1 MEETING 2 CALIFORNIA AIR RESOURCES BOARD 3 4 MARKET INCENTIVES AND OTHER INNOVATIVE ) 5 CONTROLS FOR MOBILE SOURCES AND CONSUMER ) PRODUCTS: ) 6 ) PRACTICAL MEASURES FOR INCLUSION IN THE ) 7 STATE IMPLEMENTATION PLAN ) ___________________________________________) 8 9 10 11 REPORTER'S TRANSCRIPT OF PROCEEDINGS 12 Volume 2 13 14 15 Location: COUNTY ADMINISTRATION CENTER Supervisors' Chambers, Room 310 16 1600 Pacific Highway San Diego, CA 17 Date and Time: Thursday, July 21, 1994 18 -and- 19 Friday, July 22, 1994 20 Reported by: JOANNE P. CUNNINGHAM, CSR 2734 21 Job No. 25427JC2 22 23 24 25 281 GILLESPIE REPORTING SERVICES 1 San Diego, CA Friday, July 22, 1994 2 3 P R O C E E D I N G S 4 5 CHAIRWOMAN SCHAFER: Good morning, ladies 6 and gentlemen. Welcome to the Air Resource Board's 7 second day in a series of symposia on "Market Incentives 8 and Other Innovative Control Methods: Practical 9 Measures for Inclusion in the State Implementation 10 Plan." 11 Today's sessions are going to break out into 12 two parts. Part I this morning is on the "Efficient 13 Movement of People and Goods," and this afternoon we'll 14 discuss "Accelerated Vehicle Retirement/Conversion." 15 We've come to San Diego to talk about what we 16 might do better or differently in the field of air 17 quality management as we approach the 21st century, and 18 as I said yesterday, the stock and trade of our business 19 has been performance-based standards, increasing the 20 better technologies, and the lack of turnover of aging 21 machinery of all kinds. And that will undoubtedly 22 continue, but we also are learning that there's a great 23 deal more to discuss: how to use the marketplace more 24 effectively, for one; expanding markets, as we certainly 25 know, can still stimulate the production of cleaner 282 GILLESPIE REPORTING SERVICES 1 goods and services; and also we're coming to recognize 2 more than ever how pricing signals may induce more 3 efficient and therefore less wasteful and therefore more 4 environmentally friendly choices. We hope to explore 5 market-based alternatives in some detail during these 6 symposia. 7 Focusing and accelerating our rate of 8 progress is another area important in this debate. For 9 example, we've concluded that removing gross emitters 10 from the road in California is a top priority, and we're 11 considering any ancillary embelishments to California's 12 smog check program to bring that about, and what kinds 13 of changes, specifically. 14 Another area we're exploring is the world of 15 new business practices, cutting-edge technologies or new 16 applications of existing tools that place less burden on 17 our overstrained air supply, to include manufacturing, 18 smart highway systems, more routine telecommuting and/or 19 teleconferencing. Could we achieve increased 20 productivity at a reduced emissions rate? Is there 21 something there? 22 And finally, we can talk about how we as a 23 society intend to pay for the actions that we know we 24 need, particularly as they affect existing sources of 25 emissions. 283 GILLESPIE REPORTING SERVICES 1 As we learned yesterday, some of the answers 2 to these questions may be well outside the Air Resources 3 Board's authority to control, but we should be able to 4 influence consideration of these matters in other 5 appropriate forums. 6 As I did yesterday, I would like to ask each 7 speaker to emphasize the practical aspects of his or her 8 remarks, what you'd have this board do the same or 9 differently in managing emission sources under the 10 state's jurisdiction, what obstacles you see and how 11 they might be surmounted, and what kinds of returns you 12 expect both in economic and air quality terms. 13 Our particular concern will be to try to 14 identify the emissions reductions benefit of each 15 proposal, as we go along, and I mean over a period of 16 time, this summer and fall as we put together the State 17 Implementation Plan. 18 I know many of you have been engaged in 19 discussion about the Federal Implementation Plan, and I 20 know there are strong feelings about that plan, which 21 have been reported in the local press in the last week. 22 And although this board shares many of those sentiments, 23 I don't want to use today's session to get involved in a 24 protracted discussion about the FIP. There are other 25 forums for that debate. 284 GILLESPIE REPORTING SERVICES 1 I'm also going to ask the participants to be 2 patient with respect to the State's Implementation 3 Plan. We in the local air districts are in the process 4 of constructing various features of that plan and 5 packages coming together but won't be completed until 6 later this year until after we've gone over the numbers 7 more carefully, consider our policy and legal options 8 and have a chance to reflect on some of the alternatives 9 that we'll be hearing about at these symposia. 10 There will be appropriate public hearings on 11 the State Implementation Plan, and interested parties 12 will have an opportunity to participate at that time. 13 As a state with a track record in air quality 14 management that is second to none, I believe that we can 15 chart our own future. And so we've invited all of you 16 here today to partner with us in that effort. I want to 17 thank you all for coming, and I'd like to begin by 18 inviting Councilman John Cox to the podium. 19 The way you've done it, that's fine. John, 20 however you want to proceed, with slides or anything 21 like that, will be okay too. 22 Councilman Cox, City of Newport Beach, has a 23 list of government credentials as long as your arm. I 24 won't read all of them. 25 COUNCILMAN COX: Good. 285 GILLESPIE REPORTING SERVICES 1 CHAIRMAN SCHAFER: But his role here today 2 is to represent the Southern California Economic 3 Partnership. I expect you'll be telling us a little bit 4 more about what that partnership's goals are. And we 5 want to welcome you to the Air Resources Board. Good 6 morning. 7 COUNCILMAN COX: Thank you. Thank you, 8 Chairwoman Schafer. I appreciate this opportunity to 9 talk to you this morning. I'll try to make this work as 10 best as we can. I'm going to give you some highlights 11 of comments that came out of a task force that SCAG put 12 together, an advanced transportation technology task 13 force. 14 (Overhead presented.) 15 And what I'm going to comment on is the 16 evolution of this process. 17 The objective of the task force was to deal 18 with future growth problems in the region, traffic 19 congestion, air quality congestion, and certainly the 20 economic problems that exist. 21 (Overhead presented.) 22 And you have provided us with a lot of 23 information about where we're going with air quality 24 emission reductions. I just wanted to point out some 25 market indicators which helps demonstrate the difficulty 286 GILLESPIE REPORTING SERVICES 1 with getting there. 2 This is an example of how the consumer has 3 been operating over the last 30 years, moving from -- 4 whether the use of the private vehicle to public transit 5 to walk -- work at home, walk to work, and so forth, is 6 just the opposite direction of where a lot of us have 7 been talking about we would like to see it go in the 8 future. So it is going to be difficult to address some 9 of that when the consumer functions somewhat differently 10 than we would like him to. 11 (Overhead presented.) 12 The region -- and this is directed at the 13 Southern California region. This just gives us a 14 profile of the difficulties we face, not only with 15 population growth, trip growth, VMT growth, land 16 constraints, road mile constraints, open space 17 conservation -- there's a variety of things that we have 18 to deal with in this region in order to come to grips 19 with the issue that you're focusing on. 20 (Overhead presented.) 21 To help put this in perspective of the 22 magnitude of what it is, the SCAG population forecasts 23 call for 20 million people in this region alone in the 24 year 2010. If we did all of the trip reduction programs 25 we're talking about, we would still have 10 million 287 GILLESPIE REPORTING SERVICES 1 single-occupant vehicles traveling around this region 2 every day, which points to the view that the tailpipe 3 emission issue has to be dealt with in a significant 4 fashion. Even with transit ridership being desirous, 5 you still don't get the kinds of numbers that you would 6 like to get to. And we have at risk, as we move to 7 clean fuels, a gas tax revenue strain that comes into 8 the basin of about two and a half billion dollars a year 9 that also has to be dealt with. 10 (Overhead presented.) 11 SCAG, in looking at its transportation 12 facilities, is looking at a significant problem. Forty 13 percent increase in population, 48 increase in VMT, but 14 only 12 percent increase in road mile miles, which means 15 further delay, further congestion, and thus further 16 emission problems from that congestion. 17 (Overhead presented.) 18 The problem is not only just dealing with 19 major roads. We tend to talk about the average of 12 20 percent as across all of them, but a difficulty is, how 21 are the local governments going to deal with only a 3 22 or 4 or 5 percent increase on the arterial system which 23 even causes more congestion and pollution problems. 24 (Overhead presented.) 25 The SCAG mobility plan calls for a mode 288 GILLESPIE REPORTING SERVICES 1 split. And this may be optimistic in some; some feel a 2 shift in the SOV area, ride share area, and so forth. 3 Well, one of the significant points to point out here is 4 even if we spent all the money we possibly could, the 5 view is that we could never get above 8 percent; thus 6 rail transit, the traditional rail transit program, we 7 need to get significantly higher. Our goals are 15 8 percent. 9 So proposed is a third tier transit system 10 that is something new that needs to be developed and 11 needs support to make it work. 12 Telecommute, work at home, and other issues 13 are those that have to be dealt with. 14 (Overhead presented.) 15 I won't go into the air emission reductions. 16 You provided that. But I might -- would like to point 17 out the AQMP, something that we -- I have been 18 intimately involved in, and the support of its direction 19 has got some significant challenges before it. 20 Number one, the proposal that ZEV represents 21 50 percent of the vehicle new car sales by the year 2010 22 is an enormous challenge to -- for any of us to 23 achieve. Also, of concern is the ISRs, Indirect Source 24 Rules, that are calling for trip reductions in shopping 25 centers, special event centers, and also an increase 289 GILLESPIE REPORTING SERVICES 1 of 15 -- 2.0 AVR. 2 What's significant about that chart and that 3 piece of information is that many, many people believe 4 that basing our emission reductions on trip reductions 5 criteria is a design for failure. Especially local 6 government is concerned about the business activities 7 and how it's going to continue to work if it doesn't 8 have people coming to its shopping centers. So an 9 equivalency methodology needs to be considered. 10 (Overhead presented.) 11 I know there's law changes that are required 12 in that area in order to make some of that work. 13 But let me get to the major point of where -- 14 the marketing goals that we're looking at for this 15 region. I and many of us believe we're dealing with a 16 marketing problem, not a regulatory problem, not a 17 command and control problem, but a way that we can get 18 the technology into the market and get it utilized. 19 To get to the 50 percent share of the 20 electric vehicles, we need 500,000 new vehicles every 21 year. The alternative fuels may represent 250,000. And 22 these are ballpark numbers. But in order to make the 23 transit system work, we could need as many as 50,000 24 vehicles running around the region, not the 4,000 that 25 we have today. It's a significant number. 290 GILLESPIE REPORTING SERVICES 1 Telecommute and teleservices. We have to be 2 able to have -- in this area, one of the examples that 3 some of us look at as we look at teleshopping. We would 4 prefer not to shop in New England for our goods. We 5 would prefer to shop at our local shopping centers. And 6 how do we create a teleshopping mechanism so our local 7 businesses can remain successful? 8 In the IVHS arena, you know a lot about that, 9 but I think it's one of the areas that has significant 10 opportunities, not only for travel or information, but 11 from the standpoint of dealing with this congestion 12 issue I mentioned earlier. We have got to get more 13 throughput to our system, whether it's the roads or it's 14 the parking systems, or whatever. 15 And again, if -- the example I like, 16 Disneyland always says, "Why should I have a trip 17 reduction program when I already have a 3.8 AVR; my 18 customers don't travel the peak hour." But maybe our 19 agenda ought to be better parking management so those 20 cars can park more efficiently and thus reduce the 21 emissions that would come out of a congestion process. 22 Because this is a marketing problem, we have 23 three groups here to deal with. Not only is it the 24 technology, but pricing in any product is a major, major 25 issue. And what's been put forth is the need for an 291 GILLESPIE REPORTING SERVICES 1 emissions fee to change the impact of the dirty cars and 2 help finance the technology, and that's an issue there 3 that is very, very important, but needs a lot of 4 political will to make it work. 5 And certainly there needs to be some changes 6 in our destination building standards, and in order to 7 make that happen is also very, very significant. 8 (Overhead presented.) 9 We have proposed a -- the VMT emissions fee, 10 but one of the things I would just like to point out is 11 the form of technology that could help it work in a 12 market-based sense is to have a clean transport debit 13 card. If you were to charge the public for driving 14 dirty cars, that money could be given back to the public 15 so the public can make a choice as to whether to use 16 electric vehicles, alternative fuels, etc., through a 17 debit system that the technology currently provides 18 for. 19 We also have to change the attitudes of the 20 development community and the local governments on how 21 they invest in future expansion, rather than just in 22 parking garages or street improvements. Technologies 23 need to be that -- need to be considered in that 24 fashion. 25 (Overhead presented.) 292 GILLESPIE REPORTING SERVICES 1 Same way in terms of the investment of funds 2 that funds like Reg XV, 2766, or VMT emissions fees also 3 could be used to help make these products come to market 4 in a significant way. 5 (Overhead presented.) 6 The benefits are many, not only in the trip 7 reduction, emission reduction, convenience to access of 8 centers for the public, but we gain more efficiency out 9 of our transportation resource. 10 (overhead presented.) 11 The benefits are jobs, as you've heard from 12 Project California, could be some 350,000 jobs in this 13 region. 14 (Overhead presented.) 15 We have a vision that we put forth that this 16 doesn't start in 1998. You just don't turn the switch 17 and sell 30,000 cars. You need to start it sooner, and 18 our vision is to start this program of selling these 19 technologies in 1996. And it's going to take a lot of 20 work to get there. 21 (Overhead presented.) 22 We have significant barriers that take 23 place. For example, you're aware of the technology 24 shortcomings in the battery technology and the range 25 limitations. We need to develop a system of charging 293 GILLESPIE REPORTING SERVICES 1 stations that help us fit into the environment that the 2 public works in. 3 (Overhead presented.) 4 The barriers in that regard is that if you 5 had the first 10,000 electric vehicles on the market 6 for sale, you would need, in our view, 27,000 charging 7 stations out there to accommodate the customers driving 8 today. 9 Alternative fuels would require 5,000. And 10 I say that to put out there before you the form of 11 magnitude that's necessary to accommodate the customers' 12 driving habits. 13 (Overhead presented.) 14 The same way is truth in the Smart Shuttle 15 technology. Current PUC requirements don't allow you to 16 take a customer to and from shopping centers if you were 17 to use Super Shuttle, and we need to get more abilities 18 for the private sector to function in this area to 19 provide a service. 20 IVHS, AVI transponders, Automatic Vehicle 21 Identification systems. If they were a universal 22 system, we could use them on toll roads, in parking 23 garages, parking systems, whatever the case may be, 24 transit systems, and we need to created a mechanism 25 where that's available. 294 GILLESPIE REPORTING SERVICES 1 I spoke to the telecommunications area 2 earlier. 3 (Overhead presented.) 4 How do we make all of this happen? It isn't 5 going to happen by ourselves -- by itself. And our view 6 is, we have formed -- what we propose and formed is what 7 we've called the Southern California Economic 8 Partnership. 9 (Overhead presented.) 10 It's made up of -- well, let me put it this 11 way, the objective or mission of the partnership is to 12 do everything it can to accelerate the deployment of 13 advanced transportation technologies through cluster 14 group collaboration dedicated to modifying the market 15 conditions. 16 You hear a lot about partnerships. Many of 17 them are dealing with the technology side; many are 18 dealing with the manufacturing side. This is dealing 19 with the consumer side, the marketplace that will thus 20 enhance the utilization of the technologies. 21 (Overhead presented.) 22 The Partnership is made up of support 23 through -- at AQMD, Caltrans, SCAG, and Project 24 California. We have a support staff and local 25 government officials involved in the process. 295 GILLESPIE REPORTING SERVICES 1 (Overhead presented.) 2 The board members are made up of industry 3 leaders throughout the Greater Los Angeles air basin 4 area, covering all aspects of the basin that are 5 necessary to make it work. 6 (Overhead presented.) 7 Probably the most significant part of it, 8 though, is the industry cluster groups, and these groups 9 are already beginning to be formed. They -- the 10 electric vehicle group has met now three times. They 11 are very, very excited about the collaboration of how 12 they can make these products come to market in a 13 meaningful way. The auto industry is there, the utility 14 industries are there, and so forth. 15 Examples that surface just by bringing these 16 people together are building codes that are a problem to 17 the electric-fueled vehicle arena. Building codes don't 18 allow the charging stations to be put in, in a uniform 19 fashion. And Edison has found this out the hard way, 20 trying to deploy the G.M. Impact. 21 Also, the permit process. It takes 90 days 22 to get a permit to install a charging unit in your home 23 or your garage at work. Hardly attractive to a customer 24 who wants to buy a car today and drive it home tomorrow 25 and be able to get it refueled. 296 GILLESPIE REPORTING SERVICES 1 So getting issues like that -- and I just 2 cite that one, and it's true across the board, is very, 3 very important. 4 You see the five cluster groups, each one of 5 those technologies, but supporting those are very 6 important in the financial arena. Today, if you wanted 7 to change your parking standards, you probably couldn't 8 do it, because the financial community requires a 9 certain number of parking spaces -- parking stalls in 10 order to finance a development structure. 11 We hear over and over and over again about 12 the need for education. We brought together the leading 13 advertising, public relations, sales promotions, 14 marketing people in Los Angeles to collaborate on a 15 program of how everybody can participate, from 16 television commercials down to education in kindergarten 17 level on the issue of clean air and the issue of clean 18 vehicles. 19 Clean cities is local government. They're 20 collaborating on how we will have a local government 21 building code, a permitting process, a clean fuel 22 purchasing process that will make and accelerate all 23 these things to take place. 24 Business centers or activity centers, listed 25 across the bottom. How can we help them deal with the 297 GILLESPIE REPORTING SERVICES 1 trip reduction goals that have been laid out in the 2 plan, but maybe do it in a different way that we can get 3 more throughput through the system that will reduce 4 emissions rather than just trip reductions by 5 themselves. 6 I'm going to wrap this up by saying -- 7 because I can go on and on and on with issues that have 8 come forward, and we don't have the time. But in our 9 view there's key elements that must be a part of the 10 total plan, in one way or another. Not only is it the 11 technology, but it is the investment that needs to be 12 there. It is the pricing mechanism that helps deal with 13 changing people's habits and purchase decisions, and 14 certainly the land use issues that are necessary to make 15 it convenient for the consumer to use the product. 16 This is a process that involves hundreds of 17 people, thousands of people. 18 (Overhead presented.) 19 We kind of put this out because this is not 20 one agency, one person's idea, but all of these people 21 are involved. And so far we have been meeting with 22 everyone that's in the box up here to share this message 23 and point out the necessary -- the necessity for all of 24 us to collaborate in order to bring this partnership 25 together and make it effective so that we -- the 298 GILLESPIE REPORTING SERVICES 1 marketplace is what determines whether you've cleaned up 2 the air, not just a specific regulation. 3 I've said many, many times to groups like 4 this, we look for a regulation and try to count the 5 beans that will reduce that emission. My view, the 6 ultimate test is going to be, did we get 500,000 cars a 7 year out there by 2010? The EVs. Did we get some of 8 these technologies in place? And it will take the 9 collaboration of everybody to make that work. 10 So in a brief nutshell, that's an overview of 11 what we proposed in the AQMD as a mechanism to help 12 bring the clean air about. 13 Thank you. 14 CHAIRWOMAN SCHAFER: Well done, Councilman 15 Cox. 16 Supervisor Wieder. 17 SUPERVISOR WIEDER: You should have said 18 "Woo," the train has stopped. 19 COUNCILMAN COX: I only had 15 minutes. 20 SUPERVISOR WIEDER: First of all, John, 21 you did an absolutely fantastic job. 22 COUNCILMAN COX: Thank you. 23 SUPERVISOR WIEDER: Do you have copies of 24 this? 25 COUNCILMAN COX: I can leave you with 299 GILLESPIE REPORTING SERVICES 1 some. 2 SUPERVISOR WIEDER: I would like this. I 3 have some questions. 4 COUNCILMAN COX: Okay. 5 SUPERVISOR WIEDER: How long has -- well, 6 first of all, I want to compliment SCAG on the spin-off 7 which this has become, or will become. Am I right? 8 COUNCILMAN COX: Yes. The articles of 9 incorporation for this nonprofit corporation are filed 10 now. The board of directors will meet on August 9th and 11 10th, and the cluster groups are already meeting. So 12 it's already under way. 13 We are seeking funding, as every agency does 14 these days, for a variety of reasons, and we also have 15 some funding -- advanced funding in place. 16 SUPERVISOR WIEDER: The question I have to 17 ask, John, is you indicated that AVR's goal had to be 18 enhanced, Reg XV, for 2 percent, if I remember. 19 COUNCILMAN COX: 2.0, yes. That's what's 20 in the current plan. 21 SUPERVISOR WIEDER: Okay. That's in spite 22 of the present climate of opinion and data that we're 23 gathering that still -- would almost still be 24 anti-Reg XV? 25 COUNCILMAN COX: Yes. The reason for 300 GILLESPIE REPORTING SERVICES 1 that -- and I'm not attacking the plan -- I mean, I'm 2 aware it's there, but it's there because in a planning 3 sense, you've got to look at in the future what kind of 4 mechanisms might give you the emissions reductions. And 5 the technology side of this issue is so brand-new, the 6 IVHS is hardly measurable, even telecommunications is 7 hard to measure, and the direct emission reductions is 8 going to come off of that, and then the question, can 9 you really get to a 50 percent market penetration of 10 ZEV, as an example. 11 So the plan, the way they're -- the current 12 guidelines are, is that you have to put in things that 13 you know about. The models run that way and so forth. 14 That could be fine, but I think what we're 15 suggesting needs to happen is you need to have an 16 equivalency option, and so that maybe if we get better 17 throughput, less congestion, and so forth, we also wind 18 up with emission credits for that somehow. 19 SUPERVISOR WIEDER: All right. Thank 20 you. 21 The next question that I have. Is Detroit 22 ready for those ZEV vehicles? 23 COUNCILMAN COX: Are they ready? 24 SUPERVISOR WIEDER: Yes. What do they 25 have, 35 prototypes out now? 301 GILLESPIE REPORTING SERVICES 1 COUNCILMAN COX: Well G.M. does on the 2 Impact. But Detroit's in a position where they don't 3 want to commit their product plan, so it's hard to get 4 them to say. But I get the sense that they could start 5 marketing in 1997. 6 There's other non-Detroit manufacturers that 7 are looking to do it earlier, and -- but the biggest 8 difficulty that we have, even if you bought one today, 9 you can't get it charged. I mean, I say that bluntly, 10 because I -- granted, we can plug it into a wall socket, 11 but that's not where the real market opportunities are, 12 if they're going to get the masses. And so we have to 13 build this infrastructure system, get it in place, so 14 that the cars can be purchased. 15 SUPERVISOR WIEDER: Which will encourage 16 the manufacturer. 17 COUNCILMAN COX: That's right. 18 SUPERVISOR WIEDER: The last question I 19 have, John, is kind of parochial, if not -- parochial, 20 possessive. You don't include -- you do say something 21 about county partnerships, county economic 22 partnerships. Would that not include -- for instance, 23 in our county, John -- you know, yours and mine a 24 Partnership 2010? Because partnerships are already 25 working on group clusters. I would hate to think that 302 GILLESPIE REPORTING SERVICES 1 they're off in a vacuum doing their thing, and you're 2 off in a vacuum doing yours. 3 COUNCILMAN COX: No. There are different 4 types of partnerships, and that issue and question comes 5 up in economic programs and so forth. 6 This program is an umbrella program, probably 7 going to be ultimately a nationwide model. It does not 8 preclude what is going on at the local level. We would 9 not be able to get a building code, Uniform Building 10 Code, throughout the region if we just had a local 11 partnership do that. 12 When we are driving back and forth to L.A., 13 we want to be sure we can charge in L.A. the same way as 14 here. So that's why we're dealing with an umbrella 15 thing, and it's a hand-me-down program. 16 SUPERVISOR WIEDER: Except -- and maybe I 17 don't know enough about it -- except at this point the 18 effort that Partnership 2010 is using is really in a 19 pioneer stage, and they could be a prototype to build in 20 what is yet to happen other places. So I would really 21 try to encourage you to really find out more about what 22 UCI is doing, and -- 23 COUNCILMAN COX: Right. I'm not 24 disagreeing with that. It represents a local level, 25 which we need. San Bernardino County is doing the same 303 GILLESPIE REPORTING SERVICES 1 thing. 2 SUPERVISOR WIEDER: No, they're not. 3 COUNCILMAN COX: Well, their own versions 4 of them. Each one of them has a little different spin 5 on it. But those all are necessary to make this work. 6 I agree with you. 7 SUPERVISOR WIEDER: Thank you. 8 CHAIRWOMAN SCHAFER: Let me pursue a 9 couple of these things. Has the task force put together 10 a price tag on the overall concept that you're 11 advocating? 12 COUNCILMAN COX: Well, no. 13 CHAIRWOMAN SCHAFER: The question I'm 14 really trying to get at, are you expecting to pay for 15 this through public funds? 16 COUNCILMAN COX: No. Market-based 17 programs ought to operate in the marketplace, and the 18 difficulty we've often had with identifying what this 19 program costs is the trade-offs of what we're talking 20 about. I'll site some examples. 21 Take the EV program. We hear a lot of 22 numbers, like a $20,000 vehicle today or the $35,000 23 vehicle. That's fine in a prototype sense, but in the 24 real world marketplace taking EV, Westinghouse has an 25 electric engine that cost $1800 that is equivalent to 304 GILLESPIE REPORTING SERVICES 1 the internal combustion engine that costs $2300. 2 The operation of -- and maintenance of 3 electric vehicles is half of what it is on internal 4 combustion engine. So if you put this into the true 5 mass market arena, there is no cost other than what the 6 customer is going to retain in -- attain for an 7 alternative purchase of a product, or the cost we have 8 to deal with is how do we get this jump-started? How do 9 we really begin to feed the system? And programs like 10 IVHS America and the IVHS program in ISTEA is helping do 11 that in some of these areas, in telecommunications and 12 IVHS. 13 Smart Shuttle has got a problem, how that 14 gets started, because the market -- private market is 15 not available to it yet. And I think the EV has got a 16 problem because the infrastructure is not there yet and 17 the price of the car hasn't come down. 18 So through the collaboration of these 19 industry cluster groups, we're hoping to identify really 20 what the financial barriers ultimately are, what kind of 21 jump-starting money would be required, and how do we 22 make it work from there. 23 CHAIRWOMAN SCHAFER: Okay. Because I 24 thought I heard you talk about the emission fee and VMT 25 fee as something that was, quote, to pay for this 305 GILLESPIE REPORTING SERVICES 1 technology, and I want to point out that a witness 2 yesterday, Dr. Arnn from the Claremont Institute, 3 through the studies and focusing -- and focus groups, 4 polling exercises that they're participating in, the 5 public may tolerate a change in the way that they're 6 paying for certain things now, but not increase claims 7 on their income. So I'm trying to find out whether you 8 expect these VMT emission fees would be offset by, say, 9 the reduction and what they discussed yesterday, the 10 gasoline taxes. 11 COUNCILMAN COX: Right. What they're 12 looking at is from a public policy standpoint. I look 13 at it from a marketing standpoint. When I talk about 14 pricing, the gasoline, traditional gasoline automobile 15 today is underpriced in terms of what we have to pay for 16 gasoline. If it was -- if the price was higher, you'd 17 have a different decision-making process. If the public 18 got that money back to use that money in an alternative 19 means, so it's a zero sum to them, but it gives the 20 opportunity to invest in other -- into the clean 21 technologies, that's the point of that. 22 I don't disagree that getting the political 23 will to get there is going to be very, very tough. 24 CHAIRWOMAN SCHAFER: I'm just 25 suggesting -- the testimony we got yesterday suggested 306 GILLESPIE REPORTING SERVICES 1 that if the public got its money back by a reduction in, 2 say, taxes, and therefore it chose, you know, how it 3 would get the return, the public is going to be a lot 4 more likely to accept some of these changes than if the 5 money was routed through a government agency or several 6 government agencies. 7 COUNCILMAN COX: Exactly. And that is 8 what the debit card concept was, giving it back to them 9 rather than a government agency. 10 CHAIRWOMAN SCHAFER: I gather that the 11 South Coast draft proposed plan has escalated emission 12 reductions related with them in some of these private 13 sector activities. Can you tell me to what extent the 14 plan proposals that you're advocating here to the 15 private sector are -- have emissions benefits associated 16 with them that find their way into that plan. 17 COUNCILMAN COX: Well, some of the items 18 are in the baseline, so -- like the ZEV program is in 19 the baseline -- and it calls for a 50 percent market 20 penetration by 2010 of new car sales. 21 That isn't going to happen if the marketing 22 efforts that we've been talking about here don't take 23 place to support that. It's an assumption that they 24 made in order to get there. 25 Some of the other items, I can't speak to 307 GILLESPIE REPORTING SERVICES 1 exactly the emissions reduction attainment strategy by 2 detail, because it's hard enough for, I think, them to 3 even explain it, let alone a layman like me, so I hope 4 they can help you with that. 5 CHAIRWOMAN SCHAFER: Okay. What was the 6 basis for predicting the 50 percent ZEV market share by 7 2010 that you all had done? And I assume -- and then 8 they took a 50 percent point -- midpoint there? What 9 was the basis for your assumption? 10 COUNCILMAN COX: We did it on an 11 assumption that if you had certain technologies 12 available, meaning that you got to a point out in 13 2010 that you had fuel cells available, you had 14 nickel-metal-hydride batteries available, and the 15 current lead-acid battery, you could be able to provide 16 that offset because the car, with the form, is in the 17 same fashion by that time as the way the car performs 18 today. If that technology doesn't evolve by that point 19 in time, then it doesn't happen. 20 There's a lot of evidence the technology is 21 improving extremely fast, and we could make that -- 22 those goals. 23 I have to say, though, you know, when you're 24 dealing with market-based issues and market-incentive 25 issues, you cannot force the customer to do anything. 308 GILLESPIE REPORTING SERVICES 1 We can have all the regulations we want, but the 2 customer isn't going to buy it, if he doesn't want to 3 buy. Thus, the reason we need to have all of the 4 marketing tools available possible to try to assist the 5 customer in that purchase decision, and thus the reason 6 for the partnership programs of market communications 7 and facilitation of infrastructure, removing all the 8 barriers that we can possibly uncover. Even then, they 9 may not buy it. 10 There's 300 vehicles to choose from today in 11 the marketplace, and you never know why somebody buys 12 any given one of them. It's tough. I've been there. 13 Excuse me. I worked for the auto industry for about 15 14 years, and so I understand how difficult it is to sell a 15 car. 16 CHAIRWOMAN SCHAFER: Speaking of 17 marketing, what's wrong with the teleshopping between 18 Maine and California? Presumably Maine residents are 19 going to teleshop for things in California. Maine -- 20 given the difference in population size, of course, we 21 hope it's more than Maine. But it seems to me we should 22 also be trying to promote teleshopping of the things 23 that we can do. 24 COUNCILMAN COX: Yes, we can. But 25 I'm referring sort of simplistically to the current 309 GILLESPIE REPORTING SERVICES 1 teleshopping mechanisms. You want to shop at Land's 2 End, which I think is in Massachusetts, they get the 3 sales tax, they get the sale, not the local department 4 store, not the local city. So if you have a shift in 5 sales to national places like that, the cities lose out, 6 unless every other city also has a -- 7 CHAIRWOMAN SCHAFER: I know some states 8 have figured out a way around that. I have no doubt 9 that governments will find a way of taxing things in 10 commerce, if they need to. 11 But it is interesting that -- if this is 12 going to happen, we might as well take advantage of it 13 and promote our export, so to speak. 14 COUNCILMAN COX: I'm not opposing it. I 15 am just saying we might get more trip reductions out of 16 a shopping center if we can do teleshopping out of our 17 local malls. 18 CHAIRMAN SCHAFER: Supervisor Riordan. 19 SUPERVISOR RIORDAN: Sure. A question. 