucks and they 13 know what happens when truck engines break down and what 14 goes into fixing them, we haven't used these emission 15 control devices enough yet to know what really happens to 16 them when they're in use all the time on a vehicle. And 17 the discomfort of the manufacturers of these devices 18 doesn't help us in their ability or willingness to warrant 19 the vehicle damage because it makes us more uncomfortable 20 on this issue. 21 So we're getting close to a neutral position, but 22 as of right now, we still have to oppose because of the 23 exclusion of the vehicle damage. Thank you. 24 CHAIRPERSON LLOYD: Thank you. 25 Questions? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 MS. HEATON: Thank you. 2 CHAIRPERSON LLOYD: Bruce Bertelsen, Kevin 3 Hallstrom, Marty Lassen. 4 MR. BERTELSEN: Good afternoon. My name is Bruce 5 Bertelsen. I'm representing the Manufacturers of Emission 6 Controls Technology. 7 Actually, we are not going to present additional 8 formal testimony at this hearing. We've provided both 9 written and oral testimony at the previous hearing. 10 Several of our individual members will be discussing the 11 specific elements of the staff's suggested revisions. 12 I would like to just make a couple of general 13 comments, and first of all to state on behalf of all of 14 the members of MECA the continuing and very positive 15 willingness of the staff to work with our industry to find 16 solutions to some of these tough issues. In some 17 instances there may not be total consensus among all 18 members, but there is consensus in the belief that the 19 staff has been very open to hearing the discussions, and 20 we appreciate it. And just to state as an industry, we 21 look forward to continuing to work with staff on issues 22 like this, as well the other retrofit programs. Thank 23 you. 24 CHAIRPERSON LLOYD: Thank you very much, Bruce. 25 Kevin Hallstrom, Marty Lassen, Kimberly Jones. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 MR. HALLSTROM: Good afternoon. My name is Kevin 2 Hallstrom. I work for Engelhard Corporation. Engelhard 3 is here really in support of clean air to try to provide 4 California with the most cost effective means to obtain 5 clean air. 6 The Air Resources Board's efforts have resulted 7 in tremendous air quality improvements over the last 30 8 years. These efforts have resulted in dramatic 9 improvements and reductions of mobile source emissions, 10 such that the diesel portion of those emissions is now in 11 significant source. This makes reduction of diesel 12 emissions a current objective and a need for California. 13 With this determination that diesel particulates 14 are a toxic containment, the ARB has decided to regulate 15 these vehicles. And I'd like to point out that it's 16 regulation of these vehicles and emissions of those 17 vehicles, it's not a requirement to retrofit. There are 18 options for suppliers. There are options for operators. 19 They can replace their vehicles. They can repower their 20 vehicles. They can switch to alternative fuels. 21 Retrofits are being offered as a low-cost option to 22 improve the air quality. 23 As others in California have had to improve the 24 emission of their vehicles, buying certified cars, and 25 others, we believe it's now time to look at the diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 vehicles, and they have a responsibility to reduce the 2 emissions of their vehicles. 3 The verification process that is being proposed 4 here is to determine that the retrofits that we've 5 provided will provide the emission reductions. 6 Unfortunately, we cannot support that regulation as 7 written. The reason for this is really the warranty. We 8 have no problems with the durability or our systems. But 9 to equate durability with warranty is -- we do not believe 10 that is reasonable that you warrant additional beyond what 11 we're providing. If you look at what's being requested, 12 you're saying -- I've heard comments today that, well, if 13 you're confident your equipment is not going to cause a 14 problem, you should warrant the vehicle. Well, warranty 15 is an issue of liability. A warranty does not preclude 16 legal liability. If I don't provide a warrant for the 17 vehicle, it does not include me being liable if something 18 does happen. 19 We have really three specific concerns with the 20 way the warranty is listed. Right now the retrofit 21 warranty requirements exceed what's required for new 22 vehicles. So if a person who goes out and repowers their 23 vehicle or buys a new engine, they actually get less of a 24 warranty that's being asked for as far as the retrofit 25 verification. We are concerned that the current language PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 is linking an emission control system to engine problems. 2 For the uneducated people that are going to be installing 3 these, they are going to see a warranty that says, I 4 install a retrofit device. I have a warranty on my 5 engine. We've already seen this in some cases where 6 they're linking an engine problem to the emission control 7 system. And then we have to defend that and have to 8 demonstrate that it was not caused by the emission control 9 system. 10 This puts us in an untenable position because the 11 cost of doing something to this is going to be excessive. 12 If you look at maintenance and labor rates for diesel 13 engine distributor, it's $100 an hour. It does not take a 14 lot of hours investigating warranty claims to far exceed 15 the cost of an emission control system. 16 The retrofit warranty we agreed to previously was 17 five years, 150,000 miles. Now we're being proposed a 18 two-year unlimited mileage warranty. Again, this is far 19 in excess of what is required from an engine OEM. There 20 has been talk about equivalency with an engine 21 manufacturer's warranty. Well, the engine manufacturer's 22 warranty that's being discussed is an optional one. It's 23 not a mandated warranty. It does not have mandated 24 language. It's a warranty that's provided as a 25 market-driven process to be able to warrant their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 equipment. 2 The specific language for CARB for an OEM is five 3 years, 100,000 miles, and it does specifically preclude 4 extended warranties from the engine manufacturers. It 5 does not necessarily require them to offer an extended 6 emission control warranty. Yet, what we're looking at is 7 a retrofit that's being put on an existing vehicle to have 8 a warranty that exceeds what comes with the new vehicle. 9 We do not believe that that is proper. We think the 10 warranty should be similar to what's provided to an OEM 11 warranty. 12 The third concern is our ability to put other 13 language into our legal documents and our owner's manual. 14 Right now, the ARB is only allowing emission control 15 suppliers to use the language mandated in the procedure. 16 This is contrary to the warranties allowed for new engines 17 in vehicles. They do contain other language about 18 exclusions of loss of vehicle and convenience, loss of 19 cargo. We're looking for the same ability to put the same 20 type of language. 21 The current practice by ARB is to not allow the 22 emission control suppliers the ability to exclude other 23 warranties that may be implied. This is contrary to what 24 is specifically allowed under the universal commercial 25 code. We would like to put language in such that would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 limit our warranty liability to only what's being required 2 by the regulation, preclude any other warranty that may be 3 implied or thought is implied by not allowing us to put 4 these in. This is something that's put in standard legal 5 language on terms and conditions and in normal contracts. 6 We've asked, specifically, ARB to provide us with 7 the statutory reference that will not allow us to put that 8 language in our owners manual. To date, we don't have 9 anything that specifically shows to our lawyers why we're 10 not allowed to provide that language in our warranty. We 11 understand that the warranty and the language we provide 12 should not and cannot exclude what the ARB is particularly 13 wanting to put and what it is they are regulating. But 14 we're asking to be able to preclude any other warranties 15 beyond this regulation. 16 What does this current proposed language mean for 17 operators of diesel vehicles? It means higher costs, 18 fewer options to meet the upcoming regulations. It also 19 means significantly reduced research and product 20 development to specifically support this market. 21 We have supported, over the history, ARB efforts 22 and the programs to develop this retrofit rule and the 23 technology. We're not going to be able to supply product 24 with the current warranty, due to legal concerns. We do 25 not want to end up in court. And that's our main concern. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 With the language as proposed, we feel we're going to get 2 claims that we're going to deny that's going to put us in 3 a position of having to defend ourselves and our product 4 where we will not be able to defend ourselves. 5 In conclusion, Engelhard does support the ARB, 6 does support staff's proposals as far as they've been 7 trying to work with us to reduce emissions and that 8 retrofits are viable and diesel vehicles need to be 9 cleaned up. But we cannot currently support the current 10 warranty provisions as proposed. 11 CHAIRPERSON LLOYD: Thank you. Is it true that 12 you will provide your technology through a third party? 13 MR. HALLSTROM: We will provide our technology to 14 others, however, we will not be providing the California 15 warranty. We will not be conducting verifications in 16 California. 17 CHAIRPERSON LLOYD: So it's up to the third party 18 to do that? 19 MR. HALLSTROM: Yes, it is. 20 CHAIRPERSON LLOYD: Question, Mr. Calhoun. 21 BOARD MEMBER CALHOUN: Engelhard has been around 22 a long time, selling emission control equipment for a long 23 time. And I believe you sell to the OEM, do you not? 24 MR. HALLSTROM: Yes, we do. 25 BOARD MEMBER CALHOUN: What would you do in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 case -- what have you done in the past where there was a 2 failure of a vehicle and your system was involved? How 3 did you work this out with the OEM? 4 MR. HALLSTROM: OEM is different in that the 5 warranty we provide is materials and workmanship warranty. 6 We are not responsible for integration on the vehicle. 7 BOARD MEMBER CALHOUN: You're not what? 8 MR. HALLSTROM: We're not responsible for 9 integration of the vehicle. The only thing we are able to 10 control is the application of our catalyst on to the 11 substrate. The integration onto the vehicle, the control 12 of the engine, the electronics isn't associated with 13 catalyst. If that catalyst is shown to have failed, come 14 off, be activated for some reason that wasn't supposed to, 15 we will replace and repair our product. But we can't 16 control the engine. That is the typical OEM warranty 17 right now. 18 BOARD MEMBER CALHOUN: So that is a system that's 19 been worked out with the OEM; is that correct? 20 MR. HALLSTROM: Correct. 21 BOARD MEMBER CALHOUN: How does that differ from 22 what you've been asked to do here in this particular case? 23 MR. HALLSTROM: Essentially, one of our main 24 concerns is we're being asked to warrant beyond what we're 25 required. We're perfectly happy to warrant our system, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 warrant even the labor to replace that system or fix it. 2 What we're concerned about is having to warrant engine 3 problems that we would then have to prove were not caused 4 by our system. If something did occur to actually cause 5 an engine problem, we'd more than likely as business 6 practice take care of it. However, that's different than 7 supplying a warranty. 8 BOARD MEMBER CALHOUN: That's the same thing you 9 do today with the OEM; is that correct? 10 MR. HALLSTROM: No. That's not correct. 11 BOARD MEMBER CALHOUN: If you have a system, if 12 your system causes an engine problem -- 13 MR. HALLSTROM: We replace the catalyst, because 14 we're not involved in the final design or how that 15 catalyst is applied on the engine. We provide a wash 16 coat. That's all we're providing. So we would replace 17 the wash coat of that catalyst. 18 If there were other issues, that would have to be 19 taken care of commercially. But the actual design of that 20 catalyst going on to, say, an automobile is the 21 responsibility of the engine manufacturers. We are not 22 involved in the design of the exhaust system, the design 23 of the oxygen sensor, the design of the electronic 24 control. We advise them on the performance of the 25 catalyst. All those parameters are beyond our control. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 We're only warranting what's in our control. 2 BOARD MEMBER CALHOUN: But if your system -- I 3 realize you're not involved in the initial design. 4 Somebody else takes care of that, otherwise they wouldn't 5 be buying your product. But if, by chance, there was some 6 engine damage and if the OEM thought that damage was 7 caused by your catalyst, you would have a good discussion 8 about that, would you not? 9 MR. HALLSTROM: Correct. We would. 10 BOARD MEMBER CALHOUN: And it would be resolved, 11 would it not? 12 MR. HALLSTROM: Yes, it would. 13 But I guess my point, though, is that is not 14 written in a warranty language. That would be a 15 commercial discussion between us, as a supplier to the 16 OEM, and the OEM. It's not provided for in a legal 17 contract. 18 BOARD MEMBER CALHOUN: Okay. But you have said 19 you'll be selling your product to whoever else gets a 20 verification here; is that correct? 21 MR. HALLSTROM: That's correct. 22 BOARD MEMBER CALHOUN: And don't you anticipate 23 that you'll have some kind of working arrangement with 24 that? 25 MR. HALLSTROM: We will have a working PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 arrangement, but it separates us directly from the 2 warranty language and the direct liability associated with 3 that language. We will be provide a different warranty to 4 the person who is going to be selling that and providing 5 that for California. 6 BOARD MEMBER CALHOUN: Okay. I have no further 7 questions. 8 CHAIRPERSON LLOYD: Thank you. 9 Dr. Burke. 10 BOARD MEMBER BURKE: If I put it on my vehicle, 11 you had sold the license to somebody else, I'd sue you and 12 them. 13 MR. HALLSTROM: That's a concern. Unfortunately, 14 that's one of the concerns. 15 BOARD MEMBER BURKE: So whether you license it or 16 don't license it is irrelevant? 17 MR. HALLSTROM: It's irrelevant in -- maybe in a 18 court. However, as far as what I have agreed to and 19 physically signed off on, it is different. I have not -- 20 BOARD MEMBER BURKE: I understand that. Let me 21 ask staff a question. Next Friday at South Coast we're 22 probably going to have an opportunity to approve a $12 23 million program to retrofit and purchase new school buses. 24 How does this effect that? 25 EXECUTIVE OFFICER WITHERSPOON: We think that if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 you adopt the recommended language today, it won't effect 2 it very much. There will still be an ample supply of 3 retrofit devices in California. Engelhard, which is 4 testifying now, does make its product available through 5 other parties. So although they, as a company, will not 6 be purveying a product in the market, others will. 7 Johnson Matthey who's about to testify next has said they 8 will leave the market. And they may. They may make that 9 business decision. And they may later decide to re-enter 10 through a licensee, too. But in the meanwhile, there'll 11 be a few certified devices that the South Coast can rely 12 upon in providing incentives for retrofit purchases. 13 BOARD MEMBER BURKE: Are they from companies as 14 reputable as these companies? 15 EXECUTIVE OFFICER WITHERSPOON: Yes, even more 16 so. 17 BOARD MEMBER BURKE: That wasn't nice. Thank you 18 very much. You sound like me. 19 CHAIRPERSON LLOYD: In that respect, I don't know 20 if there is any -- certainly one doesn't have the track 21 record or length of experience. So I would not agree with 22 that comment. But it's your prerogative. 23 EXECUTIVE OFFICER WITHERSPOON: We'll wait and 24 see. But they have, certainly, good track records for 25 customer service. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 CHAIRPERSON LLOYD: I certainly agree we've got 2 reputable companies, but Engelhard and Johnson Matthey 3 have been in it for years. 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: You'll 5 hear from the three that are in agreement with it. They 6 follow on the testifying list. But a couple of them are 7 very large companies, at least on the order of magnitude 8 of Engelhard and Johnson Matthey, so -- with a lot of 9 experience in the marketplace. 10 CHAIRPERSON LLOYD: One other question, I guess 11 you had a legal question. Why legally are you preempted 12 from putting some language in. That was a question I had. 13 MR. HALLSTROM: Specifically, the language is 14 other exclusions of other implied warranties. And the 15 language we've looked at or talking about proposing would, 16 in essence, say it would not effect or -- the only 17 warranty that applies is what's required by this 18 regulation. Any implied or expressed warranties are 19 hereby excluded, something to that nature, which would 20 then define the warranty we're providing is what the ARB 21 is requiring. We're not providing any other warranty. 22 And right now, we cannot do that. 23 GENERAL COUNSEL JOHNSTON: I think the legal 24 position is that in other materials that they've put out 25 they can, you know, state what their warranty coverage is. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 But within the warranty coverage for the emissions control 2 equipment, they cannot make statements other than the 3 statements that are allowed under our regulations. And as 4 the Board has heard today, we're allowing them to give 5 further examples of the type of behavior on the part of 6 the operator of the equipment that would be excluded from 7 warranty coverage. So I'm not certain what, you know, 8 else they would like from us. 9 MR. HALLSTROM: We would like to be able to put 10 it in the owners manual. Right now I think it's being 11 defined we have to have it as a separate document that 12 would not be in the owners manual. There's some concern 13 if it's not in the owners manual, then it may not be held 14 as legally binding, in that you have a specified document 15 that supposed to be the owners manual of the piece of 16 equipment, and this statement is precluded from being in 17 there. 18 And it's not so much it has to be in the ARB 19 warranty statement itself, but in the owners manual such 20 that it's referenced as excluding other warranties. And 21 we've seen cases of this where you look at an emission 22 warranty requirement in an automobile, and they'll have 23 asterisks that say "see other exclusionary warranties 24 defining" -- the warranty we're providing is only the 25 warranty as written by ARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 GENERAL COUNSEL JOHNSTON: We do have some legal 2 concerns about applied and other express warranties. 3 These are based on -- Mr. Lassen has mentioned the Uniform 4 Commercial Code and the ability under the Uniform 5 Commercial Code to exclude implied or any expressed 6 warranties. And that is correct. But the uniform 7 commercial code applies to strictly commercial 8 transactions where the parties are at equal bargaining 9 power to, you know, have a level playing field when 10 they're negotiating these things. So this would be like 11 Firestone and Ford Motor Company negotiating, you know, 12 what the warranties are. 13 This is not the position that all of the 14 purchasers of the verified technologies will be in. They 15 do not have equal bargaining power with the suppliers of 16 these devices. And we feel that, you know, improper 17 limitation of warranties may be of concern to the Board. 18 MR. HALLSTROM: And I guess our response to that 19 would be the Board and the regulation's providing a very 20 specific warranty. What I'm hearing now is, well, this is 21 our intent to provide this warranty, but, by the way, you 22 can't exclude or conduct normal business practices, which 23 is if we can provide our standard terms and conditions 24 that is on every product we normally sell to any 25 customers, OEMs, retrofit, that includes such language. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 That is a standard business practice. 2 GENERAL COUNSEL JOHNSTON: If I may also state 3 that when these providers of the retrofit technologies 4 apply to us, they can limit the application to exactly the 5 circumstances under which they are comfortable providing 6 the full warranty. 7 MR. HALLSTROM: But the full warranty defined as 8 what's in the regulation? What we're concerned about is 9 to limit our overall ability as far as other warranties. 10 CHAIRPERSON LLOYD: Well, maybe this is a point 11 that has to be discussed some more with legal staff. 12 Although, on the other hand, if Engelhard is not going to 13 the play in the market, then it's a moot point. 14 EXECUTIVE OFFICER WITHERSPOON: It's obviously a 15 balancing act, but something I'm going to steal a line 16 from Bob Cross here. As staff was analyzing where to draw 17 the line, we thought more protection ought to go to the 18 individuals upon whom we are imposing a cost, i.e., 19 directing to retrofit or replace their vehicles, as 20 imposed upon the persons who are going to make money from 21 our regulation. And the choice to enter the market is a 22 free one, and it's one based on ability to make profit. 23 And the warranty requirements we are requiring 24 are to protect the individuals upon whom we have insisted 25 participate in our diesel retrofit control programs, like PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 the one you adopted just before lunch. And they will not 2 be unduly burdened or left in the lurch should the device 3 fail or in the unusual case that consequential damage to 4 the engine results. That's how staff did the balancing 5 act. 6 CHAIRPERSON LLOYD: Thank you. 7 BOARD MEMBER D'ADAMO: Mr. Chairman. 8 CHAIRPERSON LLOYD: Yes, Ms. D'Adamo. 9 BOARD MEMBER D'ADAMO: And yet, staff would still 10 retain the discretion regarding specifically how the 11 language is put together by the manufacturer? 12 EXECUTIVE OFFICER WITHERSPOON: Not a whole lot. 13 Just discretion to give examples of what would void your 14 warranty, but not to write yourself out of the warranty 15 requirements that we are stipulating. 16 BOARD MEMBER D'ADAMO: Good. 17 CHAIRPERSON LLOYD: Thanks. 18 Marty Lassen, Kimberly Jones, Tom Swenson. 19 MR. LASSEN: Good afternoon, Mr. Chairman and 20 members of the Board. My name is Marty Lassen. I'm the 21 Commercial Development Manager for Johnson Matthey's 22 heavy-duty diesel business in North America. Johnson 23 Matthey appreciates the opportunity to provide additional 24 comments on proposed amendments to the diesel emission 25 control strategy verification modification regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 Johnson Matthey is an extraordinarily reputable 2 technology company that has been providing advanced 3 catalytic solutions to reduce emissions for over 30 years. 4 We have worked with both the ARB and EPA to develop and 5 provide these ever increasingly advanced technology 6 solutions to reduce emissions from both mobile and 7 stationary sources. 8 Johnson Matthey fully supports the goal of ARB's 9 diesel risk reduction program to significantly reduce 10 particulate matter from California's inventory of existing 11 diesel engines. Johnson Matthey has been involved with 12 the diesel risk reduction program since its inception. We 13 have provided technology, our expertise in applying this 14 technology, along with a willingness to demonstrate the 15 effectiveness of our technology as a partner with ARB over 16 the past several years. 17 Working closely with ARB staff, an interim 18 verification procedure was developed and approved by ARB 19 that included a warranty requirement limited to the 20 verified device only. Johnson Matthey's CRT particulate 21 filter was one of two filters verified by ARB. This 22 effort helped the ARB to kick off its diesel risk 23 reduction program and to start producing diesel emissions. 24 However, on January 26th, 2004, Johnson Matthey 25 ARB-verified CRT particulate filter was deverified by ARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 The deverification was not related to any technical or 2 durability concerns. It was related only to the extent of 3 the warranty liability now required by ARB. This 4 requirement is far, far more encompassing than the 5 warranty requirement the CRT filter was verified with 6 initially. 7 With this original verification, thousands of 8 particulate filters have been supplied to a diverse group 9 of users in California. Among them, transit buses, school 10 buses, refuse removal trucks, over-the-road trucks, and 11 municipal vehicles have all been successfully retrofit. 12 All of these retrofits are warranted for device only. And 13 that warranty was the same warranty the EPA required in 14 its mandated precedent-setting urban bus retrofit rebuild 15 program, a warranty that provided both mechanical and 16 performance assurances, not a warranty that extended to 17 the vehicle or the engine, but one that provided coverage 18 on the product provided. More than 25,000 retrofits were 19 completed in this EPA program. To our knowledge, there 20 were no incidents that ever included either the engine or 21 the vehicle that were attributable to the retrofit device. 22 Johnson Matthey has met with ARB staff, provided 23 written comments, and have testified on the verification 24 procedure and its warranty liability requirements many 25 times over these last two years. Today, we stand by those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 comments. But rather than repeat those comments already 2 on record, I would like to offer several new comments. 3 As I mentioned, the U.S. EPA mandated a retrofit 4 program to reduce diesel emissions from transit busses in 5 1993. The mandate required retrofit companies to provide 6 a warranty on the retrofit device alone. We believe ARB 7 should follow EPA's model and limit the warranty to device 8 only and allow commercial terms outside of this to be 9 negotiated between retrofit providers and users. 10 Under the ARB's diesel risk reduction program, 11 when you install a retrofit device on an engine that is 12 out of its manufacturers' warranty period, whether that's 13 the basic 100,000 mile warranty or an extended warranty 14 of, say, 500,000 miles, the current ARB warranty 15 requirement essentially refreshes that expired engine 16 warranty. This is not a fair requirement being placed on 17 retrofit providers. 18 We have heard from other parties that because the 19 ARB is mandating retrofits, they need to be fully 20 protected. I would submit to you that what is being 21 mandated is clean air. And with the current ARB best 22 available control technology, or BACT policy, users have a 23 choice. That choice includes replacement or repower first 24 and then retrofit. And the least-costly choice, retrofit, 25 contains the broadest warranty requirements. We believe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 with choice that the retrofit warranty should be limited 2 to device only. 3 It is clear in the diesel risk reduction program 4 mandated rules, like the transit rule, require verified 5 product, and the warranty terms are dictated. We submit 6 if ARB needs to require the high-level warranty on 7 mandated programs, then a provision for voluntary or 8 non-mandated programs should be established that includes 9 a technically-verified retrofit, but one that has a 10 warranty limited to the retrofit device only. If fact, we 11 have had conversations with South Coast AQMD where this 12 very same idea was proposed by them. They'd like to see 13 their voluntary school bus program separated from on-road 14 trucks and given the flexibility to choose 15 technically-verified product with the device only 16 warranty. That is part in order to encourage the 17 worldwide leading providers of retrofit technology to 18 reenter the California market. 19 The ARB has indicated that the warranty 20 requirements included in the verification procedure are 21 the only warranty requirements that the rule imposes, that 22 is the device and engine. However, the ARB has stated 23 that no exclusions for other implied warranties or 24 consequential damage can be included. That is Johnson 25 Matthey's position, as well as normal business practices PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 for anyone providing any type of product, that there is 2 the ability to disclaim such things as merchantability, 3 fitness for purpose, consequential damages, et cetera. 4 The Universal Commercial Code clearly stated if you do not 5 exclude something, then it is included. The current ARB 6 position preventing Johnson Matthey from being able to 7 exclude certain implied warranties thereby includes them. 8 Discussions on this issue are still continuing, though. 9 In reviewing warranty statements from both engine 10 OEs and the automotive companies, it appears that 11 allowances have been made for them to disclaim certain 12 liabilities. Further, it appears that the warranty 13 requirements for engine are limited to emission-related 14 components only. Johnson Matthey would ask these same 15 allowances be applied to retrofit suppliers and their 16 products. 17 In the development have the verification 18 procedure, John Matthey and other retrofit providers have 19 been asked to increase the levels of warranty to be 20 provided. We have agreed to increasing the number of 21 years and to the maximum number of miles. Other 22 stakeholders have only asked for more. We recognize that 23 ARB has proposed to limit the warranty through device and 24 engine only, which is a positive move, but we still 25 believe more is required. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 John Matthey has indicated throughout this 2 process we want to continue to work with the ARB to 3 identify acceptable solutions to these outstanding issues. 4 It is our belief several issues remain unresolved but 5 could be resolved with further discussion. For that 6 reason, Johnson Matthey encourages the Board to delay the 7 vote on the verification procedure and allow ARB staff, 8 Johnson Matthey, and other interested parties to continue 9 discussions and to arrive at a mutually acceptable 10 solution. We are confident we can come to a mutually 11 acceptable solution, and we look forward to the 12 reinstatement of the CRT particulate filter's 13 verification, as well as verification of other Johnson 14 Matthey technologies submissions for PM and NOx control to 15 further support ARB's clean air mandate. 16 Thank you for this time, and I'm happy to take 17 questions. 18 CHAIRPERSON LLOYD: Thank you. 19 The issue I guess Dr. Burke referred to earlier, 20 now I understand the significance in terms of the school 21 bus rule. So in that program, GM could still participate, 22 although they don't have it now. 23 EXECUTIVE OFFICER WITHERSPOON: If South Coast is 24 offer offering incentives, they have the ability to say 25 they are not requiring warranties as a condition for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 qualifying for the incentives where -- 2 CHAIRPERSON LLOYD: What if they say they need to 3 certify trap? 4 EXECUTIVE OFFICER WITHERSPOON: They'd have to 5 figure out a way to write themselves around the 6 verification, because our verification pulls the warranty 7 through with it. So Tom and I were just chatting about 8 that. So South Coast would need to be careful about how 9 it constructed the rule. It could still look for evidence 10 that it achieved X percent of emission reduction, which 11 they could draw from our certification data but stop short 12 of saying it had to be a certified device, which would 13 pull the warranty along, if they chose to fund devices 14 without the same warranty. 15 CHAIRPERSON LLOYD: Also were you implying, 16 Marty, that we actually change the rules of verification 17 mid-stream? 18 MR. LASSEN: I'm not implying that you have to, 19 Dr. Lloyd. I'm suggesting -- 20 CHAIRPERSON LLOYD: That we did. 21 MR. LASSEN: Excuse me? 22 CHAIRPERSON LLOYD: That we did, because you 23 certified it and got it certified, and then it was changed 24 and now it's decertified. 25 MR. LASSEN: We were verified under an interim PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 procedure that requires the device only. And then towards 2 the -- I guess the end of the process, right before May 3 2002, there was a recommendation to then include engine 4 and vehicle. And that was not necessarily picked up by 5 everyone. There was no public comment period on that or 6 no public notice. There were no workshops on that issue. 7 CHAIRPERSON LLOYD: Is that true? 8 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: My 9 staff has been involved in negotiations -- can you hear 10 that all right -- in negotiations with these folks for 11 literally years. The changes to this regulation which 12 changed the warranty from what was in the interim 13 procedure to what they have now was adopted a year and a 14 half ago. And there was comment on that then, and then 15 there was a lot of comment subsequent to that adoption 16 during 15-day comment periods that have dragged on 17 basically until today. 18 So the warranty issue has been one of intense 19 debate since the verification procedures were done. The 20 interim procedure, which he refers to, was one which we 21 basically adopted as an administrative procedure so we'd 22 be able to verify this stuff as it became available. It 23 was coming on the market faster than we knew what to do. 24 As soon as we could, we took that to the Board. The 25 issues of warranty were discussed, and I think we ended up PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 with today, I think, a really good compromise. 2 CHAIRPERSON LLOYD: You clarified it was an 3 interim procedure, so that we recognize that will be 4 changing. 5 BOARD MEMBER BURKE: Mr. Chairman. 6 CHAIRPERSON LLOYD: Dr. Burke. 7 BOARD MEMBER BURKE: I had a question of the 8 gentleman testifying. Why is there this discrepancy in 9 communication? I always find that troubling. Because 10 staff says we've been working with these guys all the 11 time. Then somebody gets up and testifies and say, "I 12 haven't heard from them." Can you explain that? 13 MR. LASSEN: Dr. Burke, we have been working with 14 staff all along on many issues. The point I was trying to 15 make was that when there are substantive changes to a 16 procedure or regulation, typically there is a notice sent 17 out or a workshop. And to my recollection, there was 18 neither in this case. And one of staff members did 19 confirm that several -- almost a year ago now. And I was 20 told that not -- with every change -- or not with every 21 change is there a public workshop or a notice that goes 22 out. Sometimes it's so close to the end of the cycle that 23 it just goes in. Now, shame on me for not reading the 24 five-inch thick document that included the change. 25 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 was in the 45-day notice, according to my staff. I think 2 the real issue here is that your organization and my staff 3 have been debating warranty constantly for the last 4 two years. And it's been -- as far as I can see, it's 5 been a tough but healthy negotiation where there's been 6 movement on both sides, but I don't think it's fair to 7 characterize it as a surprise. This has basically been 8 one that's been ongoing. 9 MR. LASSEN: It has been ongoing, and we are 10 clear in our position. 11 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: The 12 reg was clear that with its effective date, that the new 13 requirements would apply on January 1st of 2004. 14 MR. LASSEN: And we negotiated with ARB in good 15 faith to try to reach a compromise. 