BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD JOE SERNA JR. BUILDING CALEPA HEADQUARTERS BUILDING 1001 I STREET BYRON SHER AUDITORIUM SACRAMENTO, CALIFORNIA THURSDAY, NOVEMBER 18, 2004 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Alan Lloyd, Chairperson Ms. Dorene D'Adamo Ms. Sandra Berg Supervisor Mark DeSaulnier Dr. Henry Gong Mayor Ronald Loveridge Ms. Barbara Patrick Mrs. Barbara Riordan Supervisor Ron Roberts STAFF Ms. Catherine Witherspoon, Executive Officer Mr. Tom Cackette, Chief Deputy Executive Officer Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Tschogl, Ombudsman Mr. Bob Barham, Assistant Chief, Stationary Source Division Mr. Richard Bode, Chief, Health and Exposure Assessment Branch Mr. Steve Brisby, Manager, Fuels Section Ms. Cindy Castronovo, Engineering & Certification Branch PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCES CONTINUED STAFF Mr. Richard Corey, Chief, Research Economics Branch Mr. Bart Croes, P.E., Chief, Research Division Mr. Don Donohoue, Chief, Emissions Assessment Branch Ms. Vicky Davis, Staff Counsel Mr. Bob Effa, Chief, Air Quality Data Branch Mr. Bob Fletcher, Chief, Planning & Technical Support Division Mr. Mike Fitzgibbon, Manager, Emission Inventory Analysis Section Ms. Peggy Jenkins, Manager, Indoor Exposure Assessment Section Mr. Bob Jenne, Senior Staff Counsel Mr. Tom Jennings, Senior Staff Counsel Mr. Karperos, Manager, Transportation Strategies Section Mr. George Lew, Chief, Engineering and Certification Branch Mr. Bill Loscutoff, Chief, Monitoring and Laboratory Division Ms. Karen Magliano, Manager, Particulate Matter Analysis Section Ms. Annmarie Mora, Air Pollution Specialist Mr. Kirk Oliver, Senior Staff Counsel Mr. Thomas Phillips, Air Pollution Specialist Mr. George Poppic, Senior Staff Counsel Mr. Don Rake, Air Pollution Specialist Mr. Win Setiawan, Stationary Source Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED STAFF Mr. Dean Simeroth, Chief, Criteria Pollutants Branch Dr. Linda Smith, Manager, Health & Ecosystems Assessment Branch Ms. Peggy Taricco, Manager, Technical Analysis Section Dr. Patricia Velasco, Air Pollution Specialist Mr. Peter Venturini, Chief, Stationary Source Division Mr. Erik White, Manager, Engineering Evaluation Section ALSO PRESENT Mr. Don Anair, Union of Concerned Scientists Mr. Steven Arita, Western States Petroleum Association Ms. Diane Bailey, Natural Resources Defense Council Mr. Thomas Christofk, CAPCOA/Placer County Air Pollution Control District Mr. Robert Cline, Cline & Duplissea, representing Duraflame Mr. Jim Cross, Cross Petroleum Mr. John Crouch, Health, Patio & Barbecue Association Mr. Larry Greene, CAPCOA Mr. Harold Haskew, Harold Haskew & Associates Ms. Bonnie Holmes-Gen, American Lung Association Mr. Tom Koehler, California Fuels Partnership Mr. Joseph Kubsh, MECA Mr. Kirk Marckwald, Association of American Railroad Mr. Cory Nickchen, Guardian Industries Corporation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Charlie Peters, Clean Air Performance Professionals Mr. Dave Smith, BP Ms. Jennifer Talbert, G&M Oil Company Ms. Cindy Tuck, California Council for Environmental & Economic Balance Mr. James P. Uihlein, Western States Petroleum Association Mr. Paul Wuebben, South Coast Air Quality Management District PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Item 04-10-1 3 Chairperson Lloyd 3 Executive Officer Witherspoon 4 Staff Presentation 5 Board Discussion and Q&A 9 Item 04-10-2 10 Chairperson Lloyd 10 Staff Presentation 11 Board Discussion and Q&A 16 Motion 21 Vote 21 Item 04-10-3 22 Chairperson Lloyd 22 Executive Officer Witherspoon 23 Staff Presentation 25 Board Discussion and Q&A 57 Dave Smith 75 Joseph Kubsh 81 Paul Wuebben 84 Kirk Marckwald 86 Diane Bailey 100 Don Anair 102 Bonnie Holmes-Gen 103 Thomas Christofk 105 Charlie Peters 107 Ex Partes 109 Motion 111 Vote 112 Afternoon Session 113 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX CONTINUED PAGE Item 04-10-4 113 Chairperson Lloyd 113 Executive Officer Witherspoon 113 Staff Presentation 114 Harold Haskew 126 Board Discussion and Q&A 131 James Uihlein 134 Tom Koehler 136 Charlie Peters 153 Board Discussion and Q&A 156 Ex Partes 157 Motion 158 Vote 158 Item 04-10-9 159 Chairperson Lloyd 159 Executive Officer Witherspoon 159 Motion 163 Vote 163 Item 04-10-5 163 Chairperson Lloyd 163 Executive Officer Witherspoon 165 Staff Presentation 165 Corey Nickchen 175 Board Discussion and Q&A 178 Motion 185 Vote 185 Item 04-10-6 185 Chairperson Lloyd 185 Executive Officer Witherspoon 186 Staff Presentation 186 Jennifer Talbert 200 Jim Cross 201 Larry Greene 202 Steven Arita 203 Motion 206 Vote 206 Item 04-10-7 206 Chairperson Lloyd 206 Executive Officer Witherspoon 207 Staff Presentation 208 Board Discussion and Q&A 237 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Item 04-10-8 243 Chairperson Lloyd 243 Executive Officer Witherspoon 244 Staff Presentation 245 Board Discussion and Q&A 256 Robert Cline 259 John Crouch 267 Bonnie Holmes-Gen 270 Cindy Tuck 273 Board Discussion and Q&A 275 Motion 279 Vote 279 Public Comment 279 Adjournment 280 Reporter's Certificate 281 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. The November 3 18th, 2004, public meeting of the Air Resources Board will 4 now come to order. 5 Ms. Berg, would you please lead us in the Pledge 6 of Allegiance. 7 (Thereupon the Pledge of Allegiance was 8 Recited in unison.) 9 CHAIRPERSON LLOYD: Thank you very much. 10 Would the Clerk of the Board please call the 11 roll. 12 BOARD CLERK ANDREONI: Ms. Berg? 13 BOARD MEMBER BERG: Here. 14 BOARD CLERK ANDREONI: Ms. D'Adamo? 15 BOARD MEMBER D'ADAMO: Here. 16 BOARD CLERK ANDREONI: Supervisor DeSaulnier? 17 BOARD MEMBER DeSAULNIER: Here. 18 BOARD CLERK ANDREONI: Dr. Gong? 19 BOARD MEMBER GONG: Here. 20 BOARD CLERK ANDREONI: Ms. Kennard? 21 Supervisor Patrick? 22 BOARD MEMBER PATRICK: Here. 23 BOARD CLERK ANDREONI: Mrs. Riordan? 24 BOARD MEMBER RIORDAN: Here. 25 BOARD CLERK ANDREONI: Supervisor Roberts? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD MEMBER ROBERTS: Here. 2 BOARD CLERK ANDREONI: Ms. Pineda? 3 Mayor Loveridge? 4 Chairman Lloyd? 5 CHAIRPERSON LLOYD: Here. 6 Thank you very much. 7 Well, we've got a pretty full day today. But I 8 want to make a few comments before we get started. 9 One, there was a highlight yesterday. Governor 10 Schwarzenegger, representing the first anniversary of his 11 administration, came to this building, as he did to a lot 12 of the public buildings. So it was a great morale 13 booster, it was a great gesture on his behalf. I know 14 that we all very much appreciated that. Clearly reminding 15 us that we have much work to do, but a great boost to all 16 of us. 17 The other thing, yesterday we had a delegation in 18 from Nordrhein Westfalen in Germany, with the Minister 19 Horst coming to us and signed an MOU with the Air 20 Resources Board focusing on some renewable energy fuel 21 cells and hydrogen. And the Minister was able to meet the 22 Governor very briefly, which made his visit worthwhile. 23 But also we had a very good exchange of some of 24 the areas. And the state back there's the largest in 25 Germany, obviously heavily industrialized. But I think we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 can learn something from that. And we also had a strong 2 sprinkling of companies from Germany as well as from 3 California. 4 So, again, I want to thank -- appreciate the work 5 of the ARB staff in making that accomplished. Much 6 follow-up work to do. And also would like to thank the 7 Ombudswoman's Office, Kathleen Tschogl, and particularly 8 Diana Simeroth for an outstanding job in organizing that. 9 And we got the Secretary to show up as well and entertain 10 him. So it was a very good illustration of how we can 11 really work together. 12 Also it's a special day today, because around 11 13 o'clock we will be breaking from whatever we're doing. 14 And Secretary Tamminen will be taking over with Senator 15 Sher. And this building -- this room -- hearing room will 16 be renamed for the Senator. So at that time we will all 17 take a break and participate in that. 18 So, again, very special day for all of us, who 19 really appreciate Senator Sher. And sad to see him 20 leaving Sacramento, with all his knowledge and all his 21 devotion over the years. So hopefully will not be loss -- 22 and his personal experience and integrity will not be lost 23 to California. 24 We move on to agenda item 4-10-1. I'd Like to 25 remind anybody in the audience who wishes to testify to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 please sign up with the Clerk of the Board. And if they 2 have written comments, to provide 30 copies of that to the 3 clerk. 4 The first item on the agenda, as I indicated, is 5 our monthly informational health update. 6 Today's presentation focuses on particulate 7 matter exposures and health impacts in the indoor 8 environment. 9 And clearly as we look at cleaning up the outdoor 10 environment, the indoor environment also becomes extremely 11 important. So I'm looking forward today to the latest 12 update. 13 And I'd like to turn it over to Ms. Witherspoon 14 to introduce the staff and begin the presentation. 15 EXECUTIVE OFFICER WITHERSPOON: Thank you, 16 Chairman Lloyd. And good morning, members of the Board. 17 In this early 1990's, ARB and the U.S.EPA 18 co-funded a large-scale study of indoor and personal 19 exposure to particulate matter, often referred to as the 20 P-Team study. In that study residents of Riverside, 21 California, wore particle samplers for a 24-hour period. 22 The researchers found that personal exposure to PM greatly 23 exceeded outdoor levels and exceeded ambient air quality 24 standards as well. 25 In 1999, EPA funded follow-up studies in three PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 parts of the country, including Los Angeles, to better 2 quantify personal PM exposures and the relative influence 3 of indoor and outdoor sources. ARB co-funded the Los 4 Angeles segment of the study, conducted by Harvard 5 University, which measured exposure of patients with 6 chronic obstructive pulmonary disease. ARB later funded a 7 similar PM exposure study of healthy adults. 8 Tom Phillips of ARB's Research Division will 9 present the result of both studies. Mr. Phillips will 10 also discuss the results of another Harvard study that 11 assessed the toxicity of indoor PM. 12 Tom. 13 AIR POLLUTION SPECIALIST PHILLIPS: Thank you, 14 Ms. Witherspoon. 15 And good morning, members of the Board. 16 (Thereupon an overhead presentation was 17 Presented as follows.) 18 AIR POLLUTION SPECIALIST PHILLIPS: Today I will 19 summarize a few of the key findings from these two new 20 California studies of personal and indoor PM exposure. 21 This picture shows the type of personal exposure 22 monitor that the study subjects wore or kept nearby at all 23 times. 24 --o0o-- 25 AIR POLLUTION SPECIALIST PHILLIPS: The ARB and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 U.S.EPA co-funded these two studies of indoor personal 2 exposure to PM in California. These were among a dozen 3 U.S. studies conducted to help understand the 4 relationships among indoor, outdoor and personal exposure. 5 The California studies focused on the contribution of 6 indoor and outdoor sources to personal exposures. 7 The first study recruited 15 patients with 8 chronic obstructive pulmonary disease, or COPD, which is a 9 sensitive subpopulation of special interests. 10 The second study recruited 17 healthy subjects. 11 All subjects lived in the Los Angeles area, and 12 the sample included both coastal and inland locations and 13 households of ethnic diversity. 14 Daily pollutant sampling occurred for seven 15 consecutive days in the winter and summer. 16 Investigators measured PM10, PM2.5, and chemical 17 components of PM2.5, both inside and outside the homes and 18 in the personal breathing zone. Other measurements 19 included ventilation rates and other housing 20 characteristics such as the type of heating and cooking 21 appliances and local traffic. The subjects kept daily 22 time activity diaries, noting any events that involved 23 combustion or other PM sources. 24 --o0o-- 25 AIR POLLUTION SPECIALIST PHILLIPS: The results PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 for the COPD subjects show that on average personal PM2.5 2 concentrations across the week were greater than indoor 3 concentrations. In addition, indoor concentrations were 4 about equal to outdoor concentrations. 5 No significant indoor sources or factors were 6 associated with personal exposures except for others 7 smoking nearby. This was due to the minimal time that the 8 COPD subjects spent on indoor activities such as cooking 9 and cleaning. 10 Overall, indoor PM2.5 concentrations were higher 11 in winter than in summer and higher in inland communities 12 compared to the coastal areas. This reflects the lower 13 ventilation rates in the winter season and the higher 14 outdoor PM2.5 levels in inland areas. 15 In the study of healthy subjects the results 16 suggest that personal indoor PM2.5 had more individual 17 specific variability across the week compared to COPD 18 patients. This was due to the healthy subjects being more 19 active indoors. Cleaning and cooking activities were 20 significantly associated with increased personal PM2.5; 21 while window opening was associated with lower exposures. 22 Finally, personal PM2.5 was more strongly 23 correlated with indoor PM2.5 than outdoor PM2.5. This 24 reflects the influence of personal activities and 25 proximity to indoor PM sources on their personal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 exposures. 2 --o0o-- 3 AIR POLLUTION SPECIALIST PHILLIPS: I would loose 4 like to mention a recent study from Harvard University 5 that compared the toxicity of indoor and outdoor PM2.5 in 6 lung cell cultures. The investigators collected 14 paired 7 samples of indoor and outdoor PM2.5. Nine Boston homes 8 were sampled for one week in the spring, summer, fall or 9 winter. The results showed that the concentrations of an 10 inflammatory mediator in the lung cells were much higher 11 than when cells were treated with indoor PM2.5 compared to 12 outdoor PM2.5. The investigators concluded that indoor PM 13 toxicity may be higher than outdoor PM toxicity and that 14 this may be due to indoor PM sources. 15 --o0o-- 16 AIR POLLUTION SPECIALIST PHILLIPS: In 17 conclusion, the results of these studies have important 18 implications for PM exposure assessment and interpretation 19 of health studies. They show that the individual's 20 proximity to indoor PM sources has a substantial effect on 21 personal exposures. 22 In addition, personal PM exposure has substantial 23 individual variability during the day and week due to 24 short-term changes in air exchange rates and indoor 25 activities and PM sources. This variability must be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 considered for accurate exposure and risk assessment. 2 Finally, results from another recent study 3 indicated that further research to indoor PM toxicity and 4 exposure are needed. 5 Thank you for your kind attention. 6 CHAIRPERSON LLOYD: Thank you very much. 7 Any questions or comments from the Board? 8 One thing I'd like to -- when you talk about 9 indoor air quality, I know there's been quite a lot of 10 publicity about various advertisements vis-a-vis cleaning 11 up indoor air, and some concerns that they may be 12 degenerating ozone. And rather than cleaning up things, 13 maybe exacerbating that. 14 Do you have any comment on that? Or maybe -- if 15 you don't at this time, maybe you could provide us in the 16 future maybe an update on our understanding of this 17 equipment and what recommendations you may have for the 18 Board. 19 AIR POLLUTION SPECIALIST PHILLIPS: Certainly. 20 We have published an indoor quality guideline several 21 years ago that addresses ozone generators marketed air 22 cleaners or air purifiers. And they have been shown in 23 several studies to produce very high levels, well above 24 the current air quality standards for California in some 25 cases. And we are looking into that further now. So we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 will get more information to you in the upcoming months. 2 CHAIRPERSON LLOYD: Thank you. I think that 3 would be appreciated. At the same time we're trying to 4 drive down ozone outside, we don't want -- we want to 5 educate the people and that maybe there are some issues 6 that should be looked at. 7 EXECUTIVE OFFICER WITHERSPOON: We will have a 8 special report for the Board in January on ozone 9 generators and their risk to public health. 10 CHAIRPERSON LLOYD: Great. Thank you very much 11 indeed. 12 Okay. Seeing no more questions. 13 This is not a regulatory item. Therefore, it's 14 not necessary to officially close the record. 15 So we'll thank staff and move on to the next 16 item. 17 And this one is 04-10-2, five research proposals. 18 The concept for these projects were presented in the 19 annual research plan at last month's meeting, as we 20 recollect. These five projects have been reviewed and 21 approved by the Research Screening Committee. 22 At this point I would like to ask Head of 23 Research, Bart Croes, to take any comments that we may 24 have or any questions the Board may have after maybe a 25 brief presentation from staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 RESEARCH DIVISION CHIEF CROES: Okay. Annmarie 2 has a four-minute presentation she'd like to make. 3 (Thereupon an overhead presentation was 4 Presented as follows.) 5 AIR POLLUTION SPECIALIST MORA: Good morning, 6 Chairman Lloyd and members of the Board. 7 Today we are presenting five research proposals 8 for your approval. These proposals have been reviewed by 9 staff and approved by the Research Screening Committee. 10 I'll briefly explain the problem each proposal 11 will attempt to address, its objectives, and the expected 12 results. 13 --o0o-- 14 AIR POLLUTION SPECIALIST MORA: The first project 15 is titled "Spatial and Temporal Variability of PM2.5 16 Composition in California". 17 Many regions in California experience excessive 18 PM2.5 levels, as defined by national and state ambient air 19 quality standards, compromising the health of millions of 20 people. 21 A primary goal in helping the development of 22 cost-effective strategies to reduce particle exposures is 23 a scientific understanding of the sources and spatial 24 distribution of PM2.5. This project addresses both of 25 these objectives through field studies of several regions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 in California that are influenced by excessive PM2.5 2 levels. 3 To help overcome many of the time and spatial 4 resolution difficulties of traditional aerosol 5 measurements, single particle mass spectrometry will be 6 employed. The proposed measurements would add a 7 tremendous wealth of scientific information concerning 8 particle sources, distribution, temporal variation, 9 size-specific composition, and atmosphere of 10 transformation. Such knowledge provided in a timely 11 manner will play a critical role in the development of the 12 2008 State Implementation Plan. 13 --o0o-- 14 AIR POLLUTION SPECIALIST MORA: The next project 15 is the effects of ozone exposure on cardiovascular 16 responses in healthy and susceptible humans. 17 Epidemiology studies indicate that ozone exposure 18 is associated with increased cardiovascular morbidity and 19 mortality, although biological mechanisms that could 20 explain these effects are unknown. 21 Reduced heart rate variability and alteration in 22 several biochemical mediators are known risk factors that 23 could explain these epidemiological findings. 24 The objective of this project is to investigate 25 several possible mechanisms through which ozone could PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 adversely affect cardiovascular function in healthy and 2 asthmatic subjects between 18 and 40 years of age. 3 The subjects will undergo four-hour intermittent 4 exercise exposures to two concentrations of ozone and 5 filtered air. The results of this project will provide 6 data that will either validate or refute epidemiological 7 reports of an association between ozone and adverse 8 cardiovascular effects. In either case, the results will 9 provide critically needed support for future reviews of 10 the ambient air quality standards for ozone. 11 --o0o-- 12 AIR POLLUTION SPECIALIST MORA: The next project 13 is effects of wood smoke on cardiopulmonary responses. 14 Wood smoke is a major component of air pollution 15 in some areas of California. Epidemiological data show an 16 association between wood smoke exposure and adverse 17 respiratory health effects, including asthma, as well as 18 an association between particulate and gaseous air 19 pollution and increased cardiovascular disease and death. 20 Emerging data on ambient PM suggests that PM 21 exposure can reduce heart rate variability and possibly 22 induce airway inflammation, risk factors for adverse 23 cardiovascular effects, although this has not been 24 investigated for wood smoke. 25 This project will investigate threshold levels of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 wood smoke exposure that induce airway inflammation and 2 heart rate variability responses in humans, the influence 3 of asthma status on wood-smoke induced changes in airway 4 inflammation and heart rate variability, and the 5 biological mechanisms controlling these responses. 6 The result of this study will provide critical 7 information on the biological mechanisms mediating these 8 responses. This information will support future reviews 9 of ambient air quality standards for PM and also possible 10 regulatory actions related to wood smoke. 11 --o0o-- 12 AIR POLLUTION SPECIALIST MORA: Next is the role 13 of inhaled particles in the pathophysiology of 14 cardiovascular disease. 15 Exposure to levels of PM found in California has 16 been linked to an increased risk of heart disease. 17 Furthermore, heart disease has been associated with 18 oxidative stress caused by inflammation from exposure to 19 fine and ultrafine particles. 20 Recent epidemiological studies indicate that 21 increases in human disease and death due to lung cancer, 22 cardiopulmonary disease and asthma are associated with 23 significantly lower concentrations of fine particles than 24 those previously thought to affect human health. 25 Ultrafine particles have a high surface area that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 can carry absorbed or condensed toxic air pollutants that 2 have pro-inflammatory effects. This proposal will examine 3 the link between particle-induced inflammation and the 4 development of atherosclerosis in normal and 5 atherosclerosis-prone mice, using both fine and ultrafine 6 PM exposures. 7 It will also examine signaling pathways for 8 oxidated stress and inflammation-associated tissue damage 9 to determine the relative importance of these mechanisms 10 in the development of exacerbation of heart disease. 11 Improved understanding of these roles of these 12 mechanisms could lead to ways to prevent or treat heart 13 diseases caused by air pollution. 14 --o0o-- 15 AIR POLLUTION SPECIALIST MORA: The last project 16 is titled "Particle Phase Peroxide: Concentration, 17 Sources, and Behavior". 18 PM has been associated with significant adverse 19 health outcomes. But it is difficult to devise 20 cost-effective control strategies without a better 21 understanding of the cause of PM toxicity. Recent studies 22 implicate reactive oxygen species as responsible for much 23 of this toxicity. And the dominant reactive oxygen 24 species in PM is hydrogen peroxide. 25 Hydrogen peroxide, a strong oxidizing agent, has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 been shown to damage lung epithelial cells at levels well 2 below those expected for ambient samples. This study will 3 determine the sources, prevalence, levels, and behavior 4 of hydrogen peroxide in ambient air. 5 This study will contribute substantially to the 6 understanding of PM toxicity. Results should eventually 7 help ARB to device control strategies for PM sources that 8 are especially effective in generating reactive oxygen 9 species and, thereby, harming human health. 10 --o0o-- 11 AIR POLLUTION SPECIALIST MORA: That concludes 12 the presentation. We recommend that you accept these 13 proposals and approve funding these projects. 14 I'd be happy to answer any questions. 15 CHAIRPERSON LLOYD: Dr. Gong. 16 BOARD MEMBER GONG: I'd just like to make a 17 comment, that I've been impressed by the portfolio so far 18 for the research proposals, from the previous meeting and 19 also from this one. In fact, in this packet there are 20 five proposals, two on exposure, three on health-related 21 end-points in animals and in humans. And they're being 22 proposed by people whom I consider to be experts in their 23 particular areas. The research, design and protocols seem 24 to be very well thought out. And I've reviewed this with 25 the Research Division staff. And I want to thank them for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 their carefully evaluation and nurturing of these 2 proposals. 3 I think that much attention has been paid to 4 particulate matter for good reasons. But I think some of 5 these proposals also point out the fact that ozone remains 6 an important pollutant. And timely -- there have been two 7 recently reported articles in the medical literature about 8 excessive deaths from ozone exposures in Europe and in the 9 United States. And I think this ties in well in a sense 10 that the ARB Research Division is looking at the 11 mechanisms in the cutting-edge issues related to ozone 12 toxicity for public health. 13 So I want to just congratulate you on a nicely 14 presented package. 15 AIR POLLUTION SPECIALIST MORA: Thank you. 16 CHAIRPERSON LLOYD: Ms. Berg. 17 BOARD MEMBER BERG: As a new Board member, could 18 you just go over for me: Once these are approved, then 19 what is the process over the years as the research is 20 being done to report back to the Board the status? Or do 21 we get reports when the research is completed? 22 AIR POLLUTION SPECIALIST MORA: We do the monthly 23 health updates on the significant findings from these 24 projects. But that's the only mechanism right now for 25 reporting back to the Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 BOARD MEMBER BERG: And then once the research is 2 completed, then do we get a presentation on the findings 3 of the research? 4 AIR POLLUTION SPECIALIST MORA: Just through the 5 health update. 6 CHAIRPERSON LLOYD: But at any time, Sandra, if 7 you request that, staff is only too happy to provide you 8 with an update or site visit, whatever you need. 9 AIR POLLUTION SPECIALIST MORA: We do provide -- 10 we present the final reports for our Research Screening 11 Committee, and the Board gets a copy of an advanced agenda 12 and the agenda book listing the findings. 13 BOARD MEMBER GONG: Also, I might add that, as a 14 veteran of these processes, there are fairly close 15 interactions with the project staff or project officers 16 from the ARB with the project scientists. And I think 17 that there is a required -- is it annual or six months 18 report -- progress report back to the ARB. 19 AIR POLLUTION SPECIALIST MORA: Quarterly. 20 BOARD MEMBER GONG: Quarterly. Even worse. 21 CHAIRPERSON LLOYD: I think the staff does a 22 great job of monitoring the contacts and making sure that 23 every ounce of information is squeezed from the 24 contractors on state dollars. I can attest to that 25 personally. It works out. They do a great job. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 Also, I would reiterate Dr. Gong's comments. I 2 think that staff does a great job and the research program 3 provides a solid underpinning of science for the work that 4 we do. So, again, I think following up on the meeting 5 with Research Screening Committee last week -- last month, 6 again, I'm delighted to see these move ahead. 7 I can't resist asking one more question. You 8 know, how do we know whether mice are prone to 9 atherosclerosis? And what's the average lifetime of a 10 mouse? Because I was surprised how short the average 11 lifetime of a rat was. What's the average lifetime of a 12 mouse? 13 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 14 Well, the average -- this is Richard Bode. 15 And the average lifetime is usually around two 16 years, some a little longer, some a little shorter. 17 CHAIRPERSON LLOYD: So how do I identify that 18 these are -- 19 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 20 But these mice actually have a genetic 21 disposition. They basically lack a couple of enzymes. 22 And they basically are susceptible to atherosclerosis and 23 coronary heart disease. So actually the two -- the genes 24 are -- what is it? The low density lipoprotein receptors 25 I think are missing. So they end up having much speeded PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 up generation of these coronary plaques. So basically 2 they age very quickly -- their cardiovascular systems age 3 very quickly. 4 CHAIRPERSON LLOYD: Thanks. 5 And the other one, again getting back to the 6 hydrogen peroxide, for maybe people in the audience. When 7 you look at that, we talk about hydrogen peroxide and 8 tissue damage. Everybody uses hydrogen peroxide. You 9 know, how do you put this in context with that issue, 10 where we use hydrogen peroxide everyday? 11 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 12 Well, actually one thing is we don't breathe or 13 drink hydrogen peroxide. Usually it's used as a 14 disinfectant quite a bit. 15 CHAIRPERSON LLOYD: But you put it on your 16 tissues. 17 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 18 Yeah. And then actually the skin on the outside 19 is a pretty good protectant from -- I mean it's one of the 20 body's defenses. 21 In this case we're worried about some of the 22 mechanisms, inflammatory mechanisms that some of these 23 reactive oxygen species may have on inflammation on both 24 the respiratory system and the cardiovascular system. 25 CHAIRPERSON LLOYD. Okay. Thanks very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 Dr. Gong. 2 BOARD MEMBER GONG: I just -- I thought one of 3 the scary aspects of hydrogen peroxide was, isn't it 4 self-generated too within the body by various cells? At 5 least that's one of the possibilities -- or by the 6 particles themselves. 7 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 8 I believe -- you mean inside the body as well 9 as -- 10 BOARD MEMBER GONG: Right. Because there's -- I 11 mean it's part of local defense mechanisms as well. But 12 if they're brought in, I mean you're just adding more to 13 the burden, hydrogen peroxide. So not everything on the 14 outside that you inhale is necessarily the same as -- when 15 it gets in it could be even worse perhaps, in that sense. 16 CHAIRPERSON LLOYD: All right. Board ready to 17 vote on these proposals and entertain a motion? 18 BOARD MEMBER ROBERTS: So move. 19 BOARD MEMBER PATRICK: Second. 20 CHAIRPERSON LLOYD: So all in favor of approving 21 all five proposals say aye. 22 (Ayes.) 23 CHAIRPERSON LLOYD: Anybody against? 24 Thank you. 25 Thank you very much, staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 Take a moment while we change staff. 2 As I mentioned at the introduction, we may be 3 interrupted during this item since we expect this one to 4 run for several hours. 5 But this is Item 4-10-3, proposed diesel fuel 6 standards for harborcraft and intrastate locomotives. 7 Diesel fuel meeting California standards, 8 commonly referred to as CARB diesel, as been required for 9 most on- and off-road mobile sources since 1993. And 10 clearly it's a vital piece of the state's strategy to 11 reduce air pollution through cleaner fuels and lower 12 emitting vehicles and fuels. 13 CARB diesel has substantially reduced statewide 14 emissions of sulfur dioxide, hydrocarbons, particulate 15 matter and oxides of nitrogen. CARB diesel also reduces 16 toxic emissions, including Benzene and PAH's, or 17 polynuclear aromatic hydrocarbons. 18 In July of 2003 this Board lowered the maximum 19 sulfur content of CARB diesel to 15 parts per million 20 starting in June 2006. At that hearing, the Board also 21 extended CARB diesel fuel requirements to stationary 22 sources. At the July 2003 hearing, this Board directed 23 staff to evaluate the feasibility of extending the CARB 24 diesel requirements to locomotives and marine vessels. 25 So staff reported back last October that it would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 be feasible to require CARB diesel for the locomotives and 2 harborcraft that operate primarily within the state. 3 However, staff also concluded it would be difficult to 4 require CARB diesel fuel for interstate locomotives and 5 international oceangoing vessels since those sources can 6 easily fuel up at ports and rail yards outside of 7 California, thereby minimizing their purchases of CARB 8 diesel within the state and reducing potentially obviously 9 state revenue in that area. 10 Staff is here today with a regulatory proposal 11 for our consideration that addresses these changes in our 12 fuel regulations. 13 Now, at this time point I would like to turn it 14 over to the Executive Officer, Ms. Witherspoon, to 15 introduce the item and begin staff presentation. 16 EXECUTIVE OFFICER WITHERSPOON: Thank you, 17 Chairman Lloyd. 18 Part of the rationale for this regulation is that 19 national diesel fuel standards, while getting better, are 20 still not as stringent as we need them to be to protect 21 public health in California. In May of this year, U.S. 22 EPA established non-road heavy-duty diesel engine emission 23 standards, and at the same time promulgated non-road 24 diesel fuel requirements that will take effect in three 25 phases: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 A 500 parts per million sulfur standard takes 2 effect in June '07 for all non-road sources. 3 A 15 PPM sulfur standard starts in 2010 for 4 most -- excuse me. '07 was on-road sources. 5 Fifteen PPM sulfur standard starts in 2010 for 6 most non-road sources. 7 But it's not until 2012 that the federal 15 PPM 8 limit takes effect for locomotive and marine vessels. 9 Even with these federal requirements for low 10 sulfur diesel fuel for locomotives and marine vessels, the 11 emission benefits are still not as significant as would be 12 achieved with the use of CARB diesel because the federal 13 government does not regulate the aromatics content. The 14 implementation schedule for low sulfur content is also 15 considerably slower than California's own implementation 16 schedule. 17 To close some of this gap, staff is proposing to 18 extend the CARB diesel fuel standards to harborcraft and 19 intrastate locomotives beginning on January 1st, 2007. 20 This will provide low sulfur, low aromatic diesel fuel to 21 those mobile sources more than five years ahead of the 22 U.S.EPA rule and will achieve greater NOx and PM benefits 23 than provided by the federal program. 24 I would now like to ask Mr. Erik White to make 25 the staff presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 (Thereupon an overhead presentation was 2 Presented as follows.) 3 ENGINEERING EVALUATION SECTION MANAGER WHITE: 4 Thank you, Ms. Witherspoon. 5 Good morning, Mr. Chairman and members of the 6 Board. 7 Today I will present staff's proposal to extend 8 the requirements of the California diesel fuel regulations 9 to intrastate locomotive and harborcraft operations. 10 --o0o-- 11 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 12 will begin my presentation by providing some background on 13 the role of diesel-powered engines and vehicles on 14 California's air quality, followed by information on the 15 motor vehicle diesel fuel regulations. 16 I will provide a detailed perspective on railroad 17 and marine harborcraft operations in the state, staff's 18 proposal on the associated impacts, and a discussion of 19 California's ongoing efforts to achieve emission 20 reductions from these source categories. 21 --o0o-- 22 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 23 will now begin with some background information. 24 --o0o-- 25 ENGINEERING EVALUATION SECTION MANAGER WHITE: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 Much progress has been made in California to 2 improve air quality. However, even with this progress 3 most Californians are exposed to unhealthy levels of air 4 pollution. Over 90 percent of the state's 35 million 5 residents still breathe unhealthy air during portions of 6 the year. If the state is going to continue its 7 impressive progress towards cleaner air for all 8 Californians, it must continue to focus on its mobile 9 source control programs, which often push the envelope for 10 advanced technology development. The public deserves the 11 cleanest fuels and vehicles available. 12 --o0o-- 13 ENGINEERING EVALUATION SECTION MANAGER WHITE: As 14 you can see by the colored areas on the map above, much of 15 the state does not meet the new federal eight-hour ozone 16 standards. The South Coast, San Joaquin Valley, and the 17 Greater Sacramento Metropolitan Area are classified as 18 severe or extreme ozone nonattainment areas. 19 --o0o-- 20 ENGINEERING EVALUATION SECTION MANAGER WHITE: 21 While diesel-fueled vehicles both on and off road 22 represent only about 4 percent of the vehicle population, 23 they are responsible for 40 percent of the oxides of 24 nitrogen, or NOx, emissions and about 60 percent of the 25 directly emitted particulate matter from motor vehicles. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 In addition, the cancer risk associated with 2 diesel particulate matter accounts for approximately 70 3 percent of the ambient air toxics cancer risk. 4 In the future, planned and new emission 5 reductions must be obtained from diesel-powered vehicles 6 and engines if we are to continue to make progress to 7 reduce exposure to toxic air contaminants and attain air 8 quality standards. 9 --o0o-- 10 ENGINEERING EVALUATION SECTION MANAGER WHITE: 11 Locomotive and commercial marine emissions are 12 small but significant contributors to the statewide NOx 13 and diesel particulate matter emission inventory. Unless 14 controlled, these emissions will become a larger 15 proportion of the emission inventory in future years. 16 The marine emissions contribution is shown in red 17 and the locomotive emissions in gold. As you can see, the 18 locomotive and marine NOx contribution is projected to 19 increase from 9 percent to 16 percent, or about double, 20 between 2000 and 2020 if left uncontrolled. 21 --o0o-- 22 ENGINEERING EVALUATION SECTION MANAGER WHITE: 23 Marine vessels and locomotives are an even larger 24 contributor to particulate matter emissions. They were 25 responsible for about 16 percent of the statewide diesel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 particulate matter emissions in 2000, and will grow to 36 2 percent in 2020 if left uncontrolled. 3 --o0o-- 4 ENGINEERING EVALUATION SECTION MANAGER WHITE: 5 Diesel particulate matter is also a major 6 contributor to the ambient air toxics cancer risk in the 7 state. In 2000 diesel particulate matter accounted for 8 approximately 70 percent of the ambient air toxics cancer 9 risk, representing a statewide increased cancer risk of 10 about 540 in a million. 11 --o0o-- 12 ENGINEERING EVALUATION SECTION MANAGER WHITE: 13 Last October the Board approved the South Coast 14 Air Quality Management District's State Implementation 15 Plan, or SIP. One strategy included for development and 16 implementation by the ARB is Marine Measure 1. Among 17 other things, Marine Measure 1 calls for the use of 18 cleaner diesel fuel in the harborcraft fleet. The 19 proposed amendments, which I will present later, will 20 provide the first increment of progress towards satisfying 21 the NOx and particulate matter emission reduction 22 commitments contained in Marine Measure 1. 23 In addition, the SIP directs staff to evaluate 24 approaches to reduce emissions from in-use locomotives. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 ENGINEERING EVALUATION SECTION MANAGER WHITE: 2 The identification of diesel particulate matter 3 as a toxic air contaminant in 1998 led the Board to 4 approve the Diesel Risk Reduction Plan. This plan 5 represents a comprehensive strategy to significantly 6 reduce diesel particulate matter emissions. 7 The plan's ultimate goal is an 85-percent 8 reduction by 2020 from the 2000 baseline, along with 9 additional NOx reductions from diesel-powered engines and 10 vehicles. 11 The plans foundation is focused on four main 12 strategies: More stringent new engine standards; assuring 13 in-use compliance; clean up of existing engines; and 15 14 PPM sulfur CARB diesel fuel. 15 --o0o-- 16 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 17 will now provide some information on diesel fuel, 18 including an update on the status of the implementation of 19 the California low sulfur diesel fuel regulations. 20 --o0o-- 21 ENGINEERING EVALUATION SECTION MANAGER WHITE: 22 Since 1990, diesel fuel consumption has increased 23 by nearly 60 percent. In 2003, over 2.7 billion gallons 24 of diesel fuel were consumed in California. In the near 25 term, the California Energy Commission estimates that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 diesel fuel consumption in California will increase by 2 about 2.4 percent annually. 3 --o0o-- 4 ENGINEERING EVALUATION SECTION MANAGER WHITE: In 5 1988 the Board approved the California Diesel Fuel 6 Program. These regulations, implemented in 1993, apply to 7 both on- and off-road vehicles. And beginning next month 8 will also apply to stationary sources as well. These 9 regulations do not currently apply to locomotives or 10 marine vessels. 11 The California Diesel Fuel Program reduces 12 emissions of NOx, particulate matter, and various toxics 13 through the prescribed limits on fuel sulfur and aromatic 14 hydrocarbon content to diesel fuel. The basic 15 requirements for California vehicular diesel fuel, 16 commonly referred as CARB diesel, are a sulfur limit of 17 500 parts per million by weight and a maximum allowable 18 aromatic hydrocarbon limit of 10 percent by volume for 19 large refiners and 20 percent for small refiners. 20 Virtually all of the NOx and most of the directly 21 emitted diesel particulate emission reductions are derived 22 from the aromatic hydrocarbon standard. 23 The regulations also allowed for the production 24 of certified alternative formulations which provide 25 equivalent emission benefits. Most refiners have taken PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 advantage of this flexibility in the regulation to produce 2 fuel at lower cost. 3 --o0o-- 4 ENGINEERING EVALUATION SECTION MANAGER WHITE: In 5 July of last year, the Board approved amendments to the 6 California diesel fuel regulations which lowered the 7 allowable fuel sulfur levels to 15 parts per million by 8 weight beginning June 1st, 2006. A 15 part per million 9 standard is needed to ensure the emissions performance of 10 heavy-duty diesel engines and vehicles designed to meet 11 2007 model year federal and California exhaust emission 12 standards. 13 This action allied the sulfur specifications of 14 the California diesel fuel regulations with those 15 established by the United States Environmental Protection 16 Agency for on-road diesel fuel distributed nationwide, 17 also beginning in June 2006. In order to preserve the 18 significant NOx, particulate matter and toxic emission 19 benefits of California diesel fuel, the approved low 20 sulfur amendments retained the existing aromatic 21 hydrocarbon standard. 22 --o0o-- 23 ENGINEERING EVALUATION SECTION MANAGER WHITE: 24 Both the California and federal on-road diesel 25 fuel programs are aligned in their respective fuel sulfur PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 standards. However, the federal regulations will not 2 require non-road equipment and vehicles to use low sulfur 3 diesel until 2010, and not until 2012 for locomotives and 4 marine vessels; whereas California's low sulfur diesel 5 regulations will go into effect in 2006 and 2007. 6 Also, the federal low-sulfur-diesel program does 7 not include California's aromatic hydrocarbon standard. 8 --o0o-- 9 ENGINEERING EVALUATION SECTION MANAGER WHITE: 10 Because the federal program does not have an 11 aromatic hydrocarbon standard, it provides no NOx and less 12 particulate matter reductions relative to the California 13 Diesel Fuel Program. 