BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD AIR RESOURCES BOARD AUDITORIUM 9530 TELSTAR AVENUE EL MONTE, CALIFORNIA THURSDAY, DECEMBER 6, 2007 9:00 A.M. TIFFANY C. KRAFT, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Ms. Mary D. Nichols, Chairperson Ms. Sandra Berg Ms. Judith G. Case Ms. Dorene D'Adamo Ms. Lydia Kennard Mr. Jerry Hill Mr. Ronald O. Loveridge Mrs. Barbara Riordan Mr. Ron Roberts Dr. Daniel Sperling STAFF Mr. Tom Cackette, Chief Deputy Executive Officer Mr. James Goldstene, Executive Officer Mr. Tom Jennings, Chief Counsel Ms. Diane Johnston, Senior Attorney Mr. Michael Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Ms. Kathleen Quetin, Ombudsman Ms. Lori Andreoni, Board Secretary Ms. Analisa Bevan, Manager, Mobile Source Control Division Mr. Dipak Bishnu, Air Resources Engineer, On-Road Heavy Duty Diesel Section, Mobile Source Control Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii Mr. Richard Bode, Chief, Emissions Inventory Branch, PTSD APPEARANCES CONTINUED STAFF Mr. Bob Cross, Division Chief, Mobile Source Control Division Dr. Lori Miyasato, Health and Ecosystems Assessment Section, Research Division Ms. Annmarie Mora, Manager, Research Planning & Climate Change Outreach Section, Research Division Dr. Linda Murchison, Chief, PTSD Ms. Jamesine Rogers, Planning and Technical Support Division Mr. Doug Thompson, Manager, Climate Change Reporting Section, PTSD Mr. Michael Waugh, Manager, Program Assistance Section, SSD ALSO PRESENT Mr. Don Anair, Union of Concerned Scientists Ms. Diane Bailey, NRDC Mr. John Busterud, PG&E Co. Mr. Tim Carmichael, Coalition for Clean Air Mr. Darrell Clarke, Sierra Club Mr. Matt Davis, Port of Oakland Mr. Sean Edgar, CA Refuse Removal Council Mr. Daniel Emmett, Energy Independence Now Mr. Tony Fischer, Nummi Mr. Jim Flanagan, Maersk Inc. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv APPEARANCES CONTINUED ALSO PRESENT Ms. Sarah Flanagan, AIAM Mr. Jerry Frost, Kern Oil Refining Co. Ms. Danielle Fugere, Friends of the Earth Mr. T.L. Garrett, PMSA Mr. Bob Hoffman, Dock Watts, LLC Mr. Henry Hogo, SCAQMD Ms. Bonnie Holmes-Gen, American Lung Association Mr. Thomas Jeleic, Port of Long Beach Mr. Scott Johns, Clean Air Marine Power Mr. Tom Jordan, SJVAPCD Mr. John Kaltenstein, Friends of the Earth Mr. Gregory Klatt, AREM Mr. Greg Knapp, TXI/PCA Mr. Rhey Lee, Mayor Bonnie Lowenthal, City of Long Beach Mr. Eric Little, Southern California Edison Mr. Joseph Lyons, AB 32 Implementation Board & CA Manufacturers & Tech Association Mr. Derek Markolf, California Climate Action Registry Ms. Julie May, Communities for a Better Environment Mr. Bruce McLaughlin, California Municipal Utilities Association Ms. Ann McQueen, Mitsubishi Cement & National Cement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v APPEARANCES CONTINUED ALSO PRESENT Mr. Taylor Miller, Sempra Energy Ms. Wendy Mitchel, PG&E Ms. Linda Nicholes, Plug In America Mr. Mark Nordheim, Chevron Mr. Kevin Norton, International Brotherhood of Electrical Workers Mr. Tim O'Connor, Environmental Defense Ms. Rupal Patel, Communities for Clean Ports Mr. Norman Pedersen, Southern California Public Power Authority Mr. Doug Quetin, CAPCOA Ms. Cathy Reheis-Boyd, WSPA Mr. Mark Rose, BAAQMD Ms. Nicole Shahenian, Breathe California Mr. Jesus Torres, Communities for a Better Environment Mr. Seiichi Tsurumi, Sound Energy Solutions Mr. Barry Wallerstein, SCAQMD Ms. Devra Wang, NRDC Mr. Chuck White, Waste Management Ms. Joy Williams Mr. Eric Witten, Clean Air Logix Ms. Jill Whynot, SCAQMD PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vi INDEX PAGE Pledge of Allegiance 1 Item 7-12-1 Chairperson Nichols 3 Executive Officer Goldstene 3 Staff Presentation 3 Item 7-12-8 Chairperson Nichols 8 Executive Officer Goldstene 8 Motion 10 Vote 10 Item 7-12-2 Chairperson Nichols 11 Executive Officer Goldstene 11 Staff Presentation 13 Q&A 29 Public Comment Mr. Lewis 38 Item 7-12-3 Chairperson Nichols 42 Executive Officer Goldstene 42 Staff Presentation 44 Q&A 61 Ms. Wang 72 Mr. Nordheim 74 Mr. Busterud 76 Mr. Frost 77 Mr. Jordan 78 Ms. May 80 Mr. McLaughlin 83 Mr. Torres 85 Mr. Fischer 86 Mr. Wallerstein 89 Mr. Ross 91 Mr. Quetin 94 Mr. Little 95 Mr. White 97 Ms. McQueen 100 Mr. Klatt 102 Mr. Anair 105 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 vii INDEX CONTINUED PAGE Mr. O'Conner 106 Mr. Markolf 108 Mr. Miller 111 Mr. Clarke 112 Ms. Holmes-Gen 113 Ms. Reheis-Boyd 114 Q&A 117 Motion 134 Vote 134 Item 7-12-4 Chairperson Nichols 135 Executive Officer Goldstene 135 Staff Presentation 135 Ms. Whynot 147 Ms. Reheis-Boyd 148 Mr. Pedersen 150 Mr. Edgar 151 Mr. Knapp 154 Mr. White 155 Mr. Busterud 158 Mr. Little 160 Mr. Miller 162 Ms. Wang 164 Mr. O'Conner 164 Motion 168 Vote 168 Item 7-12-5 Chairperson Nichols 173 Executive Officer Goldstene 174 Staff Presentation 175 Q&A 181 Motion 182 Vote 182 Item 7-12-6 Chairperson Nichols 182 Executive Officer Goldstene 183 Staff Presentation 185 Q&A 210 Ms. Lee 218 Ms. Bailey 220 Ms. Holmes-Gen 225 Mr. Kaltenstein 226 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 viii INDEX CONTINUED PAGE Mr. Hogo 228 Mr. Davis 232 Mr. Johns 234 Mr. Witten 235 Ms. Williams 235 Mr. Flanagan 238 Mr. Jelenic 240 Mr. Carmichael 244 Mr. Garrett 247 Ms. Shahenan 251 Mr. Norton 254 Mr. Tsurumi 256 Ms. Patel 258 Mr. Hoffman 260 Mr. Lyons 263 Ms. Mitchell 265 Mr. Anair 265 Q&A 268 Motion 295 Vote 299 Item 7-12-10 Chairperson Nichols 299 Executive Officer Goldstene 300 Staff Presentation 302 Mr. Anair 324 Ms. Flanagan 326 Ms. Nicholes 329 Ms. Fugere 330 Ms. Holmes-Gen 334 Mr. Emmett 337 Mr. Carmichael 338 Q&A 340 Motion 352 Motion 356 Vote 370 Adjournment 371 Reporter's Certificate 372 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON NICHOLS: Good morning, and welcome 3 everybody to the last meeting for 2007 of the Air 4 Resources Board. It has been an eventful year. I'm not 5 going to give you my state of the Air Resources Board 6 report. We'll do that in January. But I do want to 7 welcome you. 8 And this is not a room that I've ever used for a 9 meeting before. So logistics are a little unfamiliar. 10 But if you can't hear, let us know. 11 We do have a court reporter, who's over here. 12 And we'll be making sure to take care of her because she's 13 the most important person actually in the meeting. 14 And if you're here because you want to speak on 15 an item, the Clerk of the Board is over on this side. And 16 we do ask you to fill out a card on the item that you want 17 to speak on so we can be sure that we call on you and also 18 that we can budget our time. We've got a very packed 19 agenda today, and we must end by 7:30. I know that will 20 be a relief for some of you to know that we will be ending 21 this evening. 22 Okay. Well, let's start out with a roll call and 23 then we'll do the Pledge of Allegiance to the flag. Make 24 sure we have a quorum. 25 SECRETARY ANDREONI: Ms. Berg? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD MEMBER BERG: Here. 2 SECRETARY ANDREONI: Supervisor Case? 3 BOARD MEMBER CASE: Here. 4 SECRETARY ANDREONI: Ms. D'Adamo? 5 BOARD MEMBER D'ADAMO: Here. 6 SECRETARY ANDREONI: Supervisor Hill? 7 SUPERVISOR HILL: Here. 8 SECRETARY ANDREONI: Ms. Kennard? 9 BOARD MEMBER KENNARD: Here. 10 SECRETARY ANDREONI: Mayor Loveridge? 11 Ms. Riordan? 12 BOARD MEMBER RIORDAN: Here. 13 SECRETARY ANDREONI: Supervisor Roberts? 14 BOARD MEMBER ROBERTS: Here. 15 SECRETARY ANDREONI: Professor Sperling? 16 BOARD MEMBER SPERLING: Here. 17 SECRETARY ANDREONI: And Chairman Nichols? 18 CHAIRPERSON NICHOLS: Here. 19 SECRETARY ANDREONI: Chairman Nichols, we have a 20 quorum. 21 CHAIRPERSON NICHOLS: Thank you very much. 22 And I'll now ask everybody to rise and face the 23 flag and we'll say the Pledge of Allegiance. 24 (Thereupon the Pledge of Allegiance was 25 recited in unison.) PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 CHAIRPERSON NICHOLS: We'll start as we normally 2 do with a health update. And I guess they'll lead us off, 3 Mr. Goldstene. 4 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 5 Nichols. 6 In previous updates staff has described the 7 impacts of air pollution on public health, including 8 increased risk of premature death, hospital admissions for 9 respiratory and cardiovascular disease, asthma symptoms, 10 acute bronchitis, and hardening of the arteries. 11 Evidence has been published suggesting that 12 exposure to air pollution might also be associated with 13 adverse effects on the brain. Today staff will report on 14 several recent studies to show possible associations 15 between air pollution exposure and inflammation and other 16 adverse effects on the brain. The findings presented in 17 this update suggest that adverse health effects associated 18 with air pollution are even more wide ranging than 19 previously thought. 20 Dr. Lori Miyasato from our Health and exposure 21 Assessment Branch will make the staff presentation. 22 CHAIRPERSON NICHOLS: Thank you. 23 (Thereupon an overhead presentation was 24 presented as follows.) 25 DR. MIYASATO: Thank you, Mr. Goldstene. Good PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 morning, Chairman Nichols and members of the Board. 2 In this health update, I will provide a brief summary of 3 recent preliminary findings of adverse effects on the 4 brain associated with long-term exposure to air pollution. 5 --o0o-- 6 DR. MIYASATO: In previous health updates the 7 Board has heard about numerous adverse health effects 8 associated with exposure to air pollution. For example, 9 air pollutant exposure has been linked to premature death, 10 hospitalizations for respiratory and cardiovascular 11 conditions, asthma symptoms, acute bronchitis, and 12 atherosclerosis. These health outcomes are the result of 13 effects on the heart, circulatory system, and lungs. 14 However, air pollutants may affect other organs 15 of the body such as the brain. Information on the effects 16 of air pollutants on the brain is just now coming to 17 light, and today we will summarize findings discussed in a 18 recent review article by Calderón-Garcidueñas and 19 colleagues. 20 --o0o-- 21 DR. MIYASATO: Although inhaled pollutants can 22 exert adverse effects directly on the lungs and heart, the 23 healthy brain is well protected against toxins by a 24 specialized membrane that usually allows entry only to 25 beneficial substance. However, recent studies suggest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 that inhaled ultrafine particles may be capable of 2 bypassing this barrier. 3 It is possible that inhaled particles may be 4 transported along nerves that travel directly from the 5 nasal passages into the brain, as shown in this simplified 6 schematic figure. The white line represents the pathway 7 of inhaled particles. 8 Another possibility is that ultrafines may enter 9 the brain by a more circuitous route by inhalation into 10 the lungs and subsequent transport via the bloodstream, 11 shown here in red, into the brain. 12 Alternatively, air pollutants may be able to 13 exert effects on the brain without actually gaining entry 14 to it. 15 Inhaled pollutants, such as fine particulates and 16 ozone, may cause an inflammatory reaction in the lung. 17 This in turn may result in chemical factors being released 18 into the bloodstream and subsequently being transported to 19 the brain, as seen here, where the dashed green line 20 represents the route of the inflammatory chemical factors. 21 --o0o-- 22 DR. MIYASATO: Evidence of the effects of chronic 23 air pollution on the brain comes from several studies 24 performed in Mexico. Researchers compared the brains of 25 accidental death victims, both adults and children, from PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 cities with highly polluted ambient air versus cities with 2 relatively clean air. Similar studies were performed on 3 healthy domestic dogs. The more polluted cities typically 4 had ozone and particulate matter levels above our national 5 ambient air quality standards. The results of these 6 studies showed that levels of inflammatory markers and 7 abnormal protein deposits were higher in the brain tissue 8 of those from the highly polluted versus the relatively 9 clean cities. Both of these changes resemble those that 10 typically precede Alzheimer's disease. However, these 11 changes do not necessarily imply the onset of disease. 12 The figure on the right side of this slide shows 13 brain tissue from a 36-year-old man from Mexico City. 14 Arrows point out locations of abnormal protein deposits. 15 In a normal healthy brain, the tissue would appear more 16 uniform in color and texture. 17 In a separate study conducted in Los Angeles by 18 Campbell and colleagues, brains of mice exposed to 19 concentrated ambient particles showed elevated levels of 20 chemical markers that may precede inflammation. This 21 suggests that particulate matter is the component in the 22 air pollution mix responsible for the increases in 23 inflammatory markers seen in the studies conducted in 24 Mexico. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 DR. MIYASATO: In conclusion, the studies 2 discussed today suggest that air pollution exposure may be 3 associated with adverse effects on the brain in both 4 humans and animals. These effects include increased 5 levels of inflammatory markers and abnormal protein 6 deposits in brain tissue. And the results suggest that 7 both adults and children may be at risk. 8 These findings also suggest that adverse health 9 effects related to air pollution exposure may be more far 10 reaching than previously thought. Therefore, it is 11 important that these linkages be rigorously investigated 12 through additional research. 13 On a positive note, levels of ambient PM are 14 decreasing in California. However, results such as those 15 presented today illustrate that continued reductions of 16 both gaseous and particulate pollution are needed to 17 protect public health. 18 This concludes the health update. We will be 19 happy to answer any questions. 20 Thank you. 21 CHAIRPERSON NICHOLS: This is very interesting. 22 Any questions from any Board members about the 23 studies? 24 Hearing none. 25 Thank you. We will be better informed. This is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 a relatively new area for research, I think, and the 2 effects. So it's good to know about. 3 MR. LLOYD: Chairman Nichols? 4 CHAIRPERSON NICHOLS: Yes. 5 MR. LLOYD: Bob Lloyd, we're videotaping the 6 proceedings today. 7 The digital sound you're hearing in the audio 8 system is a result of Blackberries and iPhones. So if you 9 have a Blackberry or an iPhone, if you could shut them 10 off. 11 Excuse me for the interruption. 12 CHAIRPERSON NICHOLS: All right. Thank you. 13 We will now move to our next item, which is the 14 appointment to replace a member of the Economic and 15 Technology Advancement Advisory Committee. 16 And who's presenting that one? 17 EXECUTIVE OFFICER GOLDSTENE: Ma'am, I'll present 18 that. 19 CHAIRPERSON NICHOLS: Okay, great. 20 EXECUTIVE OFFICER GOLDSTENE: Thank you. 21 The Global Warming Solutions Act directed ARB to 22 form two advisory committees, an environmental justice 23 advisory committee and an economic and technology 24 advancement advisory committee, or ETAAC. The Board 25 formed these committees and appointed the members in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 January of this year. 2 Both committees have been working very hard since 3 then, as you know. ETAAC in particular has been busy 4 meeting, gathering information, and drafting a report 5 containing its advice to the Board regarding the best 6 technologies for controlling greenhouse gases in 7 California and the best ways to promote those 8 technologies. The members appointed to ETAAC by the Board 9 were chosen for their expertise in areas important to the 10 task. They're scheduled to bring their final report to 11 the Board in January. 12 The ETAAC member appointed to represent the 13 California Chamber of Commerce recently resigned from his 14 position with the Chamber. So staff believes his 15 continued membership on the Committee would not be in 16 keeping with the Board's original purpose for his 17 appointment. Therefore, staff requests that the Board 18 approve a replacement and recommends Ms. Amisha Patel, 19 also of the Chamber of Commerce, to fill the position. 20 CHAIRPERSON NICHOLS: Thank you. 21 Ms. Patel has actually appeared before this Board 22 on several occasions. 23 EXECUTIVE OFFICER GOLDSTENE: Several times, 24 yeah. 25 CHAIRPERSON NICHOLS: And she's done a very good PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 job. And I think it's important that we allow the 2 Committee to finish its work. They're not yet quite ready 3 to present us with their final report, as I understand, 4 although they're working their way through 5 recommendations. 6 So I think this is a good move and will hopefully 7 make sure that they get their work done on time. 8 Are there any questions or comments on this? 9 BOARD MEMBER RIORDAN: Madam Chair, I would then 10 move the staff recommendation which would appoint her to 11 our Technical Advancement Advisory Committee. 12 CHAIRPERSON NICHOLS: Very good. 13 Do we have a second? 14 BOARD MEMBER D'ADAMO: Second. 15 CHAIRPERSON NICHOLS: Second. 16 All in favor say aye. 17 (Ayes) 18 CHAIRPERSON NICHOLS: Any objections? 19 Hearing none. 20 That is done. 21 And then we'll move to the next item, which is 22 another update. One of a series of semi-annual updates on 23 recent and significant findings in the climate change 24 research. And this is very timely, as the state is moving 25 forward on implementation of AB 32. And I'm getting ready PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 to take off on Saturday to be part of the state's team 2 representing us in the global UN meetings in Bali, 3 Indonesia, on this issue. It's good to know that we're 4 being backed up by a tremendous amount of work here at 5 home. And that's one of the things that we're there to 6 talk about is what's going on both in California at the 7 state and the local level, and to reassure other countries 8 and interests that we'll be working with in the future 9 that there is interest and commitment in this country in 10 working on these issues. 11 So this is a report on some of the strives that 12 are being made by cities and counties. 13 And, Mr. Goldstene, would you please introduce 14 this item. 15 EXECUTIVE OFFICER GOLDSTENE: Yes, well -- thank 16 you, Chairman Nichols. 17 Before I introduce this item, I'd like to make 18 sure the Board is aware of the upcoming workshops that we 19 have relative to the development of the Scoping Plan. 20 Last Friday, at the South Coast Air Quality 21 Management District offices at Diamond Bar, the staff held 22 the first of four formal workshops devoted to the 23 development of the Scoping Plan. The workshop was very 24 well attended and went over the basic structure of what 25 the scoping plan will look like. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 This coming -- or next Friday, a week from 2 tomorrow, the second workshop will be held in Sacramento 3 to provide a snapshot view of the sectors responsible for 4 the largest percentage of greenhouse gas emissions in the 5 state. 6 The workshop on the 14th will also provide an 7 overview of potential emission reduction strategies. 8 The third workshop that's coming up will be held 9 on January 16th in Oakland and will focus on the possible 10 mechanisms available to achieve the 2020 emission 11 reduction targets, including direct regulations, 12 market-based mechanisms, voluntary actions, and 13 incentives. 14 And the fourth workshop on March 24th we'll be holding a 15 scenario workshop to explore the different emission 16 reduction strategies and how they could possibly work 17 together. 18 All of this will culminate in the report 19 hopefully completed by June, which will be the first look 20 at the overall scoping plan. 21 So I wanted to make sure the Board members knew 22 that we had that all going on. 23 Now, with regard to this item, today's 24 presentation will discuss the important role local 25 organizations play in addressing climate change as well as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 the partnerships we're fostering with local governments 2 and organizations to meet greenhouse gas reduction 3 targets. 4 California cities and counties are taking the 5 lead in identifying reduction targets and aggressive plans 6 to achieve them. The presentation today will highlight 7 how cities around California are actively addressing 8 climate change and the specific actions underway from 9 small communities to big cities. Local governments and 10 organizations are taking action to fight global warming. 11 The Air Resources Board is working with these 12 organizations and cities and counties in establishing 13 collaborative efforts to work on identifying best 14 practices and public awareness campaigns. 15 Ms. Annmarie Mora, Manager of the Research 16 Planning and Climate Change Outreach Section in the 17 Research Division, will make the staff presentation. 18 CHAIRPERSON NICHOLS: Thank you. 19 Ms. Mora. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 RESEARCH DIVISION MANAGER MORA: Thank you, Mr. 23 Goldstene. 24 Good morning, Chairman Nichols and members of the 25 Board. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 Today's climate science update is a little 2 different from the previous updates. We'll be giving a 3 good news story requested by the late Dr. Gong. It is a 4 story about the commitment local entities have made or are 5 making to assist in the fight against global warming. 6 Several California cities and businesses are addressing 7 this challenge head on. Today's presentation will cover 8 how we will work with these leaders and how state and 9 local efforts will come together to meet the targets of 10 the 2006 Global Warming Solutions Act. 11 Local action is one of the 44 Early Actions that 12 you approved earlier this year. 13 --o0o-- 14 RESEARCH DIVISION MANAGER MORA: The presentation 15 will describe the important role of cities, counties, 16 business and individuals in addressing climate change. We 17 will highlight some commendable local leadership already 18 taking place, and describe our road map for achieving 19 further greenhouse gas reductions at the local level. The 20 effort we will describe will focus on municipal and 21 community operations. We realize that substantial 22 reductions will come from land use and transportation, but 23 this will require fundamental changes in how decisions are 24 made at local, regional, and state levels. Therefore, the 25 issue of land use will mostly be left to the Scoping Plan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 --o0o-- 2 RESEARCH DIVISION MANAGER MORA: Local officials 3 recognize the impact of climate change on their cities and 4 residents and the importance of taking action now. The 5 reality is that oftentimes local governments have the 6 authority to make decisions that state and the federal 7 government do not, including decisions about zoning, city 8 energy portfolios, municipal sewage and water facilities, 9 and climate-friendly purchases such as fleet vehicles that 10 use alternative fuels. These actions can also have 11 substantial co-benefits. For example, incentivizing solar 12 roof projects not only reduces greenhouse gas emissions. 13 They also reduce air pollution and likely would reduce 14 asthma and respiratory illnesses. 15 Finally, actions implemented at the local level 16 bring greater awareness of the issue to residents and are 17 more likely to inspire action both among residents and 18 surrounding municipalities. 19 --o0o-- 20 RESEARCH DIVISION MANAGER MORA: National efforts 21 that California can look to for leadership on engaging 22 local governments in greenhouse gas reduction programs 23 include the US Conference of Mayors and that of ICLEI, 24 Local Governments for Sustainability. 25 Two years ago Seattle Mayor Greg Nickels PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 introduced the Mayors Climate Protection Agreement. The 2 agreement pledges to meet or exceed the Kyoto protocol 3 standards. With over 700 signatories representing close 4 to 75 million Americans, the agreement has inspired a 5 national movement. To take the pledge cities must commit 6 to meet or beat Kyoto protocol targets in their own 7 communities as well as urge their state government and the 8 federal government to do the same and encourage the 9 establishment of a national emissions trading system. 10 As noted on this slide, there are 108 California 11 cities that have signed the Climate Protection Agreement. 12 --o0o-- 13 RESEARCH DIVISION MANAGER MORA: Another 14 significant program was initiated by ICLEI, an 15 international association of local governments. Since 16 1993, ICLEI has assisted cities in adopting policies and 17 implementing quantifiable measures to reduce local 18 greenhouse gas emissions, improve air quality, and enhance 19 urban livability and sustainability. More than 800 local 20 governments participate in the Cities for Climate 21 Protection Campaign, integrating climate change mitigation 22 into their decision-making processes. To date, 377 US 23 local governments participate in the campaign, including 24 82 California local governments encompassing an estimated 25 40 percent of California residents. As of 2005, $535 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 million have been saved in energy and fuel costs to local 2 governments following the Cities for Climate Protection 3 Campaign guidelines. 4 --o0o-- 5 RESEARCH DIVISION MANAGER MORA: For the next 6 part of the presentation, I will discuss ARB's road map 7 for achieving further local greenhouse gas emission 8 reductions. Our road map is evolving and begins with 9 working collaboratively with stakeholders to coordinate 10 ongoing statewide efforts. Because of the significant 11 amount of ongoing activity, a key aspect of our effort 12 will be coordination, promoting synergisms and integration 13 into the overall state effort under AB 32. Through our 14 collaborations we will identity existing tools or develop 15 new tools to quantify greenhouse gas emissions, assess and 16 promote best practices, develop outreach programs, and 17 identity additional opportunities for meeting the 2050 18 target. These efforts will be condensed into the early 19 action local guidance that we will bring to the Board 20 September 2008. 21 --o0o-- 22 RESEARCH DIVISION MANAGER MORA: State efforts on 23 local action pursuant to AB 32 are underway. This slide 24 illustrates the relationship between the Scoping Plan, the 25 Land Use Subgroup of the Climate Action Team, also known PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 as LUSCAT, and our Local Early Action items. The Scoping 2 Plan will outline how we as a state will meet the targets 3 of AB 32 and provide the analytical methods for the 4 strategies we will use. The LUSCAT will guide the short 5 and long term state agency efforts for measurable 6 reductions related to local government and land use. As 7 you can see, there will be focused efforts on addressing 8 the local government decisions for land use and municipal 9 and community operations. The intersection between all 10 three working groups will yield tools and strategies that 11 will allow local entities to participate in addressing 12 climate change. 13 --o0o-- 14 RESEARCH DIVISION MANAGER MORA: In addition to 15 learning from national examples, we at ARB are in the 16 process of forming working relationships with the 17 organizations listed here on this slide. Many of these 18 organizations have already instituted excellent programs 19 that facilitate greenhouse gas reductions among local 20 governments and businesses. We expect that these 21 partnerships will play a fundamental role in helping shape 22 the development of state guidance and protocols. 23 We look forward to working with additional 24 stakeholders as our efforts progress. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 RESEARCH DIVISION MANAGER MORA: One of the first 2 steps to reducing emissions is the ability to measure 3 them. Next I will discuss some of the tools we are 4 exploring to quantify emissions on a community basis. 5 These are bottom-up methods that meet the rigor of 6 realized approaches. 7 --o0o-- 8 RESEARCH DIVISION MANAGER MORA: The California 9 Climate Action Registry, or CCAR, has developed protocols 10 to calculate, report, and certify greenhouse gas emission 11 inventories. Registry participants include businesses, 12 nonprofit organizations, municipalities, state agencies, 13 and other entities. Over 300 California governments and 14 businesses report direct and indirect emissions of 15 greenhouse gases to CCAR. ARB will be contracting with 16 CCAR for specific municipal and community protocols. 17 Another tool being developed will quantify energy 18 use and greenhouse gas emissions for buildings. It is a 19 GIS-based local, state, and federal transportation, land 20 use, and natural resource planning tool called UPLAN. It 21 was developed at UC Davis and is currently available for 22 all counties in California. UPLAN could be used to 23 protect building energy use and greenhouse gas emissions 24 for various county land use and transportation scenarios. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 RESEARCH DIVISION MANAGER MORA: We believe 2 cities and businesses could utilize a reliable 3 benchmarking tool. It would facilitate energy accounting, 4 comparing a facility's energy use to similar facilities in 5 order to assess opportunities for improvement, and 6 quantifying and verifying energy savings. Cal-Arch, 7 developed by Lawrence Berkeley National Lab, is a tool for 8 benchmarking whole-building energy for California 9 commercial buildings. 10 In isolation, benchmarking can inspire action but 11 provides no practical guidance. LBNL intends to bridge 12 that gap with their energy IQ tool which will provide a 13 standardized opportunity assessment based on benchmarking 14 results, along with decision-support information to help 15 refine action plans. 16 Related to this effort, the State of California 17 will benchmark all state-owned buildings. 18 Assessments can also be done with consumer carbon 19 calculators. They can be used to quantify emissions and 20 find suggestions for making reductions at a personal 21 level. For example, the Home Energy Saver is a tool to 22 help consumers identity ways to save energy in their 23 homes. 24 At a state level, we have partnered with UC 25 Berkeley, LBNL, and Next10 to create a unified calculator PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 for California that uses California-specific factors to 2 calculate the potential CO2 impact of everyday activities. 3 The user will be able to produce a report summarizing the 4 inputs and calculated emissions and provide suggestions 5 for reducing their carbon footprint. 6 An initial version will be available in January 7 and a fully integrated calculator will be completed by 8 summer of 2008. 9 --o0o-- 10 RESEARCH DIVISION MANAGER MORA: In addition to 11 the tools, we believe it's important to assess existing 12 strategies and recommend some best practices that could be 13 undertaken at a local level. 14 --o0o-- 15 RESEARCH DIVISION MANAGER MORA: One of the 16 strategies we will look at is the effectiveness of climate 17 action plans. Many cities are using the climate action 18 plan framework provided by ICLEI to work towards reducing 19 their greenhouse gas emissions. But to date there isn't a 20 state-endorsed template. 21 Action plans can identify steps a city or county 22 can take to meet a reduction target, and include a plan to 23 monitor and verify emission reductions. Most plans also 24 include climate change education and outreach programs. 25 As a potential best practice, we would like to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 assess the various climate action plans and work towards a 2 single template for potential statewide use. 3 --o0o-- 4 RESEARCH DIVISION MANAGER MORA: Another 5 significant strategy that has a direct effect in reducing 6 greenhouse gas emissions is the promotion of green 7 building practices. Buildings account for the highest 8 proportion of energy consumption and greenhouse gas 9 emissions. Consequently they represent the greatest 10 opportunity for obtainable energy efficiency improvements. 11 Not only are green building designs more energy efficient; 12 they are also healthier, profitable, and environmentally 13 responsible places to live and work. LEED, Leadership in 14 Energy and Environmental Design, is a voluntary 15 consensus-based national rating system for developing high 16 performance sustainable buildings. Developed by the US 17 Green Building Council, LEED addresses all building types 18 and emphasizes state-of-the-art strategies for sustainable 19 site development, water savings, energy efficiency, 20 materials and resources selection, and indoor 21 environmental quality. 22 A couple of examples include the Cal/EPA 23 headquarters building in Sacramento, which you are 24 familiar with. It is LEED platinum certified and energy 25 savings add up to approximately $1.5 million a year. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 In San Jose they built the world's first green 2 library, which is LEED-certified, which uses 30 percent 3 less energy and 50 percent less irrigation water than 4 standard buildings. 5 --o0o-- 6 RESEARCH DIVISION MANAGER MORA: There are 7 several best practices that ARB will assess to help 8 businesses reduce and/or offset their greenhouse gas 9 emissions, such as promoting green purchasing. This would 10 follow California's requirement that all government 11 agencies practice environmentally preferable purchasing, 12 which means the purchase of products that are long 13 lasting, high quality, less toxic, reusable, and easy to 14 recycle and use less materials, water, and energy. ARB 15 could also promote reliance on and investment in renewable 16 energy. Businesses have already demonstrated initiative 17 in this area. Currently, Google is constructing the 18 largest solar installation on a US corporate campus. If 19 it's not possible for businesses to rely directly on 20 renewable energy, a second strategy, as demonstrated by 21 whole foods, is for ARB to promote the offsetting of 22 electricity used via the purchase of renewable energy 23 credits. Another avenue that ARB will pursue is promoting 24 green business practices, such as strategies implemented 25 by Wal-Mart to improve fleet efficiency. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 --o0o-- 2 RESEARCH DIVISION MANAGER MORA: There are also 3 climate friendly transportation decisions that could be 4 implemented by more cities and businesses. 5 In Santa Monica, more than 80 percent of their 6 municipal fleet runs on cleaner and more sustainable fuel 7 alternatives, including electricity, natural gas, 8 hydrogen, biodiesel, and gas-electric hybrids. 9 The City of Los Angeles and its employee 10 bargaining units agreed to a unique arrangement regarding 11 computer benefits and employee parking. Parking fees from 12 solo drivers are used to support ride-share programs. 13 Parking permit fees are deposited in an interest-earning 14 Ride Share Trust Fund. The computer service office uses 15 money from the fund for services like subsidizing van 16 pools and employee transit passes. 17 --o0o-- 18 RESEARCH DIVISION MANAGER MORA: We are striving 19 to promote interest in climate change protection, seeking 20 new ideas for emissions reductions, and inspiring young 21 people who will inherit the challenges and opportunities 22 for solving the climate crisis. Public awareness and 23 participation is key in effectively motivating behavior 24 change and linking local action to statewide efforts. 25 ARB's main objectives in this area are to provide guidance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 for estimating and reporting greenhouse gas emissions and 2 facilitate overall actions to reduce carbon footprint. 3 Drawing from a number of lists available on the 4 web that describe actions that individuals can take to 5 reduce their carbon footprint and as part of our local 6 action strategy, ARB is working with CAPCOA and CEC in 7 developing our own list of 12 simple and cost-effective 8 actions. ARB will also develop a portal for web-based 9 resources and information about strategies to reduce 10 greenhouse gas emissions. 11 Looking at the Climate Change Champions program 12 in the UK as an example, we aspire to develop a school 13 competition program that fosters greenhouse gas emissions 14 reductions. The Champions program is an annual 15 competition to find outstanding young people who could 16 represent England on climate change and who can become the 17 voice of young people on this issue. 18 --o0o-- 19 RESEARCH DIVISION MANAGER MORA: Besides the UK 20 Champions program, there are other international examples 21 to look to for inspiration. As ARB moves forward, we are 22 looking globally for concrete examples of achieving 23 significant greenhouse gas reductions for 2050. 24 --o0o-- 25 RESEARCH DIVISION MANAGER MORA: Here I point to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 three cosmopolitan cities that have currently achieved 2 impressive CO2 emission reductions. Over a period of four 3 years, Denmark achieved a 15 percent reduction in CO2 4 emissions. National officials attribute this decrease to 5 changes in fuel use, increased use of combined heat and 6 power, technologies, and improved energy efficiency. 7 Over a period of 13 years, the city of Vaxjo, 8 Sweden, achieved a 30 percent per capita reduction in CO2 9 emissions. National officials attribute this decrease to 10 changes in fuel use, particularly reliance on biomass fuel 11 sources for heating, and increased numbers of 12 environmental vehicles in use. 13 In 1996, the town announced its goal to be a 14 Fossil Fuel Free City. Ten years later they're halfway to 15 this goal. 16 Over a period of 14 years the city of Woking in 17 the UK achieved a 77 percent reduction in CO2 emissions. 18 This is attributed to decentralizing energy supplies by 19 building the first sustainable heating and cooling energy 20 station in the UK and by building the UK's first 21 sustainable energy fuel cell. A co-benefit of the 22 combined heating and power scheme at Woking's town center 23 has been raising public awareness of the advantages of 24 decentralizing energy. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 RESEARCH DIVISION MANAGER MORA: So our goal is 2 to bring the proposal for voluntary local actions to the 3 Board to be endorsed by the Board. 4 --o0o-- 5 RESEARCH DIVISION MANAGER MORA: To meet that 6 goal we will continue to work with stakeholders. A 7 scoping workshop is planned for February 2008 to meet with 8 local government officials and business representatives to 9 discuss financial, institutional, and political barriers 10 in regards to reducing greenhouse gas emissions. A 11 follow-up workshop is tentatively scheduled for May 2008. 12 We aim to synthesize the components of the road 13 map we have discussed today to present local action 14 guidance to the Board next September. The guidance will 15 include recommendations for local governments, small 16 businesses, and individuals and encourage an active role 17 in achieving the targets of AB 32. 18 This will just be the first step as we work 19 towards achieving further reductions and meeting the 2050 20 target. 21 --o0o-- 22 RESEARCH DIVISION MANAGER MORA: Although the 23 accomplishments to date are notable, there are many 24 challenges in motivating voluntary actions to achieve 25 additional reductions. With a multitude of stakeholders, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 coordinating a statewide effort to address climate change 2 comes with obstacles. Learning how to inspire and 3 motivate actions is an area we will be concentrating on by 4 working with stakeholders to identity effective approaches 5 such as incentivizing actions and rewarding and 6 recognizing voluntary efforts. 7 To meet the goals of AB 32, it will be critical 8 to be able to verify reductions and track progress. 9 Establishing emissions inventories may have financial 10 challenges for local governments and businesses as well as 11 the process of verifying emissions reductions achieved. 12 We will work closely with others to determine the most 13 effective mechanisms for crediting and verifying 14 reductions as appropriate. 15 Again, we acknowledge land use and transportation 16 decisions require fundamental change to achieve the 17 long-term goals. This will demand a concerted effort by 18 state, regional, and local officials in close 19 collaboration with a broad spectrum of stakeholders. We 20 plan to work with stakeholders to address this critical 21 issue in the Scoping Plan. 22 --o0o-- 23 RESEARCH DIVISION MANAGER MORA: Today's 24 presentation featured the role local government and 25 business have in addressing climate change, how PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 municipalities are taking the lead, and how by working 2 together Californians are paving the way to a brighter 3 future. We will leave no city or business behind as we 4 strive to meet the goals of the 2006 Global Warming 5 Solutions Act. 6 Thank you for your attention. We'd be happy to 7 answer any questions. 8 CHAIRPERSON NICHOLS: Thank you. 9 I'm sure there are going to be a number of 10 questions, and we'll have to, because of all the other 11 matters, keep this a little bit brief. But I have a 12 couple of things that I want to raise with you initially. 13 The first is that you've done a terrific job of 14 presenting a very well-thought-through and well-organized 15 program. And I think it's very reassuring to see the 16 number of bases that you are touching and what's being 17 included in this. And I think it will continue to be the 18 kind of, you know, thorough, careful rollout of a program 19 that the ARB is known for. So I really want to commend 20 you for it. 21 Secondly, I know that there's a lot of other 22 things going on in other places that we are not in control 23 of this issue, nor should we be, either on the voluntary 24 level or in terms of other agencies that have regulatory 25 authority. And I'm constantly being reminded that there PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 are local air districts, there are other agencies. There 2 are private citizen groups who are interested in finding 3 ways to push further, faster than even this program, which 4 is on a pretty expedited basis, can go. And one of those 5 efforts that's going on now I know is intended to feed 6 into the Scoping Plan, and that's the work that's going on 7 under the leadership of the CEC and OPR, looking at 8 land-use measures as a way of actually achieving 9 quantifiable reductions. And they are looking at some 10 measures which are mandatory I believe and making 11 recommendations at least that would include things like 12 assigning emissions reduction targets to various areas and 13 coming up with state incentives at least in terms of 14 funding to enforce those kinds of programs. 15 So are you coordinating with that effort? Or how 16 are these two things working together? Maybe I should ask 17 Mr. Goldstene about this. These are obviously relevant -- 18 related to each other. 19 EXECUTIVE OFFICER GOLDSTENE: Right, they're very 20 closely related. I think today's presentation was to give 21 the Board an overview of what we've done so far and the 22 groups we're working with. We are also looking at -- 23 well, we've been working closely with the Office of 24 Planning and Research and also the transportation 25 agencies, which were not highlighted today but we'll be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 reporting on that in the future. But we are engaging -- 2 CHAIRPERSON NICHOLS: Okay. So this is just 3 really the internal work that's being done within ARB? 4 EXECUTIVE OFFICER GOLDSTENE: Yeah, at this 5 point. 6 CHAIRPERSON NICHOLS: And we're also coordinating 7 with all these other activities that are going on. 8 Okay. That's very helpful. 9 The other thing that I noticed that was left off 10 the list -- and I know this is very challenging. But it 11 seems to me that ARB ought to be assuming more of a 12 leadership role ourselves than we have been in moving 13 towards climate neutrality. And I know there are legal 14 issues associated with what an agency can do. I know we 15 have to have the Department of Finance willing to let us 16 invest in some things and perhaps look at even offsetting 17 travel and issues like that. But it seems to me that it 18 wouldn't be hard to get a small team of people within the 19 agency who are interested in this topic, since people stop 20 me about this all the time in the hallways and elevators 21 to talk about it, to take a look at how we assess our 22 own -- I know we've already done the basic assessment of 23 what our carbon footprint is, but to look at what we could 24 do to then take that to the next step and actually join 25 the worldwide movement of people who are trying to make PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 themselves climate neutral. 2 So I'd like to propose that as a direction from 3 the Board to ask the staff to look at and to come back to 4 us perhaps in the next six month report and let us know -- 5 I'm seeing head nodding here -- what we can come up with. 6 So that's just a couple of initial thoughts. And 7 I'm sure others have more. I saw at least one hand up 8 down here, so I'll start with you. 9 Professor Sperling. 10 BOARD MEMBER SPERLING: Well, let me support the 11 proposal for ARB taking leadership. 12 I do want to -- you know, I thought that was a 13 great presentation. You know, I really appreciated it. 14 It is on a very difficult topic. And let me use that as 15 kind of a launching point to why this is important, you 16 know, very briefly, and what it means, is -- you know, 17 there's been a lot of initiatives but they're almost all 18 voluntary. And that's a good start. But I think what 19 we've learned is that there have to be incentives and 20 constraints. We need to deal with -- you know, the world 21 is going to be changing. And to get the 25 percent 22 reduction by 2020 and the much larger ones beyond that is 23 going to require some major changes. And it doesn't mean 24 it's going to cost much, but it does mean changes in 25 behavior and changes in the way things are done. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 And so I think what we need to be going toward is 2 some kind of durable framework that sends consistent 3 signals to cities and households and individuals and 4 businesses, and to be thinking about this. And, you know, 5 I just want to highlight some of the -- or there are some 6 ideas, you know, that were referred to vaguely in the 7 presentation and that Chairman Nichols was referring to 8 also. And so what I'd like to do is encourage people, you 9 know, especially in the counties and the cities and local 10 businesses to really be engaging in this process. This is 11 a really important one. You know, we have this law. We 12 have the goal. And it's going to require a lot of 13 creativity. And it does mean doing things differently in 14 terms of policy, in terms of behavior. 15 So I just want to support, you know, these 16 initials discussions and encourage everyone to participate 17 in them. So let me just leave it at that. But to 18 emphasize how important this really is. 19 CHAIRPERSON NICHOLS: Thank you. 20 Supervisor Hill. 21 SUPERVISOR HILL: Thank you, Madam Chair. 22 I just wanted to add my agreement to Professor 23 Sperling's comments. I think local government, at least 24 from my experience, they're hungry. They're hungry for 25 some direction. As you can see, in many cases they're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 looking at so many options, so many opportunities that are 2 out there, but they don't know which ones to grab or 3 they'll grab this one today and then next week they'll 4 look at this one and go after that one, thinking that 5 that's the one that will work. 6 So I guess that what I'm saying is leadership is 7 important right now. And the sooner that we can bring 8 that connection and tie us together with local government 9 at every level, I think we're going to see greater 10 successes. 11 So I appreciate this program. And if we can 12 expedite it as much as possible, it would be great, 13 CHAIRPERSON NICHOLS: Thank you. 14 Ms. D'Adamo. 15 BOARD MEMBER D'ADAMO: I agree with everything 16 that's been said. And just following up on Supervisor 17 Hill's comments, I think that maybe some jurisdictions are 18 hungrier than others for guidance. And we've seen that 19 with some of the efforts of the Attorney General on CEQA 20 actions, that maybe some communities will be pulled into 21 this sort of a little bit more in a reluctant fashion. 22 And So I'd like to comment on a concern about a 23 piecemeal approach that may be occurring unless we 24 exercise strong leadership. There may be some communities 25 that will go forward and put a strong program together. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 Others may not so much so, and in fact might be moving 2 along as a result of legal action. And so I would just 3 encourage staff to incorporate into its analysis CEQA and 4 the possible guidance that could be provided under the 5 direction of OPR, and to just engage in a very 6 comprehensive effort. There's a lot of different moving 7 parts on this. Many different agencies are involved. And 8 anything we can do to integrate as much as possible into 9 the big picture in the Scoping Plan I think would be very 10 helpful in our exercise of strong leadership. 11 CHAIRPERSON NICHOLS: Thank you. 12 And I think this goes without saying, but I'm 13 assuming that, you know, you're not trying to do anything 14 to slow down people who have voluntary programs that 15 they'd like to do, but just to make sure that everybody 16 gets a chance to be a part of this. 17 BOARD MEMBER D'ADAMO: Exactly. And for those 18 communities that are further behind and that may not have 19 the resources, I think it would be helpful for there to be 20 a one-stop shop; and as much as possible I think that that 21 ought to be us, recognizing obviously that we have to -- 22 we need to be working collaboratively with the other 23 agencies that are involved. 24 CHAIRPERSON NICHOLS: Thank you. 25 BOARD MEMBER CASE: Madam Chair? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 CHAIRPERSON NICHOLS: Yes. 2 BOARD MEMBER CASE: Just in agreement with all 3 that's been said but also as one of those sitting on this 4 Board as a local elected official, and I've been a city 5 mayor in the past and now a county supervisor, I think it 6 would be really helpful -- I like the comment, "some are 7 more hungry than others," and that's probably true as we 8 go into the next couple of years. Our county is very much 9 focused on the fiscal picture and the budgeting challenges 10 we're going to have in the next year. And I think it 11 would be really helpful to have specific tools that allow 12 them to calculate what the footprint is and then a list of 13 options, because no one size fits all for anybody. But if 14 there were to be developed programs or a list of different 15 methods that could be used to reduce their impact, I think 16 that would be really helpful. Because I know in terms of 17 gauging the public -- predominantly the public works and 18 our general services within our county, getting their 19 attention as we cut their staffing levels is going to 20 become more challenging. And I think every county and 21 city will be faced with that. 22 So from our perspective as the State Air 23 Resources Board, I think we could really be helpful in 24 that process by first helping them with determination of 25 what their footprint looks like, whether it's a city or a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 county, and then secondly having some selected tools that 2 they can start making some progress. 3 CHAIRPERSON NICHOLS: Well, and as you know and 4 as the presentation pointed out, a number of the measures 5 that are at the top of anyone's list are things that 6 actually save money and require either little or no 7 up-front investment but just changes in operating 8 practices. And many cities of course have done a lot of 9 this already. But to the extent that we can help with 10 sharing those best practices and showing some of the ones 11 that may have less staff and less resources ways that they 12 could actually save some money, that would be enormously 13 helpful right now. 14 BOARD MEMBER SPERLING: But there was an 15 important point that Supervisor Case made. And that is 16 about whatever we do, we have to be able to measure it. 17 And so -- but, you know, the staff did present some 18 initial work on that, the UPLAN model and what the climate 19 action registry is doing. And I think it is important to 20 really emphasize those. Because if we're going to be able 21 to reward cities for what they do and provide incentives 22 and so on, we have to be able to measure -- anything 23 that's done has to be measurable. And we haven't measured 24 these things in the past. And so emphasizing the 25 development of these tools in a way that can be used PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 easily by the cities and counties is really critical. 2 But I think, you know, at least some of us are 3 starting to head in that direction, and the staff I know 4 understands that well. 5 CHAIRPERSON NICHOLS: Thank you. 6 Well, this is the beginning of a much longer 7 conversation, and I appreciate that very much. 8 I'd like to ask the Board's indulgence. We 9 normally take public comment at the end of the day, 10 general public comment, that is, not on a specific item. 11 But I was asked earlier this morning to make time 12 available as early in the day as possible for a 13 representative of the trucking industry to come in and 14 make a comment on our ongoing efforts to get that 15 program -- the program dealing with the off-road 16 heavy-duty vehicles up and running. And with your 17 indulgence, I would like to allow him to do that. 18 If there are other people who are here that have 19 general public comment that is not on an item that's on 20 our agenda, I haven't seen any cards to that effect. But 21 if someone turns up late in the day, we might have to 22 allow for another period of public comment. But if not, 23 this will constitute our general public comment period. 24 Okay. Mr. Lewis. 25 MR. LEWIS: Thank you, Madam Chairman. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 appreciate the indulgence. And I've got to be at a 2 meeting at L.A. City Hall to talk about their concerns on 3 the off-road rule. So I want to take just a few minutes 4 to bring all of the Board members up to speed on where we 5 are with the implementation of the rule. 6 We are proceeding, as we committed to do at the 7 July hearing when you adopted the rule, with the 8 implementation. And I appreciate the interest of the 9 Chairman and the efforts of Board Member Berg to 10 facilitate some discussion on some points that we think 11 need to be resolved as a part of the final approval of the 12 rule. 13 We have some serious concerns about the SOON 14 program and the way it's written. You know, that program 15 got very rushed in the adoption process. It wasn't fully 16 vetted. And the longer we look at it, the more serious 17 the problems are in trying to implement it. 18 We've identified, and we've shared with your 19 staff and your Chairman, ten areas and issues that we 20 think need to be resolved, that include things as the 21 funding mechanism and the voluntary nature, eligibility, 22 the length of the contract, the need for inter-district 23 compatibility. And we've agreed to work pretty intensely 24 with your staff and the air districts, San Joaquin and 25 South Coast, over the next 30 days to try to get those PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 resolved. 2 It's also going to probably require some changes 3 to the Moyer program to make that SOON program work. And 4 I know that Board Member Berg is chairing a committee on 5 your behalf to make some changes to Moyer. And we're 6 going to be participating in that workshop on Monday as 7 well with some specific suggestions. 8 We've been having a number of meetings with the 9 local districts and with your staff about the SOON program 10 and what needs to happen to try and fix it. I think 11 we're -- there's some agreement that there are certainly 12 some changes that could be made that would make it easier 13 for more contractors to participate. As you know, the 14 construction industry is suffering a severe economic 15 downturn right now. Depending on which contractor you 16 talk to, there are -- probably 30 to 60 percent of their 17 fleets are parked. We expect that to continue until 18 mid-2009, which of course overlaps some of your reporting 19 and compliance dates and is going to make those numbers 20 look quite unusual and exceptional I think at that point. 21 Unfortunately, the bond programs haven't really kicked in 22 yet, so that they're not taking up any of that slack. 23 But you need to know that public works only 24 accounts for about one-third of the construction activity 25 in this state, and it can't take up the slack for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 private work. And until the private work begins to come 2 back, we're not going to see these contractors get back to 3 the kind of activity that we've seen over the last several 4 years. 5 We have encouraged your staff to proceed with the 6 15-day notice on the rule without the SOON program, to 7 give us some time to make some changes to that SOON 8 program that can be put out for a subsequent notice. We 9 are aware of the April 5th deadline for you to have all of 10 your documentation to the Office of Administrative Law in 11 order for them to undertake their portion of the review. 12 We recognize that. I think we've committed to your staff 13 to try and have some agreement in place by January 15th to 14 give you adequate time to notice that and put it out for 15 review. 16 We are in the process of surveying all of the 17 contractors to determine who would be able to participate 18 under a SOON-type program and under what conditions they 19 could participate to help us identity those changes that 20 we need to make. And I believe we're going to be able to 21 come up with some positive changes that will allow the 22 kind of over-compliance and additional reductions that are 23 necessary in those two air districts to meet their needs. 24 I'd appreciate the Board's interest in this 25 matter and your assistance to the industry. And I wanted PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 to make sure that all of you knew exactly where we were in 2 the process and what we're trying to do. And I appreciate 3 the time, Madam Chairman. 4 Thank you. 5 CHAIRPERSON NICHOLS: Well, thank you. 6 All the Board members had expressed a lot of 7 interest about this and making sure that it was 8 implemented properly. This is a big deal from an 9 emissions perspective, and it's also something new that 10 we're doing with the SOON program. So we welcome your 11 taking the time to come and bring us all up to date. 12 Thank you. 13 MR. LEWIS: Thank you. 14 CHAIRPERSON NICHOLS: Okay. We're now going to 15 start the next item, which is on the mandatory reporting 16 of greenhouse gas emissions. And this is going to be a 17 more extensive item than the previous ones because action 18 will be called for. 19 And I would like to begin the staff presentation. 20 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 21 Nichols. 22 Staff will present their recommendation for Board 23 adoption of a regulation for the mandatory reporting of 24 California greenhouse gas emissions. AB 32 specifies the 25 Board is to adopt a mandatory GHG reporting regulation by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 January 1st 2008. 2 The regulation was developed over the past year 3 and could not have been completed without the outstanding 4 and ongoing stakeholder involvement throughout the 5 process. And I'd like to also thank the staff for their 6 tremendous effort over the past year. 7 The reporting requirements were developed to meet 8 the requirements of AB 32. AB 32 specifies that the 9 regulation must use rigorous and consistent emission 10 accounting methods, account for all electricity consumed 11 in the state including imports, require verification of 12 emissions data, and provide consistency with other 13 programs to the extent feasible. 14 The regulation provides a foundation for 15 improving our baseline emission estimates, which you'll 16 hear about in our next agenda item, tracking emission 17 changes, supporting upcoming regulatory activities, and in 18 the future assisting with potential market or trading 19 programs. 