16 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: We 17 still have been. 18 CHAIRPERSON LLOYD: Thank you. 19 BOARD MEMBER BURKE: So because you guys can't 20 come to some understanding, we go to some guy who wears a 21 black robe, who doesn't know air from maple syrup and let 22 him or her make that decision. 23 EXECUTIVE OFFICER WITHERSPOON: There's nothing 24 to litigate here because Johnson Matthey's choice is 25 whether to enter the market or not with the warranty PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 requirements we're imposing. When Mr. Lassen alluded to 2 that earlier, he was saying -- 3 BOARD MEMBER BURKE: Catherine, let me tell you 4 what I would do if, I was him. Okay. If they really feel 5 they have a meritorious situation where they feel their 6 product has met your standards before, and you were in the 7 process of certifying or had them certified or had them 8 close to certification and then you change the rules, I 9 think that gets to a lawsuit, don't you? 10 EXECUTIVE OFFICER WITHERSPOON: You, the Board -- 11 BOARD MEMBER BURKE: The lawyer is eating the 12 microphone over there. 13 EXECUTIVE OFFICER WITHERSPOON: You, the Board, 14 changed the rules. You, the Board, adopted a standard of 15 warranty that was -- 16 BOARD MEMBER BURKE: No matter who changed it. 17 EXECUTIVE OFFICER WITHERSPOON: But they knew. 18 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: The 19 certification was always understood to be an interim 20 verification to cover the manufacturers until the Board 21 had an opportunity to take action on this. So I think 22 with -- 23 BOARD MEMBER BURKE: Let me tell you what my 24 personal concern is. 25 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: With PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 that understanding they should note that change -- 2 BOARD MEMBER BURKE: This whole program goes a 3 little deeper. We have been in the retrofit business now 4 for as long as I've been here. And for the first couple 5 of years, there was -- we had hope for all the technology. 6 And we get one put together, and then it would fall apart. 7 So us guys down there on the ground would run out, 8 companies would go bankrupt, and technologies didn't work 9 or we couldn't afford to get them certified. So it's 10 taken forever now to get the technology and companies up 11 and running. And now we have people leaving and talking 12 about they're going to license it back. 13 I don't know -- I don't know the answer. You 14 can't -- I'm not being critical of the process. But it 15 troubles me that, you know, when you have a couple 16 companies who have been in a semi-leadership roll in this 17 technology and stuck around when a lot of other companies 18 bailed, especially some of them got hundreds of thousands 19 of dollars of grant money from CARB, and then they went 20 south. So I'm not really supportive of, you know, driving 21 them out of the market to come in through another method, 22 you know, this licensing thing. 23 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: 24 You're going to hear from three companies after this 25 witness who are still in the market. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 BOARD MEMBER BURKE: That's fine. But if I had 2 two of the ones whose names I've been hearing the longest 3 leaving and then your Chairman says, well, you know, one 4 of the company is a very nice company, but it doesn't have 5 near the experience, I'm going to support this, I just -- 6 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: Just 7 be aware of -- I'll be quick. The other thing to be aware 8 of is that this technology is in the process of being 9 introduced for 2007 model year heavy-duty trucks and by 10 these same suppliers for new trucks. And the issues of 11 warranty liability are a critical part of the negotiations 12 that they have to go through with people who are going to 13 supply engines to. So just be aware of that. 14 BOARD MEMBER BURKE: I understand all of that. 15 They're not going to tell the OEM, I'm not going to pay 16 you for that. They may not have a written contract, but 17 I'm not so stupid to sit here and believe that General 18 Motors comes down and says, "Hey, man, your stuff is 19 burning up my cars," they're not going to pay for that. 20 They're going to pay for that whether they have a written 21 contract or not. It's suicide. I understand that. I'm 22 just trying to get us to be in a position where they also 23 treat us with that same kind of respect. 24 CHAIRPERSON LLOYD: Thank you. 25 Kimberley Jones, Tom Swenson, and Julian Imes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 MS. JONES: Good afternoon, Dr. Lloyd and members 2 of the Board. My name is Kimberly Jones. At a corporate 3 level, I'm the Manager of Environmental Policy and 4 Regulatory Affairs, and within our Emulsified Products 5 Division, I hold the title of Market Development Manager 6 because my commercial responsibility's in Southern 7 California. I'm here today to provide testimony on behalf 8 of the Lubrizol Corporation in support of staff's 9 recommendations to the amendments for the diesel emission 10 control strategy. By way of a brief introduction, 11 Lubrizol Corporation is a fluid technology company 12 concentrating on high-performance economic -- 13 CHAIRPERSON LLOYD: Have you changed since 14 December? Has the thrust of the company changed since 15 December? 16 MS. JONES: No. 17 CHAIRPERSON LLOYD: I think we're aware of what 18 you do. 19 MS. JONES: Okay. That's fine. 20 The main point is Lubrizol is known as a fluid 21 technology company, but we are also very interested and a 22 key participant in hardware solutions. So by way of 23 introduction or just so another name can be known, Engine 24 Control System is the company that Lubrizol acquired in 25 1995. And they were established in 1980, became a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 wholly-owned subsidiary in 1995. So basically, Lubrizol 2 is committed to delivering a variety of cost-effective 3 products that can be used to reduce emissions from not 4 only the existing fleet, but the newest and most advanced 5 diesel engine technologies, making them even cleaner. 6 Today, as a manufacturer and technology provider 7 in both national and global markets, we're proud of the 8 fact that Lubrizol has successfully secured more verified 9 products and technology verifications under the U.S. EPA 10 voluntary retrofit program than other manufacturers. And 11 it's our goal to do the same here in California under your 12 verification program. 13 With this breadth of technical and manufacturing 14 expertise, Lubrizol believes that it's uniquely positioned 15 and fully committed to offer California both fuel-based 16 and hardware-based emission control strategies to reduce 17 emissions, specifically PM and NOx. Lubrizol has the 18 established manufacturing capacity and proven resources to 19 quickly deliver a large quantity of retrofit devices and 20 low emission fuels to California marketplace for use in a 21 broad variety of applications and engine configurations. 22 Most importantly, Lubrizol stands behind its products and 23 offers for both its fuel and hardware-based strategies ARB 24 compliant warranties. 25 We commend the Board's extraordinary efforts in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 improving air quality here in California. And as an 2 active member of the public regulatory development 3 process, Lubrizol further commends ARB staff for 4 continually seeking to strike balance between the 5 regulatory efforts and the practical needs of the 6 marketplace. We believe that it's this balance that is 7 critical to the ultimate success in diesel risk reduction 8 in achieving the diesel emission reduction goals in 2010 9 and 2020. 10 With regard to the specific proposed amendments, 11 Lubrizol fully supports all of them with regard to 12 warranty, the postponement of the NO2 limit, and the 13 harmonization of durability requirements. Specifically, 14 we support ARB's efforts to harmonize verification 15 requirements between what California's requiring and what 16 U.S. EPA is requiring, and whenever possible seeking 17 reciprocity. Our feeling is that the ability for other 18 states to claim the verification values derived in 19 California can only improve the value of the ARB 20 verification process and serve as an incentive for others 21 to invest in California. 22 Lubrizol has made a multi-year, multi-million 23 dollar investment in developing a variety of emission 24 control strategies and secured the necessary regulatory 25 credentials to legitimize and quantify the claimable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 emission reductions. In recent years, we have accelerated 2 these investments in good faith to support the goals of 3 the diesel risk reduction plan. 4 So here today Lubrizol respectfully requests the 5 Board to formally adopt the proposed changes to the 6 verification procedure without delay to assure these 7 technologies are authenticated by ARB and specific 8 emission reductions values are ascribed to them. We urge 9 ARB to maintain the integrity of the verification process 10 to assure that only the durable and environmental 11 technologies are introduced to the market. 12 We strongly support staff's efforts to complete 13 the regulatory package so that the owners and operators of 14 existing or in-use diesel engines in California may 15 cost-effectively comply in a timely basis to the goals 16 contained within the diesel risk reduction plan in other 17 related programs. 18 We thank you for the opportunity to provide that 19 testimony today. 20 CHAIRPERSON LLOYD: Thank you very much. 21 Comments or questions? 22 Thank you. I guess you're aware that Lubrizol 23 emulsion will be hopefully approved? 24 EXECUTIVE OFFICER WITHERSPOON: We have a 25 California Policy Council meeting on April 30th. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 CHAIRPERSON LLOYD: Okay. 2 MS. JONES: Thank you. 3 CHAIRPERSON LLOYD: Thank you. 4 Tom Swenson, Julian Imes, Sean Edgar. 5 MR. SWENSEN: Good afternoon. Tom Swenson. I'm 6 the Director of Strategic Marketing for Cleaire Advanced 7 Emission Controls, a California-based diesel retrofit 8 technology manufacturer. We're the guys that haven't been 9 around as long as some of the other folks and just wanted 10 to offer a couple of comments on that. 11 CHAIRPERSON LLOYD: But based in California? 12 MR. SWENSEN: But based in California, 13 absolutely. 14 We use only first Tier suppliers. Our technology 15 has also been evaluated in addition to the ARB 16 verification process by Cummins through their fleet guard 17 system and passed all their tests and is listed as a 18 federal part throughout the United States from Cummins 19 through fleet guard. 20 Just a couple of introductory comments, echo the 21 comments about staff's willingness and hard work to try to 22 come to resolution. Cleaire supports the overall -- all 23 of the overall provisions of the proposal, and these 24 comments are offered specific to the warranty, which seems 25 to be the one of most contention. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 We have reviewed the proposed warranty 2 requirements under consideration today and believe they 3 are fair and balanced to both providers and end users and 4 support their adoption. We also feel that it is not 5 necessarily required to reduce the vehicle component of 6 it. I know that's sort of strange coming from a retrofit 7 provider. But we've sort of looked at the market maybe 8 slightly differently than some other folks. So we'd like 9 to offer that perspective. 10 Owner and operators have a tremendous investment 11 in their engines, vehicles, and equipment and deserve a 12 warranty that protects that investment. This is 13 reasonable because they are required to install and use 14 these systems in most cases by regulation, not by choice. 15 Cleaire's core business is exhaust after-treatment 16 retrofits providing direct sales, service, and support to 17 end users. Our technology, design, and pricing are based 18 on a business model that provides the highest level of 19 customer support, including extended warranties, lease, 20 and purchase options that give our customers piece of mind 21 that their equipment is protected. We believe that CARB 22 should require warranties that make certain that end users 23 are protected. 24 Ultimately, the diesel toxic reduction program's 25 success or failure is dependent upon the performance of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 retrofit exhaust treatment systems. Should there be a 2 system failure, which we all hope is the exception rather 3 than the rule, users must be assured that their investment 4 is and will be protected. 5 At the refuse rule ATCM hearing, Waste Management 6 told this Board they were going to make a leap of faith 7 that the control technologies work and supported the 8 proposed rule. There is every expectation that a 9 technology that passes your rigorous verification process 10 will satisfactorily perform. However, we believe in a 11 highly protective warranty as the back up parachute, 12 should the primary fail. 13 Clearly, there are widely differing opinions of 14 what is necessary and reasonable. And your Board will 15 have to weigh all these opinions to determine the 16 appropriate course of action. Once again, we urge your 17 Board to maintain warranty requirements to provide the 18 highest level of protection to the end users, because it 19 is these end users who will ultimately make or break the 20 success of your programs. Thank you. 21 CHAIRPERSON LLOYD: Thank you for providing such 22 strong backup. It's great. 23 Any questions? Comments? Thank you. 24 Julian Imes, Sean Edgar. 25 MR. IMES: Chairman Lloyd and members of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 Board, my name is Julian Imes. I'm the Director of 2 Exhaust Emission Technology for Donaldson Company. 3 Donaldson desires to provide comments in support 4 of ARB's proposed amendments to the verification 5 procedures, warranty, and end-use compliance requirements. 6 Donaldson is headquartered in Minneapolis, Minnesota, and 7 is a leading worldwide provider of filtration systems and 8 replacement parts. 9 We have been actively working with ARB staff for 10 the past several years to develop and provide diesel 11 retrofit control technology in support of ARB's diesel 12 risk reduction plan. Donaldson presently has verified 13 retrofit technology for both ARB's diesel risk reduction 14 program and for EPA's voluntary diesel retrofit program. 15 Donaldson generally supports ARB staff draft 16 language of 22404 and proposed amendments to the 17 verification procedure and warranty. Concerning ARB's 18 proposed amendments to the warranty requirements, however, 19 Donaldson wishes to provide clarifying comments. We 20 continue to believe in general that details of providing 21 product warranty should be left to the marketplace in the 22 related commercial activities. However, if a mandatory 23 warranty is required, we wish to provide the following 24 points. 25 Number one, Donaldson supports ARB's present PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 written warranty procedures and amendments 22404 draft 2 which indicates that mandatory warranty coverage extend 3 only to the engine and not to the vehicle or equipment. 4 While accepting engine coverage, we do have significant 5 concerns over the potential for inappropriate engine 6 claims. Our preference would be that the mandatory 7 language coverage extend only to the diesel emission 8 control strategy. 9 Number two, most recently there has been 10 significant industry and stakeholder dialogue concerning 11 possible extended warranties that are present minimum 12 requirements either on the voluntary or mandatory basis. 13 Donaldson again believes extended warranties are best left 14 to the marketplace and related market activities. If a 15 mandatory extended warranty is required, however, we 16 recommend that the present, mandated, minimum ARB warranty 17 be retained on all application segments and to limit any 18 extended warranty to those engine vehicle segments where 19 it's most appropriate. 20 Donaldson supports ARB's proposed amendments 21 22404 draft for further extended warranty of two years 22 unlimited miles to apply only to high annual mileage 23 exceeding 100,000 miles per year, newer trucks, less than 24 250- to 300,000 miles in the on-road heavy-duty segment, 25 gross vehicle weight or exceeding 33,000 pounds. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 Number three, Donaldson strongly believes that 2 compliance to the amended warranty should take effect 3 immediately for all verified retrofit technologies. We do 4 not support extended time for compliance to this 5 extended -- amended warranty. Continued delay continues 6 market uncertainty and proceeding with adoption of 7 verified diesel control technologies. We've already seen 8 some evidence of that in a prior discussion today. 9 That concludes my comments, and I would be happy 10 to answer any questions. 11 CHAIRPERSON LLOYD: Any questions? 12 You did make the point about the warranty that 13 your preference there would be limited to the device. 14 Although, that's just a preference, not a requirement. 15 MR. IMES: Well, it's a strong preference, but we 16 are accepting of -- I don't know how else to say it. 17 CHAIRPERSON LLOYD: Yeah. Okay. But it's not a 18 requirement? But I think it's different because 19 clearly -- 20 MR. IMES: There's acceptance. 21 CHAIRPERSON LLOYD: Engelhard and Johnson Matthey 22 said it's a requirement. You're saying it's a preference, 23 and clearly that's much weaker. Even a strong preference 24 is much weaker than a requirement. 25 MR. IMES: Yes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 CHAIRPERSON LLOYD: Thank you. 2 Sean Edgar. 3 MR. EDGAR: Good afternoon, Chairman Lloyd and 4 Board members. Sean Edgar, Director of Regulatory Affairs 5 for the California Refuse Removal Council. Nice to be 6 before you this afternoon. I'll make my comments brief. 7 Our solid waste collection companies from 8 San Diego to Sacramento, from the Sierras to the Bay are 9 excited that we've gotten most of the way there with your 10 staff today. So I compliment Ms. Witherspoon and her 11 staff for reaching out and working with us to get most of 12 our point resolved. Our written comments are contained in 13 agenda item Number 10 in your package. 14 Briefly, the primary objections that our folks 15 have is regarding staff Proposal Number 3 and the three 16 bullets that we're asking is that basically the other 17 vehicle components or other parts of the vehicle be 18 covered in the event of a failure. We're asking that the 19 words that staff proposed removing about "applicant 20 demonstrating," those words not be removed. And we're 21 also asking that the words "vehicle equipment" and "other 22 vehicle components" and "vehicle equipment" should not be 23 removed. But in general, we're most of the way where we 24 would like to be. 25 I feel a new air of optimism in the air when our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 folks are getting most of the way there with you on this 2 particular issue. I'm reminded of the old physics proverb 3 that given a lever and a place to stand, we can move the 4 earth. And it's the same optimism with which our hauling 5 companies are hopeful that we can resolve the refuse rule. 6 Just as a brief recap, you know, our companies 7 have approached the recycling mandate here in the state 8 that was a public policy goal. Mandate was issued 15 9 years ago. And the Waste Board tells us we're at 48 10 diversion for a 50 percent goal. The Waste Board, as a 11 matter of fact, is handing out penalties to local 12 governments who can't quite get there because we couldn't 13 plan well enough, couldn't make the investment. 14 Solid Waste Association of North America tells us 15 we've spent 300- to $600 million as an industry trying to 16 get from 25 to 50 percent recycling. We do that through 17 franchises and labor agreements throughout the state. 18 This week we serviced five-and-a-half million 19 Californians. So one in four recycling bins out there, 20 our company picked up this week. We've create 85,000 jobs 21 as part of a $10 billion a year California economy. With 22 that as our pedigree, it's a little bit difficult to kind 23 of overemphasize our commitment to clean air and 24 environmental protection. As a matter of fact, we've 25 created jobs from environmental protection. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 As we've let your Board know, we're with you all 2 the way, and we're confident that we can get there. 3 However, it's always an educational process coming here 4 and spending the day. And I've come to find we're 5 actually struggling trying to fit a cylindrical device on 6 a rectangular garbage truck. 7 And a few comments I have particular concern 8 about -- first of all, with regard to the gentleman from 9 Engelhard, I'm a little bit disturbed. I see a few 10 indications of what we see as problems. His first 11 statement, Mr. Hallstrom's statement we're going to have 12 an uneducated installer. That was very difficult for me 13 to believe, because as I recall, your staff's vision to us 14 was that we were going to go to the technology providers 15 and it was going to get done for the part of the fleet 16 that needed to be retrofitted. 17 Your staff, to date, cannot tell us whether it's 18 5 percent or 50 percent of our trucks that are going to 19 need these types of devices. We know that the 2007 20 heavy-duty diesel engine standard you want us to get to 21 may not be there, and we can't count it being there until 22 2007. If we are going to limp through the next three 23 years with technology that we don't know how many units -- 24 and as a matter of fact, we're even more confused on how 25 many vendors, because if I was to understand, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 worldwide leader, as Mr. Lassen indicated, the largest 2 manufacturers of the devices -- we have some domestic 3 home-grown folks, and God bless them for standing behind 4 their product. 5 But the fact of the matter is my education 6 process says we're nowhere near having the level of 7 comfort to know the devices that you're asking our 8 family-owned companies to use are really going to be 9 available in the marketplace, if they explode, somebody is 10 going to stand behind them. But I digress because there 11 are a few other items here that I particularly wanted to 12 just pick up very briefly. 13 Mr. Hallstrom indicated he can't supply a product 14 with the type of warranty your staff is asking for. 15 That's funny, because we do provide a service every day to 16 5.5 million Californians who not only expect but demand we 17 make magic happen at the curb. If your garbage and 18 recyclables don't disappear, you're going to come calling 19 us. So we have to provide a product. We're there rain or 20 shine. So it's very disturbing to hear that the 21 technology providers that your staff is expecting us to 22 group hug with and solve our mutual problem aren't going 23 to be there to stand behind their product. 24 They're not responsible for integration, Mr. 25 Hallstrom indicated. We have an Integrated Waste PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 Management Board that sits in this room every month, and 2 they hand out multi tens of thousands of dollars of 3 penalties to jurisdictions that can't comply with AB 939. 4 In your individual service areas, many of our companies 5 service your communities, and we are so much in lox with 6 your communities, we're long-term dedicated to reaching 7 the goal of public policy and 939. 8 I'll wrap up my comments very quickly, because I 9 feel there is still some optimism but a little bit of 10 confusion. Ms. Witherspoon indicates there will be ample 11 supply, but that there might be, in the case of South 12 Coast with Dr. Burke's $12 million -- he's not in the room 13 right now -- but South Coast might have to stop short of 14 verified device in order to make incentive money happen. 15 That's kind of interesting because in the refuse rule your 16 staff is telling us we can only use verified devices. 17 So if we're really about trying to get emissions 18 reductions equipment on our trucks as soon as possible, 19 I'm mystified how we're going to create some legalistic 20 gymnastics that say that we stopped short of verifying the 21 device. We really want those on garbage trucks, as an 22 example. Garbage haulers have to buy them, but we're not 23 sure about the warranty. And then I found out from Ms. 24 Johnston something we've been saying for a long time. 25 That garbage hauler in the mandated community, we're not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 on an equal footing by having to purchase these devices. 2 Dr. Burke pointed out, General Motors -- Johnson 3 Matthey and these folks have a commitment to General 4 Motors. Absolutely. If General Motors, in your 5 observation, Chairman Lloyd, they have a problem, then, 6 yeah, it's going to get fixed. I don't know that any of 7 my hauling companies are enough of the market share for 8 any of the folks in the room that they're going 9 automatically rush out to fix our retrofit device if it 10 does not function as advertised. 11 That having been said, I'll just wind up saying 12 Dr. Burke's comments about companies entering and leaving 13 the marketplace, if we've got worldwide leaders, as 14 Mr. Lassen said, involved in this enterprise that are 15 going to step away from California, it really doesn't give 16 me a boost to know we're going to get a refuse rule done 17 we can implement on the streets. Because last I checked, 18 we're days away, if not today or tomorrow, the final 19 refuse rule package is going to go out on the street. 20 We're going to work on some of the intent language and 21 other things that your Board designated this September. 22 However, the whole array of technology argument 23 that we thought was going to happen is frankly crumbling 24 before my eyes. I find it very difficult to believe when 25 I do the math, that this Board with all good intention, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 enough to work with you -- the object is to get devices on 2 our trucks. I do some quick math, and I've determined 3 that '94 newer trucks under the refuse rule scenario you 4 have today were supposed to deal with 10 percent of those 5 trucks by the end of this year. That's about 600 trucks. 6 That's two trucks every calendar day starting today. We 7 haven't data logged them. We hasn't specked out the 8 equipment. We haven't taken them out of service. We 9 haven't trained our mechanics how to do it. We have less 10 information today, time going by, and time lines with 11 regard to the refuse rule not changing. So I reiterate 12 our request -- 13 CHAIRPERSON LLOYD: I thought you were winding up 14 here. 15 MR. EDGAR: I reiterate our request to have 16 another public hearing prior to finalizing the refuse 17 rule. We still have a lot of work to do. In the final 18 analysis, the refuse rule represents less than 1 percent 19 of the heavy-duty diesel fleet in the state of California. 20 If we fall down and fail, which we don't want to do, your 21 staff doesn't want to do, if we can't get it right for the 22 1 percent of the fleet and that's going to be the 23 blueprint for the other 99 percent of the fleet, I'm here 24 to tell you, we're in trouble. I appreciate your staff's 25 work and we're in support of Item 1 and 2. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 CHAIRPERSON LLOYD: From my earlier conversation, 2 it's very clear Ms. Witherspoon has such confidence, and 3 the technology is going to work. So if any of your 5.5 4 million customers don't get refuse picked up because of 5 the trap, she's available. 6 BOARD MEMBER BURKE: May I ask you one question 7 before you go away? Have you noticed -- have you got 8 traps on some trucks? 9 MR. EDGAR: Yeah. Some of our folks have them. 10 BOARD MEMBER BURKE: Have you noticed a decrease 11 in power on upgrades with the trucks? 12 MR. EDGAR: I haven't had a lot of complaints 13 from our folks with regard to that particular issue, Dr. 14 Burke. 15 BOARD MEMBER BURKE: Okay. Could you give Ron 16 Deaton at the City of Los Angeles a call and tell him 17 that, because he's opposing traps on the trucks because he 18 says it decreases power. And they have to go up that big 19 hill in the valley out in Los Angeles. So I'm glad to 20 hear that, because his trash trucks apparently have loose 21 valves. 22 MR. EDGAR: We'll have our folks in the Southern 23 District give him a holler presently. Thank you. 24 CHAIRPERSON LLOYD: Thank you. That's the end of 25 the public testimony. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 Andy comments or questions from the Board before 2 we wrap up here? 3 Mr. Calhoun. 4 BOARD MEMBER CALHOUN: Yes, I have one question. 5 Maybe it came up when Marty from Johnson Matthey was 6 testifying. And I guess I'm going to ask this question of 7 the staff first. Can you bring me up to date on when we 8 approved the original verification procedure for the 9 device? 10 CHAIRPERSON LLOYD: When did we approve the 11 changes to include the warranty? 12 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 13 HEBERT: The interim procedures, I think, were brought up 14 during the transit bus rule development back in 2000. 15 CHAIRPERSON LLOYD: When did we make that change? 16 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 17 HEBERT: We adopted the regulation in May of 2002, was 18 when all the changes were made. 19 CHAIRPERSON LLOYD: That's at the time we 20 included the warranty? 21 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 22 HEBERT: Right. The warranty -- that's when we included 23 engine coverage. We did in interim procedures have a 24 warranty to cover the product. I think the engine damage 25 coverage and consequential damage coverage is what came as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 part of the regulatory package that wasn't in the interim. 2 That's where the change happened. 3 BOARD MEMBER CALHOUN: Is the warranty we're 4 proposing here different from what was originally 5 approved? 6 HEAVY-DUTY DIESEL IN-USE STRATEGIES BRANCH 7 HEBERT: Right. Johnson Matthey and Engelhard were 8 verified on interim procedures that did not require them 9 to warrant consequential damages for the engine. 10 CHAIRPERSON LLOYD: And the change -- again, the 11 change was made -- I think what Joe is trying to ask and 12 I'm trying to make sure we understand, when they proceeded 13 over a period of time to get their traps verified, and 14 then there was a change that was made -- 15 EXECUTIVE OFFICER WITHERSPOON: The Board adopted 16 a regulation in May of '02 to take effect January 1st of 17 '04, which would impose warranty requirements effective on 18 that date. And before the regulation took effect, staff 19 devised an interim procedure where people could bring 20 traps to the market without the full compliment of the 21 warranty the Board was going to start imposing in '04, 22 because we were already aware there were issues about the 23 extent of the warranty. And we began negotiations way 24 back then trying to devise a change to the procedures 25 before the reg would take effect in '04. And it's taken PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 us until today to get you a package of how we recommend 2 you amend the existing rule. 3 CHAIRPERSON LLOYD: Because that included the NO2 4 stuff as well. 5 EXECUTIVE OFFICER WITHERSPOON: Right, which also 6 emerged along the way. 7 CHAIRPERSON LLOYD: But then you were still 8 trying to work with Johnson Matthey and Engelhard to try 9 to work out this warranty issue, but then since that 10 wasn't coming to closure, then they -- as a result of 11 that, then there was a decertification. 12 EXECUTIVE OFFICER WITHERSPOON: That's right. 13 Your regulations took effect January 1st. And since the 14 Board had not acted, there was nothing staff could do 15 about that. What they're telling you, too, is that even 16 with the change we're now proposing, they'll stay 17 decertified. 18 CHAIRPERSON LLOYD: The clarification is helpful. 19 Joe, does that help? 20 BOARD MEMBER CALHOUN: No. You'll have to run 21 that by me one more time. 22 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Let me 23 try. Before there was a regulation, we had a desire to 24 verify, more unofficially, I guess, this equipment. 25 That's because there was a demand for it, and people PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 wanted to put some on. In that preliminary verification, 2 the device was warranted. 3 Then we promised right away we'd try to turn that 4 into a regulation. We brought it to you and in that we 5 expanded -- this is in 2002. In that, we expanded the 6 warranty to the device, any damage it does to the engine, 7 any damage it does to the truck. That went into effect. 8 You adopted it. But there was a lead time to go into 9 effect until January 1. When that went into effect, 10 Johnson Matthey and Englehard said, "Too much warranty for 11 us. We're not willing to sign up to it." Their devices 12 were decertified. That was January 1 of this year. 13 BOARD MEMBER CALHOUN: Was there a requirement 14 for retrofitting, or were we just approving some procedure 15 for -- 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: No. 17 There was a requirement -- for example on transit busses 18 that are already being retrofitted, and these devices 19 would be used in that application. They were being used 20 by people who just decided to do it ahead of time in 21 response to incentive moneys and things like that. 22 So we're coming back now saying that the warranty 23 that you adopted in 2002, which had both the device 24 warranted, the consequential damage to the engine, 25 consequential damage to the vehicle, we feel we can drop PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 the vehicle damage off -- 2 BOARD MEMBER CALHOUN: But the engine -- 3 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We 4 think the engine needs to stay. Three people said that's 5 fine. Three device manufacturers said that's okay. And 6 two of them said no. The engine warranty is still too 7 much liability for us. 8 BOARD MEMBER CALHOUN: The engine warranty was in 9 there initially? 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: It was 11 in the regulation you adopted. It was not in the interim 12 procedure that we had prior to being able to bring you the 13 regulation in 2002. 14 BOARD MEMBER BURKE: Was it specified? I'm just 15 as confused as Mr. Calhoun. Was it in there, but was it 16 in there with the specificity that we have today? 17 GENERAL COUNSEL JOHNSTON: Yes, it was. It was 18 in there with that specificity. 19 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: 20 Basically, it's been backed off. The only place where 21 it's increased was the addition of the option of the 22 two-years unlimited mileage which helped with CTA. But 23 the actual vehicle and engine coverage was what you 24 adopted a year and a half ago. So they've been on notice 25 that was the requirement, which would take effect in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 January 1, and since that time. 2 CHAIRPERSON LLOYD: Ms. Riordan. 3 BOARD MEMBER RIORDAN: If I recall correctly, I 4 think it came as a result of this Board listening to the 5 discussions before us, having some empathy for individuals 6 who owned trucks or vehicles and then trying to craft 7 something that would be fair to all those concerned. And 8 I think -- am I not correct that -- 9 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: 10 Absolutely. 11 BOARD MEMBER RIORDAN: This Board was responding 12 to some of the testimony. 13 It seems to me -- Mr. Chairman, if I can just 14 have a moment. I think the staff has worked very hard to 15 try to craft something that is a reasonable compromise for 16 all of the affected parties. And I salute them for that 17 because it's not easy to do. 18 My concern and my hope -- and I see Johnson 19 Matthey's still here. I don't know if Engelhard is still 20 in the audience. But my hope would be, based on some 21 years of experience, that you would go back to your 22 company and say that there's a bigger picture here, and 23 that is that California truly needs to do something about 24 diesel particulate and the whole diesel issue because so 25 much of our industry is dependant upon it, and that you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 might reconsider becoming involved. 