14 The California Diesel Fuel Program provides 14 15 tons per day of additional reductions in directly emitted 16 particulate matter and a 110 tons per day of NOx emission 17 reductions beyond the federal program. The difference in 18 sulfur oxide emissions is due to the application of the 19 California standards to both on- and off-road sources, 20 whereas the federal standards only apply to on-road 21 vehicles until 2007. 22 --o0o-- 23 ENGINEERING EVALUATION SECTION MANAGER WHITE: In 24 terms of California refiners' progress towards 25 implementing the California low sulfur diesel fuel PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 requirements, most have begun the California Environmental 2 Quality Act, or CEQA, process to determine any 3 environmental impacts of the proposed refinery projects. 4 Concurrent to this, refiners have commenced the district 5 permitting process. All refiners are currently on 6 schedule towards meeting the June 2006 implementation 7 date. 8 --o0o-- 9 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 10 will now provide some background on the locomotive 11 operations of California railroad operators. 12 --o0o-- 13 ENGINEERING EVALUATION SECTION MANAGER WHITE: 14 The Federal Surface Transportation Board 15 classifies railroads nationwide based on annual operating 16 revenue. These classifications are adjusted annually 17 based on inflation. 18 The largest railroads are classified as Class 1 19 railroads, those with operating revenues greater than $278 20 million. There are seven railroads nationally that are 21 Class 1 railroads. Only two of these railroads, Union 22 Pacific and Burlington Northern/Santa Fe, or BNSF, have 23 California operations. 24 The smaller railroads are Class 2 and Class 3 25 railroads. These railroads are typically regional or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 local in nature, haul less freight, and operate 2 significantly fewer locomotives than the Class 1 3 railroads. There are a number of these smaller railroads 4 currently operating in California. 5 --o0o-- 6 ENGINEERING EVALUATION SECTION MANAGER WHITE: 7 Today, there are almost 21,000 locomotives in 8 active service nationwide. As you can see shown on the 9 slide, about 60 percent of these locomotives are operated 10 by Union Pacific and BNSF. 11 Typically most of these locomotives are not 12 assigned to any particular geographic area of operation, 13 but are operated based on system-wide locomotive power 14 requirements. As such, it is difficult to identify the 15 total number of locomotives that may be in operation in 16 California at any given time. 17 --o0o-- 18 ENGINEERING EVALUATION SECTION MANAGER WHITE: 19 The map on this slide shows the rail lines 20 currently in service in California. The heavy lines 21 designate those rail lines operated by Union Pacific and 22 BNSF. As you can see, these railroads have major rail 23 lines through almost the entire interior length of the 24 state, traversing the San Joaquin and Sacramento Valleys, 25 into southern Oregon and southern California. They also PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 have major lines from the San Francisco Bay Area, east 2 into northern Nevada, and from the Los Angeles Basin, east 3 in southern Nevada and Arizona. 4 The thinner lines are those rail lines operated 5 by smaller railroads. These are typically regional 6 operations where freight is hauled and handed over to the 7 larger railroads for transportation to other parts of the 8 country. 9 --o0o-- 10 ENGINEERING EVALUATION SECTION MANAGER WHITE: 11 California's intrastate passenger railroads 12 typically share many of the same line segments with Union 13 Pacific and BNSF. Three of these lines are state 14 supported under contract to the California Department of 15 Transportation, with the remaining being operated by local 16 or regional government authorities. 17 --o0o-- 18 ENGINEERING EVALUATION SECTION MANAGER WHITE: 19 California's smaller Class 3 railroads are 20 regional in nature. They are typically older spur 21 segments that were once operated by the larger railroads, 22 but have since been sold to a smaller operator. 23 Class 3 railroad operations can be found 24 throughout the state, but are typically concentrated in 25 four areas: The San Joaquin Valley, Sacramento Valley, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 the San Francisco Bay Area, and the Los Angeles Basin. 2 About 70 percent of the diesel fuel consumed by Class 3 3 railroads in the state occurs in these four areas. 4 --o0o-- 5 ENGINEERING EVALUATION SECTION MANAGER WHITE: To 6 better understand the operational practices of California 7 intrastate locomotive operators staff worked with industry 8 to develop and implement a survey. The survey was 9 designed to collect information on the number of 10 locomotives in service, their age, the amounts and quality 11 of fuel consumed, and other information such as annual 12 miles traveled and hours operated. The survey was sent to 13 50 railroad operators in May of this year and was posted 14 on the ARB web page. Staff received responses by July 15 from most California intrastate railroad operators. 16 --o0o-- 17 ENGINEERING EVALUATION SECTION MANAGER WHITE: 18 For Class 1 railroads, two broad classifications 19 of locomotives, either intrastate or interstate, can 20 generally be defined based on a locomotive's length of 21 stay in the state. 22 Intrastate locomotives are identified as those 23 locomotives which are typically resident to California, 24 and include locomotives in switch, short haul, and 25 commuter rail service. These are the locomotives which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 are the focus of today's proposed rule making. 2 Interstate locomotives are typically line-haul 3 locomotives which move freight between various parts of 4 the country. They are not typically assigned to 5 particular routes, but assigned to trains based on the 6 railroad system-wide power requirements. Because of this, 7 a single interstate locomotive can traverse different 8 parts of the country over a very short period of time. As 9 such, the residence time of any particular one of these 10 locomotives in California is typically very short. 11 Interstate locomotives have a maximum range of 12 about 1500 miles, but typically travel about a thousand 13 miles between fuelings. Outside of California these 14 locomotives generally use lower quality diesel fuel, 15 meaning the federal non-road sulfur limit of 5,000 parts 16 per million. With the implementation of the new lower 17 federal non-road sulfur limit of 500 parts per million in 18 2007, this fuel quality will improve. 19 A significant amount of fuel is also dispensed 20 into these locomotives at California rail yards. This 21 fuel is typically higher in quality, meeting either 22 federal on-road or CARB diesel specifications. However, 23 while significant amounts of this fuel are dispensed in 24 California, the majority of this fuel is consumed after 25 these locomotives have left the state. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 --o0o-- 2 ENGINEERING EVALUATION SECTION MANAGER WHITE: 3 Since intrastate locomotives are counted to 4 California, they are almost exclusively fueled at rail 5 yards within the State. Because of limitations in the 6 California fuel distribution system, only on-road quality 7 fuels, either federal on-road diesel fuel or CARB diesel 8 fuel, are dispensed into these locomotives. As such, 9 intrastate locomotives almost always use relatively 10 cleaner fuels. 11 --o0o-- 12 ENGINEERING EVALUATION SECTION MANAGER WHITE: 13 Both Union Pacific and BNSF have extensive 14 intrastate operations in California. These operations are 15 serviced by about 400 captive locomotives, which perform 16 switch functions at railroads, typically the moving of 17 line haul locomotives and freight cars within the yard, as 18 well as providing local and regional freight movements. 19 These locomotives typically have been retired from line 20 haul service. 21 As such, they are older, with lower horsepower 22 than the line haul locomotives currently in service. The 23 average age of an intrastate locomotive is between 15 and 24 20 years old, with an average rating of about 2400 25 horsepower. Annually, each of these locomotives consume PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 about 60,000 gallons of diesel fuel. 2 For a perspective, an on-road heavy-duty truck 3 that traveled about a hundred thousand miles each year 4 would consume about 20,000 gallons of diesel fuel. 5 --o0o-- 6 ENGINEERING EVALUATION SECTION MANAGER WHITE: 7 There are currently seven intrastate passenger 8 train operations in California, which operate an estimated 9 8 million miles per year. These intrastate passenger 10 trains consist of intercity commuter-type time operations 11 that occur exclusively within the state. Some of these 12 operations, such as the capital corridor and the San 13 Joaquin, are privately operated on behalf of CalTrans. 14 Others, such as Metro Link, are operated by local and 15 regional rail authorities. 16 California's intrastate passenger trains utilize 17 a fleet of 113 locomotives to support their operations. 18 These locomotives typically have both the main propulsion 19 engine, which moves the train, and on the auxiliary 20 engine, which provides lighting and climate control to the 21 passenger cars. 22 These locomotives are typically newer, averaging 23 about 10-years old, with propulsion engines of about 3100 24 horsepower. Since these locomotives typically operate up 25 to 18 hours a day everyday, they consume significant PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 quantities of diesel fuel, about 180,000 gallons annually 2 per locomotive. 3 --o0o-- 4 ENGINEERING EVALUATION SECTION MANAGER WHITE: 5 California has 20 Class 3 railroads. These 6 railroad operations can generally be segregated into two 7 major subsets: Switcher terminal operations, such as 8 Pacific Harbor Lines which operate in the Los Angeles and 9 Long Beach harbors; and short haul operations, such as the 10 San Joaquin Valley Railroad. 11 In many cases the Class 3 short-line railroads 12 purchase older locomotives when they are retired by the 13 larger railroads. As such, the 120 locomotives operated 14 by Class 3 railroads are typically older, averaging about 15 40-years old, with an average range of 24 to 62 years. 16 Engine sizes range up to 3,000 horsepower, averaging about 17 1600 horsepower, which is about the average engine size of 18 the locomotives used for intrastate passenger train 19 operations. 20 Annually these locomotives consume about 28,000 21 gallons of diesel fuel per locomotive. 22 --o0o-- 23 ENGINEERING EVALUATION SECTION MANAGER WHITE: 24 This slide summarizes the total amount of 25 locomotive diesel fuel dispensed at rail yards in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 California and consumed in the State. As you can see, 2 last year about 150 million gallons of diesel fuel were 3 dispensed and consumed in California. Intrastate 4 locomotives consumed about a third, or 47 million gallons 5 of diesel fuel. This is the fuel consumption that would 6 be covered under staff's proposal. 7 --o0o-- 8 ENGINEERING EVALUATION SECTION MANAGER WHITE: 9 The Federal Clean Air Act preempts California 10 from adopting emission standards for new or rebuilt 11 locomotives. While the U.S.EPA has established emission 12 standards for new and rebuilt locomotives which will 13 result in the development of cleaner locomotives, the rate 14 of locomotive fleet turnover is slow, with only about 500 15 to 1,000 new locomotives being sold annually. 16 In order to get locomotive emission reductions in 17 the South Coast Air Basin beyond the federal program, the 18 ARB worked with the U.S.EPA, Union Pacific and BNSF to 19 develop a memorandum of understanding. The MOU, which was 20 approved by U.S.EPA in 1994 as SIP Measure M-14, provides 21 NOx emission reductions from the locomotive engines 22 operating within the South Coast Air Basin through the 23 accelerated introduction of newer lower emitting 24 locomotives. This is achieved through the use of a fleet 25 average NOx limit that each railroad must achieve, which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 is equal to the 2010 new locomotive emission standard. 2 This will ensure that by 2010, the locomotive 3 fleet operating in the South Coast Air Basin will have the 4 cleanest locomotives available and result in an additional 5 35-percent reduction in emissions beyond what would be 6 achieved through normal fleet turnover. The emission 7 benefits from the use of cleaner fuels, including car 8 diesel fuel, can be used by the railroads towards meeting 9 their fleet average requirements under the MOU. 10 --o0o-- 11 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 12 will now provide some background on the operations of 13 California harborcraft. 14 --o0o-- 15 ENGINEERING EVALUATION SECTION MANAGER WHITE: To 16 better understand the California harborcraft industry, 17 staff developed and distributed a survey to harborcraft 18 operators in 2002. The survey was designed to collect 19 information on fuel consumption, fleet age, distribution 20 of various types of vessels, and vessel activity. 21 The data collected covered the period from 1999 22 through 2001. Staff collected information on 900 vessels 23 and about 1800 engines. In March of this year staff 24 completed a survey report of the findings. This 25 information will be used to improve the ARB harborcraft PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 emission inventory. 2 --o0o-- 3 ENGINEERING EVALUATION SECTION MANAGER WHITE: 4 Similar to locomotives, marine vessels typically 5 fall into one of two broad classifications: Harborcraft 6 and oceangoing ships. Harborcraft are generally 7 identified as those marine vessels which are typically 8 resident to California, including tugboats, ferries and 9 fishing boats. These are the marine vessels which are the 10 focus of today's proposed rulemaking. 11 --o0o-- 12 ENGINEERING EVALUATION SECTION MANAGER WHITE: 13 Oceangoing vessels are significantly larger than 14 harborcraft and typically operate internationally. These 15 vessels include cargo and container ships, cruise ships, 16 and tankers. 17 In most cases oceangoing are fueled prior to 18 arriving in California, typically at their port of origin. 19 This fuel is of low quality, typically being high in 20 sulfur content. Because of their large fuel storage 21 capacity, they can travel significant distance between 22 fuelings, often being able to cross the Pacific Ocean and 23 back without the need to refuel. This allows these 24 vessels to avoid the need to fuel in California if 25 desired. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 While significant quantities of fuel are 2 dispensed through California ports into oceangoing ships, 3 most of this fuel is consumed outside the state. 4 --o0o-- 5 ENGINEERING EVALUATION SECTION MANAGER WHITE: By 6 comparison, harborcraft typically operate within 7 California coastal waters. Because of this, these vessels 8 are fueled almost exclusively by fuel distributed within 9 the state and supplied through California harbors. As was 10 the case with intrastate locomotives, distribution system 11 limitations provide that the fuel supplied through 12 California harbors almost always is of on-road quality, 13 either meeting federal or CARB specifications. 14 Compared to oceangoing vessels, California 15 harborcraft almost exclusively use cleaner fuels. 16 --o0o-- 17 ENGINEERING EVALUATION SECTION MANAGER WHITE: 18 There are about 4,000 harborcraft operating 19 statewide. Harborcraft operate primarily along 20 California's coastline and in inland waterways. Most 21 commercial harborcrafts spend the majority of their time 22 operating within 25 miles of shore, with very low 23 operation beyond 100 miles of shore. 24 Of the harborcraft operating in California 25 coastal waters, about 65 percent are commercial fishing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 boats. While ferries represent only a small percentage of 2 the total harborcraft population, they represent over a 3 third of the diesel fuel consumed annually. 4 Harborcraft can have one or more propulsion 5 engines and often have auxiliary engines as well. About 6 two-thirds of commercial harborcraft have one propulsion 7 engine, and the remaining third have two or more. These 8 propulsion engines range from less than 50 to up to 3600 9 horsepower. The auxiliary engines are typically smaller, 10 with horsepower ratings of about 400. 11 The average age of California harborcraft is 12 about 30 years old. 13 --o0o-- 14 ENGINEERING EVALUATION SECTION MANAGER WHITE: In 15 total, harborcrafts consume about 90 million gallons of 16 diesel fuel annually. About 40 percent of this is already 17 CARB diesel fuel, with most of this being consumed by 18 ferries, which by statute must already use CARB diesel 19 fuel. The remaining 60 percent is typically federal 20 on-road diesel fuel. As you can see from the slide, very 21 little diesel fuel is consumed by recreational 22 harborcraft. 23 --o0o-- 24 ENGINEERING EVALUATION SECTION MANAGER WHITE: 25 With that background and history, I will now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 present staff's proposed amendments. 2 --o0o-- 3 ENGINEERING EVALUATION SECTION MANAGER WHITE: 4 Staff is proposing that beginning January 1st, 5 2007, diesel fuel supplied, offered for supply, or sold to 6 intrastate locomotive and harborcraft operators meet the 7 standards for CARB diesel fuel. We believe that the 8 proposed implementation date will provide adequate time 9 for diesel fuel suppliers to comply. 10 The proposed affected date would be in the winter 11 when diesel fuel demand is historically low and diesel 12 fuel inventories are typically at higher levels. 13 Implementation during the winter months should reduce 14 potential impacts on diesel fuel production and supply. 15 However, in order to meet NOx and particulate emission 16 reduction commitments in the SIP related to harborcraft 17 operating in the South Coast Air Quality Management 18 District, staff is proposing that these same requirements 19 be applicable to harborcraft operators in the South Coast 20 beginning January 1st, 2006, which is one year earlier 21 than the statewide implementation date. 22 Staff is also proposing to provide some potential 23 compliance flexibility to intrastate locomotive operators 24 through an alternative emission control plan, or AECP. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 ENGINEERING EVALUATION SECTION MANAGER WHITE: 2 The AECP would allow the owner or operator of an 3 intrastate diesel electric locomotive to submit for 4 approval by the executive officer a substitute fuel or 5 emission control strategy. The substitute fuel or 6 emission control strategy must achieve equivalent or 7 greater reductions than those achieved solely through 8 compliance with the CARB diesel fuel requirements. In 9 addition, adequate enforcement provisions are necessary. 10 Whatever approach is proposed, an AECP may not 11 sacrifice emission reductions in one area or region of the 12 state at the expense of another. An AECP cannot take 13 credit for other measures, such as smoke reduction 14 programs or efforts that would reduce unnecessary idling, 15 that should be implemented as best management practices 16 around major rail facilities or are required by other 17 regulations or agreements. 18 --o0o-- 19 ENGINEERING EVALUATION SECTION MANAGER WHITE: 20 Staff is proposing that the definition of 21 harborcraft include any ship, boat, watercraft, et cetera, 22 used as a means of transportation on water. This includes 23 recreational as well as commercial vessels. 24 This definition would include such vessels as 25 tugboats, fishing boats, crew boats and pleasure craft. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 Staff is proposing to exclude oceangoing ships from the 2 definition of harborcraft. 3 For intrastate locomotives staff is proposing 4 that these be defined as a locomotive that operates 5 principally within California, where at least 90 percent 6 of a locomotive's fuel consumption, hours of operation or 7 annual rail miles traveled occur within the boundaries of 8 the state of California. This definition is intended to 9 allow for some out-of-state operations of intrastate 10 locomotives for such activities as repair or maintenance 11 at facilities outside of the state. This definition would 12 include such locomotives used in commuter, shortfall and 13 switch operations. 14 Staff is also proposing to not include in the 15 definition of intrastate locomotives those line haul 16 freight locomotives meeting the U.S.EPA's lower emitting 17 Tier 2 locomotive emission standards and subject to the 18 South Coast MOU. 19 --o0o-- 20 ENGINEERING EVALUATION SECTION MANAGER WHITE: 21 Staff is also proposing to modify the original 22 proposal as presented in the initial statement of reasons 23 to exempt military vessels from the supply requirements 24 for CARB diesel. The proposed changes are in the 25 information provided to you and are also available to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 public on the table outside of the hearing room. 2 Staff-proposed exemption for military vessels is 3 consistent with consideration given by the U.S.EPA in 4 their non-road diesel fuel rule issued earlier this year 5 for vessels having national security or special tactical 6 considerations. This is also consistent with current 7 provisions contained in the California Diesel Fuel Program 8 for motor vehicles having national security or special 9 tactical considerations. 10 --o0o-- 11 ENGINEERING EVALUATION SECTION MANAGER WHITE: I 12 will now discuss impacts of staff's proposal. 13 --o0o-- 14 ENGINEERING EVALUATION SECTION MANAGER WHITE: 15 Staff estimates that the proposed amendments will 16 apply to about 134 million gallons of diesel fuel consumed 17 annually in the state. About a third of this is consumed 18 by intrastate locomotives and about two-thirds is consumed 19 by harborcraft. A little over half of this consumption is 20 already CARB diesel. 21 To put the 134 million gallons in perspective, 22 this represents about four and a half percent of the total 23 statewide diesel fuel consumption of 2.7 billion gallons. 24 --o0o-- 25 ENGINEERING EVALUATION SECTION MANAGER WHITE: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 The use of CARB diesel fuel will provide 2 significant and immediate emission benefits in intrastate 3 locomotives and harborcraft as compared to federal diesel 4 fuel. Staff estimates that the use of CARB diesel fuel 5 will provide a 6 percent reduction in NOx and a 14 percent 6 reduction in directly emitted particulate matter from 7 engines using diesel fuel that is not already CARB 8 compliant. 9 This reduction in particulate emissions will also 10 provide a comparable reduction in toxic emissions. In 11 addition, based on today's sulfur levels relative to 12 future low sulfur 15 PPM levels, about a 95 percent 13 reduction in emissions of oxides of sulfur will also be 14 realized. 15 --o0o-- 16 ENGINEERING EVALUATION SECTION MANAGER WHITE: 17 Statewide, in 2007, staff estimates that the 18 proposed amendments will provide about two tons per day of 19 NOx emission reductions from engines using diesel fuel 20 that is not already CARB compliant. This includes about 21 0.4 tons per day of NOx emission reductions from 22 harborcraft in the South Coast, which provides the first 23 increment of progress towards the emission reduction 24 commitments contained in SIP Measure Marine 1. 25 The proposed amendments will also provide about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 six-tenths of a ton per day of particulate emission 2 reductions, both directly and indirectly emitted. Also, 3 almost two tons per day of oxides of sulfur reductions 4 will be realized. Because intrastate locomotives and 5 harborcraft typically already use on-road quality fuels, 6 this reduction would already likely occur through the 7 implementation of the CARB and U.S.EPA on-road low sulfur 8 diesel fuel regulations. However, the proposed amendments 9 will allow us to take credit for these reductions in the 10 emission inventory and for SIP purposes. 11 --o0o-- 12 ENGINEERING EVALUATION SECTION MANAGER WHITE: 13 With the lower directly and indirectly emitted 14 particulate emissions, the risk associated with exposure 15 to diesel particulate will also be reduced. Staff 16 estimates that by 2010 the proposed amendments will result 17 in 71 avoided deaths. By 2020 this increases to 233 18 avoided deaths. 19 In addition, the risk associated with directly 20 emitted particulate from intrastate locomotive and 21 harborcraft will be reduced in areas such as near rail 22 yards and ports where there has historically been a 23 significant impact on local communities. 24 --o0o-- 25 ENGINEERING EVALUATION SECTION MANAGER WHITE: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 Staff has worked with the California Energy 2 Commission to evaluate any potential impacts of the 3 proposed amendments on the California diesel fuel supply. 4 Based on staff's analysis, the proposed regulations should 5 not affect the ability of California refiners to supply 6 sufficient quantities of diesel fuel to the California 7 market. 8 --o0o-- 9 ENGINEERING EVALUATION SECTION MANAGER WHITE: 10 Staff estimates that the proposed amendments will 11 likely result in a fuel production cost increase to 12 refiners of about 3 cents per gallon. This cost 13 represents the higher processing costs associated with 14 CARB diesel fuel relative to federal on-road diesel fuel. 15 Because of fueling logistics at certain railroads, this 16 increase could be greater for certain locomotive fueling 17 applications where individual tank trucks must be brought 18 in to fuel the locomotive. 19 Statewide the anticipated costs of the proposed 20 amendments could be between $2 and $3 million. These are 21 the likely costs associated with the higher fuel costs of 22 CARB diesel. 23 Based on these costs and the anticipated emission 24 benefits, staff estimates that the cost effectiveness of 25 the proposed amendments is between a dollar ten and a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 dollar sixty per pound of NOx and particulate matter 2 reduced. 3 Staff also performed a sensitivity analysis of 4 the cost effectiveness to reflect potential higher costs. 5 Staff found that even for costs as high as 10 cents per 6 gallon, the proposed amendments are still within the 7 cost-effectiveness range of previously approved fuels 8 measures. 9 The cost effectiveness of the proposed amendments 10 is in the range of other measures approved by the Board, 11 such as the California Phase II reformulated gasoline 12 regulations and the low sulfur amendments of the 13 California diesel fuel regulations, which had 14 cost-effectiveness ranges of $3 to $5 per pound of 15 pollutant reduced, and is significantly less than the $32 16 to $67 per pound of particulate reduced in the waste 17 collection vehicle regulation. 18 --o0o-- 19 ENGINEERING EVALUATION SECTION MANAGER WHITE: 20 The proposed amendments are not expected to have 21 any significant impact on the California economy; and 22 based on discussions with California refiners, should not 23 require the installation of any new refinery equipment or 24 the expenditure of any new capital at California 25 refineries. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 The anticipated impact of the proposed amendments 2 on intrastate locomotive and harborcraft owners and 3 operators is expected to be minor, with no significant 4 effects on small businesses. 5 --o0o-- 6 ENGINEERING EVALUATION SECTION MANAGER WHITE: In 7 addition to our efforts to achieve emission reductions 8 from locomotives and marine vessels to the proposed 9 amendments you have heard today, staff continue to 10 evaluate other opportunities and strategies which will 11 provide additional emission reductions from these source 12 categories. 13 ENGINEERING EVALUATION SECTION MANAGER WHITE: 14 We are continuing to work with the railroads to 15 determine the best strategies to reduce locomotive 16 emissions statewide. These efforts include the 17 consideration of measures such as reduced idling at rail 18 yards, the voluntary early introduction of cleaner federal 19 Tier 2 locomotives and retrofitting locomotives with 20 after-treatment devices for particulate matter and NOx 21 control. 22 Along with these efforts, we're also evaluating 23 the local air quality impacts associated with rail yards. 24 Staff recently completed a study on the emissions and 25 toxics impacts associated with the Union Pacific Roseville PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 rail yard east of Sacramento. And we are working with 2 stakeholders to develop a comprehensive statewide strategy 3 to reduce the impacts of these rail yards on local 4 communities. 5 We are also continuing our efforts to encourage 6 the U.S.EPA to pursue new after-treatment based NOx and 7 particulate standards for new locomotives. We believe 8 that these knew standards are technologically feasible and 9 can provide significant additional reductions in 10 locomotive emissions. 11 --o0o-- 12 ENGINEERING EVALUATION SECTION MANAGER WHITE: 13 Staff will also continue their efforts to 14 implement multiple strategies to reduce marine vessel 15 emissions and air toxic impacts. First, we are working to 16 encourage U.S.EPA and the International Maritime 17 Organization to pursue more stringent new-engine standards 18 for NOx and particulates from oceangoing ships. 19 At the state level, we are currently evaluating 20 an auxiliary engine rule that would require oceangoing 21 ships entering California ports to use lower sulfur fuels. 22 Building on this, we are also conducting a shore-based 23 power feasibility study to determine the emission benefits 24 of ships plugging into shoreside electricity versus 25 on-board generators to supply their power requirements PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 while they are at dock. 2 We have also been actively involved in conducting 3 our Ship Retrofit Demonstration Project to reduce NOx and 4 particulate emissions from in-use vessels. 5 We have been working with the U.S.EPA and our 6 sister agencies in Canada, Alaska, Washington, and Oregon 7 to establish a sulfur emission control area on the west 8 coast to implement the use of lower sulfur bunker fuels in 9 oceangoing ships operating in these waters. 10 We are also participating in the west coast 11 collaborative effort, backed by funding from the U.S.EPA, 12 to create additional incentives for the early application 13 of federal and state on-road and non-road diesel engines 14 and fuel standards and greater participation in voluntary 15 diesel emissions mitigation programs through a 16 market-based incentives, innovative technologies, and 17 collaborative approaches. 18 --o0o-- 19 ENGINEERING EVALUATION SECTION MANAGER WHITE: We 20 are also developing an air toxic control measure for 21 harborcraft to reduce diesel particulate emissions that 22 occur in ports and harbors. 23 We're also developing a comprehensive statewide 24 strategy for the ports. This strategy may include a 25 number of measures, including the use of alternative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 diesel fuels, operational controls such as slow-down zones 2 or idling limits and, as mentioned earlier, the use of 3 shoreside power at dockside. 4 As part of the comprehensive strategy for ports 5 we are also considering the development of an air toxic 6 control measure to reduce diesel PM emissions from cargo 7 handling equipment. 8 --o0o-- 9 ENGINEERING EVALUATION SECTION MANAGER WHITE: 10 Staff recommends that the Board approve the 11 proposed amendments, as modified, to the California diesel 12 fuel regulations. 13 This concludes my presentation. 14 CHAIRPERSON LLOYD: Thank you very much. 15 Questions from the Board? 16 Ms. D'Adamo. 17 BOARD MEMBER D'ADAMO: First of all I'd like to 18 compliment staff for that excellent presentation. And you 19 made it all look easy in the end. 20 I remember when the CARB diesel rule was before 21 us, I guess about a year and a half ago, and the Board 22 making the request. And I appreciate the timely response. 23 I didn't expect it to come back so soon. So I think 24 that's great that you were able to work things out. 25 A couple of questions. First of all, on slides 7 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 and 8, the marine and locomotive contribution to statewide 2 NOx and diesel PM emissions. 3 The increase that's expected, I imagine in large 4 part that's due to improvements in some of the other 5 emission categories. But I also see that in another slide 6 that there is some growth associated within this category. 7 Is there a way to -- well, could you comment on 8 the growth issue, as compared to perhaps the reduction in 9 some of the other categories, to put it in better 10 perspective. 11 ENGINEERING EVALUATION SECTION MANAGER WHITE: 12 Well, you're absolutely correct. The increases 13 reflective of both, improvements in the off-road and 14 on-road mobile source categories in terms of their 15 emissions. And growth in the marine vessel -- and 16 particularly the marine vessel emissions associated with 17 the increased operations. And I believe the lag in terms 18 of the emission standards for those categories relative to 19 the other on-road and off-road sources. 20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think we 21 need to note that the growth in these two sectors is very 22 large. Because what we've seen in the last decade, and we 23 expect over the next two decades, is an ongoing increase 24 in international trade, with California being both a 25 participant directly in terms of consumption of the goods, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 and then a passed-through area. So the ship emissions, 2 which don't have any scheduled additional controls, are 3 going absolutely. The locomotive emissions, which will 4 become cleaner over time per engine, some of that progress 5 is being offset because of the increase in movements of 6 those goods through California to other markets. 7 BOARD MEMBER D'ADAMO: Great. Which brings to 8 mind my next question and, that is, next steps, the future 9 strategies section of the report. I think it would be 10 helpful for us to hear back from staff about the progress 11 that's been made. And I know that we have some limited 12 authority. But perhaps setting some time aside where we 13 could receive a presentation on what EPA is doing and what 14 role this Board could take. 15 In addition, what I would find helpful would be 16 if I could receive some information about the emissions 17 category by district. Because as a resident in the 18 valley, I know there's a lot of interest by policymakers, 19 but the public is slowly catching on to this topic as 20 well. And I think that with the valley getting more and 21 more interested in air quality issues, it would be helpful 22 to get a better handle on the impacts in the valley as 23 compared to some of the other districts, and also to 24 incorporate -- 25 CHAIRPERSON LLOYD: Is this for marine or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 locomotive? 2 BOARD MEMBER D'ADAMO: Both. I think it would be 3 helpful to incorporate in the analysis transport 4 emissions. Obviously there's very little going on in the 5 valley as far as marine as compared to some of the coastal 6 areas. But I imagine that there are some impacts relative 7 to transport. 8 CHAIRPERSON LLOYD: Before I take any other 9 comments from the Board, I should have asked the Madam 10 Ombudsman, would you describe the public participation 11 process which was followed due to the development of this 12 rule; and provide the Board with any comments or 13 observation you have with us at this time. 14 OMBUDSMAN TSCHOGL: Mr. Chairman and members of 15 the Board, I'm sure that you already are under the 16 impression that they worked very cooperatively with a 17 large number of stakeholders. But I will tell you who 18 they were. 19 It's a comprehensive and coordinated effort 20 between ARB staff and many stakeholders: Representatives 21 from Class 1 railroads, passenger trains, Class 3 22 railroads; and nearly 30 harborcraft-related companies; 23 several engine and emission control manufacturers and the 24 petroleum industry actively participated in this 25 rule-development process. And many government agencies, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 including the California Energy Commission, the California 2 Department of Transportation, Metro Link, Southern 3 California Regional Rail Authority, Cal Trains, San Mateo 4 County Transit District, United States Coast Guard, 5 California Department of Fish and Game, United States Army 6 Corps for Engineers, California Maritime Academy, and the 7 Naval Sea Systems Command. United States Maritime 8 Administration and the local air districts were also 9 involved in this regulation. 10 At the July 2003 and October 2003 Board hearings, 11 the Board directed staff to investigate the feasibility of 12 applying California diesel standards to locomotives and 13 marine vessels and to develop regulatory recommendations 14 for the Board by November 2004. Consequently, in February 15 of this year staff held the first of six public workshops. 16 On average, 50 people attended these workshops. 17 During a four-month period they had four meetings 18 with the commercial harborcraft work group and ARB 19 maritime working group public meetings; a conference call 20 with the refiners; a meeting with the president and CEO of 21 a railroad company; a meeting with CalTrans; three 22 meetings with a railroad association; and several meetings 23 with railroad companies. 24 On October 1st, 2004, the initial statement of 25 reasons and public hearing notice published by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 California Office of Administrative Law were posted on 2 ARB's web page. More than 3,000 individuals received the 3 information via the list serve. 4 This concludes my comments. 5 CHAIRPERSON LLOYD: Thank you. 6 Supervisor Roberts and then Mayor Loveridge. 7 BOARD MEMBER ROBERTS: I had a question of staff. 8 Is it appropriate? 9 CHAIRPERSON LLOYD: Yeah, now we can go into the 10 staff, yes. 11 BOARD MEMBER ROBERTS: Well, I was reviewing the 12 letter from Captain Gonzales representing Admiral 13 Bettencourt. And he had recommended some specific 14 language be incorporated. 15 While you made reference to an exemption for the 16 military, is the exemption identical to the language that 17 was recommended or requested in that letter? 18 SENIOR STAFF COUNSEL JENNINGS: The effect is 19 identical. 20 BOARD MEMBER ROBERTS: The effect is identical? 21 SENIOR STAFF COUNSEL JENNINGS: Yes. 22 BOARD MEMBER ROBERTS: And has that been 23 transmitted to them? 24 SENIOR STAFF COUNSEL JENNINGS: Did we -- we 25 drafted it yesterday afternoon. I'm not sure it's been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 transmitted to them. But I can assure you that the effect 2 is identical to what they asked for. 3 BOARD MEMBER ROBERTS: Okay. 4 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 5 CHIEF SIMEROTH: Supervisor Roberts, we had -- they had 6 contacted us earlier to alert us they were going to send 7 the comments. In discussing with them, we told them we 8 generally felt them to be acceptable and would be 9 proposing amendments today. 10 BOARD MEMBER ROBERTS: Okay. The only question I 11 had was, in the staff report it seemed like it left the 12 door open slightly from -- to interpret whether these 13 things met, you know, some military mission. I'm assuming 14 the interpretation though basically is up to them. 15 EXECUTIVE OFFICER WITHERSPOON: Well, just one 16 more point. 17 They will have an opportunity to comment on the 18 exact language staff has drafted during the 15-day change 19 period. And if anything has happened that we've missed, 20 we can correct the language once again. 21 BOARD MEMBER ROBERTS: Would you make sure that 22 Captain Gonzales gets a copy of that? 23 SENIOR STAFF COUNSEL JENNINGS: Definitely. 24 BOARD MEMBER ROBERTS: Thank you. 25 CHAIRPERSON LLOYD: Would you like a copy that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 also, Supervisor? 2 BOARD MEMBER ROBERTS: Please. 3 CHAIRPERSON LLOYD: Mayor Loveridge. 4 BOARD MEMBER LOVERIDGE: I was exhausted by the 5 size of the public table, the participation. And I also 6 would join in, I thought it was a very careful and 7 thorough report. 8 Just one question -- it might be helpful to me if 9 you could just tutor me on this. This is really on page 10 20, slide 40. And this is the Alternative Emission 11 Control Plan. And I guess my general preference is things 12 to be simple rather than complex. I'm not sure what this 13 does to enforcement. You wonder why everybody isn't 14 playing by the same rules. And this is -- your 15 expectation is that everybody will choose this? Or is 16 this for a very small -- some kind of particular 17 circumstance? And if you could help me out on that. 18 EXECUTIVE OFFICER WITHERSPOON: Mr. Loveridge, 19 the reason this -- Mayor Loveridge, this proposal came up 20 because of the exact fueling operations of different rail 21 yards and the extent to which they have single tanks, 22 multiple tanks, or are using tanker trucks to bring fuel 23 to the locomotives. 24 Also, the number of trains heading immediately 25 out of state versus remaining in California and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 complexity of the logistics. And how much additional cost 2 they might incur if they had no choice but to guaranty 3 that a hundred percent CARB fuel got into all the captive 4 locomotives. They might have to overcomply to guaranty 5 that outcome. And so they inquired, would we accept an 6 alternate strategy that got the same emission reductions 7 where in lieu of backing into that corner they might 8 change a switcher engine out faster than what would 9 otherwise be the case, a retrofit equipment or otherwise 10 accelerate a turnover. Those emission reductions are very 11 real, those locomotives are resident. 12 And so we're confident if those are the kinds of 13 alternate proposals we receives, that we could compare 14 them one to one to the fuel use question. But it was that 15 concern about having to overcomply to meet our regulation. 16 BOARD MEMBER LOVERIDGE: What percent -- what's 17 your guess would be the choice to participate in 18 alternative -- 19 EXECUTIVE OFFICER WITHERSPOON: You know, I don't 20 have a sense of that. You might ask that of the railroad 21 interests when they come forward to speak. I think it 22 will be rail yard specific. 23 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And we 24 believe it will be a relatively small percentage of the 25 overall compliance will be achieved that way. But, for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 example, if someone wants to bring in very low emission 2 locomotives or put some particulate retrofits that 3 currently don't exist on it and get some credit on the 4 fuel side for that, we think that's a type of program 5 where we get some -- we serve the emission benefits and we 6 get some other benefits of demonstrating technologies. 7 The industry wanted this. And we tried to craft 8 it in a way that would protect those people who live close 9 to rail yards, that would benefit from the regulation if 10 it's applied directly, and would not cost the state any 11 emission reductions over and above what we would otherwise 12 expect to get. 13 BOARD MEMBER LOVERIDGE: So this is not a new 14 reclaim program with some variation on it? 15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: No, there's 16 no money involved here or trading. 17 (Laughter.) 18 CHAIRPERSON LLOYD: My understanding, that -- for 19 example, introduction of a green goat or LNG locomotives 20 would be pulled into that sort of category? 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That's 22 correct. And what the rail yard could do is if it came 23 up -- well, let's say, half its fleet were retrofitted or 24 green goats or something like that and the other resident 25 locomotives might be able to use the same fueling tank PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 that the intrastate locomotives use and they could save a 2 little bit there. And we'd actually get overall better 3 emission performance. 4 CHAIRPERSON LLOYD: Supervisor -- no, Ms. Berg 5 and then Supervisor DeSaulnier. 6 BOARD MEMBER BERG: I just got promoted. 