20 And I want to understand something, if you can clarify 21 how it works, what this transfer debit card is and how 22 it works. Could you run that by me again one more 23 time. 24 COUNCILMAN COX: It's just an idea. 25 Sometimes we have to throw these on the table to 310 GILLESPIE REPORTING SERVICES 1 discuss -- 2 SUPERVISOR RIORDAN: That's what we're 3 here for. 4 COUNCILMAN COX: The issue developed out 5 of the concern that the gentleman points out, that the 6 public is very, very concerned about taxing me some more 7 and giving it to government who's going to waste that 8 money. 9 So if you could figure out a way to level 10 that playing field, you take the money away from the 11 dirty cars, you give it back to everybody that's of 12 driving age, in the form of a debit card, like a credit 13 or debit card. And the technology accommodates this 14 today. Then the consumer can make the choice of where 15 he purchases the clean vehicles. It's designated where 16 you can spend that money. You can't spend it on 17 clothes, you can't spend it on food, you can't spend it 18 on things like that, but you can designate that you 19 could spend it on electricity, teleshopping, 20 telecommuting, or whatever. So the consumer makes the 21 choice on what products that he would choose to 22 purchase, not the government. That's the concept. 23 Now, technologywise, we can do it. 24 Policywise, can we? I don't know. 25 SUPERVISOR RIORDAN: Interesting. Thank 311 GILLESPIE REPORTING SERVICES 1 you. 2 CHAIRWOMAN SCHAFER: Yes, Miss Edgerton. 3 MS. EDGERTON: Hi. You continue to make 4 incredibly progressive progress, and the breadth of your 5 vision continues to be so impressive. 6 When you said the problem is not regulatory, 7 the problem is market, is with the market -- I thought 8 that was an important articulation of your vision, but 9 then your slides go on and say there are certain 10 regulatory barriers to the market, which means that 11 there are certain regulatory -- problems that are 12 regulatory. 13 If it's a regulatory barrier, if it's a 14 certain kind of regulation that is preventing the market 15 from proceeding -- for example, codes that take 90 16 days -- then that is a regulatory problem. 17 So why am I saying this? The reason is 18 because one of the things that this board does is 19 regulate, and what we want to do is be sure that there 20 are -- we're -- we've got in place a system whereby the 21 regulations that we're adopting work cooperatively with 22 the regulations at state and local -- I mean, at local 23 levels. 24 So what we would -- what I would be 25 interested in seeing and what I will review your 312 GILLESPIE REPORTING SERVICES 1 material for is, I think we need to be thinking about -- 2 kind of like the (incomprehensible word) -- is sort of a 3 list of the specific regulations that are barriers to 4 your vision. And we could sort of look at them and see 5 if there's something within our authority to do, to 6 change. So I guess I'd look at it as regulatory 7 opportunities and barriers. 8 So that's one of the things we need to look 9 at, is to make sure we've got our house in order and 10 that we are doing everything we can to make sure that 11 the market can work, that government is not doing things 12 that preclude the market from working successfully. 13 COUNCILMAN COX: Yes. That's right. I 14 don't mean to say that there's barriers that preclude 15 opportunities. There are opportunities. And I don't 16 mean to say that there shouldn't be regulatory 17 activities. There needs to be for health and safety 18 reasons. There needs to be for guideline reasons, like 19 the building code. They need to be there. 20 We've been reluctant at this point in time 21 to get too far out in front on ideas until we start 22 collaborating on them. But like your tailpipe catalytic 23 converter regulations, maybe there's a regulation that 24 says you need an automatic vehicle identification system 25 on all cars that will help throughput, if you will, of 313 GILLESPIE REPORTING SERVICES 1 garages or wherever the case may be. 2 Maybe there needs to be a way to help with 3 the telecommunications arena. Maybe there needs to be a 4 way of dealing with the Smart Shuttle arena. 5 But we don't know what those are yet, and we 6 hate -- those of us who tend to be concerned about 7 regulations hate to look at regulations only as being 8 the opportunity. 9 I mean, I like this idea of examples today. 10 Nobody regulated the amount of cellular telephones that 11 are being sold today. I mean, they created an 12 opportunity for them to be sold. Or that nobody 13 regulated the number of PCs to be sold, but they created 14 the opportunity. 15 The credit card system that's on a fuel 16 pump -- your gasoline pump -- those are not regulations 17 that had to happen. It came for the consumer's 18 convenience. And if we can identify consumer 19 convenience like that, and then if there's a regulatory 20 barrier to it, let's remove it; or if we can assist it 21 and become more of a standard in the marketplace and an 22 opportunity, then let's do that. 23 But that's what this process, the 24 partnership, is looking at over the next few years, 25 is to do it -- is to identify all those barriers and 314 GILLESPIE REPORTING SERVICES 1 opportunities. And right now they're just ideas. 2 MS. EDGERTON: Well, I appreciate that. I 3 wanted to ask about the 50 percent assumption for the 4 South Coast. Do you know whether that -- isn't -- are 5 you assuming any change in the ARB regulations to 6 achieve that? 7 COUNCILMAN COX: No. I'm assuming that 8 the technology comes along and the price comes down and 9 the infrastructure is in place that allows that to 10 happen. You wouldn't need it. The district may have a 11 different view of that, but not to my knowledge that 12 they're looking at a change. That's just one mechanism 13 you could look at. 14 MS. EDGERTON: And the other thing I 15 noticed was that you were in partnership with -- doesn't 16 some -- it does address Smart Shuttles and personal 17 transportation, but it doesn't seem to have addressed 18 the issue of heavy-duty trucks and transport of -- 19 where's your -- transport of larger -- of a larger sort, 20 or off-road transport. 21 Where is your cut-off line, that -- there's 22 something there that you all have decided, is obvious 23 from the slides, but you probably can articulate it for 24 me. 25 COUNCILMAN COX: That's right. In fact, 315 GILLESPIE REPORTING SERVICES 1 that's an issue that has come up, that we have 2 addressed, and should we. That's a good question. And 3 should we be addressing the poor issues or the trucking 4 industry issues? We haven't because we think that's a 5 lot to handle. We've got a -- but we could. 6 The bigger picture still comes out of getting 7 the automobile that is contributing so much to the 8 pollution and has to change over the next 10, 15 years, 9 creating the market forces that will allow that to 10 happen faster. 11 The district believes -- I think -- and again 12 I don't want to speak for them, but I -- they believe 13 that some technological advancements can come forth in 14 the heavy-duty vehicle arena that will begin to address 15 that problem. It's a focus that needs to happen, not 16 unlike what happened in stationary sources. 17 MS. EDGERTON: Who thinks that there needs 18 to be -- 19 COUNCILMAN COX: The district. 20 MS. EDGERTON: Okay. Good. Because I was 21 wondering if there was any -- any -- since your group is 22 not handling it, is anybody else making the same sort of 23 consorted effort? 24 COUNCILMAN COX: Not yet. There's some 25 talk about doing that. The railroads are doing it -- 316 GILLESPIE REPORTING SERVICES 1 they're talking about doing it. The port centers are 2 talking about doing it with the trucking industry, 3 right -- or heavy duty. It's not only trucking, it's 4 off-road vehicles too. 5 MS. EDGERTON: Let me go back to -- I had 6 a question about the Southern California Economic 7 Partnership. What's your opening budget? What sort 8 of -- what's your goal in terms of your funding for 9 SCEP? 10 COUNCILMAN COX: The numbers right now -- 11 I think the numbers are about 5, 600,000 that is 12 available for this year. We're looking at probably in 13 the neighborhood of a million dollars a year for 14 operations. But one of the things you get into is that 15 you have also needs to do other types of things. 16 For example, we look at every industry 17 cluster group coming out with a cookbook, for lack of a 18 better definition, a guidance, on how certain things 19 ought to operate. We need to communicate with 186 20 cities in this region and what their building code ought 21 to look like. We have to adopt documentation for that. 22 So there will be special contracts that will 23 be put together as time goes on to deal with these 24 special projects. Now, maybe some of them will be done 25 on a free basis, if you will, by the parties being put 317 GILLESPIE REPORTING SERVICES 1 together; others we may have to hire special people to 2 do that. 3 The cities are very, very much interested in 4 it because they don't want to do it individually -- the 5 cities and counties. If we can collaborate and do it at 6 once, so much the better. 7 SUPERVISOR RIORDAN: To have it 8 standardized. 9 COUNCILMAN COX: That's right. We're much 10 better off. So there will be identified budgets as we 11 address those issues. 12 MS. EDGERTON: And is that then -- this 13 project for establishing the code, for example, a model 14 code for adoption by the 186 cities -- it's not yet -- 15 there's no contract let or -- what's the status of 16 that? Because that is vital for our infrastructure. 17 COUNCILMAN COX: That's correct. Well, it 18 is actually moving fast now, if you will -- fast in the 19 sense that the EV cluster group has met, as I mentioned, 20 two or three times. We met again this week. Building 21 code is number one on the priority list. They 22 established a working group made up of a building 23 director, Edison Company, DWP, CALSTART -- and they're 24 dealing with a National Building Code Association 25 also -- and hopefully in 30 days to have a draft plan 318 GILLESPIE REPORTING SERVICES 1 back to the cluster to propose as a -- for dialogue, and 2 take it to the clean city group, which is the local 3 government, by -- within 90 days. That's the goal. 4 And then from there, disseminate it for 5 comment, and comment on it within six months, have one 6 that we can begin to use that would come as close as 7 possible to the national standard. 8 The national standard, we understand, may not 9 be ultimately approved until 1997, and that's not good 10 enough for us. 11 MS. EDGERTON: Well, that's excellent. 12 You know, one thought that comes to my mind is that ARB 13 has had the opportunity to use guidelines, and if we -- 14 if you had a model -- I know we're not regulating land 15 use. I'm just wondering whether the statewide issuing 16 of guidelines to make sure everyone knew what was going 17 to be the code, what was the specs, for the plugs, what 18 were the expectations with respect to how quickly they 19 were to be installed, and so forth, it might be 20 useful -- might be useful for us to help spread that 21 uniformity through the state. 22 COUNCILMAN COX: Well, absolutely. And 23 once that is established, we want to share that with 24 everybody, and we'll see if we can get a buy-in from 25 everybody and make it happen. But that's the reason for 319 GILLESPIE REPORTING SERVICES 1 the cluster group, to follow through on those goals. 2 CHAIRWOMAN SCHAFER: That kind of 3 conformity could also have been privately done, 4 Underwriters Laboratory kind of a model. Just a point. 5 If it's done, it's a generally accepted standard that 6 then everybody goes towards. 7 COUNCILMAN COX: Yes, that's true, and 8 that's in a sense how this is happening. But the 9 difficulty you have is every city has to adopt it, and 10 they always want to change it. And what we're trying to 11 do is have them be a part of the solution, not become a 12 problem so they don't -- so they oppose it later because 13 they think there's something wrong with it. So that 14 it's they that take ownership of it through the 15 collaboration that you're talking about. And then the 16 goal is to accelerate its implementation. And we just 17 think that kind of collaboration might help. 18 MS. EDGERTON: Well, one question I would 19 have. Do you think it would be any value to having a 20 state enabling once that is done -- a state enabling 21 measure or code or something to establish -- some pieces 22 of it that are state law. I mean, it's in the state's 23 interest. 24 COUNCILMAN COX: That's right. 25 MS. EDGERTON: That would be legislative. 320 GILLESPIE REPORTING SERVICES 1 COUNCILMAN COX: There again, there's a 2 timetable, a time problem. But that's correct. There 3 is really a three-prong strategy, is develop a local 4 agreed-upon standard that would come as close as 5 possible to complying with the national and state 6 standards, and then go and help advocate a state 7 legislation necessary to adopt it, and the federal 8 approval too. 9 MS. EDGERTON: Thank you very much. 10 CHAIRWOMAN SCHAFER: Supervisor Wieder. 11 SUPERVISOR WIEDER: John, what's apparent 12 to me is a conviction I have had for the last few years 13 that air quality as a public policy issue is going to be 14 the engine that's going to be driving our future 15 decisions in the next -- in the next century, and which 16 economic decisions are significantly important. 17 Having said that, should I assume that SCEP, 18 Southern California Economic Partnership, do not use 19 economics for that; that transportation is just the 20 first beginning issue of that? It's not exclusively 21 just transportation; is that correct? 22 COUNCILMAN COX: Yes. That was very 23 deliberate. There was a question as to whether we ought 24 to create similar kinds of assistance for the film 25 industry, for the clothing industry, or any other 321 GILLESPIE REPORTING SERVICES 1 industry, biomedical industry. 2 That's not our major priority, although all 3 those other those industries, I'm sure, think they are a 4 priority. Our priority now is trying to deal with the 5 issues that I tried to lay out here, but it could become 6 more than that. 7 SUPERVISOR WIEDER: Thank you. 8 CHAIRWOMAN SCHAFER: Thank you very much, 9 Councilman Cox. It's always an interesting session when 10 you're with us. Thank you for your time today. 11 I'd like now to recognize Dr. John McDonald, 12 here representing the Orange County Private Sector Task 13 Force. Dr. McDonald has his doctorate degree in 14 physical chemistry from Purdue University, and is the 15 retired chairman of the board of PDA Engineering and 16 currently is a director of the company. 17 Prior to his association with PDA, he was 18 Director of the Material Science at Sandia Laboratories, 19 one of the national laboratories for the Department of 20 Energy. 21 Dr. McDonald is the chairman of the Private 22 Sector Task Force which provides counsel to the Regional 23 Advisory and Planning Council on matters of air quality 24 regulation. The Task Force has been a leader in 25 promoting market-based incentive programs as 322 GILLESPIE REPORTING SERVICES 1 alternatives to command and control for reducing 2 emissions. He is also the founding member of the Board 3 of Directors for Partnership 2010, a public/private 4 partnership dedicated to strategic planning for Orange 5 County. 6 I'd like to welcome you, Dr. McDonald, today, 7 to be with the Air Resources Board, and we look forward 8 to your comments. 9 SUPERVISOR WIEDER: May I also add that 10 he's an accomplished scuba diver. 11 DR. MC DONALD: I'm looking forward to 12 becoming the world's oldest scuba diver. 13 SUPERVISOR WIEDER: Okay. 14 DR. MC DONALD: Thank you very much. I 15 can't really start this without answering a question 16 that was asked earlier. The Private Sector Task Force 17 and the viewpoints that I'm going to bring are with 18 respect to those of a CEO, the business perspective, is 19 something that in my experience over the last several 20 years does not get expressed often enough. I want to 21 make sure that that does get out this morning. 22 We worked very closely with John in both my 23 private capacity and with -- in the public capacity as a 24 Private Sector Task Force, and for the most part, we 25 have no difficulty with anything he presented except the 323 GILLESPIE REPORTING SERVICES 1 AVR of 2.0 on Regulation XV. And you need to understand 2 the business viewpoint. 3 (Overhead presented.) 4 It is not something which says this is an 5 unreasonable -- it's unrealistic. And the problem is 6 that AVO, AVR of 2.0 means that every single employee in 7 your company is engaged in ride share, and that's 8 absolutely ridiculous. It's never going to happen and 9 it's a ridiculous objective. 10 If you have an AVR of 1.1, it's 18 percent; 11 a 1.5 AVR means that you have two-thirds of the 12 employees involved; and 2.0 means that they are all 13 involved, and it will never happen. 14 The infrastructure and the business 15 operations in this -- in California will never permit 16 that to occur. So you're kidding yourself if you think 17 that is your realistic objective. 18 Now, I'm not going to go into any of the 19 reasons for market-based incentives, any of those sorts 20 of things. There's some thoughts on those in the 21 testimony that I gave you. 22 What I want to start out immediately with is 23 the list of specific items that we have been concerned 24 with for the last several -- last few years. There are 25 four of those on the list: direct emission fees, the 324 GILLESPIE REPORTING SERVICES 1 congestion pricing, at-pump pricing, and parking 2 restrictions and pricing that are going to be covered, 3 we understand, in long-awaited research operation under 4 the ARB. 5 Something else I probably can bring you 6 up-to-date with on this morning is that prompt ticketing 7 of gross polluters, there is now within Orange County a 8 pilot program that is being defined to address what I 9 think is the third issue for gross polluters. And the 10 first one had to do with what kinds of things can 11 employers do. 12 And Hughes Aircraft Company has done a very 13 good job in looking at that. The City of Los Angeles 14 did a study with respect to the socioeconomic impact of 15 ticketing or apprehension of gross polluters, and that 16 study now is due for publication very shortly. 17 The thing that has been missing is, how do 18 you apply this to the streets and highways in a 19 particular area? And the study that's being undertaken 20 as a pilot program is aimed at doing just exactly that. 21 The RFPs are out; the proposals are in. They 22 are currently about be evaluated. And I would expect 23 that perhaps in about a year, we will begin to have some 24 of the information about how do you do it, what does it 25 cost you, and how effective it is. That's a real step 325 GILLESPIE REPORTING SERVICES 1 forward. 2 CHAIRWOMAN SCHAFER: Dr. McDonald, who is 3 doing that work? Who is sponsoring it? 4 DR. MC DONALD: It is being sponsored by 5 the district. The Private Sector Task Force and the 6 Industrial League of Orange County have worked very 7 closely with them, along with a few of the private 8 sector, to define a program which is technologically 9 feasible, which can be accomplished in a reasonable 10 length of time, and economically. It can get out of 11 hand, as you know. And which will give us the answers 12 that you need. 13 If you now put together the employer-based 14 things that you could do, socioeconomic impact, and the 15 implementation strategy, now you've got a complete 16 package. 17 I want to jump straight to a set of obstacles 18 that I see and then make some specific recommendations 19 in a few minutes with respect to that particular list. 20 The first obstacle is a psychological one or 21 a bureaucratic one or both. No bureaucracy has ever 22 voluntarily self-destructed. If you don't believe that, 23 look at the growth of the federal government for the 24 last 200 years. We still have the Commission on the 25 U.S.-Canadian boundaries that was formed after the War 326 GILLESPIE REPORTING SERVICES 1 of 1812, and it hasn't done anything for a hundred 2 years, but you can't get rid of it. 3 So it's a nontrivial issue to be concerned 4 about that as we begin to change to market base. And 5 part of the reason is because there's a real fear within 6 the bureaucracy of the market-based purchase. 7 At a meeting that I was at recently, one of 8 the comments that was made was, "They're fine, but 9 they're so uncontrollable." Well, that's exactly the 10 problem with them, but that's exactly why they're so 11 effective. 12 A second major roadblock has to do with our 13 understanding of the effectiveness of these various 14 market-based approaches, and it's very poor. It's 15 evident in the fact that there are three programs that 16 are in the '94 AQMP, and they are in there as 17 placeholders. There is no credit taken for any of those 18 from the sense of emission reductions, and the fact that 19 they are there represents really a great progress over 20 the past several years, but at this point we do not 21 understand them well enough to be able to define the 22 emissions reductions and to take the appropriate 23 credit. 24 The three that are in there are the VMT 25 registration fees, at-the-pump pricing, and congestion 327 GILLESPIE REPORTING SERVICES 1 pricing. And now if you go back and talk to the 2 business community about these, one of the attitudes 3 that you get is, did some of these sneak in here 4 disguised as market-based programs? Because you really 5 have to differentiate between an incentive and a 6 disincentive and whether or not it meets a bunch of free 7 market kinds of requirements. 8 Specifically, as it is in the '94 AQMP 9 at-the-pump pricing seems to designed to generate money, 10 but it does not know how to use the money nor how to 11 quantify the emissions. That's the actions that have 12 yet to be taken, and we hope that they can be taken in 13 the next three-year time period so that they can 14 actually be put in place to replace command and control 15 measures. 16 If you apply that as a disincentive to 17 driving, it certainly will do that if you make the price 18 high enough; but it does not recognize the fact that 19 what you really need to do in a free market is that 20 you must provide -- allow the individual to meet his 21 personal objectives in an environment that lets him make 22 the best economic choice. You've got to get -- give him 23 the choice. 24 Congestion pricing continues to confuse us, 25 and I hope Lynn Scarlett is going to qualify that this 328 GILLESPIE REPORTING SERVICES 1 morning. It is hard to tell whether it's emissions 2 reduction strategy or a congestion strategy. Is it 3 both? It may very well be. 4 The ambivalence that we see comes now from 5 meetings with the district which indicate that, "Well, 6 we're going to change our philosophy from VMT to VT 7 control," and the rationale for that is in the basin one 8 cold start is equal to the average emissions that you 9 get on an average vehicle trip. 10 So which of these two things are going to be 11 controlling? John made the point that maybe a VT 12 approach is self-defeating from a market standpoint. 13 Those issues are not yet resolved. 14 For the emissions, VMT, and registration 15 fees, this is the one I think we see as having the 16 greatest potential to become a really market-based 17 program. 18 The third obstacle is the lack 19 of understanding of the economic impact of these 20 methods. We need to understand it very specifically, 21 all the way from the impact on the poor to the economy 22 in general. It seems to me that the impact on the poor 23 is something that is more easily addressed than the 24 latter. And the reason is that most of these, or many 25 of these, as you begin to implement them, are going to 329 GILLESPIE REPORTING SERVICES 1 be enormous generators of money. I think the money is 2 going to be there. My concern is that I have -- is 3 whether our legislature is going to use the money 4 wisely, not whether we can use it to offset the impact 5 of the disadvantaged. 6 In general, we seem to be unable to deal with 7 the economic impact. There is no study which shows what 8 the economic impact on the South Coast Air Basin is, and 9 there should be. Prudence would seem to indicate that 10 you should understand that. 11 Our legislators continue to believe that 12 there is such a study done. And the problem is that the 13 district conducts a socioeconomic impact analysis which 14 is misunderstood to be the instrument that tells you 15 what the economic impact is. What that study does is to 16 estimate the cost burden on a business, on the economy, 17 and trade that off against the societal benefits that 18 come from reduced public health, increased visibility, 19 corrosion, materials, maintenance, those sorts 20 of things. 21 But that impact has nothing to do with the 22 business decision that has to deal with what my balance 23 sheet and what my profit-and-loss statement is like. It 24 has no effect on whether I stay in the valley or whether 25 I move. It has no effect whatsoever. 330 GILLESPIE REPORTING SERVICES 1 What we need to understand from the economic 2 impact is what the impact on our competitive position is 3 and what the impact on jobs and prices is. 4 Now, this is a continuing discussion that we 5 have had with the district over the past. And there was 6 a Senate Bill 803 that was introduced this last year to 7 require that, and the Natural Resources Committee 8 decided that it was not needed. 9 When you look at that economic impact -- 10 you're talking now in '94 AQMP plan at $5.3 billion or 11 more, with a cost benefit of public health kinds of 12 benefits of something like 9 billion, with only 46 13 of the hundred-plus measures in there having been 14 quantified. So the number's got to get bigger. 15 And things like Regulation XV have never been 16 included in any effective analysis that the district has 17 done. It has not dealt with -- the cost-effective 18 analysis, it was done completely outside. And that's 19 going to run on the order of 200 million. When Alaskan 20 Oil was done, it was 160 to 250. So you're still 21 talking a very big number. 22 That's in addition to whatever -- competitive 23 analysis impact is in addition to the 60,000 jobs to be 24 foregone already defined in the socioeconomic impact 25 report. So that's the tip of the iceberg. 331 GILLESPIE REPORTING SERVICES 1 In trying to look at the combined costs of 2 the AQMP and the FIP, recognizing the FIP costs are 3 really major wags at this point, you're talking about a 4 number that comes close to 2 percent or more of the 5 region's domestic product. 6 It doesn't sound like a very big number, but 7 when you realize that that is the after-tax profit level 8 of a large number of businesses, it now suddenly becomes 9 a big number. So you're going to reach a point where 10 these kinds of expenditures are going to be questioned 11 as they continue to escalate. 12 The fourth obstacle is political and 13 legislative. Clearly, some of these are going to be 14 more politically viable than others for a variety of 15 reasons. 16 Regressive impact on the poor. It looks a 17 lot like taxes in some places. Clan warfare between 18 environmental and business groups and internecine 19 arguments within the regulated community. 20 I suspect you understand this, the will to 21 begin to -- to identify the legislative hurdles in 22 enough detail that we can get over them is what we have 23 to do next. 24 And a word of caution about -- concerning 25 these market-based strategies. John mentioned ideas. 332 GILLESPIE REPORTING SERVICES 1 The ideas have to be quantified in some way before we 2 can begin to deal with them. There are a lot of 3 intuitively satisfying ideas out there, which in 4 Regulation XV's case, have been presented with almost a 5 religious fervor. And the idea if you get people out of 6 their cars, you will reduce emissions, it's great. I 7 mean, if it weren't for gravity, I could fly. 8 The problem is that the alternatives are 9 lacking. The trips have to go away. And we not only 10 don't provide those alternatives, but we also don't have 11 the right set of expectations for what can be 12 accomplished. 13 The trips that are assumed to be capable of 14 elimination are double-counted. And as long as that 15 exists and you don't consider how many trips really go 16 away, and just simply don't get moved, and how many 17 trips that are time moveable -- once you understand 18 that, you can start with the real numbers, and the 19 expectations are going to be different. We can't afford 20 to repeat the mistakes, intuitively good ideas that do 21 not have the quantification that is required. 22 So I think that before we -- we really take 23 the steps to begin to implement any of these, there are 24 three steps that we need to do. The first is, I want to 25 see that list, with another column that says, these are 333 GILLESPIE REPORTING SERVICES 1 the emission reductions. And if you have to put in a 2 trip reductions or VMT or AVR or anything else, then you 3 really ought to question what that measure is for. If 4 you can't put your trip reductions, you're headed 5 towards a mistake. 6 The second thing I'd like to see go on 7 that list is that the cost of the measures should be 8 understood in three different forms, in existing 9 socioeconomic -- you need to understand that, but 10 you also need to understand what those benefits are, 11 and you need to understand what the costs are in terms 12 of competitiveness, prices, and that sort of thing. 13 Those define the economic impact. 14 And then you need to look at the list from 15 the standpoint of the economic -- or the political and 16 legislative viability of it. We're going to have three 17 different lists, but that's the only way we're going to 18 have enough information to make the right set of 19 selections, because we need to select the ones that are 20 most effective in emission reductions, least 21 economically damaging, and most cost-effective. 22 And I'd like to make some specific 23 suggestions to you at this point, remind you, first, 24 that business decisions are based on profit-and-loss 25 statement and the balance sheet, and if you impose an 334 GILLESPIE REPORTING SERVICES 1 additional incentive, it usually winds up as a cost of 2 some sort and it either comes out of profitability or 3 gets added to overhead. 4 If you're going to change it, you've got to 5 apply some kind of a market force, and the best kind of 6 a market force is a pull. The market is like a rope. 7 It's a lot easier to pull on it than it is to push on 8 it. 9 And all of these issues, as we have presently 10 been discussing them, and they're included in the plan, 11 are more on the disincentive side, more on the push side 12 than the pull side. 13 So let's make an assumption that we can do 14 some things that -- from the pull side and look at what 15 happens. 16 A tax credit is a good way to begin to think 17 about a pull that is really important to business. We 18 build a whole industry in the solar energy based on tax 19 credits. And if you simply take that as an example -- 20 and look at the telecommuting, for example. The focus 21 in the plan is on more telecommuting and teleconferences 22 and is based on the assumption that people do not 23 telecommute because of the cost of computers and 24 facilities are too expensive, and that's absolute 25 hogwash. 335 GILLESPIE REPORTING SERVICES 1 The problem is that middle management in the 2 majority of the companies has to have their culture 3 changed from the idea that "If that employee is not 4 sitting here from 8:00 to 5:00, he's not working. I 5 want him where I can see him." That's the big problem. 6 In no company that I know of nor have I been 7 associated with has telecommuting ever been questioned 8 if it makes business sense. If it doesn't make business 9 sense, it doesn't work. 10 And things like a tax credit can now begin to 11 pull you in the direction of that. As long as the R&D 12 tax credits were in, while I was a CEO, I never lost a 13 R&D tax credit. They dropped straight to the bottom 14 line. It is enormously motivating to business. 15 It's unrealistic to assume that you can -- 16 assembly line workers can telecommute, but in fact, in 17 reality, there are many businesses for which there are 18 performance-based jobs which can be done equally well at 19 home. And if you provide the incentive, then you are 20 going to get the cooperation of the businesses. 21 Another example is in the ride sharing. Any 22 costs there are clearly nonproductive overhead. If you 23 change that to give the employers either credit for the 24 dollars that were spent under Regulation XV or a tax 25 credit that allows them to look at real emissions 336 GILLESPIE REPORTING SERVICES 1 reductions from whatever control they might have over 2 mobile sources, you're going to change that direction 3 also. 4 So thinking in a tax credit kind of approach, 5 if you provide them with something which is measurable, 6 and that's the emissions reductions, something which is 7 attainable and something which is cost-effective, and 8 you give them the tax credit to accomplish it, that's a 9 step in exactly the same direction. 10 A similar kind of example could be obtained 11 from the private transit. The deregulation of private 12 transit is one up there. John covered a part of that 13 issue. The Smart Shuttle is going to be able to deal 14 with part of it, but you've still got a major problem 15 for employers that you can't get from wherever the rail 16 stop is to the office. And the bus system and Smart 17 Shuttle are not going to help that problem. They're 18 going to take over a part of it but not the whole 19 problem. 20 During the gasoline shortage in the 21 mid-seventies, I ran a shuttle to pick up the employees 22 at the Santa Ana station to get to work. It was simply 23 a part of the normal use of the vans. When the 24 motivation went away, we got gasoline back, then that 25 died. There's no incentive to do that sort of thing 337 GILLESPIE REPORTING SERVICES 1 now, because the money is being spent on traffic 2 coordination for Regulation XV. 3 But if you take that same concept and ask 4 now, how can I provide the incentive to the employer? 5 You may be able to come up with another kind of tax 6 credit. But thinking about tax credits in the sense now 7 of pull motivations for businesses, and now expanding it 8 to pull motivations for the public, the retail centers, 9 the sport event centers, it's a different philosophy. 10 I want to make one last comment on a totally 11 different subject. The FIP is going to impose punitive 12 fees to encourage many engine users and manufacturers to 13 comply with the standards. That's basically what 14 they're trying to do. I would suggest a better approach 15 would be to establish a credit trading market for mobile 16 sources much like RECLAIM, and that the EPA delegate 17 that responsibility to the state to begin to identify it 18 and set it up. 19 The idea is very simple-minded, and any 20 manufacturer who can exceed those standards, that's tax 21 credits that can be sold. A trucker who cannot meet the 22 requirements, because it's not on the schedule for his 23 engine replacements, can buy those credits and use them 24 to cover the period while he's in default. 25 It meets all the requirements of a free 338 GILLESPIE REPORTING SERVICES 1 market: It's got a willing buyer and seller. It has 2 the pull that is necessary, and it's got the choice. 3 Thank you very much for the opportunity to 4 speak this morning. 5 CHAIRWOMAN SCHAFER: Thank you very much, 6 Dr. McDonald, for a very lucid and helpful 7 presentation. 