0001
 01                BEFORE THE STATE OF CALIFORNIA 
 02                     AIR RESOURCES BOARD
 02
 03
 03
 04
 04
 05
 05
 06  IN THE MATTER OF THE PUBLIC    ) 
 06  HEARING REGARDING AGENDA       ) 
 07  ITEMS:                         )
 07                                 )
 08  96-5-1, 96-5-2, 96-5-3, 96-5-4 )
 08  AND 96-5-6.                    )
 09  _______________________________)
 09
 10
 10
 11
 11
 12
 12
 13
 13
 14
 14
 15                  TRANSCRIPT OF PROCEEDINGS
 15
 16                    SAN DIEGO, CALIFORNIA
 16
 17                    FRIDAY, JUNE 14, 1996
 17
 18
 18
 19
 19
 20
 20
 21
 21
 22  REPORTED BY:
 22
 23  MICHELLE HANNAH, 
 23  CSR NO. 9985
 24
 24  JOB NO.:
 25  NCO9170
 25
0002
 01                BEFORE THE STATE OF CALIFORNIA 
 01
 02                     AIR RESOURCES BOARD
 02
 03
 03
 04
 04
 05
 05
 06  IN THE MATTER OF THE PUBLIC    ) 
 06  HEARING REGARDING AGENDA       ) 
 07  ITEMS:                         )
 07                                 )
 08  96-5-1, 96-5-2, 96-5-3, 96-5-4 )
 08  AND 96-5-6.                    )
 09  _______________________________)
 09
 10
 10
 11
 11
 12
 12
 13
 13
 14
 14
 15               TRANSCRIPT OF PROCEEDINGS, TAKEN AT
 15
 16         1600 PACIFIC HIGHWAY, SUPERVISORS CHAMBERS,
 16
 17         ROOM 310, SAN DIEGO, CALIFORNIA, COMMENCING 
 17
 18         AT 8:30 A.M., ON FRIDAY, JUNE 14, 1996, HEARD 
 18
 19         BEFORE THE CALIFORNIA AIR RESOURCES BOARD, 
 19
 20         REPORTED BY MICHELLE HANNAH, CSR NO. 9985, 
 20
 21         A CERTIFIED SHORTHAND REPORTER IN AND FOR 
 21
 22         THE STATE OF CALIFORNIA.
 22
 23
 23
 24
 24
 25
 25
0003
 01  APPEARANCES:
 01
 02     THE BOARD:                   JOHN D. DUNLAP, III
 02                                  CHAIRMAN
 03                                  PUBLIC MEMBER  
 03
 04                                  EUGENE A. BOSTON, M.D.
 04                                  PHYSICIAN AND SURGEON      
 05                                  MEMBER    
 05
 06                                  LYNNE T. EDGERTON
 06                                  LAW MEMBER
 07
 07                                  JOHN S. LAGARIAS, P.E.
 08                                  SCIENCE MEMBER
 08
 09                                  BARBARA RIORDAN
 09                                  SUPERVISOR, SAN BERNARDINO 
 10                                  COUNTY   
 10                                  OTHER DISTRICT MEMBER     
 11
 11                                  JOSEPH C. CALHOUN, P.E.
 12                                  AUTOMOTIVE ENGINEERING
 12                                  MEMBER
 13
 13                                  M. PATRICIA HILLIGOSS
 14                                  MAYOR, CITY OF PETALUMA
 14                                  BAAQMD MEMBER
 15
 15                                  RON ROBERTS
 16                                  SUPERVISOR, SAN DIEGO      
 16                                  COUNTY
 17                                  SAN DIEGO APCD MEMBER
 17
 18                                  DOUG VAGIM
 18                                  SUPERVISOR, FRESNO COUNTY
 19                                  SAN JOAQUIN VALLEY UNIFIED
 19                                  APCD MEMBER 
 20
 20                                  PAT HUTCHENS
 21                                  BOARD SECRETARY
 21
 22
 22
 23
 23
 24
 24
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 25
0004
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 07      96-5-4                                 82
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 08      96-5-6                                 98
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0004
 01         SAN DIEGO, CALIFORNIA, FRIDAY, JUNE 14, 1996
 02                          8:30 A.M.
 03
 04
 05         MR. DUNLAP:  PLEASE COME TO ORDER.  
 06               AT THIS POINT, I'D LIKE TO ASK THE AUDIENCE 
 07  TO PLEASE RISE.  
 08               WE HAVE ASKED SUPERVISOR ROBERTS TO LEAD US 
 09  IN THE PLEDGE OF ALLEGIANCE.  
 10               (WHEREUPON THE PLEDGE OF ALLEGIANCE
 11         WAS LED BY SUPERVISOR RON ROBERTS)
 12         MR. DUNLAP:  THANK YOU.  
 13               COULD I ASK THE BOARD SECRETARY TO PLEASE 
 14  CALL THE ROLL.  
 15         MS. HUTCHENS:  EUGENE BOSTON.  
 16         DR. BOSTON:  HERE.  
 17         MS. HUTCHENS:  JOSEPH CALHOUN.
 18         MR. CALHOUN:  YES.
 19         MS. HUTCHENS:  LYNNE EDGERTON.
 20         MS. EDGERTON:  HERE.
 21         MS. HUTCHENS:  PATRICIA HILLIGOSS.
 22         MS. HILLIGOSS:  HERE.
 23         MS. HUTCHENS:  JOHN LAGARIAS.
 24         MR. LAGARIAS:  HERE.
 25         MS. HUTCHENS:  JACK PARNELL.
0005
 01               BARBARA RIORDAN.
 02         MS. RIORDAN: HERE.
 03         MS. HUTCHENS:  RON ROBERTS.  
 04         MR. ROBERTS:  HERE.
 05         MS. HUTCHENS:  JAMES SILVA.
 06               DOUG VAGIM.
 07         MR. VAGIM:  HERE. 
 08         MR. DUNLAP:  THANK YOU.  
 09               GOOD MORNING.  I'M JOHN DUNLAP, CHAIRMAN OF 
 10  THE CALIFORNIA AIR RESOURCES BOARD.  AND I AM VERY PLEASED 
 11  TO CONVENE THE MEETING OF THE BOARD HERE TODAY IN 
 12  SAN DIEGO.  
 13               AS I WAS TRAVELING HERE, IT OCCURRED TO ME IT 
 14  IS A PERFECT TIME FOR US TO SCHEDULE A BOARD MEETING IN 
 15  SAN DIEGO, BECAUSE SAN DIEGO IS, OF COURSE, BEAUTIFUL ANY 
 16  TIME OF THE YEAR, BUT IS ESPECIALLY ATTRACTIVE NOW 
 17  CONSIDERING THE TEMPERATURES IN SACRAMENTO HAVE BEEN WELL 
 18  OVER A HUNDRED DEGREES FOR SOME TIME.  
 19               BEFORE WE BEGIN OUR FORMAL AGENDA TODAY, I'D 
 20  LIKE TO INTRODUCE RICHARD SOMMERVILLE, THE AIR POLLUTION 
 21  CONTROL OFFICER FOR THE SAN DIEGO AIR POLLUTION CONTROL 
 22  DISTRICT, TO THE NEWER MEMBERS OF THE AIR RESOURCES BOARD.  
 23               WE HAVEN'T HAD A CHANCE, SOME OF US, TO GET 
 24  TO KNOW MR. SOMMERVILLE.  MR. SOMMERVILLE HAS BEEN 
 25  EMPLOYED BY THE SAN DIEGO AIR POLLUTION CONTROL DISTRICT 
0006
 01  SINCE 1973 AND WAS APPOINTED ITS AIR POLLUTION CONTROL 
 02  OFFICER IN 1978.  DURING HIS TENURE, AIR QUALITY IN 
 03  SAN DIEGO COUNTY HAS IMPROVED, DESPITE THE AREA'S RAPID 
 04  POPULATION GROWTH.   
 05               FOR EXAMPLE, A.R.B.'S ANALYSIS OF SAN DIEGO 
 06  COUNTY AIR POLLUTION TREND SHOWS A 69 PERCENT DECREASE IN 
 07  POPULATION-WEIGHTED EXPOSURE TO OZONE LEVELS ABOVE THE 
 08  STATE STANDARD BETWEEN '82 AND '92.  
 09               MR. SOMMERVILLE HAS ALSO CONTRIBUTED HIS 
 10  TALENTS TO MANY STATEWIDE AIR POLLUTION CONTROL PROGRAMS, 
 11  PARTICULARLY THE SMOG CHECK EFFORTS.  AS THE CHAIR OF THE 
 12  CALIFORNIA INSPECTION AND MAINTENANCE REVIEW COMMITTEE, 
 13  HE'S ALSO ASSISTED IN DEVELOPING THE ENHANCED SMOG CHECK 
 14  PROGRAM THAT'S NOW GETTING UNDERWAY.  THIS PROGRAM 
 15  PROVIDES A SENSIBLE ALTERNATIVE TO THE U.S. E.P.A.'S SMOG 
 16  CHECK REQUIREMENTS.  THE U.S. E.P.A. PROGRAM WOULD HAVE 
 17  FORCED THE CLOSURE OF MANY LEGIT SMOG CHECK STATIONS AND 
 18  WOULD HAVE FORCED A COSTLY AND INCONVENIENT PROGRAM ON 
 19  CALIFORNIA DRIVERS.  
 20               MR. SOMMERVILLE, DID YOU WANT TO SAY A FEW 
 21  WORDS TO THE BOARD THIS MORNING? 
 22         MR. SOMMERVILLE:  WELL, FIRST OF ALL, CHAIRMAN 
 23  DUNLAP, BOARD MEMBERS, I WANT TO WELCOME YOU HERE.  
 24               I HAD A LITTLE PRESENTATION IN TERMS OF JUST 
 25  UPDATING THE BOARD MEMBERS AS TO WHAT IS GOING ON IN 
0007
 01  SAN DIEGO.  WE HAVE BEEN VERY SUCCESSFUL HERE IN TERMS OF 
 02  THE AIR PROGRAM WITH DRAMATIC IMPROVEMENTS IN TERMS OF THE 
 03  FEDERAL AND STATE STANDARDS.  
 04               THE CLASSIFICATION IN SAN DIEGO FIRST WAS AT 
 05  SEVERE, BOTH THE STATE RECLASSIFIED US DOWN TO SERIOUS IN 
 06  1993.  THE FEDERAL CLASSIFICATION WAS DROPPED TO SERIOUS 
 07  IN 1994.  AND OF COURSE THAT MAKES QUITE A BIT OF 
 08  DIFFERENCE IN TERMS OF THE POLLUTION CONTROL REQUIRED ON 
 09  INDUSTRY AND SAVES THE REGION AND BUSINESSES A LOT OF 
 10  MONEY.  
 11               IN TERMS OF THE AIR QUALITY, AS YOU MAY KNOW, 
 12  WE DO HAVE A SIGNIFICANT TRANSPORT ISSUE WITH THE SOUTH 
 13  COAST AIR BASIN IN WHICH A LOT OF OUR VERY HIGH DAYS ARE 
 14  DUE TO TRANSPORT FROM THE SOUTH COAST.  AND WE HAVE DONE A 
 15  LOT OF WORK IN TERMS OF EVALUATING TRANSPORT MECHANISMS 
 16  AND PROBABLY ARE AT LEAST AMONGST THE LEADERS IN TERMS OF 
 17  DOING THAT KIND OF ANALYSIS AND BEING ABLE TO DETERMINE 
 18  WHAT IS HAPPENING IN REGARD TO TRANSPORT.  AND, IN FACT, 
 19  OUR METEROLOGIST WAS RECENTLY AWARDED METEROLOGIST OF THE 
 20  YEAR BY A NATIONAL ORGANIZATION FOR HIS WORK IN THAT 
 21  AREA.  AND SEVERAL PAPERS HAVE BEEN PUBLISHED AS TO HOW WE 
 22  HAVE MANAGED TO DO THAT.  
 23               FOR EXAMPLE, WE ARE DOWN NOW TO, AS FAR AS 
 24  THE FEDERAL STANDARDS, IN 1993, 1994, 1995, TO A TOTAL OF 
 25  RANGING BETWEEN 9 AND 14 DAYS OVER STANDARD.  AND AS FAR 
0008
 01  AS THE LOCAL DAYS, THOSE ARE DOWN INTO THE 1 AND 2 DAYS.  
 02  SO WE ARE VERY CLOSE TO THE FEDERAL STANDARD.  IN TERMS OF 
 03  STATE STANDARD, WHICH AS YOU KNOW, OF COURSE, IS MORE 
 04  STRINGENT, THERE'S BEEN BETWEEN 80 AND 95 DAYS OVER 
 05  STANDARD.  AND THE RELATIONSHIP THERE IS ABOUT 50/50 
 06  TRANSPORT.  
 07               AND THAT JUST SAYS THAT THIS SMOG PRODUCING 
 08  MECHANISM IS VERY NONLINEAR.  AS YOU WORK ON THE HIGH 
 09  LEVELS, THAT DOES NOT MEAN THAT THE LOWER LEVELS ARE GOING 
 10  TO REDUCE AT THE SAME RATE.  AND, IN FACT, IN SOME CASES, 
 11  IT CAN BE ARGUED THAT IF YOU DON'T WATCH WHAT YOU ARE 
 12  DOING, THE LOW LEVELS, NUMBER OF LOW LEVEL DAYS CAN 
 13  INCREASE.  
 14               WE HAVE NOT HAD A FIRST STAGE SMOG ALERT 
 15  SINCE 1991.  AND WE ARE IN COMPLIANCE WITH ALL THE STATE 
 16  STANDARDS EXCEPT OZONE AND PM-10.  AND IN REGARD TO PM-10, 
 17  I'M NOT SURE IF THERE IS ANY PLACE THAT IS IN COMPLIANCE 
 18  WITH PM-10, ONE OR TWO PLACES.  SO THAT'S PRETTY 
 19  DIFFICULT.  
 20               ON THE FEDERAL SIDE, THE SAME THING APPLIES 
 21  WITH RESPECT TO OZONE.  HOWEVER, WE ARE UNCLASSIFIED WITH 
 22  REGARD TO PM-10.  SO IF YOU CONSIDER IN 1978 ARENA WE DID 
 23  NOT MEET ANY OF THESE STANDARDS EXCEPT FOR THE 
 24  SULFERDIOXIDE, WHICH HAS NEVER EXCEEDED, THERE HAS BEEN A 
 25  TREMENDOUS IMPROVEMENT IN THE AIR QUALITY IN SAN DIEGO AND 
0009
 01  THROUGHOUT THE STATE, BECAUSE WHAT'S HAPPENING IN 
 02  SAN DIEGO IS SIMPLY A SNAPSHOT OF WHAT'S HAPPENING IN THE 
 03  STATE.  
 04               OF COURSE IT'S VERY IMPORTANT FOR AN AIR 
 05  POLLUTION CONTROL OFFICER THESE DAYS TO POINT OUT WHERE 
 06  THE PROBLEM IS.  AND SO I'M GOING TO DO THAT.  WHEN YOU 
 07  LOOK AT THE EMISSIONS THAT ARE INVENTORIED, TOTAL PERSONAL 
 08  VEHICLES NOW ARE AROUND 49 PERCENT OF THE POLLUTION 
 09  PROBLEM IN TERMS OF OZONE.  THAT WOULD BE OXIDES OF 
 10  NITROGEN AND HYDROCARBONS.  
 11               WHEN ONE LOOKS AT THE TOTAL OF ALL MOTOR 
 12  VEHICLES, IT GETS UP TO ABOUT 60 PERCENT OF THE PROBLEM.  
 13  AND WHEN YOU LOOK AT INDUSTRIAL AND COMMERCIAL ACTIVITIES, 
 14  IT'S UNDER 16 PERCENT.  THIS NUMBER IS 15.6.  SO WE CAN 
 15  SEE THAT THE TREMENDOUS EFFORT THAT HAS BEEN ACCOMPLISHED 
 16  SINCE 1980 IN REGARD TO INDUSTRIAL SOURCES.  AND THE 
 17  RIGOROUS PERMITTING PROGRAM IN CALIFORNIA HAS BEEN VERY, 
 18  VERY EFFECTIVE IN REGARD TO INDUSTRIAL SOURCES.  
 19               BUT THE MOTOR VEHICLE FOR ALL SORTS OF 
 20  REASONS IS GOING TO BE THE FOCUS, I BELIEVE, IN THE 
 21  FUTURE.  AND I THINK THAT MEANS A COUPLE OF THINGS.  ONE 
 22  OF THEM IS THAT THE AIR RESOURCES BOARD, OF COURSE, IS 
 23  GOING TO HAVE TO INVEST MONEY AND RESEARCH TO KNOW WHAT IS 
 24  ACTUALLY HAPPENING IN REAL LIFE UNDER REAL USAGE 
 25  CONDITIONS TO THESE EMISSION CONTROL SYSTEMS AND FIND WAYS 
0010
 01  TO DEAL WITH THOSE ISSUES AND IMPLEMENT, OF COURSE, ALL 
 02  THE NEW CAR STANDARDS, INCLUDING THE Z.E.V. STANDARD.  
 03               BUT THE IMPORTANT THING IN THE FUTURE IS THE 
 04  RESEARCH AND THE EFFORTS TO KNOW WHAT'S COMING FROM 
 05  AUTOMOBILES, WHY IT IS COMING IN REAL LIFE IN SITUATIONS 
 06  NOT BASED ON NECESSARILY ON A TEST THAT IS NOT REAL WORLD 
 07  AND DO SOMETHING ABOUT THAT.  AND THERE'S A LOT OF THINGS 
 08  THAT ARE GOING TO HAVE TO BE DONE.  AND ATTENTION TO 
 09  DETAIL IS GOING TO MAKE THE BIG, BIG DIFFERENCE.   
 10               OF COURSE, LOCALLY, WE ARE INTERESTED IN 
 11  ADDRESSING THE MOTOR VEHICLE PROBLEM.  WE HAVE DONE SOME 
 12  OF THE STANDARD THINGS, HELP PURCHASE C.N.G. BUSES, WHICH 
 13  HAS BEEN WORTH ABOUT 600 TONS OVER A 12-YEAR PERIOD.  WE 
 14  HAVE CAR SCRAPPING PROGRAMS THAT ARE WORTH ABOUT -- THE 
 15  FIRST ONE IS 125 TONS OVER THREE YEARS.  THE SECOND ONE 
 16  THAT'S IN PLACE NOW IS GOING TO GIVE US ABOUT 500 TONS 
 17  OVER ANOTHER THREE-YEAR PERIOD.  
 18               WE ARE SUPPORTING ALTERNATIVE FUELS.  WE GAVE 
 19  MONEY FOR IMPLEMENTING INFRASTRUCTURE FOR NATURAL GAS AND 
 20  CONVERTING VEHICLES.  WE ARE WORKING ON JOINING THE CLEAN 
 21  CITIES PROGRAM.  WE ARE EVALUATING JOINING IN ON THE BLUE 
 22  SKIES PROGRAM.  WE RECEIVE MONEY FROM THE ENERGY 
 23  COMMISSION AND MATCH THAT TO PROVIDE INCENTIVES FOR 
 24  PURCHASING ELECTRIC VEHICLES.  
 25               BUT ONE OF THE THINGS THAT I THINK I WANT TO 
0011
 01  BRING TO YOUR BOARD'S ATTENTION IS THE TREMENDOUS 
 02  POTENTIAL OF I & M FOR REDUCING POLLUTANTS, THE EXISTING 
 03  FLEET.  IN MY OPINION, I THINK THAT NOBODY REALLY KNOWS 
 04  THE TRUE BENEFIT THAT CAN OCCUR THERE, BECAUSE THERE IS A 
 05  LITTLE BIT OF HAZE ABOUT WHAT HAPPENS WITH REAL VEHICLES 
 06  AT ALL TIMES.  BUT WE KNOW IT'S BIG, VERY, VERY BIG.  
 07               AND I WOULD LIKE TO BRING YOUR ATTENTION TO 
 08  THIS NEUTRONICS SIGN OVER HERE.  WHAT WE HAVE DONE IS 
 09  FUNDED A PROGRAM THAT WE THINK WILL FIT INTO WHAT IS GOING 
 10  ON IN I & M RIGHT NOW.  WE HAVE ABOUT A MILLION AND A HALF 
 11  VEHICLES.  30 PERCENT OF THOSE ARE 1975 TO 1981, WHICH IS 
 12  THE PRECATALYST OLD TECHNOLOGY.  THOSE SYSTEMS ARE WHAT IS 
 13  TERMED OPEN LOOP.  AND THEY HAVE VERY SIMPLE OXIDATION 
 14  CATALYST IN THEM, WHICH TODAY, UNLESS THEY HAVE BEEN 
 15  REPLACED, ARE PROBABLY NOT WORKING VERY WELL.  
 16               THE MAJORITY OF THESE VEHICLES ARE OWNED BY 
 17  PEOPLE WHO CANNOT AFFORD A BETTER VEHICLE.  AND THIS 
 18  LEAVES A FINANCIAL ISSUE WITH RESPECT TO GETTING THOSE 
 19  VEHICLES REPAIRED AND BROUGHT BACK UP.  
 20               AND NEUTRONICS CAME TO US AND TALKED TO US 
 21  ABOUT A SYSTEM THAT THEY HAD THAT THEY HAD BEEN DESIGNING 
 22  AND, IN FACT, IMPLEMENTING IN GERMANY.  AND I THINK IT WAS 
 23  SOMETHING LIKE 1986 WHEN THEY STARTED DOING THIS IN 
 24  GERMANY.  AND THERE'S ABOUT 30,000 GERMAN MERCEDES RUNNING 
 25  AROUND IN GERMANY WITH THIS SYSTEM ON IT.  
0012
 01               WHEN WE STARTED WORKING WITH THEM, WE SAID, 
 02  "WELL, THAT'S FINE."  YOU KNOW, THE STANDARD THING.  "IT 
 03  MIGHT WORK IN GERMANY OR THE SOUTH COAST, BUT IT MAY NOT 
 04  WORK HERE."  AND SO WE STARTED A PROCESS OF SEEING HOW 
 05  GOOD THIS SYSTEM IS.  AND WE HAVE HELPED TEST THE SYSTEM 
 06  AND GET IT CERTIFIED, DONE DURABILITY TESTING.  
 07               AND WE CAN SAY WITH ASSURANCE THAT YOU WILL 
 08  GET AT ABOUT 30,000 MILES A 50 PERCENT REDUCTION IN 
 09  HYDROCARBONS AND OXIDES OF NITROGEN.  
 10               AND IT'S BEEN CERTIFIED BY THE AIR RESOURCES 
 11  BOARD.  AND I AM NOT SURE HOW MANY ADD-ON DEVICES THE AIR 
 12  RESOURCES BOARD HAS ACTUALLY CERTIFIED AS EFFECTIVE AND 
 13  DONE ALL OF THIS DURABILITY TESTING ON IT, AND I'M NOT 
 14  SURE IF IT'S MORE THAN ONE, BUT I KNOW THIS IS ONE OF 
 15  FEW.  
 16               WHAT WE ARE DOING IS WE HAVE FUNDED NOW THE 
 17  NEXT STAGE OF THAT.  AND THAT IS WE HAVE A PROGRAM TO 
 18  RETROFIT ABOUT 1,350 VEHICLES.  SO WE HAVE A TWO-PRONG 
 19  APPROACH THAT WE ARE DEVELOPING IN SAN DIEGO, AND WE ARE 
 20  HOPING TO HOOK THIS TO I & M AT THE RIGHT TIME, BECAUSE 
 21  WHEN THESE CARS START TO GET THE LOADED MODE TEST, THEY 
 22  ARE GOING TO FAIL.  THEY ARE NOT GOING TO GET PAST THE 
 23  LOADED MODE TEST IF THE CUT POINTS ARE SET SO THAT A GOOD 
 24  CATALYST IS REQUIRED.  
 25               AND PEOPLE ARE GOING TO EITHER HAVE TO CRUSH 
0013
 01  THESE CARS, BECAUSE YOU REALLY CAN'T FIX THEM WITHOUT 
 02  SPENDING TOO MUCH MONEY, OR THERE ARE GOING TO BE VEHICLES 
 03  THAT NEED QUITE A BIT OF MONEY TO FIX, BUT THE ENGINE IS 
 04  BASICALLY SOUND.  AND IF THE ENGINE IS BASICALLY SOUND, 
 05  FOR $500 YOU CAN PUT A NEUTRONICS SYSTEM ON THERE AND GO 
 06  FROM AN OXIDATION CATALYTIC, A VERY SIMPLE CATALYTIC, TO A 
 07  THREE-WAY CATALYTIC WITH A THREE CLOSED LOOP OPERATION.  
 08               WE WILL GET ABOUT 57 TONS OVER THE PERIOD OF 
 09  EVALUATION FOR THIS SYSTEM WITH JUST THAT MANY CARS.  IT'S 
 10  VERY EFFECTIVE, AND THE COST EFFECTIVENESS IS AROUND $5 TO 
 11  $6 A TON.  I & M IS AROUND $6 TO $7 A TON.  THIS IS A 
 12  VERY, VERY COST EFFECTIVE APPROACH.  
 13               FUNDING IT IS GOING TO BE THE ISSUE.  HOW DO 
 14  WE FUND IT, AND HOW DO WE INTEGRATE IT?  BUT THE BENEFITS 
 15  ARE TREMENDOUS, AND I WOULD STRONGLY SUGGEST THAT THIS IS 
 16  ONE ASPECT THAT SHOULD BE CONSIDERED IN TERMS OF STATEWIDE 
 17  IMPLEMENTATION, BECAUSE PERSONALLY, I THINK WHEN ALL OF 
 18  THESE GROSS POLLUTERS ARE IDENTIFIED, THERE'S GOING TO BE 
 19  A REAL PROBLEM, BECAUSE PEOPLE ARE GOING TO HAVE A HARD 
 20  TIME GETTING THEM FIXED.  
 21               THE COST LIMIT, THERE IS NONE.  AND THERE'S 
 22  EITHER GOING TO BE A HUGE REVOLT OR WE'RE GOING TO HAVE A 
 23  WAY TO ENABLE THEM TO DO WHAT'S RIGHT.  
 24               I'D LIKE TO INTRODUCE TO YOU KEITH -- AM I 
 25  GOING TO SAY IT RIGHT -- FRANKENBINER.  AND I WOULD LIKE 
0014
 01  HIM TO GO THROUGH NEUTRONICS SYSTEM FOR YOU AND RESPOND TO 
 02  ANY QUESTIONS YOU MIGHT HAVE.  
 03               KEITH IS THE PRESIDENT OF NEUTRONICS.
 04         MR. FRANKENBINER:  I KNOW THIS SOUNDS LIKE A 
 05  COMMERCIAL TO YOU, BUT BELIEVE IT OR NOT, IT'S NOT.  IN 
 06  THE SENSE THAT WE HAVE BEEN IN THIS BUSINESS ABOUT 
 07  12 YEARS --
 08         MR. DUNLAP:  I THINK THERE'S A PORTABLE MIKE THERE 
 09  YOU MIGHT BE ABLE TO USE. 
 10         MR. FRANKENBINER:  I WOULD LIKE TO SAY THAT WHILE 
 11  THIS SOUNDS MAYBE LIKE NEW TECHNOLOGY HERE, IT'S NOT NEW 
 12  TECHNOLOGY AROUND THE WORLD.  AND THE PROBLEM IN THE 
 13  WORLD, BELIEVE IT OR NOT, IS THAT THEY ARE 20 YEARS BEHIND 
 14  US OR PROBABLY 30 YEARS BEHIND CALIFORNIA IN THE SENSE 
 15  THAT THEY ARE JUST NOW STARTING TO RECOGNIZE THEIR 
 16  EMISSION PROBLEM, AND THE MANUFACTURERS OF VEHICLES THERE, 
 17  THE REAL ANSWER TO THEM HAS ALWAYS BEEN BUY A NEW CAR.  
 18               IN GERMANY, WE HEARD THIS STORY.  AND THEY 
 19  WERE CERTAIN ENVIRONMENTAL GROUPS, PRIMARILY THE GREENS 
 20  THERE, WHO SAID THAT'S NOT SATISFACTORY.  OUR PEOPLE  
 21  CAN'T ALL AFFORD NEW CARS.  AND EVEN IF THEY COULD, IT'S 
 22  NOT GOING TO BE THE ANSWER TO THE LONG-TERM PROBLEM, 
 23  BECAUSE WE STILL HAVE THIS AGING FLEET OUT THERE THAT'S 
 24  NOT GOING TO GO AWAY.  
 25               SO SENSIBLY, OURSELVES AND MANY OTHER 
0015
 01  COMPANIES ADDRESSED THIS PROBLEM WITH THEM.  THE SEEKER TO 
 02  IT REALLY IS CERTIFICATION.  IF YOU DON'T HAVE DURABILITY, 
 03  YOU CAN MAKE ALL KINDS OF CLAIMS.  
 04               SO WE APPROACHED SAN DIEGO AND RICH AND THE 
 05  SUPERVISORS ABOUT FOUR YEARS AGO.  AND, AGAIN, THERE WAS 
 06  THIS ISSUE OF DURABILITY, PROOF OF CONCEPT; WE KNOW YOU 
 07  CAN MAKE THESE CLAIMS IN GERMANY.  AND RICH SAID, "WELL, I 
 08  DON'T OWN A MERCEDES.  I DON'T KNOW OF ANYBODY ELSE IN MY 
 09  GROUP THAT DOES.  HOWEVER, WE DO HAVE A LOT OF OLDER 
 10  VEHICLES HERE, AND WE'D LIKE TO SEE WHAT YOU GUYS CAN DO 
 11  TO FIX THOSE, TOO."  
 12               SO WE STARTED ON THIS PROGRAM AT THAT POINT 
 13  AND DEVELOPED THIS FEEDBACK CONTROL.  THERE'S NOTHING 
 14  UNIQUE ABOUT WHAT WE ARE PROVIDING.  IT'S AUTOMOTIVE KNOWN 
 15  TECHNOLOGY.  AND REALLY THE ONLY SECRET THAT WE HAVE DONE 
 16  IS APPLY NEW CAR TECHNOLOGY TO THESE OLDER CARS.           
 17               OSTENSIBLY, THEY DIDN'T HAVE CLOSED LOOP AND 
 18  FANCY COMPUTERS.  IT'S NOTHING MORE THAN A MICROPROCESSING 
 19  CHIP THAN YOU HAVE IN YOUR COMPUTER AT HOME.  IT BASICALLY 
 20  NEEDS A SENSOR.  SO WE BRING AN OXYGEN SENSOR INTO PLAY, 
 21  THE SAME THAT'S ON ALL NEW CARS.  THE SECRET IS REALLY THE 
 22  CATALYTIC.  WITHOUT THAT, YOU ARE OUT OF CONTROL.  THESE 
 23  OLD CARS ARE THAT WAY.  SO WHAT WE'VE DONE IS PRODUCED A 
 24  THREE LOOP CATALYTIC.  AND THAT'S REALLY THE ANSWER TO 
 25  FIXING MOST OF THE OLD CARS.  
0016
 01               ONE OF THE PROBLEMS IN GERMANY -- AND I WILL 
 02  JUST BRIEFLY MENTION IT TO YOU, AND YOU WILL HEAR IT 
 03  HERE -- AS VEHICLES FAIL THE LOADED MODE TEST, THE FIRST 
 04  AND SIMPLEST RESPONSE THAT A MECHANIC'S GOING TO GIVE IS 
 05  REPLACE THE CATALYTIC AND IT WILL GIVE YOU AN EARLY FIX TO 
 06  THE PROBLEM.  
 07               WHEN YOU ARE IN THIS BUSINESS A LITTLE 
 08  LONGER, YOU START TO REALIZE WHAT CAUSED THAT CATALYTIC TO 
 09  FAIL.  IT DIDN'T FAIL JUST BECAUSE OF AGE, NECESSARILY, 
 10  BUT IT PROBABLY FAILED BECAUSE THE CAR WASN'T MAINTAINED 
 11  AND TUNED.  
 12               SO WHEN YOU GET DOWN TO WHAT DO YOU DO FOR 
 13  CONTROL WITH THESE SMOG REPAIR CENTERS, YOU'VE GOT TO 
 14  EDUCATE THEM ON WHAT ARE THE REAL CAUSES OF CATALYTIC 
 15  FAILURE.  MOST OF IT IS IGNITION PREFAIL.  SOME OF IT CAN 
 16  BE JUST POOR TUNING.  
 17               HOWEVER, THE SECRET TO IT, IN OUR VIEW IS:  
 18  YES, YOU CAN REPLACE THE CATALYTIC, BUT IF YOU DON'T 
 19  REALLY GET TO THE HEART OF WHAT CAUSED THE FAILURE, YOU 
 20  ARE GOING TO HAVE ANOTHER FAILURE.  
 21               AND THIS IS EXACTLY WHAT HAPPENED IN 
 22  GERMANY.  THEY HAD A TWO-LEVEL PROGRAM.  THEY FUNDED 
 23  CATALYTICS ONLY FOR ABOUT 6,700 DEUTSCHEMARK.  THEY FUNDED 
 24  RETROFIT FEEDBACK CONTROL FOR ABOUT 1,200 DEUTSCHEMARK.  
 25  AT THE END OF NINE MONTHS, THE FIRST YEAR OF THE 
0017
 01  PROGRAM THEY HAD 70 PERCENT FAILURE OF THE OPEN LOOP 
 02  OXIDIZED SYSTEMS.  THEY STOPPED THAT END OF THE FUNDING 
 03  AND SAID, IF YOU DON'T HAVE CATALYTIC THREE WAY CONTROL 
 04  CLOSED LOOP, WE'RE NOT INTERESTED IN FUNDING YOU.
 05               THE SAME ISSUE IS GOING TO HAPPEN HERE.  SO 
 06  ONE OF THE THINGS THAT WE ARE TRYING TO DO IS EDUCATE 
 07  THROUGH THE DISTRICT AND OBVIOUSLY THROUGH THE SMOG REPAIR 
 08  THE FACT THAT THE CATALYTIC REPLACEMENT BY ITSELF IS 
 09  FINE, BUT YOU BETTER UNDERSTAND CLEARLY WHY IT FAILED AND 
 10  ADDRESS THAT ISSUE, TOO.  
 11               I'D BE MORE THAN HAPPY TO ANSWER ANY 
 12  QUESTIONS.  
 13         MR. DUNLAP:  ANY QUESTIONS?  
 14               MR. CALHOUN?
 15         MR. CALHOUN:  I WOULD LIKE TO MAKE A COMMENT 
 16  FIRST.  MR. SOMMERVILLE MENTIONED THE FACT THAT WE OUGHT 
 17  TO TAKE A LOOK AT THE EMISSIONS THAT ARE COMING FROM THE 
 18  CAR.  I KNOW THE AIR RESOURCES BOARD HAS SURVEILLANCE 
 19  PROGRAMS, SO THAT'S ONGOING.  AND MAYBE IT ISN'T AS 
 20  COMPREHENSIVE AS IT SHOULD BE, BUT IT IS SOMETHING THAT'S 
 21  ONGOING.  AND I WOULD LIKE YOU TO ELABORATE ON IT, IF YOU 
 22  WOULD LIKE.  
 23               AND YOU ALSO MENTIONED THE POTENTIAL FOR 
 24  I & M.  I'M A FIRM BELIEVER THAT WE PLACE TOO MUCH 
 25
0018
 01  EMPHASIS ON INSPECTION AS OPPOSED TO THE MAINTENANCE, 
 02  WHICH IS KIND OF WHAT YOU ALLUDED TO.  AND IN TERMS OF THE 
 03  DEVICES YOU HAVE, I DON'T THINK THERE'S ANY QUESTION ABOUT 
 04  WHAT TECHNOLOGY OF THAT TYPE WOULD PROBABLY WORK ON THE 
 05  VEHICLE.  
 06               ONE OF MY BIG CONCERNS ABOUT THE PROGRAM IS 
 07  THE DURABILITY OF IT.  AND I TALKED ABOUT THAT EARLIER 
 08  TODAY.  I THINK THAT IS ABSOLUTELY ESSENTIAL THAT ANY 
 09  SYSTEM THAT IS PLACED ON CARS THAT ARE IN USE ALSO APPLIES 
 10  TO THE NEW VEHICLE TECHNOLOGY.  
 11               AND I GUESS ONE OF THE QUESTIONS I WOULD LIKE 
 12  TO ASK IS THE EXTENT TO WHICH THIS SYSTEM HAS BEEN VALUED.
 13         MR. SOMMERVILLE:  LET ME RESPOND TO THE QUESTION.   
 14               IN THE FIRST INSTANCE ABOUT THE NEW CAR, 
 15  ABOUT THE SURVEILLANCE, YES, I'M NOT SAYING THAT THE AIR 
 16  RESOURCES BOARD IS NOT DOING ANYTHING.  I'M SAYING THAT 
 17  THE AIR RESOURCES BOARD -- AND I RECOGNIZE IT AS A 
 18  BASELINE -- IS DOING THE MOST SURVEILLANCE IN TERMS OF 
 19  EMISSION CONTROLS ON MOTOR VEHICLES IN THE WORLD 
 20  PROBABLY.  
 21               BUT WITH THAT AS A BASELINE, IT'S BECOMING 
 22  CLEAR, IN THE DETAILS OF WHAT HAPPENS IN THE REAL WORLD, 
 23  THAT MORE ATTENTION CAN BE TAKEN IN TERMS OF WHAT'S 
 24  HAPPENING IN REAL LIFE DRIVING.  AND I AM JUST SUGGESTING 
 25  THE COMMITMENT TO SPEND THE MONEY TO DO THE RESEARCH TO 
0019
 01  UNDERSTAND WHAT IS REALLY HAPPENING IN THE DETAILS NOW.  
 02  THIS IS WHAT'S GETTING TO US, IS THE DETAILS.  AND DO 
 03  SOMETHING ABOUT THAT.  
 04               CLEARLY THE AIR RESOURCES BOARD IS TOP GUN.  
 05  AND THE SURVEILLANCE IS A GOOD PROGRAM.  BUT I'M SAYING 
 06  THERE'S THIS NEXT INCREMENTAL STEP.  
 07               IN TERMS OF THIS SYSTEM, WE CAN PROVIDE YOU A 
 08  REPORT ON THE DURABILITY TESTING.  IT'S HERE.  IT WAS DONE 
 09  AND TESTED.  THE STANDARD DURABILITY TESTING THAT IS DONE 
 10  FOR, LIKE, NEW CARS WAS BASICALLY DONE ON A FLEET OF 
 11  VEHICLES THAT REPRESENTED AN ARRAY.  
 12               SO THERE'S SUBSTANTIAL WORK DONE.  AND IT WAS 
 13  ALL DONE PURSUANT TO A.R.B. PROTOCOL, AND IT'S ABOUT AS 
 14  GOOD AS YOU CAN DO.  IT'S A STANDARD APPROACH TO 
 15  DURABILITY TESTING.  SIX VEHICLES WERE DONE FOR 30,000 
 16  MILES EACH.  IT TOOK US A LITTLE OVER A YEAR TO DO THE 
 17  DURABILITY TESTING.  THE CRITERIA -- AND THE BOARD IS 
 18  AWARE OF THIS.  YOU HAVE TO MEET A MINIMUM OF A 20 PERCENT 
 19  REDUCTION OF TWO OF THE THREE MEASURED GASES AND NO 
 20  INCREASE IN THE THIRD.  THAT CRITERIA, WHILE IT DOESN'T 
 21  SOUND TOUGH, BECOMES VERY TOUGH WHEN YOU ARE DEALING WITH 
 22  CARS THAT WE DID THAT ARE 135,000 MILES STARTING.  
 23               WE DID NOT PRESELECT THEM.  THE BOARD 
 24  PRESELECTED THE VEHICLES FOR US.  SO WE HAD ACTUALLY NO 
 25  INPUT OR MODIFICATION TO WHAT THE VEHICLES LOOKED LIKE OR 
0020
 01  HOW THEY WOULD PERFORM.  I'M NOT GOING TO SAY TO YOU THAT 
 02  OLD CARS ARE NOT A PROBLEM, BECAUSE THEY ARE, AND WE HAD 
 03  SOME PROBLEMS WITH THIS FLEET PUTTING 30,000 MILES ON 
 04  THEM.  
 05               AND THAT'S WHY I GO BACK TO IT AND SAY IT'S 
 06  ONE THING TO ADD THE TECHNOLOGY AND HAVE A BIG SPLASH TO 
 07  START WITH.  A FRESH CATALYZER IS GOING TO GIVE YOU A BIG 
 08  REDUCTION IN HYDROCARBONS AND C.O., BUT WHAT ARE YOU GOING 
 09  TO LOOK LIKE AFTER TWO OR THREE YEARS.  
 10               WHAT WE'VE LEARNED -- AND I GO BACK TO THIS 
 11  EDUCATIONAL THING FOR THE REPAIR INDUSTRY -- IS YOU HAVE 
 12  TO MAINTAIN THE CARS.  IF YOU DON'T, I DON'T CARE HOW GOOD 
 13  YOUR SYSTEM IS, IT WILL ULTIMATELY FAIL AGAIN.  AND THE 
 14  FAILURES THAT WE SEE ARE NORMALLY FROM IGNITION PROBLEMS.  
 15  THE VEHICLE IS NOT MAINTAINED WELL.  IT IS NOT TUNED.  
 16  BELIEVE IT OR NOT, EVEN OIL CHANGES AND FILTERS MAKE THE 
 17  DIFFERENCE.  
 18         MR. DUNLAP:  MR. LAGARIAS. 
 19         MR. LAGARIAS:  IS THIS RETROFIT PROGRAM DESIGNED 
 20  PRIMARILY TO CARS THAT ALREADY HAVE THREE WAY CATALYSTS?  
 21  ARE YOU PROPOSING TO INSTALL THESE ON PRECATALYST CARS?  
 22  NOW, THAT'S PRE '82, AND THAT MEANS THAT THESE CARS HAVE A 
 23  VALUE IN THE ORDER OF A THOUSAND DOLLARS OR SO.  
 24               SO HOW MUCH ARE YOU GOING TO SPEND ON 
 25  UPGRADING? 
0021
 01         MR. FRANKENBINER:  YOU HIT ON TWO VERY KEY 
 02  POINTS.  FIRST OF ALL, I THINK YOU HAVE TO LOOK AT YOUR 
 03  INVENTORY AND SEE WHERE THE BULK OF YOUR EMISSIONS ARE 
 04  COMING FROM.  IF THEY ARE COMING FROM PRE '80, BECAUSE 
 05  THAT WAS ESSENTIALLY THE INTRODUCTION OF THREE-WAY 
 06  CATALYSTS, THERE'S ANOTHER ISSUE, BECAUSE THAT FLEET IS 
 07  AGING, TOO.  BUT THERE'S KNOWN TECHNOLOGY TO FIX THOSE.    
 08               WE SPECIFICALLY WITH THE DISTRICT SAID WE 
 09  WANT TO ISOLATE A FLEET.  AND WE HAVE AN UNUSUAL CONDITION 
 10  HERE IN SAN DIEGO.  WE ARE CLOSE TO THE BORDER.  WE HAVE 
 11  WHAT YOU MIGHT SAY A REOCCURRING FLEET THAT DOESN'T GO 
 12  AWAY, AND WE KNOW THAT THEIR BASIC TRANSPORTATION IS NEVER 
 13  GOING TO GO AWAY FOR THIS TYPE OF CAR.  SO WE ARE LOOKING 
 14  AT A VERY NARROW FOCUS ON A FLEET THAT WE CAN GET THE 
 15  BIGGEST BANG FOR THE BUCK FOR, AND THAT'S INTRODUCING 
 16  FEEDBACK CONTROL AND THREE-WAY CATALYSTS TO A CAR THAT 
 17  DIDN'T HAVE IT.  
 18               I CAN TALK TO YOU JUST A SECOND ABOUT THIS 
 19  COST ISSUE, WHICH IS THE BIGGEST PROBLEM WE HAVE HAD.  
 20  YES, VERY HONESTLY, WE ARE NOT MAKING A LOT OF MONEY ON 
 21  THIS SYSTEM WITH THEM, BECAUSE WE ARE CAUGHT SHARING IT.  
 22  BUT WE ARE DOING IT FOR A SELFISH REASON.  WE WANT TO SHOW 
 23  THAT IT WILL WORK AND IT WILL WORK HERE.  WE CAN THEN 
 24  EXPAND THAT TO OTHER AREAS.  
 25               AND OBVIOUSLY, AS WE GROW VOLUME, WE ARE GROW 
0022
 01  MONEY, TOO.  BUT IT IS AN EXPENSIVE SYSTEM.  
 02         MR. ROBERTS:  IT'S ABOUT $500; RIGHT? 
 03               BASIC TRANSPORTATION WILL LEAVE THE PEOPLE 
 04  WITH THEIR CARS, AND I THINK YOU SAID, IF I REMEMBER 
 05  CORRECTLY, RICH, IT WAS 57 TONS OVER THE PERIOD?
 06         MR. SOMMERVILLE:  RIGHT.  ABOUT A 1,300 FLEET.  
 07         MR. ROBERTS:  ABOUT 1,300 CARS, WHICH IS PRETTY 
 08  SIGNIFICANT.  
 09               AND WHAT IT REALLY IS DOING IS GIVING US 
 10  ANOTHER OPTION TO REACH PEOPLE THAT WE ARE NOT REACHING 
 11  WITH THE CRUSHING PROGRAM AND WANT TO KEEP THEIR CAR WHO 
 12  ARE NOT IN THE POSITION TO BUY A NEW CAR, EVEN WITH THE 
 13  $700.  