7 On slide number 28, a comment was made that the 8 locomotives use 60,000 gallons of diesel annually versus a 9 truck of 20,000 gallons. But what would be the load 10 difference? Are we assuming that the load that a 11 locomotive would pull would be equal to that, to the load 12 of one truck? 13 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 14 CHIEF SIMEROTH: No. There's obviously a very large 15 difference in the load. This was just to give you a 16 concept of what a locomotive would consume a year compared 17 to a truck. We weren't -- the emissions benefits and the 18 hauling capacity in this are not -- obviously not directly 19 comparable. You're looking at an engine that has 3100 20 horsepower versus something that probably would have 600 21 horsepower. So -- 22 BOARD MEMBER BERG: But in fairness, it would 23 take several trucks to pull the load if we were going to 24 replace -- 25 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 CHIEF SIMEROTH: Oh, definitely. This is no -- 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: In general 3 locomotives in long haul situations are four to six times 4 more fuel efficient per -- the tons of goods moved per 5 gallon of fuel used is very much in the advantage of the 6 locomotive. That's why they get that long haul service. 7 BOARD MEMBER BERG: And then, Kathleen, did the 8 industry agree that the economic impact is relatively 9 insignificant? 10 OMBUDSMAN TSCHOGL: I would have to refer you to 11 staff to that, because I was not involved in the actual 12 conversations with the industry on those issues. But you 13 can -- 14 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 15 CHIEF SIMEROTH: If I could. Industry's never agreed with 16 us that an impact is small. If you look at the price of 17 diesel fuel and the amount of increase and -- then their 18 operational costs and what that increase would impact them 19 on their operational costs, that's where the term "small" 20 comes from. 21 It's still significant. We didn't mean to 22 underplay that impact on the industry. And I'm sure there 23 are some operators who will say any increase in their 24 fueling costs to be very significant. 25 EXECUTIVE OFFICER WITHERSPOON: Just to elaborate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 on that. One of the things the industry was very 2 concerned about is -- they currently purchase a portion of 3 CARB diesel fuel because it's available to them at no 4 additional cost. It's what the market is selling. And 5 they were concerned that once we mandate the use of CARB 6 diesel, that they would be subject to more price gouging, 7 at least some escalation in price. And so that was a huge 8 concern. And also the degree to which we made them 9 vulnerable for more than captive locomotives for the 10 interstate. 11 So I would say that they're very concerned, that 12 the price of diesel fuel -- the price of fuel generally is 13 one of the most important factors in rail operations and 14 rail profitability. And so this was not an easy 15 regulation to put together. It took a lot of good will on 16 the part of industry to come to the table and finally 17 reach consensus with us, that, yes, they will do it, yes, 18 they will endure this cost increase. 19 And I think we've also created a regulation that 20 they're less inclined to maneuver around, which they have 21 some latitude to do in terms of purchasing fuel out of 22 state and using less CARB diesel than they otherwise would 23 absent a regulation. 24 So I think we've come to a very good place. And 25 they deserve some credit for working cooperatively with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 us. 2 BOARD MEMBER BERG: Thank you very much. 3 CHAIRPERSON LLOYD: Supervisor DeSaulnier. 4 BOARD MEMBER DeSAULNIER: I hesitate to bring 5 this up. But since Didi mentioned transport, just a 6 comment and potential update on this sometime in the 7 future. 8 We in the Bay Area have spent a lot of our Carl 9 Moyer funds on retrofitting tugboats in particular. And 10 part of the discussion, as some of the Board members will 11 remember it -- I'm sure Didi will and Supervisor Roberts 12 and Supervisor Patrick -- about the proper distribution of 13 those funds. And I was led to believe that those 14 discussions amongst staff were going well in this type of 15 regard where we would try to focus some of that -- some of 16 the funds that we were in disagreement about towards these 17 kind of programs that would benefit both the Port of 18 Modesto and the Bay Area. 19 That was just a comment. 20 (Laughter.) 21 BOARD MEMBER DeSAULNIER: We could -- I know it's 22 going to be a long day. So since Didi and I are sitting 23 further apart than we normally do, we probably shouldn't 24 get in -- but I think there's an opportunity there as we 25 continue to look at this as something that's really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 productive for both. But not just the Bay Area, but Los 2 Angeles and San Diego and their downwind neighbors as 3 well. 4 BOARD MEMBER D'ADAMO: May I jump in here? 5 First of all, I want to know where I can find all 6 this water in Modesto, at the port. 7 No, I agree. And I hope that when we get 8 together next for the four-district meeting, we can 9 revisit this issue. And that's actually why I asked staff 10 to provide some information on the inventory issue. 11 Because I think we need to get that dialogue going in the 12 valley so that they can understand and appreciate the need 13 to address these issues of marine vessels and locomotives 14 and how it impacts folks in the valley. 15 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 16 CHIEF SIMEROTH: If I could. We actually have that 17 information in the staff report, broken out by air basin, 18 for both marine and locomotive. And we can do additional 19 work if that would help your situation. But the basic 20 breakout has already been done. 21 EXECUTIVE OFFICER WITHERSPOON: We'll bring the 22 key pieces of it to the four-district meeting. 23 And also in response to your earlier point about 24 an overall briefing, in January the administration will be 25 stepping out with a major port strategy and a symposium PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 and I mini-SIP that the staff is working on putting 2 together. And we're still developing what structure we're 3 going to pursue for rail yard and railroad discussions. 4 There are also multiple-goods movement conferences going 5 on, with one coming up in the Bay Area they were to 6 co-sponsor on December 8th and 9th. And work of our own 7 in that arena. So we'll have many things to share with 8 you. 9 And Mr. Scheible and I were just chatting about 10 which Board meeting would be a good one to come in and 11 sort of give you the lay of the land of all those 12 different venues. And January might be the one. 13 CHAIRPERSON LLOYD: Can't be soon enough. 14 EXECUTIVE OFFICER WITHERSPOON: Yeah, I think 15 not. 16 CHAIRPERSON LLOYD: Well, I think it really 17 highlights a very important issue. And I think we've -- 18 we're dabbling around the edges. But I was reminded this 19 week when there were reports of some of the container 20 ships stacking up off the shore, can't get into port. 21 Obviously they're not shutting their engines off. That's 22 additional pollution there. 23 So this thing has to be looked at from a 24 statewide basis, running all the way from San Diego all 25 the way up north. And so I think it's important. And I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 delighted that staff is moving ahead aggressively. 2 Clearly when the Governor -- he expressed his sentiments 3 on the Lowenthal bill, it was directing us to move 4 aggressively, to look at the whole issue. It's a real 5 issue, but we have to look and see how everything is 6 intertwined. 7 And I say that was a big piece to me this week 8 when we can look at the harborcraft. But we have to look 9 at this very aggressively and very holistically. And 10 we'll need to use people and interact with people that 11 probably we've not interacted before. 12 I only wish that we had maybe Matt here to 13 interact with the longshoremen. So work on that area. 14 I had a question on -- getting back. So January 15 we expect -- Catherine. 16 EXECUTIVE OFFICER WITHERSPOON: I think it's a 17 good option for at least an overview of all the different 18 movement parts. 19 CHAIRPERSON LLOYD: Great. 20 The other question I had is -- our favorite here, 21 when we talk about the CARB diesel and federal diesel. 22 Do we have agreement now with EPA on the 23 benefits -- NOx benefits of our aromatic content compared 24 to theirs? 25 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 CHIEF SIMEROTH: Dr. Lloyd, the answer is basically yes. 2 They've put out a draft model for diesel fuel impacts on 3 emissions. And if you plug the fuel characteristics into 4 that model, you end up basically the same benefits as 5 we've come up with. 6 CHAIRPERSON LLOYD: Which is? Percentage. 7 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 8 CHIEF SIMEROTH: The 6-percent NOx and about 20-percent 9 particulate matter, due to the aromatics. 10 CHAIRPERSON LLOYD: Yeah, that's huge. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And U.S.EPA 12 has accepted for over a decade now our benefits as 13 reflected in all the SIP emission estimates that we give 14 them. So we take credit for our program and they accept 15 them as being valid for use in the SIP. And they more or 16 less reaffirmed it when they approved the Texas program 17 when Texas adopted a regulation that basically said 18 California fuels can be used in Texas and they got a NOx 19 benefit from that use. 20 CHAIRPERSON LLOYD: Do we have a letter from them 21 explicitly stating that to us? 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: In the SIP I 23 think it's just in the overall approval. 24 CHAIRPERSON LLOYD: Okay. 25 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 CHIEF SIMEROTH: Dr. Lloyd, they recognize these same 2 benefits for the State of Texas when the State of Texas 3 adopted their diesel fuel program, which is virtually 4 identical to ours. 5 CHAIRPERSON LLOYD: Okay. Great. 6 Any other questions from Board members? 7 With that, I'd like to call up the first three 8 witnesses. Reminder is that if they've got any written 9 testimony, provide that to the Clerk of the Board. 10 So we have Dave Smith, Joseph Kubsh, Paul 11 Wuebben. 12 MR. SMITH: Mr. Chairman, Board members. I'm 13 Dave Smith. I work for BP. We market fuels through ARCO 14 A.M./P.M. stations. You may be more familiar with ARCO 15 than BP. 16 I'm pleased to be here to be supportive of the 17 ARB proposal. I think this is due to a large part to the, 18 what I would consider, longstanding cooperative effort 19 that BP and ARCO's had with the staff with regards to 20 diesel control rules. 21 Generally we find the rules to be cost effective, 22 technically sound, and remain market competitive. We 23 believe this type of rule has resulted in significant 24 emission reductions, significant development of 25 technology, and a minimal of contentious proceedings -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 (Laughter.) 2 MR. SMITH: -- which I'm pleased to be part of 3 today, assuming that continues that way. 4 For our part, BP and ARCO, we were the first 5 company to produce ultra-low sulfur CARB diesel. We 6 market ultra-low sulfur diesel in over a hundred service 7 stations today. Actually about 20 to 25 percent of the 8 diesel that we produce at our Carson refinery is ultra-low 9 sulfur diesel already. 10 BP is also the largest supplier of natural gas to 11 the State of California. We're a significant supplier of 12 liquid petroleum gas, which is in compliance with ARB's 13 mobile source rules. And across the country, we're likely 14 to largest user of ethanol in fuels. 15 I'd like to take particular note that this rule 16 not only addresses statewide control or concerns, but also 17 tries to address some local control needs by implementing 18 the rules initially in the south coast area. As one who 19 has responsibility for both statewide rules and local 20 rules, I find this is an efficient use of my resources and 21 the staff's resources when we can deal with both local and 22 statewide concerns in one action. 23 I guess I'd have to temper my support of this 24 action by saying that as we look to extend this type of 25 control to other types of marine vessels or locomotives, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 I'd offer that there's probably other control measures 2 that you've already heard about that need to be 3 considered. Again, BP is not just sitting idly by. We've 4 just recently in the last few months announced an 5 agreement with the Long Beach Port to install shoreside 6 power at our crude terminal. And we've done a number of 7 sea water scrubbing tests in Europe that we're willing to 8 share with you as a way of additionally reducing emissions 9 from marine vessels. 10 So in conclusion, I thank you for another 11 rulemaking that I think has been well handled and thank 12 you for the staff for their willingness to talk to us 13 about the various issues that we had initially; and look 14 forward to addressing other issues in the future. 15 Thank you. 16 CHAIRPERSON LLOYD: Thank you very much, Dave. 17 BOARD MEMBER RIORDAN: Question. 18 CHAIRPERSON LLOYD: Mrs. Riordan. 19 BOARD MEMBER RIORDAN: Yes, Mr. Smith, first of 20 all, your ARCO Division has always been kind of the 21 shining star in helping I think at times to provide some 22 of the fuel that we've needed. 23 Of this regulation, which would apply to the 24 harborcraft and the locomotives, what would you say your 25 percentage of the total fuel used might be under ARCO and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 BP? Is it significant? 2 MR. SMITH: Are you asking like what is our 3 market share in this sector? 4 BOARD MEMBER RIORDAN: Yeah, that's what I'm 5 trying to say. 6 MR. SMITH: I think I'm prohibited from, you 7 know, publicly telling you our market share information. 8 But -- 9 BOARD MEMBER RIORDAN: Oh, just generally. 10 MR. SMITH: Generally, we have about 20 percent 11 of the diesel market. And we actually do market ultra-low 12 sulfur CARB diesel in the Port of Los Angeles currently. 13 It's what we call a branded distributor who sells what we 14 call ECD-1 to harborcraft already. 15 So in that market I think we're one of the few 16 refiners who are actually marketing an ultra-low sulfur 17 diesel fuel to harborcraft. 18 BOARD MEMBER RIORDAN: Thank you very much. 19 CHAIRPERSON LLOYD: Yes, Ms. Berg. 20 BOARD MEMBER BERG: So that I understand, when we 21 talk about having plug-in energy versus diesel, what type 22 of savings environmentally then the energy from plug-in is 23 cleaner? 24 MR. SMITH: Are we talking about the shoreside 25 power? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 BOARD MEMBER BERG: Yes. 2 MR. SMITH: Well, in the shoreside power 3 situation we have a number of new crude vessels that are 4 kind of dedicated vessels that go from Alaska down to Long 5 Beach and provide crude oil to our Carson refinery. 6 And although they weren't originally equipped 7 this way, we've committed with the Port of Long Beach to 8 retrofit those vessels to allow them, that when they come 9 into port and are at the dock, instead of using the 10 engines on-board ship to produce electricity that powers 11 pumps that produce -- that allow the crude to be pumped 12 out of the vessels, they'll actually turn off those 13 engines completely and just have a big -- really big plug 14 that goes into the vessel. And we've started actually 15 doing the engineering design on that. It's a very 16 interesting project. And it's much, much more 17 complicated. For one example, when you unload a crude 18 vessel, it probably goes up 15 to 20 feet. So your plug 19 has to be able to move with that. 20 There's also, you know, wave action and other 21 things. So there's a lot of things, and it's a very 22 interesting project. And we'd be glad to have any of you 23 come and see it when it gets installed. 24 DEPUTY EXECUTIVE OFFICER SCHEIBLE: In terms of 25 emission reductions, we'd estimate that it's close to 99 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 percent cleaner to generate the electricity on shore than 2 it is in the ship -- in a current ship engine using dirty 3 bunker fuel and a poorly controlled engine, that even if 4 you clean up the diesel engine on the ships and you give 5 them cleaner fuel, you're still going to have something 6 like a 90-percent benefit. The powerplants are just 7 extremely well controlled. The South Coast District does 8 an excellent job there. 9 EXECUTIVE OFFICER WITHERSPOON: But in terms of 10 the comparison of total tons per day, it would matter of 11 course how many ships are electrified, how many hours of 12 operation versus how many gallons of diesel fuel are 13 displaced. So you'd have to look at it in the aggregate 14 to know. But it's a terrific option. 15 BOARD MEMBER BERG: Great. 16 Thank you very much. 17 CHAIRPERSON LLOYD: Since you brought it up, 18 Dave, I can't let you get away with that. 19 Suppose our waiver request was granted on the 20 oxygenates. How would that affect the use of ethanol by 21 BP? 22 MR. SMITH: Well, BP as a company has supported 23 the renewable fuel standard federally. And so if that was 24 to go forward, we would see that our ethanol use would 25 basically stay the same nationwide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 If you're asking me if California's waiver goes 2 through, probably we -- what would happen is the refinery 3 would look at ethanol like it does any other blending 4 component. And it would be an economic decision about 5 whether to use it or not. 6 It would likely go down. But we would 7 continue -- it would likely also continue to be used in 8 some way in our gasoline. 9 CHAIRPERSON LLOYD: Thanks. 10 And I'd like to reiterate I think Mrs. Riordan's 11 comments again about really appreciate BP and prior to 12 that ARCO's leadership in these areas. 13 MR. SMITH: Thank you. 14 CHAIRPERSON LLOYD: Thank you. 15 Joe Kubsh, Paul Wuebeen, Kirk Marckwald. 16 MR. KUBSH: Good morning, Dr. Lloyd and members 17 of the Board. My name is Joe Kubsh. I'm the Deputy 18 Executive Director of the Manufacturers of Emission 19 Controls Association. 20 And our industry is also here to lend our support 21 to this proposed amendment to the California Diesel Fuel 22 Regulations. Our industry believes that requiring the use 23 of CARB diesel in these classes of engines that we're 24 talking about this morning here is absolutely essential to 25 achieving significant emission reductions from these PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 engines. 2 Our association is a nonprofit association of the 3 world's leading manufacturers of emission control 4 technologies. And we have a rather long history and 5 proven track record of developing emission technologies 6 for all categories of engines, whether they be on-road or 7 off-road. And some of our members are also interested in 8 developing emission technologies for locomotive and marine 9 engines that we're speaking about here this morning as 10 well. 11 But certainly the use of ultra-low sulfur fuel in 12 these categories of engines is critical to the success of 13 using the best available emission control technologies, 14 both in potential retrofit situations as well as future 15 applications on new engines in these categories. 16 I did want to mention with respect to retrofits, 17 that although there isn't a lot of experience with the 18 retrofits in marine and locomotive applications, there are 19 some examples out there. But, for example, there have 20 been the use of diesel oxidation catalysts on ferries in 21 Hong Kong, for example. And there are growing 22 applications of selective catalytic reduction technology 23 for reducing NOx emissions from marine applications. 24 And one example I can cite for you right now is 25 that the Statton Island ferries in New York are currently PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 being retrofitted with SCR technologies. And the first 2 two of those vessels with the SCR technology will be 3 commissioned I believe early in 2005. 4 So certainly having ultra-low sulfur fuels 5 available for marine and locomotives will foster the 6 further interest and development of retrofit options, 7 especially catalyst-based retrofit options such as diesel 8 particulate filters or other NOx-based technologies for 9 these classes of applications that we're talking about 10 today. 11 Also, the early implementation of clean diesel 12 fuel in locomotive and marine applications should also 13 encourage early introduction of new cleaner engines in 14 these applications. And with that, the use of the same 15 kinds of emission technologies that will show up on 16 highway trucks -- diesel trucks, for example, starting 17 here in California and nationwide in 2007 and carry on 18 through 2010. And that way California can serve as an 19 important really test ground for new technologies in the 20 locomotive and marine sector as well. 21 And this Board has certainly demonstrated true 22 leadership in the worldwide movement towards clean fuels, 23 whether we're talking about gasoline or diesel fuels. And 24 this proposal here is just another example of the Board's 25 leadership into making the best available fuels available PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 so that it can be mated with the best engine technology 2 and the best emission technology to get the best emission 3 benefits for the citizens of the State of California. 4 So, again, I -- I'd also like to compliment staff 5 for their work in this area. And I compliment the Board's 6 leadership for moving clean fuels into the locomotive and 7 marine sector. 8 Thank you very much. 9 CHAIRPERSON LLOYD: Thank you, Joe. 10 Paul Wuebben, Kirk Marckwald, Diane Bailey. 11 MR. WUEBBEN: Good morning, Mr. Chairman, members 12 of the Board. I'm Paul Wuebben, the Clean Fuels Officer 13 with the South Coast Air Quality Management District. 14 We're very pleased to support strongly the 15 recommendations being made today by your staff. And we're 16 also pleased to share with Dave Smith some enjoyment about 17 the lack of contentiousness in the process I think. 18 There are two aspects of the proposal which we 19 would like to just briefly comment on. 20 The first has to do with of course the 21 harborcraft provision, which we're pleased that you have 22 an earlier start date for the South Coast Air Basin. We 23 would support, along with CAPCOA, the extension of that 24 start date to the entire state, because we do think that 25 some harmonization would enhance the effectiveness of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 rule. And also that it would probably help in any product 2 segregation, that you would avoid that kind of a 3 situation. 4 At the same time we think that the amount of 5 diesel fuel involved in that market segment is extremely 6 small, and so there would likely be relatively minimal, if 7 any, price impacts. 8 The second issue I'd like to address briefly is 9 the exclusion of interstate locomotives within the 10 framework of the rule. As you know, interstate 11 locomotives utilize over four times the diesel fuel as 12 intrastate locomotives. And their operation within 13 California does result in significant air quality 14 degradation. 15 We believe that the fuel standard under 16 consideration should be extended to interstate 17 locomotives, given the large emission reductions involved 18 and the high degree of cost effectiveness. We think that 19 that issue should be given the highest priority. And so, 20 accordingly, we suggest that efforts along this end should 21 be pursued at soon as possible. 22 So with that, I appreciate the opportunity. 23 Commend the staff for an excellent and comprehensive staff 24 report. And I appreciate the opportunity. 25 CHAIRPERSON LLOYD: Thanks very much, Paul. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 Questions? 2 Thank you. 3 Kirk Marckwald, Diane Bailey, Don Anair. 4 (Thereupon an overhead presentation was 5 Presented as follows.) 6 MR. MARCKWALD: Thank you very much, Mr. 7 Chairman. Board members, welcome to the -- Board members 8 who I haven't met yet. And thank you for giving your 9 efforts and precious time to a stint of public service -- 10 or an additional stint of public service for many of you. 11 My name is Kirk Marckwald. I am a principal at 12 California Environmental Associates, and today 13 representing the Association of American Railroads and its 14 member railroads in California, which would be Amtrak, 15 Union Pacific, and the Burlington Northern/Santa Fe. 16 --o0o-- 17 MR. MARCKWALD: I've seen this happen before. 18 I too am here today to support the staff's 19 efforts. I believe they have struck a balanced and 20 supportable regulatory program. 21 We do urge the Board to resist a suggestion that 22 the rule should be extended further particularly to 23 interstate locomotives. I think it raises a host of 24 operational costs and with uncertain environmental 25 benefits. And we would be opposed to that if it were to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 be considered. And I know it can't be considered in the 2 context of this notice. But ultimately we would be 3 prepared to put another set of facts on the record to 4 support that. 5 --o0o-- 6 MR. MARCKWALD: I thought the overview that Erik 7 White gave you was excellent and the staff report was 8 excellent. 9 Just a couple of things about locomotive 10 operations. And then to put some context in locomotives 11 with respect to other source categories in California, and 12 particularly in the South Coast Air Quality Management 13 District. 14 First of all, locomotives are different in terms 15 of how you get fuel. You don't have -- you don't pull up 16 to the pump and there's diesel and CARB diesel and EPA on 17 highway. There's one tank, there's one fueling system. 18 And the only option to do otherwise is direct to 19 locomotive fuelings with a fuel truck that goes out and 20 actually puts fuel into the locomotives. 21 So we're eager that it be a particularly simple 22 and straightforward proposal. And I think the staff has 23 struck that balance. 24 Fueling locations suspend on many factors, 25 including crew change points, system locations, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 proximity to pipelines. And as such, our fueling efforts 2 and system are a bit more complicated than others. 3 Currently railroads purchase about -- CARB 4 diesel, which is about 30 percent of fuel that 5 locomotives -- the railroads and Amtrak purchase, as well 6 as EPA on-road. And there's a little teeny bit of EPA 7 non-road. 8 The one thing we do think is that -- you heard 9 Erik White say that the -- generally the staff believes 10 the costs are 2 to 3 cents; but even at 10 cents, they 11 would be cost effective. But we actually think in certain 12 locations that this additional cost of fuel to the 13 railroads will be somewhere in the neighborhood of 21 14 cents. And we have been back and forth. And I think 15 it -- the difference in our points of view is this cost of 16 direct to locomotive fueling and what the cost of the 17 trucks may be. 18 --o0o-- 19 MR. MARCKWALD: Fuels are a part of a larger 20 piece of the puzzle that railroads are actively involved 21 with, not only the Air Resources Board but the U.S.EPA, 22 the South Coast District, other districts in terms of 23 finding a mix -- a suite of actions. And I just want to 24 run down a couple of them for you. 25 First, there are -- on EPA standards for new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 locomotives there are two tiers. The newest one starts in 2 January. Those units will be approximately 60 to 65 3 percent cleaner than the units that were available in the 4 year 2000. They will become the cornerstone of the 5 agreement that the staff noted of the South Coast -- in 6 the South Coast Air Quality Management District, which is 7 a fully enforceable agreement, which ensures that the 8 cleanest locomotives available will be basically the 9 average of the fleet in southern California. The average 10 emissions from the fleet will be as if they were all the 11 cleanest possible units. 12 An additional item. We've engaged with the Air 13 Resources Board. But with our money -- on looking at 14 particulate trap research, there are very few units that 15 are sold each year. And so manufacturers have not been 16 that eager to come forth with a product that in fact could 17 make some progress with particulate traps. The railroads 18 have committed $5 million to work with Southwest Research 19 and the Air Resources Board staff to try to see if there 20 is a promising trap technology. 21 Also, the railroads, both the Union Pacific and 22 Burlington Northern and Amtrak are working to install 23 idling reduction devices on their units. All the new 24 units of both the major freight railroads come with that. 25 Which means if a unit is not doing work for -- and it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 depends on where it is and what the temperature is -- but 2 for somewhere between a half an hour -- or about a half an 3 hour the unit monitors itself, if the battery works, if 4 it's not too cold, if the starter is able to restart the 5 motors, it automatically turns off these units. And over 6 time that's going to be an important additional effort to 7 lessen emissions around rail yards. 8 And, finally, the freight railroads are working 9 with the ARB staff to really look at rail yards, as Erik's 10 presentation touched upon, and what are some additional 11 things, and the non-regulatory, non-emission standards 12 that would make a difference. 13 --o0o-- 14 MR. MARCKWALD: Just looking at some of those 15 things in a different way, we wanted to give the Board an 16 appreciation of this -- these are the inventories for 17 trucks, off-road, ships, aircraft urban buses, and 18 locomotives. Locomotives constitute about 2 percent of 19 the emissions inventory in the South Coast. And these are 20 the various things that various -- that have been required 21 of various source categories. Everybody has standards, 22 EPA or CARB standards, for new units. In the case of 23 urban buses, there's a voluntary retrofit. In the case of 24 locomotives, when you rebuild them, they must be rebuilt 25 to the standard that they were originally certified at. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 There's also -- and Erik referred to the diesel 2 reduction strategy. Also I believe railroads are one of 3 the -- are the only mobile sources that have agreed as 4 part of our EPA certification that their will be in-use 5 testing of units to ensure the emissions performance is 6 true over the time of the life. Now, not all the units 7 are. But we're building a base case to say, "Are these 8 units actually performing as they're certified?" And, 9 finally, the fleet average for the South Coast. 10 --o0o-- 11 MR. MARCKWALD: Member D'Adamo said, "Well, how 12 do these numbers really relate to inventories?" And I 13 only have the South Coast charts. But I'll be happy to 14 get our view of them from the others as well. But 15 basically these are again the major source categories in 16 the mobile source side. And with using the South Coast 17 numbers, you know, what's the percentage of the inventory 18 and what's the direction the inventory's going? And we 19 feel pleased and proud at the work that the locomotive 20 operators have done to not only reduce -- to dramatically 21 reduce our contribution to the inventory. And the way 22 we've gotten there is through the use of the South Coast 23 Fleet Average Agreement. 24 So this is for NOx. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 MR. MARCKWALD: The next slide goes to the 2 relative contribution of the PM2.5 inventories. So that 3 gives you generally a sense of directionally how big are 4 these source categories and what direction are they 5 moving. 6 Now, Member Berg talked a little bit about -- and 7 she was right on the money -- on the question of relative 8 train, truck how does that really stack up? And I think 9 the next slide -- 10 --o0o-- 11 MR. MARCKWALD: -- shows you on NOx emissions on 12 a per ton of freight moved. If we take the regulations 13 that are on the books today, you can see that the 14 environmental mode of choice is our railroads. I mean 15 they are substantially more effective than other options. 16 And while it looks like these lines maybe are going to 17 come together in, you know, 2020, they're not, because we 18 leveled -- we flatlined this at 2012 because we don't know 19 what the new tier-through standards of the locomotives are 20 going to be. The one thing we know is they're going to be 21 dramatic just like the last round of truck standards 22 reductions were dramatic. 23 So we believe and have every sense that these 24 lines are going to continue to go forward and that 25 locomotives are going to be the environmental mode of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 choice to move freight. 2 --o0o-- 3 MR. MARCKWALD: Similarly, the next slide shows 4 the relationships of particulate emissions per ton of 5 freight moved in the South Coast Basin. Again, we 6 flatlined it in 2010 because we don't know what the new 7 standard is. But we know that in fact the biggest 8 opportunity will be in the newly designed locomotives for 9 particulate emissions reductions. And we believe, again, 10 these lines will continue their path downward. 11 Next slide. 12 --o0o-- 13 MR. MARCKWALD: We talked a little bit about 14 expansion to interstate locomotives. Because it's not 15 before you today, I don't want to spend a lot of time. I 16 know you have other things to get on to. But basically I 17 think staff alluded to -- and just a final bullet on the 18 staff -- that the staff in its staff report suggested that 19 requiring interstate locomotives to fuel with CARB diesel 20 might increase the purchase of U.S.EPA non-road diesel 21 prior to entering California, thus reducing potential 22 benefits of this option. And that's on page 15 of your 23 staff report. We believe that's an accurate conclusion. 24 And when and if that ever comes before you, we'll be 25 prepared to explain why that is the case. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 --o0o-- 2 MR. MARCKWALD: So, in summary, I believe the 3 railroads have repeatedly demonstrated a willingness to be 4 part of the solution. We engaged in a cooperative effort 5 with the U.S.EPA to establish the first standards. We 6 engaged in a cooperative effort with your agency to do a 7 fleet average agreement. I think in the fuels area that 8 it's no exception. The AR an its members support the 9 staff proposals. They take seriously the opportunity to 10 be the environmentally preferable mode of choice. And we 11 intend to maintain that in the decades ahead. 12 Thank you so much. I'd happy be happy to answer 13 any questions. 14 CHAIRPERSON LLOYD: Thank you. 15 Any questions? 16 Just a comment -- oh, Supervisor Roberts. 17 BOARD MEMBER ROBERTS: Well, I'm just puzzled by 18 the vast difference in projected costs of this, the 3 19 cents per 21 cents. And I was wondering if staff might 20 comment further on that. 21 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 22 CHIEF SIMEROTH: Supervisor Roberts, this is the first 23 time we've seen the 21 cents. Our best ability to look at 24 the impacts is to look at the costs of production and some 25 reasonable distribution costs, and that represents our 3 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 cents. It costs about 3 cents more to produce over what 2 been allowed to buy. 3 Then you get into that a lot of their purchases 4 are on contract, which we don't have access to the terms 5 of the contract or how they negotiated the contracts. We 6 still feel that the range that we looked at, the 3 to 10 7 cents, represents the difference in cost of production and 8 the reasonable distribution impact. 9 Twenty-one cents is getting into things we don't 10 have access to evaluate. 11 MR. MARCKWALD: I mean I would just reinforce 12 what Mr. Simeroth said. I think the assumption is on the 13 direct fuel cost of buying at the spot versus buying on 14 contract. And that probably attributes 5 or 6 cents. And 15 then the second element was the staff's proposal does not 16 include the ratio required for direct-to-locomotive 17 fueling, the additional costs that come about from that. 18 First you buy the fuel, and then you have to get it into 19 the units because these units are not located necessarily 20 by pipelines. And if you're trucking CARB diesel to those 21 units, that we think that it's somewhere about a dime. 22 And so at the extreme where you had a long contract and a 23 long haul for direct-to-locomotive fueling or used a high 24 portion to direct-to-locomotive fueling, that would be the 25 difference of where the staff has one view, we have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 another. 2 CHAIRPERSON LLOYD: At this point -- is that 3 okay? 4 BOARD MEMBER ROBERTS: Yeah, I'll ponder that 5 one. 6 CHAIRPERSON LLOYD: Well, I would like to keep 7 the witness here to come back. But as previously 8 announced, we have a very distinguished, important 9 gathering at the rear of the room. So as I previously 10 announced, we'll take a short recess and welcome -- and 11 turn it over to Secretary Terry Tamminen who will 12 introduce and share in this. 13 But I would like everybody, if they could, sit 14 down, take some seats. And I'll turn it over to the 15 Secretary at this stage. 16 (Thereupon a recess was taken.) 17 CHAIRPERSON LLOYD: Well, I'd like to continue 18 again. That was a very nice ceremony. 19 So one of my colleagues -- one question I had, 20 Kirk, on that -- you showed very impressive numbers. But 21 as we've seen, the key issues is moving from some of the 22 issues that we talked about during the MOU when we looked 23 at NOx and particulates as a regional, and on the SIP. 24 But while you -- you know, you can have a significant 25 reduction in emissions, at some of the railroads obviously PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 it's no comfort to people there if they're impacted by 2 those emissions. And I'm aware that you're, you know, 3 working with great diligence, or at least the members, 4 with staff to try to recognize that difference and how 5 things have changed there. 6 So I was pleased to see that. And also pleased 7 to see that you're trying some out of the new 8 technologies, which I think has been very important. 9 I'd just like to get back to the other issue that 10 you raised there. And I -- again, on the face of it I was 11 interested in looking at extending this to interstate. In 12 talking with staff and whatnot, it's -- and knowing Mr. 13 Scheible, how carefully he looks at this, and I guess he 14 sees some of the downsides of that piece of it. 15 So I guess -- I don't know, Mr. Scheible, if you 16 want to commend on that piece of it at all. And clearly 17 that's staff's considered opinion that it could have a 18 potential unintended consequence at least in the near term 19 on that. 20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right. 21 Because the current situation means that the railroads buy 22 the bulk of the fuel that their locomotives burn in 23 California in California. And they will be getting, when 24 they do that, CARB diesel for intrastate locomotives and a 25 combination of CARB diesel and U.S.EPA low sulfur on-road PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 diesel for the rest of their fleet. If the economics turn 2 around, they have the ability to buy much of their fuel 3 outside of the state. And were they to do that, we would 4 actually see via this regulation a potential for a loss in 5 net benefits of over what we have today rather than a gain 6 in benefits. And we felt that since that was a practice 7 that we're relying on the current economics to keep the 8 better fuel sales in California, that we -- it was ill 9 advised for us to make a proposal that might change that. 10 CHAIRPERSON LLOYD: Yeah. I guess this also 11 reflects ARB's experience over the years that you've got 12 to -- these things have to be handled very carefully as we 13 talk about that mix and whatnot. 14 Any questions from my colleagues. 15 No. 16 MR. MARCKWALD: Mr. Chairman -- 17 CHAIRPERSON LLOYD: Yes. 18 MR. MARCKWALD: -- if I might, just to go to your 19 first point. 20 Clearly the enforceable MOU on NOx sets the 21 foundation for further progress in urban areas. And we 22 have looked mostly at the South Coast, but we're certainly 23 looking at rail yards throughout the state. It's 24 something the railroads take seriously. Looking at a 25 combination of operating practices, perhaps some new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 technologies, fuels are clearly a piece of the puzzle why 2 we're here to support your staff's rule today. But I give 3 you my assurances and the Association's assurances that we 4 know this is an issue, and I think we'll approach it with 5 the same comprehensive nature and the same forthrightness 6 that we did when we addressed the NOx issue. 7 CHAIRPERSON LLOYD: Well, thank you. 8 And, again, I'm impressed also to see the 9 commitment here to some of the longer term work and to 10 understand some of the issues, also to work with some of 11 the particulate filters and try to learn from some 12 experience in Switzerland and how that works out here and 13 whatnot. 14 So, again, it can't come fast enough, but thank 15 you. 16 MR. MARCKWALD: Well, and thank you and your 17 staff's leadership in looking at really the next 18 generation, which doesn't really relate to cargo handling 19 or locomotives or trucks, but really looks at the system 20 of how goods move throughout the state, how can you create 21 incentives, how do you ensure we're not sending signals 22 inadvertently that in fact move things less 23 environmentally soundly than more so. And as you convene 24 your work on that, we stand ready to be fully engaged in 25 that discussion as well. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 CHAIRPERSON LLOYD: We rely on your help for 2 that. 3 Thank you. 4 MR. MARCKWALD: Thank you. 5 CHAIRPERSON LLOYD: Diane Bailey, Don Anair, 6 Bonnie Holmes-Gen. 7 MS. BAILEY: Good morning, Chairman Lloyd, 8 members of the Board. 9 CHAIRPERSON LLOYD: Put your mike on. 10 MS. BAILEY: Good morning. My name is Diane 11 Bailey and I'm a scientist with the Natural Resources 12 Defense Council. And I'm here today in very strong 13 support of this rule. 14 We came before you in July of 2003 very 15 disappointed that locomotives and marine vessels were left 16 out of that low sulfur diesel rule. And we're pleasantly 17 surprised that staff came back with a rule addressing 18 those sources so quickly. So I can't emphasize how 19 pleased we are with this rule, and we urge your adoption 20 of it. 21 Since we've signed on two written comments, I'll 22 keep my comments very brief. And you've heard so much 23 already on how important this rule is and why. 24 But I just want to add to that that the recent 25 release last month of the Roseville rail yard risk study PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 really highlights the importance of this rule. What that 2 study showed is extremely high risk in wide swathes around 3 the Roseville rail yard. And it's unclear whether those 4 high risk exist at every rail yard in California, but I 5 think it's very important to start addressing these 6 under-regulated sources, both the locomotives and the 7 marine vessels. 8 And there are so many Californians that are 9 exposed to these sources, both around the rail yards on 10 Commerce and Vernon and Colton and elsewhere. And also in 11 the busy harbor areas, in San Pedro and Wilmington and 12 West Oakland. 13 And so we really hope to see the Board continue 14 on this path of addressing these important sources. 15 Especially if there is a vacuum of regulatory work on 16 these sources at the federal level, we really hope to see 17 California step in and address these important sources. 18 And, in particular, we hope to see some idling rules 19 developed for locomotives. 20 I know that this is a difficult area because of 21 potential federal preemption. But we hope to see staff 22 explore that. 23 And that's really I have. Thank you. 24 CHAIRPERSON LLOYD: Thanks, Diane. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 Don Anair, Bonnie Holmes-Gen, Thomas Christofk. 2 MR. ANAIR: Good morning. I'm Don Anair. I'm 3 with the Union of Concerned Scientists. And we also sign 4 on to the letter of support that Diane mentioned. 5 I just wanted to highlight some of the comments. 