8 Supervisor Wieder. 9 SUPERVISOR WIEDER: Thank you very much, 10 Madam Chairwoman. 11 John, in your typical erudite, 12 thought-provocative way of thinking, you made a great 13 contribution to this board. In fact, I'd like to pose a 14 question to staff, or maybe to you, Madam Chairwoman, 15 who is -- who runs the staff. 16 Much as ARB has had a Scientific Review 17 Committee and Scientific Research Committee, along the 18 lines of what has been generated, what we've heard and 19 hopefully learned from the testimony these past few 20 hours, then maybe we need some -- a group to guide us 21 towards making some changes, people -- if I may, without 22 embarrassing you, John, people like Dr. John McDonald, 23 in a truly consultant capacity, zeroing in on how best 24 to implement, I think, what we've heard in a manner in 25 which it is possible. 339 GILLESPIE REPORTING SERVICES 1 So I'm reacting to what I'm hearing you say, 2 Dr. McDonald, as to really where we would go with some 3 of your thought-provocative ideas -- for what it's 4 worth. Okay? 5 So thank you, John. 6 DR. MC DONALD: Thank you. 7 CHAIRWOMAN SCHAFER: Well, I think that 8 all of us, working together, is the mechanism that gives 9 guidance to the staff to fully develop the policy and 10 direction we're going. And what Dr. McDonald just did 11 was provide us with a set of absolutely sterling 12 approaches and ideas that we can begin to develop, and 13 he did it for free. 14 DR. MC DONALD: Well, wait a minute. 15 CHAIRWOMAN SCHAFER: I think what we 16 need to do, regardless of mechanism, organizational 17 mechanism, which is to begin to do some of the 18 estimating that you're suggesting, some of the 19 prioritizations that you're suggesting. And I think 20 you have given us a lot of food for thought and some 21 direction, practical direction that we can move in, and 22 I appreciate it very much. 23 Yes, Mayor Hilligoss. 24 MAYOR HILLIGOSS: I would just like to 25 find out how you made the calculation that 2 AVR takes 340 GILLESPIE REPORTING SERVICES 1 in 100 percent of the employees. Would you tell me. 2 DR. MC DONALD: Yes. It's the fault of 3 a simple calculation. If you look at the number of 4 vehicles that are involved, and like -- I could send it 5 to you in detail a little bit later, if you like -- but 6 if you look at the number of vehicles involved, and what 7 it means, if you take 10 percent of your employees 8 ride-share, there is one sharing and there is one who is 9 driving, and that's one vehicle that's eliminated. And 10 then all you do is look at the fraction of your 11 employees -- 12 MAYOR HILLIGOSS: Some of them, you know, 13 are in vans, and they have six and eight people in 14 them. 15 DR. MC DONALD: That's wonderful. 16 MAYOR HILLIGOSS: So there would be other 17 people that would drive alone still. 18 DR. MC DONALD: Yes. A vanpool does help 19 that quite a bit. But it doesn't change the number at 20 2.0 from a hundred percent below about 80 percent. 21 We're still never going to see that number. 22 There's no manipulation of the numbers that 23 you can do that makes it realistic at 2.0 unless 24 everybody rides the train and the bus. It's that kind 25 of an extreme situation. But it will -- I'll send up 341 GILLESPIE REPORTING SERVICES 1 the calculation, if you like. 2 MAYOR HILLIGOSS: Thank you. 3 CHAIRWOMAN SCHAFER: Any more questions 4 from the board? 5 If not, I would like to propose taking about 6 a three-minute break, and we'll be back at 11:20 to 7 resume with the first panel. Thank you. 8 (Brief recess was taken.) 9 CHAIRWOMAN SCHAFER: I'd like to get 10 started again, if everyone will take their seats. The 11 next will be Steve Heminger. 12 Mr. Heminger is manager of Legislation and 13 Public Affairs for the Metropolitan Transportation 14 Commission. MTC is the regional transportation planning 15 and finance agency for the San Francisco Bay Area. 16 Mr. Heminger also directs MTC's state and 17 federal legislative advocacy as well as its public 18 outreach and informational activities. 19 Prior to joining MTC, Mr. Heminger was Vice 20 President of Transportation for the Bay Area Council, a 21 regional public policy group, and has also served as a 22 staff aid in the California State Legislature and U.S. 23 Congress. 24 He has had extensive experience in the field 25 of transportation and air quality, and he's a parking 342 GILLESPIE REPORTING SERVICES 1 commissioner for the San Francisco Parking and Traffic 2 Division. 3 Mr. Heminger, thank you very much for joining 4 us today. 5 MR. HEMINGER: You give your tickets to me 6 and I'll make sure you pay them. 7 I'm here to tell you about a demonstration 8 project for congestion pricing on the Bay Bridge, which 9 is from Oakland to the San Francisco Bay area. We've 10 been awarded a $25 million grant for this project, the 11 only grant so far awarded by the Federal Highway 12 Administration. We're using about a million and a half 13 of those dollars this year in planning for the project. 14 The rest of the money is contingent upon the legislature 15 next year approving, authorizing us to change the 16 tolls. 17 The chairwoman asked us to comment about what 18 you could do to help us. What you could do to help me 19 is that next year you can support our bill, and that 20 will allow this project to go forward. The project -- 21 the planning phase of the project is the old cliche, a 22 public/private partnership. 23 (Overhead presented.) 24 I don't think we're going to have a tribal 25 warfare with the business and environmental community, 343 GILLESPIE REPORTING SERVICES 1 because they're both part of the project and both sit on 2 the management board for the project. We also have a 3 close working relationship with our air district and 4 Caltrans in planning the project and, we hope, 5 implementing it. 6 And we're planning the project more or less 7 like a political campaign, because that's what we think 8 we have ahead of us. It's our view, especially with 9 congestion pricing in the Bay area, that the primary 10 obstacle for us is political, it's not technical, and so 11 we're organizing the project accordingly. 12 We are running focus groups, we're doing 13 opinion polls, we're meeting with legislative staff, as 14 well as doing a considerable amount of analytical work, 15 some of which I'll share with you this morning. 16 I think most of you are familiar with the Bay 17 area. There are a couple of things I think, off the 18 bat, that make the Bay Bridge a good place to do this 19 kind of project. First of all, it's a bridge. And one 20 of the problems with congestion pricing -- for example, 21 if you did it on a freeway down here in L.A. -- is you 22 price the freeway, and then folks will go to the 23 arterial or go to the next freeway, so you've got to 24 price everything in order to deal with the spillover 25 effect. In the case of the Bay Bridge, the spillover 344 GILLESPIE REPORTING SERVICES 1 would be fairly literal, and you'd have to -- 2 (General laughter.) 3 -- you'd have to go quite a distance to get 4 to the next crossing -- to get to the next bridge. 5 A second thing is that all of those bridges 6 you see on the map are toll bridges already. And I 7 think it's considerably easier to introduce congestion 8 pricing and the notion of a higher -- and maybe I 9 should -- I'm assuming you're all familiar with the 10 concept. 11 It's basically the idea of taking 12 Mr. Fitzmaurice's phone system rates and putting them on 13 the road system, so that during the peak period the 14 ratings are higher and during the off-peak they're lower 15 in order to encourage use during the off-peak, as well 16 as in the case of transit where we can do Pacific Bell 17 one better, encouraging the use of alternatives like 18 transit and carpooling. 19 So the fact that these are all toll bridges 20 already, the tolls have been collected for years, I 21 think makes it easier to introduce it. We don't have a 22 technological problem, even though as part of our 23 project, or rather at the same time frame as our 24 project, all of these bridges are going to get 25 electronic toll collection, as well, which comes in 345 GILLESPIE REPORTING SERVICES 1 handy for us in a way. 2 A third thing that I think helps us with this 3 project is the little blurry writing that you have a 4 hard time seeing at the top. Right now going through 5 the Bay Bridge corridor -- the BART 2 is under that 6 corridor, and we consider it part of it. 7 Right now 70 percent of the people use 8 commute alternatives during the morning peak, which is 9 an extraordinarily high number. So that tells me, first 10 of all, that it's not impossible. You know, there's a 11 lot of moaning about "Gee, there's no alternative. Gee, 12 people will never use them." In this corridor people 13 use them a lot, and there are a lot of them already. 14 Secondly, it tells me that what we need to do 15 is make an incremental amount of improvement off a very 16 successful use of commute alternatives to try to reduce 17 congestion in the corridor. What we're left with, and 18 that's the bottom half of the little writing that you 19 can't read, is that of the remaining 30 percent who do 20 travel alone, they cause 75 percent of the traffic on 21 the bridge. 22 And that maybe is the fourth thing why this 23 is a good project. This is one of the most congested 24 places in the United States during the peak period. And 25 so if you want to do pricing of congestion, you go where 346 GILLESPIE REPORTING SERVICES 1 the congestion is. And we've got it in spades in this 2 corridor, and I think that makes it a good demonstration 3 path. 4 You can see the transit alternatives, you can 5 see the BART train, the BART 2. There are buses across 6 the bridge, there are ferries that parallel the bridge, 7 and there are also kinds of nontraditional things like 8 telecommuting and other sorts of things. 9 This just puts it in graphic form for you. 10 The fact that we have such a large share in the morning 11 peak -- the bigger pie at the top is the morning peak -- 12 using carpooling and vanpooling, using BART, and using 13 AC transit. 14 The toll structure right now is a flat $1 15 toll, all day long. During the peak periods, morning 16 and afternoon carpools -- that is, anything with three 17 or more people in it, including buses -- go for free, 18 and most of those folks are carpooling not because they 19 save a dollar, they're carpooling because they save 20 about 20 minutes getting through the backup, because the 21 carpool lanes come out through the approaches. And so 22 time savings is the big advantage. 23 There is also a fairly high use of commute 24 alternatives in the afternoon peak, but it's 25 considerably less because the toll is collected 347 GILLESPIE REPORTING SERVICES 1 westbound into San Francisco. There's not a comparable 2 advantage in terms of time savings in the afternoon. 3 (Overhead presented.) 4 One of the things we have a hard time telling 5 people about with this project is that we don't need to 6 get rid of all the traffic. We don't need to get rid of 7 everybody who is using -- who is driving alone right now 8 to make an appreciable difference with traffic 9 congestion. And we try to do it with this chart. And 10 what the chart shows is that all of the gray in here is 11 traffic that could be handled by the capacity on the 12 bridge. Where the peak commute period causes congestion 13 is this little bubble at the top, and what we need to do 14 is to try to flatten or eliminate that bubble. And if 15 we do -- and you can add it up yourself, I think, in 16 terms of the grid. It's about 3500 cars. 17 If we can make a dent on that 3500 cars, we 18 can significantly reduce the peak-period congestion. We 19 don't have to make an appreciable dent on the folks 20 below the line. And that, again, puts it in the 21 range -- in the realm of plausibility for people. And 22 that's half the problem with this project, is trying to 23 convince people that something like this might actually 24 work. 25 (Overhead presented.) 348 GILLESPIE REPORTING SERVICES 1 One of the issues, and to some extent, I 2 think, it shouldn't be as much of an issue as it is, 3 but it is, that is the so-called equity question with 4 pricing. So to see where we were in terms of a baseline 5 in the Bay Bridge corridor, we do have access through 6 the census to fairly sophisticated income information on 7 current users in the corridor. 8 And what this shows, if you look at the left 9 half of the graph, these are East Bay residents who are 10 traveling in the morning peak over to San Francisco or 11 San Mateo County. You can see -- first of all, if you 12 look at the average household in the East Bay, you're 13 talking about a household income of about $40,000. You 14 look at the commuters who are using that bridge during 15 the peak, and you'll see that their income is 16 substantially higher than the average income in the East 17 Bay. And you will also see something perhaps a little 18 surprising, that carpool/vanpool income is the highest 19 of all. And we attribute that, if you believe in 20 economics, to the fact that those folks value their time 21 more than anybody else, and the time savings of 22 carpooling is very high through that corridor. 23 You see a similar kind of pattern with the 24 West Bay residents. These are the folks who live in 25 San Francisco. They come to the East Bay to work in the 349 GILLESPIE REPORTING SERVICES 1 morning, and then they come back in the afternoon, home, 2 and they pay the toll on the way going home. 3 There is less of a disparity in the income 4 between the average and the commuters, but there is 5 still a significantly higher income profile among 6 commuters. 7 What we've shown in the little hash-mark part 8 of the drive-alone and the people who have only two 9 people in the car, and those folks right now pay the 10 toll and presumably would pay the higher toll under 11 congestion pricing. 12 We used the income figure that PG&E uses and 13 that Pac Bell uses for their Life-Line Program, because 14 if we do some kind of mitigation strategy for low-income 15 folks, we'd probably model it after that, and that's 16 what we're looking at right now. And what we found in 17 the corridor is that those residents, those commuters 18 comprise, as you can see, about 4 or 2 percent of the 19 commute population that would be subject to a higher 20 toll in the peak period. 21 So that doesn't say the problem doesn't 22 exist. I mean, that's great if you're not one of those 23 2 or 4 percent of the population, but it does say that 24 it's manageable, and that I think we can design 25 strategies to deal with those folks, first of all, to 350 GILLESPIE REPORTING SERVICES 1 provide them better commute alternatives, and second of 2 all, if we need to, to do a direct kind of income 3 mitigation strategy, whether it's a toll discount or a 4 discount on transit fares or just dedicated transit 5 service. I think the low numbers make it manageable. 6 Now, this corridor, I think, is not unique. 7 I think, generally speaking, we do know that commuters 8 tend to have a higher income than noncommuters. The 9 people who drive alone tend to have a higher income than 10 transit users, and so forth. But it shows me in our 11 corridor, I think, that we have a manageable problem in 12 terms of any kind of low-income impacts. 13 (Overhead presented.) 14 The reason that we think pricing makes sense 15 in this corridor is maybe demonstrated in this graph. 16 The first column is the Bay Bridge toll expressed in 17 current dollars and then real dollars. And you'll see 18 that back when the bridge opened in '36, the toll in 19 current dollars was about 12 bucks, and right now it's a 20 dollar. This chart is a little bit old. So the real 21 dollar toll, the real value of the toll on the Bay 22 Bridge has declined substantially, whereas transit has 23 more or less kept pace with inflation. So I don't think 24 people -- you know, despite the fact that 70 percent of 25 the folks do take transit, the folks who don't are not 351 GILLESPIE REPORTING SERVICES 1 making economically an irrational decision. 2 This is our -- 3 (Overhead presented.) 4 -- estimate so far, and this is based upon 5 computer modeling of the kind that's going on for your 6 study of four metropolitan areas in the state -- in 7 fact, by the same person, Greg Harvey -- and this is his 8 estimate of what a peak-period toll would do to the 9 morning delay on the Bay Bridge toll plaza. 10 Right now it's a dollar toll, and we have 11 about a 20-minute backup on average during the weekday. 12 His estimate is that with a $5 toll, we would just about 13 clear out the cue; with a $3 toll, it would reduce it by 14 a little less than half. 15 CHAIRWOMAN SCHAFER: What happens if you 16 just remove the toll? 17 MR. HEMINGER: If -- what if you remove 18 the toll? 19 CHAIRWOMAN SCHAFER: Yes. 20 MR. HEMINGER: Well, if you remove the 21 toll, you probably wouldn't change congestion much at 22 all. Right now -- and I maybe should have mentioned 23 this. The collection of the toll does not cause the 24 delay on the bridge. The capacity on the bridge causes 25 the delay. And right now there are a row of metering 352 GILLESPIE REPORTING SERVICES 1 lights that are on in the morning and the afternoon, so 2 all that happens if you take the toll plazas out -- and 3 we hope to do that to some extent with electronic toll 4 collection -- is you'll get to the metering light a lot 5 faster, and then you'll stop. So the toll collection 6 isn't really affecting local traffic. 7 That's that estimate. Now, these estimates 8 are contestable, and I know there's been some 9 dissatisfaction expressed with estimates. What we'd 10 like to do is to try it out. I mean, this is a pilot 11 project, and that means you don't know all the answers 12 going in, but you try to know as much as you can, and 13 then you see if it works. 14 Now, I think we've talked about pricing -- I 15 have, at least, until I'm blue in the face, and I think 16 it's time to try out some of these strategies and see if 17 they work. 18 These are the kinds of things that we're 19 considering in terms of funding alternatives in that 20 corridor, both with the higher toll revenue as well as 21 with the federal money that is waiting for us if the 22 legislature authorizes the project. 23 The federal money is about 25 million, as I 24 mentioned. Each dollar increase in the toll in the 25 morning peak raises about another $7 million, which is 353 GILLESPIE REPORTING SERVICES 1 dedicated annual revenue. 2 And in addition to sort of the kind of maybe 3 traditional commute alternatives, like more BART trains 4 and more AC transit buses and more ferries, some of the 5 things that we're hearing from the focus groups that are 6 especially important are things like security. 7 There's a lot of concern that transit is not 8 safe, especially among women, and we think that that, in 9 terms of upgrading security, might make it a lot more 10 attractive to a lot of commuters. 11 Telecommuting and flex time. We're having a 12 difficult time figuring out exactly how we would go 13 about improving those things with funding, because I 14 think a lot of the problems that you'll see there -- and 15 I think Dick will mention this -- are attitudinal on 16 behalf of employees and employers, but that's something 17 we're interested in. And you'll also see specifically 18 low-income discounts, that we would fund either a 19 discount off the toll or a discount off transit fares 20 with the project. 21 (Overhead presented.) 22 We have run now through two series of focus 23 groups. We'll have a third later on this year. And 24 this is what the folks are telling us so far about the 25 project. Not surprisingly, the higher the toll level 354 GILLESPIE REPORTING SERVICES 1 is, the less they like it. It's looking to us like 2 $3 may be the magic number in terms of political 3 viability. 4 Support for a higher toll increase is 5 substantial if you're buying popular alternatives with 6 it. The focus groups that we just finished last week, 7 we began the group by asking people just off the top of 8 their head: "What do you think of this idea? Higher 9 tolls at peak periods." And the response was generally 10 mixed or negative. 11 And then we went through and gave them 12 the opportunity to buy and purchase some commute 13 alternatives by spending the revenue that we expect the 14 project to generate; and then we asked them at the end, 15 "Now what do you think about the idea?" And generally 16 speaking, the response went from negative to mixed, to 17 mixed to positive. And that, I think, is very 18 encouraging, the fact that people are willing to 19 entertain, to have doubts, and to learn about the 20 process, and to come on board. 21 MR. CALHOUN: What's a commute 22 alternative? 23 MR. HEMINGER: BART, trains, buses, 24 ferries, all kinds of things. 25 There is skepticism that any toll increase is 355 GILLESPIE REPORTING SERVICES 1 going to work, and part of this, I think, is just a 2 disconnect. The Golden Gate Bridge toll has been 3 increasing, and so we have to go through this long 4 explanation about the fact that actually it has reduced 5 traffic, which we have, I think, demonstrated; but 6 secondly, it was a flat toll increase, and so there was 7 no advantage to traveling at the off-peak. There's also 8 no carpool lane on the Golden Gate Bridge. So you do 9 save the three bucks, but you don't save any time by 10 carpooling. So I think there are some significant 11 differences. 12 Some people also say, "Gee, well, the Bay 13 Bridge toll was increased in 1988," which it was, but it 14 went from 75 cents to a dollar, and that's not going to 15 affect many people's behavior. 16 There is a concern that the toll revenue will 17 be wasted, and we're going to have to build in something 18 like a citizens' oversight committee who audits up 19 the "waazoo" to try to deal with that issue. We'll also 20 have to, I think, have these commute alternatives up and 21 running and visible on the streets with big signs 22 running before we raise the toll, I think, as a way of 23 keeping faith. 24 There's little support for what we call the 25 revenue-neutral option, which is to have a peak-period 356 GILLESPIE REPORTING SERVICES 1 toll increase and then an off-peak discount -- take it 2 below a dollar during the off-peak. We thought that 3 might be attractive to people as a way of saying, 4 overall, "We're not trying to steal any money from you; 5 we're not trying to raise your taxes," but generally 6 speaking, people told us, "If you've going to raise the 7 toll, do something with the money that's useful and that 8 we want." 9 We had been concerned and we still are, 10 despite what people are telling us, that if we do clear 11 out congestion a lot, some people might come off the 12 BART trains and buses and go back to driving, because it 13 will be a faster trip. Most people tell us they won't 14 do that, and I tend to believe them, because I think 15 most of us are creatures of habit. And once we're using 16 BART or a bus, we'll probably keep using it even if 17 driving might be a little bit faster. For one, we'd 18 still have to find a way to park in San Francisco, and 19 that's no small challenge. 20 We also found that equity has a lot of 21 dimensions to a lot of different people, and I think too 22 often when we think of equity with pricing, we think of 23 income, and that was just one of the things that people 24 thought of. In fact, in our poll we found people more 25 concerned not about income equity, but about people who 357 GILLESPIE REPORTING SERVICES 1 live or work in transit-poor locations, people who need 2 or think they need their cars for their jobs, in sales 3 and so on, the equity of spending the money in the East 4 Bay versus the West Bay, depending on who we're 5 collecting the money from. 6 I think that's especially a political 7 dimension. And in the Bay area we sort of have this 8 transit political correctness thing where -- whether you 9 should spend it on rail or bus -- you know, because bus 10 is better -- in the Bay area, even rail is relatively 11 better. We're well beyond roads. 12 So we found that people have concerns about 13 equity in a lot of different ways, and it's quite a 14 challenge to try to respond to those and stay on track. 15 (Overhead presented.) 16 Let me say these four things about air 17 quality with the project, because clearly that's your 18 principal interest. 19 The computer modeling that Greg and others 20 have done do show that areawide pricing can have a 21 significant effect on VMT and auto emissions. That's 22 not surprising to me. It's not demonstrated yet in the 23 real world, but I don't doubt those results. Our 24 problem is that we have a single-facility demonstration 25 project, and that is unlikely to have any kind of an 358 GILLESPIE REPORTING SERVICES 1 appreciable impact on regional air quality. 2 We have installed a monitor -- the air 3 district has -- at the toll plaza to try to do a before 4 and after, especially with localized emissions. The 5 problem, and it's not so much of a problem, really, is 6 that the before readings, the readings right now are 7 very low in terms of emission levels, so we may have 8 trouble trying to figure out before and after and really 9 distinguish a difference. 10 We will also model the effects of the project 11 in terms of any reduction in trips and VMT to try to 12 translate that into emissions. I think the bottom line 13 with air quality in this project is we're going to have 14 a hard time drawing good conclusions. But I think we 15 will have, if we're successful, proved that you can do 16 it, and I think the first step to areawide pricing is 17 going to be facility pricing. 18 And in the Bay area, if we could get pricing 19 on all of our bridges and then a couple of our gateways, 20 like the Altamont Pass, I think we're doing a lot. 21 In terms of the viability of the project, let 22 me just leave you with these editorials that have been 23 written, and you'll see that opinion is split somewhat. 24 (Overhead presented.) 25 Some people think it's a very bad joke. 359 GILLESPIE REPORTING SERVICES 1 Some think it's a costly rhetorical question. The 2 San Francisco Examiner and the San Jose Mercury News, 3 and it's easier for them to say -- the bridge doesn't 4 come anywhere near them -- think it's a fine place for a 5 test. 6 So we clearly have a very large political 7 challenge in front of us next year in the legislature. 8 We are going to be counting on the work that we've done 9 with voters and constituents and legislative staff this 10 year to help us with that, and we're going to be 11 counting on what I think is a fairly broad-based 12 reservoir of support with the business and environmental 13 communities in the Bay area, as well as the fact that 14 instead of the recent I&M debate, where the federal 15 government came in and said, "Unless you do this, 16 Legislature, we're going to spank you, we're going to 17 take away your highway money, we're going to beat you 18 over the head with a stick," our project is, "If you do 19 this, Legislature, we're going to give you $23 million 20 to improve transit alternatives for your constituents." 21 And I think the care approach might be a little bit more 22 successful with our legislature than the other. 23 So thank you. 24 CHAIRWOMAN SCHAFER: Thank you very much, 25 Mr. Heminger. I understand that you have a plane to 360 GILLESPIE REPORTING SERVICES 1 catch urgently. I'd like to defer to other board 2 members. 3 Mayor Hilligoss, did you have any questions? 4 MAYOR HILLIGOSS: No. I thought he did an 5 excellent job. Thank you. 6 CHAIRWOMAN SCHAFER: Any other board 7 members? 8 SUPERVISOR RIORDAN: Just a very quick 9 comment. You said you would use some of that money for 10 security on BART? 11 MR. HEMINGER: Yes. 12 SUPERVISOR RIORDAN: I've not ridden BART 13 that many times, but I'll tell you, as a woman, I agree, 14 that would be a very wise expenditure of money. 15 CHAIRWOMAN SCHAFER: Yes, Miss Edgerton. 16 MS. EDGERTON: I just wanted to ask 17 whether -- you didn't mention the emissions reductions 18 benefits you project from the congestion. 19 MR. HEMINGER: We really haven't run the 20 model on it yet. We can't because -- as you can see, we 21 have projected a delay reduction, and we'll be doing 22 that shortly. Again, I think there is a problem in 23 generalizing from this project. If you know the area, 24 it's also pretty windy there, too, and so the wind is 25 blowing everything all over the place, and so it's going 361 GILLESPIE REPORTING SERVICES 1 to be difficult for us to get any kind of direct 2 readings. And we will be able to model, and to the 3 extent we have confidence in the modeling, that will 4 give you some sense of what one facility might portend 5 for a broader application pricing. 6 CHAIRWOMAN SCHAFER: I had some questions 7 but I think I'll save them for a write-in. 8 MR. HEMINGER: I have copies of these as 9 well. 10 CHAIRWOMAN SCHAFER: Thank you. Thank you 11 very much. 12 I'd like now to invite Lynn Scarlett to make 13 her presentation. Lynn Scarlett is the Vice President 14 of Research of the Reason Foundation, a nonprofit, 15 public policy think tank based in Los Angeles. She has 16 made quite a reputation for herself in the local 17 government level. 18 Miss Scarlett has a bachelor and master's 19 degree in political science and a Ph.D. in political 20 science and political economy. She has written 21 extensively and testified extensively on environmental 22 regulation and solid waste policy before many forums at 23 the state and federal level, and is doing some 24 exceptional work for the California Environmental 25 Protection Agency in the I&M area. 362 GILLESPIE REPORTING SERVICES 1 So I want to thank you very much for your 2 appearance here today and all the work you're doing for 3 us directly and indirectly. 4 MS. SCARLETT: Thank you. Let me 5 apologize, first. I was told that I had ten minutes to 6 speak, and so I dispensed with my overheads and so 7 forth, thinking that that would take too much time, so 8 you'll have to bear with me here. 9 I did bring two reports, to which I refer, 10 and I have enough, I think, for all of you, so I'd be 11 happy to distribute them, and they go into more detail. 12 Let me just start with a few background 13 comments, because I always like to put my discussion 14 of specific policies into a broader context first. 15 Obviously, I think we're all after clean 16 air, and as it relates to air emissions and market 17 approaches, I think there are four premises or -- I'm 18 going to leave it to three at the moment -- three 19 premises of good policy design, and why is it that 20 market approaches I think warrant looking at. 21 The first is the very simple notion that the 22 polluter should pay. If single-occupancy vehicles are 23 increasingly the source of the emissions that we're 24 looking at, we need to direct our attention to the 25 individual automobile driver. It is very difficult to 363 GILLESPIE REPORTING SERVICES 1 get at that driver and that behavior through proxy 2 measures. For example Reg XV, one of its shortcomings 3 is that it really is a proxy. It's kind of a barrier 4 between the actual driver and the person trying to put 5 the program in place, the employer. 6 Secondly, I think it's worth pointing out in 7 this meeting that mobility is a positive value. I think 8 sometimes as we look at some of these market approaches 9 and these disincentives in pricing, we sometimes talk as 10 if we want to drive mobility out of existence, like the 11 dinosaur. But I think it's important to remember that 12 we do want people to be mobile. That is an important 13 part of economic activity, and wealth creation and so 14 forth. Certainly, in California. 15 And finally, the key issue we need to keep in 16 mind is flexibility. If we're going to get at least 17 cost, we need to have individuals able to make multiple 18 responses in order to preserve their mobility and in the 19 least costly way. 20 So with that as background, what are the 21 implications of these comments for a few specific 22 policies. Ones that we are working on conceptually, 23 I -- a couple of them actually are under way in some 24 small scale in reality as well. 25 First of all, let me just back up by saying 364 GILLESPIE REPORTING SERVICES 1 that market approaches are no magic bullet. They 2 certainly need to work in conjunction with regulations. 3 And secondly, I would like to suggest, as I talk about 4 these four policies that I'm going to present, one needs 5 to think of them as a cluster of interrelated policies, 6 not simply separate policies that one would think of in 7 isolation, because they actually work together. 8 And specifically, there are two kinds 9 of market approaches -- or two orientations to market 10 approaches. One set, about which we have heard quite a 11 bit, are demand-side approaches. That is, policies that 12 attempt to impact the incentives of drivers through 13 pricing schemes, whether it's vehicle emission fee, 14 whether it's congestion pricing, and so on. 15 But I'm going to posit that there's another 16 important side, and that's the supply side; that it does 17 no good to give people lots of disincentives to drive by 18 themselves if one does not have alternatives. That is, 19 one needs to put forth other modes of travel options, 20 and I'm going to look at one such option. 21 Now, with those comments in mind, I want to 22 present four different policies. One is what we call a 23 hot lane pricing policy. Essentially, what is this? 24 This is a form of congestion pricing, but it is a 25 phased-in approach. Rather than thinking of immediately 365 GILLESPIE REPORTING SERVICES 1 making a road pricing available or in place on all of 2 our freeways all at once or do all our metropolitan 3 areas all at once, what we are talking about is taking 4 existing HOV lines, high-occupancy vehicle lanes, and 5 allowing for a buy-in for single-occupant and 6 double-occupant vehicles. That is, turning those HOV 7 lanes into HOV free lanes only for vehicles occupied by 8 three people or more. If you have only two persons or 9 one person, however, you will be able to buy in to that 10 hot lane. 11 This essentially could gradually expand to 12 other lanes. As your pricing and as your flows of 13 traffic on those HOV, or hot lanes, if you will, become 14 more full, you can extend those outwards to other 15 lanes. This is a gradual way of phasing in congestion 16 pricing. 17 Secondly, in addition to expanding on 18 existing lanes, there's is the prospect for as we 19 construct new HOV lanes, thinking of them in turns of 20 hot lanes. 21 Now, what's the rationale behind this? Just 22 to briefly quote Mark Twain, "A habit is a habit and not 23 to be flung out the window but coaxed away one step at a 24 time." And I think as we move away or are weaned away 25 from thinking of road space as being free, perhaps we 366 GILLESPIE REPORTING SERVICES 1 need to do it gradually. 2 Now, let me give a brief background on just 3 how this works and what we think its implications are. 4 California right now has 661 miles of HOV lanes either 5 in existence or planned. Now, there are three 6 deficiencies with the current HOV lanes as they're in 7 operation. One is that there's ample evidence that they 8 are underused during the shoulders of peak periods. 9 That is, that you have these roadways, these lanes, 10 which during shoulders of peak periods essentially are 11 underused. And that, of course, is a cost -- a cost to 12 society generally as well as to drivers specifically. 