20 Adoption of the proposed regulation is only the 21 first step in the emissions reporting. Implementation of 22 the regulation will require significant ongoing effort 23 from ARB staff. Staff is committed to continuing our 24 positive working relationship with stakeholders to ensure 25 that the greenhouse gas reporting program is successful, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 providing the technical support and training needed for a 2 smooth transition to put these new requirements into 3 practice. 4 I would now like to introduce Ms. Rajinder 5 Sahota, who will make the presentation to the Board on the 6 proposed regulation. 7 (Thereupon an overhead presentation was 8 presented as follows.) 9 AIR POLLUTION SPECIALIST SAHOTA: Thank you, Mr. 10 Goldstene and good morning, Chairman Nichols and members 11 of the Board. 12 Today we are proposing for your consideration the 13 mandatory reporting regulation for greenhouse gases 14 pursuant to the California Global Warming Solutions Act of 15 2006, or AB 32. 16 --o0o-- 17 AIR POLLUTION SPECIALIST SAHOTA: After briefing 18 describing the statutory requirements for mandatory 19 reporting, I will present the key components of the 20 mandatory reporting regulation, requirements for 21 third-party verification, the estimated cost to facilities 22 to comply with the regulation, and additional 23 modifications we are proposing to the draft regulation we 24 released on October 19th. 25 These modifications are based on input from a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 broad range of stakeholders and also include some general 2 cleanup of the originally proposed language. 3 Lastly, we will present our recommendation to 4 you. 5 --o0o-- 6 AIR POLLUTION SPECIALIST SAHOTA: AB 32 requires 7 ARB to develop a mandatory reporting regulation that 8 includes the largest greenhouse gas emission sources; 9 accounts for all electricity consumed in the state, 10 including imports and line losses; ensures rigorous and 11 consistent accounting of emissions; includes a 12 verification element. 13 We are also directed to incorporate the standards 14 and protocols developed by the California climate action 15 registry to the extent feasible and promote consistency 16 among other reporting programs. 17 We believe that the regulatory proposal before 18 you today meets these requirements. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SAHOTA: This timeline 21 provides an overview of the full scope of AB 32 22 requirements. For this Board item, we are focusing on the 23 mandatory reporting regulation, shown in the highlighted 24 box on the slide. Later today, you will be asked to 25 approve the 1990 emissions level and 2020 emissions limit. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 --o0o-- 2 AIR POLLUTION SPECIALIST SAHOTA: Staff was 3 guided by several key principles that are consistent with 4 existing reporting programs: 5 Completeness requires emissions from all 6 significant greenhouse gas sources and activities to be 7 reported; 8 Consistency allows for meaningful comparison of 9 emissions year to year and across similar facilities; 10 Transparency calls for methods and results to be 11 publicly available; and 12 Accuracy requires rigorous calculation methods. 13 The verification process helps to ensure that the 14 greenhouse gas emissions reports are accurate, precise, 15 and considerable. 16 The data gathered under this regulation will help 17 California improve our inventory of greenhouse gases, 18 monitor the results of emission reduction strategies, and 19 support our overall program and goals. 20 --o0o-- 21 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 22 describe to you the proposed mandatory reporting 23 regulation. 24 --o0o-- 25 AIR POLLUTION SPECIALIST SAHOTA: As required by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 AB 32, we have focused mandatory reporting on those 2 sources contributing the most to statewide greenhouse gas 3 emissions inventory. 4 We propose that all electric generating 5 facilities one megawatt and larger and emitting at least 6 2500 metric tons of carbon dioxide per year must report. 7 Those facilities that generate power using nuclear, 8 hydroelectric, solar, or wind energy are not suggest to 9 reporting because they do not produce greenhouse gas 10 emissions. 11 Because emissions from imported power must be 12 accounted for, we have included reporting requirements for 13 electricity retail providers and marketers. 14 Cogeneration facilities which produce both heat 15 and electricity are also subject to reporting under the 16 proposed regulation if they meet the same thresholds of 17 other power plants. 18 Oil refineries, hydrogen plants, and cement 19 plants are other significant sources of greenhouse gas 20 emissions that are included in the staff proposal. 21 We also propose to include a category of large 22 combustion sources not in the industrial sectors that I 23 mentioned that emit 25,000 or more metric tons of carbon 24 dioxide per year from their stationary combustion sources, 25 such as large boilers or furnaces. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 We estimate that about 800 facilities will be 2 subject to the mandatory reporting requirements. This 3 will account for about 94 percent of the overall 4 stationary carbon dioxide emissions produced within 5 California. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SAHOTA: There are 8 several key requirements in the regulation. Everyone 9 subject to the regulation would be required to submit 10 greenhouse gas emissions reports on an annual basis. 11 The company with operational control of the 12 facility that emits greenhouse gases will be required to 13 submit the report. This is the company with the authority 14 to introduce and implement operating, environmental 15 health, and safety policies at the facility. 16 All Kyoto gases shall be reported where 17 specified. 18 Reporting in the electric power sector goes 19 beyond the facility level, to include purchases and sales 20 by retail providers and marketers. And we are proposing 21 an independent third-party verification program to ensure 22 the quality and completeness of submitted data. Staff has 23 proposed that verification be required on an annual basis 24 for the more complex sources and once every three years 25 for less complex sources. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 --o0o-- 2 AIR POLLUTION SPECIALIST SAHOTA: Reporting 3 facilities would account for combustion emissions, 4 emissions from chemical and other processes, and fugitive 5 emissions as specified in the regulation. 6 Facilities outside the electricity sector would 7 also report their usage of purchased electricity and 8 thermal energy. 9 The proposed regulation specifies how emissions 10 are to be calculated. Depending on the type of facility 11 reporting, the regulation requires fuel sampling for 12 heating value or carbon content, the use of default 13 factors for emissions, the use of continuous emissions 14 monitoring systems, or mass balance approaches. 15 Though reporting of all specified sources is 16 required, we have included de minimis level with a cap 17 that facilities may apply to their smallest sources. Such 18 emissions could be calculated using simplified methods. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SAHOTA: Facilities 21 would submit their first emissions reports in 2009, for 22 their 2008 emissions. Staff is proposing a staggered 23 reporting schedule. Facilities with more complex 24 reporting requirements are given additional time to submit 25 their data. An online reporting tool will be made PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 available by ARB for data submittals. 2 Staff proposes a transitional start-up year for 3 the 2008 emissions data. For this year, facility 4 operators may use the best available data instead of the 5 specific calculation methods within the regulation if 6 information is not available to comply with the specified 7 requirements. Data submitted during this first year would 8 also not be subject to verification except at the option 9 of the reporter. 10 Beginning with the 2009 emissions reported in 11 2010, data submittals must be in full compliance with the 12 requirements and methods specified in the regulation 13 including verification requirements. 14 --o0o-- 15 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 16 talk about the power sector reporting requirements. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SAHOTA: For the power 19 sector, the proposed regulation requires generators, 20 retail providers, and marketers to all report. 21 Specifically, we are requiring the power plant 22 operators for all facilities one megawatt or higher, that 23 also emit 2500 metric tons or more of carbon dioxide per 24 year, to report. 25 Secondly, we include retail providers who serve PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 end-users of electricity, including investor-owned 2 utilities and publicly-owned utilities. 3 Third, marketers who purchase or sell power at 4 the wholesale level but do not serve end-users must also 5 report. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SAHOTA: Each of these 8 groups has unique reporting requirements. The reporters 9 of electric generating facilities will report the direct 10 emissions from their facilities using methods adopted from 11 the California Climate Action Registry protocols. 12 The retail providers will be required to report 13 both direct emissions from the facilities they operate and 14 electricity purchase and sales data. 15 Marketers would principally report electricity 16 purchase and sales data. 17 Collection of electricity purchase and sales data 18 is necessary to calculate emissions from imported 19 electricity. 20 --o0o-- 21 AIR POLLUTION SPECIALIST SAHOTA: Staff's 22 proposal is based on the California Public Utilities and 23 California Energy Commission's recommendations for the 24 collection of purchase and sales data for retail providers 25 and marketers. These recommendations were adopted by both PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 agencies in September of this year. The joint 2 recommendations reflected in our regulation would allow 3 collection of data for all potential regulatory 4 approaches. 5 Once the regulatory program has been defined, we 6 intend to revise the reporting regulation focus on the 7 data needed to support the approach taken. 8 Our reporting requirements, and the proposed 9 methods and factors by which ARB will calculate emissions, 10 will continue to be refined through a public process 11 involving the California Public Utilities Commission, 12 California Energy Commission, and ARB. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SAHOTA: The proposed 15 reporting requirements for cogeneration facilities are 16 based on the California Climate Action Registry's 17 efficiency method. The method requires operators to 18 calculate emissions from both electricity and thermal 19 energy. 20 As with other electricity-generating facilities, 21 facilities larger than one megawatt electricity-generating 22 capacity that emit at least 2500 metric tons of carbon 23 dioxide per year are required to report. 24 As will be discussed later, staff is proposing 25 some modifications today to simplify reporting for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 smallest cogeneration facilities. 2 --o0o-- 3 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 4 describe the reporting requirements for refineries and 5 hydrogen plants. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SAHOTA: Unlike the 8 other sectors included in today's proposal, the climate 9 action registry has not developed a reporting protocol for 10 oil refineries. Staff developed the reporting 11 requirements for this regulation using a variety of 12 sources including the American Petroleum Institute, or API 13 Compendium; the Climate Action Registry Refinery Protocol 14 discussion paper; existing California air district rules 15 and methods; and U.S. EPA, IPPC, and European Union 16 guidance documents. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SAHOTA: Refineries will 19 have to report their combustion emissions. We are 20 proposing an enhancement to the API methods to require 21 calculation of refinery-specific carbon dioxide emission 22 factors, rather than reliance on default values, because 23 refinery fuel gas is a highly variable source. 24 Refineries would also report process-related 25 emissions, from catalytic cracking and regeneration, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 sulfur recovery and asphalt flowing. 2 And refineries would report fugitive and flaring 3 emissions using established methods. 4 --o0o-- 5 AIR POLLUTION SPECIALIST SAHOTA: A number of 6 issues arose during the regulatory development process for 7 the petroleum refining sector. 8 Stakeholders raised concerns about the frequency 9 of measurement of the carbon content of refinery fuel gas. 10 We are proposing daily sampling to account for the 11 significant variability in this fuel. Combustion of 12 refinery fuel gas accounts for about half of refinery 13 greenhouse gas emissions. This approach is consistent 14 with the EU and IPCC. 15 For small refineries there is typically less 16 variability, and staff is proposing modifications to the 17 sampling frequency for these refineries. 18 Stakeholders also raised the issue of how to 19 account for emissions when required metering instruments 20 break down. We agree on the need to address this issue 21 and propose to develop language for a 15-day package. 22 --o0o-- 23 AIR POLLUTION SPECIALIST SAHOTA: Hydrogen 24 production is critical to the production of ultra-low 25 sulfur and low emission transportation fuels. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 In some cases, hydrogen production plants are on 2 site at a refinery complex. In other cases, they are 3 stand-alone facilities. 4 Reporting requirements for the hydrogen plants 5 are similar to requirements for refineries, and staff has 6 again modified existing API methods to reflect variations 7 in plant operations and fuels. 8 --o0o-- 9 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 10 discuss the cement plant reporting requirements. 11 --o0o-- 12 AIR POLLUTION SPECIALIST SAHOTA: California's 13 eleven cement plants will calculate and report their 14 combustion process and fugitive emissions using methods 15 based on the California Climate Action Registry protocols. 16 Cement plants will report emissions using plant-specific 17 emission factors, and also calculate and report efficiency 18 metrics to specify how much carbon dioxide emissions are 19 generated per metric ton product. 20 We recognize that there are broad issues related 21 to the issue of imports and leakage that will need to be 22 addressed as the overall program develops. 23 --o0o-- 24 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 25 describe the general stationary combustion reporting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 requirements. 2 --o0o-- 3 AIR POLLUTION SPECIALIST SAHOTA: We are 4 proposing that any facility that emits greater than or 5 equal to 25,000 metric tons of carbon dioxide with for 6 stationary combustion report under this regulation. 7 Reporting requirements for the general combustion 8 facilities are less complex than for the preceding 9 specific sectors and are typically based on fuel 10 consumption and the use of default emission factors. 11 Staff recognizes that some of the facilities in 12 this category may have process or fugitive emissions. We 13 will consider adding additional reporting requirements in 14 future updates to this regulation. 15 --o0o-- 16 AIR POLLUTION SPECIALIST SAHOTA: This next slide 17 shows some of the significant sectors that we brought in 18 with this threshold. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 21 describe the proposed verification requirements. 22 --o0o-- 23 AIR POLLUTION SPECIALIST SAHOTA: AB 32 24 explicitly calls for the verification of greenhouse 25 emissions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 A strong verification component is important to 2 the rigor and integrity of any greenhouse gas reporting 3 program. We are proposing a third-party verification 4 program that is built on international standards. 5 Third-party verification is consistent with the 6 requirements of the California Climate Action Registry and 7 European Union programs. 8 Our proposal allows for both private consultants 9 and California air district staff to provide verification 10 services which will give flexibility to the reporting 11 facility. 12 --o0o-- 13 AIR POLLUTION SPECIALIST SAHOTA: ARB staff will 14 train and accredit verifiers beginning next year. The 15 training will be multi-day with an exit examination, with 16 sessions focused on specific sectors such as retail 17 providers and petroleum refineries. ARB is committed to 18 the training and accreditation of sufficient number of 19 verifiers before verification requirements begin in 2010. 20 ARB will be responsible for the accreditation of 21 verifiers and conducted targeted audits of submitted data. 22 --o0o-- 23 AIR POLLUTION SPECIALIST SAHOTA: The proposed 24 regulation specifies the services that must be conducted 25 as part of verification of reported emissions. Each of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 the items discussed on this slide are internationally 2 recognized components of verification. 3 The required services include making a site visit 4 to determine facility boundaries, developing a sampling 5 plan for the larger sources, and conducting data checks. 6 The verifier must attest to whether or not the total 7 facility emissions reported would be within 5 percent of 8 the true emissions at the site. At the end of 9 verification services, the verifier submits a verification 10 opinion to the facility and to ARB. 11 --o0o-- 12 AIR POLLUTION SPECIALIST SAHOTA: Next, I will 13 provide an overview of the estimated costs to businesses 14 to comply with the proposed regulation. 15 --o0o-- 16 AIR POLLUTION SPECIALIST SAHOTA: We expect about 17 800 sources to be affected by the regulation. The vast 18 majority of these are private businesses. But some public 19 agencies such as large municipal utility districts would 20 also be affected. 21 Based on cost survey data, we have estimated the 22 annual program implementation costs to be in the range of 23 21 to $30 million per year. We anticipate that industry 24 costs will decrease over time as facilities establish the 25 systems and expertise to make greenhouse gas reporting a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 part of their normal business practices. 2 We could find no evidence to indicate that the 3 proposal would lead to a loss in California jobs. 4 Instead, we anticipate that there could be a small 5 increase in jobs for technical consultants to act as 6 verifiers. 7 --o0o-- 8 AIR POLLUTION SPECIALIST SAHOTA: At this time, 9 we are proposing some modifications to the draft 10 regulation that was released on October 19th. Most of 11 these are to provide clarification or to address specific 12 issues raised in the public process. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SAHOTA: Staff proposes 15 to raise the de minimis cap from 10,000 to 20,000 metric 16 tons of CO2 equivalent. We believe that the higher cap, 17 which is consistent with similar limits in the European 18 Union, will provide additional flexibility in the 19 calculation of reported emissions without a significant 20 impact on overall data quality. 21 As we mentioned earlier, we agree there needs to 22 be language to address reporting procedures during 23 instrument breakdowns. And we will develop language to be 24 included in the 15-day package. 25 Staff is proposing several clarifications PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 affecting how purchases and sales are reported by retail 2 providers in the power sector. These changes include 3 clear designation of power sold within California as a 4 California sale, and reduced limits on claims of power 5 from nuclear and hydroelectric facilities. 6 Staff is proposing to allow weekly versus daily 7 sampling for refinery fuel gas composition at small 8 refineries. This would affect only the small refineries, 9 accounting for 2.5 percent of state's crude oil processing 10 capacity. These small refiners typically have a single 11 blended refinery fuel gas system, so variability is low. 12 Staff is proposing to simplify reporting 13 requirements for small cogeneration facilities by not 14 requiring them to report thermal energy production 15 separately. These facilities often lack the steam 16 metering equipment needed to do that. 17 Finally, our revised proposal includes other 18 minor changes and clarifications including several new 19 definitions and general language cleanup. 20 --o0o-- 21 AIR POLLUTION SPECIALIST SAHOTA: Staff 22 recommends that the Board approve the proposed regulation 23 and modifications as presented today. 24 This concludes the staff presentation, and we 25 would like to now answer any questions or concerns the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 Board may have. 2 CHAIRPERSON NICHOLS: Thank you for the 3 presentation. 4 We will be holding a formal public hearing and 5 asking for a vote on this at the end. 6 This is the first actual regulation that this 7 Board will be adopting pursuant to AB 32, although we've 8 taken a number of other actions before now. And it's a 9 major step forward in implementation of the program. 10 I looked through the comment letters that were 11 provided to us, and there were a large number of technical 12 comments that related to how emissions were to be 13 calculated, how they were to be apportioned, et cetera. 14 And I guess my question would be just to ask the staff 15 whether you feel that you addressed most of those comments 16 in the final -- or in the proposal that you have brought 17 before us today? 18 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 19 Madam Chairman, this is Richard Bode. And we've 20 actually done quite a few modifications that are before 21 you today that we brought in addition to our original 22 proposal. We've looked at several of those comments too, 23 and we think there probably may be more as we move forward 24 with this 15-day package. So we'd suggest -- we're going 25 to go through some of those comments and see if there's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 other clarifications we might make in that. But I think 2 we've actually done a pretty outstanding job in 3 addressing. 4 And, you're right, some very technical issues 5 with the sectors. 6 CHAIRPERSON NICHOLS: Thank you. 7 Other questions before we begin? 8 Yes. 9 BOARD MEMBER SPERLING: So to follow up on that. 10 Can you tell us what is the process for revising and 11 making changes in this as we go along. You know, there is 12 the concern that we're adopting this rule before we even 13 know what the policies are going to be. And normally 14 you'd want to figure out what you're trying to achieve and 15 then figure it out. And, you know, I understand why we're 16 doing this early. But -- so can you reassure us about -- 17 or tell us what the process will be for updating, 18 revising, and so on and how that will work? 19 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 20 Well, our plan is we'll take the modifications 21 that are approved here at this Board meeting. There's 22 still some that are discussed in our presentation today 23 that we'll put into actual language in the regulation. We 24 again have to put that out for a 15-day process of public 25 review. And we'll get those into a final regulation, that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 then has to be adopted -- or approved by the Office of 2 Administrative Law. 3 Our plan right now is to get the implementation 4 of the reporting program up and started this next year. 5 Quite a bit of work to do that. And then we as the -- 6 actually the Act says is we expect to come back to this 7 Board with modifications again as we respond to that 8 implementation of the program and as the whole AB 32 9 program changes. 10 BOARD MEMBER SPERLING: So will there be a normal 11 annual update or -- I mean because it's not just this 12 immediate rule but it's into the long-term future as well. 13 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 14 We expect we'll probably be back within a year's 15 time, especially as we start the implementation and we 16 find new things out. And especially as the first year of 17 reporting takes place, that we'll learn new things. And 18 facility operators tell us ways the program should change. 19 I don't know if we want to do it every year. But, you 20 know, I think a lot of that will depend on issues we find 21 out as the process moves forward. 22 DEPUTY EXECUTIVE OFFICER TERRY: I was just going 23 to say, staff doesn't want to commit to every year. But I 24 think realistically for the next few years it will likely 25 be every year because the program is going to be so active PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 in the next few years. And because this first year is a 2 transitional year, we think we will learn a lot. And the 3 technical guidance that we plan to provide for our 4 facilities early next year, so that first transition year 5 can be as rigorous as possible, I think we'll learn a lot 6 as we develop the technical guidance and we answer 7 questions from facilities reporting. So we will 8 definitely be back with changes in the first year. 9 BOARD MEMBER SPERLING: And just one last 10 question. 11 And so can we be -- how can the companies be 12 certain that the rules are not going to change too much on 13 them as they go along? How do you think about that? 14 DEPUTY EXECUTIVE OFFICER TERRY: How do you 15 balance that? 16 (Laughter.) 17 CHAIRPERSON NICHOLS: Enough flexibility but also 18 enough certainty, yes. 19 DEPUTY EXECUTIVE OFFICER TERRY: Well, and I 20 think going back to the derivation of the calculations, 21 these are based, by and large, on international protocols, 22 CCAR protocols. So the fundamental calculations are not 23 likely to change. But what we're talking about is sort of 24 practical application in the real world and a lot of -- 25 there will be new monitoring, meters and so on, actually PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 physical changes made at facilities for tracking for some 2 of the largest facilities. And then we'll look at -- one 3 of the things we did commit to was look at process 4 emissions from the combustion sources and to make sure we 5 haven't missed anything significant. 6 So those are some obvious things we'll look at in 7 the first year. 8 CHAIRPERSON NICHOLS: Yes, Ms. Riordan. 9 BOARD MEMBER RIORDAN: First of all, let me thank 10 the staff for one thing which I think is so important. 11 And, that is, that you developed some regulations here 12 that are very sympathetic to what had been before as a 13 voluntary reporting operation through the California 14 action registry. And I think that's so important for us 15 to acknowledge what businesses have stepped forward under 16 a voluntary program and to try to make this as easy a 17 transition as possible. 18 And at the same time recognizing what Ms. Terry 19 just said. The first year is going to be a real learning 20 experience for all of us, probably. And we are going to 21 need to go back and make some adjustments, but recognizing 22 that we want to keep most things very consistent for our 23 businesses and our entities that are reporting. 24 But I just think, Madam Chairman, it's so 25 important that we make a real effort to help those who had PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 been at the volunteer, cutting-edge, early-on, and that we 2 make it as easy as possible for them to transition into 3 this new program. 4 CHAIRPERSON NICHOLS: Thank you. 5 Yes, Supervisor Hill. 6 SUPERVISOR HILL: Thank you, Madam Chair. 7 I know there's been a lot of discussion going on 8 of late over the reporting and the air district's role in 9 that reporting. And within the last couple of days 10 CAPCOA, it's my understanding, has changed their position 11 and have become neutral. And they were certainly 12 supportive of the idea of reporting going through the 13 local air districts, and the air districts taking that 14 leadership role in this. 15 I know Mark Ross is here, the Chair of the Bay 16 Area District. And yesterday at our Board meeting at the 17 Bay Area Air Quality Management District we had a very 18 heated passionate discussion over this issue. And the 19 Board members feel very strongly that they are the closest 20 to the sources and that have the information available. 21 They're already working and reporting most of the 22 emissions coming from there. And what I'd like to -- and 23 I know Mark will be speaking to this later. But I would 24 like to just have for the record why the direction is 25 going the way it's going. And if there are -- and I know PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 there probably is many reasons to have the air district do 2 it, as there are for from not to do this. And I think 3 there's a role for the air districts, and I think Mike and 4 I were talking about it earlier, that they will have a 5 role as we move forward. 6 Personally, I feel that the direction we're going 7 is appropriate. But I think the air district board 8 members throughout the state in many cases are not of that 9 mind and have -- and I think it would be appropriate for 10 us to share with them the reasons why we're going in the 11 way we are and that the ARB staff and that ARB should be 12 taking that role. 13 CHAIRPERSON NICHOLS: Thank you. This is going 14 to be coming up in the comments on the proposal. But I 15 think it might be useful to have staff address the issue 16 up front as to why this regulation has taken the shape 17 that it has. I know there -- I myself participated in 18 some discussions also with some district board and staff 19 members about this issue. And you're certainly right, 20 that it's generated a lot of passion. And I think that 21 the resolution which is being proposed does give the 22 districts a significant role, at least those districts 23 that want to have a significant role. But I think it 24 might be good to just explain the reasons why the staff is 25 taking the approach that they have. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 Do you want to start, Ms. Terry? 2 DEPUTY EXECUTIVE OFFICER TERRY: Yes. 3 We certainly at the staff level want to continue 4 our good working relationship with district staff. And we 5 have had conversations about the value, as we move into 6 inventorying greenhouse gas emissions, that we want to 7 integrate that technical work with our criteria pollutant 8 programs and toxics programs. It makes ultimate sense 9 and, in fact, will improve California's overall emissions 10 inventory. So to that end we're working with the 11 districts to develop integrated reporting tools. So we've 12 made that offer, and some of the largest districts 13 particularly interested in working with us. 14 So as we develop our online reporting tool, we're 15 working with your district, for example, in South Coast, 16 and others that are interested to have a reporting tool 17 that -- if they would like to develop one that is seamless 18 with ours so that a facility in the Bay Area, for example, 19 could report their district required emissions as well as 20 the statewide greenhouse gas emissions in a seamless 21 system, we think that's a wonderful thing to work on and 22 we're committed to do that. 23 The broader question of why reporting directly to 24 ARB, I mean at first blush AB 32 directed that a statewide 25 program be developed, that facilities would report their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 emissions to ARB, and that we would follow to the greatest 2 extent possible the international paradigm of voluntary 3 reporting, the CCAR protocols. And so it seemed like 4 one-stop shopping for the State of California was very 5 consistent with the way this program is evolving 6 internationally. 7 That said, however, we do think there's a very 8 valuable role for districts going forward with this 9 program. 10 CHAIRPERSON NICHOLS: Okay. I think that's 11 pretty much the best that can be said, a lot of lower 12 level detail, but overall that was the philosophy. So I 13 appreciate that response. 14 If it's acceptable, Ms. Kennard. 15 BOARD MEMBER KENNARD: I had a question regarding 16 the economic analysis. And it was very thorough in the 17 staff report. And although you kind of indicated that 18 there's no significant material impact, it is still 19 significant number of dollars particularly in the first 20 years. Costs are costs. And I'm assuming that you 21 anticipate that either the private businesses are going to 22 absorb this cost or they are going to be incrementally 23 passed on to the consumer. That's my first question. 24 CLIMATE CHANGE REPORTING SECTION MANAGER 25 THOMPSON: I'm Doug Thompson, Manager of the Climate PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 Change Reporting Section. 2 We did an economic analysis where we attempted to 3 look at some of the effects and how they might trickle 4 down through the economy. And our conclusion was that we 5 didn't see adverse economic impact. We thought there 6 might be a slight increase in jobs, for example. 7 I think that your original question was regarding 8 what the -- could you restate your question? 9 BOARD MEMBER KENNARD: Sure. Even though you've 10 said they're materially insignificant, the costs, but they 11 are costs nonetheless. At some point somebody has to bear 12 those costs, either the businesses or the local 13 governments or the consumers. So at some point this 14 economic analysis I would hope would have determined that 15 either the businesses are going to absorb it or it's 16 ultimately going to be passed down to consumer. 17 CLIMATE CHANGE REPORTING SECTION MANAGER 18 THOMPSON: That's correct. 19 DEPUTY EXECUTIVE OFFICER TERRY: That's right. 20 That's the nature of our Research Division economic staff. 21 And the construct for doing the analysis is to look at 22 whether the economic impacts are such to cause someone to 23 go out of business. And what is sort of the impact by 24 sector by business. 25 And we actually have a number of backup slides if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 you're interested to go into more detail on the economics. 2 BOARD MEMBER KENNARD: I just want to be clear. 3 Because this is a mandatory program. Ultimately, the 4 consumer is going to pay in some way, shape, or form. 5 And the other question is relative to local 6 government's ability to pay. Many governments are so 7 strapped. Although again the numbers are seemingly de 8 minimis, do you anticipate that they'll be some local 9 governments that will have an inability to bear the burden 10 of the cost? 11 CLIMATE CHANGE REPORTING SECTION MANAGER 12 THOMPSON: We don't anticipate a problem with that. We 13 haven't heard concern about that at this point. 14 We do know that municipal utilities will have 15 some burden to bare here. But we're not bringing in local 16 governments, per se, at this point. There will be some 17 local impact from utilities, for example, and possibly on 18 solid waste or other facilities. 19 BOARD MEMBER KENNARD: Thank you. 20 CHAIRPERSON NICHOLS: Okay. Let's now go to the 21 public hearing then, and we will be imposing a time limit. 22 I hope we have our timer here. And we will be asking you 23 to keep your comments to three minutes or less. And I'll 24 just call the witnesses in order. And I'll try to give 25 you some notice of when you're next in line. So we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 beginning to begin with Devra Wang, followed by Mark 2 Nordheim and then John Busterud. Good morning. 3 MS. WANG: Good morning, Madam Chair and members 4 of the Board. My name is Devra Wang with the Natural 5 Resources Defense Council. I'm here in support of the 6 proposed mandatory reporting regulations. 7 We are urging you to adopt the reporting 8 regulations with one important change. Before I jump into 9 that though, I'd very much like to commend CARB staff and 10 the staff at the sister agencies that did an excellent job 11 putting together these mandatory reporting regulations 12 through a very productive public process this year and 13 under very significant time constraints. So we very much 14 appreciate all of your hard work this year. 15 As you know, these reporting rules are a critical 16 foundation for a successful implementation of AB 232. As 17 the saying goes, you only manage what you measure. And 18 this gets California starting to measure its greenhouse 19 gas emissions. So we think this is very important 20 starting point for AB 32 implementation. 21 So let me explain the one change that we asked 22 you to make in the reporting regulations. Currently, the 23 proposed rules would have all reporters submit best effort 24 reports in 2009 in order to allow time for the 25 verification infrastructure to be put into place. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 first verified reports would be submitted in 2010, but 2 only for some of the reporters. And so what this means is 3 that the state wouldn't have a complete set of verified 4 data until the end of 2011. 5 So we are urging you to modify the rule to 6 require that all of the reporters will be submitting 7 verified reports in 2010. 8 We think this is important, because without the 9 change, CARB won't have a complete set of verified data 10 until the end of 2011, which is just months or perhaps 11 days before the enforcement of emission reduction programs 12 begins. And this is a concern because one of the 13 principle lessons that I think we've all learned from 14 other emission reduction programs, including the European 15 Union's emission reduction program, is how important it is 16 to begin collecting fully verified emission data well in 17 advance of the start of the program. So we would urge you 18 to ensure that CARB has a complete set of verified data by 19 2010. And with that modification, we would strongly 20 support your adoption of these proposed rules. 21 Now, of course, the reporting regulations before 22 you today are an excellent start. But they are only just 23 a start. And as you discussed, over the next year, the 24 reporting program will need to be expanded to include 25 other significant sources that aren't included in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 rules today, such as natural gas utilities, landfills, and 2 some other significant sources. 3 So as the Board continues to refine the program, 4 we urge you to continue to work with stakeholders to make 5 sure that the reporting is as transparent as possible, to 6 develop efficiency metrics wherever feasible, and to 7 establish annual verification for emitters. 8 So we look forward to continuing to work with you 9 and urge you to adopt the rules. Thank you. 10 CHAIRPERSON NICHOLS: Thank you. 11 That piercing sound, for those in the audience 12 who couldn't see it, shows that the red light has come up. 13 And Ms. Wang did a great job of ending at three minutes. 14 Mark Nordheim, John Busterud, and Jerry Frost. 15 MR. NORDHEIM: Good morning. My name is Mark 16 Nordheim. I'm the state regulatory team leader for the 17 Chevron Corporation. And for the last eleven months, I've 18 also chaired our industry's working group working with 19 your staff on the regulation that's before you today. 20 I want to start out by -- I think you're going to 21 hear a lot of support for the fine work your staff has 22 done. This has been a yeoman effort, zero to 60 in eleven 23 months. This moves us roughly to UE Tier 2 maybe before 24 they get there. So there are a lot of transition issues 25 that have been incorporated into this rule that will help PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 us get there. 2 I want to express my personal thanks to Richard, 3 Doug, and Rajinda and the people who have worked in our 4 sector for taking the time to come look at our facilities 5 and help us learn along with them on how to do the best 6 job. 7 As you heard today, there's still work in 8 progress. We still have fugitives to go next year. There 9 are startup issues. The guideline activity, the 10 development of verification training, all those things 11 become integrally important get this off the ground as 12 effectively and quickly as possible. 13 There are 138 pages of regulation, 57 equations, 14 five industry categories. And to try to briefly answer 15 the Chairwoman's earlier question, through a speed read 16 yesterday with the exception of a little bit of 17 wordsmithing to ensure clarity, we're going to be in good 18 shape for the 15-day comment period. Very specifically, 19 the work on break down stuff, we look very much forward to 20 working with the staff on that issue. 21 Just to click off a couple of other things. The 22 issue of the districts, we think the staff approach brings 23 a nice balance to their way to handle that issue. I know 24 there have been people on both sides of that equation. 25 And I want to close by reinforcing something that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 Board Member D'Adamo brought up in the previous Board item 2 related to local government. And that's the issue of CEQA 3 and the opportunity to bring some guidance, clarity, 4 certainty not just for local government, for those of us 5 who are going to have to be permitting, maybe important 6 facilities to help reduce emissions so we get some 7 clarity, consistency. And the opportunity to do that I 8 think is very ripe within the context of the scoping work 9 that's going on right now. 10 So with that, I'll close and answer any questions 11 that you have. 12 CHAIRPERSON NICHOLS: Thank you very much. I 13 don't see any questions. Thanks a lot. 14 John Busterud, and Jerry Frost and Tom Jordan. 15 MR. BUSTERUD: Good morning, Chair Nichols and 16 Board. I'm John Busterud, Director and Counsel of 17 Environmental Affairs for Pacific Gas and Electric 18 Company. 19 We're committed to making AB 32 a success. And 20 we're one of the earliest supporter of this landmark 21 legislation. 22 I was also pleased to hear the recognition for 23 those who have stepped forward voluntarily to report, and 24 we were a charter member of the California Climate Action 25 Registry. I'll be brief today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 We're pleased to speak in support of the proposed 2 greenhouse gas reporting regulations. Sound information 3 on emission sources and levels is the bedrock upon which 4 this Board can build a successful AB 32 program. And it 5 can also serve as model for emerging regional and national 6 programs. 7 I'd like to note in support of what staff said to 8 Professor Sperling, there is -- the regulation is 9 comprehensive, yet flexible. And the way we read it at 10 least, for example, can accommodate various point of 11 regulations to dive right into detail on work that awaits 12 the Board. But it does have flexibility built into it 13 without missing key sectors. 14 We want to commend staff for their outreach, 15 stakeholder engagement, and their very diligent efforts to 16 understand and work with the sectors and sources to which 17 the regulation will apply. Thank you. 18 CHAIRPERSON NICHOLS: Thank you. 19 Jerry Frost. 20 MR. FROST: Good morning, Madam Chair and members 21 of the Board. My name is Jerry Frost. I'm with Kern Oil 22 and Refining Company. I'm here today to recognize and 23 commend the CARB's management and their staff for working 24 together with us and in particular listening to our issues 25 and suggestions and recommendations. We very much PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 appreciate that. 2 They've made themselves accessible, even though 3 we know they have a tremendous workload and a daunting 4 task before them. 5 We appreciate their recognition of the importance 6 of designing a program that will work and will produce 7 results. We also appreciate their recognition that the 8 program should ultimately reduce greenhouse gas emissions, 9 yet stimulate, not stagnate, economic growth and 10 development within the state. 11 Kern has been involved in this regulatory process 12 from the beginning and is committed to continuing that 13 effort by working together with staff to cooperatively 14 develop a program that will be technologically feasible, 15 cost effective, will minimize leakage, will stimulate the 16 economy, and will ultimately yield tangible and measurable 17 results. Thank you. 18 CHAIRPERSON NICHOLS: Thank you. Very succinct 19 statement. 20 Tom Jordan followed by Julia May and Bruce 21 McLaughlin. 22 MR. JORDAN: I'm Tom Jordan with the San Joaquin 23 Valley Air District. I'm here today representing our 24 Executive Director and APCO of the district. 25 We support the mandatory reporting regulations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 that staff has proposed, and we definitely appreciate 2 ARB's willingness to develop reporting system that allows 3 facilities to report directly to both the air districts 4 and ARB, much of the data we already collect through 5 systems that we have. So we think that's important. 6 We think whatever systems developed should be 7 non-duplicative. And I think that that proposal to allow 8 the dual reporting does that and is efficient as possible. 9 All the air districts in the state have a lot of 10 experience in dealing particularly with the stationary 11 sources, and we've set up systems that allow the sources 12 to become familiar with and make it very easy for them to 13 get the data in. So I think a lot can be gained by 14 working together of that area. 15 We also appreciate ARB's recognition that the air 16 districts have a lot of experience in dealing with these 17 sources and allowing districts if they so chose to become 18 certified as third-party verifiers. We think that's an 19 important aspect of this. And allows districts to work 20 with their regulated community. And if it makes sense in 21 their areas to become verifiers and provide that service 22 to folks. 23 And as many of you may be aware, the San Joaquin 24 Valley Air District did join and partner with the State on 25 the lawsuit with the federal government over the waiver PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 issue. We think that those partnerships are important. 2 And we'd like to keep partnering with you as we develop 3 these regulations to make sure they're efficient and 4 effective as possible and make sure we all meet our goals 5 of reducing greenhouse gases. Thank you. 6 CHAIRPERSON NICHOLS: Thank you. 7 Julia May. 8 MS. May: I'm actually supposed to be on the 9 opposing list. 10 CHAIRPERSON NICHOLS: Yes. That's all right. 11 MS. MAY: I thought you were doing all the 12 support first. 13 CHAIRPERSON NICHOLS: No. We have many more 14 supporter. 15 MS. MAY: We support if you changed certain 16 aspects of the regulation. We want to thank the staff. 17 It's clear the staff has done a tremendous amount of work 18 under a very difficult regulatory deadline. That's also 19 had a negative impact on public involvement unfortunately. 20 I'm with Communities for a Better Environment. 21 My colleague, Jesus Torres from Wilmington will speak 22 about aspects of this regulation. 23 We oppose the secret reporting that keeps the 24 data calculations housed in individual companies where the 25 public can't even look at it. That is fundamentally PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 opposed to environmental justice principles. So we ask 2 that the ARB require the companies put that data in-house 3 Jesus will talk more about that. 4 I also wanted to talk about hydrogen plants. You 5 noted they got piecemealed out, segregated from 6 refineries. The hydrogen plants are probably the fastest 7 growing source of greenhouse gases in the state. Because 8 most of the refineries are switching to dirty crude oil 9 that's high carbon and high sulfur, they need a lot more 10 hydrogen to strip the sulfur and to crack the 11 hydrocarbons, the heavy high carbon crude oil. So they're 12 going the wrong way. They're building an infrastructure 13 that's going to use a lot more hydrogen. 14 One example, in the Bay Area, one in a quarter 15 million metric tons of CO2 increase at one refinery mostly 16 from a hydrogen plant. They're going to be separating out 17 the hydrogen plants from the oil refineries. We oppose 18 this. They should be included with the refineries. 19 Because even though the refineries are frequently farming 20 these out to other companies, most of the time they're on 21 refinery property. They're contracted by the refineries. 22 They can even use fuels from the refineries. And they're 23 making a product that goes back into the refineries. 24 They're not doing this as an alternative energy source. 25 And frequently are oversizing these sources. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 CEQA really needs to be addressed in this issue 2 in a way that looks holistically at the refinery. We ask 3 those plants be included with the refineries. 4 We think the air district's role could be very 5 helpful to address environmental justice principles in 6 making the reporting to the air districts not just the 7 data and emission results, but the actual calculations 8 where local people who work on the local criteria and 9 toxic emissions and are also very interested in climate 10 change and greenhouse gas can get the data more easily. 11 The public is very involved in scrutiny of these 12 large facilities. And right now the data is going to be 13 housed secretly in each company. ARB doesn't even 14 necessarily get the data unless you specially request it. 15 All you get is the emissions results. 16 Because of that, we think that's a fatal flaw in 17 the regulation and we oppose it. If you would change to 18 bring that in house, that would make a major difference. 19 And again we thank the staff. And we urge you 20 include hydrogen plants with the refineries, pull your 21 data calculations in house, or report them to the air 22 districts where the public can review them. If you have 23 any questions. 24 CHAIRPERSON NICHOLS: I was going to ask the 25 Board if they wouldn't mind if we can go through the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 witnesses and then ask the staff to respond to these 2 points as we go forward. I think we're going to learn a 3 lot from the comments. Thank you. 4 Bruce McLaughlin, followed by Jesus Torres and 5 Tony Fischer. 6 MR. MCLAUGHLIN: Madam Chair and members of the 7 Board, I'm Bruce McLaughlin representing the California 8 Municipal Utilities Association. 9 We participated in all the work shops, met with 10 staff many times, and filed comprehensive comments for the 11 record in this rulemaking. Staff is both professional, 12 worthy of much respect, and I just flat out like them. 13 Nonetheless, I was disappointed with the certain 14 language in the original and revised staff proposals that 15 were articulated we think very clearly in our written 16 comments which we advised to your reading pleasure. 17 So today, I come equipped with a copy of AB 32 18 and two candy bars. AB 32 is relevant, of course, because 19 it defines the height, breadth, and depth of authority 20 granted to this Board by the Legislature. As scientists, 21 this Board no doubt recognize that the accuracy of any 22 experiment or test depends on the integrity of the system 23 being measured. Therefore, a critical first step is to 24 define that system. 25 In terms of AB 32, the step is specifically PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 defined by the gases to be measured and the geographical 2 scope as expressly stated in the statute defining 3 statewide greenhouse gas emissions, which are greenhouse 4 gases emitted into the state of California or from 5 electricity generated and then delivered to and consumed 6 inside the state. 7 That system then applies to all the reporting 8 rules in the regs, the 2020 target, all rules establishing 9 the emission reduction measures, all the optional 10 market-based compliance measures, the requirement that 11 reduction be real, and the enforcement procedures. 12 This position is not a rejection of any 13 obligation to reduce greenhouse gas emissions by the 14 publicly-owned electric utilities in state of California. 15 CMA welcome a robust and cross sector approach that's 16 regional or national in scope under the proper 17 jurisdictional authorities. 18 Now, why are these relevant? Well, as we all 19 know all, Almond Joy has nuts, but Mounds don't. And CARB 20 is able to regulate the chocolate, but they cannot 21 regulate the nuts. And that's defined by the Legislature. 22 And so CMA requests that you read our comments 23 defining the limits of the scope of AB 32 and leave out 24 the nuts. Thank you. 25 CHAIRPERSON NICHOLS: Okay. Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 Mr. Torres, followed by Mr. Fischer and Barry 2 Wallerstein. 3 MR. TORRES: Good morning, members of the Board. 4 My name is Jesus Torres. I'm a community member of the 5 city of Wilmington and also an organizer with Communities 6 for a Better Environment. My community and many others in 7 California face heavy burdens from refineries, oil 8 drilling, ports, and power plants, which put out large 9 emissions of greenhouse gases. At the same time, they are 10 emitting smog-forming chemicals and toxics. 11 Low-income communities of color will likely be 12 impacted worse by climate change includes hotter days that 13 causes more smog and especially hurts people with asthma. 14 Heat waves that hurt the elderly and low-income people the 15 most and many other impacts we will feel right here due to 16 climate change. 17 As a result, we need good information and 18 reporting on greenhouse gases. And we need open access to 19 this information, which is a fundamental requirement of 20 environmental justice. Unfortunately, right now your 21 draft regulation allows the calculations for the reporting 22 to be held secretly at company headquarters where the 23 public cannot review it. 24 ARB will only receive the results of the 25 calculations. Adopting this new method for CEQA reporting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 is a bad idea that moves away from public access to data 2 and away from environmental justice. 3 Companies already have strong protections for 4 information that is legitimately trade secret, but this 5 mandatory reporting regulation before you today is 6 providing an added layer of secrecy by keeping the 7 calculations for reporting housed as industrial 8 headquarters instead of housing at the ARB. 9 CBE strongly opposes this idea that goes against 10 the normal government practices for collecting data, 11 reviewing the data, and providing the public access to the 12 data as part of the good practices for public scrutiny. 13 Please direct your staff to require the calculations 14 forming the basis of the data to be submitted to ARB and 15 air districts so that the public may go through the normal 16 public records process to review the data. 17 Thank you for your consideration. And we look 18 forward to continue working with you on these issues. 19 Thank you. 20 CHAIRPERSON NICHOLS: Thank you very much. 21 Tony Fischer. 22 MR. FISCHER: Thank you, Madam Chair and Board 23 members. My name is Tony Fischer representing Nummi. As 24 many of you know, Nummmi is the GM/Toyota venture in 25 Fremont that employs over 5,000 team members and produces PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 approximately 400,000 vehicles per year. 2 Nummi has attracted two California 23 affiliated 3 major part supplying company and employ a total of 4,000 4 additional team members. 5 Nummi sees environmental stewardship as a very 6 high priority and is taking a strong interest in finding 7 workable solutions leading to the reduction of greenhouse 8 gases. 9 We recommend that any emission reporting be very 10 carefully tailored to assure need and consistency in 11 gathering information and guaranteeing accurate counts. 12 We appreciate staff proposal to exempt backup or emergency 13 generators and portable equipment from the mandatory 14 reporting requirements. The fuel usages and emissions 15 associated with these equipments can be counted and 16 determined from upstream fuel reporting. However, we are 17 concerned that staff continues to propose to require 18 mandatory reporting from energy end users and other 19 combustible sources whose emissions can be determined from 20 generators or upstream fuel reporting. 21 AB 32 does not require reporting from individual 22 entities except for retail sellers of electricity, unless 23 there is a need from such entities in determining the 24 statewide greenhouse gases. 25 Mandatory reporting of indirect energy usage by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 end users, especially electricity, is an unnecessary and 2 duplicative reporting requirement proposed by staff. This 3 is so because end users would be reporting energy usage 4 that has already been accounted for by the generators. 5 Staff has argued that the principle consideration 6 of indirect energy usage provides more complete picture of 7 emission footprint of facilities. This may provide more 8 information about a facility, but as discussed above, such 9 reporting should not be mandated because AB 32 only 10 requires reporting necessary to determine statewide 11 greenhouse gas emissions. 12 Similarly, natural gas users who generate 13 greenhouse gas emissions through combustion should not 14 report emissions, if the methodology used to determine the 15 statewide greenhouse gas emission in 1990 was based on 16 upstream natural gas fuel usage. It would be much less 17 complicated for the state to gather distribution figures 18 from the limited number of upstream fueled distributors, 19 i.e., natural gas pipeline companies, than to inventory 20 the usage of many downstream combustion sources. 21 In summary, in order to track the state's 22 progress in achieving its emission goals, mandatory 23 reporting is only needed from those fuel sources emitted 24 that were used to determine the 1990 statewide greenhouse 25 gas emission levels. In fact, this methodology is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 necessary to ensure consistency and determining future 2 yearly emissions. This type of reporting system will be 3 simpler for the state to administer. It would also ensure 4 more accurate account by eliminating the possibility of 5 energy uses. 6 In summary, for the above reasons, Nummi 7 respectfully requests that CARB exempt from duplicative 8 mandatory reporting those facilities whose emissions due 9 to indirect electricity, end use, or natural gas usage 10 would properly be counted for by generators of upstream 11 fuel sources. Thank you. 12 CHAIRPERSON NICHOLS: Thank you. 13 Barry Wallerstein, followed by Mark Ross and Doug 14 Quetin. 15 MR. WALLERSTEIN: Good morning, Chairman Nichols, 16 members of the Board. I'm Barry Wallerstein, the 17 Executive Officer of the South Coast AQMD. 18 I'm not sure about the candy bar, but what I 19 think you're really doing today is establishing the GPS 20 system for AB 32 implementation. Next item will be your 21 origin point, and the mandatory reporting will give you 22 year by year position towards your goal of 2020 and 2050. 23 I'm pleased to share with the Board that our 24 Board recognizes the importance of mandatory reporting, 25 has authorized our staff to already begin modifying our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 existing reporting tools so that we may incorporate all 2 the data required in your draft regulation or the final 3 regulation and to have simultaneous reporting to our two 4 agencies. 5 This new tool will be available for beta testing 6 by March 1st and for full implementation by July 1st of 7 2008. Of course, by having the tools such as that, we 8 will be able to increase efficiency and decrease costs for 9 our facilities. 10 Turning to the other major component of the 11 program, which is the verification aspect, we do plan to 12 send our staff to CARB training to get certified as 13 verifiers. And I am in discussions with the governing 14 board about offering verification services. 15 We do have, however, one important request of you 16 today regarding the verification. And that is that you 17 ask the staff when they come back next year with another 18 look at this rule that they provide you with an auditing 19 plan. We think that that is very important because our 20 past experience in our traditional program with a third 21 party verification is that it has been really a mixed bag. 22 In fact, a number of years ago, we ultimately had a 23 settlement over $100 million which was due in large part 24 to falsified data, in our view, submitted by a third party 25 verifier. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 So while we recognize you are following the 2 international model, we think that the auditing that was 3 noted on your staff's slide number 28 is critical. And it 4 deserves some Board review in the way of an audit plan 5 which would also be a further deterrent to anyone that has 6 a notion that we're not looking for accurate data. 7 And we also think that this element will have to 8 be re-visited should you adopt the cap and trade program, 9 because verification will then be critical to investments 10 of millions or hundreds of millions of dollars. 11 Lastly, I wanted to note that your new Executive 12 Officer, Mr. Goldstene, met with CAPCOA earlier this week. 13 You'll hear more about that from the CAPCOA. But I wanted 14 you to know from my viewpoint that the meeting went very 15 well. Mr. Goldstene was very open and extended clearly a 16 hand of partnership to the air district and we're very 17 appreciative of that. 18 CHAIRPERSON NICHOLS: So he passed the first 19 test. They gave him a name plate for the first time 20 today. Good work. 21 Mark Ross, Doug Quetin, Eric Little. 22 MR. ROSS: Thank you, Chairman Nichols, members 23 of the Board. And life is like a box of chocolates. You 24 don't know what you're going to find. And the European 25 Union found out they didn't have quite the inventory they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 thought they had because of some frothing and some trouble 2 in their market. 3 Well, we at the Bay Area Air Quality management 4 District, my Board of Directors and our staff, feel very 5 strongly about a good inventory and helping the state 6 develop and make AB 32 a success. And so in that spirit 7 of cooperation, I am here to extend our greetings that we 8 would really encourage you to and in fact urge you in the 9 spirit of partnership to include local air districts in 10 the inventory and reporting of greenhouse gas emissions. 11 We have extensive experience over the decades as 12 do the other air districts in collating the data for other 13 pollutants. We feel we are right there pre-disposed to do 14 this job well. We don't have any qualms about it. We 15 have the people in place. I have the utmost confidence in 16 our staff. I can't speak for the other districts. But I 17 think we have one of the best staffs in the country, if 18 not the world. 19 So I would like to urge the Board to consider 20 amend the regulation to include local air districts in the 21 inventory. As Barry Wallerstein had said, the South Coast 22 is going to expand their duties to include carbon 23 inventorying in their scope. And we at the Bay Area Air 24 Quality District will be intending on doing the same. Not 25 as quickly as them, but we will be doing the same with the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 hope it will help CARB and the success of AB 32 in the 2 future. 3 Now, the partnership aspect, as noted in the 4 earlier agenda item, is something very near and dear to 5 us. We've had a good relationship with CARB in the last 6 year. You've helped us with our auditing. You've helped 7 us with a few other items in the last 48 hours, and we 8 really are appreciative of that. So we're looking forward 9 to working with CARB. Hoping we can collaborate with you 10 in a meaningful way. 11 Mr. Hill expressed the heated debate portion that 12 we had yesterday over the this resolution. Not that we 13 don't disagree with CARB's generation direction in this. 14 But we really think that we have a passionate view in the 15 Bay Area of we want to help with the Global Warming 16 Solutions Act. In fact, we were honored that the Governor 17 chose to Bay Area to sign the Act in the Bay Area. We're 18 here in the spirit of cooperation. 19 We put in a neutral card, but it's neutral with a 20 nudge. Didn't feel an opposition card was the feeling of 21 the Board. We are here in the spirit of cooperation. 22 Thank you very much for your time. If there are any 23 questions -- 24 CHAIRPERSON NICHOLS: Doug Quetin, Eric Little, 25 Chuck White. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 MR. QUETIN: Thank you, Madam Chair, members of 2 the Board. Doug Quetin, President of the California Air 3 Pollution Control Officers Association. 4 CAPCOA appreciate the opportunity to comment on 5 this mandatory reporting regulation and recognizes the 6 significance of this agenda item as well as the one that 7 follows setting the greenhouse gas 1990 baseline and the 8 2020 emission limits. 9 We acknowledge and applaud your Board and staff 10 for your work on the difficult task at hand and the tasks 11 ahead to reduces and reverse global warming. 12 This is an historical and heroic effort. Over 13 the past several months, local districts have consistently 14 expressed concern about the proposed mandatory reporting 15 regulation. Generally, we believe this program could be 16 more efficient, the data more accurate, and the program 17 more viable were local air districts to serve directly as 18 the intermediary in collecting and reporting data on the 19 designated stationary sources. 20 We've been operating permitting and enforcement 21 programs and pollutant data reporting systems for the past 22 three decades. Local permitting and enforcement ensure 23 the integrity of the reported pollutant data through the 24 continual district vigilance over stationary sources, 25 including the sources targeted by the regulation you are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 considering today. 2 That being said, earlier this week, the CAPCOA 3 Board of Directors hosted a retreat with Executive Officer 4 Goldstene and his senior staff to discuss our role in 5 ARB's implementation of AB 32, among other issues. 6 Your staff openly reviewed in considerable detail 7 all of the climate change work underway and that expected 8 in the near future. The meeting was especially productive 9 because of the collegial tone James set and his 10 professionalism and general interest and collaborative 11 effort and mutual support. We are very much pleased with 12 his invitation to better define a partnership between ARB 13 and CAPCOA on AB 32 implementation. We are confident that 14 our knowledge and experience will provide added value to 15 your future efforts to reverse global warming through 16 emission reductions and by setting a model for the nation 17 and internationally. Thank you. 18 CHAIRPERSON NICHOLS: Thank you. Apologize for 19 butchering your name. 20 Eric Little, followed by Chuck White and Ann 21 McQueen. 22 MR. LITTLE: Good morning, Madam Chair, members 23 of the Board. 24 I think you'll notice the written comments we 25 submitted today both have two topics involved in them. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 One is this topic. One is the next agenda item. In order 2 to keep us focused here today, I think I will come back on 3 the second agenda item and simply address the topics at 4 hand right now. 5 I'd like to thank the staff for the efforts that 6 they've made in the development of the proposal for 7 mandatory reporting protocols and the recognition of some 8 of our concerns. 9 I was also glad to hear Dr. Sperling this morning 10 discuss the possibility of making some additional changes, 11 because there are some elements in this plan that we 12 believe still need further modification. 13 For example, the recognition that exchange 14 agreements between utilities have a different GHG profile 15 than a simple export of power. 16 Additionally, we do recognize as the presentation 17 pointed out there is a requirement to account for 18 transmission system losses. However, it does not state 19 that it needs to be a one-size-fits-all, such as the seven 20 and a half percent lose factor applied to all imports from 21 the pacific northwest and desert southwest as currently 22 proposed. 23 Furthermore, the staff acknowledges there was not 24 a determination at the point of regulation made yet for 25 the electricity sector. To compensate for this, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 current the current proposal requires the reporting of 2 emission information for various alternative approaches. 3 While Edison understands the needs for this based upon the 4 current conditions, we also recognize that continue to do 5 so after a point of regulation has been determined could 6 result in duplicate or triplicate reporting. For example, 7 as you saw in the presentation, the reporting is required 8 from generation, from a marketer, as well as from a retail 9 provider. While frequently one megawatt of energy that is 10 marketed is sold to a marketer who further sells to a 11 retail provider, in which case the GHG emission with that 12 one megawatt would be reported three times. 13 Therefore, once a point of regulation has been 14 determined, we believe this should be reconsidered and the 15 duplicative reporting should be eliminated. Therefore, we 16 recommend that Board direct staff to revisit its proposal 17 with the intent of eliminating any unnecessary reporting 18 requirements. This would adhere to the intent of AB 32's 19 directive to minimize administrative burden. 20 Thank you very much. 21 CHAIRPERSON NICHOLS: Thank you. Thank you for 22 double siding your comments, too. 23 Okay. Chuck White, Ann McQueen and Gregory 24 Klatt. 25 MR. WHITE: Chuck White. Thank you, Madam Chair, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 members of the Board. Chuck White representing Waste 2 Management. 3 Waste Management was an early supporter of AB 32. 4 We were the first solid waste company to join the 5 California Climate Action Registry. We're working with 6 the solid waste industry group called Solid Waste Industry 7 for Climate Solutions. 8 We've gotten to know your staff very well over 9 the last few months and really had a good working 10 relationship. And I think most of our concerns have been 11 addressed. 12 There are two areas though that we do have 13 continuing concerns. We're not asking you to necessarily 14 change this rule making, but I'm glad to hear you will be 15 revisiting these rules in the future. 16 One of the area of both reporting to CCAR and to 17 the Air Resources Board. AB 32 encourages the Board to 18 rely on CCAR procedures. You've tried to make them as 19 similar as possible, but that still requires two separate 20 reports and possibly other reports to the air districts. 21 Other states like New Mexico and Nevada are developing 22 reporting relying on CCAR or the forming of the Climate 23 Registry. 24 I would urge you to in the future when you come 25 back and look at this, is there a way that California's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 reporting requirement can be made as consistent as 2 possible with the reporting of these other regional and 3 national reporting organizations. 4 One of our other concerns has to do with biogenic 5 emissions. Biogenic versus anthropogenic. Unfortunately, 6 these regulations don't distinguish between biogenic and 7 anthropogenic greenhouse gas emissions. The anthropogenic 8 emissions are basically fossil fuel emissions. Whereas 9 biogenic emission are from the near-term natural carbon 10 cycle. Examples are landfill gas combustion emissions, 11 biogas combustion emissions, biomass and waste to energy, 12 both which be totally biomass or partially biomass, 13 partially fossil fuel, such as plastics and waste. 14 We would like to see that the reporting protocols 15 allow reporters to distinguish their greenhouse gas 16 emission between anthropogenic, fossil fuel, and biogenic 17 near-term carbon cycle emissions. We think you are after 18 the fossil fuel emissions. And in fact to treat them the 19 same runs counter to the Governor's Bioenergy Action Plan, 20 runs counter to the low carbon fuel standards. In the 21 case of the low carbon fuel standard, you're still burning 22 carbon, but good carbon versus bad carbon. It's carbon 23 that comes from ethanol or other types of maybe landfill 24 gas or biogas to displace carbon combustion sources. 25 So what we're asking is as you move forward to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 adopt these rules. And in the future to come back, see 2 how well you can integrate this reporting with other 3 regional reporting like the climate registries, and ask 4 the staff to take a look at differentiating in the 5 reporting framework between anthropogenic emissions of 6 greenhouse gases and biogenic. We think you want to 7 reduce your anthropogenic and want to encourage those 8 types of energy sources that rely on biogenic sources. 9 Right now, they're all mixed together in your 10 reporting framework, all treated one and the same. We 11 don't think that makes sense. We don't think the state of 12 California thinks it makes sense based on the low carbon 13 fuel standard and the Bioenergy Action Plan. When you 14 revisit this rule in a year, I hope you will address that 15 issue. Thank you. 16 CHAIRPERSON NICHOLS: Thank you. 17 Ann McQueen followed by Gregory Klatt and Don 18 Anair. 19 MS. MCQUEEN: Hello. My name is Ann McQueen, and 20 I'm here representing Mitsubishi Cement and National 21 Cement. And I appreciate the opportunity to address the 22 Board. 23 Both of these companies manufacture cement in 24 California. The cement industry has participated actively 25 in regulatory development thus far, including the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 mandatory reporting and emission inventory. At this time, 2 we would like to reiterate some comments previously made 3 because we think these comments are very important and 4 have not yet been addressed. 5 First regarding the scope of the mandatory 6 reporting regulations, we believe that the failure to 7 include the transportation sector, which is the largest 8 single sector contribution to greenhouse gas emissions, in 9 the mandatory reporting regulations will cause a problem 10 when preparing the scoping plan for achieving required 11 reductions. 12 For sectors not subject to mandatory reporting, 13 it will be much more difficult to regulate these sectors. 14 In general, the current mandatory reporting approach will 15 limit the opportunities for reduction measures, aggravate 16 the burden on industrial sources, and ultimately increase 17 the overall costs and corresponding job loss. 18 Second, we believe that the remaining uncertainty 19 in the 1990 emission inventory are significant. For 20 example -- these do not relate specifically to cement, by 21 the way. For example, given that some sectors are still 22 undergoing protocol development, this implies there will 23 be an inherent discrepancy between the 1990 inventory and 24 the reporting for the sectors once reporting is initiated. 25 To address these known discrepancies as well as other PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 uncertainties, we recommend that ARB include provisions 2 for scheduled period review and adjustment of the 1990 3 inventory as new information becomes available. 4 Third, although the development of the 2020 5 projections is at an early stage, it is essential that ARB 6 seek input from all sectors, because the variation in 7 growth rates between sectors and the potential for causing 8 leakage. Specifically, we are concerned that growth 9 projections could in effect become production limits for 10 domestic industry which could eventually result in 11 shifting of greenhouse gas emissions out of state to other 12 jurisdictions that likely have less stringent greenhouse 13 gas standards, if any. 14 Thank you very much for the opportunity to 15 present these comments. 16 CHAIRPERSON NICHOLS: Thank you. 17 And just for planning purposes, we're going to 18 take an 11:30 break for about ten minutes. And then we're 19 going to take a 1:00 lunch break or close there to. Just 20 so people can plan their time accordingly. 21 Gregory Klatt, Don Anair. 22 MR. KLATT: Thank you, Madam Chair, members of 23 the Board. I'm here today on behalf of the Alliance for 24 Retail Energy Markets. 25 Now this is the first time that we've appeared PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 before the Board. Just want to give a brief introduction. 2 If acronym is AREM. Produced arm like your arm. And the 3 members of AREM are electric service providers that 4 provide electricity to many of the businesses that will be 5 affected by the reporting regulations and will themselves 6 as retail providers in the electricity sector being 7 affected by the regulation in terms of mandatory 8 reporting. 9 We still have to decide the point of regulation 10 issue, and that will go to how much further they will be 11 effected directly by the regulations adopted pursuant to 12 AB 32. 13 AREM was involved in the process before the 14 Public Utilities Commission and the Energy Commission put 15 together the proposed regulations and would look to 16 commend staff of both those organizations and staff of 17 this agency for the remarkable job they've done in putting 18 this together in a very short amount of time, going 19 through a lot of very technical issues, and just doing an 20 exceptional job. 21 I think the gentleman from Chevron used all the 22 good adjectives, so I'll leave it at that and say thank 23 you for a job well done. 24 We still have -- AREM generally supports the 25 proposed regulations. We have one fairly technical issue PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 that we would like staff to address that has to do with 2 the attribution of default emissions to new contracts with 3 existing resources. We believe that that requirement is 4 really intended to get at contract shuffling with large 5 hydro -- potential for contract shuffling in terms of 6 contracting with large hydro and nuclear facilities. 7 And our concern is that it will interfere with 8 compliance with the State's resource adequacy requirements 9 by smaller retail providers such as the electric service 10 providers and our members of AREM. And we would suggest 11 that this requirement or the default emission attribution 12 not include new contracts with existing resources that are 13 entered into for purposes of meeting resource adequacy 14 requirements. And we go into that in more detail in our 15 comments. 16 The second issue that we have some concern about 17 is confidentiality. We appreciate the reference in the 18 regulations to confidentiality. And there's a process 19 there for reporting entities to request confidentiality. 20 We think that basically covers it. 21 We would suggest there be a more specific 22 reference to the trade secret provision of the Public 23 Records Act in the regulations. And we would also request 24 that -- and this may be an issue that would be addressed 25 once actually reporting is done. But we would suggest PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 that some of the information that is reporting is very 2 sensitive, and we request that type of information be made 3 public on an aggregated basis only. Thank you. 4 CHAIRPERSON NICHOLS: Thank you. 5 I'm thinking that we need a system to either 6 deduct all time spent complimenting the ARB staff for 7 their good work or just kind of do a ditto. What do you 8 think? 9 BOARD MEMBER SPERLING: Maybe we can have a 10 credit trading system. 11 CHAIRPERSON NICHOLS: A credit trading system for 12 how long and extensive the comments can be. 13 EXECUTIVE OFFICER GOLDSTENE: We do like hearing 14 it. 15 CHAIRPERSON NICHOLS: We know. That's why we let 16 it go on. 17 MR. ANAIR: Good morning, Madam Chair AND members 18 of the Board. My name is Don Anair. I'm with the Union 19 of Concerned Scientists. And let me just start off by 20 thanking staff for what a wonderful job they did with this 21 regulation. 22 So now my timer starts. 23 I just want to make some brief comments. We 24 support the mandatory reporting requirements that are 25 before you today. Believe the accurate reporting of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 climate change emissions is really the foundation of AB 32 2 and successful implementation and achieving our climate 3 change goals. 4 The one request I have, and reiterating the 5 request that Ms. Wang made earlier, is to move forward the 6 full compliance date with verification by 2010. We 7 believe this is necessary to have that data prior to the 8 2012 date of implementing the regulations and enforcing 9 the regulations. We think that's a necessary requirement. 10 We also believe that it's doable. It will provide one to 11 two years to build the infrastructure reporting and 12 verification and provide the data that we need. 13 There's other comments we made in our written -- 14 we submitted in our written comments. I won't go into 15 those now. I think those can be addressed as we move 16 forward and further develop the reporting requirements 17 over the next months and years to come. Thank you very 18 much. 19 CHAIRPERSON NICHOLS: Thank you. 20 Tim O'Connor followed by Derek Markolf and Taylor 21 Miller. 22 MR. O'CONNOR: Good morning, Madam Chair, members 23 of the Board. My name is Tim O'Connor. I'm here 24 representing Environmental Defense. 25 First, I would also like to say thank you to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 CARB staff. We've been active throughout this process 2 participating in the work groups and appreciate the 3 complexity and the thoroughness of the mandatory reporting 4 regulation and think it is a great step towards meeting 5 the AB 32 goals of reducing California's greenhouse gas 6 emissions. 7 I'd like to touch on a couple of topics where we 8 feel the mandatory reporting regulation could go a little 9 bit further. 10 First, I'd like to echo some of the comments that 11 full compliance should indeed be moved forward and that 12 there is really at this point no reason to delay the full 13 verification activities that are necessary in order to 14 make sure that the emissions reporting is accurate. 15 CARB intends to certify approximately 150 16 verifiers per year by increasing the number of facilities 17 that will be required to have their emissions verified. 18 There would be approximately 300 more facilities. That is 19 about one verification per verifier. We feel this is 20 completely doable in the 2010 timeline. 21 Second, we would like to see in the next year the 22 expansion of the mandatory reporting regulation to a 23 number of areas where the staff has agreed and commented 24 that it would indeed go. We would like to see 25 consideration of lowering the mandatory reporting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 threshold to 10,000 metric tons. Also like to see 2 inclusion of landfills in terms of their fugitive 3 emission, natural gas providers, oil and gas extraction 4 facilities in terms of their fugitive emission, as well as 5 the transportation sector, at least included in the 6 mandatory reporting regulation staff report or in some 7 consideration documents. 8 Finally, in assessment of the staff's proposal to 9 increase the de minimis reporting threshold to 20,000 10 metric tons, we'd like to see some assessment of what 11 that's going to include. We don't know yet in terms of 12 like what streams would be following underneath the de 13 minimis reporting threshold. And in order to accurately 14 and have an educated comment letter on the expansion of 15 that to a higher threshold, we'd like to see maybe just an 16 assessment of what the expected streams are. If indeed 17 all the refinery waste water emissions fall underneath 18 this, there may not be a need for a waste water fugitive 19 emissions reporting scheme within the mandatory reporting 20 regulation. 21 And in conclusion, thank you very much. And we 22 strongly support the adoption of the mandatory reporting 23 regulation by the Board. Thank you. 24 CHAIRPERSON NICHOLS: Thank you. 25 Derek Markolf, Taylor Miller, Darrell Clarke. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 MR. MARKOLF: Hello, Madam Chair and Board. 2 Thank you. My name is Derek Markolf with the California 3 Climate Action Registry. And we are here in support of 4 the mandatory reporting regs that are before you. 5 First of all, I'd like to strongly commend that 6 staff of ARB and the sister agencies on the development of 7 these regulations. I guess those could be allocation for 8 trading comments later. 9 So the California Climate Action Registry was 10 formed by legislation at the State level in 2000 as a 11 nonprofit public/private partnership to develop greenhouse 12 gas accounting standards and protocols. And we now have 13 over 300 member organizations, many of which the ARB staff 14 have become to know by first name over the last year or 15 so. And we're very pleased to see that the lessons 16 learned through the voluntary reporting of greenhouse gas 17 inventories by our members to our organization have very 18 much so helped to inform this rule development process. 19 And so that's kind of a commending to our members as well. 20 They've become empowered and have been active and informed 21 stakeholders through this whole process. 22 And we're also pleased that the ARB staff have 23 consulted with the California Climate Action Registry 24 through the whole development process here. And the 25 registry's standards and protocols are well reflected in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 the regulation that is before you, especially the general 2 stationary combustion, cement, co-generation, and 3 verification portions of the regulation. 4 In general, there are some differences. And for 5 the most part, those differences are due to the fact that 6 our protocols were put together for voluntary reporting 7 purposes. And the regulations that are before you now are 8 obviously mandatory and therefore have a lot more rigor 9 built into them. 10 So sectors in particular where the regulations do 11 differ some are -- or more than others I guess -- not some 12 doesn't say it well -- but are the refinery section and 13 the power sector. And as Rajinder stated, the Registry 14 protocols simply don't have guidance for the refinery 15 sector. So ARB staff has done a wonderful job of working 16 with stakeholders to put together a very rigorous 17 accounting structure for the refining sector. 18 Also, the power utility protocol that the 19 Registry has developed was developed through a very 20 comprehensive stakeholder process. It was completed in 21 2005, and it's a version 1.0 that's been out on the street 22 for a couple years and being used. So our protocols being 23 living documents, it is time for them to be updated. 24 Hence, the large update. 25 So we look forward to continuing to work with you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 guys on the development of future programs under AB 32. 2 Thank you. 3 CHAIRPERSON NICHOLS: Thank you. Thanks for all 4 that you contributed to this process and also for that 5 explanation of where there are differences, why that has 6 come to be. 7 Taylor Miller, Darrell Clarke, Bonnie Holmes-Gen. 8 MR. MILLER: Good morning, members of the Board. 9 I'll try to be very brief. 10 I have to thank staff, sorry, particularly Pam 11 Bermitch for our sector. I'm with Sempra Energy. And 12 STG&E is a member of CCAR and has been reporting to them. 13 We are in support of the regulation that's been proposed. 14 We did submit comments in mid November. One of those was 15 accepted, which we certainly appreciate. One other was 16 not. And we continue to work with staff. It has to do 17 with how to deal with SF 6 emissions which involve 18 numerous individual units. So it presents a bit of a 19 challenge for us in terms of verification. 20 I would like to just take a quick second and 21 reiterate support for a comment made earlier by another 22 speaker to try to find time to help us deal with the CEQA 23 aspects of AB 32. I think all parties involved on 24 whatever part of the spectrum could use more certainty on 25 how to deal with that. So I'd like to put in a plug in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 for that. 2 With that, I'll close. See you on the inventory 3 item. 4 CHAIRPERSON NICHOLS: All right. Great. Thank 5 you. 6 MR. CLARKE: I'm Darrell Clarke with the Sierra 7 Club, and particularly the Angeles Chapter Executive 8 Committee and the California Global Warming and Energy 9 Committee. 10 I'd like to take a step back and compliment that 11 we're here doing this right now. It seems like others are 12 still debating the whether in Washington D.C. and Bali, 13 and we've moved on to how. I think that's fabulous. 14 And I do want to compliment staff, in particular 15 Chuck Shulock and his team. I attended the staff workshop 16 last week and felt it was in very good hands, recognizing 17 what a big process their setting out to begin the 18 transparency, the many stakeholders, really going off to 19 what hasn't been done before. And I thought they did a 20 great job of kicking that off and listening to 21 stakeholders on all sides. 22 And beyond that, I'm here to underscore we've had 23 joint letters from the different environmental groups that 24 have already been described to you. So I will stop there. 25 CHAIRPERSON NICHOLS: We have two more witnesses PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 before we come to the end of the list. So I think we'll 2 try to take them both and then take our break. 3 Bonnie Holmes-Gen and then Reheis-Boyd. 4 MS. HOLMES-GEN: Thank you, Chairwoman Nichols. 5 Bonnie Holmes-Gen with the American Lung Association of 6 California. 7 And the American Lung Association of California 8 of course supports strong and rapid efforts to implement 9 AB 32 because of our concern about the lung illnesses and 10 deaths associated with air pollution and global warming. 11 We have signed on to the joint letter that you 12 heard about from statewide environmental health 13 organization. Our three quick points are we are 14 supporting the regulation of before you. We do think this 15 is a critical first step in AB 32 implementation. We are 16 asking you to make a modest but significant change in the 17 regulation by requiring entities that are subject to the 18 triennial verification to fully comply with the mandatory 19 reporting requirements by 2010. We think this would add a 20 significant strengthening component to the package. We 21 have this reporting information earlier. Companies would 22 have accurate information early to plan their emission 23 reduction efforts and provide a strong foundation for 24 moving forward into the regulatory phrase in 2012. 25 Secondly, we do believe that the air districts PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 can play a valuable role in the reporting of greenhouse 2 gas emissions, and we do urge you to continue working with 3 the air districts to find ways to incorporate their 4 expertise in the monitoring of local facility emissions 5 and just to generally ensure the districts are well 6 integrated into this process. 7 I know you've discussed that. We want to express 8 our support for that effort. 9 And we also want to express our support for ARB 10 striving to achieve transparency of emissions reporting 11 methods and data as much as possible as we move forward 12 into this important next step. 13 So those are our basic comments. We thank you 14 for the great work you've done on this, and we look 15 forward to continuing to work with you. 16 CHAIRPERSON NICHOLS: Thank you. 17 Ms. Reheis-Boyd. 18 MS. REHEIS-BOYD: Wow, the closer. Good day, 19 Chairwoman Nichols, member of the Board. Cathy 20 Reheis-Boyd, Chief Operating Officer, Western States 21 Petroleum Association. 22 I was in Calgary yesterday. And I was really 23 glad when I handed my passport to the officer in customs 24 and he asked me what was there for and I said to talk 25 about climate change. And he said, "Well, thank goodness PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 they call it climate change instead of global warming 2 because it's been snowing for two weeks." And I thought 3 so there you go. We got the terminology right. 4 But it's an international dialogue. And I really 5 wanted to compliment the staff and the Board for 6 incorporating that concept into these regulations because 7 you are I think really establishing the linkage, which I 8 think is really, really important as we go forward. 9 We're here to support the proposed regulation. 10 Again, I hate to say this, but I want -- I don't want to 11 be the only one that doesn't compliment staff. So I'm 12 complimenting the staff. The outreach has been amazing. 13 It really has. I mean, how they have worked with the 14 stakeholders learning about refineries and oil production 15 facilities and how they work is very, very difficult. And 16 they really took the time to do that, which we really 17 appreciate. 18 It's a well designed program. It's got all of 19 the right requirements: The compliance, the reporting 20 requirements, the recordkeeping. It's very, very good. 21 So we support also the staff's proposal on the role of our 22 friends at the district as an option for verifiers in this 23 process. And we also support the proposal that will 24 address through the 15-day package any of these unresolved 25 issues that we have. And we're very willing to work with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 that. And also to have a process where if issues come up 2 that you can address those with the staff and the 3 Executive Officer as we move forward. 4 And then lastly, I also would just like to 5 comment on the issue of CEQA and encourage you all to take 6 that opportunity every chance you can. You have the broad 7 authority under AB 32. You have a broad authority under 8 CEQA and to make that linkage early on in this regulation, 9 in the next one we're going to talk about, and every one 10 from then I think will help provide the interim regulatory 11 certainty we use, because we have all have CEQA 12 guidelines. We know those are going to be developed. But 13 those are probably two years out. So I think that's 14 really, really important that CEQA be first and foremost 15 on our minds as we go forward. 16 And again, thank you very much for all you've 17 done on this regulation and look forward to commenting of 18 the next one. 19 CHAIRPERSON NICHOLS: Thank you. 20 I want to command the staff for having done a 21 terrific job of getting us to 11:30 exactly on the dot in 22 time for our break. And honestly to echo all the good 23 things that have been said. But it is now time to take a 24 break. 25 It's freezing in this room. I can't be the only PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 person who's cold. We need to do something to raise the 2 heat a little bit, please. But we'll take a ten-minute 3 break and let's try to make it ten minutes and we'll be 4 back to discuss this. 5 (Thereupon a recess was taken.) 6 CHAIRPERSON NICHOLS: Call this meeting back to 7 order, please. If we can get people back into their 8 seats. 9 What I'd like to do now is to turn to the staff. 10 And I know many of us were taking notes during the 11 testimony and had questions that we wanted to have 12 followed up on. And so what I'd like to use this time for 13 now is to have the staff respond to those points that 14 seemed like they needed some clarification or we wanted to 15 know why you did what you did. So if that's an acceptable 16 procedure for other folks, maybe I'll just start with a 17 couple of the key points that I heard and then others will 18 add things that seemed important to them that I may have 19 left off. 20 First, the question about why we couldn't roll 21 the date for verification for all the data to be verified 22 to the end of 2010 would be on my list. 23 And then another that came up that was kind of a 24 broader issue was the access to calculation data that went 25 into the reporting information and how it could be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 possible or if it would be possible for members of the 2 public who have an interest in following this to get 3 access to that data. 4 I think we've talked a lot about the relationship 5 with the districts and what their role would be. But 6 certainly one of the benefits of having a combined 7 reporting system would be easier access on the part of the 8 public to the data if people don't have computer access to 9 everything that people could at least go to the district 10 offices rather than having to come to Sacramento or El 11 Monte to get a hold of it. So I think that was a valuable 12 point that was made. 13 The question was raised about why the 14 transportation sector wasn't included in mandatory 15 reporting on the first go-round. I think I know the 16 answer, but I think we should be clear about that. 17 And then there was several technical questions 18 which I think probably are going to end up being addressed 19 during the 15-day comment period, such as the issue about 20 how you attribute the hydrogen plants and how you deal 21 with the default emissions from the hydro and nuclear 22 plants. Both of those seem to me of some importance to 23 the utility industry and to the refining industry. But I 24 think it would be a good idea if we could at least have 25 some comments on those. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 So those are my questions. Maybe others want to 2 add other questions to the list and we can sort of go 3 through them all one by one. I'll start with you. 4 BOARD MEMBER D'ADAMO: I would just add to that 5 differentiating between anthropogenic and biogenic 6 emissions, the point raised by Chuck White from Waste 7 Management. 8 SUPERVISOR HILL: Tony Fischer from Nummi raised 9 the question that AB 32 really doesn't apply in reporting 10 to end users. It's the upstream that really should be 11 checked. I guess that's more of a legal interpretation, 12 but I would like to get some clarification on that. 13 CHAIRPERSON NICHOLS: Okay. Any other points 14 that people want? 15 BOARD MEMBER CASE: I don't know if it has 16 similarity, but maybe staff comment on a couple of 17 comments on duplication of reporting and how that ties in 18 with the local air districts and what are the benefits and 19 problems going either direction. 20 CHAIRPERSON NICHOLS: Right. 21 BOARD MEMBER SPERLING: And playing off of that 22 hydrogen question, I think the real question there is how 23 does the responsibility for reporting relate to the point 24 of regulation? In other words, if hydrogen in this case 25 is kept separate from the refinery, when we adopt a cap on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 the refineries or low carbon fuel standard also, does it 2 set any precedent or create any problems when we designate 3 point of regulation? 4 CHAIRPERSON NICHOLS: Right. Okay. So could we 5 just ask you to run through those? 6 EXECUTIVE OFFICER GOLDSTENE: Yeah. Ms. Terry 7 will begin. 8 DEPUTY EXECUTIVE OFFICER TERRY: I'll start with 9 the easy ones and give staff the tough ones. 10 The easy one is on the verification issue and the 11 acceleration. And our initial proposal was simply based 12 on a resource issue. And we really wanted to be sure that 13 there would be adequate number of verifiers for the most 14 significant sources. So we've proposed staggering it 15 initially. 16 We've since looked at it, and we are going to 17 gear up this program. And we expect to have adequate 18 number of verifiers. So if the Board so desires, we are 19 very supportive of making that change. 20 CHAIRPERSON NICHOLS: Thank you. 21 DEPUTY EXECUTIVE OFFICER TERRY: In terms of the 22 public access to data, this is a really important one to 23 clarify. This is an extremely comprehensive regulation. 24 The 130 pages or so of very prescriptive data that must be 25 provided to the Air Resources Board. Ever piece of that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 data that is reported to the Air Resources Board is public 2 information with the exception of those things that fall 3 under the very specific trade secret provision of state 4 law. And our attornies can speak to that. And we will 5 make every effort in our online reporting. That is will 6 facilitate reporting by those subject to the regulation. 7 But at the same time, we are going to focus on an online 8 system the public can have access to the data, provide 9 user-friendly reports, as well the underlying data that is 10 reported to ARB is all public information without 11 exception. 12 CHAIRPERSON NICHOLS: That's really good to hear. 13 Now, are you saying then that the tool has not actually 14 been developed yet? 15 DEPUTY EXECUTIVE OFFICER TERRY: It has not been 16 developed yet. 17 CHIEF COUNSEL JENNINGS: Just to clarify that. 18 All the emissions data is public. But data used to 19 calculate the emission data can be withheld if it 20 qualifies as trade secret. 21 CHAIRPERSON NICHOLS: How did we determine 22 whether it does qualify as a trade secret? How will that 23 be determined? 24 CHIEF COUNSEL JENNINGS: Under our regulations, 25 people designate it as trade secret. And if there is a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 request for disclosure of it, we ask the company to 2 demonstrate that it meets all the criteria for trade 3 secret. 4 CHAIRPERSON NICHOLS: So there's a mini contested 5 hearing or proceeding on this? 6 CHIEF COUNSEL JENNINGS: Under our regulations, 7 yes, there's a process of evaluating whether it qualifies 8 or not. 9 CHAIRPERSON NICHOLS: Okay. 10 BOARD MEMBER BERG: Madam Chair, may I ask a 11 quick question? Is this type of reporting any different 12 from other emissions reporting such as the TRI Form R or 13 the toxic hot spot? Are we following the same type of 14 transparency? 15 DEPUTY EXECUTIVE OFFICER TERRY: In terms of the 16 data availability, yes. You're not talking about the 17 reporting tool, but the access piece? 18 BOARD MEMBER BERG: Correct. I'm talking about 19 the access piece. 20 DEPUTY EXECUTIVE OFFICER TERRY: Right. 21 CHAIRPERSON NICHOLS: Okay. Continuing on. 22 DEPUTY EXECUTIVE OFFICER TERRY: Supervisor Case 23 mentioned the duplication issue relative to air districts, 24 and I just wanted to assure the Board that we really do 25 intend to work closely with the air districts on this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 reporting tool issue. 2 Now, facilities are subject to federal law, State 3 law, and local requirements. And so when we developed 4 this tool, one of the rationales is to facilitate their 5 reporting processes for these multiple obligations. So we 6 think as we develop these reporting tools in conjunction 7 with districts, we will be able to develop tools that will 8 help meet both their district reporting needs as well as 9 their State reporting needs. And I have all confidence 10 that the technical staff can come up with something that 11 does that. 12 CHAIRPERSON NICHOLS: Now, as of today, 13 individual districts have their own reporting 14 requirements. They're subject to our oversight and 15 federal oversight if the sources are large enough to 16 comply to be subject to Title 5. But I assume there's 17 quite a bit of variation on a district to district basis. 18 DEPUTY EXECUTIVE OFFICER TERRY: There is. And 19 there's also a variation in terms of district resources 20 among the 35 air districts. So some of the larger 21 districts are already on board, as Dr. Wallerstein talked 22 about and the Bay Area in particular. 23 What we have done is made an offer to the smaller 24 districts that we will develop and pay for development of 25 an interface computer tool that will allow their systems PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 to be linked to ours as a way of ensuring that the 2 information that comes directly to us from regulated 3 facilities can be transferred back to the district so that 4 they can reconcile information coming to the state, for 5 example, fuel consumption. This is a check on the 6 existing criteria pollutant data bases. 7 CHAIRPERSON NICHOLS: So I guess in the long run, 8 although this isn't an objective of the rule, one of the 9 benefits that could accrue from having the districts 10 involved in developing this statewide tool would be it 11 could drive us in the direction of more consistent 12 reporting protocols throughout the state for everybody, 13 which would be a big benefit not only for those sources 14 that operate in more than one district, but also for 15 citizen organizations that are looking to get comparable 16 data out of the system also. 17 DEPUTY EXECUTIVE OFFICER TERRY: That's how we 18 see it. 19 BOARD MEMBER CASE: And Madam Chairman, maybe we 20 should suggest through CAPCOA that they look at if there's 21 an opportunity to work together, pool their resources 22 together to do some systems that would be usable across 23 the board and then have it interface with the ARB data 24 systems, it could really improve our system of efficiency 25 and also be very helpful to those that are in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 regulated community. 2 CHAIRPERSON NICHOLS: Right. 3 DEPUTY EXECUTIVE OFFICER TERRY: On the issue of 4 transportation sector, that comment came early in the 5 process and it's such an obvious one that the 6 transportation sector is key to the solution from a 7 programmatic standpoint. 8 This mandatory reporting is focused on 9 facilities. Of course, in the next item, you will hear 10 about the inventory and transportation will be prominent 11 in there. So it's certainly not lost in terms of looking 12 at where the emissions lie. 13 The other and important issue relative to the 14 hydrogen plants was the point of regulation issue. And 15 again it's sort of the cart before the horse that this 16 regulation in staff's view does not set any precedent in 17 terms of the actual program development. But it is 18 intended to meet the early statutory requirements of AB 32 19 relative to reporting. 20 And with that -- 21 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 22 MURCHISON: If I can make a clarification on the hydrogen 23 plants, too. There was some concern about whether or not 24 hydrogen plants associated with refineries would be 25 separated, because we require the operational control to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 report the emissions. Where a hydrogen plant is under the 2 operational control of refineries, it does come in with 3 refinery emissions. It's only in the case where it's 4 separated and operated under somebody else that it's 5 reported separately. 6 CHAIRPERSON NICHOLS: So if there were a hydrogen 7 plant -- and I don't know if this is actually a real world 8 situation. But if a refiner had invited someone onto 9 their premises which was a separate company or had set up 10 a separate company to operate the hydrogen plant, that 11 hydrogen plant would not be treated as part of the same 12 facility? 13 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 14 MURCHISON: That's correct. 15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: There are 16 merchant hydrogen plants, and they serve more than one 17 customer. You have to apportion the supply to various 18 customers. 19 And also on transportation fuels, accounting for 20 the fuels and doing reporting is going to be intensive 21 part of the low carbon fuel standard and that regulation, 22 because we're going to have to go into great detail of how 23 we determine what the various emissions are associated 24 with all of the different transportation fuels. So we'll 25 be addressing that issue next year as part of that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 regulation. 2 CHAIRPERSON NICHOLS: Well, just to push this a 3 little bit further though, because I'm sympathetic to the 4 point that was made by CBE. Is there a way in which this 5 hydrogen plant's emissions would, in effect, escape 6 reporting or whereby an interested community group would 7 be unable to find out what was being emitted because of 8 this bifurcation? I understand the rational for doing it 9 that way. There is a rational for doing it that way. 10 But the question is, what is the impact of that 11 going to be in terms of people's actually being able to 12 figure out what's coming at them, you know, at the fence 13 line level. Understanding that CO2 itself is not a 14 localized pollutant, but they're trying to figure out 15 what's going on at the local level. 16 DEPUTY EXECUTIVE OFFICER TERRY: And that's 17 fundamental to the design of the regulation which is 18 facility based. So I think the more pertinent point is 19 how we deal with it in the regulatory phrase. 20 But in terms of the emissions, it really has no 21 impact. The requirement is identical. They can go down 22 to the unit level of these facilities whether they're on 23 site at a refinery or off. 24 CHAIRPERSON NICHOLS: So if a facility is big 25 enough to be within the scope of this rule at all, it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 going to be uncovered. 2 DEPUTY EXECUTIVE OFFICER TERRY: I'm going to 3 turn it back to staff. There were a number of technical 4 questions on the power sector perhaps. I think Mary had a 5 couple there. 6 On the biogenic, just a quick clarification. The 7 bottom line is on landfills, that is an early action item, 8 and there's a separate process going on to look at 9 reductions. And as part of that, the reporting issue will 10 be addressed in terms of methane. So there is no 11 requirement to report methane as part of this regulation 12 that's being dealt with in a parallel process. The only 13 thing landfills will report now going forward are their 14 combustion emissions. 15 BOARD MEMBER SPERLING: Could I add to that? You 16 know, it just points out the fact that we have to be very 17 careful in doing good life cycle analysis as we develop 18 the other tools. You know, because it all comes down to 19 how that -- where that carbon or methane came from. So I 20 think that's the real lesson there. Probably just leave 21 it at that. 22 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 23 You're took all the easy ones. I'm going down through my 24 list. You answered the biogenic anthropogenic. 25 The next question I had was from Mr. Miller at PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 Sempra about the sulfur hexafluoride and combining those 2 emissions. And that is done as part of our modifications 3 that we're bringing to the Board today. 4 And I think the other one we had was from Greg 5 Klatt. This is regarding the default of emission factors 6 for new contracts. And the power sector -- and correct 7 me, Doug, on this one -- is part of our recommendations 8 now are based on the recommendation we receive from Public 9 Utilities Commission and CEC and their process. That is 10 an ongoing process too as they move ahead and especially 11 as they move ahead into the regulatory sphere itself. So 12 that might be one that ARB and the staff from those 13 agencies work on. 14 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 15 MURCHISON: And then if I could, I'll jump in there, too. 16 We had a comment from Tony Fischer, and this is regarding 17 the requiring facilities to report their indirect energy 18 usages. And we did that because AB 32 is clear we need to 19 account for all the electricity consumed in the state. 20 Even though we are requiring retail providers to report, 21 we thought it was important to clearly understand the 22 footprint at each individual facility and what they're 23 responsible in terms of not only their process and 24 combustion, but their activities as well. And that would 25 involve the indirect energy use. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 And we think it's also important as we move 2 forward in looking at ways of reducing those footprints in 3 our overall greenhouse gas obligation, we look at things 4 like energy efficiency that it's important to know what 5 individual companies are using and how we might address 6 that from an efficiency perspective. 7 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 8 And Mr. Little from Southern California Edison mentioned 9 that alternative approaches for reporting. As we move 10 forward in the regulatory program, this is for power. As 11 that adapts as the regulatory agencies get involved that 12 our reporting approach adapt as well. That's certainly 13 what we're planning to do. I think we might have 14 mentioned it in our presentation, but it's definitely that 15 when we get better indications of what happens with the 16 Public Utilities CEC recommendations and ARB as we move 17 ahead, we'll adapt our reporting program to that. 18 Mr. Wallerstein talked about bringing auditing 19 plan to the Board. And definitely when we come back next 20 year we can do that. But that's for the verification. 21 I'm going through my list, and I think that's 22 just about all of it. 23 CHAIRPERSON NICHOLS: Are there any questions? 24 HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE: 25 The de minimis question. What might be left out. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 CHAIRPERSON NICHOLS: To detract that. I think 2 this was really a request that we report on that issue. 3 CLIMATE CHANGE REPORTING SECTION MANAGER 4 THOMPSON: Yes. Tim O'Connor raised that question and we 5 indeed will sit with him and try to explain what the 6 impact is. We do think it's quite minimal. I want to 7 emphasize de minimis emissions are indeed reported 8 emissions. This is essentially a mechanism by which 9 facilities are able to use alternative means to calculate 10 those emissions. And we think the impact will not have 11 much bearing on the data that we receive. 12 DEPUTY EXECUTIVE OFFICER TERRY: But we will 13 track the information and report back. 14 CHAIRPERSON NICHOLS: All right. 15 Yes. Ms. Berg. 16 BOARD MEMBER BERG: If staff could just comment 17 on the duplicative reporting up and down the supply chain. 18 And I understand this first year will be our pilot year. 19 But how do we plan on identifying those things and 20 simplifying as we go along? 21 PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF 22 MURCHISON: We developed our reporting regulations for the 23 power sector based on recommendations from the California 24 Public Utilities Commission and the California Energy 25 Commission. But we recognize that we are requiring -- we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 are collecting duplicative information. 2 As we move forward in the program and better 3 defined where the point of regulation will be in the power 4 sector, then we agree it makes perfect sense to come back 5 and amend this regulation and focus just on the 6 information that's needed to support that. 7 BOARD MEMBER BERG: Thank you very much. 8 CHAIRPERSON NICHOLS: Okay. If there are no 9 further questions by the Board members, I think it's time 10 to bring this to a conclusion. Staff want do make any 11 final comments? Closing comments? 12 EXECUTIVE OFFICER GOLDSTENE: No. 13 CHAIRPERSON NICHOLS: Good. Okay. I'm happy to 14 entertain a resolution. Before we do, I think because of 15 the regulatory nature of the item we need to disclose any 16 ex parte communications that we may have had. So people 17 can look at their folders and their notes. 18 I'll start with mine. I had a conversation by 19 phone. I was on the phone with Elroy Garcia and Casey 20 Bishop, and that repeated the substance of what we heard 21 here. 22 And my notes show a meeting with Devra Wang of 23 NRDC on November 20th. I cannot actually remember that we 24 had that meeting. But if we did, I'm sure it didn't 25 differ materially from what she testified to here today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 We'll start down at this end. 2 BOARD MEMBER BERG: Thank you, Madam Chair. I'm 3 glad I'm not the only one as I look over my list going, 4 huh. 5 I just have one phone call with Cathy 6 Reheis-Boyd, and that was on December 4th. And she is 7 from the Western States Petroleum Association. And our 8 conversation mirrored the testimony today. 9 BOARD MEMBER D'ADAMO: I had a telephone 10 conference call with Diane Bailey, Devra Wang, NRDC; John 11 Kaltenstein, Friends of the Earth. And the discussion was 12 consistent with the testimony they presented today. 13 And then on December 5th, I had a conference 14 call, and my notes don't accurately reflect all the 15 individuals that participated in the call. So I'm going 16 to just go with what I recall. Elroy Garcia, Western 17 States Petroleum; Casey Bishop with Chevron. And then 18 there were two other individuals, and they raised the 19 concern regarding CEQA that Ms. Reheis-Boyd included in 20 her testimony today. 21 SUPERVISOR HILL: Madam Chair, on December 5th, I 22 had a conversation telephone conversation with Tony 23 Fischer from Nummi. And his conversation was consistent 24 with his testimony today. 25 And I may have had a conversation with a number PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 of -- Diane Bailey and Devra Wang over this issue. It may 2 have been November the 26th. But I don't see it here. We 3 were discussing other issues, and it would have been 4 consistent with the testimony today. 5 BOARD MEMBER CASE: On November 28th, I had a 6 conversation with several folks over three agenda items, 7 but this item was included in my -- it was a 8 teleconference call with Bonnie Holmes-Gen with American 9 Lung Association; Devra Wang with NRDC; John Kaltenstein 10 Friends of the Environment; Rupal Patel, the Communities 11 for Clean Ports -- excuse me. That's on the other item. 12 And Don Anair with the Union of Concerned Scientists. And 13 they just briefly commented consistent with today's 14 testimony. 15 CHAIRPERSON NICHOLS: Any others? Okay. 16 BOARD MEMBER HILL: I'd like to move the 17 resolution, if I may, with the one change of the 18 verification would begin in 2010 for all reportable 19 sources. 20 BOARD MEMBER CASE: Second. 21 CHAIRPERSON NICHOLS: It's been moved and 22 seconded. 23 I sense that we probably have a unanimous vote 24 here. Are there any dissenters? 25 Very good. Regulation is adopted. Thank you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 very much. This is really a great start. 2 I imagine there's going to be a shift of cast of 3 characters here before we move to the next item. Do we 4 need a minute to sort things out? 5 We're going to get started on the 1990 statewide 6 greenhouse gas emissions level and 2020 emissions limit. 7 So more AB 32. 8 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 9 Nichols. 10 Staff will now present a proposed 2020 greenhouse 11 gas emission limit and describe the technical basis for 12 how they got there. 13 Under AB 32, the 2020 limit must be set equal to 14 California's 1990 emissions as determined by the Board. 15 In developing the 19190 emission level, staff completed a 16 comprehensive review of the statewide emissions inventory 17 initially developed by the California Energy Commission. 18 As a result of this review, several updates and 19 refinements have been made. Staff will continue the 20 inventory improvement process as AB 32 implementation 21 proceeds. Jamesine Rogers from the staff will make the 22 presentation. 23 (Thereupon an overhead presentation was 24 presented as follows.) 25 MS. ROGERS: Good afternoon, Chairman Nichols and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 members of the Board. My name is Jamesine Rogers, and I 2 will be presenting this staff's proposed for establishing 3 the 1990 emissions level and the 2020 emissions limit as 4 required by the Global Warming Solutions Act of 2006. 5 --o0o-- 6 MS. ROGERS: Here is a overview of my 7 presentation today. First, I will briefly summarize the 8 statutory requirements of the Act, often referred to as AB 9 32, as it pertains to the 1990 emissions level and 2020 10 emissions limit. 11 Then I describe how we determined the 1990 12 emissions level and what improvements we made. 13 I will also talk about the preliminary 2020 14 emission projection to provide some context for you. 15 The difference between the emissions limit that 16 you are considering today and the 2020 projected emission 17 is the amount of greenhouse gas reductions needed to 18 achieve the 2020 limit. 19 I will also discuss key comments and issues 20 raised by stakeholders during the development of the 1990 21 emissions level. 22 Finally, I will provide our recommendation for 23 the statewide 2020 emissions limit based on the 1990 24 level. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 MS. ROGERS: AB 32 requires that the Air 2 Resources Board determine the 1990 emission level using 3 the best available scientific, technological, and economic 4 information. 5 The 1990 level is the total amount of greenhouse 6 gases emitted statewide in 1990 and is equivalent to the 7 emissions limit that must be achieved by the year 2020. 8 The Act states that the 2020 limit will remain in 9 effect unless amended by the Board. We will only bring it 10 back to the Board if there is a change that significantly 11 alters the 1990 level. 12 --o0o-- 13 MS. ROGERS: You have seen this slide in previous 14 AB 32 presentations. It shows the sequence of 15 implementation milestones for AB 32. 16 The action we are addressing today is highlighted 17 in yellow. The Act requires that the Air Resources Board 18 determine the 1990 emissions level and approve the 2020 19 limit by January 1, 2008. 20 Over the next year, ARB staff will be developing 21 a scoping plan that identifies the mix of measures and 22 mechanisms needed to reduce greenhouse gas emissions to 23 the 2020 limit. 24 It will be brought before this Board in November 25 2008. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 --o0o-- 2 MS. ROGERS: I will now discuss how we developed 3 the 1990 emissions level. 4 --o0o-- 5 MS. ROGERS: As I said earlier, the 1990 6 emissions level is based on the emissions of greenhouse 7 gases or the emissions inventory. 8 In estimating the 1990 inventory, we included all 9 six Kioto gases: Carbon dioxide, methane, nitrous oxide, 10 perfluorocarbons, hydrofluorocarbons, and sulfur 11 hexaflouride from all major sources in California. 12 In order to look at the total impact of these six 13 gases on climate change, we use the international 14 convention of expressing them in a common metric called 15 carbon dioxide equivalents, or CO2e. We do that by using 16 global warming potential for each gas as established by 17 the Intergovernmental Panel on Climate Change. 18 The 1990 inventory also includes estimates of 19 emission sinks, which sequester carbon by taking carbon 20 dioxide out of the air and storing it in California's 21 forests. 22 --o0o-- 23 MS. ROGERS: Prior to this year, California's 24 greenhouse gas emissions inventory was maintained by the 25 California Energy Commission. State law transferred that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 responsibility to the Air Resources Board in January. 2 Using CEC's inventory as a starting point, we 3 undertook a comprehensive review and update of the 4 existing estimates, making improvements using new 5 information where available, and updating methodologies 6 for some categories. 7 Throughout this review and update process, we 8 strived to be as consistent with international guidelines 9 for greenhouse gas development as possible. 10 --o0o-- 11 MS. ROGERS: The result is a variety of 12 improvements that have been made to the 1990 inventory 13 over the past year including: 14 Improved methods to estimate emissions from 15 transportation and landfills compared to the CEC's 16 approach. 17 Facilities specific data for certain categories 18 and cement manufacturing in particular. 19 And updated data inputs primarily for fuel 20 combustion related emissions. 21 We've received considerable assistance in the 22 form of improved data from many agencies during this 23 process, including the Integrated Waste Management Board, 24 CEC, and some federal agencies. 25 We also developed extensive documentation for the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 inventory to ensure that our methods and sources of data 2 were clearly outlined for the public and stakeholders to 3 review. Over 12,000 pages of documentation are available 4 on the web and on CD. 5 We have set up a demonstration of that 6 documentation at the back of the room today for those who 7 are interested in learning more about it. 8 --o0o-- 9 MS. ROGERS: Our review and improvements focused 10 on the five key sectors listed on this slide. These 11 sectors together represent roughly 80 percent of total 12 greenhouse gas emissions in 1990. 13 The transportation sector includes on-road 14 vehicles, ships, trains, planes. 15 We improved emissions estimates for on 16 road-vehicles, which were the largest fraction of this 17 sector's emissions using ARB emission factors and updated 18 fuel sales data. 19 We also improved factors CEC's nitrous oxide 20 estimates from diesel vehicles. 21 We followed a methodology similar to the CEC's 22 for estimating emissions from in-state and imported 23 electricity generation. 24 We also considered line losses and more 25 comprehensively characterized imports resulting in a 40 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 percent increase in 1990 import emissions. 2 The entire industrial sector was included in the 3 review, but our focus was on emissions from cement 4 manufacturing, landfills, and petroleum refining. We 5 updated the data inputs for these three and used an 6 improved methodology for landfill emissions. 7 Finally, we updated emissions estimates for the 8 agriculture and forest sectors using similar methodologies 9 as the CEC, as well as data provided by other agencies. 10 The remaining 20 percent of emissions occur in 11 the residential and commercial sectors as a result of 12 combustion activities such as heating and cooking. 13 --o0o-- 14 MS. ROGERS: Stakeholder input was vital 15 throughout the development of the 1990 emissions level. 16 To ensure that the inventory was built on a solid 17 technical foundation, we held nine technical meetings with 18 stakeholders and experts in the respective sectors. 19 We also held five general public workshops. 20 Stakeholders have provided valuable input through these 21 meetings, workshops, and other outlets which we greatly 22 appreciate. 23 --o0o-- 24 MS. ROGERS: The result of this process is an 25 improved 1990 greenhouse gas emission inventory. This PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 slide shows the relative contributions of the key sectors 2 to the 1990 inventory. 3 The transportation sector is the largest 4 accounting for 35 percent of all emissions in 1990. This 5 number has increased to roughly 40 percent today. 6 Combined in state and imported electricity 7 generation is the next highest with the industrial sector 8 a close third. 9 The overall contribution from transportation 10 emissions decreased a bit compared to the CEC's 1990 11 estimate, while electricity generations contribution 12 increased due to inventory improvements. 13 --o0o-- 14 MS. ROGERS: In developing the 1990 emissions 15 level, we included all emissions occurring in California 16 from these sectors to the atmosphere and the sequestration 17 or removal of carbon dioxide from the atmosphere by the 18 state's forest sinks. 19 AB 32 specifically requires that the level also 20 include emissions associated with electricity that's 21 imported to California. 22 Given the anticipated growth in goods movement in 23 the coming years, we thought it was important to include 24 emissions from all ships traveling within 24 nautical 25 miles of the California coast to or from a California PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 port. This is consistent with ARB's goods movement 2 program inventory. 3 The 1990 level includes emissions from flights 4 within California as well. 5 --o0o-- 6 MS. ROGERS: We have chosen to not include 7 emissions from certain types of sources based on 8 international conventions for greenhouse gas inventories. 9 --o0o-- 10 MS. ROGERS: International practice recommends 11 tracking, but not including, all international shipping 12 and aviation in the total inventory estimates. 13 While we choose to include internationally 14 flagged ships traveling within 24 nautical miles of the 15 California cost, the 1990 level excludes emissions from 16 all ships traveling outside of these waters. The 1990 17 level excludes interstate and international flights to be 18 consistent with the international approach of only 19 including emissions from flights within a jurisdiction's 20 borders. 21 --o0o-- 22 MS. ROGERS: Based on the improvements made, we 23 have estimated the 1990 emissions level to be 427 million 24 metric tons of carbon dioxide equivalent. This is an 25 aggregated statewide level. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 You may notice that the proposed 1990 level is 2 very similar to the 1990 emission estimates from the 3 Climate Action Team and CEC. There are some important 4 differences among individual sector emission estimates. 5 But in aggregate, the 1990 estimates are quite similar. 6 --o0o-- 7 MS. ROGERS: In order to put the 1990 emissions 8 level and 2020 limit in context, we also estimated a 9 preliminary 2020 emissions projection. Although not part 10 of today's action, it is important to understand the tons 11 of reduction that will be needed to get from the 2020 12 projected emissions to the 2020 emissions limit as 13 estimated by the 1990 level. 14 --o0o-- 15 MS. ROGERS: The 2020 emission projection is the 16 estimated emission level that would occur in 2020 if 17 California did not take additional actions to reduce 18 emissions. 19 The difference between this projection and the 20 2020 limit that we are proposing today determines the 21 magnitude of emission reductions that must be addressed by 22 the scoping plan. 23 We estimated the 2020 projection using ARB and 24 CEC data to be approximately 600 million metric tons of 25 carbon dioxide equivalent. The difference between this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 preliminary estimate of 600 and the 1990 level of 427 is 2 173 million metric tons of carbon dioxide equivalent. 3 We will continue to refine this 2020 projection 4 in the coming months as we develop the scoping plan. 5 --o0o-- 6 MS. ROGERS: I'd like now like to discuss some 7 issues that were brought up during the public process and 8 how we are addressing them. 9 We continue to receive comments on three sector 10 related issues in particular and their effects on the 1990 11 emission level: Electricity imports, forestry, and 12 landfills. 13 --o0o-- 14 MS. ROGERS: One of the major topics of 15 discussion in the development of emission estimates for 16 the power sector was the assumption used to estimate 17 emissions from imported electricity that cannot be traced 18 back to a specific facility or fuel type. 19 The CEC examined this issue in 1990 and again 20 1992. The Commission held several hearings and took 21 testimony from stakeholders before determining what 22 methodology should be used for calculating emissions from 23 unspecified sources. 24 Based on those hearings, the Commission 25 recommended a set of assumptions for attributing regional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 unspecified power to certain fuel types. Some 2 stakeholders disagree with the CEC's recommendation. 3 The CEC reiterated its recommendation to us in a 4 recent letter. Staff reviewed the assumptions and agree 5 with the CEC's findings and recommendations. 6 --o0o-- 7 MS. ROGERS: The forest sector has proven to be a 8 challenging sector, but an extremely important one. 9 Sequestration of carbon by trees is an important element 10 in our overall determination of greenhouse gas emission 11 levels. 12 We have worked closely with our sister agency, 13 the California Department of Forestry and Fire Protection, 14 and U.S. Forest Service, to determine the best available 15 information for estimating forest sequestration. However, 16 this sector requires more evaluation, and we have formed a 17 work group of agencies and stakeholders to improve 18 estimates of forest stocks and forest emissions and 19 sequestration. 20 The last issues are related to landfills. There 21 are differing opinions concerning the best value for 22 landfill gas collection efficiency and how to best account 23 for carbon stored in landfills. The 1990 estimate uses 24 U.S. EPA default values for landfill gas collection 25 efficiency since no scientifically rigorous data is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 available. 2 Moving forward, we will continue to work with 3 stakeholders to improve collection efficiency estimates as 4 part of the early action regulatory process. 5 Whether or not landfills and other sectors 6 receive credit for carbon storage will be addressed 7 through the broader AB 32 planning process. 8 After an extensive review and update of the 1990 9 emissions level, we recommend the Board above a 2020 10 emissions limit of 427 million metric tons of carbon 11 dioxide equivalent based on the 1990 emissions level. 12 This concludes my presentation. We would be 13 happy to answer any questions. Thank you. 14 CHAIRPERSON NICHOLS: Do Board members have 15 questions before we hear from the public on this item? 16 Does anybody have any questions about the methodology or 17 any of the issues? 18 Okay. Let's move directly to the public hearing 19 portion. We have eleven witnesses who have signed up on 20 this item. So I'll just call them in order. I'm tempted 21 to make her first because she was the last, but she is a 22 actually number two on the list. Jill Whynot first and 23 then Cathy Reheis-Boyd followed by Norman Pedersen. 24 MS. WHYNOT: Good afternoon, Chairman Nichols and 25 members of the Board. My name is Jill Whynot. I'm one of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 the staff members of the South Coast AQMD. We wanted to 2 come up today and commend the staff for what we think is a 3 comprehensive and thorough job on a very difficult task of 4 back casting an inventory to 1990. We feel they have used 5 to latest models and the best information available. 6 We actually did some cross checking for our 7 portion of the inventory. We looked at on- and off-road 8 sources and stationary sources, and things looked very 9 reasonable. So we think they did a great job on that. 10 As with any inventory, as you know, especially 11 with the mobile sources, we feel they probably will need 12 to bring the 1990 inventory back to you in the future as 13 new information and better information becomes available. 14 But in summary, we support the 1990 inventory today as the 15 target for the state and think your staff did a great job. 16 CHAIRPERSON NICHOLS: Thank you. 17 Ms. Reheis-Boyd. 18 MS. REHEIS-BOYD: Thank you again, Chairman 19 Nichols, members of the Board. Cathy Reheis-Boyd, Western 20 States Petroleum Association. We're also here today to 21 support this regulation on inventory. 22 I want to make sure we are going to bank up all 23 these great compliments because, just a guess, I think 24 going forward we might have a little more contentious 25 issues to deal with. Just don't want to staff to get too PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 comfortable. 2 But basically very pleased at the amount of work 3 that's gone into the inventory. The adjustments that have 4 been made by the staff for our sector in particular, I 5 mean it was really difficult going back and finding 6 missing data for the past 17 years. So just a yeoman's 7 job on this. 8 Since it was so difficult and complex, I really 9 do think it took our collective wisdom to get this as good 10 as it is. And we all know there are issues going forward. 11 But I think what we learned is that we really needed each 12 other. All of the stakeholders needed each other in this 13 process to fill the gaps and make this the best inventory 14 we could going into '08. 15 We also appreciate the willingness of the staff 16 to true up the inventory as we get any new information 17 going forward. And that will be very important, 18 especially if we learn something significant, which we 19 might. 20 So just in short, the accuracy of this inventory 21 is really critical, because it's going to set the stage 22 for everything we do going forward. 23 We're very happy that hopefully when 2020 rolls 24 around and we all look back at this that we got it right. 25 And if we didn't, that we were smart enough to pause and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 correct anything that we learned along the way. 2 So thank you. And we will be working hand in 3 hand with you going through this regulation as well. 4 Thank you very much. 5 CHAIRPERSON NICHOLS: Thank you. 6 Norman Pedersen followed by Sean Edgar and Greg 7 Knapp. 8 MR. PEDERSEN: Thank you, Chairman Nichols and 9 members of the Board. I'm Norman Pedersen for the 10 Southern California Public Power Authority, SCPPA. 11 I, too, would like to compliment the staff on the 12 excellent job they did. However, we think that some 13 further work is still needed to get the accurate 1990 14 figure that I think we all want to have. 15 SCPPA is concerned that the 1990 total emission 16 figure that you've been presented today may be inaccurate 17 as it stands. Particularly, we believe there has been an 18 understatement of the 1990 emissions associated with 19 imported electricity. According to the staff, electricity 20 generation accounts for about 111 million tons or 26 21 percent of total 1990 statewide emissions, the 427 million 22 tons figure. 23 Approximately a third of the electricity figure, 24 31 million tons, are associated with what are called 25 unspecified imports. We believe that the 31 million ton PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 figure for unspecified imports may be low by as much as 20 2 million tons. In other words, the figure for unspecified 3 imports may below by 40 percent. 4 The staff's figure, as the staff explained this 5 afternoon, was taken from the CEC. The figure relied on 6 certain CEC assumptions about how electricity is 7 dispatched from particularly the pacific northwest. We 8 are concerned that the assumptions do not accurately 9 reflect how electricity is actually dispatched from the 10 pacific northwest. 11 In order to allow this issue and issues like it 12 to be more thoroughly vetted for particularly the electric 13 sector, SCPPA urges the Board to permit the 1990 figure to 14 continue to be refined. Thank you very much for this 15 opportunity to appear before you today. 16 CHAIRPERSON NICHOLS: Thank you Mr. Petersen. 17 Sean Edgar, Gregg Knapp, and then Chuck White. 18 MR. EDGAR: Madam Chair and Board members, Sean 19 Edgar appearing before you on behalf of the California 20 Refuse Removal Council. You have a copy of our letterhead 21 of the CRRC. 22 And I'd also like to join in the staff love fest 23 especially for the item. 24 And off line, I'll be talking to Mr. Goldstene 25 for his barber's phone number. I'll soon be joining him. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 But I'll be part of Mr. Goldstene love fest a little bit 2 later on. 3 CHAIRPERSON NICHOLS: Starting to get too 4 personal I think. 5 MR. EDGAR: And I'd like to compliment staff on 6 recognizing specific to the item in the forestry sink 7 item. So specific to the staff recommendation for how to 8 account for forestry sinks. 9 You'll hear from major landfill company 10 representatives again today about the issue that 11 sequestration of organics in the landfill should be 12 counted in the inventory as a carbon sink. 13 CRRC is before you today to once again express 14 their strongly held in support of California's long 15 standing waste management hierarchy that all materials be 16 properly managed in order to maximize the diversion of 17 material from landfills and manage all materials to their 18 highest and best use in accordance with the adopted state 19 hierarchy which has been in place since 1989. 20 There is no question that there is a place for 21 well-managed properly safe disposal of non-marketable 22 residuals in California. The issue is how do we account 23 for those. And the staff has hit the nail on the head in 24 this particular case. And specifically your sister board, 25 the California Integrated Waste Management Board, has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 adopted a strategic directive to in fact reduce the amount 2 of organics that goes into the landfills 50 percent by 3 2020. 4 As we related to your earlier item to action at 5 the local level, our companies are primarily family 6 operations serving more than eight million Californians 7 with curbside recycling service every week and somewhere 8 in excess of 150 communities throughout the state. And 9 those family operated companies certainly want to note 10 that the recycling efforts are recognized as part of the 11 AB 32 process. 12 Just to touch on a few high points in our letter 13 and then I would be happy to sit down. CRRC believes the 14 recycling and composting of organic materials needs to 15 occur first. The landfill should not be incentivized to 16 be the first stop. The landfill should be the last stop. 17 So with regard to the inventory figures that your staff 18 has in fact gotten it right specific to the carbon flux 19 table and diagram that's located in Appendix B of your 20 staff report. 21 And just to touch on sequestration as we 22 understand it, it's commonly understood to be the uptake 23 and long term storage of carbon. The sequestration of 24 greenhouse gases pertains to lumber and yard waste occurs 25 during the period of plant growth. The contention has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 been made landfill disposal of wood and compostable 2 organic waste which reduces its susceptibility to carbon 3 decomposition represents a sequestration. This approach 4 simply serves to maintain the landfill carbon pool. 5 We support your staff's recommendation and remain 6 committed to working with you on cleaner cities, cleaner 7 fuels, and cleaner fleets. Thank you. 8 CHAIRPERSON NICHOLS: Thank you very much. 9 Okay. Greg Knapp and then Chuck White and John 10 Busterud. 11 MR. KNAPP: Chairman Nichols, member of the 12 Board, thank you for the opportunity to comment. 13 We've been working with staff as well as many 14 others have and think they've done a very good job to date 15 on this important 1990 inventory 2020 goal, which we think 16 can only get better with time. 17 We have heard that the staff would come back to 18 the Board if there are changes to the 1990 inventory that 19 would be significant, which begs the question what's 20 significant. For example, if it was a difference of three 21 percent, that may not be significant to some folks. To 22 the cement industry, it would be. It's more than our 23 entire contribution. 24 So to that end of improving this inventory over 25 the next several years, we would suggest that a mandatory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 annual review and refinement of the 1990 inventory be 2 required. And if changes may be less than three percent, 3 appear that they be brought to the Board for 4 consideration. 5 As we move towards 2020 and try to reduce these 6 emissions and meet our goal, the statewide inventory is 7 out there. There may be a tendency to start breaking that 8 down and looking at sector wide inventories and sector 9 goals. We would certainly discourage that, as our sector 10 and many others in the state have undergone considerable 11 capacity increases since 1990 to meet State demands. And 12 certainly to meet a 1990 level after capacity increases 13 have occurred over 20 or 30 years would be essentially 14 impossible. 15 But with that, I'll conclude. And thank you for 16 the opportunity. 17 CHAIRPERSON NICHOLS: Thank you. 18 Chuck White. 19 MR. WHITE: Thank you, Madam Chair and members of 20 the Board. Chuck White with Waste Management. 21 There's both good news and bad news with respect 22 to what the inventory says so far. We are not here to 23 oppose it. We assume you will go ahead and adopt it. 24 The good news with respect to landfills is 25 they're no longer listed as the larges source of methane PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 emissions. I guess that mantle is now worn by enteric 2 fermentation. In fact, the landfills are now shown to be 3 about -- emissions from landfills are about 65 percent 4 lower than CCAT which is estimating about two years ago 5 because the large amount of work the staff has done to 6 refine the data that was used for the CCAT report. 7 Even though you don't have the data in front of 8 you, you see the landfill emissions for 2005 the staff is 9 estimating are even six percent lower than 1990 emissions. 10 That's in large part because of our improvement's the 11 industry has made to capture landfill gas to hopefully 12 convert as much as we possibly can to renewable energy. 13 Beyond these landfills, the industry has done a 14 tremendous amount in working with the local governments 15 and the State government. We're at a 50 percent diversion 16 goal, all of which contributes to lower greenhouse gas 17 emissions. Alternative fuel vehicle also contributes. 18 Energy from waste, and of course landfill gases to petrol. 19 And getting to the maybe bad news but things we 20 want to keep working with you and the staff on is the 21 focus has been solely on landfills, not all the other 22 things that the solid waste industry is doing in terms of 23 composting, recycling waste to energy as well as 24 landfills. 25 We're concerned that the emission inventory PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 procedures they're are using here are not consistent with 2 what U.S. EPA is doing. I won't bore you with the 3 details. EPA uses a stock change approach. Your staff is 4 using an atmospheric flow approach. That has some 5 limitations about the ability to recognize in your 6 inventory avoided emissions. 7 My friend Sean Edgar made reference to landfill 8 sequestration. This is partially good news and bad news 9 from our standpoint. The staff is recognizing that 10 landfills in fact do have the capability of long-term 11 storage of carbon and thereby reducing emissions that 12 would have otherwise occurred. You're not including that 13 in your inventory in large part because of your reluctance 14 on this atmospheric floor approach. Whereas, U.S. EPA 15 uses a stock change approach that does in fact give credit 16 to carbon sequestration and carbon storage in landfills. 17 What we're worried about relying on the 18 atmospheric flow approach is other types of avoided 19 greenhouse gas emissions will similarly not be able to be 20 included. My friend Sean Edgar likes to talk about 21 composting and carbon storage in soils as a result of 22 composting. That wouldn't be able to be credited under 23 the atmospheric flow approach. That would only be able to 24 be credited under the stock change approach. 25 Similarly, credit for recycling or increased PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 recycling, which is one of the areas that I know this 2 state is focusing on, will similarly not be able to be 3 credited in this approach as well. 4 So these are issues of good news and bad news. 5 We're happy for the good news. We're going to keep 6 working with you on what we perceive to be the bad news. 7 We'd like to get the factors that are used to estimate 8 fugitive emissions from landfills updated. The staff made 9 reference to the fact that the some of the data is not 10 scientifically rigorous. The default data that EPA -- 11 they've used and EPA uses is likewise not scientifically 12 rigorous either. 13 So the problem is we need to keep working to come 14 up with the best possible information we can on emissions 15 from landfills and we are committed to doing that. Thank 16 you. 17 CHAIRPERSON NICHOLS: Thank you. 18 Mr. Busterud, followed by Eric Little and Taylor 19 Miller. 20 MR. BUSTERUD: Chair Nichols, members of the 21 Board, it's good to see you again so soon. 22 We acknowledge that estimating the 1990 23 greenhouse gas emissions, coming up with that inventory, 24 is no simple task, especially when it addresses 25 unspecified power imports occurring more than 17 years PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 ago. 2 We do want to acknowledge the hard work staff has 3 put in on this, and they should be commended for their 4 efforts. We support much of staff's work on the baseline 5 and the CEC's data on which it is based. But we are among 6 those in our sector that disagree with some critical 7 assumptions made concerning greenhouse gas emission's 8 attributed to unspecified power imports from the northwest 9 and southwest in 1990. 10 A power expert retained by PG&E, Mr. David Levey 11 of Power Cast, has examined 1990 imports using a widely 12 respected and robust modeling method that was not 13 available in the early 1990s and concluded that the CEC's 14 upon which the staff report is based may be substantially 15 lower than actual 1990 emissions, along the lines of the 16 numbers cited by SCPPA. 17 We believe this analysis suggests emissions 18 estimates for 1990 unspecified power imports would benefit 19 from additional review and that the baseline be adjusted 20 accordingly. 21 PG&E shares the interests of California, its 22 regulated community, and all stakeholders in seeing that 23 the statewide greenhouse gas limit and the base line from 24 which it is derived are based on the best available 25 scientific, technological, and ecologic information as PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 required by AB 32. 2 Staff has stated on several occasions that it 3 would consider information concerning the 1990 baseline 4 and 2020 target in the future if such information was 5 significant and credible. 6 In this spirit, we ask that the Board and staff 7 not foreclose further review of the base line and continue 8 to be receptive to supplemental information and to look 9 for additional opportunities to discuss this complex issue 10 going forward. Thank you. 11 CHAIRPERSON NICHOLS: Thank you. 12 Mr. Little, Mr. Miller, and then Devra Wang. 13 MR. LITTLE: Good afternoon, Madam Chair and 14 members of the Board. First, I'd like to discuss a little 15 bit, Chairman Nichols, a comment earlier thanking us for 16 double-siding our comments. I do have to confess we 17 actually faxed that to you this morning. So all of the 18 thank you actually goes to, well, you can guess, your 19 wonderful staff here that did it for you. 20 CHAIRPERSON NICHOLS: Thank you for correcting 21 the record. 22 MR. LITTLE: Edison does appreciate the efforts 23 of staff and particularly in the power sector assessment. 24 That being said, we do still have some concerns 25 with the consistency between the development of the 1990 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 baseline and the protocols to be adopted for reporting of 2 emissions going forward. 3 In particular, the staff used a top-down approach 4 referred to as a fuel input approach to estimate the 1990 5 emissions. While the reporting requirements going forward 6 rely in many instances on in-stack monitoring data. This 7 wouldn't be a concern except for the fact that on average 8 in-stack monitors tend to report emissions approximately 5 9 percent higher than the fuel input methodology. Some 10 ability to reconcile these approaches needs to be pursued. 11 Of a different concern are the reductions the 12 staff has recently made to the CEC's original 1990 13 transportation sector GHG estimates. 1990 estimates for 14 highway vehicles were reduced by 9.4 million metric tons 15 of carbon dioxide equivalent, or more than six percent. 16 At the same time, estimates for trains, ships, 17 and planes were reduced by 29 million metric tons of 18 carbon dioxide equivalent, or more than two-thirds of the 19 CED estimate for 1990. Although we're not experts in the 20 transportation sector, we are concerned over such a 21 reduction since there is a high likelihood that the 22 electric sector would be saddled with share of GHG 23 reduction going forward as a result. 24 By way of background, Edison's GHG emissions 25 today are below our 1990 levels. As a result, Edison PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 believes that part of adopting the 1990 baseline the Board 2 needs to recognize the need to review the baseline 3 estimates a year from now to ensure that it is as accurate 4 as possible. The staff is recommending that a review 5 occur if there is significant change. All that we are 6 asking for is to suggest that instead of trying to define 7 what a significant change is, that we just plan to review 8 this analysis within a year of today's date. 9 Thank you very much. 10 CHAIRPERSON NICHOLS: Thank you. 11 Mr. Miller followed by Devra Wang and then Tim 12 O'Connor. 13 MR. MILLER: Thank you, Madam Chairman and 14 members. I can be relatively brief, I believe. I think 15 this is obviously a very daunting task, and staff have 16 done a great job of coming up with the estimates they 17 have. Mr. Tasat in particular I'd like to commend. And 18 Larry Hunsaker from our sector did a great job. 19 We are basically in support of the comments 20 you've heard a few minutes ago from Edison and PG&E and 21 SCPPA. We do have a concern about the accuracy of the 22 1990 emissions estimate for unspecified power. 23 And I think also I'd like to tee up an issue 24 that's related that's also mentioned I believe by the 25 gentleman from Edison, and that is consistency. We have PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 basically three fundamental building blocks to this system 2 that are under construction. One is setting the goal, the 3 inventory. Another is setting the reductions, which would 4 be the 2020 projection. And third is measuring 5 compliance, which would be the mandatory reporting. 6 And to return to the GPS analogy that was 7 mentioned by Mr. Wallerstein earlier, if you're familiar 8 with GPSs, which I'm not really, there is a datum that has 9 to be set for each unit. There are multiple different 10 datums. If you put one in, you will get a different 11 location than if you put another in. So the risk is that 12 we would have three different datums, if you will, for 13 these three basic tasks, and each pointing to a different 14 answer as we go forward. 15 But we're thinking is -- it's very difficult to 16 evaluate the significance and indifference of methodology 17 of any one of these three prior to really the conclusion 18 of the scoping plan. And when we then begin to see how 19 these pieces really fit together and whether there's 20 consequences or not. In some ways, we're forced to raise 21 issues without understanding completely what they matter. 22 So from that perspective, we think that 23 revisiting this does make sense in the course of scoping. 24 So that concludes my comments. Thank you very much. 25 CHAIRPERSON NICHOLS: Thank you for your comment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 Ms. Wang and then Mr. O'Connor, you're our last 2 witness. 3 MS. WANG: Thank you. Devra Wang again with the 4 Natural Resources Defense Council. 5 And we strongly support the staff's proposed 2020 6 global warming pollution limit of 427 million metric tons 7 of CO2 equivalent. I'd like to rejoin the big group hug 8 and commend the staff again for all of their hard work. 9 They did a very thorough review of the state's existing 10 greenhouse gas inventories, held a very good public 11 process, and did all this under significant time 12 constraints. So thank you for all of your hard work. 13 As you know, this pollution limit is a critical 14 foundation for AB 32 as it sets the goal that all of our 15 efforts going forward will be driving towards. And so we 16 think it's very important that you establish this limit 17 today. 18 As you know, in order to meet the 2020 limit, 19 businesses and sectors across California's economy will 20 need to make long-term investments to reduce emissions. 21 And so certainty is very important to enable those 22 long-term investments. 23 So we urge you to be very clear today as you 24 adopt this 2020 limit that the Board will strive to keep 25 any changes to the limit to the absolute minimum necessary PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 in order to provide that certainty. Similarly, you've 2 heard suggestions for additional changes today. As you 3 know, the California Energy Commission has maintained an 4 emissions inventory for California for many years. And 5 with each reassessment the changes to California's 1990 6 inventory have been quite small. And so we urge you to 7 focus the Board's efforts going forward on reducing 8 emissions rather than expending further significant staff 9 effort on trying to refine the data from what happened 10 nearly 20 years ago. In other words, we urge you to adopt 11 the proposed limit today and stick with it and focus on 12 the future and reducing the pollution. Thank you. 13 CHAIRPERSON NICHOLS: Thank you. 14 Mr. O'Connor. 15 MR. O'CONNOR: Hello again. Tim O'Connor from 16 Environmental Defense. 17 I'd like to express two points. One is a strong 18 support for adoption of the 1990 inventory which is before 19 you today. Setting the 2020 limits is obviously very 20 important. And we have extensively participated in this 21 process, and we're very comfortable with the level which 22 has been named by the staff. 23 Second, we'd like to express our feelings of 24 importance for a process going forward by which the 1990 25 inventory would be amended. Currently, there is just sort PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 of some questions about, well, if it's adopted by the 2 Board today, what are the criteria by which we would send 3 it back a year or when better data comes out in six months 4 or three years or ten years for amending that 1990 level. 5 And just some guidance on whether and to what extent that 6 emission limit can be amended and providing guidance to 7 the staff as well as some certainty to the regulated 8 community and to the state of California for the strength 9 of that number and whether it can move. 10 We think that certainty -- I'd like to sort of 11 just reiterate Devra's comments that certainty is indeed 12 very, very important in this process going forward. And 13 we'd like to see us moving forward rather than continually 14 looking backward at the 1990 level. But if indeed there 15 is better data that comes out, we'd like to see a process 16 for which that would be incorporated to make some changes. 17 Thank you very much. 18 CHAIRPERSON NICHOLS: Thank you for your 19 comments. That concludes our witness list. 20 Does the staff have any additional comments they 21 wants to make in closing? 22 Hearing none, it comes back to the Board then for 23 further discussion. And I think we've heard nothing but 24 support for moving forward today. So I don't feel like 25 there's any real difficulty with that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 The only question I think would be whether there 2 are additional guidance we want to give to the staff about 3 what to do in the future. And I guess I'd like to express 4 the view that limiting the frequency and the number of 5 changes that are made to the inventory is a good idea. 6 That short of some fundamental information that shows that 7 we were off by more than ten percent in some key area I 8 don't see the benefit of shifting this number around. 9 It's an important target. 10 And at some point there could be real money 11 riding on shift of a ton or two. But it's very likely 12 that any shift in one direction would end up being shifted 13 back in another. The more work we put into refining those 14 numbers is just the nature I think of these kinds of 15 numbers. 16 So I'm not in favor of an annual thorough going 17 review on this process. I do think that if new science 18 comes along that really challenges the basis of some of 19 these estimates or calculations, then of course we should 20 be open to that. 21 I also would really like to use the opportunity 22 to say that we are extremely fortunate to be in the 23 position of having the inventory that the CEC has done for 24 us. It may not be perfect, but the fact that the 25 California Energy Commission saw fit back in 1990 to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 actually start doing this kind of inventory work is really 2 I think one of those things that should be noted in terms 3 of just how thoughtful California has been in anticipating 4 what future environmental needs are going to be. Because 5 long before AB 32 was even a glean in anybody's eye, they 6 were thinking about greenhouse gas emissions and the 7 problem of global warming and trying to be in a position 8 to be able to do something if the time ever came. 9 So while undoubtedly their review has made a few 10 little changes along the way, the fact that we have such a 11 robust inventory to work with is really a tremendous 12 blessing as far as I'm concerned. 13 So having expressed my views on this, I hope we 14 can have a motion and a second. 15 BOARD MEMBER D'ADAMO: Move adoption of 16 Resolution 7-55. 17 SUPERVISOR HILL: Second. 18 CHAIRPERSON NICHOLS: Okay. Very good. Do we 19 have any further discussion on this one? 20 Hearing none, all in favor say aye. 21 (Aye) 22 CHAIRPERSON NICHOLS: Any opposed? 23 Carries unanimously. 24 Thank you all for great work. Ex parte. I 25 didn't have any so I didn't imagine anybody else did. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 It's not a regulation anyway, so we don't have to. Thank 2 you for being our conscious. 3 Before we break for lunch which we should do 4 momentarily, I have one very pleasant item to add to the 5 list of this morning -- well, it's sort of a pleasant 6 item. It's a recognition of one of our staff so we've 7 been hearing about all morning here. But it's not exactly 8 a happy occasion for us, although it is for him, which is 9 that we have a resolution commemorating the retirement of 10 our stellar counsel, Tom Jennings. 11 And I'm going to read this resolution, because if 12 it were applicable to anybody else, it would be -- well, 13 it could be of questionable taste actually. But since it 14 appears to have been drafted by his peers and by people 15 who really like him, I'm assuming that they intended this 16 to have a positive reaction. So I don't usually read all 17 these whereas's, but I'm going to do it here today. 18 And, Tom, you're going to have to sit there and 19 listen. 20 "Whereas, William Thomas Jennings, otherwise 21 known as Tom, after excelling at foosball at Overland and 22 demonstrating academic excellence at the University of 23 Michigan Law School, has focused his legal career on 24 environmental activism, crowing his 28 years of service at 25 the Air Resources Board by serving as Chief Counsel since PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 2005. 2 "And whereas, Tom began his legend as the 3 godfather of fuel regulations with the curtailment of led 4 in gasoline in 1982 and clinched it by tackling the 5 gargantuan challenge of shepherding the ARB's 6 precedent-setting low emission vehicle clean fuels program 7 through the legal obstacle course beginning in 1928 and up 8 to winning the ZEV waiver in 2005. 9 "And whereas, without Tom's skill and drafting 10 bullet proof regulations for clean fuels and clean cars, 11 the flanks of lawyers hired by the auto, trucking, and 12 fuel industries would not have earned a fortune in their 13 futile efforts to overturn either set of regulations. 14 "And whereas, Tom's superior intelligence, cool 15 head, respectful manner, and dauntless stamina have 16 resulted in successful settlements of complex matters 17 after heated negotiations with numerous adversaries, 18 including a number of former ARB kingpins" -- that isn't 19 even in quotes. 20 "And whereas, Tom not only talks the talk, he 21 walks the walk, having cycled approximately 105,000 22 commuter miles to work since 1987, sometimes carrying a 23 pair of pruning shears to rid the American River bike 24 trail of hazardous branches. 25 "And whereas, a superb as Tom's analytical skills PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 are, he's even better at mountain climbing, as evidenced 2 by his race to the summit of Sentinel Dome with Mike 3 Kenney. 4 "And whereas, in addition to mentoring new 5 attornies by hearing his expansive legal and institutional 6 knowledge of ARB's motor vehicle control program, as well 7 as sharing his wealth of homemade music CDs Tom, continues 8 to provide critical legal insight as California pursues 9 cutting edge efforts to regulate greenhouse gases. 10 "And whereas, Tom has made ARB history more 11 accessible by ensuring that his office is a repository of 12 every note, memo, e-mail, and yellow sticky he has 13 produced over the past 28 years." 14 I can attest to that. 15 "Making it a record retention center that rivals 16 the state archives. 17 "And whereas, Tom is retiring from ARB in order 18 to enjoy time with his gifted daughters and engage in his 19 gardening and furniture making and pursue his dreams of 20 traveling in New Zealand, France, and parts unknown with 21 his wife, Betsy, herself an accomplished environmental 22 attorney. 23 "Now, therefore be it resolved, that the Board 24 expresses its deep appreciation to William Thomas Jennings 25 for his many years of dedicated service and wishes him a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 long, happy, and productive retirement cheering at the 2 Tour de France, admiring the wines and vines and other 3 plants down under, and transferring his legal skills of 4 infinite patience and painstaking precision to that 5 relaxing hobby of fine woodworking. 6 "Be it further resolved, that the Board and the 7 staff have not had enough of Tom, and the Board applauds 8 his decision to continue to work for us as a retired 9 annuitant to assist with ARB's low carbon fuel standard 10 adoption process. 11 "Executed at Sacramento, California, the 6th day 12 of December 2007." 13 Tom, we have a beautiful framed resolution which 14 recites all these wonderful things for you. And I think 15 we should recess for lunch in your honor and give you this 16 to carry off with you. We hope you'll display it 17 somewhere very prominently. 18 And if any of the other Board members wants to 19 add a word, they should feel free to. But as a lawyer who 20 has worked with you over the years -- I was on the Board 21 when you first came to the ARB -- it's my particular 22 pleasure and privilege to be able to present you with 23 this. Thank you. 24 (Applause) 25 CHIEF COUNSEL JENNINGS: I'd just like to say a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 couple things. 2 One is I graduated from law school in 1971. I 3 have a ridiculously low bar number. In my first nine 4 years, I was in four different jobs and kind of kicked 5 around with a lot of stuff. And I started working for the 6 Air Resources Board in January 1980. And it has been such 7 a great place to work. I'm really been glad I've been 8 able to work for for the 27 years. 9 And then I wants to say to cap the career for the 10 last two-and-a-half years to work with the executive 11 office. I think the Executive Officer, the former 12 Executive Officer, the Deputies have been -- it's just 13 been an honor to work with them because they do such 14 extraordinary work. And I really appreciate that. 15 CHAIRPERSON NICHOLS: Thank you. Okay. We will 16 be back in an hour. Thanks, everybody. 17 (Thereupon a lunch recess was taken.) 18 CHAIRPERSON NICHOLS: We can get started, please. 19 We did just a great job this morning we decided to 20 continue. 21 The next item on the agenda is a proposal to 22 adopt gaseous pollutant measurement allowances for 23 California's heavy-duty diesel in-use compliance 24 regulation. And these proposed allowance were developed 25 in a research test program jointly funded by ARB the U.S. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 EPA and the engine manufacturers. 2 Today staff will present to the Board a summary 3 of the research test program and the measurement 4 allowances determined under this program for the Board's 5 approval. Mr. Goldstene. 6 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 7 Nichols. 8 Health and Safety Code Section 43104 directs the 9 Air Resources Board to adopt test procedures to ensure 10 compliance with emissions standards for engines used in 11 heavy-duty motor vehicles. 12 In 2006, the Board adopted new heavy-duty diesel 13 in-use compliance regulations and test procedures known as 14 the manufacturer-run heavy-duty diesel in-use testing 15 program. Testing under this program will be conducted by 16 the engine manufacturers with portable emission 17 measurement systems. 18 Prior to adoption of the heavy-duty diesel in-use 19 compliance regulation, the Air Resources Board, 20 United States Environmental Protection Agency, and the 21 engine manufacturers agreed to fund a research test 22 program to determine appropriate measurement allowances 23 for each gaseous pollutant. Those allowances would 24 account for any potential difference in measurement 25 accuracy between measurements made with portable emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 measurement systems in the field and laboratory grade 2 analyzers in the laboratory. 3 The research test program conducted by the 4 Southwest Research Institute has been completed and ARB, 5 U.S. EPA, and the engine manufacturers have agreed on the 6 appropriate measurement allowances. 7 The proposed measurement allowances are more 8 stringent than those originally adopted and would provide 9 for a more effective in-use compliance program in 10 California. 11 I'd like to turn the presentation now over to 12 Dipak Bishnu of the Mobile Source Control Division who 13 will provide an overview of staff's findings and present 14 recommendations. 15 CHAIRPERSON NICHOLS: Thank you. 16 (Thereupon an overhead presentation was 17 presented as follows.) 18 AIR RESOURCES ENGINEER BISHNU: Thank you, Mr. 19 Goldstene. Good afternoon Chairman Nichols and members of 20 the Board. 21 Today's presentation will summarize staff's 22 proposal for gaseous pollutants measurement allowances for 23 California's heavy-duty diesel in-use compliance 24 regulation. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 AIR RESOURCES ENGINEER BISHNU: In September 2 2006, ARB adopted new in-use compliance regulations and 3 test procedures applicable to on-road heavy-duty trucks. 4 Prior to the adoption of this rule, determining compliance 5 for heavy-duty trucks required that ARB remove the engine 6 from at least ten trucks and then install the engine on an 7 engine dynamometer for emission testing. Because this is 8 a very costly and time-consuming procedure, ARB has never 9 conducted compliance testing for on-road heavy-duty 10 trucks. 11 The recently adopted regulation established a 12 manufacturer-run heavy-duty diesel in-use testing program 13 that requires manufacturers to emission test a set number 14 of their certified engine families each year. Compliance 15 would be based on whether the trucks meet in-use emission 16 limits under normal, on-road driving conditions. The 17 actual testing would be performed using portable emission 18 measurement systems, or PEMS, installed on in-use trucks. 19 Since PEMS are a relatively new technology, their 20 measurement variability under in-use conditions needed to 21 be determined before they could be used to determine 22 compliance with emission standards. 23 --o0o-- 24 AIR RESOURCES ENGINEER BISHNU: This chart 25 illustrates how compliance based on in-use testing is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 determined and the significance of the measurement 2 variability allowance. 3 If we could test an engine in our lab, compliance 4 would be determined by comparing tested emissions to the 5 certification emission standard. However, this is not 6 practical. 7 By using PEMS, emissions can be measured on road 8 and the results can be compared to the on-road emission 9 standard, called the not to exceed, or NTE standard. 10 Because this program is new and these are in-use 11 vehicles, an allowance for mileage accrual is added. 12 Finally, an allowance to reflect the greater 13 variability of measurements obtained on road is added. 14 This is the factor we are proposing you adopt today. 15 Based on the manufacturers in-use testing of 16 trucks, in a specific engine model has emissions higher 17 than shown by this bar, remedial action to lower emissions 18 will be required. 19 --o0o-- 20 AIR RESOURCES ENGINEER BISHNU: Testing conducted 21 in the past few years has shown that PEMS technologies 22 have performed well and can accurately measure gaseous 23 emissions from heavy-duty diesel trucks under a variety of 24 driving conditions. PEMS emission analyzers used for 25 measuring gaseous pollutants are compact versions of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 same technologies used in laboratories. They can be 2 easily mounted to a truck chassis as shown here. 3 Because testing will be conducted on the road, 4 instead of in an environmentally controlled laboratory, 5 PEMS have greater test to test variability due to 6 environmental factors such as temperature, altitude, and 7 vibration. A measurement allowance accounts for this 8 variability and assures a complying truck will not be 9 erroneously determined to be non-complying. 10 --o0o-- 11 AIR RESOURCES ENGINEER BISHNU: Measurement 12 allowances for each regulated pollutant are needed before 13 implementing the in-use compliance program. In May 2005, 14 a Measurement Allowance Steering Committee was formed to 15 develop the measurement allowances. The Southwest 16 Research Institute in San Antonio, Texas, was contracted 17 to perform testing to develop the measurement allowances. 18 --o0o-- 19 AIR RESOURCES ENGINEER BISHNU: The testing 20 program was multi-faceted and complex with specific steps 21 and goals. A key element of the program involved the 22 selection and use of a comprehensive and rigorous 23 statistical model. To calculate the appropriate 24 measurement allowances, different potential sources of 25 error were evaluated. This was done by collecting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 emission data on a number of engines on an engine 2 dynamometer, in parallel with PEMS, to determine PEMS 3 measurement error. 4 Also, environmental chamber tests were conducted 5 to expose the PEMS to a variety of environmental factors, 6 namely electromagnetic interference, atmospheric pressure, 7 temperature, humidity, vibration, and ambient hydrocarbon 8 levels. 9 There were three acceptable emission calculation 10 methods used in the statistical model, yielding three 11 different sets of measurement allowances. The measurement 12 allowances were then validated under new real world 13 conditions using a tractor trailer equipped with 14 laboratory grade instruments. 15 --o0o-- 16 AIR RESOURCES ENGINEER BISHNU: Here are the 17 proposed measurement allowances. The 2007 through 2009 18 model year allowances shown in the middle column were 19 based on preliminary validation work and thus reflect more 20 uncertainty and a bigger allowance. They apply only to 21 the first three model years. Completion of the testing 22 program including validation resulted in smaller 23 measurement allowances that will apply in 2010 and 24 subsequent model year engines. 25 The smaller allowances result in a more stringent PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 in-use compliance program that has a greater chance of 2 identifying high emitting models that may be recalled to 3 replace poorly designed components. These are shown in 4 the right hand column. 5 --o0o-- 6 AIR RESOURCES ENGINEER BISHNU: Staff's original 7 proposal included an amendment that would adopt the 8 measurement allowances that I just discussed. However, 9 subsequent to the release of our hearing notice, the 10 United States Environmental Protection Agency stated their 11 intent to adopt relatively minor technical amendments to 12 the testing protocol. In the spirit of harmonization, 13 staff proposes to incorporate these amendments into our 14 test procedures. 15 Another proposed amendment would include the 16 combined NOx plus NMHC measurement allowance for 2007 17 through 2009 model year engines. 18 Finally, the 15-day notice would incorporate the 19 proposed measurement allowances in a more appropriate 20 section of the regulation as compared to their location in 21 the staff's original proposal. 22 --o0o-- 23 AIR RESOURCES ENGINEER BISHNU: Gaseous 24 measurement allowances are necessary to account for 25 variability and to allow the in-use compliance program to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 be fully implemented. The allowances for 2010 and beyond 2 are small and will assure that high emitting trucks are 3 properly identified for remedial action. Staff recommends 4 adoption of these allowances with 15-day changes. 5 We will be returning to you once a similar 6 process, now underway, produces allowances for PM 7 emissions. 8 Thank you. This concludes my presentation. 9 CHAIRPERSON NICHOLS: Thank you very much. I'm 10 impressed that you managed to get through this whole 11 process without generating a single comment. No one has 12 signed up to comment on this issue. Obviously, it's a 13 technical and somewhat difficult issue. 14 But as I understand it -- I just want to be clear 15 about this. And I'm not sure whether I should ask you the 16 question or someone else. It seems as though this will 17 now enable us to run some form of I&M program for 18 heavy-duty on-road vehicles; is that correct? 19 MANAGER LEMIEUX: Not exactly. It's not designed 20 so we can implement an I&M per se program as we know I&M 21 today for light duty. This will enable able us to do 22 actual in-use compliance -- 23 CHAIRPERSON NICHOLS: But it would be testing 24 that will allow you to test real world trucks in real 25 conditions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 MANAGER LEMIEUX: Correct. Under the normal 2 driving condition. 3 CHAIRPERSON NICHOLS: Good. That's important for 4 all kinds of reasons. So I thank you for that. 5 I'm going to close the item on this item since 6 there are no comment. 7 Do the Board members have any questions or 8 comments to add? 9 SUPERVISOR HILL: Move the Resolution. 10 BOARD MEMBER RIORDAN: Second. 11 CHAIRPERSON NICHOLS: All in favor say aye. 12 (Ayes) 13 CHAIRPERSON NICHOLS: Any opposed? 14 Thank you and congratulations. 15 BOARD MEMBER RIORDAN: A bit of the truth is, 16 Madam Chairman, that they've worked on this long and hard. 17 And I think over a period of time really resolved all the 18 extraneous issues. 19 CHAIRPERSON NICHOLS: I'm sure that's right. 20 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Perhaps we 21 can do the next item by consent also. 22 CHAIRPERSON NICHOLS: Nice try. 23 The next item is one of our major issues for this 24 meeting and for the year, for that matter. And that's the 25 proposed regulation dealing with oceangoing vessels that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 will apply while they're at berth at ports in California. 2 This is a measure that's designed to dramatically 3 reuse exposure to neighborhoods near these ports to 4 particulate matter and also reduce the impact of 5 port-related emissions on regional levels of particulate 6 and ozone. And it also will help ARB in achieving 7 greenhouse gas reduction goals under AB 32. 8 So it has major important benefits that are at 9 stake here. But it is also a new area for us to be moving 10 into. And staff has worked hard to bring this to us in 11 the situation where it has the greatest possible degree of 12 support, but I'm sure not everyone is going to be 13 100 percent unanimous. 14 So with that, look forward to the staff 15 presentation. 16 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 17 Nichols. 18 Today, we're proposing a regulation that will 19 significantly reduce emissions from oceangoing vessels 20 while docked at California ports. As you know, these 21 ports are often located adjacent to densely populated 22 areas. Because of the high concentrations of diesel 23 engines, residents are exposed to unhealthy levels of 24 pollutants. 25 In 2004, staff completed an exposure assessment PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 for the ports of Los Angeles and Long Beach that revealed 2 that the emissions from docked ships or hoteling 3 emissions, as they're often referred to, impact the very 4 large area and result in elevated potential cancer risks, 5 premature mortality, and other adverse health effects. 6 Last year, the Board approved the Goods Movement 7 Emission Reduction Plan. In that plan, we identified a 8 variety of measures aimed at reducing emissions from goods 9 moving via the state's highways, railways, and ports. One 10 of the measures was aimed at reducing hoteling emissions 11 by requiring ships to shut off diesel auxiliary while at 12 dock with the exception they could connect to much cleaner 13 shore-based electricity sources. This is sometimes 14 referred to as shore power or cold ironing. 15 As you'll see in the staff's presentation, we 16 developed a proposal to implement this concept. The 17 proposed regulation would reduce the public's exposure to 18 diesel PM emissions and the resultant cancer and other 19 health impacts. In addition, the regulation will 20 contribute to improvements in regional air quality by 21 reducing precursors to ozone and PM. These reductions 22 will help the South Coast basin meet the 2014 deadline for 23 PM2.5 attainment as well as its future ozone attainment 24 deadlines. 25 In addition, the regulation will have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 co-benefit of reducing the emissions of carbon dioxide. 2 In October, you approved an expanded list of early action 3 measures to reduce greenhouse gas emissions in California. 4 The green ports measure, or port electrification as it was 5 previously described, was reclassified on this list as a 6 discrete early action measure for reducing greenhouse 7 gases. The regulation before you today will result in 8 significant reductions in carbon dioxide emissions which 9 will assist the state in meeting its 2020 greenhouse gas 10 emissions reduction goal. 11 Last year, the state's voters approved a one 12 billion dollar bond to provide incentive funds for cleaner 13 equipment and technologies associated with freight 14 movement. We have proposed some of these bond funds 15 should be used in concert with that proposal today in 16 order to accelerate the reductions attained with this 17 regulation. 18 Next month, staff will bring proposed guidelines 19 to the Board to implement the Goods Movement Bond Program. 