6 Diane mentioned some of those. We're pleased to see that 7 CARB is addressing the marine and locomotive sources that 8 were left out of the original diesel regulation. 9 Just to reiterate, diesel emissions continue to 10 contribute to California's unhealthy air. This year we 11 estimate nearly 3,000 Californians will die prematurely 12 from diesel PM and nitrogen oxide emissions. So this rule 13 is important, as all of these diesel PM and nitrogen oxide 14 rules are. 15 Especially, 16 percent -- today we learned 16 16 percent of diesel PM comes from marine and locomotives. 17 And that's expected to grow over time. So it kind of 18 highlights the importance of this sector. 19 Also Diane mentioned the Roseville rail yard 20 study showing elevated cancer risk for thousands of people 21 that live nearby this rail yard. 22 And also I just wanted to mention that the use of 23 low sulfur fuel in these sources, locomotives and marine 24 vessels, will allow the use of technology -- retrofit 25 technology in the future to further reduce PM and nitrogen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 oxide emissions. So this is an important first step in 2 reducing -- further reducing emissions from these sources. 3 And, finally, I just wanted to compliment staff 4 and the Board for moving forward with clean diesel for 5 these sources. 6 Thank you. 7 CHAIRPERSON LLOYD: Thank you very much. 8 Bonnie Holmes-Gen, Thomas Christofk, Charlie 9 Peters. 10 MS. HOLMES-GEN: Good morning. I'm pleased to be 11 here in the Byron Sher Room to testify in support of this 12 regulation. Bonnie Holmes-Gen with the American Lung 13 Association of California. 14 And we also believe this regulation is an 15 important step forward in our diesel pollution control 16 program. And it's especially important because we have so 17 far to go in controlling diesel pollution from off-road 18 engines. We have a long way to go in that area, and this 19 is an important step forward. 20 And you've heard many times the health 21 statistics, and know them very well, about the premature 22 deaths that are associated with diesel particulate. But 23 it's important to also note that this week -- in fact on 24 Tuesday the Journal of the American Medical Association 25 published a landmark new study linking ozone exposures to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 premature deaths in 95 cities across the nation. And many 2 of those cities are in California. And this tells us that 3 the health risks from ozone is even greater than we had 4 known previously. And we need to do even more to reduce 5 the public's exposure to ozone. And of course diesel 6 pollution, in addition to emitting particulate, of course 7 is important -- emits NOx, which is an important ozone 8 precursor. So the premature death estimates that you're 9 hearing are even lower than we're actually experiencing 10 because of the additional ozone-related mortality. 11 So we need to move forward quickly. We are 12 especially concerned about the need to move forward in all 13 areas of goods movement. There's been a growing awareness 14 that this is the key area where we need to make progress 15 in diesel pollution control, in goods movement including 16 ports, rail, air ports, marine vessels. And your staff 17 has listed out many of the key strategies that can be 18 pursued. 19 And I just wanted to make the point that this is 20 an area where the Board really needs to take leadership. 21 There are huge emission reductions to be captured. There 22 are large environmental justice impacts that you're, I 23 know, aware of for communities that live close to ports 24 and rail yards, airports and other sources. And 25 California needs to take the lead, because of course we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 just not seeing enough movement on this at the federal 2 level. 3 So we would be interested to work with you in 4 putting together this major initiative. It sounds like 5 the administration is already moving forward on ports. 6 But we need the broader initiative. We need to look at 7 all of these areas in a comprehensive way. And the Air 8 Board really needs to be the leader on this. 9 So we look forward to working on that. 10 CHAIRPERSON LLOYD: Thank you very much, Bonnie. 11 I think you herd staff said they're ready to 12 go -- they're going. 13 Thomas Christofk and Charlie Peters. 14 MR. CHRISTOFK: Thank you, Mr. Chairman. My name 15 is Thomas Christofk. I'm the Air Pollution Control 16 Officer for the Placer County Air Pollution Control 17 District. And I'm here representing both CAPCOA and 18 Placer County. 19 And we're pleased to see staff bring this 20 proposed regulation forward. We strongly support it. As 21 a CAPCOA board member, we actually concur with Mr. 22 Wuebben's remarks from South Coast. We strongly support 23 it. We do believe that the harborcraft provisions might 24 be considered to be accelerated to apply statewide, 25 effective January 2006. And we also would encourage the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 interstate locomotive aspects to be considered to have 2 this regulation apply. 3 With respect to Placer County, we are host to the 4 largest rail facility in the western United States. About 5 46,000 locomotives pass through the Roseville rail 6 facility on an annual basis. There's a thousand tons of 7 NOx that emanate from that facility per year, about three 8 tons per day; and with respect to line hauls and the 9 switchers in Placer County, about eight -- between eight 10 and nine tons of NOx, which is 25 percent of my emissions 11 inventory. So it's a huge source for Placer County. And 12 any benefit that we get with NOx reductions and PM 13 reductions are going to certainly benefit my county in 14 terms of attainment. And certainly with respect to the 15 PM, I'm expressly interested in measures to control and 16 reduce PM because of the elevated health risk from the 17 rail yard and the study results that staff provided to our 18 district last month. 19 And I am working very closely with Union Pacific 20 to look at measures -- mitigation measures. And this 21 certainly would fit right into the agreement and the 22 strategies that we're looking at. 23 So we definitely encourage, as CAPCOA, and I 24 personally encourage you, to adopt this regulation. 25 Thank you for your time. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 CHAIRPERSON LLOYD: Thanks very much, Tom. 2 Appreciate your work out there as well working with us. 3 Charlie Peters. 4 MR. PETERS: Yes, Mr. Chairman and Board. I'm 5 Charlie Peters, Clean Air Performance Professionals. We 6 represent motorists. 7 I heard testimony here today, and I just couldn't 8 resist. I had to get up and see if I couldn't add a 9 little bit to the questions about the mandate of 10 oxygenates in our fuels in California. 11 Very much appreciated the Chairman and virtually 12 a very broad-based California constituency that has 13 supported that relief. I just find it amazing that we're 14 continuing to just blame this on the fed. Here I have an 15 April 2nd letter to the President of the United States, 16 signed on by Mr. Waxman and several of our Congress folks, 17 indicating that the Secretary of Energy indicated that 18 they were going to give consideration to our waiver. And 19 that particular -- the following day the price of crude 20 oil went down 4.2 percent in the futures market, price of 21 gasoline went down 5.2 percent in one day just with the 22 thought that we might consider that. 23 So the cost, the environmental impacts, its 24 effect on older cars, which is probably negative, clear 25 down to we're using the product off the generation of -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 corn generation of ethanol that may very well be 2 significantly affecting our beef. 3 CHAIRPERSON LLOYD: Charlie, it would be helpful 4 if you could reserve this. The next item relates to RFG. 5 And I think the oxygenate question's appropriate in that 6 context rather than the diesel rule, if you wouldn't mind 7 coming back. 8 MR. PETERS: Well, I just was delighted to hear 9 that British Petroleum even indicated that they would use 10 financial issues and that that would reduce the amount of 11 oxygenates in our fuel. And I just appreciated you 12 bringing that issue up in talking with the gentleman from 13 British Petroleum. 14 CHAIRPERSON LLOYD: Yeah, I will. Thank you. 15 Hopefully the next item after lunch will be 16 appropriate for that issue to be raised. 17 One question I had of -- I guess we have no more 18 witnesses. The one question I had was a letter that we 19 had a very brief discussion with WSPA on some of the 20 calibrating of costs, and look at that on a more 21 consistent basis. 22 Is staff working with WSPA to iron that issue 23 out? 24 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 25 CHIEF SIMEROTH: Dr. Lloyd, we had two phone calls with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 WSPA yesterday to further address this. I think we 2 basically reached an understanding on how to do this. We 3 overcounted some sulfate emission reductions that we 4 probably shouldn't have. It will not significantly change 5 the cost effectiveness calculation. 6 CHAIRPERSON LLOYD: So we're discussing that -- 7 so this issue can get resolved quick? 8 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 9 CHIEF SIMEROTH: Oh, yes, Dr. Lloyd. 10 CHAIRPERSON LLOYD: Great. Thank you very much. 11 I guess any -- I guess we'll take some more 12 comments. Are there any more comments from staff? 13 So I will now close the record on this agenda 14 item. However the record will be reopened when the 15-day 15 notice of public availability is issued. 16 Written or oral comments received after this 17 hearing date but before the 15-day notice issued will not 18 accepted as part of the official record on this agenda 19 item. When the record is reopened for a 15-day comment 20 period, the public may submit written comments on the 21 proposed changes, which will be considered and responded 22 to in the final statement of reasons for the regulation. 23 Before I entertain further discussion on the 24 motion, any ex parte communications? 25 Supervisor DeSaulnier. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 BOARD MEMBER DeSAULNIER: Yes, Mr. Chairman. I 2 had a conversation -- a phone conversation with Kirk 3 Marckwald yesterday that was consistent with his testimony 4 today. 5 CHAIRPERSON LLOYD: Ms. Berg. 6 BOARD MEMBER BERG: Yes, I had a meeting a 7 meeting with the Western States Petroleum Association on 8 November 9th at Ellis Paint Company in Los Angeles. In 9 attendance was Joe Sparano, President of WSPA, and David 10 Lee with Exxon-Mobil; and it's consistent with their 11 letter that's been entered into the testimony. 12 CHAIRPERSON LLOYD: Dr. Gong. 13 BOARD MEMBER GONG: Yes. I also had a meeting 14 with Joe Sparano and David Lee from Western States 15 Petroleum Association at my office in Downey, California, 16 on November 9th of this year. And consistent again with 17 their letter. 18 I also had a meeting with Kirk Marckwald of the 19 California Environmental Associates yesterday, November 20 17th, consistent with his presentation today. 21 CHAIRPERSON LLOYD: Thank you. 22 I also had a meeting yesterday with a 23 representative of the railroads and also representative of 24 WSPA, and brought up items consistent with the testimony 25 today, including the last item I asked board -- the staff PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 to look into. 2 BOARD MEMBER RIORDAN: None. 3 CHAIRPERSON LLOYD: Mayor Loveridge. 4 BOARD MEMBER LOVERIDGE: I did have a 5 conversation with both WSPA and railroad consistent with 6 the comments made the Board members. 7 CHAIRPERSON LLOYD: Thank you. 8 Again, I'm going to congratulate staff here, by 9 the way. It's amazing. I think you've done a wonderful 10 job to have all stakeholders essentially praising you 11 here, with some, you know, slight things. But it was 12 very, very good, on a difficult issue. And for Diane 13 Bailey to come back and express amazement how quickly 14 staff worked, that also is a real compliment to you, 15 staff. So you did a great job. 16 With that, any more discussion? Otherwise I'm 17 going to entertain a motion. 18 BOARD MEMBER D'ADAMO: I move the adoption of 19 Resolution 04-38, with the addition that staff come back 20 on the items that we've discussed previously some time 21 early next year. 22 BOARD MEMBER RIORDAN: I would like to second the 23 motion. 24 CHAIRPERSON LLOYD: January. 25 So we have a second. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 Any further discussion? 2 All in favor say aye. 3 (Ayes.) 4 CHAIRPERSON LLOYD: Anybody against? 5 Thank you very much. 6 Well, we'll now take -- it's 12 o'clock. We'll 7 take probably a 40-minute break for lunch. 8 So we will reassemble at 12:40 by the clock 9 there. 10 (Thereupon a lunch break was taken.) 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 AFTERNOON SESSION 2 CHAIRPERSON LLOYD: Start back on the next agenda 3 item, which is 04-10-4, proposed amendments to the 4 California reformulated Gasoline Regulations. 5 In 1999 the Board approved the California Phase 6 III Reformulated Gasoline Regulations, banning the use of 7 methyl tertiary butyl ether, commonly known as MTBE, and 8 other oxygenates, except ethanol, from California 9 gasoline. As a result, today all California gasoline is 10 MTBE free. 11 Today staff is proposing minor technical changes 12 to clarify various parts of the Regulation. Staff will 13 also report on the overall implementation status as part 14 of this agenda item. 15 I will now ask our Executive Officer, Catherine 16 Witherspoon, to introduce the item and to begin staff 17 presentation. 18 EXECUTIVE OFFICER WITHERSPOON: Thank you, 19 Chairman Lloyd. 20 Today's presentation will be given in two parts. 21 First, staff will present the last update on 22 implementation of the Phase III reformulated gasoline 23 regulations, including the results of a recently completed 24 ethanol permeation study that was co-sponsored by the 25 Coordinating Research Council and ARB. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 Staff will then present additional refinements to 2 the Phase III reformulated gasoline regulations, including 3 clarifications, corrections, and improvements in 4 compliance flexibility and enforceability. 5 At this time I'll ask Mr. Win Setiawan of the 6 Stationary Source Division make the presentation. 7 (Thereupon an overhead presentation was 8 Presented as follows.) 9 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Thank 10 you, Ms. Witherspoon. Good afternoon, Mr. Chairman and 11 members of the Board. 12 Welcome to Byron Sher Auditorium. 13 (Laughter.) 14 CHAIRPERSON LLOYD: Very good. 15 (Laughter.) 16 STATIONARY SOURCE DIVISION STAFF SETIAWAN: 17 Today's presentation will be given in two parts. 18 The first part I will present an update on the 19 implementation of the California Phase III reformulated 20 gasoline regulations, which will include the result of a 21 recently completed ethanol permeation study. 22 Then I will describe the staff's proposal 23 regarding the Phase III regulations. 24 --o0o-- 25 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Now, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 I will begin by providing some background information 2 regarding California Reformulated Gasoline Program. 3 --o0o-- 4 STATIONARY SOURCE DIVISION STAFF SETIAWAN: 5 Vehicles are major contributors to California's 6 air quality problems. In the past 20 years the number of 7 miles driven by Californians has increased at a faster 8 rate than the rate of population growth. Over 90 percent 9 of Californians still breathe unhealthy air. 10 --o0o-- 11 STATIONARY SOURCE DIVISION STAFF SETIAWAN: As 12 can be seen in this graph, gasoline consumption in the 13 states has risen steadily from about 860,000 barrels per 14 day in 1992 to over a million barrels of gasoline per day 15 now. This increase in consumption is expected to continue 16 into the foreseeable future at the rate of about one and a 17 half percent per year. 18 --o0o-- 19 STATIONARY SOURCE DIVISION STAFF SETIAWAN: This 20 slide shows gasoline rack price in the west coast for the 21 last four years. On average, gasoline rack price in 22 California is comparable to those in Las Vegas, Phoenix, 23 and Portland. 24 --o0o-- 25 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 Air Resources Board treats fuel and vehicle emission 2 control technology as an integrated system, and it has 3 been developing flexible fuel regulations. 4 --o0o-- 5 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 6 Board has a long history of regulating fuel properties to 7 reduce emissions, beginning in 1971 with the introduction 8 of vehicle evaporative controls, carbon cannisters, and 9 fuel volatility control. 10 --o0o-- 11 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 12 California Phase II Reformulated Gasoline Regulations, 13 adopted in 1991 and implemented in 1996, set limits of 14 eight fuel properties, the most extensive set of 15 specifications in the world. 16 --o0o-- 17 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 18 Phase II Reformulated Gasoline Program is one of the most 19 significant emission reduction measures ever undertaken in 20 this state. It has reduced smog forming emissions by 21 about 300 tons per day, equivalent to removing 3.5 million 22 vehicles from California roads. And has cut benzene 23 emissions in half. 24 The program has reduced potential cancer risks 25 from toxic exposure by about 40 percent. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 Unlike new vehicle standards, emission benefits 2 from fuel regulations are realized as soon as the fuel is 3 introduced. 4 --o0o-- 5 STATIONARY SOURCE DIVISION STAFF SETIAWAN: I 6 will now provide you with an update on the implementation 7 of the California Phase III Reformulated Gasoline 8 Regulations. 9 --o0o-- 10 STATIONARY SOURCE DIVISION STAFF SETIAWAN: In 11 1999, this Board approved the Phase III regulations. 12 These regulations prohibited the addition of MTBE or other 13 oxygenates, except ethanol, to California gasoline 14 beginning December 31st, 2003. 15 The Phase III regulations provide refiners with 16 additional flexibility to reduce gasoline with or without 17 ethanol as MTBE is phased out. 18 --o0o-- 19 STATIONARY SOURCE DIVISION STAFF SETIAWAN: In 20 1999, there were several follow-up items which needed to 21 be addressed. These follow-up items are contained in 22 Board Resolution 99-39. 23 Some items, such as the effect of commingling, 24 the mixing of oxygenate and non-oxygenate reformulated 25 gasolines, had been addressed. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 An update of the remaining items shown here will 2 be addressed today. 3 --o0o-- 4 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 5 Federal Reformulated Gasoline Program requires that 6 gasoline sold in the smoggiest areas of the nation contain 7 at least 2 percent oxygen. This requirement applies to 8 approximately 80 percent of gasoline sold today in 9 California. Because of the MTBE phase-out and the federal 10 oxygenate requirement, ethanol is now the only oxygenate 11 used to produce gasoline in the state. 12 --o0o-- 13 STATIONARY SOURCE DIVISION STAFF SETIAWAN: As 14 you may be aware, in response to U.S.EPA's denial of 15 California's waiver request from the federal oxygenate 16 requirement, the ARB and California Attorney General's 17 Office sued the U.S.EPA in federal court. 18 In July last year the 9th Circuit Court vacated 19 the U.S.EPA's decision. Early this year Governor 20 Schwarzenegger sent a letter requesting an immediate 21 waiver be granted. In addition, Secretary Tamminen has 22 provided new supporting document. However, the U.S.EPA 23 has not responded to this latest request. 24 --o0o-- 25 STATIONARY SOURCE DIVISION STAFF SETIAWAN: A PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 waiver would benefit refiners by reducing production costs 2 and increasing flexibility to produce gasoline, consumers 3 by affording the refiners with more options to produce 4 fuel, and the environment by reducing criteria pollutant 5 emissions such as hydrocarbons, nitrogen oxides, and 6 particulate. 7 --o0o-- 8 STATIONARY SOURCE DIVISION STAFF SETIAWAN: While 9 some refiners object to phase out MTBE early, it was not 10 until beginning of this year that all refiners were able 11 to fully comply with the Phase III regulations. It has 12 been a success story. The transition went smoothly. As a 13 result, today all California gasoline is MTBE free. 14 MTBE phase-out has led the California consumption 15 of ethanol of about 900 million gallons per year, almost 16 all of which must be imported from the midwest states. 17 --o0o-- 18 STATIONARY SOURCE DIVISION STAFF SETIAWAN: This 19 last summer marked the first ozone control season when the 20 Phase III gasoline was fully implemented. The ARB 21 enforcement data from refiners presented us with a view of 22 what Phase III gasoline properties are like. On average, 23 sulfur, the one single gasoline property that reduces all 24 pollutant emissions including toxic, has gone down from 22 25 to 9 parts per million by weight, less than half of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 Phase II gasoline levels. 2 --o0o-- 3 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Now 4 I'll present to you the result of ethanol permeation study 5 completed last September. 6 --o0o-- 7 STATIONARY SOURCE DIVISION STAFF SETIAWAN: This 8 study was started in 2002, was sponsored by the Air 9 Resources Board and the Coordinating Research Council, 10 that represents car manufacturers and all companies. The 11 objective is to measure evaporative emission of gasoline 12 compounds that might reduce soft fuel system components. 13 These emissions are also called permeation emissions. 14 The steering committee included representatives 15 from car manufacturers, oil companies, ethanol industry 16 and the ARB. 17 Ten vehicles were randomly selected to present 18 approximately equal percentile of California vehicle fleet 19 from model year 1978 to 2001. Vehicle fuel system 20 evaporative emissions from two oxygenated gasoline, MTBE 21 and ethanol, as well as a non-oxygenated gasolines were 22 compared. 23 The tests were conducted following the same 24 protocol of the California two-day diurnal test and two 25 state temperature tests PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 --o0o-- 2 STATIONARY SOURCE DIVISION STAFF SETIAWAN: 3 In order to measure permeation from vehicle's 4 fuel system as accurately as possible inside a shed, a 5 special design rate was used to hold fuel system 6 components as they were found in the vehicle in their 7 relative positions. 8 This fuel component had to be carefully removed 9 from the vehicle body to preserve the original conditions. 10 Because of this setup, only fuel compounds migrating to 11 the soft plastic fuel components were measured. Emissions 12 from other sources, such as fuel tank's charcoal canister 13 of fuel cap, were either vented out or completely sealed. 14 --o0o-- 15 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 16 results show that all vehicles experienced higher diurnal 17 emissions when tested on ethanol fuel than MTBE. Similar 18 results were shown in 9 out of 10 vehicles when tested on 19 non-oxygenated fuel. On average, ethanol permeation is 20 about 65 percent or 1.4 grams per vehicle per day higher 21 relative to MTBE fuel, and 45 percent or 1.1 grams per 22 vehicle per day more than the non-oxygenated fuel. 23 This result is statistically significant and 24 consistent with findings from other studies. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 STATIONARY SOURCE DIVISION STAFF SETIAWAN: A 2 second phase of the permeation study is currently being 3 planned. This phase, which is expected to be completed 4 late next year, will include new vehicle technologies such 5 as LEV II and PZEV and some other fuel compositions that 6 were not included in the first phase. 7 Mr. Harold Haskew, the principal investigator and 8 architect of this study, is here today. And he is 9 available after my presentation to respond to any 10 questions or comments you may have regarding this test 11 program. 12 --o0o-- 13 STATIONARY SOURCE DIVISION STAFF SETIAWAN: In 14 order to estimate the impact of increased permeation on 15 the vehicle emission inventory, the result of the study 16 must be adjusted. Vehicle activity and fuel temperature 17 data must be integrated to find an appropriate temporal 18 and spatial distribution of emissions. However, a 19 preliminary estimate suggests that permeation emissions 20 from ethanol use could potentially add 40 to 50 tons per 21 day of hydrocarbon from gasoline vehicles statewide in 22 2004. 23 This represents approximately a 7-percent 24 increase in total hydrocarbon emissions from the on-road 25 gasoline fleet. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 --o0o-- 2 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Motor 3 vehicles are not the only source of permeation emissions. 4 Data from other sources indicate that. That permeation 5 could add another 10 to 20 tons per day of hydrocarbon 6 emissions statewide. This does not include other sources 7 where data do not exist yet. 8 --o0o-- 9 STATIONARY SOURCE DIVISION STAFF SETIAWAN: 10 Overall, ethanol permeation including some from 11 off-road source could increase evaporative hydrocarbon 12 emissions by about 50 to 60 tons per day statewide. 13 Although new vehicle standards will help alleviate the 14 future hydrocarbon's increase to some extent, a 15 substantial portion of the increase will come from the 16 older vehicle well into the future. As a result, the 17 hydrocarbon increase from ethanol permeation is projected 18 to affect emission inventory into the foreseeable future. 19 As the earliest slide on fuel properties 20 indicates, there is probably very limited ability to 21 further reformulated gasoline to offset the permeation 22 impact. However, staff will report back to you next year 23 on options to mitigate the impact. 24 These options include: 25 Resubmit our waiver request to the U.S.EPA. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 waiver would allow flexibility to produce gasoline to 2 minimize the impact. And develop and propose 3 non-traditional approach to addressing the impact. 4 --o0o-- 5 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Now I 6 will describe staff's proposal to amend the Phase III 7 regulations. 8 --o0o-- 9 STATIONARY SOURCE DIVISION STAFF SETIAWAN: These 10 proposed amendments represent minor changes to the 11 existing regulations, the objective is to clarify the 12 regu -- to clarify the regulatory language to be 13 consistent with the intended goals of the regulations, to 14 correct minor errors, and to improve enforceability. 15 These modifications include: Adding provisions to allow 16 transmix and small amount of ethanol gasoline to be 17 blended into CARBOB. These provisions are similar to 18 those that were available under the Phase II regulations. 19 --o0o-- 20 STATIONARY SOURCE DIVISION STAFF SETIAWAN: Other 21 changes include revising the RVP requirement schedule for 22 gasoline produced in the northern part of the state for 23 use in the south, simplify recordkeeping for CARBOB 24 importers and denatured ethanol suppliers, and 25 miscellaneous minor changes. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 --o0o-- 2 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 3 proposed changes will not significantly affect the 4 formulation of California gasoline. The basic prohibition 5 against adding MTBE or other oxygenates that could affect 6 water quality remain unchanged. There would be no 7 significant negative environmental impact. 8 This proposal is not expected to have any 9 negative economy impacts. In fact, there could be 10 potential benefits by improving enforcement language and 11 removing unintended barriers to the distribution and 12 marketing of gasoline. 13 --o0o-- 14 STATIONARY SOURCE DIVISION STAFF SETIAWAN: The 15 staff recommends that the Board adopt the proposed 16 amendments to the Phase III gasoline regulations. 17 This concludes my presentation. Thank you for 18 your kind attention. 19 CHAIRPERSON LLOYD: Thank you very much. 20 A quick question on slide 22, which talks 21 about -- and maybe Harold is the one to address that. It 22 says that for non-oxy fuels that the emissions are higher 23 on almost all vehicles. 24 Is any characteristic on vehicles which were not? 25 So what we're saying there, that even if we got oxygen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 out, that there would be maybe higher emissions. Is that 2 a right deduction or not? 3 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 4 CHIEF SIMEROTH: Dr. Lloyd, there was only one vehicle in 5 the test program where they did not show a reduction in 6 emissions going from ethanol to either non-oxy or MTBE. 7 In that case it was -- the effect only showed up on the 8 oxygenated fuel -- or non-oxygenated fuel. Excuse me. 9 We're not sure what happened to that vehicle. The vehicle 10 otherwise performed as all the other nine vehicles did. 11 Don't have a good explanation. Maybe Harold could 12 collaborate on this. 13 It still showed for the non-oxygenated gasoline 14 that the ethanol gasoline had 45 percent more emissions. 15 The non-oxygen compared to the MTBE basically would have 16 the same emissions impact. The difference between 1.l and 17 1.4 would not be statistically significant. 18 CHAIRPERSON LLOYD: And the other question there, 19 I guess -- I think I've asked you before. But the make-up 20 of the VOC permeation emission is similar to gasoline? 21 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 22 CHIEF SIMEROTH: We originally went into this testing 23 thinking that most of the evaporative emissions with the 24 increased permeation would be ethanol. Somewhat to our 25 surprise we found out that it was more representative of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 the gasoline than ethanol. Ethanol was a constituent, but 2 you also had other constituents of gasoline coming through 3 as well. 4 CHAIRPERSON LLOYD: Harold, feel free to come up. 5 MR. HASKEW: Thank you, Dr. Lloyd. I'm Harold 6 Haskew, President of Harold Haskew and Associates. And I 7 am an independent consultant who was the principal project 8 administrator on this study. 9 I want to compliment CARB and CRC for the 10 resources devoted to this. And including CRC in that 11 program brought a lot of technical help that was really a 12 pleasure to work with. 13 We speciated, Dr. Lloyd, all of the shed samples 14 and looked at the individual molecules because that was of 15 great interest to us. Having done that, we were able to 16 calculate specific reactivity using the Carter methods as 17 recommended by CARB. 18 And we're surprised, if I can just elaborate on 19 what Dean just said, that the increase in hydrocarbons -- 20 or the increase in total emissions when we went from MTBE 21 to ethanol wasn't just ethanol. Only about half of the 22 increase was ethanol. So for some cumulative reason the 23 ethanol is increasing the other hydrocarbons as well. 24 We've discussed that at length with people who 25 know this kind of business. And I think it's clear to say PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 we don't understand why. But it was true on all ten 2 vehicles, and we think it's fundamental. 3 We came out with another understanding that the 4 permeate looks almost identical to liquid gasoline. And 5 permeation studies or speciation studies we've been doing 6 of the environment and identifying as leaks at the Board. 7 And I've heard presentations where people say there's a 8 lot of leaking liquid gasoline. Well, it turns out 9 speciation -- the speciation of the shed permeate looks 10 just like the liquid, unlike vapor, which were the 11 assumptions that we had had all along. 12 So I think there have been a lot of things that 13 have come out of this study that have benefited and of 14 course teased you to say, as any consultant would say, 15 more research is required. We do have a second level 16 approved, it's being funded by CRC, to follow up with 17 comparisons of California RFG3 E6, as I call it -- 6 18 percent ethanol -- and federal E10, as well as the E0. 19 And we also have just added an E85 vehicle. 20 We've never measured the impact of permeation or 21 evaporative emissions with E85 fuel. I think that will a 22 welcome addition to the knowledge. 23 CHAIRPERSON LLOYD: The other part, I know that 24 staff said they're coming back to the Board next year with 25 a better estimate of quantification of the permeation PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 effect and then what to do about the mitigation. 2 Obviously we have to make up for that. 3 What is your feeling though -- and I know you've 4 got -- those of the Board members who don't know Harold, I 5 mean he's had extensive experience with GM over the years. 6 And so he's been of great service to the Board in his 7 current capacity to retired. Very knowledgeable on the 8 issue. 9 Do you feel that this is something that we can 10 mitigate once we obviously we'd recognize it's an issue 11 now and that we can control it on the vehicles, 12 particularly the newer vehicles? 13 MR. HASKEW: No. 14 CHAIRPERSON LLOYD: You don't think there's any 15 way of -- 16 MR. HASKEW: No. You have -- I'm an engineer. 17 I'm not a lawyer or a politician. Okay? 18 CHAIRPERSON LLOYD: Well, that's why you give a 19 straight answer, I can see. 20 (Laughter.) 21 MR. HASKEW: If I read the Clean Air Act, it says 22 that the administrator in the Clean Air Act amendments can 23 grant an exemption from the RFG requirements if the state 24 shows that that exemption is necessary to meet their air 25 quality plan. I mean we have got peer-reviewed undeniable PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 indications -- conclusions that the ethanol is increasing 2 the evaporative emissions in the State of California. And 3 how the government -- how the EPA administrator would not 4 grant that waiver baffles me. But there is another world 5 in the universe that those decisions get made in. 6 But I think you have an extremely strong -- see, 7 we published this data September 10th. It had been kept 8 very close until this last September. We are wrestling 9 with -- and while modeling is not my strong point, I have 10 worked with the modelers trying to take grams per day or 11 grams per hour that we measured during this study and 12 convert it to tons per day, adjusting for temperature, 13 activity and all the things that modelers do. 14 What that has exposed is we -- I'll use my 15 corporate hat -- we have severely underfunded the modeling 16 and the testing of in-use vehicles for at least a decade. 17 And these modelers are doing their best with maps made in 18 a two-dimensional world. And we've asked them right now 19 to project what the emissions are in a different frame of 20 reference. And I strongly suggest that the staff and the 21 Board consider let's go back to refunding the emission 22 factors work and go forward with a new understanding. 23 I just say, the modelers are really working with 24 an outdated deck of cards. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 Ms. D'Adamo. 2 BOARD MEMBER D'ADAMO: Question of staff: 3 Whether or not this information is contained in our waiver 4 request, at least generally? And if not, is there a way 5 that it can be incorporated into our request? 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The effect of 7 permeation was a fundamental aspect of our waiver request. 8 And when we updated it, we provided some improved 9 estimates. And in our demonstration we felt to show that 10 with a waiver and to the extent that non-oxygenated fuels 11 were used in California, that we would get environmental 12 progress. 13 These new tests give us a lot more science behind 14 the previous estimates. And we will to have look at them 15 and say what amendments should we make and recalculations 16 should we make based on this new information, and then 17 submit that as further evidence to go along with our 18 previous requests. 19 And if I could comment for a minute on Mr. 20 Hascue's statement. I think when we looked at the results 21 in terms of what can be done in the future, we agree -- I 22 think we agree that the permeation effect of ethanol fuels 23 is probably going to be there. We saw that in the newer 24 systems tested as well as the older systems tested. What 25 is happening fortunately is the total evaporative PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 emissions in the fleet and in the new vehicles are going 2 down fairly dramatically. So you may have the same 3 percent increase from those vehicles, but their emissions 4 will be much lower. 5 The corresponding problem is that the bulk of the 6 emissions that we're going to see in 2010 or 2015 are 7 coming from vehicles that are on the road today and have 8 this effect and will continue to have this effect. And we 9 don't see any way to somehow go into the vehicle and treat 10 it with something so that the -- you know, the hoses and 11 the other components become less permeable. So it's a -- 12 do something to the fuel, which is quite limited in terms 13 of our specifications; use more non-oxygenated fuel, which 14 would be a good option. 15 And then if we have to mitigate it the beyond 16 that, we're going to have to probably go into more 17 programs that we're pursuing anyway for the SIP, which 18 would be accelerate the turnover in the fleet. And if we 19 do that, learn enough to say: What vehicles have the 20 greatest permeations? Are there certain fuel tank 21 arrangements that make these especially high emitters? 22 And target those in such a program. 23 CHAIRPERSON LLOYD: Thank you. 24 Other questions from my colleagues? 25 Thank you very much, Harold. It's very helpful. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 Do you know when next year we'll likely get the 2 next set of results? 3 MR. HASKEW: The new vehicles, two of which are 4 already on hand the, vehicle selections are being made. 5 I'm purchasing the vehicles to make into rigs. One of the 6 four test fuels is on site. I should be testing by 7 Christmas time -- on test, with ongoing progress reports. 8 It will take 48 weeks to complete the testing. So it 9 would be this time a year from now we'll have completed -- 10 using current assumptions, we'll have completed test 11 results. Of course, but we'll be updating the staff. I 12 publish weekly progress reports. 13 CHAIRPERSON LLOYD: Thank you. 14 I skipped again the Ombudsman. 15 Thank you, Harold. 16 Madam Ombudsman, would you please describe the 17 public participation process that was followed as this 18 regulation was developed, and share with us any comments, 19 observations, or concerns that you may have. 20 OMBUDSMAN TSCHOGL: Sure. 21 Mr. Chairman and members of the Board. The 22 proposal before you has been developed with input from car 23 manufacturers, petroleum industry, trade associations, 24 ethanol industry, pipeline operator and oil distributors, 25 government agencies including the air districts, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 universities. Also several consultants providing 2 comments. 3 In February, staff initiated their effort to 4 refine the Phase III gasoline regulations. They have held 5 six regulatory and non-regulatory fuel workshops since 6 that time in Sacramento. About 30 representatives 7 attended each workshop. 8 On October first, 2004, the initial statement of 9 reasons and public hearing notice published by the 10 California Office of Administrative Law were mailed and 11 E-mailed to approximately 2600 stakeholders. And they 12 were also posted to the ARB's website. 13 That's it. 14 CHAIRPERSON LLOYD: Thank you very much. 15 Seeing no further questions, I'd like to call up 16 the two witnesses, James Uihlein and Tom Koehler. 17 MR. UIHLEIN: Good afternoon. My name's Jim 18 Uihlein. I'm with BP. And I'm here today representing 19 the Western States Petroleum Association, or WSPA. I'm 20 the Chairman of the WSPA Fuels Committee. 21 We'd like first off to thank CARB staff, 22 Particularly Dean Simeroth and his staff, for working with 23 us over the past year to develop the amendments that are 24 before you today. 25 As you may know, WSPA's 30 companies are involved PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 in all aspects of the production, distribution, refining 2 and marketing of petroleum and petroleum products in six 3 western states. Our industry the seen a series of 4 gasoline reformulation regulations adopted by your agency, 5 starting with Phase I gasoline in 1991. Phase II 6 gasoline -- or in 1990. Excuse me. 7 Phase II gasoline was adopted in 1991, with 8 implementation in 1996 at a cost to our industry of $4 to 9 $5 billion. Phase II has been credited with taking the 10 emissions equivalent of three and a half million vehicles 11 off of the road. 12 We then transitioned into Phase III, non-MTBE 13 gasoline beginning at the start of this year at an 14 additional cost of $1 billion. During this latest 15 transition, as has been true in each of the past gasoline 16 reformulations, there arose a number of issues with the 17 wording in the regulations and with their implementation 18 that were not foreseen. 19 It is our understanding that the purpose of 20 today's hearing is to help clarify the wording in the 21 regulations and provide a small but important amount of 22 additional flexibility and to improve the enforceability 23 of the regulations, all of which will help our industry in 24 its ability to provide the market with gasoline in a 25 reliable, predictable manner. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 WSPA supports the proposed amendments that are 2 before you today. We would also like to state our current 3 willingness -- or our continued willingness to work with 4 ARB in the coming months on additional implementation 5 issues that have already been identified and need 6 resolution. 7 Thank you for your attention. And I'd be happy 8 to take any questions. 9 CHAIRPERSON LLOYD: Thank you very much, Jim. 10 Any questions? 11 Thank you. 12 Tom Koehler and Charlie Peters. 13 (Thereupon an overhead presentation was 14 Presented as follows.) 15 MR. KOEHLER: Thank you, Chairman Lloyd and 16 members of the Board. My name is Tom Koehler. I'm with 17 the California Renewable Fuels Partnership. 18 We are in favor of the amendments today. And I 19 wanted to give you a little update about what's happening 20 in California regarding ethanol. 21 --o0o-- 22 MR. KOEHLER: How do you make this thing work. 23 California Renewable Fuels Partnership is a 24 coalition of environmental groups, agricultural interests, 25 local governments, and ethanol developers, all with one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 goal in mind. And, that is, increasing the use and the 2 production of renewable fuels in California. So it's 3 truly a broad-based coalition has come together for some 4 very good reasons. 5 --o0o-- 6 MR. KOEHLER: Currently there are six to eight 7 projects in advanced stages of development. These 8 projects are all over the state, from the south, the 9 Imperial valley all the way up to the north, and also in 10 the Central Valley in particular. 11 Three projects have been fully permitted. One is 12 in construction today as we speak. If you take these 13 projects as a whole combined, approximately 400 million 14 gallons of ethanol per year. 15 --o0o-- 16 MR. KOEHLER: I want to speak a little bit about 17 the economic development aspect of bringing ethanol to 18 California. Simply put, ethanol is a job creator of 19 maximum proportions. If you look at the first phase of 20 what will happen in California, and the second -- the 21 first phase of these six to eight projects that I referred 22 you to, primarily from conventional feed stocks. The 23 second phase will be from the cellulose materials. 24 On the first phase, based upon the experience of 25 the midwest -- I'm sure that there could be some PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 differences -- but essentially you're looking at 7,000 new 2 jobs throughout the economy, over $600 million of capital 3 investment, and providing economic development and jobs in 4 areas of the state where it's desperately needed. 