13 Secondly, there is evidence that about 14 43 percent of the two-occupant vehicles on the -- 15 on those lanes are, in fact, people from the same 16 household. Now, why does that matter? Well, there's 17 some evidence that those who are in the same household 18 would have been carpooling anyway, so you are not really 19 getting a net gain. That is, you're not really enticing 20 lots of new people into those lanes. Yes, to be sure, 21 some. But again, in terms of your net gains, they are 22 somewhat overstated, I think, because of this 23 two-household situation. 24 Now, thirdly, they are very expensive to 25 construct, and this is magnified, of course, if they're 367 GILLESPIE REPORTING SERVICES 1 underused. So this is what has prompted us to think of 2 a hot-lane concept. 3 What about the financial feasibility of it? 4 We believe -- and we've done some modeling that is in 5 this report, and because I don't have the slides, I 6 won't try to repeat the numbers -- but we believe that 7 under certain scenarios, when you set the price of a 8 certain level, that it would be feasible actually to 9 have these -- the new construction of hot lanes, because 10 they are generating revenues, it would be possible to 11 contract out in a franchise basis and have the private 12 sector actually build this, which would of course 13 alleviate the need for public-sector funding. 14 There are some scenarios in which the 15 revenues would not be sufficient to allow a private 16 operator to build them and -- to finance, build, and 17 operate the facility, in which case one would need the 18 public sector to step in and operate these facilities. 19 There is a little bit of experience, not 20 under way, but planned. State Route 91 plans 21 essentially a hot-lane idea. Preliminary modeling shows 22 that increase in ride sharing in response to total trip 23 changes -- total trip charges ranging from $2.50 to 24 $9.90 round trip could indeed be significant. 25 SANDAG, right here in Southern California, in 368 GILLESPIE REPORTING SERVICES 1 San Diego, on the I-15, for an eight-mile, two-lane 2 reversible highway system, is also currently examining 3 the prospect of changing that HOV lane expressway into a 4 buy-in. 5 We have done, on the issue of consumer 6 acceptance, a little bit of work. And in cars -- in 7 fact, cars focus group, the Greg Harvey study, what they 8 did find is that there was interest in the buy-in into 9 the HOV. For example, people who are going to pick up 10 their children at day care centers, and those day care 11 centers charge a $5 a minute fee or fine to be there 12 on time, there was a significant concern about that 13 interview, that time is of the essence sometimes, and 14 that many people would consider buying in from time 15 to time. There was a -- there was a quasi-acceptance 16 for the notion, albeit with all of the points that 17 Mr. Heminger made, there obviously is some opposition as 18 well. 19 I am going to leave behind the hot-lane 20 concept, and as I said, I do have the reports here, 21 which you can consider in greater length. We go into 22 some detail just exactly how that would operate and what 23 legislative barriers exist and so on. 24 I want to move to the second concept, which 25 is the supply side concept. That is, thinking of 369 GILLESPIE REPORTING SERVICES 1 transit options. And I would like to put on the table 2 something other than the typical rail proposals that 3 we've often heard, and that is to think in terms of 4 introducing a privately operated commute vanpool 5 service. 6 If you think of airport shuttle service, 7 door-to-door airport shuttle service, this would be an 8 extension -- a vanpool shuttling to commuter operations 9 on a subscription basis. 10 When we look at transportation needs, we find 11 three key items that consumers consistently raise. One 12 is they want speed. They want to get where they're 13 going as fast as possible. Secondly, they are concerned 14 about safety, as you suggested yourself. And thirdly, 15 they do prefer to have a minimum number of segments. 16 That is, they prefer to have door-to-door service, if 17 possible, rather than multiple segments -- to your 18 house, to the bus stop, to wherever you're going, and 19 then walking or riding again to work. They prefer 20 door-to-door service. 21 Now, we view current transit situations as 22 being not up to the task of providing an alternative 23 for the many people that we're trying to attract into 24 transit, the 19 percent goal, for example, by the 25 year 2010. 370 GILLESPIE REPORTING SERVICES 1 Current costs of rail systems cover -- 2 current fare box covers about 37.5 percent of operating 3 costs only. That is not your capital costs. So there's 4 an enormous amount of public dollars going into these 5 systems, and as we have seen with some of the charts 6 put up there, actual transit ridership with rail has 7 declined over the last decade, notwithstanding the new, 8 very nicely designed systems. 9 We've done a cost -- performance comparison 10 between vans and rails, relying on some Congressional 11 Budget Office and other data, and what one finds is that 12 rail is significantly more costly than vehicles and 13 largely because you have very low average-load factors. 14 That means that if you spread the ridership over the 24 15 hours a day during which those systems operate, heavy 16 rail operates with about a 12 percent load factor, 17 commuter rail about 28 percent. This contrasts, for 18 example, to a conceptual commuter van system that could 19 operate at 90 percent or 95 percent load factor -- 20 virtually full. 21 How does this translate into energy use, 22 which is, of course, critical in terms of air 23 emissions? What we find is that at a 96 percent load 24 factor -- that is, with your vans operating 96 percent 25 full, in comparison to transit load factors currently in 371 GILLESPIE REPORTING SERVICES 1 operation -- that the van, on a per-passenger basis, 2 actually uses about 37 percent of the energy required to 3 operate a bus and about 30 percent the energy required 4 to operate light rail. 5 Now, again, I remind you this is on a 6 per-passenger basis. If you could get those light-rail 7 systems operating 100 percent full all day long, of 8 course, the picture would be different. 9 What about feasibility and potential impact 10 on moving people out of SOVs and into carpools and so 11 forth? Transportation Research Record Study has 12 estimated, and we don't have the specific numbers, but 13 that an increase in transit ridership using vanpools 14 would be about two to four times greater than increases 15 in transit ridership that we could expect by increasing 16 rail, for example -- rail service -- because of the 17 attractiveness of door-to-door relative to fixed-route 18 service. 19 Now, let me give you a brief case study of 20 airports. We did try to model this and see what this 21 could do to air emissions. And what we did was to look 22 at existing experience with airport shuttles, because 23 that represents kind of a mini model, if you will, of 24 what we'd be looking at. 25 Looking at LAX and San Francisco, LAX with 372 GILLESPIE REPORTING SERVICES 1 the introduction of vanpools resulted in about 5 percent 2 reduction in single-occupancy vehicle travel to LAX and 3 at San Francisco about a 10 percent reduction. That is, 4 the shuttle took up or absorbed that much ridership. 5 We, through a variety of calculations, 6 actually translated that into a net emissions 7 reduction -- and this is total emissions, not criteria 8 pollutant by criteria pollutant -- but a net emission 9 reduction at LAX on a per-year basis from the 10 introduction of shuttle vans of about 66 tons per year. 11 Obviously, that -- and that is -- that is -- would all 12 be located primarily in the LAX service areas. 13 Cost feasibility to operate a vanpool 14 system, a vanpool computer system, either publicly or 15 privately. We -- the -- you have to compare essentially 16 the costs for SOV, what it costs a passenger to ride by 17 himself in his own vehicle, and therefore, the 18 likelihood, if he has to pay something else to ride on a 19 commuter van, that he would switch. 20 Out-of-pocket cost -- and this is not your 21 full cost for operating a vehicle, but what really 22 counts is your daily out-of-pocket costs for this 23 comparison -- is about 13.7 cents per mile for a 24 single-occupant vehicle. Cost for a commuter van, an 25 eight-passenger van, would be about 17.5 cents per 373 GILLESPIE REPORTING SERVICES 1 mile. So you can see that there is a little bit of a 2 difference there. But this is under current operating 3 conditions, with no parking pricing, no hot lanes, no 4 congestion pricing, no emission fees, and so on. 5 Total trip cost, therefore, in the baseline 6 example that we have, and this is in the report here, 7 would be about $3.75 to operate a single-occupant 8 vehicle. It would cost you about $4.38 per trip for an 9 eight-passenger vehicle. 10 Now, you know what happens when you put this 11 in conjunction with parking pricing? The situation 12 changes. When you introduce parking pricing based on 13 certain baseline assumptions that we have, your SOV 14 costs, your single-occupant vehicle costs, jump to about 15 $8.4. If you add a hot-lane component -- that is, some 16 kind of road pricing component -- your single-occupant 17 vehicle costs jump to about $12.79 per day for round 18 trip. 19 So you can see that if you put in place some 20 of these economic incentives that we're talking about, 21 suddenly that commuter van appears very attractive. 22 Now, we have looked at another alternative, 23 and that would be to take some of the moneys that would 24 be raised through a hot-lane pricing system and use 25 that -- those as a $3 voucher to users of commuter van 374 GILLESPIE REPORTING SERVICES 1 services. And what that does is takes that $4.38 cost, 2 you get a $3 voucher, it brings it down to $1.38, and 3 suddenly you are very, very competitive in relationship 4 to your -- what it costs you to drive a single-occupant 5 vehicle. So we think that some kind of incentive 6 program using vouchers like that would be feasible. 7 Now, how does this compare, by the way, with 8 the kinds of public monies that we're spending right now 9 on rail and other public transportation systems? The 10 Blue Line right now is about $11.34 per passenger per 11 day, so a $3 voucher to get people into a commuter van 12 system is really relatively modest. 13 Other implications I want to briefly 14 mention. Job creations, since you know I have an 15 interest in the wedding of economic and environmental 16 matters. It's estimated that a minimum of 1.1 persons 17 per vehicle is needed to operate a vanpool system. In 18 the South Coast we have estimated that you need about 19 66,000 vans if you were to bring transit ridership up to 20 that 19 percent relying on a commuter rail -- commuter 21 van system. That would be about 73,000 jobs. And 22 indeed, some estimates put that a little bit higher than 23 that. 24 We also suggest that a commuter vanpool 25 system is a very natural audience or a very natural 375 GILLESPIE REPORTING SERVICES 1 recipient of alternative fuel vehicles. It's very 2 difficult for single-occupant vehicles to use some of 3 the alternative fuels because of the lack of 4 infrastructure and the degree to which these vehicles 5 are wedded to certain kinds of infrastructure, whether 6 one's talking about electric vehicles or alternative 7 fuels. 8 The nice thing about vanpools is that they're 9 fleet operated, and fleet operated have centralized 10 facilities for fueling up and so forth. And so it is 11 very feasible and a nice blending with efforts to 12 introduce alternative fuels. 13 Thirdly, and also equally important, I think, 14 this provides a natural market for some of the high-tech 15 systems we're talking about, IVHS, onboard tracking, and 16 so forth. Many commuter vans currently use such 17 systems. Perhaps not in their most sophisticated form. 18 But again, a significant expansion of commuter vanpool 19 systems would create very significant opportunities for 20 some who have these high-tech road systems that we're 21 talking about. 22 I want to move on now -- and again, we do 23 have all of that outlined in more detail here, and I do 24 have, I think, enough for all of you to have. I don't 25 know whether you want to wade through them. 376 GILLESPIE REPORTING SERVICES 1 The third policy I want to briefly mention, 2 and others have done so, so I'm really going to just 3 scurry over this. That is that the notion of a 4 registration fee for vehicles based on emissions times 5 the miles the vehicle drives. 6 What I would like to do is rather than give 7 specific amounts as to how that emission fee ought to be 8 set, just to basically outline what we see as some of 9 the key issues or the problem areas in thinking about 10 emission fees. 11 The first is that an emission fee tied to 12 registration is a crude fee. It's crude because it's 13 applied only annually, and therefore, it gives the 14 consumer with that high-emitting vehicle, who's paying 15 the high fee, no incentive for interim maintenance of 16 that car and so forth. So it is somewhat crude in that 17 respect. 18 In terms of feasibility, and this is the plus 19 side, it would be relatively easy to piggyback such a 20 system onto the existing registration fee. There would 21 need to be changes in the California Vehicle Code, but 22 nonetheless, it would be relatively feasible. 23 There is also the problem of equity about 24 which we have heard some. There are differential 25 impacts on different income quintiles. Let me just 377 GILLESPIE REPORTING SERVICES 1 throw out a couple little numbers to show how dramatic 2 this can be. 3 An old vehicle, by some estimates, produces 4 pollutants the equivalent of about 6 cents per mile 5 versus a new vehicle whose pollutants could be 6 calculated or translated into about one-third a cent 7 per mile. That's a huge disparity there, and to the 8 degree that ownership of old vehicles or driving of old 9 vehicles is skewed by income, you could see that this 10 fee could have some equity implications. 11 There is, of course, then, the political 12 feasibility issue: Would this be perceived as a new 13 tax? And here I accede to Larry Arnn's comments, which 14 I understand he made yesterday, which is that it would 15 probably be prudent to introduce such a fee and at the 16 same time repeal or remove some other tax, be it part of 17 the gas tax or whatever. 18 Technical issues are considerable, and that 19 is most specifically the big question, the devil's in 20 the details. How do you establish a pollution profile 21 for a vehicle? Do you use simply the crude vehicle 22 model and make? -- which we know is not a very good 23 predictor of actual emissions. Do you use remote 24 sensing of some sort, where you do on-road readings? 25 Do you use enhanced smog check? -- and so forth. There 378 GILLESPIE REPORTING SERVICES 1 are many issues, I think, there that need to be 2 considered. 3 And this brings me to the smog check program 4 about which I want to say a little bit, because I think 5 it is relevant. 6 The state of California, as many of you know, 7 is embarking on a set of pilot projects as a part of a 8 resolution made with the Federal EPA and the California 9 EPA to address problems with the current smog check 10 program. I want to briefly state what those problems 11 are. 12 The current smog check program, of course, is 13 episodic. That is, it's biennial. And what that means 14 is that during the off-cycle time, during the time 15 between Year 1, when you get your car checked, and the 16 subsequent year or years when you have to get your smog 17 checked, you have no -- there's no off-cycle testing of 18 your vehicle. You have no incentive to maintain your 19 car to some standard of air emission or air quality, and 20 you certainly have no incentive not to tamper with your 21 vehicle and so on. 22 The consequence of this lack of -- lack of 23 incentive to observe your air emissions off-time is 24 that, indeed, we do have a fairly significant problem 25 of vehicle tampering, and we do have low and poor 379 GILLESPIE REPORTING SERVICES 1 maintenance. 2 We also have a phenomenon whereby the goal 3 for the consumer has primarily been to achieve that 4 certificate. The goal ought to be, of course, to 5 achieve clean air. 6 The implications of this are, I think, to 7 revise that smog check program and enhance it in ways 8 that, number one, reduce fraud, and number two, provide 9 some deterrent mechanism for resistance to tamper with 10 their vehicles, and number three, provide them with some 11 incentive to keep their vehicles properly tuned. 12 Part of what California is looking at is the 13 use of -- is the potential of add-on of remote sensing 14 to an enhanced inspection and maintenance program with 15 the idea that remote sensing would be a means to detect 16 vehicles' emissions during off-cycle times, identify 17 those emitters, and potentially eventually have some 18 kind of a pull-over program or a ticketing program or a 19 program whereby those drivers are alerted to the fact 20 that their car exceeds appropriate air standards. 21 Two pilot projects are under way. One is 22 looking at enhanced inspection and maintenance. That 23 is, looking at different kinds of equipment for actually 24 testing vehicles. And the other is a pilot in which 25 they are (incomprehensible) . . . just how difficult it 380 GILLESPIE REPORTING SERVICES 1 is to place remote sensing to get a reading of all the 2 vehicles in a given area. 3 The particular current program under way is 4 not really testing the deterrent aspect of remote 5 testing. There is no pull-over component to the current 6 plan. And I think many of us on the I&M review 7 committee do view that as a shortcoming, and we're very 8 interested in the Orange County experiment which will be 9 attempting to do that. 10 I want to conclude with just a few words on 11 pricing systems in general. The advantage of pricing 12 systems, of course, is that they do generate 13 flexibility. Think of the multiple different kinds of 14 responses that people can have when faced with pricing. 15 One, of course, they have opportunities for 16 changed route choices, changes in time of travel, 17 changes in mode choice -- that is, how they get where 18 they're going -- changes in their destination choices, 19 ultimately, changes in trip chaining -- that is, how 20 they combine their trips from work to getting -- picking 21 up a child at school and so on and so forth -- changes 22 in trip frequency, changes in actual activity 23 selection -- what it is they're going to do when. Do 24 they go get that bottle of milk that they forgot, or do 25 they just stay at home and wait until next time they go 381 GILLESPIE REPORTING SERVICES 1 shopping? And ultimately, over the long term, it has 2 implications for where we site our residential and 3 commercial construction, and indeed also it has 4 implications for location of residential with employment 5 areas. 6 However -- that's the upside, the 7 flexibility. The downside is, of course, that that 8 means the responses to prices are very unpredictable, or 9 at least very complex to predict, and indeed also the 10 responses are some of them negative and some of them 11 positive. 12 To the degree we have only a road pricing 13 on freeways, there is the problem of people simply 14 getting onto surface streets. That is a significant 15 consideration, one of the potential adverse consequences 16 of an ill-designed program. 17 The scope of price response is also complex. 18 It depends on existing income, it depends on your 19 existing price base, it depends on the amount of route 20 competition, and the so-called spillover effects. It 21 depends on delay patterns, existing delay patterns and 22 how they are conceived as onerous. It depends on 23 available alternatives, which is why we get into the 24 supply-side issues and vanpooling. And it depends on 25 your flexibility in being able to shift your type of 382 GILLESPIE REPORTING SERVICES 1 work and so on. 2 I think I'm going to close with that, but I 3 do want to mention that congestion pricing is not 4 altogether a new item. There are examples overseas of 5 congestion pricing -- not really in the United States -- 6 but Berien (phonetic spelling), Oslo, has operated with 7 a toll ring for its business district, Singapore has 8 operated for some years with a toll ring, and 9 essentially when you enter that district, you pay a toll 10 areawide. 11 There are some results from the Berien toll 12 ring which suggest that through traffic into Berien and 13 out the other side actually reduced about 6 to 7 percent 14 with the advent of congestion pricing. Car occupancy 15 declined slightly, but we don't have actual numbers on 16 that. Violators, people who try to get around the 17 system, are levelling at around 2 percent. 18 I want to make one final comment, and it's 19 just a word of caution with respect to tax credits. Tax 20 credits -- and I was not planning to say this, but 21 because it was mentioned, I feel compelled. Tax credits 22 do offer some incentive, certainly, but I would like to 23 suggest a downside of tax credits. There is some 24 evidence, some anecdotal evidence in some circumstances, 25 that they subsidize inefficient producers and that they 383 GILLESPIE REPORTING SERVICES 1 field those efficient producers from innovation. 2 And I'm going to give you an example of the 3 solar industry. I have the great fortune of being 4 married to someone who is in the solar electric 5 business -- that's what he does for a living -- and 6 basically what you saw in the solar thermal industry -- 7 not solar (incomprehensible word), but solar thermal -- 8 was the introduction of tax credits for consumers to 9 purchase these essentially subsidized the industry, the 10 inefficient thermal producers, by raising the overall 11 prices that you could charge to the consumer. Those who 12 were not efficient producers in terms of their cost 13 structure were able to still compete. 14 What happened was as soon as that tax credit 15 was pulled, the rug was pulled out from under them, and 16 the whole industry collapsed. It has taken ten years 17 for that industry to recover from the black eye that was 18 the result of subsidizing those inefficient producers 19 during that time frame. 20 So I say that as a word of caution, not to 21 suggest that's what you're doing, but that you think of 22 the potential adverse consequences sometimes of 23 ill-designed tax credits, if you will. 24 Thank you. 25 CHAIRWOMAN SCHAFER: Thank you very much 384 GILLESPIE REPORTING SERVICES 1 for an outstanding presentation. 2 Miss Edgerton. 3 MS. EDGERTON: I think we're very 4 fortunate in Los Angeles to have you working on our 5 problems, and I expect you'll get them all straightened 6 out for us. 7 I was particularly interested in your views 8 about the viability of a clean commuter company. My 9 understanding is that, from -- for example, Prime Time. 10 I had the opportunity to hear a presentation from Prime 11 Time -- actually, at the SCAG Advanced Transportation 12 Technologies Task Force meeting -- to the effect that 13 they didn't think that it was economical right now to 14 have clean vehicles, that they cost more to have a 15 natural-gas vehicle, and certainly an EV was more 16 difficult. They have a computerized system, as you 17 know, but -- so they really are a ride share. 18 But I was perplexed by the response that 19 they didn't think they were -- that they could 20 economically -- that they looked into it. They didn't 21 think economically shifting to low emission things would 22 work. 23 Do you have any comments on how to make that 24 transition occur even in these small companies that are 25 starting to do what I think you're talking about? 385 GILLESPIE REPORTING SERVICES 1 MS. SCARLETT: I think there are two 2 issues that we need to separate out, and they're equally 3 important. One is using existing vehicles. That is, 4 gasoline-powered vehicles. Is it economically feasible 5 to think of these private subscription services serving 6 commuters? And this study that I have brought 7 essentially tracks that, and we did meet with Prime 8 Time, we did meet with many other of the current shuttle 9 operators, go over their numbers to try to determine 10 just how that all -- all that fell out. And essentially 11 those were the numbers that I briefly described, that 12 currently the cost of me getting into a commuter van is 13 slightly larger than my out-of-pocket costs of getting 14 into a -- just driving on my own. However, it is a 15 relatively small differential. If you will recall, it's 16 three dollars and something cents, I said, versus four 17 dollars and something. We think -- and they agree with 18 us -- that either some sort of a voucher system would 19 completely turn that around and make it a very viable 20 system and/or any introduction of these other matters 21 that we've talked about, such as parking price and such 22 as hot lanes. 23 The second question you ask, specifically 24 as it relates to shifting them out of their 25 gasoline-powered vehicles and into some new vehicles, 386 GILLESPIE REPORTING SERVICES 1 some new vehicle mode or some new-fueled vehicle, we did 2 not specifically model for that or look at that, and we 3 got similar kinds of feedback in simply initially 4 discussing it. However, again -- and this would be -- 5 this is a very interesting sort of next step for 6 research, I think, is just to model that. 7 But again, what we -- what we do find is 8 that even if you switch to a new vehicle -- I mean, a 9 new-powered vehicle -- while there is a -- that would 10 make the cost of that vehicle go up under current 11 conditions, and therefore that makes that differential 12 between the single-occupant vehicle and the commute 13 vehicle somewhat larger. Nonetheless, it looks as if, 14 again, a relatively small voucher would close that gap 15 and again make it feasible. 16 The bottom line to your question is under 17 current conditions, it probably is not feasible. You 18 would not attract the ridership because of that 19 differential. With the implementation of some of 20 these other policies to supplement a vanpool program -- 21 that is, vouchers, some parking pricing, and so forth -- 22 that gap would close fairly readily, including the 23 gap between a single-occupant vehicle and an 24 alternative-fuel vehicle. 25 But as I said, we simply modeled for the 387 GILLESPIE REPORTING SERVICES 1 gasoline-powered vehicle, saying, "Okay. Let's look at 2 what we have right now. Just how close to becoming 3 feasible is that?" Because we see even there, even 4 using the gasoline-powered vehicles, it could move a 5 number of people into that mode of transit, and you 6 would still be significantly decreasing your -- or 7 potentially decreasing your air emissions. 8 MS. EDGERTON: I think that's a real 9 contribution. It occurs to me that in the next step, it 10 might be worth thinking about the effect of Air Board 11 regulations on that market issue, because at least now 12 there's a requirement that -- for sales of certain 13 numbers of ultralow and zero-emission vehicles, 14 particularly in the zero-emission vehicle. 15 If it was a zero-emission shuttle, there 16 would be some kind of -- or if there were some other way 17 that there were some -- I'm just thinking out loud. 18 That's what the purpose of this is, is to brainstorm a 19 little -- would there be something that would tip the 20 scale and swing those shuttles into the cleanest 21 possible transport mode? And we'd like your help on 22 that sometime. 23 MS. SCARLETT: I appreciate that, because 24 we do -- I do have a follow-up study going on, and it 25 would be interesting to get your thoughts on what we 388 GILLESPIE REPORTING SERVICES 1 should include in that next stage. 2 MS. EDGERTON: And I'd like to get your 3 thoughts too. Thank you. Bye. 4 CHAIRWOMAN SCHAFER: Miss Scarlett, I 5 gather from the discussion of the voucher subsidy 6 transferring revenues raised from HOVs into the shuttle 7 van industry that that industry might not be profitable 8 on its own at this time. Is that because it's a low -- 9 you know, low-margin operation, high cost? 10 MS. SCARLETT: The real issue is not -- 11 certainly, the shuttle vans that operate at the airport 12 are profitable. They are certainly profitable. 13 Otherwise, they wouldn't have endured to the degree that 14 they have, and they operate without subsidies. 15 Prime Time actually did an experiment trying 16 to offer a commuter subscription service several years 17 back, and they fell just short of being able to be 18 profitable and sustain themselves over time. Part of 19 the reason is the lower numbers that I give for 20 per-passenger operations do require that you operate 21 with a relatively full vehicle, and because of the cost 22 differential between my out-of-pocket costs to drive my 23 car all by myself and the costs they needed to charge 24 me, they weren't getting that close to, say, a six or 25 eight passenger full vehicle. They were very close. 389 GILLESPIE REPORTING SERVICES 1 And indeed, they have argued that they fell really just 2 short. But -- so the answer to your question is, they 3 are not profitable as long as they cannot attract enough 4 riders to get up to that six- or eight-passenger-per- 5 vehicle level. 6 This is why we think that this supply side 7 approach of commuter vans needs to be supplemented with 8 some other mechanisms that do change the price that 9 we're paying for our single-occupancy vehicle, whether 10 that be parking prices, whether that be a voucher which 11 operates as an incentive instead of disincentive, or 12 whether it be hot lanes, or whatever, but some 13 mechanism. 14 And it is the view of the shuttle -- current 15 shuttle operators that with a slight change like that, 16 they would attract enough ridership to be independently 17 profitable. 18 CHAIRWOMAN SCHAFER: Miss Edgerton. 19 MS. EDGERTON: Tell me if this is correct, 20 because I think this is -- this was a point that 21 interested me, and I think it's the same thing that 22 Chairwoman Schafer is interested in. 23 In some of the discussions with Prime Time, I 24 got the impression that they had fees levied on them by 25 the airport, curb charges -- all shuttles do. They have 390 GILLESPIE REPORTING SERVICES 1 certain fees. But that they were fees and so forth that 2 could be removed, that would help some of the real -- 3 well, some of the shuttles that are actually -- what is 4 the word you used? The commuter -- 5 MS. SCARLETT: Subscription shuttles. 6 MS. EDGERTON: Subscription shuttles. 7 And then the other issue was that they had 8 to compete with the nonsubscription shuttle folks at 9 the curbside, so they had -- so riders that they develop 10 and people who learn to use the shuttle through, say, 11 Super Shuttle or Prime Time, they will go back out to 12 the shuttle curb, see any old shuttle, you know, and 13 take that to an airport or something. So that they 14 don't get to -- the benefit of what they develop. So 15 that's one of the problems why they don't get the 16 ridership. 17 MS. SCARLETT: Well, remember, we're 18 talking about two different things here. We have to -- 19 I use the airport shuttle system as an example just to 20 show kind of how this works, but we have seen an 21 evolution in the airport shuttle system here in 22 Los Angeles from a free-for-all where it was virtually 23 anybody at the curb, and we saw a proliferation of any 24 old body. And I don't know if you ever rode those, but 25 if you got into some of those vehicles, you were putting 391 GILLESPIE REPORTING SERVICES 1 your life at peril in some instances. 2 That has been largely, to our -- it is our 3 understanding that that is being largely remedied by a 4 change in the regulations of how that system at the 5 airport is operating, and you will have noticed in the 6 last year or two a reduction in all of those kinds of 7 fly-by-night people operating up and down and around. 8 But to the fee issue, I think one needs to 9 remember that you probably can't altogether abandon some 10 sort of fee and permitting system for shuttles, whether 11 it's for commuter subscription service or airport 12 service, because there are safety regulations, there are 13 kinds of other monitoring issues that come into play. 14 So you don't want to completely abandon that and thereby 15 open the door to the fly-by-night operators that you're 16 talking about. You need some kind of an oversight 17 mechanism. 18 The real issue, I think, is not trying to 19 further lower the cost of commuter van services as 20 it is to try and change the cost structure for the 21 single-occupant vehicle, whether it's through vouchers 22 or whether it's through parking pricing and so on. 23 CHAIRWOMAN SCHAFER: Are there any other 24 questions for Miss Scarlett from members of the board? 25 I think we'll probably pursue a number of 392 GILLESPIE REPORTING SERVICES 1 these areas, but in the interest of time, we'd like to 2 move on. 3 Thank you very much for your presentation. 4 And I suspect we'll be wanting to talk to you a lot in 5 the future, Lynn. Thanks very much for coming. 6 Our last witness for the morning is -- 7 represents a breakthrough technology that a lot of us 8 where looking forward to. 9 Dick Fitzmaurice, from Pacific Bell, has made 10 an important contribution in the area of alternatives 11 from imploring trip production and particularly in 12 telecommuting, and I understand that he does some 13 telecommuting himself, and I can understand why the 14 phone company would be encouraging its employees to 15 telecommute. But I would like to ask him to address, 16 among other things, what the barriers are to getting 17 other firms to do the same thing. 18 Welcome, Dick. 19 MR. FITZMAURICE: Thank you very much. 20 The title of the panel is "The Efficient Movement of 21 People and Goods," and the first thing I want to do is 22 to suggest that you fell just a little bit short in 23 making that title. I think the title really ought to 24 be "The Efficient Movement of People, Goods, and 25 Information." Once you add those two words to the 393 GILLESPIE REPORTING SERVICES 1 concept of transportation, you open up a whole new way, 2 I think, of reducing air pollution. 3 In fact, a redefinition of transportation was 4 done a couple of years ago by the California Engineering 5 Foundation, and it was called "Transportation 6 Redefined." The report coming out of that conference 7 made specific recommendations not only to redefine the 8 word but to redefine transportation policy, to increase 9 the capacity of our -- actually not our capacity of our 10 highways, but to lower the demand for the space on the 11 highways so you increase the mobility. 12 The recommendations included developing tax 13 incentives to encourage telecommuting, using fuel tax 14 money to underwrite telecommuting equipment and 15 training, and revising regulations covering 16 communications, transportation, insurance, and labor 17 practices to encourage rather than hinder the use of 18 telecommunications as a transportation substitute. 19 You know that the idea of telecommunications 20 as a transportation substitute isn't particularly new. 21 Remember the walking fingers? Let your fingers do the 22 walking through the Yellow Pages. The idea of that was 23 to call ahead to check with your retailer to see if the 24 item you wanted was in stock before you got in the car 25 and drove there. 394 GILLESPIE REPORTING SERVICES 1 There was another one, too, that you might 2 remember. "Long distance -- it's the next best thing to 3 being there," which gets out the notion of substitute 4 telecommunications for a trip. 5 I think that needs a little updating and it 6 probably ought to substitute telecommunications for long 7 distance in that analogy, so "Telecommunications is the 8 next best thing to being there" might be the slogan 9 today. 