2 I realize that you've had to make a business 3 decision as to what your company wants to absorb in terms 4 of liability. But I do think that there's a much larger 5 picture that I would hope that your industries would want 6 to become involved in. There are people here who really 7 support clean diesel and new diesel technology. And 8 you're a part of that. And I just wish that you would 9 become more willing to take what I know is an awkward 10 business step for you. But perhaps in looking at it in a 11 larger perspective, you'd be there, because we really do 12 need that part of the industry involved. 13 I'm finished, Mr. Chairman. Thank you. 14 CHAIRPERSON LLOYD: Thank you. I will agree with 15 that. On the other hand, I think we have some companies 16 in California willing to step up and become another 17 Johnson Matthey and Engelhard. 18 So one question I had, from the vehicles that 19 have already been retrofitted with traps which are now 20 decertified, what happens? 21 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: They 22 came in. 23 CHAIRPERSON LLOYD: So we're not going to do 24 anything, rip them off, or anything? 25 EXECUTIVE OFFICER WITHERSPOON: No. It's just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 new sales going forward. 2 MOBILE SOURCE DIVISION CONTROL CHIEF CROSS: In 3 fact, there was some things done with the transition from 4 certified to decertified covering orders and processes and 5 stuff like that. 6 CHAIRPERSON LLOYD: The other thing I would also 7 say just before we move ahead towards the voting is that 8 from the earlier comments I was assured, but I think we 9 want to do -- want to make sure that we facilitate what 10 Dr. Burke and his Board wants to do and we don't get in 11 the way of that. But from what I understand what you 12 said, Ms. Witherspoon, that won't be the case. 13 EXECUTIVE OFFICER WITHERSPOON: Well, we would 14 certainly recommend that they use certified devices in the 15 sense that they're known, proven to reduce emissions 16 effectively. They're known to be durable. If the 17 district, though, chooses not to take the whole package, 18 you know, warranty and the rest, that is their choice and 19 we won't impede them. But we'd recommend the very best 20 devices to -- 21 CHAIRPERSON LLOYD: But we should have our staff 22 working with Dr. Burke's staff. 23 EXECUTIVE OFFICER WITHERSPOON: We'd be happy to 24 do that. 25 BOARD MEMBER BURKE: It's my inclination today, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 would only go with certified traps. I don't see any 2 reason to do anything other than that. 3 CHAIRPERSON LLOYD: Seeing no other questions, 4 now we'll close the record officially on this agenda item. 5 However, the record will be reopened when the 15-day 6 notice of public availability is issued. Written or oral 7 comments received after that hearing date but before the 8 15-day notice is issued will not be accepted as part of 9 the official record on this agenda item. When the record 10 is reopened for a 15-day comment period, the public may 11 submit written comments on the proposed changes, which 12 will be considered and responded to in the final statement 13 of reasons for the regulation. 14 Again, anybody in ex parte communication on this 15 rule? 16 Mr. Calhoun. 17 BOARD MEMBER CALHOUN: On the 18th and 23rd of 18 this month I talked to Brad Edgar from Cleaire, and he 19 repeated that his company was willing to accept the 20 responsibility -- the warranty responsibility. He also 21 invited me to visit one of their facilities. 22 CHAIRPERSON LLOYD: And I have had some 23 conversations with representatives from Johnson Matthey on 24 this warranty issue and I think along the lines we 25 discussed today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 Ms. D'Adamo. Oh, sorry. 2 BOARD MEMBER D'ADAMO: I'm going to make a 3 motion. I don't believe there were any changes. I know 4 there was a lot of discussion, but no changes to the 5 resolution. I move we adopt resolution 03-38. 6 BOARD MEMBER RIORDAN: I'd like to second. 7 CHAIRPERSON LLOYD: All in favor say aye. 8 (Ayes) 9 CHAIRPERSON LLOYD: Any negatives? No. 10 Thank you. 11 I think one thing is to continue to work on this. 12 The next agenda item today is 04-2-2, Proposed 13 Airborne Toxic Control Measure for Diesel Fuel Portable 14 Engines. This is a new proposal before the Board, so 15 we've done the easy ones, unlike the three we've already 16 heard. But, like the others, would minimize the public's 17 exposure to diesel PM, and further the goals identified in 18 the Board's diesel risk reduction. Without further ado, 19 I'd like to turn it over to Ms. Witherspoon to introduce 20 the item and begin staff's presentation. 21 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 22 Lloyd. 23 Diesel-fueled portable engines are moved from 24 location to location throughout California and are used to 25 power a variety of equipment, including pumps, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 compressors, generators, oil well drilling, and workover 2 rigs, and dredging equipment, just to name a few. Many of 3 these engines are used in urban centers, increasing the 4 potential for public exposure. 5 As you will see soon in staff's presentation, the 6 proposed ATCM will reduce public exposure by requiring all 7 portable engines greater than 50 horsepower to be 8 certified to new non-road engine standards by 2010. After 9 2010, rule would establish fleet-weighted PM emission 10 standards that become more stringent through 2020, 11 ultimately achieving a 95 percent reduction in diesel PM. 12 An additional benefit of the proposed regulation is a 13 significant reduction in NOx, resulting from expedited 14 engine replacements. Mr. Grant Chin of our Stationary 15 Source Division will present the proposed ATCM. 16 (Thereupon an overhead presentation was 17 presented as follows.) 18 MR. CHIN: Thank you, Ms. Witherspoon. Good 19 morning, Mr. Chairman and members of the Board. I will be 20 presenting for your consideration staff's proposed 21 airborne toxic control measure for diesel-fueled portable 22 engines. As another diesel measure that you have 23 considered today, this proposed ATCM was developed to 24 reduce public exposures to diesel PM and to fulfill the 25 goals of the diesel risk reduction plan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 This item is the first of two presented to you 2 today that address portable equipment. Following this 3 item, staff will be proposing amendments for your 4 consideration for the portable equipment registration 5 program. All these two regulatory items affect each other 6 and they have been developed concurrently, they are 7 separate proposals. 8 --o0o-- 9 MR. CHIN: In today's presentation, I will 10 provide background information on portable engines, 11 including examples of how they are used and their 12 estimated emissions. Next I will describe existing 13 regulations that impact portable engines and then discuss 14 the proposed portable diesel engine ATCM. I'll discuss 15 the environmental and economic impacts of the proposed 16 ATCM, staff's proposed changes to the original proposal, 17 and finally outline activities staff intends to undertake 18 in the near future. 19 --o0o-- 20 MR. CHIN: First some background information on 21 portable diesel engines in California. 22 --o0o-- 23 MR. CHIN: As the name implies, portable engines 24 are engines that can be moved easily from one location to 25 another. Particularly, they may have wheels or skids or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 other means of convenient transportation. These engines 2 power a variety of equipment and can range in size from 3 less than 50 horsepower to nearly 3,000 horsepower. Their 4 operating hours can vary widely as well. Portable engines 5 are used by both public agencies and businesses and are 6 operated in both rural and urban environments. This 7 diversity of sizes, applications, and operating patterns 8 presents challenges during the development of the proposed 9 ATCM. 10 --o0o-- 11 MR. CHIN: The next few slides give examples of 12 uses of portable engines and associated equipment. Many 13 portable diesel engines are used to drive pumps. For 14 example, the pump on the left is driven by an 80 15 horsepower engine and is used to pump water out of an 16 aggregate quarry. The pump on the right is owned by a 17 Water District and is used for flood protection. 18 --o0o-- 19 MR. CHIN: Power generators are probably the most 20 common use of portable diesel engines. At the left is 180 21 horsepower generator at a construction site and at the 22 right, a generator at an aggregate and asphalt batch plant 23 that is nearly 1500 horsepower. 24 --o0o-- 25 MR. CHIN: Compressors are common at construction PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 sites to operate a variety of tools. These portable 2 engines range in size from 70 to 500 horsepower, all 3 though typically they're less than 200 horsepower. 4 --o0o-- 5 MR. CHIN: Some of the larger portable diesel 6 engines can be found in the oil industry. At the left is 7 an oil well drilling platform powered by several 8 generators, and at the right is an example of workover 9 equipment. These engines range from 250 horsepower to 10 about 2,500 horsepower. 11 --o0o-- 12 MR. CHIN: This slide shows a dredge in a harbor, 13 which is used to remove silt in waterways. Dredging 14 requires the use of large engines ranging from 400 15 horsepower to 10,000 cumulative horsepower. 16 --o0o-- 17 MR. CHIN: Portable diesel engines are used to 18 power other specialized equipment. On the left is a 700 19 horsepower tug grinder at a landfill. Grinders are used 20 to convert biomass to pulp. At the right, a 150 21 horsepower ground power unit that provides electricity to 22 aircraft when their engines are not operating. 23 --o0o-- 24 MR. CHIN: There are other uses of portable 25 diesel engines, and staff estimates that there are about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 33,000 of these engines in California. These engines 2 contribute an estimated 4.2 tons per day of diesel PM and 3 67 tons per day of NOx. This slide illustrates some 4 reduction will occur in portable diesel engine emissions 5 from the year 2000 to 2020. These reductions are 6 attributable to ARB's existing portable equipment 7 registration program, which accounts for a 30 percent 8 reduction in both NOx and PM from registered engines by 9 2010, to district programs where a small percentage of 10 equipment is currently permitted, and to natural engine 11 attrition, where engines at the end of their useful lives 12 are replaced by newer, cleaner engines. 13 --o0o-- 14 MR. CHIN: Why control portable diesel engine 15 emissions? First, as was seen in the previous slide, 16 portable diesel engine are a source of diesel PM 17 accounting for about 5 percent of ambient diesel PM 18 concentrations and associated health risks. Also, many 19 engines operate in urban locations where there is greater 20 exposure to these emissions. Because of technologies 21 available today and in the near future, significant 22 reductions of diesel PM emissions and associated health 23 risks are possible. And as will be discussed later, we 24 believe these emission reductions can be achieved in a 25 cost-effective manner. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 --o0o-- 2 MR. CHIN: There are existing regulations that 3 currently affect portable diesel engines. 4 --o0o-- 5 MR. CHIN: Unlike the engines we use in mobile 6 on-road vehicles and stationary engines, the state's 7 authority to regulate off-road engines is subject to a 8 preemption of the Federal Clean Air Act. Specifically, 9 states are precluded in the preemption from adopting 10 emissions standards from new off-road engines less than 11 175 horsepower that are used in construction or 12 agricultural activities. However, the Clean Air Act 13 allows California to adopt and enforce emission standards 14 for all other new off-road emissions after receiving a 15 waiver from the U.S. EPA. The proposal ATCM is designed 16 to comply with the federal preemption, and staff will 17 request a waiver from U.S. EPA if the proposed ATCM is 18 approved by the Board. 19 --o0o-- 20 MR. CHIN: Two other regulations that currently 21 affect portable engines used California are the new 22 off-road engine emission standards and ARB's portable 23 equipment registration program, which I mentioned earlier 24 in my presentation. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 MR. CHIN: Finally, local air district rules 2 effect portable diesel engines and these rules vary widely 3 statewide. Some specifically address portable engine, 4 while most address internal combustion engines in general. 5 --o0o-- 6 MR. CHIN: New portable engines sold in 7 California are subject to off-road engine emissions 8 standards that become more stringent over time. There are 9 currently three tiers of emission standards, Tier 1, 2, 10 and 3. Each set of standards phase in over several years 11 based on the power rating of the engine. Tier 1 standards 12 became effective for new engines sold in 1996. Tier 3 13 standards will become effective for all engines in 2008. 14 Each successive tier is more stringent than the previous 15 tier of standards. 16 In April of last year, U.S. EPA proposed Tier 4 17 off-road emission standards that would require most new 18 portable engines to meet more stringent PM and NOx limits 19 in the 2011 to 2014 time frame. These standards are 20 expected to be promulgated later this year. 21 --o0o-- 22 MR. CHIN: In 1997, pursuant to legislation, the 23 ARB established a portable equipment registration program. 24 This is a voluntary program that portable engine owners 25 can use to register their engines with the state. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 Registration allows engine owners to move their engines 2 throughout the state without obtaining operating permits 3 from multiple air districts. There are approximately 4 15,000 portable diesel engines registered with the State, 5 roughly half of the estimated portable engines in the 6 State. 7 The statewide program promotes the use of clean 8 portable engines in California. By January 1st, 2010, all 9 registered engines must be certified to Tier 1, 2 or 3 new 10 off-road emission standards. As we mentioned earlier, 11 this program will result in a 30 percent reduction of both 12 diesel PM and NOx emissions from registered portable 13 engines by 2010. The majority of fleets are currently in 14 the process of turning over their engines in anticipation 15 of the 2010 requirement. 16 --o0o-- 17 MR. CHIN: I will now provide an overview of the 18 proposed airborne toxic control measure, including the 19 steps that staff took during its development. 20 --o0o-- 21 MR. CHIN: The ARB staff made extensive efforts 22 to ensure that the public was aware of and had an 23 opportunity to participate in the rule making process for 24 this proposed ATCM. Eighteen months ago, we began holding 25 the first of six public work group meetings with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 portable diesel engine work group to help us develop the 2 proposed ATCM. The work group was comprised of affected 3 industry and associations, district staff, and other 4 interested members of the public. 5 --o0o-- 6 MR. CHIN: We then held four public workshops to 7 solicit additional ideas and comments on the proposed 8 requirements. 9 --o0o-- 10 MR. CHIN: Throughout this process, we also met 11 with or conducted conference calls with interested 12 stakeholders, including engine owners, industry 13 associations, and environmental communities, and local air 14 districts to discuss the proposal. 15 --o0o-- 16 MR. CHIN: We also sent over 1,000 surveys to 17 government agencies to solicit information on the types 18 and numbers of portable engines they use. 19 --o0o-- 20 MR. CHIN: One of the basic concepts underlying 21 staff's ATCM proposal is accelerating engine replacement 22 where the older, higher-polluting engines are replaced 23 with the cleaner off-road engines coming onto the market. 24 We also wanted to provide flexibility to engine owners 25 when choosing control strategies to meet the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 requirements. 2 Finally, we want to provide incentives to 3 encourage owners to use cleaner technologies, such as 4 alternative fuels, and to encourage early purchase of the 5 cleanest engines available. 6 --o0o-- 7 MR. CHIN: The proposed ATCM would affect all 8 diesel-fueled portable engines equal to or greater than 50 9 horsepower. This includes engines registered with the 10 State, engines subject to district permitting 11 requirements, and engines that have historically been 12 previously exempt from those requirements. 13 --o0o-- 14 MR. CHIN: The first step in the proposed ATCM is 15 to require all portable diesel engines 50 horsepower or 16 greater to be certified to Tier 1, 2, or 3 new off-road 17 engine standards by 2010. This is currently required for 18 the engines in the statewide program. 19 After 2010, fleets of portable engines must meet 20 interim fleet weighted PM emission standards in 2014 and 21 2017. Fleet owners have some flexibility in determining 22 how these standards are met. 23 The third set of fleet emission standards become 24 effective in 2020 when the final requirements of the 25 proposed ATCM are in place. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 --o0o-- 2 MR. CHIN: By requiring all engines to be 3 certified by 2010, the proposed portable diesel engine 4 ATCM builds on the success of the statewide program and 5 further reduces diesel PM emissions and associated public 6 exposure statewide. Furthermore, the 2010 requirement 7 utilizes technologies available today and in the very near 8 future, Tier 1, 2, and 3 engines. These certified engines 9 are much cleaner than older non-certified engines that are 10 currently in many fleets. 11 --o0o-- 12 MR. CHIN: After 2010, owner of fleets of 13 portable engines must satisfy progressively more stringent 14 PM emission standards for 2013, 2017, and ultimately 2020. 15 The purpose of the interim standard is to provide a 16 reasonable rate of progress towards the 2020 goal where 17 portable engines will either be Tier 4 engines or engines 18 equipped with control technologies that result in 19 equivalent PM reduction. 20 --o0o-- 21 MR. CHIN: Diesel PM standards are being proposed 22 for three ranges of engine sizes, as shown in this slide. 23 The need for three separate fleet standards is based on 24 the timing and emission limits of tiered off-road engine 25 emission requirements for different size categories of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 engines. Fleet owners will have flexibility in 2 determining how the fleet emission standards are met. 3 Options that are available include replacing engines, 4 using add-on control devices, switching to alternative 5 fuels or alternative diesel fuels, and utilizing other 6 incentives to be discussed later. 7 --o0o-- 8 MR. CHIN: The proposed 2013 standards 9 essentially result in fleets containing the equivalent of 10 only Tier 2 or later engines. The proposed 2017 standards 11 represent fleets where roughly half of the engines are 12 replaced with Tier 4 engines or equipped with verified 13 control technologies that achieve 85 percent reduction in 14 diesel PM. 15 The proposed 2020 standards, the ultimate goal 16 for the proposed portable diesel engine ATCM, would result 17 in all engines either being Tier 4 engines or engines 18 equipped with verified control technologies that achieve 19 equivalent PM reductions. The internal fleet standards 20 approach will also impact NOx emissions by resulting in 21 large reductions in these emissions. 22 --o0o-- 23 MR. CHIN: Staff is proposing to exclude some 24 types of engines from the fleet requirements. These 25 include engines operated within the outer continental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 shelf, engines currently equipped with properly operating 2 catalytic reduction systems, engines used exclusively in 3 emergency applications, and engines qualifying as low use. 4 --o0o-- 5 MR. CHIN: Emergency use is defined in proposed 6 ATCM as the failure or loss of grid power from use in 7 flood control or fire suppression or to prevent sewage 8 overflow. Low-use engines are engines operating 80 hours 9 or less a year. 10 --o0o-- 11 MR. CHIN: Although emergency use and low-use 12 engines would being exempt from the fleet average 13 standards, they are still subject to the 2010 certified 14 engine requirement, unless the owners commit to the Tier 4 15 option. That is, they replace these engines with Tier 4 16 engines within two years of when the Tier 4 engines are 17 available. Ultimately, these engines must be replaced 18 with Tier 4 engines or equipped with verified technologies 19 that achieve 85 percent PM reduction by 2020. 20 --o0o-- 21 MR. CHIN: The proposed ATCM establishes 22 procedures intended to provide incentives for using grid 23 power or alternative fueled engines or for early purchase 24 of the Tier 4 engines. In these instances, the use of 25 these technologies is counted toward meeting the 2013 and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 2017 fleet average. 2 --o0o-- 3 MR. CHIN: The proposed recordkeeping 4 requirements would apply to those engines with annual 5 operating limits, namely, alternative fueled engines, 6 electrification, and low-use engines. Engines used 7 exclusively in emergency applications would also be 8 subject to recordkeeping. These engines must be equipped 9 with nonresetable hour meters and records must be 10 maintained on the engine's annual hours of operation. 11 Most engines will not need recordkeeping for the purposes 12 of complying with the proposed ATCM. 13 --o0o-- 14 MR. CHIN: The proposed ATCM requires the 15 submittal of a status report in 2011 and subsequent 16 compliance reports in 2013, 2017, and 2020. 17 --o0o-- 18 MR. CHIN: I have outlined the requirements of 19 the proposed ATCM. Now I will discuss environmental and 20 economic impacts. 21 --o0o-- 22 MR. CHIN: First the air quality benefits. 23 --o0o-- 24 MR. CHIN: A basic premise underlying the 25 analysis of the proposed ACTM is that eventually, given PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 enough time, all portable diesel engines would be Tier 4 2 engines. This is referred to as a status quo case and is 3 reflected by the diesel PM emissions curve on this slide. 4 The data on the far right on the slide is approximately 5 2040. 6 --o0o-- 7 MR. CHIN: As seen by the second curve here, the 8 proposed ATCM will achieve diesel PM emission reductions 9 much sooner through accelerated replacement and 10 modification. 11 --o0o-- 12 MR. CHIN: Therefore, the air quality benefits 13 can be graphically described as the difference between the 14 two curves or the shaded area here. The cumulative diesel 15 PM emission reductions achieved by the proposed ATCM are 16 estimated to be 500 tons by 2010, 4,700 tons by 2020, and 17 nearly 11,000 tons in total. 18 --o0o-- 19 MR. CHIN: Although the curves look different, 20 the proposed ATCM also results in significant NOx 21 reductions. The cumulative NOx emission reductions are 22 estimated to be 6,400 tons by 2010, 56,000 tons by 2020, 23 and 81,000 tons in total. 24 --o0o-- 25 MR. CHIN: The emission reductions achieved from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 the proposed ACTM will result in reduced exposure and 2 associated health risks to all individuals located near 3 sites where diesel fueled portable engines are operating. 4 The diesel PM reductions are expected to reduce the number 5 of premature deaths in California. The ARB staff 6 estimates that by 2010, 50 premature deaths will be 7 avoided, and by 2020 cumulatively a total of 340 premature 8 deaths will be avoided. 9 --o0o-- 10 MR. CHIN: The ARB staff estimates that the total 11 cost of the proposed ACTM to affected businesses and 12 government agencies to be between 350 and $420 million. 13 As with the air quality benefits of the proposed ATCM, the 14 cost will be distributed over a 35-year period. The ARB 15 staff estimates the total annual average cost to a typical 16 business of 15 engines will be about 2,000 to $8,000 per 17 year. Staff recognizes that the capital cost will be 18 higher for some businesses that have larger fleets of 19 engines or very large engines in their fleets or both. 20 --o0o-- 21 MR. CHIN: We would just like to point out that 22 the staff report did not include the cost of the current 23 PERP regulation, and that cost is estimated to be 90 and 24 $140 million. 25 The overall estimated cost effectiveness of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 proposed ATCM, considering only the benefits reducing 2 diesel PM, is between 16 and $19 per pound of diesel PM 3 reduced. This cost effectiveness estimate is similar to 4 those for some diesel PM ATCMs. 5 --o0o-- 6 MR. CHIN: After considering comments received to 7 date and working with interested stakeholders, ARB staff 8 would like to recommend the following modification to the 9 portable diesel engine ATCM proposal made available to the 10 public January 9th, 2004. 11 --o0o-- 12 MR. CHIN: The first change proposed by staff is 13 to clarify that engines manufactured and sold under the 14 flexibility provisions contained in federal and state 15 regulations are considered part of the most stringent 16 standard engine requirements in the proposed ATCM. 17 The second change proposed by staff is to 18 recognize that the portable engines and lattice boom 19 cranes may be more difficult to replace. Staff recommends 20 that lattice boom cranes with secondary engines be exempt 21 from the interim requirements of the proposed ATCM as 22 determined by the Executive Officer. 23 Finally, there are a number of proposed revisions 24 to the regulation that are intended to either clarify a 25 provision or to ensure that certain provisions of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 proposed ATCM are consistent with other ATCMs approved by 2 the Board. 3 --o0o-- 4 MR. CHIN: And as part of our proposal today, ARB 5 staff will commit to specific future activities associated 6 with this ATCM. 7 --o0o-- 8 MR. CHIN: First as mentioned earlier, staff will 9 seek a waiver from the U.S. EPA as required in Section 10 209(e) of the Federal Clean Air Act. We will work with 11 CAPCOA and affected parties to develop an outreach program 12 for effected industries and the public to educate them on 13 requirements and effective dates of the ATCM. 14 --o0o-- 15 MR. CHIN: We will closely monitor the progress 16 and development of emission control technologies as they 17 apply to the emission standards in the ATCM. Staff will 18 report back to the Board no latter than 2008 regarding 19 post-2010 fleet standards. 20 --o0o-- 21 MR. CHIN: Finally, staff will continue to 22 evaluate measure for engines operating near schools. 23 --o0o-- 24 MR. CHIN: In conclusion, staff recommends that 25 the Board approve the proposed ATCM with diesel fueled PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 portable engines with the proposed modifications. 2 --o0o-- 3 MR. CHIN: Thanks you very much. 4 CHAIRPERSON LLOYD: Questions from my colleagues 5 on the Board? 6 I'd like to ask Madam Ombudsman, would you please 7 describe the public participation process that was 8 followed during the development of this regulation, and to 9 share with us any observations, concerns you have at this 10 time. 11 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 12 the Board, as you heard the ARB staff along with 13 interested stakeholders developed this proposed regulation 14 over a 14-month period. The stakeholders included 15 representatives from businesses and industries including 16 dredging oil, rentals, wood waste recycling, industrial, 17 construction, telecommunications, water and electric 18 utilities, entertainment, government, and the military. 19 As was briefly mentioned by staff, in 2002, ARB 20 formed a portable diesel engine work group to assist with 21 the development of the proposed ATCM. All businesses 22 currently registered in the ARB's portable equipment 23 registration program were notified of the formation of the 24 work group and were asked to participate in the 25 development of the regulation. The work group included PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 over 60 representatives from various industries and 2 associations, staff from the local air districts, and 3 other interested members of the public. 4 Six work group meetings were held in Sacramento. 5 Approximately 25 to 50 persons attended or participated by 6 telephone in each these work group meetings. Staff also 7 held four public workshops; three in Sacramento, one in El 8 Monte. Thirty to 50 persons attended each workshop. At 9 all public workshops, except the December 4th, 2003, 10 workshop, were accessible via simultaneous webcast. That 11 workshop was accessible via teleconference. 12 In addition, staff held numerous individual 13 meetings and conference calls with affected industry, 14 association, engine manufacturers, environmental groups 15 and public agencies to address their specific concerns, 16 obtain information, and receive comments. 17 Staff sent over 1,000 surveys to California 18 cities, counties, colleges, state-owned facilities to 19 announce the development of the proposed ATCM and to 20 solicit information on the types and numbers of portable 21 engines that are used in state and local government. 22 Staff also surveyed a cross section of air 23 districts through telephone calls and e-mails to better 24 understand the specific requirements placed on portable 25 diesel-fueled engines by the districts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 For each work group meeting and public workshop, 2 staff mailed over 1700 copies of meeting notices and 3 notified more than 550 subscribers on the list serve. On 4 January 9th, 2004, the staff report and Board hearing 5 notice were posted on ARB's website. Members of the list 6 serve were notified, and notification was mailed to those 7 on the mailing list. Thank you. This concludes my 8 comments. 9 CHAIRPERSON LLOYD: You set a record for the 10 amount of information you provided on that. 11 OMBUDSMAN TSCHOGL: For the day. 12 CHAIRPERSON LLOYD: With that, I'd like to move 13 into public testimony and call the first three witnesses. 14 Tim French, Janet Hathaway, Bonnie Holmes-Gen. 15 MR. FRENCH: Chairman Lloyd, distinguished 16 members of the Board, my name is Tim French. I'm counsel 17 with the Engine Manufacturers Association. Thank you for 18 allowing us to be here and participate. And also I want 19 to extend a special thank you to ARB staff. Recently, we 20 brought to them an issue that, frankly, escaped my 21 attention, and I apologize for that, the flex engine 22 program. It's a key component of the federal non-road 23 engine rule making, specifically the Tier 4 rule making. 24 It's vitally necessary to keep that harmonization with 25 that flex engine program such that these standards are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 feasible and this program also is feasible. So that key 2 requirement for harmonization and alignment has been 3 preserved through some quick action by your staff, and 4 we're very greatful for that, Peter, Mike, thank you very 5 much for that. 6 There are three areas where we've agreed to 7 disagree. I'm talking about very fast because it's been a 8 long day. First of all, in our view, the ATCM improperly 9 regulates new farm and construction machinery less than 10 175. That's why we've had to be neutral on this 11 provision. Otherwise, we would support it. But there are 12 some aspects of preemption that we still need to make our 13 record. Now we've done that. 14 Second of all, we think that the staff report -- 15 and as we've said before with some of these ATCMs -- 16 overstates risks, overstates benefits. 17 And the third point, we feel it understates 18 costs. And we think that's significant, especially in 19 this context because you've adopted now three ATCMs with 20 the total price tag of about a billion dollars. And the 21 folks subject to those costs are probably some subset of 22 the same industry. If I've got a portable engine, chances 23 are I may have a stationary engine, chances are I may have 24 a facility with a TRU as well. 25 So the economic burden from these rule makings is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 very substantial. And so we sympathize with other 2 commentors. We understand there is a job to do, and we 3 need to implement the diesel risk reduction program. As 4 we go forward with additional rule makings, please bear 5 the cumulative cost in mind, not just the one-off cost 6 from each of the rules. 7 The one key area where we've agreed to agree is, 8 again, harmonization and alignment, keeping any portable 9 or non-road rule makings from the ARB in line with those 10 federal programs. We have a mutual a commitment to do 11 that. It will allow us to bring these Tier 4 products on 12 line. It will facilitate cleaner fuels, because we have a 13 stable marketplace. Hopefully those cleaner fuels will 14 show up for marine and locomotive engines as well. 15 With that, I thank you very, very much. 16 CHAIRPERSON LLOYD: Thank you, Tim. 17 Any questions? 18 Thank you. 19 Janet Hathaway, Bonnie Holmes-Gen, Sven Thesen. 20 Janet, we're delighted to see you back. 21 MS. HATHAWAY: I'm very happy to be here before 22 you. Janet Hathaway with the Natural Resources Defense 23 Council, and this is Baxter. 24 CHAIRPERSON LLOYD: We've got a Baxter on our 25 staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 MS. HATHAWAY: I'm very happy to be representing 2 the Natural Resources Defense Council here. This is a 3 very momentous occasion because this is an opportunity for 4 you to take action about one of the big sources of our 5 diesel emissions from some old engines that have needed 6 regulation for a very long time. As you know, this is one 7 of the key sources of not just diesel emissions, but also 8 NOx, and a key source of toxics in our state. 9 I know that this is a cost to a number of the 10 regulated parties, but it also is a huge health issue, and 11 that's the reason really that we're all here. The 12 environmental and public health community feels that this 13 has been such a long, long time coming. And though your 14 regulation would take effect in 2010, we feel strongly 15 that that is taking too long, and we propose to you an 16 acceleration of your staff proposal, with a third of the 17 larger fleets being asked by our proposal to take action 18 in 2008 rather than 2010. We think that that would give 19 them time to actually buy cleaner engines that would be 20 available by the EPA and ARB schedule at that point. And 21 then ease into the 2010 period more gradually, rather than 22 by the ARB staff's proposal at 2010 suddenly. 23 So we think that the kind of recommendation that 24 we're making actually is something that would make it more 25 feasible and ease you into having a regulation that would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 be more workable. So we think that it's something to 2 consider and something that really the state would benefit 3 from. It's not something that we're doing, that we're 4 recommending, because we want to make things harder for 5 industry or turn them into scapegoats. It's because we 6 think this is just so important for public health. 7 And I want to just give one anecdote that is 8 really important, I think. I was listening to the Nightly 9 News about two weeks ago, and it was one of those very 10 depressing nights on Nightly News and happened to be very 11 relevant to this hearing. It was about an elementary 12 school child who had died at school from an asthma attack, 13 and the mother was being interviewed on camera. In what 14 seemed to be a very modest home, the mother was talking 15 about her child and talking about the outrage she felt, 16 because the child had not been recognized to be having an 17 asthma attack at the school. The mom felt completely 18 angry at the school and angry at the teacher and felt 19 terribly let down and outraged at everybody that people 20 didn't know what the symptoms were of asthma. 