5 --o0o-- 6 MR. KOEHLER: On an energy security level, 7 renewable fuels are a great non-petroleum source of 8 transportation fuel. They're produced in America. They 9 can be produced in every county of California. And your 10 board just this year passed a goal of -- AB 2076, a goal 11 of 20 percent alternative fuels by 2020, in which 12 specifically noted as a key strategy was the use of 13 ethanol starting at 5.7 percent and going up. So ethanol 14 plays a key role in the state's own goals for petroleum 15 displacement. 16 --o0o-- 17 MR. KOEHLER: Here is a slide from California 18 Energy Commission basically telling us why we need 19 alternative fuels. The bottom red line is our refining 20 capacity and the blue line is our demand. 21 --o0o-- 22 MR. KOEHLER: So we need new capacity -- we need 23 efficiency and we need new capacity on line. Ethanol in 24 California can help provide that. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 MR. KOEHLER: Here is a -- also from the 2 California Energy Commission website, talking about the 3 prices of ethanol versus other. And I think there's been 4 quite a bit of misinformation on this topic, partially 5 originating from your own staff. 6 But this graph from the Energy Commission clearly 7 shows ethanol being 60 cents cheaper than gasoline. And 8 even cheaper than that -- than the replacement for 9 ethanol, which is alkylate. So there's no question in 10 today's market, and really since MTBE has been banned, 11 ethanol helps the consumer reduce -- gives reduced price 12 to the consumer. And that's just a fact. 13 --o0o-- 14 MR. KOEHLER: From an environmental aspect, 15 ethanol is a very cost effective reduction of CO2. You 16 just completed a historical Board action on CO2 admittedly 17 for the cars itself. And in regards to fuel, there's no 18 question that ethanol can play a role in that. And as Win 19 was pointing out, ARB looks at the fuel and the car as one 20 system. I know you're going to be looking at fuels for 21 CO2 in the near future. And when you do, you'll find that 22 ethanol is the most cost-effective way to reduce CO2 in 23 the near future. 24 That statement on top from the Pew Center for 25 Global Climate change, a study that MIT did for them. ARB PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 had a study done by TIAX, which shows today's ethanol use 2 in California reducing 3.6 million tons of CO2 today. So 3 real live benefits. 4 It also reduces carbon monoxide, which is a very 5 important ozone precursor and is getting more important. 6 As well, it's a clean replacement for aromatics 7 and other gasoline components. 8 --o0o-- 9 MR. KOEHLER: In regards to permeation, it's 10 important to understand, when we talk about permeation, 11 what causes permeation. The cause of permeation are 12 aromatics. That is a fact. And what the aromatics do is 13 they solubilize -- I'm not sure that's a word, but close 14 to it -- the soft hoses. And then it's a race for the 15 molecules to get out. Ethanol being a smaller molecule 16 will escape first. 17 If aromatics are reduced substantially, 18 permeation will be reduced. A declining -- And, as 19 mentioned, the permeation is a declining air quality issue 20 as the new fleet gets turned over. 21 When staff is considering mitigations and when 22 you as a board are considering mitigations, I think 23 there's one strategy that would link the state's goals of 24 CO2, the state's goals of economic development and job 25 creation, the state's goals of energy security in 2076, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 and the state's goals of clean air. And, that is, by 2 going -- increasing the amount of ethanol to 10 percent. 3 We feel that 10-percent ethanol could be the most 4 cost-effective way of offsetting the permeation emissions 5 simply by getting further reductions in CO, and the CO's 6 impact on reducing ozone. 7 And you might be scratching your a little bit on 8 that one. And what the literature is telling us is that 9 the permeation emissions from 10-percent ethanol are 10 roughly the same as they are at five-sixths. So you get 11 all these additional benefits by going to further ethanol. 12 Now -- and I guess I'll just -- I have to say 13 this because it's part of my job description. But in the 14 context of a waiver, you're not necessarily going to hear 15 staff come up with this solution because it puts the 16 waiver on its face. And so we have a little bit of a 17 situation where the emperor has no clothes. We have a 18 viable strategy, a program that absolutely makes sense for 19 California, and we are not -- we're not as policy makers 20 necessarily considering all the facts because we're being 21 blinded by a single focus on the waiver. 22 --o0o-- 23 MR. KOEHLER: So, in conclusion, I would just 24 like to say that ethanol and other biofuels are key 25 components to California's transportation future and we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 look forward to working with you in the future on this. 2 I'd be happy to answer any questions. 3 CHAIRPERSON LLOYD: Which of the staff is going 4 to play the emperor -- 5 (Laughter.) 6 CHAIRPERSON LLOYD: -- to respond to the -- Dean. 7 Okay. 8 Well, two issues, Dean, I think. The one that 9 Tom last referred to. And then it's a perennial question 10 on the cost or the curve that Tom showed there. 11 MR. KOEHLER: If we could get back to that curve. 12 CRITERIA POLLUTANTS STATIONARY SOURCE DIVISION 13 CHIEF SIMEROTH: The Energy Commission put out that curve. 14 And unfortunately it has apples and oranges mixed in 15 there. The alkylates are the spot price in the gulf plus 16 the transportation. If you're routinely using alkylates 17 in your production of motor vehicles fuels, you would not 18 be paying the spot price. You would negotiate a contract 19 for the routine imports. 20 The transportation costs, I don't have a problem 21 with that bringing that down. I'd have to ask -- It's 22 been so long since I've looked at it, so I've forgotten if 23 the ethanol price includes the excise tax waiver or not. 24 It does. 25 Our view is is that somebody has to pay that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 cost. We prefer looking at ethanol without taking that 2 into consideration. If you put that into it, it puts the 3 ethanol basically up with the CARBOB and alkylate price. 4 Our monitoring of this was not as sophisticated 5 as what the Energy Commission tried to do. We look at the 6 spot prices in California for both ethanol and CARBOB and 7 what else may be shown on the Oil Price Information 8 Service. It shows them being virtually the same. And you 9 would expect that. We can show similar sites for the OPIS 10 if you desire. But it would just simply -- if you add the 11 excise tax waiver in, it would put them back up there all 12 about the same price. If you picked different points of 13 time, you can show slightly different relationships 14 between the ethanol and the CARBOB prices. 15 In terms of us, 10 percent or not, which is sort 16 of the second point of this, we'll be updating our 17 protective model, which is what refiners use to decide how 18 they want to adjust the blends that they're producing. 19 We'll be using the latest information available. 20 The Coordinating Research Council has a study 21 they're funding at the University of California Riverside 22 C-Cert Laboratory where they're looking at sulfur, oxygen 23 and at least one other parameter. And that will be on the 24 most recent vehicle technologies that we -- we frankly 25 don't really have enough data to modify or a model to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 reflect. This would be a major improvement to our model. 2 What the data is going to show, we don't know. 3 We're not a participant in that study, so we don't get 4 early glimpses of what the data's doing. So we're 5 anxiously awaiting that. We've been told we should 6 receive the data late winter, at the worst early spring. 7 We'll immediately begin work on updating our 8 protective model. We'll probably do a lot of the work 9 internally. But the work also will be done through Jim 10 Uihlein's fuel committee, through University of 11 California, a Dr. David Rock who's assisted in the past on 12 this. 13 The model has to be peer reviewed before the 14 Board can consider it and the previous versions of the 15 model have been peer reviewed as well. We will endorse 16 that practice and we'll make sure it's peer reviewed 17 expeditiously as possible. We work with the Cal EPA 18 achieving that, so we're one step away from that peer 19 review process itself. And see where it takes us. 20 The issue of the carbon monoxide. The particular 21 model has an adjustment for non-oxygenated fuels, so that 22 they have to achieve greater hydrocarbon emission 23 reductions as part of a way to preserve the benefits of 24 the program where the oxygenates get a greater carbon 25 monoxide emission benefits than the non-oxygenated. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 That's built in as best we could into the model today. 2 We'll look at that again. 3 Dr. Lloyd, as you're aware, the Reactivity 4 Committee, who advises the Board on reactivity issues, is 5 relooking at the issue of what's a proper value for the 6 reactivity of carbon monoxide and have we done it 7 correctly. And certainly we'll accept it and go with 8 whatever comes out of that process. 9 Having said all that, I think we're still going 10 to end up short here. And the use of 10 percent or 7.7 or 11 6 percent, assuming that we don't get a waiver or there's 12 not some other flexibility, is really up to the producers 13 of the gasoline in making their economic decisions. 14 The model's such that the benefits the program 15 are preserved regardless of what they use. 16 I think that touched on most of the points. 17 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I'd lust like 18 to clarify something else in terms of where the staff is 19 coming from. And it relates to the allegation what role 20 is our technical analysis playing here versus the Board's 21 and the policy of several administrations now relative to 22 the waiver. 23 The policy recommendations in the case for the 24 waiver came out of the staff's technical analysis. We do 25 the best science possible we know how to do. And the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 facts come out the way they come out. And the facts come 2 out, in our view, justifying the waiver on an emissions 3 basis. 4 We also believe that a waiver provides 5 flexibility, flexibility provides cost reduction. In no 6 way is our analysis predicated on the policy has to be 7 maintained despite the facts. And I guarantee you that 8 the staff has given you in the past and will continue to 9 give you our best technical assessment based on the facts 10 as we are able to produce them. 11 EXECUTIVE OFFICER WITHERSPOON: And then I want 12 to chime in on the policy side, because I do think we're 13 in a very tough spot. We would like to embrace ethanol 14 wholeheartedly for the climate change benefits, for the 15 fuel displacement benefits. And what has happened instead 16 is that we have been struggling through these negative 17 disbenefits of ethanol when it's in blends in gasoline, 18 and fighting about whether they're real or not. We 19 believe they are real. And so it's a very difficult 20 proposition. If ethanol were quite a bit cheaper and we 21 could use it in an E100 paradigm where it wasn't blended 22 with gasoline at all, it would be a winner, although it -- 23 CHAIRPERSON LLOYD: How would you start E100? 24 EXECUTIVE OFFICER WITHERSPOON: What do mean how 25 would I start E100? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 E85 -- well, yeah, E85. You're exactly right. 2 But what I mean to say is it's the blending in 3 the gasoline. And then state law requires us, if we lose 4 emission reductions from any of our strategies on 5 gasoline, we have to make them up by law. So whether we 6 get the waiver or not, we have a gulf here now to make 7 back up. 8 And Mr. Haskew when you asked him the question 9 point blank, "Can you fix this?" he said no. And that's 10 staff's conclusion too, either by tinkering with the fuel 11 properties we won't close the tonnage gap, by tinkering 12 with the cars as they're manufactured, we won't close it. 13 So we have to come up with a basket full of strategies. 14 They'll be expensive. They have to be innovative and 15 creative. We need the oil industry's help and their 16 capital. And I wish it weren't so. But we have been 17 dealing with this dilemma now for as long as I can 18 remember at Air Resources Board, and I don't see it being 19 resolve any time soon. 20 CHAIRPERSON LLOYD: No, and I appreciate that. 21 It's a tough issue. As you know, I personally got 22 involved with this, and because I see the benefits here, 23 we see the renewable fuels. And yet we've got these other 24 issues. And, again, let the science dictate it. We're 25 still going to come into a situation of how do we balance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 the energy and environmental issues? And you've got pros 2 and cons there. 3 So I appreciate that. And I know that Tom and 4 Neal have been working also very closely on this. So 5 we're trying -- no, we are trying. And I pushed on the CO 6 benefit and -- because, for some of the colleagues on the 7 Board, CO can act as a hydrocarbon because it basically 8 will react in the atmosphere and promote the NO to NO2 9 oxidation, create more ozone. Although somewhat slower it 10 is, as you reduce other hydrocarbons, then it become more 11 reactive. So we're working through at it. But it's -- 12 no, it is really a tough issue. 13 I was taken aback by Harold's answer, to be quite 14 honest with you. I didn't expect Harold to say. But I 15 know Harold's very honest and I know -- I appreciate his 16 integrity. 17 I guess -- one way I guess if you put stainless 18 steel lines on everything, then you might be able to do 19 that. But clearly that's impractical for all the vehicle 20 fleet. Maybe that's wrong also. 21 MR. HASKEW: No, I think you could build a 22 nonpermeable vehicle. But we hold our breath for 30 years 23 until such time as you could get the existing fleet off 24 the road. 25 CHAIRPERSON LLOYD: That's exactly right. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 MR. HASKEW: So we've got to deal with what we've 2 got. 3 CHAIRPERSON LLOYD: I agree. And that of course 4 is a continuing problem. Which reminds me -- some of my 5 colleagues over here will remind me, that's one of the 6 reasons why we go to zero emission technology. We don't 7 have this problem. But we're not giving up on that. 8 But, anyway -- But, Tom, rest assured, you can 9 see where we're really grappling with this issue. And we 10 want to continue to work with you as well. 11 MR. KOEHLER: Yeah, Chairman Lloyd, I'm extremely 12 grateful for your role in this. And we will continue to 13 work with you and -- 14 CHAIRPERSON LLOYD: We need to continue to do 15 that. 16 MR. KOEHLER: I'm convinced that ethanol is part 17 of the solution. You know, frankly, there's a choice here 18 to be made. One is to use no ethanol and the other is to 19 use more. And given the prices, given the CO2, the 20 economic -- the energy security, I think the answer's 21 pretty clear. And we do have some tests out there that 22 will help in that decision making. 23 CHAIRPERSON LLOYD: When I saw that in other 24 parts of the world, they look very much at ethanol as a 25 big help in looking at greenhouse gases, when looking at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 CO2. A lot of those areas, however, they feel -- they've 2 basically abandoned -- some others won't abandon, I guess. 3 But they don't realize that, you know, we have to -- in 4 California at least we have to look at both. We've not 5 solved the urban air pollution problem, we've not solved 6 the issue of EJ. So we have to take care of those issues 7 as well as climate change. Some parts of the world 8 they're saying, "Well, we've solved one. Let's just take 9 care of the others." So we're in a tough spot, but -- 10 MR. KOEHLER: And, again -- and not to hammer on 11 it. Just to -- I only raised it because -- and I used the 12 emperor metaphor just because I think it -- as policy 13 makers up here, it deserves some thinking about it, 14 instead of just kind of getting in line with the 15 conventional wisdom, which might lead us off a cliff. 16 But the waiver was predicated really on two 17 things: One is non-oxygenated can be cleaner and 18 non-oxygenated is cheaper. And I would suggest that both 19 those assumptions are -- today, with the empirical 20 evidence that we have, deserves some questioning. 21 This CEC -- which, as you know, California Energy 22 Commission is the body emboldened by the State of 23 California to determine what is correct on supply and 24 prices of fuel, tells us that it's 60 cents cheaper. 25 And then on your own website, the only test data PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 that has tested an ethanol fuel with a California 2 compliant non-oxygenated fuel has the California ethanol 3 fuel outperforming on emissions both hydrocarbon, NOx and 4 CO against the non-oxy. 5 So all I can say is I appreciate your 6 open-mindedness and look forward to continue to working 7 with -- 8 CHAIRPERSON LLOYD: Well, we'll continue -- staff 9 will continue. And, again, I've got the utmost respect 10 also for the research under CRC with staff participating. 11 That's -- in the end we have to look at the data and try 12 to come up with looking at how we implement the results of 13 that. And this Board will continue. 14 But we look forward to working with you and how 15 we can actually created more jobs, balance the environment 16 in California's as well because -- 17 MR. KOEHLER: And clean air. 18 CHAIRPERSON LLOYD: And clean air, exactly. 19 Both. 20 MR. KOEHLER: Thank you. 21 CHAIRPERSON LLOYD: We can be -- again, we need 22 clean air so people can breathe as well as a climate 23 change. And we're not going to sacrifice either. 24 MR. KOEHLER: Absolutely. And I'm not suggesting 25 we should. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 CHAIRPERSON LLOYD: No. 2 Thanks, Tom. 3 Ms. Berg. 4 BOARD MEMBER BERG: I just have a question for 5 you, however, on this current chart that you're looking 6 at. 7 Is it accurate that ethanol is in fact 8 subsidized. 9 MR. KOEHLER: Absolutely. There is an excise tax 10 exemption that they have to -- the refiners actually get. 11 So this is the price -- the blue line is the price that 12 the refiners received. Okay? 13 BOARD MEMBER BERG: And then how do you feel the 14 600 million capital investment is going to affect that 15 price? 16 MR. KOEHLER: Well, it will most likely decrease 17 it because we'll have more production in the State of 18 California. 19 And the only other thing I'd like to add to the 20 subsidy question is that -- although ethanol receives a 21 subsidy that is reflected at the blender level, so the 22 consumer gets a cheaper product, which is what we're 23 talking about, it pales in comparison to subsidies that we 24 provide for the oil infrastructure. 25 So I mean if Mr. Simeroth would like to include PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 all those on there, the spread would be even bigger than 2 it is today on that chart. 3 BOARD MEMBER BERG: Thank you. 4 CHAIRPERSON LLOYD: Any other questions? 5 Thanks very much. 6 And last speaker, Charlie Peters. 7 MR. PETERS: Mr. Chairman, the Board. I'm 8 Charlie Peters, Clean Air Performance Professionals. And 9 we are a coalition of motorists. And we're quite 10 interested in the issue of both fuel and regulation of 11 cars. 12 Part of that constituency is people that drive 13 older cars, collector cars. And many of those people 14 perceive that those cars weren't designed to operate with 15 oxygenated fuels, and that it has a significant negative 16 impact to being able to maintain those cars, negative 17 impacts to the fuel system, that increases emissions, 18 increases the amount of maintenance necessary. 19 And certainly that's not a large part of the 20 California market that you have to be concerned with. But 21 politically those people have some serious concerns that 22 it has a negative impact on their fuel tank, on their fuel 23 lines, issues of rust and degradation of the car. In 24 other words there is a strong perception that that causes 25 a degradation that increases emissions, increases the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 amount of maintenance necessary. 2 Many of those people don't use those cars a lot. 3 So having oxygenated fuels in those cars that are not 4 designed for it over time can have quite a negative 5 economic impact to those people and their hobby. 6 I provided a little information to the Governor's 7 Performance Review on September the 17th in that I 8 indicated that there was a $30 billion positive economic 9 impact to the State of California available within -- to 10 accomplish within a year by doing something about the 11 fuel, relieving California from the requirements for 12 oxygenates in gasoline and addressing the issue of the 13 federal cafe credits which are allowing the new cars to 14 use a lot more fuel than they would without the credit. 15 About 10 percent of the mileage on an SUV is 16 allowed because of the cafe credit by the fed. There's 17 been an awful lot of concern by the environmental groups 18 indicating that that was not appropriate public policy. 19 In addition to relief as a waiver -- and the 20 waiver situation to me, somehow or another perceiving that 21 California has no political horsepower, has no ability to 22 do anything, some little farm state has all the power and 23 we have none, just somehow or another doesn't swallow very 24 good for me. Right here I have an article in February 25 6th, 2004, saying the only way you can -- we're going to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 affect global warming in the next 15 years is corn 2 whiskey. RFA, Pew Center. Somehow or another I don't 3 think the Board agrees with that. I think there's 4 probably a lot of other policies that can affect that. 5 And I think if we responsibly manage spot 6 check -- and a gentleman from the Air Resources Board was 7 asking a number of questions about whether or not we're 8 finding out what's broken is getting repaired. The 9 combination of determining that, which we have a study 10 with remote sensing being funded currently in southern 11 California -- nobody's even looking to see what those cars 12 really are. 13 So we're going to make a decision on remote 14 sensing based upon possibly nebulous information. I 15 support the CARB or the Bureau of Automotive Repair 16 reviewing those cars before they go in there. That's part 17 of this process. And we can do a whole lot better job, 18 provide the public appropriate support. 19 The State of California wants relief from the 20 oxygenate requirement. We should do something about it 21 here. We are a political gorilla and we could do what we 22 want. Are we going to sit here being pansies and pretend 23 like the federal government is forcing us to have dirty 24 air, spend more money, destroy our old cars -- I'm sorry. 25 We need to do something to act responsibility to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 improve our environment, to improve our cost of fuel, to 2 improve the gas mileage, and to do something here that's 3 going to work better. 4 Thank you. 5 CHAIRPERSON LLOYD: Thank you. 6 Any other questions from my colleagues here? 7 Yeah, I know. I'm aware. 8 BOARD MEMBER PATRICK: Mr. Chairman, I do have a 9 comment to make. 10 CHAIRPERSON LLOYD: Please. 11 BOARD MEMBER PATRICK: As the rest of our Board 12 members are gathering for our vote. 13 CHAIRPERSON LLOYD: Yes. 14 BOARD MEMBER PATRICK: I am very appreciative of 15 the fact that staff has brought forward this scientific 16 information. And I think it gives me -- certainly me 17 great concern, and I would imagine all of us as well. And 18 we're looking forward to finding out more as you pursue -- 19 as you pursue the information. 20 And obviously it's incumbent upon staff and all 21 of us to work with all interested stakeholders on this. 22 But I do think that it's very important that you keep us 23 as informed as possible about this, because -- I'm 24 certainly have certainly very appreciative of the fact 25 that you've brought forward the amendments to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 reformulated gasoline. But this other is something we 2 were not necessarily expecting to see. But we'll all look 3 with great interest as we move forward on this. 4 CHAIRPERSON LLOYD: Yeah, I recognize we probably 5 lost sight of the main item here. But I think it was 6 important that staff did bring forward that information 7 and what we can do about it, but basically highlighting 8 for us there's more work to be done. And, again, I'm 9 delighted that we're going ahead with that second phase. 10 Since all testimony, written submissions, and 11 staff comments for this item have been entered into the 12 record, and the Board has not granted an extension of the 13 comment period, I'm officially closing the record on this 14 portion of Agenda Item 4-10-4. Written or oral comments 15 received after the comment period is closed will not be 16 accepted as part of the official record on this agenda 17 item. 18 Ex parte from my colleagues? 19 Ms. Berg. 20 BOARD MEMBER BERG: Yes, I had a meeting with the 21 Western States Petroleum Association on November 9th at 22 Ellis Paint Company. In attendance was Joe Sparano, 23 President of the Western States Petroleum Association, and 24 David Lee with Exxon-Mobil. 25 I also had a meeting on Wednesday, November 10th, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 with Shell Chemical, with Dick Sather and Marty Stallman. 2 My conversation with both groups are consistent 3 with testimony heard today. And Shell Chemical's also 4 gave me an educational overview on distribution. 5 CHAIRPERSON LLOYD: Thank you. 6 I also met with a representative of WSPA on this 7 item. And the testimony was -- and the discussion was 8 along the lines of Mr. Uihlein today. 9 Again, I must say it was a wonderful day 10 yesterday. Not only did we have the Governor here and 11 some visitors, but WSPA came in and basically supported 12 everything that we're doing -- well, on this item. 13 (Laughter.) 14 CHAIRPERSON LLOYD: It was a great day. 15 Thank you. 16 So with that, we've got a resolution before us. 17 So take a moment to review that, and entertain a motion. 18 BOARD MEMBER PATRICK: Mr. Chairman, I would make 19 a motion on resolution 04-39. 20 BOARD MEMBER ROBERTS: Second. 21 CHAIRPERSON LLOYD: All in favor say aye. 22 (Ayes.) 23 CHAIRPERSON LLOYD: Anybody against? 24 Abstain? 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 Thank you, staff. 2 And we look forward to coming back next year on 3 that follow-up study. 4 Okay. And the next item should be fairly short. 5 And this is item 4-10-9, a request that the Board delegate 6 authority to the Executive Officer to consider emergency 7 regulatory action delaying the January 1st, 2005, 8 implementation date of the diesel fuel lubricity standard. 9 The emergency action is being sought to avoid potential 10 supply disruptions of California diesel fuel that could 11 occur if the implementation date is not extended. 12 And I'd like to turn it over to Ms. Witherspoon 13 to explain that and what's required here and why we need 14 to take this action. 15 EXECUTIVE OFFICER WITHERSPOON: Certainly. And 16 thank you, Chairman Lloyd. 17 As you stated, I'm requesting delegation from the 18 Board to conduct an emergency hearing to consider delaying 19 the January 1, 2005, diesel fuel lubricity standard for up 20 to 120 days. 21 Lubricity additives have been added to diesel 22 fuel since the early 1990's. However, the January 2005 23 standard will likely increase the use of lubricity 24 additives in diesel, which has raised some concerns with 25 pipeline carriers about the risk of contaminating other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 fuels that pass through the same pipelines, especially jet 2 fuel. 3 Essentially the issue is that lubricity additives 4 could collect on the sides of the pipelines and then 5 contaminate later batches. Once in jet fuel the additives 6 increase the propensity to absorb water, which would 7 create a dangerous condition if that fuel made it into an 8 airplane at high altitudes in freezing conditions. 9 Since 1993, there have only been two instances of 10 contamination which have been reported related to 11 lubricity additives. In those two instances jet fuel 12 immediately followed low sulfur diesel fuel that was 13 additized with lubricity additives. This contamination 14 was detected, thankfully, and the fuel was diverted. But 15 even with that history, the concern remains, and 16 Kinder-Morgan has asked us and the oil industry to do 17 everything we can to minimize the risk. 18 On October 26th Kinder-Morgan announced effective 19 immediately diesel fuel containing lubricity additives 20 could not be shipped in its pipelines. Other pipeline 21 operators in the United States announced similar 22 prohibitions. 23 I'm a little bit out of order. 24 But we immediately began talks with them and 25 proposed an alternate system where diesel fuel additives PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 would be added after the fuel leaves the pipeline, at the 2 fuel dispensing terminals instead. So based on that 3 agreement, Kinder-Morgan notified shippers on November 5th 4 that it will allow the continuing transport of CARB diesel 5 fuel treated historical levels of additives for an interim 6 period, until the additization blending equipment can be 7 installed at the terminals. 8 Additionally, the pipeline operator will 9 coordinate product shipments to minimize the possibility 10 of jet fuel contamination. 11 Because the installation of terminal additization 12 equipment cannot be done immediately, an emergency hearing 13 to consider a 120-day delay in the January '05 14 implementation date of the lubricity fuel standard is 15 necessary. 16 State law authorizes the Board to delegate 17 emergency rulemaking authority to the executive officer in 18 situations such as this. The Board's regulations also 19 direct the executive officer to conduct emergency variance 20 hearings to avert immediate and significant economic 21 hardships that could result from compliance with ARB's 22 fuel regulations. 23 As an example of past precedent, in 2000 the 24 Board delegated authority to the executive officer to make 25 amendments to the table of maximum incremental reactivity PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 values in ARB's regulations. 2 If the Board chooses to delegate authority in 3 this case, the hearing would be conducted within the next 4 couple of weeks, either by myself or by Mr. Scheible, and 5 a decision would be reflected in an executive order under 6 my signature. 7 We believe the four-month delay in the lubricity 8 standard will be sufficient to solve the problem. 9 However, if that is not the case, I will return to the 10 Board with an update and a proposed course of action. 11 CHAIRPERSON LLOYD: Again, I'd like to compliment 12 the staff and all the stakeholders for the way they saw 13 this problem and came to us with -- so it can implement a 14 solution there. So I think it's avoiding a real potential 15 disaster there. 16 So any questions? 17 Ms. Berg, do you have a question? 18 BOARD MEMBER BERG: No, just a -- also just a 19 compliment. Shell Chemical also complimented the staff, 20 and I want to pass that on, in approaching and taking care 21 of this issue. 22 Thank you. 23 CHAIRPERSON LLOYD: Again, I think it just also 24 highlights the complexity when we deal with these issues. 25 You know, some things you really don't see offhand, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 unintended consequences can occur. 2 If you have no more questions, then do we have a 3 motion and a seconder to give her the authority to -- 4 BOARD MEMBER BERG: So moved. 5 BOARD MEMBER GONG: Second. 6 CHAIRPERSON LLOYD: So all in favor say aye. 7 (Ayes.) 8 CHAIRPERSON LLOYD: Against? 9 Thank you. 10 Proceed swiftly. 11 So the next agenda item is 04-10-5. And this is 12 a proposal to amend the nonvehicular source, consumer 13 products, and architectural coatings fee regulations. 14 And I think Ms. Berg has a statement to read at 15 this time. 16 BOARD MEMBER BERG: Yes, I'd like to announce 17 that I'll be recusing myself from voting on this agenda. 18 The proposed regulation affects fees paid by the paint 19 manufacturing companies as a part of the consumer groups. 20 I am President and Chief Executive Officer of Ellis Paint 21 Company. Although a small manufacturer and is not 22 affected by the fee, I am also a former board member of 23 the National Paint Coatings Association. And I'm recusing 24 myself to avoid any appearance of conflict of interest. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 Last fiscal year 2003-2004, the State Legislature 2 enacted a budget balancing measure that shifted $14.4 3 million of ARB's General Fund base to fee-supported 4 programs. Those fees, paid by large stationary source 5 facilities and large manufacturers of consumer products 6 and architectural coatings, were designed to support 7 reasonable costs incurred by the ARB in implementing its 8 stationary source programs. 9 As a budget balancing measure for Fiscal Year 10 2004-2005, the state budget authorized the Board to shift 11 an additional $2.6 million the General Fund to 12 fee-supported programs. 13 ARB's stationary source programs are critical to 14 our efforts to improve air quality in the state. The 15 Board has absorb significant budget cuts to this program 16 over the past few years. Adoption of this proposal is 17 necessary because we cannot afford to sustain further cuts 18 to this program without hindering our ability to protect 19 public health in California. 20 However, we are mindful of the impacts that these 21 fee burdens place on businesses. Therefore, we have a 22 duty to ensure that the fees are spent wisely on our 23 stationary source programs and are consistent with the 24 intent of the enabling statutes. 25 Ms. Witherspoon, will you please introduce this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 item and begin the staff's presentation. 2 EXECUTIVE OFFICER WITHERSPOON: Thank you, 3 Chairman Lloyd. 4 The proposal before you today amends our existing 5 fee regulation and provides a supplemental assessment on 6 large stationary sources. The fees for manufacturers of 7 consumer products and architectural coatings would remain 8 essentially unchanged. 9 The fees are necessary to implement the 10 legislature's and the Governor's direction in the Fiscal 11 Year 2004-2005 budget to shift most of ARB's stationary 12 source budget from the General Fund to fee supported 13 programs. We anticipate that this will be a permanent 14 change to ARB's baseline budget. 15 I will now ask Mr. Don Rake of the Planning and 16 Technical Support Division to present staff's proposal. 17 (Thereupon an overhead presentation was 18 Presented as follows.) 19 AIR POLLUTION SPECIALIST RAKE: Thank you, Ms. 20 Witherspoon. 21 Good afternoon, Chairman Lloyd and members of the 22 Board. 23 The basis for today's proposal is to implement 24 the legislature's further direction to shift part of the 25 Stationary Source Program budget from the General Fund to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 a fee-based program. The proposal also complies with the 2 requirement to relate fees to the activities of those 3 paying the fees. 4 --o0o-- 5 AIR POLLUTION SPECIALIST RAKE: This slide 6 outlines the material I will cover in my presentation. 7 --o0o-- 8 AIR POLLUTION SPECIALIST RAKE: I will start my 9 presentation with a brief description of the activities 10 leading up to today's proposal. 11 --o0o-- 12 AIR POLLUTION SPECIALIST RAKE: Beginning with 13 Fiscal Year 1989-1990 and continuing on through Fiscal 14 Year 2002-2003 the ARB collected legislatively-authorized 15 fees of $3 million per year. In recent years the fees 16 were assessed on about 60 large facilities per year that 17 emitted 500 or more tons per year of nonattainment 18 pollutants or their precursors. The fees were used to 19 help recover the costs of ARB's programs related to 20 nonvehicular sources. 21 --o0o-- 22 AIR POLLUTION SPECIALIST RAKE: In July 2003, the 23 Board adopted regulations to implement newly adopted 24 Assembly Bill 10X, which authorized the ARB to assess fees 25 to offset reductions in General Fund support of the ARB's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 Stationary Source Program. 2 For Fiscal Year 2003-2004, the Legislature 3 authorized the ARB to collect a total of $17.4 million in 4 fees. 5 --o0o-- 6 AIR POLLUTION SPECIALIST RAKE: The enabling 7 legislation lowered the applicable threshold limits from 8 500 to 250 tons per year of emissions. It provided three 9 fee collection options, including allowing the Board to 10 collect the fees directly. And it increased the cap on 11 facility fees to $13 million. 12 --o0o-- 13 AIR POLLUTION SPECIALIST RAKE: The legislation 14 also authorized fees to be assessed on manufacturers of 15 consumer products and architectural coatings whose 16 products emit 250 tons per year or more of volatile 17 organic compounds. For these sources the ARB must collect 18 the fees directly, and the fees are to be used solely to 19 mitigate or reduce air pollution created by consumer 20 products and architectural coatings. 21 --o0o-- 22 AIR POLLUTION SPECIALIST RAKE: The regulations 23 that were adopted last year specify procedures to identify 24 and assess fees, including calculations for a uniform 25 emissions-based fee on all sources subject to the fees. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 The regulations provide an opportunity for comment on our 2 preliminary estimates of emissions that serve as the basis 3 for the fees. They also allow the fees on facilities to 4 be adjusted for inflation based on increases to the 5 California Consumer Price Index as reported by the 6 Department of Industrial Relations. 7 --o0o-- 8 AIR POLLUTION SPECIALIST RAKE: Last fiscal year 9 a uniform fee of approximately $84 per ton of emissions 10 was assessed. There were 79 facilities subject to the 11 fees, that emitted about 128,000 tons of emissions. And 12 these facilities were assessed a total of approximately 13 $10.8 million in fees. 14 Sixty-eight consumer products and architectural 15 coatings manufacturers with about 79,000 tons of emissions 16 subject to the fees were assessed a total about $6.6 17 million in fees. 18 --o0o-- 19 AIR POLLUTION SPECIALIST RAKE: The adopted 20 Fiscal Year 2004-2005 budget shifts an additional $2.6 21 million to fees to provide further savings to the general 22 fund. Adding this additional $2.6 million to the already 23 authorized amount of 17.4 million results in a total fee 24 assessment of $20 million. This represents about half the 25 ARB's stationary source budget and about 15 percent of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 ARB's total budget. 2 --o0o-- 3 AIR POLLUTION SPECIALIST RAKE: I will now 4 describe the proposal before you here today. 5 --o0o-- 6 AIR POLLUTION SPECIALIST RAKE: The amendments to 7 the regulations we are proposing would apply only in 8 fiscal years where the ARB is authorized to collect fees 9 in excess of $17.4 million. The proposal provides for 10 recovering fees in excess of $17.4 million only from large 11 permitted facilities. Other procedures remain generally 12 unchanged from existing regulations. 13 --o0o-- 14 AIR POLLUTION SPECIALIST RAKE: California law 15 requires that there must be an adequate nexus between a 16 fee and the program activities funded by the fee. This 17 means that the fees collected from manufacturers of 18 consumer products and architectural coatings must be spent 19 on ARB programs related to these sources. The cost of ARB 20 programs related to consumer products and architectural 21 coatings can be estimated in different ways. 22 If we use an emissions-based approach, the costs 23 last year were about $6.9 million. If you use an approach 24 based on calculating the actual program costs of the staff 25 and other resources used in the ARB's consumer products PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 and architectural coatings program, the costs are $8.9 2 million. 3 If we keep fees for manufacturers of these 4 products at their current levels, this will avoid any 5 potential nexus problems by insuring that the lower 6 emissions based nexus threshold will not be exceeded. 7 --o0o-- 8 AIR POLLUTION SPECIALIST RAKE: The mandated fee 9 cap for facilities is $13 millions plus inflation each 10 year. We estimate that the fees for facilities if we 11 collect the entire $2.6 million in supplemental fees from 12 facilities, plus their share of the total existing $17.4 13 million in fees, will be about $13 million. 14 Therefore, the proposal meets statutory 15 provisions for assessing fees on facilities and avoids fee 16 nexus issues for consumer products and architectural 17 coatings. 18 --o0o-- 19 AIR POLLUTION SPECIALIST RAKE: As with the 20 existing fees, districts may collect the supplemental fees 21 if they wish. And the process for collecting the fees is 22 the same process as in the existing regulations. However, 23 this does nod apply to Fiscal Year 2004-2005 because we 24 have a limited timeframe in which to collect the fees. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 AIR POLLUTION SPECIALIST RAKE: The proposal 2 would add two new provisions to the regulations: 3 The first new provision would allow compliance 4 with legislative direction if the Legislature directs the 5 particular dollar amounts or percentages be collected from 6 each source category. 7 A second new provision directs the ARB to use any 8 modified emissions threshold enhanced by the 9 Legislature -- enacted by the Legislature. 10 --o0o-- 11 AIR POLLUTION SPECIALIST RAKE: Based on current 12 information, the supplemental fee on facilities would be 13 about $23 per ton, and the additional fees per facility 14 would range from about $6,000 to $225,000. 15 Facilities would pay a total about $1 million 16 more than if the existing uniform fee were assessed, which 17 is about 7 percent more than under the existing 18 regulations. 19 --o0o-- 20 AIR POLLUTION SPECIALIST RAKE: There are no 21 significant environmental impacts associated with the 22 proposal and there is no significant impact on the 23 creation, elimination or expansion of affected businesses 24 or jobs and there are no adverse environmental justice 25 impacts associated with the proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 --o0o-- 2 AIR POLLUTION SPECIALIST RAKE: We held a public 3 workshop on September 14th. All affected facilities were 4 notified of the staff's proposal, and additional 5 discussions were held with affected facilities and 6 association. 7 --o0o-- 8 AIR POLLUTION SPECIALIST RAKE: During the public 9 process, one issue was raised which related to our 10 proposal to apply the entire supplemental fees only to 11 facilities. As we indicated, we believe this is the best 12 approach because it ensures that we do not exceed the 13 nexus requirement for manufacturers of consumer products 14 and architectural coatings and we can recover the amount 15 within the facility cap of $13 million. 16 --o0o-- 17 AIR POLLUTION SPECIALIST RAKE: The proposed 18 amendments would enable us to recover the total amount 19 authorized by the Legislature in the state budget. The 20 supplemental fees proposed would apply only if the ARB is 21 authorized to collect fees in excess of $17.4 million. 22 The proposal will also meet fee nexus requirements, and 23 the two new provisions will allow for compliance with 24 future legislative direction. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 AIR POLLUTION SPECIALIST RAKE: We recommend that 2 the Board adopt the staff's proposals. 3 That concludes my presentation. And we'd be 4 happy to answer any questions you may have. 5 CHAIRPERSON LLOYD: Thank you. 6 Before questions, I'd like to ask the Ombudsman 7 to make any comments on the public participation process 8 that was followed during the development of this 9 regulation, and provide us any -- her observations on the 10 process. 11 OMBUDSMAN TSCHOGL: Sure. 12 The staff did give you a little overview of the 13 public outreach, but I will give you a little bit more. 14 Mr. Chairman and members of the Board, this 15 regulation was developed with input from the trade 16 associations, including the California Council for 17 Environmental and Economic Balance, the National Paint and 18 Coatings Association, and the Roof Coatings Manufacturers 19 Association, a gas company, a glass manufacturer, and the 20 local air districts. 