10 And, of course, since we know the cost of 11 being there now, the cost of the car insurance, and 12 gasoline, the social costs of smog and congestion, the 13 slogan might very well be today, "Telecommunications -- 14 it's better than being there." 15 So while the notion of telecommunications as 16 a substitute for travel is not particularly new, what 17 is -- although it might as well be, because the 18 technologies that have -- are merging, television, 19 telecommunications, and computers, and couple that with 20 the number of people who can telecommute, who are 21 information workers, you have a quantum leap in this -- 22 in the ability to do this substitution. 23 There's an estimate that nearly 60 percent 24 of Californians make their living working with 25 information -- data entry and retrieval, analysis 395 GILLESPIE REPORTING SERVICES 1 research, writing, design, consulting, or telephone 2 sales. They're all candidates to telecommute at least 3 one or two days a week. If such a thing happened, the 4 impact would be just tremendous. 5 The city of Los Angeles conducted a 6 telecommuting pilot program in the early nineties. The 7 summary of the project, the city concluded that some 8 15,000 city employees could telecommute at least 9 part-time, that telecommuting is an effective 10 transportation demand management strategy. If all 11 15,000 participated -- 1.4 days a week, the study 12 says -- the target AVR at the civic center in 13 Los Angeles would be 1.75 percent, and with no other 14 trip reduction program necessary other than what they're 15 already doing. 16 The city says telecommuting dramatically 17 reduces the amount of pollutants going into the air. 18 The average reduction per telecommuter was 276 pounds of 19 carbon monoxide. If all 15,000 participated, it would 20 be a reduction of 6.2 million pounds. 21 A few years ago the A. D. Little Company 22 did a study showing that a 10 to 20 percent 23 telecommunications substitutions for travel would 24 allow 6 million automobile commuters to work at home, 25 replace almost 3 billion shopping trips annually, 396 GILLESPIE REPORTING SERVICES 1 eliminate almost 13 million business trips a year 2 by teleconferencing, eliminate 1.8 million tons 3 of pollutants produced by vehicles, save 3.5 billion 4 gallons of gasoline, free up -- I like this one -- free 5 up 3.1 billion hours of personal time, and reduce a half 6 a billion dollars in maintenance costs for the existing 7 transportation system. 8 Now, you can see from these statistics that 9 we're not just talking about telecommuting, working from 10 home. It's eliminating shopping trips by browsing the 11 L. L. Bean catalog electronically, or a catalog produced 12 right here in California as we heard a little bit 13 earlier; it's not booking a trip to Los Angeles, 14 because you can walk down the hall and use the video 15 conferencing equipment -- and that's going on today. 16 You can also today do a video conference from your 17 desktop. It will be commonplace in the next couple of 18 years. You sit there and you see the person in the 19 corner of your computer, live, in real-time. 20 Telecommunications as transportation also 21 means ordering a pay-per-view movie on your TV set 22 through your remote control and not making a trip to the 23 video store. It's sending your blood pressure reading 24 to the doctor over the regular telephone lines and 25 having the doctor diagnose it remotely, and you don't 397 GILLESPIE REPORTING SERVICES 1 have to make a trip to the doctor's office or the 2 clinic. And it's accessing the Internet to get the 3 latest ARB information on air quality without having to 4 make a trip to the library. 5 The other thing that's new about all of this 6 is fiber optics; and I've got to mention that, I think. 7 Pacific Bell has committed $16 billion to put fiber 8 optics into every neighborhood in California over the 9 next several years. We call it pots to pans. What you 10 have in your home now is dial tone over copper wire, and 11 it works just fine, but it's known as plain old 12 telephone service, POTS. And all the stuff that we're 13 talking about now is pretty new stuff, PANS. So we're 14 going from pots to pans. 15 The project that we have to put in fiber is 16 called California First. Again it's a $16 billion 17 project. We have begun construction on it in four 18 regions in California. We anticipate having more than 19 one and a half million homes hooked up by 1996, an 20 additional 5 million by the year 2000, and all 21 14 million residential and business customers on-line 22 by the year 2010. 23 Pacific Bell has also committed $100 million 24 to wire the schools, starting -- not with fiber, but 25 with something called ISD -- a great technology, but not 398 GILLESPIE REPORTING SERVICES 1 quite the same as fiber. But to convert to fiber over 2 the next few years so that students can have axis to the 3 educational opportunities that are available on line. 4 What we believe, and we hope you do, too, 5 that advanced telecommunications network along with the 6 powerful computers that we have, user friendly software, 7 innovative information providers is a highway. No more, 8 no less, than a real highway. It's a virtual highway. 9 And we also think the technology has arrived just in a 10 nick of time because real highways are getting more and 11 more difficult to build. 12 Travelers on the information highway don't 13 pollute. If you're looking for a way to maintain 14 mobility and reduce mobile-source emissions, this is 15 it. 16 Let me end with a couple of suggestions. The 17 main one, I think, is to make telecommunications, the 18 telecommunications solution to air quality problems, 19 part of your everyday thinking so that you see the 20 opportunities when they come up. 21 You might not ordinarily pay much attention 22 to -- I don't know if you do or not, but you might not 23 pay attention to a bill that deals with taxes. But if 24 it's a tax credit to buy computers, and you know that 25 that computer might be used to work at home a couple of 399 GILLESPIE REPORTING SERVICES 1 days a week, you might want to write a letter to the 2 legislature on it. 3 Perhaps the board can influence state policy 4 makers to spend a portion of the traditional highway 5 dollars on this alternative form of transportation. We 6 subsidize roads. Why can't we subsidize computers? 7 Pacific Bell believes that when it comes to 8 trip reduction programs, you get the most bang for the 9 buck with episodic control programs such as the "Spare 10 the Air" program in the Bay area. You might want to 11 help fund or get involved with some sort of workshop, 12 encouraging people to telecommute as a way of meeting 13 the spear leader goals. 14 Given when Mr. Heminger's congestion pricing 15 program happens on the Bay Bridge, there will have to be 16 some information around that about alternatives. 17 Telecommuting ought to be part of that. 18 At Pacific Bell we like to say that "Cars 19 don't cause gridlock, bosses do." It's a reference to 20 the managers we heard about earlier that still manage by 21 attendance rather than by objective. A workshop or 22 promotional campaign aimed at making telecommuting as an 23 important business tool as total quality management 24 might help in that sort of regard. 25 There might also be a workshop demystifying 400 GILLESPIE REPORTING SERVICES 1 the technical part of all of this, the -- I think a lot 2 of times managers sit there and say "Telecommuting? I 3 don't even understand my computer. I don't want to have 4 to deal with hooking up the wires to my main frame," or 5 whatever. It's relatively simple to do in most cases. 6 Perhaps a workshop on how that might happen for middle 7 managers might be of value. 8 It's also not just managers. A lot of times 9 people are concerned about not being in the mix at work, 10 missing out on promotions because nobody sees them every 11 day. There is that concern. There needs to be some 12 education around that as well. 13 A joint advertising campaign with the various 14 players in the telecommuting arena to promote the 15 telecommunications solution is a possibility, and I 16 suspect strongly that Pacific Bell would join you in 17 that sort a program. 18 And finally, I think telecommuting would 19 benefit from your influence at the -- perhaps influence 20 at the California Public Utilities Commission, 21 specifically to gain some pricing flexibility for 22 Pacific Bell in this regard. From time to time we like 23 to package the products we have in a telecommuting 24 package and sell it at a discount, but the pricing 25 scheme, as outlined at the PUC, is that we can't do that 401 GILLESPIE REPORTING SERVICES 1 except in special circumstances. 2 And one of those was the earthquake. We put 3 together a special package. I believe what it was, was 4 you put an extra line in your home because you want to 5 telecommute after the earthquake in Los Angeles, and we 6 waived the installation charge. But it takes a special 7 decision from the Public Utilities Commission to do 8 that. 9 Absent an emergency kind of situation, we 10 might or we might not get the approval to sell at a 11 discount. Aside from being cumbersome, it just doesn't 12 make much business sense either. You know, would Macy's 13 be able to compete with Nordstrom's if they had to go to 14 the government every time they wanted to do the White 15 Flower Day sale? 16 But just a few ideas. I'd be happy to link 17 anybody up with the people in Pacific Bell who have 18 specific knowledge on these various areas. And I want 19 to thank you for the opportunity to talk to you. 20 CHAIRWOMAN SCHAFER: I thank you very 21 much. 22 Are there any questions from the board 23 members for Mr. Fitzmaurice? 24 Yes, Dr. Boston. 25 DR. BOSTON: I can see for a large 402 GILLESPIE REPORTING SERVICES 1 company, it may not be a problem, but for the small 2 employer who has just a few employees and he's just 3 operating on a very close margin anyhow, how do you 4 reassure him that his employee at home, telecommuting, 5 isn't going to be playing with the dog or cutting the 6 grass or -- how do you reassure that guy? 7 MR. FITZMAURICE: Well, the first thing is 8 that you might manage by objective, by performance. Did 9 the work get done? And did it get done on time? And I 10 don't really care if somebody goes out at 11 o'clock and 11 mows their lawn, and maybe even goes to the store, as 12 long as the report I need next Thursday is on my desk at 13 that time. 14 DR. BOSTON: But if he has a stack of work 15 on his desk, and he's sitting there doing it eight hours 16 a day, and it gets down only so far, how do you know 17 it's going to get down further if he's sitting there 18 under observation than when he's at home doing it, when 19 he's not getting observed? 20 MR. FITZMAURICE: Actually, the studies 21 that are out there show that telecommuters increase 22 productivity by 20 percent, and that keeps happening 23 over and over and over again in the various studies. 24 And also supervisors -- telecommuters will tell you, "My 25 productivity went up 35 percent." Supervisors will say, 403 GILLESPIE REPORTING SERVICES 1 "You know, well, it went up, but it only went up 15 2 percent. You know, somewhere in there." But the 3 important part of it is that the supervisor also sees an 4 increase in productivity. 5 I think people want to do good jobs. I don't 6 think there's a real problem with -- at least so far -- 7 with telecommuters goofing off and not getting the job 8 done. 9 DR. BOSTON: Okay. 10 CHAIRWOMAN SCHAFER: Miss Edgerton. 11 MS. EDGERTON: I wanted to ask -- 12 Mr. Boyd, I wanted -- I was going to ask Mr. Boyd, 13 what is the -- does the ARB have any policy on 14 telecommuting? 15 MR. BOYD: You mean with respect to our 16 own operations? Or -- 17 MS. EDGERTON: Yes. 18 MR. BOYD: As a matter of fact, as a 19 result of attending the conference that the gentleman 20 mentioned, last year, in which I appeared on a panel 21 with others, we just finally have installed in our 22 conference room in the last week telecommuting 23 capability with our El Monte office. So yes, we are 24 trying to be on the cutting edge. 25 Financially and otherwise it took quite a 404 GILLESPIE REPORTING SERVICES 1 while to accomplish it, but we need to set an example, 2 and as a result of that conference, I came back and 3 hopefully energized the staff to a little more 4 enthusiastically look at this in our quality planning 5 arena because of learning of the huge commitment that 6 Pacific Bell and others were putting into the 7 operation. And the panel I was on with the PUC and with 8 legislators and the Energy Commission, and Caltrans, and 9 what have you, I did go away somewhat energized. I 10 don't know if any of that energy is left after the 11 passage of roughly a year, but it definitely is an area 12 that's of interest to us. But you do have to keep 13 energizing the subject, because it is easy to slip back 14 to the issue of the day. 15 But you know, we are trying to lead somewhat 16 by example, and we are offering our facilities to the 17 air districts of the state, who tend to get together on 18 a regular basis, to be able to talk to themselves out of 19 our conference room and what have you. 20 They are still debugging the system. It 21 worked beautifully one morning and refused to cooperate 22 that night; but that's just part of progress. 23 MS. EDGERTON: Do you have any policies 24 about staff? I mean, can staff work out of their home, 25 or what are -- 405 GILLESPIE REPORTING SERVICES 1 MR. BOYD: We -- 2 MS. EDGERTON: -- what are the -- is there 3 a -- 4 MR. BOYD: Yes, I was -- 5 MS. EDGERTON: -- state restriction on 6 that? 7 MR. BOYD: I guess I got hung up on the 8 new teleconferencing that we're doing. But we have a 9 policy of telecommuting. We do allow it. It does take 10 place. We've had quite a number of experiments with it, 11 and we do have a fairly -- we have a good number 12 of employees who actively engage in it. So we do -- 13 there is an in-house policy that allows it and provides 14 for it and provides the equipment to facilitate it as 15 well. 16 MR. FITZMAURICE: The equipment, by the 17 way, can range anywhere from, you know, a notepad. You 18 don't necessarily need a computer at home. It depends 19 on what your job is. It may be that you telecommute one 20 day a week to catch up on your "in" messages, in 21 reading, and you know, making phone calls, and that kind 22 of thing. So not always do you need all this high-tech 23 stuff. And that's what makes it difficult to explain to 24 people sometimes. This telecommuting is staying at home 25 and working, whatever you need to do that. 406 GILLESPIE REPORTING SERVICES 1 MS. EDGERTON: That's true, because my 2 thought was that you had to be all networked in with -- 3 your computer had to be able to work with everybody 4 else's computer; you had to know how to have all these 5 systems go together. And that's obviously not the 6 case. 7 MR. FITZMAURICE: Not necessarily, no. 8 It depends. If you're a service rep for, you know -- 9 anybody -- and you're taking calls at home, well, you 10 need access then to the main computer system; but if 11 you're at home, writing a report, you can write it on 12 your PC, a laptop, put it on a disk, and bring it back 13 into work, and then put it into the main system if you 14 have to. You know, just there's tons and tons of 15 different scenarios that can evolve. 16 CHAIRMAN SCHAFER: Mayor Hilligoss. 17 MAYOR HILLIGOSS: Yes. I was wondering, 18 the fiber optics that you mentioned, are you going to be 19 in competition with cable too? 20 MR. FITZMAURICE: It seems likely that we 21 will be. What -- we're doing it for two reasons. One 22 is the fiber is much easier to maintain, and so -- and 23 plus it's better sound quality. So we'll get a better 24 telephone system -- you know, traditional telephone 25 system out of it. 407 GILLESPIE REPORTING SERVICES 1 The other thing is, all this access and 2 interactive access to the catalogs, interactive access 3 to educational institutions. You know, we have pilot 4 programs where students at high schools are taking 5 college classes, distance learning, over fiber. And 6 it's -- like I said, it's interactive. 7 I suspect that at some point that other cable 8 companies from around the country might be coming up to 9 us and say, we want to buy time on, you know, this city, 10 this city, this city, and this city, and we'll compete 11 with the existing cable operator there. I don't know. 12 And will we put something on there? Probably. 13 MAYOR HILLIGOSS: You could put all the 14 programs on, couldn't you? 15 MR. FITZMAURICE: Not currently, we 16 can't. It will take a change in federal law. 17 MAYOR HILLIGOSS: In that case, would you 18 give franchises to the cities too? 19 MR. FITZMAURICE: Yes. If we're providing 20 cable, then we would just provide it, yes. 21 MAYOR HILLIGOSS: Thank you. 22 CHAIRWOMAN SCHAFER: Supervisor Riordan. 23 SUPERVISOR RIORDAN: Yes. Thank you. I 24 truly believe in telecommuting for a whole variety of 25 reasons, but we're here today because of air quality 408 GILLESPIE REPORTING SERVICES 1 issues, and my question -- and I think it's really not 2 necessarily that the speaker, though you may have the 3 answer, but to staff as well -- there is a theory that 4 even though you're at home, you may indeed be using some 5 trips. And while you may not be commuting to work, you 6 may be commuting to the local store, you may be 7 commuting and taking your child to school, the whole 8 raft of other things. 9 Are there any studies that are being -- or 10 that are in the works at this point in time to sort of 11 look at that to see what is indeed the pattern that is 12 being experienced? 13 MR. FITZMAURICE: I know of one. 14 Patricia Mokhtarian at U.C. Davis, the Institute for 15 Transportation Studies, I believe it is, has asked that 16 very question, and has done all kinds of surveys, and 17 finds that so far it is not a problem. And that may 18 very well be because people are -- telecommuters are 19 still in the minority. They're still trying to prove to 20 the boss that they're -- you know, that -- they want to 21 earn the right to keep earning it. So they're there, 22 and they're available at their phone, at their computer 23 all the time. They're not making those trips. 24 So hopefully that will continue, but it is a 25 cautionary note that it may be that as telecommuting 409 GILLESPIE REPORTING SERVICES 1 becomes commonplace, that people will start making more 2 trips during the midday. 3 CHAIRWOMAN SCHAFER: Cathy. 4 MS. WITHERSPOON: There have been a number 5 of studies that have tended to gather this question, 6 either through surveys about what people are doing with 7 their time and the amount of trips that they're taking, 8 to other kinds of research into telecommuting 9 specifically and the activities during the time at 10 home. 11 It's a very complicated question because 12 not only is there the work ethic, people combine 13 telecommuting with at-home child care, so they're not 14 necessarily going to leave. You have to remember during 15 the workday you take other trips, too, during your lunch 16 hour, if you have your car -- after the workday, on your 17 way home. And so you really are trying to find out the 18 difference between all of the trips during the day. 19 We think clearly you have avoided the work 20 trip, and so it's really the ancillary trips, and it's 21 the free time, if it's really free time, is causing you 22 to travel more during the day. And we don't know 23 exactly the answer to that question, but we inject that 24 comment every time telecommuting comes up as a magic 25 solution to air quality problems. 410 GILLESPIE REPORTING SERVICES 1 SUPERVISOR RIORDAN: Just for the board's 2 edification, one of the things that we've done in the 3 county of San Bernardino -- all of our building 4 inspectors operate with this, so that they do not have 5 to come into the office to pick up their work 6 assignments, so that they've eliminated an entire trip 7 to the office, and they go from home to their first work 8 assignment, which has made a big difference in our 9 building and safety department. 10 MR. FITZMAURICE: That's a great idea. 11 CHAIRWOMAN SCHAFER: I had another 12 question for Mr. Fitzmaurice. A lot of job creation 13 today is either through contract or part-time -- and the 14 opportunity for working out of your home, and therefore, 15 changing the whole -- the megapicture for how we work 16 seems to be changing these days. 17 One of the barriers, I understand, to 18 home offices is the federal tax code and the recent 19 interpretations given by the IRS to deductibility of 20 expenses associated with that. 21 Is the phone company involved in trying to 22 get Congress to look at that, out of curiosity? 23 MR. FITZMAURICE: We're not right this 24 moment, but it is an issue that has come up in recent 25 months. And yes, we're concerned about that. 411 GILLESPIE REPORTING SERVICES 1 CHAIRWOMAN SCHAFER: Have you done any 2 analysis of the air quality benefits, which might be a 3 good argument to use when you do go to Congress? 4 MR. FITZMAURICE: No. I would have to 5 work with the people on your staff, and I would be happy 6 to do that. 7 CHAIRWOMAN SCHAFER: Okay. Good. Thanks 8 very much. 9 MR. FITZMAURICE: You're welcome. 10 CHAIRWOMAN SCHAFER: Any other questions 11 from board members for this witness? 12 If not, I want to thank you and other panel 13 members this morning for very excellent presentations 14 and very helpful in terms of specifics for us to move 15 forward and develop further specific proposals that we 16 might be able to use. 17 We're going to resume at 2 o'clock with 18 witnesses who will address themselves to accelerated 19 vehicle retirement/conversion -- car crushing, that kind 20 of thing. There's practical experiences out there that 21 the board would like to hear about and also see if we 22 can improve incentives that we might be involved in. 23 Thank you. 24 (Lunch recess was taken.) 25 CHAIRWOMAN SCHAFER: Good afternoon, 412 GILLESPIE REPORTING SERVICES 1 ladies and gentlemen. Our session that's about to 2 begin . . . 3 (Discussion was held off the record.) 4 This afternoon's session actually has three 5 separate components. The first is the use of cleaner, 6 alternative fuels and all types of mobile sources; 7 second is the retirement of older passenger cars through 8 auto buyback or cash-for-clunkers program, and we have a 9 presentation on a special pilot project where remote 10 sensing was used at a worksite to ensure the effective 11 maintenance of employee commute vehicles. 12 I'd like to handle these subjects one at a 13 time so this board has the benefit of hearing related 14 presentations together. So I'm going to start by 15 calling forward Alex Sapre, if he's here this afternoon, 16 with Hughes Aircraft Company. Once he's finished, I 17 would like to convene a three-person panel on the auto 18 buyback programs, and we'll conclude with the final 19 panel on the fuel conversions. 20 If there are other individuals in the 21 audience today who wish to address the board, please 22 identify yourself to Judy Lounsbury, board secretary, 23 and we will give you that opportunity before we adjourn 24 this afternoon. 25 Now, if I may, I'd like to introduce Dr. Alex 413 GILLESPIE REPORTING SERVICES 1 Sapre with the Hughes Aircraft Company, who will 2 describe their experience for us. 3 Good afternoon. 4 DR. SAPRE: Is this the correct location 5 for me to stand? 6 CHAIRWOMAN SCHAFER: You may stand there, 7 you may use overheads, or proceed as you care to. 8 DR. SAPRE: I did not bring any 9 overheads. I would be more than happy to provide a copy 10 later on. 11 CHAIRWOMAN SCHAFER: Very good. We'll be 12 happy to take a look at it, too, and make copies for all 13 the board members. 14 DR. SAPRE: I certainly will do that. I 15 want to -- I, first of all, thank you for inviting me 16 and Hughes Aircraft Company to be here and talk about 17 something that we have been doing now for almost three 18 years. 19 My presentation and discussion is going to be 20 substantially informal, and anytime any of you have a 21 question or want some additional information, I'll be 22 happy to provide that if I have it with me. Otherwise, 23 I'll be more than happy to submit it later on. 24 I would like to give you a little bit of 25 background on this, realizing that you've got about six 414 GILLESPIE REPORTING SERVICES 1 or seven speakers in one hour, so I'm going to take no 2 more than five or seven minutes to just describe what we 3 are about. 4 As you well know, Hughes has been in the 5 California area I guess for years and years, and remains 6 to be one of the -- if not the largest employer -- and 7 particularly with General Motors. 8 Clearly, we have a significant interest in 9 the air quality in this area. We also have a 10 significant number of manufacturing facilities in this 11 area, so any kind of radiation or any other restriction 12 on the emissions of those facilities certainly are of 13 interest, and we are working hard in developing new 14 technologies, new materials, and processes to reduce and 15 in most cases eliminate any of the emissions that are 16 generated through these manufacturing activities. 17 Thirdly, you also know that Hughes has a 18 reputation of creating some new innovative technology, 19 has done so in the defense arena for a number of years. 20 One of those technologies is the remote sensing 21 technology that we have used in the defense arena and 22 will be -- have employed now and are in the process of 23 converting that technology for commercial application, 24 and one of the applications is the remote sensing of 25 vehicle emissions. 415 GILLESPIE REPORTING SERVICES 1 We have -- we thought that this technology 2 had a potential. We have been working with our 3 technical people as well as the regulatory people, 4 with the South Coast Air Quality Management District, 5 and in fact some of the California Air Resources Board 6 technical people as well, along with the EPA personnel. 7 Our idea is -- actually the basis of the 8 idea, and I think some of you, or all of you, I'm sure, 9 are well aware, that a number of studies have shown that 10 a limited number, a small number of cars, vehicles, 11 produce a significantly large, disproportionately large, 12 amount of emissions. Certainly, if we were to be able 13 to identify those vehicles that have high emissions in a 14 cost-effective manner, with a reliable, repeatable 15 technology, it will make a lot of sense to focus on 16 those vehicles for repair and maintenance activities or 17 whatever is required to reduce the emissions of those 18 vehicles. That was the basis with which we started, and 19 I think a number of studies have shown that to be the 20 case. 21 The technology that we used is the I/R 22 technology, the detection technology, with using a 23 sensor that can identify hydrocarbons and CO emissions 24 from a vehicle continuously with a great deal of 25 accuracy, like 99.99-plus percent accuracy, at that 416 GILLESPIE REPORTING SERVICES 1 particular instant. Not to say that this technology is 2 totally available for worldwide use today, but I think 3 with the results that we have obtained, using our 4 employee sites, we have -- I think we have demonstrated 5 that this technology is ready to be used on a scale 6 of -- and with the provision that a customized program 7 is designed at this stage so that we understand what 8 goes on with the site, how the employee's behavior is, 9 and be able to identify the vehicles that are high 10 emitters. 11 We conducted this program at one of our 12 El Segundo sites with -- on three different occasions. 13 The first was about two years ago when we set up a 14 detection system as the employee entered from the site. 15 The -- as the employees' vehicles passed through the 16 systems, through the detection system, we were 17 immediately able to identify the vehicles that have 18 above average, substantially above average hydrocarbon 19 and CO emissions. 20 As the employees drove through, we gave them 21 a little piece of paper -- I guess not -- a notice is 22 not a right word -- to let them know that their 23 particular vehicle was a high emitter, just for them to 24 be aware of that fact, and if they were interested in 25 doing something about it, to call a particular number 417 GILLESPIE REPORTING SERVICES 1 that we have set up. It was totally done anonymously. 2 And a number of people, about half of the people who 3 received the notice called back and asked about the 4 program as well as what the problems were. 5 After doing that study, at one time we 6 repeated the study later on, and we found that the 7 average emissions for that particular site had gone 8 down, and we are believing that our employees are 9 conscientious and, in fact, did something on their own. 10 At that time we had not provided any kind of incentive 11 for any of the people. We are considering that at this 12 stage. 13 What we found was that we have to make some 14 adjustments. We had to have, in fact, two sensors, not 15 one, to get an accurate reading. We had to keep the 16 sensors at two different -- at a particular distance to 17 make sure that the accuracy was improved. 18 But we went through that program and we did 19 that a third time and found, I think, at a variety of 20 locations that our employees were very, very receptive, 21 that the technology is feasible. 22 In fact, the cost of conducting this study 23 and identifying the number of vehicles, and if you were 24 to assume certain amount of cost for repairing those 25 vehicles, we found that this would be one of the most, 418 GILLESPIE REPORTING SERVICES 1 if not the most, cost-effective way to improve the air 2 quality, based on the number of alternatives that are 3 available. 4 Now, the part of the program that we have 5 done so far is, in fact, installing the system and 6 identifying the vehicles. We have a program with the 7 South Coast Air Quality Management District to follow 8 through in providing the incentives to, in fact, see how 9 receptive the people are, the employees are, so that we 10 can demonstrate the actual reduction in emissions as a 11 result of applying this technology along with a 12 particular program. 13 Just to provide you the scale of -- of the 14 experiment that we conducted, we had at that particular 15 site over 10,000 employees at one time. Over the years, 16 of course, that number has gone down, unfortunately, but 17 it's still in the thousands. It's like 8,000 employees 18 still. And so there's a large number of cars that went 19 through a -- a large number of vehicles that went 20 through. It has worked very well. 21 We think this is something that will be 22 employed at a variety of sites, not only 23 singular-employer site. It could be -- for example, it 24 could be done at office buildings, medical centers, 25 shopping centers, if necessary. In fact, we had some 419 GILLESPIE REPORTING SERVICES 1 discussions with some of the larger entertainment 2 industries as well. 3 So I guess in a nutshell, I just wanted to 4 share with you what we believe is something that is 5 technically very viable, what -- based on our 6 experiment, very -- has practically no intrusion on 7 the employees, and therefore the public at large, we 8 believe, and something that could be very cost-effective 9 in terms of reducing actual emissions. 10 So that's all I wanted to share with you, 11 and I'll be more than happy to give details of the 12 experiments and other information as necessary. 13 A final comment. As you well know, we are 14 involved in a number of other technical areas, such as 15 pollution monitoring through satellites, a number of 16 other areas, and some of that technology eventually 17 could be used for emission quotas. 18 Thank you very much. 19 CHAIRWOMAN SCHAFER: Very good. Thank 20 you. 21 Supervisor Riordan. 22 SUPERVISOR RIORDAN: My question would be 23 to when the employee responded to this phone number, 24 what did you tell that employee? What was the message 25 that was given? 420 GILLESPIE REPORTING SERVICES 1 DR. SAPRE: The message that was given was 2 that we have -- we described the program, we told them 3 that through this program we have identified your 4 vehicle being one of the high emitters, and we want 5 to -- you make sure you get it repaired, and beyond 6 that, we have no incentive to -- for that to happen. 7 But we think that this is something that you should 8 consider in terms of your requirements. 9 SUPERVISOR RIORDAN: Thank you. 10 CHAIRWOMAN SCHAFER: Mr. Calhoun. 11 MR. CALHOUN: The program that Dr. Sapre 12 described is one that could possibly be carried out by 13 other companies with a lot of vehicles coming into some 14 particular area. And I suspect -- I don't know this, 15 but I suspect that the ARB staff may be approached with 16 the idea of conducting -- of a given company conducting 17 a poll of this type. And I don't know if the staff has 18 given any consideration to this or not, or have we -- 19 has someone talked to us about this at all? 20 MS. WITHERSPOON: We've given a lot of 21 consideration to the Hughes Aircraft experiment and to 22 any other kind of approach which would reduce emissions 23 at worksites other than traditional ride sharing, and we 24 had advocated, along with several other parties, that 25 the legislature amend the law to permit such strategies 421 GILLESPIE REPORTING SERVICES 1 to be used, and we are participating in efforts to 2 quantify their impact and establish generic formulas so 3 people could trade easily across different kinds of 4 strategies that they have. 5 MR. CALHOUN: I just have a question for 6 Dr. Sapre. I believe, Alex, at one time you were 7 thinking in terms of using the remote sensor for 8 stationary source. Is that something that's still 9 viable? 10 DR. SAPRE: Well, I think there are a 11 couple of technologies, but -- a number of technologies 12 are available that could be used. Ourselves, we have 13 not employed any of the technologies for our sites, no. 14 But I think we have a number of technologies. We have 15 talked to some of the people all the way from EPA and 16 others who have actually developed that further, so I 17 think it could be commercially employed. 18 CHAIRWOMAN SCHAFER: Miss Edgerton. 19 MS. EDGERTON: I wanted to ask 20 Miss Witherspoon, is the proposal that the ARB has 21 endorsed before the legislature for substituting this 22 sort of strategy for ride share, or is it a broader 23 opening up of the whole credit system for companies? 24 Where do you see good citizenship like this fitting in? 25 MS. WITHERSPOON: Well, I was referring 422 GILLESPIE REPORTING SERVICES 1 to a law which has already passed, which authorizes 2 equivalent emission reduction strategies for ride 3 sharing and other transportation control measures. We 4 are not currently sponsoring legislation that, for 5 example, implements some of the bubbling contests we've 6 heard about over the last day and a half. That would 7 certainly be something that could be considered in the 8 future. 9 MS. EDGERTON: So then I wanted to ask, 10 what was the incentive for Hughes to do this? 11 DR. SAPRE: Well, that's a good question, 12 and I guess I have to -- the initial interest is -- was 13 not only to apply the technology capabilities we have, 14 but also as a result of Reg XV, which is what you are 15 referring to, which has to do with the carpooling. 16 We found -- and I think we are not the only 17 ones -- that the Reg XV, as it stands, was not directed 18 really to reducing emissions, but it was -- it appeared 19 to us it was more for traffic congestion-related issues 20 and not the air quality-related issues. 