 14               IT GIVES US ANOTHER EFFECTIVE OPTION, AND I 
 15  THINK THAT'S HOW YOU HAVE TO LOOK AT IT.  
 16         MR. CALHOUN:  ARE YOU SUGGESTING, THEN, THAT THIS 
 17  SHOULD BE AN OPTION THAT'S AVAILABLE TO THE PEOPLE JUST 
 18  HERE IN SAN DIEGO, OR IN OTHER PARTS OF THE STATE, TOO?  
 19         MR. SOMMERVILLE:  REMEMBER IT IS AVAILABLE TO 
 20  PEOPLE HERE.  AND AS WE GET INTO THIS PROGRAM, I'M ANXIOUS 
 21  TO GET THROUGH THE 1,300 CARS.  AND IF IT WORKS, THEN WE 
 22  WILL INCREASE THAT.  
 23               BUT I WANTED YOU TO BE AWARE OF IT, BECAUSE I 
 24  THINK THAT'S AN OPTION THAT COULD BE PURSUED FOR OTHER 
 25  DISTRICTS.  
0023
 01         MR. LAGARIAS:  IT SEEMS APPROPRIATE FOR THE AIR 
 02  RESOURCES BOARD TO REALLY EVALUATE AND SEE WHAT ITS VALUE 
 03  IS TO US THROUGHOUT THE CITY.  
 04         MS. EDGERTON:  ONE OF THE THINGS THAT'S VERY 
 05  ATTRACTIVE TO ME IS IT SELLS PART OF MY RESERVATIONS ABOUT 
 06  THIS CRUSHING PROGRAM, WHICH IS, I DON'T HAVE TO GET 
 07  ANOTHER CAR.  
 08               BUT WHAT KIND OF CAR DO THEY GO GET?  ISN'T 
 09  IT REASONABLE TO THINK THEY WOULD GET ANOTHER CAR THAT 
 10  HAD EXACTLY THE SAME EMISSION PROBLEM?  SO YOU REALLY 
 11  HAVEN'T NECESSARILY CLEANED UP THE AIR.  
 12               YOU MAY GET MORE CERTAINTY THAT YOU HAVE 
 13  CLEANED IT UP WITH YOUR PROGRAM.  BUT WE WILL WAIT AND 
 14  SEE.  
 15               MY QUESTION, THOUGH, IS WITH RESPECT TO THE 
 16  VERY SERIOUS POINT THAT YOU RAISED ABOUT MAINTENANCE.  
 17  WHAT EFFORTS, IF ANY, HAVE BEEN SUCCESSFUL OR DO YOU 
 18  BELIEVE WOULD BE SUCCESSFUL TO UNDERTAKE IN CONNECTION 
 19  WITH THE PROGRAM TO ASSURE THAT THIS $500 INVESTMENT WOULD 
 20  BE USEFUL LONGER THAN A YEAR, BECAUSE, OF COURSE, AS WE 
 21  ALL KNOW HERE, THE CARS LAST AS LONG AS PEOPLE HERE. 
 22         MR. SOMMERVILLE:  WELL, UNFORTUNATELY, THE CARS 
 23  MAY LAST LONG ENOUGH, AND THEY MAY GO DOWN THE ROAD, BUT 
 24  NOT ALL CYLINDERS MAY BE WORKING.  BUT IF YOU HAVE EIGHT 
 25  CYLINDERS, HEY, YOU CAN WORK WITH SIX; RIGHT?  NO.  WHAT 
0024
 01  NEEDS TO BE DONE -- AND THIS IS WHAT WE ARE DOING -- IS 
 02  THERE HAS TO BE A QUALIFICATION.  AND AS A PART OF THAT 
 03  QUALIFICATION, IT HAS TO BE DETERMINED THAT THE ENGINE IS 
 04  RUNNING PROPERLY AND THERE'S NO FUNDAMENTAL CARBURETION 
 05  PROBLEMS OR IGNITION PROBLEMS OR INTERNAL VALVES OR 
 06  CYLINDERS.  AND IT MAY TAKE $150 OR SO TO FIX THE IGNITION 
 07  SYSTEM SO THERE'S NO MISFIRES AND DO JUST GENERAL 
 08  UPGRADING MAINTENANCE.  
 09               AND IF THERE'S NOTHING FUNDAMENTALLY WRONG 
 10  WITH THE ENGINE, EDUCATION'S NEEDED TO THE PERSON WHO'S 
 11  GETTING THIS FIXED ABOUT MISFIRES AND THE NECESSITY OF 
 12  DOING IT, BECAUSE THAT'S THE MAJOR THING THAT WILL TAKE 
 13  OUT A CATALYST, NOT ONLY IN THESE VEHICLES, BUT IN YOUR 
 14  VEHICLE, ASSUMING YOU ARE DRIVING A RECENT ONE.  SO A 
 15  LITTLE BIT OF EDUCATION.  
 16               AND WE GO THROUGH A PROCESS OF ASSURING THAT 
 17  WHEN THAT CATALYST IS PUT ON, ALL THE FUNDAMENTAL PROBLEMS 
 18  ARE TAKEN CARE OF AND THE PERSON KNOWS SOMETHING ABOUT THE 
 19  NECESSITY OF MAINTAINING AT LEAST BASICALLY THE IGNITION 
 20  SYSTEM AND CARBURETION. 
 21         MR. DUNLAP:  ALL RIGHT.  
 22               ANY OTHER QUESTIONS?  
 23               SUPERVISOR VAGIM?
 24         MR. VAGIM:  THANK YOU, MR. CHAIRMAN.  
 25               FIRST OF ALL, I DIDN'T HEAR WHAT LEVEL OF 
0025
 01  EMISSIONS THAT YOU BRING ANY ONE CAR TO.  
 02               IS IT RELATIVE TO THE CAR YOU ARE 
 03  CONVERTING? 
 04         MR. SOMMERVILLE:  NO.  IN GENERAL, FOR THE TESTED 
 05  FLEET AT 3,000 MILES, YOU CAN EXPECT A 50 PERCENT 
 06  REDUCTION AT 30,000 MILES.
 07         MR. VAGIM:  FOR ANY ONE CAR?
 08         MR. SOMMERVILLE:  RIGHT.  AND THAT'S OVER THE 
 09  VEHICLES THAT WE TESTED.  50 PERCENT IS ABOUT A GOOD 
 10  NUMBER.  OF COURSE WHEN YOU PUT IT ON INITIALLY, IT'S 
 11  HIGHER THAN THAT.  OVER 30,000 MILES, 50 PERCENT ARE 
 12  REDUCTION.
 13         MR. VAGIM:  WHAT'S THE AVERAGE AGE OF THE FLEET YOU 
 14  TESTED? 
 15               DO YOU KNOW THAT NUMBER?
 16         MR. FRANKENBINER:  THE FLEET AVERAGED FROM A '75 TO 
 17  '81 VEHICLE.  
