Comment Log Display

Dear Board Members,

We would like to thank the Board and staff for reviewing the on
and off-road diesel regulations as it pertains to the economy and
for the opportunity to comment.  Knife River is a construction
materials supplier and a construction company with over 200 on-road
trucks and an equal number of off-road equipment.  In addition to
these vehicles, we also have equipment subject to the harbor craft,
drayage truck, and portable equipment regulations.  

As you know, we are in dire economic times, especially in the
industries in which we do business.  Our business unit’s revenues
are down between 40% and 50%.  In fact, our business unit with the
highest concentration of on-road trucks is not currently making a
profit and margins are down well over 100%.  Not only are revenue's
down on our other business units margins are extremely thin.  We
have already spent millions of dollars to comply with the harbor
craft, portable equipment, and off-road regulations.  Under this
economic climate, this is putting a large strain on our company. 
There simply is no excess capital to spend.  We now estimate that
for every two VDECS being installed, we will have to lay off one
employee just to remain at the break-even point for earnings. 
Since Knife River is a publically traded company that operates in
multiple states, I fear that the Board of Directors will one day
pull out of California all together due to these difficult times in
the state coupled with the expense of complying with the diesel
regulations to maintain an acceptable return to the shareholders.

We attended the workshop held by staff last week and appreciate
their efforts to estimate the effect of the economy on emissions,
however, we feel their analysis falls short of what is actually
occurring.  Staff estimated that overall truck activity is down
between 10% and 18% since the 2007 peak.  This appears to be
underestimated.  At this point, most in our industry would be
pleased if this actually were the case.  The 10-18% number was
based mostly on California fuel sales data.  While we have no
back-up information available to review other than sources. 
However, one reason this fuel data can be skewed is the fact that
newer trucks get poorer fuel economy.  Our late 2006 and newer
trucks get up to 25% worse fuel economy that the older vehicles. 
We add that that this fact also contributes to an increase in
carbon emissions since more fuel is being burned to do the same
job.  We have not seen any studies commissioned by the ARB to
quantify the excess greenhouse gas emissions due to poorer fuel
economy.  Since the carbon emissions are of such great concern to
the Board and since diesel fueled vehicles are such large emitters
of carbon, it would be recommended that such a study be performed.

Staff also indicates that fleets are getting older and fewer new
trucks are being purchased, so even with the slower economy,
emissions remain the same as projected.  Staff never contacted
industry to determine this and did not consult with industry to
determine overall activity either.  The fact is that for the most
part, the older vehicles in our fleet are the ones that are not
being utilized.  Our newer equipment has higher ownership costs and
we have to use this equipment first in order to pay for
depreciation, etc.  New trucks are not being purchased because
there is no work for the trucks to perform.

Staff presented two scenarios for the recovery growth.  There is a
quick growth scenario and a slow growth scenario. These scenarios
are optimistic by any measure.  The quick growth scenario is
totally unrealistic.  Even under the quick growth scenario, the
economy is expected to return to a long term trend in about eight
years.  However, charts shown during the staff presentation show
that under the quick growth scenario indicate that NOx and PM 2.5
emissions in 2014 will be the same as was predicted well over a
year ago.  This information appears to conflict; but again, we have
no supporting evidence to review.

In light of the information presented above, we recommend that
staff works with industry to compile a more realistic economic
outlook and to better estimate actual truck activity in a more
transparent manner.  In addition, it is recommended that some
relief be included in the on-road, off-road, and drayage truck
regulations.  The relief on the off-road regulations that the
legislature provided earlier this year was nice, however, more is
needed.  We all want clean air to breath and are not asking to
total dismantle the regulations.  The regulations are extremely
aggressive in the early years, so we do ask for a reprieve in the
early years and to more evenly distribute the compliance
requirements over the life of the regulations.

We look forward to an economic recovery that will help to off-set
the cost of the regulations.  It is well documented that we
recovered from all previous recessions with the help of a strong
construction industry.  Hopefully the Board understands this and
does not further cripple an industry that has already been severely
cripple.


Sincerely,
Steve Azevedo
California Environmental Manager
Knife River Corporation