20 I'd like now to have Mr. Grant Chin of our 21 Stationary Source Division present the staff's proposal. 22 Grant. 23 (Thereupon an overhead presentation was 24 presented as follows.) 25 AIR RESOURCES ENGINEER CHIN: Thank you, Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 Goldstene. Good afternoon, Madam Chairman and members of 2 the Board. 3 Today, I will be presenting staff's proposed 4 regulation for reducing emissions from oceangoing ships 5 while at berth at California ports. 6 --o0o-- 7 AIR RESOURCES ENGINEER CHIN: This slide presents 8 the topics I will be discussing. 9 --o0o-- 10 AIR RESOURCES ENGINEER CHIN: First, I will 11 provide background information. 12 --o0o-- 13 AIR RESOURCES ENGINEER CHIN: While docked, ships 14 run large diesel auxiliary engines to meet their on-board 15 electrical needs such as lighting, ventilation, pumps, 16 communication, and refrigeration. 17 The power requirements are specific to ship 18 category and types of cargo carried and vary from about 19 one megawatt to as much as 15 megawatts. 20 Another term for a ship at dock is to say that it 21 is hoteling, which is a term I will use in this 22 presentation. 23 This proposal has been described as port 24 electrification in the Goods Movement Emission Reduction 25 Plan and as green ports in the Early Action Measures to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 reduce greenhouse gas emissions. 2 --o0o-- 3 AIR RESOURCES ENGINEER CHIN: Hoteling emissions 4 occur for extended periods at near shore locations and 5 contribute to regional PM2.5 ambient air quality levels 6 and health impacts to population near ports. Based upon 7 the health risk assessment for the ports of Long Beach and 8 Los Angeles, the impacts of hoteling emissions on 9 communities are significant. 10 The potential cancer risks shown are based on 11 hoteling emissions for 2006. Since the implementation of 12 the auxiliary engine fuel regulation in January 2007, 13 emissions and risks have been reduced by about 65 percent. 14 This rule would reduce these levels further. 15 --o0o-- 16 AIR RESOURCES ENGINEER CHIN: These impacts 17 include increased cancer and non-cancer risks including 18 premature death and adverse respiratory effects. 19 --o0o-- 20 AIR RESOURCES ENGINEER CHIN: Reducing hoteling 21 emissions is necessary for several reasons. 22 First, the measure is needed to help achieve an 23 85 percent reduction of diesel PM by 2020 as stated in the 24 2000 Diesel Risk Reduction Plan. This proposed regulation 25 working with the auxiliary engine fuel regulation adopted PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 in 2005 meets that goal. 2 Second, the measure will meet the stated 2015 and 3 2020 goals for hoteling in the 2006 Goods Movement 4 Emission Reduction Plan. 5 Next, the measure will help achieve both direct 6 PM and oxides of nitrogen reduction needed to help meet 7 the South Coast Air Basin's State Implementation Plan 8 requirements for PM2.5 and ozone. This proposed 9 regulation is essential to provide the Board's 10 contribution to these reductions. 11 Finally, this measure is necessary to deliver 12 greenhouse gas emission reductions as a discreet early 13 action measure identified by the Board last October. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: In the early 2005, 16 staff began investigating hoteling emissions and the use 17 of shore power. We published a draft evaluation report in 18 March of 2006. The report showed that shore power could 19 be a cost effective measure in many instances. Therefore, 20 staff began to develop a proposed regulation. 21 --o0o-- 22 AIR RESOURCES ENGINEER CHIN: I would now like to 23 discuss in more detail the ships that visit California 24 ports and those that would be affected by the proposed 25 regulation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 In 2006, about 2000 ships made over 10,000 visits 2 to California ports. About 70 percent of these visits 3 were made to the ports of Long Beach, Los Angeles, and 4 Oakland. The ports of Los Angeles and Long Beach comprise 5 the busiest container port complex in the nation and the 6 fifth busiest in the world. The port of Oakland is the 7 fourth busiest container port in the nation. 8 --o0o-- 9 AIR RESOURCES ENGINEER CHIN: This slide lists 10 the seven major categories for oceangoing ships. The 11 focus of the regulation today is on the first three 12 categories listed: Container ships, passenger ships, and 13 refrigerated cargo shipped called reefer ships. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: This slide shows 16 the relative percentage of visits made by each ship 17 category for the 10,000 visits California ports received 18 in 2006. The containers ships are the largest category 19 and represent 45 percent of the total visits. 20 --o0o-- 21 AIR RESOURCES ENGINEER CHIN: However, when 22 considering the relative emissions from the various ship 23 categories, the container ship category dominated 24 accounting for two-thirds of the NOx emissions. Passenger 25 ships, with only seven percent of the visits, represent 13 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 percent of the emissions. Together, the three categories 2 of ships considered in this rulemaking comprise about 85 3 percent of the NOx emissions from hoteling with a similar 4 breakdown for diesel PM. 5 --o0o-- 6 AIR RESOURCES ENGINEER CHIN: This chart shows 7 that without the proposed regulation in place, hoteling 8 NOx emissions will increase through 2020, and the relative 9 contribution of the container ships and passenger ships 10 will account for most of that increase. 11 Staff estimates that in 2020 these two ship 12 categories would emit 85 percent of the total hoteling 13 emissions. The emission trends for PM over this period 14 would be similar. 15 --o0o-- 16 AIR RESOURCES ENGINEER CHIN: The next three 17 slides provide more detail regarding the ship categories 18 affected by the proposal. 19 As mentioned earlier, the emissions from 20 container ships at dock represent nearly two-thirds of the 21 total emissions from all ship categories. 22 The power needs of a container ship at dock 23 depends upon the number of refrigerated containers on 24 board. This will vary over the year. A typical load is 25 about 1.5 megawatts, but for a voyage where the ship is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 carrying the maximum number of refrigerated container, the 2 power requirements for refrigeration would be about seven 3 megawatts. 4 --o0o-- 5 AIR RESOURCES ENGINEER CHIN: Passenger ships 6 represent a much smaller percentage of the total visits to 7 California ports. Although they have short berthing 8 times, the high power requirements result in significant 9 hoteling emissions. 10 --o0o-- 11 AIR RESOURCES ENGINEER CHIN: The last ship 12 category covered by the proposed regulation is 13 refrigerated cargo ships or reefers. These type of ships 14 bring fresh produce such as bananas to the west coast. 15 This category represents only about three percent 16 of the total ship visits and four percent of the total 17 at-berth emissions, but they are good candidates for shore 18 power because of their long berthing times, high power 19 requirements, and frequency of visits. 20 --o0o-- 21 AIR RESOURCES ENGINEER CHIN: Staff will 22 continues to evaluate the other ship categories and 23 develop a proposal to reduce hoteling emissions from these 24 categories as well as tugboats. Staff expects to bring 25 these measures to the Board in the late 2006. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 --o0o-- 2 AIR RESOURCES ENGINEER CHIN: I will now discuss 3 the requirements of the proposed regulation. 4 --o0o-- 5 AIR RESOURCES ENGINEER CHIN: I meant 2008. 6 Sorry about that. 7 The proposal was designed the maximize cost 8 effective reductions of diesel PM and NOx hoteling 9 emissions. The proposal also seeks reductions on the most 10 expeditious schedule possible. Implementation of these 11 requirements will also result in a significant reduction 12 of CO2, a greenhouse gas. 13 The proposal affects the ship categories most 14 suitable for shore power: Container ships, passenger 15 ships, and reefer ships. 16 The proposal will require ship fleets that make 17 more than 25 visits to a port to reduce emissions of PM 18 and NOx by at least 80 percent by 2020. The proposal 19 reduces hoteling emissions by reducing the use of the 20 ship's auxiliary engines by the ship is docked. 21 While the proposal does not specify that grid 22 based power must be used, staff expects that this will be 23 the primary compliance option. Additionally, the proposal 24 allows the use of other alternatives that achieve the same 25 level of reduction as those expected to be achieved with PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 grid-based power. These alternatives include the use of 2 distributed generation, or DG, or the use of emission 3 control techniques either on the ship or located at the 4 terminal. 5 Finally, the schedules have been designed based 6 on the time needed to fully implement the selected 7 technology and to require all ships to use shore power if 8 available. 9 --o0o-- 10 AIR RESOURCES ENGINEER CHIN: The proposal 11 affects 31 terminals that operate at the six ports. Each 12 of these terminals operates independently from one another 13 and in most cases independently from the port authority. 14 Of the 31 terminals affected, 25 are container ship 15 terminals, four are passenger ship terminals, and two are 16 reefer terminals. Seventeen of the terminals, over half, 17 will be at the ports of Long Beach and Los Angeles. 18 --o0o-- 19 AIR RESOURCES ENGINEER CHIN: Each terminal will 20 have one to four berths that will need to have shore power 21 equipment added to the berth. This slide shows the total 22 berths affected by the proposal for each port. 23 --o0o-- 24 AIR RESOURCES ENGINEER CHIN: The proposal 25 requires substantial efforts by the terminal operators and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 ship operators. The slide shows the major commitment that 2 will need to be made by both the terminals and ship 3 operators, based on the ship visit criteria in the 4 proposal. 5 Thirty-one terminals at six ports will be 6 affected. We expect these terminals will add grid-based 7 power equipment are other equivalent controls to an 8 estimated 44 berths by 2014 and to an additional 32 berths 9 by 2020. Similarly, for the ship operators, we expect 10 about 300 ships to be equipped to satisfy the 2014 goal 11 and an additional 450 ships by 2020. 12 Ships are periodically redeployed to other 13 routes. As this occurs, the replacement ships must also 14 be equipped to except shore power. Staff estimates 15 another 700 containers ship could need to be equipped due 16 to redeployment. 17 --o0o-- 18 AIR RESOURCES ENGINEER CHIN: Substantial capital 19 investment will be necessary to provide the power to those 20 vessel operators that want to plug in. Using grid-based 21 power requires substantial modification to terminal 22 infrastructure including modifying the electrical system 23 at an operating facility. These modifications will take 24 longer if additional power needs to be brought to the port 25 in general. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 The complexity of these modifications will vary 2 from terminal to terminal. Additionally, the requirements 3 of the California Environmental Quality Act also need to 4 be satisfied. Overall, staff believes it will take up to 5 five years before all 31 of the affected terminals could 6 be equipped to use grid-based power. 7 Grid-based shore power is a proven technology. 8 The U.S. Navy has been employing shore power for decades 9 around the world. Passenger ships in Juneau, Alaska and 10 Seattle use shore power, as do a couple of container 11 berths at the port of Los Angeles. 12 Based on our discussions with port staff, the 13 ports of Long Beach, Los Angeles, San Diego, and 14 San Francisco plan to primarily satisfy the requirements 15 of the proposal with a grid-based approach. These four 16 ports are pursuing grid-based shore power because the 17 utility grid is reliable, can handle the full range of 18 electrical requirements for various ships, and is a proven 19 technology. Once it is constructed, it is easy to 20 implement and maximizes emission reductions at the port. 21 --o0o-- 22 AIR RESOURCES ENGINEER CHIN: Grid-based shore 23 power applications are currently planned in California. 24 Late last year, the ports of Los Angeles and Long Beach 25 jointly approved their Clean Air Action Plan. The plan PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 includes a commitment to modify 22 container and passenger 2 ship berths, 15 of them existing berths, and establish a 3 timetable to use grid-based power for 1,000 visits by mid 4 2011. 5 Today, China Shipping and NYK operate two berths 6 for container ships using shower power or alternative 7 maritime power, AMP, as referred to by the port of Los 8 Angeles. By the end of the next year, grid-based power 9 will be used for to more container berths, a tanker 10 terminal, and two berths at a cruise terminal at the two 11 ports. 12 --o0o-- 13 AIR RESOURCES ENGINEER CHIN: The proposed 14 regulation offers the flexibility of using alternative 15 methods of compliance instead of grid-based power. Under 16 the proposed emission reduction implementation schedule, 17 the ship operators and terminals use individual methods or 18 a combination of shore power or power from DG technology 19 or emission control techniques such as different fuels and 20 post-combustion emission controls. 21 At this time, many of the potential alternative 22 methods of compliance have been demonstrated in concept, 23 but have not been applied to marine applications 24 commercially. For example, the DG concept has been 25 demonstrated during a single visit of a container ship and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 under partial load conditions. Using DG power can 2 potentially reduce hoteling emissions by 85 percent, 3 assuming all the ships electrical needs can be satisfied 4 and the connection is quickly achieved. 5 Additionally, some ship operators are exploring 6 on-board methods. For example, a demonstration using 7 emulsified fuel is nearly complete, which can reduce NOx 8 emissions up to 20 percent and PM emissions up to 70 9 percent. 10 --o0o-- 11 AIR RESOURCES ENGINEER CHIN: For terminals using 12 DG systems, the proposal contains minimum NOx and CO2 13 emissions standards applicable for these systems. 14 Prior to 2014, the initial NOx standard allows 15 the use of a relatively clean IC engine without add-on 16 emission controls. After 2014, when the requirement for 17 grid based systems becomes effective, any shore technology 18 will be required to satisfy emission standards consistent 19 with the implementation of best available control 20 technology. The resulting emissions will be closer to the 21 emissions from the utility providing grid power. 22 To ensure greenhouse gas benefits, the proposal 23 requires CO2 emissions be no greater than the CO2 24 emissions from any of the utilities natural gas fueled 25 power plants. We believe that in most cases the utility PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 will use natural gas fueled power plants to provide the 2 power for these ships. 3 --o0o-- 4 AIR RESOURCES ENGINEER CHIN: Similarly, there 5 are significant CO2 emission reductions using shore power. 6 The proposed regulation would cap CO2 emissions from DG 7 equipment at the same level recommended by the Public 8 Utilities Commission and the Energy Commission for 9 unspecified sources of power, a combined cycle gas turbine 10 producing 500 grams per kilowatt hour. 11 Actual CO2 emissions to create the electricity 12 needed for shore power are likely close to the emissions 13 from marginal grid electricity. According to the grid 14 analysis by the Climate Action Team, this is best 15 represented by a modern combined cycle gas turbine but 16 with 20 percent renewables in the mix. 17 In any case, the use of shore power will maximize 18 the potential for CO2 emission reductions. The grid has a 19 smaller carbon footprint than most technologies used for 20 DG. In addition, as AB 32 measure require the cleanup of 21 California's grid, the greenhouse gas benefits of 22 grid-based shore power will be more pronounced. 23 --o0o-- 24 AIR RESOURCES ENGINEER CHIN: Based on public 25 comments and staff's own evaluation, we are proposing a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 revised implementation schedule. The schedule is simpler 2 than the original proposal, consisting of two compliance 3 options, a grid-based power option, and an emissions 4 reduction that is technology neutral. 5 The compliance time lines are consistent with the 6 ability to deploy the technologies. Both options are 7 required to achieve 50 percent reduction and 80 percent 8 reduction in 2014 and 2020 respectively. 9 We have added a 70 percent reduction requirement 10 in 2017 to assure reasonable progress toward the 2020 11 goal. And we have also provided flexibility in the early 12 years for alternative technologies that achieve early 13 emission reductions. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: To provide 16 incentives for early emission reductions, staff proposes 17 to allow some time averaging under the emission 18 performance option. Reductions achieved early than or in 19 excess of the 2010 requirement can be used toward meeting 20 the 2012 or 2017 requirements. 21 Similarly, reductions achieved in excess of 22 either the 2010 or the 2012 requirement can be used toward 23 meeting the 2017 requirement. This allows those ship 24 fleets achieving early emission reductions some greater 25 flexibility with later requirements. Never the less, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 2014 and 2020 performance requirements must be met under 2 either option and serve as a floor for the required 3 emission reductions and ensure full benefits are delivered 4 by these two keys milestone years. 5 There was some concern expressed about switching 6 from the grid-based option to the emission reduction 7 option, thereby circumventing the earlier interim 8 performance targets. Staff proposes that such a switch 9 would only be allowed if the fleet operator were meeting 10 the current interim target immediately. 11 --o0o-- 12 AIR RESOURCES ENGINEER CHIN: Here's the revised 13 schedule. The proposal requires that all ships must use 14 shore power if they are equipped to do so and it is 15 available at the berths. 16 So emission reductions will occur with the grid 17 perfect power option before 2014. 18 Both options must achieve 50 percent reductions 19 in 2014 and 80 percent reductions in 2020. In addition, 20 the emissions reduction option has two earlier performance 21 standards in 2010 and 2012. These will assure that 22 emission reduction techniques that can be deployed in an 23 earlier time frame will be deployed. 24 --o0o-- 25 AIR RESOURCES ENGINEER CHIN: The proposal PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 requires by July of 2009 terminal operators to submit 2 plans declaring the types of shore side infrastructure 3 that will be installed based upon the compliance options 4 chosen by the fleets visiting that terminal. 5 These plans will require the coordination of the 6 ship operators, the terminal operators, the ports, and the 7 local utility companies. Staff is confident that this 8 level of coordination will occur, that the necessary and 9 required emission reductions will be achieved in a timely 10 and cost effective manner. 11 The terminals are also required to provide follow 12 up reports to the Executive Officer indicating that 13 progress toward implementing the plan to install 14 infrastructure. Similar planning and reporting 15 requirements are applicable to the ship fleets. 16 --o0o-- 17 AIR RESOURCES ENGINEER CHIN: I will now discuss 18 the air quality benefits associated with the proposal. 19 --o0o-- 20 AIR RESOURCES ENGINEER CHIN: This slide shows 21 the estimate emission reductions achieved by the proposal 22 for the years 2014 and 2020. These reductions assume that 23 the emission reductions are the result of power being 24 provided by the grid. Staff believes that power will be 25 likely provided combined cycle power plants. A range is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 given for CO2 reductions from these plants based on the 2 different estimates provided by the PUC and the Climate 3 Action Team as discussed earlier. 4 In summary, the proposal will yield substantial 5 reductions in NOx, PM, and CO2. 6 --o0o-- 7 AIR RESOURCES ENGINEER CHIN: This slide shows 8 the NOx emissions from the three ship categories: 9 Container, passenger, and reefer ships. These emissions 10 are more than 80 percent of the total hoteling emissions 11 from all ship categories, include the impact from 12 implementing the auxiliary engine fuel regulation. 13 Because the expected growth in goods movement and the 14 cruise industry, NOx emissions could double between 2006 15 and 2020 without mitigation measures. 16 --o0o-- 17 AIR RESOURCES ENGINEER CHIN: This chart 18 illustrates the substantial NOx emissions reductions 19 achieved by the proposal reducing emission despite 20 substantial growth in port activity. The early reductions 21 starting in 2009 are mainly from the implementation of the 22 San Pedro Bay Ports Clean Air Action Plan. 23 As I mentioned previously, the two ports hope to 24 use grid-based power for 1,000 visits by mid 2011. This 25 level is half of the visits necessary to achieve the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 50 percent reduction 2014 goal from each of the affected 2 fleets at the ports of Long Beach and Los Angeles. 3 --o0o-- 4 AIR RESOURCES ENGINEER CHIN: This slide shows 5 the diesel PM emissions for the same ship categories. As 6 you can see, the implementation of the auxiliary engine 7 regulation, which was adopted by the Board in 2005, will 8 reduce diesel PM emissions every year until 2010 when the 9 auxiliary engine regulation will be fully implemented. 10 Again, the expected growth in goods movement and cruise 11 activity could increase the diesel PM emission from 2010 12 levels to about 70 percent by 2020 without further 13 mitigation. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: This chart shows 16 the reductions in diesel PM resulting from the proposal. 17 Similar to the previous chart, the top line represents the 18 base emissions from the three ship categories reflecting 19 the auxiliary engine regulation. The proposal would 20 prevent any emission increases resulting from the growth 21 in goods movement and cruise activity and further reduce 22 emissions by about 75 percent. Overall, the two rules 23 result in a 95 percent decrease, despite tremendous growth 24 in the number of containers handled. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 AIR RESOURCES ENGINEER CHIN: In the Clean Air 2 Action Plan, both San Pedro bay ports anticipate adding 3 shore power equipment to 22 berths by mid 2011, 4 accommodating 1,000 ship visits. 5 The proposed regulation meshes with the Clean Air 6 Action Plan but goes well beyond it. To meet the 7 requirements of the proposed regulation, the ports of Long 8 Beach and Los Angeles will have to double the number of 9 ships visits using shore power in 2014, thirty months 10 after the current Clean Air Action Plan commitments. 11 They more than double ship visits again to meet 12 the 2020 emission reduction goals. An additional 20 13 berths would need to be equipped with shore power 14 capability. Staff believes that this is an aggressive but 15 achievable goal. 16 --o0o-- 17 AIR RESOURCES ENGINEER CHIN: By significantly 18 reducing the diesel PM and NOx at-berth emissions, the 19 proposal will provide significant health benefits. Staff 20 has evaluated the impact of the proposal on the 21 near-source cancer risk for the ports of Los Beach and Los 22 Angeles and have determined that the proposal would 23 significantly reduce-near source cancer risk near these 24 ports. Staff believes similar benefits would occur at the 25 other ports affected by this proposal. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 --o0o-- 2 AIR RESOURCES ENGINEER CHIN: The other health 3 benefits shown in the slide are the cumulative benefits 4 achieved over the years 2009 through 2020. 5 --o0o-- 6 AIR RESOURCES ENGINEER CHIN: I will now discuss 7 the estimated costs of this proposal. 8 --o0o-- 9 AIR RESOURCES ENGINEER CHIN: These costs are 10 based on the implementation of the grid-based 11 infrastructure on the shore side. Staff estimates the 12 overall costs, in 2006 dollars, would $1.8 billion. 13 The majority of the cost will be for equipping 14 the ships with shore power equipment. This cost is based 15 on the modification of nearly 80 berths at six ports and 16 the equipping of over 1,400 ships. Costs would be 17 significantly lower if new ships are designed to use grid 18 power or if shipping companies minimize ship redeployment. 19 --o0o-- 20 AIR RESOURCES ENGINEER CHIN: This slide shows 21 the cost effectiveness of the proposal. Two methods for 22 estimating cost effectiveness were used. The cost 23 effectiveness values given at the top of the chart are 24 based upon the entire cost being assigned to a single 25 pollutant. The cost effectiveness values at the bottom of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 the chart are based upon half of the total costs assigned 2 to NOx emissions and the other half assigned to diesel PM 3 emissions. 4 The $6.00 per pound of NOx reduced is well within 5 the cost effectiveness of the other measures adopted by 6 the Board. 7 The PM cost effectiveness values are high due in 8 part to the previously approved auxiliary engine 9 regulation which reduces PM emissions by 70 percent. 10 Consequently, these values are above cost effectiveness of 11 regulations previously approved by the Board. 12 In summary, while the proposal will require 13 significant capital investment, it is a cost effective NOx 14 regulation and also achieves significant reductions in 15 diesel PM and CO2. 16 --o0o-- 17 AIR RESOURCES ENGINEER CHIN: State funding will 18 likely be available to partially offset the costs for 19 projects that achieve reductions well ahead of the 20 requirements of the proposal. 21 For example, the Proposition 1B bond funding 22 could make substantial funding available for shore side 23 infrastructure improvement for projects used in goods 24 movement. 25 The specific guidelines of the program will be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 presented for the Board's consideration early next year. 2 Carl Moyer funding, which is administered by local 3 districts, may be available for the projects that satisfy 4 the program criteria. Moyer funds could be used to assist 5 conversion of cruise terminals. The availability of these 6 funds vary by district. 7 To qualify for funding from either program, the 8 reductions need to be achieved three years prior to the 9 regulatory deadline and satisfy the applicable program 10 guidelines. Additional incentive funds are expected from 11 some of the ports themselves. 12 --o0o-- 13 AIR RESOURCES ENGINEER CHIN: As discussed 14 earlier, staff is proposing revisions to the 15 implementation schedule, compacting four schedules into 16 two, and more closely aligning the schedules between 17 grid-based option and the option that contains alternative 18 emission reduction techniques. 19 Staff also proposes to revise the definition of 20 fleet and person to add clarity and add a definition of 21 regulated California waters. 22 To accommodate these proposed revisions, staff 23 must make a number of revisions to the recordkeeping, 24 reporting, and planning requirements. Staff proposes to 25 add a method for determining the point in the compliance PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 period at which a violation has occurred. Staff is also 2 proposing several technical modifications that include 3 incorporating standards for ammonia slip on ships using 4 selective at catalytic reduction systems and additional 5 plan requirements for terminals and ship operations. 6 --o0o-- 7 AIR RESOURCES ENGINEER CHIN: Most of the 8 comments we received pertained to the original 9 implementation schedule. We believe that we have 10 addressed most of these comments with our revised 11 schedule. We have received other public comments. 12 Several commenters want more stringent and earlier 13 performance standards in the implementation schedule. 14 Staff believes that the recommended schedule is reasonable 15 and fair, is based on the time required to widely deploy 16 the emission reduction technologies, and that an 17 accelerated schedule cannot be successfully implemented. 18 Another commenter wanted best available control 19 technology to be applied immediately to distributed 20 generation technologies. Staff believes that there is an 21 incentive to make these engines as clean as possible in 22 order to achieve required emission reductions with less 23 equipment. 24 One commenter wanted the shore side 25 infrastructure plans to be required of the ports, not the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 terminals. Staff believes that terminal plans are 2 appropriate because of the working relationship between 3 the terminal operators and ship operators. It is the 4 ships that will be required to reduce emissions. We know 5 that to meet the requirements of this regulation, the ship 6 operators, the terminals, the ports, and the local utility 7 companies must work together. 8 --o0o-- 9 AIR RESOURCES ENGINEER CHIN: In summary, the 10 proposed regulation to reduce hoteling emissions from 11 oceangoing ships at California ports satisfy the goals of 12 the Goods Movement Plan and the Diesel Risk Reduction Plan 13 by reducing both NOx and diesel PM by 80 percent by 2020. 14 Additionally, the proposed 2014 milestone assists 15 the South Coast AQMD's efforts to attain the PM2.5 and 16 ozone standards. 17 Staff has demonstrated that the proposed 18 regulation is cost effective. Therefore, staff recommends 19 that the Board adopt the proposed regulation with staff's 20 proposed modification. 21 This concludes my presentation. At this time we 22 would be happy to answer any questions. 23 EXECUTIVE OFFICER GOLDSTENE: Thank you, Grant. 24 I want to reiterate for the Board that this rule 25 will do four things that we're very concerned about. One, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 it relates to the Diesel Risk Reduction Plan, the State 2 Implementation Plan, the Goods Movement Plan, and the 3 Greenhouse Gas Reduction Plan. So it's an important rule. 4 CHAIRPERSON NICHOLS: Thank you for that. I 5 believe we also have a statement from the Ombudsman about 6 the public participation process. 7 OMBUDSMAN QUETIN: Thank you, Chairman Nichols 8 and members of the Board. 9 This proposed regulation has been developed with 10 input from ports, utilities companies, shipping companies, 11 terminal operators, environmental groups, planning 12 coalitions, distributive generation and alternative 13 control technology companies. Shore power consultants 14 construction consultants, shipping and petroleum 15 associations, and labor unions. 16 Staff began their efforts in November 2004 with 17 the development of a draft shore power evaluation report. 18 Development of the regulation began in January of this 19 year. Between then and November of 2007, they have held 20 ten work group meetings and workshops. These meetings 21 included two workshops held during evening hours in 22 community centers in Wilmington and west Oakland. 23 On average, 40 to 50 people attended the workshop 24 meetings. Some of them attending via webcast or 25 teleconference. In addition, staff's outreach efforts PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 including over 170 personal contacts via telephone calls 2 and individual meetings. 3 Staff also made numerous visits to California 4 ports during this time that included meetings with port 5 representatives as well as tours of specific activities at 6 the ports. 7 At one of these meetings, they toured a container 8 ship that was equipped with shore power capability and 9 observed the demonstration of a portable distributive 10 generation power source for powering container ships while 11 in port. 12 The staff report was released for public comment 13 on October 19th, 2007. It was noticed on the ARB website, 14 and an internet message was send to the over 2,000 people 15 on the shore power list serve. Thank you. 16 CHAIRPERSON NICHOLS: Very good. Thank you. 17 If there are no Board questions -- 18 SUPERVISOR HILL: I did have a question if I 19 could, Madam Chair. 20 First of all, I wanted to thank the staff. The 21 Bay Area District has worked closely with the port of 22 Oakland in an alternative fuel source. And you were very 23 accommodating and really worked closely and diligently I 24 think to come up with some solutions for that. So thank 25 you for that. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 The question I had -- and in reading this there 2 is a time element when the ship is docked to when the ship 3 that is to plug in if plug in is available. What is that 4 time? It said like three to five hours I remember or 5 something like that. I'm just looking for clarification. 6 Is it three hours to five hours -- and if it is three to 7 five, why wouldn't it be just as soon as you practically 8 can do it? 9 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: I'm 10 Mike Waugh, Manager of the Program Assistance Section. 11 In discussing this requirement with the carriers, 12 there is a period of time when, for example, there would 13 be an inspection by the homeland security up front or 14 maybe in the back of the visit before the vessel left. 15 There might be -- the ship might be held up at the last 16 minute because of coast guard and ship traffic. 17 So what we tried to account for here is that 18 essentially it should be applied as quickly as possible. 19 We think that were the revisions we put here with the 20 megawatt hours having to be shifted that that provides the 21 incentive to do it as quickly as possible, but 22 understanding that sometimes the vessel is not released 23 from homeland security up front or has been held up by the 24 coast guard in the back. So the three hours would be 25 required for ships that can synchronize their electricity. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 They don't know black. They synchronize their 2 electricity, and so they can leave more quickly. 3 The five hours is the rare occasion when you have 4 someone who looses power momentarily. They have to start 5 up their gyros again at the very end. So they need some 6 additional time. So the three hours would be one. Five 7 hours would be the other based upon our conversations with 8 the carriers, the inspections needed, the release by the 9 coast guard. 10 SUPERVISOR HILL: But if they can do it in two 11 hours or one hour, they wouldn't have to do it within that 12 period of time? 13 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Those 14 are maximum allowed times that we have in our regulations. 15 SUPERVISOR HILL: And the incentive. 16 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: The 17 incentive we have now would be if you're trying to get the 18 megawatt hours shifted over, you'd want to do that as 19 quickly as possible. It's not only the visit, but how 20 much power you reduced on board. So there's the incentive 21 to do it as quickly as possible with the understanding 22 that we would allow a maximum of three hours if you're 23 synchronized on the trip on the visit, a maximum of give 24 hours if you're not on the visited. We think the 25 incentive is built in there to do it more quickly. But PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 those are maximum allowable. 2 SUPERVISOR HILL: Thank you. 3 CHAIRPERSON NICHOLS: Any other Board questions 4 before we hear from the public? 5 BOARD MEMBER D'ADAMO: Question of staff and a 6 request of the commenters that will be coming up on the 7 issue of the 25 or less visits. I'm very comfortable with 8 what staff is proposing and think that you've had to walk 9 a very fine line here between public health and economic 10 impact. But I'm just a little uncomfortable on the 25 11 visits and curious what folks have to say about whether or 12 not this could get gamed. I guess it refers to fleets. 13 Could a dummy company be created so there could be more 14 visits. 15 And I just seems to be a relatively high number 16 perhaps in the out years. Not the early years. Seems 17 like a low number, and it would be appropriate in the 18 early years. But as we go out into the out years, the 19 question of staff and of the commenters should that number 20 be reduced. 21 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Thank 22 you. With the existing data that we have, for example, 23 with container ships, with the containers ships and with 24 the cruise ships that with this exemption that we have for 25 the occasional fleet visitor to California where it would PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 not be cost effective for the occasional fleet to show up, 2 that based on current data for the container ships, the 3 affected fleets made an average of 108 visits and the 4 exempt fleets made a visit average nine times. So there's 5 a break right there that either you're doing business in 6 California and making a lot of visits. Then you have the 7 stragglers that come. So we think we have really good 8 coverage there with container ships. 9 The same thing with cruise ships. You have these 10 large fleets like Celebrity or Carnival and Princess, and 11 then you have an occasional visitor from a different fleet 12 that would be exempt. 13 We have proposed some changes in the definition 14 of fleet and the definition of a person. We will be 15 getting wharfinger data annually from the ports. And with 16 the compliance reports that we'll be getting from the 17 vessel operators, we'll be able to determine whether or 18 not there are ships that are unaccounted for in fleets. 19 The wharfinger data does identity who the fleet 20 operator is. So we will be monitoring this. If we find 21 out there's some attempt to splinter a fleet, for example, 22 and to get an exemption, we'll be able to detect that very 23 quickly and would be willing to modify the regulation to 24 tighten that up. We think we have good coverage now. But 25 if something were to occur later, we'd be able to pick PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 that up quickly and modify the regulation if needed to be 2 modified. 3 CHAIRPERSON NICHOLS: Okay. Thank you. 4 Yes, Ms. Berg. 5 BOARD MEMBER BERG: Thank you. 6 As far as enforcement, could you talk a little 7 bit about enforcement and touch also upon what the 8 strategy is going to be and what will happen if power from 9 the grid may not available for whatever reason? 10 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Thank 11 you. There is a lot of recordkeeping involved with this 12 regulation. One of the reasons for that is that these 13 sources of emission leave the state. So it's not quite as 14 easy to be able to go out and do an inspection on any 15 particular ship. So we have very extensive recordkeeping 16 and reporting requirements in terms of enforcement. 17 We feel like because of the recordkeeping that we 18 will be able to determine whether compliance reports we'll 19 be able to determine compliance with this. We have a 20 proposal that we're going to try to determine a little bit 21 more clearly the nature of the violation when it occurs 22 with regard to these fleet averages. So we've been 23 working on a lot of recordkeeping and inspection in fact. 24 STATIONARY SOURCE DIVISION CHIEF FLETCHER: 25 Relative to your question on what happens if the grid is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 down and they cannot get power, they're not obviously 2 required to hook up. 3 But at this time, we're still making them 4 accountable for the emission reductions. And we think in 5 the event there was a major interruption in grid power 6 that necessitated a revision to that, then we would look 7 at this on case by case basis. And we have interrupts in 8 power from time to time. You know, we had them recently 9 with the fires in San Diego where the Navy shut off their 10 grid shore power. But we don't think it will be 11 sufficient to substantially change the requirements we 12 have for 50 percent and 80 percent on grid in those years. 13 BOARD MEMBER BERG: Thank you. 14 On the compliance, who is out of compliance if 15 the criteria isn't met? 16 STATIONARY SOURCE DIVISION CHIEF FLETCHER: The 17 ship owner operators would be responsible. And Floyd may 18 want to elaborate on that in terms of the violation. 19 SENIOR STAFF COUNSEL VERGARA: This is Floyd 20 Vergara, Senior Staff Counsel. 21 Bob is correct. The onus would be on the ship 22 operators to make sure they are in compliance with 23 basically the engine shut down requirements of the 24 regulation. And so if they are operating their vessels in 25 violation of the specified shut down requirements, then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 they would be found in violation and held liable for that. 2 BOARD MEMBER BERG: Thank you. You answered any 3 question. Thank you very much. 4 CHAIRPERSON NICHOLS: Any others? Okay. We have 5 18 witnesses. We're going to impose the three-minute rule 6 on testimony. There is a time keeper up here. If any of 7 you weren't here this morning, the light goes on so you 8 can see it when you're at the podium. If you get to the 9 three-minute point after the red light goes on, there's 10 also a really annoying buzzing sound. So I think it's 11 kind of a self-enforcing mechanism. 12 So we'll start out with Rhey Lee representing 13 Vice Mayor Bonnie Lowenthal from City of Long Beach, 14 followed by Diane Bailey, and Bonnie Holmes-Gen. 15 MS. LEE: Good afternoon, Chair Nichols and 16 members of the Board. My name Rhey Lee. I'm here to read 17 a statement on behalf of the Vice Mayor Bonnie Lowenthal 18 from the City of Long Beach. 19 I urge the adoption and implementation of 20 regulations to require oceangoing vessels to reduce their 21 emissions while docked at a California port. 22 I'm supportive of the strictest regulations that 23 would result in the greatest reductions of emissions in 24 the earliest possible time frame. Currently, ocean-going 25 vessels run diesel auxiliary engines while docked at berth PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 to run on-board equipment. According to the CARB staff 2 report, these vessel generated 1.8 tons per day of diesel 3 particulate matter and 21.1 tons per day of nitrogen oxide 4 in California in 2006. 5 I have promoted and supported cold ironing as an 6 alternative power at the port of Long Beach since 2001 7 when I was first elected. The health of communities 8 adjacent to the port and throughout the state of 9 California are being negatively impacted by the harmful 10 pollutants generated by oceangoing vessels docked at 11 berth. These harmful pollutants cause and elevate serious 12 health problems such as the risk of cancer, respiratory 13 and cardiovascular illnesses, and premature mortality. I 14 urge you to adopt regulations to maximize emissions 15 reductions and protect our communities' health as early as 16 possible. 17 Thank you. 18 CHAIRPERSON NICHOLS: Thank you. And thank the 19 Vice Mayor for her testimony. 20 This gives me an opportunity to mention yesterday 21 when we held a press conference down in Long Beach to 22 announce in advance what was on the agenda here today, I 23 had the opportunity, but I thought I should do it again 24 here today, to acknowledge that these rules which are 25 statewide rules are a floor which local ports can go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 above. The ports themselves can have stricter regulations 2 of what goes on on their ports if they choose to do so 3 within the limits of their own legal authority. 4 And I want to acknowledge that, at least with 5 respect to Oakland and L.A. and Long Beach, there's a lot 6 of activity that's already going on at the local level. 7 So this is not a situation where ARB is coming into a 8 territory where nothing is going on. These are important 9 rules for us because of our legal authority and the 10 requirement that we act under state law. And these are I 11 think very strong rules. 12 But local districts and local ports are free to 13 do more if they want to. And I'm happy to say many of 14 them have chosen to do that. So just wanted to put that 15 out there on the record. 16 Okay. Diane Bailey. 17 MS. BAILEY: Good afternoon, Chairwoman Nichols, 18 members of the Board, and staff. My name is Diane Bailey. 19 I'm a scientist with the Natural Resources Defense 20 Council. And I'm here today in very strong support of 21 this rule. 22 We are so pleased to see this rule finally go to 23 the Board. As many of you know, we've been working on 24 this issue for many years now generally to get the ports 25 in California cleaned up and especially when it comes to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 the marine vessels to get them to shut their dirty engines 2 down and plug them in. 3 This issue is extremely important to the harbor 4 side communities in California where residents are facing 5 a staggering health toll. For example, in West Oakland, 6 not too far from where I live, children in West Oakland 7 face asthma rates of one in five. And so we don't have 8 any representatives here today from West Oakland, but this 9 rule is very important to them. And I just want to pass 10 on their thanks for bringing this rule. 11 We've submitted some detailed written comments, 12 and I just want to pull out some of those points. We 13 really appreciate staff's efforts to make some 14 improvements to this rule. And we just have a few 15 remaining concerns where we think some minor modifications 16 can strengthen this rule and prevent some loopholes in the 17 future. 18 One of them was mentioned a few minutes ago, and 19 it has to do with the threshold of ship visits, the 25 20 visit threshold for container and reefer ships and the 21 five visit threshold for cruise ships. We feel this 22 threshold is too high, and it could potentially be gamed. 23 And we're really hoping that thoughtful consideration 24 could be given to ratcheting that threshold down. At the 25 very least during final compliance in 2020. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 And our preferred threshold would be any more 2 than two visits per year to any California port. And when 3 you look at some of these fleets, there's definitely the 4 means there to pay for these modifications, especially 5 where the modifications have already been made on the 6 terminal side. 7 Another issue I want to bring up is the fact that 8 happily this is the first measure as an early action 9 measure under AB 32 and we are very pleased to see that as 10 well. We are a little concerned, however, that there 11 isn't a broader policy to prevent any greenhouse gas back 12 sliding with this rule. And by that I mean that some of 13 the alternative compliance strategies may causes increases 14 in greenhouse gases. And where there are no other 15 feasible means to comply, maybe that could be considered. 16 But in this case, we feel there are feasible alternatives 17 that would be positive on greenhouse gases, meaning we 18 would see reductions. 19 So I respectfully urge you to put in a no 20 greenhouse gas backsliding clause into this rule to 21 prevent that from happening. 22 And with that, I thank you very much and strongly 23 urge to you adopt this very critical rule. 24 CHAIRPERSON NICHOLS: Thank you very much. 25 Bonnie Holmes-Gen and then John Kaltenstein and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 Henry Hogo. 2 MS. HOLMES-GEN: Good afternoon, Chairwoman 3 Nichols and members. Bonnie Holmes-Gen with the American 4 Lung Association of California. 5 I'm also very pleased to be here supporting this 6 important regulation. We strongly support the Air 7 Resources Board moving forward to take action on this huge 8 source of diesel emissions, both to reduce the immediate 9 health threats in port communities and to enact an 10 important AB 32 early action measure. 11 And as you very well known, hoteling of ships is 12 generating a major public health threat in local 13 communities and contributing to our poor air quality 14 statewide. And we are pleased to see the Air Board acting 15 today. And one of our first messages is that it is 16 critical that you adopt this regulation today. And we 17 urge you not to delay, not to send the regulation back to 18 staff, that we need to adopt this regulation and move 19 forward. 20 This regulation will mean a tremendous amount to 21 communities that are living next to the ports. And I was 22 pleased that your staff calculated some of the health 23 impacts that would be avoided by the regulation. And we 24 can see on paper that we're going to be avoiding over 280 25 premature deaths, over 8,000 cases of asthma related PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 respiratory symptoms, hundreds of cases of acute 2 bronchitis. Tens of thousand of lost work days will be 3 avoided. This is a tremendous testimony to the importance 4 of this regulation. 5 As always, we do agree there should be some 6 strengthening of the regulation. We appreciate there's 7 been a lot of significant improvements made by the staff. 8 And we appreciate their hard work and still requesting 9 that you make a couple of significant modifications. And 10 the key one I wanted to mention is to agree with my 11 colleague, Diane Bailey, about our belief that you could 12 still accelerate the compliance time frame and add some 13 earlier targets for use of shore side power. 14 We believe that there is a strong basis for 15 accelerating the implementation and enforcement of this 16 regulation, because there are so many actions that are 17 already being taking at the ports of L.A. and Long Beach. 18 There is bond funding. Prop. 1B funds will be available. 19 There probably be other statewide funds available to 20 assist in implementation. And we believe we can do more 21 and get earlier public health benefits. We believe that 22 the regulation would be stronger if the two compliance 23 pathways were unified into one pathway with an early 24 emission reduction target starting in 2010. And that 25 would be consistent with the Goods Movement Emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 Reduction Plan. And we believe that should be a 20 2 percent reduction target. 3 So we would strongly ask you to consider speeding 4 up, accelerating the implementation time frames for this 5 regulation. 6 We also agree with the comments of Diane Bailey 7 about the need to strengthen the criteria for the coverage 8 of the regulation that should be on a per ship rather than 9 per visit requirement. And we need to look at 10 strengthening the criteria for passenger ships. 11 Okay. Last message is enforcement. We urge you 12 to watch closely over the enforcement. And we think that 13 you may need some additional resources and staff on this. 14 And we would like to work with you on that, because this 15 is going to be a huge effort, and we're going to need the 16 additional coverage to make sure that we're getting the 17 public health benefits, that we're getting emissions 18 reductions that are expected from this regulation. 19 Thank you. 20 CHAIRPERSON NICHOLS: Thank you. Appreciate it. 21 BOARD MEMBER BERG: Madam Chair, may I ask a 22 quick question? 23 Do you see in the infrastructure that there is 24 going to need to be environmental impact studies or CEQA 25 process in order to get the power to the fence and through PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 the port? 2 MS. HOLMES-GEN: I'm not sure. I mean I assume 3 there would be some environmental analysis that would have 4 to be done clearly. 5 BOARD MEMBER BERG: Thank you very much. 6 CHAIRPERSON NICHOLS: Okay. John Kaltenstein and 7 Henry Hogo. 8 MR. KALTENSTEIN: Good afternoon, Madam Chair, 9 Board members, and staff. I appreciate the opportunity to 10 comment on this important precedent-setting regulation. 11 My name is John Kaltenstein, and I'm here on 12 behalf of Friends of the Earth. Our organization supports 13 this rule, because it reduces harmful air emissions and 14 provides substantial public health benefits. This rule 15 particularly helps impacted port communities subject to 16 diesel pollution from trucks, ships, and locomotives. 17 Never the less, the rule can be strengthened to hasten 18 emission reductions. 19 First, we joined with eleven other environmental 20 and public health organizations in calling for 20 percent 21 of ship visits to use shore power by 2010 in accord with 22 the Goods Movement Emission Reduction Plan goals. 23 Second, emissions for passenger fleets and 24 container and reefer fleets should be modified. All 25 visiting passenger ships should use shore power at berth. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 Cruise lines have the highest power requirements while 2 hoteling, from five to eleven megawatts, and may stay in 3 port for extended periods of time resulting in significant 4 air emissions. 5 More over, cruise lines have the resources with 6 billions in revenues and profit and the capacity to make 7 necessary retrofits. 8 Container and reefer ships should also face a per 9 vessel threshold of two visits on top of fleet 10 requirements to inhibit companies from circumventing the 11 rule. In the least, if these exemptions are approved as 12 is, ARB staff should monitor their use to ensure they are 13 not abused. 14 And I just want to take out an example, too. It 15 is my understanding that even within the Carnival 16 umbrella, certain lines, because it only comes in a few 17 times into San Francisco would be exempted. And I think 18 just for the mass and the scale of a ship coming into port 19 and the impacts it would have, even though it only comes 20 in a few times, we believe it should be included within 21 the scope of this rule. 22 Lastly, Friends of the Earth urges the Board to 23 place high priority on the second phase of regulation for 24 tankers, vehicle carriers, tugboats, and cargo ships. And 25 I know that's on the agenda with priority for 2008 and to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 pick up the remaining 20 percent that was withheld from 2 this one. 3 And I'd like to commend Grant Chin, Tom Waugh for 4 their excellent work and look forward to working with them 5 again. Appreciate your time. Thank you. 6 CHAIRPERSON NICHOLS: Thank you very much. 7 Henry Hogo followed by Matt Davis and Scott 8 Johns. 9 MR. HOGO: Good afternoon, Madam Chair and 10 members of the Board. Henry Hogo, Assistant Deputy 11 Executive Officer of our Mobile Source Division at the 12 South Coast Air Quality Management District. 13 I do have a PowerPoint presentation along with a 14 handout that I provided to the clerk, and if that could be 15 brought up. 16 While they're bringing it up, I do want to 17 commend the staff also for all the hard work they put into 18 developing the proposed regulation. And the South Coast 19 AQMD staff is in general support of the proposed 20 regulation. However, we do have some recommended 21 enhancements to the proposed regulation which we believe 22 will help get additional emission reduction and reduce 23 population exposure earlier. 24 If we could go to the next slide, please. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 presented as follows.) 2 MR. HOGO: We're recommending that the proposed 3 implementation schedule be revised to the schedule that 4 was actually provided by staff in the October 2007 5 version. This is Section D(2)(b), which has the 20, 40, 6 and 60 percent schedule for 2010, 2012, and 2014. 7 In addition, it is critical that you set some 8 interim targets for the grid-based power option. At this 9 time, the only criteria that we have is that ships need to 10 use the shore power if available. We believe that you 11 need to set some sort of interim target, and we are 12 proposing that those interim target be the same as that 13 for the non-grid-based alternative or any combination. 14 Next slide, please. 15 --o0o-- 16 MR. HOGO: In order to provide some compliance 17 flexibility, we believe that it's going take a long lead 18 time for shore power or grid-based power to come in play. 19 So we believe that there is some compliance allowance that 20 would be necessary prior to 2014. 21 We're proposing that in the equivalency 22 demonstration could be done to achieve those targets on a 23 port wide basis. Basically, the proposed regulations on a 24 vessel operator basis at this time. So on the average, it 25 should come out to be the same port wide. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 In addition, we recognize that some berths, some 2 terminals cannot put end of infrastructure as early as 3 possible. So we believe some exemption prior to 2014 4 should be allowed. 5 Next slide. 6 --o0o-- 7 MR. HOGO: On the non-grid-based power option, we 8 strongly believe that any technologies should be at best 9 available control technology levels. And they should be 10 consistent with local air district regulations. As such, 11 we are proposing that the standard be set lower limit at 12 .2 grams per kilowatt hours prior to 2014 and .014 after 13 2014. 14 CHAIRPERSON NICHOLS: I want to interrupt you on 15 that for a moment. Because if somebody is going to be 16 installing a facility at a port that requires a permit 17 from you, you're going to be applying BACT requirements to 18 them anyway, aren't you? 19 MR. HOGO: We believe so. But it depends if the 20 equipment is considered portable and whether we allow that 21 to be considered. 22 CHAIRPERSON NICHOLS: Okay. 23 MR. HOGO: So that's the concern we have. 24 I do want to mention that a .03 is the average 25 utility base level at this time, and that will be in our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 local rule. That's coming before our Governing Board in 2 January. So we believe after 2014 that could be met. 3 Next slide. 4 --o0o-- 5 MR. HOGO: We did some analysis of what the -- 6 CHAIRPERSON NICHOLS: You can finish up. 7 MR. HOGO: We did some analysis of what the more 8 aggressive schedule would bring in terms of emission 9 reductions. 10 As you can see from this slide, by 2014, we can 11 see almost an additional two tons per day of NOx 12 reduction. As you know, we need those reductions for 13 South Coast. And we also looked at what the cost would be 14 to implement some of these technologies, and we based it 15 on a per container basis, a 20-foot container equivalent 16 unit. 17 And as you can see here, all these technologies 18 are about the same in cost. And we believe the vessel 19 operator of the ship can actually recoup this cost at a 20 nominal charge of only about two dollars per 20 foot 21 container. So we believe this is really not a costly rule 22 in the sense that the cost can be recouped over time. 23 And by last slide is to urge your Board adoption 24 of the proposed regulation and consider the revisions. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 CHAIRPERSON NICHOLS: Thank you very much. 2 Matt Davis from Port of Oakland, and Scott Johns 3 and Eric Witten. 4 MR. DAVIS: Good afternoon, Madam Chair and 5 members of the Board. My name is Matt Davis. I'm 6 representing the Port of Oakland. It's pleasure to be 7 here today. 8 I'd first like to thank the Board and staff, let 9 you know how much we appreciate the hard work and 10 consistent dialogue that have gone into crafting a rule 11 that will result in reduced emissions from oceangoing 12 vessels. But we have background from the outset. 13 The port of Oakland has expressed its serious 14 concerns over any rule that would mandate a power grid 15 only shore power requirement. In Oakland, the provision 16 of shore power through the grid is estimated to cost $90 17 million and could take years to implement at best. To put 18 that number in context, our annual maritime revenues are 19 approximately only in comparison $120 million, which would 20 create a severe hardship. And we're also backed by nearly 21 $1.5 million in debt due to previous improvements on our 22 terminals. 23 It would be difficult to recover these costs 24 through tariffs in our lease agreements as our position as 25 a discretionary port of call requires we provide the most PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 cost effective services and facilities to maintain our 2 business and continue to deliver economic benefits to 3 local, regional, and state economies. 4 That being said, we have reviewed the 15-day 5 revisions. And pending review of the final rule are 6 pleased to offer our support for the changes that create 7 incentives for early reductions and also create a level 8 playing field so that alternative reduction measures, such 9 as distributed generation systems, can continue to emerge 10 and mature. 