21 And I just kept thinking how this hearing here 22 and what you all are doing is probably the solution that 23 we need more than anything else. Schools can't really 24 help everybody who has asthma and recognize instantly all 25 the children who are having symptoms of asthma. Teachers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 can't always be there the instant that a child is 2 struggling for a breath, as much as we would want them to 3 be. And as much as, you know, all of us are concerned 4 about everybody in the state that has a respiratory 5 problem, the solution is to have clean air. 6 So I just am thinking that if we can simply get 7 more of those engines retired faster, the real solution to 8 the problem is in that. And if we can possibly move just 9 even somewhat faster with these older engines, what we're 10 doing will be the best possible tribute to that child, to 11 these teachers, to every person in the state who has 12 respiratory diseases or who is taking care of somebody 13 with such a disease and to anybody who is going to have to 14 deal with someone who is in a classroom who is struggling 15 with a breath, for a breath. And we need to really 16 consider everything we can possibly do to make that happen 17 as soon as possible. 18 So I commend the staff for their proposal. I 19 think it's wonderful. If we can do something to make it 20 happen faster, that would make it even better. So I know 21 you have a letter from the environmental and public health 22 community before you. They're very committed to the work 23 that you're doing. We really admire your leadership, 24 which has always led the nation on recognizing the 25 problems from diesel. And we just hope that you can do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 that even more strongly on this matter than even your 2 staff would propose. So thank you so much. 3 CHAIRPERSON LLOYD: Thank you. 4 Questions? 5 Thank you. 6 Are there any incentives for early adopters? 7 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Under 8 the portable equipment registration program, we have a 9 couple of things in the program right now. It's been in 10 effect since '97, and as staff mentioned earlier, we have 11 about 15,000 units in the program right now that we have 12 been monitoring and watching the progress that's been 13 made. 14 What we have seen is that over time people are 15 replacing their engines, replacing them on schedule. 16 We're going at a rate of about 20 percent per year. We're 17 getting the engines turned over to new certified engines. 18 Progress is being made. The engines are very expensive. 19 In a lot of cases they have to buy -- not just the engine, 20 but whole new pieces of equipment. So it takes long-range 21 planning, and people are following in to that and right on 22 track for the 2010 deadline. 23 For the engines that are uncertified in the 24 program, we do have emission limits on that equipment. We 25 do have recordkeeping and reporting requirements, all the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 things that people don't like. This severely restricts 2 their ability to operate and tries to encourage them to 3 gets those engines turned over quickly -- 4 MS. HATHAWAY: Dr. Lloyd, as with the TRU issue, 5 Mr. Modisette mentioned to me that this regulation, too, 6 has the defect of not really rewarding people who go 7 further than actually the regulation's standard itself. 8 So in other words, if there is somebody who is wanting to 9 go to a ZEV standard, they don't really get any kind of 10 incentive to do that. Going just to the Tier 3 level is 11 adequate, but you don't really get any reason for reward 12 to go to, say, a fuel cell or to go to a ZEV level. So 13 that's something to consider as an issue. 14 EXECUTIVE OFFICER WITHERSPOON: I guess I was 15 going to say in the case of TRUs, we could write an 16 incentive in where if you leapt ahead on technology, you 17 bought yourself time. That's implicit in this reg. Once 18 you're zero, you have no requirements anymore. And maybe 19 that needs to be emphasized more. 20 The other thing I was sitting here thinking was 21 about the Carl Moyer program and how money has gone to 22 agricultural engines in particular, but not just 23 agricultural engines, some construction equipment has been 24 cleaned up and other types of dredging equipment and 25 whatnot with Carl Moyer money. And so those incentives, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 to the extent we get new infusion of funds, will always be 2 there ahead of our regulatory deadlines. And I'm 3 struggling to think of something else that could be added 4 that stimulates rapid movement. 5 CHAIRPERSON LLOYD: If you have any ideas, maybe 6 you'll provide them to staff on that. 7 Peter. 8 STATIONARY SOURCE DIVISION CHIEF VENTURINI: 9 There are two basic reasons why we, as staff, are strongly 10 recommending coming back no later than 2008 to take 11 another look at this regulation. One is to assure 12 ourselves -- 13 CHAIRPERSON LLOYD: You'll still be here, Peter? 14 STATIONARY SOURCE DIVISION CHIEF VENTURINI: I 15 take the fifth on that. I hope not. This guy will be 16 here, though. 17 CHAIRPERSON LLOYD: Why don't we before you 18 retire, come back. 19 STATIONARY SOURCE DIVISION CHIEF VENTURINI: That 20 may be too soon. 21 One of the reasons is we think it's important is 22 because of the cost of this program to do a reality check 23 at that time to make sure the assumptions we're using hold 24 and to see where the technology is. But also will give us 25 an opportunity to see what advances are occurring in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 next few years in alternative technology and other ways of 2 doing things. And should something become available that 3 could enable us to move soon, and particularly if it's in 4 the alternative technology arena, we would certainly want 5 to come back beforehand to modify this and take advantage 6 of those developments. 7 CHAIRPERSON LLOYD: Thank you. 8 And thank you, Janet. 9 Bonnie Holmes-Gen, Sven Thesen, Sharon Rubalcava. 10 MS. HOLMES-GEN: Mr. Chairman, members, Bonnie 11 Holmes-Gen with the American Lung Association of 12 California. And first, I want to congratulate you and the 13 Board for adopting already two critical diesel control 14 measures today. It's very gratifying after a few months 15 of you not being able to take action to finally see those 16 measures adopted and see the diesel risk reduction plan 17 moving forward. As you know, we are a strong supporter of 18 the diesel risk reduction program, as are all of the 19 health professionals and asthma groups that work closely 20 with us. It's a really important and critical program. 21 We already know so much information about how 22 particulates and diesel particulates are connected to 23 asthma, bronchitis and premature death. But just recently 24 there's been, as you're aware, a string of studies 25 demonstrating that particulates -- elevated particulate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 levels have been associated with heart conditions, with 2 worsening of heart conditions, with premature death, from 3 heart attacks -- 4 CHAIRPERSON LLOYD: We had an excellent 5 presentation this morning. 6 MS. HOLMES-GEN: And you had an excellent 7 presentation this morning on that, so I want to just 8 underscore we're just finding out more and more about how 9 particulates are affecting so many other areas of our 10 health. Your own analysis, I just want to remind you, 11 demonstrates the benefits of diesel control programs 20 to 12 $28 in benefit for every dollar of costs. I'm sure that's 13 conservative. Our main focus today is to both 14 congratulation the staff for the work that has been done 15 and, of course, to see if we can urge you to move a little 16 further, a little faster with this regulation. 17 As Janet Hathaway testified, one of our key 18 recommendations is to move up the compliance deadline, at 19 least for some portion of the larger fleets. In most of 20 the other diesel risk reduction measures, we've been able 21 to see requirements coming on line before 2010. And while 22 we appreciate the tremendous reductions that that 23 regulation will achieve between 2010 and 2020, we really 24 feel desperately we need to get some additional reductions 25 before 2010. That's why we've asked you to consider PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 looking at a stepped-up schedule for at least the larger 2 fleets with 15 or more engines. So we would just second 3 that recommendation. 4 We understand that the cleaner Tier 3 engines 5 will be available starting in 2006, and so the engines 6 will be available. There's -- in fact, I understand that 7 the staff have assumed there will be some turn over in the 8 fleet anyway during that time. So it just seems an easy 9 thing -- relatively easy thing for to you do, just require 10 in that turn over that by 2008, especially the larger 11 fleets, be purchasing the cleanest engines that are 12 available, the Tier 3 engines. So I want to just second 13 that recommendation. 14 Also wanted to ask you to take another look again 15 at protections for children, especially school children. 16 We just, again, had discussion about the stationary engine 17 rule this morning, and there's been a lot of back and 18 forth about what to do about engines that are on school 19 grounds. And you adopted some special protections, some 20 operating restrictions for engines that are located on 21 school grounds or in very close proximity to school 22 grounds. And it seems to us there should be some similar 23 kinds of restrictions or limitations for portable engines. 24 Seems to be the same issue, the same problems, the same 25 concern of diesel particulate affecting children that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 exercising, playing on school grounds. 2 I know we noted that an earlier draft of this 3 regulation included some operation restrictions -- or 4 actually some operating requirements. Beginning 2006 5 engines operating within 300 feet should be certified to 6 an admission standard for newly manufactured non-road 7 engines, and after 2008 should be certified to Tier 2 8 standards, and then went on to another in requirement in 9 2015. But there was specific languages that was worked 10 out to require that cleaner engines be used at school 11 sites. 12 And there was also a recordkeeping requirement 13 for engine operators to keep records about their operation 14 of engines within 300 feet of a school. That would 15 include, you know, the dates of operation, purpose of 16 operation. That would help the Board to keep track of 17 what is happening in terms of operation of these engines 18 near schools so we can determine how big of an issue and 19 problem it is. 20 So I think that -- I'd like to urge you to 21 include some -- go back and maybe include some of the 22 language in this regulation that would be both requiring 23 the use of cleaner engines at schools. You might also 24 look at some kind of limitation on hours of operation of 25 engines at schools. But it just seemed easiest to maybe PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 suggest that you look at the language you already put on 2 the table a couple of months ago and maybe talk about 3 including that in the 15-day notice. You know, we 4 continue to be concerned that all of these regulations 5 need to take into account sensitive populations. 6 Another suggestion that we had with portable 7 engines would just to clarify these portable engines 8 should not be -- if they're going to be used at a school, 9 they shouldn't be operated near any ventilation intake 10 ducts or windows that are used for ventilation, because 11 that's an obvious source of indoor air pollution when you 12 have diesel emissions that are floating into the school 13 environment. 14 So those are some specific suggestions that we 15 had for improving the regulation, and we would look 16 forward to hearing your response and believe that if 17 you're really going to be consistent with your concern 18 about children and schools specifically, that you really 19 do need to employ some of these provisions to ensure that 20 we're not just protecting kids from stationary engines but 21 also portable engines use on school grounds. 22 Thank you. That concludes my testimony. 23 CHAIRPERSON LLOYD: Thank you very much. 24 Next we have Sven Thesen, Sharon Rubalcava, and 25 Cindy Tuck. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 MR. THESEN: Dr. Lloyd and members of the Board, 2 ARB staff, my name is Sven Thesen. I'm an engineer with 3 the Pacific Gas and Electric Company. PG&E operates in 4 over 20 air districts and has approximately 200 portable 5 engines. Ninety percent are under 175 break horsepower 6 and 70 percent are below 80 horsepower. These are small 7 engines. They provide the force to air compressors, 8 cement pumps, generators, used both during emergencies and 9 when maintaining and upgrading our customers' energy 10 supply, pole loggers, electric arc welders, cranes, water 11 pumps, cable pullers. We have the full gamut of all 12 different flavors of portable engines. 13 What's interesting is that PG&E does not use them 14 for long periods at any given job site. However, they are 15 present because they are affixed to the actual truck or 16 their a pull behind and because we don't know if we'll 17 actually need the portable equipment for that particular 18 task. Given this low use, their lifetimes are 20-plus 19 years. 20 I've participated in the work groups and 21 submitted comments on February 18th and would like to 22 thank ARB staff for all their hard work. Given what 23 Ms. Hathaway has just said in regard to the ATCM, I'd like 24 to encourage the Board to consider an additional incentive 25 for converting to alternative-fueled portables -- cleaner PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 alternative portables taking effect now, rather than 2013. 2 My proposal is essentially -- and this was in my letter of 3 February 18 -- essentially for fleet installs and runs an 4 alternative-fueled vehicle for more than 100 hours for 5 two years prior the January 1st, 2009, then the engine 6 counts double in the 2013 and 2017 fleet weight average. 7 This will encourage cleaner alternative-fueled engine now, 8 rather than the 2013, 2017 time frame and the associated 9 reduction in diesel emissions. Thank you. 10 CHAIRPERSON LLOYD: Thank you very much. What's 11 the staff response to that? Sounds like a good idea. 12 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: 13 Regarding the proposal for the low use engines, I'd like 14 to say, first of all, while it is true that some of the 15 larger engines that run less would emit the same of diesel 16 PM as some of the smaller engines running for longer 17 periods of time, our low use engine consideration in this 18 ATCM is built on cost effectiveness, not on the emissions 19 per se. Basically, staff essentially determined if 20 capital is spent on an engine that not running, then the 21 cost effectiveness is not there. That's why we carved out 22 the low use. 23 CHAIRPERSON LLOYD: I was referring to the 24 all-fuel incentive for that. 25 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: With PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 regard to the all fuel, I believe that Mr. Thesen has 2 based this on the provision that we have for double county 3 Tier 4 engines. And we believe that Tier 4 engines, 4 because they result in 93 percent PM reduction, 90 percent 5 NOx reduction, there's definitely room for incentivizing 6 early purchase of Tier 4 engines. 7 With regard to alternative fuels, we do have a 8 provision in there that provides an incentive in terms of 9 the double counting. We would have to look at the 10 individual alternative fuels to see, for example, NOx 11 impacts or impacts of other pollutants. We think there's 12 already an incentive for early use of alternative fuels 13 and that if an alternative fuel engine is purchased before 14 2010, then certainly no further purchase of a diesel 15 engine or retrofit is required. And also if alternative 16 fuel engines are run before 2010, they may displace the 17 use of other diesel engines, such that those diesel 18 engines can take advantage of the low use provision we 19 have in the ATCM already. 20 CHAIRPERSON LLOYD: So you think it's covered? 21 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Yes. But 22 we appreciate Mr. Thesen's proposal here. But as we said, 23 we'd have to look at the NOx benefits and -- 24 CHAIRPERSON LLOYD: Maybe we can continue to do 25 some work on that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 EXECUTIVE OFFICER WITHERSPOON: I think what's 2 not covered is you're not going to get an automatic double 3 credit, because staff would need to examine each fuel to 4 see if that was warranted. 5 CHAIRPERSON LLOYD: With exploring what Mr. 6 Thesen said. Thank you. 7 Sharon Rubalcava, Cindy Tuck, James Thomas. 8 MS. RUBALCAVA: I'll defer my comments to the 9 registration program. 10 CHAIRPERSON LLOYD: Oh, thank you. 11 Cindy Tuck. You can do the same, Cindy, if you'd 12 like. 13 MS. TUCK: I'd love to but -- thank you, Dr. 14 Lloyd and members of the Board. Cindy Tuck with the 15 California Council for Environmental and Economic Balance. 16 CCEEB is neutral on the proposed ATCM. And I'm pleased 17 that we're at that spot. 18 I'd like to offer two comments today for your 19 consideration. The first issue has to do with the school 20 comments that you've heard. We anticipated that that 21 would come up this afternoon. We agree with the staff 22 that it doesn't make sense to include a special schools 23 provision in the ATCM, at least at this time. I'd like to 24 give you the reasons why. 25 We think that there needs to be more discussion PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 on two issues. One, is it needed in the first place? And 2 in the second one is, is it feasible? And a couple things 3 on the is it needed issue. This ATCM is drafted, as staff 4 said, would obtain 95 percent reductions in diesel PM 5 emissions. It's more than you had from the stationary one 6 this morning. It's a huge reduction as proposed 7 currently. The price tag on this ATCM, as staff said, is 8 over $400 million. And part of that goes to local 9 governments, which I think is over $100 million for local 10 governments the way it's drafted now to get that 95 11 percent reduction. 12 This is a huge cost. The business community has 13 participated in all these work group meetings, workshops, 14 and I think a lot of people have really stretched to be 15 able to be going along with the ATCM as drafted, because 16 it's a huge price tag. But it's a very effective rule, 17 and it's going to be a very important part of the diesel 18 reduction strategy. So, you know, but I just suggest that 19 you looked at those factors. 20 On the feasibility side, this needs a lot more of 21 a look. And I'd just like to give one example to help 22 illustrate that point today. On the utility side, as Mr. 23 Thesen mentioned, utilities will have hundreds of these 24 portable engines just attached to trucks they use to 25 take -- you see them all the time on the street. What PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 they do is like power things like tearing up the streets 2 to install a gas line, that kind of thing. 3 And what I've heard from our utility members is 4 doing that kind of operation at night, there's worker 5 safety issues. And then also, you have to run more 6 engines to run the lights to provide the safety for the 7 workers, and you're tearing up streets with jackhammers. 8 You want to do that in the neighborhood, run more engines 9 at night. Some things like hour restrictions that you 10 thought made sense for stationary may not make sense on 11 portable. All those kinds of things need to be talked 12 there. There's lot of examples that have come up that 13 have just illustrated that this needs more work before 14 something is ready to go in the reg on this. So that's 15 what I'd like to say on the schools issue. 16 The other comment we wanted to provide on the 17 ATCM was that we appreciate the commitment to have a 18 review of ATCM no later than 2008. We think that's 19 important for a lot of reasons. Certainly, this ATCM 20 relies on purchases of Tier 4 engines or retrofit of, I 21 believe, Tier 3 engines. And there's going to be 22 availability issues, maybe feasibility issues, hopefully 23 not. But 2008 or before is a good time to check in on 24 that. And so we appreciate that assessment. 25 The suggestions that we've heard from the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 environmental groups, I appreciate the desire to have 2 reductions earlier, but there would be concerns from the 3 business community on that. Again, as drafted, this 4 regulation has an over $400 million price tag on the 2010 5 requirements. I think staff said the cost of that is 6 between 90 and 140 million on the PERP regulation, and 7 that would be hitting earlier if you phased it in earlier. 8 We certainly would be interested in the 9 alternative or incentives concept, if there was something 10 that could be done on an incentive basis, and we'd be glad 11 to be at the table and help come up with some ideas on 12 that. That's a very good suggestion. But we think that 13 the 2010 requirements should stay as it is, and definitely 14 some people will be phasing in earlier than that to make 15 the investments. But changing that at this point I think 16 wouldn't be a good idea. 17 In closing, we participated -- a lot of our 18 members participated in your process in the work group 19 meetings and in the workshops. I participated in at least 20 one work group meeting and I think all the workshops. And 21 I have to give a lot of credit to Mike Tollstrup and Mike 22 Waugh and Grant Chin. There was, at these workshops, 23 question, question, question. And they just were very 24 patient and were responsive and came up with something 25 where they got the business community to stretch a long PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 way. 2 CHAIRPERSON LLOYD: Thanks, Cindy. No questions. 3 James Thomas, Doug Van Allen, Mike Buckantz. 4 MR. THOMAS: Good afternoon, Dr. Lloyd and 5 distinguished Board members. I appreciate the opportunity 6 to talk to you and testify today. My name is James 7 Thomas. I'm a Regulatory Affairs Manager for Pool Well 8 Services Company. And to get it clear, we are not in the 9 swimming pool business. We're in the oil field service 10 business, and we're a work over company. We do support 11 the ATCM, and we support a lot of parts of it, but we have 12 some particular concerns. 13 First of all, I'd like to comment on some of the 14 presentations that were before me, the discussions about 15 early replacement of engines. Staff is here. They can 16 verify that our company is a leader in replacing engines 17 in the portable equipment program. We have been replacing 18 engines on an extremely fast basis with certified engines. 19 And we will have a majority of our engines completed by 20 the beginning of 2009. So we're not one of the companies 21 that's going to wait until 2010 to replace engines. So 22 you are receiving some benefits from our replacements. 23 One of the other comments I'd like to point out 24 is there is a discussion with the Carl Moyer funding. The 25 Carl Moyer funding excludes engines that are in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 portable equipment rule. We're changing these engines 2 without assistance. 3 With that said, I want to start off with my 4 comments in stating that Pool Well Services has 5 participated in the development of the portable equipment 6 rule and the ATCM over the last 11 years. We have never 7 missed a meeting. We've never missed a workshop. We get 8 up in the morning. We drive from Bakersfield to attend 9 the meetings, and we go home. 10 Pool Well Services has nine locations throughout 11 the state of California. We employ 1,200 employees. We 12 are concerned about their viability and their families as 13 well. 14 So our concerns today is in one particular area, 15 and it's the cost effectiveness analysis that was supplied 16 by the staff report. One of the statements in the staff 17 report states that affected businesses will be able to 18 absorb the costs without adverse impact to their 19 profitability. I'm here to tell you that that's not true 20 with all companies. Then they talk about a return on 21 owners equity, ROE. Well, in the business that we work 22 in, we ask for money. And our corporations give us that 23 funding. And then we must generate returns on that 24 investment. We get that return by revenues, and that 25 additional revenue is where we generate our returns. In PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 the ATCM, we will not be able to charge our customers for 2 additional fundings. So all of the moneys that I talk 3 about today are absorbed costs. 4 The first fallacy we find with the analysis is 5 that the report did not include the capital outlay to meet 6 the 2010 standard. We feel like, as Mr. French mentioned 7 earlier, that you need to look at the whole process to 8 understand the total dollars that a company is spending. 9 To meet 2010 standards, Pool has 240 registered 10 engines. We have 60 certified engines. We'll probably 11 have somewhere in the neighborhood of 20 more by the end 12 of the year. We're one of the leaders, and it's still 13 going to cost me $8.1 million. We performed a survey in 14 the oil field service industry. We believe that it will 15 cost these service companies $143 million to meet the 2010 16 standard. We believe that this is a significant dollar 17 amount that must be recognized. 18 We're concerned about the replacement and repower 19 of engines because we believe they're understated. We 20 believe that the cost that was in the report is the cost 21 of an engine. But when you have an engine, you also have 22 auxiliary component parts, like a radiator. You have to 23 change them. One of the major problems is whenever you're 24 replacing an old engine, you have to get a transmission 25 that will marry up to the engine. A lot of times these PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 transmissions have to be replaced. The transmission is as 2 much as the engine, and sometimes if it's electronic can 3 be three times as much. 4 The last cost that we're concerned about is the 5 engineering cost. A lot of our equipment would require us 6 to completely dismantle the equipment and redesign it. If 7 you saw the pictures earlier, there was one of the engines 8 that was up there that would require this. 9 In the ATCM, in the year 2020, we must have Tier 10 4 engines, our Level 3 verified control devices. At this 11 current time, there is no Level 3 control devices. In the 12 staff report, the staff's analysis, they took the Tier 2 13 and Tier 3 engines and placed a diesel particulate trap on 14 those to achieve the 2010 standard. The cost is $40 per 15 horsepower. We believe that number is low. 16 But that is the cost to put one diesel 17 particulate trap on an engine. Many of our engines are 18 dual exhaust. That would require having diesel 19 particulate traps on both sides. That's two traps on that 20 engine. 21 The other concern that we have is in the staff 22 report they say that the life of a diesel particulate trap 23 is 8,000 hours. We have several engines that's in our 24 inventory that are getting 30,000 hours. If you do the 25 arithmetic, we will have to change four diesel particulate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 traps to get this to 30,000 hours. But these 30,000-hour 2 engines are dual exhaust so we'll have to replace them 3 with eight. For Pool to reach the 2010 standards, it's 4 8.1 million. To reach the 2013 standards, will cost us 5 4.8 million. 6 One of the things that was talked about earlier 7 is there any incentive to get people to change their 8 engines early? Well, there's a decentive for Pool, 9 because we were one of the companies that were changing 10 certified engines when we were told that the program in 11 2001 -- you're going to have to -- by the year 2010, 12 you're going to have to have it. So in 2001, we started 13 changing engines, and we went through the process. And in 14 that process, we changed to Tier 1 engines. Half of my 15 engines are Tier 1, but we changed them. Now we're going 16 to have to change those engines out by the year 2013 so 17 that we can meet that standard. 18 The last part we're concerned with is the useful 19 life of an engine. The report says 25 years. It says 20 that the average useful life of an engine is 450 hours. 21 Pool has equipment that has a useful life of 20- to 30,000 22 hours. We believe that we're going to have equipment that 23 will have a useful life of between 20- and 35- to 40,000 24 hours. 25 We believe that they have underestimated our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 costs of getting rid of our Tier 1 engines in the year 2 2013. We ask that you create a balance and give us credit 3 for the useful life that we're going to lose on our Tier 1 4 engines. 5 Appreciate it. Thank you for your time. 6 CHAIRPERSON LLOYD: Thank you very much. Do you 7 have any staff response at all? 8 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Just 9 make a general response. And I think we are well aware 10 that of the cost -- particularly the potential costs 11 beyond 2010 of this measure with the fleet averages, 12 particularly if verified devices do not become 13 available -- and the witness is correct there are no 14 verified devices for these equipment yet. We're very 15 hopeful there will be devices. And that is why we think 16 it's very important to have the reexamination of this 17 before that 2008 time frame so we can take a look at this 18 and see what the status of technology is and have another 19 look at the costs, as well this discussed by the witness. 20 CHAIRPERSON LLOYD: Thank you. 21 Doug Van Allen, Mike Buckantz, and Frank Caponi. 22 MR. VAN ALLEN: Ladies and gentlemen of the Board 23 and staff, my name is Doug Van Allen. I'm the Safety and 24 Environmental Manager for BJ Services Company here in 25 California. BJ Services Company is a high-pressure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 pumping service for the oil industry. We provide pumping 2 service to increase -- stipulate the wells so we can get 3 more oil and gas out of the wells. 4 BJ Services was founded 132 years ago in 5 Woodland, California. And BJ is now a worldwide 6 publicly-owned company. We employ 124 individuals here in 7 California at our company. And the current pumping 8 service total annual market for California is $100-plus 9 million. That's the revenues that we're trying to pull 10 from. 11 This market has declined over the past three 12 years at an annual rate of 11 to 12 percent, and this has 13 caused as a result a higher cost to produce oil and the 14 decline in oil reserves in the oil market here in 15 California. Currently, 70 percent of all the oil and gas 16 produced in California comes from three of our customers, 17 Era, Chevron Texaco, and Occidental. That means instead 18 of having a customer base of thousands of customers we can 19 try to regroup our costs from, we will be limited to 20 regrouping our costs from less than a dozen customers we 21 work for. 22 With that said, the comments on the ATCM, BJ 23 Services currently has 103 engines permitted in the state 24 of California. BJ Services supports the ATCM to clean up 25 the air in California. We believe it's necessary. We do PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 have three concerns with the current ATCM, and that's the 2 cost estimates that staff has placed in the ATCM. 3 Number one, is $89 million. Eighty-nine million 4 dollars is what BJ Services will have to generate in 5 revenue to be able to replace the current engines that we 6 have to meet the 2010 PERP regulation. We'll have seven 7 years the generate that. That equates to an increase of 8 sales that we'll have to make over and above what we're 9 currently making of approximately twelve-and-a-half 10 million dollars per year, just to break even on a 11 replacement cost for those engines for 2010. However, 12 that cost was not figured into the ATCM, because it was 13 calculated as a cost that we have to spend anyway because 14 we're in the PERP program. However, it is still an 15 expense that we will have to fulfill. 16 Number two, the ATCM states the estimated cost to 17 replace engines and equipment is approximately $220 per 18 horsepower. Based on experience this last year, BJ 19 Services has replaced eleven units, and we went back and 20 calculated our costs. The average cost is $330 per 21 horsepower. It makes a big difference when you're 22 calculating the figures on that. We're talking 23 half-a-million-dollar units. Grant Chin put a picture up 24 there of the oil field service units this morning. That 25 blue truck with the big engine of it, that's one of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 frag pumps. That's a half-a-million-dollar unit to 2 replace that. Takes big costs there. 3 Currently, number three, there are no upgrades 4 available to bring the Tier 1 and 2 engines up to Tier 3 5 levels, as JT brought up earlier, as required by the ATCM 6 for the 2017 date. ATCM states that the cost to retrofit 7 engines will be $40 per horsepower. However, that cost is 8 for one engine. As JT said, that is for one side, one 9 bank. We had the group here in front of -- we invited 10 them down to BJ Services and hosted a meeting down there 11 where they took the picture of our frag pump. 12 At the same time we had Engelhard and some of the 13 other manufacturers there to look at it. That frag pump 14 there that they took the picture of, the Engelhard people 15 says, yes, we can put a particulate trap on that. What 16 we'll do is take six of those 400 horsepower ones and put 17 six on each side and we'll be able to control the 18 emissions out of that engine. So instead of having that 19 2000 horsepower pump at $40 per horsepower, that comes out 20 to the particulate traps are going to cost us more than 21 what the complete pump does. That's a concern of BJ. 22 BS Services will have to generate an additional 23 $6 1/2 million in sales just to break even for retrofits 24 on the current 35 engines that we have replaced with Tier 25 1 and Tier 3 engines already to meet the 2017 reg. Myself PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 and the other 123 BJ families living in California are 2 quite concerned that these costs could drive BJ Services 3 out of business in California. 4 Thank you for your attention. 5 CHAIRPERSON LLOYD: Thank you very much. 6 Mike Buckantz, Frank Caponi, and then Daniel 7 McGivney. 8 MR. BUCKANTZ: Good afternoon. My name is Mike 9 Buckantz, Justice and Associates. And I'm here 10 representing today the Construction Industry Air Quality 11 Coalition, who's memberships includes the Southern 12 California Chapters of Associated General Contractors, the 13 Building Industry Association, the Engineering Contractors 14 Association, the Southern California Rock Products 15 Associates, and the Southern California Contract 16 Association. 17 CIAQC appreciates the opportunity to testify 18 today on the proposed air toxic control measures for 19 portable diesel engines. While we have worked with your 20 staff in resolving many of our major differences -- and 21 the staff has done an outstanding job of working with 22 us -- there is still one unresolved issue in the air toxic 23 control measure and couple of issues in the PERP 24 regulation that we'd like to talk about today. 