 18               WE HAVE TO BE CAREFUL AND NOT TALK BY AGE.  
 19  WE TALK MORE BY ENGINE FAMILY, WHICH IS OSTENSIBLY OPEN 
 20  LOOP OXYGENATION CATALYZED VEHICLES, WHICH COVERS A MUCH 
 21  LARGER SECTION OF THE FLEET.  
 22               THE AVERAGE MILES IS 135,000 IN THESE 
 23  VEHICLES WHEN WE STARTED.  SO WE PURPOSELY -- AND I KNOW 
 24  THE BOARD PURPOSELY PICKED VEHICLES THAT THEY DEEMED A 
 25  REPRESENTATIVE OF WHAT'S OUT THERE ON THE ROAD TODAY AND 
0026
 01  WHAT'S GOING TO BE OUT THERE FOR THE NEXT FIVE AND TEN 
 02  YEARS.  
 03         MR. VAGIM:  DO YOU THROW IN CONVERTING THEIR 
 04  EIGHT-TRACK TO CASSETTE?
 05         MR. FRANKENBINER:  I DON'T THINK YOU GET ANY 
 06  EMISSION GAIN FROM THAT, JUST MAYBE THE NOISE.
 07         MR. VAGIM:  THANK YOU VERY MUCH. 
 08         MR. DUNLAP:  ANY OTHER QUESTIONS?  
 09               ALL RIGHT.  MR. SOMMERVILLE, THANK YOU FOR 
 10  THAT PRESENTATION.  
 11               KEEP UP THE GOOD WORK HERE IN SAN DIEGO.
 12         MR. SOMMERVILLE:  THANK YOU.  
 13               AND I HOPE YOU ALL ENJOY YOUR DAY HERE. 
 14         MR. DUNLAP:  ALL RIGHT.  I'D LIKE TO REMIND THOSE 
 15  IN THE AUDIENCE WHO WOULD LIKE TO PRESENT TESTIMONY TO THE 
 16  BOARD ON ANY OF TODAY'S ITEMS TO PLEASE SEE THE BOARD 
 17  SECRETARY OVER HERE.  
 18               PAT, IF YOU CAN WAVE YOUR HAND?  
 19               WE ARE IN NEW TERRAIN HERE.  IF YOU HAVE A 
 20  WRITTEN STATEMENT, PLEASE PROVIDE HER WITH 20 COPIES SO 
 21  EACH OF THE MEMBERS OF THE BOARD MIGHT HAVE A COPY OF YOUR 
 22  REMARKS.  
 23               THE FIRST AGENDA ITEM TODAY IS 96-5-1, PUBLIC 
 24  HEARING TO CONSIDER THE ADOPTION OF A REGULATION AND 
 25  CRITERIA FOR EQUIPMENT AND PROCESS PRECERTIFICATION.  
0027
 01               THE PROPOSED REGULATION WILL ESTABLISH THE 
 02  PROCESS WHICH WILL BE FOLLOWED AND REQUIREMENTS WHICH MUST 
 03  BE MET FOR THE AIR RESOURCES BOARD TO PRECERTIFY EQUIPMENT 
 04  AND PROCESSES AS BEING IN COMPLIANCE WITH APPLICABLE AIR 
 05  QUALITY RULES AND REGS.  
 06               AS PART OF CALIFORNIA'S PERMIT REFORM 
 07  EFFORTS, THE LEGISLATIVE PRECERTIFICATION AS AN IMPORTANT 
 08  PROGRAM, A PRIORITY PROGRAM FOR STREAMLINING THE AIR 
 09  PERMIT PROCESS AND AS A RESULT MANDATED THE A.R.B. TO 
 10  DEVELOP AND IMPLEMENT A PRECERTIFICATION PROGRAM.  
 11               AT THIS POINT, I'D LIKE TO ASK MR. BOYD TO 
 12  INTRODUCE THE ITEM AND BEGIN THE STAFF'S PRESENTATION.     
 13               GOOD MORNING, JIM.
 14         MR. BOYD:  THANK YOU, MR. CHAIRMAN.  
 15               GOOD MORNING, BOARD MEMBERS AND GOOD MORNING 
 16  TO THE MEMBERS OF OUR AUDIENCE HERE.  
 17               I THINK AS BOARD MEMBERS KNOW, THE AIR 
 18  RESOURCES BOARD HAS A LONG AND SUCCESSFUL HISTORY OF 
 19  CERTIFYING VARIOUS TYPES OF EQUIPMENT PROCESSES AND NEW 
 20  ENVIRONMENTAL TECHNIQUES AS PART OF OUR EFFORTS TO REDUCE 
 21  EMISSIONS FROM MOTOR VEHICLES AND MOBILE SOURCES.          
 22               EXISTING CERTIFICATION PROGRAMS INCLUDE THE 
 23  CERTIFICATION MOTOR VEHICLE EMISSION CONTROL SYSTEMS, THE 
 24  CERTIFICATION OF AFTER MARKET PARTS FOR MOTOR VEHICLES, 
 25  THE CERTIFICATION OF GAS AND VAPOR RECOVERY SYSTEMS AND 
0028
 01  EQUIPMENT AND THE CERTIFICATION OF MOTOR VEHICLE FUELS AND 
 02  FUEL ADDED PACKAGES.  
 03               AND FROM THE LAST DISCUSSION, YOU SAW A PIECE 
 04  OF EQUIPMENT THAT WOULD HAVE BEEN AND WAS A CERTIFIED 
 05  PROGRAM, I GUESS, BY THE AIR RESOURCES BOARD.  
 06               TODAY WE WILL BE PRESENTING A NEW 
 07  CERTIFICATION PROGRAM, WHOSE GENESIS IS REALLY IN 
 08  PROVIDING ASSISTANCE TO LOCAL DISTRICTS TO GAIN GREATER 
 09  EFFICIENCY IN THE ISSUANCE OF PERMITS AT THE LOCAL LEVEL.  
 10               THE EQUIPMENT AND PROCESS PRECERTIFICATION 
 11  PROGRAM IS A VOLUNTARY PERMIT STREAMLINING PROGRAM FOR 
 12  MANUFACTURES OR DISTRIBUTORS OF EQUIPMENT AND PROCESSES 
 13  COMMONLY ASSOCIATED WITH STATIONARY SOURCES IN 
 14  CALIFORNIA.  
 15               THIS IS THE BEGINNING OF THE FIRST FOR US.  
 16  AS YOU ARE AWARE, STATIONARY SOURCES ARE, OF COURSE, 
 17  HISTORICALLY REGULATED BY LOCAL DISTRICTS.  
 18               DISTRICTS ADOPTED THE RULES AND REGULATIONS, 
 19  WHICH THE REQUIREMENTS SET PERFORMANCE STANDARDS FOR MANY 
 20  TYPES OF EQUIPMENT AND PROCESS CATEGORIES.  
 21               THE AIR RESOURCES BOARD HAS BEEN CHARGED BY 
 22  THE LEGISLATURE TO DEVELOP CRITERIA AND GUIDELINES IN 
 23  COORDINATION WITH LOCAL AIR DISTRICTS TO PRECERTIFIED 
 24  EQUIPMENT AND PROCESSES AS BEING IN COMPLIANCE WITH 
 25  APPLICABLE AIR QUALITY RULES AND REGULATIONS.  
0029
 01               WE BELIEVE THAT OUR PROPOSED CRITERIA FIRST 
 02  PROVIDE FOR AN INDEPENDENT VERIFICATION BY THE AIR 
 03  RESOURCES BOARD OF THE PERFORMANCE OF EQUIPMENT AND 
 04  PROCESSES; SECONDLY, PROVIDE FOR A DETERMINATION OF 
 05  COMPLIANCE WITH RULES AND REGULATIONS WITHOUT AFFECTING 
 06  THE EXISTING PERMITTING AND COMPLIANCE AUTHORITY OF LOCAL 
 07  DISTRICTS; THIRDLY, RESULT IN A REDUCTION IN COST TO 
 08  BUSINESSES BY REDUCING THE NEED FOR DUPLICATIVE TESTING.   
 09               ALL OF THIS SHOULD RESULT IN REDUCTION IN THE 
 10  TIME NEEDED TO ISSUE PERMITS AT EACH DISTRICT IN THE 
 11  STATE.  
 12               I'D LIKE ALSO TO NOTE THAT THE A.R.B.'S 
 13  EFFORTS ARE INDEED ONE PART OF A LARGER EFFORT UNDER WAY 
 14  WITHIN CAL/E.P.A. TO IMPLEMENT ENVIRONMENTAL TECH 
 15  CERTIFICATION PROGRAMS THROUGHOUT THE VARIOUS BOARDS AND 
 16  DEPARTMENTS OF CAL/E.P.A.  
 17               AN OFFICE OF ENVIRONMENTAL TECHNOLOGY WAS 
 18  RECENTLY ESTABLISHED AT THE AIR RESOURCES BOARD TO 
 19  COORDINATE THESE VARIOUS PROGRAMS, INCLUDING THE HAZARDOUS 
 20  WASTE ENVIRONMENTAL TECHNOLOGY CERTIFICATION PROGRAM AT 
 21  THE DEPARTMENT OF TOXIC SUBSTANCE.  SO WE TURNED OVER A 
 22  NEW LEAF AND HAVE LAUNCHED A NEW AREA AND NEW EFFORT.      
 23               WITH THAT INTRODUCTION, AT THIS POINT I'LL 
 24  TURN THE PRESENTATION OVER TO MR. BRADLEY BRANSEN, WHO 
 25  WILL GIVE YOU THE DETAILS OF THE AIR RESOURCES BOARD 
0030
 01  PROPOSAL.  
 02               MR. BRANSEN?
 03         MR. BRANSEN:  THANK YOU, MR. BOYD.  
 04               GOOD MORNING, CHAIRMAN DUNLAP AND MEMBERS OF 
 05  THE BOARD.
 06               MY NAME IS BRADLEY BRANSEN, AND I WORK IN 
 07  THE STATIONARY SOURCE DIVISION OF THE AIR RESOURCES BOARD.  
 08  AND TODAY WE WILL DESCRIBE OUR EFFORTS IN DEVELOPING THE 
 09  AIR RESOURCES BOARD'S EQUIPMENT PRECERTIFICATION PROGRAM.  
 10  AND WE'D LIKE TO PRESENT OUR PROPOSED REGULATION OF 
 11  CRITERIA FOR YOUR ADOPTION.  
 12               IN TODAY'S PRESENTATION, I WILL DISCUSS WHAT 
 13  EQUIPMENT PRECERTIFICATION IS, WHY EQUIPMENT SHOULD BE 
 14  PRECERTIFIED, WHO PARTICIPATED IN DEVELOPING THE EQUIPMENT 
 15  PRECERTIFICATION PROGRAM, WHAT IS IN THE PROPOSED 
 16  REGULATION AND CRITERIA, AND HOW EQUIPMENT WILL BE 
 17  PRECERTIFIED.  
 18               THE A.R.B. EQUIPMENT PRECERTIFICATION PROGRAM 
 19  IS A VOLUNTARY STATE-WIDE PROGRAM WHICH CONSISTS OF TWO 
 20  STEPS:  A PERFORMANCE PRECERTIFICATION AND A REGULATORY 
 21  PRECERTIFICATION.  
 22               THE PERFORMANCE PRECERTIFICATION IS AN 
 23  INDEPENDENT VERIFICATION OF PERFORMANCE CLAIMS AND A 
 24  PRELIMINARY ENGINEERING EVALUATION FOR EQUIPMENT AND 
 25  PROCESSES.  ALL APPLICANTS ARE REQUIRED TO GO THROUGH THIS 
0031
 01  PERFORMANCE VERIFICATION PROCESS.  AND A.R.B. STAFF WILL 
 02  VERIFY THE PERFORMANCE OF EQUIPMENT, BASED ON APPLICANTS' 
 03  CLAIMS AND WILL CONFIRM THAT THE CLAIMS ARE ACCURATE AND 
 04  TRUE WHEN EQUIPMENT IS OPERATED UNDER SPECIFIED 
 05  CONDITIONS.  
 06               IN ADDITION TO THE PERFORMANCE 
 07  PRECERTIFICATION, APPLICANTS MAY REQUEST A REGULATORY 
 08  PRECERTIFICATION.  THIS IS A REGULATORY REVIEW FROM STATE 
 09  AND LOCAL REGULATORS TO DETERMINE COMPLIANCE WITH NONSITE 
 10  SPECIFIC AIR QUALITY REGULATIONS.  
 11               FOR PRECERTIFICATION TO BE USEFUL AS A PERMIT 
 12  STREAMLINING TOOL, THE APPLICANTS WILL BE ENCOURAGED TO GO 
 13  THROUGH THIS STANDARD REVIEW PROCESS.  COMPLIANCE 
 14  DETERMINATIONS TO APPLICABLE LOCAL AIR POLLUTION LAWS WILL 
 15  BE CONDUCTED BY LOCAL AIR DISTRICT STAFF, AND THE A.R.B. 
 16  STAFF WILL DETERMINE APPLICABLE FEDERAL AND STATE 
 17  REGULATIONS.  AND WE WILL CONSULT WITH U.S. E.P.A. FOR 
 18  COMPLIANCE WITH THE FEDERAL REGULATIONS.  
 19               WHEN APPLICANTS REQUEST A PRECERTIFICATION 
 20  FOR EQUIPMENT THAT AFFECTS MORE THAN ONE ENVIRONMENTAL 
 21  MEDIA, THEY WILL HAVE THE OPPORTUNITY TO PARTICIPATE IN 
 22  ANY OF THE ENVIRONMENTAL TECHNOLOGY CERTIFICATION PROGRAMS 
 23  OFFERED BY CAL/E.P.A., SUCH AS THE DEPARTMENT OF TOXIC 
 24  SUBSTANCES CONTROL'S HAZARDOUS WASTE CERTIFICATION 
 25  PROGRAM.  CROSS-MEDIA CERTIFICATIONS WILL BE COORDINATED 
0032
 01  BY THE OFFICE OF ENVIRONMENTAL TECHNOLOGY LOCATED WITHIN 
 02  THE COMPLIANCE DIVISION OF THE A.R.B. 
 03               THERE ARE MANY REASONS WHY EQUIPMENT 
 04  PRECERTIFICATION WILL BENEFIT LOCAL AIR DISTRICTS, 
 05  INDUSTRY, AND THE STATE.  FIRST IT WILL ASSIST IN 
 06  STREAMLINING THE PERMITTING PROCESS.  THE EVALUATION 
 07  REPORT PRODUCED IN A PRECERTIFICATION PROCESS WILL ACT AS 
 08  A PRELIMINARY ENGINEERING EVALUATION TO ASSIST DISTRICTS 
 09  IN REDUCING THE TIME REQUIRED TO EVALUATE EQUIPMENT AND 
 10  RESULT IN ISSUING AIR POLLUTION PERMITS MORE QUICKLY.      
 11               SECOND, IT WILL AID IN PROMOTING INNOVATIVE 
 12  TECHS.  PRECERTIFICATION WILL ASSIST IN REDUCING THE 
 13  DIFFICULTY AND REDUNDANCY IN STATE, LOCAL AND 
 14  ENVIRONMENTAL APPROVED PROCEDURES AND ASSIST IN BREAKING 
 15  DOWN BARRIERS TO THE QUICK ACCEPTANCE OF NEW PRODUCTS AND 
 16  TECHNOLOGIES.
 17               THIRDLY, IT CAN ENCOURAGE UNIFORM PERMIT 
 18  CONDITIONS.  STATEWIDE PRECERTIFICATION WILL ASSIST IN 
 19  ESTABLISHING SOME COMMON OPERATING CONDITIONS FOR 
 20  EQUIPMENT THAT'S USED AND OPERATED IN THE SAME MANNER 
 21  THROUGHOUT THE STATE.  
 22               AND FINALLY, THERE ARE SOME LEGAL 
 23  REQUIREMENTS TO ESTABLISH PRECERTIFICATION PROGRAMS.  THE 
 24  AIR POLLUTION PERMIT STREAMLINING ACT ESTABLISHED IN '92 
 25  REQUIRES THE TEN MOST POPULATED DISTRICTS TO DEVELOP AN 
0033
 01  EQUIPMENT PRECERTIFICATION PROGRAM AS PART OF AN EXPEDITED 
 02  PERMITTING PROCESS.  THROUGH THE C.A.P.C.O.A. PERMIT 
 03  STREAMLING SUBCOMMITTEE, DISTRICTS AGREED THAT 
 04  PRECERTIFICATION WILL BEST BE ACCOMPLISHED AS A 
 05  COOPERATIVE EFFORT AND AS A STATEWIDE PROGRAM.  
 06               ASSEMBLY BILL 32515 SIGNED BY GOVERNOR WILSON 
 07  IN SEPTEMBER 1994 AMENDED CALIFORNIA HEALTH AND SAFETY 
 08  CODE SECTION 39620.  THIS AMENDMENT REQUIRES THE AIR 
 09  RESOURCES BOARD TO DEVELOPMENT AND IMPLEMENT A STATEWIDE 
 10  EQUIPMENT PRECERTIFICATION PROGRAM IN COORDINATION WITH 
 11  THE LOCAL AIR DISTRICTS FOR THE PURPOSE OF PRECERTIFYING 
 12  SIMPLE COMMONLY USED EQUIPMENT AND PROCESSES.  
 13               DEVELOPING AND OPERATING AS A STATEWIDE 
 14  CERTIFICATION PROGRAM WILL PROVIDE STANDARDIZED 
 15  EVALUATIONS AND PERMITTING CONDITIONS.  A STATEWIDE 
 16  PROGRAM WILL PROVIDE CONSISTENCY THROUGHOUT THE STATE AND 
 17  WILL ASSIST MANUFACTURERS DURING THE EVALUATION OF 
 18  EQUIPMENT.  MANUFACTURERS WOULD HAVE EQUIPMENT EVALUATED 
 19  ONE TIME AS OPPOSED TO A NUMBER OF TIMES THROUGH THE 
 20  VARIOUS LOCAL DISTRICTS.  
 21               IN ADDITION, PURCHASERS OF PRECERTIFIED 
 22  EQUIPMENT WOULD HAVE A GENERAL IDEA REGARDING THE 
 23  CONDITIONS THAT WOULD BE PLACED ON THE PERMIT TO OPERATE.  
 24               ALSO, THE PROGRAM WILL ASSIST IN EXPEDITING 
 25  LOCAL PERMITTING PROGRAMS.  SOME AIR DISTRICTS HAVE OR ARE 
0034
 01  IN THE PROCESS OF DEVELOPING EXPEDITED PERMITTING 
 02  SYSTEMS.  THE EXPEDITED SYSTEMS ARE TAILORED FOR EACH 
 03  DISTRICT'S RULES AND REGULATIONS AND ALSO ASSIST TO 
 04  FULFILL THE AIR POLLUTION PERMIT STREAMLINING ACT.  THE 
 05  EQUIPMENT PRECERTIFICATION WILL PROVIDE STATEWIDE 
 06  CONSISTENCY IN THE CERTIFICATION PROCESS.  
 07               THE PROGRAM WILL ALSO ESTABLISH A CENTRAL 
 08  LOCATION FOR INFORMATION ACCESS.  FINAL EVALUATION REPORTS 
 09  IN COMPLIANCE WITH DETERMINATIONS WILL BE COMPILED AND 
 10  MAINTAINED IN ONE CENTRAL LOCATION.  INFORMATION WILL BE 
 11  MADE AVAILABLE ON THE A.R.B.'S INFORMATION SYSTEM WHICH IS 
 12  ACCESSIBLE THROUGH THE INTERNET OR BY COMPUTER MODEM.  
 13  HARD COPIES OF THE EVALUATION REPORTS WILL BE SUPPLIED TO 
 14  THE DISTRICTS AND MADE AVAILABLE TO THE PUBLIC UPON 
 15  REQUEST.  
 16               WHILE DEVELOPING THIS PROGRAM, IT IS OUR 
 17  DESIRE TO GAIN INPUT FROM THOSE WHO WOULD BE AFFECTED BY 
 18  THE PROGRAM.  WE WORKED WITH LOCAL AIR POLLUTION CONTROL 
 19  DISTRICTS INDIVIDUALLY AND THROUGH THE C.A.P.C.O.A. PERMIT 
 20  STREAMLINING SUBCOMMITTEE.  IN ADDITION, WE HAVE SURVEYED 
 21  THE DEPARTMENTS TO IDENTIFY THE TYPES OF EQUIPMENT THAT 
 22  WOULD BE MOST BENEFICIAL TO HAVE CERTIFIED.  
 23               WE HELP FOUR PUBLISH WORKSHOPS TO GAIN INPUT 
 24  FROM OUR INDUSTRY AND MET INDIVIDUALLY WITH INDUSTRY 
 25  GROUPS AND CONSULTANTS SUCH AS THE CALIFORNIA 
0035
 01  ENVIRONMENTAL BUSINESS COUNCIL.  
 02               WE ALSO WORKED WITH THE OTHER BOARDS AND 
 03  DEPARTMENTS FROM CAL/E.P.A. AND VARIOUS WORK GROUPS, THE 
 04  INTERAGENCY TASK FORCE AND THE OFFICE OF ENVIRONMENTAL 
 05  TECHNOLOGY.  
 06               THE PROPOSED REGULATION IS A SHORT PARAGRAPH 
 07  WHICH ADOPTS CRITERIA FOR THE PROGRAM BY REFERENCE.  YOU 
 08  SHOULD HAVE IN YOUR PACKAGE A COPY OF THE MODIFIED 
 09  REGULATION.  IT HAS BEEN MODIFIED TO INCLUDE THE LOCATIONS 
 10  OF WHERE THE CRITERIA CAN BE OBTAINED.  THIS INCLUDES THE 
 11  MAILING ADDRESS OF THE A.R.B. FOR A HARD COPY AS WELL AS 
 12  THE INTERNET ADDRESS WHERE THE CRITERIA CAN BE DOWNLOADED 
 13  BY COMPUTER.  THIS IS CONSIDERED A NONSUBSTANTIVE CHANGE 
 14  AND IS AVAILABLE ON THE BACK TABLE FOR ANY INTERESTED 
 15  PARTIES.  
 16               THIS CRITERIA OUTLINES THE PROGRAM ELEMENTS 
 17  WHICH INCLUDE THE PROCESS WHICH THE A.R.B. AND THE 
 18  APPLICANT WILL FOLLOW TO CERTIFY EQUIPMENT AND THE 
 19  REQUIREMENTS AS TO THE INFORMATION AS REQUIRED FOR A 
 20  COMPLETE APPLICATION PACKAGE AND VERIFICATION TESTING 
 21  REPORTS.  
 22               THE CRITERIA ALSO IDENTIFIES THE 
 23  ADMINISTRATIVE PROCEDURES, WHICH INCLUDES AN APPEALS 
 24  PROCESS FOR ANY APPLICANT WHO HAS PRECERTIFICATION DENIED 
 25  OR REVOKED.  
0036
 01               IN ADDITION, THE CRITERIA OUTLINES A FEE 
 02  STRUCTURE.  WE ARE REQUIRED TO CHARGE A FEE FOR THE 
 03  PROGRAM, AND WE HAVE ESTABLISHED THIS AS A FEE FOR SERVICE 
 04  PROGRAM.  APPLICANTS WILL BE GIVEN AN ESTIMATE OF THE 
 05  AMOUNT OF HOURS THAT ARE REQUIRED TO CERTIFY THEIR 
 06  EQUIPMENT.  THE ESTIMATED HOURS WILL BE MULTIPLIED BY AN 
 07  HOURLY RATE ESTABLISHED BY THE ADMINISTRATIVE SERVICES 
 08  DIVISION.  AND THIS WILL RESULT IN THE ESTIMATED COST FOR 
 09  A CERTIFICATION.  
 10               I SHOULD ALSO MENTION THAT THE CRITERIA ALSO 
 11  ALLOWS A.R.B. STAFF TO DEVELOP GUIDELINES FOR THE PROGRAM 
 12  TO ASSIST APPLICANTS IN UNDERSTANDING THE PROGRAM 
 13  REQUIREMENTS AND PROCESS.  THESE GUIDELINES ARE THE PLAIN 
 14  ENGLISH VERSION OF OUR REGULATION, AND CRITERIA AND WILL 
 15  BE PROVIDED TO ALL PRECERTIFICATION APPLICANTS AND 
 16  INTERESTED PARTIES.  
 17               AT THIS POINT, I'D LIKE TO SHARE THE BASIC 
 18  PROCESS ON HOW EQUIPMENT WILL BE PRECERTIFIED, AND FOR 
 19  TODAY'S PRESENTATION, I'VE BROKEN IT UP INTO FOUR AREAS:  
 20  PREAPPLICATION PROCEDURES, APPLICATION AND TESTING 
 21  REQUIREMENTS, EVALUATION OF TEST REPORTS AND ISSUANCE OF 
 22  DOCUMENTATION.  
 23               DURING THE PREAPPLICATION PROCEDURES, WE WILL 
 24  DETERMINE THE ELIGIBILITY OF THE EQUIPMENT OR PROCESS, 
 25  CONDUCT A PREAPPLICATION MEETING THE APPLICANT AND 
0037
 01  ESTIMATE THE APPLICANT'S COST OF PRECERTIFICATION.  WE 
 02  WILL ALSO IDENTIFY THE INFORMATION REQUIRED TO SUBMIT A 
 03  COMPLETE APPLICATION PACKAGE.  
 04               AS FOR THE APPLICATION AND TESTING 
 05  REQUIREMENTS, A WRITTEN AND SIGNED APPLICATION WILL BE 
 06  REQUIRED FROM EACH APPLICANT, ALONG WITH THE APPLICANT'S 
 07  PERFORMANCE CLAIM.  THE APPLICATION PACKAGE SHOULD ALSO 
 08  INCLUDE ANY EXISTING TEST REPORTS, WHICH SUPPORT THEIR 
 09  CLAIMS, PROTOCOLS FOR PROPOSED TESTING AND ONE-HALF OF THE 
 10  ESTIMATED FEE.  
 11               UPON RECEIVING THE APPLICATION PACKAGE, 
 12  A.R.B. STAFF WILL EVALUATE THE TESTING REPORTS PROVIDED BY 
 13  THE APPLICANT TO ENSURE THAT THE INFORMATION AND DATA 
 14  SUPPORT THEIR CLAIMS.  
 15               IF THE INFORMATION AND TEST DATA SUPPORT THE 
 16  APPLICANT'S CLAIMS, THE A.R.B. WILL ISSUE DOCUMENTATION 
 17  CONSISTING OF A FINAL EVALUATION REPORT AND AN EXECUTIVE 
 18  ORDER TO THE APPLICANT.  THE GUIDELINES PROVIDE A FLOW 
 19  CHART AND TIME LINE WHICH ILLUSTRATE HOW EQUIPMENT WILL BE 
 20  PRECERTIFIED.  
 21               WE ARE CURRENTLY OPERATING AND CERTIFYING 
 22  EQUIPMENT AS PART OF A PILOT PROGRAM.  THIS HAS ENABLED US 
 23  TO EVALUATE THE PROPOSED REGULATION AND CRITERIA, TO 
 24  ESTIMATE RESOURCES NEEDED AND TO IDENTIFY ANY OBSTACLES TO 
 25  THE PROGRAM'S SUCCESS.  PRECERTIFICATIONS WILL BE ISSUED 
0038
 01  ON PROVISIONAL BASIS UNTIL A REGULATION HAS BEEN ADOPTED.  
 02  WE ESTIMATE THE ISSUANCE OF 16 PRECERTIFICATIONS BY THE 
 03  END OF THIS JUNE.  
 04               THESE PRECERTIFICATIONS WERE ISSUED TO 
 05  DISTRICT IDENTIFIED PRIORITY EQUIPMENT CATEGORIES.  
 06  THROUGH THE DISTRICT SURVEY, DISTRICTS IDENTIFIED SMALL- 
 07  TO MEDIUM-SIZED BOILERS, DRY CLEANING EQUIPMENT AND SOIL 
 08  REMEDIATION EQUIPMENT AS THE MOST BENEFICIAL FOR PERMIT 
 09  STREAMLINING.
 10               IN ADDITION TO THESE EFFORTS, WE HAVE BEEN 
 11  WORKING CLOSELY WITH THE SOUTH COAST AIR QUALITY 
 12  MANAGEMENT DISTRICT TO PROVIDE RECIPROCITY TO 
 13  MANUFACTURERS OF EQUIPMENT THAT HAVE BEEN PRECERTIFIED. 
 14               IN CONCLUSION, I'D LIKE TO STATE THAT THE 
 15  DEVELOPMENT OF THE EQUIPMENT PRECERTIFICATION PROGRAM IS 
 16  MANDATED BY LAW THROUGH THE CALIFORNIA HEALTH AND SAFETY 
 17  CODE AND THAT OUR PROPOSED PROCESS HAS BEEN DEVELOPED IN 
 18  AN OPEN PUBLIC FORUM WITH THE PARTICIPATION FROM INDUSTRY, 
 19  LOCAL AIR DISTRICTS AND THE BOARDS AND DEPARTMENTS OF 
 20  CAL/E.P.A.  
 21               THE PROPOSED STATEWIDE PROGRAM WILL ASSIST IN 
 22  STREAMLINING AIR POLLUTION PERMITTING PROCESS, PROMOTING 
 23  THE ACCEPTANCE OF INNOVATIVE TECHNOLOGIES AND ENCOURAGE 
 24  UNIFORM PERMITTING CONDITIONS.  
 25               THROUGH OUR EXPERIENCE WITH THE PILOT 
0039
 01  PROGRAM, WE BELIEVE WE ARE PREPARED FOR FULL 
 02  IMPLEMENTATION OF THE EQUIPMENT PRELIMINARY.  AND IT IS 
 03  OUR RECOMMENDATION THAT THE BOARD ADOPT THE PROPOSED 
 04  REGULATION AND CRITERIA TODAY.  
 05               I'D LIKE TO THANK YOU FOR YOUR TIME AND 
 06  CONSIDERATION.  
 07               AND WE'D LIKE TO ANSWER ANY QUESTIONS THAT 
 08  YOU MAY HAVE AT THIS TIME. 
 09         MR. DUNLAP:  THANK YOU FOR THE OVERVIEW.  I 
 10  APPRECIATE THAT COMPREHENSIVE LOOK AT THAT INNOVATIVE NEW 
 11  PROGRAM.  
 12               ANY QUESTIONS OF STAFF?  
 13         MR. CALHOUN:  WHO IS IT THAT OPERATE IT, THE LOCAL 
 14  DISTRICTS OR THE STATES?
 15         MR. BRANSEN:  THE LOCAL DISTRICTS ISSUE THE PERMIT 
 16  TO OPERATE.
 17         MR. CALHOUN:  DOES THAT INCLUDE AN ON-SITE VISIT TO 
 18  THE PLANT OR WHEREVER THIS PROCESS IS TAKING PLACE?
 19         MR. BRANSEN:  BASICALLY, THE PERMITTING PROCEDURES 
 20  OF THE DISTRICTS WON'T CHANGE IN ANY WAY.  OUR DESIRE IS 
 21  THE PRELIMINARY ENGINEERING EVALUATION WILL BE USED TO 
 22  REDUCE THE TIME REQUIRED AT THE DISTRICT TO EVALUATE THE 
 23  EQUIPMENT AND SOME DISTRICTS HAVE IDENTIFIED THAT THEY 
 24  WOULD WAIVE THE SOURCE TEST REQUIREMENT FOR INSTALLATION, 
 25  BECAUSE THE CERTIFICATIONS ARE BASED ON SOURCE TEST 
0040
 01  INFORMATION.  
 02               SO IT WOULD SAVE COST TO THE APPLICANT AND 
 03  TIME AT THE DISTRICT.  BUT IT DOESN'T CHANGE DISTRICT 
 04  AUTHORITY FOR PERMITTING.  
 05               DOES THAT ANSWER YOUR QUESTION?
 06         MR. CALHOUN:  I GUESS. 
 07         MR. DUNLAP:  ANY OTHER QUESTIONS OF STAFF?  
 08               MR. LAGARIAS?
 09         MR. LAGARIAS:  PRECERTIFICATION, I THINK, IS A 
 10  GREAT IDEA, THAT THIS TYPE OF EQUIPMENT MAY BE APPLIED FOR 
 11  THIS PROCESS.  THE APPLICANT WILL ALSO BE REQUIRED TO HAVE 
 12  AN OPERATING PERMIT, BECAUSE AN OPERATING PERMIT SPECIFIES 
 13  THE CONDITIONS UNDER WHICH THIS EQUIPMENT WOULD OPERATE.  
 14  AND WITHOUT THAT, IT DOESN'T MEAN ANYTHING.
 15         MR. BRANSEN:  YES.  OKAY.  AGAIN, THE REQUIREMENTS 
 16  FOR SOMEBODY THAT PURCHASES PRECERTIFIED EQUIPMENT DON'T 
 17  CHANGE.  THEY HAVE TO APPLY AT THE LOCAL DISTRICT FOR AN 
 18  OPERATING PERMIT.  AND WHAT THE STATEWIDE PROGRAM WILL DO 
 19  WILL TEST THE EQUIPMENT, VERIFY THE PERFORMANCE CLAIMS, 
 20  AND THE FINAL EVALUATION REPORT WILL HAVE SOME PROPOSED 
 21  PERMIT CONDITIONS.  AND THE LOCAL DISTRICTS WOULD THEN 
 22  LOOK AT THE SITE SPECIFIC REQUIREMENTS AND ADD SOME 
 23  ADDITIONAL ONES AND MODIFY THE ONES THAT WERE THERE, BUT 
 24  THE DISTRICT WOULD ISSUE THE PERMIT.  
 25         MR. AMES:  ALSO A COMMENT IS THAT THIS PROGRAM IS 
0041
 01  FOCUSED ON COMMONLY USED EQUIPMENT AND SIMPLER TYPE OF 
 02  EQUIPMENT.  
 03               SO IT IS TRUE THERE WOULD BE SITE SPECIFIC 
 04  CONDITIONS FOR CERTAIN TYPES OF EQUIPMENT WE WILL BE 
 05  EVALUATING UNDER THIS PROGRAM, BUT WE DON'T ANTICIPATE 
 06  LOOKING AT MAJOR SOURCES THAT ARE VERY COMPLEX. 
 07         MR. DUNLAP:  MR. AMES, ARE THEY COUPLED, THOUGH?  
 08  IS IT COUPLED WITH THE PRECERTIFICATION OR NOT? 
 09         MR. AMES:  YES, THERE'S A DIRECT LINK. 
 10         MR. DUNLAP:  OKAY.  MS. EDGERTON?
 11         MS. EDGERTON:  MR. CHAIRMAN, MEMBERS OF THE BOARD, 
 12  THIS IS ONE OF THE PROGRAMS I'M MOST ENTHUSIASTIC ABOUT.  
 13  IT'S SUBTLE, BUT IT'S TREMENDOUSLY IMPORTANT, BECAUSE IN 
 14  ORDER TO HAVE NEW, CLEANER TECHNOLOGIES, THEY HAVE GOT TO 
 15  BE ABLE TO PERSUADE THE POTENTIAL BUYER THAT IT REALLY 
 16  DOES WHAT IT DOES, WHAT THEY SAY IT DOES, AND ALSO THAT 
 17  IT'S VERY LIKELY, IF NOT ALMOST ASSURED, TO QUALIFY FOR 
 18  THE ENVIRONMENTAL REGULATORY PURPOSES.  
 19               SO I THINK THIS IS TREMENDOUS.  IT'S MY 
 20  UNDERSTANDING THAT FOUR ARE ALREADY CERTIFIED AND 16 ARE 
 21  COMING ALONG BY THE END OF THE MONTH.  
 22         MR. AMES:  THAT IS CORRECT.
 23         MS. EDGERTON:  I JUST CONGRATULATE YOU.  I'M 
 24  EXCITED ABOUT THIS.  MAYBE ONLY A LAWYER CAN LOVE A 
 25  REGULATORY STREAMLINING, BUT I JUST THINK THIS IS TERRIFIC 
0042
 01  IN TERMS OF TAKING US IN THE DIRECTION OF BEING ABLE TO DO 
 02  GOOD AND DO WELL AT THE SAME TIME.  
 03               SO THANK YOU VERY MUCH. 
 04         MR. DUNLAP:  MR. CALHOUN?
 05         MR. CALHOUN:  I AGREE WITH WHAT YOU SAID, 
 06  MS. EDGERTON.  
 07               BUT I THINK MR. LAGARIAS' QUESTION IS POINTED 
 08  IN THE SAME DIRECTION AS MY QUESTION.  AND THAT'S WHAT 
 09  COMES OUT THE STACK OF THE FUNCTION OF THE PROCESS, AND 
 10  YOU CAN GET PRECERTIFIED, BUT THERE ARE CONDITIONS, AND I 
 11  GUESS THAT IS WHAT WE WERE KIND OF FOCUSING ON.  
 12         MR. AMES:  OKAY.  THERE'S TWO TYPES OF 
 13  CERTIFICATIONS.  ONE IS PERFORMANCE AND ONE IS 
 14  REGULATORY.  
 15               FOR EXAMPLE, OXYGEN BOILERS, SOME OF THE 
 16  APPLICANTS COME TO US AND WANT TO CERTIFY THE USING OF 
 17  NATURAL GAS AT THE RATED CAPACITY OF THAT BOILER, IT WILL 
 18  EMIT SO MANY GRAMS OF NOX PER UNIT OF ENERGY.  AND SO 
 19  THAT'S ONE TYPE OF CERTIFICATION.  
 20               AND THEN THERE'S A REGULATORY CERTIFICATION 
 21  THAT RELATES DIRECTLY TO INDIVIDUAL DISTRICT'S 
 22  REGULATIONS.  AND THERE WE WORK WITH THE LOCAL DISTRICTS 
 23  TO ENSURE THAT ALL OF THEIR CONDITIONS UNDER WHICH THAT 
 24  UNIT WOULD BE INSTALLED WOULD BE SATISFIED.  
 25               AND SO IT'S A PARTNERSHIP BETWEEN THE STATE 
0043
 01  AND THE LOCALS IN ORDER TO STREAMLINE THAT LOCAL PROCESS. 
 02         MR. DUNLAP:  OKAY.  
 03         MR. BOYD:  MR. CHAIRMAN, I WOULD JUST ADD TO 
 04  MR. AMES, TO PERSUADE ANY CONCERN ANY BOARD MEMBER MIGHT 
 05  HAVE, NOTHING IN THIS PROCESS IMPEDES THE REQUIREMENTS 
 06  THAT THE EMISSIONS FROM THE STACK OR EMISSIONS FROM THE 
 07  FACILITY IN QUESTION MEET EXISTING REQUIREMENTS.  
 08               WHAT THIS DOES, AS THE STAFF INDICATED, IS 
 09  PROVIDE A SHORTCUT AND A SPEEDING UP OF THE ENGINEERING 
 10  PROCESSES THAT HISTORICALLY TAKES PLACE WHEN YOU DO A 
 11  SITE-BY-SITE REVIEW, AND IT IS PART OF STREAMLINING.  
 12               AND BOARD MEMBER EDGERTON STOLE MY CLOSING 
 13  LINES.  WITH REGARDS TO THIS, I THINKS IT IS VERY 
 14  SIGNIFICANT, AND IT IS A BIG FIRST.  AND I THINK IT WILL 
 15  GO A LONG WAY TO SETTING THE STAGE FOR DOING OTHER THINGS 
 16  LIKE THIS THAT WILL, INDEED, SPEED UP THE PROCESS FOR 
 17  CALIFORNIA BUSINESSES WHO WANT TO LOCATE, MODIFY AND BUILD 
 18  NEW FACILITIES HERE. 
 19         MR. DUNLAP:  THANK YOU, MR. BOYD.  
 20               WE HAVE ONE WITNESS.  MR. LACY.  WE'D LIKE 
 21  YOU TO COME FORWARD.  
 22               GARY LACY FROM FULTON BOILERWORKS IS OUR SOLE 
 23  WITNESS.  
 24               AND GOOD MORNING.
 25         MR. LACY:  GOOD MORNING.  GOOD MORNING, BOARD 
0044
 01  MEMBERS.  
 02               MY NAME IS GARY LACY WITH FULTON BOILERWORKS 
 03  OUT OF NEW YORK, UPSTATE NEW YORK.  I'M A RESIDENT OF 
 04  CALIFORNIA FOR 15 YEARS.  I LIVE IN ALTA LOMA, 
 05  CALIFORNIA.  
 06               I HAVE AN ASTHMATIC SON, SO I AM VERY 
 07  INTERESTED IN THE AIR QUALITY ISSUES THAT PRESENT TO US IN 
 08  CALIFORNIA, BUT NOT ONLY IN CALIFORNIA, ACROSS THE 
 09  COUNTRY.  
 10               AS A MANUFACTURER OF BOILERS, WE HAVE A 
 11  MANUFACTURING PLANT IN NEW YORK, ENGLAND, ALSO IN CHINA, 
 12  AND WE'RE ASSEMBLING BOILERS HERE IN CALIFORNIA PRESENTLY 
 13  BECAUSE OUR MARKET HAS EXPANDED.  
 14               WE LOOK AT THIS PRECERTIFICATION PROGRAM AS A 
 15  BASIS PROBABLY FOR A NATIONAL STANDARD.  ONE OF THE THINGS 
 16  THAT WE HAVE NOTICED IN THE BOILER INDUSTRY IS THERE'S 
 17  ALWAYS BEEN A CONCENTRATION FROM AN AIR QUALITY DISTRICT 
 18  STANDPOINT ON LARGE BOILERS.  AND THE REASON THEY 
 19  CONCENTRATED ON THAT WAS FOR GOOD REASON, BECAUSE THOSE 
 20  BOILERS ARE PRIMARILY REGISTERED WITH THE STATE THROUGH 
 21  LOCAL AREAS, SO THEY KNOW THEY EXIST.  
 22               BUT THE PRECERTIFICATION PROGRAM, 
 23  SPECIFICALLY FROM OUR STANDPOINT, ADDRESSES BOILERS THAT 
 24  WERE NOT LOOKED AT BEFORE.  BOILERS FROM THE SIZE RANGE OF 
 25  250 B.T.U.'S TO TWO MILLION B.T.U.'S.  
0045
 01               THE REASON THEY WEREN'T LOOKED AT IS THEY 
 02  REALLY DIDN'T KNOW THEY EXISTED, BECAUSE THERE WAS NO 
 03  EQUIPMENT TO REGISTER THOSE PARTICULAR BOILERS.  JUST IN 
 04  ORANGE COUNTY ALONE, THERE ARE APPROXIMATELY 3,000 OF 
 05  THOSE BOILERS JUST IN THE HOTEL INDUSTRY.  
 06               TO GIVE YOU AN EXAMPLE, A BOILER THAT HAS AN 
 07  INPUT OF 840,000 B.T.U. INPUT OPERATING 40 HOURS A WEEK 
 08  WOULD PRODUCE ABOUT 283 POUNDS OF NOXIOUS OXIDES A YEAR.  
 09               WITH THE NEW TECHNOLOGY LIKE WE HAVE 
 10  DEVELOPED THAT'S UNDER THIS PRECERTIFICATION PROGRAM, THAT 
 11  SAME BOILER, THE EMISSIONS WOULD BE REDUCED DOWN TO 
 12  34 POUNDS PER YEAR.  
 13               WHEN WE DEVELOPED OUR TECHNOLOGY, WE TALK 
 14  ABOUT LOW EMISSIONS, NOT LOW NOX.  WE TALK ABOUT LOW 
 15  EMISSIONS.  WE ATTACK NOT ONLY NOXIOUS OXIDES, BUT ALSO 
 16  C.O. EMISSIONS.  
 17               IN THAT SAME SCENARIO, THAT AVERAGE BOILER 
 18  IN THAT CATEGORY WOULD HAVE C.O. EMISSIONS OF ABOUT 
 19  315 POUNDS PER YEAR, AND WITH THIS NEW TECHNOLOGY, WE CAN 
 20  REDUCE THOSE EMISSIONS TO 134 POUNDS PER YEAR.  
 21               IT'S ALWAYS SURPRISED ME, AND I HAVE WATCHED 
 22  THIS AND BEEN INVOLVED WITH THE AIR QUALITY BOARD, 
 23  ESPECIALLY IN SOUTH COAST, THAT THIS PARTICULAR TYPE OF 
 24  BOILER, THE SMALLER BOILERS, WHICH THE PRECERTIFICATION 
 25  WILL AFFECT, HAS REALLY NEVER BEEN LOOKED AT.  
0046
 01               AND I'LL GIVE YOU AN EXAMPLE.  FULTON HAS 
 02  PRODUCED SINCE 1949 1,000,000, A SUBSTANTIAL NUMBER.  THE 
 03  AVERAGE SIZE OF THOSE BOILERS THAT THEY PRODUCED IS 
 04  30 HORSEPOWER, WHICH IS APPROXIMATELY 1.2 MILLION 
 05  B.T.U.'S, WHICH MEANS IT'S A BOILER THAT NORMALLY ISN'T 
 06  REGISTERED WITH ANYWHERE IN THE COUNTRY.  
 07               FROM OUR PERSPECTIVE, THE BULK OF THE AIR 
 08  POLLUTION HAS COME FROM BOILERS THAT ARE COMING FROM THE 
 09  SMALLER APPLICATIONS, HYDRONIC HEATING BOILERS LIKE IN 
 10  THIS BUILDING, OR A HOTEL, IN A DRY CLEANING PLANT.  
 11               AND IN LOS ANGELES COUNTY, OVER 
 12  159.5 HORSEPOWER BOILERS, WHICH ARE 309,000 B.T.U.'S, ARE 
 13  REPLACED EVERY YEAR.  THE AVERAGE LIFE EXPECTANCY OF THESE 
 14  BOILERS ARE BETWEEN FOUR AND SEVEN YEARS.  
 15               WITH A PRECERTIFICATION PROCESS, WHICH WE ARE 
 16  IN FAVOR OF, YOU WOULD IMMEDIATELY HAVE A BOILER THAT'S 
 17  DESIGN CERTIFIED.  
 18               AND TO ANSWER THIS GENTLEMAN'S QUESTION, 
 19  THESE BOILERS WHEN THEY ARE PREDESIGNED CERTIFIED, THEY 
 20  CAN ONLY BE OPERATED UNDER ONE CONDITION, AND THAT IS A 
 21  LOW EMISSION CONDITION.  THEY CAN'T OPERATE ANY OTHER 
 22  WAY.  
 23               IT'S A VERY SIMPLE TYPE BOILER, AND THERE'S 
 24  BASICALLY NOTHING THAT YOU CAN DO TO CHANGE THE EFFECT OF 
 25  THAT PARTICULAR BOILER.  BUT IN THIS INDUSTRY ALONE, IF 
0047
 01  THERE WAS A PRECERTIFICATION PROGRAM AND IF THE LOCAL 
 02  DISTRICT HAD A BASELINE, IMMEDIATELY WHEN THAT BOILER WAS 
 03  TURNED OVER OR WHEN IT WAS REPLACED, IT WOULD HAVE A NEW 
 04  LOW EMISSION DESIGN.  
 05               SO WE ARE IN FAVOR OF THIS.  WE HAVE INVESTED 
 06  OVER TWO MILLION DOLLARS IN DEVELOPING LOW EMISSION 
 07  TECHNOLOGY, NOT ONLY JUST BECAUSE OF CALIFORNIA.  WE 
 08  BELIEVE THAT IT'S GOING TO BE A NATIONAL ISSUE.  AND WE 
 09  BELIEVE THAT THIS PRECERTIFICATION PROGRAM IS SOMETHING 
 10  THAT WOULD MAYBE BE THE BASIS FOR THAT.  
 11               AND I THANK YOU FOR THE TIME.  
 12               IF YOU HAVE ANY QUESTIONS, I'LL BE GLAD TO 
 13  ANSWER THEM FOR YOU.
 14         MR. DUNLAP:  OKAY.  MS. EDGERTON. 
 15         MS. EDGERTON:  I APOLOGIZE, BUT I DIDN'T CATCH 
 16  WHERE YOUR PLANT IS IN CALIFORNIA. 
 17         MR. LACY:  WELL, RIGHT NOW WE'RE ASSEMBLING IN 
 18  SANTA ANA JOINTLY WITH ANOTHER BOILER MANUFACTURER.  BUT 
 19  WE HAVE MADE A COMMITMENT THAT WE WILL HAVE A FACILITY 
 20  HERE THAT WE WILL BE DOING ALL OF OUR PRODUCTION FROM 
 21  DENVER WEST.
 22         MS. EDGERTON:  WHERE DO YOU THINK THAT WILL BE?  IS 
 23  THAT IN SANTA ANA ALSO?
 24         MR. LACY:  PROBABLY.  IT'S GOING TO BE SOMEWHERE IN 
 25  CALIFORNIA.  THEY HAVE MADE THAT COMMITMENT.
0048
 01         MS. EDGERTON:  IF THERE'S ANYTHING WE CAN DO TO 
 02  HELP YOU, LET US KNOW.  WE APPRECIATE YOUR WORK.  
 03               THANK YOU.
 04         MR. LACY:  THANK YOU. 
 05         MR. DUNLAP:  MR. LACY, IT'S NICE TO RECOGNIZE 
 06  SOMEONE FROM RANCHO CUCAMUNGA.
 07         MR. LACY:  THANK YOU. 
 08         MR. DUNLAP:  STAFF, DO WE HAVE ANY COMMENTS WE NEED 
 09  TO SUMMARIZE BEFORE THE BOARD CONSIDERS THE RESOLUTION 
 10  HERE?  
 11         MR. BOYD:  YES, WE DO. 
 12         MR. DUNLAP:  MR. AMES?  
 13         MR. AMES:  WE HAVE FOUR COMMENT LETTERS WE 
 14  RECEIVED.  
 15               THE FIRST LETTER IS A CALIFORNIA PRESIDENT OF 
 16  THE CALIFORNIA AIR POLLUTION CONTROL OFFICERS 
 17  ASSOCIATION.  AND IN THAT LETTER, MR. HESS STATES THAT 
 18  C.A.P.C.O.A. SUPPORTS THE ADOPTION OF THE PROPOSED 
 19  PRECERTIFICATION REGULATION AND CRITERIA.  
 20               HE ALSO COMMENTS THAT THEIR EFFORT WILL 
 21  ASSIST APPLICANTS WITHOUT ADVERSELY AFFECTING AIR QUALITY, 
 22  AND THE AIR DISTRICTS LOOK FORWARD TO WORKING WITH THE 
 23  A.R.B. IN PARTNERSHIP ON THIS ISSUE.  
 24               THE SECOND LETTER IS A JUNE 11TH LETTER FROM 
 25  MR. BRIAN RUNKEL, EXECUTIVE DIRECTOR OF THE CALIFORNIA 
0049
 01  ENVIRONMENTAL BUSINESS COUNCIL.  THE FIRST POINT 
 02  MR. RUNKEL MAKES IS THAT HE EXPRESSES STRONG SUPPORT FOR 
 03  ADOPTION OF THE REGULATIONS AND CRITERIA.  SECONDLY, THAT 
 04  THIS EFFORT CAN HELP TECHNOLOGY, DEVELOPERS AND 
 05  MANUFACTURERS BREAK INTO NEW MARKETS, PARTICULARLY EXPORT 
 06  MARKETS.  THIRDLY, MR. RUNKEL EXPRESSES APPRECIATION FOR 
 07  DEVELOPING A USER-FRIENDLY PROGRAM AND FOR ADDRESSING THE 
 08  CONCERNS OF SMALL BUSINESSES.  FINALLY, MR. RUNKEL 
 09  ACKNOWLEDGES THE MANY STATEMENTS MADE BY CHAIRMAN DUNLAP 
 10  AND PERSONALLY ON BEHALF OF ENVIRONMENTAL TECHNOLOGY AND 
 11  THE IMPORTANCE OF MAINTAINING CALIFORNIA'S LEADERSHIP IN 
 12  THIS AREA, AND THIS LEADERSHIP HAS MADE A DIFFERENCE IN 
 13  MOVING CALIFORNIA FORWARD TO A CLOSER HEALTHIER 
 14  PARTNERSHIP WITH CALIFORNIA'S ENVIRONMENTAL INDUSTRY AND 
 15  URGES SPEEDY ADOPTION.  
 16               THE THIRD LETTER IS A LETTER FROM 
 17  MR. WALTER BROWN, GOVERNMENT AFFAIRS DIRECTOR OF THE 
 18  ENGINE MANUFACTURERS ASSOCIATION.  
 19               THE FIRST COMMENT IS THAT E.M.A. SUPPORTS THE 
 20  GOALS OF THE STAFF PROPOSAL TO STREAMLINE PERMITS AND TO 
 21  PROMOTE UNIFORMITY BETWEEN DISTRICTS.  
 22               HOWEVER, E.M.A. HAS SEVERAL CONCERNS AND 
 23  SUGGESTIONS AS A PROPOSED REGULATION APPLIES TO STATIONARY 
 24  COMPRESSION IGNITION ENGINES.  THE E.M.A. LETTER RAISES 
 25  FOUR ISSUES.  
0050
 01               ON JUNE 12TH, THE STAFF CONTACTED MR. BROWN 
 02  TO DISCUSS HIS CONCERNS AND TO CLARIFY SOME 
 03  MISUNDERSTANDINGS THAT E.M.A. HAD CONCERNING THE SCOPE OF 
 04  THE STAFF PROPOSAL.  FIRST, E.M.A. RAISES THAT THE TESTING 
 05  REQUIREMENTS ARE LIMITED TO INDEPENDENT TESTING, AND 
 06  E.M.A. SUGGESTS ALLOWING SELF-TESTING BY MANUFACTURERS OF 
 07  ENGINES.  
 08               IN RESPONSE, WE POINTED OUT TO MR. BROWN ON 
 09  THE PHONE THAT THE EXECUTIVE OFFICER MAY APPROVE 
 10  ALTERNATIVE TESTING LIKE THAT REQUESTED BY E.M.A.  THIS 
 11  OPTION WAS ADDED TO OUR PROPOSED REGULATION IN RESPONSE TO 
 12  COMMENTS BY CATERPILLAR, INCORPORATED, AT A PUBLIC 
 13  WORKSHOP LAST JULY.  MR. BROWN WAS PLEASED TO HEAR THAT 
 14  THIS IS THE CASE.  
 15               SECONDLY, E.M.A. WANTS ABSOLUTE ASSURANCE 
 16  THAT ALL AIR DISTRICTS WILL ACCEPT STATEWIDE 
 17  PRECERTIFICATIONS.  IN RESPONSE, THE STATE BILL THAT WAS 
 18  THE BASIS FOR THIS PERMIT DID NOT CHANGE THE AUTHORITY OF 
 19  THE AIR RESOURCES BOARD OR THE AIR DISTRICTS WITH RESPECT 
 20  TO PERMITTING.  HOWEVER, WE HAVE HAD A VERY GOOD 
 21  RELATIONSHIP WITH THE AIR DISTRICTS IN DEVELOPING THIS 
 22  PROGRAM AND HAVE EVERY REASON TO BELIEVE THAT THIS WILL 
 23  CONTINUE TO BE THE CASE, AND I THINK THAT C.A.P.C.O.A.'S 
 24  LETTER IS A GOOD DEMONSTRATION OF THAT.  
 25               MR. BROWN WAS SATISFIED AND PLEASED TO HEAR 
0051
 01  THAT THE AIR DISTRICTS ARE WORKING WELL WITH US.  
 02               THIRDLY, E.M.A. WAS CONCERNED WITH THE 
 03  PERCEPTION THAT ONLY A.R.B. TEST METHODS WOULD BE ALLOWED 
 04  FOR TESTING ENGINES, AND REQUESTS THAT AN I.S.O. METHOD 
 05  8178 BE ALLOWED FOR TESTING ENGINES.  
 06               IN RESPONSE, WE EXPLAINED THAT THE STAFF 
 07  PROPOSAL DOES ALLOW FOR FLEXIBILITY IN TESTING.  AND 
 08  E.M.A. HAS BEEN IN RECENT CONTACT WITH THE MONITORING AND 
 09  LABORATORY DIVISION STAFF AT THE A.R.B. ON THIS ISSUE AND 
 10  PLAN TO MEET SOON WITH THEM TO FOLLOW UP ON IT.  
 11               THE FOURTH AND FINAL ISSUE E.M.A. RAISES IS A 
 12  CONCERN BASED ON THE PERCEPTION THAT PRECERTIFICATION 
 13  MIGHT SOMEHOW MANDATE HARDWARE REQUIREMENTS RATHER THAN 
 14  PERFORMANCE STANDARDS.  AND IN RESPONSE, WE EXPLAINED TO 
 15  MR. BROWN THAT THE PRECERTIFICATION PROPOSAL DOES NOT 
 16  SPECIFY THE FORM OF ANY STANDARDS, THAT EACH APPLICANT 
 17  VOLUNTARILY COMES TO THE A.R.B. FOR PRECERTIFICATION 
 18  PERFORMANCE OR STANDARDS, WHICH ARE LIKELY TO REFLECT 
 19  LOCAL DISTRICT REGULATIONS.  
 20               AND WE OFFERED TO SIT DOWN WITH E.M.A. TO 
 21  DISCUSS ANY OPTIONS OR CONCERNS THEY MIGHT HAVE, AND HE 
 22  WAS SATISFIED WITH THAT.  
 23               THE FOURTH AND FINAL LETTER IS A JUNE 13TH 
 24  LETTER FROM DR. ANN HEYWOOD, DEPUTY SECRETARY FOR 
 25  ENVIRONMENTAL TECHNOLOGY AT CAL/E.P.A.  MS. HEYWOOD ASKS 
0052
 01  THAT WE READ HER LETTER INTO THE RECORD.  SO PER HER 
 02  REQUEST, I'LL GO AHEAD AND DO THAT.  
 03                     "I WOULD LIKE TO TAKE THIS 
 04               OPPORTUNITY, CHAIRMAN DUNLAP AND BOARD        
 05               MEMBERS, TO EXPRESS SUPPORT FOR YOUR          
 06               FAVORABLE CONSIDERATION OF THE PROPOSED       
 07               REGULATION AND CERTIFICATION FOR THE 
 08               CRITERIA FOR THE PRECERTIFICATION OF 
 09               SIMPLE, COMMONLY USED AIR POLLUTION 
 10               EQUIPMENT AND PROCESSES.  SINCE THE EARLY     
 11               1970'S, CALIFORNIA HAS LED NOT ONLY THE       
 12               NATION BUT ALSO MUCH OF THE WORLD IN          
 13               ENVIRONMENTAL PROTECTION.  ALONG WITH 
 14               THESE HIGH STANDARDS, A SIGNIFICANT           
 15               ENVIRONMENTAL TECHNOLOGY STANDARD HAS GROWN;  
 16               TODAY, THIS 18 TO 20 BILLION DOLLAR INDUSTRY  
 17               EMPLOYS NEARLY 180,000 CALIFORNIANS.          
 18               COMPANIES PROVIDING AIR POLLUTION EQUIPMENT   
 19               AND PROCESSES REPRESENT AN IMPORTANT PART 
 20               OF THIS INDUSTRY, AND THE MEANS OF            
 21               ACHIEVING OUR ENVIRONMENTAL GOALS.  THE       
 22               PROPOSED REGULATION, WHICH YOU WILL           
 23               CONSIDER AT THE JUNE 14TH HEARING, WILL       
 24               PROVIDE ENVIRONMENTAL TECHNOLOGY COMPANIES 
 25               A NEW MEANS OF GAINING ACCEPTANCE IN THE       
0053
 01               MARKETPLACE AND THROUGHOUT THE PERMITTING      
 02               PROCESS.  PRECERTIFICATION AFFORDS             
 03               OPPORTUNITIES TO ENCOURAGE NEW TECHNOLOGIES,   
 04               STREAMLINE THE PERMITTING PROCESS, AND         
 05               ESTABLISH UNIFORM PERMIT CONDITIONS            
 06               STATEWIDE.  
 07                     "I ALSO COMMEND THE AIR RESOURCES 
 08               BOARD FOR IMPLEMENTING A PILOT                
 09               PRECERTIFICATION PROGRAM AND DEVELOPING       
 10               THE PROPOSED REGULATION AND PROCESS 
 11               QUICKLY AND EFFECTIVELY.  WORKING TOGETHER    
 12               WITH REPRESENTATIVES OF INDUSTRY, THE LOCAL   
 13               AIR DISTRICTS, VERIFICATION TESTING 
 14               ENTITIES AND OTHER INTERESTED PARTIES, 
 15               YOUR STAFF HAS MADE A NOTABLE EFFORT 
 16               SEEKING INPUT.  THE STAFF REPORT REFLECTS     
 17               THOUGHTFUL CONSIDERATION OF THE NEEDS OF      
 18               PROGRAM PARTICIPANTS.  THE PROPOSED RULE 
 19               AND PRECERTIFICATION PROGRAM WILL SERVES AS 
 20               A MODEL FOR OTHER CERTIFICATION PROGRAMS IN   
 21               CALIFORNIA.  
 22                     "ALTHOUGH I AM UNABLE TO ATTEND THE     
 23               PUBLIC HEARING, I WANT TO THANK YOU FOR 
 24               THE OPPORTUNITY TO EXPRESS SUPPORT FOR THE    
 25               PROPOSED REGULATION.  MY SINCERE THANKS 
0054
 01               ALSO FOR THE CONTINUED LEADERSHIP YOU, THE    
 02               BOARD MEMBERS, AND YOUR STAFF HAVE            
 03               DEMONSTRATED IN PROMOTING ENVIRONMENTAL       
 04               TECHNOLOGIES AS PART OF OUR ENVIRONMENTAL     
 05               PROGRAMS.  YOUR WORK IS APPRECIATED BY THE    
 06               PEOPLE OF CALIFORNIA.  
 07                     "SINCERELY, ANN HEYWOOD, DEPUTY         
 08               SECRETARY FOR ENVIRONMENTAL TECHNOLOGY."
 09               THAT'S THE FOURTH AND FINAL LETTER.
 10         MR. DUNLAP:  THANK YOU, MR. AMES.  I APPRECIATE 
 11  THOSE WORDS FROM DEPUTY SECRETARY HEYWOOD, BECAUSE IT 
 12  SHOWS CLEARLY, AS WE HAVE COME TO EXPECT AND APPRECIATE, 
 13  THAT WE HAVE CAL/E.P.A. BEHIND OUR INNOVATED WORK, THAT 
 14  THEY HAVE TAKEN A DEEP INTEREST IN THIS PROGRAM'S 
 15  IMPLEMENTATION.  AND WE ARE POSITIONED WELL TO BE ABLE TO 
 16  GO OUT AND SET SOME STANDARDS THAT OTHERS WILL LIKELY 
 17  FOLLOW.  
 18               SO WITH THAT, ANY OF MY COLLEAGUES ON THE 
 19  BOARD HAVE ANY QUESTIONS OR COMMENTS?  
 20               MR. BOYD INDICATED ARE HERE THAT WE PUSHED 
 21  HIM TO HAVE HIS WRAP-UP EARLIER THAN HE NORMALLY WOULD 
 22  HAVE, BUT I THINK THERE'S CONSENSUS WE HAVE GOT A WINNER 
 23  HERE.  
 24               MS. EDGERTON?
 25         MS. EDGERTON:  I THINK I SHOULD TAKE THIS 
0055
 01  OPPORTUNITY TO THANK THE CHAIRMAN FOR HIS WORK ON 
 02  ENVIRONMENTAL TECHNOLOGY IN A FORMER LIGHT WHEN YOU WERE 
 03  OVER AT THE TOXICS DEPARTMENT, AND NO ONE HERE HAS POINTED 
 04  OUT THAT THIS IS IN PART A RESULT OF YOUR EXCELLENT WORK 
 05  AS WELL.  
 06               SO I THANK YOU PERSONALLY. 
 07         MR. DUNLAP:  YOU'RE WELCOME.  
 08               WELL, THANK YOU.  
 09               MR. BOYD?
 10         MR. BOYD:  I ALWAYS DESIRE GETTING A LAST WORD IN, 
 11  MR. CHAIRMAN, IF YOU WOULD GIVE ME ONE LAST OPPORTUNITY.   
 12               I WOULD LIKE TO POINT OUT, AND I WISH I DID 
 13  WHEN MR. LACY WAS AT THE PLATFORM, EARLIER THIS WEEK, 
 14  E.L.A. ASSERTED FOUR PRECERTIFICATION DOCUMENTS FOR FULTON 
 15  BOILERWORKS, AND I WOULD JUST LIKE THE BOARD AND THE 
 16  AUDIENCE -- MR. LACY WAS PROBABLY AWARE OF THAT FACT 
 17  ALREADY -- TO KNOW THAT THIS WAS KIND OF A FIRST, AND THEY 
 18  ARE AMONG THE FIRST.  
 19               AND WE FEEL GOOD ABOUT THE PROGRAM AND GOOD 
 20  ABOUT THE EFFORT THEY HAVE MADE.  
 21               SO I COMMEND THAT AND COMMEND THE STAFF. 
 22         MR. DUNLAP:  OKAY.  THANK YOU.  THAT'S ALL THE 
 23  TESTIMONY.  
 24               WRITTEN SUBMISSIONS AND STAFF COMMENTS FOR 
 25  THIS ITEM HAVE BEEN ENTERED INTO THE RECORD AND THE BOARD 
0056
 01  HAS NOT GRANTED AN EXTENSION OF THE COMMENT PERIOD.  I'M 
 02  OFFICIALLY CLOSING THE RECORD ON THIS PORTION OF AGENDA 
 03  ITEM NUMBER 9-5-1.  WRITTEN OR ORAL COMMENTS RECEIVED 
 04  AFTER THE COMMENT PERIOD HAS BEEN CLOSED WILL NOT BE 
 05  ACCEPTED AS PART OF THE OFFICIAL RECORD ON THIS AGENDA 
 06  ITEM.  
 07               ARE THERE ANY EX PARTE COMMUNICATIONS THE 
 08  BOARD MEMBERS NEED TO MENTION AT THIS POINT? 
 09               OKAY.  WE HAVE BEFORE US RESOLUTION 96-35.  
 10  WE HAD IT FOR A WHILE.  THE CHAIR WOULD ENTERTAIN THE 
 11  MOTION TO ADOPT THIS RESOLUTION.  
 12         MR. BOSTON:  I MOVE RESOLUTION NUMBER 96-35'S 
 13  ADOPTION.
 14         MR. DUNLAP:  THANK YOU.  
 15               IS THERE A SECOND? 
 16         MR. HILLIGOSS:  SECOND. 
 17         MR. DUNLAP:  THANK YOU.  
 18               ANY DISCUSSION?  
 19               I THINK WE CAN GO FORWARD ON A VOICE VOTE.  
 20               ALL THOSE IN FAVORS SAY AYE.  
 21               (WHEREUPON EACH AND EVERY BOARD MEMBER        
 22         RESPONDED "AYE")
 23         MR. DUNLAP:  ANY OPPOSED?  
 24               NO OPPOSED. 
 25               THANK YOU.  
0057
 01               ALL RIGHT.  WE WILL ASK STAFF TO CHANGE 
 02  POSITIONS AND GIVE OUR COURT REPORTER A MOMENT. 
 03               (PAUSE IN THE PROCEEDINGS)