11 These alternatives have the potential to deliver 12 near-term air quality benefits and also serve as a 13 long-term option for ports such as Oakland that might not 14 be able to deliver a cost effective grid power option. 15 We still have some unanswered questions as to how 16 this rule will accurately and reasonably calculate a 17 baseline level of fleet emissions for new and/or expanded 18 shipping activity that might occur after the rule is in 19 effect. For example, the port of Oakland is actively 20 marketing its facilities and hope to see growth in its 21 cargo throughput. We would be interested in learning how 22 new shipping lines and fleets that call on Oakland in 2012 23 or 2014, for example, will be able to calculate a 24 reasonable emissions reduction target when their baseline 25 level emissions in Oakland right now is essentially zero. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 On this and other questions that will certainly 2 arise, we look forward to continued dialogue with ARB 3 staff so this rule can help achieve the air quality 4 improvements that we all support, while still allowing for 5 the economic benefits and activity the port of Oakland 6 provides as an economic engine of the bay area. 7 So in conclusion, I'd like to again thank the 8 Board and staff. 9 And in reference to the earlier question that was 10 raised, in 2006, we had approximately 1900 unique ship 11 calls, of which 93 percent were of fleets composed of 25 12 or more vessels. So it's a very small fraction that we 13 would expect would not be subject to this rule. 14 CHAIRPERSON NICHOLS: Thank you for that 15 information. 16 Scott Johns, Eric Witten, and then Joy Williams. 17 MR. JOHNS: Good afternoon. My name is Scott 18 Johns, Clean Air Marine Power, a division of Clean Air 19 Logix. 20 First, we'd like to thank the staff for their 21 hard work on this regulation. Also for acknowledging that 22 alternative technologies are available today and that we 23 are able to meet the 2020 goals pretty much immediately. 24 We'd also like to urge the Board to go ahead and 25 vote for this regulation. Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 235 1 CHAIRPERSON NICHOLS: Thank you. 2 Eric Witten. 3 MR. WITTEN: Good afternoon, Madam Chair and 4 Board and staff. 5 I want to commend the staff for their diligent 6 and hard work over the past couple of years and personally 7 wanted to thank Grant Chin and Mike Waugh for their 8 professionalism. I met with them probably 18 or 20 times 9 in the last year maybe. And they've always treated me 10 with kindness and professionalism. 11 I've read the proposed 15-day revision and 12 support that revision and believe that it goes a long way 13 to allowing multiple technologies. And even those that we 14 don't know about today would be able to function under 15 this rule. 16 I believe that the regulation should be approved, 17 and I voice my support for that. And I want to thank 18 again the staff for the hard work and for listening and 19 taking the time to make the best regulation possible. 20 Thank you. 21 CHAIRPERSON NICHOLS: Appreciate that. 22 Joy Williams and then Jim Flanagan, Thomas 23 Jelenic. 24 MS. WILLIAMS: Hello. I'm Joy Williams from the 25 Environmental Health Coalition. We're a 27-year-old PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 236 1 nonprofit environmental health and justice organization in 2 the San Diego/Tijuana region. Environmental Health 3 Coalition signed onto the support letter submitted by 4 Candice Kim and other environmental and community 5 organizations, and we concur with their comments on the 6 shore power rule. 7 This is our first appearance before this Board on 8 a goods movement issue, and I would like to take the 9 opportunity to thank and commend the staff on their hard 10 work on development of both the ship and truck rules. 11 Environmental Health Coalition works in two low 12 income communities of color that are located adjacent to 13 San Diego Bay and the cargo terminals. Barrio Logan is 14 immediately downwind of the 10th Avenue terminal and the 15 old town community of National City, is a closest 16 neighborhood to the National City marine terminal. 17 Our community's concerns with diesel pollution 18 have led to a focus on the ports as a major source of both 19 pollution and truck traffic. A year ago, we asked the 20 port of San Diego to begin development of a green ports 21 plan, and the port did agree to development of a plan to 22 address the air quality impacts of port operations. 23 The first step, a baseline inventory of emission 24 sources, has been completed. The inventory confirms that 25 container ships and cruise ships are appropriate targets PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 237 1 for shore power in San Diego. Hoteling at berth is the 2 single largest source of both particulate and greenhouse 3 gas emissions in this analysis. The cruise ships and 4 reefers of the first and third top sources of emissions 5 respectively. So cold ironing of these ships is an 6 essential step in reducing exposure to diesel particulates 7 in Barrio Logan and other harbor side communities. 8 At the same time, we note that in San Diego the 9 bulk ships are also a large part of the current problem 10 and in fact comprise all the ships that berth in National 11 City. Auto carriers, for example, are the second top 12 source of pollutant emissions and greenhouse gases. And 13 bulk ship as a whole are fourth. 14 Cement ships make relatively few calls but stay 15 in port for seven to ten days at a time. And the port's 16 current maritime business plan identifies growth 17 opportunities in bulk fruit, steel other bulk cargo, so it 18 seems be probable the source of emissions will increase. 19 For this reason, we urge you to address the bulk 20 carriers in the near futures with a rule that requires 21 shore power or equivalent reductions for this emissions 22 source. 23 In conclusion, we support the shore power rule 24 for cruise and container ships and urge you to adopt it 25 with the amendments suggested by others, to add a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 238 1 threshold for individual ships, and to harmonize the 2 compliance time line for all the energy sources. 3 In addition, we hope to see emissions reduction 4 requirements extended to bulk ships in the future. Thank 5 you. 6 CHAIRPERSON NICHOLS: Thank you. 7 Jim Flanagan and then Thomas Jelenic. 8 MR. FLANAGAN: Madam Chairman, distinguished 9 Board members, thank you for allowing us the opportunity. 10 My name is Jim Flanagan. I represent Maersk, Inc., which 11 is an international steam ship company in the 12 containerized business. 13 It goes without saying that we are involved in 14 the port business in both Los Angeles, Oakland, and in 15 fact the entire west coast. To date, we have switched 16 fuels in 80 different vessels. Those vessels came into 17 port about 300 plus times. So we're very well versed in 18 switching fuels. 19 In addition, we have shown our commitment to the 20 environment in California by not only switching in the 21 auxiliary engines, but also switching in the main engines. 22 We believe we are the only company that is doing this to 23 date. So we're switching in the main engine also. 24 After reviewing the proposed regulation, we do 25 have a couple of concerns. One of them is that we need to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 239 1 have an even playing field regardless of the technology. 2 Regardless if you want to cold iron or you want to do an 3 alternative, we would like to see an even playing field. 4 So that basically we would appreciate the ARB setting 5 standards, setting time frames to meet those standards, 6 and then basically standing back and letting industry seek 7 the technology that will give you what you want with 8 regard to emission reductions. 9 We're really not against cold ironing, per se. 10 However, cold ironing is a shore-based technology that 11 does not travel with the vessel. As a global carrier 12 operating more than a thousand vessels worldwide, we 13 believe that the best solution stays with the vessel and 14 therefore transfers those savings in emissions to other 15 ports throughout the world. And as a global carrier, 16 that's what we are seeking, a solution that stays with the 17 vessel. 18 We've invested a lot of money over the years. 19 We've taken some firsts. We believe we're the first to 20 put an SCR unit on a vessel. We have done a waste heat 21 recovery, which captures the heat out of the smoke stack 22 and puts it back into energy to drive the vessel. 23 Right now we're working on a technology that we 24 think holds some real promise: an electronic scrubbing 25 device. However, again, the timing is critical to us. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 240 1 It's going to take some time to get this technology up and 2 running to where it will actually provide the emissions 3 that we think it is capable of doing. 4 We as a company hasn't shied away from our 5 commitment to clean up the environment. And it's always 6 been more or less a timing issue with us. Everyone we 7 think wants to clean up the environment. But there's a 8 timing issue as to how fast we can do that. 9 We have that commitment to the State. We have 10 that commitment more importantly to ourselves to clean up 11 the fleet. But we want to make sure that we do just that. 12 We clean up the fleet that travels throughout the world. 13 i want to thank you for your time. 14 CHAIRPERSON NICHOLS: Thomas Jelenic followed by 15 Tim Carmichael and then T.L. Garrett. 16 MR. JELENIC: Good afternoon, Madam Chair, Board 17 members. My name is Thomas Jelenic. I represent the port 18 of Long Beach. 19 The port of Long Beach appreciates the 20 opportunity to provide comments on the proposed shore 21 power regulation. The port has aggressively pursued a 22 comprehensive plan to achieve emission reductions from 23 ocean-going vessels while at berth. The initial plan was 24 incorporated into the Clean Air Action Plan, and major 25 steps are being taken to implement the port's commitment. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 241 1 Since the plan was adopted, the port has made 2 significant progress in providing the facilities necessary 3 to connect vessels to shore power. For example, at the BP 4 terminal, infrastructure is nearly complete and systems 5 testing is scheduled to begin within weeks. At the ITS 6 container terminal, electrical system improvements are 7 underway and the system is on schedule for a May 2008 8 start up. 9 Engineering design for the retrofit of four 10 berths at two other container terminals is also underway. 11 The cold ironing rule as proposed is supported by the port 12 of Long Beach. 13 While the port supports the proposed regulation, 14 we also wish to bring to the Board's attention that the 15 proposal by some groups to accelerate the proposed 16 schedule is unrealistic for a number of reasons. Two 17 items are at issue. The schedule for providing grid-based 18 power and the viability of alternatives to grid-based 19 power. In order to accomplish the required capacity 20 enhancements as well as ensure that service to each 21 terminal is enhanced to accommodate additional loads, the 22 port and Southern California Edison are working in concert 23 in this effort. Given the phased nature of the work, we 24 have limited ability to move up completion of the initial 25 work. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 242 1 Another concern is the impact the retrofitting of 2 existing terminals will have on the tenants and cargo 3 moving operations. To construct the infrastructure 4 necessary to connect the vessel to shore power, large 5 segments of an operating terminal must be disrupted to 6 install underground conduits. Ship berths must be taken 7 off line to install the outlets at the wharf. And the 8 terminal electrical system must also be upgraded, which 9 requires system-wide outages. 10 We are working to carefully plan for how multiple 11 concurrent retrofit projects can take place while 12 minimizing the delay in cargo movement. We do not believe 13 acceleration of the implementation schedule could be 14 achieved. While the port envisions that alternatives to 15 grid-based power have an important place in reducing 16 emissions from ships that technology is not currently 17 mature, cannot meet the power needs of many vessels, and 18 will be most suitable for vessels not targeted by the 19 proposed regulation such as bulk vessels. 20 A disadvantage to distributed generation systems 21 is that a significant amount of space is required on the 22 wharf adjacent to the vessel. As a result, the proposed 23 technology would not eliminate the need for infrastructure 24 or save time. Since, unlike some other ports, the 25 terminals at the port of Long Beach do not have space in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 243 1 front of key cranes to position such equipment. Such 2 equipment would need to be located in terminal backlands 3 with the necessary trenching and wharf improvements 4 constructed at the berth. 5 While relying on the alternative technology while 6 following the path to grid-based power would potentially 7 double the cost of the emission reductions strategies 8 while straining the resources of the port's engineering 9 staff to meet the near term and long term cold ironing 10 solutions? 11 CHAIRPERSON NICHOLS: Mr. Jelenic, could you 12 summarize, please? We do have your letter. We can read 13 faster than you can talk. 14 MR. JELENIC: Okay. Finally, it's important to 15 note that the port does not operate marine terminals. 16 Rather, we lease facilities and act as a landlord. The 17 regulation has appropriately assigned responsibility where 18 it belongs, with shipping lines and terminal operators. 19 Thank you very much. 20 CHAIRPERSON NICHOLS: Thank you very much. 21 Appreciate your support. 22 Tim Carmichael, T.L. Garrett, Nicole Shahenian. 23 MR. LLOYD: Chair Nichols, Bob Lloyd with AGP 24 Video again. 25 The digital sound that you are hearing is due to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 244 1 Blackberry phones. So if you have a Blackberry or iPhone, 2 if you could shut them off. 3 CHAIRPERSON NICHOLS: I turned mine off. It's 4 not me. 5 MR. CARMICHAEL: Good afternoon. Tim Carmichael, 6 Coalition for Clean Air. 7 Let me start with just an appreciation of the 8 fact that we are here today. I was working on this issue 9 on some level almost ten years ago when Sharla Pear 10 working with ACUREX and U.S. EPA and ARB first started to 11 breakdown where were all the emissions coming from the 12 ports complex. You know, the ships off-shore, the ships 13 in port, the trucks, the docks side equipment. And the 14 fact that we are here almost ten years later, it's been a 15 long time, but it's also really good that we are here. 16 And I know that the ARB staff, many of them have been 17 working on it for longer than I was even aware of the 18 problem, and I appreciate that as well. 19 Many of the comments I was going to make have 20 been made by my colleagues, Diane Bailey from NRDC and 21 Bonnie Holmes-Gen from American Lung. I want to emphasize 22 there are dozens of activists around the state working on 23 this issue, and many of them here in southern California. 24 And I want to remind you the reason they're not here today 25 is not that they don't care. There is a very important PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 245 1 hearing down at the ports, a precedent-setting EIR hearing 2 for one of the large marine terminals. And that has many 3 of our colleagues engaged elsewhere today on a similarly 4 important issue. 5 But the bottom line is the ships in port are huge 6 sources of pollution. And there are multiple ways to 7 address that. And we believe that the ARB staff has done 8 a good job in capturing that in this regulation. That 9 said, we do agree with the South Coast that ARB could push 10 further sooner and require an accelerated schedule. And 11 that adding to this ARB proposal a BACT requirement as the 12 South Coast requested we think is an appropriate thing to 13 do. 14 Again, we thank the staff very much for the work 15 they've done and we appreciate that we are here and ARB is 16 moving on this very, very important issue. 17 CHAIRPERSON NICHOLS: Thank you for holding down 18 the fort. We appreciate that. 19 BOARD MEMBER BERG: Madam Chair, could I ask a 20 question? 21 CHAIRPERSON NICHOLS: Yes, please. 22 BOARD MEMBER BERG: Mr. Carmichael, since you so 23 noted that so many of your colleagues are down at the port 24 on an EIR matter, do you see EIR or CEQA issues being part 25 of this process. And if so, are you in a position or your PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 246 1 colleagues in a position to help move this process along 2 if we were to look at trying to accelerate? 3 MR. CARMICHAEL: Yes to the first question. 4 Now I'm not a CEQA attorney by any stretch of the 5 imagination, not even an attorney. We do assume that for 6 the larger infrastructure projects there will need to be a 7 CEQA review and there will be a process involved with 8 that. 9 That said, to the extent that the ports and the 10 construction crews are using clean equipment to do the job 11 and proposing to do that and that the project is designed 12 as we've been talking about to reduce emissions from the 13 system as a whole, we believe that the vast majority of 14 people that are commenting are going to comment favorably 15 and say let's get this done soon. 16 BOARD MEMBER BERG: But it would be fair to 17 say -- it's important that the process take place and that 18 just takes time. 19 MR. CARMICHAEL: It takes some time. 20 BOARD MEMBER BERG: Appreciate your comment. 21 MR. CARMICHAEL: Just one final point. The South 22 Coast AQMD never forgets about CEQA. So part of their 23 review and analysis and part of what they presented I'm 24 certain took that into consideration. And nobody is 25 suggesting that the time line that the South Coast has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 247 1 advocated for and that we support is easy. But it's 2 doable. And that's where we are coming from. We need to 3 be pushing as much as we can push. 4 BOARD MEMBER BERG: I would submit on the other 5 side they would say we are pushing them. So just trying 6 to find that balance. Thank you for your comment. 7 CHAIRPERSON NICHOLS: Thanks. 8 T.L. Garrett and then Nicole Shahenian. 9 MR. GARRETT: Madam Chair, honorable Board 10 members, my name is T.L. Garrett representing the Pacific 11 Merchant Shipping Association. We represent ocean 12 carriers and terminal operators on the west coast of the 13 United States that move approximately 90 percent of the 14 containerized cargo in and out of the United States. 15 We have a number of concerns remaining on this 16 regulation. I want to command staff as well. They've 17 been great to work with. They've sat down and listened to 18 our concerns. They scheduled special meetings with our 19 members to address the concerns. But there are still a 20 number of them outstanding. 21 Just the highlight some of them, our biggest 22 concern has to do with the terminal operator being 23 responsible for the plant. We believe that is 24 inappropriate. We think since we have no land use 25 authority, no ability to do CEQA or issue permits to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 248 1 ourselves, that it would be more appropriate on a port 2 wide basis to assign that responsibility to the port 3 authorities, have them do the planning documents, do the 4 appropriate approvals, and also through their leasing 5 authority amortize the cost again the broad number of 6 terminal operators to take out some of the variability 7 that's reflected in the cost effectiveness numbers here. 8 We also think that this is an instance where the 9 industry is far ahead of the public sector. We have more 10 vessels out there today that are capable of being plugged 11 in then there are plugs for the vessels. 12 The staff report acknowledges the large number of 13 companies that have proactively taken measures, not just 14 for cold ironing, but for other technologies to address 15 these issues at the berth for the public health of the 16 citizens in California. We are very proud of that. And 17 if you look at the Clean Air Action Plan, those efforts, 18 your regulation essentially becomes a backstop measure for 19 the Clean Air Action Plan. So there's no real analysis -- 20 today is the first time I've seen an attempt by staff to 21 quantify the additional benefits of this regulation beyond 22 the Clean Air Action Plan. We think more work needs to be 23 done on that. 24 We think that staff is going to move forward and 25 place that responsibility on the terminal operators. At PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 249 1 the very least, staff should be committed to coming up 2 with detailed criteria so that as we are preparing these 3 plans and talking about the number of terminals that you 4 saw earlier, if we're preparing these plans, we know what 5 it's going to take to get these plans approved when 6 they're actually submitted. 7 On another fairness issue, if a power utility 8 cannot provide power to the ships through no fault of the 9 ship operator, they shouldn't be penalized for the failure 10 by the power utility. That should not be counted in their 11 overall compliance. 12 Finally, on the 15-day changes, we have one 13 significant concern. And it has to do with the language 14 that ships must use shore power if available. Some of the 15 terminals have gone ahead and provided for shore power. 16 Are we now to assume that because of their proactivity all 17 vessels now calling at those terminals are going to be 18 required to plug in? It's a question to staff we haven't 19 had the opportunity to ask. But we think it's a key 20 question, because I don't think you want to penalize early 21 compliance behavior. I think the intent was actually to 22 provide a mechanism to develop credits. 23 Bottom line, we think the voluntary efforts that 24 have been demonstrated by the industry should speak for 25 themselves. The Clean Air Action Plan adopted by the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 250 1 ports should be allowed to proceed in a timely manner and 2 that voluntary efforts will largely take care of this 3 effort, and we ask you to step back from this regulation. 4 Thank you. 5 CHAIRPERSON NICHOLS: Thank you, Mr. Garrett. 6 STATIONARY SOURCE DIVISION CHIEF FLETCHER: If I 7 might just make a clarification. The requirement for 8 hooking up to shore power if it's available is not a 9 15-day requirement. That has been part of the regulation 10 throughout. So all we're saying is if you have the 11 capability to hook up and the berth has the capability to 12 hook up, then you need to hook up. 13 CHAIRPERSON NICHOLS: Then do it. Okay. 14 MR. GARRETT: May I ask, does that apply to both 15 the vessel's ability as well as the berth's ability. 16 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Yes. 17 BOARD MEMBER SPERLING: Could I ask one question? 18 You said most large number of ships are already outfitted 19 capable to hook up to shore power? 20 MR. GARRETT: There is a large number of 21 proactive companies that have gone down this technology 22 pathway. 23 BOARD MEMBER SPERLING: Why is it? Is it because 24 other ports in other parts of the world? Why have they 25 done this? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 251 1 MR. GARRETT: I think they looked at it as a way 2 to demonstrate their good citizenship, their corporate 3 responsibility as a means of addressing what is perceived 4 by all as a very real public health concern by the 5 citizens of California. 6 CHAIRPERSON NICHOLS: Yes, Nicole Shahenian, 7 followed by Kevin Norton. 8 MS. SHAHENIAN: Chairwoman Nichols, members of 9 the Board, my name is Nicole Shahenian. Thank you for 10 allowing me to speak today on behalf of Breathe 11 California. 12 Breathe California is comprised of five statewide 13 affiliate organizations throughout the state, including 14 offices in Sacramento, San Francisco, the Silicon Valley, 15 the Central Coast, and Los Angeles. Since 1904, Breathe 16 California's five local agencies have worked to reduce the 17 impact of lung disease through prevention, education, 18 advocacy, and patient services. 19 Breathe California is in strong support of the 20 proposed regulation to reduce emissions from diesel 21 auxiliary engines on the ongoing vessels while at berth. 22 Marine emissions account for 30 percent of all diesel 23 particulate matter in California. CARB's diesel 24 particulate matter exposure assessment for the ports of 25 L.A. and Long Beach found that emissions from ongoing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 252 1 vessels with the top cause of elevated cancer risk from on 2 port sources. 3 As trade volume increases, ships are expected to 4 contribute roughly three-fourths of the diesel PM from 5 freight transportation sources by 2020. Communities 6 living in close proximity to the ports experience higher 7 levels of high health risk from the associated air 8 pollution. 9 This regulation will reduce the number of 10 premature deaths, prevalence of cancer, and impacts to 11 lung and cardiovascular health caused by exposure to dirty 12 diesel exhaust from ships. 13 We ask that the regulation be strengthened to 14 tighten loopholes and phase in early compliance rather 15 than defer all compliance until 2014. 16 In particular, we also ask that you close the 17 passenger ship loophole. This regulation in its current 18 form exempts container fleets that visit a port less than 19 25 times per year and passenger ships that visit less than 20 five times per year. This could result in a significant 21 loophole because polluting ships may not be required to 22 comply. This requirement should apply to each vessel 23 rather than to fleets so that cruise lines and shippers 24 cannot create subsidiaries to evade public health 25 compliance. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 253 1 Passenger vessels can remain in ports for 2 extended periods of time, operating with hundreds of 3 people on board and nearby communities breathing in 4 significant amounts of harmful disease pollution. 5 The rule should require all cruise vessels 6 visiting California to use shore power while at berth. 7 We also ask that you continue to reduce 8 greenhouse gas reduction from -- greenhouse gas reductions 9 from this regulation can be significant in achieving early 10 reductions in keeping with the spirit of AB 32, the Global 11 Warming Solutions Act. Compliance should be held to the 12 GHG standards set for distributed generation or a higher 13 standard to ensure the maximum potential reductions 14 through this rule. 15 Breathe California encourages the Board not to 16 wait until 2014 for public health. CARB's diesel risk 17 reduction plan commits to reducing the health risks from 18 diesel PM by 75 percent in 2010. California may not be on 19 track to meet this target unless regulations such as this 20 one accelerate compliance. 21 CARB can send a clear signal to ports, terminal 22 operators, and shipping lines to ship incrementally 23 towards shore power by incorporating 2010 emission 24 reduction requirements and adding an interim deadline of 25 2012. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 254 1 We support the Coalition for Clean Air's 2 recommendation to achieve this goal articulated in the 3 GMERP, twenty percent of all ship visits to California 4 ports using shore power by 2010. We urge CARB to phase in 5 compliance so that by 2012 40 percent of ship visits be 6 required to use shore power and 60 percent of ships would 7 be required by 2014 and 80 percent by 2016. 8 CHAIRPERSON NICHOLS: Your time is up. 9 MS. SHAHENIAN: Thank you. 10 CHAIRPERSON NICHOLS: Thank you. 11 Kevin Norton and Seiichi Tsurumi, Rupal Patel. 12 MR. NORTON: Good afternoon, Madam Chair and 13 Board members. My name is Kevin Norton. I represent IBW 14 Local 11 and our 8,000 members who work in Los Angeles. I 15 also represent the IBW statewide and our 110,000 members 16 who work in all aspects of the electrical power industry. 17 Our members built and operate the shore power 18 system in the port of Los Angeles currently in place. We 19 support the use of cold ironing shore power. We believe 20 it's high time to promote relief for everyone who lives 21 and works in the port areas. 22 Secondly, we know that the largest industry in 23 Los Angeles County is logistics. The port of Los Angeles, 24 port of Long Beach are the backbone of this industry and 25 provide middle class jobs to thousands of people. The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 255 1 only way to grow the ports and create more good jobs is by 2 decreasing the impact of the ports on the surrounding 3 communities. 4 I'd like to address the availability of power for 5 this initiative. There's ample power available for shore 6 power, and there's 12 power plants currently being planned 7 that were initially approved by the AQMD this summer. One 8 plant, the Vernon power plant, would provide 914 megawatts 9 of power. There are also several solar power plants being 10 approved in the Inland Empire as we speak. 11 We also support other proven technologies as a 12 supplement to shore power. Finally, the goals are 13 achievable if the will is there to implement the plan. 14 The highly skilled men and women of the IBW and our union 15 contractors are willing to get to work on this critical 16 project as soon as you approve it. Thank you. 17 CHAIRPERSON NICHOLS: Thank you, Mr. Norton. Do 18 you represent the workers at one of the utilities here or 19 just in general? 20 MR. NORTON: IBW represents Edison workers, DWP, 21 Burbank power workers. 22 CHAIRPERSON NICHOLS: You're speaking on behalf 23 of all of them? 24 MR. NORTON: I'm speak on behalf of the IBW. 25 BOARD MEMBER BERG: Madam Chair, I'd like to make PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 256 1 a comment. I appreciate the speaker bringing up the fact 2 that we do have power plants on the drawing board. 3 However, the Vernon power plant is currently being taken 4 to court. And those types of things are just very 5 problematic between the communities that live around 6 Vernon and the environmental groups and the environmental 7 justice issues. And so it is not always as clear as it 8 could be. So we are hopeful that down the road we'll be 9 able to see some of these come to fruition because they 10 are cleaner. They should be cleaner. But it isn't easy. 11 CHAIRPERSON NICHOLS: Okay. Thank you. 12 Mr. Tsurumi followed by Mr. Patel. 13 MR. TSURUMI: Madam Chair, members of the Board, 14 my name is Seiichi Tsurumi. I represent Sound Energy 15 Solutions. Sound Energy Solutions is working to develop 16 an liquefied natural gas import terminal in the port of 17 Long Beach. SCS has long been an advocate for increasing 18 the use of cleaner burning liquid natural gas in the 19 transportation industry. 20 We have funded and managed the development of the 21 world's first LNG terminal tractors. These units, which 22 are the cleanest yard tractors available at the time of 23 their use, were demonstrated at berth Yusen terminals, 24 Inc. in the port of Los Angeles and the Long Beach 25 container terminal in the port of Long Beach. Yusen PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 257 1 Terminals, Inc., is still using these LNG powered units. 2 SES also helped to develop LNG yard tractors for 3 use in the BNSF intermodal facilities and have recently 4 agreed to help international transportation service in the 5 port of Long Beach develop a new LNG yard hustler 6 demonstration project. 7 We are therefore very pleased to see the efforts 8 of those who are working to reduce emissions from hoteling 9 oceangoing vessels through the use of LNG fueled on-dock 10 power generation. SES is excited about this technology. 11 LNG fueled on-dock powered generation is a technology that 12 is available today to provide power to berthed ships at 13 emissions rates comparable to the state's electrical grid. 14 Having been a part of Long Beach community for 15 over five years, SES understands the severe impacts that 16 pollution from port operations has on local communities, 17 particularly those who are already disproportionately 18 impacted by hazardous air quality at their homes and work 19 places. 20 SES is dedicated to being a part of the solution 21 for these communities by working towards the development 22 of cleaner alternatives to conventional transportation 23 technology. We firmly believe that liquefied natural gas 24 offers the ability to dramatically reduce diesel emissions 25 in the entire port area and believe the clean air maritime PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 258 1 marine powered technology is another great example of 2 this. 3 Lastly, SES urges the Board to accelerate the 4 requirements for shore power so that local communities can 5 enjoy the benefits of reduced emissions from diesel fueled 6 auxiliary power units sooner rather than later. 7 Thank you very much. 8 CHAIRPERSON NICHOLS: Thank you. 9 I'm assuming this is a solution that would 10 qualify for treatment as an alternative to meet the 11 deadline. 12 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 13 think what it is is SES has the LNG and some of the 14 distributive generation use LNG so it's a compatible 15 solution. 16 CHAIRPERSON NICHOLS: And it's Ms. Patel. I said 17 Mr. before. 18 MS. PATEL: Good afternoon. My name is Rupal 19 Patel, and I represent Communities for Clean Ports, a 20 nonprofit public education campaign based in Los Angeles. 21 Particulate matter emissions from international 22 shipping vessels cause 60,000 annual deaths worldwide. 23 And we echo many of the statistics that were related today 24 on the cancer risk around the ports and the elevated lung 25 health issues that also exist. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 259 1 So early and aggressive and significant emission 2 reductions from ships docked at California ports are 3 critical to the environmental and public health of our 4 state. 5 We support ARB's latest revisions to the 6 regulation which move toward a uniform time line and a 7 compliance requirement for short power regardless of which 8 technology is used. However, we are also disappointed 9 that the time line has been slowed down and relaxed. 10 ARB's March 2006 study on cold ironing at California ports 11 concludes that 20 percent of ship calls utilizing cold 12 ironing by 2010 is both technologically feasible and cost 13 effective. The current proposal now requires cold ironing 14 only if available or ten percent reduction of emissions by 15 2010. 16 Significant emissions are possible now with 17 alternative technologies which have shown to deliver 18 comparable and immediate reduction benefits to grid-based 19 shore power. Those technologies will result in air 20 quality relief today, not seven years from today, as AQMD 21 outlined in their presentation. 22 So again we support uniform time line for 23 compliance, but ask that the regulation's pace be set by 24 the most aggressive technology that is available now. 25 We urge the ARB Board to adopt regulation which PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 260 1 will require, regardless of technology, that 20 percent of 2 all ship visits to California ports use shore power by 3 2010. And further, ARB should include an additional 4 interim goal by 2012 that 40 percent of all ship visits be 5 required, 60 percent by 2014, and 80 percent by 2016. 6 These compliance deadlines will assure early and 7 aggressive emission reductions necessary to address the 8 public health and environmental crisis that ships so 9 grossly contribute to. We will also assure that federal 10 air quality standards will be met in a timely manner. 11 We urge you to adopt these regulations today and 12 thank you for your leadership on this critical issue. 13 CHAIRPERSON NICHOLS: Thank you. 14 We have Bob Hoffman, Joseph Lyons, and Wendy 15 Mitchell have been added to the list. Bob Hoffman 16 followed by Joseph Lyons and Wendy Mitchell. 17 MR. HOFFMAN: Good afternoon. And thank you for 18 giving me the opportunity to speak on this. 19 I'm Bob Hoffman with Dock Watts, LLC, and we've 20 been watching shore power development since 2004. And I 21 was one of the 170 people that participated with Mike 22 Waugh early on several informal meetings just sharing our 23 knowledge. 24 We are going to be involved in the implementation 25 of shore power, so we support this process. Originally, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 261 1 we were hoping for a market-based solution that actually 2 could come up with emission reduction credits or other 3 ways to achieve that. But I see this is the right way to 4 go and we support it. 5 One thing that wasn't clearly mentioned in a lot 6 of the reporting and in the rule now is that shore power 7 provides a measurable means of measuring emission 8 reductions. The electric meter, every megawatt hour or 9 kilowatt hour actually measures so many pounds or tons of 10 emission reduction. So I would encourage part of the 11 implementation which may be a later phase to actually show 12 that the results of this good work that the metered 13 delivery, whether it's from distributed generation or from 14 to grid itself, that would be able to measure the tons 15 reduced of NOx, PM, and CO2. 16 As far as the grid, the reason I got up to speak 17 is when I heard early on about the grid interruption and 18 what that will mean, and that caused me to think about two 19 topics. One is that I believe as Mr. Garrett said earlier 20 that there should be a variance or some exemption if the 21 grid is actually interrupted or not able to provide the 22 power. Utilities themselves are power generators and 23 that's call a force de jour and on some contractual 24 commitments they're giving a pass until force de jour can 25 be cured. Typically a grid reduction would last for just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 262 1 hours or no more than a day or so. 2 Utilities interrupt our homes and other 3 refrigerators. So I think if there is interruption caused 4 by something outside of the ship or terminal operators' 5 control, they should be given a pass. 6 The other thing -- and this is something we at 7 Dock Watts have been thinking about, because I come out of 8 the utilities industry. And there are parallel efforts 9 going with greenhouse gas, with CARB, with the PUC and 10 that deals with the electric market, not only how we can 11 collectively reduce greenhouse gas emissions, but how we 12 can improve reliability of the grid. And maybe there 13 should be consideration that if on occasion there's a grid 14 emergency or a stage one or two alert where it was facing 15 rolling blackouts that the suppliers of grid power be 16 allowed to interrupt that supply and allow the ships to 17 power up for a brief few hours. Maybe a few hours per 18 year. That would help improve resource adequacy as well 19 as part of the utilities response measure. So that's 20 something that maybe should be considered down the road as 21 something that the California ISO would very much welcome. 22 And finally, even though searching as Mr. 23 Flanagan said, even though grid power is being talked, 24 there are other alternative. Let the industry, let the 25 stakeholders decide what to do as long as they achieve the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 263 1 desired emission reduction. So in searching for the last 2 remaining market solution, there is no greenhouse gas 3 attributes and who owns those. 4 I can tell you in the utility industry there is a 5 lot of debate on the generation when a utility procures 6 that power who owns the greenhouse gas attribute that may 7 be a tradable asset down the road. I would propose those 8 greenhouse attributed be owned by the entity implementing 9 shore power. 10 Those are my comments. I'm right on the button. 11 Thank you very much. 12 CHAIRPERSON NICHOLS: Thank you. Well done. 13 So Joseph Lyons and then Wendy Mitchell. 14 MR. LYONS: Thank you, Madam Chair. Joe Lyons 15 with the California Manufacturers and Technology 16 Association, and also here on behalf of the AB 32 17 implementation group, which is a broad coalition of over 18 140 businesses statewide that are constructively engaged 19 in the AB 32 implementation process. And working to 20 ensure that the California's climate policies are 21 implemented in such a way that is both cost effective and 22 technologically feasible, which of course are the twin 23 requirements of the bill. 24 I have just a few comments. The gentleman said 25 earlier about the several ocean carriers or have been PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 264 1 taking proactive steps with regard to shore power, and we 2 certainly agree with that and hope that's reflected in the 3 regulations that the Board approves. Keep that in mind 4 and sort of try to provide while achieving the goals and 5 requirements that you're setting out to do, but to do it 6 in such a way that allows a certain amount of flexibility 7 for the businesses to comply in their compliance, I should 8 say. 9 We also just as general themes, and this 10 certainly applies to this, want to work to ensure that the 11 costs are fairly allocated. The costs of compliance are 12 fairly allocated and also that with regard to what was 13 mention with market mechanisms. And that to the extent 14 that it's -- that any chance we can get to achieve these 15 goals and requirements at the same time to lower the cost 16 of compliance as much as possible. To have the least cost 17 compliance. 18 And I would finally just note one of the 19 gentlemen earlier spoke about -- mentioned jurisdictional 20 issues and port. And we certainly agree that with regard 21 to this issue it's appropriate for the ARB to have the 22 jurisdiction or service jurisdiction. 23 And he also mentioned the CEQA, and I would say 24 on that as well, you know, certainly the AB 32 clearly 25 places full responsibility on jurisdictions with regard to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 265 1 implementation to climate policies. And on CEQA, we 2 believe strongly that it makes more sense. It would be 3 better for our climate policies and our state in general 4 if we have ARB overseeing instead of having this piecemeal 5 approach we're now saying with the CEQA debate and things 6 that are going on. So thank you. 7 CHAIRPERSON NICHOLS: Wendy Michel and then Don 8 Anair, and that will be our last witness. 9 MS. MICHELL: Chairman Nichols and members, my 10 name is Wendy Mitchell. I'm here on behalf of PG&E to 11 support the regulation and the proposed amendments. 12 I just honestly am here to thank the staff for 13 all their hard work to address our concerns. We think the 14 proposed amendments achieve our goals of cleaning up the 15 ports. And thank you very much for all your time and 16 effort. 17 CHAIRPERSON NICHOLS: Great. Well done. Thank 18 you. 19 Mr. Anair. 20 I think you get credits that are bankable on that 21 one. 22 MR. ANAIR: Good afternoon, Madam Chair, members 23 of the Board. I'm Don Anair with the Union of Concerned 24 Scientists. 25 I want to just mention our strong support for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 266 1 this regulation. We think this is a groundbraking 2 regulation which will have national and international 3 impact, as the ships that are outfitted to comply with 4 this regulation will plug into systems elsewhere as they 5 go into place. 6 But most importantly, it is the local impacts 7 that we are here today to talk about, and implementing 8 this will reduce emissions from the largest source of 9 diesel pollution at the ports. So we strongly urge you to 10 move forward and adopt the regulation today. 11 I also want to thank staff for responding to some 12 of our concerns that we raised over the past few months, 13 both simplifying the time lines as well as putting the 14 interim targets for 2012 and 2017 to ensure that we're 15 making progress towards these goals. 16 Again, as others have mentioned, we encourage you 17 to look at accelerating that time frame to try to get 18 additional emission reductions from the source because it 19 is so important. 20 Two issues I just wanted to touch on again, one 21 regarding the exemptions and then the technology neutral 22 standards. In terms of the exemptions, we agree generally 23 with staff that the way the exemptions are written now 24 there would be a small percentage of emission losses from 25 the loss of emissions through that exemption. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 267 1 We do think that this is sort of based on 2 assumptions that things are not going to change over time 3 in terms of the makeup of the shipping fleets, the size of 4 the shipping fleets. And so we feel this could be 5 tightened up a little bit to ensure that we have 6 protections to make sure these ships are plugging in when 7 they should be. 8 For instance, that the current exemption for 9 container vessels less than 25 visits per year, that 10 applies on a port by port basis. So a shipping line that 11 has ships coming into port in Oakland and ones that are 12 coming into Long Beach, it's not the combined visits. 13 It's just visits at one port, less than 25 visits at 14 another less than 25. We think that could be less than 25 15 for all of California ports. I think that would tighten 16 that up. 17 And as Ms. D'Adamo mentioned earlier, this 18 doesn't have to occur immediately. It could occur further 19 down the line as the regulation goes into place. 20 And the same could go for the cruise vessels as 21 well. That's on a per port basis right now. Limiting 22 that to the total of all port visits in California would 23 also ensure that that's tightened up a little bit. 24 USC supports technology neutral standards, and we 25 are supportive of the standards that are in place in this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 268 1 regulation. My belief is that the staff proposal does 2 include standards for NOx and PM emissions. However, I 3 don't believe that greenhouse gas emissions have been 4 treated equally in this regulation. 5 And I just want to point out this is the first 6 ARB regulation under AB 32 early action measures that the 7 Board have adopted. And we would like to see some 8 protections in this regulation for greenhouse gas emission 9 backsliding at a minimum to ensure that we move forward 10 and get the emission reductions we all desire. 11 Thank you very much. And urge you to vote today 12 to move forward with this regulation. 13 CHAIRPERSON NICHOLS: Thank you very much. 14 Thanks for those comments. Okay. 15 That is the last witness. And we can draw the 16 public hearing to a close. 17 Do you, Mr. Goldstene or the staff, have any 18 additional comments that you wish to make at this time? 19 EXECUTIVE OFFICER GOLDSTENE: Yeah. Mr. Scheible 20 does. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I don't know 22 how the Board wants to proceed with the discussion. I 23 kept track of the various points raised -- 24 CHAIRPERSON NICHOLS: Good. I was making notes 25 also. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 269 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: --by the 2 witnesses in the testimony had a little scorecard here. 3 We can go over them. 4 CHAIRPERSON NICHOLS: Why don't you do that 5 first, and then see what else needs to be asked. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I'm use the 7 proven method of Lynn Terry of taking the easier ones 8 first. And then when I get in trouble, staff will have to 9 save me. But they've been doing all the work anyway. 10 So there's some easier ones. I heard one we were 11 urged to ensure the rule will be enforced. I can promise 12 you we will do that. And it's sometime before this rule 13 gets going, so we have time to plan the resources and 14 other things. 15 Second, there was a question about what happens 16 for a base line for new fleets. I think that's fairly 17 easy, because you bring in the new fleet, it's an 18 intensity requirement. So the new fleet doesn't need a 19 baseline. It simply needs to show it's reduced its 20 emissions the same as any other operating fleet. Now, if 21 there's a brand new terminal and new fleet coming in, they 22 might have to have some planning time to make sure the 23 ships can hook up to the existing shore power. But I 24 think that's not a barrier to entry like it is for a new 25 source. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 270 1 There was a remark made that ample power is 2 available, therefore it's not a power problem. We didn't 3 see a problem with the power being able to be produced on 4 the grid. The problem we saw was that for Long Beach or 5 San Diego the wires from the power plants and the 6 sub-stations to the port needed to be put in line. And 7 that's a process you have to work through the utility. 8 You have to go through neighborhoods potentially. You do 9 have to do CEQA. That's part of a long planning period 10 for places like Long Beach and San Diego. But we agree 11 the power's available. 12 Then we get into the issue of the number of ships 13 in the fleet. The industry trend has been to consolidate. 14 So unless they change dramatically, you're going to have, 15 you know, the same large fleets operating in the future as 16 now. And staff is looking into making sure that 17 regulation can't be gamed through ownership or some other 18 method. That if it looks like a ship coming from XYZ 19 container company, that it is counted in our reg as a ship 20 from that company, regardless of the ownership, which 21 could be very -- as we found out from this ship that hit 22 the bridge in the bay area, quite difficult to figure out. 23 So we're going to put together a regulation that 24 deals with that. And if it isn't working, we'll come back 25 to you and say here's what it takes to work. I think we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 271 1 have -- a question do you want to lower it by number from 2 25 to 12 in the future or fewer visits by cruise ships I 3 think is a policy call. But we can probably re visit that 4 later as we see how it's working out. 5 There's a real policy issue on global warming 6 gases. We put this regulation together, and we included 7 it as AB 32 because it gets real benefits. We're sure 8 it's going to get real benefits. And we want to claim 9 those. And it's legitimate to do so. 10 You notice we didn't give you cost and give you a 11 technology assessment because they are co-benefits. And a 12 question comes down to there are some potential options of 13 technologies that wouldn't get those benefits. We don't 14 think they would subtract substantially from the 15 regulations effectiveness. But do we want to rule them 16 out as part of the regulation? Or do we want to say, no, 17 we think that since this is being done primarily for NOx 18 and PM control, we are going to allow someone to use those 19 options, even though they won't deliver the benefits. 20 This is no different than, for example, the 21 example I used is if someone develops a technology that 22 you can pull alongside the ship and collect the emissions 23 and put it through an SCR and a particulate collection 24 system, it will be -- it could be very effective in 25 controlling NOx and PM. It could be the cost effective PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 272 1 option. It will not get the greenhouse gas benefits. 2 CHAIRPERSON NICHOLS: I have a view on this, but 3 let's table that for a minute. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think it's 5 a policy call and the Board needs to discuss. 6 CHAIRPERSON NICHOLS: What about the question of 7 whether we should be regulating the terminals versus the 8 ports as a whole? Obviously, the South Coast wants us to 9 regulate the whole port and so does PMSA. 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We debated 11 this intensely as we went around. We couldn't figure out 12 how to regulate the port. And we decided that we needed 13 to regulate the ships and the ship operators. Many times 14 they and the terminals are either the same or so closely 15 related it doesn't make any difference. 16 But in reality, unless the port and the terminals 17 and the ship operators work together to make this work, 18 and we think we at the local districts have to do it, too, 19 we think we have the right mix here. And we do agree with 20 the witness's suggestion that we need to commit to make it 21 clear what the terminal operator has to do in order to 22 fulfill their commitment and that we need to work to 23 expedite that process. But we think we have the 24 regulation in the best possible place. 25 I don't know if legal wants to opine on that or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 273 1 not. 2 CHAIRPERSON NICHOLS: Probably not. I'm looking 3 at them, and they don't seem eager to jump in. 4 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Okay. I'm 5 getting to the fundamental last, which is the accelerated 6 schedule. 7 Also we were asked to deliver the rule for the 8 remaining ships as quickly as we can. And hopefully next 9 year, we'll do that. It may not be this easy because the 10 cost effectiveness for those ships for cold ironing is 11 going to be far worse than for these. And we decided to 12 bring you this group of vessels first, because it was the 13 most attractive case. But we'll do the analysis and try 14 to figure out how to maximize the emission reductions. 15 I'm down to a couple now. One is another policy 16 call, which is the South Coast and others are urging us to 17 require better control in the early years from sources 18 that would use distributive generation. The Bay Area 19 district didn't raise it, but actually the Bay Area folks 20 were saying you know this is a big improvement over the 21 diesel engine. You don't need to push it that hard. 22 Allow some flexibility in the early years and our judgment 23 was to sit again a floor saying you got to do at least 24 this well and then by the time 2014 comes you have to 25 clearly put on BACT and if a local district wants to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 274 1 more stringent than that I think that's their prerogative. 2 But we chose not to make the call. 3 CHAIRPERSON NICHOLS: And again that's sort of in 4 the interest of trying to level the playing field here 5 between the shore power and the alternative. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And allow the 7 alternative a chance to demonstrate they work and they're 8 financially viable and they can go ahead. And in the 9 interim you're still getting emission reductions that you 10 otherwise might not get. And there's a big benefit. So 11 there's always that trouble. Do you settle for something 12 that gets you 85 percent of the NOx that you want that 13 gets you virtually all of the PM benefits that you want? 14 But again, it's a call of where do we -- what do 15 we set as a floor and how much discretion do we want to 16 allow the district? That's a policy call. 17 I think we're at the issue now which is the 18 accelerated compliance schedule. We've always looked at 19 this as the most likely compliance route for most of the 20 terminals and most of the ports have been to go to 21 grid-based power. We have not in any way diminished or 22 lightened up on the compliance schedule for that. 23 Our most recent proposal actually strengthens it 24 in a number of ways. It requires that the ships get 25 50 percent of visits and 50 percent of load switched over. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 275 1 We added an interim date in 2015. So we accelerated that. 2 We do not think that it's sustainable to have a rule that 3 went to 20 percent -- everybody has to get a 20 percent 4 emission reduction and 2010 or a 40 percent in 2012. Our 5 quick analysis is that less than a quarter of the 6 terminals have a shot at the 2010 date, and probably only 7 a third or so to a half have a shot at the 2012 date, 8 given the likely time -- if they're to use grid power. 9 They have to use some sort of hybrid, and that didn't pass 10 any of our cost analysis. We think that would be a very 11 difficult route. 12 We do believe we should go in and work with each 13 party to say how do we get you there as fast as we can. 14 We have some bond money that might help you do that and 15 make it attractive for you. It could be used under either 16 option that they take. And we think that actually in L.A. 17 and Long Beach, most of those reductions work for whether 18 we have a rule or not. But if we think that if we put it 19 in the rule and said each and every terminal has to do it, 20 we wouldn't be successful. It wouldn't be successful if 21 we said each and every port had to do it. The port of 22 Long Beach we do not think can meet the 2010 goal. 23 So that's our assessment on that one. We think 24 we're getting it done as fast as we can, and we are 25 willing to use other mechanisms to accelerate the emission PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 276 1 reduction. 2 CHAIRPERSON NICHOLS: So just talk more about how 3 you intend to work with these ports and the terminal 4 operators to get these emission reductions actually 5 underway. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Bob, how are 7 you going to do that? 8 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I'm 9 going to punt to Mike Waugh. 10 CHAIRPERSON NICHOLS: They have pictures of all 11 of you guys up on the walls at these places. I know the 12 pin-up favorites. 13 STATIONARY SOURCE DIVISION CHIEF FLETCHER: I 14 think the key is the compliance plans that are required in 15 2009. And that is something that we're going to have to 16 work very closely with the terminal operators, the ports, 17 and utilities and the other stakeholders to get them in 18 and sit them down. We've done this a few times in the 19 course of this rulemaking. 20 But it's really obvious -- and I think Mr. 21 Jelenic said that as well. It's really critical for the 22 ports to look at the entire infrastructure so they know 23 that they have to play a role here. They know that 24 they're scheduling because there's down time that has to 25 be managed. And I think bringing all that in and us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 277 1 working with them and to see how that comes will not only 2 ensure that we meet the 2014, but it will also ensure that 3 we actually get an accelerated implementation of it to the 4 maximum extent feasible. 5 And CEQA is not going to be easy, you know. It's 6 just not going to be an easy process when you're running 7 lines through the middle of the city, for example, to get 8 the infrastructure into the port. 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We also need 10 to work with the PUC and the regulated utilities to bring 11 some speed to that process to make it clear that it's not 12 a bargaining situation between the captive utility 13 customer and the utility, to speed it up as much as we 14 can. But this is a big measure. We need it to work. 15 It's a critical part of our plan. 16 BOARD MEMBER CASE: Just a further question on 17 that, because I hear clearly an interest in accelerating 18 the compliance. And I also hear real definitively that 19 some ports will look at grid power. Understanding the 20 CEQA process, they're looking probably at a minimum of one 21 to two years to get through that process to properly 22 publicly notice, to properly hold hearings, to do all of 23 that outreach that has to happen. And we do a lot of CEQA 24 review as local elected officials, and it just doesn't 25 move quickly. Even if some groups are wholeheartedly in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 278 1 support, there's always one or two that want to look at it 2 and adjust and it figure that out. 3 But is there an opportunity anywhere for those 4 that have capacity to move quicker, finding some ways to 5 reward that or incentivize that? Because even, you know, 6 maybe some areas aren't going to move as fast as others 7 depending on their circumstance and what else is out 8 there. But I'm thinking in terms of the number of people 9 who live by any of these ports and how their health is 10 truly impacted. It's such a huge amount of pollution 11 nearby to where they live and their children live. Is 12 there any opportunity there? That's the one remaining 13 question for me. 14 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Two things. 15 There's clearly an opportunity in terms of incentive 16 funding to say, the sooner you get it done, the more 17 likely you are to qualify for funds where the state can 18 pay a portion of the infrastructure cost on the pier. 19 And on the second issue on health, I just want to 20 say, remember this source is being regulated twice right 21 now. The difference is we're getting about a 75 percent 22 risk reduction from the rule that we are currently 23 applying and will apply greater through 2010 on the fuel 24 side. And we're getting the next 75 percent from this. 25 So the early years we're talking -- it's not like we're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 279 1 losing a third of the benefit in early years of the net 2 program. We're losing a few percent. 