25 The issue with respect to the air toxic control PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 measure deals with cranes and determining a cost effective 2 approach to reducing emissions from the upper engines of 3 twin-engine cranes. Unlike generators, compressors, 4 pumps, and other portable equipment, cranes are complex, 5 costs -- a bit expensive, and difficult if not impossible 6 to retrofit. Also there is a small and diminishing number 7 of affected engines in California that operate 8 intermittently and low-emission cycles. Most of them are 9 manufactured outside of the United States by companies 10 that are usually not immediately responsive to EPA and 11 CARB certification requirements. 12 Before setting certification requirements on the 13 upper engine of twin engine cranes, ARB should contact the 14 cane and engine manufacturers to ensure full technical 15 compliance with those requirements. CIAQC, therefore, 16 supports the ARB's decision to delegate that decision to 17 its Executive Officer until she determines on a 18 case-by-case basis that certified engines can be installed 19 in existing cranes. 20 Thank you. Appreciate your time. 21 CHAIRPERSON LLOYD: Thank you very much. 22 Frank Caponi, Daniel McGivney. 23 MR. CAPONI: Good afternoon, Dr. Lloyd, members 24 of the Board. My name is Frank Caponi. I'm with 25 Los Angeles County Sanitation Districts. We're one of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 largest operators in the country of landfills and POTVs. 2 I know it's late in the afternoon, but I really 3 want to take the opportunity because I think it's worth it 4 to thank the staff and tell you how grateful we are for 5 your staff and how well they work with the industry. JT 6 mentioned we've been at this for 11 years, and I've been 7 there from day one. It's been so long that I had 8 completely forgotten so I'm glad he reminded me. All I 9 know is my hair was less gray. I think at that time I 10 called Dr. Lloyd, Allen so -- 11 Just the context of our comments, I just want to 12 put it all in perspective where we're coming from. 13 Obviously, we're an essential public service. And this 14 was stated earlier on testimony but I think it's worth 15 repeating over and over again, is that is an essential 16 public service. Obviously, we operate a lot of portable 17 engines, and they're used in really the service of the 18 public. And very often, we have to weigh public health 19 issues with environmental issues. And it's competing 20 risks that we have to constantly struggle with. But when 21 push comes to shove and the sewage is in the street, we 22 need to act on that. That's really the context in what 23 we're coming from. 24 In that regard, I just wanted to address an issue 25 of an emergency with the ATCM. In the PERP program, which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 is coming up next, the PERP program has really taken care 2 of emergencies. For example, a large earthquake where we 3 would have to bring in emergency engines to deal with that 4 situation, the PERP allows that to happen very easily. 5 Mike -- I talked to Mike Tollstrup earlier, and Mike 6 assure me that the ATCM, even though they don't have 7 specific language, the affect does not get in the way of 8 that requirement. And if Mike says that, I trust Mike. 9 Mike could get hit by a bus tomorrow, so I'm a little 10 concerned about that. And we don't want that to happen. 11 So I would request that somewhere there be some reference 12 to this perhaps in the resolution, somewhere that 13 specifies that the ATCM will not get in the way of these 14 emergency-type situations. 15 With the issues of schools, this has been 16 probably one of the more contentious issues that has faced 17 our working group. I'm just going to talk briefly about 18 it, and I want to support the staff delaying that aspect 19 of the regulation. It needs more discussion. There's a 20 lot of issues here. But bear in mind this is really a 21 different animal from the stationary engines. By nature, 22 portable engines are portable, and they don't stick around 23 for very long. But very often, at least in our industry, 24 we need those portable engines even more than the 25 stationary side to take care of not only the emergency PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 situations, but more importantly, the maintenance 2 situations. Because if we keep up with our maintenance 3 situations, like sewer line slip lining, we can avoid a 4 lot of the emergencies down the road. So we are concerned 5 about any restriction -- unnecessary restrictions that 6 would come as a result of the school issue. 7 And certainly, we support any protection of 8 children. And in that regard, I would like to echo some 9 comments about some of the health analyses that were done. 10 And once again, portable is a different animal than 11 stationary. The analyses that were done on the stationary 12 side don't really a fit on the portable side. That needs 13 to come into the debate. 14 One last thing on the school issue. This was in 15 the stationary, and we were really glad to see this one 16 aspect of the rule come in. And that was really a 17 recognition of clean engines. I know Mr. Calhoun had 18 questioned that and how they were getting basically an 19 exemption from the school location issue, if you were a 20 clean engine or .01 engine. And you know, the staff is 21 correct in that they are really low risk or zero risk 22 engines. But really it is another point here that I think 23 needs to be made. 24 The other point is that I think by allowing these 25 engines to operate right next to a school, I think you're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 sending a powerful message to the public that your 2 regulations are creating the engine along with the 3 partners in the industry that is -- really can be a good 4 neighbor. So we're not out there demonizing diesel. 5 Diesel itself is not bad, once we have all these control 6 technology on it. You have yourself a clean engine that 7 can work side by side with the public. I think that's an 8 important message to send to the public. And I think I 9 applaud you putting that in there, and we would like to 10 see this eventually wind up in this regulation also. 11 I just want to make a few comments about 12 technology. We heard an awful lot about that today, and 13 it's really an important issue. And I think it's even 14 probably more important here, because the application of 15 technology on portable equipment is even more difficult 16 than on the stationary side and even more difficult than 17 on the mobile side. We have a lot of concerns about 18 technology. 19 And my agency has really -- I'm not going to say 20 on the forefront, but I think we are one of lead people 21 out there tying to adopt clean fuels and clean engines. 22 In 1992, we build the first landfill gas to a compressed 23 natural gas facility, probably, in the country that was 24 operating trucks at a landfill. And we have sites in the 25 future to be able to build, once the technology is there, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 an L&G facility that would be fueled by landfill gas. So 2 we've been behind these regulations. You know, we helped 3 the industry develop dual fuel engines. 4 We, ourselves, have experienced many experiences 5 now where technology is not available. It has been 6 frustrating for us. We want to be up there complying with 7 these regulations, but also be ahead of the curve on the 8 regulations. Just to cite an example -- I know it's late 9 in the day. This isn't directly associated with portable 10 equipment. In compliance with 1193, we were in the 11 process of purchasing 41 transfer rigs for one of our 12 materials recovery facilities. We would like to purchase 13 liquefied natural-gas-powered vehicles. They're not 14 available. We're very frustrated about that because we're 15 going to be forced to buy diesel engines. We don't want 16 to do that. We want to buy the L&G powered vehicle. In 17 fact, in preparation for that, in anticipation these 18 engines would be available, we built a $1.2 million L&G 19 fueling station, which is sitting there right now empty 20 and unused. And we don't have a use for it. We joke 21 around the office -- it's really not a joke -- there's 22 going to be very expensive diesel fuel tanks. We don't 23 want that to happen. We want to be able to use that 24 facility for its purpose. 25 And the reason I cited this example is because PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 what's happening here at the mobile sector with engines I 2 think could also be concerned here on the portable side. 3 We're pushing these alternative fuel engines -- and I 4 support Sven and his early compliance issue, but we're 5 just concerned these engines are not available. 6 Likewise, we heard a lot today on the retrofit 7 side of things, and we are very concerned about that. You 8 know, we have worked with Johnson Matthey and Engelhard 9 over the years on development of our use of traps on 10 mobile equipment both on on-road and off-road. When you 11 have two companies like that where they have such a track 12 record and such a large amount of experience and they pull 13 out of the market, that gives us grave concern about the 14 availability of these retrofits in the future. 15 We're a public agency, but when we buy things, we 16 have to be out to bid. We can't have one or two 17 manufacturers that claim they can't meet warranty 18 requirement. Of course, we want warranty requirement. 19 But we also want the ability to comply with your rules. 20 So we are really concerned about the availability of the 21 technology. 22 I think this goes directly to the comment that 23 was made earlier about early compliance, that perhaps we 24 should have some early compliance. We're concerned about 25 being able to comply with the regulation as it is, no less PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 an early compliance, you know, putting aside the dollar 2 issues there. So I just don't think early compliance is 3 feasible in any way, sense, or form. 4 So because of this concern about technology, you 5 know, we support your proposal to have a technology review 6 by 2008. And I'm concerned, though, about the scope of 7 that technology review. I think the way it was stated was 8 that it would look at the ability of the technologies to 9 get us to 2010. I think the technology view has to go way 10 beyond that. It has to look at the whole picture of 11 getting us to 2020. I would submit that perhaps 2008 is 12 too late for this to happen. Perhaps this technology 13 review should come in a little earlier, because industries 14 and the users have to make plans about how they're going 15 to go about their strategies to comply with these rules. 16 And two years from 2008 to 2010 is really a short time to 17 do that when you're dealing with a lot of engines out 18 there. 19 So I would ask for your consideration to relook 20 at that and perhaps strengthen that requirement on the 21 technology review. I think I've covered all my issues and 22 I appreciate your listening to these. Thank you. 23 CHAIRPERSON LLOYD: Thank you. 24 Peter. 25 STATIONARY SOURCE DIVISION CHIEF VENTURINI: Just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 to provide a clarification on the intent of the review. 2 The focus from our perspective for that review is for the 3 post 2010 requirements. The 2010 requirement was set in 4 place in 1997. That basically was a very simple 5 requirement, by 2010 you have certified engines. And I 6 think many of the other comments we heard really are 7 focusing on the post 2010 time frame, and we share some of 8 those concerns. And that's why we feel very strongly to 9 come back no later than 2008. And we intend to do a 10 comprehensive review with the same type of participation 11 that we've had for the process that brought this measure 12 to you today. 13 CHAIRPERSON LLOYD: Thank you. 14 Our last witness, Daniel McGivney. 15 MR. McGIVNEY: Afternoon, Mr. Chairman, members 16 of the Board. My name is Daniel McGivney representing 17 Eastern Municipal Water District in Western Riverside 18 County. To save time, I basically support all the 19 comments made by Mr. Caponi of L.A. County San District. 20 I would like to just give a couple of additional comments 21 on some of those similar related issues. 22 First of all, you heard earlier testimony today 23 that was maybe requesting that you make some account for 24 some limitations in operation or something around schools, 25 and it referred to a previous proposal that proposed to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 maybe use cleaner engines near schools when you're 2 operating near school. And it has a very expedited 3 schedule of using Tier 1 through higher tiered engines. 4 At least for the water and sanitation industries, 5 that's a very tough things to do. First of all, you're 6 already mandated to meet, at minimum, Tier 1 by 2010. We 7 operate in eastern territory at 550 square-mile service 8 area, five sewage treatment plants, hundreds of miles of 9 sewers and water pipelines. And we have these portable 10 engines that are distributed over that entire area doing 11 jobs. 12 And if we come upon a school, to have to try to 13 find out where the Tier 1 or Tier 2 engine is and have it 14 dispatched to that area, it would be very cumbersome, 15 difficult to implement. It would almost require us to 16 roll over our entire fleet by what in that proposal was a 17 2006 time frame. So we not only have to meet the 2010 18 time frame significantly earlier, but some of the later 19 tiered engines wouldn't be available as they might be in 20 2010, which would create added impact to us for the later 21 compliance dates. 22 Again, we really support giving staff the added 23 months they're requesting to work with industry and come 24 back with the best approach that we can craft, such that 25 we can mitigate all these different issues because of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 this. As you've heard many people testify today before 2 you, the use of portable engines is extremely wide and 3 variable. And there's a lot of issues, you know, involved 4 there, unlike stationary engines or some of the other 5 source categories. 6 Additionally, I'd like to ask staff to evaluate 7 one change in their regulation. And as Frank indicated in 8 his testimony, the portable equipment registration program 9 has a definition for "emergency." That definition pretty 10 much includes everything that's in the definition of 11 emergency in the proposed ATCM, as well as what's included 12 in the second definition emergency event. It kind of 13 covers all those things. And we would ask that the Board 14 and staff revise these two definitions and combine them 15 into just one definition for "emergency." 16 There is some related language later on that 17 affects low-use engines whereby it's stipulating that if a 18 low-use engine is used in an emergency to respond to an 19 emergency event, that the hours of that emergency are not 20 counted against the 40 hours of its -- that's designated 21 as a low-use engine. 22 We would argue if any portable engine is used to 23 respond to an emergency event, it should just be responded 24 to any emergency that is under the definitions and not be 25 restricted to a certain portion of those definitions. And PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 I don't know if that was what staff's intent was or not. 2 But again, I guess we'd like to see those definitions 3 combined. That makes it consistent between the two 4 regulations. It's really the same right now, just a 5 little bit segregated. So with that, I conclude my 6 comments. If there's any questions, happy to answer them. 7 CHAIRPERSON LLOYD: Thank you. 8 I think Peter is ready with a response. 9 STATIONARY SOURCE DIVISION CHIEF VENTURINI: We'd 10 be willing to take a look at the emergency provisions and 11 see if there is consistency between the two measures. 12 CHAIRPERSON LLOYD: Thank you. 13 I guess I lied. Bruce is now, I guess -- maybe 14 there's some implications about the after-treatment so 15 he's coming up to speak on behalf of MECA. 16 MR. BERTELSEN: Good afternoon. My name is Bruce 17 Bertelsen. I'm representing the Manufacturers of Emission 18 Controls Association. I know the hour is getting late, 19 but I did want to take just a brief opportunity to first 20 express MECA's supported for the proposed initiative. We 21 think it's an important step forward, and we support it 22 fully, and again, commend the staff for the outstanding 23 job they did in developing the proposal and also in 24 working with all of the various stakeholders. 25 I really want to focus my comments here to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 question of the availability of retrofit technology. As 2 we stated in our written testimony, we're very optimistic 3 that the technology will be available for these types of 4 engines, verified retrofit Level 3 technology. There are 5 a number of companies that are working on it. Obviously, 6 we hope as we look forward Engelhard and Johnson Matthey, 7 a few of our members, will become re-engaged in the 8 California market. There are a number of other companies 9 out there that are working on and marketing technologies. 10 There's a growing interest in focusing on the non-road 11 sector engines, as we characterize them, which would 12 include these types of engines. A lot of work going on in 13 the stationary source side. And as we look forward, our 14 industry is, again, very confident that the technology 15 that will be needed will be available. Thank you. 16 CHAIRPERSON LLOYD: Thank you, Bruce. Thank you. 17 Any other comments from staff? 18 With that, I will now close the record in this 19 agenda item. However, the record will be reopened when 20 the 15-day notice of public availability is issued. 21 Written or oral comments received after this hearing date 22 but before the 15-day notice is issued will not be 23 accepted as part of the official record on this agenda 24 item. 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 266 1 proposed changes, which will be considered and responded 2 to in the final of statements of reasons for the 3 regulation. 4 Any ex partes communication to mention? 5 So we have a resolution before us. 6 BOARD MEMBER RIORDAN: Mr. Chairman, I just have 7 one quick question. Have we solved the crane issue? It 8 was raised, and I want to be sure, because I don't 9 remember if it's in the body of the -- 10 STATIONARY SOURCE DIVISION CHIEF VENTURINI: That 11 was one of the 15-day changes staff proposed. 12 BOARD MEMBER RIORDAN: I know cranes are unique. 13 BOARD MEMBER McKINNON: I had an ex parte 14 discussion with Cindy Tuck on this item on Tuesday 15 afternoon in Sacramento here. Most of the content of that 16 discussion she testified to today, to make it short. 17 CHAIRPERSON LLOYD: Any other comments? 18 Ms. D'Adamo and Supervisor DeSaulnier. 19 BOARD MEMBER D'ADAMO: Well, I'm prepared to 20 support the resolution, but would like to just briefly 21 have a discussion about schools. I think that the issues 22 were adequately raised by witnesses on both sides of the 23 issue. It does seem that further discussion is warranted. 24 I, for one, however, wouldn't want something just open 25 ended, so would just defer to staff on a good time, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 proper amount of time before bringing it back before the 2 Board. I think it's an important item that we should take 3 a further look at. 4 EXECUTIVE OFFICER WITHERSPOON: Staff is 5 suggesting something on the order of six months or a 6 little longer. Be back to you by the fall. Does that 7 sound all right? 8 BOARD MEMBER D'ADAMO: Fine with me. 9 CHAIRPERSON LLOYD: August. 10 EXECUTIVE OFFICER WITHERSPOON: September. 11 Inside joke. 12 CHAIRPERSON LLOYD: Okay. Supervisor DeSaulnier. 13 SUPERVISOR DeSAULNIER: I thought you were going 14 to break out into song, maybe. 15 I was going to bring up the same thing. I 16 think -- I appreciate Cindy's comments, particularly 17 comments about local government, the cost to local 18 government, and to school districts, in particular, 19 knowing what they're going through. But on the other 20 hand, what the environmental community has asked for. I 21 would like to continue to push, I think, that's consistent 22 with what DD's asking for. We may be able to find 23 creative ways to get the spirit of the earlier language 24 back in. I'll be waiting to have it come back in -- it 25 was August, right? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 EXECUTIVE OFFICER WITHERSPOON: September. 2 CHAIRPERSON LLOYD: We won't call for a vote on 3 that. 4 Any other comments? Entertain a motion on this 5 item. 6 BOARD MEMBER D'ADAMO: So moved, Mr. Chairman. 7 BOARD MEMBER McKINNON: Second. 8 CHAIRPERSON LLOYD: All in favor say aye. 9 (Ayes) 10 CHAIRPERSON LLOYD: Anybody opposed? 11 No. 12 Again, thank you very much. Thank you, staff. 13 We're going to take a ten minute break until 25 after by 14 that clock there and then move to our last item. 15 (Thereupon a recess was taken.) 16 CHAIRPERSON LLOYD: The last item on the agenda 17 today is 04-2-3, Proposed Amendments to the Statewide 18 Portable Equipment Registration Program, which this Board 19 approved in 1997 and amended in 1998. 20 ARB staff has been implementing this program 21 since 1998. I understand that the program has been well 22 received by participating businesses who appreciate the 23 ability to register at the state level and move equipment 24 across district lines. However, there are some concerns 25 about engines that are neither in the statewide PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 registration program nor under district permit that staff 2 is trying to address. Finally, there is a need to revisit 3 the statewide registration program to make sure it meets 4 the Board's needs for the diesel risk reduction 5 objectives. 6 At this time, I would like to turn over the item 7 to Ms. Witherspoon to begin staff's presentation. 8 EXECUTIVE OFFICER WITHERSPOON: In the interest 9 of time, I'm just going to introduce Todd Wong of the 10 Stationary Source Division to present the proposed 11 amendments. 12 (Thereupon an overhead presentation was 13 presented as follows.) 14 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Thank 15 you, Ms. Witherspoon. Good afternoon, Chairman Lloyd and 16 members of the Board. As Ms. Witherspoon indicated, I 17 will be presenting the proposed amendments to the 18 statewide portable equipment registration program 19 regulation. The purpose of the proposed amendments is to 20 ensure consistency with the portable engine ATCM and to 21 provide additional clarity and enforceability of the 22 statewide portable equipment registration regulation, 23 hereafter referred to as the statewide regulation or the 24 statewide program. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 TECHNICAL ASSESSMENT SECTION MANAGER WONG: In 2 the interest of time, I will not cover the background item 3 in great detail since Mr. Chin's presentation provided you 4 with information about the statewide program. The 5 remainder of my presentation will cover the proposed 6 amendments, summarize the environmental and economic 7 impacts, discuss 15-day changes to the staff proposal, and 8 conclude with the staff recommendations. 9 --o0o-- 10 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Based 11 on staff estimates, there are approximately 33,000 12 portable engines with 50 horsepower or greater operating 13 in California. Roughly half, or about 15,000, portable 14 engines are currently registered in the statewide program. 15 About 3,000 engines are permitted by the district. The 16 remaining 15,000 engines are either exempt from district 17 permits or operating without district permits or statewide 18 registration. 19 --o0o-- 20 TECHNICAL ASSESSMENT SECTION MANAGER WONG: By 21 2010, the statewide regulation achieves significant 22 reductions in NOx and PM emissions by requiring all 23 portable engines registered in the statewide program to 24 meet U.S. EPA and ARB new engine off-road emission 25 standards. ARB estimates that in 2010, emissions from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 engines currently registered in the statewide program will 2 be reduced by about 5.5 tons per day of NOx and 0.7 tons 3 per day of PM. 4 --o0o-- 5 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Now I 6 would like to go over the proposed amendments to the 7 statewide regulation. 8 --o0o-- 9 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Since 10 the inception of the statewide program, staff has worked 11 with the local district and has determined that some uses 12 of portable engines are more appropriately handled under 13 district permitting program. These applications include 14 using portable generators to feed the electrical grid, 15 portable generators used to provide primary or 16 supplemental power to a building stationary source or 17 stationary equipment, and portable engines used to power 18 equipment that is permitted by a district. 19 --o0o-- 20 TECHNICAL ASSESSMENT SECTION MANAGER WONG: 21 Earlier I mentioned that there are about 15,000 engines 22 operating without district permits or statewide 23 registration. Many of these engines are uncertified 24 engines and would not qualify for registration. The 25 current statewide regulation only allows portable engines PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 meeting new engine off-road emission standards to register 2 in the statewide program. 3 In order to encourage equipment owners and 4 operators to come into a regulatory program, we are 5 proposing to allow operators of certified and uncertified 6 portable engines the option to voluntarily register in the 7 statewide program until December 31st, 2005. Only engines 8 that can demonstrate prior operation in the state will 9 qualify for registration under this provision. In 10 addition, staff will make available to the district a list 11 of companies new to the statewide program. ARB staff 12 intends to work with the district to determine if and what 13 enforcement actions are appropriate for equipment operated 14 without district permits. 15 --o0o-- 16 TECHNICAL ASSESSMENT SECTION MANAGER WONG: In 17 order to minimize and streamline recordkeeping and 18 reporting requirements, staff is proposing that operators 19 who are subject to recordkeeping requirements maintain 20 records for five years, instead of the current two-year 21 requirement. In addition, operators will no longer have 22 to submit annual reports to the ARB staff, but will be 23 required to make records available to ARB and district 24 staff upon request. To improve enforceability, 25 non-resetable hour meters will be required for portable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 engines subject to hourly operating limits. 2 --o0o-- 3 TECHNICAL ASSESSMENT SECTION MANAGER WONG: 4 Current fees have not changed since the inception of the 5 statewide program in 1997. These fees are not adequate to 6 cover ARB's cost to administer the statewide program. 7 --o0o-- 8 TECHNICAL ASSESSMENT SECTION MANAGER WONG: The 9 current registration fee is $90 per unit for a three-year 10 registration. That works out to $30 per year. Staff is 11 proposing to increase the registration fee to $270 for a 12 three-year registration. That equates to $90 a year. 13 Renewable fees are currently $90 for a three-year renewal. 14 Staff is proposing to increase the renewal fee to $225 15 for a three-year renewal, or $75 a year. 16 --o0o-- 17 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Now I 18 will summarize the environmental and economic impacts. 19 --o0o-- 20 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Staff 21 has determined that the proposed amendments will not 22 impact the emission benefits of the existing statewide 23 regulation. The cost impact of the proposed amendments 24 are estimated to be about $400,000 per year. The cost is 25 mainly attributed to increase renewal fees and for a small PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 number of operators who will need to obtain district 2 permits. 3 --o0o-- 4 TECHNICAL ASSESSMENT SECTION MANAGER WONG: In 5 response to comments received, staff is proposing a number 6 of 15-day changes. 7 --o0o-- 8 TECHNICAL ASSESSMENT SECTION MANAGER WONG: State 9 law requires ARB to establish a uniform statewide fee 10 schedule to allow the districts to reasonably recover 11 their costs for enforcing the statewide regulation. 12 Information provided by CAPCOA is indicating that the 13 current $75 inspection fee is not adequate to cover the 14 district inspection costs, nor does it provide necessary 15 resources to enforce the statewide regulation. CAPCOA is 16 proposing to increase the district inspection fee from $75 17 to $175. The inspection fee can be collected for an 18 engine only once per year statewide. 19 In addition, CAPCOA is proposing a local program 20 fee of $75 per engine to be assessed, which will allow the 21 district to recover administrative costs associated with 22 enforcement of the statewide regulation. This fee would 23 be collected annually by the district. In order to 24 accommodate the district's collection of the local program 25 fee, an additional amendment is necessary to change from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 optional to mandatory that statewide registered equipment 2 owners designate a home district. CAPCOA representatives 3 are present today to address your questions about the 4 proposed district fees. 5 --o0o-- 6 TECHNICAL ASSESSMENT SECTION MANAGER WONG: For 7 new applicants entering the program during a one-year 8 window, we are proposing an additional $100 increase to 9 the proposed registration fees I discussed earlier. In 10 addition, a one-time $25 per unit increase in the local 11 program fee is being proposed. The increases are 12 necessary to cover the expected costs associated with the 13 need for increased outreach and enforcement activities. 14 The proposed additional fees will not apply to first-time 15 registrants that are seeking statewide registration as a 16 result of the loss of a district permit exemption through 17 a change in state law or as a result of the portable 18 engine ATCM. 19 --o0o-- 20 TECHNICAL ASSESSMENT SECTION MANAGER WONG: In 21 order to ensure a smooth transition from the statewide 22 program to district programs, equipment owners will be 23 allowed to continue to operate under statewide 24 registrations until districts act upon their permit 25 application. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 Staff is also proposing to clarify that portable 2 generators can be used to feed into a grid only during 3 emergency events to maintain grid stability. 4 --o0o-- 5 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Staff 6 expects a large number of applications resulting from the 7 approval of the portable engine ATCM and the proposed 8 amendments to the statewide regulation. Although state 9 law allows up to 180 days to complete the evaluation of an 10 application, the statewide regulation provides 90 days. 11 In order to satisfy statutory time constraints 12 for processing applications, staff is proposing to 13 temporarily increase the time allowed from 90 days to 180 14 days. This temporary provision would expire on December 15 31st, 2005. The Board had approved this provision before 16 when a large number of applications were expected. Our 17 intent is to not use the full 180 days, but to ensure that 18 the statutory time frame for processing applications is 19 met. 20 Finally, in order to increase enforceability, new 21 engines with fuel usage or hour restrictions will be 22 required to have fuel flow meters and non-resetable hour 23 meters. 24 Staff is proposing a number of minor amendments 25 to provide additional clarity. These amendments include PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 deleting or modifying obsolete definitions, correcting 2 formatting and grammatical issues, and other minor 3 administrative changes. 4 --o0o-- 5 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Now 6 for the staff recommendations. 7 --o0o-- 8 TECHNICAL ASSESSMENT SECTION MANAGER WONG: Staff 9 recommends that the Board approve the proposed amendments 10 to the statewide regulation with the staff's proposed 11 15-day changes. That concludes my presentation. 12 CHAIRPERSON LLOYD: Thank you. Maybe I asked you 13 this once before. You've got 15,000 missing engines. How 14 many of those are exempt? 15 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: We 16 don't have a good handle on how many of them are exempt. 17 We know there is a portion of them in the ag irrigation 18 pumps that just lost their exemption in state law. 19 There's 3,000 of those. Other than that, we don't think 20 there's a big percentage. We think most of these are 21 unpermitted. 22 CHAIRPERSON LLOYD: And the other comment you 23 make on the environmental impact, you say staff's proposed 24 change will not impact emission benefits of exiting 25 statewide program. I would not disagree. But also we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 now adding more emissions to the statewide inventory, are 2 we not? Because if we find these engines and they're not 3 in the inventory, it means we're adding more emissions. 4 STATIONARY SOURCE DIVISION CHIEF VENTURINI: No. 5 The engines are in the inventories, as best as our 6 inventory staff -- 7 CHAIRPERSON LLOYD: But if we don't know where 8 they are, how can they be -- where are they located? 9 STATIONARY SOURCE DIVISION CHIEF VENTURINI: The 10 inventory staff have made estimates based on their sources 11 of information that I don't recall. That's where that 12 33,000 has come from. We don't know where all of them 13 are. You're correct. But what we're presenting to you is 14 what ARB's best estimate is. There's some that believe 15 there may be more engines than that. That's why I think 16 it's important. And I have to talked to a colleague, Mr. 17 Jim Ryden, about looking into this in collaboration with 18 some of the districts to try to track some of these down. 19 Because with the ATCM, it now affects all engines, whether 20 they're registered -- 21 CHAIRPERSON LLOYD: They're stationary engines, 22 so they're the responsibility of the districts? 23 STATIONARY SOURCE DIVISION CHIEF VENTURINI: No. 24 They're portable engines, but under -- our program is a 25 voluntary program. So basically an owner of a portable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 engine has the option of voluntarily registering with our 2 program. If they choose not to register with our program, 3 they basically need a district permit. And we think there 4 are thousands of engines that are operating without 5 district permits, and we think we ought to work with the 6 districts to close that gap. So that means they'll either 7 have to come into the registration program or seek a 8 district permit. 9 CHAIRPERSON LLOYD: How do we arrive at the 10 number of missing engines? Is it just an estimate? 11 STATIONARY SOURCE DIVISION CHIEF VENTURINI: I 12 think it's just an estimate. 13 CHAIRPERSON LLOYD: Comments? Questions? 14 Mr. Calhoun. 15 BOARD MEMBER CALHOUN: Can you explain the 16 difference between the inspection fee and a program fee? 17 What's the difference? 18 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: As we 19 understand CAPCOA's intent, the inspection fee, the $175, 20 is a fee that the district would charge each time they 21 actually went out and performed an inspection. That would 22 be one time per year, per state inspection fee that they 23 would charge. 24 The $75 fee is an automatic fee they would charge 25 every registered engine based on home district PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 designation. They would bill the sources directly. That 2 fee, as we understand, would be used to basically fund the 3 enforcement program, pay for the additional outreach and 4 enforcement that's necessary to -- 5 BOARD MEMBER CALHOUN: Send the bill out or the 6 program fee? 7 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: That 8 would be the intent. 9 BOARD MEMBER CALHOUN: And the inspection fee, 10 you have to go out -- 11 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: You 12 have to actually perform the inspection. 13 MR. CHIN: This is Grant Chin. I want to respond 14 to Dr. Lloyd's question about the number of engines. That 15 is an emissions inventory estimate. The number of 16 engines, that is, in turn, based on a parceling of 17 nationally the number of engines that are there nationally 18 for California. So they estimate roughly 33,000 of the 19 engines sold nationally would be in California. 