 04         MR. DUNLAP:  THE SECOND AGENDA ITEM IS 96-5-2.      
 05               AGAIN, I ENCOURAGE THOSE IN THE AUDIENCE WHO 
 06  HAVE WRITTEN TESTIMONY TO PLEASE SEE THE BOARD SECRETARY 
 07  TO PROVIDE THE 20 COPIES WE HAVE ASKED FOR.  
 08               96-5-2 IS A PUBLIC MEETING TO CONSIDER THE 
 09  ADOPTION OF A NONREGULATORY AMENDMENT TO REMOVE ACETONE 
 10  FROM CATEGORY III OF THE AB 1807 TOXIC AIR CONTAMINANT 
 11  IDENTIFICATION LIST.  
 12               I UNDERSTAND THAT THIS IS THE FIRST OF TWO 
 13  ACTIONS THE BOARD WILL BE CONSIDERING REGARDING ACETONE, 
 14  ONE THIS MONTH, THE OTHER NEXT MONTH.  TODAY'S ACTION 
 15  WOULD REMOVE ACETONE FROM THE AB 1807B TOXIC AIR 
 16  CONTAMINANT IDENTIFICATION LISTING.  
 17               AT THIS POINT, I'D LIKE TO ASK MR. BOYD TO 
 18  INTRODUCE THE ITEM.  
 19               JIM? 
 20         MR. BOYD:  THANK YOU, MR. CHAIRMAN.  
 21               ON SEPTEMBER 21ST, 1995, THE CHEMICAL 
 22  MANUFACTURERS ASSOCIATION SENT A PETITION TO THE AIR 
 23  RESOURCES BOARD REQUESTING REMOVING OF ACETONE FROM BOTH 
 24  THE TOXIC AIR CONTAMINANT PROGRAM OF THE AIR RESOURCES 
 25  BOARD, SOMETIMES REFERRED TO AS THE AB 1807 PROGRAM, FROM 
0058
 01  ITS IDENTIFICATION LIST OF TOXIC AIR CONTAMINANTS AND ALSO 
 02  FROM THE TOXIC HOT SPOTS PROGRAM LIST, SOMETIMES REFERRED 
 03  TO AS THE AB 2588 PROGRAM.  
 04               TODAY WE WILL PRESENT TO THE BOARD THE BASIS 
 05  FOR OUR RECOMMENDATION TO REMOVE ACETONE FROM THE 
 06  NONREGULATORY TOXIC AIR CONTAMINANT LIST.  AND NEXT MONTH, 
 07  AS INDICATED, YOU WILL HEAR RECOMMENDATION FOR ACETONES 
 08  REMOVAL FROM THE AIR TOXIC HOT SPOTS PROGRAM LIST.  
 09               THESE ACTIONS WILL FACILITATE INDUSTRY'S USE 
 10  OF ACETONE AS A SUBSTITUTE FOR BOTH TOXIC AND OZONE 
 11  DEPLETING SUBSTANCES AND ALSO SUPPORT THE STATE'S EFFORTS 
 12  TO CONTROL EMISSION OF VOLATILE COMPOUNDS.  
 13               WITH THAT BRIEF INTRODUCTION, I'D LIKE TO 
 14  INTRODUCE MS. MICHELLE HOUGHTON OF THE STATE RESOURCE 
 15  DIVISION WHO WILL PRESENT AND SUMMARIZE THE STAFF'S 
 16  ANALYSIS OF THE PETITION FROM THE CHEMICAL MANUFACTURERS 
 17  ASSOCIATION.  
 18               MS. HOUGHTON.
 19         MS. HOUGHTON:  THANK YOU, MR. BOYD.  
 20               TODAY WE ARE PROPOSING THAT ACETONE BE 
 21  REMOVED FROM OUR AB 1807 TOXIC AIR CONTAMINANT LIST.  THIS 
 22  ACTION IS NECESSARY IN ORDER TO ALLOW ITS SUBSEQUENT 
 23  REMOVAL FROM THE AIR TOXICS HOT SPOTS LIST.  
 24               TO DESCRIBE THE BASIS FOR OUR RECOMMENDATION 
 25  AND FOR THE BENEFIT OF OUR NEW BOARD MEMBERS, I WILL FIRST 
0059
 01  GIVE AN OVERVIEW OF THE PROGRAM AND THE IDENTIFICATION 
 02  LIST.  NEXT, I WILL GIVE SOME BACKGROUND INFORMATION ON 
 03  ACETONE; OUR EXPOSURE AND HEALTH EVALUATION WHICH FORMS 
 04  THE BASIS FOR OUR RECOMMENDATION; OUR RATIONALE FOR 
 05  REMOVAL; AND FINALLY, A SUMMARY AND STAFF RECOMMENDATION.  
 06               FIRST, THE TOXIC AIR CONTAMINANT PROGRAM.  
 07  THIS PROGRAM WAS ESTABLISHED IN 1983 BY AB 1807 WITH THE 
 08  PURPOSE OF PROTECTING PUBLIC HEALTH BY REDUCING EMISSIONS 
 09  OF T.A.C.'S.  IT CONSISTS OF TWO PHASES, THE 
 10  IDENTIFICATION OR RISK ASSESSMENT PHASE AND THE CONTROL OR 
 11  RISK MANAGEMENT PHASE.  
 12               LAST JULY, THE BOARD HEARD A DETAILED 
 13  OVERVIEW AND UPDATE ON CALIFORNIA'S AIR TOXICS PROGRAM.  
 14  TODAY I WILL BRIEFLY TOUCH ON THE MAIN POINTS FROM THAT 
 15  UPDATE.  
 16               THE TOXIC AIR CONTAMINANT PROCESS IS AS 
 17  FOLLOWS:  AFTER A SUBSTANCE OFFICIALLY ENTERS THE FORMAL 
 18  PROCESS OF IDENTIFICATION, THE A.R.B. STAFF PREPARES AN 
 19  EXPOSURE ASSESSMENT AND THE OFFICE OF ENVIRONMENTAL HEALTH 
 20  HAZARD ASSESSMENT PREPARES A HEALTH ASSESSMENT.   
 21               THE SCIENTIFIC REVIEW PANEL, WHICH CONSISTS 
 22  OF SIX INTERNATIONALLY RECOGNIZED EXPERTS, INDEPENDENTLY 
 23  REVIEWS THE COMBINED EXPOSURE AND HEALTH REPORTS AND THE 
 24  SCIENTIFIC INFORMATION ON WHICH THEY ARE BASED.  THIS 
 25  REVIEW ASSURES THAT THE BEST SCIENTIFIC DATA ARE USED.  
0060
 01               A VERY IMPORTANT PART OF THIS PROCESS IS 
 02  PUBLIC OUTREACH.  THIS INCLUDES OPEN PUBLIC WORKSHOPS, 
 03  MEETINGS WITH INDUSTRY ASSOCIATIONS, AND EXTENSIVE 
 04  CONTACTS WITH INDIVIDUALS INTERESTED IN OUR PROPOSED 
 05  ACTIONS.  
 06               THE FINAL STEP IN THIS PROCESS IS YOUR 
 07  DECISION AT A PUBLIC HEARING TO FORMALLY IDENTIFY A 
 08  COMPOUND AS A TOXIC AIR CONTAMINANT.  
 09               AFTER A SUBSTANCE IS IDENTIFIED AS A T.A.C., 
 10  THE A.R.B. WORKS WITH LOCAL AIR POLLUTION CONTROL 
 11  DISTRICTS, AFFECTED SOURCES AND INTERESTED PUBLIC TO 
 12  INVESTIGATE THE NEED, FEASIBILITY AND COST OF REDUCING 
 13  EMISSIONS OF THAT SUBSTANCE.  THIS ANALYSIS INCLUDES A 
 14  REVIEW OF ALL RISK REDUCTION OPTIONS.  
 15               AS IN THE IDENTIFICATION PHASE, PUBLIC 
 16  OUTREACH IS AN ESSENTIAL COMPONENT OF RISK MANAGEMENT.  
 17               IF CONTROLS ARE JUSTIFIED, THE A.R.B. ADOPTS 
 18  A CONTROL MEASURE AT A BOARD HEARING.  LOCAL AIR POLLUTION 
 19  CONTROL DISTRICTS THEN ADOPT AND ENFORCE EQUIVALENT OR 
 20  MORE RESTRICTIVE MEASURES TO REDUCE EMISSIONS OF THE 
 21  T.A.C.  
 22               ACHIEVEMENTS OF THE PROGRAM INCLUDE 
 23  20 SUBSTANCES WHICH THE BOARD HAS IDENTIFIED AS TOXIC AIR 
 24  CONTAMINANT UNDER AB 1807, THE LISTING OF ALL 189 
 25  HAZARDOUS AIR POLLUTANTS AS REQUIRED BY AB 2728, THE 
0061
 01  DEVELOPMENT AND IMPLEMENTATION OF EIGHT AIR TOXIC CONTROL 
 02  MEASURES WITH OVER 7,000 SOURCES REDUCING EMISSIONS OF AIR 
 03  TOXICS.  
 04               AS PART OF THE IDENTIFICATION PROGRAM, WE 
 05  MAINTAIN A NONREGULATORY TOXIC AIR CONTAMINANT 
 06  IDENTIFICATION LIST.  THE PURPOSE OF THE LIST IS TO INFORM 
 07  THE PUBLIC OF SUBSTANCES WHICH HAVE BEEN IDENTIFIED AS 
 08  TOXIC AIR CONTAMINANTS AND TO ASSIST A.R.B. STAFF WITH 
 09  SELECTION OF THE POLLUTANTS FOR REVIEW AS TOXIC AIR 
 10  CONTAMINANTS.  
 11               THIS LIST IS DIVIDED INTO THREE CATEGORIES.  
 12  CATEGORY ONE CONTAINS SUBSTANCES WHICH HAVE FORMERLY BEEN 
 13  IDENTIFIED AS T.A.C.'S AND INCLUDES ALL FEDERAL HAZARDOUS 
 14  AIR POLLUTANTS.  
 15               CATEGORY TWO INCLUDES THOSE CHEMICALS THAT 
 16  ARE CURRENTLY UNDER REVIEW.  WE HAVE TWO SUBSTANCES IN 
 17  THIS CATEGORY, INORGANIC LEAD AND DIESEL EXHAUST.  
 18               THE LAST CATEGORY CONSISTS OF SUBSTANCES 
 19  WHICH ARE BEING CONSIDERED FOR REVIEW BUT LACK SUFFICIENT 
 20  HEALTH AND EXPOSURE DATE.  ACETONE IS INCLUDED IN THIS 
 21  CATEGORY.  
 22               THIS LIST WAS LAST MODIFIED BY THE BOARD IN 
 23  APRIL OF 1993 WHEN THE FEDERAL HAZARDOUS AIR POLLUTANTS 
 24  WERE FORMALLY IDENTIFIED AS TOXIC AIR CONTAMINANTS UNDER 
 25  ASSEMBLY BILL 2728.  
0062
 01               NOW FOR SOME BACKGROUND ON ACETONE.  LAST 
 02  JUNE, THE U.S. E.P.A. EXEMPTED ACETONE AS A VOLATILE 
 03  ORGANIC COMPOUND BECAUSE OF ITS NEGLIGIBLE PHOTOCHEMICAL 
 04  REACTIVITY.  AT THE SAME TIME THEY REMOVED ACETONE FROM 
 05  THE LIST OF TOXIC CHEMICALS UNDER THE SUPERFUND AMENDMENTS 
 06  REAUTHORIZATION ACT, S.A.R.A., TITLE III.  
 07               S.A.R.A., TITLE III COLLECTS RELEASE 
 08  INFORMATION ON AIR, WATER AND LAND RELEASES PRIMARILY FROM 
 09  MANUFACTURING INDUSTRIES.  THIS INFORMATION IS PUT INTO 
 10  THE FEDERAL TOXIC RELEASE INVENTORY.  
 11               LAST SEPTEMBER WE AMENDED OUR V.O.C. 
 12  DEFINITION TO EXEMPT ACETONE FROM ALL CONSUMER PRODUCT 
 13  REGULATIONS BASED ON COMPUTER MODELING THAT SHOWS ACETONE 
 14  HAS LOW PHOTOCHEMICAL REACTIVITY AND WHEN SUBSTITUTED FOR 
 15  MORE REACTIVE COMPOUNDS, SHOULDN'T RESULT IN ADVERSE 
 16  IMPACTS TO GROUND-LEVEL OZONE.  
 17               WE THEN NOTIFIED THE DISTRICTS OF THE CHANGE 
 18  SO THEY COULD ASSESS THE APPROPRIATENESS IN EXEMPTING 
 19  ACETONE FROM THEIR OWN V.O.C. DEFINITION.  
 20               ON SEPTEMBER 21ST, 195, THE CHEMICAL 
 21  MANUFACTURERS ASSOCIATION OR C.M.A. PETITIONED THE A.R.B. 
 22  TO REMOVE ACETONE FROM ITS LIST OF AIR TOXICS, INCLUDING 
 23  THE CALIFORNIA AB 2588 AIR TOXICS HOT SPOTS PROGRAM.  
 24               IN DECEMBER, WE GRANTED C.M.A.'S PETITION AND 
 25  AGREED TO SCHEDULE A PUBLIC MEETING TO RECOMMEND REMOVAL 
0063
 01  OF ACETONE FROM CATEGORY III OF THE NONREGULATORY AB 1807 
 02  TOXIC AIR CONTAMINANT IDENTIFICATION LIST.  WE ALSO AGREED 
 03  TO SCHEDULE A PUBLIC HEARING PROPOSING TO REMOVE ACETONE 
 04  FROM THE AIR TOXIC HOT SPOTS LIST.  THAT HEARING IS 
 05  SCHEDULED FOR JULY.  
 06               ACETONE IS A NATURAL BY-PRODUCT OF THE BODY'S 
 07  NORMAL METABOLISM.  IT IS ALSO PRODUCED AND USED IN MANY 
 08  INDUSTRIAL PROCESSES.  POTENTIAL HEALTH EFFECTS INCLUDE 
 09  IRRITATION TO THE EYES, NOSE AND THROAT.  TO EVALUATE THE 
 10  POTENTIAL EFFECT OF INCREASED USAGE OF ACETONE, SHOULD IT 
 11  BE REMOVED FROM OUR LIST, THE A.R.B. STAFF MODELED THREE 
 12  FACILITIES IN CALIFORNIA USING CONSERVATIVE ASSUMPTIONS TO 
 13  DETERMINE THE POTENTIAL AIR IMPACTS OF REMOVING ACETONE 
 14  FROM THE TOXIC AIR CONTAMINANT PROGRAM.  
 15               SINCE REPORTED, ACETONE EMISSION RATES HAVE 
 16  DECLINED OVER THE PAST DECADE.  WE CHOSE FACILITIES TO 
 17  MODEL WHICH REPRESENT A HISTORICALLY HIGH ACETONE EMISSION 
 18  RATE, A CURRENT HIGH EMISSION RATE AND A SMALL FACILITY.  
 19  THE ESTIMATED DOWNWIND CONCENTRATIONS REPRESENT WORST-CASE 
 20  METEOROLOGICAL CONDITIONS.
 21               FOR THEIR ANALYSIS, O.E.H.H.A. STAFF REVIEWED 
 22  U.S. E.P.A.'S DOCUMENTATION ON ITS DECISION TO REMOVE 
 23  ACETONE FROM S.A.R.A., TITLE III AND AGREED THAT INCREASED 
 24  USE OF ACETONE IS NOT EXPECTED TO POSE A HEALTH HAZARD.    
 25               THE RESULTS FROM OUR MODELING EXERCISE SHOWED 
0064
 01  AIR CONCENTRATIONS 10 TO 100 BELOW ACUTE OR CHRONIC HEALTH 
 02  VALUES.  AND THAT IS FOR FACILITIES WITH THE HIGHEST 
 03  EMISSIONS IN CALIFORNIA TODAY.  EVEN IF EMISSIONS INCREASE 
 04  TO HISTORICALLY HIGH VALUES, AIR CONCENTRATIONS WOULD 
 05  STILL BE WELL BELOW THE LEVEL OF CONCERN.  
 06               RATIONALE FOR REMOVAL:  ACETONE EMISSIONS ARE 
 07  NOT EXPECTED TO POSE A HEALTH THREAT, AND WE WILL BE 
 08  TRACKING FUTURE USE.  
 09               SHOULD ACETONE BE REMOVED FROM BOTH THE TOXIC 
 10  AIR CONTAMINANT IDENTIFICATION LIST AND THE AB 2588 LIST, 
 11  IT MAY BE USED AS A SUBSTITUTE FROM OUR HAZARDOUS AND 
 12  OZONE DEPLETING SUBSTANCES AND WILL COST EFFECTIVELY AID 
 13  IN EFFORTS TO CONTROL EMISSIONS OF VOLATILE ORGANIC 
 14  COMPOUNDS.  
 15               FINALLY, REMOVAL OF ACETONE FROM CATEGORY III 
 16  DOES NOT PRECLUDE ITS FUTURE CONSIDERATION AS A T.A.C., 
 17  SHOULD NEW HEALTH EFFECTS AND EMISSIONS INFORMATION 
 18  INDICATE THAT SUCH CONSIDERATION IS WARRANTED.  
 19               TO SUMMARIZE, ACETONE EMISSIONS ARE NOT 
 20  ANTICIPATED TO POSE ACUTE OR CHRONIC HEALTH HAZARDS OR 
 21  ADVERSE ENVIRONMENTAL IMPACTS.  
 22               REMOVING ACETONE FROM THIS LIST WILL ALLOW A 
 23  SUBSEQUENT REMOVAL FROM THE HOT SPOTS PROGRAM LIST.  THIS 
 24  WILL HAVE A POSITIVE BENEFIT ON AIR QUALITY AS ACETONE MAY 
 25  BE USED AS A SUBSTITUTE FOR MORE HAZARDOUS AND OZONE 
0065
 01  DEPLETING SUBSTANCES.  
 02               FOR THESE REASONS, STAFF RECOMMENDS ACETONE 
 03  BE REMOVED FROM CATEGORY III OF OUR TOXIC AIR CONTAMINANT 
 04  IDENTIFICATION LIST.  
 05               THAT CONCLUDES MY PRESENTATION, AND WE WILL 
 06  BE GLAD TO ANSWER ANY OF YOUR QUESTIONS.
 07         MS. RIORDAN:  THANK YOU VERY MUCH.  
 08               DO YOU HAVE ANY OTHER COMMENTS THAT WOULD GO 
 09  WITH THE STAFF REPORT BEFORE WE ASK OUR QUESTIONS?  
 10         MR. BOYD:  I THINK WE HAVE SOME COMMENT LETTERS 
 11  THAT WE COULD PROVIDE, BUT WE COULD DO THE WITNESSES 
 12  FIRST.  
 13         MS. RIORDAN:  THERE IS NO WITNESS LIST.  
 14         MR. BOYD:  I WONDERED WHY THERE IS NOTHING IN FRONT 
 15  OF ME.  
 16               WELL, THEN, LET ME HAVE THE STAFF SUMMARIZE.  
 17         MS. RIORDAN:  ALL RIGHT.  BUT THERE MAY BE SOME 
 18  QUESTIONS FROM THE BOARD MEMBERS.  SO MAYBE BEFORE YOU DO 
 19  THE SUMMARY, LET ME ASK IF THERE ARE ANY QUESTIONS FROM 
 20  THE BOARD MEMBERS OF STAFF.  
 21               HEARING NONE, THEN IF YOU WANT TO DO THE 
 22  SUMMARY OF LETTERS, THEN THAT'S FINE. 
 23         MS. HOUGHTON:  OKAY.  WE HAVE RECEIVED ONE LETTER 
 24  OF SUPPORT FROM THE ACETONE PANEL OF THE CHEMICAL 
 25  MANUFACTURERS ASSOCIATION.  AND THAT LETTER IS DATED 
0066
 01  JUNE 12TH OF 1996.  
 02               THEIR SUPPORT IS BASED ON THE BELIEF THAT 
 03  REMOVAL OF ACETONE FROM THE LIST WILL ENSURE RESOURCES ARE 
 04  FOCUSED ON REDUCING AIR EMISSIONS OF POLLUTANTS TRULY OF 
 05  CONCERN AND WILL FACILITATE INDUSTRY'S USE OF ACETONE AS A 
 06  SUBSTITUTE FOR HAZARDOUS AIR POLLUTANTS AND OZONE 
 07  DEPLETING SUBSTANCES.
 08         MR. DUNLAP:  OKAY.  ANYTHING ELSE TO ADD, STAFF?  
 09  MR. BOYD? 
 10               YES, DR. BOSTON.
 11         DR. BOSTON:  LET ME JUST ASK WHAT THE CONCERN IS OR 
 12  WHY THERE IS NO CONCERN ABOUT HUMAN PERSONS THAT MAY BE 
 13  WORKING IN THE INDUSTRY.  I NOTICE THAT YOU DO MENTION 
 14  THERE IS A POSSIBILITY OF INTERNAL TOXICITY OR PERHAPS 
 15  REPRODUCTIVE ABNORMALITIES IN ANIMALS.  
 16               HOW ABOUT THE LADIES THAT WORK IN THIS 
 17  INDUSTRY?  IS THERE A KNOWN CONCERN ABOUT THESE PEOPLE?  
 18         MS. DENTON:  MY NAME IS JOAN DENTON WITH THE AIR 
 19  RESOURCES BOARD.  
 20               DR. BOSTON, IF I CAN REPEAT YOUR QUESTION, 
 21  YOU WERE WONDERING WHY THERE IS NO CONCERN FOR WOMEN WHO 
 22  MIGHT BE WORKING IN AN INDUSTRY WHICH USE ACETONE; IS THAT 
 23  CORRECT?  
 24         MR. BOSTON:  OR MANUFACTURER.
 25         MS. DENTON:  OR MANUFACTURER.  
0067
 01               AS YOU KNOW, ACTUALLY OSHA, FEDERAL OSHA AND 
 02  STATE OSHA HAVE THE WORK PLACE STANDARDS CRITERIA, AND WE 
 03  ACTUALLY HAVE STANDARDS THAT WE HAVE LISTED IN OUR REPORT 
 04  AS FAR AS LEVELS WHICH ARE DEEMED TO BE PROTECTIVE.  
 05               BUT WE ARE LOOKING AT POTENTIAL FOR EMISSIONS 
 06  OF ACETONE ON AMBIENT CONCENTRATIONS.  THAT'S WHAT WE 
 07  FOCUSED ON, AND POTENTIAL IMPACTS ON NEARBY RESIDENTS.
 08         MR. DUNLAP:  SO YOU ARE LOOKING AT MORE AMBIENT 
 09  IMPACTS, PRIMARILY MANUFACTURING, RATHER THAN USER 
 10  IMPACTS; IS THAT CORRECT?
 11         MS. DENTON:  THAT'S CORRECT.  
 12         MR. AMES:  THAT'S CORRECT.  ALSO, IN ADDITION TO 
 13  THAT, ALL WE HAVE GATHERED FROM WORKING WITH THE INDUSTRY, 
 14  IT APPEARS THAT ACETONE WILL REPLACE FAR MORE HAZARDOUS 
 15  SUBSTANCES, SO IT WILL BE A HEALTH BENEFIT.  
 16         MR. ROBERTS:  WORK PLACE STANDARDS WILL STILL BE IN 
 17  PLACE?
 18         MR. AMES:  THAT'S CORRECT.
 19         MR. DUNLAP:  AND ADMINISTERED BY OSHA?
 20         MR. AMES:  THAT'S CORRECT.
 21         MR. DUNLAP:  HAS THERE BEEN ANY ISSUE SURROUNDING 
 22  OSHA'S ADMINISTRATION OF THIS SUBSTANCE, ANY CHANGES, 
 23  ANYTHING GOING ON THERE? 
 24         MS. DENTON:  NO; NOT THAT WE ARE AWARE OF.
 25         MR. DUNLAP:  OKAY.  ALL RIGHT.  VERY GOOD.  
0068
 01               ANY OTHER QUESTIONS OF STAFF? 
 02         MR. DUNLAP:  ALL RIGHT.  
 03               SINCE THIS ISN'T A REGULATORY ITEM, IT IS NOT 
 04  NECESSARY TO CLOSE THE RECORD.  
 05               HOWEVER, WE DO HAVE A RESOLUTION BEFORE THE 
 06  BOARD, 96-36.  THIS RESOLUTION CONTAINS THE STAFF 
 07  RECOMMENDATIONS.  
 08               AND THE CHAIR WOULD ENTERTAIN A MOTION.
 09         MS. RIORDAN:  I MOVE FOR THE ADOPTION.
 10         MR. VAGIM:  SECOND.
 11         MR. DUNLAP:  THANK YOU, SUPERVISOR RIORDAN.  
 12               IS THAT A SECOND?  SUPERVISOR VAGIM, DID I 
 13  HEAR A SECOND?
 14         MR. VAGIM:  YES.
 15         MR. DUNLAP:  ALL RIGHT.  ANY DISCUSSION?  
 16               ALL RIGHT.  HEARING NONE, I GUESS WE WILL 
 17  PROCEED WITH THE VOICE VOTE.  
 18               ALL THOSE IN FAVOR OF ADOPTING RESOLUTION 
 19  96-36 WHICH CONTAINS THE STAFF RECOMMENDATION, PLEASE SAY 
 20  AYE.  
 21               (WHEREUPON EACH AND EVERY BOARD MEMBER        
 22         RESPONDED "AYE")
 23         MR. DUNLAP:  ANY OPPOSED?  
 24               VERY WELL.  MOTION CARRIES, WHICH BRINGS US 
 25  TO AGENDA ITEM 3.  
0069
 01               THE THIRD ITEM IS 96-5-3, A PUBLIC MEETING TO 
 02  CONSIDER APPROVAL OF A PROPOSED REPORT TO THE CALIFORNIA 
 03  STATE LEGISLATURE ON FUNDING SOURCES OF CALIFORNIA'S AIR 
 04  POLLUTION CONTROL DISTRICTS WITH ANNUAL BUDGETS EXCEEDING 
 05  ONE MILLION DOLLARS.  
 06               THIS ITEM IS THE CONSIDERATION OF THE '96 
 07  REPORT TO THE LEGISLATURE OF FUNDING SOURCES ON CALIFORNIA 
 08  AIR POLLUTION CONTROL DISTRICTS.  AS REQUIRED BY STATE 
 09  LAW, THIS REPORT PROVIDES FUNDING INFORMATION FOR THOSE 
 10  DISTRICTS THAT HAVE BUDGETS OVER ONE MILLION DOLLARS 
 11  ANNUALLY.  
 12               AS I'M SURE STAFF WILL DISCUSS IN DETAIL, 
 13  STATE LAW IS EXPLICIT ABOUT THE INFORMATION TO BE INCLUDED 
 14  IN THIS REPORT.  THE PRIMARY REQUIREMENT IS THAT WE 
 15  IDENTIFY DISTRICTS' REVENUE SOURCES AND THE ALLOCATION OF 
 16  THOSE REVENUES TO DISTRICT PROGRAMS.  BUDGET INFORMATION 
 17  WAS PROVIDED BY EACH OF THE 12 DISTRICTS WITH BUDGETS OVER 
 18  ONE MILLION DOLLARS.  SO NEARLY A THIRD -- ACTUALLY, OVER 
 19  A THIRD OF THE 34 DISTRICTS HAVE BUDGETS IN OUR STATE OF 
 20  OVER A MILLION DOLLARS.  I WOULD LIKE TO RECOGNIZE THEIR 
 21  EFFORTS TO PROVIDE US WITH THIS INFORMATION SO WE CAN MEET 
 22  OUR REPORTING REQUIREMENTS.  
 23               THE LOCAL DISTRICTS WORK WELL WITH STAFF, 
 24  CERTAINLY MATURED THE RELATIONSHIP RELATIVE TO RAPPORT, 
 25  AND I APPRECIATED THE INSIGHT THAT THE ASSISTANT EXECUTIVE 
0070
 01  OFFICER LYNN TERRY SHARED WITH ME ON THIS POINT A FEW DAYS 
 02  AGO.  
 03               AT THIS JUNCTURE, I WOULD LIKE TO ASK 
 04  MR. BOYD TO INTRODUCE THIS BRIEF ITEM.
 05         MR. BOYD:  THANK YOU, MR. CHAIRMAN, MEMBERS OF THE 
 06  BOARD.  THIS IS THE FOURTH REPORT THAT WE HAVE PREPARED 
 07  FOR SUBMITTAL TO THE LEGISLATURE RELEVANT TO THIS TOPIC.   
 08               AS WERE THE PREVIOUS REPORTS, THIS ONE, TOO, 
 09  IS A STRAIGHTFORWARD PRESENTATION OF INFORMATION ABOUT AIR 
 10  DISTRICT REVENUES AS SPECIFIED IN STATE LAW.  
 11               THE REPORT YOU WILL CONSIDER TODAY ADDRESSES 
 12  THE SAME REQUIREMENTS AS DID LAST YEAR'S REPORT.  THERE 
 13  HAVE BEEN NO CHANGES IN STATE LAW RELATIVE TO THIS REPORT 
 14  AND THE CONDUCT OF THIS ACTIVITY.  
 15               THE BOARD CONSIDERED LAST YEAR'S REPORT.  YOU 
 16  REQUESTED THAT WE WORK WITH THE CALIFORNIA AIR POLLUTION 
 17  CONTROL OFFICERS ASSOCIATION TO DEVELOP STANDARDIZED 
 18  FORMATS FOR PRESENTING DATA TO THE A.R.B. AND TO THE 
 19  LEGISLATURE.  
 20               WE HAVE DONE THIS.  AND AS YOU INDICATED, WE 
 21  APPRECIATE THEIR ASSISTANCE.  WE RECOGNIZE THAT EACH 
 22  DISTRICT HAS ITS OWN ACCOUNTING PROCEDURES, AND THIS MEANS 
 23  THAT IT TOOK AN EXTRA EFFORT FOR DISTRICTS TO PROVIDE THE 
 24  INFORMATION IN THE REQUESTED FORMAT.  AND THE DISTRICTS 
 25  DID PUT FORTH THIS EFFORT IN ORDER TO MEET OUR NEEDS AND 
0071
 01  THE NEEDS OF THE BOARD.  AND, AGAIN, WE APPRECIATE THAT.   
 02              AND SEEING MR. SOMMERVILLE STILL IN THE 
 03  AUDIENCE, I HOPE HE RELAYS TO C.A.P.C.O.A. OUR 
 04  APPRECIATION FOR THE WORK THAT ALL THEIR DISTRICT 
 05  DIRECTORS DID.  
 06               WITH THAT, AT THIS POINT, I'D LIKE TO TURN 
 07  THE STAFF PRESENTATION OVER TO MR. GARY HONCOOP WHO'S WITH 
 08  OUR OFFICE WITH AIR QUALITY AND TRANSPORTATION TO GIVE YOU 
 09  THE DETAILS OF THE STAFF PRESENTATION.  
 10         MR. HONCOOP:  THANK YOU, MR. BOYD.  MR. CHAIRMAN 
 11  AND MEMBERS OF THE BOARD, AS YOU HEARD MR. BOYD SAY, THIS 
 12  DISTRICT FUNDING REPORT THAT WE ARE BRINGING BEFORE YOU 
 13  TODAY FOR YOUR CONSIDERATION IS THE FOURTH EDITION.  
 14  PREVIOUS REPORTS WERE SUBMITTED TO THE LEGISLATURE IN 
 15  1990, '92 AND '95.  
 16               STATE LAW IS QUITE SPECIFIC ABOUT THE 
 17  REPORT'S CONTENTS, BUT IT DOES NOT REQUIRE AN EVALUATION 
 18  OR ANALYSIS OF THE DISTRICT'S BUDGETS OR PROGRAMS.  AND 
 19  THIS YEAR'S REPORT PROVIDES BUDGET INFORMATION FOR FISCAL 
 20  YEAR 1994/95, BECAUSE THAT IS THE MOST RECENT YEAR IN 
 21  WHICH THE DISTRICTS HAD COMPLETE FISCAL INFORMATION.  
 22               THE FOCUS OF THE REPORT IS THE DISTRICTS' 
 23  OPERATIONAL BUDGETS.  HOWEVER, SOME OF THE DISTRICTS' 
 24  BUDGETS INCLUDE FUNDS THAT ARE NOT USED BY THE DISTRICTS 
 25  BUT ARE PASSED THROUGH TO OTHER AGENCIES.  AND THE PRIME 
0072
 01  EXAMPLE OF THESE FUNDS ARE THE MOTOR VEHICLE FEES.  THE 
 02  DISTRICTS ACCOUNTED FOR THESE FUNDS IN THEIR BUDGETS IN 
 03  DIFFERENT WAYS.  SO WHERE APPROPRIATE, I'LL POINT OUT 
 04  WHERE THE INCLUSION OF THOSE FUNDS AFFECTS THE COMPARISONS 
 05  AMONG THE DISTRICTS' BUDGETS.  
 06               PROVIDING THE INFORMATION NEEDED FOR THIS 
 07  REPORT, AS YOU HEARD LAST YEAR, THE DISTRICT FUNDING 
 08  REPORT USED A STANDARDIZED FORMAT FOR REPORTING THE BUDGET 
 09  INFORMATION.  SO WE DID WORK WITH THE CAPITAL BOARD OF 
 10  DIRECTORS AND ITS FINANCIAL OFFICERS SUBCOMMITTEE TO 
 11  DEVELOP A SET OF STANDARDIZED CATEGORIES FOR THE DISTRICTS 
 12  TO USE WHEN REPORTING THEIR FUNDING SOURCES AND 
 13  EXPENDITURES.  
 14               HAVING THE STANDARDIZED CATEGORIES PROVED TO 
 15  BE A CHALLENGE, BECAUSE NO DISTRICTS' ACCOUNTING SYSTEM 
 16  MATCHES EXACTLY THE SELECTED CATEGORIES.  SO WE FOUND THAT 
 17  SOME OF THE DISTRICTS DATA FIT THE STANDARDIZED CATEGORIES 
 18  BETTER THAN OTHERS.  
 19               WE HAD A NUMBER OF LATE CHANGES TO THE 
 20  REPORT, BECAUSE THE WORK OF MAKING THOSE BUDGET NUMBERS 
 21  FIT INTO THE STANDARDIZED CATEGORIES AND ALSO BECAUSE THIS 
 22  YEAR OUR REQUEST FOR DATA FROM THE DISTRICTS CAME AT THE 
 23  SAME TIME THAT THEY WERE DEVELOPING NEXT FISCAL YEARS' 
 24  BUDGETS.  
 25               FOR EXAMPLE, THE SOUTH COAST SACRAMENTO AND 
0073
 01  SANTA BARBARA DISTRICTS RECENTLY IDENTIFIED CHANGES THAT 
 02  NEEDED TO BE MADE TO THE BUDGET DATA IN THE REPORT.  SO 
 03  THE NUMBERS THAT ARE PRESENTED TO YOU TODAY WILL BE THE 
 04  UPDATED NUMBERS, WHICH YOU SHOULD HAVE RECEIVED AS A 
 05  PACKAGE OF REVISED TABLES.  
 06               THIS YEAR'S REPORT HAS A NEW FORMAT COMPARED 
 07  TO LAST YEAR.  THE STANDARDIZED REPORT CATEGORIES ALLUDE 
 08  US TO PRESENT THE BUDGET INFORMATION IN UNIFORM FUNDING 
 09  CATEGORIES.  WE ALSO IDENTIFIED CORE DISTRICT PROGRAMS TO 
 10  USE WHEN REPORTING HOW THE DISTRICTS ALLOCATED THEIR 
 11  REVENUES.  AND FINALLY, WE ADDED A CATEGORY OF EXTERNAL 
 12  PROGRAMS TO IDENTIFY SPECIFICALLY THE MONEYS THAT THE 
 13  DISTRICTS DID NOT USE FOR DISTRICT OPERATIONS BUT PASSED 
 14  THROUGH TO OTHER AGENCIES.  
 15               THIS NEXT SLIDE SHOWS THOSE 12 DISTRICTS WITH 
 16  BUDGETS GREATER THAN 12 MILLION DOLLARS IN FISCAL YEAR 
 17  '94/95 THAT ARE ADDRESSED IN THE REPORT.  AS YOU CAN SEE, 
 18  THEY RANGE FROM THE LARGER DISTRICTS LIKE THE SOUTH COAST, 
 19  S.F. BAY AREA, ON DOWN THROUGH THE SMALLER ONES LIKE 
 20  YOLO-SOLANO AND SAN LUIS OBISPO.  
 21               AS I STATED EARLIER, STATE LAW SPECIFIES WHAT 
 22  THE REPORT IS TO CONTAIN.  THE REQUIRED ELEMENTS OF THE 
 23  REPORT INCLUDE THOSE SHOWN ON THIS SLIDE:  THE BUDGET OF 
 24  EACH DISTRICT WITH A BUDGET OVER ONE MILLION DOLLARS; THE 
 25  DISTRICT'S BUDGET DEVELOPMENT PROCESS; THE DISTRICT'S 
0074
 01  FUNDING SOURCES; THE SOURCE OF INDUSTRY FEES; HOW 
 02  DISTRICTS ALLOCATE THESE FUNDS TO THEIR PROGRAMS AND 
 03  SERVICES; AND FINALLY, FINES AND PENALTIES.  
 04               THIS SLIDE PRESENTS THE 94/95 BUDGET TOTALS 
 05  FOR THE DISTRICTS.  I NOTED EARLIER SOME PASSED IT THROUGH 
 06  TO OTHER AGENCIES.  FOR EXAMPLE, THE SAN JOAQUIN VALLEY 
 07  DISTRICT'S BUDGET, WHICH YOU SEE HERE AT 20.9 MILLION 
 08  DOLLARS, INCLUDES 5.5 MILLION DOLLARS OF PASS THROUGH.  
 09  SAN DIEGO'S BUDGET OF 16.2 MILLION DOLLARS INCLUDED 
 10  4.7 MILLION DOLLARS OF PASS THROUGH MONEYS.  