21 And I think you are well aware, just -- 22 and I'm going to give you a little bit of personal 23 experience and relate this to the Reg XV. At one time I 24 was in a vanpool, and we are six people in the van, and 25 each one of us would start their car and come to a 423 GILLESPIE REPORTING SERVICES 1 particular centralized location. Every time we started 2 our car, knowing a little bit about the automotive 3 engines, I thought I was already polluting 70 or 80 4 percent of my share of emissions, which was -- I did not 5 think it was appropriate. It didn't make sense to me. 6 So there had to be -- if the Reg XV or 7 similar traffic control activities were focused on 8 emission reduction, there would be a lot -- they would 9 be a lot more valuable. That's number one. 10 Secondly, whereas, Reg XV really focused only 11 on the travel back and forth to work -- and we travel 12 all over the place, all over -- and substantially longer 13 distances than just coming to work -- so it makes sense 14 that if we have really cleaned up the cars, or use the 15 cars -- do not use the cars that are high polluters, 16 we'd be a lot more effective in terms of reducing 17 pollution. 18 So as a result of -- I guess there was a 19 third item, as well, a negative cost. When we look at 20 the Reg XV cost, we thought that administrative cost 21 of Reg XV was very high, and we have really great doubts 22 about the effectiveness in terms of emission reduction. 23 A combination of these thoughts really went 24 into developing this technology, and in fact, at our 25 expense, showing the -- for our employees and the public 424 GILLESPIE REPORTING SERVICES 1 at large that this, in fact, is a viable technology, 2 this is a direct approach -- this is one of the direct 3 approaches that can be cost-effective. It is -- it does 4 the job in terms of it identifies, which is our No. 1 5 requirement, to know which vehicles are high polluters, 6 and then develop a program that would -- that would then 7 be used to clean up those vehicles. 8 One way -- it would be -- which is the 9 subject, I guess, of this workshop or symposium -- and 10 that is, how do you -- you know, you can basically 11 retire them, if you want to call it that. 12 So that's -- those are the facts that went 13 into our developing this program, which is fundamentally 14 to believe that unless we reduce emissions, it's not 15 going to work. It just -- that has to be the focus of 16 any of the traffic control activities or any of the 17 Reg XV activities. 18 MS. EDGERTON: And you substituted -- have 19 you tried under the law -- have you tried to use the law 20 that Miss Witherspoon just brought up, and say that this 21 is equivalent to -- 22 DR. SAPRE: You mean the Reg XV kind of 23 thing? 24 MS. WITHERSPOON: Yes. 25 DR. SAPRE: Well, as you, perhaps know, 425 GILLESPIE REPORTING SERVICES 1 there is currently a debate going on regarding -- there 2 is an advisory committee, of which I'm a part, in trying 3 to establish a number of alternatives for Reg XV rather 4 than just having a carpool kind of program for an 5 employer -- such as Hughes. 6 That means -- for an example, under those 7 conditions, one of the -- I mean, in that situation one 8 of the alternatives would be for an employer to install 9 a remote sensing program or establish a remote sensing 10 program as a safe harbor, so to say, as a Reg XV 11 activity. 12 So yes, this and a number of other arguments 13 are under consideration. Obviously, there's a lot more 14 debate going on in that area. 15 CHAIRWOMAN SCHAFER: I gather this 16 statute was permissive, and it was still up to the 17 local district as to whether or not they would allow a 18 substitution. We were providing the opportunity to 19 score it, so to speak, but you still have to persuade 20 the local decision makers to provide the flexibility, 21 and I gathered that's under way. 22 I was going to ask you, but I think I know 23 the answer from your testimony. You were successful 24 with ride sharing, just as a congestion management 25 program, and you're successful with this, evidently. 426 GILLESPIE REPORTING SERVICES 1 Would you go back to the other, or are you still 2 persuaded that the air quality benefits of this approach 3 is superior to that? 4 DR. SAPRE: Well, I want to say we will 5 qualify our success with the ride-sharing program. It 6 was really kind of a qualified success in that. If 7 you -- because, it has -- the program has improved the 8 carpooling -- the AVR has gone up -- and I don't recall 9 exact numbers from what -- something like 1.13 to 1.17, 10 or something like that, but it certainly has not gone up 11 as much as we expected and certainly has been a matter 12 of great concern for us, because the amount of money 13 that has been expended in this area is large, and we are 14 still concerned about -- and we are doubtful about the 15 air quality benefits. We think the -- this approach, 16 what we are proposing, will have a much better chance 17 of improving the air quality at large and really not 18 addressing the so-called traffic congestion problem 19 per se. And I think that's where the focus should be. 20 CHAIRWOMAN SCHAFER: One of the potential 21 arguments against this program is that smog check 22 presumably takes care of it. Could you comment on 23 whether this actually still increases emission benefits 24 over and above the smog check program, as we expect that 25 it will be administered in the future. 427 GILLESPIE REPORTING SERVICES 1 DR. SAPRE: Well, I think I am, too, for 2 the -- if -- when it goes into effect -- I don't know if 3 I should say "if and when it goes in effect" -- but I 4 am, too, for the -- to have significant benefits over 5 the current program, current smog check program -- but 6 even then it is going to be done on an annual or once in 7 two years or whatever supply period. My understanding 8 is that program is expensive -- I think this would be a 9 lot more cost-effective. 10 This can be done much more randomly, more 11 frequently, which it can be done without employees or 12 people taking necessary time out to do those things. So 13 when I put all that together, this perhaps is not a 14 replacement for an I&M program, but it certainly is a 15 complement to an I&M program. It should be something 16 that could be done along with the I&M program. 17 CHAIRWOMAN SCHAFER: And, therefore, would 18 achieve that additional emission benefits? 19 DR. SAPRE: I believe so, because if you 20 identified -- there is a -- as you know, a great debate 21 about how long once you go to an I&M kind of activity -- 22 if it is once in two years, what happens if a particular 23 vehicle goes over the emissions or exceeds the emissions 24 during the time between the tests? We really have no 25 way of knowing that. This will be a lot -- I think this 428 GILLESPIE REPORTING SERVICES 1 could be done, because it is cost-effective, it could be 2 done more frequently, and therefore, would be of more 3 value. 4 CHAIRWOMAN SCHAFER: Are there any other 5 questions? 6 Dr. Boston. 7 DR. BOSTON: Dr. Sapre, maybe you're not 8 in a position to know this, but do you think the 9 regulatory community has been responsible for some of 10 the job loss from Hughes Aircraft leaving this area and 11 moving to other states? Such regulations as we're 12 talking about. 13 DR. SAPRE: Well, I can only comment on 14 what our chairman, Mr. Armstrong, has commented on 15 publicly, I think, and that is that in the -- I guess 16 he has stated that the regulations certainly are a 17 restriction on -- California regulations are a 18 restriction on the way the business is being done. The 19 cost is high compared to other states. 20 DR. BOSTON: El Segundo went from 10,000 21 to 3,000? 22 DR. SAPRE: No. I hope not. 23 (General laughter.) 24 DR. SAPRE: 10,000 to 7,000. But we 25 continue to grow, restructuring our -- as a result of 429 GILLESPIE REPORTING SERVICES 1 the defense decline. This is not to say that the 2 regulations are the only part that has made this change, 3 but certainly that is one of the considerations. 4 DR. BOSTON: Thank you. 5 CHAIRWOMAN SCHAFER: Any other questions 6 from members of the board for Dr. Sapre? 7 Thank you very much. We really appreciate 8 your presentation this afternoon. Very interesting. 9 DR. SAPRE: Thanks for the opportunity. 10 CHAIRWOMAN SCHAFER: Next I'd like to 11 invite three panelists to join together, to discuss 12 the auto buyback practice, Mr. Patrick McLafferty, 13 with Breathe Easy Sacramento, Miss Linda Urata with 14 Project Clean Air, in the San Joaquin Valley, and 15 Dr. Mike Riehle with Unocal. Will you please come 16 forward. 17 I think what we'll do is allow each witness 18 to make a presentation and then we should hold our 19 questions until after each one of them has spoken, and 20 then we can present questions which then they can field, 21 as need be. 22 Miss Urata, would you like to start out. 23 MS. URATA: I'm just passing down some 24 information about Project Clean Air and about our 25 current car buyback program. 430 GILLESPIE REPORTING SERVICES 1 I am the Executive Director with Project 2 Clean Air. It's a nonprofit that was started in Kern 3 County about four years ago, and we address air quality 4 and attempt to try and clean up the air for health and, 5 for us, to see the mountains, on a day-to-day basis 6 addressing air pollution from different issues. 7 And in looking at this, we came upon the 8 Unocal scrap program, and we decided to attempt to do it 9 using the AB2766 grant funds that were available. 10 And before I go on, I'll tell you I'm a 11 graduate of UCLA. When you graduate, they make you take 12 an oath that says you have to use a John Wooden quote 13 whenever you speak in front of people. So the quote for 14 the day is "Things turn out best for those who make the 15 best of the way things turn out." And add to that 16 significantly, "The way things turn out often depends on 17 how well we can communicate, plan, and cooperate to make 18 a positive outcome possible." 19 So I want to talk to you about our KAR 20 program. That's for Kern Auto Recycle. And as you've 21 heard today there is solid evidence that older vehicles 22 emit a disproportionate amount of air pollution. And 23 it's been said by your agency that only -- the pre-1975 24 vehicles, those that are 20 years old or older, although 25 they represent only 5 percent of the total vehicle miles 431 GILLESPIE REPORTING SERVICES 1 traveled in the passenger fleet, they contribute 20 2 percent of the fleet reactive organic gases and 3 9 percent of the fleet oxides of nitrogen. 4 Kern Auto Recycle, as I said, was modeled 5 after the Unocal SCRAP program, and they continue to be 6 helpful to our task force. Our project is overseen by a 7 completely volunteer task force and is helped out 8 substantially by donations from the community. 9 For instance, our office furniture is 10 donated. We get our lease at a lower rate from a 11 donation through the realtor. All kinds of those types 12 of things help make our program more cost-effective. 13 The program that we did in 1992 took back 14 430 cars, and it was just in the Kern County area. The 15 program was very popular locally, and we continued to 16 receive about seven calls a week for the next year. The 17 air district, the DMV, and the local wrecking yard, 18 Golden State Metals, also continued to receive phone 19 calls. In 1993 we did a buyback in Los Angeles, 20 privately, from an industry, and we took 137 cars over 21 a 30-day period. 22 So we've tried doing programs in different 23 ways. We did the first buyback in 1992, over a 24 condensed two-week period with a massive public 25 relations campaign, bringing all the cars into one 432 GILLESPIE REPORTING SERVICES 1 central location at one time. The next time we did it 2 we tried it over an extended period, having the vehicles 3 turned in to a local dismantler. This year's car 4 buyback program is also funded with DMV fees, $945,000 5 from the Valley Air District, and this is -- now the fee 6 has gone up. It's at $4. When we did our first 7 buyback, the fee was only $2. 8 The primary objective of the buyback is to 9 achieve net emissions reductions of 243 tons of reactive 10 organic gases, 68 tons of NOx, and 1,114 and a half tons 11 of carbon monoxide. The secondary objective of KAR is 12 to raise public awareness of the high emissions levels 13 of vehicles 20 years old or older. 14 We have a Spanish-speaking staff member 15 onboard, many of our forms are bilingual, and we plan to 16 conduct -- well, we are conducting our public education 17 efforts in English and in Spanish. 18 "Things turn out best for those who make the 19 best of the way things turn out." Project Clean Air has 20 learned some very important lessons from its previous 21 vehicle buyback efforts. That's causing us again to 22 evaluate how we're doing our next one. 23 We've received another grant for $500,000, 24 and we're going to extend our buyback in the valley 25 through 1993, till the end of the year. 433 GILLESPIE REPORTING SERVICES 1 In our follow-up survey from 1992, we found 2 that 50 percent of the drivers are now driving 1980 or 3 newer vehicles, 10 percent are using alternative 4 transportation -- they're either walking, riding their 5 bike, taking the bus -- 40 percent are driving cars that 6 are 1979 or older, 58 -- the way people use the money is 7 also of interest to us, and we found that 58 people paid 8 bills, 61 people saved the money, and one couple bought 9 wedding rings. 10 We've had interesting responses to our 11 program. One lady expressed that she had fewer 12 headaches since selling us her car. Apparently she had 13 exhaust re-entering into the car and was having carbon 14 monoxide difficulty, so now she has less headaches, so 15 she was really happy with the buyback. So there are 16 other benefits to this program. 17 It's also not -- so sometimes things do turn 18 out best. It's not always easy to say goodbye to your 19 car. We have at least one person in every county kiss 20 their car good-bye or cry, come to tears. It's a very 21 emotional thing. And I think that's important for us to 22 remember, that cars are an emotional part of how, you 23 know, we live. We have attachments with our vehicles. 24 Perhaps there's companies in your various 25 communities which may be faced with a possible bad 434 GILLESPIE REPORTING SERVICES 1 turnout in looking to reduce their emissions or to face 2 the expense of an employee ride-share campaign. We are 3 all certainly faced with poor air quality, poor health, 4 a struggling economy, and attainment plan deadlines. 5 I have the names of people who want to sell 6 their old cars, to move to Kansas, pay the rent, and to 7 just get rid of that problem, smoggy, gas-guzzling old 8 car. So perhaps Wooden was right that things turn out 9 best for those who make the best of the way things turn 10 out. 11 Successful and highly visible vehicle 12 scrapping programs such as Unocal's SCRAP or PCA's KAR 13 not only result in immediate and measurable emissions 14 reductions, but they catch the general public's 15 attention by dramatically illustrating a solution to 16 pollution. 17 We try not to just tell people, "Here's, you 18 know, $500 for your car." We also work to educate 19 them. On the blue brochure that we passed around, 20 you'll see that there's suggestions for ways that you 21 can reduce air pollution from your current vehicle. 22 Everybody is given a brochure from the air district, 23 "Twenty-five Tips to Clean Air." 24 We also try and saturate a county with PSAs 25 and other public information while we're in that county 435 GILLESPIE REPORTING SERVICES 1 so that people are hearing different ways that they can 2 participate in cleaning the air, whether it's recycling 3 or ride sharing, maintaining their old car, dust 4 prevention, all of these issues. So we feel that it's 5 very important that you not just buy the old cars, but 6 that you educate the public at the same time while you 7 have their attention, because it does get their 8 attention. 9 Some of our concerns about continued buyback 10 programs. Twice we've submitted a proposal to recycle 11 old big-rig trucks, and we're going to keep working on 12 that. We'd like to do a pilot program on that. 13 It depends on which emissions reduction 14 you're looking for. If you're looking for carbon 15 monoxide reduction, recycling old cars is the way to 16 go. If you're looking at reducing NOx emissions, you 17 might want to look at the big-rigs. And I'm seeing a 18 lot of the heavy-duty diesel and engine conversions 19 coming from your office, and that's a good sign. 20 But again, as somebody earlier said, it's 21 easier to pull on the rope than to push it, and a lot of 22 the diesel trucks' smaller owner-operator companies 23 aren't in a financial position to go out and spend 24 $80,000 on an advanced electronic engine or converting 25 their vehicle, and so we are going to have to look at 436 GILLESPIE REPORTING SERVICES 1 creative solutions, and tax credits again may not be the 2 way. We have to come up with packages. 3 There's concern in our community already 4 that -- you know, Project Clean Air has been out there 5 now, buying up about -- this project is 1500. We hope 6 to buy another 700 by the end of the year. That's 2200 7 cars now that we've taken out of the vehicle pool for 8 companies that are looking for these products, for one 9 reason or another. So there's concern about that in our 10 valley. 11 There's also ongoing complaints from 12 dismantlers. Although our rule for mobile source 13 emission credits in the valley allows for parting out of 14 cars, our particular buyback does not do that. We felt 15 that -- our Board of Directors of Project Clean Air felt 16 that we didn't want to be buying the same car door time 17 after time after time. We wanted to crush that car 18 completely. So we crush the cars completely, we recycle 19 the fluid, and properly deal with the battery, and the 20 tires and everything is handled as environmentally as 21 possible. 22 But because of those reasons, not just the 23 dismantlers but people who are -- you know, who are 24 trying to fix up their cars have deep and real concerns 25 about the availability of parts, and what we're doing to 437 GILLESPIE REPORTING SERVICES 1 the cost of the parts of the cars, and are they going to 2 be able to continue to use their vehicles as they need 3 them. 4 And part of that is the affordability of the 5 new technology. It's not cheap to go out and buy a 6 newer car or to convert a car to natural gas. 7 The other concern about old vehicle buy-backs 8 is that not all of the cars in that vehicle pool are, 9 you know, what you would call a gross emitter. We do -- 10 on the first buyback we just did a snap idle and high 11 idle smog test on all of the cars, and while some of 12 them, you know, barred out or maxed out on the smog 13 test, a number of these cars are being driven on the 14 road. They have to pass smog. Granted, the smog is 15 different for a '74 car versus a '93, but still some 16 of these older cars are not the gross polluters when 17 you're just doing a cast-your-net-and-reel-them-in type 18 buyback. 19 The other concern with buybacks is that 20 people are now starting to think about holding onto 21 their cars. So if they missed my buyback this year, 22 they might -- instead of just letting their car go nonup 23 and sit on the driveway, they might keep it registered, 24 hoping that another buyback is going to come along next 25 year. We are starting to hear that already. People are 438 GILLESPIE REPORTING SERVICES 1 continuing to drive their cars, just waiting for the 2 next buyback. 3 We need to continue to market ride share, 4 not simply for clean air, just to do the cars. It's 5 difficult, especially in the valley. Out here on the 6 coast today you wouldn't know it, but trying to convince 7 somebody in Bakersfield, when it's been 110 degrees for 8 the past 15 days, that they really should be walking to 9 the bus stop really is complicated. So we're trying to 10 let people know that it's choice, and you can choose to 11 take the bus one day a week, carpool one day a week, 12 maintain your car, and at least that way the car that 13 you're driving remains clean. 14 So that's about all I have to let you know 15 for -- that's all we know about KAR. And thank you very 16 much for your time. 17 CHAIRWOMAN SCHAFER: Very interesting. 18 Thanks very much, Linda. We'll take the other 19 witnesses, and then we'll ask some questions. 20 I guess I should follow my own staff's advice 21 and I should have asked Mike Riehle to come forward 22 first. I'll ask you to come next and talk about 23 Unocal's programs, since, as Miss Urata suggested, 24 you're the model. You got there first. 25 I also understand besides being an expert on 439 GILLESPIE REPORTING SERVICES 1 the Unocal's SCRAP program, you are a car enthusiast, 2 and own two older Alfa Romeos. I hope you can explain 3 yourself, sir. 4 (General laughter.) 5 MR. RIEHLE: Well, I guess I didn't do my 6 part for the clear air today. I brought my 1959 Alfa 7 Romeo down, and it's in the parking lot. It was just 8 too good an opportunity to pass up. 9 I did notice earlier that you introduced me 10 as Dr. Riehle. Actually, M.D. are my initials, not my 11 degree. 12 (General laughter.) 13 In any event, another comment I'd like to 14 make, before we go a little farther, is that Unocal 15 supports buyback programs in virtually all areas where 16 they make sense and regardless of whether they're public 17 or private. The KAR program is something we support in 18 the SCRAP feature of enhanced (incomprehensible word) is 19 something we support. Basically, we think old car 20 buybacks are a good thing, and as long as it isn't 21 financed by windfall profits tax and my employer, we're 22 pretty open-minded about where the money comes from. 23 That's an oblique reference to Senator Rosenthal. 24 We do recognize SCRAP is not a magic bullet. 25 We need to attack the whole problem. It does attack a 440 GILLESPIE REPORTING SERVICES 1 very dirty piece of the problem and does that very 2 effectively. 3 My involvement with SCRAP has been in all 4 four -- I guess at this point all three of Unocal 5 SCRAPS. Our 1990 SCRAP was an 8,000 car demonstration 6 program. One of my original involvements was to do the 7 emissions testing, and it was a combination of good 8 judgment and dumb luck. 9 I kept running to the CARB people in El Monte 10 for advice, got two things. I learned a lot, and I 11 designed the testing fairly well, and before we were 12 done, I got the boys in El Monte to do some of the 13 testing for us. 14 SCRAP 2 was done last year. Also very much 15 in partnership with the Air Resources Board. The SCRAP 16 guidelines basically call for a separation of church and 17 state. That is, you have programs that are research 18 programs, and then you have programs that are credit 19 programs. SCRAP 2 was 100 percent a research program. 20 I'll come back to that in just a minute. 21 SCRAP 3, which was literally about two months 22 later, was a small 335-car, four-credit program for 23 Unocal. 24 Going back to SCRAP 2 which, as I say, was 25 designed in partnership with CARB from the get-go, was 441 GILLESPIE REPORTING SERVICES 1 basically to build on what we learned in the original 2 program and extend that database to include 1971 to 1979 3 model year vehicles. 4 One of the big surprises that came out of 5 that is we found out that the cat cars -- I am going to 6 use these cars terms a little bit loosely. '75 to '79 7 cars are really the two-way catalyst cars. The '72 8 to '74 cars -- actually '70 cars to '74 cars, are the 9 precat cars. 10 When we do this, we look at technology 11 classes more than we look at model years, but the cat 12 cars -- the early cat cars were only slightly cleaner 13 than the noncat cars. That was probably due to the fact 14 that they have more to go wrong. Most of the catalysts 15 weren't in very good shape. In fact, the vast majority 16 of them were somewhere between dead and decomposed. 17 In terms of changes to the guidelines, I 18 think the only thing I've been lobbying for is the 19 guidelines put all 1975 to '81 cars in the same 20 emissions category, and I'd like to see that broken into 21 smaller categories, particularly since the '75 to '79 22 cars are a lot dirtier than the '80 and '81 cars. 23 Also, the way it works, since I only get 24 one-third as many credits if I buy a '75 to '79 car, I'm 25 not about to buy a '75 to '79 car due to the price. 442 GILLESPIE REPORTING SERVICES 1 I'll buy a newer car. 2 In the spirit of what we're really talking 3 about here today, I'd like to talk a little bit about 4 the broader application of the SCRAP programs, and start 5 a little bit by talking about some of the research we've 6 done on vehicle asking prices. And what we've done is 7 we've gone out and we've looked at asking prices in 8 private-party transactions. And then basically if a car 9 sounds like you can drive it home, and it's licensed, we 10 put it in our database, we sort the prices, and we found 11 that 10 percent of all asking prices, the lowest 10 12 percent were $600 or less. 13 It didn't compute averages. I don't think 14 average prices mean very much. We will never get 15 Corvettes and Ferraris and the like. We're really 16 targeting particular segments of the vehicle 17 population. 18 By offering $700, which is what Unocal has 19 offered and what Chevron has offered, we're really 20 bottom-fishing. We're literally buying the worst of the 21 worst. 22 But to extend that, about 25 percent of the 23 asking prices are $1200 or less. The median asking 24 price is right around $1800. 25 One interesting point is vehicle age doesn't 443 GILLESPIE REPORTING SERVICES 1 matter very much as long as the vehicle is at least ten 2 years old. Our interpretation is vehicle condition is 3 all that matters. Vehicle age just doesn't mean very 4 much. 5 You're squinting. If the car is five years 6 old, it means a lot. If it's one year old, it means a 7 whole lot. But if it's more than ten years old, you 8 just want to see if that car is in good shape and you 9 can drive it. 10 A couple of interesting things about that. 11 Chevron, in their program, paid $700 for pre-'72 cars 12 and only $600 for '72 to '74 cars because they got less 13 credits when they scrapped '72 to '74 cars. They didn't 14 offer any money for '75 to '79 cars because, on the same 15 basis, they were only offered $200 for them. 16 One other kind of related thing is that 17 we're worried about the social aspects of this kind of 18 program. The correlation here is somebody can sell, 19 say, a 1970 car into the program, and they can buy a 20 considerably newer car for virtually the same price. 21 Again, in all cars more than ten years old, condition is 22 all that matters. 23 They could get rid of the 1970 beater, buy a 24 1980, 1981 or '82 or '83 beater in the same condition 25 and presumably a lot cleaner car. In fact, this is what 444 GILLESPIE REPORTING SERVICES 1 tends to happen, because the newer cars are a lot more 2 numerous in the vehicle population. 3 I might also comment that the average age 4 of the car out there has been increasing, is currently 5 somewhere between eight and nine years. According to 6 DMV records, about 23 percent of the fleet is model year 7 1981 and older; half of the fleet is model year 1986 or 8 older. 9 I would think if we were, you know, just 10 brainstorming for fun and trying to figure out how big a 11 buyback program we could conceive for California, we 12 could probably get something on the order of 25 percent 13 of the cars for something between 1200 and $1800. Of 14 course, if you do a big program, you're necessarily 15 going to impact the market. So you drive up the price 16 of old cars. So you can't get half of the cars for 17 $1800. You get something less than half. 18 Twenty-five percent of the pre-'81 cars that 19 are out there is about a million cars. I suppose that 20 sounds a little bit like a flash in the pan, but you 21 know, we're never really going to run out of old cars. 22 I remember in 1990 I was talking to -- it was 23 Debbie Pope Jones (phonetic spellings), as a matter of 24 fact, and I put to her, "Debbie, by the time we retire, 25 we're going to be scrapping 1990 beaters." But I've 445 GILLESPIE REPORTING SERVICES 1 been thinking this morning, as we get out somewhere 2 between the year 2000 and 2010, and the new cars are, 3 oh, .0-something grams per mile, I'll be looking at a 4 1990 beater that's up around 1 gram per mile, and I'll 5 be making the same arguments. I will be scrapping 1990 6 beaters by the time I retire. 7 I'd like to say just a couple of -- one more 8 little area. That when I look for a cost-effective way 9 to reduce emissions, I invariably look at cars that are 10 like eight to ten years old. New cars are too clean. 11 The really old cars are too rare. But when you get into 12 these older cars, that's where -- there's a lot of them 13 out there, and they're old enough that they pollute. 14 There are -- one thing I've been working on. 15 In fact, I've been working with Mark Carla (phonetic 16 spelling) on this. I was trying to get him pumped up to 17 do a carbon cannister retrofit to reduce evaporative 18 emissions in older cars. I don't know if you'll be 19 hearing more about it. I hope so. I know Mark's 20 platter is running over, even though he's pretty 21 enthusiastic. But this kind of a program is something 22 that has the potential to achieve the same, or should I 23 say a cost-effectiveness comparable to SCRAP, as being 24 comparable to buying pre-'72 cars, which we won't be 25 able to do forever. 446 GILLESPIE REPORTING SERVICES 1 We do know that (incomprehensible word) 2 degrade somewhat with time. We do know that open-bottom 3 canisters were used until the late 1980s, and we do know 4 that new canisters are physically a lot larger than the 5 older canister. And just looking at the model, we say 6 our chances are pretty good. I'm hoping that we'll come 7 back to you one of these days and try to get permission 8 to do that. 9 There is another retrofit system out there 10 I've been following for a few years. I think you heard 11 about it a couple of days ago. Neutronics here in 12 San Diego has developed a system for putting three-way 13 catalysts and feedback controls on cars from the late 14 1970s that do not have feedback controls. 15 I've seen the system. It's undergoing some 16 durability testing now. There is every reason to think 17 that it will work. 18 I'd like to see CARB give more emphasis to 19 dealing with the emissions from the fleet that's out 20 there, just because that's where a lot of the emissions 21 come from. 22 Thank you. 23 CHAIRWOMAN SCHAFER: Thank you very much. 24 We'll hold our questions until 25 Mr. McLafferty finishes with his presentation. And I 447 GILLESPIE REPORTING SERVICES 1 invite you to come up to the podium or speak from that 2 vantage, whichever you prefer. 3 Mr. McLafferty is President of Pacific 4 Dynamics Corporation and its subsidiary, HES Engineering 5 Services, and over the last 12 years he's guided these 6 firms that he's been associated with into a unique area 7 of specialization, and that is the use of public/private 8 partnerships to solve environmental and other policy 9 issues. And one of those that he's going to talk about 10 today is his work with the development of Breathe Easy 11 Sacramento, a vehicle retirement program designed to 12 utilize market forces to meet public policy goals of the 13 development of a viable mobile emission credit trading 14 market as well as improved air quality. 15 So we welcome you. 16 MR. MC LAFFERTY: Thank you very much. I 17 appreciate the opportunity to speak with you. I also 18 want to say, as I open, that I appreciate the catalytic 19 effect and the leadership that you've demonstrated in 20 creating the car scrapping guidelines. Those guidelines 21 in their initial rendition and follow-on rendition have 22 provided food for a lot of superb debate and gave us a 23 good deal of assistance. 24 I'd like to briefly spend a moment talking 25 with you about the parameters of Breathe Easy 448 GILLESPIE REPORTING SERVICES 1 Sacramento. Breathe Easy Sacramento is a proprietary 2 program of our management, consulting, and engineering 3 practice. We looked at the forums, organizational 4 forums that we felt it might work in. We decided we 5 wanted to go with a very strong market-driven approach, 6 decided to make it proprietary, but also recognized the 7 public policy implications implicit in the program and, 8 therefore, joined in a joint venture with the Sacramento 9 Metropolitan Air Quality Management District, so that 10 the basis of our program is two things. One, a contract 11 with that district to do a three-year, 25,000-vehicle 12 program, and secondly, our rule applications under that 13 district's rules, 204 and 206, and soon under the 1,000 14 series rules for mobile-to-mobile credit trading. 15 Right now we are involving in dismantlers as 16 we look at this program. We've asked them to sponsor 17 the program. We believe that when you use market-driven 18 approaches, one needs to take all of the profit centers 19 available. There is the scrap metal value of cars 20 available. There is the value of parts that is 21 available in these things. And all of those profit 22 centers assist us in reducing the cost of credits to 23 ultimate credit buyers. There's also some cost centers, 24 and those cost centers include the preparation of the 25 vehicles for scrappage, using environmentally sound 449 GILLESPIE REPORTING SERVICES 1 means and methods. 2 Of particular interest to you perhaps is that 3 we have rather strictly adhered to your guidelines, both 4 in the amount of credit that will be given for the cars 5 and also the method of dealing with the block and frame 6 of the vehicles. 7 Also inherent in our program, I think, are a 8 couple of features that I think are interesting. One is 9 that -- as you know, collector car folks have a -- while 10 they have trouble defining what those things are, 11 certainly have a volatile interest, a passionate 12 interest in collector cars. And what we've done is 13 found a mechanism that will enable collectors to 14 purchase any vehicle from us that they may wish in the 15 program, and the mechanism is simply that we use a 16 standardized pricing. 17 There's several manuals for pricing. If a 18 collector finds a vehicle in a ten-day window of 19 opportunity, they can come in and purchase the vehicle. 20 We may have bought this vehicle for hundreds of dollars; 21 it may be worth thousands. I doubt that will happen 22 often, but if it's true -- that is not a windfall, by 23 the way, for us. What that is, is an opportunity to 24 take any amount over our cost and turn it into 25 additional scrap vehicles for community air quality. So 450 GILLESPIE REPORTING SERVICES 1 we have, I think, a unique characteristic there. 2 In addition to that, we are maintaining, as 3 part of our commitment to the district, lots of 4 demographic information about vehicle sellers, 5 et cetera. 6 While it's not easy to marry market 7 mechanisms and public policy goals, it can be achieved 8 in almost any arena if and only if there is a requisite 9 political will to do so. 10 Plainly said, the problem that we've 11 experienced in creating a sustainable and effective 12 mobile source -- or mobile credit marketplace, as we've 13 gone out to talk to fleet owners in the stationary 14 sources, is the perception that there is not the 15 political will to support that marketplace. 