21 Staff began their effort to draft amendments to 22 the regulations in July of this year following the 23 adoption of the state budget. All facilities that might 24 be subject to the proposed amendments were notified of an 25 upcoming workshop. The workshop was held in Sacramento on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 September 14th, 2004. 2 The individuals had the option to participate in 3 person or via teleconference. Eight individuals 4 participated. Six were industry representatives that 5 included a law corporation, consumer products, a lobbyist 6 for the cement industry, a cement manufacturer, and two 7 individuals from the National Paint and Coatings 8 Association. The remaining two were air district staff. 9 Additionally staff worked with many individual 10 companies and air districts to confirm that the best 11 possible emission estimates are used to calculate the 12 fees. The staff report was released on October 1st, 2004. 13 It was noticed via mail, websites, and list serves. 14 About 320 individuals are on the combined postal 15 mailing lists for all three source types. That would be 16 large facilities, consumer product manufacturers, and 17 architectural coatings manufacturers. And about a 18 thousand individuals have signed up for the electronic 19 mailing lists for the three source types. 20 That concludes my comments. 21 CHAIRPERSON LLOYD: Thank you. 22 Any questions from the Board? 23 Seeing none. 24 Since all testimony, written submissions, staff 25 comments for this item have been entered into the record, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 and the board has not granted an extension of the comment 2 period, I'm officially closing the record. 3 EXECUTIVE OFFICER WITHERSPOON: Dr. Lloyd, excuse 4 me. There is one witness signed up to speak. 5 CHAIRPERSON LLOYD: Sorry. You're right. Sorry 6 for my jumping too quickly here. 7 We have one witness signed up. Cory Nickchen of 8 Guardian Industries. 9 Thank you. 10 I apologize. 11 MR. NICKCHEN: You had me scared there for a 12 second. 13 CHAIRPERSON LLOYD: I apologize. 14 MR. NICKCHEN: My name is Corey Nickchen. I'm 15 with Guardian Industries. We're in Kingsberg, California. 16 We're just south of Fresno. And I apologize for not being 17 part of the initial group meetings. We get a little busy 18 right now. We're in the midst of doing a lot of work. 19 But I just wanted to make one comment, as Don had 20 brought up. I think the question is is: Have we looked 21 at all possible options? And the options in the 22 conservative realm is that everything gets assessed on the 23 facilities, that we bear the brunt. In reality no one's 24 budget ever gets smaller. It always gets bigger. 25 So we're looking at it from our perspective, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 facilities are now the ones that are going to be bearing 2 the brunt of every time the budget gets bigger. That's 3 just how it's going to go. So this precedent we set, as 4 was said in the very initial comment was, whatever comes 5 out of this right now is going to stay pretty much 6 forever. It's not going to come back. We're not going to 7 change this. So we're setting a precedent here on this. 8 So the only option other than shy of saying, you 9 know, we shouldn't have to pick it up and we should try 10 and have everyone pay for this, is should 100 percent of 11 that be paid by the facilities? Is there any way -- 12 because we're not dealing from, you know, last year. 13 We're dealing from a couple years ago, our inventory. 14 These numbers should be known, this is not hidden 15 information. We know what the inventories are. 16 Based on the simplicity of the formula, we should 17 be able to go back and say, okay, let's squeeze it a 18 little bit tighter maybe and say maybe only 75 percent of 19 that has to be paid by facilities rather than all 100 20 percent of it. 21 Now, I know we're trying to avoid dealing with 22 going into further legal matters. But I'm just saying, is 23 there any other way we can squeeze it maybe a little 24 tighter? Because it does have an impact. You know, 25 $225,000 is not -- thank God that's not coming out of our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 facility. But that does hurt. 2 CHAIRPERSON LLOYD: Maybe staff could comment on 3 that. 4 EXECUTIVE OFFICER WITHERSPOON: We actually 5 should have covered this in our presentation what the 6 trend in the air resources budget has been, because 7 there's a misunderstanding. We have in fact shrunk over 8 the last four years by a total of about $15 million and by 9 60 positions. Thirty of those were vacancies at the time 10 we started contracting, and the other 30 had actual people 11 in them who left for a variety of reasons and the 12 positions were eliminated, you know, as attrition took 13 place. 14 And so there has been both downsizing and cost 15 shifting going on for the last four years. And I would 16 say that means we have looked at the alternatives, and 17 this is, in our conclusion and that of the Governor and 18 the Legislature, the bear minimum we need to sustain the 19 legally required Stationary Source Control Programs that 20 the Air Resources Board operates. 21 22 CHAIRPERSON LLOYD: Yeah, I think that's a good 23 comment, having been here seeing that. And I sympathize 24 with your comments there. But I know staff -- the burden 25 has increased rather than decreased. But there has been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 that shrinkage. So any time we ask staff now to look at 2 other stuff, you know, it's gone from a squeal to a real 3 shriek. 4 But I understand. Your message is a good one. I 5 think this played out in the Legislature very toughly. 6 And it's tough for us. And we also heard from the local 7 districts too, because we're also tapping into some of 8 their resources. But we feel -- again, I think you 9 indicated this -- the staff isn't increasing and we're not 10 we're not increasing the budget. We're shifting the 11 burden, and that's what we'd been required to do. But 12 we've taken a really sharp pencil to this stuff. 13 But I appreciate it. 14 Mrs. Riordan. 15 BOARD MEMBER RIORDAN: Mr. Chairman, if I -- 16 May -- and this maybe is appropriate for the time when I'd 17 like to make some comments, because I represent the 18 midsize and smaller air pollution control districts, and 19 they do have some concerns. And in specificity, my 20 district, Mojave, because we have some very large 21 operations there that are paying, you know, some pretty 22 hefty fee. 23 The process really isn't to be debated here. 24 It's one at budget time. And I would encourage the 25 industries that you are involved with -- and I'm looking PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 out at Cindy Tuck and those that she may have contact 2 with. The real issue is that at budget time when the 3 monies are taken from our budget here to place into the 4 General Fund, probably to supplement some other state 5 operation, we are simply responding. 6 And, as our Executive Officer said, we have made 7 some cuts. We probably are at a place where we have -- 8 we're rather forced to do this. These are extraordinary 9 times. Unfortunately the State of California's budget is 10 not at its best. And I think I read something just 11 recently, I don't look to seeing a bright future, maybe 12 even next year. But you should be at the table. And when 13 I say at the table, probably at your legislator's table, 14 when the budget issues are raised and explain to them what 15 your issues are. 16 But that's the time -- and correct me if I'm 17 wrong, Mrs. Witherspoon -- but I think that's the time 18 when those who have issue with this item need to be 19 present, not -- unfortunately this is just a little bit 20 too late and out of our area of control at this point. 21 But that's where everybody ought to be when the 22 State of California's budget is being discussed and make 23 your concerns known there. 24 MR. NICKCHEN: Thank you. 25 CHAIRPERSON LLOYD: Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 Supervisor Roberts. 2 BOARD MEMBER ROBERTS: Yeah, Mr. Chairman. Maybe 3 staff can correct me, but I -- you know, I have maybe a 4 slightly different memory of this. And I remember how 5 this came up unexpectedly in July of last year -- june of 6 last year. And at that time we were basically asked to 7 take over because of major problems at the state and 8 transfer -- quickly transfer a lot of expenses on to a lot 9 of companies. 10 And all due respect, talking about the state 11 budget, I remember asking why couldn't we do this with a 12 broader view of looking at our own budget. And at that 13 time nobody wanted to talk. I'm hearing about these 14 positions and these cuts that I didn't hear about last 15 year. You know, it was like it was off the table. That 16 was not an option that was made available, and there was 17 very little discussion about that. And I still think that 18 would have been the proper way to talk about shortage, 19 however they're imposed. And the history here is somewhat 20 different than I'm hearing it today, at least in my own 21 memory. 22 I would like to hear more about how we have 23 handled our own budget issues prior to assessing any new 24 fees. And these are significant fees. These are very 25 significant fees on companies. And I'm still having PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 problems with this. 2 CHAIRPERSON LLOYD: Well, I think what we 3 could -- what we could provide you, Supervisor Roberts, 4 maybe staff can provide some details to you of exactly 5 what went on at the budget cuts, the cuts that were made, 6 the vacancy which weren't filled. I think. 7 BOARD MEMBER ROBERTS: Well, I think that should 8 have been an issue. I mean at every level of government 9 we've been faced with lesser budgets. There's no question 10 about that. I can tell you, representing a county where 11 we had significant reductions, very significant 12 reductions, that the option of just all of a sudden 13 passing millions of dollars in fees on to people just 14 doesn't -- it just doesn't sit right with me until I know 15 that we've done the things that that is completely and 16 thoroughly as we should be doing. I mean there is no 17 mandate from heaven that says we can't look at our own 18 budget before we start handing out new fees. 19 CHAIRPERSON LLOYD: Yeah, I think here's the 20 process -- and, Ms. Witherspoon, will you correct me -- 21 because since I've taken over, when I've asked certain 22 things on the budget, for example, typically the budget 23 issue is debated in front of the Legislature. And we make 24 those sort of defenses there and whatnot. And it's not 25 played out as much in front of this Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 EXECUTIVE OFFICER WITHERSPOON: That's correct. 2 One of the oddities here is that we are implementing the 3 Governor's budget as provided by the Legislature and not 4 in command of our own dollars and our own resources. And 5 so we do the best with both the policy directives and the 6 fiscal directives that we are given. 7 And you might remember from the ceremony early on 8 for Senator Sher the joking going on about times where 9 legislators put money in the budget that the Governor 10 doesn't want to see there because the Legislature values 11 the programs higher than the -- sort of the Department of 12 Finance has already administered cuts across the board, 13 and then the Legislature rescues certain program areas. 14 I would say to you that the Air Resources Board 15 has been protected in cycle after cycle, but not immune 16 from contraction. And you're remembering the big shift 17 that happened where we had had a $3 million baseline fee 18 for a number of years for stationary facilities. And then 19 it jumped up by 17 million in addition. A big shift. And 20 then we were asked in the last budget cycle, "Can you go 21 any higher?" And they wanted to get the last increment of 22 fee shift potential available. 23 But while that process was going on and sort of 24 moving many programs into fee support across state 25 government, there were also concurrent drills that were PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 cutting other aspects of the budget, taking away contract 2 dollars, taking away travel dollars, taking away 3 authorized positions. 4 And so between the two of them, we've had a net 5 loss in ARB's core operating budget. Though there's, you 6 know, an infusion of large grant dollars for Carl Moyer 7 and such. But that doesn't pay staff positions or, you 8 know, the overhead of our day-to-day work. It goes right 9 back out of here, diesel grants and such. 10 But we'd happy to provide a more detailed 11 write-up for you of the year-by-year shifts in our budget. 12 But it's not something that we can debate here because the 13 Governor and Finance and the Legislature decide. 14 BOARD MEMBER ROBERTS: Well, they decide what the 15 budget's going to be. Do they also decide how you're 16 going to spend every dollar? 17 EXECUTIVE OFFICER WITHERSPOON: No, not how we're 18 going to spend every dollar. 19 BOARD MEMBER ROBERTS: Okay. That's my point. 20 EXECUTIVE OFFICER WITHERSPOON: That's right. 21 BOARD MEMBER RIORDAN: But I think, Ms. 22 Witherspoon -- if I might, Mr. Chairman -- I think that 23 would be helpful for all of us to have, if we are asked to 24 explain to either our constituents or anyone who might be 25 asking what the effect has been on the ARB. And then I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 think it would be very helpful for the industry that's 2 most affected to have that understanding. Because there 3 is going to be a time when we're all together, you know, 4 in that budget process, that's going to be upcoming very 5 soon, I'm sure. And I think it just helps everybody to 6 understand. And then they can make rather intelligent 7 decisions, I hope, in the process of budgeting. 8 EXECUTIVE OFFICER WITHERSPOON: We'd be happy to 9 do that. We'll develop a written summary of our budget 10 and the trends through the years. 11 CHAIRPERSON LLOYD: Thank you. That would be 12 helpful. 13 BOARD MEMBER LOVERIDGE: So moved. 14 CHAIRPERSON LLOYD: You jumped ahead? 15 I take the hint. 16 I'll continue where I mistakenly -- since all 17 testimony, written submissions, staff comments for this 18 item have been entered into the record, and the Board has 19 not granted an extension of the comment period, I am 20 officially closing the record on this portion of the 21 Agenda Item 4-10-5. Written or oral comments received 22 after the comment period has closed will not be accepted 23 as part of the official record on this agenda item. 24 Any ex parte communications on this? 25 Seeing none. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 Then I'm open to a resolution. And I think we've 2 got a motion. 3 BOARD MEMBER LOVERIDGE: So moved. 4 BOARD MEMBER PATRICK: Second. 5 CHAIRPERSON LLOYD: Seconder. We've got that. 6 All in favor say aye. 7 (Ayes.) 8 CHAIRPERSON LLOYD: Any against? 9 (No.) 10 CHAIRPERSON LLOYD: Supervisor Roberts. 11 And one abstention, I guess, yeah. 12 Thank you very much. 13 Court reporter, do you want a five-minute break? 14 Let's take a five-minute break, until 25 of. And 15 then we'll continue. 16 (Thereupon a recess was taken.) 17 CHAIRPERSON LLOYD: Next item on the agenda today 18 is 04-10-6, proposed amendments to the effective and 19 operative dates for enhanced vapor recovery systems. 20 In March of 2000, the Board approved the Enhanced 21 Vapor Recovery, or EVR, Program making major changes to 22 certification standards for vapor recovery systems at 23 gasoline service stations. Existing stations are 24 currently in the process of upgrading their vapor recovery 25 systems to meet those requirements. The proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 amendments to the EVR Program presented today are intended 2 to reduce costs to service station operators to comply 3 with EVR standards. 4 I'd like to turn it over to Ms. Witherspoon to 5 introduce the item. 6 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 7 Lloyd. 8 And in the interest of time, I'm just going to 9 turn it directly over to Cindy Castronovo of our Monetary 10 and Laboratory Division, who will present staff's 11 recommendation. 12 (Thereupon an overhead presentation was 13 Presented as follows.) 14 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Thank 15 you, Ms. Witherspoon. 16 Good afternoon, Chairman Lloyd and members of the 17 board. 18 Today I will present proposed revisions to the 19 enhanced vapor recovery regulations for gasoline 20 dispensing facilities. 21 --o0o-- 22 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Our 23 presentation will begin with some background on the Vapor 24 Recovery Program, including the current implementation 25 schedule for enhanced vapor recovery, or EVR, which the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 Board approved in March 2000. 2 We will discuss the need for staff's proposed 3 amendments to extend EVR deadlines. Then we will cover 4 the cost impacts of the proposal as well as changes in the 5 emission reductions. We'll provide a summary of comments 6 received and our proposed revisions in response to those 7 comments to be considered as 15-day changes. 8 --o0o-- 9 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 10 EVR regulations affect two types of gasoline transfer that 11 take place at service stations which are characterized as 12 Phase I and Phase II. 13 As shown in this slide, Phase I vapor recovery 14 returns vapors, shown in pink, from the service station 15 underground storage tank to the cargo tank truck and 16 eventually to the terminal vapor control system. 17 Phase II vapor recovery routes the vapors 18 displaced from fueling vehicles back into the underground 19 storage tank. 20 Phase I and Phase II equipment must be certified 21 by ARB to meet emission standards. 22 California districts began controlling vapor 23 emissions from gasoline stations as early as 1970. In 24 1987 California adopted the Benzene air toxic control 25 measure, which led to use of vapor recovery systems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 statewide to reduce toxic exposure to Benzene. 2 Under the Federal Clean Air Act, ARB certified 3 equipment is required in nonattainment areas outside 4 California and is the standard for many countries around 5 the world. 6 --o0o-- 7 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: 8 Vapor recovery is an important program for 9 control of reactive organic gas emissions. This chart 10 compares the emission reductions in tons per day for the 11 South Coast Air Basin for three major emission control 12 strategies. 13 As shown here, the emissions reductions 14 attributable to vapor recovery are estimated at 108 tons 15 per day, more than the reductions for low emission 16 vehicles and cleaner burning gasoline. 17 In March 2000 the Board approved the Enhanced 18 Vapor Recovery Program to gain an additional 25 tons per 19 day of emission reduction statewide and increase 20 durability and reliability of vapor recovery systems. 21 --o0o-- 22 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Now 23 we will focus on the Enhanced Vapor Recovery Program which 24 is currently being implemented. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: As 2 already mentioned, the Board approved the Enhanced Vapor 3 Recovery, or EVR, regulations in March 2000. Because 4 several of the EVR standards were technology-forcing, the 5 Board directed staff to conduct a technology review for 6 standards with future effective dates. 7 The results of the technology review presented to 8 the Board in December 2002 showed that all but one of the 9 EVR standards could be met by current or newly designed 10 vapor recovery equipment. Amendments to modify the 11 dripless nozzle standard to an achievable level and to 12 adjust the EVR schedule to provide an additional year to 13 develop equipment to meet Phase II standards became 14 effective in 2003. 15 The EVR program is divided into six parts, which 16 we call EVR modules. Each module represents one or more 17 standards for vapor recovery systems. 18 The first module applies to Phase I vapor 19 recovery systems. As you will recall, Phase I captures 20 vapors during filling of the underground storage tank. 21 Modules two through six are requirements for 22 Phase II vapor recovery systems, which capture vapors from 23 vehicle refueling. 24 Module three, the ORVR compatibility standard, is 25 the focal point of staff's proposed amendments, as we will PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 discuss in the next few slides. 2 --o0o-- 3 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 4 1990 Federal Clean Air Act amendments mandate use of vapor 5 recovery equipment on motor vehicles, which is known as 6 on-board refueling vapor recovery, or ORVR. ORVR vehicles 7 were phased in beginning with the 1998 model year. 8 ARB field tests show that some Phase II vapor 9 recovery systems are not compatible with ORVR vehicles. 10 During the fueling of an ORVR vehicle, vapor that normally 11 would be recovered by the Phase II system is instead 12 collected on the vehicle canister. However, Phase II 13 assist systems with vapor pumps are still trying to draw 14 in vapors. 15 Since vapor is not available, the Phase II system 16 draws in the air through the nozzle. The air becomes 17 saturated with gasoline, which leads to an increase in 18 vapor volume in the underground storage tank. The excess 19 volume, which is rich in hydrocarbon vapors, exits the 20 service station vent valve shown on the left. 21 --o0o-- 22 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 23 EVR standards are being phased in with different effective 24 dates based on the time needed to develop and certify 25 equipment to the new standards. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 Here is the current EVR time line. The start of 2 each color bar represents the start date for each EVR 3 standard. New stations must comply with the requirements 4 in effect at the time of installation. Under state law 5 existing stations have up to four additional years to 6 comply. The final compliance date for all facilities to 7 meet a standard is the date at the end of the colored bar. 8 Note that all stations must be ORVR compatible by 9 April 2005, about five months from now. Existing stations 10 do not have to meet the additional requirements of full 11 EVR until April 2008. 12 --o0o-- 13 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Some 14 stations have installed ORVR compatible systems over the 15 past years. It has been available since 1998. Others 16 plan to wait until a full EVR system was available. Full 17 EVR also meets ORVR requirements and, thus, only one 18 modification to the station would be needed. 19 Unfortunately certification of the first full EVR 20 system is not expected until January 2005. Those stations 21 that waited now find themselves unable to complete 22 installation of EVR by the April 2005 deadline for ORVR 23 compliance. They will have to shift plans and make ORVR 24 modifications right away. As a result, they will also 25 likely install additional full EVR-compliant equipment in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 2008. This will increase costs and delay achieving the 2 extra emission reductions realized by full EVR systems. 3 --o0o-- 4 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 5 Board has been aware of the possibility of delays in the 6 availability of full EVR systems for some time. As a 7 result of the December 2002 technology review, the Board 8 directed staff to evaluate whether there would be 9 sufficient lead time for station owners to install EVR 10 Phase II systems before the ORVR compatibility deadline. 11 The intent was to avoid the need for station owners to 12 upgrade vapor recovery equipment more than once. With the 13 first certified full EVR system expected in January, only 14 two months would remain for 3500 stations to install 15 either a full EVR system or an ORVR compatible system. 16 This is not enough time. 17 --o0o-- 18 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Now 19 that we have outlined the current EVR situation, we are 20 ready to turn to our proposed regulatory proposal. 21 --o0o-- 22 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: This 23 slide summarizes what we have just discussed regarding the 24 need for the proposed amendments. 25 First, the Board has already indicated that two PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 equipment upgrades should be avoided if possible. 2 Second, staff's analysis has found that more time 3 is necessary to convert the estimated 3500 stations to 4 systems that are compatible with ORVR vehicles. Note that 5 many of these station operators have been waiting for 6 certification of an EVR Phase II system to avoid two 7 equipment upgrades. 8 Finally, the first EVR Phase II system is not 9 expected to be available until January 2005. The Healy 10 EVR Phase II system has successfully completed all field 11 test requirements and the Executive Order is being 12 finalized. 13 --o0o-- 14 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 15 proposal will extend the ORVR compatibility deadline by up 16 to 11 months depending on station gasoline throughput. 17 The existing regulations provide that pre-eVR systems may 18 continue to be used if the ARB Executive Officer finds 19 that the systems meeting the EVR standards are not 20 commercially available. The Phase II EVR deadlines have 21 been modified twice under these conditions. The first 22 time to October 1st, 2004, and again to January 1st, 2005. 23 The proposal would make the regulation consistent with 24 these Executive Officer actions. 25 Also, the proposal includes a change to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 in-station diagnostics, or ISD, implementation dates to 2 maintain a one-year difference between high and medium 3 throughput stations that was in the original ISD phase-in 4 schedule. 5 --o0o-- 6 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: In 7 the next two slides we will address the economic and the 8 environmental impacts associated with the staff's 9 proposal. 10 --o0o-- 11 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: As 12 discussed in the staff report, the proposed amendments 13 will save money for station owners by providing an option 14 to avoid two vapor recovery system upgrades to meet full 15 EVR requirements. If a station were to install an ORVR 16 system that was not eventually certified as part of a full 17 EVR system, the loss of investment could be as high as 18 $22,000, depending on the ORVR system chosen. 19 Additional costs savings may be possible if more 20 ORVR compatible or EVR system are certified in the next 21 year, providing a more competitive market and possibly 22 reducing system prices. Manufacturers of currently 23 certified ORVR compatible systems may be adversely 24 affected by the delay, as it will delay product sales and 25 allow more time for their competitors to certify ORVR PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 compatible systems. 2 --o0o-- 3 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: Our 4 analysis indicates that emission reductions of 1.9 tons 5 per day would be delayed by extending the ORVR 6 compatibility deadline. However, those station owners who 7 avoid two upgrades will be installing full EVR systems 8 three years or earlier than required. Full EVR Phase II 9 systems provide additional emission reductions compared to 10 ORVR compatible systems and, thus, provide additional 11 emission reductions of up to 8.3 tons per day for 2006, 12 2007, and 2008. 13 Since the staff report was issued on October 1st, 14 we have received comments from stakeholders that have 15 resulted in revisions to our original proposal. In the 16 next section we will review the comments received and 17 discuss our proposed 15-day changes. 18 --o0o-- 19 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: This 20 slide summarizes those groups affected by vapor recovery 21 regulations. We have work closely with the stakeholders 22 identified here in preparing the staff's proposal. A 23 summary of the outreach efforts will be presented by the 24 Ombudsman following this presentation. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: We 2 have not received any comments opposing the proposal to 3 extend the ORVR compatibility deadline. However, as noted 4 in the staff report, California's air pollution control 5 districts have requested that interim compliance 6 milestones be included in the regulation amendments to 7 minimize adverse air quality impacts resulting from the 8 delay and avoid difficulties that might arise from a 9 last-minute installation crunch, given the limited number 10 of available vendors and contractors. The milestones 11 would also assist districts in orderly processing of the 12 large number of permit revisions expected for these 13 equipment upgrades. 14 Staff has worked California Air Pollution Control 15 Officers' Association, or CAPCOA, and gasoline marketers 16 to device an ORVR compatibility phase-in schedule that we 17 are proposing as 15-day changes to our original staff 18 proposal. 19 This schedule is based on the October 18th, 2004, 20 letter from Larry Greene, President of CAPCOA. The 15-day 21 notice will include an additional month for each 22 milestone. This change has been recently communicated to 23 CAPCOA, and our understanding is that CAPCOA will continue 24 to support the proposal. 25 The additional month is proposed to be added PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 because staff determined that a full EVR Phase II system 2 is now expected to be certified in January rather than 3 December, as stated in the staff report. CAPCOA and all 4 stakeholders will have an opportunity to comment on the 5 proposed 15-day changes when formally issued. 6 --o0o-- 7 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: The 8 proposed phase-in of the ORVR compatibility requirement is 9 based on service station annual throughput. A similar 10 phase-in has already been adopted for the EVR in-station 11 diagnostics requirements. Under this proposal stations 12 with annual throughput of greater than two million gallons 13 per year would need to comply by September 1st, 2005, a 14 delay of five months compared to the current regulations. 15 For one major district this represents approximately 20 16 percent of the affected stations, which dispense about 50 17 percent of the gasoline throughput. 18 Stations with throughputs between one and two 19 million gallons per year would need to comply by January 20 1st, 2006, which could bring 70 percent of the affected 21 stations, comprising about 90 percent of the total 22 throughput, into compliance. The remaining stations with 23 less than one million gallons per year would have an 24 additional 11 months, until March 1st, 2006, to comply. 25 Note that this final compliance date is still one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 month sooner than the staff's original proposal for a 2 one-year extension. 3 The 2003 calendar year annual throughput would be 4 used as the basis for determining compliance with these 5 deadlines. 6 --o0o-- 7 STAFF AIR POLLUTION SPECIALIST CASTRONOVO: In 8 conclusion, this amendment is consistent with previous 9 Board direction to avoid circumstances which would force 10 two vapor recovery system upgrades. The proposal will 11 lower costs for many station owners to comply with EVR 12 requirements. Although some emission reductions would be 13 delayed nearly a year, this proposal promotes the early 14 implementation of EVR Phase II systems, which will provide 15 significant emission reductions ahead of schedule. The 16 proposal was developed with extensive outreach to affected 17 parties, with no adverse comments to the staff's proposal. 18 We recommend approval of the proposed amendments 19 with the suggested 15-day changes. 20 This concludes my presentation. 21 CHAIRPERSON LLOYD: Thank you very much. 22 Turn it over to Madam Ombudsman. 23 OMBUDSMAN TSCHOGL: Thank you. 24 Mr. Chairman and members of the Board, this rule 25 was developed, as you heard, with input from a large PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 variety of stakeholders that have already been identified. 2 The proposed amendments were prompted by comments received 3 at the July 2004 Board meeting on related vapor recovery 4 amendments. 5 On August 19th, 2004, staff held a public 6 workshop in Sacramento. Approximately 30 stakeholders 7 attended the workshop, which was also made available via 8 web broadcast on the Internet. Staff also held more than 9 15 individual meetings with stakeholders. 10 They were encouraged to join the vapor recovery 11 list serve to receive electronic mail notifications when 12 new materials are posted on the vapor recovery web page. 13 The workshop notices, agendas, and presentations, as well 14 as the letters to the manufacturers all are available on 15 the web page. 16 Stakeholders also were encouraged to submit 17 formal comments by letter, and were permitted and 18 encouraged to address questions and comments to staff via 19 E-mail. 20 An advisory entitled "Enhanced Vapor Recovery 21 Implementation Update," dated September 10th, 2004, was 22 provided to stakeholders through a mail-out, E-mail list 23 serve, and a web page posting. The advisory alerted 24 affected parties that extensions to the EVR implementation 25 dates would be considered at the November Board meeting, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 and were encouraged to comment. 2 On October 1st, 2004, the staff report and 3 hearing notice were released and posted on the web. The 4 hearing notice was sent to the vapor recovery mailing list 5 and an E-mail was sent to the vapor recovery list serve 6 advising how to download the notice and staff report from 7 the ARB website. There are nearly 400 on the vapor 8 recovery mailing list and 955 on the vapor recovery list 9 serve. 10 Thank you. 11 CHAIRPERSON LLOYD: Would you say this is one of 12 your most popular regulations? 13 OMBUDSMAN TSCHOGL: I think it's -- it's a very 14 interesting subject. It's one of my favorites. 15 CHAIRPERSON LLOYD: Thank you. 16 OMBUDSMAN TSCHOGL: I love the subject. 17 CHAIRPERSON LLOYD: Any members of the Board have 18 questions? 19 I'd like to call the first -- I guess we've got 20 four witnesses -- call them up. Jennifer Talbert, Jim 21 Cross, Larry Greene, and Steve Arita. 22 MS. TALBERT: Good afternoon. 23 My name is Jennifer Talbert from G&M Oil. I'm 24 also representing the California Independent Oil Marketers 25 Association. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 And we are in support of the recommendation for 2 the ORVR deadline extension. And we are also in support 3 of the CAPCOA milestones. 4 CHAIRPERSON LLOYD: Thank you. 5 Where is G&M oil located? 6 MS. TALBERT: We are in southern California. We 7 operate 115 gas stations. 8 CHAIRPERSON LLOYD: Thank you. 9 MS. TALBERT: Thank you. 10 CHAIRPERSON LLOYD: Jim cross. 11 MR. CROSS: Good afternoon. 12 My name's Jim Cross, and I represent Cross 13 Petroleum and also the California Independent Oil 14 Marketers Association. 15 We too encourage you to support the staff's 16 recommendations on the ORVR extension. We're also an 17 owner and operator of gasoline dispensing facilities that 18 have issues with the ORVR compatibility and the equipment. 19 And the extension will allow us to make the right 20 decisions and not have to upgrade our equipment more than 21 once, as they've stated in their report. So we'd just 22 encourage you guys to approve this extension. 23 CHAIRPERSON LLOYD: Where is Cross located? 24 MR. CROSS: We're located in Redding, California. 25 We're a little smaller family-owned business. We operate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 12 sites in northern California. 2 CHAIRPERSON LLOYD: Thank you. 3 MR. CROSS: Thanks. 4 CHAIRPERSON LLOYD: Larry Greene and Steven 5 Arita. 6 MR. GREENE: Good afternoon, Chairman Lloyd, 7 members of the Board. I'm Larry Greene. I am the Air 8 Pollution Control Officer at Sacramento Metropolitan Air 9 Quality Management District, past President of CAPCOA. I 10 signed this letter, but we switched over since that time. 11 However, I was very involved in this effort, as was Dick 12 Smith from San Diego. 13 We believe that this has been -- it's been very 14 well proved by the staff that in fact this extension is 15 necessary. During the process, we were concerned about 16 jamming up all this change at the very end. That's not -- 17 there's not a good history of that. So we recommended 18 this schedule. We appreciate staff's considering that in 19 recommending that, and we appreciate industry's support of 20 that, because we feel like that's beneficial to them and 21 to us, and we'll make this a smoother operation. 22 So we're in support of this and we're in support 23 of the one-month extension that staff has recommended. 24 I wouldn't always say that discussions on vapor 25 recovery have been this painless. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 (Laughter.) 2 MR. GREENE: But this particular one I think we 3 had a good meeting and we all came to a good resolution to 4 that. 5 CHAIRPERSON LLOYD: Thanks, Larry. 6 Questions? 7 Thank you. 8 Steven Arita. 9 MR. ARITA: Good afternoon, Mr. Chairman, members 10 of the Board. For the record, my name is Steven Arita 11 with the Western States Petroleum Association. 12 On behalf of WSPA, we strongly support staff's 13 recommendation to extend the ORVR compliance deadline 14 date. As noted in staff's presentation, it has taken 15 longer than expected to certify vapor recovery systems, 16 particularly EVR Phase II systems. And, however, though, 17 it is our understanding that a system -- or the first 18 system will be approved some time in January. 19 In that regard, the proposed one-year extension 20 by staff will -- or an 11-month installation deadline date 21 extension will allow operators the option to upgrade vapor 22 recovery equipment to achieve full EVR and ORVR compliance 23 with just one retrofit. Again, we support staff's 24 recommendations. 25 Secondly, as noted in staff's presentation, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 as presented by Mr. Larry Greene of CAPCOA, President, 2 CAPCOA also supports an extension of the deadline date. 3 And we appreciate that very much. 4 To summarize, we support staff's recommendation 5 for the ORVR time line extension. We also support the 6 revised 15-day proposed rulemaking language, which 7 includes the CAPCOA three milestone dates to be included 8 into the extension that's being proposed before you today. 9 We would urge the Board to adopt the proposed 10 recommendations along with the proposed 15-day changes. 11 In closing, I would like to express our thanks 12 and appreciation to Ms. Witherspoon and Mr. Loscutoff in 13 particular for their willingness to not only hear our 14 concerns and meet with us on this very complex and 15 difficult issue. It hasn't always been easy, but we very 16 much greatly appreciate their willingness to meet with us 17 and work through these difficult issues. 18 I'd also like to point out our appreciation also 19 to George Lew and Cindy Castronovo for their hard work in 20 working through all of the very difficult technical 21 issues. 22 And, finally, again I would be remiss if I did 23 not thank Mr. Larry Greene and Mr. Dick Smith for their 24 tireless efforts through CAPCOA to find an implementation 25 approach that ultimately is acceptable to everyone PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 involved. 2 Again, thank you. And I'm available for any 3 questions. 4 CHAIRPERSON LLOYD: Thank you, Steve. 5 Any questions? 6 Thank you. 7 MR. ARITA: Thank you. 8 CHAIRPERSON LLOYD: Any other comments, Ms. 9 Witherspoon? 10 Any other comments? 11 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 12 CHAIRPERSON LLOYD: Okay. I will now close the 13 record on this agenda item. However, the record will be 14 reopened when the 15-day notice of public availability is 15 issued. Written or oral comments received after this 16 hearing date but before the 15-day notice is issued will 17 not be accepted as part of the official record on this 18 agenda item. When the record is reopened for a 15-day 19 comment period, the public may submit written comments on 20 the proposed changes which will be considered and 21 responded to in the final statement of reasons for the 22 regulation. 23 Any ex parte communications? 24 I also met with WSPA yesterday, and they 25 mentioned this very briefly, along the lines of what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 Steven said. But it was all milk and honey so it was very 2 good. 3 (Laughter.) 4 CHAIRPERSON LLOYD: And we now have a resolution 5 before us. 6 So I will entertain a motion. 7 BOARD MEMBER RIORDAN: Mr. Chairman, since this 8 is all milk and honey -- and I love those kind of 9 issues -- I will move approval of the staff recommendation 10 and the associated resolution. 11 BOARD MEMBER BERG: Second. 12 CHAIRPERSON LLOYD: Seconded. 13 All in favor say aye. 14 (Ayes.) 15 CHAIRPERSON LLOYD: Anybody against? 16 Again I'd like to compliment staff for really 17 excellent work done in bringing this forward and also to 18 avoiding some potential issues there and doing things in a 19 very sensible way. So good job. 20 With that we'll move on to the next item. 21 Next item on the agenda is a presentation on 22 particulate matter in California. Particulate matter 23 pollution is one of the most formidable air quality 24 challenges facing California today. And we've heard that 25 a number of times. It is also scientifically complex. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 Before we hear the next item related to 2 particulate matter controls, I think it is very 3 appropriate to take a few minutes to set the stage. This 4 informational item will highlight the results of health 5 studies on the adverse effects of particulate matter as 6 well as characterize the nature of California's 7 particulate matter problem and some of the challenges we 8 face. And I think this will be particularly beneficial to 9 new Board members as we move ahead in addressing this 10 tough yet critically important area of health effect. 11 So with that, I'd turn it over to Ms. 12 Witherspoon. 13 EXECUTIVE OFFICER WITHERSPOON: Thank you, Dr. 14 Lloyd. 15 When we talk about the billions of dollars of 16 health costs caused by air pollution and we talk about the 17 avoidance of premature death, we're mostly referring to 18 particulate matter. And about a month ago we had a 19 teach-in for our entire management team on the current 20 state of knowledge about particulate health studies and 21 also our understanding of the nature of the particulate 22 problem throughout California. And that was such an 23 extraordinary amount of work that our Research Division 24 and Planning and Technical Support Division pulled 25 together, that we wanted to share it with you, as well as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 a preface to proposed control measures to be adopted 2 throughout California particulate. 3 So without further ado, Barbara Weller with the 4 Research Division will present the health effects portion 5 of the presentation, followed by Karen Magliano of the 6 Planning and Technical Support division. 7 Barbara. 8 (Thereupon an overhead presentation was 9 Presented as follows.) 10 Thank you, Ms. Witherspoon. 11 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 12 Good afternoon, Chairman Lloyd and members of the 13 Board. 14 This afternoon I'll be providing an overview or a 15 primer of particulate matter and its health effects. I'll 16 also discuss why we may want to think about exposure 17 patterns and relative toxicity of particles when 18 considering control measures, and end with future 19 directions. 20 --o0o-- 21 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 22 In the second part of the presentation, Karen 23 Magliano will characterize California's current 24 particulate matter problems and future challenges. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 2 Here's some background on particulate matter. 3 What is particulate matter? Particulate matter 4 is not a single pure substance like ozone or carbon 5 monoxide, but rather a complex mixture of compounds from 6 multiple sources as shown on this slide. 7 Even the individual particles themselves are 8 usually mixtures of components. For example, a diesel 9 particle may contain a core of elemental and organic 10 carbon into which ammonium nitrate and water condense. 