 11  SANTA BARBARA'S BUDGET OF 10.4 MILLION HAS 3.7 MILLION 
 12  DOLLARS IN PASS THROUGH.  AND SACRAMENTO HAD A BUDGET OF 
 13  6.5 MILLION, BUT IT HAD 1.2 MILLION DOLLARS IN PASS 
 14  THROUGH.  
 15               THIS NEXT SLIDE SHOWS THE BUDGETS FOR THE 
 16  REMAINING SIX DISTRICTS COVERED IN THE RECORD.  AND AGAIN, 
 17  WE HAVE SOME OF THESE BUDGETS WITH NONOPERATIONAL FUNDS 
 18  INCLUDED, THE MOST SIGNIFICANT BEING MONTEREY BAY.  IT 
 19  SHOWS A BUDGET HERE OF 8.9 MILLION, BUT THAT INCLUDES 
 20  APPROXIMATELY 3.2 MILLION DOLLARS THAT CAME FROM A 
 21  ONE-TIME SETTLEMENT PAYMENT FOR DELAYED COMPLIANCE.  
 22               THE NEXT ELEMENT OF THE REPORT COVERS THE 
 23  DISTRICTS' BUDGET DEVELOPMENT PROCESS.  FOUR STEPS THAT 
 24  YOU SEE LISTED ON THIS SLIDE IS A GENERALIZED SUMMARY OF 
 25  THE PROCESS.  DISTRICTS PREPARE DRAFT BUDGETS.  THEY HOLD 
0075
 01  AT LEAST ONE WORKSHOP, WITH SOME DISTRICTS HOLDING 
 02  SEVERAL.  THE PUBLIC'S ALSO GIVEN AN OPPORTUNITY TO 
 03  PROVIDE INPUT WHEN THE PROPOSED BUDGET IS PRESENTED TO THE 
 04  DISTRICT BY THE DISTRICT STAFF TO THE GOVERNING BOARD AND 
 05  AT A SUBSEQUENT MEETING WHEN THE GOVERNING BOARD APPROVES 
 06  THE FINAL BUDGET.  WE ALSO FOUND THAT SEVERAL DISTRICTS 
 07  PROVIDE ADDITIONAL OPPORTUNITIES FOR PUBLIC REVIEW BY 
 08  SUBMITTING THE PROPOSED BUDGET TO PUBLIC ADVISORY 
 09  COMMITTEES.  
 10               THE NEXT SLIDE LISTS THE DISTRICTS FUNDING 
 11  SOURCES.  INFORMATION THAT YOU SEE HERE IS BASED ON A 
 12  COMPOSITE OF ALL DISTRICT BUDGETS.  THE REPORT CONTAINS 
 13  THE SPECIFIC DATA FOR EACH OF THE 12 DISTRICTS.  
 14               AS YOU CAN SEE, THERE ARE THREE MAJOR SOURCES 
 15  OF DISTRICT FUNDING AND SEVERAL LESSER SOURCES.  THE 
 16  LARGEST SOURCE OF DISTRICT REVENUES WERE THE STATIONARY 
 17  SOURCE FEES THAT PROVIDE ABOUT 50 PERCENT.  THE NEXT 
 18  LARGEST IS THE MOTOR VEHICLE FEES, WHICH ACCOUNT FOR ABOUT 
 19  24 PERCENT.  AND THEN WE HAVE FEDERAL AND STATE GRANTS, 
 20  WHICH COMBINED CONTRIBUTED ABOUT 10 PERCENT OF STATE 
 21  FUNDING, OF TOTAL FUNDING.  AND THE LESSER SOURCES INCLUDE 
 22  LOCAL TAXES, WHICH PROVIDE FOUR PERCENT, AND FINES AND 
 23  PENALTIES, WHICH PROVIDE ABOUT TWO PERCENT OF TOTAL 
 24  FUNDING.  
 25               NEXT I WANT TO DISCUSS THE SOURCES OF THE 
0076
 01  INDUSTRY'S FEES.  THIS IS ANOTHER AREA WHERE WE WORK WITH 
 02  THE C.A.P.C.O.A. FOLKS TO DEVELOP A STANDARDIZED METHOD OF 
 03  REPORTING.  SO WHAT WE CAME UP WITH AND WHAT YOU SEE HERE 
 04  ARE CATEGORIES THAT ARE BASED ON S.I.C. CODES.  THE FIRST 
 05  ONE SHOWS MANUFACTURING AND INDUSTRIAL PROVIDED THE 
 06  HIGHEST PERCENTAGE OF FEES AT 40 PERCENT.  
 07               THE NEXT SET OF SOURCES ARE GROUPED TOGETHER, 
 08  BECAUSE THEY FALL UNDER A GENERAL CATEGORY CALLED SERVICE 
 09  AND COMMERCE.  AND THAT GROUP, WHICH COMPRISES ELECTRIC 
 10  UTILITIES ON GAS, CONTRIBUTE ABOUT 26 PERCENT OF THE FEE 
 11  REVENUES.  
 12               THE LAST GROUP SHOWN HERE IS IDENTIFIED IN 
 13  THE REPORT AS RESOURCE DEVELOPMENT AND IS MADE UP OF THE 
 14  SOURCES THAT INCLUDE OIL AND GAS EXTRACTION, MEANING AND 
 15  AGRICULTURE.  AS YOU CAN SEE, AS A GROUP, THEY CONTRIBUTED 
 16  TO ABOUT 11 PERCENT OF THE DISTRICT FEE REVENUES.  
 17               AS WITH THE BUDGET DEVELOPMENT PROCESS, ALL 
 18  DISTRICTS SET THEIR FEES THROUGH AN OPEN PUBLIC PROCESS.  
 19  DISTRICT STAFF SOLICIT INPUT FROM THE PUBLIC AND AFFECTED 
 20  PARTIES BEFORE PROPOSING THE FEES, BEFORE THE PROPOSED 
 21  FEES ARE CONSIDERED FOR ADOPTION AT A PUBLICLY NOTICED 
 22  HEARING.  THIS PROCESS FOLLOWS THE REQUIREMENTS LAID OUT 
 23  IN STATE LAW.   
 24               NEXT, LET ME COVER HOW THE DISTRICT REVENUES 
 25  WERE ALLOCATED TO VARIOUS PROGRAMS.  WE STANDARDIZE THE 
0077
 01  CATEGORIES TO FIT THE FOUR PROGRAMS FROM THE DISTRICTS.  
 02  AND HERE ARE OUR MAJOR FINDINGS:  ON A STATEWIDE BASIS, 
 03  PERMITTING AND COMPLIANCE WHERE THE PROGRAMS ARE RECEIVING 
 04  MOST OF THE DISTRICT RESOURCES YOU SEE ABOUT 40 PERCENT.  
 05  THIS HIGH PERCENTAGE IS CONSISTENT WITH THE DISTRICTS' 
 06  PRIMARY STATUTORY RESPONSIBILITY OF REDUCING EMISSIONS 
 07  FROM STATIONARY SOURCES.  
 08               NEXT, WE HAVE THE COMBINED CATEGORIES OF 
 09  PLANNING INVENTORIES AND RULES.  THAT TAKES UP ABOUT 
 10  15 PERCENT OF COMBINED DISTRICT RESOURCES.  AIR MONITORING 
 11  TAKES ABOUT TEN PERCENT, AS DOES EXTERNAL PROGRAMS.  AND 
 12  BY EXTERNAL PROGRAMS, WE MEAN THOSE FUNDS THAT ARE PASSED 
 13  THROUGH THE OTHER PUBLIC AND PRIVATE AGENCIES.  AND THE 
 14  LARGEST PORTION OF THESE FUNDS ARE THOSE MOTOR VEHICLE 
 15  FEES THAT ARE USED TO FUND PROJECTS TO REDUCE EMISSIONS 
 16  FROM MOTOR VEHICLES.  
 17               AND OTHER PROGRAMS RECEIVING LESS THAN TEN 
 18  PERCENT ARE THE LOCAL MOBILE SOURCE PROGRAMS AND PUBLIC 
 19  OUTREACH.  
 20               FINALLY, A FEW COMMENTS ABOUT HOW MUCH THE 
 21  DISTRICTS' REVENUES DROPS FINES AND PENALTIES.  WE FIND 
 22  THAT FINES AND PENALTIES ARE NOT A SUBSTANTIAL 
 23  CONTRIBUTION TO DISTRICT BUDGETS.  IN TOTAL, THEY AVERAGE 
 24  ONLY AROUND TWO PERCENT AND IN NO DISTRICT ARE MORE THAN A 
 25  THREE PERCENT CONTRIBUTION.  BY COMPARISON, LAST YEAR'S 
0078
 01  REPORT ONLY SHOWED ABOUT A TWO PERCENT AVERAGE 
 02  CONTRIBUTION FROM FINES AND PENALTIES.  
 03               AS I STATED EARLIER, WE RECEIVED THREE 
 04  LETTERS IDENTIFYING A NUMBER OF CHANGES THAT NEEDED TO BE 
 05  MADE TO THE REPORT.  AND I WILL BRIEFLY SUMMARIZE THEM AT 
 06  THIS TIME.  
 07               THE FIRST LETTER WAS DATED JUNE 5, 1996 FROM 
 08  MR. NORM COVELL (PHONETIC), AIR POLLUTION CONTROL OFFICER, 
 09  THE SACRAMENTO METROPOLITAN AIR QUALITY MANAGEMENT 
 10  DISTRICT.  
 11               MR. COVELL PROVIDED SEVERAL UPDATES.  FIRST, 
 12  ADMINISTRATIVE COSTS WERE REDISTRIBUTED.  THE SECOND 
 13  CHANGE THAT SACRAMENTO REQUESTED WAS THE ADDITION OF 
 14  FINES, HEARING BOARD FEES AND INTEREST INCOME THAT HAD 
 15  INADVERTENTLY BEEN LEFT OUT.  FINALLY, SACRAMENTO 
 16  CLARIFIED THE AMOUNT OF CARRYOVER OF MOTOR VEHICLE FEES.  
 17               THE SECOND LETTER WAS DATED JUNE 7, 1996 WITH 
 18  DR. JAMES LENS (PHONETIC), EXECUTIVE OFFICER OF THE SOUTH 
 19  COAST AIR QUALITY MANAGEMENT DISTRICT.  DR. LENS PROVIDED 
 20  CORRECTED FINES AND PENALTIES DATA, REQUESTED THE ADDITION 
 21  OF DATA THAT IDENTIFIED THE TRANSFER OF FUNDS AMONG 
 22  PROGRAMS, AND THEN CLARIFIED THAT THE FISCAL YEAR 94/95 
 23  BUDGET HAD DECREASED BY NINE PERCENT COMPARED TO PREVIOUS 
 24  YEAR OF 93/94.  
 25               AND THEN THIS WEEK WE RECEIVED A LETTER FROM 
0079
 01  THE SANTA BARBARA AIR POLLUTION CONTROL DISTRICT 
 02  REQUESTING SIMILARLY THAT THE TABLE ON THE APPENDIX BE 
 03  CLARIFIED TO REFLECT THAT EXPENDITURES FOR THE DISTRICTS' 
 04  TOXICS PROGRAM.  
 05               AND AS I NOTED EARLIER, WE REVISED THE 
 06  APPROPRIATE TABLES AND THEY HAVE BEEN SUBMITTED TO THE 
 07  BOARD AS A PACKAGE.  
 08               IN CLOSING, WE RECOMMEND THE BOARD ACCEPT THE 
 09  CHANGES TO THE REPORT SUBMITTED BY THE SOUTH COAST, 
 10  SACRAMENTO AND SANTA BARBARA DISTRICTS AND THE APPROPRIATE 
 11  RELATED CHANGES TO THE TEXT OF THE REPORT.  
 12               WE ALSO RECOMMEND THAT THE BOARD APPROVE THE 
 13  REPORT WITH THE CORRECTIONS I'VE JUST NOTED FOR SUBMITTAL 
 14  TO THE GOVERNOR AND THE LEGISLATURE.  
 15               THANK YOU.  AND I WOULD BE PLEASED TO ANSWER 
 16  ANY QUESTIONS YOU HAVE AT THIS TIME. 
 17         MR. DUNLAP:  THANK YOU VERY MUCH.  
 18               I GUESS I WOULD ASK MY COLLEAGUES AND THE 
 19  BOARD TO AGAIN NOTE THE CLOSE COORDINATION WITH LOCAL 
 20  DISTRICTS.  I KNOW THAT'S NOT AN EASY TASK, NOR 
 21  NECESSARILY SHOULD IT BE.  BUT I KNOW THAT YOU WORKED 
 22  CLOSELY WITH THEM AND PRIDE YOURSELF ON COORDINATING, 
 23  MAKING CERTAIN THEY WERE AWARE OF NOT ONLY THE LEGAL 
 24  REQUIREMENTS, BUT MOTIVES.  SO WELL DONE.
 25               WITH THAT, DO ANY OF MY BOARD MEMBERS, 
0080
 01  COLLEAGUES HAVE ANY QUESTIONS OF STAFF ON THIS ITEM? 
 02         MR. VAGIM:  MR. CHAIRMAN, I THINK THE ONLY THING 
 03  THAT CAN BE DISCUSSED AT THIS POINT IS THE FUTURE OF 2766 
 04  FUNDS, AND I UNDERSTAND THE LEGISLATURE IS WALKING THROUGH 
 05  SOME INTERESTING DISCUSSIONS AS WE SPEAK, AND HOPEFULLY, 
 06  AS YOU CAN SEE, IT IS A DEFINITE LIFELINE OF LOCAL 
 07  DISTRICTS, AND WE DO A LOT WITH THEM.  SO HOPEFULLY WE CAN 
 08  KEEP A CLOSE WATCH ON THAT.
 09         MR. DUNLAP:  SUPERVISOR VAGIM, ON THIS POINT, LAST 
 10  YEAR WAS THE REQUIREMENT TO BE AUDITED, TO REVIEW THE 
 11  PROGRAM.  I THINK NEXT YEAR WE ARE GOING TO BE DOING 
 12  ANOTHER ONE.  
 13               IS THAT RIGHT, MS. TERRY?
 14         MS. TERRY:  THAT'S RIGHT, SCHEDULED FOR NEXT YEAR.
 15         MR. DUNLAP:  AND WE ARE GOING TO CONTINUE TO 
 16  SUPERVISE AND TO NUDGE THE DISTRICTS THAT NEED A NUDGE TO 
 17  MAKE SURE THEY ARE USING CRITERION THAT SHOW NOT ONLY COST 
 18  EFFECTIVENESS BUT INSURING WE GET THAT BANG FOR THE BUCK 
 19  PROGRAM ADEQUATELY THAT WE NEED.  
 20               SO I'M COMFORTABLE AT THIS JUNCTURE WITH 
 21  STAFF'S TAKES SO TO SPEAK ON THE VALUE OF THOSE VALUES FOR 
 22  THE LOCAL DISTRICTS.  
 23               ANY QUESTIONS OF THE STAFF? 
 24         MR. DUNLAP:  OKAY.  THEN I GUESS WE WILL GO TO THE 
 25  WITNESS LIST.  AND THERE ISN'T ONE.  
0081
 01               PAT, WE DON'T HAVE ANYONE SIGNED UP, AS I 
 02  UNDERSTAND IT.  
 03               ANY WRITTEN COMMENTS?  
 04               YOU COVERED SOME CHANGES THAT THE LOCAL 
 05  DISTRICTS HAD SUBMITTED.  ANY ADDITIONS TO THAT?
 06         MR. HONCOOP:  NO.  THOSE WERE THE ONLY COMMENTS WE 
 07  RECEIVED.
 08         MR. DUNLAP:  OKAY.  THEN WE WILL OFFICIALLY CLOSE 
 09  OFF THIS ITEM.  WE HAVE NO RESOLUTION FOR THIS ITEM.  BUT 
 10  I WOULD ENTERTAIN A MOTION FROM MY COLLEAGUES AND THE 
 11  BOARD TO MOVE THIS ITEM TO FORWARD THE REPORT TO THE 
 12  GOVERNOR AND ULTIMATELY TO THE LEGISLATURE.
 13         MR. VAGIM:  FIRST.
 14         MS. RIORDAN:  I SECOND IT. 
 15         MR. DUNLAP:  ANY DISCUSSION?  
 16               OKAY.  WITH THAT, WE WILL PROCEED WITH A 
 17  VOICE VOTE.  
 18               ALL THOSE IN FAVOR SAY AYE.
 19               (WHEREUPON EACH AND EVERY BOARD MEMBER        
 20         RESPONDED "AYE.")
 21         MR. DUNLAP:  ANY OPPOSED?   
 22               VERY GOOD.  
 23               STAFF, PLEASE MOVE THIS REPORT TO GOVERNOR 
 24  WILSON'S OFFICE AND THE STATE LEGISLATURE. 
 25               OKAY.  THE FOURTH AGENDA ITEM TODAY IS 
0082
 01  96-5-4.  IT'S A PUBLIC MEETING TO CONSIDER PROPOSALS FOR 
 02  THE A.R.B.'S INNOVATIVE AND AIR TECHNOLOGY PROGRAM.  
 03               THIS IS THE SECOND YEAR FOR THIS EFFORT WHICH 
 04  IS INTENDED TO SUPPORT TECHNOLOGIES THAT NOT ONLY HAVE 
 05  HIGH POTENTIAL FOR IMPROVING AIR QUALITY IN CALIFORNIA, 
 06  BUT ALSO OFFER GREAT COMMENTS FOR STIMULATING THE STATE'S 
 07  ECONOMY THROUGH SIGNIFICANT COMMERCIALIZATION ACTIVITIES. 
 08                WITH THAT, I WOULD LIKE TO ASK MR. BOYD TO 
 09  DISCUSS THE FOUR PROPOSALS THAT WE ARE HAVING RECOMMENDED 
 10  TO US TODAY AND HOW YOU RECOMMEND WE PROCEED.  
 11               MR. BOYD.
 12         MR. BOYD:  THANK YOU AGAIN, MR. CHAIRMAN.  
 13               AS THE CHAIRMAN AS HE INDICATED, WE, INDEED, 
 14  WILL BE DISCUSSING WITH YOU THE INNOVATIVE CLEAN AIR 
 15  TECHNOLOGIES PROGRAM.  THIS PROGRAM WAS CREATED TO PROVIDE 
 16  SEED MONEY FOR SELECTED PROJECTS TO MOVE FROM THE 
 17  SO-CALLED RESEARCH AND DEVELOPMENT PHASE TO THE 
 18  COMMERCIALIZATION PHASE.  
 19               LET ME POINT OUT, IN ORDER TO BE ELIGIBLE FOR 
 20  CONSIDERATION UNDER THIS PROGRAM, PROPONENTS OF PROJECTS 
 21  MUST COMMIT SIGNIFICANT RESOURCES OF THEIR OWN.  THEY MUST 
 22  ALSO SHOW RESOURCE COMMITMENTS FROM OUTSIDE SOURCES.  
 23               WE HAVE RECEIVED A NUMBER OF GOOD PROPOSALS 
 24  FOR FUNDING COMMERCIALIZATION DEVELOPMENT UNDER THIS 
 25  PROGRAM.  WE HAVE EVALUATED THESE PROPOSALS TO DETERMINE 
0083
 01  WHICH CAN BEST SUPPORT THE BOARD'S GOALS OF CLEANING UP 
 02  OUR AIR WHILE SIMULTANEOUSLY HELPING OUR STATE'S ECONOMY.  
 03               LAST FALL WE RECEIVED 38 PROPOSALS IN 
 04  RESPONSE TO THE REQUEST FOR PROPOSALS THAT WE ISSUED UNDER 
 05  THIS PROGRAM.  
 06               AFTER EVALUATION, WE REQUESTED SEVERAL 
 07  PROPONENTS TO SUBMIT FULL PROPOSALS.  TEN PROPOSALS WERE 
 08  RECEIVED AND WERE EVALUATED.  OF THESE TEN PROPOSALS, WE 
 09  RECOMMEND THAT THE BOARD CONSIDER FOUR TO BE APPROVED FOR 
 10  FUNDING.  
 11               WE BELIEVE THE OBJECTIVES OF OUR FOUR 
 12  PROPOSALS OR OF THESE FOUR PROPOSALS ARE CONSISTENT WITH 
 13  THE BOARD'S GOALS AND POLICIES, AND ALSO THESE PROPOSALS 
 14  MEET THE TECHNICAL AND BUSINESS REQUIREMENTS OF OUR 
 15  PROGRAM.  
 16               WITH THAT, MR. CHAIRMAN, MEMBERS, I'D LIKE TO 
 17  TURN THE PRESENTATION OF THE ITEM OVER TO MARLA MUELLER OF 
 18  OUR RESEARCH DIVISION. 
 19         MR. DUNLAP:  PLEASE PROCEED.
 20         MS. MUELLER:  THANK YOU, MR. BOYD.  
 21               GOOD MORNING, CHAIRMAN DUNLAP, MEMBERS OF THE 
 22  BOARD.  
 23               THE PURPOSE OF MY PRESENTATION IS TO 
 24  SUMMARIZE STAFF RECOMMENDATIONS FOR FUNDING OF PROPOSALS 
 25  RECEIVED UNDER INNOVATIVE CLEAN AIR TECHNOLOGIES, OR 
0084
 01  I.C.A.T., PROGRAM.  
 02               I.C.A.T. PROJECTS MUST INCREASE THE 
 03  EFFICIENCY OF EXISTING AIR POLLUTION CONTROL TECHNOLOGIES, 
 04  INCREASE THEIR COST EFFECTIVENESS, OR DEVELOP NEW COST 
 05  EFFECTIVE ALTERNATIVES.  ALL PROJECTS MUST HAVE 
 06  BROAD-BASED APPLICATION AND POTENTIAL FOR CREATING JOBS IN 
 07  CALIFORNIA.  ALL TYPES OF AIR POLLUTION PREVENTION AND 
 08  CONTROL TECHNOLOGIES ARE ELIGIBLE FOR FUNDING.  
 09               IN THE UNITED STATES, FUNDING FROM RESEARCH 
 10  SUCH AS DEVELOPMENT OF AN IDEA AND PROOF OF CONCEPT, 
 11  STEPS 1 AND 2 ON THE FIGURE, IS MUCH MORE AVAILABLE THAN 
 12  FOR PROTOTYPE DEVELOPMENT AND APPLICATION DEMONSTRATION.  
 13  ONCE AN APPLICATION HAS BEEN DEMONSTRATED, VENTURE FUNDS 
 14  MAY BE AVAILABLE TO MOVE THE TECHNOLOGY INTO 
 15  COMMERCIALIZATION.  
 16               HOWEVER, SOMEWHERE AROUND STEPS 3, 4, AND 5 
 17  ON THE FIGURE, IS THE VALLEY OF DEATH.  MANY PROJECTS DIE 
 18  FROM LACK OF FUNDING AND EVENTUALLY COMMERCIALIZE.  
 19  I.C.A.T. FUNDS WILL BE USED TO HELP BUSINESSES BRIDGE THE 
 20  VALLEY OF DEATH, SO THAT GOOD IDEAS CAN LEAD TO CLEANER 
 21  AIR AND A STRONGER ECONOMY.  
 22               THIS YEAR WE HELD A WORKSHOP FOR COMPANIES 
 23  SUBMITTING I.C.A.T. PROPOSALS TO ADDRESS ISSUES WHICH 
 24  CAUSED CONFUSION LAST YEAR.  AT THIS WORKSHOP, WE DISCUSS 
 25  THE OVERALL I.C.A.T. PROGRAM OBJECTIVES AND ADMINISTRATIVE 
0085
 01  REQUIREMENTS SUCH AS MATCHING FUNDS AND THE PARTICIPATION 
 02  OF MINORITY, WOMEN AND DISABLED VETERAN BUSINESSES.        
 03               MATCHING FUNDS ARE REQUIRED OF ALL PROJECTS 
 04  FUNDED UNDER THE I.C.A.T. PROGRAM.  THE APPLICANT MUST 
 05  PROVIDE AT LEAST 20 PERCENT OF THE PROJECT COST.  
 06               IN ADDITIONAL, 30 PERCENT OF THE PROJECT COST 
 07  MUST BE PROVIDED BY THE APPLICANT OR BY CO-FUNDING 
 08  PARTNERS.  
 09               THIS MEANS THAT I.C.A.T. WILL PROVIDE NO MORE 
 10  THAN 50 PERCENT OF THE TOTAL PROJECT COST.  IN ADDITION, 
 11  A.R.B. FUNDING UNDER I.C.A.T. IS LIMITED TO A MAXIMUM OF 
 12  $250,000 PER PROPOSAL.  
 13               THE I.C.A.T. R.F.P. SPECIFIED THAT OVERHEAD 
 14  IS NOT TO EXCEED 100 PERCENT, FRINGE BENEFITS ARE NOT TO 
 15  EXCEED 35 PERCENT AND GENERAL AND ADMINISTRATIVE COSTS ARE 
 16  NOT TO EXCEED 15 PERCENT OF SALARIES.  ALSO, APPLICANTS OR 
 17  PARTNERS CANNOT CHARGE ANY FEE OR PROFIT.  WE SET THESE 
 18  STANDARDS, BECAUSE THE PURPOSE OF THE I.C.A.T. PROGRAM IS 
 19  TO HELP COMPANIES GET TECHNOLOGIES COMMERCIALIZED.  
 20  COMMERCIALIZATION OF THE TECHNOLOGY WILL ENABLE THE 
 21  COMPANIES TO RECOVER THEIR EXPENSE AND MAKE A PROFIT.      
 22              I.C.A.T. PROPOSALS WERE EVALUATED BY A.R.B. 
 23  STAFF AND BY AN ADVISORY COMMITTEE WHICH CONSISTED OF 
 24  EXTERNAL REVIEWERS.  
 25               LAST YEAR WHEN WE PRESENTED THE I.C.A.T. 
0086
 01  PROPOSALS, THE BOARD REQUESTED THAT THE I.C.A.T. ADVISORY 
 02  COMMITTEE BE EXPANDED TO INCLUDE INDIVIDUALS FROM THE 
 03  PRIVATE SECTOR.  WE CONTACTED SEVERAL ORGANIZATIONS TO 
 04  HELP US IDENTIFY QUALIFIED INDIVIDUALS WHO WOULD BE 
 05  INTERESTED IN SERVING ON THE COMMITTEE.  WE ALSO SOLICITED 
 06  RECOMMENDATIONS FROM MEMBERS OF THE BOARD.  
 07               BASED ON THIS RESEARCH, WE EXPANDED THE 
 08  ADVISORY COMMITTEE TO INCLUDE TWO INDIVIDUALS FROM THE 
 09  PRIVATE SECTOR, MS. SHEILA WASHINGTON AND DR. SUSAN 
 10  HACKWOOD.  
 11               MS. WASHINGTON IS PRESIDENT AND C.E.O. OF THE 
 12  CALIFORNIA BUSINESS INCUBATION NETWORK.  DR. HACKWOOD IS 
 13  THE EXECUTIVE DIRECTOR OF THE CALIFORNIA COUNCIL OF 
 14  SCIENCE AND TECHNOLOGY.  
 15               IN ADDITION, WE REPLACED ONE OF LAST YEAR'S 
 16  TECHNICAL REVIEWERS WITH DR. ROBERT SAWYER FROM THE 
 17  MECHANICAL ENGINEERING DEPARTMENT OF THE UNIVERSITY OF 
 18  CALIFORNIA AT BERKELEY.  
 19               WITH THESE ADDITIONS, THE I.C.A.T. ADVISORY 
 20  BUSINESS REVIEWERS WERE PROFESSORS SAMUEL DOCTORS FROM 
 21  CALIFORNIA STATE UNIVERSITY OF HAYWARD, JANE HALL FROM 
 22  CALIFORNIA STATE UNIVERSITY AT FULLERTON AND 
 23  CORNELIA PECHMANN FROM UNIVERSITY AT IRVINE.  AND 
 24  MS. SHEILA WASHINGTON AND DR. HACKWOOD WERE BOTH ADDED 
 25  THIS YEAR.
0087
 01               THE I.C.A.T ADVISORY TECHNICAL REVIEWERS 
 02  WERE PROFESSORS DANIEL CHANG FROM UNIVERSITY OF CALIFORNIA 
 03  AT DAVIS, ROBERT SAWYER, WHO'S NEW THIS YEAR, AND 
 04  FOREMAN WILLIAMS FROM THE UNIVERSITY OF CALIFORNIA AT 
 05  SAN DIEGO.  
 06               WE RECOMMEND THAT YOU APPROVE FOUR PROPOSALS 
 07  FOR FUNDING UNDER THE I.C.A.T. PROGRAM.  WE SELECTED THESE 
 08  PROPOSALS BECAUSE THEY ADDRESS IMPORTANT PROGRAM NEEDS AT 
 09  THE A.R.B., ARE TECHNICALLY FEASIBLE, HAVE THE POTENTIAL 
 10  TO IMPROVE AIR QUALITY, HAVE MARKET POTENTIAL AND COULD BE 
 11  COMMERCIALIZED WITHIN A FEW YEARS.  
 12               THE FIRST PROPOSAL ENTITLED "ZERO-V.O.C. 
 13  INDUSTRIAL MAINTENANCE METAL COATING," WAS SUBMITTED BY 
 14  AERO VIRONMENT ENVIRONMENTAL SERVICES LOCATED IN MONROVIA 
 15  AND ADHESIVE COATING COMPANY, OR A.D.C.O., LOCATED IN 
 16  SAN MATEO.
 17               THE U.S. E.P.A. PLANS TO PROPOSE REGULATIONS 
 18  TO CONTROL ORGANIC COMPOUND, OR V.O.C., EMISSIONS FROM 
 19  ARCHITECTURAL AND INDUSTRIAL MAINTENANCE COATINGS.  THE 
 20  EMISSIONS OF THE V.O.C.'S FROM THESE COATINGS OPERATIONS 
 21  ARE A SUBSTANTIAL COMPONENT OF TOTAL V.O.C. EMISSIONS.     
 22               THIS PROJECT WOULD BE AN EVALUATION AND FIELD 
 23  DEMONSTRATION OF THE ZERO-V.O.C. COATING TECHNOLOGY.  THE 
 24  RESIN FORMULATION FOR THE COATING WOULD BE ADJUSTED DURING 
 25  THE PROJECT TO PROVIDE ACCEPTABLE DRYING TIMES, 
0088
 01  FLEXIBILITY AND HARDNESS, AND ULTRAVIOLET, CHEMICAL AND 
 02  SALT SPRAY RESISTANCE FOR USE AS A TOPCOAT ON METAL 
 03  FURNITURE.  THE TECHNOLOGY WITH THEN BE DEMONSTRATED IN 
 04  SMALL-SCALE TESTING IN SOUTHERN CALIFORNIA, FOLLOWED BY 
 05  FULL-SCALE DEMONSTRATION AT A STEELCASE METAL FURNITURE 
 06  MANUFACTURING FACILITY IN GRAND RAPIDS, MICHIGAN.  
 07               THE COMMERCIALIZATION OF THIS TECHNOLOGY 
 08  WOULD CREATE JOBS IN CALIFORNIA IN THE COATING/RESIN 
 09  SECTOR AND PREVENT THE LOSS JOBS IN FURNITURE 
 10  MANUFACTURING AND POSSIBLY OTHER INDUSTRIAL COMPANIES.     
 11               THIS PROJECT WOULD COST ABOUT $447,000 WITH 
 12  50 PERCENT OF THE FUNDS FROM AERO VIRONMENT AND A.D.C.O., 
 13  AND THE REMAINING FUNDS FROM THE I.C.A.T. PROGRAM.  
 14               THE SECOND PROPOSAL ENTITLED "DYNAMICALLY 
 15  OPTIMIZED RECIRCULATION COUPLED WITH FLUIDIZED BED 
 16  ABSORPTION TO COST EFFECTIVELY CONTROL EMISSIONS FROM 
 17  INDUSTRIAL COATING AND SOLVENT OPERATIONS" WAS SUBMITTED 
 18  BY AIR QUALITY SPECIALISTS, LOCATED IN NEWPORT BEACH.      
 19               INDUSTRIAL COATING AND SOLVENT OPERATIONS ARE 
 20  SIGNIFICANT COMPONENTS OF V.O.C. EMISSIONS.  CONTROLLING 
 21  EMISSIONS FROM THESE OPERATIONS IS OFTEN COST PROHIBITIVE 
 22  DUE TO THE HIGH VENTILATION FLOW RATES AND THE ENERGY 
 23  INTENSIVE NATURE OF STANDARD EMISSIONS CONTROL SYSTEMS.    
 24               THE PROJECT WOULD INVOLVE TWO TECHNOLOGIES, A 
 25  DYNAMICALLY OPTIMIZED RECIRCULATION SYSTEM TO CONTINUALLY 
0089
 01  MINIMIZE EXHAUST VOLUME FLOW RATES, AND A FLUIDIZED BED 
 02  EMISSIONS CONTROL AND SOLVENT RECOVERY TECHNOLOGY USING 
 03  NEW ADSORBING RESINS FOR COST EFFECTIVE OPERATION.  
 04               FOR THIS PROJECT, AN EXISTING PAINT BOOTH 
 05  RECIRCULATION SYSTEM ON A STEELCASE FURNITURE COATING LINE 
 06  IN TUSTIN, CALIFORNIA WOULD BE MODIFIED TO INCLUDE DYNAMIC 
 07  RECIRCULATION.  THE LONG TERM APPLICABLE EFFECTIVENESS OF 
 08  THE FLUIDIZED BED AND DYNAMIC RECIRCULATION SYSTEMS WOULD 
 09  THEN BE EVALUATED.  
 10               THE COMMERCIALIZATION OF THIS TECHNOLOGY WITH 
 11  WOULD REDUCE OPERATING COSTS AND ALSO ALLOW THE EXPANSION 
 12  OF EXISTING FACILITIES, WHICH COULD RESULT IN ADDITIONAL 
 13  CALIFORNIA JOBS IN THE INDUSTRIAL COATINGS SECTOR.  
 14               THE PROJECT WOULD COST ABOUT $490,000 WITH 
 15  JUST OVER 50 PERCENT OF THE MONEY FROM AIR QUALITY 
 16  SPECIALISTS AND THEIR PARTNERS, STEELCASE NORTH AMERICA 
 17  AND SOUTHERN CALIFORNIA EDISON.  
 18               THE THIRD PROPOSAL ENTITLED "PROTOTYPE 
 19  DEMONSTRATION OF C.H.A. NOX REMOVAL SYSTEM FOR TREATMENT 
 20  OF STATIONARY DIESEL ENGINE EXHAUST" WAS SUBMITTED BY 
 21  C.H.A. CORPORATION LOCATED IN LARAMIE, WYOMING.  
 22  STATIONARY DIESEL ENGINES MUST CONTINUE TO MEET EVER 
 23  TIGHTENING ENVIRONMENTAL AIR QUALITY STANDARDS.  BOTH 
 24  ENGINES AND ASSOCIATED POLLUTION CONTROL DEVICES MUST MEET 
 25  DIFFICULT REQUIREMENTS, INCLUDING INSTALLATION INTO 
0090
 01  SPACE-LIMITED SITES AND INTERMITTENT AND/OR FREQUENT 
 02  OPERATION, VARYING AND/OR CYCLIC PROCESS CONDITIONS AND A 
 03  HIGH LEVEL OF AUTOMATION AND A VERY HIGH DEGREE OF 
 04  RELIABILITY.  
 05               THE C.H.A. NOX PROCESS REMOVES NOX POLLUTANTS 
 06  FROM THE SMALL STATIONARY DIESEL ENGINES.  CURRENTLY THERE 
 07  ARE NO FEASIBLE CONTROLS FOR THESE ENGINES.  THIS PROJECT 
 08  WOULD INCLUDE CONSTRUCTING A PROTOTYPE C.H.A. NOX CONTROL 
 09  SYSTEM AND TESTING IT ON A 50 HORSEPOWER DIESEL ENGINE AT 
 10  THE C.H.A. CORPORATION LABORATORY.  THEN THE SAME DEVICE 
 11  WOULD BE DEMONSTRATED AT MC CLELLAN AIR FORCE BASE ON A 
 12  15 HORSEPOWER DIESEL MOTOR GENERATOR SET FOR AIRCRAFT 
 13  GROUND EQUIPMENT.  
 14               SO SINCE CALIFORNIA CURRENTLY REPRESENTS THE 
 15  LARGEST MARKET FOR DIESEL EXHAUST CONTROL TECHNOLOGY, 
 16  PRODUCTION OF THE ACTUAL TREATMENT DEVICES WOULD BE IN 
 17  CALIFORNIA.  THE C.H.A. CORPORATION AND PARTNERS WOULD 
 18  SUBMIT A MC CLELLAN AIR FORCE BASE REUSE COMMERCIALIZATION 
 19  PROPOSAL FOR MANUFACTURING THE DEVICES AT THE MC CLELLAN 
 20  A.F.B.  
 21               THE PROJECT WOULD COST ABOUT $425,000 WITH 
 22  50 PERCENT FUNDING FROM THE C.H.A. CORPORATION, THE 
 23  SACRAMENTO MUNICIPAL UTILITY DISTRICT, MC CLELLAN AIR 
 24  FORCE BASE GERLING APPLIED ENGINEERING IN MODESTO.  
 25               THE LAST PROPOSAL ENTITLED 
0091
 01  "INJECTOR/INTENSIFIER SYSTEM FOR NATURAL GAS FUELING OF 
 02  TRANSIT BUS" WAS SUBMITTED BY VALLEY DETROIT DIESEL 
 03  ALLISON, LOCATED IN THE CITY OF INDUSTRY.  
 04               THE CATEGORY OF HEAVY-DUTY DIESEL VEHICLES IS 
 05  ONE OF THE LARGEST CONTRIBUTORS TO THE ON-ROAD MOTOR 
 06  VEHICLE EMISSIONS INVENTORY FOR NOX AND PARTICULATE 
 07  MATTER.  THE STATE IMPLEMENTATION PLAN INCLUDES A NUMBER 
 08  OF MEASURES DESIGNED TO REDUCE EMISSIONS FROM HEAVY-DUTY 
 09  VEHICLES.  
 10               THIS PROJECT WOULD DEMONSTRATE A NATURAL GAS 
 11  INJECTOR TECHNOLOGY ON TWO TRANSIT BUSES IN CALIFORNIA.  A 
 12  PROTOTYPE NATURAL GAS FUEL INJECTOR SYSTEM WOULD BE 
 13  FABRICATED, INSTALLED AND CERTIFIED ON TWO DIESEL BUSES.  
 14  PERFORMANCE, DURABILITY AND RELIABILITY WOULD BE EVALUATED 
 15  DURING THIS DEMONSTRATION PERIOD.  ALSO, EMISSIONS WOULD 
 16  BE TESTED.  
 17               COMMERCIALIZATION OF THIS TECHNOLOGY WOULD 
 18  INCREASE SALES, PRODUCTION AND SERVICE JOBS IN 
 19  CALIFORNIA.  
 20               THE PROJECT WOULD COST ABOUT $500,000 WITH 
 21  50 PERCENT OF THE FUNDING FROM VALLEY DETROIT DIESEL, 
 22  WESTPORT RESEARCH OF WEST VANCOUVER, BRITISH COLUMBIA, 
 23  ANTELOPE VALLEY SCHOOLS TRANSPORTATION AGENCY, CULVER CITY 
 24  TRANSPORTATION DEPARTMENT AND THE SOUTHERN CALIFORNIA GAS 
 25  COMPANY.  
0092
 01               THIS CONCLUDES MY PRESENTATION.  
 02               WE WILL BE HAPPY TO ANSWER ANY QUESTIONS YOU 
 03  MAY HAVE. 
 04         MR. DUNLAP:  THANK YOU.  
 05               HAVE YOU TALKED ABOUT THE MATCHING FUNDS?  
 06  OUR CONTRIBUTION IS A LITTLE UNDER A MILLION DOLLARS FOR 
 07  THESE FOUR PROJECTS, MR. BARHAM?  
 08         MR. BARHAM:  YES.  IT'S APPROXIMATELY THE SAME 
 09  AMOUNT OF MONEY IN TERMS OF MATCH.
 10         MR. DUNLAP:  ALL RIGHT.  SO A MILLION DOLLARS OF 
 11  THE STATE'S MONEY, A MILLION DOLLARS OF THE PRIVATE SECTOR 
 12  AND THE PARTNER MONEY?
 13         MR. BARHAM:  THAT'S CORRECT. 
 14         MR. DUNLAP:  ALL RIGHT.  VERY GOOD.  
 15               MR. LAGARIAS, I KNOW THERE'S A QUESTION OR 
 16  TWO COMING FROM YOU.
 17         MR. LAGARIAS:  MR. BARHAM, AS YOU KNOW, I'VE BEEN 
 18  VERY SUPPORTIVE OF THIS PROGRAM.  
 19               HOW MANY PROPOSALS DID YOU RECEIVE THIS YEAR 
 20  BEFORE YOU GOT DOWN TO THESE FOUR?
 21         MR. BARHAM:  WE RECEIVED A TOTAL OF TEN.  
 22               THIS NEXT YEAR, THOUGH, I WANT TO MENTION TO 
 23  THE BOARD THAT WE ARE TRYING TO THROW THE NET MUCH WIDER 
 24  THAN WE HAVE THE FIRST TWO YEARS OF THE PROGRAM.  WE ARE 
 25  GOING OUT WITH NOTIFICATIONS AND DIFFERENT PUBLICATIONS.  
0093
 01  WE HAVE A NOTICE ON THE INTERNET.  HOPEFULLY, WE WILL GET 
 02  MORE SUBMITTALS NEXT YEAR.  
 03               ANOTHER THING THAT WE ARE PROCEEDING WITH IS 
 04  TO INCREASE THE UPPER LIMIT OF THE PROGRAM FROM $250,000 
 05  STATE CONTRIBUTION TO A HALF MILLION DOLLARS NEXT YEAR.  
 06  AND WE ANTICIPATE THAT THERE WILL BE MORE INTEREST IN THE 
 07  PROGRAM BECAUSE OF THESE ACTIONS.
 08         MR. LAGARIAS:  HOW MANY PROPOSALS DID WE RECEIVE? 
 09         MR. BARHAM:  WE RECEIVED TEN THIS YEAR.
 10         MR. LAGARIAS:  HAVE WE MADE AN ASSESSMENT IN EACH 
 11  OF THESE INNOVATIVE CONTROL TECHNOLOGIES AS TO IF THESE 
 12  TECHNOLOGIES WERE TO BE SUCCESSFUL, WHAT CONTRIBUTION 
 13  WOULD THEY MAKE IN REDUCING AIR POLLUTANTS IN THE STATE OF 
 14  CALIFORNIA?  
 15               FOR EXAMPLE, I DON'T WANT TO SEE US SPENDING 
 16  A MILLION DOLLARS FOR CONTROL TECHNOLOGY, WHICH WOULD 
 17  RESULT IN ONLY A MINOR BENEFIT TO THE STATE.
 18         MR. BARHAM:  WELL, IT VARIES, OBVIOUSLY, FROM 
 19  SOURCE TO SOURCE.  
 20               I THINK PROFESSOR SAWYER, FOR EXAMPLE, IN HIS 
 21  ANALYSIS OF THE DYNAMIC RECIRCULATION PROJECT SUGGESTED 
 22  THAT DIRECTLY THAT MAY NOT HAVE A LARGE BENEFIT OF 
 23  HYDROCARBON.  BUT INDIRECTLY THERE MAY BE SUBSTANTIAL 
 24  REDUCTIONS IN ENERGY REDUCTION.  
 25               THE C.H.A. PROCESS, FOR EXAMPLE, RESULTS IN 
0094
 01  SIGNIFICANT AIR NOX EMISSIONS FROM PORTABLE EQUIPMENT.  
 02  ALL OF THESE REDUCTIONS WILL GO INTO THE PROVERBIAL BLACK 
 03  BOX AND ARE NEEDED TO ACHIEVE THE AIR QUALITY STANDARDS IN 
 04  THE STATE.  SO WE HAVE A LITTLE HERE AND A LITTLE THERE, 
 05  BUT ADDED TOGETHER, IT WILL ALL SUBSTANTIALLY IMPROVE THE 
 06  AIR QUALITY, IS OUR ASSESSMENT OF THESE PROJECTS.  
 07         MR. CACKETTE:  MR. LAGARIAS, THAT'S ONE OF THE 
 08  CRITERIAS WHEN WE REVIEW THEM, IT'S TO MAKE SURE THERE'S 
 09  SIGNIFICANT EMISSION REDUCTIONS.  
 10               AS YOU KNOW, NO ONE SOURCE IS A MONSTROUS 
 11  SOURCE ANYMORE.  WE DON'T GO FOR THE ONES THAT ARE A FEW 
 12  POUNDS.  WE LOOK FOR THE ONES THAT BOTH HAVE EMISSION 
 13  REDUCTION POTENTIAL AND POTENTIAL FOR THE TECHNOLOGY TO BE 
 14  TRANSFERRED TO OTHER SIMILAR SOURCES.  SO POSSIBLY THERE'S 
 15  A BIGGER BANG FOR THE BUCK OUT OF IT.
 16         MR. LAGARIAS:  WELL, THIS IS THE FIRST TIME I'VE 
 17  HEARD THIS, AND I APPRECIATE THE FACT THAT THESE 
 18  TECHNOLOGIES WOULD HELP REDUCE THE BLACK BOX EMISSION 
 19  REDUCTIONS, BUT HOW WILL IT COME ABOUT?
 20         MR. CACKETTE:  EITHER SOME OF THEM IN GREATER 
 21  EFFICIENCY, SOME OF THEM IN THE C.H.A. PROCESS APPLIED TO 
 22  SOURCES THAT DON'T HAVE CONTROL AT ALL RIGHT NOW.  SO IT 
 23  WILL HELP FROM THAT ASPECT.
 24         MR. LAGARIAS:  WILL THESE PROCESSES BE PROPRIETARY 
 25  TO THE DEVELOPER, OR WILL THEY BE AVAILABLE TO OTHER 
0095
 01  INDUSTRIAL COMPETITORS?
 02         MR. BARHAM:  THESE ARE PROPRIETARY TO THE DEVELOPER 
 03  FOR THE MOST PART.
 04         MR. LAGARIAS:  DO WE HAVE ANY LEGAL PROBLEM IN THAT 
 05  REGARD?
 06         MR. CACKETTE:  NO. 
 07         MR. LAGARIAS:  NO. 
 08         MR. DUNLAP:  OKAY.  MR. CALHOUN, DO YOU HAVE A 
 09  QUESTION?
 10         MR. CALHOUN:  I DON'T HAVE A QUESTION.  I JUST WANT 
 11  TO CITE AN OBSERVATION THAT I HAVE DISCUSSED WITH THE 
 12  STAFF.  
 13               IN REVIEWING THESE PROPOSALS, I NOTE THAT I'M 
 14  NOT SURE WHICH ONE OF THE PARTICULAR APPLICANTS OFFERED A 
 15  LOT OF IN-KIND SERVICE, AND I THINK IN THE FUTURE, WE JUST 
 16  OUGHT TO BE A LITTLE CAREFUL ABOUT THAT AND MAKE SURE THAT 
 17  THEY ARE, IN FACT, CONTRIBUTING RESOURCES TO THE POT.  AND 
 18  I AM NOT DISREGARDING THE IN-KIND SERVICES.  I THINK IT'S 
 19  IMPORTANT.  I THINK WE OUGHT TO MAKE SURE THEY DO BRING 
 20  SOMETHING TO THE PARTY.
 21         MR. BARHAM.  THAT'S ACKNOWLEDGED. 
 22         MR. DUNLAP:  OKAY.  MR. BARHAM, I APPRECIATE YOUR 
 23  COMMENTS ABOUT CASTING A LARGER NET TO GET MORE 
 24  SUBMISSIONS, BECAUSE IT IS IMPORTANT FOR US TO BE LOOKING 
 25  FOR NEW TECHNOLOGIES THAT WE MIGHT BE ABLE TO HELP THROUGH 
0096
 01  THIS VALLEY OF DEATH.  
 02               GIVE US SOME GEOGRAPHIC REPRESENTATION IN OUR 
 03  STATE.  I'M GOING TO BE THE LAST ONE TO TELL YOU WE NEED 
 04  TO HAVE ONE FOR EVERY CORNER OF STATE, PER SE.  BUT THERE 
 05  ARE CERTAIN REGIONS OF OUR STATE.  IN PARTICULAR, I'M 
 06  THINKING OF THE SAN JOAQUIN VALLEY AND SAN DIEGO AREA 
 07  WHERE THERE'S A LOT OF INNOVATIVE WORK GOING ON, AND WE 
 08  MIGHT BE ABLE TO MAKE PEOPLE AWARE OF WHAT'S GOING ON.  
 09               WE HEAR A LOT ABOUT SOUTH COAST.  BUT WE HAVE 
 10  OTHER PARTS OF THE STATE WITH PEOPLE TRYING TO TACKLE 
 11  THOSE PROBLEMS AS WELL.  SO PAY PARTICULAR ATTENTION TO 
 12  REGIONS, AND I AM CERTAIN, WITH THAT STATEMENT, TWO OF MY 
 13  COLLEAGUES WILL WANT TO TAKE ME TO LUNCH AFTERWARD.  
 14               OKAY.  IF THERE ARE NO OTHER QUESTIONS OF 
 15  STAFF, I WILL TAKE THIS ITEM UP AS FAR AS BOARD ACTION.    
 16               WE HAVE SOME RESOLUTIONS, I GUESS, BEFORE 
 17  US.  THEY ARE IN THE PACKAGE.  
 18               WHAT PAGE, TOM?  
 19         MR. CACKETTE:  229. 
 20         MR. DUNLAP:  ANY WRITTEN COMMENTS, STAFF?  DID WE 
 21  RECEIVE ANY? 
 22         MR. BARHAM:  NO, WE HAVE NOT RECEIVED ANY WRITTEN 
 23  COMMENTS.
 24         MR. DUNLAP:  RELATIVE TO THE PROCESS, ONE GOES 
 25  THROUGH THE SCREENING AND THE CONTRACTING PROCESS.  
0097
 01  MR. BOYD, I KNOW YOU ALWAYS PRIDE YOURSELF ON DOING THAT 
 02  JUST RIGHT.  ARE YOU CONFIDENT, THIS YEAR IN PARTICULAR, 
 03  THAT THE BASES HAVE BEEN SMOOTHLY COVERED?
 04         MR. BOYD:  YES, MR. CHAIRMAN.  I'M CONFIDENT THAT 
 05  YOUR DEPUTIES AND I WENT THROUGH A VERY ELABORATE PROCESS 
 06  OF REVIEWING THIS ALONG WITH DR. HOLMES IN THE RESEARCH 
 07  DIVISION.  SO I AM VERY CONFIDENT. 
 08         MR. DUNLAP:  VERY GOOD.  THANK YOU.  
 09               SO WE HAVE IN OUR PACKAGE FOUR SEPARATE 
 10  RESOLUTIONS.  AND I KNOW THE BOARD MEMBERS HAVE FOUND THEM 
 11  NOW AND HAVE HAD A CHANCE TO LOOK AT THEM.  
 12               ARE THERE ANY ADDITIONAL CONCERNS OR COMMENTS 
 13  ON ANY OF THESE OR COMMENTS ANY OF THE BOARD MEMBERS HAVE 
 14  ON ANY OF THESE RESOLUTIONS?  
 15               THEY SEEM TO BE PRETTY STRAIGHTFORWARD.  
 16               IF NOT, IS THE BOARD PREPARED TO VOTE ON 
 17  THESE FOUR RESOLUTIONS?  AND THE NUMBERS ARE 96-37, 96-38, 
 18  96-39 AND 96-40.  IF SO, I ENTERTAIN A MOTION.  