16 There's a relevant analogy that may be drawn 17 between the development of market-driven programs for 18 achieving air quality and demand-side management and 19 energy programs. Demand-side management, by the way, 20 has a number of different approaches, and its different, 21 I think, in energy in some ways than in air quality; but 22 in the energy field, it is simply talking about energy 23 efficiency -- in this area. 24 Demand-side management programs and energy 25 have achieved dramatic successes both in meeting public 451 GILLESPIE REPORTING SERVICES 1 policy goals and reducing per capita energy consumption, 2 as well as profitability for private sector 3 organizations that have been involved. And I believe 4 there are four elements that are analogous from that 5 situation to the one that we face. 6 One of them is commitment. In that 7 circumstance, public utility and public service 8 commissions and the U.S. Department of Energy across the 9 nation demonstrated a commitment to the creation of a 10 demand-side management marketplace; and they evidenced 11 that commitment by the second issue, which is going out 12 and seeking private sector expertise to deal with the 13 issues, not only being an occasional venue, but also 14 exerting leadership and actually seeking active 15 partnerships, we believe is critically important. 16 The third is a recognition on the part of 17 public agencies that profitability in an appropriate 18 approach is an acceptable outcome of such a partnership, 19 and that private entities will seek to and will make 20 profit from your activities, including your regulatory 21 activities. 22 The fourth is the creation of a playing 23 field. That can take the form of many different kinds 24 of venues, but absolutely critical, the people who come 25 to the table, that you solicit to talk to from the 452 GILLESPIE REPORTING SERVICES 1 private sector, and your agency need to believe that 2 whatever comes out of that is worthy of the continued 3 expenditure of energy and corporate resources. 4 Those kinds of things are rare, but 5 critical. What's happened to energy in demand-side 6 management is that we now have -- if you take a look at 7 the Energy Star program for computers, that program that 8 kind of puts computers to sleep even when they're on, 9 but not in use; the Superficial Refrigerator program 10 that we had some involvement in; those programs have 11 involved dozens of manufactures, hundreds of 12 distributors, thousands of retailers, and most 13 importantly, millions of consumers who are retiring 14 nonefficient appliances and devices in favor of 15 efficient devices. So that is, in fact, extraordinary 16 success. 17 We believe that you can, in fact, create 18 market-driven programs for alternative fuel and electric 19 vehicle programs, vehicle retirement programs, 20 conversion programs, those kinds of things that we 21 believe are important to ensure that the mobile 22 emissions problem is taken care of. 23 If I might spend just a moment with some 24 final comments that deal with some -- a couple of 25 concerns that we encountered as we moved through our 453 GILLESPIE REPORTING SERVICES 1 regulatory process. Perhaps not completely in your 2 control, but we spent approximately six months in the 3 30-day review period with the USEPA. As I mentioned 4 earlier, we have been very careful to follow the ARB 5 guidelines in the development of our program, and most 6 of that protracted time was spent because of concerns 7 apparently -- and I wasn't privy to all the 8 discussions -- between the two guideline documents, both 9 agencies insisting the documents were only guidelines, 10 and both rather insistently wanting adherence to them. 11 And again, that's a problem that from the private sector 12 is difficult for us to deal with. 13 A second issue is that under the Department 14 of Motor Vehicles current regulations, there is no way 15 to kill a vehicle. There is not a nonrevivable title 16 document. For purposes of creating a viable scrap 17 program, the ability to have a nonrevivable title would 18 be an appropriate activity. I believe that will have to 19 be legislative in nature, but just to bring it to your 20 attention so that you know that that exists. 21 A third issue is that commercial sources 22 for older vehicles are, in our opinion, a critical 23 component. There is a substantial trade, outside of the 24 private market, in older vehicles, and that trade is 25 largely with used-car dealers and dismantlers. 454 GILLESPIE REPORTING SERVICES 1 An informal survey in Sacramento that we took 2 indicated that a dismantler has an opportunity to buy a 3 car which complies with the program at least once a 4 week, through the normal processes. In Sacramento 5 County there's also approximately 300 dismantlers. So 6 you can see that the opportunity to take in cars through 7 an existing commercial mechanism does exist without 8 going out and creating a new ceiling or floor for 9 vehicle pricing or disrupting existing market. So to 10 the extent that programs prohibit that, we think that 11 they should, in fact, embrace it. 12 In summary, I want to say that I believe 13 you can create viable integrated enterprises or 14 public/private partnerships in regard to not only 15 vehicle scrap programs but, as well, all manner of 16 mobile source programs. To do that we need to ensure 17 that the political will exists, and even if it exists 18 currently, it is not perceived to exist. And if I have 19 a message for you, I want you to know that. It's not 20 questioning your intentions or any of that, but to 21 indicate that it's not perceived that it exists. 22 I'd be happy to answer any questions. 23 CHAIRWOMAN SCHAFER: Thank you very much, 24 Mr. McLafferty. 25 Do any board members have questions for this 455 GILLESPIE REPORTING SERVICES 1 panel? 2 Miss Edgerton. 3 MS. EDGERTON: Well, I just want to 4 follow up on that. Thank you all for your excellent 5 presentations. I learned a lot. I appreciate you 6 coming. 7 I want to be sure that I understood you in 8 terms of a couple of messages. Can you -- I know you 9 said it several times. What is it that -- what is the 10 perception that is concerning you, particularly? -- The 11 specific perception. The perception is that the ARB 12 won't stick with market incentives or the perception 13 that there isn't a will to have clean air or -- what 14 is -- 15 MR. MC LAFFERTY: No. I want to be very 16 clear about that. That's not the -- the perception is 17 when one goes to form a marketplace -- and perhaps I can 18 give it best to you in describing the feedback that I 19 get from people we approach about purchasing credits. 20 And that is, a concern that the credits don't have 21 integrity; that despite any approvals we may have, 22 someone doesn't -- believes they will be further 23 discounted during a term. 24 In other words, a three-year credit for a 25 light-duty vehicle is salable if and only if it has 456 GILLESPIE REPORTING SERVICES 1 integrity for its term. If it's discounted 18 months 2 into the process because of reformulated fuel or 3 something like that, there is no marketplace. So there 4 is that level of concern. 5 I think, additionally, when people who would 6 buy credits contact the air districts, as an example, 7 there is a concern on the air district's part that 8 the -- how credits will be created and those kinds of 9 things. 10 It's just -- it's an infant circumstance, but 11 does not have a requisite conviction behind it on the 12 part of the regulatory bodies to give credit buyers 13 comfort. That's what we're saying. 14 MS. EDGERTON: Well, perhaps -- so what do 15 you think is -- perhaps the staff can comment, or do you 16 want to comment on how that is directly affecting you? 17 Right now, does your program -- you pay money for old 18 cars. 19 MR. MC LAFFERTY: We are just about to 20 kick that off, yes. Right now we're just in the 21 process. 22 MS. EDGERTON: All right. So are you 23 proposing to give credit -- to try to get the air 24 pollution district to give credits for the old cars 25 instead of paying money? 457 GILLESPIE REPORTING SERVICES 1 MR. MC LAFFERTY: No. 2 MS. EDGERTON: How does this relate to the 3 scrap program? You know, exactly. 4 MR. MC LAFFERTY: What we're doing is 5 creating a program that creates mobile emission 6 reduction credits to be used as offsets by stationary 7 sources and fleets. 8 MS. EDGERTON: Okay. Right. 9 MR. MC LAFFERTY: And in that process, 10 the fleet owners and operators, the stationary source 11 people, have a very difficult time understanding why a 12 three-year credit would be a viable credit. And when 13 they speak to local regulators, and I'm told others, 14 they get the feeling that there are some people who 15 don't believe in this marketplace, that are concerned, 16 in fact, that you can't even give offsets to the mobile, 17 because as an example in Sacramento so much of the 18 problem is mobile that perhaps we shouldn't allow any 19 mobile offsets at all. 20 MS. EDGERTON: So it's the stability of 21 the credits. 22 MR. MC LAFFERTY: It's the stability of 23 the credit, yes, and the whole system. Exactly. 24 CHAIRWOMAN SCHAFER: Let me ask what I 25 think was Ms. Edgerton's question in a little bit 458 GILLESPIE REPORTING SERVICES 1 different way. What do you think the Air Board's role 2 ought to be for expanding more opportunities for credit 3 trading then? Us, in particular. I realize there are a 4 lot of institutions involved. 5 MR. MC LAFFERTY: In particular, I believe 6 that we need to have an understanding of governing 7 guidelines or, in fact, specific regulations, whether it 8 will be the USEPA or whether it is the ARB, first. 9 Secondly, I believe that there needs to be a 10 dialogue happen between people who would engage in 11 scrapping programs and the regulators, outside of a 12 rulemaking proceeding or a regulatory arena, because I 13 think there are some things there that might be able to 14 come to the table that would be reduced or codified 15 later that would be useful. 16 I think, third, it is important that there be 17 performance as well as prescriptive standards created. 18 Prescriptive standards deal with you have to have all 19 your fenders and your glazing must be on without 20 blemish, et cetera, et cetera. The real issue is that 21 regulators are rightly concerned from a policy view that 22 that is a street-operated vehicle, and each one tries to 23 approach it differently to make that assurance. I 24 believe that through some financial guarantees and 25 indemnifications you can, in fact, get quality assurance 459 GILLESPIE REPORTING SERVICES 1 programs through scrap operators that will allow that. 2 So there's a number of issues there that I 3 think are important. I didn't bring those up 4 specifically because of the time constraints this 5 afternoon. 6 CHAIRWOMAN SCHAFER: Okay. I certainly 7 invite the other panelists to address themselves, if you 8 care to, to the question of what you think this Air 9 Resources Board might be able to do to expand the market 10 opportunities for credit training, if you have some 11 suggestions. And it doesn't have to be limited to 12 today. If you think of something later, send us back -- 13 I'd be interested in putting it in the record. 14 MR. RIEHLE: A quick comment, I guess, I'd 15 like to make along those lines. 16 CHAIRWOMAN SCHAFER: Certainly, 17 Mr. Riehle. 18 MR. RIEHLE: When we got Rule 1610 amended 19 in the South Coast this last time, that was a pretty -- 20 CHAIRWOMAN SCHAFER: Can you get closer to 21 the mike? 22 MR. RIEHLE: When we got Rule 1610 amended 23 in the South Coast here early this year, that was a very 24 contentious proceeding. And I think the final product 25 that came out of that was a very good product, so I 460 GILLESPIE REPORTING SERVICES 1 don't want any misunderstanding. But certainly from 2 my perspective, I deal with some people at the EPA who 3 want to be a little bit conservative. I deal with 4 some people at CARB who want to be a little bit 5 conservative. And I deal with some people at South 6 Coast who want to be a little bit conservative. And 7 when I multiply them all together, sometimes I don't 8 much care for what I see. So maybe that's more what it 9 is. It's a compounding of a little bit of conservatism 10 at every level, which sometimes it makes more sense to 11 look at the final product. 12 At one point, for example, in Rule 1610 they 13 were going to require me to back up every single vehicle 14 500 feet in reverse to make sure it worked. Well, if 15 you have 50-foot blocks and ten houses to a block, 16 that's one city block that you've backed up in reverse. 17 How was I supposed to do that? Literally, I 18 was going to have to take each and every car out for a 19 test drive on city streets and find some place on a 20 street where I could back a car up for quite a long 21 distance. 22 Fortunately, that was amended out, and we did 23 get the part in there that was the most important. That 24 was to shut every car off and verify it and restart it 25 and move up the line, which is easy to do and very 461 GILLESPIE REPORTING SERVICES 1 reasonable. Cars that don't pass that test probably 2 don't belong in the program, but that's one of the 3 things that sneak in in the process that can pretty 4 easily sink the final product. 5 CHAIRWOMAN SCHAFER: Mr. Calhoun. 6 MR. CALHOUN: Mr. Riehle -- 7 MS. URATA: Can I quick add something that 8 we found along those same lines is that in our valley, 9 it's been our experience that some of the vehicles that 10 are being driven the most don't even fall into the 11 registered vehicle category, and particularly with farm 12 vehicles that are run on the farm. That can be a ranch 13 with major -- you know, a thousand acreage, and yet it's 14 registered differently because it's not supposed to 15 leave the property. 16 So there's vehicles that are of that age 17 category that are being excluded from the buyback 18 process completely because of the way that they need to 19 be registered and street operable and smogged and 20 everything to participate. 21 CHAIRWOMAN SCHAFER: Okay. 22 MR. CALHOUN: Mike, you mentioned a few 23 moments ago that you think the ARB staff ought to take a 24 good look at some of the current vehicles that are on 25 the street, at least pay some more emphasis on that. 462 GILLESPIE REPORTING SERVICES 1 I'm not sure exactly what your words were. But do you 2 have anything specifically in mind that might be 3 offered? 4 MR. RIEHLE: Well, the comment really 5 stemmed from the fact that I tend to look at everything 6 in terms of cost-effectiveness, and anything that looks 7 cost-effective in terms of something else is probably a 8 good idea. These older cars blew the lot, so there's 9 more opportunity there. 10 I think this chuck-old-canister program that 11 I'm going to try to get kicked off as a research program 12 has a lot of potential. I think this other retrofit 13 system, which does have, if I remember right, an 14 emissions certification from CARB -- emissions device 15 certification from CARB -- is a pretty intriguing 16 system, and these guys have been able to sell the system 17 in Third-World Countries around the world, but they 18 haven't sold system one in California, because the 19 system really isn't set up to accommodate it -- or maybe 20 encourage it is a better word. The system definitely 21 accommodates it. 22 But I think if somebody could get credits for 23 doing it, or if -- I don't know who -- somehow, if we 24 were more creative, we'd find a way to use a system like 25 that. 463 GILLESPIE REPORTING SERVICES 1 MR. CALHOUN: It may interest you to know 2 that I've been talking to the staff recently about 3 looking at the vehicles that are (incomprehensible). 4 That there may be something there, but I am not certain, 5 but I'd certainly encourage them to take a look at it. 6 And I haven't been able to get them very excited about 7 it yet, but I think we'll be talking about it, and maybe 8 there is something there. 9 I do know this, when you have 10 technology-forcing standards like you have here in 11 California for many, many years, almost since day one, 12 the manufactures are required to meet the standards in 13 selling cars, and they learn from their experience and 14 the equipment that's with cars, that first cut at it, 15 and perhaps there are some cars on the road today 16 that -- whose emission performance could be improved by 17 a replacement of some of these existing cars. And I'm 18 going to keep harping on that until such time as we take 19 a real good look at it. 20 Thank you. 21 CHAIRWOMAN SCHAFER: Thank you. 22 Any other questions from the members of the 23 board for this panel? 24 I have one question, if you can just refresh 25 my memory. I'm sure you mentioned this in your 464 GILLESPIE REPORTING SERVICES 1 testimony, but I want to compare them side by side, is 2 what was the original source of funding for your 3 program? I remember, Miss Urata, you said you had 4 grants from the district and -- 5 MS. URATA: It's from the DMV fee, 6 primarily -- 7 CHAIRWOMAN SCHAFER: That's right. 8 MS. URATA: -- and a small percentage 9 comes from contributions, donations of services, like 10 printing, office furniture, from the local community. 11 CHAIRWOMAN SCHAFER: But that was not with 12 the expectation of getting emissions credits? 13 MS. URATA: No. All of the -- 14 CHAIRWOMAN SCHAFER: Community based. 15 MS. URATA: All of the credits generated 16 from this belong for the air district. 17 CHAIRWOMAN SCHAFER: All right. Okay. 18 And Unocal's initial source of funding for 19 the program? 20 MR. RIEHLE: Well, we've done all of the 21 above by this point. 22 CHAIRWOMAN SCHAFER: You've got some 23 grants to do this? 24 MR. RIEHLE: The SCRAP 2 was done under 25 AB2766. 465 GILLESPIE REPORTING SERVICES 1 CHAIRWOMAN SCHAFER: All right. 2 MR. RIEHLE: And we didn't get any credits 3 from that. SCRAP 3 was strictly a four-credit program. 4 So we had a separation of church and state there. 5 CHAIRWOMAN SCHAFER: Okay. And 6 Mr. McLafferty, the Sacramento Breathe Easy? 7 MR. MC LAFFERTY: The initial funding for 8 the program design and those things was private funding, 9 and the credits will be funded by -- or vehicle 10 purchases will be credit -- funded by credit buyers. 11 CHAIRWOMAN SCHAFER: Okay. Well, I thank 12 you all. I always think we benefit by learning from 13 these practical applications, and I notice that all of 14 them are pretty local. So -- you know, locally 15 generated. So that's a lesson, a very important 16 lesson. 17 Thank you all very much for participating 18 this afternoon. 19 Finally, I'd like to call the third and last 20 panel up to discuss fuel conversions, including 21 Mr. Andrew Hirsch with The Gas Company, Mr. Howard Levin 22 with San Diego Gas and Electric, and Carl Moyer with 23 Accurex. 24 I think I'll follow the same general 25 practice, to let you all have -- you know, say your 466 GILLESPIE REPORTING SERVICES 1 mind, and then we'll ask you some questions. 2 Mr. Hirsch, would you like to start. 3 MR. HIRSCH: Sure. Good afternoon. I'm 4 Andy Hirsch, and I'm a Senior External Affairs Manger in 5 the Environment and Safety Department of Southern 6 California Gas. The Gas Company wants to thank you very 7 much for this opportunity to be part of your SIP 8 symposia to talk about market incentives and ongoing 9 innovations and mobile source controls. 10 I also want to say that it's fun for me to be 11 back in San Diego. In the late eighties I had the 12 privilege of working for the County of San Diego, and 13 Supervisor Bilbray was on one of my advisory 14 committees. I'm disappointed that he's not here. It's 15 always fun to appear before Supervisor Bilbray. If 16 you've not had the opportunity, I would encourage you to 17 do that. 18 CHAIRWOMAN SCHAFER: He was here 19 yesterday, and I know what you mean. 20 (General laughter.) 21 MR. HIRSCH: The timing of these hearings 22 is, of course, very, very appropriate. Southern 23 California and much of our state is now ongoing with the 24 development of air plans, SIPs, as you talked about. 25 That would be the first plans that will be required 467 GILLESPIE REPORTING SERVICES 1 under the 1990 Clean Air Act amendments. These plans 2 will also be required to show compliance with the 3 California Clean Air Act, and of course, the plans will 4 be reviewed by your board. And for three areas of the 5 state, we are now reviewing the FIP, as you've discussed 6 earlier. I think we referred to this as FIP week and 7 some folks were treated to a FIPwich, I understand, at 8 the South Coast hearing, so this is a good time to talk 9 about air quality. 10 I also want to pause for a second and reflect 11 on some of the comments that we heard yesterday. 12 Yesterday we saw a brief debate between Mr. Bob Wyman 13 and Miss Gladys Meade on the RECLAIM program, and for a 14 second I thought we were back debating RECLAIM, and it 15 was hard for me to stay at the back of the room and not 16 come forward and, of course, sit on Miss Meade's part 17 of the table in the RECLAIM debate. But we're still 18 learning and RECLAIM, of course, remains an unanswered 19 questions as to its effectiveness in the South Coast. 20 The Gas Company's position on that program is, of 21 course, well known. 22 The planning efforts that are going on have 23 moved air quality very much to the front of everyone's 24 collective agenda, and there is a lot of discussion, as 25 I mentioned earlier. These meetings will help with that 468 GILLESPIE REPORTING SERVICES 1 planning effort. 2 Yesterday when your hearing opened, the 3 Chair admonished us to try to speak with practical 4 recommendations, and I will close my remarks today with 5 two very specific things which I think your board can do 6 to help us improve air quality in our region. 7 I want to mention two things that I think are 8 particularly interesting, and most of them -- three 9 things, rather, that come from our experiences at the 10 South Coast Air Basin. 11 The draft AQMP that is now in the streets, 12 that people are reviewing, tells us that the baseline 13 NOx emissions from things that move will increase 14 from 80 percent of the inventory to an astonishing 15 91 percent of the inventory in 2010. Miss Meade 16 yesterday called that grim, and I think that's a fair 17 word along with astonishing. Ninety-one percent of 18 the NOx projected to be from things that move in the 19 draft AQMP. 20 What that means is that all of the emissions 21 from my company, all of the emissions from our 22 customers, all of the NOx emissions from refineries, 23 from Edison's power plants, from DWP's power plants -- 24 all of those emissions are projected to be less than 25 9 percent of the baseline inventory. We really have to 469 GILLESPIE REPORTING SERVICES 1 redouble our mobile source efforts. 2 Obviously, the innovation of this board has 3 focused on the light-duty vehicles, and we've heard in 4 some of the earlier testimony today and yesterday the 5 importance of looking at the heavy-duty vehicles, and 6 I'm going to address that in a few seconds. 7 Secondly, we find when you look at some of 8 the draft AQMP numbers, that the NOx emissions from 9 things that float and engines and sources that support 10 things that float account for approximately the same 11 emissions as the entire RECLAIM universe, approximately 12 11 percent of the NOx universe. Again, from ships, 13 harbors, ports and related things. So the message is 14 there that we need to look to the movement of goods, the 15 movement of people as key to our attainment strategy. 16 Finally, we talked about Reg XV in the last 17 couple of days. I can't wait to get back to my office 18 to tell my Reg XV people that the representative of The 19 Reason Foundation mentioned Singapore in her references 20 to Reg XV. Perhaps Singapore would provide us with 21 another incentive for getting people to ride share. 22 Reg XV, of course, is a challenging reg, and 23 I might note that in our facilities -- we have several 24 dozen facilities, of course, throughout Southern 25 California. We have twice as many full-time equivalents 470 GILLESPIE REPORTING SERVICES 1 managing Reg XV as we do for all of our stationary 2 sources -- twice as many employees on the Reg XV efforts 3 as we have for all of our stationary sources. And we 4 take a very compliant attitude. We're fortunate to have 5 a large 52-story building in downtown L.A. The AVR for 6 that building can approach three on certain months. 7 We're very fortunate to be at the nexus of a lot of 8 transit systems. But it's very costly in terms of 9 personnel. 10 To give you a further understanding of that, 11 prior to RECLAIM we had approximately 400 South Coast 12 permits for our stationary sources. The management of 13 that took about six full-time people. We have 12 to 15 14 people doing Reg XV. It takes a lot of effort. 15 Finally, and I mention these numbers, these 16 inventory numbers. Your board early next year will 17 introduce new emission models that will correct for some 18 of what we know now is the undercount in the mobile 19 source inventory. So the numbers of mobile -- mobile 20 source numbers will even go up higher than the numbers 21 that I mentioned earlier. 22 So as I said, the need for increased controls 23 on mobile source is very clear, and your board has got a 24 history of innovation on that. 25 Most of the air plans look forward. They 471 GILLESPIE REPORTING SERVICES 1 look forward to things that we can do in the future, 2 requirements for new sources, requirements for new 3 controls, requirements for new fleets. 4 Mr. Wyman yesterday said that you should look 5 forward in terms of the economic powers of some of those 6 reductions. Today I'm going to ask you in essence to 7 look backwards. Let's look at the existing fleets that 8 we have, especially heavy-duty fleets, and let's look at 9 a way that we can convert some of those existing fleets 10 to create reductions now that may exist beyond those 11 that are called for in plans of future reductions. 12 Either the accelerated retirement of existing 13 vehicles, which we've just heard about, or their 14 conversion to cleaner fuels will result in fewer 15 emissions from those fleets. 16 I want to mention two rules that help do 17 that. The San Joaquin Valley's newly adopted Rule 2303 18 will help do that, and the South Coast's Rule 1610 will 19 also do that. We should encourage additional 20 rulemakings like those to promote these reductions. 21 I might note that prior to my current 22 assignment with The Gas Company, I had the South Coast 23 desk, and I will tell you that absent RECLAIM, more 24 customers called me up to lobby The Gas Company in 25 support of Rule 1610 than any other rulemaking that I 472 GILLESPIE REPORTING SERVICES 1 was involved with. It's a very, very popular rule. 2 Regarding the conversion of vehicles, I can 3 tell you today happily that a vehicle conversion 4 industry is developing. The Gas Company has an Ecotrans 5 facility, which some of you have toured. That facility 6 is now converting gasoline and diesel-powered cars to 7 run on natural gas. Most of those conversions, in fact, 8 are being done, in effect -- in advance, rather, of any 9 plant control measure or requirement. 10 I want to stress that the Ecotrans 11 manufacturing facility in central Los Angeles, in the 12 shadow of the Sears building off the 10, is creating not 13 promised jobs or planned jobs or expected jobs, but real 14 employment today. 15 I also want to tell you that we will soon 16 announce a dramatic increase at the manufacturing 17 capability of that facility. The existing facility can 18 convert over 2,000 vehicles a year and approximately 350 19 have been converted or modified so far. 20 Current and prior customers include the 21 United States Postal Service, through a contract with 22 Mesa Environmental, March Air Force Base, United Parcel 23 Service, Covina Police Department, Port Hueneme Naval 24 Base, City of Covina and Irvine, and of course The Gas 25 Company itself, for our own fleet. 473 GILLESPIE REPORTING SERVICES 1 As I said, many of these organizations are 2 converting their vehicles today, because they want to 3 reduce emissions not because of adopted rules or 4 mandate, and the state should do everything it can to 5 encourage that. 6 I'll close now with two very specific 7 suggestions. First, the ARB should approve the 8 San Joaquin Valley Unified Air Pollution Control 9 District's newly adopted mobile source trading rule, 10 Rule 2303, and the ARB should also encourage that other 11 air pollution districts throughout the state adopt rules 12 like 2303. The policy guidance document recently issued 13 by this board has assisted the San Joaquin Valley folks 14 and it can assist other districts in doing so. 15 Next, the ARB should conduct a review of its 16 current existing vehicle certification requirements to 17 determine if bench testing and other alternate means can 18 be used to quickly certify these vehicles. 19 Unfortunately, the certification efforts now 20 required can be tougher than those imposed on the 21 original equipment manufacture vehicles, and they can 22 hinder the development of this conversion industry. 23 These certification proceedings and 24 requirements now are very costly. I might note that 25 for one type of kit, the certification cost alone 474 GILLESPIE REPORTING SERVICES 1 approximates a thousand dollars per vehicle. And if 2 we're talking about 3 to $5,000 to convert a vehicle to 3 run from gasoline to natural gas, that thousand-dollar 4 share is quite substantial. 5 I also wanted to note that your staff has 6 showed a willingness to work with us to explore 7 alternates, and we are pursuing that with them, and we 8 are very much appreciative of them for that. 9 Finally, The Gas Company would like to do 10 anything we can to help you in these efforts. Each 11 converted vehicle promotes the acceptance of alternate 12 fuels as a mobile source reduction technique, and each 13 natural gas vehicle produces cleaner air and promotes 14 the viability of an expanding universe of natural gas 15 vehicle refueling stations. 16 Councilman Cox yesterday addressed -- or 17 earlier today, rather, addressed the need to change 18 building codes. We have found that for home fueling 19 systems for NGVs. We recently received guidance 20 documents from the Building and Safety Department of the 21 City of L.A. to allow for home fueling stations to be 22 permitted by Los Angeles. Were trying, through other 23 means, to get other cities to adopt similar things. 24 In closing, thank you very much for this 25 chance to participate, and we look forward to working 475 GILLESPIE REPORTING SERVICES 1 with you to try and free up even more converted 2 vehicles. 3 CHAIRWOMAN SCHAFER: Thank you very much 4 Mr. Hirsch. 5 Mr. Levin, you're certainly invited to come 6 up next. 7 Howard Levin is the Alternative Fuels Manager 8 in the Customer and Marketing Services Division at 9 San Diego Gas and Electric, and he and I a couple of 10 weeks ago had an opportunity to look at public work 11 centers, San Diego Natural Gas Refueling Station, which 12 was a project of mine in a former life, and I finally 13 got a chance to see it. It's a very, very nice 14 facility. 15 I understand the navy here in San Diego is 16 planning to by 1997 have about one-third of their 17 vehicle fleet operating with natural gas. So it's a 18 good project, I think. 19 MR. LEVIN: Thank you very much, and I 20 appreciate being invited here to speak to you this 21 afternoon, and it is interesting how our paths crossed 22 over time. When I first met the Chairwoman and 23 mentioned that project, she had told me about how it 24 started when she was in Washington, and it was nice to 25 see it completed, and now she is chair of the Air 476 GILLESPIE REPORTING SERVICES 1 Resources Board. 2 As part of my introduction, my 3 responsibilities at San Diego Gas and Electric span the 4 development of natural gas on the electric vehicle 5 marketplace in our service territory, which is primarily 6 San Diego county. 7 Before I directly discuss the purpose of this 8 workshop, I thought maybe I could describe briefly some 9 of the things that we've been doing in those areas to 10 give you a framework for where my thought process is 11 coming from. 12 Over the last few years, we've built 18 13 natural gas fueling stations, one of which was up at the 14 navy. And we've been able to achieve some measured 15 success for natural gas vehicles. There's now about 400 16 operating in San Diego county. By the end of the year, 17 it will be approximately a thousand. 18 On the electric vehicle side, we've been 19 closely following technology. We've been supporting 20 regulations and legislation and doing a lot of planning 21 for what we as the energy provider will need to do to 22 provide the energy for those vehicles in the most 23 economical manner possible. 24 We think that accelerated vehicle retirement 25 and conversion of vehicles to cleaner fuels will happen 477 GILLESPIE REPORTING SERVICES 1 under the current regulations, but there's a lot that 2 could be done to make that transition happen faster and 3 perhaps become an easier, more pleasant process for the 4 people making those changes. And we think by providing 5 different kinds of incentives, monetary incentives, some 6 nonmonetary innocentives, we can provide more choice so 7 people can implement the measures. 8 My initial understanding of the purpose 9 of this symposium is to discuss the alternatives to 10 command and control and future regulations. And I guess 11 from my point of view, it's important to emphasze that 12 most of the Air Resources Board regulations, while 13 they've been characterized as command and control, 14 aren't strictly command and control. They really 15 require a lot of other factors in the marketplace, in 16 the public sector, to happen so that that change can 17 take place. 18 For example, the low-emission vehicle 19 registrations on performance standards, which allow 20 manufacturers how to best decide to meet those 21 standards, is essentially fuel neutral. It's up to the 22 manufacturer to determine the best way to meet the needs 23 of, hopefully, their customers; and they also have the 24 option to meet the standard by purchasing emission 25 credits from others so they're not obligated to do 478 GILLESPIE REPORTING SERVICES 1 something themselves. 2 And even the much publicized zero-emission 3 vehicle regulations, which have a been a bold 4 technology-forcing policy, which I commend this board 5 for adopting and continuing, it also gives the 6 automakers a flexibility to use a combination of 7 techniques to meet it. 8 And as you know, many of these companies and 9 component suppliers are located in California, and some 10 will produce jobs in the future, and some can produce 11 jobs just as Mr. Hirsch indicated a few minutes ago. 12 And I think the LEV and ZEV regulations are 13 truly models, at least for the nation, if not beyond 14 that. And it's evidenced by so many other states 15 planning on or that have adopted those regulations or 16 ones very similar to it. 17 Furthermore, California has a history of 18 combining regulatory techniques and other policy tools, 19 such and monetary and nonmonetary incentives, to achieve 20 our policy goals such as pollution reduction. In fact, 21 I guess you could say policy makers have a pallette of 22 tools and techniques to help motivate the public and 23 achieve the end goal, and it's important that we 24 continue to expand that approach. 25 With regard to low-emission and zero-emission 479 GILLESPIE REPORTING SERVICES 1 vehicles, today we're only using a small part of the 2 total pallet of public policy, and I guess my principal 3 message to you today is to use your authority and your 4 influence with others to add complementary public 5 policy tools and techniques that both ensure and 6 enhance the success of the policies already in place. 7 I guess it's something I would call maybe a mandate 8 flexibility. 9 You know, you can impose mandates on 10 manufacturers or on fleets, but none of us can truly 11 force somebody to change on the spot. You really have 12 to find a way to ease them into that, but hopefully at a 13 rack-up pace to meet the end goals. 