3 So that's why we think it's not good that it's 4 going to take more time, but still the community is 5 getting great benefits from the combination. 6 CHAIRPERSON NICHOLS: It's important to remember 7 these are coming on top of recently adopted and going into 8 effect rules. And I think we don't always make that 9 clear, because we do these things one rule at a time. 10 Yeah. 11 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And tomorrow 12 you'll get the chance to do even more for the community 13 with the port trucking rule that we propose to implement 14 almost fully for PM by 2010. 15 CHAIRPERSON NICHOLS: It might be useful for all 16 of us and the stakeholders to put together some kind of a 17 fact sheet just to kind of give people a sense of the 18 total picture of the new programs that are out there 19 relating to the ports. I see nodding from the 20 communications director. So that's good. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: As you know, 22 we don't have unlimited staff with unlimited energy. 23 We're trying to bring you another rule that's going to 24 have even larger benefits, which is the fuel rule for the 25 main engines. So we're delivering -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 280 1 CHAIRPERSON NICHOLS: So what are you guys 2 wasting time on this for? 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: There's 4 always the weekend unfortunately. 5 CHAIRPERSON NICHOLS: Thank you for that. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: That 7 covers -- the only other issue I heard was should we have 8 something when you arrive at the dock and you need to hook 9 up, you have to do it as soon as possible. I think we 10 could put a provision in like that. The ship operators 11 have a big incentive to hook in, because they only get 12 credit for the hours they're hooked up. And our 13 reluctance to include is it's not very enforceable. It's 14 enforceable when you have a known window and you exceed 15 the time or meet the time. But when it's did you make the 16 best efforts if it's there, I don't know if that makes a 17 whole lot of difference. 18 CHAIRPERSON NICHOLS: No, but it could cause 19 mischief at some point. I can understand the reluctance 20 to see the language actually put into the rule. 21 CHAIRPERSON NICHOLS: All right. Additional -- 22 yes, Supervisor Hill. 23 SUPERVISOR HILL: I do. Thank you, Madam Chair. 24 And thank you, Mike, for answering most of the 25 questions. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 281 1 I just want some clarification on a couple. The 2 greenhouse gas backsliding, you indicated there may not be 3 the benefit derived from some of this different technology 4 that could be used, but that doesn't mean it would be 5 backsliding I guess is what I -- unless I'm missing 6 something. 7 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, what I 8 call backsliding. If you put add-on controls, you haven't 9 reduced the emissions from the source. And the add-on 10 controls are going to use some energy in order the reduce 11 the NOx and the PM. So you've increased fuel use, but 12 you've gained a big criteria pollutant improvement. 13 And I think our view is, you know, when you do 14 that, that's great. We need the local health benefits. 15 And we've lost a small amount of greenhouse gas benefit in 16 that particular instance. We just have to make that up 17 elsewhere. 18 And the question here when you have a technique 19 and you say allow the choice for that when the source 20 operator decides that's most cost effective to get -- the 21 primary thing this rule is designed to do or should we 22 say, no, you know, we're going to only allow you to use 23 your choices of things that are either neutral or net 24 benefit for greenhouse gases. 25 CHAIRPERSON NICHOLS: I think we could have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 282 1 discussion at this point actually if people don't mind 2 about the CO2 issue. 3 Maersk testified that they wanted to use some 4 sort of an on-ship control throughout their fleet. And 5 I'm assuming that that would automatically mean if it was 6 something they're doing to the ship that that is going to 7 cause them to burn more fuel; right? It's not going to 8 make it more efficient. 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yes. But 10 that also has a side benefit of not only operating at dock 11 but when the ship is underway and getting ready to do so, 12 there's even potential for even greater benefit. So 13 different -- 14 CHAIRPERSON NICHOLS: That's a life cycle kind of 15 issue, isn't it? 16 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right. 17 CHAIRPERSON NICHOLS: Okay. I was worried about 18 that. 19 SUPERVISOR HILL: Another question when we're 20 talking about the number of visits that a ship makes or a 21 fleet makes. If a ship came into a port a few times only, 22 but did it regularly, but didn't meet the threshold, it 23 would not be included in this; is that true? I mean, I 24 would think if it's a regular visit, it falls under that 25 we should -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 283 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The ship 2 visit regardless of whether it's once or ten times, it's 3 in a fleet, is included in the fleet. 4 SUPERVISOR HILL: I was thinking more of 5 passenger -- the issue of cruise ships that may come in a 6 few times or fall under the threshold within a fleet -- 7 you know, that particular fleet, but doesn't do it. Are 8 there examples of that or cases where that could happen? 9 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: Yeah. 10 I think with regard to the cruise ships, there are an 11 occasional fleet. For example, there's a Japan line that 12 showed up in California one time, and that would be a 13 fleet that would -- 14 SUPERVISOR HILL: I didn't mean one time. I mean 15 one time every six months or you know they're taking a 16 trip every year going around -- I guess I'm just looking 17 for that regular visit that probably is not -- 18 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: I 19 think still from a cost effective standpoint that even if 20 it comes regularly but not regularly enough to come five 21 times, then say it shows up once a year, twice a year, 22 three times a year, it's still at the point where it's not 23 cost effective to use shore power. 24 One of the things that we're finding in the 25 cruise industry and one of the provisions we have in our PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 284 1 proposal here goes back to the fact that if you have the 2 ability to plug in both from the ship side and the berth 3 side, you will. 4 So what we're finding is sometimes you may be 5 required to do that because you're part of a fleet that 6 shows up in San Francisco, and then when you come down to 7 San Diego for that occasional visit, because you have the 8 ability, you will plug in. And we think we're going to 9 capture -- especially in the cruise industry as these 10 ships are redeployed, they're all capable of plugging in, 11 we are going capture a lot of those ones and twosies that 12 visit for that reason. 13 SUPERVISOR HILL: One for just a clarification, 14 Mike. You talked about the fleets -- this specifically 15 applies to the port of Oakland where the new shipping line 16 comes in at 2012 or 2014 and in terms of Calculating the 17 reduction target and how that would work for future 18 emissions. You feel that's not going to be a problem. 19 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, it 20 would have the same calculation method as an existing 21 fleet. So if they made 100 visits, they have to plug 22 in -- in 2014, they'd have to plug in 50 of those -- at 23 least 50 of those visits and have to make sure those 50 24 accounted for at least 50 percent of the load. So the 25 only problem comes down to if the business came so quickly PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 285 1 that they could not somehow retrofit the ships and they'd 2 have to come on to some sort of compliance schedule. 3 CHAIRPERSON NICHOLS: Presumably the port of 4 Oakland is out soliciting clean vessels. 5 DEPUTY EXECUTIVE OFFICER SCHEIBLE: They're going 6 to know what the obligation is. They would incorporate 7 that into their decision to come. 8 We're not trying to put up a new barrier for 9 fleet composition to change or whatever. We're trying to 10 make for every fleet that's there, whether an existing 11 one, an expanding one or new one meets the same basic 12 requirement. 13 SUPERVISOR HILL: Thank you. 14 CHAIRPERSON NICHOLS: Ms. D'Adamo followed by 15 Supervisor Roberts. 16 BOARD MEMBER D'ADAMO: Just following up on the 17 25 visits. First of all, I want to make sure I understand 18 this. Is it 25 total visits to California, all ports in 19 California, or 25 per port? 20 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: It is 21 25 per port. 22 BOARD MEMBER D'ADAMO: Then I'm even more 23 uncomfortable than I was earlier on this. I think we 24 should -- and I hate to be the one throwing out there 25 exactly what it ought to be -- but reduce it so that it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 286 1 25 total for California. Perhaps even in a combination 2 with a phase down or phase out in the out years. Because 3 I think we're assuming that this regulation is going to 4 take off in other areas of the world. And by 2020, 5 hopefully it wouldn't be such a burden. 6 So I'd welcome comments from staff or other Board 7 members as to what that actual number and date ought to 8 be. But I'm uncomfortable with that high of a -- 9 CHAIRPERSON NICHOLS: Do you want to comment on 10 the feasibility? 11 PROGRAM ASSISTANCE SECTION MANAGER WAUGH: 12 Currently, the way that the vessel fleets are operating 13 even with the current proposal we would get 94 percent, 95 14 percent have all vessel visits. 15 I think the concern comes from whether or not you 16 get smaller fleets because of splintering. Like Mike 17 said, there's more of the direction of consolidation. 18 So what we have again based on the data, even 19 when getting roughly half the fleets in these three ship 20 categories, we're still getting 95 percent of the vessel 21 visits. 22 BOARD MEMBER D'ADAMO: I understand. But as far 23 as community impact, a visit is a visit. I hear what 24 you're saying. In most instances, it's an occasional 25 visit of one or two. If that's the case, it shouldn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 287 1 matter if we reduce the amount. I just don't know what 2 the threshold ought to be in total. 3 CHAIRPERSON NICHOLS: What would be the harm be 4 of redefining it from 25 per port to 25 in California? 5 That's the question. 6 SUPERVISOR HILL: How many more would you 7 capture? 8 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Probably 9 would capture very few more. 10 CHAIRPERSON NICHOLS: It could capture a few 11 more. And the negative impact would be? 12 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The few more 13 it would capture, they would have a very high end cost 14 effectiveness. 15 CHAIRPERSON NICHOLS: For those small -- 16 DEPUTY EXECUTIVE OFFICER SCHEIBLE: For that 17 particular fleet, because the emission reductions produced 18 per fleet versus their capital costs. 19 Now in all likelihood a container ship or cruise 20 ship is already going to have the capital facility put in 21 at the terminal. It's going to be the ship side cost. So 22 if the Board wants to go with a smaller number, we can put 23 that out in the 15-day notice and see the comments on it. 24 CHAIRPERSON NICHOLS: Okay. Let's hold that 25 thought. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 288 1 Supervisor Roberts. 2 BOARD MEMBER ROBERTS: Thank you, Madam Chairman. 3 First of all, I want to thank the staff for 4 making some of the changes that I was particularly 5 concerned about that had to do with the unequal timing of 6 the different tracks that we were going to be available. 7 I think this is clearer and tighter and I think makes a 8 lot more sense. 9 I was concerned also with the 25/5. The five 10 being the cruise ships and the 25 being the cargo ships 11 with the total visits. And I felt it should be statewide 12 rather than just the individual ports. Especially 25 to 13 each port sounds like a huge -- it could be a huge number 14 and could become part of the schedule in the way these are 15 handled. I would feel far more comfortable if we were to 16 look at those even though it theoretically only affects a 17 small number. I think that adjustment should be made. I 18 would heartily support that. 19 CHAIRPERSON NICHOLS: Okay. Additional questions 20 or comments from Board members. Ms. Berg. 21 BOARD MEMBER BERG: I just had one on my list 22 remaining and that was the grid emergency issue again 23 dealing with the fact that if the vessel was there willing 24 to plug in but electricity is not available, the fairness 25 and having them make it up. And if it isn't a big issue, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 289 1 it's not a problem. But we've lived through times where 2 it has been a big issue. 3 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We don't 4 think it's going to be much of an issue because it occurs 5 so infrequently. But on the other hand, if the Board 6 wants to say, you know, on a fairness if the vessel is 7 equipped to plug in, they would have plugged in, they 8 can't plug in because the grid was turned off, we want to 9 simply say that doesn't count for them or against them. 10 That would not change the regulation to say you were 11 forced off. We are not going to count the emissions 12 during that forced outage again your compliance. But if 13 you didn't have that option to plug in, then those 14 emissions counted. 15 If you want us to do a 15-day change like that, 16 that's your call obviously. 17 BOARD MEMBER ROBERTS: If I could just weigh in 18 for a minute. We just went through one of these 19 situations. And in fact, all of the Navy vessels that are 20 all equipped, all had to unplug so that we would have the 21 power during the recent fire storms. So these things do 22 occur. And surely if we would have had other ships 23 visiting, we would have done the same thing for them. 24 CHAIRPERSON NICHOLS: I think that's a very valid 25 point. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 290 1 I didn't actually formally say that I had closed 2 the record, but I guess I should do that; right? The 3 record is closed at this point on this item. And that it 4 will be reopened again when the 15-day notice is issued. 5 So any comments that were to come in from now to the time 6 of the notice would not be considered. But once the 7 record is reopened, the public can comment on any of the 8 proposed changes that may come forward at this point. And 9 that will be included as part of the Statement of Reasons 10 for the regulation. 11 I think before we take action on amendments and 12 motions that we should do the ex parte statements. So 13 I'll start down at your end, Mr. Roberts. I usually go 14 the other way. 15 BOARD MEMBER ROBERTS: I have one meeting. On 16 November 29th, I had a meeting with Scott Sadler from 17 Oakland Port Authority and Dana Markle who's with Clean 18 Air Logix. And we discussed the scheduling and the use of 19 alternative technologies. 20 CHAIRPERSON NICHOLS: Great. 21 BOARD MEMBER SPERLING: Yes. I had a telephone 22 call with Bonnie Holmes-Gen; Diane Bailey, NRDC; John 23 Kaltenstein, Friends of the Environment; and Rupal Patel, 24 Communities for Clean; Irvin David, Tim Carmichael, Don 25 Anair from various organizations about some of this. It PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 291 1 was a fairly brief call, but it reflects the conversations 2 that had been had here. 3 I don't have it recorded here, but I had another 4 conversation with a group of people. And I guess I should 5 have written it down. I can provide it later from the 6 ports, from the Whitmer -- the company doing the Whitmer 7 technology and PG&E. But the discussion just a few days 8 ago. But the discussion was before the revisions were 9 made. And I think they've reflected a different 10 discussion then what is going on here because of the 11 changes. 12 CHAIRPERSON NICHOLS: Okay. Thank you. 13 Supervisor Case. 14 BOARD MEMBER CASE: On November 28th, I had a 15 conference call with Bonnie Holmes-Gen with the American 16 Lung Association; Devra Wang with NRDC; John Kaltenstein, 17 Friends of the Environment; Rupal Patel, Communities for 18 Clean; and Don Anair of the Union of Concerned Scientists. 19 On November 28th, I met in my office in Fresno 20 with Rick Lehman and Scott Sadler in regards to 21 representing the Oakland Port Authority. 22 And on December 3rd, I had a telephone call with 23 Bob Riding with PG&E. And the testimony in those meetings 24 were reflective of today's testimony. 25 CHAIRPERSON NICHOLS: Ms. Riordan. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 292 1 BOARD MEMBER RIORDAN: Yes. I had two telephone 2 conference calls. First, on November 28th, with Candice 3 Kim from Coalition of Clean Air; John Kaltenstein from 4 Friends of the Earth; and Rupal Patel from Communities for 5 Clean Ports. That conversation mirrored the testimony 6 provided today. 7 As well as yesterday I spoke to the port of Long 8 Beach, Robert Kanter and his staff. And within the letter 9 that we have received, the conversation mirrored that. 10 CHAIRPERSON NICHOLS: Okay. I have four items to 11 report. On November 20 was a busy day for the 12 environmental groups. And I met with large number of them 13 also. Bonnie Holmes-Gen, Dennis Hall, Bill McGavern, 14 Diane Bailey, Devra Wang, Camille Kustin, Kathryn 15 Phillips, Raphael Aguilera, Rafael Pizarro, Candice Kim, 16 Wendy James, and Don Anair. And their as a group 17 reflected the same points they've made here today. 18 On December 4th, I spoke with T.L. Garrett and 19 Mike Jacob, Shaudi Falamaki, Chuck Cole, PMSA and 20 Kahl-Pownall Advocation. 21 On December 5th, I participated in a conference 22 call with Scott Sadler from Lehman Kelly English and 23 Sadler; Matt Davis, Howard Berman, Chris Ferrera and Wendy 24 Mitchell, all concerning the changes that had been made 25 with the rule and they expressed their support for changes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 293 1 that had been made, which was great. 2 And then this morning I met here before the Board 3 meeting with representatives of Maersk. And they 4 explained in more detail than they did in their testimony 5 but the same basic point. They're concerned that the 6 timing for those who are going to go with the alternative 7 to shore power is too strict for them. They're worried 8 about whether they're going to be able to make it. They 9 said they would comply no matter what. But they were 10 concerned they would be pushed harder than they were 11 comfortable with on being able to demonstrate that the 12 technology they're working on is really going to work. So 13 that was it. 14 SUPERVISOR HILL: I have on November 26th a call 15 with Diane Bailey and Devra Wang of NRDC; Bonnie 16 Holmes-Gen of American Lung; Irvin David, Sierra Club; and 17 John Kaltenstein from Friends of the Earth. 18 December 3rd, a call with Pacific Merchant 19 Shipping Association; T.L. Garrett, PMSA; Mike Jacob, 20 PMSA, Shaudi Falamaki, Kahl-Pownall; and Chuck Cole from 21 Advocation. 22 And then there was a meeting I had -- I don't 23 have the date -- with Matt Davis and others from the port 24 of Oakland to discuss the issues that they raised today 25 and had been raising before. So those are mine. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 294 1 BOARD MEMBER D'ADAMO: On November 27, I 2 participated in a conference call with the NRDC 3 representatives Diane Bailey and Devra Wang; and John 4 Kaltenstein, Friends of the Earth. 5 On December 5th, I participated in a conference 6 call with Pacific Merchant Shipping Association; T.L. 7 Garrett, PMSA; Mike Jacobs, PMSA; Shaudi Falamaki, 8 Kahl-Pownall; and Chuck Cole from Advocation. And the 9 comments that they provided on the phone were similar to 10 the testimony they provided today. 11 BOARD MEMBER BERG: On November 17th, I met with 12 Candice Kim, Coalition for Clean Air at Ellis Paint 13 Company. 14 On December 3rd, I had a phone call with Pacific 15 Merchant Shipping Association. On that phone call was 16 T.L. Garrett, Mike Jacobs, and Shaudi Falamaki make with 17 K-P Public Affairs. 18 On December 4th, I had a phone call with the port 19 of Long Beach with Robert Kanter, Director of 20 Environmental Affairs and Planning and his staff; Thomas 21 Jelenic and Ari Steinberg and Dominica Davis. 22 CHAIRPERSON NICHOLS: Okay. Thank you. Do the 23 Board members want additional time to review the 24 resolution, or are you ready to proceed with any proposed 25 amendments? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 295 1 STATIONARY SOURCE DIVISION CHIEF FLETCHER: We 2 have one proposed resolution be it further resolved that 3 we would like to add to the proposed resolution. 4 CHAIRPERSON NICHOLS: All right. 5 STATIONARY SOURCE DIVISION CHIEF FLETCHER: Be it 6 further resolved that the Board direct the staff to work 7 with terminal operators, ports, local utilities, and other 8 stakeholders to accelerate the implementation of this 9 regulation through coordinated planning, effective use of 10 incentive funds, and expedited environmental planning 11 processes. 12 CHAIRPERSON NICHOLS: Without objection, I think 13 that will be accepted. All right. 14 BOARD MEMBER D'ADAMO: Madam Chair, perhaps we 15 should just put a motion for the resolution on the table. 16 And so I propose adoption of Resolution 07-5-7. 17 BOARD MEMBER ROBERTS: I'll second. 18 CHAIRPERSON NICHOLS: It has been seconded. 19 BOARD MEMBER D'ADAMO: And then I know there are 20 a number of things discussed. But I would propose that we 21 limit the exemption of 25 carriers and five cruise ships 22 to total visits in California. 23 BOARD MEMBER ROBERTS: I would second that. 24 CHAIRPERSON NICHOLS: I see a second to that. 25 Can I see a show of hands -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 296 1 CHIEF COUNSEL JENNINGS: One clarification on 2 that. This probably goes without saying, but it would be 3 to ports subject to the regulation in California. 4 BOARD MEMBER D'ADAMO: Okay. 5 STATIONARY SOURCE DIVISION CHIEF FLETCHER: If I 6 can add or just request a clarification that I would like 7 to have the flexibility to tailor that requirement in a 8 way that makes sense and that we don't end up with a 9 single berth and a single ship coming that ends up somehow 10 getting electrified. So I think their intent is to make 11 sure that it deals with the regular visit of ships to 12 California ports. 13 BOARD MEMBER D'ADAMO: That's fine. 14 CHAIRPERSON NICHOL: Do I see enough nodding to 15 indicate that's going to be accepted? 16 BOARD MEMBER KENNARD: I actually have a 17 question. I would like to see kind of the economic cost 18 benefit analysis on such an expansion of this regulation 19 before we go forward with -- this could be a significant 20 change. And I heard a lot of the public comments saying 21 what about two versus 25. And I don't know that I 22 personally feel I have enough information to say it should 23 be one visit versus 25 or five. I just don't know that we 24 have enough information and the analysis hasn't been done. 25 And Mr. Scheible had indicated that we're just really PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 297 1 touching are the margins here in any event. 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yes. And we 3 can do that as part of the 15-day process. 4 CHAIRPERSON NICHOLS: Because you can extend the 5 work you've already done. 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: It's going to 7 be on the ship side of things mostly, because the 8 terminal -- the passenger terminals are going to have the 9 ability to plug the ship in. It's the matter of the ship 10 cost. 11 CHAIRPERSON NICHOLS: So you could recommend that 12 if the Board goes ahead with that amendment that you would 13 do the analysis as part of the 15-day process and it would 14 include it at that point. Okay. 15 BOARD MEMBER RIORDAN: Madam Chair, there was an 16 item that Member Berg brought up, and I think that ought 17 to be included. Whereby a ship not be penalized or a 18 vessel not be penalized when power is not available for 19 some unusual reason, you know, emergencies, whatever we 20 want to call it. 21 CHAIRPERSON NICHOLS: That was -- the suggestion 22 on that I think has to do with how long that availability 23 might be. Because I think we indicated that if it was a 24 matter of a few hours, it wouldn't matter in terms of the 25 overall compliance scheme. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 298 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, if it's 2 a short time, it wouldn't matter. If it's a long time, we 3 have bigger problems how this rule got complied with that 4 quarter. 5 So I what I think we can -- again, using the 6 15-day process, and I would suggest is it would count as a 7 visit if the ship was willing and would have done it 8 except for the emergency. The emissions that occur 9 because it had to operate its engines won't count against 10 it. It won't benefit in an emissions sense, but it won't 11 be hurt. And it won't be hurt on the number of visits. 12 So it should be able to comply right. It's neutral. 13 CHAIRPERSON NICHOLS: We have a lot of heads 14 nodding on that. 15 Are there other amendments people wanted to 16 specifically -- 17 BOARD MEMBER BERG: Just a point of 18 clarification. 19 The resolution that staff proposed in working 20 with the ports, that would also lay out the criteria so I 21 could cross that one off my list? Where we said ARB would 22 assist in establishing plan criteria for the operators. 23 That would be covered in the resolution that staff just 24 read? 25 STATIONARY SOURCE DIVISION CHIEF FLETCHER: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 299 1 Actually, we are proposing a 15-day modification that 2 would provide additional criteria for that planning 3 process already. 4 BOARD MEMBER BERG: Thank you very much. 5 SENIOR STAFF COUNSEL VERGARA: That language is 6 in the resolution before you. 7 BOARD MEMBER BERG: I just wanted that point of 8 clarification. I'm good. 9 CHAIRPERSON NICHOLS: Does anybody feel they need 10 of a voice vote, or can we just proceed -- I mean a roll 11 call vote? Can we proceed on a voice vote? Okay. 12 All in favor of adopting Resolution 07-5-7 please 13 say aye. 14 (Ayes) 15 CHAIRPERSON NICHOLS: Opposed? 16 Very good. Thank you all for a great piece of 17 work. Really great to have this done. 18 And we have one more item today. But I think 19 there is a desire for the break. How much about giving us 20 until five o'clock even, 5:05. 21 (Thereupon a recess was taken.) 22 CHAIRPERSON NICHOLS: I think we're ready to go. 23 This is an item that we placed on the agenda in 24 order to consider the options for responding to a Public 25 Records Act request for information regarding our zero PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 300 1 emission vehicle, or ZEV program. And the information 2 that's being sought is the ZEV credit data, and it's being 3 sought for every manufacturer that's subject to the rule. 4 At our November meeting three weeks ago, Tim 5 Carmichael of the Coalition for Clean Air expressed 6 concern that the information still had not been provided, 7 so we asked to put the matter on the agenda for today's 8 meeting. 9 And I'm going to ask you to introduce this item, 10 Mr. Goldstene. 11 EXECUTIVE OFFICER GOLDSTENE: Thank you, Chairman 12 Nichols. 13 Exactly a year ago, the ZEV Alliance, a coalition 14 of environmental groups, submitted a Public Records Act 15 request that ARB provide the ZEV credit data we have for 16 each auto maker. This is the information about how many 17 and what kinds of credits a manufacturer has generated or 18 acquired to be used for compliance with the annual ZEV 19 obligation that started in the 2005 model year. 20 All of the ZEV credit information ARB has for 21 individual auto makers has been derived from submittals by 22 the manufacturers, in most cases under a claim of trade 23 secret. 24 Our legal staff asked each auto maker claiming 25 confidentiality to provide detailed demonstration why the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 301 1 company believed that the data are exempt from disclosure 2 under the Public Records Act. After reviewing these 3 submittals, the legal staff concluded that the 4 manufacturers had adequately demonstrated that the ZEV 5 credit data were trade secrets that were exempt from 6 disclosure. The ZEV Alliance was notified of this in 7 January and February of this year, and only redacted 8 materials were provided. 9 At the May 2007 Board meeting, you heard the 10 report of the ZEV expert review panel and staff's status 11 update on the ZEV regulation. Members of the ZEV Alliance 12 expressed concern that the manufacturers' ZEV credit 13 information was being withheld. They believe that ARB's 14 failure to release the data precluded their fully informed 15 participation in the ZEV rulemaking process. This was 16 because the vehicle mix and individual auto makers who 17 actually produce to comply with the existing provision or 18 potential amendments depended on the auto maker's ZEV 19 credit status. 20 The resolution you adopted at that Board meeting 21 directed the staff to take a broad legal view regarding 22 the disclosure of credits issue in order to achieve a 23 transparent public process. 24 As a result, our legal staff invited the ZEV 25 alliance and the manufacturers to provide additional PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 302 1 analysis in support of their respective positions. Our 2 lawyers considered the issues carefully and released a 3 report this past Monday. 4 Today, you will hear the recommendations of Tom 5 Jennings, our Chief Counsel. I think you'll see this 6 suggest presents some difficult and challenging issues, 7 some of which are strictly legal and some of which have 8 important policy components. 9 Although you're be hearing the advice of our 10 Chief Counsel on a matter that may very well lead to 11 litigation, we believe it is appropriate for the Board to 12 conduct the discussion in open session. This will ensure 13 that the public has the opportunity to provide input and 14 to observe any deliberation the Board engages in. 15 CHAIRPERSON NICHOLS: Thank you very much. 16 Mr. Jennings, I bet you weren't expecting such 17 excitement at your last Board meeting. 18 (Thereupon an overhead presentation was 19 presented as follows.) 20 CHIEF COUNSEL JENNINGS: Maybe I retired a month 21 too late. 22 Next slide please. 23 --o0o-- 24 CHIEF COUNSEL JENNINGS: This slide just outlines 25 the role of ZEV credits in the ZEV regulation. As you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 303 1 know, there are three levels of vehicles: Gold, silver 2 and bronze, which generate credits. The amount of credit 3 depends on the category, characteristics, and model year 4 of the vehicle and then those credits can be banked and 5 traded. 6 Then for each model year starting with 2005, 7 manufacturers use credits to meet their obligation -- 8 their ZEV obligation. And in many instances there's only 9 certain kinds of credits that can be used to meet certain 10 elements of the ZEV requirements. 11 And the regulation also provides choice between 12 base compliance path and alternative path. And whether a 13 manufacturer chooses the alternative path depends to some 14 extent on how many gold ZEV credits the manufacturer has. 15 Next slide. 16 --o0o-- 17 CHIEF COUNSEL JENNINGS: This slide just lays out 18 what Mr. Goldstene went over on how we address the issue 19 after we received the request from the ZEV Alliance. 20 And we can skip to the next slide. 21 --o0o-- 22 CHIEF COUNSEL JENNINGS: Which lays out the 23 language in the resolution from last May in which the 24 Board asked us to take another look at this issue. 25 Next slide, please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 304 1 --o0o-- 2 CHIEF COUNSEL JENNINGS: Back in June, the legal 3 staff wrote to both the manufacturers and the ZEV Alliance 4 asking for additional analysis, if they choose to do so. 5 We got a letter from the First Amendment Project on behalf 6 of the ZEV Alliance, a letter from the Pillsbury Firm on 7 behalf of the large volume manufacturers and from three or 8 four individual manufacturers. 9 Next slide, please. 10 --o0o-- 11 CHIEF COUNSEL JENNINGS: This lays out the 12 principles of the California Public Records Act. That is 13 a quote from the first section of it. There's a provision 14 in the Constitution of California that emphasizes the 15 importance of the disclosure of public records. At the 16 same time, the Public Records Act identifies some specific 17 exemptions to disclosure that State agencies need to 18 follow. 19 Next slide, please. 20 --o0o-- 21 CHIEF COUNSEL JENNINGS: The main section of the 22 Public Records Act that the manufacturers are relying on 23 is Section 6254.7 of the Government Code. So the next 24 several slides are going to go over that. 25 And that section has six subsections as you can PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 305 1 see here. The first three identity three categories of 2 information that are declared to be public records by the 3 statute. 4 The next section states that with two exceptions 5 trade secrets are not public records under this section. 6 E talks about emission data being public even if 7 it is trade secret. 8 And F has a provision having to do the use of 9 data used to calculate emission credits for permit 10 programs. 11 Next slide, please. 12 --o0o-- 13 CHIEF COUNSEL JENNINGS: We've identified three 14 legal issues in terms of the applicability of this 15 section. 16 And the first one is whether the information is 17 trade secret. There's a definition in the statute I'm 18 going to go over. 19 The second question is if the data are trade 20 secrets, is the data always exempt from disclosure or does 21 it have to fall into one of the three categories 22 identified in Subsections A, B, and C. And I'm going 23 discuss that as the second issue. 24 And then the third issue, if this answer on the 25 second one is it does have to fall within those sections, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 306 1 to analyze whether in fact it does. 2 Next slide. 3 --o0o-- 4 CHIEF COUNSEL JENNINGS: Oh, and I want to 5 mention -- and this is very important. A couple things I 6 had meant to mention. 7 First, under Section 6254.7, if it's exempt from 8 disclosure, that exemptions is absolute. And the decision 9 maker doesn't then do any balancing of public interests. 10 I'm going to talk later on where there's another 11 statute that's pertinent where the Board would be doing a 12 balancing of public interests. 13 And the other thing that I forgot to mention is 14 that in implementing the Public Records Act, the Air 15 Resources Board has adopted regulations. And one 16 provision of those regulations is that where an entity has 17 submitted information based on a claim of confidentiality 18 and the ARB decides that it isn't exempt from disclosure 19 that we first have to give 21 days' notice to the entity 20 submitting the material to us before we release that data 21 so that they have a chance to seek a judicial remedy if 22 they want to. 23 So now I'm going to talk about whether these data 24 are trade secret. In the definition of trade secret, you 25 can break it up into five elements. And these are the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 307 1 first three. 2 On the first one, we believe the ZEV credit 3 information clearly is a compilation of information. So 4 it falls within that first category. 5 The data clearly are not patented, so they fall 6 within the second category as well. 7 And then the third category I think is one of the 8 two somewhat challenging categories, and that is which is 9 known only to certain individuals within a commercial 10 concern. 11 The manufacturers all submitted information in 12 more or less detail on their efforts to keep the ZEV 13 credit information confidential within their companies. 14 And I don't think there's much question about that. 15 The First Amendment Project asserted that all of 16 these data are available publicly, and therefore the data 17 are not just known to certain individuals within the 18 commercial concern. And when we certify motor vehicles 19 gold, silver, or bronze motor vehicles, we always identify 20 now in the certification order what credits they're 21 generating. 22 And then the First Amendment Project asserts that 23 one could go to DMV and obtain a lot of information about 24 registration of vehicles. And combining that information 25 and maybe executive orders that we've issued on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 308 1 transportation credits and things like that, one could 2 figure out pretty well what the ZEV credit status of a 3 company is. 4 In some ways, the bottom line is that the efforts 5 of the auto companies are so strong to try to avoid 6 releasing this data under the Public Records Act and the 7 efforts of the ZEV Alliance are so strong in trying to get 8 the data that I think that's pretty good evidence that the 9 data is not generally available without resort to this 10 Public Records Act request. 11 So now the next slide is on the last two 12 criteria. 13 --o0o-- 14 CHIEF COUNSEL JENNINGS: The next one is that the 15 information is being used to manufacture a product. The 16 vehicle manufacturers make passenger cars for sale in 17 California that have to meet the ZEV regulation. They 18 need to know their ZEV credit status to make vehicles that 19 comply with the regulation, and I think that that's pretty 20 straight forward. 21 And the last one is knowledge of the trade secret 22 that gives the user an opportunity to obtain a business 23 advantage over competitors who do not know or use it. And 24 the main point that the manufacturers have made is that 25 their ZEV credit status shows what their upcoming business PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 309 1 plan is likely to be, about the kinds of vehicles they'll 2 be certifying and selling, if they are interested in 3 engaging in a trade with another manufacturer over gold, 4 silver, or bronze credits. If the person they're doing 5 the transaction with knows what their credit status is, 6 their bargaining position may be different than if they 7 don't know what their ZEV credit position is. Do they 8 have to get these credits to comply with the regulation or 9 will it just give them a cushion? 10 And next slide, please. 11 --o0o-- 12 CHIEF COUNSEL JENNINGS: Our conclusion on 13 whether it's a trade secret is pretty clearly that we 14 believe these data do qualify as trade secret, which gets 15 us to the second issue under Section 6254.7. 16 And -- just a second. Under the second issue, 17 the question is whether all trade secrets are exempt or 18 only those trade secrets that fall within Subsections A, 19 B, or C. 20 And when the section was originally enacted in 21 1971, there were three subsections. And the first two 22 were the same subsections that are there now identifying 23 two categories of air pollution records as public records. 24 And then Subsection C, which is now D, said trade secrets 25 are not public records under this section. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 310 1 And it seems pretty clear from that that it is 2 only an exception from the kinds of information that are 3 declared to be public under A and B. As originally 4 enacted, it was not intended to be a blanket exemption for 5 trade secrets, even if they had nothing to do with air 6 pollution or water pollution or anything like that. 7 And I have to say that this is an issue that we, 8 the legal office, never really looked at that vigorously 9 before, but it was raised by the First Amendment Project. 10 And as we looked at it more, we became more convinced it's 11 a very real issue. 12 The section has been amended six times. Five of 13 the amendments are wholly consistent in our view with the 14 principle that when the Subsection D refers to are not 15 public records under this section, they're only referring 16 to the kinds of documents that are declared under the 17 section to be public records. 18 Next slide. 19 --o0o-- 20 CHIEF COUNSEL JENNINGS: There is one amendment 21 that's very problematical. And that is in 1981 the 22 Legislature added this language to what's in Subsection D. 23 And it said it added the second exception, and the 24 exception had to do with data regarding the results -- the 25 answers to standardized tests. And clearly that doesn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 311 1 have to do with any of the documents declared to be public 2 records in any other subsection there. So it raises a 3 question if Subsection D only refers to trade secrets that 4 are identified as public under A, B, and C, there would 5 have been no reason for the Legislature to put that 6 underlined language in there. 7 But on the other hand, when you think about it, 8 is the Legislature's putting that language in there in 9 1981, does that really reflect an intent to convert what 10 the whole section meant compared to what it meant before 11 that amendment was put in. That sort of also calls into 12 question what did the Legislature mean by are not public 13 records under this section if things in other sections are 14 relevant as well. 15 So next slide. 16 --o0o-- 17 CHIEF COUNSEL JENNINGS: When we look at the 18 question overall, we have concluded that we think that 19 trade secrets -- the trade secret exemption only applies 20 to information that's identified in A, B, and C. 21 And just to digress for one moment. You'll 22 recall in the mandatory reporting rulemaking that we did 23 earlier there was a good deal of information about or 24 testimony about trade secret stuff and emission data. All 25 of that data clearly does fall within Subsection A. So PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 312 1 there is a lot of meaning to Subsection A. The question 2 is for us whether the ZEV credit data falls under 3 Subsection A. 4 So this slide shows what the first half of 5 Subsection A and I think the pertinent part. And it 6 refers to all information, analyses, plans, or 7 specifications that disclose the nature, extent, quantity, 8 or degree of air contaminants where other pollution which 9 any article, machine, equipment -- don't you love how laws 10 are written -- or other contrivances will produce. And 11 then after another clause, it says are public records. 12 So I think that it's clear that when it refers to 13 emissions from other contrivances, that would include 14 motor vehicles. But it's talking about the actual 15 emissions that come out of contrivances and equipment and 16 stuff like that. And then again when you look back at the 17 mandatory reporting rulemaking, it was all about what are 18 the actual emissions of these facilities. 19 And with the ZEV credits, the ZEV credit is not 20 based on the actual emissions of the particular vehicle 21 model that got certified. It's based on the certification 22 standard that the vehicle was certified to. So that all 23 PZEVs, regardless of what the actual emissions of the 24 tested vehicle were, are treated the same. And all AT 25 PZEVs are treated the same in terms or they're all PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 313 1 assigned the same emissions level, which is the 2 certification level. 3 And next slide, please. 4 --o0o-- 5 CHIEF COUNSEL JENNINGS: Because of that, we have 6 concluded that although the ZEV credit information does 7 qualify as trade secret under 6254.7D, it is not covered 8 by the whole section because that provision doesn't cover 9 this kind of information. And that is not however the end 10 of the story. 11 Next slide. 12 --o0o-- 13 CHIEF COUNSEL JENNINGS: But we are halfway 14 there. Only half of the story is left. 15 There's another provision in the Public Records 16 Act 6254k, that says that anything that's privileged under 17 the Evidence Code is exempt from disclosure under the 18 Public Records Act. And there is a provision of the 19 Evidence Code that exempts certain trade secret 20 information. And it basically exempts the trade secrets 21 if the allowance of the privilege will not tend to conceal 22 a fraud of otherwise work injustice. 23 Next slide. 24 --o0o-- 25 CHIEF COUNSEL JENNINGS: It's pretty obvious to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 314 1 us that there's a special definition under the Evidence 2 Code about what trade secret means. But if it's trade 3 secret under the other provision, we think it's trade 4 secret under this one. 5 So we get to the second clause there, and the 6 question becomes would disclosure conceal fraud or 7 otherwise work injustice? There's one California case -- 8 reported case that interprets this in the context of the 9 Public Records Act. 10 Could we go back one? 11 --o0o-- 12 CHIEF COUNSEL JENNINGS: And that case is Uribe 13 versus Howie. It was a 1971 case in which the farm worker 14 sought to gets the records that had been filed by 15 pesticide applicators of the monthly pesticide spray 16 reports they submitted to the County Ag Commissioner. In 17 construing what conceal a fraud or otherwise work 18 injustice meant, that court basically applied a balancing 19 test. They said that the trade secret might be protected 20 only if interests of justice are best served. And after 21 couple pages of analysis and balancing the interest, that 22 court declared that the data was not exempt from 23 disclosure, because the interest in disclosure outweighed 24 the interest in nondisclosure. And there's an analysis in 25 the report we did that goes into this in more detail. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 315 1 Next slide, please. 2 --o0o-- 3 CHIEF COUNSEL JENNINGS: So I think the most 4 important thing here and the thing we need to do is 5 compare the public interests. And I'll jump ahead for a 6 second. 7 Just leave the slide as it is. 8 We feel that there are powerful interests both in 9 favor of disclosure and in favor of nondisclosure. And 10 that because those present to a large extent policy 11 considerations and because the Board is the ultimate 12 policy maker for our agency that we're going suggest that 13 the Board is best suited in deciding how those different 14 public interests should be balanced. 15 So I'm going to go over now the public interest 16 in disclosure and then the public interest in 17 nondisclosure. 18 First the public interest in disclosure. The ZEV 19 Alliance generally identified two reasons why they thought 20 that the data should be released. And the first is they 21 believe there's a need of the public to monitor compliance 22 and to make sure that the regulation is being adequately 23 enforced. 24 I just learned today I think that issue may have 25 not just disclosure whether people are in compliance or PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 316 1 not, but perhaps elements of how certain credits were 2 assigned to vehicles back when and whether those vehicles 3 should have qualified for those credits. But they make 4 this argument that the public needs to see the credit data 5 to see if the regulations' being adequately enforced. 6 When I thought about this, it struck me that the 7 same considerations come up with income tax returns. We 8 don't really know that the Internal Revenue Service is 9 adequately enforcing the tax laws with respect to a 10 particular person unless you see those tax returns and see 11 if they're doing it right. And obviously there's a strong 12 interest in not releasing individual tax returns and that 13 doesn't happen in our country. So there are 14 countervailing interests there. 15 We think that it is important to publicly release 16 the information that all manufacturers have positive 17 credit balances for model years 2005 and 2006. And we 18 could provide more information to report something like 19 that. But you'll have to evaluate how important this 20 consideration is. 21 --o0o-- 22 CHIEF COUNSEL JENNINGS: The next slide talks 23 about the other public interest in disclosure. And that 24 is -- and I think it's the more important one. As we come 25 to the Board's consideration of the upcoming ZEV PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 317 1 rulemaking, there is a concern among members of the ZEV 2 Alliance that they won't really know what the impact of 3 various amendments are unless they know what the ZEV 4 credit status of the various companies are. Because they 5 don't know whether a company will have enough banked 6 credits that they'll be able to move to a different 7 compliance path, et cetera. 8 And to give one example -- there aren't all that 9 many examples, but there are certainly some good examples. 10 That the amount of an outstanding gold credit balance that 11 a company has may determine whether that manufacturer 12 would leave the alternative path and move to the base path 13 if the alternative path provisions were tightened so much 14 that they really didn't want to deal with those provisions 15 anymore. 16 When you move to the base path, you have to meet 17 all your gold obligation with gold vehicles. So your 18 ability to move to that path depends on how many credits 19 you've banked for those pure ZEVs that you've produced in 20 the past. 21 I do want to mention one thing. And I think this 22 is important. That under the open meeting law, we believe 23 that the Board could conduct a closed session during the 24 rulemaking and the Board could receive all of the ZEV 25 credit data and review the material and discuss it -- the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 318 1 Board members could discuss that data among themselves 2 consistent with nondisclosure under the Public Records 3 Act. I think that would inform your decisions. But the 4 big issue is would that be satisfactory to members of the 5 public, because members of the public are concerned with 6 what will be the real impacts. 7 CHAIRPERSON NICHOLS: I just want to ask a 8 question, which I think I know the answer to. But just to 9 be clear. If this information were trade secret -- and if 10 it is trade secret and it were subject to complete 11 nondisclosure, even members of this Board would not have 12 access to it. Only those individuals designated by the 13 requirements of the ARB would have it? In other words, if 14 we hadn't made your balancing suggestion, if you hadn't 15 come to the balancing conclusion -- 16 CHIEF COUNSEL JENNINGS: Technically, the Board 17 members could see it at as parts of ARB without 18 disclosure. 19 But the key issue is to the extent it's relevant 20 to the rulemaking normally if you were going to discuss it 21 with other members, you would have to do that in the open 22 session. And there is actually a provision in the open 23 meeting law that allows the Air Resources Board 24 specifically to have a closed session to consider 25 production data from manufacturers. And we think that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 319 1 this is close enough to be production data. 2 Now you would still be under an obligation not to 3 disclose it, because you could be State officers who've 4 received this information. But it would be satisfactory 5 for your needs, but obviously there's a major question 6 whether the public would find that adequate. 7 So now to move to the next slide and talk about 8 the last question -- 9 --o0o-- 10 CHIEF COUNSEL JENNINGS: -- which is the public 11 interests in nondisclosure. There are two public 12 interests we've identified. The first one is the basic 13 interest that the companies have in not having their 14 information provided to potential competitors. 15 As I described before, it could tip off 16 competitors to their compliance plans. It would affect 17 their bargaining positions and credit transactions. 18 There is a question that we haven't explored very 19 much, but it is possible that if everybody's data was 20 disclosed, that could in some ways level the playing 21 field. Because although companies would know your data, 22 you could know their data. But obviously some companies 23 who were sort of more on the edge would be more affected 24 than other companies. 25 Next slide, please. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 320 1 --o0o-- 2 CHIEF COUNSEL JENNINGS: Which moves us to the 3 last public interest that we've identified for 4 nondisclosure. And I think it's a very important one. 5 And that is that the staff very much relies on 6 confidential data that the manufacturers provide us in 7 both developing regulations and implementing regulations. 8 And there's a good deal of exchange there, and receiving 9 that information is very important. 10 And there are even situations where we receive 11 confidential information that goes to the same kind of 12 issue that the ZEV credit data go to, because it goes to 13 whether companies can comply with the regulation or not. 14 There have been instances where individual manufacturers 15 have told us that they can comply with the proposed 16 regulation, even though the trade association is raising 17 lots of questions. But they say, you can't tell. You 18 can't publicly disclose that. 19 Question whether a member of the public would say 20 you need to disclose that information because that's 21 relevant to my ability to comment on whether the 22 regulation is technologically feasible or not. I don't 23 want to minimize the importance of the trade secret 24 information that staff does receive on an ongoing basis 25 from the manufacturers and the potential impacts that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 321 1 disclosure in this case could have on the ongoing supply 2 of that data. 3 CHAIRPERSON NICHOLS: Tom, I'm sure everybody has 4 comments and want to jump into this, but I just have to 5 ask you one question about that, because this isn't -- 6 well, maybe I'm not understanding how the ZEV program 7 works. So maybe that's what I need more clarification on. 8 Because it would seem to me that the information about how 9 many banked credit a manufacturer has would be information 10 that we would have. In other words, they may be 11 collecting it themselves, but they have to file that 12 information with us. 13 CHIEF COUNSEL JENNINGS: That's correct. 14 CHAIRPERSON NICHOLS: In terms of their sales 15 data. 16 CHIEF COUNSEL JENNINGS: The information that we 17 have is all either directly submitted by the manufacturers 18 to us under these forms that they're required to submit or 19 is information that we've derived from the manufacturers' 20 submittals. 21 If we had information that wasn't -- that we had 22 identified independently, then there's no doubt that that 23 can be released, because we didn't receive it under a 24 claim of confidentiality. And we have thought in ZEV 25 rulemaking about whether we could try to create data PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 322 1 ourselves to provide information to you. And it seemed 2 like it was going to be a real challenge to do that. So 3 we haven't done that yet. 4 CHAIRPERSON NICHOLS: But I guess where I was 5 headed with the question is that I understand the nature 6 of the kinds of conversations that staff are able to have 7 with representatives of manufacturers that enable them to 8 make better judgments about where to go on rule makings. 9 But those could be sort of informal conversations. They 10 would be data collected. 11 CHIEF COUNSEL JENNINGS: I was talking to Tom 12 Cackette and Bob Cross about that. And I point out the 13 Public Records Act only applies to records, documents, 14 things like that. If we're told something and there's no 15 writing involved, then it's not subject to the Public 16 Records Act. 17 Bob Cross pointed out that -- he's the guy who 18 runs these meetings with manufacturers about their product 19 plans, et cetera. That there's a lot of technical 20 diagrams and things like that that are provided. And it's 21 hard to just all keep it in our head without having any 22 records. 23 CHAIRPERSON NICHOLS: Okay. 24 CHIEF COUNSEL JENNINGS: So we're just about at 25 the end, and I'll go -- I think there are only two more PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 323 1 slides. We'll go to the next slide. 2 --o0o-- 3 CHIEF COUNSEL JENNINGS: Which just talks about 4 why we think it's appropriate for the Board to engage in 5 this balancing test. 6 And then the last slide is the summary. 7 --o0o-- 8 CHIEF COUNSEL JENNINGS: We do believe that the 9 ZEV credit information is trade secret. But we don't 10 believe it's absolutely exempt from disclosure. I do want 11 to emphasize that we have never looked at the precise 12 issue before about whether it has to fall within the 13 Subsection A, B, and C. And we released our analysis only 14 on Monday, so I think you're going to hear from some 15 people that they haven't had enough time to analyze our 16 opinion. 17 And under the Evidence Code, you disclose whether 18 the withholding -- unless withholding the information 19 would not work an injustice, there's strong public 20 interest both ways. And I think it's worth discussing 21 these issues now. 22 CHAIRPERSON NICHOLS: And just to clarify the 23 process, if the Board were to decide that the interest in 24 disclosure outweighed the interest in nondisclosure, what 25 would happen? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 324 1 CHIEF COUNSEL JENNINGS: What would happen is the 2 staff would send a letter to each of the manufacturers who 3 submitted the data saying that we have decided that the 4 data is not exempt from disclosure under the Public 5 Records Act and that we plan to release the data after 6 they receive 21 days' notice. So we would identify the 7 date the 22nd day -- it would be receipt, not delivery. 8 So we have to figure that out. But there would have to be 9 a pause of at least three weeks before we release that 10 data. And I think there's not an insignificant chance 11 they would go to court and try to get a restraining order 12 again us. 13 CHAIRPERSON NICHOLS: They have time to do that 14 before the data goes out. 15 Okay. Well, would anyone like to start the 16 discussion? Yes. I'm sorry. We do have witnesses. We 17 have to hear from them first. Fair enough. I forgot. 18 Don Anair from Union of Concerned Scientists, 19 followed by Sarah Flanagan with AIAM, I assume, and Linda 20 Nicholes. 21 MR. ANAIR: Good evening. I think I've gone 22 through all good morning, good afternoon, good evening. 23 But now I get to speak on behalf of my colleague, Mr. 24 Kwong, who couldn't be here and who is tracking this 25 issue. So I just wanted to read his comments to you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 325 1 The Union of Concerned Scientists cannot speak to 2 the legal aspects of the request to disclose zero emission 3 vehicle credit data. However, from a scientific 4 standpoint, without the gold level credit data, it is 5 impossible to analyze the effectiveness of the ZEV 6 program. 7 For example, much discussion on the ZEV mandate 8 has centered on the 25,000 pure ZEV vehicle credits 9 during -- requirements during 2012 through 2014. If the 10 number of credits that each car company has accumulated is 11 unknown, it is impossible to tell if the gold requirements 12 in Phase 3 should be reduced or if an auto company can 13 meet its requirement using the banked credits, thereby not 14 producing any ZEV vehicles for three years. How can the 15 public provide accurate comments on the proposed changes 16 to the ZEV program without knowing this information? 17 In contrast to the gold level vehicles, the 18 number of silver and bronze vehicles sold at dealerships 19 in California is publicly available for purchase from at 20 least two different companies. That is, I can pay a 21 company to tell me how many ATP ZEV Priuses or PZEV Ford 22 Focuses or Foci, whatever you prefer, were sold in 23 California in 2006. Because the data is available to the 24 public for a price, UCS wonders how much of a trade 25 secrets are these silver and bronze credits. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 326 1 UCS strongly encourages the Board to release all 2 record requested by the ZEV Alliance. This will allow the 3 public the opportunity to properly judge the effectiveness 4 of the ZEV program. Furthermore, if data on the ZEV 5 program remains hidden it prevents proper scientific 6 analysis of other ARB programs, such as the Global Warming 7 Solutions Act. Thank you. 8 CHAIRPERSON NICHOLS: Thank you. 9 Sarah Flanagan. 