 19         MS. HILLIGOSS:  FIRST.  
 20         MR. CALHOUN:  SECOND.
 21         MR. DUNLAP:  WE WILL HAVE A VOICE VOTE AS WELL.    
 22               IF THERE'S NO DISCUSSION, ALL THOSE IN FAVORS 
 23  OF ADOPTING ALL FOUR OF THOSE RESOLUTIONS, PLEASE SAY 
 24  AYE. 
 25               (WHEREUPON EACH AND EVERY BOARD MEMBER
0098
 01         RESPONDED "AYE")
 02         MR. DUNLAP:  ANY OPPOSED?  
 03               VERY GOOD.  
 04               MOTION CARRIES.  
 05               THANK YOU.  THANK YOU, STAFF.  
 06               THIS BRINGS US TO 5.
 07               WE HAVE TWO REMAINING AGENDA ITEMS, AND WHAT 
 08  I WOULD PROPOSE TO DO IS FLIP-FLOP THE TWO, GET INTO THE 
 09  CLEANER BURNING GASOLINE ITEM AS OUR FIFTH ITEM.  SO WE 
 10  WILL MOVE ON 96-5-6.  
 11               AGAIN, I'D LIKE TO REMIND THOSE OF YOU IN THE 
 12  AUDIENCE WHO WOULD LIKE TO PRESENT TESTIMONY TO THE BOARD, 
 13  PLEASE SEE OUR BOARD SECRETARY AND PROVIDE COPIES OF YOUR 
 14  WRITTEN TESTIMONY TO HER.  
 15               THE SIXTH ITEM IS TO UPDATE THE BOARD ON THE 
 16  CALIFORNIA CLEANER BURNING GASOLINE REGULATION 
 17  IMPLEMENTATION EFFORTS.  
 18               ON APRIL 25TH OF '96, WE HELD AN INFORMAL 
 19  MEETING TO UNDERSTAND HOW THE BOARD'S GASOLINE AND DIESEL 
 20  REGULATIONS AFFECTED FUEL SUPPLIES AND TO INVESTIGATE THE 
 21  DEGREE TO WHICH CLEAN FUEL PROGRAMS CONTRIBUTED TO THE 
 22  RAPID RISE IN FUEL PRICES THAT OCCURRED IN THE MARCH/APRIL 
 23  TIME PERIOD.  
 24               AT THAT TIME, THE PRICE OF GASOLINE AND 
 25  DIESEL FUEL AND SPECIFICALLY THE INCREASES IN PRICE THAT 
0099
 01  HAD OCCURRED DURING THE PREVIOUS TWO MONTHS WERE ON MANY 
 02  PEOPLE'S MINDS.  
 03               I'M PLEASED TO NOTE THAT THE AVERAGE 
 04  WHOLESALE PRICES OF GASOLINE AND DIESEL FUEL DROPPED 
 05  SUBSTANTIALLY IN MAY.  RETAIL PRICES, AS IS USUALLY THE 
 06  CASE, HAVE FALLEN MUCH MORE SLOWLY.  
 07               AT THE APRIL MEETING, WE HEARD TESTIMONY FROM 
 08  THE OIL COMPANIES THAT THE RECENT PRICE SURGES WERE 
 09  PRIMARILY DUE TO INTERNATIONAL, NATIONAL AND REGIONAL 
 10  FACTORS.  CRUDE OIL PRICES HAD RISEN 50 PERCENT OR THE 
 11  EQUIVALENT OF UP TO 20 CENTS PER GALLON OF GASOLINE 
 12  EARLIER IN THE YEAR.  
 13               OTHER CONTRIBUTING FACTORS WERE THE EXPECTED 
 14  INCREASE IN DEMAND THAT TYPICALLY OCCURS IN THE SPRINGTIME 
 15  AND UNEXPECTED OPERATING PROBLEMS AT SEVERAL CALIFORNIA 
 16  REFINERIES.  THE INCREASED PRODUCTION COST OF CLEANER 
 17  BURNING GASOLINE WAS ALSO A FACTOR IN OUR STATE.  AND WE 
 18  HEARD MUCH ABOUT THAT.  WE WERE FORTUNATE TO HAVE 
 19  CHAIRMAN IMBRECT FROM THE ENERGY COMMISSION SPEND 
 20  SIGNIFICANT TIME WITH US AT THAT APRIL MEETING AS WELL.  
 21               THE BOARD HEARD CONVINCING TESTIMONY THAT THE 
 22  AIR RESOURCES BOARD'S CLEANER BURNING GASOLINE PROGRAM WAS 
 23  A RELATIVELY SMALL PART OF THE PRICE INCREASE, 
 24  CONTRIBUTING ON THE ORDER OF FIVE TO EIGHT CENTS PER 
 25  GALLON TO THE CURRENT GASOLINE PRICES.  
0100
 01               THE BOARD DIRECTED STAFF TO LOOK IN SEVERAL 
 02  AREAS AND TO REPORT BACK.  LAST MONTH WE RECEIVED A 
 03  WRITTEN REPORT FROM STAFF ON THIS MATTER.  TODAY, THE 
 04  STAFF WILL REPORT WHAT THEY AND THE ENERGY COMMISSION HAVE 
 05  LEARNED SINCE THE APRIL MEETING.  
 06               AND AT THIS POINT, I'D LIKE TO CALL ON STAFF 
 07  AND MR. BOYD IN PARTICULAR TO BEGIN THE PRESENTATION.  
 08               BUT IT'S IMPORTANT FOR US TO CONSIDER TODAY 
 09  THAT WHILE ONE CAN'T CLOSE THE FINAL CHAPTER ON WHAT'S 
 10  GOING ON IN THE MARKET, BECAUSE WE ARE AT A GIVEN POINT 
 11  THIS YEAR, AND WE, LIKE MANY CONSUMER, MANY MOTORISTS, ARE 
 12  INTERESTED IN FINDING OUT WHAT EXACTLY IS GOING ON, WHAT 
 13  THE RESPONSE HAS BEEN IN THE MARKETPLACE.  
 14               AND I WANT TO COMMEND STAFF AT THE OUTSET AND 
 15  THE ENERGY COMMISSION STAFF, MS. BROWN, FOR HOW DOGGED 
 16  YOU'VE BEEN IN TRYING TO GET FACTS PUT ON THE TABLE, 
 17  QUESTIONS ANSWERED.  
 18               AND I MUST TELL YOU, TOO, AT THE OUTSET, THAT 
 19  THERE'S A REAL HUNGER ON THE PART OF MYSELF AND MY BOARD 
 20  MEMBER COLLEAGUES TO LEARN ALL THAT YOU HAVE LEARNED AND 
 21  YOU HAVE BEEN ABLE TO DETERMINE.  
 22               SO WITH THAT, MR. BOYD, WOULD YOU PLEASE 
 23  ENLIGHTEN THIS BOARD?
 24         MR. BOYD:  THANK YOU, MR. CHAIRMAN.  
 25               AS THE CHAIRMAN HAS INDICATED, TODAY'S ITEM 
0101
 01  WAS SCHEDULED AT YOUR REQUEST AT OUR APRIL HEARING.  WE 
 02  WERE TO INVESTIGATE THE PRICE AND SUPPLY ISSUES OF WORKING 
 03  ALONGSIDE THE CALIFORNIA ENERGY COMMISSION AND TO REPORT 
 04  BACK TO YOU WITH ANSWERS TO YOUR QUESTIONS AND CONCERNS.   
 05               NOW, THIS MORNING MY INTRODUCTORY REMARKS ON 
 06  THE ITEM PERHAPS WILL BE A LITTLE MORE SUBSTANTIAL, 
 07  MEANING A LITTLE MORE LENGTHY THAN I ORIGINALLY HAD 
 08  PLANNED.  I FEEL IT NECESSARY TO PROVIDE TO YOU AND, IN 
 09  PARTICULAR, TO THE AUDIENCE, A BIT OF HISTORY ABOUT THE 
 10  EVOLUTION AND DEVELOPMENT OF THIS PROGRAM IN ORDER TO DEAL 
 11  WITH ISSUES AND CONCERNS THAT HAVE BEEN EXPRESSED, 
 12  PARTICULARLY IN ONE REGION OF THE STATE.  
 13               THESE CONCERNS COULD UNNECESSARILY AND I SEE 
 14  IT UNJUSTIFIABLY UNDERMINE SOME PUBLIC CONFIDENCE IN THIS 
 15  PROGRAM IN THIS PARTICULAR REGION.  IT WOULD BE TRAGIC TO 
 16  HAVE HARM DONE TO THIS PROGRAM ANYWHERE, FRANKLY, IN THE 
 17  STATE OF CALIFORNIA.  IT HAS SUCH A LARGE NUMBER OF 
 18  PUBLIC, PRIVATE, BUSINESS, ENVIRONMENTAL AND CITIZEN 
 19  GROUPS HAVE INDEPENDENTLY AND COLLECTIVELY COME TO AGREE 
 20  THAT THIS PROGRAM IS ONE OF THE MOST EFFECTIVE AIR QUALITY 
 21  STRATEGIES TO BE INTRODUCED IN THE PAST TWO DECADES.  
 22               AS YOU MEMBERS OF THE BOARD KNOW AND HAVE 
 23  HEARD FROM ME AND OTHERS AND THE STAFF ON PREVIOUS 
 24  PRESENTATIONS, THE CLEANER BURNING GASOLINE REGULATION WAS 
 25  APPROVED BY THE AIR RESOURCES BOARD IN NOVEMBER OF 1991.  
0102
 01  AND WAS AT THAT TIME AND STILL IS A KEY COMPONENT OF THE 
 02  AIR RESOURCES BOARD'S SO-CALLED LOW EMISSION VEHICLE CLEAN 
 03  FUELS PROGRAM.  
 04               NOW, WORK ON THIS LOW EMISSION CLEAN VEHICLE 
 05  PROGRAM BEGAN, QUITE FRANKLY, IN THE '80'S AS A RESULT OF 
 06  THE BOARD'S FINDINGS AT THAT TIME THAT THE MOTOR VEHICLE 
 07  WAS STILL THE PRINCIPAL AIR QUALITY PROBLEM IN CALIFORNIA 
 08  AND THAT WE COULD NOT ATTAIN OUR HEALTH PROTECTIVE AIR 
 09  QUALITY STANDARDS WITHOUT ADDITIONAL EMISSIONS REDUCTIONS 
 10  FROM MOTOR VEHICLES.  
 11               AT THAT TIME, WE SET OUT AND WE HAD THE 
 12  OBJECTIVE TO DESIGN A PROGRAM THAT DEALT WITH THE MOTOR 
 13  VEHICLE AND ITS FUEL AS A SINGLE SYSTEM.  WE WANTED TO 
 14  ESTABLISH PERFORMANCE STANDARDS.  
 15               FRANKLY, WE ENVISIONED A PROGRAM WHERE AUTO 
 16  MAKERS WOULD WORK WITH FUEL SUPPLIERS TO DELIVER SYSTEMS 
 17  TO MEET TAILPIPE EMISSION PERFORMANCE STANDARDS AND ANY 
 18  FUEL COULD BE UTILIZED.  
 19               DURING THIS SAME TIME FRAME, THE '70'S AND 
 20  THE '80'S, QUITE FRANKLY, OTHER EVENTS, PARTICULARLY TWO 
 21  OTHER EVENTS TOOK PLACE THAT WERE TO BECOME, IN MY MIND, 
 22  THE GENESIS OF TODAY'S CLEANER BURNING GASOLINE.  FIRST IT 
 23  WAS DURING THIS TIME FRAME THAT THE AIR RESOURCES BOARD 
 24  UNDER ITS TOXIC AIR CONTAMINANT PROGRAM LISTED BENZINE AS 
 25  A TOXIC AIR CONTAMINANT.  AND GASOLINE WAS IDENTIFIED AS 
0103
 01  THE MAJOR SOURCE OF BENZINE EMISSIONS IN CALIFORNIA.  
 02               THE AIR RESOURCES BOARD STAFF AND OIL 
 03  INDUSTRY REPRESENTATIVES BEGAN DISCUSSING WAYS AND 
 04  EXPLORING FEASIBILITY OF WAYS TO REDUCE BENZINE AND 
 05  GASOLINE.  IT WAS AT THAT TIME THAT THE CONCEPT OF 
 06  REFORMULATION TO MEET THIS OBJECTIVE WAS TALKED ABOUT, AND 
 07  THEN BROADER OBJECTIVES BEGAN TO BE DISCUSSED.  
 08               WE BEGAN TO DISCUSS THE IDEA OF REFORMULATING 
 09  GASOLINE TO BE CLEANER BURNING.  SECONDLY, DURING THE SAME 
 10  TIME FRAME, CALIFORNIA WAS STUDYING AND EXPERIMENTING WITH 
 11  ALTERNATIVE CLEANER BURNING FUELS, SUCH AS NATURAL GAS, 
 12  COMPRESSED NATURAL GAS OR LIQUEFIED NATURAL GAS, ALCOHOL 
 13  FUELS, BOTH ETHANOL AND METHANOL, SO ON AND SO FORTH.  
 14               AND I THINK, AS YOU ARE AWARE, THERE WERE 
 15  MANY EXTENSIVE RESEARCH AND PILOT EXPERIMENTS DONE BY 
 16  MULTIPLE STATE AND LOCAL GOVERNMENT AGENCIES, MOST 
 17  PARTICULARLY THE ENERGY COMMISSION.  
 18               DURING THIS TIME FRAME, THE LEGISLATURE 
 19  DEBATED THE ISSUE OF ALTERNATIVE FUELS.  AND ULTIMATELY 
 20  LEGISLATION WAS PASSED BY THEN AN ASSEMBLYMEN BUT NOW 
 21  SENATOR LEONARD DIRECTING THE AIR RESOURCES BOARD IN 
 22  CONCERT WITH A HOST OF OTHERS TO STUDY THE ALTERNATIVE 
 23  FUELS.  AND AGAIN, MOST PARTICULARLY, METHANOL SEEMED TO 
 24  BE THE CANDIDATE.  
 25               NEAR THE END OF THIS STUDY, WHICH WAS 
0104
 01  EXTENSIVE, DETAILED AND, FRANKLY, VERY INFORMATIVE AND 
 02  INTERESTING, AT THE END OF THIS STUDY, THE OIL INDUSTRIES 
 03  AND ONE REPRESENTATIVE IN PARTICULAR ANNOUNCED THAT THE 
 04  INDUSTRY COULD AND WOULD REFORMULATE GASOLINE TO BURN AS 
 05  CLEAN AS IT HAD BEEN SHOWN THAT THESE ALTERNATIVE FUELS, 
 06  MOST PARTICULARLY METHANOL COULD DO.  
 07               THE REPORT FROM THIS PANEL EVENTUALLY 
 08  CONCLUDED THAT THE A.R.B. SHOULD DEVELOP REGULATIONS TO 
 09  REFORMULATE AND TO CLEAN UP GASOLINE.  AND I WOULD LIKE TO 
 10  SAY I THINK THE REST IS HISTORY.  
 11               AT THIS TIME, THE AUTO OIL STUDY THAT WAS 
 12  DONE ON A NATIONAL BASIS BEGAN.  CONGRESS BEGAN TO EMBRACE 
 13  CALIFORNIA'S IDEAS.  AND THEIR DEBATES RELATIVE TO 
 14  REAUTHORIZATION OF THE CLEAN AIR ACT, WHICH WAS ULTIMATELY 
 15  DONE IN '90, AND THE LOW EMISSIONS VEHICLE CLEAN FUEL 
 16  CONCEPT THAT CALIFORNIA PIONEERED WAS EMBRACED AS WELL.   
 17               FOLLOWING THIS AND AS PART OF THIS PROGRAM 
 18  THAT I MENTIONED TO YOU, THE AIR RESOURCES BOARD IMPROVED 
 19  IN '90 THE LOW EMISSION VEHICLE, ZERO EMISSION VEHICLE 
 20  PROGRAM.  
 21               SUBSEQUENTLY, THE AIR RESOURCES BOARD ADOPTED 
 22  SO-CALLED PHASE ONE AND PHASE TWO OF FORMERLY GASOLINE 
 23  REGULATIONS IN 1991.  NOW, PHASE TWO REFORM OF GASOLINE 
 24  HAS COME TO BE KNOWN AS CLEANER BURNING GASOLINE, THE 
 25  CLEANER BURNING GASOLINE OF TODAY THAT WE ARE DISCUSSING.  
0105
 01               DURING THIS TIME FRAME, OIL COMPANIES BEGAN 
 02  TO INTRODUCE CLEANER BURNING FORMULAS OF THEIR OWN.  I 
 03  THINK CREDIT HAS TO BE GIVEN TO ARCO, WHO INTRODUCED 
 04  E.C. ONE AS THEY CALLED IT AND EVENTUALLY E.C.X. WHICH WAS 
 05  A HIGHER REFORMULATION.  
 06               ALL OF THOSE PRECEDED OUR REGULATIONS AND 
 07  EVENTUALLY WERE SUPERSEDED BY OUR REGULATIONS.  AS I SAY, 
 08  THE REGULATIONS WERE PASSED IN '91, AND THE INTRODUCTION 
 09  OF PHASE TWO OR NOW CLEANER BURNING GASOLINE WAS SCHEDULED 
 10  FOR AND HAS TAKEN PLACE IN '96, THUS GIVING THE INDUSTRY 
 11  FIVE YEARS OF LEAD TIME TO DEAL WITH THIS ISSUE.  
 12               IT ALSO GAVE EVERYONE INVOLVED WITH THIS 
 13  ISSUE, INCLUDING YOURSELF, THE OPPORTUNITY TO TAKE 
 14  ADVANTAGE OF THE RESULTS OF MULTIPLE STUDIES GOING ON IN 
 15  THE NATION, BUT MOST NOTABLY, THE SO-CALLED AUTO OIL STUDY 
 16  TO ASCERTAIN THE EVENTUAL FORMULA OR REQUIREMENTS THAT 
 17  WERE USED IN OUR PROGRAM AND TO ASCERTAIN THE VIABILITY, 
 18  FEASIBILITY AND PRACTICALITY, SAFETY AND SO FORTH OF THESE 
 19  KINDS OF FUELS.  
 20               AFTER PASSAGE OF THE REGULATION, AS YOU KNOW, 
 21  THE OIL COMPANIES WORKED TO MODIFY THE REFINERY, SPENDING 
 22  SOMEWHERE BETWEEN FOUR AND FIVE BILLION DOLLARS IN 
 23  CALIFORNIA IN THE PROCESS OF DOING THIS.  AND AS YOU KNOW, 
 24  YOUR STAFF ASSISTED THE OIL COMPANIES IN OBTAINING THE 
 25  VARIOUS PERMITS AND DEALING WITH SEQUA REQUIREMENTS AND 
0106
 01  DOING EVERYTHING WE COULD TO STREAMLINE THE PROCESS TO 
 02  BRING THIS FUEL TO MARKET.  
 03               THE A.R.B. CREATED AN ADVISORY COMMITTEE OF 
 04  OVER 75 MEMBERS TO DEAL WITH A HOST OF QUESTIONS THAT 
 05  WOULD BE ASKED ABOUT THE SUPPLY, THE PERFORMANCE, WHICH BY 
 06  PERFORMANCE WE MEAN WHETHER OR NOT WE WOULD HAVE 
 07  MATERIALS, DESTRUCTION COMPATIBILITY PROBLEMS WITH THE 
 08  FUEL AND TO DEAL, OF COURSE, WITH PUBLIC INFORMATION, 
 09  PUBLIC EDUCATION.  THIS WAS DONE IN 1994.  
 10               ALSO DURING THIS TIME FRAME, THE AIR 
 11  RESOURCES BOARD WORKING IN CONCERT WITH ALL THE AFFECTED 
 12  PARTIES, MOST PARTICULARLY, THE OIL INDUSTRY, CREATED THE 
 13  GROUND BREAKING PREDICTED MODEL WHICH ALLOWED EVEN MORE 
 14  FLEXIBILITY TO INDUSTRY TO COST EFFECTIVELY MEET THE 
 15  REGULATIONS AND TO MEET OUR PERFORMANCE STANDARD, RATHER 
 16  THAN HAVE TO DEAL WITH ANY KIND OF PERSPECTIVE FORMULA FOR 
 17  GASOLINE.  
 18               AND, OF COURSE, DURING THIS TIME FRAME, AFTER 
 19  THE CREATION OF THE ADVISORY COMMITTEE, A VERY EXTENSIVE 
 20  TEST PROGRAM WAS UNDERTAKEN RELATIVE TO THE PERFORMANCE 
 21  CRITERIA THAT LAID OUT THIS FUEL TO ASSURE OURSELVES THAT 
 22  FUELS MADE TO CALIFORNIA'S REQUIREMENTS WOULD, INDEED, BE 
 23  PRACTICAL, BE SAFE AND BE NONDESTRUCTIVE TO VEHICLES AND 
 24  TO HOPEFULLY CORROBORATE ALL THE STUDIES THAT HAD GONE ON 
 25  BEFORE.  
0107
 01               WELL, FRANKLY, ALL WENT WELL.  ALL HAS GONE 
 02  WELL.  REFINERS IN CALIFORNIA MET THEIR JANUARY 1ST, 1996 
 03  DEADLINE TO PROVIDE FUEL.  THE MARCH DEADLINE WAS MET WITH 
 04  REGARDS TO HAVING FUEL IN THE INTERMITTENT POINTS IN THE 
 05  SYSTEM.  AND I AM PLEASED TO ANNOUNCE THAT ALL PARTS OF 
 06  THE SYSTEM MET THE JUNE 1 DEADLINE FOR HAVING FUEL 
 07  DELIVERED AT THE PUMP FOR MOTORISTS.  
 08               QUITE FRANKLY, AS YOU'VE HEARD IN PREVIOUS 
 09  REPORTS, FORMULATED GASOLINE OR CLEANER BURNING GASOLINE 
 10  WAS MOST LIKELY IN THE SYSTEM ALMOST 100 PERCENT SHORTLY 
 11  AFTER THE END OF MARCH.  
 12               CONCURRENT WITH THIS MARCH TO JUNE TIME 
 13  FRAME, WE BEGAN TO EXPERIENCE THE NATIONAL PRICE RISE.  
 14  AND I AM NOT GOING TO REPEAT ALL THE INFORMATION THAT YOU 
 15  LEARNED IN THE APRIL HEARING.  BUT THAT PRICE RISE GAVE 
 16  RISE ULTIMATELY TO YOUR BOARD HAVING ITS MEETING TO 
 17  INVESTIGATE THE SUBJECT.  AND, OF COURSE, THAT WAS THE 
 18  FIRST INVESTIGATION OF THE ISSUE TO TAKE PLACE IN THE 
 19  NATION.  
 20               SO THAT DOES BRING ME TO THE APRIL BOARD 
 21  HEARING AND TO THE SUBJECT OF TODAY'S PRESENTATION TO 
 22  YOU.  
 23               AND SO, WITH THAT, I WOULD LIKE TO TURN THE 
 24  PRESENTATION OVER TO OUR STAFF AND MR. SIMEROTH, I 
 25  BELIEVE, TO BEGIN THE PRESENTATION, AND CALLING UPON 
0108
 01  WHATEVER ASSISTANCE WE NEED OF MS. BROWN FROM THE ENERGY 
 02  COMMISSION.  
 03               AND I WILL HAVE SOME ADDITIONAL REMARKS AT 
 04  THE END OF THAT PRESENTATION.
 05         MR. DUNLAP:  IF YOU COULD FORMALLY INTRODUCE 
 06  MS. BROWN BEFORE US?  
 07         MR. SIMEROTH:  THANK YOU, CHAIRMAN DUNLAP.  THIS 
 08  IS SUSAN BROWN OF THE CALIFORNIA ENERGY COMMISSION, 
 09  ASSISTANT DIVISION CHIEF.  AND HER RESPONSIBILITIES 
 10  INVOLVE MONITORING THE SUPPLY AND PRICE AND THE GENERAL 
 11  SITUATION REGARDING MOTOR VEHICLE FUELS FOR CALIFORNIA. 
 12         MR. DUNLAP:  OKAY.  THANK YOU.  
 13               CONTINUE, MR. SIMEROTH. 
 14         MR. SIMEROTH:  THANK YOU, MR. BOYD, CHAIRMAN 
 15  DUNLAP, MEMBERS OF THE BOARD.  
 16               I'M GOING TO GIVE YOU A BRIEF SUMMARY OF SOME 
 17  BACKGROUND INFORMATION I KNOW YOU ARE FAMILIAR WITH, BUT 
 18  THIS WILL BE A LOOK AT WHAT'S HAPPENED SINCE THE APRIL 
 19  BOARD MEETING REFLECTING ON WHAT WAS GOING ON PRIOR TO THE 
 20  APRIL BOARD MEETING.  FINALLY, MOST IMPORTANTLY, I'LL GO 
 21  OVER WHAT STAFF'S DONE IN RESPONSE TO QUESTIONS POSED BY 
 22  THE BOARD TO THE STAFF.  
 23               OVER 90 PERCENT OF CALIFORNIANS BREATHE 
 24  POLLUTED AIR.  GASOLINE-POWERED VEHICLES AND EQUIPMENT ARE 
 25  RESPONSIBLE FOR ABOUT HALF OF THE POLLUTION OR THE SMOG 
0109
 01  FORMING OR HALF OF THE CALIFORNIA SMOG FORMING EMISSIONS. 
 02               THE BENEFIT OF THE CLEANER BURNING GASOLINE 
 03  PROGRAM IS IT REDUCES THE SMOG-FORMING EMISSIONS FROM 
 04  MOTOR VEHICLES BY 300 TONS PER DAY.  THAT'S EQUIVALENT TO 
 05  REMOVING THREE AND A HALF MILLION VEHICLES FROM THE ROAD.  
 06  THE S.I.P. RELIES HEAVILY ON THE CLEANER BURNING GASOLINE 
 07  AND GETTING ABOUT ONE-QUARTER OF THE NEEDED S.I.P. 
 08  REDUCTIONS FROM THE SMOG PROGRAM.  
 09               AS YOU HEARD FROM MR. BOYD, THE PROGRAM HAS 
 10  BEEN SUCCESSFULLY IMPLEMENTED.  THE FINAL IMPLEMENTATION 
 11  DATE WAS JUNE 1ST.  THAT CAME AND WENT WITHOUT MISHAP OR 
 12  ANYTHING HAPPENING.  
 13               PRIMARILY, BY THE END OF MARCH, MOST OF THE 
 14  SERVICE STATIONS WERE ALREADY SUPPLYING MINIMUM BURNING 
 15  GASOLINE TO THE MOTORISTS.  THEY DIDN'T HAVE TO DO 
 16  ANYTHING ABOUT JUNE 1ST REGARDING THE CLEANER BURNING 
 17  GASOLINE.  
 18               AT THE APRIL BOARD MEETING, THE PURPOSE WAS 
 19  TO OBTAIN INFORMATION ON PRICE AND SUPPLY ISSUES, AND 
 20  PARTICULARLY, WHAT ROLE CLEANER BURNING GASOLINE WAS 
 21  PLAYING IN THOSE ISSUES.  
 22               WE HEARD TESTIMONY FROM A NUMBER OF 
 23  INDIVIDUALS.  PRIMARILY THE GROUPS ARE SHOWN HERE.  AND 
 24  PARTICULARLY WE HEARD FROM CHAIRMAN IMBRECT OF THE 
 25  CALIFORNIA ENERGY COMMISSION.  
0110
 01               THE VERTICAL LINE ABOUT THE MIDDLE OF THE 
 02  SLIDE SHOWS THE DATE OF THE APRIL BOARD MEETING.  THIS 
 03  SHOWS THAT CALIFORNIA CLEANER BURNING GASOLINE WAS BEING 
 04  PRODUCED STARTING IN MARCH AND BEING IN THE NORMAL RANGE 
 05  OF HISTORIC PRODUCTION.  
 06               ALSO, SOME CONVENTIONAL GASOLINE WAS BEING 
 07  PRODUCED.  CONVENTIONAL GASOLINE IS TO SUPPLY NEIGHBORING 
 08  STATES, AS WE HAVE ALWAYS DONE.  AND YOU CAN SEE THAT MOST 
 09  OF THE PRODUCTION IN CALIFORNIA IS CLEANER BURNING 
 10  GASOLINE.  APPROXIMATELY 80 TO 90 PERCENT OF OUR 
 11  REPRODUCTION IS CLEANER BURNING GASOLINE.  
 12               SINCE THE APRIL BOARD MEETINGS, SUPPLIES HAVE 
 13  INCREASED.  PRODUCTION INCREASED.  WE HAD A SLIGHT DIP.  
 14  BUT OVERALL, WE CONTINUED TO INCREASE OUR PRODUCTION SINCE 
 15  APRIL 25TH OF THAT BOARD MEETING.  INVENTORY, IN SOME 
 16  SENSE, IS ALMOST MORE IMPORTANT THAN PRODUCTION.  THE 
 17  INVENTORY IS USED TO PROVIDE THE SHIPMENTS AND PIPELINE TO 
 18  THE TERMINALS FOR THE GASOLINE TANK TRUCKS TO COME AND 
 19  DISTRIBUTE IT TO THE SERVICE STATIONS.  
 20               INVENTORIES HAD DECLINED PRIOR TO THE APRIL 
 21  BOARD MEETING.  THEY ARE STARTING TO RECOVER AND INCREASE 
 22  IMMEDIATELY BEFORE THE APRIL BOARD MEETING AND INTENDED 
 23  BEYOND THAT TO GET WELL BEYOND THAT TO GET WELL WITHIN THE 
 24  HISTORICAL NORMS FOR INVENTORY.  
 25               AGAIN, YOU CAN SEE THAT MOST OF THE STORAGE 
0111
 01  INVENTORIES, IF YOU WOULD, IN CALIFORNIA, IS OF CLEANER 
 02  BURNING GASOLINE.  WE ARE ONLY KEEPING INVENTORIES OF 
 03  CONVENTIONAL TO ONLY SHOW THE SURROUNDING STATES.  
 04               THIS SHOWS WHAT'S HAPPENING TO RETAIL PRICE.  
 05  THE SPOT MARKET, BRANDED, THE SO-CALLED UNBRANDED, DEALER 
 06  TANK WAGON AND RETAIL.  RETAIL IS THE UPPER LINE.  YOU CAN 
 07  SEE IT PEAKED SHORTLY AFTER THE APRIL BOARD MEETING AND 
 08  HAS DECLINED SINCE THEN.  
 09               MORE NOTICEABLE IS THE SPOT, WHICH IS SORT OF 
 10  THE WHOLESALE MARKET, IF YOU WOULD, WHERE PEOPLE GO FOR 
 11  LARGE VOLUMES OF SUPPLY, WHICH INCREASED SLIGHTLY AFTER 
 12  THE APRIL BOARD MEETING.  BUT ONCE INVENTORIES AND 
 13  PRODUCTION REESTABLISHED THEIR EQUILIBRIUM, THE SPOTS 
 14  STARTED GOING DOWN DRAMATICALLY.  IT'S GONE DOWN OVER 
 15  30 CENTS AND COME BACK SLIGHTLY SINCE THEN.  
 16               UNBRANDED, WHICH IS ALSO A WHOLESALE TYPE 
 17  THING, IS WHERE THE INDEPENDENTS GET THEIR GASOLINE.  
 18  FOLLOW THE SPOT, AND THERE'S A DIFFERENTIAL, BUT THAT'S 
 19  APPROXIMATELY THE HISTORIC DIFFERENTIAL BETWEEN SPOT AND 
 20  UNBRANDED.  
 21               DEALER TANK WAGON AND BRANDED -- THIS IS 
 22  WHERE 80 PERCENT OF THE GASOLINE IS PURCHASED TO SUPPLY 
 23  THE SERVICE STATIONS -- DIDN'T FOLLOW THAT PATTERN.  AND 
 24  THAT'S DIFFERENT IN HOW IT'S ACTED HISTORICALLY, AND WE 
 25  ARE SEEING UP TO 20 CENTS, 16 TO 20 CENTS HIGHER THAN 
0112
 01  WHERE IT WOULD BE HISTORICALLY.  IT SHOULD BE DOWN, BUT 
 02  SLIGHTLY HIGHER THAN THE UNBRANDED AND THE SPOT.  IT 
 03  DIDN'T FOLLOW THAT PATTERN.  THAT'S BASED ON HISTORIC 
 04  INFORMATION.  
 05               THESE ARE FAMILIAR FROM THE APRIL BOARD 
 06  MEETING.  IN DECEMBER, $1.15.  THAT'S A DECEMBER 1ST 
 07  PRICE.  APRIL 26TH IT INCREASED TO $1.53.  JUNE 7TH, THE 
 08  STATEWIDE AVERAGE -- AND THESE ARE ALL STATEWIDE AVERAGE 
 09  NUMBERS -- IS DOWN TO $1.52.  THAT'S DOWN SLIGHTLY SINCE 
 10  JUNE 7TH.  
 11               CRUDE HAS FOLLOWED THE SIMILAR PATTERN.  
 12  CRUDE IS DOWN.  DEALER MARGINS ON AVERAGE ARE UP SLIGHTLY 
 13  SINCE THE APRIL MEETING.  AND REFINERY APPARENT MARGIN IS 
 14  UP SLIGHTLY SINCE THE APRIL BOARD MEETING AS WELL.         
 15               LOOKING AROUND THE WESTERN STATES AND HOW 
 16  RETAIL PRICES VARY, YOU CAN SEE IT'S HIGH VIRTUALLY 
 17  EVERYWHERE.  WE ARE NOT ALONE IN HIGH PRICES.  IT'S THE 
 18  GENERAL SITUATION THROUGHOUT THE SO-CALLED P.A.D.D. FIVE.  
 19  IT'S A PETROLEUM MARKETING AREA THAT'S USED FOR A NUMBER 
 20  OF PURPOSES; CALIFORNIA, WASHINGTON, ARIZONA, NEVADA AND 
 21  ANOTHER WESTERN STATE.  
 22               AT THE BOARD MEETING, THE BOARDS FOLLOWED 
 23  DIRECTION AND ASKED THE EXECUTIVE OFFICER QUESTIONS ABOUT 
 24  THE EFFECTS OF POTENTIAL REGULATORY CHANGES.  THE BOARD'S 
 25  QUESTIONS ARE SHOWN HERE.  WE ARE GOING TO GO THROUGH THEM 
0113
 01  ONE BY ONE, SO I WON'T REVIEW THEM AT THIS POINT.  
 02               THE FIRST QUESTION.  TO INVESTIGATE, TO 
 03  PROVIDE THE INFORMATION IN ANSWER TO THE BOARD'S 
 04  QUESTIONS, STAFF MET WITH ALL CALIFORNIA GASOLINE 
 05  PRODUCERS WITH THE EXCEPTION OF EXXON.  THEY PROVIDED SOME 
 06  COMMENTS.  WE DIDN'T MEET WITH THEM BECAUSE OF SCHEDULING 
 07  DIFFICULTIES.  WITH MET WITH THE CALIFORNIA INDEPENDENT 
 08  MARKETERS ASSOCIATION AND CALIFORNIA TRUCKING ASSOCIATION, 
 09  AND WE CONTINUED WORKING WITH THE CALIFORNIA EMISSION 
 10  STAFF.  AND ALL OF THAT INFORMATION THAT WE ARE GOING OVER 
 11  AT THIS POINT HAS BEEN DEVELOPED WITH THEM FOR OUR 
 12  FINDINGS TO DATE.  
 13               NOW, THE FIRST QUESTION:  HOW MUCH ADDITIONAL 
 14  FUEL COULD BE MADE AVAILABLE?  
 15               IT LOOKS LIKE ANY TEMPORARY SUSPENSION WOULD 
 16  NOT RESULT IN SIGNIFICANT INCREASE IN GASOLINE PRODUCTION 
 17  IN CALIFORNIA.  IT'S THAT THE REFINERIES ARE HARD-PRESSED, 
 18  BECAUSE THEY CAN'T MAKE QUICK CHANGES.  
 19               IMPORTS HAVE NOT BEEN LIMITED BY THE 
 20  REGULATION.  CALIFORNIA IS NOT A TRUE HIGH.  WE ARE HAVING 
 21  IMPORTS AND FUEL COMING INTO CALIFORNIA.  SINCE MARCH 1ST 
 22  WE HAVE HAD OVER FOUR MILLION BARRELS.  IT'S ABOUT A 
 23  170 MILLION GALLONS OF COMPLYING FUEL THAT'S COME INTO THE 
 24  STATES.  
 25         MR. DUNLAP:  MR. SIMEROTH, ON THE ISLAND ISSUE, 
0114
 01  WHERE HAVE THESE IMPORTS COME FROM?       
 02         MR. SIMEROTH:  CERTAINLY.  THEY HAVE COME FROM THE 
 03  HISTORIC SUPPLIERS TO CALIFORNIA.  PACIFIC NORTHWEST HAS 
 04  BEEN A SOURCE OF SOME.  MORE IMPORTANTLY, THE GULF AND THE 
 05  VIRGIN ISLANDS HAVE BEEN THE MAIN SUPPLIERS.  WE HAVE ALSO 
 06  HAD SOME AMOUNTS FROM AS FAR AWAY AS FINLAND AND 
 07  INDONESIA.
 08         MR. DUNLAP:  SO THE ASSERTION OF THE ISLAND IS 
 09  FALSE, BECAUSE PEOPLE ARE COMING GREAT DISTANCE TO SEND 
 10  PRODUCT HERE TO SELL IN OUR MARKET; IS THAT CORRECT?
 11         MR. SIMEROTH:  THAT'S CORRECT.  WE HISTORICALLY 
 12  HAVE GONE TO THE GULF AND THE VIRGIN ISLANDS WHEN WE 
 13  NEEDED GASOLINE, AND THAT SITUATION IS CONTINUING. 
 14         MR. DUNLAP:  OKAY.  I KNOW IT'S DIFFICULT TO 
 15  PREDICT.  MAYBE MS. BROWN COULD ADDRESS THAT.  I'M 
 16  INTRIGUED BY THIS ISLAND POINT, BECAUSE SOME CRITICS HAVE 
 17  SAID WE ARE SOME SORT OF AN ISLAND.  
 18               BUT THE NOTION THAT PEOPLE ARE SENDING 
 19  PRODUCT HERE FROM GREAT DISTANCES TO ACCESS THIS MARKET 
 20  SIGNALS A VERY DIFFERENT SET OF CIRCUMSTANCES.  
 21               MS. BROWN OR MR. SIMEROTH, CAN YOU SPEAK TO 
 22  THAT IN A BIT MORE DETAIL?  DO YOU SEE THIS AS A TREND 
 23  CONTINUING?  
 24         MS. BROWN:  MR. CHAIRMAN, AGAIN, SUSAN BROWN.  I 
 25  THINK WHAT WE'VE LEARNED THROUGH THIS TRANSITION PERIOD IS 
0115
 01  THAT REFINERS ARE ABLE TO, IN FACT, IMPORT LIMITED VOLUMES 
 02  IN BOTH COMPLYING GASOLINE AND DIESEL AS LONG AS THE PRICE 
 03  IS HIGH ENOUGH TO JUSTIFY THE INITIAL TRANSPORTATION 
 04  COST.  
 05               I THINK WHAT WE HOPE AND WHAT WE THINK WILL 
 06  HAPPEN IN THE FUTURE IS AS WE GAIN EXPERIENCE WITH 
 07  REFORMULATION FUELS, NOT ONLY WOULD REFINERS ACHIEVE SOME 
 08  EFFICIENCIES OF THE REFINERY THAT WILL ACTUALLY MAKE IT 
 09  NOT NECESSARY TO IMPORT AS MUCH, BUT IT IS POSSIBLE THAT 
 10  OTHER MARKETS WILL DEVELOP TO SERVE OUR NEEDS.  
 11               SO I THINK WE ARE VERY POSITIVELY ENCOURAGED 
 12  BY WHAT WE'VE SEEN IN THE LAST SEVERAL WEEKS. 
 13         MR. DUNLAP:  OKAY.  VERY GOOD.  
 14               I APOLOGIZE.  PLEASE CONTINUE.
 15         MR. SIMEROTH:  THANK YOU, MR. CHAIRMAN.
 16               PRODUCTION PROBLEMS:  ONE OF THE CONCERNS 
 17  WAS WHETHER IT WAS BEING EXACERBATED BY OUR FUELS 
 18  PROGRAM.  EXCEPT FOR ONE MINOR PROBLEM, THE PROBLEMS THAT 
 19  WERE OCCURRING WERE NOT ASSOCIATED WITH THE REGULATIONS.  
 20  THEY WERE UNITS THAT WERE ALREADY IN EXISTENCE AT 
 21  REFINERIES.  
 22               ANY SUSPENSION -- THIS IS BASICALLY OIL 
 23  COMPANIES -- COULD HAMPER IMPORTS COMING INTO THE STATE.  
 24  YOU ARE GOING TO IMPORT IN.  THERE'S SOME CERTAINTY IT'S 
 25  GOING TO HAVE SOME VALUE BY THE TIME IT GETS HERE.
0116
 01               QUESTION:  HOW LONG WOULD TO TAKE TO MAKE 
 02  ADDITIONAL FUEL AVAILABLE?  FIRST WE LEARNED THAT 
 03  CALIFORNIA INVENTORIES OF NON-CALIFORNIA FUELING BASICALLY 
 04  COMMITTED TO SUPPLYING THE NEIGHBORING STATES THAT ARE 
 05  ACCOUNTED FOR, THAT WE USE THOSE FOR CALIFORNIA.  THEY 
 06  WERE STATES THAT HAD PROBLEMS.  THEIR TRUCKS WOULD COME 
 07  INTO CALIFORNIA AND FILL OUR TERMINALS, AND WE'D BE IN THE 
 08  SAME SITUATION.  THEY ALSO HAVE CONTRACTUAL ARRANGEMENTS 
 09  TO SUPPLY THAT FUEL TO SURROUNDING STATES.  
 10               ABILITY TO QUICKLY IMPORT FUEL WOULD ONLY BE 
 11  CHANGED IN TERMS OF TIME.  IT'S ONE OR TWO DAYS IN 
 12  BRINGING FUEL DOWN THE PACIFIC NORTHWEST.  THAT TIME IS 
 13  BASICALLY THE TIME IT WOULD TAKE TO BLEND UP A BATCH OF 
 14  COMPLYING FUEL.  THE GULF COAST/VIRGIN ISLANDS WOULD ADD 
 15  APPROXIMATELY AN ADDITIONAL WEEK, AGAIN, THE TIME NEEDED 
 16  TO BLEND UP A BATCH OF THE GASOLINE SPECIFIC FOR 
 17  CALIFORNIA.  
 18               ALLOWING INDEPENDENT MARKETERS TO IMPORT 
 19  NON-CALIFORNIA FUEL WOULD BE A VERY SHORT TERM, ONE TO TWO 
 20  DAYS, AND LIMITED BENEFITS.  THEY WOULD GO TO THE 
 21  SURROUNDING STATES AND BRING IT BACK IN BY TRUCK, WHICH 
 22  WOULD EXACERBATE THE PROBLEMS IN THE SURROUNDING STATES.   
 23               QUESTION 3:  HOW WOULD AVAILABILITY OF 
 24  ADDITIONAL FUEL AFFECT PRICE?  WE HEARD AT THE APRIL 
 25  MEETING THAT CALIFORNIA CLEANER BURNING GASOLINE IS ONLY A 
0117
 01  SMALL PART.  WE HEARD AT THAT MEETING IT IS APPROXIMATELY 
 02  FIVE TO EIGHT CENTS PER GALLON.  INCREASED SUPPLIES 
 03  NATURALLY SHOULD HAVE A DOWNWARD EFFECT ON PRICES.  IF YOU 
 04  INCREASE SUPPLIES, THAT TENDS TO RESULT IN DECREASED 
 05  PRICES.  BUT UNFORTUNATELY, AS YOU HEARD EARLIER, THAT'S 
 06  NOT THE SITUATION.  
 07               THE LAST QUESTION:  WHAT WOULD BE THE 
 08  SHORT-TERM AND LONG-TERM ENVIRONMENTAL CONSEQUENCES OF 
 09  TEMPORARY CHANGES IN THE FUEL REGULATIONS?  WE FELT THAT, 
 10  AT MOST -- AND THIS IS THE WORST CASE -- IT WOULD BE UP TO 
 11  50 PERCENT LOSS OF BENEFITS.  AND THE REASON IT'S LIMITED 
 12  BY THE 50 PERCENT IS THAT WE STILL HAVE TO COMPLY WITH THE 
 13  FEDERAL REFORM GASOLINE REQUIREMENTS.  AND THAT'S 
 14  ACHIEVING ABOUT 50 PERCENT OF OUR BENEFITS.  
 15               WE FEEL THAT WE HAVE NOWHERE NEAR APPROACHED 
 16  THAT.  AND IT WOULD REALLY BE SOMETHING MUCH LESS THAN 
 17  50 PERCENT IN REALITY.  IF IT LASTED FOR A LONG TIME, THEN 
 18  REFINERIES WOULD ADAPT, AND THE BENEFITS WOULD RANGE TO 
 19  50 PERCENT.  