20 CHAIRPERSON LLOYD: Okay. Thank you. 21 Any more questions from the Board? 22 Madam Ombudsman, will you please describe the 23 public participation process that was followed during the 24 development of this regulation and describe any concerns 25 or issues you have at this time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 2 the Board, I'll be brief. The outreach activities for 3 this regulation were done concurrently with the ATCM for 4 portable engines, the item you've just completed. As 5 such, all of the outreach activities described in that 6 item are the same for this one. And I don't suppose you'd 7 like me to repeat them all? 8 CHAIRPERSON LLOYD: Nope. Thank you. 9 OMBUDSMAN TSCHOGL: Thank you. 10 CHAIRPERSON LLOYD: I was looking puzzled because 11 the first person -- going to public testimony, the first 12 on the sign-up is Tim French. I thought I saw Tim depart 13 earlier. He did. We'll have to make sure that Jed knows 14 Tim left early on this item. 15 (laughter) 16 CHAIRPERSON LLOYD: Larry Green, Mike Buckantz, 17 Ken Barker. 18 UNIDENTIFIED SPEAKER: He's in the building. 19 He's on his way. 20 CHAIRPERSON LLOYD: Mike Buckantz, Ken Barker, 21 Tom Umenhofer. 22 MR. BUCKANTZ: Somebody has got to lead off, 23 right. Thank you, once again. My name is Mike Buckantz, 24 Justice and Associates. I testified earlier on behalf of 25 CIAQC. In addition to representing CIAQC at this time, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 I'm also representing folks who operate portable hot mix 2 asphalt and portable crumb rubber equipment. 3 With respect to the proposed fee increases, our 4 comments are directed to those fee increases that would go 5 to local districts and not to the fees that are due to the 6 state, which we are in support of. With respect to the 7 CAPCOA fees, we recently learned that CAPCOA has 8 recommended increasing their inspection fee on portable 9 from $75 to $175, and adding a $75 home district per 10 engine fee. And it was actually today that we learned of 11 the $100 first-time entrance fee that is being requested 12 as well. 13 The original $75 inspection fee would appear to 14 be adequate to pay for the approximately 30 minutes that 15 we've observed inspectors coming to sites to check on 16 registration and observe whether serial numbers on engines 17 match up with the registrations, make sure that stickers 18 are there, and things like that. And inspectors should at 19 a very minimum be able to inspect at least four engines a 20 day, including travel time, and many more can be inspected 21 in rental yards. 22 In view of California's budget crisis and 23 concerns about businesses leaving the state, CIAQC 24 recommends disapproval of the CAPCOA request to increase 25 the district inspection fee by $100, and the $75 per PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 engine home district fee, as well as the $100 first-time 2 program participant entrance fee to local districts. And 3 if I might, I'd like to defer the rest of my testimony on 4 the hot mix asphalt issue until the following speakers 5 speak, or could I just go and grab my prepared testimony? 6 CHAIRPERSON LLOYD: Please. 7 MR. BUCKANTZ: Hold on one moment. 8 CHAIRPERSON LLOYD: After, this we're going to 9 have Barbara Lee speak on behalf of Larry Green, speaking 10 on behalf of CAPCOA. 11 MR. BUCKANTZ: That's what happens when you're 12 not expecting to lead off. You always do something to 13 make yourself more memorable than you'd like to be. 14 I'd also like to address some concerns related to 15 removing engines from the PERP, which provide power to 16 portable hot mix asphalt plants and portable crumb rubber 17 plants. This provision will impact a relatively small 18 number of companies, a few of which are here today, and a 19 small number of engines, perhaps two or three dozens 20 statewide. 21 These companies pave roads primarily for 22 Caltrans, for counties, for cities, local municipalities. 23 Most of the companies voluntarily entered the PERP because 24 it provided an efficient, cost-effective alternative to 25 obtaining permits from up to 35 local air districts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 They're now being asked to re-apply to these same local 2 air districts, which in some cases they may not be able to 3 obtain permits because of some inconsistent applications 4 of BACT on a district to district basis. 5 For facilities utilizing rental engines, this 6 cost-effective option will not be available because most, 7 if not all, of the rental fleets, have PERP registrations 8 but not local air district permits. Most importantly, air 9 quality will not benefit from this action. The PERP 10 requires that all of these engines be certified no later 11 than 2010. 12 Additionally, this Board just adopted an air 13 toxic control measure which will uniformly reduce 14 emissions from these engines statewide. In fact, the 15 uncertainty associated with the ability to get a local 16 district permit may result in some companies providing 17 asphalt from stationary plants resulting in increased 18 emissions from diesel trucks that will be required to haul 19 the asphalt long distances. 20 Therefore, we recommend that engines already 21 registered should be allowed to continue providing this 22 vital service and that certified engines be allowed to 23 continue to enter the program to power up portable hot mix 24 asphalt and portable crumb rubber plants. 25 I thank you for your time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 CHAIRPERSON LLOYD: Thank you. Barbara Lee and 2 Ken Barker. 3 MS. LEE: Good afternoon, Mr. Chairman, members 4 of the Board. Thank you for your patience. My name is 5 Barbara Lee. I'm the Air Pollution Control Officer in 6 Northern Sonoma County. I'm also the Chief Financial 7 Officer for CAPCOA this year. And I'm here in lieu of 8 Larry Green, who is in a meeting upstairs with the 9 Secretary's office and was unable to get free. 10 I will make my remarks brief. I want to start 11 out by saying that this is a program we have worked with 12 ARB staff on for a number of years. We have not always 13 seen the program the same way or thought it ought to go in 14 the same direction, but I want to thank them for the hard 15 work that they have put in in terms of addressing our 16 concerns about how to make this program an effective 17 program for air quality in California. 18 We have worked with staff on a number of issues 19 in the development of this particular proposal and 20 resolved most of our concerns in the development of the 21 proposal. And for that, we are very thankful. 22 We have a couple of outstanding issues that I 23 have been asked to highlight for you, and I will do that. 24 The first is the issue of fees and the need for adequate 25 program support. In proposing additional fees for this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 program, CAPCOA provided ARB staff with a survey we did of 2 local air districts, and the funds that we are asking to 3 be recovered for this program do not equal our average 4 costs for inspecting these types of operations. We 5 identified average costs. We didn't feel that that would 6 be a reasonable things to include. And what we have 7 settled for is less than average cost recovery. 8 I strongly urge you to support that provision for 9 us, because these are the funds that we need to ensure 10 this program gets you the emission reductions that it 11 needs to get. Without it, the districts are having a 12 very, very hard time enforcing the program. 13 The other issues include the need for adequate 14 notification when engines are moved between districts so 15 that we know where they are and we are able to inspect 16 them when they need to be inspected. We also need to have 17 meters on -- fuel meters and use meters on the engines so 18 that we know how they are being used in the field when we 19 do our inspection. And these are important elements of 20 being able to ensure that the way the engines are being 21 operated they do ultimately achieve the goal of the 22 program. 23 This is not something we were able to resolve 24 prior to the rule making, in spite of significant efforts 25 on the part of ARB staff, on our part, and with industry. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 In discussions recently with staff and with industry, we 2 believe we are not too far off from being able to come up 3 with a reasonable proposal that everyone can agree to. We 4 would ask this Board direct staff to come back in 60 days 5 with revised language on those two points. 6 The final point I want to touch on, I understand 7 now, even though we were not in the room, that it is 8 somewhat out of order, and I apologize for that. We're 9 concerned about the control requirements that are 10 ultimately envisioned for the toxics portion of the 11 regulation of these engines. We understand ARB has -- 12 staff have concerns about the availability of certified 13 equipment for these engines. We understand that cannot be 14 changed in this rule making. We do ask that staff agree 15 to continue to work with CAPCOA and with the business 16 community to review what is available in the near term and 17 to come back in two years with a review for your Board on 18 the state of the control technology development and 19 implementation to see if the schedule could be moved up. 20 CHAIRPERSON LLOYD: Mr. McKinnon. 21 BOARD MEMBER McKINNON: Hi, Barbara. I want to 22 sort of ask my questions. I have a difference here. I 23 want to make sure you're here to respond and correct me if 24 I have it wrong. 25 I have a real difficult time requiring trucks PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 with portable units that are 100s in a fleet filing 2 paperwork or reports on a daily or a weekly basis on their 3 location. Okay. I have a real tough time with that, 4 particularly when almost half the engines are unaccounted 5 for. You know, it's sort of like, to me, an onerous 6 burden on those that are playing by the rules. What does 7 that get you that the home base identification doesn't get 8 you? 9 And then, in terms of the -- and I'll leave it to 10 staff. In terms of sort of the fee disparity issue, I'd 11 like to know more about that. But I really have a 12 difficult time with this sort of meeting, you know, the 13 truck at the county line with the report. 14 CHAIRPERSON LLOYD: Well, I'd also follow up, Mr. 15 McKinnon. I agree with you completely. All of sudden we 16 have all these engines running around. Nobody knows where 17 they are. We have an estimate of what they are. And you 18 don' know where they are. We don't know where they are. 19 And in the end, you're saying you have to notify within 20 one day, and then you talk about the requirement for 21 cleanup. And they're running now, and you're not worried 22 about them. So I mean, let's get some sense in this. 23 MS. LEE: Okay. Taking the questions one at a 24 time, Mr. Chairman. On the issue of the reporting, we 25 have discussed with ARB staff the possibility of putting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 together web-based reporting that would not require the 2 filing of documents. There are other ways we could work 3 out that the notification could occur. The reason that 4 the notification is important is that many engines move 5 around within that five-day time frame, or not even 6 necessarily within that time frame. 7 When a district is not notified that an engine 8 has come in at the time it comes into the district, the 9 district has no way of knowing if it's been on site for 10 one day, five days, ten days. And it is much more 11 difficult to enforce the provision if you don't know the 12 engines are there. If we know they're there, we know to 13 go out and check. 14 In terms of concern about the unregistered 15 engines and the benefit for being unregistered, we are 16 very concerned about that. We believe that there is a 17 significant air quality gain to be had by a coordinated 18 effort of compliance assurance between ARB staff and local 19 district staff. We have talked with ARB about this, and 20 we are very interested in putting together a plan to move 21 throughout the state and try to find -- together and bring 22 into the registration program the engines that are not 23 currently in it. 24 CHAIRPERSON LLOYD: Mr. McKinnon. 25 BOARD MEMBER McKINNON: Okay. I'm still not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 getting it. If you send an inspector out to a big 2 construction site, and there are engines -- portable 3 engines on that site that don't have the sticker or the 4 tag or whatever the identification is -- is it a sticker 5 or tag that says it's in the program? 6 STATIONARY SOURCE DIVISION CHIEF VENTURINI: It's 7 a sticker. 8 BOARD MEMBER McKINNON: The inspector finds a 9 bunch of engines there -- and there's 15,000 of 10 theoretically floating around. Some of them are sitting 11 on the construction site. They don't have the sticker on 12 them. Okay. To me, I don't understand why you need to 13 know when it got there. You now know it is there without 14 its sticker on it and that -- am I missing this? So it 15 seems to me, you or us or someone has an enforcement 16 action that, you know, given half the people not 17 complying, there's a fine or a penalty or something 18 attached to it. So why do we need to know whether it was 19 there one day or five days or not? And then if it's home 20 based, in terms of it being looked at once a year or once 21 every other year or whatever, it seems like that sort of 22 takes care of that. 23 MS. LEE: I think there are a number of different 24 answers to your question. But the one, as a program 25 manager, that speaks loudest for me is an issue of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 resource management. An engine that is not registered in 2 the program is not going to notify me when it comes into 3 my district. If it is a next-day notification 4 requirement, and my staff is on their way out to inspect 5 an agricultural burn or inspect a gas station or respond 6 to a complaint and they go by an engine and we don't have 7 a record of a notification that the engine is going to be 8 there, they will stop and check for sure. It's not a 9 waste of time. We may go past a lot of engines. 10 BOARD MEMBER McKINNON: Because they're on the -- 11 MS. LEE: Because they're out there. We don't 12 want to keep stopping and checking on all the ones that 13 are registered. We don't get another inspection fee every 14 time we stop and check them. If they don't have to notify 15 until they've been there for five days, there can be a lot 16 of engines out there that -- we don't know when we go by, 17 is this one in the program or not. 18 BOARD MEMBER McKINNON: Now, the example that I 19 was initially giving you is Pac Bell or a PG&E where 20 there's a huge fleet, hundreds, if not thousands, right, 21 being tracked, Internet-based, paper, it's a bunch of 22 money spent on tracking when it seems to me you could 23 audit. You could do a lot of things to determine if 24 they're complying that doesn't -- I would rather they 25 spend the money by getting us cleaner diesels. I would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 rather we spent the money finding the 15,000. And I think 2 you're sort of saying this helps do that. But I'm 3 still -- 4 MS. LEE: The other point I'd like to make in 5 response to your question is that, as I said, we were not 6 able to reach agreement with ARB staff and with business 7 on this. However, we have continued discussions, and I 8 think that it is possible to come up with ways to address 9 the extraordinary workload issues, the unusual 10 circumstances, the obvious, no, we wouldn't want someone 11 to do that situation. We just didn't have time to get 12 that far in our discussions. 13 And we are committed to continue to have those 14 discussions. We got some signals from the business 15 community that they were prepared to continue discussions 16 with us. This category is responsible for 5 percent of 17 the diesel particulate emissions in the State. 18 CHAIRPERSON LLOYD: What's the assumption for 19 that? How much per engine? If you don't know 15,000, you 20 don't know where the engines are, how do you know the 21 emissions per engine? 22 MS. LEE: This is from the risk reduction plan 23 developed by ARB staff and approved by this Board. 24 CHAIRPERSON LLOYD: So how do we know what the 25 numbers are? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 MS. LEE: This was staff's estimate, compared to 2 the 2 percent that come from stationary engines. And that 3 means that we need this category and the rules that you 4 develop to be as effective as you are estimating them to 5 be. We need to get every emission reduction -- 6 CHAIRPERSON LLOYD: We know that, Barbara. But 7 I'm really concerned. We need your help. These are 8 operating in your district. We have resource constraints 9 as well. You talk about doing all these refinements, and 10 we can't find the damn engines. That's number one 11 priority. 12 And I agree with Mr. McKinnon, that while we put 13 these onerous constraints on there, when at the moment, we 14 have half the people out there not even being aware of 15 what they are. 16 MS. LEE: The constraints for reporting don't 17 have to be onerous. We have an agricultural burn program 18 in our district. 19 CHAIRPERSON LLOYD: We hear from the industry how 20 onerous they are. They're in a better position to talk 21 about that. 22 MS. LEE: And our farmers report their burns 23 before they do them, and they call a number, and they 24 leave a message on the number. And we check that message 25 every day. It's not onerous. There are ways to design a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 reporting requirement so that it doesn't have to be 2 onerous. 3 CHAIRPERSON LLOYD: Mr. McKinnon. 4 BOARD MEMBER McKINNON: Barbara, farmers don't 5 burn every day. And they don't -- and they don't burn in 6 multiple locations every day. When you're talking about a 7 Pac Bell or somebody who's got hundreds, if not thousands, 8 of work sites that change sometimes in the middle of the 9 day and move elsewhere. It's real different than ag 10 reporting. It's -- 11 MS. LEE: But they don't cross district 12 boundaries every day, generally speaking. 13 BOARD MEMBER McKINNON: I don't know. I mean, in 14 some places in this state they might. You know, I don't 15 want to sit and badger you. I mean, if there is a fees 16 question. Or if the way this is constructed, local 17 districts can't do their job in terms of the fees, I think 18 we ought to talk about that. But -- well, you've heard 19 what I have to say. 20 MS. LEE: To be clear, we are supporting ARB's 21 proposal for the fee increase or their support for our 22 proposal. I wanted to clarify to you that we weren't 23 asking for way more than we needed. We were asking for 24 less than we estimated on average we need. 25 CHAIRPERSON LLOYD: Any other questions from -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 Mr. Calhoun. 2 BOARD MEMBER CALHOUN: You asked to have the 3 staff come back and report something to the Board in 60 4 days. I missed that. 5 MS. LEE: On two of the items that we haven't 6 reached agreement on, the reporting requirement, the 7 notification, and on the issue of whether or not the 8 engines should have fuel and use meters that are 9 non-resetable. We believe those are important pieces for 10 our ability to enforce this regulation in the field. And 11 we believe that with some additional time, we can arrive 12 at a compromise that is acceptable to ARB staff, to the 13 districts, and to business. And we believe it will 14 significantly enhance the enforceability of the program, 15 and we would ask for that time. 16 BOARD MEMBER CALHOUN: Do you think that can be 17 done within 60 days when you've had plenty of 18 opportunities in the past to get it done and it hasn't 19 happened? 20 MS. LEE: We have been working with ARB staff 21 since the 45-day notice came out on what was going to be 22 in this rule making. We have also been attending 23 workshops. But generally speaking, it is not until the 24 45-day notice comes out that we have a clear idea of 25 what's being proposed. We've been working hard since that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 time to reach agreement. We reached agreement on a number 2 of issues. This is the short list of what is left that 3 there is disagreement over. We believe that agreement 4 could be reached with some more time, and that's why we're 5 requesting the time. 6 BOARD MEMBER CALHOUN: Thank you. 7 CHAIRPERSON LLOYD: Ms. Riordan. 8 BOARD MEMBER RIORDAN: Yes. First of all, 9 Barbara, you're a good pitch hitter, and your colleague 10 owes you a bit for this. 11 I just would like -- Mr. Chairman, I have a 12 feeling we're going to hear some issues raised by the 13 industry, and I just would like to be sure that Barbara is 14 still here for us to ask some questions of you, perhaps. 15 MS. LEE: Certainly. 16 BOARD MEMBER RIORDAN: Because I think I can ask 17 better questions of her a little bit later when I hear 18 some of the other issues, other than what Ms. McKinnon has 19 raised, which I agree is a problem when a lot of these 20 engines are moving daily. I mean, you know, just maybe 21 not far, but they are moving. So thank you. 22 SUPERVISOR DeSAULNIER: I think I'll prefer to 23 badger Larry than Barbara. So when you come back, can we 24 have Larry? 25 CHAIRPERSON LLOYD: I thought I saw Larry leaving PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 when he saw Barbara up there. He ran. 2 (Laughter) 3 CHAIRPERSON LLOYD: Thank you, Barbara. 4 MS. LEE: Thank you. 5 CHAIRPERSON LLOYD: Ken Barker, Tom Umenhofer, 6 James Thomas. 7 MR. BARKER: Good afternoon, Mr. Chairman, Board 8 members, and members of the staff. I'm Ken Barker with 9 Sully-Miller Contracting, and I'm here to ask to be kept 10 in the program. We have portable asphalt plants powered 11 by generators that are currently in the program. And we'd 12 like to stay in the program. It's a dollars and cents 13 issue. As you're all aware, we're in a budget crisis with 14 the state, and that directly affects the number of dollars 15 being spent on road construction, and we build and 16 maintain roads. 17 The proposed elimination of the diesel engine 18 that power our asphalt plant will substantially increase 19 the cost of us doing business. In the last three years, 20 we have purchased two asphalt plants, one crumb rubber 21 plant, and one large diesel generator. We've made those 22 decisions in part on the flexibility that the state 23 program afforded us. 24 If the proposed regulations are passed, we'll be 25 forced to obtain and maintain permits for diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 generators in all the districts that our plants are 2 permitted in. This will increase our risk and our cost. 3 We have -- until we actually have the permits, we will not 4 know for sure that the local districts are going to permit 5 them. We could be in the middle of a job and our people 6 want to know before we go into a district, can we get a 7 permit. Until we have the permit, we're not going to 8 know, which is going to affect our ability to bid work. 9 Secondly, we have one asphalt plant and one crumb 10 rubber plant that are powered completely by rental 11 engines. At the present time, those rental engines only 12 have statewide permits. So, in effect, when you take 13 those rental engines away from us, you're shutting down 14 two of our plants. 15 Now, if we can get grid power, we'll be okay. Or 16 if the rental company agrees to go out and purchase a 17 permit for that local district, we'll be okay. But we're 18 dealing with a very small subset of engines here. And to 19 entice rental companies to go out and permit engines in 20 the local district is going to be difficult. 21 It's also increasing our costs in reducing 22 competition. I can't see how it's making the air any 23 cleaner. We're still operating under the same rules. 24 There are only about 25 to 35 of these engines that will 25 be affected by the proposed changes. We ask you to take a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 second look before you pass this proposal. Thank you. 2 BOARD MEMBER RIORDAN: Thank you. 3 The Chairman asked me to take over just for a 4 moment. 5 Are there any questions for this speaker? There 6 are none. And we thank you very much. 7 MR. UMENHOFER: Good afternoon, members of the 8 Board. My name is Tom Umenhofer. I'm a Principle and 9 Director of Air Resources for Entrix, Inc., a California 10 Company. I'm here representing the Western States 11 Petroleum Associates, commonly known as WSPA Associates, 12 of which I'm a member and a former executive Board member. 13 WSPA Associates is an association of a range of 14 California companies, hundreds of them, that provide 15 technical and professional services to the gas and oil 16 industry. And since round one of this, our group has 17 participated in the development, and actually felt very 18 vested in the development of this rule making. 19 WSPA Associates are also many of the portable 20 equipment operators in the State of California. After me, 21 you're going to hear from some of those companies with 22 regard to their specific operating concerns, kind of, on 23 the ground experience. 24 You know, I come before this Board approximately 25 one every ten years, and therefore it must be a pretty PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 good reason why I'm here. I started with one good reason. 2 I ended up with two. The first good reason I want to say 3 that we have really appreciated the interaction with the 4 staff in working this project together. And we are 5 100 percent behind the proposal by the staff that was made 6 by the staff. So that's really good. 7 So what's that second reason I'm here? The 8 second reason I'm here is because of the CAPCOA proposal. 9 And as you may know, a few days ago a letter was dropped 10 on Dr. Lloyd's desk from CAPCOA, and we had known some of 11 the things that were going on with the letter. In fact, I 12 had worked personally with Larry Green to try to resolve 13 some of these late issues. But these are the only issues 14 we have. We have no issues with what staff has come up. 15 We are just really pleased. It's kind of like you're 16 running towards the goal line and somebody sticks their 17 leg out on the side line, and down we go. So we are 18 trying to get back up. 19 Let me talk about these three issues. I also 20 want to make another comment, is that I've been a public 21 official for 15 years. The one thing that bothers me is 22 when I get things really late. We've had to deal with 23 this, with CAPCOA's position, really late in the game, as 24 you can see by the date on the letter, which is the 24th 25 of this month. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 There are three issues, and Ms. Lee, the lady 2 before me, identified those issues. One issue she brought 3 up was meters. We've resolved that issue. In my mind, in 4 a letter from Larry Green, that issue has been resolved. 5 So I will say that issue is resolved. How it was resolved 6 is flexibility in what kind of meter. We agree metering 7 ought to be done, but you should have an opportunity to 8 choose what kind of metering. And CAPCOA, from what I 9 understand, agreed with that. So for me, that issue is an 10 issue that's been resolved. It is in the staff proposal 11 the way we would like to see it. So I would say that's 12 off the table. 13 That leaves two issues, the notification and the 14 fee. And I just want to start with notification. I'm not 15 going to go into that in detail. But I will say this, the 16 notification issue was brought up this first time around 17 with this regulation, had the same discussions, same 18 concerns. And in the end, what is currently on the books 19 is what was resolved. Nothing's changed. That was not an 20 issue until the letter appeared with, hey, let's give it 21 another shot, is what I thought. We didn't get it the 22 first time, so let's give it another shot at the end of 23 the day. You will hear a lot of testimony after me on 24 notification. But my biggest concern is we've already 25 been through this. Nothing has changed. It's the same PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 thing. And it doesn't give you anything. 2 Now we're going to talk about cost next. This 3 kind of notification is what drives up costs, not only for 4 agencies, for the operators. So money is going towards 5 paper rather than pollution. I don't like that, and 6 neither does WSPA Associates. 7 So I'm going to leave it at that, but you're 8 going to hear more about how this is not only technically 9 infeasible, the proposal by CAPCOA, but also the financial 10 impacts. We go with the staff recommendation. 11 The other item is the fees. And that's 12 interesting. I want to put it in perspective. ARB staff 13 came to us and said, "We want to increase our fees three 14 times." And we said, "Why?" And so through the 15 process -- through the public process, through the 16 stakeholder process, they explained why, and we said okay. 17 That's a pretty good sales job. You just ask industry for 18 a 300 percent increase, and we said yes. 19 Well, again, we get this letter. And my 20 perspective is that perhaps CAPCOA saw how successful 21 staff was and said, "That's not a bad idea." So they came 22 back and coincidentally their fee increase, if you add it 23 all together, the potential is three times. There's two 24 problems. One is that the base they're working from is 25 two-and-a-half times higher than CARB's base. The ARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 base, remember, $30 per year, per engine. Well, the base 2 that CAPCOA is working from is $75. 3 CHAIRPERSON LLOYD: They get paid more. 4 MR. UMENHOFER: They must get paid a lot more 5 now, because they're going from $75 per year, per engine 6 to a potential of $250. That's a lot of money for an 7 operator at $20,000 loss on their cost go up to $200,000. 8 And that's a lot. That's the first part, is that 9 significant dollars just shot really high. 10 The second part is there's no process here. They 11 didn't do the things that ARB staff did, bring in the 12 stakeholders, talk about it, and provide the 13 justification. There's a huge disconnect, and you're 14 going to hear today, between what CAPCOA folks are saying 15 the costs are and what actual operators are saying the 16 costs are. 17 And one comment that was made that I read in the 18 CAPCOA is that we're asking for an inspection fee that's 19 less than our average inspection fee. Well, it ought to 20 be. In fact, it ought to be almost zero, because a lot of 21 inspectors are already going out there for another reason. 22 And they're just looking at a piece of equipment that has 23 a tag on it, versus other inspections are quite complex. 24 So there's got to be an economy of scales here. 25 We believe -- and why we accepted ARB staff's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 proposal is that we believe the agency ought to be paid 2 for the effort they put in. No doubt about it. We don't 3 disagree. It isn't free. But what is that fair price? 4 This has had, you know, just no back up for us to evaluate 5 and we just can't accept it. You know, if I was going to 6 do it, I would have gone halfway, you know, take the 7 inspection fee increase or take the fixed fee. But to do 8 both, it's just out of bounds and the cost is just 9 significant. 10 So we've asked your Board -- and it's a difficult 11 thing. And I'm a public official. It's really hard to 12 make a decision to go this way or that way or somewhere in 13 between. That's hard to do on the fly when you don't have 14 the data. So I guess the bottom line is that we just 15 don't agree with the way it's been done, and we don't 16 agree with the costs. We'd like to know what the proper 17 cost is, but we don't know today. 18 Those are the comments I have, and I just wanted 19 to reinforce that staff has done a great job. Many of the 20 issues -- up until this morning we were working issue, but 21 we got them done. And the only issues left are ones that 22 CAPCOA has thrown on the table in a very recent period. 23 That concludes my comments, and I appreciate your time. 24 CHAIRPERSON LLOYD: Thank you very much. 25 Next we have James Thomas, Doug Van Allen, Paul PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 Able. 2 MR. THOMAS: My name is James Thomas. I'm the 3 pool guy again. And in some of the previous conversations 4 they've talked about JT's testimony, so I'm also JT. 5 First of all, I want to start with the portable 6 equipment program, we support it. We support it 7 100 percent. We developed it. I think the most important 8 thing to remember here is Peter Venturini and his staff 9 has worked with us to hammer out this agreement over these 10 years. The notification discussion was held in 1996. We 11 hammered it out for days, months. Several times Peter was 12 pulled into the conversation. We kept looking for common 13 ground, and we developed the current notification program 14 that we developed. So the notification was hammered out 15 in 1996 before the program was implemented. 16 The first thing that we're concerned about is the 17 notification. I will guarantee you a non-compliance 18 company will not notify anybody. Okay. If a 19 non-compliance company will not notify anybody -- Dr. 20 Lloyd, I'm glad you came back to the room because my 21 question is -- you asked a very good question. I have 22 heard from the staff 30 percent is in the PERP program. 23 CAPCOA's letter says one-third is in the program. We 24 don't know what is out there. You don't know how big it 25 is. I would like -- I've asked the question, by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 notification of a compliance company, how does that locate 2 the companies that are not in compliance? That's the 3 first thing. 4 When they talk about fees here, on the fees, I 5 just registered my engines in December. I've got 240. 6 Cost me $21,000. If I would have been inspected, I have a 7 potential of $54,000 of inspection in a three-year period. 8 With the new fees that we're talking about, my next three 9 years will be a potential of $244,800. We have no 10 problems with the Air Resource Board's fees. You know why 11 we don't have any problems, is because they come to us and 12 they said, "We need to increase our fees." They did this 13 in June, this past summer. They presented the total cost. 14 We said, "We need to know what we're talking about." They 15 presented it. We discussed it. They agreed upon it. We 16 agreed upon it, and we moved ahead. 17 I would like the Board to allow my company to 18 continue investing these dollars into engines like you 19 were discussing so that we can reduce emissions and that 20 we can really give you a reduction in emissions, and not 21 transporting paperwork back and forth and demonstrating -- 22 trying to demonstrate compliance. 23 We believe that the fees are designed so that we, 24 the compliant companies, can pay to locate the 25 noncompliant companies. So they have received their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 benefits and their reward. Some of these programs have 2 been in place, like in South Coast, for 19 years. And 3 they have skirted the permit process. And we have 4 demonstrated and we've worked through those processes and 5 we've paid our inspection fee. We've paid our permit 6 fees. We've changed engines. And now they want to take 7 and get the money so they can go after these noncompliant 8 people. 9 The last thing I -- oh, I'd like to talk about 10 one thing about the inspections. I have been inspected. 11 The inspection process in Bakersfield, California, took a 12 total of 15 minutes. That's from beginning to end. If 13 they have trouble, it takes 20 minutes. So whenever they 14 talk about the cost -- I read somewhere in CAPCOA their 15 average cost is $25 an hour for a person. 