10 MS. FLANAGAN: Good evening, Chair Nichols and 11 members of the Board and staff. I'm Sarah Flanagan, 12 Pillsbury Winthrop Shaw Pittman. I make this statement on 13 behalf of six of the manufacturers: General Motors, Ford, 14 Chrysler, Toyota, Nissan, and Honda. I have two issues: 15 Process and merits. 16 The process issue is this is a very, very 17 significant decision you're being asked to make. It has 18 ramifications beyond these records and beyond this agency 19 in terms of the interpretation of the absolute protection. 20 This is a radical departure from prior practice. 21 And Chief Counsel Jennings said that the Board hasn't 22 considered this issue before. It has not been something 23 that has been the Board's position in the past. 24 We only learned about this new interpretation 25 late on Tuesday. We scrambled to get a brief statement in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 327 1 front of you, but it is not the analysis that we want to 2 be able to do. So we asked that this decision be put off, 3 that we be -- this is not a punt. We need time to provide 4 a good, thorough analysis. Because it's not just the Air 5 Board. There are other agencies that use this section. 6 So that's kind of number one. 7 Number two on the merits. Even though I know 8 it's a special occasion and it's his retirement and all 9 and there was that beautiful resolution read, I think he's 10 got it wrong on this one. The absolute protection should 11 apply. You can't just read out an amendment because it 12 doesn't fit within the interpretation you want to put on 13 it. And not only have we relied on it and other agencies 14 relied on it, but the Board itself has relied on it. So 15 you shouldn't change the interpretation overnight without 16 giving people a chance to really analyze and address it. 17 But on the merits, if you did get to the 18 balancing test, which I don't think you should because I 19 think the absolute protection applies. If you get to the 20 balancing test, what could be more unjust than for a 21 government agency to tell the manufacturers that they will 22 be submitting the data with the absolute protection -- 23 absolute protection for trade secrets. And then after we 24 give you to data then you say, you know, we haven't looked 25 at this before, but now that we have, we don't think the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 328 1 absolute protections should apply. What can be more 2 injustice than that? 3 Because our clients would have given you only the 4 minimum required had they known that. They would not have 5 provided the additional data that the staff finds helpful. 6 I mean, that is unjust. It's almost a rulemaking that 7 we're having here where you're changing the rules of the 8 game. 9 I attached to my letter, which is under Mr. Bars' 10 name, the advisory that went out to the manufacturers with 11 respect to this very data. And the section that talks 12 about confidentiality only talks about the absolute 13 protection. If it's trade secret, it falls under the 14 absolute protection. There's none of this A, B, and C 15 stuff. And as -- well, we need more time. Okay. I'm not 16 going to get it now, but we need more time. This is a 17 very significant matter. 18 CHAIRPERSON NICHOLS: Thank you. And I know 19 we'll be here so we can call you back for questions. 20 Appreciate that. Would you point us to the page in the 21 letter or our document rather that deals with 22 confidentiality? I'm not finding it. 23 MS. FLANAGAN: Sure. It's on page 6 of your -- 24 the first attachment to our letter. 25 CHAIRPERSON NICHOLS: Okay. Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 329 1 Ms. Nicholes, followed by Danielle Fugere and 2 Bonnie Holmes-Gen. 3 MS. NICHOLES: Good evening, Chair Nichols and 4 Board. I'm Linda Nichols from Plug In America. 5 Plug In America believes that the zero emission 6 vehicle credit system should be fully transparent to all. 7 Auto makers should not be allowed to continue to hide 8 their current credit status of compliance from the public. 9 ZEV credit data should be disclosed. In the 10 past, the auto makers have used the ZEV credit block wall 11 to hide this important information from the public. I'm a 12 member of the public. This information is important to 13 me. Disclosure allows the public to understand whether 14 plug-in cars are actually going to be put on the road and 15 what our expectations in the future might be. 16 ZEV credit disclosure is in the public's best 17 interest and does not hurt the auto maker's interest. It 18 is truly up to the Board to decide. Please do what is in 19 the public's interest. Zero emission vehicle credit 20 disclosure should be treated as a public record and 21 certainly not a confidential trade secret. The era of 22 hiding the current auto maker status of credit compliance 23 should be relegated to history. Thank you. 24 CHAIRPERSON NICHOLS: Thank you. 25 Danielle Fugere, Bonnie Holmes-Gen, and then PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 330 1 Daniel Emmett. 2 MS. FUGERE: Good evening, Madam Chair and 3 members of the Board. My name is Danielle Fugere, and I 4 represent the Blue Water Network, Friends of the Earth, 5 which is a ZEV Alliance member. 6 It's been over a year since we submitted our 7 Public Report Act request. So I appreciate your hearing 8 this today. And I hope that you make a decision on this 9 issue today. 10 With your decision, you can either bring the 11 light of day to the ZEV credit system or can you put it 12 into a black box, hidden from the public, without access 13 or review. If you find that the credits are secret and 14 the public must simply trust auto makers and regulators, 15 public confidence in the system will be gone. 16 Equally important, your decision today will set a 17 precedent for any market-based trading system set up under 18 AB 32. The public trust in that system could be 19 undermined before it is even set up if all trading and 20 credit information is retained as secret from the public. 21 Contrary to staff's conclusions and auto makers' 22 assertions, the information we requested is not trade 23 secret. In questions one and six, we requested a record 24 of the cars sold into the market by each auto maker. 25 Once a car is sold, that information becomes PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 331 1 publicly available. It's not easy available, but it's 2 publicly available. DMV records are available and 3 companies like JD Powers sell the information. They sell 4 it for money, though. 5 And because this information becomes publicly 6 available, it can no longer form the basis of a trade 7 secret claim. It's no longer secret. 8 The second type of information we requested. We 9 asked for information about ZEV credit allocations. ZEV 10 credits are enforcement records. CARB reviews auto 11 makers' sales data and makes a decision about compliance 12 status by issuing credit. Those records of government 13 decision making are not trade secret. Only the 14 information from the auto makers on which the government 15 relied for its decision can be the basis of a trade 16 secret, and that information is publicly available. The 17 decision makers' issuance of credit is not an auto maker 18 secret. 19 And note that we have not asked for plans or 20 schematics or strategies. We have not asked for any truly 21 trade secret information. So we ask that you rule on this 22 issue of trade secret when you make your ruling. 23 The fundamental point of trade secret if a 24 company invests its time and resources into developing a 25 product, a formula, or some type of computation of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 332 1 information for use in its business -- and that was left 2 out of the criteria -- that product or information should 3 not be freely given to competitors. When they create 4 something for their business, yes, the law gives it 5 protection when it's provided to the government in the 6 absence of some overriding public purpose. But it's 7 important to note it's the information that is protected, 8 not the resulting government decision or accounting. 9 In our case, auto makers are required to reveal 10 automotive sales data to CARB. It is the sales data that 11 CARB would be required to maintain in confidence if that 12 information were not publicly available. So we think 13 staff's analysis confuses those two issues and comes up 14 with the wrong decision. 15 I would like to go on. This is an important and 16 complicated issue, but -- 17 CHAIRPERSON NICHOLS: It is an important and 18 complicated issue which we are dealing with. What are 19 your additional points, just legal points or -- 20 MS. FUGERE: They're -- the point that -- the 21 information is not -- turning over ZEV credit is not 22 equivalent to providing competitors with knowledge of 23 upcoming product plans. Nissan itself said that hundreds 24 if not thousands of factors goes into product planning. 25 It's not just ZEV. It's CAFE, air quality. It's customer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 333 1 information. It's engineering information. It's not just 2 ZEV credit. You don't know what another company is going 3 to do just because you know the ZEV credits. 4 Another argument that's frequently made is ZEV 5 credits have value and that the auto makers should be able 6 to trade in secret. But this flies in the face of the 7 purported benefit of a market-based trading system in 8 which a free and open market allocates resources 9 efficiently. When you hide information, it's not 10 efficient any more. 11 CHAIRPERSON NICHOLS: Okay. I think if you want 12 to submit -- if you have a written testimony, that would 13 be fine. We may talk further. But I think the point that 14 several people have raised now confuse a number of 15 different issues. 16 I'm just -- I want to say for the record right 17 here that there's nothing about what we are doing here 18 that is relevant to whether or not there can be or should 19 be a cap and trade system put into effect or allocations 20 are assigned to people. It's a totally different kind of 21 process than what we're talking about under the ZEV 22 program. 23 Just let me finish okay. 24 Because what we're talking about is compliance 25 data which is under AB 32. It's treated in a completely PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 334 1 separate way as an alternative compliance mechanism. 2 That's the kind of mechanism we're talking about here if 3 we were to go down the path of continuing to treat it as 4 confidential data. 5 The entire trading idea is very different and so 6 is the way in which these credits are given. So I'm just 7 not buying your argument. That's all I'm telling you. 8 MS. FUGERE: And I would just say that the 9 industry will use this as a precedent, and they will say, 10 well, if the trading information in ZEV was secret, our 11 trading information should be secret as well. 12 CHAIRPERSON NICHOLS: Well, they can try. Okay. 13 I understand. 14 Ms. Holmes-Gen, Daniel Emmett, Tim Carmichael. 15 MS. HOLMES-GEN: Chairwoman Nichols and members, 16 Bonnie Holmes-Gen of the American Lung Association of 17 California. 18 First, I'd like to thank you for calendaring this 19 item for public discussion. I really greatly appreciate 20 that. As you know, we submitted a joint request for this 21 disclosure of this information a year ago. And we have 22 been anxiously waiting for a very long time for this 23 disclosure. 24 And we consider this request to really be a 25 fairly simple and modest request. We don't believe that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 335 1 this information falls in the definition a trade secret. 2 In concert with my colleagues, I really do not believe 3 this information is actually secret. I believe that it 4 can be obtained if an individual or company has the 5 financial resources and has the technical consultant and 6 can do the number crutching to get this information. 7 And so in this sense, this information is not 8 known only to certain individuals within a commercial 9 concern. It can be obtained in the public arena, as has 10 been stated, for a price and with a lot of hassle that 11 most people in the general public certainly couldn't 12 afford or go through. So in that sense, it's an injustice 13 that this information is available potentially to some who 14 could afford to obtain the information, but not to others 15 in the public who would not have the resources or the 16 ability to get that information. 17 Again, this is information that's based on the 18 certification standard of the vehicle and based on the 19 types of vehicles that were produced. This is not 20 information that was created by a car company. The 21 companies didn't create these credits. They were given to 22 them. It was a gift from a public entity in a sense. And 23 we believe that information should be available to the 24 public for all the reasons that have been discussed. So 25 that we can hold the car companies accountable for their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 336 1 obligations under the ZEV program. 2 And as has been stated, it is extremely difficult 3 to assess the car makers' progress, not only to assess 4 their progress in meeting their obligations under the ZEV 5 regulation, but to provide thoughtful and specific input 6 on the potential changes that have been put before us 7 without an understanding of how these ZEV credits are 8 going to impact the obligations of the car companies and 9 their potential plans and investments under the ZEV 10 program. 11 We need you today to determine that this 12 information is not a trade secret, and we need you to 13 grant our simple modest request and to make this 14 information -- give this information to the public. There 15 have been some estimates that have been made of the credit 16 amounts that may have been accumulated by the car 17 companies. And these estimates show that the car 18 companies collectively have over 100,000 gold credits. 19 For example, if that's the correct estimate, I don't know 20 for sure. We don't have the information. But this would 21 be an aggregate more than enough to fulfill the 22 obligations of the car companies under the ZEV program for 23 the Phase 2 time frame 2009 to 2011. So clearly we have 24 significant concerns. Clearly, we can't make a thoughtful 25 analysis of any changes to the ZEV program without this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 337 1 information. 2 CHAIRPERSON NICHOLS: Thank you. Appreciate your 3 comments. 4 Daniel Emmett and Tim Carmichael. That concludes 5 our public testimony. 6 MR. EMMETT: Good evening, Chair Nichols and 7 members of the Board. Thanks for the opportunity to speak 8 to you this evening. My name is Daniel Emmett. I'm 9 Executive Director of Energy Independence Now and a member 10 of the ZEV Alliance. 11 I'm just going to very briefly echo many of the 12 comments that have been made today by my colleagues in the 13 ZEV Alliance that we really do need this information in 14 order to participate in the process and comment on staff's 15 recommendations to changes to the ZEV regulation. 16 I think all of our organization work to be 17 thoughtful and think about the programs and the details. 18 We want to be able to do that. And we feel like we don't 19 have the information that we need to be able to do that. 20 And we feel in particular that this is not trade secret, 21 nor should it be considered as such. 22 With regard to the rational for compilation of 23 information, this is not a compilation of information 24 owned by the OEMs. Rather, it's owed to ARB and the 25 public. These compilations are information that are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 338 1 compiled about credits which are construct of the State 2 and a construct of the ZEV program. So we don't feel like 3 this is trade secret. And others have indicated that as 4 well. 5 We just want to close by saying we really need 6 this information. Thank you. 7 CHAIRPERSON NICHOLS: Thank you. 8 Tim Carmichael. 9 MR. CARMICHAEL: Good evening. I think my father 10 would say after Tom Jennings' presentation, thank you for 11 all the hard work. It's clear as mud. No offense 12 intended. 13 But there's a lot here. And as every slide 14 showed, there's two sides to this issue. Our basic 15 premise is the public has a right to know how -- has a 16 right to know if and how companies are complying with the 17 pollution laws of this state. And that is a fundamental 18 right for this agency and for the public, because we're 19 talking about companies that are polluting. We're talking 20 about sources that are polluting. 21 And Chairman Nichols, you know, I respectfully 22 disagree with your premise that this is so different than 23 AB 32 or what's going to come in that program. I actually 24 think there's more similarity than difference in the 25 handling of credits and various polluters' intention to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 339 1 maintain -- to keep information secret that should be 2 public to ensure so that we can all ensure that pollution 3 reductions are being achieved so that we can evaluate the 4 effectiveness of this or future programs. 5 I want to also say that I'm not sure that the tax 6 reporting analogy really works. We're talking about 7 public corporations that, in fact, have to release all 8 sorts have financial data, including their tax returns on 9 an annual if not quarterly basis. And so I think how 10 individuals handle their finances is not the same as how a 11 corporation has to handle public information. 12 The point was made by the attorney from Pillsbury 13 that it would be unjust to disclose this information. And 14 I might believe that, if I believed that there could be a 15 competitive disadvantage or harm to any one of these 16 companies by releasing this data. But as my colleagues 17 have mentioned, that is a very hard sell. 18 We are talking about a small fraction of the two 19 million vehicles sold in the state every year. We're 20 talking about public companies that, once they have made 21 the sales, that information is -- they have to make the 22 sales to generate the credits. And once those sales have 23 been made, that is public information. 24 The last point I want to make is that this is the 25 Air Resources Board. This is not the Ninth Circuit or the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 340 1 local district court. And that's a good thing. I think 2 part of the reason your counsel punted to you is because 3 this is more a public policy decision I believe than it is 4 a legal decision. The law, as was pointed out, can be 5 interpreted a couple of different ways. But as a matter 6 of public policy, the California Public Records Act is 7 very strongly in favor of public disclosure. And there 8 are court cases that, you know, make that finding over and 9 over. 10 So we urge you to decide on the side of the 11 public interest and disclose this information. Thank you 12 very much. 13 CHAIRPERSON NICHOLS: Thank you. Your last point 14 I think is a good one. And let me just clarify what I was 15 attempting to say before. I'm sorry if it was too short 16 circuited. 17 I agree with you that what we're dealing with is 18 a decision. And all I was trying to say about the issue 19 of comparing this to other kinds of market or credit or 20 trading programs is that, from my point of view, the issue 21 that we need to be dealing with here is not the legal 22 interpretation of the law. I think our counsel has told 23 that we can way the interests here. 24 My concern is that this is a program which was 25 set up in a certain manner. And we need to find out how PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 341 1 the program was set up and what were the legitimate 2 expectations of people who participated in it as part of 3 making the decision. To me, that's very different how I 4 would set up this program today. If you we were beginning 5 fresh to start a ZEV program and I were asked to come up 6 with some mechanism for enforcing the program and for 7 allowing people to get credits for different categories 8 and trade those categories, speaking for myself and I 9 suspect for the rest of this Board, I would never allow 10 there to be confidential information in that kind of an 11 arena. 12 But what we've heard and now need to get more 13 information about is think from our staff is, you know, 14 what actually was communicated to the companies. What is 15 the basis and fact or mortality, if you will, for them to 16 be able to claim trade secret. Not the legal issue, but 17 the more practical and also philosophical question that we 18 do have to grapple with here. 19 MR. CARMICHAEL: Just one quick point on that. 20 Even if the staff did tell every auto maker that the 21 information would be preserved as a trade secret, to make 22 a decision later as we're talking about today not to honor 23 that or not to keep it trade secret, I think it's very 24 important to consider would there be harm, would there be 25 a competitive disadvantage for anybody? If that is not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 342 1 the case, I think it's less significant to change the 2 policy over time. 3 CHAIRPERSON NICHOLS: It's different, but there 4 is a higher burden. That's all I'm trying to say. 5 Having said that, now staff, I've read this 6 document that we send out to the companies, and it's just 7 a regurgitation of the law. It doesn't actually say we've 8 accepted anything as a trade secret that was filed, even 9 if they filed saying it's a trade secret. There needs to 10 be some further action taken when somebody requests the 11 information before it actually gets stamped that way. 12 So can you illuminate this a little bit more in 13 terms of what you think the expectations of the companies 14 and the staff have been in this regard? 15 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I 16 think that we have followed the procedure that was listed 17 there. The manufacturers submitted the data. They 18 claimed trade secrets on it. And it was being treated 19 that way until someone said I want to see that 20 information. And at that point, the information -- we 21 have to notify them that someone wants to see the 22 information. And then they provide the much more 23 elaborated rational for why it is trade secret or not. 24 And our attorney has concluded that he believes it is 25 trade secret. So from that, that's the normal process if PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 343 1 I've got that right, Tom. 2 CHAIRPERSON NICHOLS: So the whole history of how 3 we got here today is that for the first time last spring 4 you got a request for the compilation of the credits and 5 then ruled on it? 6 SENIOR ATTORNEY JOHNSTON: It was submitted last 7 December and we received -- I'm Diane Johnston, and I was 8 the attorney who was assigned to actually respond to the 9 initial request from the ZEV Alliance. 10 And they made their request in December of 2006. 11 And the information we gathered -- and we followed the 12 procedure in ARB's regulations for determining whether 13 disclosure is appropriate or not. And part of that is 14 sending the information that we've collected to the people 15 who submitted it, in this case the auto manufacturers, and 16 have them indicate whether they believe that the 17 information that they had previously submitted and 18 indicated was confidential is, in fact, confidential and 19 to provide us with a rational for its confidentiality. So 20 all of that information came into the ARB back in January, 21 February, and March of this year. 22 And then subsequent to that, we made an initial 23 determination that the manufacturers had carried their 24 burden for, you know, having us treat it as confidential 25 trade information. And we advised the ZEV Alliance, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 344 1 requesters, of that fact. 2 And then they asked for a meeting with the legal 3 office. And we had a conference call. And things kind of 4 developed from there to the point where in May when the 5 Board heard the ZEV technology review, the ZEV Alliance 6 once again renewed their request for the information. And 7 in response to that, the Board directed the staff to try 8 to make this process of looking at this information as 9 transparent as possible. 10 So we once again renewed our request to both the 11 manufacturers and the ZEV Alliance to provide this 12 additional analysis. And that was done. And at the end 13 of August, we had received all the information from the 14 various parties. And we began our analysis at that point 15 looking at the law and reviewing the issues. So here we 16 are today. 17 CHAIRPERSON NICHOLS: That's helpful in terms of 18 the history. It also I think casts a somewhat different 19 light both on the claim by the attorney for the auto 20 companies that they haven't had time to think -- I guess 21 they haven't had time to think about your new legal view. 22 SENIOR ATTORNEY JOHNSTON: Right. 23 CHAIRPERSON NICHOLS: But in terms of the facts 24 for the justification for why they think this information 25 should be kept secret, they've been well aware of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 345 1 request and the information for quite some time. 2 SENIOR ATTORNEY JOHNSTON: But our analysis was 3 just posted on Monday. 4 CHAIRPERSON NICHOLS: Thank you. That's helpful. 5 Now I've been doing -- 6 MS. FLANAGAN: I know this is out of order. I 7 could have brought six of my colleagues so I could rack up 8 20 minutes. But I -- 9 CHAIRPERSON NICHOLS: If you're going to speak -- 10 MS. FLANAGAN: May I address the one reference to 11 the letter? Because I think you're missing my point. 12 CHAIRPERSON NICHOLS: All right. If I 13 misunderstood you, you can explain. 14 MS. FLANAGAN: The significance of the advisory 15 that went to the manufacturers is that under 16 confidentiality, the section it references is 6254.7. 17 That is the absolute protection for trade secrets. It's 18 not the balancing test. That's a separate section, which 19 is not mentioned at all in the confidentiality discussion. 20 Only the absolute privilege. 21 What we're now hearing is that they're saying 22 none of the data being submitted in this program could 23 possibly qualify for the absolute privilege. Okay. So 24 then why did you rely on the absolute privilege when you 25 were discussing with us how our documents would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 346 1 treated? That's my point. 2 CHAIRPERSON NICHOLS: Okay. Understood. Thank 3 you. 4 Well, does anybody have a suggestion? 5 BOARD MEMBER RIORDAN: Madam Chair, I don't have 6 a suggestion, but I have a question, which is I 7 understand -- I see this as two particular issues. One is 8 what do we do with what we've done in the past, and what 9 might we do going forward? And I don't know to -- our 10 attorneys, is there a difference, or is it just my 11 unsophisticated mind working here? 12 CHAIRPERSON NICHOLS: To put it a little 13 differently, the a Board could establish a policy for what 14 we wanted to go going forward that would be different from 15 what we decide to do about the specific request that's 16 before us right now. 17 CHIEF COUNSEL JENNINGS: I think there's a 18 definite policy that the Board could adopt a regulation 19 that says these data are going to be public. I'm not sure 20 whether there would be a concern with the fact that we 21 would be declaring the stuff they claim to be trade secret 22 public, but it would certainly change things going 23 forward. 24 CHAIRPERSON NICHOLS: Well, the alternative is to 25 try to do what you've been trying to do for a year now PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 347 1 which is work it out in a way that would give more 2 information to the groups that want it and still not 3 disrupt the relationships or the expectations that the 4 auto companies have. And that doesn't seem to be making 5 anybody happy. I'm not sure it could. 6 I guess maybe there is something short of a 7 company by company release of the documents that they file 8 that could give them the same level of information they 9 really we need to participate in the upcoming discussions 10 about the ZEV program. Frankly, I don't know that they 11 really need to have the level of company by company data 12 that we used to make decisions about enforcement as part 13 of participating in a rulemaking. But I understand 14 clearly why anyone would want it. I mean, without a 15 doubt, it would be helpful to them. 16 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If I 17 could add one thing. The relevance of a lot of this 18 information, assuming that you trust the data that we have 19 is accurate. Forget the validation part of it. Is that 20 we're trying to make projections for the future for 2009 21 for 2012 as to what would happen. Of course, the credit 22 is only part of the information. 23 A manufacture can choose to produce a bunch of 24 new cars and generate new credit and not use its banked 25 credits. They could produce very few vehicles and use PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 348 1 lots of banked credits. And that's of course what people 2 would like to know. 3 But it is a projection. And even as we present 4 the information, we're not able to predict what 5 manufacturers will do with these credits, nor can the -- 6 CHAIRPERSON NICHOLS: Nor can anybody else. 7 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: That's 8 one aspect of it. 9 What we have tried to do is to recap from before 10 is we've -- for example, in phase 2, we know a number of 11 companies have credits, what we've tried to do is say if 12 the requirement is 2500 vehicles, which is what the 13 current requirement for '09 through '11 is cumulative, 14 then we don't -- based on what we know about the bank 15 situation and assuming that people don't produce more than 16 they have to, then we might get -- I don't remember the 17 exact numbers -- only 1200 vehicles. The rest would be 18 made up by banked credits because people go on the base 19 path. So we've been able to do that. 20 I don't think we have yet, but we can probably do 21 things like say and we think that at least two unnamed 22 manufacturers will be on the base path. And we think 23 three will not. And it tells you that the three that are 24 not have to produce new product of a certain amount. And 25 on the other ones, they can use banked credits. So it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 349 1 some sense. But if you go too much further than that, 2 then it becomes -- I think there's probably an argument 3 people can figure it out, because we're only talking about 4 six manufacturers. You can get to some point where we're 5 essentially releasing it. Where that line is, I don't 6 know. And I don't know if that little bit more of 7 information that we can perhaps provide would be useful to 8 the Alliance or not. 9 CHAIRPERSON NICHOLS: What I'm finding 10 interesting about this whole discussion is what's really 11 of value is the kind of judgment based on a more intimate 12 knowledge of what the plans of the companies are that ARB 13 staff has, which is based on both conversations and 14 probably on some documents that you obtained in the course 15 of your meetings with the companies that you do on a whole 16 bunch of different things, which is not the subject of 17 this disclosure request. 18 The only thing that is actually being requested 19 is what do they got in the bank at any given time. And to 20 me, what makes it so difficult to take the position that's 21 a trade secret is it looks so much like any other kind of 22 routine data that we would request for reporting purposes 23 that we would use for enforcement. And so the only threat 24 from having that data released from my perspective is that 25 people would misuse it or would treat it as being kind of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 350 1 the only issue in whether the ZEV program could go forward 2 in a certain way or not as opposed to actually doing any 3 real harm. 4 You've had your hand up for a while there. 5 BOARD MEMBER D'ADAMO: Well, I would just like to 6 maybe give a little bit of historical perspective on this. 7 Because when I first came on the Board in 1999, this was 8 the hot issue. And I think we had a hearing in 2001 where 9 we made some adjustments. Then we had another hearing in 10 2003. There may have been another review in between. 11 But in my opinion, what this gets down to is that 12 the credits are an issue because certain manufacturers may 13 be choosing to go from the base path to the alt path. 14 This is their choice. This was a choice that we gave them 15 because of the concerns that they had relative to the 2001 16 regulation. 17 And I would like to say that every step of the 18 way we have been gamed. And I think it's absolutely 19 crucial for us to get as much information as possible, not 20 just from the auto makers, but from the general public. 21 Because we may be missing what the impact is of the 22 regulation and the impact of the proposal that we're 23 looking at. 24 I suppose the alternative is to just say you 25 don't want -- the auto makers feel so strongly about PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 351 1 disclosure that we should not disclose that to the public. 2 In that event, let the old regulation stand. 3 But they are asking once again for us to make a 4 change. And so I think that that very issue goes to our 5 need to balance. If it is in their interest that the 6 regulation be changed, then I think that the only way that 7 we can properly evaluate whether or not making changes is 8 appropriate would be if we have a full and public 9 discourse of that information. And 10 I would agree with you. I would like -- I 11 appreciate the legal analysis, but I just can't get past 12 my gut feeling that this is like a reporting requirement 13 and really nothing more than that. 14 CHAIRPERSON NICHOLS: Supervisor Hill. 15 SUPERVISOR HILL: Thank you, Madam Chair. 16 I really agree with you and you really focused in 17 on the issue. The issue is the credit. We're talking 18 about credits. We're not talking about plans or the 19 confidential information they may bring to you on an 20 ongoing basis. 21 To me, they will continue to bring that 22 confidential information if it serves their interests. If 23 it doesn't serve their interests, they won't bring it to 24 you. And that's how I see this as going forward. It's 25 clearly the public's interest -- in the public's interest. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 352 1 And the disclosure is I think crucial as we move forward 2 with the program so that everyone will be on the same 3 page. 4 And I think, Tom, you made it clear. I think if 5 there is full disclosure, then everyone -- it's a level 6 playing field and it's not going to effect anyone 7 adversely. And I would support that and move for that 8 today. 9 DIVISION CHIEF CROSS: We agree with you. We're 10 trying to revise the program in ways where the credit 11 system becomes less important. And so I think the staff 12 has been struggling with exactly the kinds of concerns 13 that both you and the ZEV Alliance have in terms of both 14 gaming and a lot other things, like some of the vehicles 15 which contribute to the credit system aren't sold. I 16 mean, they're lent to people. And there's all kinds of 17 stuff that the manufacturers do that even sort of through 18 disclosure without a lot of explanation isn't going to be 19 transparent. 20 So I think the thing that we need to do is to use 21 up the credits and move to a transparent system. I think 22 the staff is trying to work on a proposal that will do it. 23 So what I'm saying is that the disclosure issue is a short 24 term issue if we get to where we want. 25 CHAIRPERSON NICHOLS: One way or the other. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 353 1 Okay. 2 DIVISION CHIEF CROSS: For this regulation. 3 CHAIRPERSON NICHOLS: Supervisor Case and then 4 Supervisor Roberts. 5 BOARD MEMBER CASE: I'm going to weigh in in a 6 similar way. I don't have the history and I read through 7 documents. Today we're looking at a policy decision. I 8 have an anecdotal history that back in '99 I was trying to 9 get a hold of one of these vehicles, something to drive. 10 And I couldn't find them. I couldn't find information 11 them and couldn't get one. It took me almost two years. 12 So, you know, I think there is a public interest 13 that we're trying to weight here. And I live in the world 14 of HIPAA and health care. And I understand 15 confidentiality. And I also come from a business family 16 and I understand trade secrets. 17 But I think as we go forward in looking at this 18 rule, it has to be done on full disclosure. And that 19 combined with some dissatisfaction -- I think I've heard 20 other people state on the program and I'm in that camp 21 that I don't feel that things happened as I would have 22 liked to have seen, a stronger direction. 23 I think I don't hear anything. I keep thinking, 24 okay, what about a business. Would this be so harmful to 25 their operation? And I can't come up with that answer. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 354 1 So I'm going to weigh in I think there's a 2 good -- from a policy perspective, there's a good argument 3 for full public disclosure. So that as we move forward 4 with a new rule, it really comes with a full public 5 vetting and we all understand where we are and a sense 6 that in the past this may have been something that didn't 7 allow us to really get a grasp on why or why not we had 8 great degrees of succeed there. 9 I'm going to second the motion. 10 CHAIRPERSON NICHOLS: Okay. Supervisor Roberts. 11 BOARD MEMBER ROBERTS: Thank you, Madam Chair. 12 SUPERVISOR HILL: I did make a motion. You're 13 right. 14 BOARD MEMBER ROBERTS: Listening do this, it 15 seems to me that I found compelling the argument that the 16 data is available if somebody were to take the time to go 17 out there and do that. 18 The thing that concerns me is that this really is 19 a change in the expectation that somebody that in effect 20 entered into an agreement with us has been reliant on. 21 And while this has been going on for a year, if I 22 understand correctly, the attorney's position here is all 23 about three days' old. I would feel very remiss to make a 24 decision of this kind giving somebody three days' notice 25 that, in effect, has been proceeding in good faith. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 355 1 don't feel like I'm a victim in this or that I've been 2 manipulated if I had done it with my own eyes open and 3 I'll take responsibility for that. 4 And I find the arguments that we should do this 5 compelling. But the manner in which we're doing this and 6 the length of time that we've permitted for somebody to -- 7 the other side to respond in a thoughtful way I think is 8 inexcusable and I'm not going to support this motion. 9 I've would recommend -- my recommendation would be to, you 10 know, allow -- I don't know why this has to be done 11 tonight. I don't know what's driving this. But to make a 12 decision of this sort, you know. And I appreciate the 13 fact that Tom is retiring. 14 CHAIRPERSON NICHOLS: You know, he's going to be 15 back. As I said earlier, he's going to work for us on the 16 low carbon fuel standards. So he's not really escaping. 17 BOARD MEMBER ROBERTS: I would rather we take the 18 month or so to our next meeting and allow for arguments to 19 be prepared so we can -- 20 CHAIRPERSON NICHOLS: We have a motion and a 21 second on the floor, but I understand your point. And I 22 actually I have a good bit of sympathy for, because I do 23 think that we're doing something that's important that is 24 going to have implications for the future, whether it has 25 them for the entire world of all trading programs, it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 356 1 certainly has them with respect to our dealings with the 2 auto companies. 3 BOARD MEMBER BERG: I would like to move that 4 table this discussion and move as Supervisor Roberts 5 suggested that we give additional 30 days for the review 6 of the staff's legal position and gives also this Board 7 the opportunity to get the additional information. 8 I think we're looking at two things, Madam Chair. 9 That is the past and how we want to move forward. Good 10 public policy moving forward, I don't think you'd have too 11 much of an argument around this table. But doing the 12 right thing for both our credibility so when we take the 13 vote that we know that we have all the information. So I 14 would vote to table. 15 CHAIRPERSON NICHOLS: Is there a second? 16 BOARD MEMBER CASE: I'll second. 17 CHAIRPERSON NICHOLS: Before we act on that, 18 which takes precedence over the other motions, I would 19 like to get a little more information from the staff about 20 if process by which we get these reports from the 21 manufacturers. 22 This is an annual reporting requirement, is it 23 not? And so when would we be normally getting the reports 24 that would give us the status of their credit situations? 25 MANAGER BEVAN: If I recall correctly, we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 357 1 received -- this is Analisa Bevan, the Mobile Source 2 Control Division. 3 We receive the data in May following the model 4 year. And we take some time to verify that information 5 with the manufacturer, and then we issue a statement -- 6 credit statement back to them indicating that their 7 credits have been deposited. They can report credit 8 trades throughout the year, and those transactions take 9 place with a confirmation as well. 10 CHAIRPERSON NICHOLS: So this is making my life a 11 little more complicated. You're actually issuing to them 12 a credit statement? 13 MANAGER BEVAN: Correct. 14 CHAIRPERSON NICHOLS: It's not a credit statement 15 they sent us. This is a document we prepared. 16 MANAGER BEVAN: They send us a deposit, the data 17 indicating the number of vehicles, which vehicles, and the 18 calculation of the credit. We deposit that into the bank 19 and then feed back to them now what their total balance 20 is. 21 CHAIRPERSON NICHOLS: It sounds like a public 22 record to me. 23 SUPERVISOR HILL: If I could add one thing. I'm 24 just going to say to the issue that this is -- people just 25 got this a couple of days ago and there hasn't been enough PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 358 1 time to vet it and to discuss it. This has been going on 2 for years. And the auto industry, as the manufacturers, 3 have been able to certainly present their arguments 4 throughout this whole process in the past year. So I 5 think there's nothing new here we're talking about tonight 6 that the needs to be further analyzed or discussed. 7 They've already made their point. 8 CHAIRPERSON NICHOLS: I'm going to let Tom 9 Jennings address the earlier point and then Dan Sperling 10 has a -- 11 CHIEF COUNSEL JENNINGS: Although we do issue 12 credits, the credits are based entirely on the data that 13 the companies submit to us. 14 But also comment a little bit on Supervisor 15 Hill's statement. Ordinarily, when we got a Public 16 Records Act request and make a determination, it's not 17 brought to the Board. You've never had one of these come 18 to you before. So ordinarily based on the information 19 that we receive, we would have just issued our decision 20 without any additional public comment. 21 What's particularly important in my view is that 22 this is the first time that you've really considered the 23 issues of the public interest both for and again 24 disclosure. And to the extent the people want to give you 25 comment on that, they have only had the three days notice. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 359 1 CHAIRPERSON NICHOLS: Well, and I'm very 2 appreciative of the fact when you took a look at this, you 3 did determine there was a policy issue here. Because if 4 you had just gone on your previous decision that this was 5 trade secret and no way to release it, we would have been 6 in a position of being sued by the public interest groups, 7 the ZEV Alliance and others that want the data. And I 8 prefer not to be in that position if I could avoid it. 9 Dan Sperling had his hand up first and then -- 10 BOARD MEMBER SPERLING: So I just want to observe 11 two lessons learned here and then a suggestion. 12 I think the two lessons learned are let's not 13 make it so complicated in the future. And as Bob Cross 14 and Analisa just said, that is the intent. So hopefully 15 we'll learn the lesson not just for the ZEV program but 16 for a lot of other programs as well. 17 And that is the second lesson -- and so the 18 second lesson is also that we are more careful in how we 19 communicate to companies about data that they're providing 20 to us and be clear on what exactly is confidential and 21 what is not. Because I'm not convinced here in this case 22 there's anything really confidential. I mean, they're 23 just providing sales data. And because of all of our 24 complicated rules that no one can figure out -- you know, 25 I'm probably the most involved in this on the Board here, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 360 1 and I can't figure out a lot of these things that are 2 going on. You know, you get into the travel provision and 3 so on, you know, how to convert that into credit numbers, 4 you know, becomes very difficult. 5 So what I'd like to suggest is that I believe 6 that the staff has not talked to the car companies about 7 how to move forward on this issue, what might be a 8 compromise in terms of what could be disclosed and suggest 9 that that discussion take place with the intent that we do 10 want to become more transparent. And maybe this is just 11 releasing the -- kind of where Tom Cackette was going a 12 little earlier releasing some kind of information about 13 how many -- what is the credit balance, you know, per 14 company and not get into exactly which models that came 15 from and how that's calculated and not make, of course, 16 any projections to the future. And that seems to be 17 something that like that is may be -- something like that 18 can be done here without having to make any great 19 precedent setting decisions. 20 CHAIRPERSON NICHOLS: How quickly are you 21 intending to come back with a proposal for changing the 22 bank or eliminating the bank or closing the bank or 23 whatever? 24 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We're 25 scheduled right now to come to you with revisions to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 361 1 ZEV program in the February Board meeting. That means 2 that Analisa has to have her work done in another week and 3 a half in order to put it into the 45 day process. So 4 that was the schedule for doing that. 5 One aspect of that proposal -- and of course the 6 proposal was that the way by maintaining the second phase 7 '09 through '11, the way it is now it would force the 8 draw-down of the bank. That's where the previous comments 9 came. Not many people would have any credits that are old 10 left by the end of the second phase. 11 And in the third phase, we were only going to 12 allow averaging and carry forward or carry back type 13 things over a two or three year period, which would keep 14 everything fresh. It would mean what you see is what you 15 get when you pick a number for the various phases, so 16 forth, so on. 17 That was why the comment before this was it's not 18 to diminish from the policy issue or the legal issue, but 19 it is kind of a three-year thing and it goes away. 20 CHAIRPERSON NICHOLS: A practical issue. 21 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: We 22 chose that because of what Professor Sperling says is this 23 thing is too messy and we wanted to get rid of this. I 24 think the case that it needs to be more transparent has 25 been very clearly made. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 362 1 It started -- bit of history was because of what 2 was called the blackout, and there was a fear by many of 3 the ZEV Alliance that because of credits, someone rich in 4 credits, they could go three years and never produce a 5 ZEV. And therefore somehow that would stymie the 6 development of these new technologies. And I think we've 7 believed that's possible with the current credit bank, 8 which is why we want to draw it down and get it over with 9 in '09 through '11. But we also don't think that's going 10 to happen. 11 But it is clear to us different manufacturers are 12 in very different positions. Some will not make the 13 numbers that our regulation would suggest to you they will 14 make by the credits. And other ones will have to make 15 every last one of them or pretty close to that. That's 16 the situation with the reg. 17 And since the purpose of this presumably you're 18 saying this is important that the public understand this, 19 if that's where you go, then, you know, I think one month 20 delay just means we have to delay the ZEV item by one 21 month. Because otherwise we'd have the proposal in front 22 of you and the public would not know what it was based on. 23 CHAIRPERSON NICHOLS: In a sense tabling this is 24 not a helpful way to go then in terms of helping you move 25 forward to actually change the situation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 363 1 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 2 two things. Yes, it delays it. But there is not a hard 3 deadline that I'm aware of. No one is screaming that 4 we're in trouble here and they have to make product 5 decisions. I guess that's not true. There actually is at 6 least one company that told us that in late January they 7 have to make product decisions. This is somebody who 8 doesn't have a lot of credits on exactly what they're 9 going to produce. And they were looking to see our 10 proposal if not your final decision at that time. So you 11 know, I guess for some companies it may causes problems 12 with them. But not everyone is clamoring this has to get 13 done. 14 CHAIRPERSON NICHOLS: Ms. D'Adamo. 15 BOARD MEMBER D'ADAMO: That was my point. I 16 think if we do end up with a delay, what I wouldn't want 17 to see is we are backed into a corner because of some 18 artificial deadline that is out there because of decisions 19 the auto makers need to make. If it's that crucial they 20 need to make the decisions, you know, on their product 21 line, then perhaps what Professor Sperling indicated that 22 it would bring them to the table to try to come up with a 23 way to provide the information. 24 If not, what I don't want to see happen is that 25 we move forward at the next stage of beyond the concept PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 364 1 paper and once a proposal is out on the street, it will be 2 too difficult for us to provide much meaningful input, 3 especially if we don't have information from the public 4 about the impact of those credits. If we delay, I think 5 the whole thing needs to be delayed. 6 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: In the 7 case, the one manufacturer I'm aware that says they have a 8 timing issue is one that doesn't care about the public 9 disclosure. They're fine disclosing it. That won't 10 provide a leverage unfortunately. And the other ones who 11 are more concerned don't seem to be as concerned about the 12 timing. 13 CHAIRPERSON NICHOLS: So where we are right now 14 procedurally, we have a motion to table. And the effect 15 of that would be that this item would simply be carried 16 over to the next Board meeting, as I understand it. And 17 otherwise nothing would happen. 18 BOARD MEMBER CASE: If I could just clarify 19 understanding that if given the first motion would have 20 moved forward to allow disclosure because of the public 21 interest that the companies, would be contacted and there 22 would be some dialogue prior to any disclosure. So that 23 wouldn't happen just immediately? 24 CHAIRPERSON NICHOLS: Well, it's 21 days from the 25 time they receive the notice. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 365 1 CHIEF COUNSEL JENNINGS: We would absolutely have 2 to give them 21 days notice before we would released any 3 data. Whether you wanted to discussions to occur during 4 that period of time, which throw might even end in some 5 other kind of resolution, that would be up to you. But we 6 couldn't release the data for 21 days. 7 BOARD MEMBER CASE: And the other option is to 8 table it for one month and have a discussion with them. 9 Well, this is December. So if it's tabled to January, it 10 would be our very next meeting. If there were dialogue 11 during that period that the Board was giving consideration 12 for this, it might resolve some of those issues. Because 13 as I understand, the revision to the policy will coming 14 back to us currently scheduled in February. And that 15 could potentially give information to the public I would 16 hope by 30 days prior to the second hearing. But does 17 that happen if we table it and hold off, then do we have 18 the 21 day noticing and we bump up again February 19 regulatory hearing? 20 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If you 21 table it, what the sense I'm getting is you could like us 22 to go sit down with the two parties. And given where at 23 least I'm hearing the Board is coming, I think they can 24 see when the leaning is at least. So sitting down and 25 trying to figure out is there some compromise where, you PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 366 1 know, the NGO side can get the information they want and 2 the car companies can have some possible protection of 3 really valuable information and see if we can find a 4 compromise that the parties would like. 5 That's a compromise approach. You may be 6 focusing on the simple policy issue which is a black and 7 white issue here. 8 CHAIRPERSON NICHOLS: Well, I guess another 9 alternative, while we're just tossing alternatives for 10 what could happen around, is the Board could tonight 11 decide we want to move in the direction of disclosure, but 12 we want to do it by regulation. So that going forward we 13 declare that this stuff isn't trade secret and that it 14 never would be trade secret. 15 SUPERVISOR HILL: How would that effect the 16 credits currently out there for the decision making that 17 we'll have the February where the public should have a 18 right to know that information? 19 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If you 20 wanted the regulation to be retroactive to the credits, I 21 think there's probably a legal issue that needs to be 22 looked at, if I'm correct, Tom. 23 And then of course that would -- if it was a 24 regulation to do this, that would set I think the ZEV 25 program back six to nine months. Because that's how long PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 367 1 it would take to do any kind of regulation, regardless of 2 how simple it was. 3 CHAIRPERSON NICHOLS: What I was really trying to 4 accomplish with that suggestion was make it clear I really 5 want these changes and the banking system to be part of 6 whatever comes forward with your proposal. I understand 7 the regulation process could make much longer. 8 Yes. 9 BOARD MEMBER KENNARD: Let me weight in quickly. 10 This is so complicated. And I'm a lawyer, but I must be 11 totally recovered because I just can't even totally really 12 can't understand all of it and have not had the benefit of 13 reading the Pillsbury document, et cetera. 14 So I think that we're inviting litigation on 15 either side unless we go back and try to work it out. So 16 I'm very much in support of giving us all a little bit of 17 breathing room to, one, understand what's really on the 18 table and, two, to maybe work out a compromise between the 19 two parties. 20 CHAIRPERSON NICHOLS: Okay. Ms. D'Adamo. 21 BOARD MEMBER D'ADAMO: I just want to make sure I 22 understand schedule. So if we give staff some additional 23 time, it comes back in January. Then we assuming that a 24 compromise is not reached in January, we would have an 25 opportunity at that point to re-visit the issue as to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 368 1 whether or not we should disclose. And if this Board did 2 take a position at that time to disclose, there would be 3 21-day period before the disclosure would occur. 4 In light of that, what would be the time frame 5 for release of the proposal? And when would the hearing 6 be? Assuming that we would have an opportunity for 7 adequate public discussion prior to the hearing? 8 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Well, 9 release of the proposal right now for February is 11th of 10 January. So I guess if we delayed it one month, it would 11 be something like approximately 11th of February, which 12 would be after your discussion at the January Board 13 meeting. So we would be able to possibly reflect any 14 direction we have in the regulations. So it could be a 15 one month maybe a two month delay. But this would be all 16 that would be required. 17 BOARD MEMBER D'ADAMO: So March or April. 18 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Of 19 course, the flip of it is if you release it, I'm assuming 20 a vote for release and we go through the 21 and possible 21 litigation, I presume we're going to go ahead with 22 litigation at that point and not wait for litigation to be 23 resolved. 24 BOARD MEMBER D'ADAMO: And -- 25 CHAIRPERSON NICHOLS: We wouldn't be releasing PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 369 1 the data if the car companies prevailed. They would -- 2 presumably they would get a temporary injunction, because 3 otherwise the whole thing would be -- 4 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: If they 5 got a -- well, still your point applies to the 6 information. You'd have to make the call as to whether 7 our regulatory process should stop while this is resolved 8 which, of course, could be years, I suppose. 9 CHAIRPERSON NICHOLS: I prefer not to do that. 10 CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE: Or we 11 go ahead with the reg changes based on the information -- 12 you directing it to be released but not be able to be 13 released because of the legal thing, and we go ahead which 14 is kind of where we were going before this issue came up. 15 CHAIRPERSON NICHOLS: We still have to do it 16 anyway. Okay. All right. 17 Then I think I will call the question on the 18 motion to table and let's do a roll call vote on this one 19 please. 20 BOARD MEMBER SPERLING: Could you elaborate what 21 that means? Say that again. 22 CHAIRPERSON NICHOLS: The motions that is that we 23 table this discussion on the motion to release the data, 24 which was made earlier by Supervisor Hill and seconded by 25 Supervisor Case. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 370 1 The earlier motion to that we determine that it 2 was in the public interest to release the data, that 3 motion would come back before us at the January meeting. 4 And we would not make a decision on it. And that would be 5 the end of the discussion for tonight. 6 BOARD MEMBER SPERLING: What are we assuming is 7 going to happen in the next month? 8 CHAIRPERSON NICHOLS: The assumption underlying 9 that is that staff would attempt to bring the parties 10 together and to see if there is a way to resolve this 11 issue short of litigation, which is otherwise inevitable 12 by one side or the other. I think it's clear people have 13 worked themselves up to that point. 14 Okay. So on the motion to table, Madam Clerk. 15 SECRETARY ANDREONI: Ms. Berg? 16 BOARD MEMBER BERG: Aye. 17 SECRETARY ANDREONI: Supervisor Case? 18 BOARD MEMBER CASE: Aye. 19 SECRETARY ANDREONI: Ms. D'Adamo? 20 BOARD MEMBER D'ADAMO: Aye. 21 SECRETARY ANDREONI: Supervisor Hill? 22 SUPERVISOR HILL: Aye. 23 SECRETARY ANDREONI: Ms. Kennard? 24 BOARD MEMBER KENNARD: Yes. 25 SECRETARY ANDREONI: Ms. Riordan? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 371 1 BOARD MEMBER RIORDAN: Aye. 2 SECRETARY ANDREONI: Supervisor Roberts? 3 BOARD MEMBER ROBERTS: Aye. 4 SECRETARY ANDREONI: Professor Sperling? 5 BOARD MEMBER SPERLING: Aye. 6 SECRETARY ANDREONI: And Chairman Nichols? 7 CHAIRPERSON NICHOLS: I think I'll vote aye. 8 SECRETARY ANDREONI: Motion passes. 9 EXECUTIVE OFFICER GOLDSTENE: We will work to 10 bring the parties together. 11 CHAIRPERSON NICHOLS: Thank you very much 12 This has been a really good discussion. And that 13 it for tonight, and we'll see you all tomorrow morning. 14 (Thereupon the California Air Resources Board 15 recessed at 6:49 p.m.) 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 372 1 CERTIFICATE OF REPORTER 2 I, TIFFANY C. KRAFT, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing hearing was reported in shorthand by me, 7 Tiffany C. Kraft, a Certified Shorthand Reporter of the 8 State of California, and thereafter transcribed into 9 typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said hearing nor in any 12 way interested in the outcome of said hearing. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 17th day of December, 2007. 15 16 17 18 19 20 21 22 23 TIFFANY C. KRAFT, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 12277 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345