14 Some of the tools and techniques which I 15 would recommend for adoption, the first one would be 16 monetary incentives. Over the last few years there's 17 been a thousand dollar tax credit on the incremental 18 cost of low- and zero-emission vehicles. Those credits 19 currently are going to sunset in December of '95 and '94 20 for those different classifications. 21 I believe they should be extended, and I know 22 that that's not the purview of this board, but certainly 23 together we can put our voice in the proper places to 24 see if those incentives, those tax credits can be 25 extended. And it could be accomplished through the 480 GILLESPIE REPORTING SERVICES 1 mechanisms that are currently employed, or there might 2 be other tax exemptions or elimination of vehicle 3 registration fees or things that I haven't even thought 4 of that might help us induce fleet operators and 5 individual fleet owners to change the type of vehicle 6 they operate. 7 One variation of that concept was introduced 8 by Senator Hart this year. That's Senate Bill 668. 9 There are some other alternatives which received some 10 attention in recent years, which we've been supportive 11 of. One is DRIVE-plus, which is a system of fees and 12 rebates on the purchase of new cars, depending on the 13 criteria level of pollutants, and recently there has 14 been a suggestion that this mechanism could be used to 15 more directly encourage replacement of older, more 16 polluting vehicles. I guess in some respects, similar 17 to SCRAP -- just a different variation perhaps. 18 Another alternative would be to apply the 19 DRIVE-plus concept of fees and rebates to all vehicles 20 on the road by utilizing the current biennial smog 21 inspection to record actual emissions of individual 22 vehicles and actual miles driven, and use that in some 23 type of formula to determine what the appropriate fee 24 or rebate should be on the registration for that 25 vehicle. 481 GILLESPIE REPORTING SERVICES 1 SDG&E supported legislation by 2 Senator Presley this year to initiate this concept, 3 but with a general controversy over inspection and 4 maintenance, it's not clear if this measure is going to 5 go anywhere this session. 6 Air districts, it's been mentioned during 7 this symposium, also provide monetary incentives for 8 low-emission vehicles and zero-emission vehicles from 9 the various funds they have, AB2766 funds. You're well 10 aware that the Sacramento AQMD provides a thousand 11 dollar incentive for zero- and low-emission vehicles. 12 Here in San Diego, SDG&E has been working 13 closely with the San Diego Air Pollution Control 14 District, and we are close to implementing a plan that 15 provides similar measures here, that would provide a 16 thousand dollar incentive for conversion of vehicles to 17 natural gas and also dollars for fleet operators for 18 installing their own electric gas fueling station. And 19 the board may want to encourage the use of funds in 20 other districts in similar type programs. 21 Nonmonetary incentives can really be 22 particularly powerful. It might just be that extra 23 thing that pushes somebody over the edge to go up and 24 change their habits. It could be preferential parking, 25 use of high-occupancy vehicle lanes, alternative-fuel 482 GILLESPIE REPORTING SERVICES 1 vehicles. And those kinds of things can't go on 2 forever. We hope that there's more and more 3 alternative-fueled vehicles on the road, so that those 4 would have to be sunsetted out, but would certainly 5 provide a little extra incentive for the early adopters 6 to do so. 7 Sacramento Municipal Utility District has 8 provided recharging stations throughout Sacramento, and 9 I understand that the city has preferential parking in 10 place. Similar measures can be adopted throughout the 11 state. 12 We'd also urge the board to work closely with 13 the air districts to promote -- not just allow, but 14 really promote the development of regulatory incentives 15 for low- and zero-emission vehicles. This could include 16 incentives within employer trip reduction rules which 17 would allow commuting in zero-emission vehicles or 18 low-emission vehicles to be counted as a zero ride or 19 near-zero ride. 20 We could also encourage ways to investigate 21 establishing incentives for low-emission vehicles and 22 zero-emission vehicles by installing recharging 23 facilities in parking lots owned by private companies. 24 Also could be through installation of natural gas 25 compressor stations by private companies. And other 483 GILLESPIE REPORTING SERVICES 1 incentives regarding land use management as future 2 developments are established to keep in mind ways to 3 make alternative-fuel vehicles more accessible for those 4 communities. 5 And similar to The Gas Company, we also 6 urge the board to work closely with the natural gas 7 conversion industry. There are some market barriers 8 which are currently causing concern within that segment 9 of the industry. Recent policies and procedures 10 adopted, and some that are being proposed in '95 11 and '96, are so conservative and costly to implement 12 that the NGV retrofit industry could come to a grinding 13 halt, which is opposite of what we really all want to 14 see happen. 15 As Mr. Hirsch mentioned, that the cost of 16 testing those devices for certification is becoming such 17 a high cost that it makes it noncost-effective for them 18 to do so, because the market is only so great on the 19 sale of those devices, they couldn't possibly recover 20 all of their development costs. 21 We've seen -- and I believe the board has 22 seen the natural gas vehicles have the proven ability to 23 meet ULEV standards, but without public acceptance of 24 NGVs and natural gas fuel that transitional retrofits 25 would allow, that provides less impetus for the OEMs to 484 GILLESPIE REPORTING SERVICES 1 go forward with a greater variety of vehicles. It 2 creates less impetus for the oil industry to go forward 3 with building stations also. And with the proven 4 emission benefits of mass-marketed NGVs over other 5 fuels, that would likely to be lost. 6 Then there are -- is the economic side. Each 7 NGV retrofit represents anywhere from 4 to $8,000 in 8 revenue to accompany the state. And that really doesn't 9 include the trickle-down effect of those incremental 10 dollars coming into the California economy. I feel that 11 the California retrofit industry is well positioned to 12 meet the needs of the state, and to help the state meet 13 air quality goals and achieve economic gains. 14 Again, as mentioned by The Gas Company, 15 Ecotrans has contracts with some of those U.S. postal 16 service vehicles. About 110 are coming to San Diego 17 later this year, others throughout the state. Ecotrans 18 is doing work not only for vehicles that will wind up 19 in California, but also Arizona and Nevada, so it's a 20 revenue opportunity for California that we need to see 21 happen. 22 And a large number of retrofit manufacturers 23 besides the conversion shops are located in California, 24 too, so they can provide growth opportunities for 25 California companies. And I'm told some companies, like 485 GILLESPIE REPORTING SERVICES 1 Mesa, FleetStar, which are not California companies, 2 would like to expand their efforts within the state. 3 But again, they need the ability to have equipment that 4 can be certified at a reasonable cost. 5 And by no means am I suggesting that the 6 equipment they sell not meet strict air quality 7 standards. It absolutely has to. The -- what needs to 8 be done is find a way to make sure they are meeting 9 those standards, but minimize the cost requirement to 10 them to certify. 11 And I guess in that area, they would feel 12 that the board could authorize bench aging protocols 13 proposed by the industry, assign deterioration factors 14 that substantially reduce the testing and cost burdens 15 on manufacturers, but still ensure that the emerging 16 equipment does meet the air quality requirements we 17 so desperately need, and also to exempt the 18 alternative-fuel vehicle retrofit systems -- and that 19 would really be for all alternative fuels, not just 20 natural gas -- from OBD II requirements for 1998, which 21 I understand has been proposed for the OEM alternative 22 fuel vehicles but not for the converted vehicles. 23 Lastly, I'd like to say, on behalf of SDG&E 24 we're willing to be a partner with this board and with 25 the community in general to accomplish these goals, and 486 GILLESPIE REPORTING SERVICES 1 I appreciate you giving me the opportunity to speak 2 before you this afternoon. 3 Thank you. 4 CHAIRWOMAN SCHAFER: Thank you very much, 5 Mr. Levin. 6 Our last witness on this panel, Dr. Carl 7 Moyer, is Chief Scientist of the Acurex Environmental 8 Corporation in Mountain View, California. His 9 undergraduate and graduate work was at Stanford 10 University. He's spent 25 years gaining experience 11 in fuels, combustion, emissions, and the air quality 12 impacts. 13 Dr. Moyer has particular expertise in the 14 mobile sector and has prepared a talk for the Air 15 Resources Board on possible control strategies for 16 (incomprehensible word) vehicles, locomotives, and other 17 sources of carbon monoxide emissions. 18 Also, Dr. Moyer has recently been working 19 with the Sacramento Air Quality Management District on 20 their fleet rule and strategies for off-road mobile 21 sources. So we welcome you and look forward to your 22 testimony, sir. 23 DR. MOYER: Thank you. I provided the 24 secretary with copies, but I didn't actually see them 25 get distributed. I don't know what she did with them. 487 GILLESPIE REPORTING SERVICES 1 (Discussion was held off the record.) 2 DR. MOYER: I will cover -- I guess I'd 3 better use this. 4 I will cover several topics that have been 5 mentioned already today. 6 (Overhead presented.) 7 So maybe this can serve as a windup and 8 integration. I might say before I start, that I'm with 9 Acurex Environmental Corporation in Mountain View, and 10 I'm paid to come here today by Sacramento Metropolitan 11 AQMP, but any observations or conclusions that show here 12 are not theirs, they're mine. They're not necessarily 13 the same. 14 (Overhead presented.) 15 The observations and recommendations that I'm 16 going to make derive from the following five programs 17 that we've done lately. First is for Sacramento 18 Metropolitan AQMD. We developed a fleet rule that 19 requires fleets to lead in the introduction of 20 low-emission vehicles, and an associated credit rule 21 provides for flexible compliance. 22 These two rules were adopted on Tuesday, and 23 they are the first, as far as we know, rules in the 24 United States that are local rules requiring 25 low-emission vehicles to be introduced in fleets. They 488 GILLESPIE REPORTING SERVICES 1 required fleets to do it. 2 The credit rule provides flexible compliance, 3 and originally we included it to bridge across the TCMs, 4 so that if you were afflicted with a ride-sharing ratio, 5 but wished to do some technology contribution instead, 6 you could do that. 7 And subsequently the AQMD has abandoned the 8 ride-sharing rule, so we don't have any TCMs to bridge 9 through at the moment, but that was the idea. 10 We had dispaired of getting these rules until 11 very lately, but finally got momentum going in our 12 direction, and it was clear the board was responding 13 to three themes of local control -- that is, they want 14 their own mobile source program, not a federal one -- 15 flexibility of compliance, and the credit rule was very 16 key there, and also equity of the stationary source 17 measure. The stationary source community was 18 complaining that -- or at least we caused them to 19 complain that the district had never undertaken any 20 mobile source regulation, and it would only be fair if 21 local fleets had to pull their own weight. 22 Also, Puget Sound Air Pollution Control 23 Agency and Sacramento Metropolitan AQMD worked on design 24 of scrapping programs and quantification of the 25 benefits. 489 GILLESPIE REPORTING SERVICES 1 For CEC we studied mobile source credit 2 programs; we compared regulations and guidance documents 3 and did some case studies and recommended improvements 4 and simplifications to mobile source credit programs, 5 and recommendations I'll cite here in a moment. 6 For the South Coast AQMD we did a study again 7 on technology strategies -- for what it really means, 8 alternative compliance with Rule 1501. This job was 9 canceled before it was completed. Right now I see it up 10 there, it sounds like I'm whining, but I merely wanted 11 to observe that there will be no report forthcoming from 12 this, even though we did identify plenty of technology 13 options that would supply the emission reductions that 14 would have been provided by 1501 many times over. So 15 that this was a feasible way to go, if one were going to 16 allow technology alternatives to the ride-sharing ratio, 17 even to allow it just temporarily for a period of 18 years. 19 Then lastly, we worked with South Coast and 20 CEC doing technical support for the Los Angeles County 21 MTA low-NOx bus credit proposal, where they were trying 22 to obtain NOx reduction credits for their low-NOx 23 buses. That job came to brief for reasons that I will 24 mention later. 25 (Overhead presented.) 490 GILLESPIE REPORTING SERVICES 1 A few observations about scrapping programs, 2 which was a topic of the first half of the afternoon. 3 Scrapping light-duty vehicles could provide a community 4 with about 1 percent reduction of the total VOC 5 inventory. The word "annual" doesn't belong there. I 6 was going somewhere else with the sentence. 7 The fact is, if you institute an aggressive 8 scrapping program, you -- and kept it rolling each 9 year -- you could probably account for about 1 percent 10 reduction in total VOC inventory. 11 We were asked for quantification, so there's 12 a quantification. I didn't hear anywhere else today 13 about where scrapping might actually fit into an air 14 quality plan. 15 Maybe if you were hyperaggressive, you could 16 get 2 percent. So it's useful, but not make-or-break in 17 the total plan. And you could do that without adversely 18 impacting the supply and price of low-cost 19 transportation. 20 Relative to scrapping, you probably heard 21 Pat McLafferty mention, and I think Mike Riehle also 22 mentioned that, the overlapping authorities, the local 23 districts who are dealing with ARB and EPA, make 24 implementation of a scrapping program hopelessly 25 difficult. I think if you're really serious about 491 GILLESPIE REPORTING SERVICES 1 generating credits, the transaction costs will be much 2 too high. There's too many people to deal with and too 3 many trees to draw between all these parties, each of 4 whom has very firm ideas of how these things should be 5 structured and credited. 6 Thirdly, on somewhat of an arcane point, the 7 ARB guidance needs improvement, in our view, through 8 better use of the actuarial statistics on automobiles, 9 as they die and disappear. The applicant should not be 10 frozen with a fixed lifetime, fixed value type of a 11 credit; he should be allowed to trade lifetime of his 12 credit, which has significance in its market value, 13 especially if he's selling to a stationary source. This 14 could be done without compromising air quality. In our 15 opinion, the ARB guidance misses a point there that 16 needs to be expanded. 17 Fourth, scrappage guidance for other kinds of 18 things like this, especially small engines which are 19 high VOC emitters, could help promote the VOC 20 reductions. South Coast does have such guidance, but 21 nobody else does. 22 And then lastly is a point that's been 23 mentioned a number of times, scrappage guidance for 24 heavy trucks could help promote valuable NOx reductions 25 in the community. 492 GILLESPIE REPORTING SERVICES 1 (Overhead presented.) 2 Now, beyond scrapping, there are other mobile 3 source programs possible, and the previous two speakers 4 mentioned some. There are certainly low-emission 5 retrofits. These are often dismissed as not practical, 6 but actually some of them are beginning to look 7 practical, especially one Mr. Riehle mentioned, the 8 cannister retrofits, and even three-way hallest 9 (phonetic spelling) retrofits might be possible in some 10 cases. And in the heavy-duty sector there are a few 11 ways that retrofits could bring valuable NOx 12 reductions. 13 The second one is quite obvious, it's 14 substituting on-road certified engines in some nonroad 15 applications. One project like this was done in 16 Sacramento, where the airport operator bought an on-road 17 certified truck engine instead of the nonroad 18 uncertified engine he could have legally bought for a 19 fuel pumper, a service truck for the aircraft. And he 20 generated at least 10 tons per year NOx reduction at a 21 cost of less than $100 dollars a ton. 22 Now, there are not an infinite number of 23 possibilities like this, but there are a significant 24 number. 25 Introduction of new low-emissions engines 493 GILLESPIE REPORTING SERVICES 1 in some applicatons. Again, there are many, many 2 opportunities to do that beyond what regulations 3 require. 4 And then there are a number of trip 5 consolidation or other transportation kind of efficiency 6 initiatives that could also generate mobile source 7 emission reductions that would generate credit. So 8 there are a number of programs like this. 9 (Overhead presented.) 10 Now, I have a few observations about this, to 11 leave you with. First is that the opportunities to do 12 these kinds of things are quite scattered and very 13 situation specific, so it's not very feasible to write 14 rules around all these things. It might be hard to 15 write it here for a fuel pumper rule. You're going to 16 want to depend on some sort of market-based system to 17 call forth these responses, we think. Incentive or 18 market-based programs is a better way to do it. 19 The third point is the potential supply of 20 reduction from these little niches is actually quite 21 large -- 30 to 40 tons per day in the South Coast, 22 of ozone precursors, and this is a fairly conservative 23 estimate, we think. This is a respectable amount of 24 emission reductions. 25 In fact, the fourth point is this amount of 494 GILLESPIE REPORTING SERVICES 1 emission reductions is probably too large for the 2 breathers to want to give away as alternative compliance 3 options in other rules. 4 In any case, you'll probably find -- in fact, 5 we think we're finding that the reductions are too 6 abundant. They exceed the demand from other regulations 7 as alternative compliance. You can't write enough 8 deregulations, actually, as far as we can see, to 9 stimulate demand for credits. 10 In fact, we once tried to do this in 11 Sacramento, and I learned quickly that you can't get 12 away with writing a regulation if its main purpose is 13 to make somebody buy credits. It has to be a real 14 regulation or it won't fly, obviously. I don't know 15 why I was so stupid. 16 (General laughter.) 17 But I -- it only took one time to learn, 18 though. 19 Secondly, there are not enough alternative 20 compliance buyers. This is not actually seen as a good 21 business practice for them. No one is going to buy 22 credit as their main compliance option and, in fact, put 23 themselves at risk in the marketplace. They want 24 control of their own destiny. 25 This is something people do occasionally or 495 GILLESPIE REPORTING SERVICES 1 for some special purpose, not as a -- not usually as a 2 main compliance option. So you'll find yourselves 3 fairly short of buyers, even within RECLAIM, I think. 4 Thirdly, the short life of mobile source 5 credits limits their appeal. Who needs a three-year 6 credit, really, other than for an extremely temporary 7 purpose. And then not to forget, and I think Pat 8 McLafferty was touching on this, buying pollution 9 reduction as an excuse not to do something else doesn't 10 lead to a very good business image. 11 And the LACMTA credit that was actually 12 written and signed was finally nixed by "L.A. Times" who 13 were going to be the buyer. The chairman decided that 14 the public image was not very good, and he didn't want 15 to do it. 16 The same thing is happening with the SMUD 17 Sacramento RTD deal in part. These are not 18 necessarily projects, especially if they're high 19 visibility, that a business really wants to do. So 20 there are some particular difficulties with these credit 21 programs. 22 (Overhead presented.) 23 So these need to -- a couple of conclusions. 24 We want to improve market-based programs. First, for 25 those that are going to be used for alternative 496 GILLESPIE REPORTING SERVICES 1 compliance or credit trades, try to eliminate 2 conflicting guidance and to reduce conservatism. 3 The guidance ought to be simplified. It is 4 quite a chore to work through the number of steps you 5 have to go to help establish a tradable or bankable 6 mobile source credit, and then in the middle, you have 7 the EPA/ARB district consistency problem. Everyone has 8 a different idea how you're going to do this. 9 And then, thirdly, we would recommend less 10 conservatism to early projects. When everyone's done 11 with scheming, and setting aside, and lifetime 12 shortening, and everything else to protect the 13 breathers, you don't have too many business projects 14 that will actually survive now. They may have some 15 merits, but there's no use to be fooled. If you think 16 you're doing mobile source credits as an alternative 17 compliance, you actually aren't, because it's too 18 difficult to do most of these projects. 19 I don't think that you ought to consider 20 mobile source emission reductions anyway as mainly 21 alternative compliance. It can help you with some 22 rules, like if you let people do it within a 23 ride-sharing rule, but there are too many reductions to 24 do this, and these reductions ought to be captured by 25 the breathers. Now, if the breathers want to capture 497 GILLESPIE REPORTING SERVICES 1 them, they ought to pay for them. 2 And there was much talk today about market 3 systems, but I didn't hear a lot of talk about what I 4 consider a real market system. If you want to buy 5 emission reductions, buy emission reductions -- and pay 6 for them. 7 So the way you do that is to institute new 8 emission fees -- or a way to do it is to institute new 9 emission fees or registration fees or surcharges. Use 10 the revenues to buy and retire reductions from scrapping 11 and other program, through competitive bidding. For a 12 regular system, maybe people offer up, and I think you 13 will find that there is available a fair amount of 14 tonnage, even of NOx, at costs that are 1,000 to $2,000 15 a ton. And this will be a big social help, actually, if 16 you could do programs like this. 17 A program like this, I think, would address 18 the themes that we found that were prominent in our 19 fleet rule credit rule in Sacramento. Local control, 20 flexible programs, and equity with stationary source 21 programs. Why not get some of these reductions from the 22 mobile sector. And furthermore, it's a true 23 market-based program. 24 The public wants emission reductions. 25 They're probably willing to pay for them. I think they 498 GILLESPIE REPORTING SERVICES 1 will support a program like this because they can 2 actually see what they're buying. They're not buying a 3 plan, they're not buying a big staff, they're not buying 4 a lot of P.R., they're buying tons per day. It ought to 5 be so. 6 Thank you. 7 CHAIRWOMAN SCHAFER: Dr. Moyer, it's -- so 8 it's a short-, medium-, and long-term program, for 9 encouraging some of these things. I gather we just need 10 to make our guidelines a little bit more flexible and 11 let the districts go ahead? 12 DR. MOYER: I would like to see another 13 summit meeting on the credit guidelines. We have had 14 several with the ARB staff, and try to get some -- you 15 have to involve Region IX and EPA -- and try to get some 16 treaty on how these are going to be done, especially on 17 the scrappage programs. 18 CHAIRWOMAN SCHAFER: That's short-term. 19 DR. MOYER: That's the short-term one. 20 And I hope not too much longer term, the ARB could work 21 with the districts to figure out where -- how 22 significant a true mobile source buy-down program could 23 be. I would like to see some kind of a working group 24 identify roughly what the pool of emission reduction 25 was, that we're not going to be attacked by regulations 499 GILLESPIE REPORTING SERVICES 1 directly, and to work to figure out what a plausible and 2 fair funding mechanism was, and to see -- I'm not sure 3 how far ARB wished to get into the business of 4 suggesting -- obviously, you need new legislation and 5 you're going to need money, but what's needed is kind of 6 a consensus concept of money-raising legislation and the 7 program which would use the money to buy down the 8 reductions. 9 Now, part of this would be how the public -- 10 some difficulties are inescapable. How are you going to 11 quantify the reductions and report them to the plan? 12 Well, in my opinion, it's a lot easier to do that than 13 write a lot of guidelines to establish an emission 14 reduction credit that's tradable in the market. At 15 least the agencies ought to be able to agree among 16 themselves what they're crediting themselves, and it 17 ought to be simpler than forming up a formal credit 18 transaction. 19 And generally speaking, I would hope the ARB 20 might come into play as a persuasive force that this 21 kind of market-based program makes sense. Most of the 22 market-based programs, so called, that you hear about -- 23 today, and I believe yesterday -- that occurred, are not 24 my idea of market based. They're pushing demand around 25 by pricing, but it's not very clear where the money is 500 GILLESPIE REPORTING SERVICES 1 going and what good it's going to do. 2 This is much more effective. The fee has to 3 be much less. We calculated rather crudely that for 4 Sacramento, NOx attainment only, $50 per vehicle per 5 year for ten years could buy you all the NOx reductions 6 you needed for attainment in Sacramento. And that's a 7 lot less than what people are talking about, $900 8 emission fees. $50 per year for vehicle is a different 9 kind of program than one of these that push people's 10 behavior around by making the pain level very high. 11 I think more attention needs to be paid to 12 just raise some money and use it to buy emission 13 reductions. So as much help as we could get from ARB on 14 that would be valuable. 15 CHAIRWOMAN SCHAFER: Have you given any 16 thought to the current opportunity to assist air 17 districts in financing programs like this with the 18 existing up to $4 registration fee per vehicle? 19 DR. MOYER: Yes. 20 CHAIRWOMAN SCHAFER: Are we doing a good 21 job with that? 22 DR. MOYER: No. Although I shouldn't 23 comment too much on that. Most of the flow of money is 24 in South Coast and 2766 funds. Very little of that 25 money is used exclusively to buy emission reductions. 501 GILLESPIE REPORTING SERVICES 1 It's used to fund many, many kinds of programs that push 2 in the direction of emission reductions, and some of 3 them very soft and squishy emission benefits. 4 Now, I'm not saying that that should not be 5 done, but I want a pot of money that's exclusively used 6 for quantifiable emission reductions. A fund for bike 7 paths and bus stops and things like that, there's many, 8 many merits to doing that, and there are many pots for 9 doing that. I want an overtly emission pollution 10 reduction program. 11 Their problem with 2766 is not enough money. 12 Instead of $4 a vehicle, you need ten times as much to 13 make rapid progress. 14 CHAIRWOMAN SCHAFER: Finally, I'd just 15 like to ask what you thought about the funding 16 mechanisms for innovative programs for other than 17 light-duty vehicles, such as the alternative. 18 DR. MOYER: In fact, with the district we 19 wrote a proposal to EPA as part of the FIP outfall, and 20 we did receive last week notification that EPA would 21 fund that program. We are going to look at three or 22 four ways of increasing an introduction rate of 23 low-emission vehicles in the Sacramento area in the 24 nonroad sector. There's actually more NOx in the 25 nonroad sector in Sacramento than there is on-road 502 GILLESPIE REPORTING SERVICES 1 heavy-duty -- nonroad. 2 There will be what amounts to a fleet rule on 3 engine owner operators similar to our truck fleet rule, 4 and some specific encouragement of retrofits. There are 5 a substantial number of retrofit opportunities in 6 nonroad, substantial opportunities for retirement of 7 variable engines in nonroad, and several vehicle 8 alternative-fuel opportunities, especially in natural 9 gas in nonroad applications. 10 So we think we can chart a plan that shows 11 that the nonroad sector of the Sacramento plan is going 12 to produce more NOx reductions than the on-road NOx 13 reduction. 14 CHAIRWOMAN SCHAFER: Do any of the board 15 members have questions for Dr. Moyer or the other 16 witnesses this afternoon? 17 Yes, Dr. Boston. 18 DR. BOSTON: Mr. Hirsch, I think I missed 19 when you mentioned the company, Ecotrans, that was 20 converting heavy duty to natural gas. Were some of 21 those heavy-duty diesel or only gasoline engines? 22 MR. HIRSCH: Most are gasoline, but there 23 are some heavy-duty diesels, including some very large 24 trucks that are being done on -- they're very much being 25 done now on almost a jobshop customer-specific basis. 503 GILLESPIE REPORTING SERVICES 1 So there are, indeed, some of those that are being 2 done. Most of them are more like the postal vehicles 3 that will be both here in San Diego and in the 4 Los Angeles kind of 6 cylinders, V6 -- semilocal 5 delivery sorts of vehicles. That is the primary type. 6 There are a lot of large buses up in 7 San Bernardino and San Luis Obispo. There is kind of a 8 hotbed of NGV activity up there, and they like their 9 natural gas vehicles and their buses. Some of those are 10 large diesels, so it is a mixture. 11 DR. BOSTON: There's a large reduction of 12 NOx emissions from those conversions? 13 MR. HIRSCH: Correct. Those vehicles are 14 closed-loop systems, which are much, much cleaner than 15 some of the unfortunate experiences we had in the 16 seventies and eighties where there were some problems, 17 but in today's closed-loop vehicles you see great 18 reductions. 19 Of course, in a vehicle that's dedicated and 20 is solely natural gas, you have a hundred percent 21 reduction of the VOC evaporative emissions, and there's 22 very few control measures that approach that. 23 DR. BOSTON: Are the buses working out 24 well in practice? 25 MR. HIRSCH: There's been a couple of 504 GILLESPIE REPORTING SERVICES 1 problems with some of the converted engines. They had 2 a few situations where the dynamometer tests did not 3 replicate favorably in the bus, and there was some fires 4 in the engine compartments. That was a packaging 5 problem. So some of them have worked and some of them 6 have had some test problems. It's been somewhat mixed. 7 But as any new technology, we're learning, and I think 8 people feel that those problems are, of course, all 9 solvable. 10 DR. BOSTON: Incidentally, in your 11 reference to Singapore, were you suggesting that we 12 might use caning as punishment for people who fail to 13 meet the -- 14 MR. HIRSCH: As I said, when I get back 15 and talk to my Reg XV people, we have a whole menu of 16 Reg XV incentives. Perhaps that might be one. Of 17 course, I was -- you know, it's Friday here, and 18 we're -- you know, it's been a long hearing, so I think 19 we need to smile a little bit, but of course that was my 20 reference. 21 CHAIRWOMAN SCHAFER: Yes, Mr. Calhoun. 22 MR. CALHOUN: Mr. Levin and Mr. Hirsch, 23 the comment that you made regarding the cost 24 of verification isn't new. I've heard that before. And 25 I think what the staff is doing is just following the 505 GILLESPIE REPORTING SERVICES 1 procedure that the board adopted. And the principal 2 reason for the procedure is to assure that those 3 vehicles do, in fact, meet these emission standards on 4 some extended mileage, and maybe one of the reasons -- 5 one of the things that may be helpful is that if you 6 could supply them with some additional data, that would 7 provide them the kinds of assurance that they want and 8 need in order to feel comfortable that these vehicles 9 are, in fact, going to meet the standards of X number of 10 miles. I think that would be very helpful. And I don't 11 know if you've talked to them about it or not. 12 MR. LEVIN: I can -- when I wear another 13 hat, I'm the president of the California Natural Gas 14 Vehicle Coalition, which is made up of the three gas 15 utilities, also Long Beach Gas, and this morning we had 16 a meeting and discussed something similar along those 17 lines to try to make sure we get the fuel providers and 18 the equipment manufacturers working with staff, and I'm 19 certain that we can provide vehicles and data which 20 would show that. 21 Because as I said in my earlier testimony, in 22 no way do we want vehicles out there that aren't clean. 23 It's just, you know, how can we make sure that they meet 24 the requirements yet not make it so difficult to prove 25 it that it's not worth doing. 506 GILLESPIE REPORTING SERVICES 1 MR. HIRSCH: We intend to do that, 2 Mr. Calhoun, to develop a protocol cooperatively with 3 the board so that there is data to show that. 4 The bench testing protocol that Mr. Levin 5 mentioned came from the California Natural Gas Vehicle 6 Coalition. The staff is reviewing it. It's perhaps 7 half a (incomprehensible word) technical document that 8 establishes specific bench testing procedures that would 9 affirmatively show oxygen sensor and catalist testing 10 and produce some numbers. 11 MR. CALHOUN: As you know, the 12 manufacturers go through a very extensive and expensive 13 process before those vehicles are certified, and I can 14 understand why the staff is also trying to assure itself 15 that, in fact, the vehicles that you certify will meet 16 them. 17 CHAIRWOMAN SCHAFER: Are there any other 18 questions from board members for this panel? 19 If not, I want to thank all of you for your 20 participation in this symposia. We will continue this 21 series of what I'm calling our board members summer 22 seminars in Orange County on August 5th and we will 23 schedule others. In particular, I'm planning to 24 schedule one that will help us address our 25 responsibilities for consumer products, and I hope we 507 GILLESPIE REPORTING SERVICES 1 find some innovative and cost-effective ways of doing 2 that as we move towards developing the State 3 Implementation Plan. 4 I just want to thank Cathy Witherspoon and 5 her staff, in particular, for putting this seminar 6 together, and for the participation of those of you who 7 were on relatively short notice and prepared excellent 8 testimony, and I think it's very helpful, and I think 9 the board very much appreciates your effort in helping 10 us as we move along, and I expect we'll be back to ask 11 your help in the future. 12 So with that, I hope everyone has a nice 13 weekend, and I hope you enjoy your stay in San Diego. 14 (The meeting was concluded at 4:15 p.m.) 15 -o0o- 16 17 18 19 20 21 22 23 24 25 508 GILLESPIE REPORTING SERVICES 1 R E P O R T E R ' S C E R T I F I C A T E 2 3 I, JOANNE P. CUNNINGHAM, a certified shorthand 4 reporter, do hereby certify that the foregoing pages 5 comprise a full, true and correct transcription of the 6 proceedings had and the testimony taken at the hearing 7 in the hereinbefore-entitled matter. 8 Dated this 29th day of July, 1994, at Riverside, 9 California. 10 11 12 13 __________________________________ 14 JOANNE P. CUNNINGHAM, CSR No. 2734 15 16 17 18 19 20 21 22 23 24 25 509 GILLESPIE REPORTING SERVICES