16 Now, you have the time of going back and forth to 17 the location. And as Tom pointed out to you, we work in 18 an oil field. And whenever they come by to inspect 19 Chevron Texaco and their facilities, they're driving 20 through the lease. Oh, my gosh. There's an engine over 21 there. They'll pull in. They'll look at it. And they'll 22 inspect it. They did not drive from Fresno to Bakersfield 23 or wherever to look at this engine and then drive back. 24 That's not the reality. They go by. They see these 25 engines. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 I would like to point out that if it is 30 2 percent that's in the program or if it's half, it doesn't 3 matter. If you go out and inspect -- just think about 4 this. You have a 50 percent chance or a 60 percent chance 5 of catching a noncompliance engine. 6 The only thing that I have to say about the 7 program that I would like -- and I did not even know about 8 this, but Todd mentioned that they wanted an extension of 9 180 days, and we have no problem with that, to issue the 10 permits. All we would ask is if we have a certified 11 engine and you're allowing all these other engines in, can 12 the certified engine still remain within the 30-period 13 window or something, because it's not that hard to process 14 a certified engine. 15 And I appreciate your time, Dr. Lloyd. 16 CHAIRPERSON LLOYD: Thank you. And I think I saw 17 staff nodding. 18 STATIONARY SOURCE DIVISION CHIEF VENTURINI: The 19 last comment is fair. We want the extra time, because 20 we're anticipating a large influx of engines with the 21 changes. But for the existing ones, we can keep it at 22 that. 23 CHAIRPERSON LLOYD: Thank you. 24 Doug Van Allen, Paul Able, and Robert Hassebrock. 25 MR. VAN ALLEN: Doug Allen with BJ, and I'm still PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 employed with BJ this afternoon. BJ Services highly 2 supports what staff has put together. And a minute ago, 3 someone spoke about a song and dance routine. To have a 4 corporate office that's located in Texas and convince them 5 that paying three times the fees was a good deal, there 6 was a lot of song and dance going on, I guarantee you. 7 But we support what staff has put together for 8 the increase on the fees for the portable registration 9 equipment. The problem that we have with the current deal 10 is CAPCOA raising the fees on the district inspection fee. 11 For the district inspection fee at $175 per engine for the 12 103 engines BJ Services has, that's $6,008 per year. BJ 13 must budget that money at the beginning of the year, every 14 year, and set it aside for the potential to inspect. 15 Whether we're inspected on the 103 engines or not, we have 16 to budget it in our budget and set it aside just in case 17 we do get inspected. 18 The district program fee of $75 per engine adds 19 another $2,575. The total of just those two fees alone is 20 $7,500 increase over what we're currently paying. 7,500 21 may not seem like a lot of money, but when you go back and 22 look at it from the side we have to generate that money to 23 the bottom line. In order the generate the 7,500 to the 24 bottom line, we have to sell another $25,000 worth of 25 business to our customers. And in a declining market PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 where it's going down, you can't just go out there and 2 pull up another customer tomorrow that's going the pay 3 that 25,000. 4 And that extra money we're paying for these fees 5 here is all that it costs with absolutely no reductions in 6 emissions from diesel engines. So BJ Services recommends 7 that the Board disapprove of the increase inspection fee 8 and the $75 district program fee that they're trying to 9 put in here. 10 Also, on the discussion about the notification, 11 with 103 engines for BJ Services, the reporting 12 requirements will require one employee, half time, about 13 20 hours a week just to track all these engines and make 14 the reports. Our internal average cost is a little bit 15 lower than CAPCOAs. We go for $24 an hour instead of 25. 16 At $24 an hour, 20 hours a week, 52 weeks a year is 17 approximately $25,000 a year. To generate that 25,000 a 18 year to pay that person, we're going to have to sell 19 another $86,000 worth of sales to our customers that 20 aren't there. 21 BJ Services recommends that the extra paperwork 22 and reporting, that the Board also take that out of there. 23 And I thank you for your attention and chance to speak to 24 you. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 Questions? 2 Paul Able, Robert Hassebrock, and John Linnborn. 3 MR. ABLE: My name is Paul Able, I'm with 4 Schlumberger Oil Field Services. I'd like to thank the 5 Board for their time today, and also like to especially 6 thank the staff for their patience and cooperation with us 7 working through these. And we do support the program that 8 was outlined, although we do have concern with the 9 notification process. 10 Schlumberger Oil Field Service is a fairly 11 dynamic company trying to provide a wide array of services 12 to oil field for companies such as Chevron Texaco, 13 Occidental, as Doug mentioned to you. We provide 14 cementing services, logging services, fraqing services, 15 and the host goes on of all the different types of 16 services we try to provide to our customers. 17 Being a dynamic company, we are forced to move in 18 different directions at the whim of our clients' needs, 19 and providing that quality of service is what allows us to 20 grow our business or continue to sustain our business 21 within California. We will run approximately 3- to 400 22 jobs per month, and we have the ability to go in and out 23 of local air districts multiple times within a day. We 24 have approximately 138, 139 permits for portable 25 equipment. And we try to keep that equipment moving as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 quickly as we can. A typical job might last -- if it's a 2 typical logging job or cementing job might last an hour to 3 two hours, and then we're off to the next job. A lot of 4 times it takes us longer to get to the location than it 5 does to actually perform the job. By the time a 6 notification would be put in and they assemble themselves 7 to come find us, I'm sure we would be off to the next 8 location, not knowing really what benefit that would give 9 anybody. 10 The next concern is with the fees. As you've 11 mentioned, there's considerable cost to doing business. 12 With those costs, whether it be with the ATCM costs that 13 were outlined before or these additional fees, we do 14 support the increase to the ARB that we do perceive value 15 in that. But these additional costs that have been 16 proposed by CAPCOA we feel are a bit unjust. And we're in 17 a situation where we have to make tough decisions within 18 our company. There is expanding markets in Wyoming, 19 Colorado, and other areas of the United States, and we're 20 in a declining market in California. So when a large 21 industry is looking at where are we going to provide 22 resources and where are we going to commit our money, it's 23 not very attractive when additional costs are placed on 24 it. Makes that decision much easier for them to say, 25 "Well, let's just go off in this other location. We'll PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 just slowly come out of this area." We slowly come out of 2 that area, that means equipment moves out of California. 3 With equipment, goes jobs. 4 A typical truck is going to run two or three 5 people on that truck. So for each truck you lose, you 6 lose two or three jobs. And we have the potential to lose 7 hundreds of jobs in California. Schlumberger employs 8 about 300 people, plus or minus depending on how the 9 market is going. So I would just like you to consider the 10 additional cost to those costs. So thank you for your 11 time. 12 BOARD MEMBER RIORDAN: Thank you very much. 13 Are there any questions for this speaker? Thank 14 you. 15 Mr. Hassebrock and then Mr. Linnborn. 16 MR. HASSEBROCK: Thank you. My name is Robert 17 Hassebrock, and I haven't been up here yet. I'm one of 18 the guys in the oil industry. I'd like to thank you guys 19 for giving me the time. 20 And I do HSE work for a company Weatherford. 21 Come from California in the oil and gas industry. We are 22 a rental company, so our industry -- what we do is a 23 little bit different than any others. We have a lot of 24 highly-specialized units that are equipped with engines 25 all throughout the United States and here in California. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 One of the things I do at our company is doing 2 training for managers and supervisors on things. I'm 3 going to digress momentarily and then I'll make that up by 4 being short and avoiding some things that have already 5 been said. And just to recognize the fact that staff has 6 done a great job on this. Really appreciate it. We've 7 been involved in this process since the PERP started, 8 since our engine were first brought into the regulatory 9 process, and then when the PERP was proposed, et cetera, 10 on the work group, all the way through this one, back 11 during '96 with the adoption '97, et cetera. So this time 12 around we've really done a lot of hard work. Appreciate 13 the effort of staff. 14 And as I say, I train managers and supervisors to 15 do their jobs. One of the things I notice is I have to 16 tell them, you know, "Guys, it's really important that you 17 pay attention to the fact it's -- one of the hardest 18 things to do is to listen." You've all been here a long 19 time today. You got a tough job, so I appreciate the fact 20 you're giving me the time to speak right now and that you 21 do have a very difficult job in doing these things. It's 22 appreciated. 23 Anyway, as I said, we've been involved in these 24 things of -- since this whole thing started, we've been 25 involved with the work group. I might have missed a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 couple of meetings. If so, I had a good excuse, I promise 2 you, and put this together. And these poor guys had to 3 listen to us. We were definitely a pain in their side in 4 some issues, I know that, coming forward. Anyway, we've 5 got two main issues we would like to address. They're 6 kind of -- everyone has been hitting the same way. First 7 one being notification. Second one being fees. 8 On notification, we've kind of had a couple of 9 different arguments supporting why we need the 10 notification rules that have been proposed. One being 11 it's to aid in inspections. We know where they are, we 12 can come out and look. The other one being if we know 13 where they are, we don't have to waste our time. Well, I 14 don't see much validity in either argument when in reality 15 if we are going to -- as JT said, noncompliant companies 16 are not going to call and say, "Here we are." As far 17 as -- so they don't waste time coming by, there's probably 18 more validity to that argument. But in reality, coming by 19 our locations, if we're there, it means the noncompliant 20 companies aren't. So once again, let's not waste time. 21 Let's go out and look for the noncompliant companies. 22 The current rules we have right now, they were 23 forged ahead during workshops with stakeholders involved 24 during the 1996 work groups, and we retained them this 25 time around. And we have -- the location that house the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 compliant engines are, like I say, the last place you want 2 to be looking for the noncompliant engines. These new 3 notification rules will not help find noncompliant 4 engines. They do add a great amount of cost and they've 5 not resulted in any reduction in emissions. There's no 6 benefit in reduction of emissions. In fact, I'll suggest 7 momentarily that's the exact opposite. 8 What's needed is for the districts to enforce 9 rules they have on the books. That's revenue to provide 10 enforcement in the penalty rules they have on the books. 11 Perhaps there is a justification for a deference to small 12 operators or operators that have technical violations, 13 they've demonstrated good faith, et cetera. But in 14 reality, there are rules there that allow for funding for 15 enforcement. 16 As far as fees go, it was, in fact -- I'm sorry. 17 I don't have proposed notes. I've been on the road when I 18 got these things. I've not been to my office, not been 19 able to print anything off, so I scribbled some things 20 together. I'm having to go through then and it's a little 21 haphazard. So on the fee side, the proposed changes, I 22 don't see -- we have not had -- my notes say -- they're 23 without justification. We've seen justification from ARB, 24 has been mentioned, and we have not seen justification for 25 these. I would stand in opposition to them for that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 reason. 2 They target compliant companies with added cost, 3 while failing to address the need to bring the 4 noncompliant operators into the program. In a sense, 5 they're using us to fund the effort to bring the 6 noncompliant people aboard. We've been involved since day 7 one. It ought not to be upon our shoulders to make the 8 others guys compliant. 9 Also, this is a -- it says the net effect is to 10 multiply what I would call the compliance penalty, or the 11 competitive disadvantage we've suffered as compliant 12 companies to those operators that do not share the same 13 cost structure. This also is a trend that's a reversal 14 from our historic structure, as we've structured this PERP 15 program in that we've wanted to minimize costs so that we 16 can put money towards replacing engines ahead of the 17 schedules that were placed before us. Put money where we 18 get benefits and reductions of emissions. 19 This adds significantly to the cost, like the 20 proposed notification rule, the fees do, with not only no 21 benefit of reduction of emissions, but it will redirect 22 capital away from upgrades and retrofits and prolong the 23 purchases of new equipment, new technologies, and 24 integration of new technologies into our fleet. 25 Combined, these two issues, the notification and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 the fees, that have been proposed by CAPCOA will result in 2 a significant increase in what I'm calling the compliance 3 penalty that we suffer. And this compliance penalty 4 itself will result in what I'll call an incentive for 5 noncompliance. Behavioral science tells us that you 6 reward what you want more of, you penalize that which you 7 want less of. And there's -- this whole thing stands 8 reason unsaid, if it's passed, there's no reason to 9 believe the compliant companies will want to get involved, 10 because they're being rewarded as it is now. Two-thirds 11 of noncompliant -- of the engines are noncompliant, and 12 they're supposed to be the target. It feels like the 13 target is us. It doesn't seem right. I thank you for 14 your time. 15 CHAIRPERSON LLOYD: Thank you very much. 16 John Linnborn, Geoff Boraston, Sharon Rubalcava. 17 MR. LINNBORN: Good afternoon, Chairman Lloyd, 18 members of the Board, and staff. My name is John 19 Linnborn. I'm Equipment Director for Sully-Miller 20 Contracting Company. 21 On February 19th of this year, I appeared at the 22 ARB workshop to provide public testimony on the proposed 23 amendments to the California PERP. I asked the Board to 24 delay any action on this matter until economic impacts 25 analysis was accomplished. I'm uncertain as to whether PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 this was completed, but wish to inform the Board of some 2 of the hardships to the industry that the amendments will 3 present. 4 Although the Board may feel that permitting of 5 diesel engines for portable equipment can be issued by 6 individual air districts, this solution creates extreme 7 hardship on plants which operate over multiple air 8 district areas. This is true, due to the fact that each 9 air district has unique and varying requirements that 10 oftentimes are difficult or impractical to meet with 11 currently registered equipment. 12 Sully-Miller has ten stationary asphalt plants, 13 two portable hot mix plants, and one crumb rubber oil 14 blending plant that primarily -- and the three portable 15 plants primarily operate from portable generator power. 16 Sully-Miller owns one generator and usually rents two 17 others to operate these three pieces of equipment, which 18 all operate at different locations and in different air 19 districts. If the Board's proposal to eliminate portable 20 generators from the program is approved, all rental 21 generators owned by the rental companies permitted by PERP 22 will no longer be legal to power our equipment. This will 23 dramatically impact costs to consumers, which are cities, 24 counties, municipalities, and the state. 25 We're primarily a road building company. Cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 increases include the need to purchase two additional 2 portable generators at a cost of between 250- and $300,000 3 each. It will cease utilizing our portable plants to 4 remote locations near the projects resulting in sharply 5 increased transportation costs. This will obviously 6 increase truck traffic and generate higher levels of CO 7 and PM 10, thus defeating any attempt to control noxious 8 emissions. 9 The current program is uniform, is presumably in 10 compliance with the Clean Air Act, and is the most 11 streamlined manner of permitting internal combustion 12 engines. Conversely, each air district adapts differing 13 rules relative to NOx, SOX, CO, PM, and PM 10. This 14 creates extreme uncertainty as to the acceptable model for 15 use in any given jurisdiction. 16 Granted, the effect is over a small segment of 17 the industry and may not appear to help any majority 18 interest. However, the proposed action will hurt every 19 one of the operators who are here today and some who are 20 not. Those who are not have resigned themselves to defeat 21 on this issue and have reviewed that the Board doesn't 22 care. We believe and are hopeful that you do care. 23 Although the number of companies and number of 24 engines affected by the proposed exclusion are relatively 25 small, the impact is huge. These companies will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 required to go to each individual air district and seek 2 permits on each engine. Most of the engines were 3 registered within the PERP several years ago and many by 4 today's emission standards can no longer be permitted at 5 the air district level. It is interesting to note that if 6 these engines had been permitted at the air district back 7 then, they would still be permitted in the air district. 8 Excluding these engines also places a significant 9 hardship on the affected companies. Some of the operators 10 do not own engines, but instead rent PERP registered 11 engines from local rental companies near each project. As 12 proposed, rental engines with the PERP -- within the PERP 13 will no longer be allowed to serve these portable asphalt 14 and crumb rubber operations. To continue to operate, the 15 affected company would have to purchase new engines and 16 earmark them to remain with their respective portable 17 plants. New diesel generator rigs can cost, as I said, up 18 to $300,000. 19 The PERP has served the industry well with low 20 fees and has provided the ability to quickly respond to 21 project bid requirements. Having to be permitted with an 22 individual air district means a significant increase in 23 time and permitting effort. Furthermore, permitting 24 the -- and annual fees amount to several thousand dollars 25 per engine for some of the individual air districts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 The number of engines affected by the proposed 2 exclusion is very small. We estimate it to be two to 3 three dozen out of the 15,000 engines currently operating 4 within the PERP. Therefore, the proposed exclusion has 5 little impact on ARB staff, while it has major negative 6 impact on a few companies. The proposed exclusion has no 7 impact on emissions due to the ATCM regulation, which will 8 be universally applicable throughout the State. 9 My proposal is to grandfather gen sets that are 10 currently permitted under the portable equipment 11 registration program that power portable asphalt plants 12 and crumb rubber blending plants. Thank you for your 13 consideration and this opportunity to speak. 14 CHAIRPERSON LLOYD: Thank you very much. 15 Questions? 16 Mr. McKinnon. 17 BOARD MEMBER McKINNON: Yeah. This is about the 18 third speaker that's alluded to this exclusion. What is 19 it, asphalt -- 20 EXECUTIVE OFFICER WITHERSPOON: Asphalt batch 21 plants. 22 BOARD MEMBER McKINNON: Briefly, what's the story 23 here? 24 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: One 25 of the things we were doing when we were going back PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 through the reg was a doing little house cleaning. We 2 were looking at areas where we had issues with the overlap 3 between our program and the district's program. This is 4 one of the areas we identified. Although we haven't had 5 specific issues with the asphalt, we have had similar 6 categories where you've got the district permits one half 7 of it. We've got registration on the other half of it. 8 So we've got this overlap of regulatory authority. So 9 what we've attempted to do is take a lot of this equipment 10 and send it back to the districts since they're going to 11 permit the other half anyway and have them deal with it as 12 a whole. 13 BOARD MEMBER McKINNON: Has there been any look 14 at increased truck traffic as a result of this change? 15 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Staff 16 spoke to these gentlemen before the meeting today, and we 17 have not done any evaluation at this point in time. 18 CHAIRPERSON LLOYD: Thank you very much. Thank 19 you. 20 Geoff Boraston, Sharon Rubalcava, Martin Ledwitz. 21 MR. BORASTON: Good afternoon. Thank you for 22 hanging in there and hearing this issue. My name is Geoff 23 Boraston. I'm the Corporate Environmental Manager for 24 Granite Construction Company. And I'm also here to talk 25 about this issue of ineligibility of registered gen sets PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 for powering asphalt plants. I can assure you, I'm not 2 going to go back and repeat any of the testimony, because 3 what's been said, we stand behind. 4 Granite is a large paving contractor. We do 5 about one-and-a-half billion dollars a year. You've 6 probably seen our green trucks on the road. We're the 7 guys that make the commitments to go out on projects, and 8 we close lanes, and we take public safety into our hands, 9 and we accept risk for doing this. We accept liquidated 10 damages for getting the work done. 11 And I have personal experience permitting 12 equipment. That's what I do at Granite, permitting 13 asphalt plants and generators. I can tell from you 14 firsthand experience, getting kicked out of the program is 15 going to cause a severe impact to the company. It's not 16 just a financial impact. There's a question of 17 uncertainty. Even if we are to transition out of a 18 registration program and go and get permits for the air 19 districts, there's over 30 air districts. If we bought a 20 new generator, let's say, through this transition we end 21 up having to buy new generators, that may get us through 22 first permitting process. But two years later where we 23 bid a project somewhere else, we have no idea if we're 24 going to be able to get a permit in that area. We need 25 some predictability to the process. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 Now just to speak to this question of the fact 2 that there's overlapping jurisdictions, I mean, we've been 3 out on several projects where we've had asphalt plants 4 that are permitted by the local air districts and 5 generators that are registered. And in our experience, 6 that has never been an issue. 7 And the districts recognize the registration 8 program. In fact, if you go to permit a generator with 9 some of the districts -- I mean an asphalt plants, they'll 10 ask you, "Where are you getting the power from for the 11 asphalt plant?" You say, "We're going to use a 12 generator." They'll say, "I hope that's going to be a 13 registered generator." We'll say, "Absolutely. It will 14 be registered." They'll say, "Good, because you don't 15 want to go through a permitting process for that 16 generator." That will -- I'm telling you this from 17 firsthand experience. That will give you an idea of the 18 fear everybody has been presented here of getting kicked 19 out of the program and left to the mercy of 35 air 20 districts. 21 The question of truck trips has come up. What 22 contractors do at bid time, we look at the risk of a job. 23 And when a job comes out to bid, we don't have time to go 24 get permits for all the equipment on that job. There's 25 just not enough time during the bid process. So we look PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 at the job and say, "Can we get permits for this 2 equipment?" And I get calls from Vice President and say, 3 "Geoff, can you get a permit for this plant because, boy, 4 if you don't, we are in big trouble." And if I said, "I 5 don't know," what the companies then do is they figure 6 "Well, we're just going to get the asphalt plant from over 7 here. We'll haul it 70 miles to the job site." That's 8 not doing anything for air quality, and it's increasing 9 truck traffic on the road. 10 The best place to make the asphalt is on the job 11 right next to the highway. And so far I think it has 12 worked just fine having registered generators and asphalt 13 plants permitted with the district. I don't see what's 14 broken, and I don't see what needs to be fixed. And I 15 think it's a very small change to make in this proposed 16 regulation, and it involves a very small number of 17 engines. I imagine right now there's probably only a 18 handful, probably less than ten engines, operating in 19 California right now that are running portable asphalt 20 plants. I think it's a very small change in this proposed 21 regulation just to delete asphalt plants from that 22 ineligibility list. And I'd respectfully ask that you do 23 that before approving this regulation. Thank you. 24 CHAIRPERSON LLOYD: Thank you. 25 Ms. Riordan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 BOARD MEMBER RIORDAN: Yes, Mr. Chairman. 2 To the speaker -- and I'm sorry I didn't ask, 3 actually, Mr. Barker, but I'll ask you instead. You would 4 testify that in the process of getting a permit for a 5 temporary batch plant that they won't put those two 6 permits together, the permit for the temporary power and 7 the batch plant and process them at the same time? 8 MR. BORASTON: There's a lot -- permitting a 9 generator is a lot -- potentially a lot more problematic. 10 I mean, generators have this sort of demon status right 11 now and -- 12 BOARD MEMBER RIORDAN: Is more problematic than a 13 batch plant? 14 MR. BORASTON: Yes. Yes. It is. 15 BOARD MEMBER RIORDAN: I find that very hard to 16 believe. 17 MR. BORASTON: The other thing is a lot of the 18 generators have gone into the registration program. There 19 hasn't been a similar -- so there isn't a similar program 20 with the air districts that is an alternate that you can 21 go in and have portable registered engines. I think the 22 registration program was intended for just this type of 23 equipment. We're not opposed to emission reductions. We 24 did not -- 25 BOARD MEMBER RIORDAN: I recognize that. I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 just talking about the permitting process and the logic of 2 it and just having been in a situation to deal with the 3 asphalt, you know, the temporary asphalt plant and the 4 public input, which is sometimes negative. It would seem 5 to me the generator would just be a breeze to get through, 6 as opposed to the batch plant. 7 MR. BORASTON: No. When you start dealing with 8 BACT issues, when you go a new air district, you never 9 know what you're going to come up against. There's only 10 so many options with an asphalt plant. When you start 11 looking at a generator, depending on who you're dealing 12 with. And each air district has its own way of 13 approaching things. Sometimes it even comes down to the 14 individual that you're working with. And they can start 15 saying, well, we want you to look at the feasibility of 16 running line power ten miles. We want you to look at the 17 feasibility of using liquefied natural gas. I saw on the 18 Internet this web site and they're selling these 19 microturbines. We'd like you to consider putting in a 20 bank of microturbines, all for a job that may last three 21 months. 22 BOARD MEMBER RIORDAN: Thank you for your 23 testimony. 24 MR. BORASTON: Thank you. 25 CHAIRPERSON LLOYD: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 Sharon Rubalcava, Martin Ledwitz, Sven Thesen. 2 MS. RUBALCAVA: We've put Baxter to sleep. 3 SUPERVISOR DeSAULNIER: Not just Baxter. 4 (Laughter) 5 MS. RUBALCAVA: I think you're right about that, 6 actually. All right. My name is Sharon Rubalcava. I'm 7 here representing the Motion Picture Association. And I 8 would like to just say that we support the registration 9 program. This has benefited the motion picture industry 10 and television production to a great extent. We support 11 the staff's recommendation and the recommended amendments, 12 which we think are fine. We don't have a problem with it. 13 We oppose the CAPCOA suggestions with regard to 14 notification. And let me just spend most of my time 15 telling you why we oppose that. 16 The member companies, the Television Motion 17 Picture Production Studios, use portable equipment on a 18 daily basis. They use it to run lights and to power the 19 equipment that's used during filming on location. While 20 much of this location shooting is done in the South Coast 21 Air Basin, frankly they are shooting throughout the state 22 on a daily base. We are everywhere. 23 These operations are already subject to just a 24 whole thoro of regulations, and those regulations are at 25 both the state and local level. And the bottom line is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 that location shooting in California is much more 2 difficult than it is in other states or countries, like 3 Canada, all of which are wooing this industry away. 4 You know, it's well known that these other 5 locations see the economic value of the entertainment 6 industry, and they see it for what it is, which is a 7 fabulous economic engine which is benefiting greatly our 8 state right now. And they're aggressively doing whatever 9 they can to try to get production to go there. You've 10 read it in the paper. I don't have to belabor that point. 11 But what happens when production goes out of state? We 12 lose jobs. We lose good paying craft jobs. A lot of 13 money goes out of the state. 14 On its face, notification always sounds fairly 15 reasonable. All you have to do is dial up the website and 16 plug in a little bit of information. And it doesn't seem 17 like it should be that hard. But what you have to look at 18 is in terms of what it takes to fulfill that requirement 19 and how it's simply adds another burden to doing business. 20 I think that's what everybody is telling you in one way or 21 another. I'm just putting the entertainment spin on it 22 here. 23 First, it's just one of the regulations that we 24 face. And you know, for instance, in our industry there 25 are regulations governing traffic, noise, hours of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 operation, lighting, employee safety, food services we 2 provide, minors, use of hazardous materials, fire safety, 3 special effects, and the like. We have to get multiple 4 permits already for location shooting, and those can 5 contain additional restrictions and different conditions 6 too. Some days a single production company can be 7 shooting at several locations. They move from place to 8 place, just like you heard the public service people and 9 many of the other people who are testifying here today. 10 And so the notification process would have to be repeated 11 each time they move from place to place. 12 Also, this is an industry where everything 13 changes at the last minute. They can be planning to shoot 14 in one location one day. They get out there. The weather 15 is not right, the light's wrong. There's something 16 happening down the street. All of a sudden they have to 17 pick up and move. And you know, talent doesn't show up. 18 There's a lot of reasons. There's a lot of last-minute 19 changes. So if they have to start the whole notification 20 process over each time to change, it's one more burden. 21 And you know, frankly, its an opportunity to mess up and 22 get NOBs and things like that if you forget. So the 23 bottom line, it's an unpredictable business and the 24 regulatory burdens add up, and at some point the burden 25 becomes too much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 Second, there's an issue that I've been thinking 2 of, and nobody has raised this, but the question is the 3 real life doing of it. You know, we have a lot of air 4 districts. What, like 35 people? 35. Okay. How do you 5 know when you go from one district to another? The South 6 Coast Air Basin -- if you're in Orange County, you know 7 you're in the South Coast Air Basin. But the three 8 counties are split. Okay. 9 We do a lot of filming in rural locations. If 10 you don't have a street address, how do you know what 11 district you're in? When I read the definition of 12 districts, at least the South Coast district, it's like 13 metes and bounds. It's like the description of property 14 on your deed. I've never seen a street map of a district. 15 So there's just some logistical issues there, especially 16 if you're in rural locations without a street address. 17 And a lot of times that's where our location managers are. 18 So they move around. So the doing of it is perhaps a 19 little harder than it might seem to be. Also the 20 harder -- if you're in an unfamiliar location, you know, 21 it just becomes harder and harder. Anyway, bottom line is 22 we think that requiring notification any more frequently 23 than is currently required is too much of a burden. 24 We want to thank, at this point, the staff. We 25 have participated in some of the workshops. I have not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 been doing this for 11 years, like others here. But we've 2 certainly been to some of the more recent workshops. It's 3 a very impressive process. Staff has listened to our 4 concern. We submitted comments and made presentations. 5 And I personally want to thank them for the efforts 6 they've made to come up with proposed changes to these 7 regulations that reduce the burden on the industries that 8 are trying to comply. And we urge you to keep your 9 notification burden where it is and your recordkeeping 10 burdens where they are. Thank you. 11 CHAIRPERSON LLOYD: Thank you. 12 Martin Ledwitz. I don't see Martin. Thank you, 13 Martin. 14 Sven Thesen, Randal Friedman, Cindy Tuck. 15 MR. THESEN: Hi, Sven Thesen, again one of those 16 PG&E utility companies. 17 The language has been tightened up in the 18 definition of what is equipment is allowed in and out of 19 the portable registration program. And it's in regard to 20 generators being tightened to address -- to prevent people 21 from buying electrical generators and pumping energy in 22 the grid to get paid money by the utility. And also if 23 they are to run some sort of screen, when their power gets 24 cut, they turn on that generator. 25 Now from a PG&E perspective, we're concerned PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 that, depending on the interpretation, that when we go to 2 upgrade a facility, that will not be considered 3 maintenance and routine repair, and that for the 45 4 minutes, two hours that we need to put in a larger 5 transformer, we'll have to get a district permit because 6 that is not an emergency occurrence. 7 Let me give you a specific example. So a grocery 8 store expands, they put double the size of their coolers, 9 and they need more electricity to run their coolers. PG&E 10 doesn't own the grocery store. We just provide them with 11 electricity through our equipment. So we need to go and 12 upgrade the transformer that's located next to the grocery 13 store. So what we'll do is we'll cut the power to the 14 grocery store and connect up a portable engine temporarily 15 while we remove the small transformer and put in a much 16 larger transformer so they're able to use more electricity 17 to run their coolers. 