 20               WITH THAT, THAT COMPLETES MY PART OF THE 
 21  PRESENTATION, AND I TURN IT BACK TO MR. BOYD FOR A 
 22  SUMMARY.
 23         MR. BOYD:  THANK YOU, MR. SIMEROTH.  
 24               MEMBERS OF THE BOARD, AS YOU CAN SEE FROM THE 
 25  SUMMARY SLIDE, WHICH SUMMARIZES THE DETAIL THAT YOU HAVE 
0118
 01  SEEN BEFORE, THERE'S BEEN NO FINDING BY THE CALIFORNIA 
 02  ENERGY COMMISSION THAT WE HAVE A SUPPLY PROBLEM IN THE 
 03  STATE.  THUS, WITH NO SUCH FINDING, IT DOESN'T TRIGGER ANY 
 04  ACTION ON THE PART OF YOUR STAFF AS INDICATED BY THE APRIL 
 05  BOARD MEETING.  
 06               WE ARE CONTINUING TO MONITOR THE PRICE AND 
 07  THE SUPPLY OF INVENTORY IN COOPERATION WITH THE ENERGY 
 08  COMMISSION.  QUITE FRANKLY, IF I HAVE A CRYSTAL BALL, IT 
 09  DOESN'T LOOK LIKE WE HAVE AN IMPENDING SUPPLY CRISIS ANY 
 10  LONGER.  PRODUCTION IN INVENTORY ARE BACK TO HISTORICAL 
 11  NORMS.  
 12               SO, AGAIN, I WOULD SAY THERE IS NO SUPPLY 
 13  PROBLEM.  AS YOU HEARD, CALIFORNIA IS NOT AN ISLAND.  VERY 
 14  SIGNIFICANT SUPPLIES OF FUEL HAVE BEEN PRODUCED IN OTHER 
 15  PARTS OF THE NATION AND THE WORLD AND TRAFFICKED TO 
 16  CALIFORNIA BY THE MARKET FORCES.  
 17               I THINK ONE THING THIS HAS PROVEN TO MANY 
 18  PEOPLE IS THAT IT IS POSSIBLE TO MAKE CALIFORNIA CLEANER 
 19  BURNING GASOLINE IN REFINERIES OUTSIDE OF THE STATE OF 
 20  CALIFORNIA IN SUFFICIENT QUANTITIES TO PROVIDE FAIRLY 
 21  SIGNIFICANT QUANTITIES OF FUEL TO THE STATE OF 
 22  CALIFORNIA.  
 23               WE, OF COURSE, REMAIN CONCERNED ABOUT ONE 
 24  ASPECT OF THIS ISSUE THAT PERHAPS EVEN PROMPTED OUR APRIL 
 25  MEETING.  THAT IS THE PRICE ISSUE.  IN MY PAINFUL 
0119
 01  EXPERIENCE THAT I REPORTED TO YOU BEFORE IN DEALING WITH 
 02  THE FUELS ARENA, PRICE SEEMS TO GO UP BY ROCKET AND DOWN 
 03  BY PARACHUTE.  AND WE SEEM TO BE PAINFULLY EXPERIENCING 
 04  THAT HERE IN THE STATE OF CALIFORNIA AT THIS TIME.  
 05               BUT IT'S BEEN SEEN THAT CLEANER BURNING 
 06  GASOLINE PRICE OF PRODUCTION IS BUT A VERY SMALL COMPONENT 
 07  OF THE TOTAL PRICE RUN-UP THAT HAS OCCURRED.  AND I THINK 
 08  WE ARE UNFORTUNATELY THE VICTIMS OF A PRICE RUN-UP THAT 
 09  TOOK PLACE CONCURRENT WITH THE IMPLEMENTATION OF OUR 
 10  REGULATION.  
 11               AND PERHAPS MANY SOUGHT OUT THIS PROGRAM AS 
 12  THE KEY CAUSE.  AND I THINK IT'S BEEN SHOWN REPEATEDLY NOW 
 13  THAT IT IS NOT A SIGNIFICANT OR ALMOST AN UNIDENTIFIABLE 
 14  PIECE OF THE TOTAL RUN-UP.  
 15               THE JUNE 1ST DEADLINE WAS MET.  WE ARE 
 16  PRODUCING ROUGHLY 35 MILLION GALLONS A DAY OF FUEL IN 
 17  CALIFORNIA.  
 18               I THINK THE ADDITIONAL POINT I WANT TO 
 19  ADDRESS IS CONTINUED REFERENCE WE SOMETIMES SEE TO THE 
 20  FACT THAT ON A FEW OCCASIONS, CALIFORNIA REFINERIES DID 
 21  NOT MEET CALIFORNIA DEMAND.  AND THEN IT STOPS THERE.  
 22  THAT TENDS TO LEAD TO THE IMPRESSION THAT THERE IS A 
 23  SHORTFALL.  I THINK YOU'VE SEEN THAT THAT SHORTFALL HAS 
 24  BEEN ADDRESSED BY IMPORTS FROM OTHER PARTS OF THE WORLD.  
 25  AND WE WOULD LIKE TO STRESS THAT IN CALCULATING WHETHER OR
0120
 01  NOT YOU HAVE A SUPPLY EMERGENCY, ONE MUST TAKE INTO
 02  ACCOUNT NOT ONLY THE DAILY PRODUCTION OF CALIFORNIA 
 03  REFINERIES AT ANY POINT IN TIME, BUT WHAT IS AN INVENTORY 
 04  AND WHAT IS HERE AND AVAILABLE DUE TO IMPORTS FROM OTHER 
 05  REGIONS.  AND WE HAVE NOT HAD A SITUATION WHERE WE TRULY 
 06  HAD LESS FUEL IN THE STATE THAN CLEANER BURNING GASOLINE 
 07  THAN WE HAD THE DEMAND FOR.  
 08               SO WITH THAT, MR. CHAIRMAN, THAT SUMMARIZES 
 09  THE FINDINGS THAT WE SOUGHT FOR YOU AND AS YOU REQUESTED 
 10  IN THE APRIL HEARING. 
 11         MR. DUNLAP:  OKAY.  THANK YOU, MR. BOYD.  
 12               I KNOW MY COLLEAGUES ON THE BOARD HAVE 
 13  QUESTIONS AS WELL.  
 14               WHAT I WOULD LIKE TO DO, JIM, IS THERE'S BEEN 
 15  A NUMBER OF THINGS ASSERTED IN THE MEDIA.  OTHER PROMINENT 
 16  REPRESENTATIVES OF ORGANIZATIONS, SOME PROMINENT, SOME 
 17  NOT, HAVE ASKED A NUMBER OF QUESTIONS.  
 18               I'VE HAD A CHANCE TO COVER SOME OF THOSE 
 19  ISSUES WITH YOU AND YOUR STAFF.  JIM, IF YOU COULD, WOULD 
 20  YOU TAKE A FEW MOMENTS AND HAVE YOUR TEAM COVER THAT 
 21  GROUND SO THAT THE BOARD MIGHT SEE MORE CLEARLY, NOT ONLY 
 22  HOW SERIOUSLY STAFF HAS TAKEN SOME OF THOSE QUESTIONS, BUT 
 23  WHAT THE RESPONSES ARE.  AND I THINK IT WILL PERHAPS SAVE 
 24  SOME OF THE QUESTIONS THAT MIGHT BE COMING FROM THE 
 25  BOARD.  
0121
 01               SO, JIM, CAN YOU TAKE A CRACK AT THAT?
 02         MR. BOYD:   YES, MR. CHAIRMAN.  THANK YOU VERY 
 03  MUCH.  
 04               WE WELCOME THIS OPPORTUNITY TO ADDRESS YOU ON 
 05  THESE ISSUES.  AS YOU KNOW FROM MY OPENING REMARKS, I DID 
 06  INDICATE THAT I FELT IT NECESSARY TO GO BEYOND PERHAPS THE 
 07  SCOPE OF THE ORIGINAL CHARGE OF THE APRIL HEARING TO TOUCH 
 08  ON SOME OF THE HISTORY OF THE PROGRAM FOR BENEFIT OF SOME 
 09  MEMBERS OF THE AUDIENCE AND THE PUBLIC.  
 10               I WOULD LIKE TO HAVE MR. SIMEROTH ADDRESS 
 11  SOME OF THE QUESTIONS THAT HAVE BEEN PUT IN THE PUBLIC 
 12  ARENA AND PUT TO THE STAFF.  
 13               WE DO TAKE ALL ISSUES QUITE SERIOUSLY.  WE 
 14  ARE A PUBLIC AGENCY, AND EVERYTHING WE HAVE IS PUBLIC 
 15  INFORMATION.  BUT MR. SIMEROTH, I THINK, WILL ADDRESS SOME 
 16  OF THE CONCERNS, BECAUSE AS I SAID IN MY INTRODUCTORY 
 17  REMARKS, IT WOULD BE UNFORTUNATE, INDEED, IF HARM WERE 
 18  DONE TO A PROGRAM THAT IS SO EFFECTIVE IF IT WERE 
 19  PREDICATED ON MISUNDERSTANDING INFORMATION.  
 20               SO WITH THAT, MR. SIMEROTH, COULD YOU ADDRESS 
 21  SOME OF THOSE ISSUES, PLEASE?
 22         MR. SIMEROTH:  THANK YOU, MR. BOYD.  
 23               I'D LIKE TO START FIRST WITH THE ISSUE THAT 
 24  IS PROBABLY THE MOST IMPORTANT, IS THAT A.R.B. STAFF 
 25  UNDERESTIMATED THE FUEL ECONOMY IMPACT OF CLEANER BURNING 
0122
 01  GAS.  AND SPENDING A LOT OF TIME LOOKING INTO THAT, I HAVE 
 02  A FEW SLIDES TO HELP ADDRESS IT.  THESE ARE OVERHEADS, BY 
 03  THE WAY.
 04               WE WENT BACK AND STARTED WITH THE BASIC 
 05  CONCEPTS.  AND LOOKING AT THE AVAILABLE INFORMATION, AUTO 
 06  OIL IS AN ACRONYM OF A STUDY THAT IS STRONGLY FINANCED BY 
 07  THE ALL OIL MANUFACTURERS IN THE UNITED STATES AND 
 08  APPROXIMATELY 14 OF THE OIL COMPANIES IN THE UNITED 
 09  STATES.  
 10               THEIR PHASE I STUDIES WOULD COST 
 11  APPROXIMATELY 13 MILLION DOLLARS TO CONDUCT.  ONE OF THE 
 12  MAJOR FINDINGS OF THESE STUDIES WAS THEY RECONFIRMED THAT 
 13  THE FUEL ECONOMY IS DIRECTLY RELATED TO THE ENERGY CONTENT 
 14  OF GASOLINE.  SO WITH THAT STATEMENT IN MIND, WE WENT AND 
 15  LOOKED AT WHAT THE HISTORIC ENERGY CONTENT OF PREVIOUS 
 16  CALIFORNIA FUELS HAVE BEEN.  
 17               WE HAD OVER 500 SAMPLES OF '90, '91 
 18  CALIFORNIA FUELS THAT HAVE BEEN ANALYZED IN '90, '91.  WE 
 19  HAD OVER 40 BATCHES OF CLEANER BURNING GASOLINE ANALYZED 
 20  FOR ENERGY CONTENT.  WHAT COMES OUT OF THAT, THE OVERALL 
 21  DIFFERENCE BETWEEN CLEANER BURNING GASOLINE AND HISTORIC 
 22  CALIFORNIA FUELS WAS ABOUT A THREE PERCENT CHANGE TO 
 23  ENERGY CONTENT FROM NONOXYGENATED ENERGY FUELS COMPARED TO 
 24  CONVENTIONAL FUELS.  
 25               THE TEST FUEL, AS YOU CAN SEE THE BARS, THERE 
0123
 01  ARE TWO STANDARD DEVIATIONS.  THE AVERAGE IS THAT MIDDLE 
 02  SQUARE OR RECTANGLE OR WHATEVER IT IS THERE.  THE BARS 
 03  REPRESENT HOW MUCH VARIATION YOU'VE SEEN IN THE DATA.      
 04               HISTORICALLY, WE HAVE HAD ABOUT A NINE 
 05  PERCENT RANGE.  CLEANER BURNER GASOLINE HAS RESULTED IN 
 06  THAT CHANGE BEING MUCH LESS.  
 07               THE TEST FUELS ARE AT THE LOWER END OF THE 
 08  RANGE.  SO THE TEST FUEL WASN'T DESIGNED TO SHOW AN UNREAL 
 09  MILEAGE IMPACT.  
 10               NEXT, PLEASE.  
 11               OUT OF THE 800 VEHICLES, WE TESTED FUEL 
 12  ECONOMY, AND FROM 131 VEHICLES, THAT SHOWS DECLINE IN 
 13  M.P.G. OF APPROXIMATELY 2.4 PERCENT.  THAT WOULD BE WITHIN 
 14  WHAT WOULD BE EXPECTED OF THE AUTO/OIL PHASE.  WE ALSO 
 15  LOOKED CONFIRMING THAT RESULT BY DOING OUR OWN DYNAMOMETER 
 16  TEST ON A LIMITED NUMBER OF VEHICLES.  AND THAT SHOWED A 
 17  DECLINE FROM 3.5 PERCENT VERSUS CONVENTIONAL VERSUS AN 
 18  OXYGENATED SOUTHERN CALIFORNIA FUEL.  THAT ALSO IS 
 19  CONSISTENT WITH THE PREVIOUS FINDINGS BY THE OIL STUDIES.  
 20               SINCE PHASE I, AUTO/OIL HAS GONE TO DO A 
 21  NUMBER OF OTHER STUDIES.  THE TOTAL EXPENDITURES ARE IN 
 22  EXCESS OF 40 MILLION DOLLARS AT THIS POINT.  
 23               LOOKING INTO GASOLINE AND VEHICLE PERFORMANCE 
 24  ISSUES, WE ISSUED A NUMBER.  THIS IS AUTO/OIL NUMBER 16.  
 25  IN THIS CASE, WE WERE ACTUALLY USING A CLEANER BURNING 
0124
 01  GASOLINE THAT FULLY COMPLIED WITH CALIFORNIA STANDARDS 
 02  AGAINST AN INDUSTRY AVERAGE REFERENCE FUEL.  SO USING 
 03  THREE VEHICLES, '92 TO '94, THERE WAS A DECLINE OF 
 04  SLIGHTLY LESS THAN FOUR PERCENT.  
 05               USING A MUCH LARGER FLEET, 23 VEHICLES, THOSE 
 06  WERE BROKEN INTO AN OLDER FLEET, A CURRENT FLEET AND 
 07  FEDERAL TIER ONE FLEET.  FEDERAL TIER ONE IS '94 
 08  TECHNOLOGY TYPE VEHICLES.  THE RANGE WAS FROM TWO TO 
 09  SLIGHTLY OVER THREE AND A HALF PERCENT DECLINE IN MILES 
 10  PER GALLON.  AGAIN, THIS WAS WITH THE NATURAL CLEANER 
 11  BURNING GASOLINE.  
 12               TECH BULLETIN 19, THE MOST RECENT ONE, JUST 
 13  CAME OUT EARLIER THIS MONTH.  THIS TIME THEY LOOKED AT NOT 
 14  ONLY CONVENTIONAL DRIVING PATTERNS, BUT SO-CALLED 
 15  OFF-CYCLE DRIVING WHERE YOU HAVE TO HAVE ACCELERATION TYPE 
 16  THINGS HAPPENING.  '89 TO '93 MODEL YEAR VEHICLES UNDER 
 17  CONVENTIONAL DRIVING CONDITIONS DECLINED ABOUT TWO 
 18  PERCENT.  THE OFF-CYCLE WAS APPROXIMATELY THREE PERCENT.  
 19               THE DEPARTMENT OF ENERGY FUNDED A STUDY OF 
 20  FIVE VEHICLES.  THESE VEHICLES WERE ONE-YEAR-OLD 
 21  CALIFORNIA VEHICLES THAT WERE PURCHASED AND TRANSPORTED TO 
 22  THE TEST SITE IN OKLAHOMA.  THEY ACCUMULATED 30,000 MILES 
 23  DRIVING AN ON-ROAD TRACK, WHICH INCLUDED FREEWAY AND CITY 
 24  DRIVING AND SITTING IN PARKING LOTS CYCLING.  COMPARED TO 
 25  A FEDERAL REFORM GASOLINE, WE SAW A DECLINE OF ABOUT TWO 
0125
 01  PERCENT.  THAT'S CONSISTENT WITH OUR PREVIOUS TEST WE 
 02  DID.  AND THAT SORT OF SUMMARIZES THAT.
 03         MR. DUNLAP:  ON THAT POINT, YOU PRESENTED CLEARLY 
 04  THAT ENERGY CONTENT IS REFLECTED IN MILES PER GALLON.  AND 
 05  THAT'S A COMMONLY ACCEPTED AND UNDERSTOOD PREMISE BY THOSE 
 06  EXPERTS IN BOTH THE AUTO AND OIL INDUSTRY; IS THAT 
 07  CORRECT?
 08         MR. SIMEROTH:  THAT'S CORRECT.
 09         MR. DUNLAP:  CAN YOU CONTRAST FOR ME AND PERHAPS 
 10  THE AUDIENCE WHAT THE IMPACT IS, SAY, ON RUNNING ONE'S AIR 
 11  CONDITIONER OR LEAVING ONE'S WINDOW OPEN OR HAVING TIRES 
 12  THAT ARE LESS THAN WHAT THE RECOMMENDED INFLATION IS IN 
 13  THEM?  
 14               DO THOSE FACTORS OUTSTRIP THE NEGATIVE IMPACT 
 15  THAT ONE COULD SEE BY REDUCING ENERGY CONTENT IN 
 16  GASOLINE? 
 17         MR. SIMEROTH:  MOST OF THOSE FACTORS WOULD BE MUCH 
 18  LARGER THAN THE DIFFERENCE WE ARE TRYING TO MEASURE IN 
 19  TERMS OF THE DIFFERENCES IN ENERGY CONTENT.  RUNNING YOUR 
 20  AIR CONDITIONER, DEPENDING ON THE CAR, CAN HAVE UP TO A 
 21  20 PERCENT DECLINE IN MILEAGE OR FUEL ECONOMY.  INCREASING 
 22  YOUR SPEED FROM 55 OR WHATEVER YOUR REFERENCE IS ON UP IS 
 23  NOT A LINEAR IMPACT.  GOING FROM 55 TO 65 WOULD HAVE, I 
 24  THINK, ABOUT A TEN PERCENT INCREASE.  WHEN GOING INTO A 20 
 25  MILE HEAD WIND, IT WOULD HAVE A ONE OR TWO PERCENT 
0126
 01  DECREASE IN MILEAGE. 
 02         MR. DUNLAP:  OKAY.  I READ SOME INTERESTING 
 03  COMPARISONS THAT THE AUTO CLUB PUT FORWARD IN ONE OF THEIR 
 04  NEWSLETTERS THAT KIND OF OPENED MY EYES TO SOME OF THE 
 05  IMPACT OF SOME OF THOSE.  
 06               MR. LAGARIAS?
 07         MR. LAGARIAS:  WOULD YOU FILL ME IN?  WHAT KIND OF 
 08  TESTS WERE THESE?  DYNAMOMETER TESTS?  TO WHAT RANGE WERE 
 09  THEY?
 10         MR. SIMEROTH:  MR. LAGARIAS, ALL THESE TESTS WERE 
 11  DYNAMOMETER TESTS.  NOW, THE D.O.E. WAS A COMBINATION OF 
 12  NATURAL DRIVING AND DYNAMOMETER TEST.
 13         MR. LAGARIAS:  DID THEY TAKE IT OVER THE FEDERAL 
 14  TEST CYCLE?
 15         MR. SIMEROTH:  THEY USED THE FEDERAL TEST CYCLE 
 16  EXCEPT FOR THE RESULTS IN 19.
 17         MR. LAGARIAS:  WHEN YOU SAY DECLINED IN NUMBER OF 
 18  MILES PER GALLON, WHAT ARE YOU COMPARING?  REFORMULATED 
 19  GAS AGAINST WHAT?
 20         MR. SIMEROTH:  AGAINST AN INDUSTRY AVERAGE THAT'S A 
 21  NATIONWIDE AVERAGE.  IT'S A FUEL THAT'S BEEN USED IN 
 22  ALMOST ALL THESE STUDIES AS REPRESENTING WHAT EXISTED IN 
 23  '90 IN THE UNITED STATES.
 24         MR. LAGARIAS:  SO YOU ARE JUST COMPARING IT TO ONE 
 25  FORMULATION.  THERE ARE A NUMBER OF FORMULATIONS, BOTH IN 
0127
 01  THE CALIFORNIA REFORMULATED GAS AND AVERAGE GAS?
 02         MR. SIMEROTH:  THE D.O.E. TEST ALSO LOOKED AT A 
 03  SECOND FUEL.  THEY LOOKED AT A CONVENTIONAL FUEL THAT WAS 
 04  ON THE MARKET IN TEXAS.  THEY SIMPLY BOUGHT IT, AND A VERY 
 05  HIGH ENERGY CONTENT IS IN THAT FUEL.  THE 90 PERCENT 
 06  DISSOLUTION POINT, WHICH IS A GOOD MEASURE OF INCREASE IN 
 07  ENERGY, WAS 30 DEGREES HIGHER THAN WHAT THE AVERAGE IS.  
 08  AND THAT SHOWED A FIVE PERCENT EFFECT BETWEEN CLEANER 
 09  BURNING GASOLINE.  
 10               FOR OUR DYNAMOMETER TEST, WE LOOKED AT A 
 11  PHASE I NORTHERN CALIFORNIA TYPE PHASE I.  AND THEN A 
 12  SOUTHERN CALIFORNIA FEDERAL FORMULATED GASOLINE IN 
 13  ADDITION TO THE --
 14         MR. LAGARIAS:  BUT CALIFORNIA GASOLINE IS ONLY A 
 15  SPECIFICATION OF EIGHT DIFFERENT PERIMETERS.  AND THERE 
 16  ARE A NUMBER OF DIFFERENT FORMULATIONS THAT ARE -- THERE 
 17  IS NO SUCH THING AS A CALIFORNIA CLEAN GAS; IS THERE?
 18         MR. SIMEROTH:  MR. LAGARIAS, YOU ARE CORRECT.  
 19  THAT'S WHY WE HAD THE 40 BATCHES ANALYZED FOR ENERGY 
 20  CONTENT TO IDENTIFY THE RANGE OF VARIATION OF GASOLINE.    
 21               WE ARE SAYING THAT IT'S ABOUT A TWO- TO 
 22  THREE-PERCENT RANGE IN ENERGY CONTENT OR THE BATCHES THAT 
 23  ARE BEING PRODUCED FOR CALIFORNIA.  
 24         MR. SCHEIBLE:  MR. LAGARIAS, THE CALIFORNIA TEST 
 25  FUEL THAT WE DESIGNED HAPPENS TO BE AT THE EXTREME LOW END 
0128
 01  OF THE RANGE.  SO WHENEVER WE USE THE CALIFORNIA TEST 
 02  FUEL, WHICH WE DID AS MUCH AS POSSIBLE IN THESE TESTS AND 
 03  IN OUR FLEET EVALUATION, WE HAVE A GASOLINE THAT'S GOT 
 04  AMONGST THE LOWEST ENERGY CONTENT OF THE FUELS WE FOUND 
 05  OUT THERE.  SO WE ARE, IN EFFECT, ON AVERAGE, 
 06  OVERESTIMATING. 
 07               IN TERMS OF WHAT WAS USED HISTORICALLY, 
 08  PROBABLY USING AN AVERAGE FUEL IS PRETTY GOOD.  THERE'S 
 09  REALLY NO CONSISTENT RELATIONSHIP OUT THERE IN TERMS OF 
 10  BRAND SO THAT THE INDIVIDUAL CONSUMER, IF HE LOOKS BACK 
 11  OVER MONTHS OF RECORDS, PROBABLY GOT SOMETHING PRETTY 
 12  CLOSE TO THE AVERAGE, BECAUSE BATCH TO BATCH IT'S 
 13  IMPOSSIBLE TO KNOW EXACTLY WHAT YOU HAD IN THE BASELINE 
 14  COMPARISON POINT.  
 15               IT WOULD BE TRUE THAT SOMEONE WHO HAPPENED TO 
 16  FUEL UP HISTORICALLY ON THE HIGH END OF THE ENERGY RANGE 
 17  AND NOW WOULD FUEL UP WITH A FUEL THAT HAPPENED TO BE ON 
 18  THE LOW END, WE'D SEE GREATER THAN THE THREE PERCENT 
 19  IMPACT.
 20         MR. LAGARIAS:  I DON'T KNOW ABOUT THAT.  I KNOW 
 21  WHEN I CHECK MY MILEAGE, SOMETIMES I'LL GET 20 MILES PER 
 22  GALLON, AND SOMETIMES I GET 30 MILES PER GALLON.  AND I 
 23  KNOW THAT MOST OF THAT IS DUE TO THE DRIVING PATTERN THAT 
 24  I AM FOLLOWING, AND I THINK THAT'S MUCH MORE SIGNIFICANT 
 25  THAN ANYTHING I'VE SEEN SO FAR.  
0129
 01         MR. SCHEIBLE:  YEAH.  AND A FEW PERCENT COULD BE 
 02  BECAUSE OF ENERGY CONTENT, DIFFERENCES BETWEEN THE TWO 
 03  BATCHES OF FUEL THAT YOU USED ON THAT COMPARISON POINT.
 04         MR. LAGARIAS:  WHAT ABOUT HORSEPOWER?  IS THERE ANY 
 05  SIGNIFICANT DIFFERENCE IN HORSEPOWER, AND WHAT IF ANYTHING 
 06  DOES THAT MEAN?  
 07         MR. SIMEROTH:  HORSEPOWER ALSO TENDS TO FOLLOW 
 08  ENERGY CONTENT.  WE'VE TALKED TO OUR MOBILE SOURCE 
 09  DIVISION AND ASKED THEM TO LOOK INTO THAT.  THERE SEEM TO 
 10  BE NO SIGNIFICANT HORSEPOWER BETWEEN CLEANER BURNING 
 11  GASOLINE AND CONVENTIONAL.  ALSO, THE SACRAMENTO FLEET WAS 
 12  THE SACRAMENTO POLICE DEPARTMENT FLEET.  WE HAD 160 POLICE 
 13  VEHICLES, AND THEY REPORTED NO SIGNIFICANT DECLINE IN THE 
 14  HORSEPOWER PERFORMANCE. 
 15         MR. DUNLAP:  IF I MAY, IF MY COLLEAGUE WILL YIELD 
 16  TO ME FOR JUST A MOMENT, LET ME GET THIS STRAIGHT.  
 17               THOSE 131 VEHICLES WERE POLICE VEHICLES, 
 18  EXCLUSIVELY?
 19         MR. SIMEROTH:  NO.  THE 131 WERE VEHICLES FROM 
 20  THREE DIFFERENT FLEETS.  
 21         MR. DUNLAP:  HOW MANY OF THE 131 WERE THE FLEET OF 
 22  THE POLICE DEPARTMENT?
 23         MR. SIMEROTH:  I'D HAVE TO LOOK.  BUT IT WAS 
 24  APPROXIMATELY HALF. 
 25         MR. DUNLAP:  SO IN THAT SENSE, 65 OR SO OF THOSE 
0130
 01  VEHICLES WERE DRIVEN BY POLICE OFFICERS IN THE FIELD IN 
 02  USE, HIGH PERFORMANCE REQUIREMENTS, AND NONE OF THEM 
 03  COMPLAINED ABOUT FUEL?
 04         MR. SIMEROTH:  I THINK WE ARE MIXING TWO THINGS 
 05  UP.  THE POLICE FLEET WAS ALL THE VEHICLES OUT OF THE 
 06  NORTHERN SACRAMENTO FACILITY.  IT WAS WELL OVER A HUNDRED 
 07  VEHICLES AND 160 OFFICERS WORKING THREE SHIFTS, SEVEN DAYS 
 08  A WEEK DRIVING THOSE VEHICLES OVER SIX MONTHS.
 09         MR. DUNLAP:  AND THEY REPORTED NO PERFORMANCE 
 10  PROBLEMS?
 11         MR. SIMEROTH:  CORRECT.  WE DOUBLED CHECKED THAT.  
 12  WE CALLED THEM THIS WEEK AND ASKED THEM IF THEY'VE SEEN 
 13  ANYTHING DIFFERENT SINCE MARCH, SINCE THEY HAVE BEEN 
 14  BURNING THE ACTUAL COMMERCIAL FUEL.  AND NO PROBLEMS.  
 15         MR. BOYD:  MR. CHAIRMAN, COULD I ELABORATE ON THIS 
 16  POINT?  AND THIS IS A MORE SIGNIFICANT POINT THAN MEETS 
 17  THE EYE, BECAUSE YOUR STAFF OVER THE YEARS HAS WORKED WITH 
 18  POLICE AUTHORITIES, MOST PARTICULARLY CALIFORNIA HIGHWAY 
 19  PATROL ON THE ISSUE OF THE PERFORMANCE OF POLICE VEHICLES 
 20  AND VARIOUS CHANGES IN THE MECHANICAL COMPOSITION OF 
 21  VEHICLES, MOST PARTICULARLY EMISSION CONTROL EQUIPMENT.    
 22               AND LET ME ASSURE YOU THAT MY EXPERIENCE FOR 
 23  A LOT OF YEARS IS THAT IF THE PERFORMANCE OF A VEHICLE 
 24  CHANGES FROM AN ACCEPTED NORM IN THIS ARENA, THE POLICE 
 25  ARENA, YOU HEAR ABOUT IT INSTANTLY.  THEY ARE VERY 
0131
 01  SENSITIVE TO THIS.  
 02               AND I MUST ADD THAT IN THE EARLY YEARS OF THE 
 03  ADDITION OF CATALYTIC CONVERTERS TO MOTOR VEHICLES, THERE 
 04  WERE INCREDIBLE ALLEGATIONS ABOUT REDUCTION IN 
 05  PERFORMANCE.  AND YOUR STAFF DID EXTENSIVE TESTING.  AND 
 06  INDEED THERE WAS A CHANGE IN PERFORMANCE OF A PARTICULAR 
 07  ANONYMOUS BRAND OF VEHICLES AT ONE POINT IN TIME ONE 
 08  YEAR.  AND THERE WERE BACK PRESSURE PROBLEMS AND 
 09  MODIFICATIONS WERE MADE TO ALLEVIATE THAT, AND NOTHING TO 
 10  DO, PER SE, WITH THE CATALYST.  
 11               THE CASE IN POINT BEING THAT THE POLICE ARE 
 12  EXTREMELY SENSITIVE TO PERFORMANCE AND THEIR ABILITY TO 
 13  ACCELERATE INSTANTLY.  SO THESE PEOPLE KNEW WHAT WAS 
 14  HAPPENING, AND I WOULD HAVE EXPECTED INSTANTANEOUS 
 15  GRIEVANCES IF THEY PERCEIVED THEM, BECAUSE THEY WOULD BE 
 16  ALMOST LOOKING FOR THEM. 
 17         MR. DUNLAP:  RIGHT.  OKAY.  
 18               MR. LAGARIAS, PLEASE CONTINUE.
 19         MR. LAGARIAS:  LAST YEAR WHEN WE HAD A SIX-MONTH 
 20  EVALUATION ON THIS CLEANER BURNING GAS, WE HAD ABOUT 600 
 21  CARS USING THIS CLEANER BURNING GAS AND 600 CARS THAT WERE 
 22  NOT.  SO WE HAD DIRECT COMPARISONS OF THEM.  AND THAT 
 23  INCLUDED THE TEXACO FLEET, THE CHEVRON FLEET, THE 
 24  SACRAMENTO POLICE CARS, CARS IN FRESNO AND IN OTHER AREAS, 
 25  INCLUDING SOUTHERN CALIFORNIA.  
0132
 01               AND ON THE AVERAGE, WHAT DID YOU FIND IN THE 
 02  WAY OF PROBLEMS, THE CONTROL FLEET VERSUS THE FLEET USING 
 03  THE CLEANER BURNING GASOLINE?
 04         MR. SIMEROTH:  THE RESULTS FROM THE TWO FLEETS WERE 
 05  VIRTUALLY THE SAME IN TERMS OF PERFORMANCE AND 
 06  COMPATIBILITY ISSUES.
 07         MR. LAGARIAS:  CHEVRON REPORTED THEY HAD SLIGHTLY 
 08  GREATER.  I THINK THEY HAD, WHAT, 60 CARS?
 09         MR. SIMEROTH:  THEY HAD 100 CARS IN, 115.  
 10         MR. LAGARIAS:  THEY REPORTED A SLIGHTLY HIGHER 
 11  INCIDENT OF PROBLEMS.  BUT WEREN'T THESE FLEET NUMBERS 
 12  ADDED IN THE OVERALL SURVEY?
 13         MR. SIMEROTH:  YES.  WE HAD 800 TEST VEHICLES.  AND 
 14  CHEVRON DID A TEST ON THEIR OWN, WHICH THEY PROVIDED DATA 
 15  TO US WHICH WE ADDED INTO OUR STUDY.  OUR REPORT ON THAT 
 16  INCLUDES THAT WE ADDED THE CHEVRON DATA TO THE PERFORMANCE 
 17  SUBCOMMITTEE TEST PROGRAM.  
 18         MR. LAGARIAS:  WAS IT THE LAWYERS THAT TOLD THEM 
 19  THAT, TO COVER THEMSELVES WHEN THEY ADDED THESE WARNING 
 20  LABELS?  
 21         MS. BROWN:  OUR SPECULATION IS THAT WHAT WE'VE BEEN 
 22  TOLD IS THEY WERE ADVISED BY THEIR LEGAL.
 23         MR. LAGARIAS:  THEY DID HAVE A NUMBER OF LAWSUITS 
 24  WHEN THE DIESEL FUEL WAS FIRST INTRODUCED, AND I THINK 
 25  THIS IS ONE OF THE REASONS WHY THEY PROTECTED THEMSELVES 
0133
 01  THIS TIME?
 02         MR. SIMEROTH:  THAT'S DEFINITELY ONE OF THE MAJOR 
 03  REASONS.  THEY HAVE A CLASS ACTION SUIT STILL IN THE WORKS 
 04  AGAINST THEM BECAUSE OF THE DIESEL PROGRAM.
 05         MR. LAGARIAS:  BUT WHEN WE ARE TALKING ABOUT 
 06  CLEANER BURNING GASOLINE, WE ARE JUST TALKING ABOUT 
 07  GASOLINE THAT MEETS ALL THE S.A.E. AND A.S.T.M. 
 08  SPECIFICATIONS; IS THIS CORRECT?
 09         MR. SIMEROTH:  YES.  OUR REQUIREMENTS DO NOT 
 10  SUPERSEDE THE A.S.T.M. SPECIFICATIONS.  THE STAFF COMPLIED 
 11  WITH THEM.  IT'S STILL FULLY COMPLYING GASOLINE IN EVERY 
 12  SENSE.  
 13         MR. LAGARIAS:  WHEN I TALKED TO THE 
 14  SANTA FE PIPELINE COMPANY, THEY TOLD ME THAT THERE WERE 
 15  ROUGHLY TEN DIFFERENT CLEANER BURNING GASOLINE 
 16  FORMULATIONS THAT THEY WERE SHIPPING AROUND THE AREA.      
 17               SUSAN, CAN YOU VERIFY THAT? 
 18         MS. BROWN:  NOT THE EXACT NUMBER, BUT THERE ARE 
 19  VARIOUS, NOT ONLY FORMULATIONS, BUT OCTANE GRADES OF 
 20  GASOLINE THAT ARE TYPICALLY SHIPPED, YES.
 21         MR. LAGARIAS:  SO IT'S POSSIBLE THAT WHEN WE TALK 
 22  ABOUT THIS GASOLINE, WE ARE TALKING ABOUT DIFFERENT BRANDS 
 23  OF GASOLINE? 
 24         MR. SIMEROTH:  YES.  
 25         MR. LAGARIAS:  WE SET UP TWO HOTLINES TO ANSWER 
0134
 01  ANY INQUIRIES AND PROBLEMS PEOPLE MAY HAVE.
 02               HOW DO THE INQUIRIES COMPARE BETWEEN 
 03  NORTHERN CALIFORNIA AND SOUTHERN CALIFORNIA?
 04         MR. SIMEROTH:  MOST OF THE INQUIRIES WE ARE GETTING 
 05  BY A WIDE MARGIN, LIKE OVER THREE TO ONE, IS COMING FROM 
 06  NORTHERN CALIFORNIA.
 07         MR. LAGARIAS:  DO YOU HAVE ANY REASON FOR THAT, 
 08  BECAUSE THERE ARE A LOT MORE SOUTHERN CALIFORNIANS THAN 
 09  THERE ARE NORTHERN CALIFORNIANS?
 10         MR. SIMEROTH:  PART OF IT COULD BE THAT SOUTHERN 
 11  CALIFORNIA, THE FEDERAL REFORM OF THE GASOLINE PROGRAM 
 12  STARTING IN DECEMBER '94 HAD A YEAR-ROUND OXYGENATED 
 13  FUEL.  PART OF IT COULD BE THE ATTENTION THAT'S PAID IN 
 14  THE MEDIA BETWEEN THE TWO AREAS.
 15         MR. LAGARIAS:  WELL, WITH THE INTRODUCTION OF 
 16  CLEANER BURNING GASOLINE, ARE WE TALKING ABOUT AN 
 17  INTRODUCTION OF MORE OXYGENATE?
 18         MR. SIMEROTH:  THE OXYGENATE IN NORTHERN CALIFORNIA 
 19  HAD ONLY BEEN USED IN THE FOUR WINTER MONTHS.  AND NOW IT 
 20  HAD TO BE USED YEAR ROUND AT APPROXIMATELY THE SAME 
 21  LEVEL. 
 22         MR. LAGARIAS:  WELL, I UNDERSTOOD THAT BECAUSE OF 
 23  THE SUPPLY AND DEMAND ISSUE, THAT THE REFINERIES WERE 
 24  PUTTING IN AS MUCH OXYGENATE AS THEY WERE LEGALLY ALLOWED, 
 25  2.7 PERCENT.