11 --o0o-- 12 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 13 There are several ways to describe particulate 14 matter, which is abbreviated as PM. Briefly it can be 15 described by its origin. Primary PM is directly emitted. 16 And secondary PM is produced in the atmosphere by 17 photochemical reactions. 18 We typically describe PM in three different size 19 fractions: 20 The coarse, which ranges from the 2.5 to 10 21 microns; the fine, which is 2.5 microns or less; and the 22 ultrafine, which is .1 micron or less. And, finally, it 23 can be described by how it is measured in the field. 24 Either PM10, which contains all three size fractions; or 25 PM2.5, which contains only fine and ultrafine PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 A new designation of PM10 minus 2.5 represents 2 the coarse fraction. 3 --o0o-- 4 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 5 To give you a perspective on how small these 6 particles are: The left side of the slide, this slide, 7 shows an electromicrograph of a human hair; on the right 8 is a representation of the cross-section of the hair 9 compared with two particles, one, a 10 micron particle, 10 and the other, a 2.5 micron particle. One Micron is 11 one-millionth of a meter or about one twenty-five 12 thousandth of an of inch. 13 Although PM2.5 particles themselves are not 14 visible to the naked eye, they can cause reduced 15 visibility which we associate with haze. The majority of 16 ultrafine particles are many times smaller than the PM2.5 17 particles shown in this picture. 18 --o0o-- 19 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 20 Although other methods can be used, PM is 21 usually -- is typically measured by passing ambient air 22 through a filter or by optical methods. Regardless of the 23 method used, the unit we use to describe the quantity of 24 PM in air is the microgram per cubic meter of air. And 25 One microgram is one-millionth of a gram. To demonstrate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 how small this is, the mass of one grain of salt is about 2 100 micrograms. 3 Particulate matter comes from many sources, and 4 the main ones are shown on this slide. Some particles are 5 directly released into our atmosphere from sources such as 6 road dust or wind-blown dust, grinding processes or 7 abrasion, as well as combustion related processes from 8 sources like motor vehicles, industrial facilities, fire 9 places, or your local fast food restaurant. 10 Secondary PM forms in the atmosphere through 11 chemical reactions of gaseous pollutants arising from 12 combustion sources, livestock, sewage, biogenic 13 hydrocarbons, and sea salt. 14 --o0o-- 15 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 16 The main form of secondary PM in California is 17 ammonium nitrate, which is formed from NOx emissions by 18 the same photochemical process that produces ozone. 19 Sulfates are formed from SOx emissions. Secondary PM is 20 also formed from reactions of organic gases from fuel 21 combustion, but many details are not well understood at 22 this time. 23 --o0o-- 24 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 25 The sizes of particles are not uniformly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 distributed. In fact, there are distinct cut ranges. In 2 ambient air, particles fall into two general size ranges, 3 the coarse and the fine particles. 4 --o0o-- 5 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 6 The coarse peak contains particle that are 7 mostly -- material, such as soil and dust, but also 8 contain particles of biological origin. 9 The fine peak contains secondary PM as well as 10 primarily PM that results from combustion. 11 Note that there is a relationship between 12 particle size and chemical composition, and there is 13 not -- that there is not a sharp cut point at 2.5 or 10 14 microns, which makes PM10 and PM2.5 difficult to measure. 15 There is a third fraction, ultrafine particulate 16 matter, which contains short-lived particles seen 17 primarily close to their point of origin. A major source 18 of ultrafine particles is motor vehicle exhaust. For this 19 reason air near freeways has a significant fraction of 20 ultrafine PM. 21 --o0o-- 22 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 23 Now I'd like to move on to the health effects of 24 PM, which are significant. In fact our health benefits 25 analysis has shown that PM accounts for at least 80 to 90 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 percent of the serious health effects that can be linked 2 to air pollution. 3 --o0o-- 4 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 5 This is an illustration of where PM deposits in 6 the lung. It shows that the potential for particulate 7 matter to induce adverse health effects is related to 8 particle size. 9 Particles larger than 10 microns in diameter are 10 generally filtered out in the nasal passages and have a 11 much lower likelihood of entering the lungs. 12 Particles 10 microns or less in aerodynamic 13 diameter can be inhaled deeply into the lungs where they 14 could induce tissue damage and various adverse health 15 effects. Some manage to deposit in the lower respiratory 16 tract. 17 For fine particles, deposition in the lower 18 respiratory tract is more important. But deposition in 19 the nose and threat are still observed. 20 For ultrafine PM, all three areas of deposition 21 are observed. 22 --o0o-- 23 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 24 Both epidemiologic and mechanistic studies are 25 used to determine air pollution health effects. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 Epidemiologic studies are used to investigate 2 responses on a population basis. And there are three 3 basic types: 4 Time series studies look for relationships 5 between acute changes in health status and daily or other 6 short-term fluctuations in air quality. 7 Longitudinal studies involve following a group of 8 specific individuals over a long period. 9 Intervention studies are the gold standard and 10 detect the effects of air pollution control programs on 11 human health. 12 Mechanistic studies explain how particles cause 13 biologic responses in cells, individual animals or humans 14 who are exposed to controlled concentrations of PM. There 15 are relatively few studies of this type due to the 16 difficulties in producing and controlling artificially 17 created particles. However, recent advancements allow 18 ambient particles to be concentrated for use in controlled 19 exposure studies, and this is currently an active area of 20 research. 21 --o0o-- 22 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 23 There is strong statistical evidence linking PM 24 to health effects for the vulnerable populations shown in 25 this slide. The most vulnerable are those with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 preexisting heart disease such as atherosclerosis or lung 2 disease such as asthma, COPD, and respiratory infections. 3 Mechanistic studies show that PM is associated 4 with a number of factors that clinical research has 5 identified as risk factors for cardiac events such as 6 heart attacks. These risk factors include decreased heart 7 rate variability and increased blood viscosity. 8 Emerging mechanistic data show PM exposure leads 9 to cellular oxidative stress, resulting in inflammation or 10 organs such as the lung. 11 The children's health study found reductions in 12 annual lung function growth and overall lung development 13 in communities with high PM. Other studies found increase 14 in infant mortality, low birth weight, premature delivery, 15 and even birth defects with greater PM10 levels. 16 Long-term diabetics typically also have 17 cardiovascular disease as a complication of their disease. 18 And investigators have found that hospital admission rates 19 for cardiovascular disease are double for diabetics than 20 the general population during high PM events. 21 --o0o-- 22 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 23 This slide summarizes the scientific studies on 24 the health effects associated with chronic PM exposure 25 that formed the basis for the annual PM10 standards the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 Board adopted two years ago. The American Cancer Society 2 study followed roughly half a million individuals in many 3 cities throughout the U.S. Validated findings from 4 several studies done on this group of individuals have 5 provided strong evidence of death from cardiopulmonary 6 disease and lung cancer. 7 The Harvard six cities study also found a strong 8 association between PM exposure and an increased risk for 9 death, which is shown on the next slide. 10 --o0o-- 11 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 12 The six cities that are indicated by the letters 13 in these two graphs -- are indicated by the letters in 14 these two graphs. The annual average PM for each city is 15 shown along the bottom axis and the increased death risk 16 relative to the cleanest city, P for Portage, is shown on 17 the vertical axis. The death risk increases linearly as 18 the annual average concentration of either PM10 or PM2.5 19 increases. There may be chronic effects at even lower PM 20 levels, but one would need to study less polluted cities. 21 --o0o-- 22 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 23 To afford the most protection of public health, 24 OEHHA recommended and the ARB recently adopted annual 25 standards at 20 micrograms per meter cubed for PM10 And 12 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 micrograms per meter cubed for PM2.5, as shown in this 2 overlay. The current U.S.EPA standards are much higher. 3 --o0o-- 4 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 5 Short-term exposures to PM also increases death 6 rates. This analysis of 90 U.S. cities found the highest 7 risk in southern California and in the northeast, about .3 8 percent increase in total death risk from natural causes 9 for every 10 micrograms per cubic meter increase in daily 10 PM. 11 This is a lower amount, as European studies of 30 12 million people found a two to four times increase risk of 13 death up to 40 days after the initial exposure to PM. 14 There also does not appear to be a threshold for these 15 short-term effects. 16 Long-term exposures appear to have the greatest 17 health impact, and it's difficult to separate the effects 18 of the acute exposures from the underlying chronic 19 effects. 20 --o0o-- 21 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 22 The previous slides outline research that shows 23 statistical associations between increases in air 24 pollution and increased disease and death. However the 25 converse has also been found. When PM is controlled, real PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 health improvements are reported. 2 For example, when a Utah valley steel mill, the 3 primary source of PM10 in the area, closed for a 13-month 4 period, hospital admissions for school-age children went 5 down dramatically. 6 Results from the southern California children's 7 health study saw a return to normal lung function growth 8 rates when the children moved from a high to a low PM10 9 area. 10 Other intervention studies showed a decline in 11 death rates following a ban of coal sales in Dublin, 12 reduced PM following reunification in Erfurt, East 13 Germany, and a reduction of the sulfur content of fuel in 14 Hong Kong. 15 --o0o-- 16 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 17 California's new standards for particulate matter 18 shown here became effective last year. A 24-hour PM2.5 19 standard was not established due to statistical problems 20 with the software used in the short-term death studies. 21 These problems have now been resolved and we plan to take 22 a fresh look at the short-term PM2.5 literature in 2008 23 after reviewing ozone and NO2. 24 The U.S.EPA's currently reviewing their standards 25 with a court-ordered adoption date of September 30th, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 2006. Shown here are the ranges that the U.S.EPA is 2 considering with the lower end close to our standards. 3 Also, a coarse particle standard is being set due to an 4 industry lawsuit that PM10 overlaps with PM2.5. However, 5 since most studies use PM10 or PM2.5 data, setting a 6 coarse standard may prove difficult for the U.S.EPA. 7 --o0o-- 8 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 9 Typically PM exposure is not a cause of death in 10 the sense that it's written on the death certificate. But 11 PM10 -- PM contributes to the death of vulnerable 12 populations that already have compromised health, 13 particularly the elderly with preexisting heart or lung 14 disease. In addition to developing recommendations for 15 standards, we also estimate the health benefits of 16 attaining the new standards. Calculations of these 17 impacts are based on population data, current ambient 18 concentrations, and exposure response relationships 19 derived from epidemiological studies. Although coarse PM 20 has been linked to death, most researchers believe that 21 death is linked mainly to PM2.5 exposures. 22 --o0o-- 23 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 24 Our diesel risk reduction plan is driven by the 25 goal of reducing cancer risk from its value of 270 lung PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 cancers per year on a statewide basis. But diesel PM is 2 not only a toxic contaminant; it's also a significant 3 fraction of the ambient particles in the air. And the 4 health impact of diesel as a component of PM2.5 is about 5 2,000 deaths per year. OEHHA bases its unit risk factor 6 for toxic air contaminants on the 95th percentile upper 7 confidence limit. The equivalent value for PM2.5 8 mortality is 3,000 deaths for directly emitted PM. 9 --o0o-- 10 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 11 Up till now this presentation has focused on 12 statewide averages of PM concentrations and the associated 13 health effects. However, variations in exposure and 14 particle toxicity can have profound effects on public 15 health, which will be discussed in this part of the 16 presentation. 17 --o0o-- 18 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 19 The basis for our control programs is emissions 20 reductions which treat all masses of PM equally important, 21 or a ton is a ton. However, emissions do not equal 22 exposure, as will be explained in a moment. 23 Also, a second factor not currently taken into 24 account in the ton-is-a-ton approach is the relative 25 toxicity of particles. In fact, evidence is beginning to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 accumulate that suggests that some particles are more 2 toxic than others on an equal mass basis. 3 --o0o-- 4 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 5 PM emissions do not equal exposure. Although 6 exposure is dependent on the total mass emitted from a 7 source, other factors should be considered. For example, 8 some particles are more effectively inhaled than others 9 due to their size, lack of dilution in the atmosphere, or 10 people's proximity to the source of PM such as near high 11 volume freeways or surface streets. At these locations PM 12 concentrations can be higher than air measured at 13 monitoring stations. Indoor particles can also be an 14 important but unquantified source of PM. Also PM exposure 15 in a highly populated urban area will lead to a higher 16 number of people exposed than exposure in a sparsely 17 populated area. Finally, exposure depends on how much air 18 is breathed into the lungs. 19 When these factors are combined to calculate 20 differences in exposure impact, a variation of as much as 21 a hundredfold is found. 22 --o0o-- 23 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 24 The toxicity of particular sources of PM can 25 vary. It is measured as a toxic effect per mass of PM, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 and is determined from human and animal studies as well as 2 laboratory-based cell culture studies; where animal 3 studies, the vast differences in the methods used makes 4 direct toxicity comparisons for all sources difficult. 5 However, there are a few studies where animals were tested 6 using the same protocol for a number of emission sources. 7 And one example is shown on the next slide. 8 --o0o-- 9 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 10 For the study illustrated in this slide, 11 Seagraves and colleagues collected emissions from diesel 12 and gasoline vehicles and measured the relative toxicity 13 of the samples for one of the markers of cell damage. The 14 highest relative potency was observed in the white smoke 15 emitter gasoline vehicle. It should be noted that very 16 few vehicles were studied and these don't represent fleet 17 averages. 18 Also, while these results are important, they 19 represent only one biological endpoint other. 20 Another recent study used an experimental engine 21 to show that when catalytic controls are applied to diesel 22 engines, the toxicity appears to be reduced, bringing 23 closer the promise of reducing the health risk of diesel 24 exhaust. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 2 Although recent research findings have greatly 3 improved our knowledge on the health impacts of PM 4 exposure, significant data gaps still exist. 5 --o0o-- 6 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 7 The major push on health research will be in the 8 area of source toxicity in order to prioritize PM controls 9 with findings accepted over the next -- expected over the 10 next five years. The ARB will be looking at health 11 impacts of traffic-related pollutants and wood smoke. 12 The HEI-funded emission study will investigate 13 the health effects of the latest control technology for 14 diesel engines. Biological mechanisms of PM toxicity will 15 continue to be investigated for those sub-populations 16 where statistical association with PM exposure has been 17 found. And the ARB will continue to fund programs on 18 ultrafine particles. 19 --o0o-- 20 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 21 Ultrafine PM is defined as particles less than 22 one micron. The major source of ultrafines is combustion, 23 but there is also evidence of secondary formation in urban 24 areas. Once emitted or formed, ultrafine particles 25 rapidly coagulate into fine particles, reaching background PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 levels within a few hundred meters of the source. Ambient 2 monitoring is limited, and the only comprehensive routine 3 network in the world was operated by the ARB at the 12 4 stations for the Southern California Children's Health 5 Study. 6 The health effects of these particles are 7 beginning to come to light. A study in Erfurt, Germany, 8 found significant associations between exposure to 9 ultrafine PM and daily mortality from respiratory and 10 cardiovascular disease. Also recent studies have found 11 that ultrafine particles can actually pass into the human 12 circulatory system, thus can cause an exposure to organs 13 such as the liver. 14 And, finally, toxicology studies of ambient 15 particles in Los Angeles indicate that ultrafine PM is 16 more potent than fine or coarse PM on a mass basis towards 17 inducing cellular damage, a possible indicator of the 18 biological mechanism of how ultrafine PM exposure can 19 affect human health. While these findings are intriguing, 20 much more work is needed however to elucidate the true 21 health effects of ultrafine particles. 22 --o0o-- 23 HEALTH AND ECOSYSTEMS ASSESSMENT MANAGER SMITH: 24 To summarize: 25 PM is responsible for at least 80 to 90 percent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 of the serious health effects known from exposure to 2 ambient air pollution. 3 Significant benefits accrue from annual average 4 PM reductions. We estimate that a thousand lives can be 5 saved per year for each microgram per meter cubed 6 reduction. 7 While diesel ranks as an important PM source, 8 control of gasoline and home wood burning represents 9 important opportunities for additional health improvement. 10 In the future we can expect to see more emphasis 11 on determining concurrent reduction of ultrafine particles 12 and PM mass at the source. The task will not be easy, as 13 the measurement of ultrafine particles shows strong 14 dependence on sampling conditions. 15 At this point I would like to turn the microphone 16 over to Karen Magliano, who will continue the 17 presentation. 18 --o0o-- 19 PARTICULATE MATTER ANALYSIS SECTION MANAGER 20 MAGLIANO: Thank you, Linda. 21 You've just heard about the serious health 22 impacts caused by exposure to PM. Over the past decade we 23 have devoted considerable resources to improving our 24 understanding of the diverse nature of PM in California 25 through our monitoring programs, data analysis, and air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 quality modeling. This work has laid a strong foundation 2 for developing a effective strategies to reduce PM 3 exposure. 4 --o0o-- 5 PARTICULATE MATTER ANALYSIS SECTION MANAGER 6 MAGLIANO: The remainder of the presentation will briefly 7 describe our PM monitoring program, summarize progress on 8 meeting the federal PM10 standards, and the transition to 9 the new PM2.5 standards. It will also highlight future 10 challenges and our ongoing control programs. 11 --o0o-- 12 PARTICULATE MATTER ANALYSIS SECTION MANAGER 13 MAGLIANO: As the first part of the presentation 14 emphasized, PM is certainly complex. There are many 15 different sizes of particles for which we've established 16 standards, including PM10 and the subset of fine particles 17 known as PM2.5. 18 Because PM can of short-term and long-term health 19 impact, we have both 24 hour and annual standards. In 20 addition, there are many different types of particles, 21 including those that are directly emitted as particles and 22 those that are formed in the atmosphere precursor gases. 23 These various aspects combine to create very different 24 types of PM problems across the state and in different 25 seasons of the year. While understanding these nuances is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 a challenge, it's one where we've made great progress. 2 --o0o-- 3 PARTICULATE MATTER ANALYSIS SECTION MANAGER 4 MAGLIANO: California has established a comprehensive 5 monitoring program for PM, with over 150 sites collecting 6 PM10 data and 80 collecting PM2.5. While most sites 7 provide us with information on 24-hour average PM 8 concentrations, a number of sites also have new monitoring 9 technologies that provide continuous realtime information 10 on PM and its composition. This data has helped us better 11 understand the sources of PM as well as provide valuable 12 information for public health index reporting. 13 --o0o-- 14 PARTICULATE MATTER ANALYSIS SECTION MANAGER 15 MAGLIANO: Examples of several different types of PM 16 monitors are displayed outside the Board room. 17 In addition to the routine monitoring network, a 18 number of special studies have been conducted to study PM 19 in selected regions more intensively. These programs have 20 provided extensive information on PM in areas of the state 21 with the most severe and complex PM problems. They 22 include large scale studies in central and southern 23 California, U.S.EPA supersites in Fresno and Los Angeles, 24 and the landmark children health study that Linda referred 25 to. Combined these studies represent the largest and most PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 scientifically advanced assessment of PM in the nation. 2 --o0o-- 3 PARTICULATE MATTER ANALYSIS SECTION MANAGER 4 MAGLIANO: The information gathered in our routine network 5 and these special studies is being used on an ongoing 6 basis to improve our understanding of PM. The next slides 7 will illustrate the progress we've made in meeting the 8 federal PM10 standards. 9 --o0o-- 10 PARTICULATE MATTER ANALYSIS SECTION MANAGER 11 MAGLIANO: Federal nonattainment areas for PM10 were 12 originally established in 1990. The four regions shown in 13 blue -- Sacramento, Trona, Indian Wells, an a portion of 14 the Mojave Desert -- have since attained the federal PM 15 standards. The remaining nonattainment areas, shown in 16 orange, include Owens and Mono Lakes, the San Joaquin 17 Valley, the Coachella Valley, the South Coast Air Basin, 18 and Imperial County. 19 --o0o-- 20 PARTICULATE MATTER ANALYSIS SECTION MANAGER 21 MAGLIANO: These areas represent a diverse array of 22 different PM10 problems. Many of the areas, including 23 Owens and Mono Lakes, Imperial County, and the Coachella 24 Valley, have primarily coarse particle fugitive dust 25 problems, with more limited contributions from smaller PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 PM2.5 particles. 2 As shown in the bar chart for Owens Lake on the 3 right-hand side of the slide, these areas violate the 4 federal standards for PM10 but not for PM2.5. Each of 5 these regions are implementing measures to reduce fugitive 6 dust. 7 Imperial County also has the added challenge of 8 addressing transport from Mexico. 9 --o0o-- 10 PARTICULATE MATTER ANALYSIS SECTION MANAGER 11 MAGLIANO: In contrast, the San Joaquin Valley and the 12 South Coast have a more complex problem, with 13 contributions from both fugitive dust and fine particle 14 combustion sources. As a result, these two areas violate 15 both the federal PM10 and PM 2.5 standards. Both areas 16 adopted comprehensive PM state implementation plans in 17 2003 that address a broad spectrum of sources that will 18 reduce both PM10 and PM2.5. 19 --o0o-- 20 PARTICULATE MATTER ANALYSIS SECTION MANAGER 21 MAGLIANO: As a result of ongoing control programs, annual 22 average PM10 concentrations in the San Joaquin Valley and 23 South Coast have decreased by approximately 25 percent 24 since 1990. And both areas are approaching the level of 25 the annual standard. The number of exceedances of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 24-hour standard have also declined by 70 percent in the 2 same period. 3 The South Coast PM10 state implementation plan 4 has a 2006 attainment date, while the San Joaquin Valley 5 has a 2010 attainment date. 6 --o0o-- 7 PARTICULATE MATTER ANALYSIS SECTION MANAGER 8 MAGLIANO: To augment the federal PM10 standard, in 1997 9 the U.S.EPA set new PM2.5 standards focusing on the 10 smallest particles within PM10. These standards initiated 11 a new attainment planning process on which we are just 12 embarking. 13 --o0o-- 14 PARTICULATE MATTER ANALYSIS SECTION MANAGER 15 MAGLIANO: Three areas in California are expected to be 16 named by U.S.EPA next month as nonattainment for the 17 federal PM 2.5 standards: The San Joaquin Valley, South 18 Coast, and San Diego. 19 While San Diego exceeds only the annual standard, 20 the San Joaquin Valley and South Coast exceed both the 21 24-hour and annual standards. 22 State implementation plans for PM2.5 are due in 23 February 2008, with attainment deadlines of 2015. 24 --o0o-- 25 PARTICULATE MATTER ANALYSIS SECTION MANAGER PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 MAGLIANO: In addition to the three areas in California, 2 there are a number of other areas in the nation that 3 exceed the new PM2.5 standards. 4 As you can see from this map of annual 5 concentrations, areas violating the federal standard are 6 primarily on the east and west coasts. However, with the 7 exception of a small area in Libby, Montana, California's 8 the only nonattainment area in the western half of the 9 nation. 10 --o0o-- 11 PARTICULATE MATTER ANALYSIS SECTION MANAGER 12 MAGLIANO: We can put California in perspective in another 13 way, by assessing national exposure to PM2.5 14 concentrations above the level of the federal standard. 15 Due to the severity of our problem as well as our large 16 population, California residents receive more than 60 17 percent of the population-weighted exposure to PM2.5 18 concentrations above the annual standard. 19 Moreover, since California is virtually the only 20 state to exceed the federal 24-hour standard, California 21 residents account for 98 percent of exposure to 22 concentrations above the 24-hour standard. 23 --o0o-- 24 PARTICULATE MATTER ANALYSIS SECTION MANAGER 25 MAGLIANO: Just how severe is the problem in California? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 The annual average concentrations for the three federal 2 nonattainment areas are shown in this graph. While San 3 Diego is just above the federal standard of 15, both the 4 South Coast and the San Joaquin Valley have a considerable 5 way to go to attain the standard. And as mentioned 6 previously, both the South Coast and San Joaquin Valley 7 also exceed the 24-hour standard of 65 micrograms per 8 cubic meter. 9 --o0o-- 10 PARTICULATE MATTER ANALYSIS SECTION MANAGER 11 MAGLIANO: Annual averages are made up of individual 12 24-hour concentrations. The magnitude of those 24-hour 13 concentrations can vary considerably throughout the year, 14 with some months or seasons having a much greater 15 likelihood of exceeding the standard than others. 16 Monthly PM2.5 concentrations in 2001 are shown 17 here for the San Joaquin Valley and South Coast. 18 The San Joaquin Valley, in blue, displays a 19 distinct seasonal pattern, with concentrations that exceed 20 the 24-hour standard occurring in the fall and winter. 21 The South Coast, in green, has a more uniform 22 pattern. And high concentrations often occur throughout 23 the year. 24 Control programs in each region will need to 25 consider this regional variability in designing strategies PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 the meet both the 24-hour and annual standards. 2 --o0o-- 3 PARTICULATE MATTER ANALYSIS SECTION MANAGER 4 MAGLIANO: The most important element in setting PM is 5 linking the measured air quality to the sources that need 6 to be controlled. Just as we have seen that the magnitude 7 and seasonality of PM varies by region, so do the 8 contributing sources. While there are differences, there 9 are also similarities that can identify a common 10 foundation for control. 11 In both the San Joaquin Valley and the South 12 Coast there are substantial contributions from secondary 13 PM, the portion of PM formed from reactions of precursor 14 gases. Secondary PM often comprises 50 to 70 percent of 15 the measured PM2.5. Other common sources include directly 16 emitted PM from gasoline and diesel vehicles. 17 One of the key differences, however, is the much 18 larger contribution from wood combustion and agricultural 19 and prescribed burning in the San Joaquin Valley. This 20 type of difference illustrates the need for control 21 programs that are also tailored to the unique nature of 22 the local PM problem. 23 --o0o-- 24 PARTICULATE MATTER ANALYSIS SECTION MANAGER 25 MAGLIANO: As I just described, secondary PM is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 significant part of the problem in many areas. The 2 precursors of secondary PM include NOx, SOx, ROG, and 3 ammonia. But not all precursors are equally important in 4 all areas. Therefore, reducing the secondary portion of 5 PM requires identification of the appropriate precursors 6 for control. 7 One key point to note is the importance of ROG 8 and NOx reductions for both ozone and PM. Because of this 9 linkage, ongoing control programs for ozone have been 10 effective in reducing PM as well. 11 --o0o-- 12 PARTICULATE MATTER ANALYSIS SECTION MANAGER 13 MAGLIANO: Attainment of the federal standards, however, 14 is just one step in achieving clean air. We also have a 15 number of other challenges before us. 16 California has established more stringent state 17 standards than the U.S.EPA for both PM10 and PM2.5. 18 Virtually the entire state exceeds the state PM10 19 standards and all major urban areas exceed the state PM2.5 20 standard. 21 You will hear more about efforts under way to 22 ensure continued progress towards meeting the more 23 stringent state standards in the next presentation. 24 --o0o-- 25 PARTICULATE MATTER ANALYSIS SECTION MANAGER PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 MAGLIANO: PM also contributes to regional haze or reduced 2 visibility in our national parks. To protect this 3 important resource, the U.S.EPA is requiring submission of 4 plans to address regional haze. At the same time this PM 5 2.5 plan's in early 2008. 6 The reductions included in our PM2.5 plans will 7 also benefit visibility. Through these measures we will 8 help ensure that the views of Half Dome in Yosemite 9 continue to look more like the pristine conditions in the 10 top photo and less like those in the bottom photo. 11 --o0o-- 12 PARTICULATE MATTER ANALYSIS SECTION MANAGER 13 MAGLIANO: The ARB has a long history of developing 14 stringent emission controls. The Last few slides will 15 illustrate how our ongoing control programs for PM are 16 building off of these efforts as well as where we need to 17 head in the future. 18 --o0o-- 19 PARTICULATE MATTER ANALYSIS SECTION MANAGER 20 MAGLIANO: ARB's existing ozone control program will 21 provide significant PM2.5 benefits into the future. 22 Because of the dual role that NOx and ROG play in ozone 23 and secondary PM formation, our strategy is to reduce 24 ozone precursors, especially NOx, will also reduce the 25 ammonia nitrate fraction of PM. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 The LEV II program and recent diesel rules 2 adopted by this Board are critical to the successful PM 3 program, as will be the remaining measures in the 2003 4 statewide strategy that staff will bring to you over the 5 next few years. 6 In addition to reducing PM mass, progress towards 7 ARB's 2010 and 2020 diesel risk reduction goals are also 8 critical from a perspective of reducing toxics exposure. 9 --o0o-- 10 PARTICULATE MATTER ANALYSIS SECTION MANAGER 11 MAGLIANO: Because PM has many different constituents, 12 ammonium nitrate, ammonium sulfate, organic particles, it 13 would be critical to attack PM on many fronts. This will 14 require additional efforts on the local, state and federal 15 level. 16 In addition, as we develop strategies for diesel 17 particulate sources, for example, we will need to look for 18 opportunities to reduce NOx from the same sources at the 19 same time. As a result, we need be thinking not of 20 separate ozone and PM strategies, but of an integrated 21 control program for both pollutants. 22 --o0o-- 23 PARTICULATE MATTER ANALYSIS SECTION MANAGER 24 MAGLIANO: In summary, PM is one of the most formidable 25 public health challenges facing California today. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 health impacts of exposure to PM are extremely serious, 2 and California has one of the most severe PM problems in 3 the nation to overcome. 4 However, we've made substantial progress in 5 understanding the sources contributing to PM and needed 6 control strategies. Our ongoing control programs have 7 been effective in reducing PM over the past 20 years. But 8 we still have a long way to go. 9 It will be crucial to provide a continued focus 10 on PM reductions to ensure healthy air for all residents 11 of California. 12 And that concludes our presentation. And we 13 would be happy to answer any questions you might have. 14 CHAIRPERSON LLOYD: When do you anticipate coming 15 back to the Board on the 24-hour standard for PM2.5? 16 RESEARCH DIVISION CHIEF CROES: In 2008. We're 17 currently dealing with an ozone and NO2 standard 18 simultaneously, and would need quite a bit of time to 19 prepare a 24-hour standard. So 2008. 20 CHAIRPERSON LLOYD: 2008? 21 RESEARCH DIVISION CHIEF CROES: (Nods head.) 22 CHAIRPERSON LLOYD: What about the -- maybe I 23 misunderstood what Barbara was saying. But the way I 24 looked at some of the particulate -- were you looking at 25 something like a toxicity reactivity scale for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 particulates? 2 RESEARCH DIVISION CHIEF CROES: Actually there's 3 a big push right now to get federal funding for developing 4 systematic approaches to defining toxicity. Some of that 5 work's been started already at the work going on with the 6 Lovelace Research Institute in Albuquerque. 7 What we're finding though in our review of the 8 literature is there seemed to be some inconsistencies with 9 what you find in the laboratory versus what you find with 10 real populations with these epidemiology studies. So I 11 think there needs to be more cross-comparison between the 12 various methods of defining toxicity. 13 EXECUTIVE OFFICER WITHERSPOON: Just a quick 14 correction. Although my script said it was Barbara Weller 15 making the health presentation, that is of course Dr. 16 Linda Smith. I turned around and then I realized that. 17 And I apologized to her for not introducing her by her 18 actual name. 19 CHAIRPERSON LLOYD: I thought it was. I got 20 confused there. But okay. 21 And she got so offended, she left? 22 (Laughter.) 23 RESEARCH DIVISION CHIEF CROES: Actually Linda 24 had a doctor's appointment. Barbara was originally 25 scheduled to make the presentation. But she came in this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 morning and was very sick, so we sent her home. 2 CHAIRPERSON LLOYD: Okay. 2008. 3 (Laughter.) 4 EXECUTIVE OFFICER WITHERSPOON: Let's finish 5 ozone and NO2 and then we'll talk. 6 CHAIRPERSON LLOYD: That's 5, 6, 7, 8. 7 (Laughter.) 8 CHAIRPERSON LLOYD: Okay. Any questions? 9 Thank you very much. A very good -- and what I'd 10 suggest also, if you could send the copies of this to -- a 11 couple of the Board members I know were missing. I know 12 they'd particularly like some of this background. 13 Oh, sorry. Mayor Loveridge. 14 BOARD MEMBER LOVERIDGE: Just one historic 15 question. This sort of discovery of particulates and the 16 emphasis of particulates, that's fairly recent, right? 17 We're talking last five years or so, I guess. What 18 precipitated -- you know, particulates obviously are not 19 new. What precipitated -- what kind of precipitated this 20 attention on particulates, which was not here before? 21 EXECUTIVE OFFICER WITHERSPOON: I would say it 22 was the six city study showing the link between 23 particulate levels and mortality, which then brought it 24 very high in our consciousness. And then as we converted 25 that into cost figures for loss of life and integrated in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 our control strategies, it dwarfed everything we had 2 looked at previously for ozone control. 3 And we began in the late nineties saying 4 particulate matter is the pollution of the next century. 5 And one of the reasons we conducted the in-house training 6 session was, although we've been saying that and 7 understanding that in our Research Division and at the 8 executive management level, we weren't behaving that way 9 throughout the entire organization and hadn't sort of 10 cultivated that understanding amongst our staff. 11 And one of the things we discussed in our 12 training session is that we needed to spread that word 13 more broadly and adjust our communications strategies to 14 all parties in California, because that's not a generally 15 understood fact about air pollution in our state. 16 BOARD MEMBER GONG: I might chime in a little 17 bit. 18 CHAIRPERSON LLOYD. Please do. 19 BOARD MEMBER GONG: From my perspective, I think 20 there are two major happenings that really precipitated 21 more interest and concern about particulates. And I agree 22 with you, Catherine, about the epidemiological studies, 23 which have been fairly consistent from different 24 investigators and different areas of the country and 25 world, showing health effects from -- well, associated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 with PM of different sizes. 2 And I think the other major advancement is 3 technology. We've been able to actually capture and have 4 willing animals or humans inhale concentrated particulates 5 via these interesting instruments that basically 6 concentrate ambient particles. And that has produced, 7 shall we say, fresh bio-active particles that can 8 potentially cause problems. And you can demonstrate that 9 best in the cells in some animal models. And, indeed, 10 we're going to be looking at that in one of the research 11 protocols we approved today. 12 So I think you're absolutely right, Mayor 13 Loveridge, that particles have been around -- been around 14 for centuries, ever since we started our first fire, I 15 guess. So it's just -- we just have to have the tools and 16 the wherewithal to measure and to actually build the 17 experiments I think. And I think we're at that stage and 18 you're seeing some of the results. 19 CHAIRPERSON LLOYD: Supervisor Patrick. 20 BOARD MEMBER PATRICK: Oh, what's her name down 21 here on the left. 22 CHAIRPERSON LLOYD: Oh, I just was going to say 23 Mayor Patrick. 24 BOARD MEMBER PATRICK: Oh, that would be fun. I 25 wonder if I could do both jobs and this too. That would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 be very fun. 2 I just wanted to compliment staff. What a great 3 job you've done here. And this really helps to set the 4 stage for our next item that's going to be coming before 5 us. 6 When I first came on the Board the very first 7 action that this Board took in 1997, in June, was to adopt 8 the valley's PM plan. And certainly as time has gone on 9 and more and more of the studies have indicated how 10 dangerous this is to human health -- you know, there's 11 just been more and more discussion of it as an issue all 12 along. And so I think it's terrific that you have brought 13 this forward. And I know this will be a good resource for 14 me because I'm often asked about, you know, particulate 15 matter problems, not only in the State of California, but 16 more particularly in the valley. And this chart will be 17 very, very helpful for me. And I think it's terrific that 18 staff has done such a good job of just giving us an 19 overview before we address our next item. 20 So I just wanted to hand compliments all around. 21 Good job. 22 BOARD MEMBER GONG: And I would second that once 23 more. And also I think the highest compliment one 24 professional can give another is to say I'm going to steal 25 your slides. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 Thank you. 2 (Laughter.) 3 CHAIRPERSON LLOYD: Also I think, getting back to 4 an earlier comment there, Mayor Loveridge, I think the 5 fact that these particulates were identified as a toxic 6 air contaminant in 1998 by this Board also gave a 7 tremendous boost to some of the controls and the focus on 8 that as well. Obviously the cancer side, but also the 9 other side of that as well. 10 Any other questions from the Board? 11 Any other comments? 12 EXECUTIVE OFFICER WITHERSPOON: Nothing. 13 CHAIRPERSON LLOYD: Since this is not a 14 regulatory item, it's not necessary to officially close 15 the record. 16 So we'll expeditiously move ahead to Item 4-10-8, 17 which is the consideration of a proposed list of measures 18 to reduce PM10 and PM2.5 as required by Senate Bill 656. 19 The previous presentation highlighted the serious 20 health effects of particulate matter air pollution, and 21 also the complexity of California's particulate matter 22 problem, as well as the need to develop an expeditious 23 PM2.5 standard in the shortest time possible. The 24 implementation of SB 656 will be an important next step as 25 we address the critical public health issue. The Board's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 consideration of this list is a starting point. The 2 follow-up action by local air districts will ensure that 3 we make continued progress in reducing particulate matter 4 emissions. 5 Well, I'm sure we'll -- I see some of the local 6 districts here, so I'm sure we'll here from some of them. 7 So with that, I would like to turn it over to Ms. 8 Witherspoon to begin the staff presentation. 9 EXECUTIVE OFFICER WITHERSPOON: Just a bit of 10 history here. 11 When Senator Byron Sher wrote the Clean Air Act 12 in 1988, he had intended to include particulate among the 13 list of pollutants for which we had to adopt plans and 14 control pressures. And the Air Resources Board staff 15 urged him not to do that, but to set it in a second 16 category, because at that time we did not know how to 17 accomplish 5 percent annual emission reductions in 18 particulate, nor were we able to say what all feasible 19 measures for particulate matter meant. 