18 Now, because that's not an emergency, because we, 19 as PG&E, said we're going to take the power down. It's 20 not an emergency. It's not some act of God. We're 21 sitting there pulling the switch. And it's not routine 22 repair. It's an actual upgrade. There's the potential, 23 depending on your interpretation, that we may need a 24 district permit for that particular portable generator for 25 that short-term job. And I've got some other comments in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 my letter of February 18th. I just want to make sure 2 that's out there, and I'm hopefully working with staff to 3 resolve this. But I want to point this out. 4 CHAIRPERSON LLOYD: Thank you. Is that it? 5 MR. THESEN: No. Sorry. 6 CHAIRPERSON LLOYD: I'm getting comments from my 7 colleagues here that we need to really curtail stuff here, 8 stuff we haven't heard before. 9 MR. THESEN: I'm going to say anything about the 10 recordkeeping reporting except to add that the actual 11 recordkeeping -- the notification requirements per an 12 actual registration document, all it says is that when we 13 notify the district, we're just to notify the district 14 that we're there and the name and telephone number of a 15 contract person so that if they want to go inspect, they 16 can go inspect. We don't tell them exactly where we are. 17 We just provide them with the name and a phone number. So 18 if we do this on a daily basis, certainly from a utility 19 where we do operate in multiple districts on a single day, 20 it's going to be very difficult for all involved to 21 provide and track this paperwork. 22 BOARD MEMBER McKINNON: Mr. Chairman, I'm going 23 to -- and I started it. I started it. I'll take 24 responsibility. We start of beat that issue to death. 25 And I'm wondering if we could impose a time limit so we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 don't lose a quorum and we're able to vote. 2 MR. THESEN: One last thing then, sir, please, is 3 on -- 4 SUPERVISOR DeSAULNIER: Baxter, attack. 5 (Laughter) 6 MR. THESEN: This is not to do with the 7 notification, I promise. We would encourage ARB to extend 8 the registration period for these portable units. Right 9 now, the permit lifetime is three years then you need to 10 reregister. We, as PG&E, like I said, hold our engines 11 for 20-plus years. It's sort of silly every three years 12 to submit the same information over and over again and pay 13 the fees. We would much rather have a choice to have a 14 five-year or even a seven-year permit and may pay a very 15 large sum up front and not to have to go through the 16 paperwork. It costs us at least $500 internally, 17 nevermind fees, just to prepare the paperwork to 18 reapply -- it's not reapply, but to renew our permit 19 applications. Can I just pole the room? How many people 20 engine users would like to have a five-year permit? Raise 21 your hand. 22 Anyone here who would not like to have the option 23 of a five-year program, raise your hand. He's with ARB. 24 But we like him. 25 I would -- on that notification, there's a rental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 section that says if you're a rental company and less than 2 200 break horsepower, you don't have to do any of the 3 notification. Why don't we expand that to everybody 4 because they're just so small, there are so many. Let's 5 think big picture here. Thank you. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Randal Friedman, Cindy Tuck, Daniel McGivney. 8 I'll time it here for three minutes. 9 MR. FRIEDMAN: Mr. Chairman, members, Randal 10 Friedman on behalf of the United States Navy. Quite 11 simply, portable equipment is indispensable to today's 12 military. Without it, planes can't fly. We can't 13 communicate. We can't do the R&D that's necessary for new 14 weapon systems. It's absolutely vital. 15 In 1995, we worked with ARB staff, with the 16 Legislature on AB 531, and they recognized the unique 17 situation of our tactical support equipment in the passage 18 of the original AB 531. I say this to speak to two issues 19 in particular, and also just to reiterate. Since 1995, 20 we've had nothing but a tremendous relationship with your 21 staff in resolving any number of issues relating to this 22 and had have a very successful -- in fact, this is one 23 instance where we can actually say other states are 24 copying California in the way that they treat the 25 military. And it's been many other states that have used PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 California as the model on how to take these unique 2 military aspects into account. 3 In terms of the notice, one example at China 4 Lake, it's in three different air districts. Our aircraft 5 fly very past and very far. They are constantly using 6 portable equipment to power transmitters and radar 7 installations to track the tests and the training. The 8 district boundaries in the middle the Mojave Desert are 9 hard to see. They're basically meaningless. Yet, if 10 we're going to have to every time a transmitter or radar 11 installation moves across some unseen district boundary, 12 we're going to have people doing nothing but doing notices 13 back and forth on the movement of this portable equipment. 14 In terms of the fees, I just would point out that 15 our tactical support equipment is exempt from the 16 recordkeeping, from the notice, and from the engine 17 specification. So frankly, we've always had issue trying 18 to see even where a district would spend $75 per engine 19 for an inspection. We certainly don't see how a district 20 could spend $175, especially when we're coming to an 21 installation that has 40 or 50 identical pieces of 22 equipment on a flight line and they're looking at them in 23 the course of an hour or two. We would have significant 24 problems with the fee increases and with the notice. 25 And I'm available for questions. Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 CHAIRPERSON LLOYD: Thank you very much. 2 Cindy Tuck, Daniel McGivney, Frank Caponi. 3 MS. TUCK: I've never been up here three times in 4 one day, personal record. Cindy Tuck with the California 5 Council for Environmental and Economic Balance. I think 6 due to Mike Tollstrup's credit and Todd Wong's credit, 7 CEEB is neutral on this rule making as proposed by staff. 8 One comment I do want to make is that we also 9 think the PERP program is a good program. I won't 10 elaborate, but I'm glad to do that off line any time. 11 On notification, that is the one issue that we 12 want to talk about. We support the staff proposal. We're 13 fine with what staff's suggesting, but we have major 14 concerns with the CAPCOA proposal. You've heard a lot. I 15 probably don't need to say too much about this. We 16 certainly have utilities with hundreds of the engines 17 moving all the time. If you're in West Sac and you come 18 across the bridge, you've switched air district. You 19 know, these guys are moving all the time everywhere. 20 And I have to give the companies credit. They've 21 gone along with the ATCM. They're not opposing the $400 22 million rule making. This was something that just hits, 23 you know, it didn't make sense level. That's why we're 24 testifying on it. 25 We think that the districts can really do an PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 inspection in the home district. They've got the contact 2 information. They can call them up, schedule the 3 inspection, get it done. We think generally they should 4 be focused on trying to find the people who aren't in 5 program. They're not in the program. They're in 6 violation. They can hit them for permit violation. 7 Getting to the bottom line, the CAPCOA proposal, 8 there's a problem because of the timing. I called Larry 9 Green a couple weeks ago. I said "Larry, we're hearing 10 this. We have major problems." The first time we sat 11 down and actually talked about this was yesterday. There 12 was a brief discussion about talking -- working something 13 out within the context of the 15-day comment period. 14 There was no discussion there about having a 60-day 15 discussion. 16 Our preference would be for this to be done and 17 for it to just go with what the staff is proposing. If 18 there was a desire to have discussions within the 15-day 19 period, we would be glad to participate in those 20 discussions in a constructive fashion. With that, I'd be 21 glad to answer any questions. 22 CHAIRPERSON LLOYD: Thank you, Cindy, for keeping 23 with time. 24 Daniel McGivney, Frank Caponi, David Grose. 25 MR. MC GIVNEY: Mr. Chairman members of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 Board, Dan McGivney, Eastern Municipal Water District. 2 I'll try to keep my one comment brief. 3 Staff indicated to you earlier that one of the 4 changes that was made in the regulation involved -- and 5 there had been some other discussion about it from 6 previous speakers and stuff -- that there's been some uses 7 that based on issue that have occurred over the past few 8 years they've determined are inappropriate to maintain 9 within the regulation. Because of that, there may be some 10 engines that have to drop out of the PERP regulation and 11 go back to the local districts. 12 Some of those engines -- and we made comment on 13 this issue at the last workshop, and our concern had to do 14 with many of our engines, you know, like Eastern's 15 engines, were previously permitted with various location 16 permits at local agencies before enrolling in the PERP 17 many years ago. So many of us in this room have been 18 complying were the regulations for years. Now because of 19 a determination that may or may not be appropriate to 20 delete these uses, but because they're being deleted, 21 these engines may have to go back to the local agencies. 22 Well, several years have transpired and BACT has changed 23 for engines at local district permits, and these engines 24 are for the most part going to be old engines and aren't 25 going to meet BACT standards to be able to obtain a permit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 under the current requirements. 2 Staff has indicated that, you know, as part of 3 their strategy to help mitigate this, you know, they've 4 offered to maintain your registration as effective until 5 the local agency takes action on your permit application. 6 The action could be to approve an issue and permit. 7 Action could be to disapprove your permit application, 8 because you don't meet BACT. That would leave us out in 9 the cold. That would leave a piece of equipment unable to 10 be utilized any longer and require us to maybe spend tens 11 of thousands of dollars to replace it in order to get a 12 local agency permit. 13 At the same time that you're doing these changes 14 here, you're actually opening up the regulation in 15 anticipation. And staff discussed what they believe might 16 be an increase in workload because of this, but a number 17 of these engines that are unpermitted by local agencies, 18 unregistered in the PERP program, and you're hoping to 19 gather them into this program in order to account for them 20 and get them into compliance with the regulations, and we 21 support trying to do that. 22 But at the same time, these engines are maybe 23 going to pay a penalty that may be 100 or $200 for a 24 higher registration fee to come in because they haven't 25 previously done that. At the other end of the coin is we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 may have an engine getting knocked out that may cost tens 2 of thousands to replace. And while you're replacing it, 3 you lose use of that piece of equipment for however many 4 months it might take you to procure the permit. So we 5 urge the Board to have staff do something that works with 6 local agencies. They have to take these engines. I know 7 like in ours, our engines are in the PERP program, but 8 they're not -- they don't leave the district. They say in 9 our home district. And so they've always been there. 10 They're previously permitted in the local agencies to just 11 take them back until they get the 2010 Tier 1 requirement 12 is, to me, the simple thing to do. So thank you. 13 CHAIRPERSON LLOYD: Thank you. 14 Frank Caponi, David Grose. 15 MR. CAPONI: Frank Caponi, L.A. County Sanitation 16 Districts. One quick issue and then one quick comment. I 17 just want to support what Dan just discussed regarding 18 engines that could potentially be thrown out of the 19 program. There's one provision in the regulation, and I'm 20 going to paraphrase the provision. The provision 21 basically says that the EO can throw out just about any 22 engine they want out of the program. Staff has told us 23 that they will produce the guidance document after the 24 fact to discuss which engines those are. We think that's 25 after-the-fact rule making, and we would like to see some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 language in here that addresses what engines they're 2 looking at and how they're going to address that. 3 CHAIRPERSON LLOYD: And the 15-day notice. 4 EXECUTIVE OFFICER WITHERSPOON: Yeah. I'll speak 5 for broadly to throwing stuff out of the program because a 6 lot of issues have come up. 7 MR. CAPONI: Just one comment. This is the 8 CAPCOA issue. And you've already heard a lot of 9 discussion of the issues themselves, and I'm not going to 10 talk about that because it's been beat it death. Just a 11 general comment about CAPCOA in general. As I said in my 12 previous testimony, I have been at every working group 13 meeting and every workshop. CAPCOA has not been there. 14 We had a couple representatives from local APCDs, and we 15 appreciate them being there. They weren't representing 16 CAPCOA. 17 Every meeting we had the same comment. Where's 18 CAPCOA? We want to understand what CAPCAO's issues are, 19 and they never came forth. In the eleventh hour a letter 20 was plopped down and stated all these issues. They said 21 they were working with individuals and groups. If that 22 was happening, it was happening behind the scenes and that 23 wasn't in a public forum. My comment on that is they're 24 asking for additional time to negotiate or whatever they 25 want to do, and I don't think what has happened is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 respectful of the industry or the process, and we would 2 hope you would not allow it to happen. Thank you. 3 CHAIRPERSON LLOYD: Thank you. 4 Finally, David Grose. 5 MR. GROSE: Dr. Lloyd, members of the Board. I'm 6 David Grose. I'm the Stationary Source Program Manager at 7 the Sacramento Metropolitan Air Quality Management 8 District. I've been participating in all of -- at least 9 most of the workshops and work group meetings during the 10 last year and a half. At some point in time during that 11 period of time up until October I was the representative 12 for enforcement managers of CAPCOA, so I think that CAPCOA 13 did have some presence that the meeting. I thank you for 14 your time. I'll try to set a record for brevity. I know 15 it's past my bedtime. We'll go from there. 16 We've heard a lot about the single day 17 notification and the fees. And I need to say something 18 from an opposing point of view. First of all, the fees 19 that we -- Sacramento Metropolitan Air Quality Management 20 District supports the CAPCOA recommendation, both with 21 regard to fees, as well as with regard to notification. 22 The reason for the fees is, currently, we also 23 support the fees that the Air Resources Board staff are 24 seeking. We think it's justified. They put in a lot of 25 work when these notifications and the process of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 registering equipment comes in. We think those are 2 justified. 3 On the other hand, heretofore, there haven't been 4 a lot of methodology for us to recover fees. There's been 5 a $75 inspection fee, but we have to know about that 6 engine first and be able to go out and see it. Okay. 7 The one thing that the CAPCOA proposal provides 8 is a way to -- it's a tool. We hear every time -- and I 9 have to say that I was, in fact, at the work group 10 meetings, and it wasn't an issue that, what are we doing 11 about the 15,000 engines that are out there. That 12 question was asked earlier today. It's one thing to say 13 we're going to go out there and do it, but we have to take 14 from program fees, and we're certainly willing to do that, 15 or through penalties to go out and find these. 16 The difference between finding a stationary 17 source by doing that same method and finding a portable 18 source is that a stationary source is there and is waiting 19 to be found. Right now under the current system of 20 five-day notification, the only ones that we really know 21 about are those that are going to be there for more than 22 five days. And that's even kind of qualified because if 23 they don't originally intend to be there for five days but 24 ultimately are, they have an additional two days to 25 notify. So those are the only engines in my district that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 I will know about, unless I trip over them. 2 Single day notification is a tool for me to help 3 with that program. I will be happy and I would love 4 nothing more than to focus on those engines that are not 5 in either program, not in the registration program, nor in 6 the district permitting program. But I need tools. I've 7 been practicing enforcement in this state for 22 years. I 8 think I know what I need to get the job done. I would 9 like that tool, and I would like fees to pay for 10 inspections. 11 So I heard the comment today it was a 20-minute 12 inspection. I can guarantee you it's not a 20-minute 13 inspection. Just getting into the process to locate the 14 engine in the database to make sure that it does have a 15 registration, to write up the report many times in itself 16 will take 20 minutes. When we have hour meters and fuel 17 meter type of requirements -- it's one thing to spend your 18 five minutes looking at the meter and recording what it 19 says, but what that's going to be telling us is when we go 20 back and find out what it said last month or last year to 21 see if that usage was complied with. Those are the 22 reasons why we need both shorter notification period as 23 well as fees to cover those. That's all I have to say. 24 Thanks. 25 CHAIRPERSON LLOYD: Thank you. With that, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 guess we don't have any more. 2 Staff, do you have any more comments? 3 EXECUTIVE OFFICER WITHERSPOON: Yeah. Just some 4 summary comments. In our judgment, the number one problem 5 with the portable equipment program is the high degree of 6 scofflaws out there. And that's both our responsibility 7 and the district's responsibility to find them. And our 8 Chief of Enforcement, Jim Ryden, has already begun 9 discussions with district enforcement personnel on how to 10 conduct some kind of sweep and outreach effort to start 11 making people more aware of these regulation and driving 12 them into either the district permitting program or our 13 registration program. 14 Now, it will take money to do that, and so 15 although CAPCOA has not up until this point satisfied all 16 the stakeholders with how they arrived at their fees -- 17 one more thing. A lot of the resources do come out from 18 the penalties collected from the ones we catch and then 19 use that to fund the next round of inspections, et cetera. 20 But seed money is definitely needed. Just like ARB has 21 been underfunded and subsidized in this program for years, 22 so have the districts. 23 So we don't want to cut off the fee discussion 24 completely. They don't have the Discretion to set them 25 themselves. The state law requires you to set them. What PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 I would suggest we do is provide CAPCOA another 2 opportunity to present during our 15-day change process 3 along side of it to the stakeholders the calculations and 4 the resource needs that are behind their figures and then 5 we can arrive at what the right -- 6 CHAIRPERSON LLOYD: You mentioned another 7 opportunity. My understanding from a lot of the 8 stakeholders, they haven't had the opportunity. 9 EXECUTIVE OFFICER WITHERSPOON: That's right. 10 But have CAPCOA come forward with more substantive support 11 for the numbers they've recommended. And I think I can 12 tell you when we do the final changes, it will be no 13 higher than what you've heard today and may come down a 14 bit. But we do need to set a fee in this rule for what 15 districts may collect. And to not do it at all is a 16 missed opportunity, because we won't be back here again 17 for a little while, I hope, with regulatory changes. 18 Staff does not like the idea of prolonging this 19 another 60 days and continuing to argue over notification. 20 I think you heard overwhelming opposition to the CAPCOA 21 notification proposal, and I don't think that's going to 22 move in 60 days. 23 And we didn't get into depth about metering 24 requirements, but similar opposition lies there, too. I 25 think staff would prefer to stay with what we proposed to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 you. 2 Now, the last issue that has been troubling me 3 today is this notion of throwing people out of the 4 registration program. And what was motivating staff in 5 part was lessons that we've learned from the power crisis, 6 and you've set very stringent BACT requirements for power 7 plants, temporary and permanent, so have air districts. 8 We wanted to be sure that anything pumping energy into the 9 grid was not escaping our very tough NOx control 10 requirements by being in the portable registration 11 program. So that was one motivation. 12 And then the second motivation was when we had a 13 stationary source at which portable engines were common, 14 that we pick them up under the bubble all of the 15 stationary source permit. This was the logic. What we're 16 hearing today is the problems with that logic that there's 17 not an amnesty process thought out at the district level, 18 perhaps a way of walking them over from where technology 19 stood when they registered to what the BACT requirements 20 are now and permitting requirements. 21 So can see why they're so anxious, and I'm a 22 little troubled by it, too, and want to have staff spend 23 some time thinking through and talking to districts about 24 if we're going to forcibly transition people back into 25 permitting, there's some thought and reasonableness in how PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 that transition takes place so that we don't just dump 2 them in with no forethought about it. And then I'll give 3 staff an opportunity if they want to add anything from 4 what they've heard. 5 STATIONARY SOURCE DIVISION CHIEF VENTURINI: That 6 about covers it. 7 CHAIRPERSON LLOYD: I agree. And I think it 8 comes back to the thing I said at the beginning. The 9 thing that's most disturbing is we put our priorities to 10 get these rogue engines. Maybe David Kay is available for 11 hire. He's had practice here. So on the serious side, I 12 think that's a glaring, glaring omission. And none of us 13 can be proud. We can't be proud. And I still don't 14 understand how we can fully understand how much emissions 15 out there. 16 As I said the other day, when we gone through the 17 SIP process, we went through the SIP process at the South 18 Coast. And we talk about all the emission reductions 19 we're putting on various industries, various sectors. We 20 look down to a tenth of a ton. We don't even know where 21 these engines are. So how can we be that precise? So 22 clearly somebody is breathing in the air. We need to get 23 to that. 24 I agree with staff, and I get the sentiments from 25 my colleagues on the Board. That should be number one, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 and we should be going after them, rather than punishing 2 the people who are abiding by the law. I'm pleased with 3 what I hear from what staff is proposing. But turn it 4 over to my colleagues for any comment. 5 BOARD MEMBER RIORDAN: Mr. Chairman, I did ask 6 Barbara to stay, not that I'm going to ask you any 7 questions. Do you think it was good that you heard some 8 of the issues that were discussed in the testimony so you 9 can have a sensitivity for the problems that people see in 10 the process perhaps with the districts? And as you 11 come -- and I'm going to support Ms. Witherspoon's 12 comments about an extension of the 15-day to work on these 13 fees. You'll have a sense of what the concerns are from 14 the people. 15 I would just like to suggest to the staff -- and 16 in this, you know, discussion with the affected parties, 17 that we severely penalize those who have not registered. 18 I think we can -- the good old carrot and stick. If 19 you've really participated in the program and you've done 20 it in an honest, up front way, you should be rewarded. 21 And those who have not participated, who have been the 22 rogues in this issue -- I don't know how many are out 23 there -- but they should be penalized as much as possible, 24 because I've always felt that we should never penalize 25 somebody who's participating in the program. We should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 penalize those who are not. And I would just encourage 2 you to work on that. I say that to you, the districts, as 3 well. Don't penalize those who are really working with 4 you. Penalize those who are getting around the 5 regulations. 6 CHAIRPERSON LLOYD: Mr. McKinnon. 7 BOARD MEMBER McKINNON: First of all, Barbara, I 8 understand that wasn't your idea, and I'm sorry you had to 9 take all of that from all of us. But anyway, I won't 10 belabor it. Anyway, maybe the person with the idea can 11 come next time and take all that, you know. 12 I absolutely agree on increasing the fines, and 13 you know, if we need to go to the Legislature, whatever we 14 need to do. The bad guys should have to pay. The good 15 guys that play by the rules shouldn't have to make up for 16 it. 17 And in terms of folks that are sort of being 18 pushed out of the program, I heard what you said. I'm not 19 comfortable. Is that something that can be done in the 15 20 days, or is it something that we need to not have it 21 change and have it that subject come up another day? 22 EXECUTIVE OFFICER WITHERSPOON: That's a very 23 good question. I'll ask staff what they think about our 24 ability to work it out during the 15-day change process. 25 STATIONARY SOURCE DIVISION CHIEF VENTURINI: My PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 initial reaction is I think we can work it out during the 2 15-day process. The way the process works is if something 3 isn't worked out, it does come back. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And there's 5 different situations here. Some of what we want to move 6 out is like the use of portable generator in lieu of 7 getting a backup bug at a facility. And normally that bug 8 would be regulated by the districts, versus this other 9 situation where we've got a plant that half of the plant 10 has to get a district permit, but the portable engine is 11 an essential part. Now we have equity issues involved if 12 they move out of the program all of a sudden. I think we 13 can sort those out in 15-day process. 14 I think we are quite sensitive from what we heard 15 to the people who are being forced out and are legitimate 16 portable engines. And our theory about let's just move 17 them into single permit process maybe isn't a good idea. 18 There's not a lot of emission benefit one way or the 19 other. 20 BOARD MEMBER McKINNON: Thank you. 21 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 22 SUPERVISOR DeSAULNIER: I just want to associate 23 myself with Barbara's comments and the difficulty in not 24 rewarding people, incentivize people who do the right 25 thing. In effect, you take resources away from getting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 the people who don't do the right thing. 2 And then lastly, I'd like to say in regards to 3 who is responsible, it's my clear understanding that it's 4 not the Bay Area's APCO who came up with this idea, and 5 the district where the idea did come up to is not 6 represented here today, but he usually sits between Board 7 Member Riordan and Calhoun. 8 (Laughter) 9 CHAIRPERSON LLOYD: The positive thing from the 10 business side is that since South Coast works four days a 11 week they don't have to worry about it that one day. 12 Mr. Calhoun. 13 BOARD MEMBER CALHOUN: What are we going to do 14 about the fees? I didn't hear one single person support 15 CAPCOA's request today. 16 EXECUTIVE OFFICER WITHERSPOON: I'm supporting 17 their need for some increase in fees. And what I'm 18 suggesting is they do a better job of justifying how they 19 arrived at the number and the workload involved. That 20 it's not sufficient -- though I might be able to trust 21 CAPCOA that they did a survey amongst themselves, there's 22 a sales job to be done with the stakeholders and industry 23 are that paying the fees. That's what needs to happen. 24 When we get to the end of that process, we'll know the fee 25 and put it in the 15-day package. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 CHAIRPERSON LLOYD: You made that commitment to 2 work with the stakeholders, so it's not just between us 3 and CAPCOA, it's with the stakeholders. 4 EXECUTIVE OFFICER WITHERSPOON: Exactly. 5 CHAIRPERSON LLOYD: Supervisor Patrick. 6 SUPERVISOR PATRICK: I'm just greatful to hear it 7 wasn't our APCO in the valley. That makes me feel much 8 better, Supervisor DeSaulnier. 9 SUPERVISOR DeSAULNIER: You were ready to blame 10 me, though, weren't you? 11 SUPERVISOR PATRICK: I wanted to see who you were 12 making eye contact with when you started talking about 13 that. 14 SUPERVISOR DeSAULNIER: You would have been my 15 second guess. 16 SUPERVISOR PATRICK: Actually, Dave was my first 17 guess, but I'm glad to know that's not the case. And you 18 can turn off the recorder at any time. 19 But I did want to say I don't know when I've 20 heard more compelling testimony by industry. You know, 21 what an hour and a half ago or whatever, you know, we 22 moved forward with the ATCM. And you all were saying this 23 is costing you a gazillion dollars. You said even though 24 it was very expensive, you knew it was going to clean the 25 air. So we were able to move forward with that and feel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 that there is, indeed, a justification. 2 In hearing the testimony today, you know, I think 3 our button line always has to be clearing the air. So 4 much of what we heard today was that that is not going to 5 happen with some of the proposals that have come up. And 6 so I'm very greatful to hear that you're going to be 7 working with industry on a myriad of issues, especially 8 from those people who are being requested to leave the 9 program and go back to a district program. They have 10 grave concerns about that, and I'm glad that you're going 11 to be working with them. And I'm very grateful it wasn't 12 our district who came up with these ideas. 13 CHAIRPERSON LLOYD: Mr. McKinnon. 14 BOARD MEMBER McKINNON: Of staff, I'm wondering, 15 this five-year permitting stuff that was suggested, and 16 I'm thinking if you had five-year permitting and a bunch 17 of new folks coming in next year, for a few years there 18 would be a pretty flush operation to go after those that 19 were not playing by the rules. Any reaction to that? 20 EXECUTIVE OFFICER WITHERSPOON: The money is 21 deposited in Air Pollution Control Fund and appropriated 22 to us based on our annual costs. So even if it comes in 23 in a large bulk, we don't draw it on that way in the 24 Governor's budget. So I get the theory, but we do a 25 stable draw for sort of a basic level of rule development PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 and enforcement year by year. Is that what you meant? 2 BOARD MEMBER McKINNON: Is there anything we can 3 do to impact that? I mean, you know, half are unaccounted 4 for. 5 EXECUTIVE OFFICER WITHERSPOON: We certainly can 6 go out and do enforcement, and that brings in another set 7 of revenues. And then you can also work out settlement 8 agreements about how those revenues get spent and that 9 sort of thing. If they go to district coffers, that's 10 well and good too. Districts are able to move more 11 expansively on enforcement activities. 12 BOARD MEMBER McKINNON: Now, was there reaction 13 specifically on the five-year? 14 EXECUTIVE OFFICER WITHERSPOON: There's a 15 bookkeeping reaction. Everyone needs to be three-year or 16 everyone needs to be five to keep track of everybody, is 17 the idea. 18 BOARD MEMBER McKINNON: Okay. Well, it sounded 19 like there wasn't any opposition to five year. 20 CHAIRPERSON LLOYD: Maybe, Mr. McKinnon, we could 21 ask staff if they could explore that. 22 EXECUTIVE OFFICER WITHERSPOON: We could propose 23 it as an alternative and take comment on it. 24 CHAIRPERSON LLOYD: The other thing I would like 25 to suggest, report back to us in a year to see how many of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 those 33,000 missing engines we've -- what progress we're 2 making, as an informational item would be helpful. 3 EXECUTIVE OFFICER WITHERSPOON: We typically do 4 an enforcement update every year. We could certainly add 5 this to it as a prominent item. 6 CHAIRPERSON LLOYD: Please, that would be good. 7 Seeing no more comments, I would now close the 8 record on this agenda item. However, the record will be 9 reopened when the 15-day notice of public availability is 10 issued. Written or oral comments received after the 11 hearing date but before the 15-day notice is issued will 12 not be accepted as part of the official record on this 13 agenda item. When the record is reopened for the 15-day 14 comment period, the public may submit written comments on 15 the proposed changes which will be considered and 16 responded to in the final statement of reasons for this 17 regulation. 18 Any ex parte communication on this particular 19 item? 20 Mr. McKinnon. 21 BOARD MEMBER McKINNON: I had a very lengthy 22 conversation about the reporting requirements with Cindy 23 Tuck, I believe, on Tuesday afternoon about 2:30 at Jump 24 Start Cafe. 25 CHAIRPERSON LLOYD: So with that, we have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 resolution. We had the discussion. So I'll entertain a 2 motion. 3 SUPERVISOR DeSAULNIER: Move the resolution and 4 incorporate the discussions and direction. 5 BOARD MEMBER RIORDAN: Second. 6 That is leaving open the fee for CAPCOA? 7 CHAIRPERSON LLOYD: Yes. 8 BOARD MEMBER RIORDAN: And any other item that 9 we've discussed cutting loose. Okay. 10 GENERAL COUNSEL JOHNSTON: Would the Board want 11 just to provide the staff with direction to do that, or 12 would you like it included in the resolution, just a point 13 of clarification, please? 14 SUPERVISOR DeSAULNIER: Whatever you prefer. 15 CHAIRPERSON LLOYD: What's your advice? 16 GENERAL COUNSEL JOHNSTON: It would be easier to 17 do it as direction to the staff without changing the 18 resolution. 19 CHAIRPERSON LLOYD: If that's easier, that's 20 good. All in favor say aye. 21 (Ayes) 22 CHAIRPERSON LLOYD: Anybody opposed? No. 23 Thank you. Thank you very much, staff. Thank 24 you very much for all the people who have waited this hour 25 as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 With that, we've got one more item to go. One 2 more item to go, that's to officially close the Board 3 meeting. Thank you all. 4 (Thereupon the California Air Resources Board 5 adjourned at 6:44 p.m.) 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 362 1 CERTIFICATE OF REPORTER 2 I, TIFFANY C. KRAFT, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 8 State of California, and thereafter transcribed into 9 typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said hearing nor in any 12 way interested in the outcome of said hearing. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 11th day of March, 2004. 15 16 17 18 19 20 21 22 23 TIFFANY C. KRAFT, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345