20 And so he took that advice, but I think it was 21 with great regret. And every year since then he and his 22 staff kept -- returned to us, you know, "When will we 23 amend the California Clean Air Act to add to it 24 particulate matter mandates?" And so this in his final 25 year was a crucial step forward and to say, "Let's at the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 very least put the measures on the table that we now know 2 to be readily available and attack this problem more 3 directly, instead of waiting for the research to continue 4 to collect." 5 So with that introduction I'll turn the 6 presentation over to Patricia Velasco of the Planning and 7 Technical Support Division. 8 AIR POLLUTION SPECIALIST VELASCO: Thank you, Ms. 9 Witherspoon. 10 Good afternoon, Mr. Chairman, members of the 11 Board. 12 (Thereupon an overhead presentation was 13 Presented as follows.) 14 AIR POLLUTION SPECIALIST VELASCO: As you heard 15 earlier today, exposure to particulate pollution is linked 16 to serious respiratory health effects and premature deaths 17 in people with preexisting cardiac or respiratory disease. 18 Health effects have been associated with PM10 as well as 19 PM2.5, the subset of fine particulate. 20 Particulate matter is a complex and widespread 21 problem. Virtually the entire state exceeds the state 22 PM10 standards, with most urban areas and several isolated 23 sub-areas also exceeding the state PM 2.5 standard. 24 To ensure continued progress in reducing public 25 exposure to particulate matter, the Legislature enacted PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 Senate Bill 656, or SB 656, by Senator Sher in 2003. 2 --o0o-- 3 AIR POLLUTION SPECIALIST VELASCO: During today's 4 presentation I will summarize the requirements of SB 656. 5 I will describe the criteria used to develop the SB 656 6 list of PM control measures in the emissions source 7 categories included on the list. 8 I will then explain ARB's role in developing the 9 control measures list and in preparing resource materials 10 to assist air districts in the bill's implementation 11 process. 12 Finally, I will detail the steps each district 13 will follow to meet the legislation's requirements. 14 --o0o-- 15 AIR POLLUTION SPECIALIST VELASCO: Let us start 16 by going over the bill's requirements. 17 --o0o-- 18 AIR POLLUTION SPECIALIST VELASCO: SB 656 19 requires ARB in consultation with the air districts to 20 develop and adopt by January 1st, 2005, a list of control 21 measures that could be employed by air districts to reduce 22 PM10 and PM2.5. By July 31st, 2005, the bill requires air 23 districts to adopt implementation schedules for 24 appropriate air district measures. Finally, no later than 25 January 1st, 2009, the ARB must prepare a report PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 describing actions taken to fulfill the requirements of 2 the legislation as well as recommendations for further 3 actions to assist achieving the State PM standards. 4 --o0o-- 5 AIR POLLUTION SPECIALIST VELASCO: The 6 legislation specified a number of criteria for developing 7 the list of measures. 8 The first criterion was to identify the most 9 readily available, feasible, and cost effective measures 10 that could be employed by air districts to reduce PM10 and 11 PM2.5. 12 Second, the proposed control measures are to be 13 based on rules, regulations, and programs existing in 14 California as of January 1st, 2004, to reduce emissions 15 from stationary area and mobile sources. The list must 16 include but is not limited to measures for specific 17 emissions source categories, such as stationary combustion 18 sources, wood stoves and fire places, and construction and 19 grading operations. 20 Finally, measures to control directly emitted as 21 well as emissions of precursor pollutants are to be 22 included. The Legislation also included a process for air 23 districts and public consultation. 24 --o0o-- 25 AIR POLLUTION SPECIALIST VELASCO: The list of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 measures is the starting point for the legislation 2 implementation phase. The focus of today's presentation 3 is on the SB 656 required list of air district measures. 4 However, for information purposes staff also developed a 5 summary of measures that ARB adopted through January 1st, 6 2004, as well as a summary of measures that ARB is 7 considering for development as part of ARB's diesel risk 8 reduction program as part of the Board adopted 2003 9 strategy for PM10 and ozone. 10 The ARB summary includes measures comprising new 11 engine standards for different types of vehicles and 12 equipment to ensure fleets get cleaner in the future, as 13 well as in-use requirements to ensure the existing fleet 14 remains as clean as possible. 15 --o0o-- 16 AIR POLLUTION SPECIALIST VELASCO: Emission 17 standards have also been adopted for about 100 categories 18 of consumer products. In 2001, ARB also updated the smog 19 management guidelines to minimize smoke impacts from 20 agricultural and prescribed burning. 21 --o0o-- 22 AIR POLLUTION SPECIALIST VELASCO: In addition, 23 earlier today the Board approved extending the use of 24 California's low sulfur diesel fuel for locomotives 25 traveling within the state and for harborcraft. Through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 the Diesel Risk Reduction Program, the ARB has also 2 adopted airborne toxic control measures to reduce exposure 3 to numerous diesel particulate matter sources. 4 --o0o-- 5 AIR POLLUTION SPECIALIST VELASCO: As I 6 previously noted, the main element of today's presentation 7 is the list of air district measures. The list of air 8 district measures was compiled from a comprehensive 9 assessment of existing air district rules. This 10 assessment was done within the context of the 11 legislation's criteria specifying measures that were the 12 most readily available, feasible, and cost effective from 13 the perspective of attaining the PM standards as well as 14 an assessment of the types of measures that best reflect 15 the nature of different PM source contributions on a 16 statewide basis. 17 The ARB staff identified measures that generally 18 represented the best levels of emission control that have 19 been adopted within the context of the screening 20 procedures previously described. In several instances 21 similar rules or programs may have been adopted by 22 multiple air districts. But in general only one has been 23 listed as a representative example. 24 Finally, in assembling the list ARB staff 25 organized all identified rules and programs by emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 source category. 2 --o0o-- 3 AIR POLLUTION SPECIALIST VELASCO: In preparing 4 the list of air district measures, ARB staff sought public 5 input through a workshop held on May 6th, 2004, in 6 Sacramento on a draft version of the air district list 7 released on April 22, 2004. 8 Staff worked closely with air districts through 9 conference calls with the California Air Pollution Control 10 Officers' Association, planning managers, and rule 11 development committees, as well as with individual air 12 districts. 13 Staff also obtained input from business, 14 agriculture, and environmental stakeholders through 15 follow-up meetings and conference calls. 16 --o0o-- 17 AIR POLLUTION SPECIALIST VELASCO: The air 18 district list includes approximately 100 measures in six 19 broad categories as shown on this slide. These measures 20 range from wood burning in the fire places and wood stoves 21 to stationary combustion sources to programs that reduce 22 emissions from vehicles like Spare the Air and other 23 outreach programs. 24 --o0o-- 25 AIR POLLUTION SPECIALIST VELASCO: I will now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 describe ARB's role in the SB 656 implementation process. 2 --o0o-- 3 AIR POLLUTION SPECIALIST VELASCO: To assist air 4 districts in the development of implementation schedules, 5 ARB staff compiled the available cost effectiveness 6 information for each measure that will serve as a starting 7 point for air districts' cost-effectiveness analysis. 8 An initial evaluation of PM in each of the 9 state's 15 air basins has been developed to assist air 10 districts in understanding the nature of their PM problem. 11 Staff also prepared a suggested list of basic 12 measures for different types of PM problems that air 13 districts may want to consider in developing and 14 prioritizing measures for their implementation schedules. 15 For cost-effectivness staff prepared a summary 16 table of available data in each major emission source 17 category organized by increasing cost-effectiveness range 18 as well as more detailed cost-effectiveness information on 19 each individual measure. As an additional resource for 20 air districts, ARB staff is developing a clearinghouse of 21 the cost-effectiveness documentation prepared by the air 22 districts at the time they adopted the rules. 23 This information will be made available via the 24 web to facilitate air district evaluations of local 25 cost-effectiveness and emission reduction potential PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 considerations. 2 --o0o-- 3 AIR POLLUTION SPECIALIST VELASCO: To assist air 4 districts in assessing the nature and severity of PM in 5 their areas, ARB staff prepared an initial evaluation of 6 PM in each of the 15 air basins. This assessment 7 evaluates the magnitude of the PM2.5 and PM10 problem. By 8 analyzing the portion of PM that is formed in the 9 atmosphere through the reaction of precursor pollutants, 10 the seasonal and hourly variations in PM concentrations, 11 and the chemical concentration of ambient PM, the 12 assessment identifies significant sources of PM. The 13 initial version of this document is available on ARB's web 14 page. The document will be updated by January 2005 with 15 the most recent data available from routine monitoring 16 sites and special purpose studies. 17 --o0o-- 18 AIR POLLUTION SPECIALIST VELASCO: This slide 19 illustrates three types of PM2.5 problems found in 20 different areas of the state. 21 Seasonal variations in PM2.5 levels and the PM2.5 22 chemical composition data point towards a 23 woodsmoke-dominated problem in Chico. 24 In Simi Valley PM2.5 concentrations result from 25 different types of combustion sources. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 Finally, in Calexico unhealthy PM2.5 levels 2 result from a combination of combustion and dust sources. 3 --o0o-- 4 AIR POLLUTION SPECIALIST VELASCO: The list of 5 air district measures is comprehensive in scope. And as 6 previously mentioned, air districts will select a subset 7 of measures appropriate to the nature of their PM problem. 8 As a starting point ARB staff prepared a table of 9 suggested measures grouped by different types of PM 10 problems. 11 For example, areas with a winter woodsmoke 12 problem may want to target control measures for 13 wood-burning fire places and heaters. Areas with fugitive 14 dust problems may focus on measures that control emissions 15 from construction operations. While other areas may focus 16 on precursor controls to address secondary PM. 17 --o0o-- 18 AIR POLLUTION SPECIALIST VELASCO: After 19 development of the list of measures, air districts must 20 next develop implementation schedules for selected 21 measures. 22 --o0o-- 23 AIR POLLUTION SPECIALIST VELASCO: In preparing 24 the implementation schedules the districts must identify 25 the selected subset of measures and the dates for final PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 adoption, implementation, and sequencing of selected 2 control measures. 3 Each air district will tailor its implementation 4 schedule to its individual PM problem. Therefore, air 5 districts will first characterize the major components of 6 PM in their area to determine the most appropriate type 7 and level of control approach. Air districts next 8 determine the cost-effectiveness of available and proposed 9 control measures and prepare a list that ranks them from 10 least to most cost effective. 11 --o0o-- 12 AIR POLLUTION SPECIALIST VELASCO: The 13 implementation schedule also considers other ongoing 14 programs such as measures being adopted to meet federal 15 air quality standards or the state ozone planning process. 16 Each air district is to conduct at least one public 17 workshop on their proposed implementation schedule for 18 selected control measures, with adoption of the schedule 19 by July 31st, 2005, at a public hearing. 20 --o0o-- 21 AIR POLLUTION SPECIALIST VELASCO: In addition to 22 the resources just described, ARB staff is committed to 23 continue working with air districts on the development of 24 their implementation schedules. 25 Staff would also prepare a fact sheet on the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 steps air districts will follow in implementing SB 656 to 2 assist the public in understanding the implementation 3 process. 4 --o0o-- 5 AIR POLLUTION SPECIALIST VELASCO: After the 6 staff report release on October 19th, ARB staff received 7 the following comments: One commenter requested that we 8 emphasize that the list provides a menu of options from 9 which air districts will select and prioritize the 10 measures that most appropriately address the nature and 11 severity of their problems. 12 Another commenter suggested the districts should 13 enforce existing measures to ensure that the intended 14 emission reductions are achieved. 15 --o0o-- 16 AIR POLLUTION SPECIALIST VELASCO: Based on our 17 ongoing discussion with the districts, we are proposing to 18 add three measures to the air district list. These 19 measures further address NOx emissions from petroleum 20 boilers and heaters; pM10 emissions from storage and 21 handling of coke, coal, and sulfur; and SOx emissions from 22 petroleum coke calcining operations. 23 --o0o-- 24 AIR POLLUTION SPECIALIST VELASCO: In conclusion, 25 ARB staff recommends that the Board adopt the proposed PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 list of air district measures with the three additional 2 measures just discussed. The consideration and adoption 3 of these rules by air districts in their implementation 4 schedules, coupled with ARB's ongoing programs to reduce 5 PM, will ensure continued progress in reducing public 6 exposure to PM and attainment of the state and federal 7 standards. 8 CHAIRPERSON LLOYD: Thank you very much. 9 On slide 23, one additional public comment was 10 districts should enforce existing measures to ensure 11 public health benefits. 12 When was the last order of a district by the 13 Board? 14 EXECUTIVE OFFICER WITHERSPOON: This year the Air 15 Resources Board audited the San Joaquin Valley Air 16 District, with a report coming out within the next I think 17 month or so. 18 CHAIRPERSON LLOYD: When's it coming out? 19 EXECUTIVE OFFICER WITHERSPOON: Within the next 20 month or so. We do one major air district per year and 21 then one to two small to medium size air districts. 22 That's how many we have staff to perform. And when we're 23 in the district, it's a comprehensive audit of their 24 enforcement practices, their permitting, and their 25 rulemaking. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 CHAIRPERSON LLOYD: So San Joaquin's coming out 2 with one. What's next year -- which one next year? 3 EXECUTIVE OFFICER WITHERSPOON: I don't recall. 4 I can find that out for you. 5 We have a chart that we worked on together with 6 CAPCOA and agreed to the schedule based on who had been 7 audited in previous years, so that it's rotational. 8 CHAIRPERSON LLOYD: Okay. Mayor Loveridge. 9 BOARD MEMBER LOVERIDGE: Yeah, I'm just really 10 following up with the same -- how many districts are there 11 that we're auditing? 12 EXECUTIVE OFFICER WITHERSPOON: There are 35 air 13 districts in California. But the majority of the 14 activities go on in the largest districts with the most 15 source categories. 16 BOARD MEMBER LOVERIDGE: So the audit is not in 17 serial fashion, all 35 of -- 18 EXECUTIVE OFFICER WITHERSPOON: No, it is not. 19 We rarely audit the most far flung rural air districts. 20 What we do is one major air district every year, plus 21 either two smallish districts or one medium and one small. 22 BOARD MEMBER LOVERIDGE: I guess sort of a 23 follow-up from the premise of Allen's question is -- you 24 know, should enforce existing rules. That suggests that 25 districts are not enforcing existing rules? Is that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 the -- or is that just an observation that was made as 2 opposed to a judgment? 3 EXECUTIVE OFFICER WITHERSPOON: There's constant 4 concern that particular rules aren't enforced as well as 5 they should be; and even the rules that this Board adopts, 6 whether they'll be enforced. 7 For example, the idling regulation the Board just 8 adopted a few months ago for heavy-duty trucks. We've got 9 a lot of concern from environmental groups whether they'll 10 see enough presence in the field to make sure that 11 actually happens. And then as neighborhood issues crop 12 up, environmental justice issues crop up. One of the most 13 common complaints is that the regulations currently in 14 effect are not being policed. 15 And so in addition to our regular audit schedule, 16 we also do case-by-case investigations and pursue every 17 complaint brought to our attention. If it's under 18 district authority we forward the complaint to the 19 district and ask for a response to the issues raised. And 20 if we're not satisfied by that response, we conduct our 21 own investigation. 22 DEPUTY EXECUTIVE OFFICER TERRY: And maybe just 23 to clarify. This was a fairly narrow comment relating to 24 hot asphalt and applications; and a comment that some 25 districts were enforcing or passing limits quite well and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 South Coast was one of them. But that wasn't the case 2 necessarily. So it was particularly targeting that 3 observation. 4 CHAIRPERSON LLOYD: Any questions from the Board? 5 If not, I will call up our first witness, Robert 6 Cline. And the first three are Robert Cline, John Crouch, 7 Bonnie Holmes-Gen. 8 MR. CLINE: Mr. Chairman, members of the Board. 9 My name is Robert Cline. I'm a governmental affairs 10 representative for Duraflame Corporation, a producer of 11 clean burning manufactured fire logs, which is 12 headquartered in Stockton, California. 13 Duraflame began as an outgrowth of the company's 14 founders' need to find a suitable disposal for the sawdust 15 created from the manufacturing of pencil stock. The 16 sawdust was then mixed with wax and extruded as a fire 17 log. 18 Today Duraflame recaptures not only the fire log 19 sawdust -- the sawdust to make the fire logs, but also 20 from numerous other sources, and also agricultural waste 21 which used to end up in dumps is now -- such as almond 22 shells, which is now used in the production of the fire 23 logs. We believe we're an environmentally sound 24 corporation. The waste that would have ended up in those 25 dumps is now being recycled. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 We also note that, although we all enjoy the 2 ambiance created by a cozy wintertime fire, we also are 3 affected by the improper use of burning in fireplaces and 4 the adverse weather conditions such as inversion layers 5 which impact our air quality. 6 We applaud CARB's actions in recommending 7 educational programs for consumers to promote cleaner 8 burning appliances and fuels such as manufactured fire 9 logs and the proper use of fireplaces. 10 However, our concern today is that other staff 11 recommendations have gone far beyond the EPA mandates in 12 recommending statewide limitations on fireplaces, which 13 would unfairly place those restrictions in areas that 14 don't have severe pollution and due to fireplace use. 15 This one-size-fits-all approach does not 16 acknowledge the diversity of our great state, and I think 17 unjustly penalizes some regions based on the air pollution 18 problems which exist in other regions of the state. 19 We, therefore, have recommended and do recommend 20 to you and support a two-stage curtailment for fireplace 21 use. The first stage being a voluntary stage, with 22 exemptions for clean-burning appliances and manufactured 23 fire logs which burn at least two-thirds cleaner than cord 24 wood. We support a second-stage mandatory curtailment of 25 all burning when the AQI index reaches 150. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 We also ask that CARB reject any proposed 2 limitations on fireplaces in new construction as a method 3 to reduce PM pollution, except in those areas of proven 4 pollution problems. 5 Most studies have shown that fireplaces are used 6 infrequently, certainly in temperate zones, and that 7 blanket pollution policies shouldn't be adopted. The San 8 Joaquin Valley Air District in 2003 required two 9 fireplaces per acre in new construction. And that 10 benefits only of course the more affluent homeowners who 11 have larger pieces of property, to the detriment of the 12 general population of homeowners. 13 We hope that the Board will consider these points 14 and agree with our assessments and your assessments of the 15 staff proposals. 16 I'd be happy to answer questions, particularly 17 relating to concerns of studies which have been done 18 showing that fire logs are more environmentally friendly 19 than cord wood. 20 CHAIRPERSON LLOYD: Thank you. I know we 21 discussed this matter. I'm not sure whether Ms. Terry can 22 respond. 23 DEPUTY EXECUTIVE OFFICER TERRY: Going to answer 24 the question? 25 Oh, I didn't expect you to answer, but to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 respond. 2 DEPUTY EXECUTIVE OFFICER TERRY: Yes. And we 3 were hoping to be very clear in the staff presentation 4 that to emphasize this list is not a mandatory list of 5 measures to be adopted by every district uniformly. It is 6 simply the starting point for the evaluation at each 7 district. And so certainly the comments in the letter and 8 the testimony here, I think we're in agreement in terms of 9 the process. The local districts will look at the 10 science, the nature of their problem and decide, you know, 11 do they need these kinds of measures and to what extent, 12 and which of the measures, whether there's a voluntary 13 component or whether it's mandatory and the density issues 14 would all be worked out at the local level. 15 CHAIRPERSON LLOYD: And I think we're -- at least 16 I support that in terms of it is a local district that has 17 to enforce that and they have to look at that. But your 18 sentiments that rather than just taking one-size-fits-all, 19 I think that's a valid concern there. And -- 20 MR. CLINE: Well, we are specifically concerned 21 that the premature of the California Air Resources Board 22 in submitting these to local districts looks like a 23 mandate. And if there were sufficient language in the 24 recommendations of the Board to the local districts 25 emphasizing that, I think that would help us greatly. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 CHAIRPERSON LLOYD: If I could -- 2 BOARD MEMBER BERG: I have a question, Mr. 3 Chairman. 4 CHAIRPERSON LLOYD: Yes. 5 BOARD MEMBER BERG: I'm looking at the wood 6 burning fireplace and wood burning heaters. And on page 7 C1 there is under number 3 voluntary. Is that what -- I 8 mean there's three things. There's mandatory and 9 voluntary. Is that what we're talking about? 10 DEPUTY EXECUTIVE OFFICER TERRY: That's exactly 11 what we're talking about. It's a menu of what's out there 12 and has been done at the various districts. And then the 13 process under SB 656 is that there's public workshops, 14 there's public hearing. And through that process each 15 district will develop the particular strategies that make 16 sense for them. And that is discussed in quite good 17 detail in the staff report in a number of places. 18 BOARD MEMBER BERG: And, Mr. Cline, how would you 19 like to see that changed if it's listed in both ways? 20 MR. CLINE: Well, if the report were certainly 21 more specific in stating that these are suggestions and/or 22 other districts having adopted them, that each district is 23 not mandated to adopt them, that certainly satisfies us. 24 PLANNING AND TECHNICAL SUPPORT CHIEF FLETCHER: 25 Chairman Lloyd, if I could just add: The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 resolution -- we've sort of recognized that in the 2 resolution itself. And one of the findings in the 3 resolution states that the proposed list of district 4 measures provides a menu of control options to address the 5 many different types of PM problems that exist throughout 6 California. Each district will need to consider a 7 different mix of measures to address the unique nature of 8 the PM problem in their region. 9 CHAIRPERSON LLOYD: Does that satisfy -- 10 MR. CLINE: That's getting better. 11 (Laughter.) 12 BOARD MEMBER BERG: On the opening -- you know, 13 on the opening comment here it does say approval does not 14 signify that the contents necessarily review the -- 15 reflect the view and policies of the Air Resources Board. 16 And so I'm -- I feel that there has been some changes made 17 here. Are you feeling that that's the case, Mr. Cline? 18 MR. CLINE: Certainly we're moving more in the 19 direction that we stated during my presentation. 20 CHAIRPERSON LLOYD: I think it sounds as though 21 that's about as far as we can go, in all honesty. I don't 22 know -- again, Supervisor Patrick, I guess it was your 23 district that was being looked upon. 24 (Laughter.) 25 BOARD MEMBER PATRICK: We kind of have emerged PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 from the wars of this. 2 And I can assure you, there is not a district in 3 California that would go through the process that we went 4 through on a willy-nilly basis, because there is nothing 5 that has ticked off our constituents more than messing 6 with their fireplaces. 7 So -- 8 (Laughter.) 9 BOARD MEMBER PATRICK: -- believe me, I can't 10 imagine if a district was not absolutely compelled due to 11 scientific evidence, they would certainly not want to 12 undertake this. 13 It was -- in the final analysis it was not as 14 painful. I mean there were no weapons or anything at the 15 meeting that we did this, but -- 16 (Laughter.) 17 BOARD MEMBER PATRICK: You know, you probably 18 were there, Mr. Cline. I've forgotten. But it was quite 19 traumatic for the entire valley when we did this. And we 20 only did it because we felt absolutely compelled to do it. 21 And so there is no well-intentioned and bright 22 group of people that is purposely going to take this on 23 with their constituents, because people get real concerned 24 when we start making rules about what's going to happen 25 inside their front door. And I know that you're aware of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 that. 2 MR. CLINE: Indeed. 3 BOARD MEMBER PATRICK: And so I think personally 4 that the language that staff has come up with is good. It 5 indicates that this is a menu that -- you know, look and 6 see what's appropriate for your air quality problems. It 7 seems like a real good place to go. But just as a person 8 who's been through this, nobody in world is going to go 9 through this that doesn't absolutely have to, because 10 its's pretty ugly along the actually. 11 MR. CLINE: Well, our concern has been that with 12 the restrictions on funding in each one of the air 13 districts, that they take the easy approach as opposed to 14 the scientific approach. 15 BOARD MEMBER PATRICK: This is not easy, believe 16 me. 17 (Laughter.) 18 MR. CLINE: Thank you very much. 19 CHAIRPERSON LLOYD: Thank you very much, sir. 20 And Thank you for waiting. 21 BOARD MEMBER LOVERIDGE: Alan, just a quick -- 22 CHAIRPERSON LLOYD: Oh, sorry. 23 BOARD MEMBER LOVERIDGE: Just a quick comment. 24 You know, 50 years ago we cheered on the backyard 25 incinerators. My guess, 50 years from now, I'm not sure PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 making the same kind of voluntary statements about fire 2 places. But we're not 50 years from here. 3 CHAIRPERSON LLOYD: John Crouch, Bonnie 4 Holmes-Gen, Cindy Tuck. 5 MR. CROUCH: Chairman, members of the Board. I'm 6 John Crouch. I'm the Regional Representative of the 7 National Trade Association, the HPBA, which is the hearth 8 industry EPA -- wood stove, gas fireplaces, pellet stoves, 9 chimney -- all the related things. Duraflame's an 10 important member of our organization as well. 11 I've been involved with many of the specific air 12 district rules in this state. And we did file comments to 13 the district -- to the Air Board staff on some of the 14 issues. And we found Karen and her people very 15 responsive. 16 I did want to follow-up on something that 17 Supervisor Patrick alluded to. Obviously because of the 18 PM10 serious designation, San Joaquin had to go through a 19 drill here which was very challenging. And they now have 20 on their staff one of the experts in this area. Although 21 I'm not sure if Mr. Jordan would volunteer to go through 22 that again. 23 But July 31st of next summer is a very aggressive 24 timeframe for some of the small districts or any of 25 districts in the state to look at what is really a fairly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 anguished issue and pick out what is appropriate. And I 2 guess I'd like to suggest that there might be one more 3 thing that the Air Board staff could do in this area in 4 support of this bill. It wasn't called for in the bill. 5 But perhaps a one-day workshop, if the air districts are 6 interested, that brings people like Tom Jordan from San 7 Joaquin, also Dwayne Ono kind of at the other end, where 8 he did a district for -- a rule for Great Basin that just 9 focused on Mammoth Lakes, kind of the inverse of the San 10 Joaquin Valley. As well as stakeholders like myself and 11 the Lung Association. And, you know, it doesn't have to 12 be a big dramatic thing, but to decide what's appropriate 13 for each district in this state, get it through their 14 public hearing process. And not have contention by July 15 31st. Even just to pick a date will be I think a 16 challenge. 17 And as Ms. Terry is aware, the EPA is recently 18 paying more focus, more attention on this sector. And I 19 think OEQPS would probably attend such a workshop as that. 20 So we'd be happy to help if the air district can 21 pull something like that together. 22 DEPUTY EXECUTIVE OFFICER TERRY: We'd certainly 23 be happy to do that. 24 And the other thing too in terms of the tightness 25 of the time line, I do want to comment that, you know, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 that's just a process of developing the list of measures 2 to be pursued. It's not the rule language itself. So, 3 you know, it can be a pretty general list to get done in 4 the six months. And then you begin the real serious 5 in-depth analysis for each rulemaking districts typically 6 do. 7 CHAIRPERSON LLOYD: Yeah, I think that seems a 8 very good suggestion. 9 Maybe Mr. Ono could host the meeting. 10 (Laughter.) 11 MR. CROUCH: Indeed. 12 BOARD MEMBER BERG: I have a comment. 13 Yes. 14 In fairness to small manufacturers such as 15 Duraflame -- they're going to have to participate on 16 several fronts, and maybe several of your constituents as 17 well. However we could assist some of the stakeholders 18 and getting them into less meetings, I think would be 19 extremely helpful. 20 MR. CROUCH: Mr. Chairman, if I may. That was a 21 good point and kind of my point, in that everyone -- even 22 just to make a decision about what on the list should be 23 on their list, their district's list, or what shouldn't 24 be, we're going to have to bring up to speed a number of 25 air districts who haven't yet thought about it. It's not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 on-board vapor recovery certainly. But it's got its own 2 set of nuances. 3 And so I appreciate your comment. 4 CHAIRPERSON LLOYD: Thank you. 5 Bonnie Holmes-Gen, Cindy Tuck. 6 MS. HOLMES-GEN: Good afternoon, Mr. Chair, Board 7 members. I'm Bonnie Holmes-Gen with the American Lung 8 Association of California. 9 And we were very pleased to be a strong supporter 10 of the legislation by Senator Sher requiring the 11 development of this list and requiring the air districts 12 to move forward with implementation schedules. 13 We believe the particulate matter problem is an 14 urgent public health priority. We describe it as such 15 every chance that we get in the media, because we think 16 it's so important and we want everyone to understand the 17 urgency of the problem we're facing. 18 We're very proud of California's PM2.5 and -- all 19 of California's PM standards, because we are ahead of the 20 rest of the country. And we're very proud that we have 21 the most stringent health-based standards on particulate 22 matter. And we're very anxious to get going on this more 23 focused effort to meet our state standards. 24 As you're aware, the federal process for 25 implementing the PM with the newer federal PM2.5 standards PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 is moving forward but on a very slow timetable. We're 2 just about to get the area designations next month, so we 3 hear. And then it will be a whole another process to 4 determine what the implementation process is. And we're 5 expecting deadlines in the 2015 time frame. 6 So it's extremely important to get going on 656. 7 This bill fills an important gap, in requiring progress on 8 the California -- requiring progress on our California and 9 federal standards much earlier than the federal 10 requirements. 11 We'd just like to make a couple of comments. You 12 know, we applaud the work your staff has done. The 13 presentation on PM health effects was excellent. We think 14 the list that is before you today is very comprehensive. 15 And we're pleased that you're developing a clearinghouse 16 to try to reach out and work with air districts as they're 17 going through this next stage. 18 We would like to suggest that you -- that the Air 19 Board continue to be involved in the next step in a more 20 integrative process, you know, watching what's happening 21 at the air district level. Obviously the steps that the 22 air districts take is extremely important. They need to 23 look at this list. And it's important that the Board is 24 watching to make sure that the districts are adopting all 25 of the feasible cost-effective and appropriate measures PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 for their air basins. Since we don't have a report back 2 until 2008, I think it's important for the Air Board to be 3 involved very early on in watching what's happening at the 4 air district level. 5 We're also hoping that there can be somewhat of 6 a -- maybe an elevated mention of the concern over diesel 7 as you pass on this information to the air districts. 8 That's obviously a key priority of the state. And there 9 is a lot that the local air districts can continue to do. 10 Because of the way the lists are segregated, there's 11 nothing really on the air district list for diesel. But 12 they are obviously assisting in enforcement of key diesel 13 control regulations such as the idling regs for school 14 buses and for other trucks and buses. They're 15 obviously the key agencies that are administering the Carl 16 Moyer funds. So there's a lot they're doing in this area. 17 And if we can maybe just make that a key message from the 18 Air Board as this package is pushed out to the air 19 districts, that would be helpful. 20 And, finally, I want to just revisit this issue 21 of the PM2.5 24- hour standard. I understand that budget 22 limitations are difficult. I understand that you have a 23 lot on your plate in the standard review -- in the area of 24 standards review. And you have -- you're still working on 25 the ozone and have other standards to review. But the PM PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 24-hour -- PM2.5 24-hour standard was pretty much all 2 completed at one point. And of course then it was pulled 3 back because of these software issues. 4 So I just wanted to respectfully request that 5 maybe take another look at that 2008 date and see if that 6 couldn't be brought forward to 2006 at least. 7 CHAIRPERSON LLOYD: I knew we could count on you. 8 (Laughter.) 9 MS. HOLMES-GEN: Again, I can't, you know, 10 presuppose the additional work that needs to be done. But 11 the standard was out to the Air Quality Advisory Committee 12 in a fairly complete form at one point. And so I just 13 want to encourage you to explore if you can't move that 14 forward maybe to 2006. 15 Thank you again for the tremendous work on this. 16 And we again want to work with you on this process. 17 CHAIRPERSON LLOYD: Thank you very much, Bonnie. 18 Questions? 19 Cindy Tuck. 20 MS. TUCK: Thank you, Chairman Lloyd and members 21 of the Board. Cindy Tuck with the California Council for 22 Environmental & Economic Balance. 23 For the benefit of the new members, I would just 24 like to say what that organization is, what CCEEB is. And 25 what it is is a private nonprofit coalition. It's a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 statewide coalition. And we're comprised of leaders from 2 the business community, from organized labor, and leaders 3 from the public sector. What we try to do is develop 4 policies that both protect the environment and also allow 5 for California's economy to grow. 6 CCEEB participated at the Legislature in 2003 on 7 the development of SB 656 along with the Air Resources 8 Board and the Lung Association. And certainly this bill 9 is an important part of Byron Sher's legacy, so it's 10 appropriate that you're taking up this item today. 11 CCEEB is pleased to support the staff's proposal 12 for this program. 13 To Mr. Cline's point, I think it's -- the statute 14 is very clear and the staff report is clear that the 15 districts don't have to adopt every measure on the list. 16 Each district is supposed to review the measures and 17 develop a list of what's most cost effective for that 18 district. And there's other specific statutory criteria. 19 But I thought the staff report was very well written and 20 was clear on that point. 21 I would like to say that the development of the 22 list -- if you looked at not only the list but the 23 appendices, it was clear that there was a lot of staff 24 work done there. And we would like to thank Mr. Effa and 25 his staff, and particularly Karen Magliano and Patricia PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 Velasco for their work on this effort. 2 And that concludes my testimony. 3 CHAIRPERSON LLOYD: Thanks very much, Cindy. 4 Any other -- yes, Ms. Berg. 5 BOARD MEMBER BERG: I just have one other 6 question of staff. 7 I'm a little confused on the -- what are the air 8 districts measuring against? How are they going to decide 9 what they need to do? What's the specific goal for them 10 to reduce PM? 11 EXECUTIVE OFFICER WITHERSPOON: Ultimately 12 they're measuring against the state ambient air quality 13 standards for PM. But if they're far from that goal, they 14 might start off with measures that bring them into 15 attainment with federal, and then continue to provide 16 progress. So districts are at varying degrees of 17 nonattainment status and different sources contributing to 18 it. 19 So the ultimate goal though is the state -- 20 California standard. 21 BOARD MEMBER BERG: So would I be correct that 22 the San Joaquin Valley has really addressed -- it looks 23 like they have a pretty aggressive plan on the books, 24 right? 25 EXECUTIVE OFFICER WITHERSPOON: Yeah, the list PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 reflects what the most aggressive districts have done, and 2 recommends that to the other districts for their 3 consideration. That's really what it is, is a compilation 4 of best rules out there. 5 BOARD MEMBER BERG: So San Joaquin wouldn't have 6 to come back then by July 5th with -- I mean July 2005 7 with anything else? 8 EXECUTIVE OFFICER WITHERSPOON: Only if there's a 9 gap. 10 BOARD MEMBER PATRICK: Yes. I think if there's 11 something -- some stone we've left unturned. But doesn't 12 everybody have to come back with some kind of a plan? 13 DEPUTY EXECUTIVE OFFICER TERRY: Yeah, I think -- 14 it's very clear that districts like the South Coast or the 15 San Joaquin Valley have both done a lot because they have 16 the federal mandated and have done PM10 plans recently. 17 That isn't to stay, however, that -- and I think there's 18 maybe one or two examples in another case where the South 19 Coast has a slightly better rule and in another case the 20 Valley has a slightly better rule. But I think they're 21 minor tweaks to pretty comprehensive programs in both 22 those areas. 23 BOARD MEMBER BERG: So we're not asking them to 24 do double work? 25 DEPUTY EXECUTIVE OFFICER TERRY: No. It's just a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 review: Is there last piece that's missing? And it 2 really is an opportunity for all of those other districts 3 who are not under the federal mandate, all of those 4 districts who have to meet, you know, state standard, as 5 Catherine talked when we introduced the item -- this is 6 the first time that there's been a directive under state 7 law to really focus on particulate pollution and the state 8 standard. And that's where the other districts come into 9 play, other than the South Coast and the San Joaquin and a 10 few other areas that have dealt with fugitive dust from a 11 federal PM10 standpoint. 12 BOARD MEMBER BERG: So from a small district 13 point of view are we going to provide them with 14 information on the cost-effectiveness of each one of these 15 so it would be easier for them to be able to choose from? 16 DEPUTY EXECUTIVE OFFICER TERRY: Actually that 17 was one of the things that came out of the public process. 18 So we added -- staff did a lot of work to add in the 19 cost-effectiveness data, and it's actually in the report. 20 BOARD MEMBER BERG: Great. 21 Thank you. 22 CHAIRPERSON LLOYD: Well, also getting back to 23 San Joaquin. Before we gave them a real passing grade, we 24 still have the report coming up. And then we'll know in 25 January a little bit better whether they're doing all they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 can on that. 2 BOARD MEMBER PATRICK: And that kind of prompts 3 another question in that. We've recently adopted our PM 4 plan. And So will we then take those -- you know how we 5 have rules that we're going to be working in the future. 6 Will we incorporate those into the information that we'll 7 send to you -- 8 DEPUTY EXECUTIVE OFFICER TERRY: Yeah, 9 actually -- 10 BOARD MEMBER PATRICK: -- and say we're going to 11 do these? And, you know, we've looked through these 12 others and perhaps, you know, we could mirror what South 13 Coast is doing in another area or something like that? 14 DEPUTY EXECUTIVE OFFICER TERRY: I think that's a 15 point. Essentially your list is done and your 16 implementation schedule has been laid out in your SIP's in 17 both cases with perhaps some minor additions. 18 BOARD MEMBER PATRICK: Okay. Thank you. 19 CHAIRPERSON LLOYD: Any further questions? 20 Any further comments from -- 21 EXECUTIVE OFFICER WITHERSPOON: Nothing further. 22 Since it is not a regulatory item, it is not 23 necessary to officially close the record. 24 However, we do have a resolution before us which 25 is passed around. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 So I'm willing to entertain a motion on the 2 resolution. 3 BOARD MEMBER PATRICK: So moved. 4 BOARD MEMBER RIORDAN: Second. 5 CHAIRPERSON LLOYD: All in favor say aye. 6 (Ayes.) 7 CHAIRPERSON LLOYD: Anybody against? 8 BOARD MEMBER LOVERIDGE: The traditional great 9 staff work. 10 CHAIRPERSON LLOYD: Again, I heard great staff 11 work today. So clearly we'll take the usual government 12 bonus -- take it to the bank. 13 (Laughter.) 14 CHAIRPERSON LLOYD: But great job. 15 EXECUTIVE OFFICER WITHERSPOON: We all get to 16 take the rest of the day off? 17 (Laughter.) 18 CHAIRPERSON LLOYD: Yeah. 19 BOARD MEMBER RIORDAN: How generous, Ms. 20 Witherspoon. 21 CHAIRPERSON LLOYD: And seeing no other items 22 here before the Board, no public comment period, I will 23 officially bring the November 18th meeting of the Air 24 Resources Board to a close. 25 And thank you very much. And remind everybody PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 that next month it's an early Board meeting, early in the 2 month. 3 CHAIRPERSON LLOYD: Happy thanksgiving. 4 (Thereupon the California Air Resources Board 5 meeting adjourned at 4:30 p.m.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 29th day of November, 2004. 15 16 17 18 19 20 21 22 JAMES F. PETERS, CSR, RPR 23 Certified Shorthand Reporter 24 License No. 10063 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345