0135
 01         MR. SIMEROTH:  MR. LAGARIAS, THE PREDICTED MODEL 
 02  ALLOWS REFINERIES TO ADJUST THEIR FORMULAS TO GO UP TO
 03  2.7 PERCENT.  SOME OF THE REFINERIES WERE DOING EXACTLY 
 04  WHAT YOU ARE SAYING.  ALSO, SOME PUT IN LESS.  SO WE HAD 
 05  QUITE A WIDE RANGE OF OXYGEN CONTENT.
 06         MR. LAGARIAS:  WHEN YOU INTRODUCE OXYGENATE, IT'S 
 07  AT THE EXPENSE OF GASOLINE, AND THE ENERGY CONTENT GOES 
 08  DOWN SINCE THE OXYGENATE HAS LESS ENERGY; IS THAT CORRECT?
 09         MR. SIMEROTH:  THAT'S CORRECT, MR. LAGARIAS. 
 10         MR. LAGARIAS:  SO THE IMPACT ON OXYGENATE CAN HAVE 
 11  A SIGNIFICANT IMPACT ON TOTAL ENERGY?
 12         MR. SIMEROTH:  THE TWO PERCENT OXYGEN CONTENT WOULD 
 13  COUNT FOR ABOUT TWO PERCENT OF THE THREE PERCENT ENERGY 
 14  CONTENT REDUCTION. 
 15         MR. LAGARIAS:  THAT'S ALL FOR NOW. 
 16         MR. DUNLAP:  THANK YOU.  
 17         MR. CALHOUN:  CAN I ASK ONE QUESTION?  WOULD YOU 
 18  VERY BRIEFLY DESCRIBE THE PREDICTED MILE SO THE PEOPLE IN 
 19  THE AUDIENCE WILL HAVE AN APPRECIATION FOR WHY THE 
 20  SPECIFICATIONS ARE REQUIRED BY THE RESOURCES BOARD?  
 21         MR. SIMEROTH:  CERTAINLY, MR. CALHOUN.  THE 
 22  PREDICTED MODEL CONCEPT WAS DEVELOPED BY TRADITIONAL 
 23  FLEXIBILITY TO REFINERS IN PRODUCING GASOLINE THAT 
 24  COMPLIED WITH OUR REQUIREMENTS.  THE PREDICTED MODEL WAS 
 25  BASED UPON OVER 700 INDIVIDUAL TESTS.  OVER A THOUSAND 
0136
 01  VEHICLES WERE TESTED.  IT WAS CREATED INTO A DATABASE AND 
 02  WE USED A COMPUTER TO DEVELOP A RELATIONSHIP BETWEEN THE 
 03  SEVEN PERIMETERS AND THE BENEFITS OF V.O.C. REDUCTIONS, 
 04  NOX REDUCTIONS, TOXICS REDUCTIONS.                
 05               THIS ALLOWS THE REFINER TO LOOK AT HIS 
 06  INDIVIDUAL SITUATION, HIS REFINING PROCESSES, SAY, "WELL, 
 07  I HAVE A VERY LOW SULFUR CONTENT.  THAT MEANS I CAN SHIFT 
 08  MY OTHER PERIMETERS TO TAKE ADVANTAGE OF THAT INHERENTLY 
 09  LOW SULFUR CONTENT WITH THE GASOLINE THEY ARE PRODUCING," 
 10  AS AN EXAMPLE.  
 11               THIS STILL GIVES THE SAME ENVIRONMENTAL 
 12  BENEFIT.  AS MR. LAGARIAS INDICATED, SOME OF THE 
 13  REFINERIES TOOK ADVANTAGE OF THE PREDICTED MODEL TO 
 14  ACTUALLY PUT MORE OXYGENATES IN TO INCREASE THE VOLUMES 
 15  THEY WERE SUPPLYING.  
 16         MR. CALHOUN:  THANK YOU.  
 17               I HAVE ONE OTHER QUESTION.  IT'S BEEN 
 18  TROUBLING ME SINCE I HEARD OF THIS.  AND FOR A MEANINGFUL 
 19  COMPARISON OF THE FUEL ECONOMY INPACTS ON ANY GIVEN 
 20  ENGINE, IT SEEMS TO ME THAT THERE HAS TO BE SOME TYPE OF 
 21  STANDARDIZED TEST.  AND THE ENVIRONMENTAL PROTECTION 
 22  AGENCY EACH YEAR CERTIFIES VEHICLES, AND THEY DID IN THE 
 23  PAST, AND I ASSUME THAT THEY STILL DO.  
 24               THE PUBLIC FUEL ECONOMY DATA AND THOSE TESTS 
 25  FROM WHICH THE DATA ARE OBTAINED ARE BASED ON A 
0137
 01  STANDARDIZED TEST.  AND IT'S CAREFULLY CONTROLLED.  AND 
 02  WHAT I HAVE SAID EARLIER, I THINK FOR A MEANINGFUL 
 03  COMPARISON, THE TEST HAS TO BE VERY CAREFULLY CONTROLLED. 
 04         MR. DUNLAP:  IF I COULD?  THANK YOU, MR. CALHOUN.   
 05               BACK TO THE STUDY SLIDE, IF YOU PUT THAT UP 
 06  JUST FOR A MOMENT, THIS IS A QUESTION FOR YOU, 
 07  MR. CALHOUN.  OUR STUDY WAS 131 VEHICLES, AS MR. SIMEROTH 
 08  OUTLINED.  SO YOU'VE HAD A NUMBER OF YEARS EXPERIENCE IN 
 09  THE PRIVATE SECTOR WORKING FOR AUTO COMPANIES.  
 10               CAN YOU SPEAK TO THE NUMBER OF VEHICLES IN 
 11  THESE STUDIES HERE THAT HAVE BEEN DONE BY AUTO AND OIL 
 12  INDUSTRY STUDY?  ARE THOSE REPRESENTATIVE?  I MEAN, ARE 
 13  THOSE STATISTICALLY SIGNIFICANT?  WHAT'S YOUR COMFORT 
 14  LEVEL WITH THE NUMBERS THERE?
 15         MR. CALHOUN:  OBVIOUSLY THE NUMBER OF VEHICLES THAT 
 16  YOU TEST INCREASES YOUR CONFLICT LEVEL.  AND THE THREE 
 17  VEHICLES IN THE FIRST ONE UP THERE, I DON'T KNOW HOW MANY 
 18  TESTS WERE PERFORMED.  IT COULD HAVE BEEN REPLICATIONS.  
 19  AND IT COULD HAVE TESTED THOSE THREE VEHICLES 50 TIMES.   
 20               SO LIKEWISE, THE SAME IS TRUE WITH ALL THE 
 21  OTHER VEHICLES THERE.  IN MANY, MANY CASES, THEY DO 
 22  REPLICA TESTING.  AND AS I INDICATED EARLIER, THE MORE 
 23  VEHICLES YOU HAVE AND THE MORE TEST DATA YOU HAVE, YOUR 
 24  CONFLICT LEVEL INCREASES.  
 25
0138
 01               AND THE AIR RESOURCES BOARD HAD ADVANTAGE OF 
 02  ALL OF THAT KNOWLEDGE WHEN THEY STARTED PROPOSING THESE 
 03  REGULATIONS, AND I THINK IT'S VERY, VERY IMPORTANT TO HAVE 
 04  PEOPLE UNDERSTAND THAT.  I DON'T THINK THIS IS A HOAX WE 
 05  ARE PERPETRATING ON THE STATE OF CALIFORNIA.  I THINK THE 
 06  BOARD HAS ACCESS TO A LOT OF DATA BEFORE THEY PROPOSE 
 07  THESE REGULATIONS.
 08         MR. DUNLAP:  WHAT WAS THE PRICE TAG AGAIN, 
 09  MR. SIMEROTH, OF THESE STUDIES? 
 10         MR. SIMEROTH:  THE ENTIRE AUTO/OIL PROGRAM WAS IN 
 11  EXCESS OF 40 MILLION DOLLARS. 
 12         MR. DUNLAP:  40 MILLION DOLLARS.  
 13               JOE, YOU ARE TELLING ME, EVEN THOUGH IT MAY 
 14  LOOK LIKE A SMALL NUMBER OF VEHICLES THAT THEY TESTED 
 15  NUMEROUS TIMES, 50, WHATEVER THE NUMBER IS, THAT THERE'S A 
 16  HIGH CONFIDENCE YOU WOULD HAVE IN THE RESULTS?  
 17         MR. CALHOUN:  YES, SIR. 
 18         MR. DUNLAP:  THANK YOU.  
 19         MR. VAGIM:  WHAT WERE THE DATES OF THESE, 16, 17, 
 20  19?
 21         MR. SIMEROTH:  19 WAS DONE I BELIEVE ABOUT SIX 
 22  MONTHS OR SO AGO.  THE 16 WAS DONE ABOUT A YEAR AGO.  AND 
 23  THE 17 WAS DONE IN BETWEEN, ROUGHLY.  I'D HAVE TO LOOK UP 
 24  THE EXACT DATES ON THE REPORTS. 
 25         MR. VAGIM:  ROUGHLY A YEAR AGO, YOU SAY?
0139
 01         MR. SIMEROTH:  OVER THE LAST TWO YEARS THOSE TESTS 
 02  HAVE BEEN DONE. 
 03         MR. DUNLAP:  DEAN, DO YOU HAVE ANY FINAL POINTS YOU 
 04  WANTED TO MAKE?  
 05               SUPERVISOR ROBERTS HAS BEEN VERY PATIENT AND 
 06  HAS A FEW QUESTIONS HE'D LIKE TO ASK.
 07         MR. SIMEROTH:  THE FINAL POINT IS THAT THE 
 08  PERFORMANCE SUBCOMMITTEE, IN LOOKING AT ALL INFORMATION -- 
 09  AND A LOT OF THOSE MEMBERS HAD SERVED ON THE AUTO/OIL 
 10  COMMITTEES, AND WE'RE USING A LOT OF EXPERIENCE -- THEIR 
 11  ASSESSMENT WAS A THREE PERCENT DECREASE WOULD BE 
 12  REASONABLE COMPARED TO A CONVENTIONAL OF NONOXYGENATED 
 13  GASOLINE AND A ONE PERCENT DECREASE COMPARED TO AN 
 14  OXYGENATED GASOLINE. 
 15         MR. DUNLAP:  THIS WAS HOW MANY MEMBERS? 
 16         MR. SIMEROTH:  APPROXIMATELY 50 MEMBERS, MOSTLY 
 17  REPRESENTING THE AUTO/OIL INDUSTRY, BUT ALSO FLEET 
 18  MANAGERS AND OTHER USER GROUPS WERE REPRESENTED BY THIS 
 19  SUBCOMMITTEE.
 20         MR. DUNLAP:  PEOPLE THAT HAVE REAL WORLD IN-USE 
 21  EXPERIENCE WITH PERFORMANCE.  AND PLUS, MR. LAGARIAS AND 
 22  MR. CALHOUN ALSO PARTICIPATED.
 23         MR. SIMEROTH:  YES. 
 24         MR. DUNLAP:  OKAY.  VERY GOOD.  
 25         MR. SIMEROTH:  NEXT, OUT OF THE 800 VEHICLES, WE 
0140
 01  ONLY USED 131.  AND THESE WERE SELECTED TO, QUOTE, SKEW 
 02  THE RESULTS.  OUR PROGRAM WAS DESIGNED TO INCLUDE THE 
 03  WIDEST VARIETY OF VEHICLES TO ALLOW EVALUATION OF 
 04  PERFORMANCE AND COMPATIBILITY ISSUES.  WE WANT TO GET 
 05  EVERY TYPE OF VEHICLE REPRESENTED.  SO THE FLEETS 
 06  REPRESENTED EVERYTHING FROM HEAVY-DUTY VEHICLES USED IN 
 07  CONSTRUCTION WITH CAL TRANS TO LIGHT-DUTY VEHICLES SERVED 
 08  AS RENTAL VEHICLES, THAT EFFECT.  
 09               THE FUEL ECONOMY EFFECT, AS YOU HEARD, WE ARE 
 10  LOOKING FOR CONFIRMATION OF THE IMPACT USING REAL WORLD 
 11  EXPENSE.  ALL DATA WAS MADE AVAILABLE TO EVERYONE WHO 
 12  WANTED ACCESS TO IT.  BUT CERTAINLY IT WAS MADE AVAILABLE 
 13  TO THE MEMBERS OF THE PERFORMANCE SUBCOMMITTEE FOR THEIR 
 14  REVIEW AND CONCURRENCE WITH THE FINDINGS.  
 15               PACIFIC BELL HAD TWO FLEETS IN THE PROGRAM, 
 16  ONE IN ORANGE COUNTY AND ONE IN SACRAMENTO.  G.T.E. HAD A 
 17  FLEET IN SOUTHERN CALIFORNIA, VENTURA.  THEY WERE MAINLY 
 18  VANS FROM LIGHT-DUTY VANS TO VERY HEAVY-DUTY TRUCKS.  
 19               BANK OF AMERICA TEST VEHICLES WAS RELATIVELY 
 20  A SMALL FLEET, ONLY APPROXIMATELY 20 VEHICLES.  DURING THE 
 21  TEST PROGRAM, FOR VARIOUS REASONS, THEY HAD TO USE 
 22  CONVENTIONAL FUEL AS WELL AS THE TEST FUEL ON THE 
 23  VEHICLES, WHICH COMPLICATED USING DATA FROM THAT FLEET.    
 24               CAL TRANS'S FLEET WAS PRIMARILY HEAVY-DUTY 
 25  TRUCKS USED IN CONSTRUCTION AND SUBJECT TO LONG PERIODS OF 
0141
 01  IDLING.  
 02               THE CALIFORNIA STATE UNIVERSITY FRESNO FLEET 
 03  WAS BASICALLY USED ON CAMPUS.  THEY GO A MILE OR TWO AND 
 04  THEN SET FOR A LONG TIME, GO A MILE OR TWO BACK.  WE HAD 
 05  ONE VEHICLE THAT WAS DOING A THOUSAND MILES A YEAR.  WE 
 06  DID USE SOME VEHICLES IN THE STATE CALIFORNIA UNIVERSITY 
 07  FLEET IN OUR 131 FLEET.  
 08               FROM THE CITY AND COUNTY OF SACRAMENTO, WE 
 09  USED A TOTAL OF 161 VEHICLES OUT OF THEIR 279 VEHICLE 
 10  FLEET THAT WERE COMBINED BETWEEN THE TWO.  THE REASON WE 
 11  DIDN'T USE THE OTHER VEHICLES IS BASICALLY THE LACK OF 
 12  DATA.  WE FOUND OUT THAT THE PEOPLE DRIVING THESE VEHICLES 
 13  ARE NOTORIOUS FOR NOT PUTTING IN ACCURATE ODOMETER 
 14  READINGS.  IT IS ALMOST IMPOSSIBLE TO GO BACK AND CORRECT 
 15  THOSE.  WE HAD ONE THAT THE STARTING ODOMETER READING WAS 
 16  OVER A MILLION MILES, AND THAT'S IMPOSSIBLE IN THE FIRST 
 17  PLACE TO HAVE THAT ON YOUR ODOMETER.  SO WE HAD A NUMBER 
 18  OF COMPLICATIONS THAT MADE IT DIFFICULT TO RECONCILE THE 
 19  DATA FROM ALL THE VEHICLES USED IN THE PROGRAM.  
 20               ALL THE DATA WAS AVAILABLE TO THE PEOPLE WHO 
 21  REVIEWED THE TEST PROGRAM.  AND THE CONCLUSION WAS MADE 
 22  BASED UPON THOSE 50 INDIVIDUALS LOOKING AT THE DATA.  
 23         MR. BOYD:  MR. CHAIRMAN, IF I COULD JUST ADD, THAT 
 24  IS THE STANDARD SCIENTIFIC METHOD THAT'S FOLLOWED IN ANY 
 25  REGIME, LOOKING AT DATA TO QUALITY ASSURE THE DATA TO 
0142
 01  ASSURE THAT THERE ARE NO DATA THAT WERE BIASED RESULTS ONE 
 02  WAY OR ANOTHER.  
 03               AND, AGAIN, THIS WAS DONE PUBLIC.
 04         MR. DUNLAP:  SO THE DATA YOU USED WAS ABSOLUTELY 
 05  CORRECT; YOU WANTED TO MAKE SURE IT WAS SUFFICIENT QUALITY 
 06  AND DEFENSIBLE SO THAT IT WOULD ACTUALLY SHED SOME LIGHT 
 07  ON WHAT WE WERE GOING TO DETERMINE?
 08         MR. SIMEROTH:  THAT'S CORRECT, CHAIRMAN DUNLAP.  
 09               WE NEVER CALCULATED THE OVERALL AVERAGES TO 
 10  EVEN KNOW WHAT THE FLEETS RECEIVED.
 11         MR. DUNLAP:  VERY GOOD.  THANK YOU FOR THAT.  
 12  THAT'S A KEY CLARIFYING POINT.  I HOPE THAT SOME PEOPLE IN 
 13  THE ROOM WILL PICK UP ON THE IMPORTANCE OF THAT POINT.     
 14               MR. LAGARIAS.
 15         MR. LAGARIAS:  WITH REGARD TO THAT SACRAMENTO DATA, 
 16  IS THAT BOTH THE CONTROL AND THE TEST FLEET, THE 131 CARS?
 17         MR. SIMEROTH:  THE 131 I MENTIONED IS ONLY THE TEST 
 18  VEHICLES.
 19         MR. LAGARIAS:  WAS THERE A CONTROL FLEET GOING ON 
 20  AT THE SAME TIME?
 21         MR. SIMEROTH:  THERE'S A CONTROL FLEET GOING ON FOR 
 22  BOTH THOSE FLEETS AT THE SAME TIME.
 23         MR. LAGARIAS:  SO THAT THE COMPARISON WAS MADE OF 
 24  THE SAME TYPE OF CARS IN PERFORMANCE BETWEEN THE CONTROL 
 25  GAS, THE TEST GAS AND THE OLD GAS?
0143
 01         MR. SIMEROTH:  WE TOOK THE TEST FLEET AND WENT BACK 
 02  A YEAR IN TIME.  AND OVER THE SAME RELATIVE TIME PERIOD, 
 03  SAME APPROXIMATE VOLUME OF FUEL FOR THOSE VEHICLES, AND 
 04  LOOKED AT THE IMPACT ON GAS MILEAGE, LOOKING BACK 
 05  HISTORICALLY FOR THOSE VEHICLES TO A CONVENTIONAL 
 06  GASOLINE.  
 07               WE DID THE SAME THING FOR THE CONTROL FLEET.  
 08  WE FOUND THAT YOU CAN'T SIMPLY LOOK BACK IN TIME.  THERE 
 09  NEEDS TO BE SOME ADJUSTMENTS MADE.  IF WE HAD TO MAKE 
 10  THOSE ADJUSTMENTS, THE MILEAGE THAT WE WOULD BE REPORTING 
 11  WOULD BE LESS THAN WHAT WE ENDED UP REPORTING.  
 12               SO WE USED ALL THE DATA, BOTH CONTROL AND 
 13  TEST, FOR THOSE VEHICLES.
 14         MR. BOYD:  WE WENT THROUGH GREATER PAINS TO BE AS 
 15  CONSERVATIVE AS POSSIBLE IN THE APPROACH AND BE AS 
 16  THOROUGH AS ONE COULD BE IN THE APPROACH.  
 17         MR. SIMEROTH:  THE OTHER ASSERTION HAS BEEN THAT 
 18  THE FUEL ECONOMY CALCULATED WERE BASED ON FEDERAL R.F.G. 
 19  AND NOT TO CONVENTIONAL FUEL.  
 20               GOING BACK HISTORICALLY TO THE '94 RECORDS, 
 21  THE BASIS FOR THE FUEL ECONOMY COMPARISON, THERE WAS NO 
 22  FEDERAL R.F.G. IN '94.  ALSO, SACRAMENTO AT THAT TIME 
 23  WASN'T A FEDERAL R.F.G. AREA, AND NO FEDERAL R.F.G. WAS 
 24  BEING SUPPLIED TO THAT AREA.  
 25               IT TURNED OUT TO BE UNFORTUNATE, BUT THE 
0144
 01  COMPARISON ENDED UP NOT USING THE FUEL FROM SOUTHERN 
 02  CALIFORNIA.  
 03               THE OTHER WAS WE TESTED, QUOTE, TEXAS FUEL.  
 04  IT WAS OUR TEST FUEL.  THAT IS CORRECT.  FUEL WAS PRODUCED 
 05  IN TEXAS.                    
 06               THERE ARE TWO REFINERIES IN THE UNITED STATES 
 07  THAT TEND TO PRODUCE TESTS OR SPECIALTY FUELS OF THE TYPE 
 08  OF VOLUME THAT WE ARE PURCHASING FOR OUR TESTS.  WE PUT 
 09  OUT OPEN BID FOR PEOPLE TO SUPPLY US WITH THE FUEL.  
 10               A SUBCOMMITTEE PROBABLY SPENT AS MUCH TIME 
 11  ON THIS PARTICULAR ISSUE OF DESIGNING SPECIFICATIONS OF 
 12  TEST FUEL AS THEY DID THE SINGLE PART OF THE TESTS OVER 
 13  THE SIX MONTHS.  THE PERFORMANCE SUBCOMMITTEE WANTED TO 
 14  MAKE SURE THE FUEL WAS REPRESENTATIVE OF TYPICAL 
 15  CALIFORNIA CLEANER BURNING GASOLINE THAT WE'D PRODUCE IN 
 16  THE FUTURE.  
 17               WE NOT ONLY SET THE SPECIFICATIONS FOR THE 
 18  '89 PERIMETERS THAT WE REGULATE.  WE ALSO SET 
 19  SPECIFICATIONS FOR THE REFINERY PROCESSES AND WHAT'S TO BE 
 20  USED IN PRODUCING THE FUEL TO BE PRODUCED IN CALIFORNIA.   
 21               IF YOU REMEMBER THE PREVIOUS CHART, YOU SAW 
 22  THAT WE ENDED UP AT THE LOW END OF THE ENERGY CONTENT 
 23  RANGE, NOT AS A TYPICAL CLEANER BURNING GASOLINE THAT WE 
 24  USED IN THE TEST PROGRAM.  AND ALSO YOU'VE HEARD WE HAD 
 25  FOUR MILLION BARRELS REPORTED FOR VARIOUS PARTS.  WE DON'T 
0145
 01  JUST USE FUEL IN CALIFORNIA THAT'S ONLY PRODUCED IN 
 02  CALIFORNIA.  WE HAVE A FAIR AMOUNT OF FUEL SUPPLIED FROM 
 03  TEXAS AND THE VIRGIN ISLANDS AND ELSEWHERE AROUND THE 
 04  WORLD USED IN CALIFORNIA.
 05         MR. BOYD:  I WANT TO REEMPHASIZE THOSE TWO POINTS. 
 06  ONE IS THE CONSERVATIVE FORMULA USED IN THE TEST FUEL AND 
 07  THE TREMENDOUS AMOUNT OF EFFORT THAT THE ADVISORY 
 08  COMMITTEE PUT INTO GETTING A FORMULA THAT WOULD BE AS 
 09  REPRESENTATIVE AS POSSIBLE OF CALIFORNIA FUEL, RECOGNIZING 
 10  AS, MR. LAGARIAS, YOU POINTED OUT EARLIER, THAT ON ANY 
 11  GIVEN DAY, FUELS VARY.  
 12               THE SECOND POINT, OF COURSE, IS THIS TEST WAS 
 13  OCCURRING AT A TIME WHEN CALIFORNIA REFINERIES WERE 
 14  CONVERTING OVER.  SO THEY WEREN'T ABLE TO MEET FUEL.  AND 
 15  THAT'S IN IRRELEVANT POINT ANYWAY.  GASOLINE IS A FUNGIBLE 
 16  ITEM.  GASOLINE COMES FROM ALL OVER THE WORLD.  WE HAD 
 17  PROVEN RECENTLY THAT CALIFORNIA'S NEW CLEANER BURNING 
 18  GASOLINE IS A FUNGIBLE ITEM.  IT CAN COME FROM ANYWHERE.  
 19  THE POINT IS:  DOES IT MEET THE SPECIFICATIONS OF THE 
 20  STATE OF CALIFORNIA, NOT WHERE IT CAME FROM.  THAT'S A 
 21  TOTALLY IRRELEVANT POINT. 
 22         MR. DUNLAP:  ANYTHING ELSE, MR. SIMEROTH?
 23         MR. SIMEROTH:  THE FINAL ASSERTION HAS BEEN THE 
 24  PRODUCTIONS IN FUEL ECONOMY MAY OFFSET THE EMISSION 
 25  BENEFITS.  
0146
 01               EMISSION BENEFITS ARE DETERMINED ON A MASS 
 02  PER MILE TRAVEL OF VOLUME OF FUEL USED.  AND FROM THE 
 03  PREVIOUS TEST PROGRAMS, A LOT OF THOSE PROGRAMS WERE ALSO 
 04  TO LOOK AT EMISSION BENEFITS AS WELL AS MILEAGE IMPACTS.  
 05  AND SO THE MILEAGE AFFECT WAS PART OF THE PROGRAM.  THE 
 06  BASIC THING IS WE LOOK AT EMISSIONS ON A MILES TRAVELED, 
 07  NOT ON VOLUME USED. 
 08         MR. DUNLAP:  OKAY.
 09               ALL RIGHT.  THANK YOU.  
 10               WE HAVE ONE PERSON SIGNED UP TO TESTIFY.  
 11               AND IF IT'S OKAY WITH MY BOARD MEMBER 
 12  COLLEAGUES, I'LL HAVE HER COME FORWARD.  
 13               JAN SPEELMAN IS FROM THE AUTOMOTIVE TRADE 
 14  ORGANIZATIONS OF CALIFORNIA.  SHE WANTS TO TALK TO US 
 15  ABOUT SERVICE STATIONS. 
 16               GOOD MORNING.  YOU ARE OUR SOLE WITNESS.
 17         MS. SPEELMAN:  THAT'S IT THIS MORNING?  LAST TIME 
 18  YOU INTRODUCED ME, IT WAS AUTOMOTIVE TRADE ORGANIZATIONS 
 19  OF AMERICA, WHICH MY MEMBERSHIP GREW IN LEAPS AND BOUNDS 
 20  IN SECONDS.  I KIND OF LIKED THAT.  BUT IT TRULY IS 
 21  CALIFORNIA.  
 22               WE ARE THE LARGEST TRADE ASSOCIATION 
 23  REPRESENTING SERVICE STATIONS AND AUTOMOTIVE SERVICE 
 24  RETAILERS IN THE STATE.  WHAT I WANTED TO SAY TODAY WAS 
 25  PRETTY SIMPLE.  
0147
 01               FIRST OF ALL, THAT THROUGH MY MEMBERSHIP, 
 02  FAMILY, ACQUAINTANCES, EVEN SOME STRANGERS WHEN I FIGURED 
 03  I COULD ASK THEM AND DIDN'T GET IN TROUBLE, WE HAVE FOUND 
 04  NO PERFORMANCE AND NO MILEAGE CONCERNS.  AND I THINK 
 05  THAT'S SIGNIFICANT.  
 06               WE ARE TALKING ABOUT A GROUP OF PEOPLE WHO 
 07  NOT ONLY PUMP IT, BUT SEE REGULAR CUSTOMERS WHO WOULD BE 
 08  COMING BACK.  IF THEY ARE COMING BACK MORE OFTEN WITH LESS 
 09  MILEAGE, I THINK WE'D HEAR ABOUT IT.  WE CERTAINLY HEARD 
 10  ABOUT THE PRICE ESCALATIONS AND ALSO THE REPAIR END OF OUR 
 11  MEMBERSHIP.  
 12               I'VE ASKED NUMBERS.  I COULD PROBABLY SAY THE 
 13  TELEPHONE SURVEY WAS WELL OVER A HUNDRED.  ALSO, ANYONE 
 14  WHO CALLS IN, WE SORT OF DO THESE RANDOM QUESTIONS.  AND 
 15  CALIFORNIA REFORMULA GASOLINE HAS BEEN ONE OF THOSE.  AND 
 16  WE HAVE FOUND NO PERFORMANCE PROBLEMS.  WE FOUND NO REPAIR 
 17  PROBLEMS.  WE HAVEN'T FOUND AN INCREASE IN EVEN THE HIGHER 
 18  MILEAGE VEHICLES WITH SOME FUEL PROBLEMS SUCH AS WE WERE 
 19  PERHAPS EXPECTING.  SO I JUST DON'T BELIEVE THAT IT IS A 
 20  SIGNIFICANT PROBLEM, NO MORE SO THAN PERHAPS CHANGING OVER 
 21  TO OXYGENATED FROM NONOXYGENATED IN THE PAST.  
 22               THERE ARE GOING TO BE SOME PROBLEMS, OF 
 23  COURSE, WHEN YOU CHANGE FUELS.  WE JUST HAVEN'T SEEN 
 24  THEM.  AND THESE ARE THE PEOPLE THAT ARE ON THE FRONT 
 25  LINE.  SO I WANTED TO SHARE THAT WITH YOU. 
0148
 01         MR. DUNLAP:  THANK YOU VERY MUCH.  
 02               CAN YOU GIVE ME A PERSPECTIVE ON YOUR 
 03  MEMBERSHIP AGAIN? 
 04         MS. SPEELMAN:  CERTAINLY.  WE HAVE, OF COURSE, THE 
 05  GASOLINE RETAILERS, ANY FUEL RETAILERS.  MANY OF THEM SELL 
 06  DIESEL ALSO.  MANY OF THOSE ARE CONVENTIONAL SERVICE 
 07  STATIONS, WHICH ALSO INCLUDE THE REPAIR COMPONENT.  MANY 
 08  OF THOSE ALSO SELL TWINKIES AND DO CARWASHES.  
 09               HOWEVER, WE ALSO HAVE REPAIR SHOPS, REGULAR 
 10  REPAIR SHOPS WHO ARE MEMBERS OF OUR ORGANIZATION.  IT IS 
 11  THE FULL SPAN OF AUTOMOTIVE SERVICE, IF YOU WILL, IN THE 
 12  AFTER MARKET SECTOR.  
 13               ALSO, I PERSONALLY DID SOME MILEAGE TESTS.  
 14  LAST OCTOBER AND NOVEMBER, ANTICIPATING WHAT WAS COMING, 
 15  OF COURSE, AND SERVING ON THE COMMITTEE, AN ADVISORY 
 16  COMMITTEE WITH MANY OF THE WONDERFUL PEOPLE SITTING UP 
 17  HERE, I DID SOME TESTS OF MY OWN ON MY OWN PERSONAL CAR.   
 18               I DRIVE A 1992 FORD.  I DO TUNE IT UP.  I DO 
 19  MAKE SURE THAT I HAVE OIL CHANGES REGULARLY AND SO ON.  
 20  BUT I DID MY MILEAGE OCTOBER, NOVEMBER.  AND I STARTED 
 21  DOING IT AGAIN ABOUT APRIL 15TH WHEN I COULD DEFINITELY 
 22  SAY TO ANYONE THAT I WAS PUMPING CALIFORNIA REFORMULATED 
 23  GAS IN MY CAR.  
 24               AND I HAVE SEEN NO SIGNIFICANT CHANGE IN 
 25  MILEAGE.  I AM WELL WITHIN THE RANGE THAT WE EXPECTED.  
0149
 01  WHEN I WAS IN THE MOUNTAINS, I HAD A REDUCTION IN MILEAGE, 
 02  BUT I DID WHEN I WAS USING CONVENTIONAL FUEL.  SO THERE 
 03  REALLY ISN'T A DIFFERENCE IN MY DRIVING.  
 04               MY FAMILY HASN'T NOTICED THAT, NOR HAVE THE 
 05  PEOPLE THAT I HAVE TALKED TO, FRIENDS AND ACQUAINTANCES.  
 06  SO I WANTED TO SHARE THAT TODAY FOR THE RECORD. 
 07         MR. DUNLAP:  THANK YOU.
 08         MS. SPEELMAN:  I BELIEVE AND I THINK ALSO SOMETHING 
 09  I WANTED ON THE RECORD IS THAT AUTO BELIEVES IN CALIFORNIA 
 10  REFORMULATED FUEL.  WE HAVE SUPPORTED IT FROM THE 
 11  BEGINNING.  
 12               AND WE BELIEVE IT'S A SIGNIFICANT STEP, AND 
 13  IN CONNECTION WITH OUR SMOG CHECK PROGRAM, IT IS THE ONLY 
 14  WAY WE ARE GOING TO GET SIGNIFICANT REDUCTIONS IN AIR 
 15  POLLUTION.  AND I THINK IT NEEDS TO BE BACKED.  
 16               AND I THINK THAT THE REFORMULATION HAS TAKEN 
 17  HITS BASED ON THE PRICE INCREASES AND THAT THOSE HITS ARE 
 18  UNWARRANTED.  AND WE HAVE TAKEN EVERY OPPORTUNITY TO SHARE 
 19  THAT WITH MEDIA WHEN WE HAVE HAD A CHANCE, THAT IT IS NOT 
 20  CALIFORNIA REFORMULATED FUEL THAT WAS EVEN WHAT WE 
 21  CONSIDER A MINOR PART OF THE INCREASE IN PRICES.  HOWEVER, 
 22  IT'S TAKEN A HUGE AMOUNT OF THE WRAP.  
 23               I DID WANT TO SHARE FOR THE RECORD THE 
 24  DEPARTMENT OF ENERGY SUBMITTED A REPORT TO THE WHITE HOUSE 
 25  YESTERDAY.  AND I ONLY HAVE THE ORAL.  IT'S A FAIRLY THICK 
0150
 01  REPORT, AND I DON'T HAVE IT YET IN MY HOT LITTLE HANDS.  
 02  BUT IT WAS SHARED WITH ME THAT THOSE PRICE INCREASES WERE 
 03  IN REFINERY MARGINS, AND IT'S IMPORTANT TO NOTE THAT THE 
 04  REFINERY MARGINS, ACCORDING TO THE DEPARTMENT OF ENERGY, 
 05  IN CALIFORNIA WENT FROM ABOUT 13 CENTS A GALLON TO ABOUT 
 06  35 CENTS A GALLON.  AND THAT'S WHERE THE PRICES WENT.  
 07               IT WAS NOT IN THE CALIFORNIA REFORMULATION.  
 08  AND THAT, TO ME, WAS A REAL SIGNIFICANT PART OF THIS 
 09  REPORT.  WE WERE EAGER TO HAVE THAT BROUGHT OUT.  AND 
 10  THANK GOODNESS IT WAS.  IT'S THE FIRST TIME WE HAVE EVER 
 11  HAD THIS IN A MAJOR REPORT LIKE THIS, AND THEY DID 
 12  SEPARATE OUT CALIFORNIA, BECAUSE OUR PROBLEMS HERE ON THE 
 13  WEST COAST ARE DIFFERENT THAN MANY PARTS OF THE UNITED 
 14  STATES.  
 15               AND, MOSTLY, I WANTED TO POINT OUT THAT IT'S 
 16  TIME TO TAKE THE FINGER AWAY FROM CALIFORNIA REFORMULATED 
 17  GASOLINE AND HOPEFULLY GET MORE PEOPLE ON BOARD TO ACCEPT 
 18  THIS AND APPLAUD ITS USE AND TO START POINTING THE FINGER 
 19  OF BLAME AS FAR AS THE PRICE INCREASES AT THE MARKETPLACE 
 20  WHERE IT BELONGS AND THE LACK OF A COMPETITIVE 
 21  MARKETPLACE, WHICH UNFORTUNATELY, THIS BOARD CAN'T HELP US 
 22  WITH.  BUT WE PLAN ON WORKING WITH THE LEGISLATURE TO DO 
 23  JUST THAT.  
 24               I THANK YOU VERY MUCH. 
 25         MR. DUNLAP:  THANK YOU VERY MUCH.  
0151
 01               MR. LAGARIAS HAS A QUESTION.
 02         MR. LAGARIAS:  I THINK YOUR STORY OUGHT TO BE TOLD 
 03  TO THE BAY AREA.  I THINK THERE'S A CHANNEL THAT WOULD BE 
 04  INTERESTED IN IT.
 05         MS. SPEELMAN:  YES.  I'VE HAD OPEN DISCUSSIONS WITH 
 06  THEM, MR. LAGARIAS.
 07         MR. LAGARIAS:  THEY HAD A SERVICE STATION ATTENDANT 
 08  EVALUATE THE NEW GASOLINE.  THEY OPENED UP A VALVE TO THE 
 09  STORAGE TANK AND SMELLED IT.  AND THE SERVICE STATION 
 10  ATTENDANT SAID IT DIDN'T SMELL AS STRONG AS THE OLD 
 11  GASOLINE.  AND THAT'S AN INTERESTING TEST.
 12         MS. SPEELMAN:  THAT IS INTERESTING, SINCE 
 13  REFORMULATED FUEL HAD SUCH A STRONG ODOR.  AND THAT WAS IN 
 14  WISCONSIN, THAT, GOSH, PEOPLE WERE KEELING OVER AND HAVING 
 15  NAUSEA.  SO I GUESS OURS DOESN'T SMELL AS STRONG.  I'D SAY 
 16  THAT WAS A PLUS.
 17         MR. LAGARIAS:  IT IS ONE OF THE CHARACTERISTICS OF 
 18  THE CLEANER BURNING GASOLINE.  IT HAS A LOWER VAPOR 
 19  PRESSURE.  AND YOU WOULD EXPECT THAT IT WOULD BE THAT WAY.
 20         MS. SPEELMAN:  YOU ARE RIGHT.   
 21         MR. DUNLAP:  VERY GOOD.  
 22               THANK YOU FOR TESTIFYING. 
 23         MS. EDGERTON:  I'M TRYING TO FIGURE OUT WHAT SOME 
 24  OF THESE LETTERS ARE.  I'VE BEEN PRETTY CAREFUL IN READING 
 25  ALL THE LETTERS WE HAVE BEEN GETTING, PARTICULARLY THE 
0152
 01  ONES COMPLAINING ABOUT IT.  
 02               I WAS TRYING TO FIGURE OUT HOW SOME OF THE 
 03  INDIVIDUALS ARE GETTING THESE KINDS OF ANECDOTAL RESULTS.  
 04  AND ONE OF THE THINGS THAT I SEE IS MAYBE THEY ARE OUT ON 
 05  THE HIGHWAY MORE, BECAUSE WE WENT UP FROM 55 MILES AN HOUR 
 06  TO 65 MILES AN HOUR, AND THAT WOULD BE A TEN PERCENT DROP 
 07  RIGHT THERE.  
 08               BUT YOU ARE SAYING YOU DIDN'T FIND ANY.  YOUR 
 09  FOLKS DIDN'T FIND ANY DIFFERENCE?
 10         MS. SPEELMAN:  NO.  I FOUND NO DIFFERENCE IN GAS 
 11  MILEAGE THAT WAS NOT WITHIN THE RANGE THAT I EXPECTED.  
 12  THAT ONE TO THREE PERCENT IS ACCURATE.  
 13               AND, AGAIN, IT DEPENDED.  I DID A COUPLE OF 
 14  MOUNTAIN TRIPS IN THE SIERRAS LAST OCTOBER, AND I JUST 
 15  WENT UP TO MAMMOTH AND SO ON AND DID A COMPARISON WITH 
 16  THAT TANK.  AND THERE WAS I THINK IT WAS BETWEEN A TWO AND 
 17  THREE PERCENT DIFFERENCE IN LESS GAS MILEAGE.
 18         MS. EDGERTON:  I GUESS YOU ARE NOT GOING FASTER.
 19         MS. SPEELMAN:  YOU ARE RIGHT.  
 20               AND I HAVE HAD ONE PARTICULAR PERSON CALL WHO 
 21  HAD BEEN RELAYED TO ME FROM THE NORTHERN CALIFORNIA RADIO 
 22  STATION THAT HAS BEEN OBVIOUSLY ON THE AIR QUITE A BIT.  I 
 23  ATTEMPTED TO CALL IN ON THAT STATION AT ONE POINT, DID NOT 
 24  GET THROUGH TO BE ON AIR TO DEBATE A COUPLE OF POINTS.  
 25  HOWEVER, I DID SAY, "WOULD YOU PLEASE PASS ALONG SOME OF 
0153
 01  THESE ANECDOTAL STORIES?  PASS THEM ALONG TO ME.  I'D LIKE 
 02  TO TALK TO THEM.  I'D LIKE TO FIND OUT WHAT THE STORY 
 03  IS."         
 04               I ONLY GOT ONE CALL.  IT WAS VERY 
 05  INTERESTING.  IT WAS AN INDIVIDUAL WHO WENT FROM 
 06  SACRAMENTO TO TAHOE.  "I JUST GOT ABSOLUTELY NO MILEAGE 
 07  WHATSOEVER.  IT WAS HORRIBLE.  MY GOD, I GOT TEN MILES AN 
 08  HOUR TO THE GALLON LESS.  IT WAS HORRIBLE."  AND I SAID, 
 09  "WELL, WHAT WERE YOU COMPARING IT WITH?"  "WELL, MY 
 10  PREVIOUS GAS TANK FULL."  "WELL, WHERE DID YOU TRAVEL WITH 
 11  THAT?"  "WELL, IN SACRAMENTO TO AND FROM WORK."  SO, YOU 
 12  KNOW, THERE YOU HAVE SOMEONE GOING UP THE HILL INTO HIGH 
 13  ALTITUDES VERSUS DRIVING ON THE FLAT TO AND FROM WORK.  
 14  YOU KNOW, JUST NO COMPARISON.  
 15               SO I THINK THE ANECDOTAL INFORMATION THAT WE 
 16  ARE GETTING, THAT SOME OF THAT IS JUST NOT VALID.  IT'S 
 17  NOT PEOPLE THAT HAVE DONE STUDIES.  YOU KNOW, IF YOU ARE 
 18  GOING TO LOOK FOR SOMETHING VALID, LOOK AT THE STUDIES.
 19         MS. EDGERTON:  THANK YOU. 
 20         MR. VAGIM:  MR. CHAIRMAN, I DO HAVE A QUESTION.    
 21               DO YOU REPRESENT THE SO-CALLED UNBRANDED, 
 22  TOO?
 23         MS. SPEELMAN:  WHAT FEW ARE LEFT.  I WISH I 
 24  REPRESENTED A LOT MORE.  WE WOULDN'T HAVE HAD AS MANY 
 25  PRICE SPIKES.  BUT YES, WE DO HAVE VERY FEW OF THEM.
0154
 01         MR. VAGIM:  THERE LIES AT LEAST ONE OF MY CONCERNS 
 02  AND WHY WE ASKED STAFF TO STAY ON THEIR TOES ON THIS ONE, 
 03  BECAUSE WHEN YOU LOOK AT THE PRICE DIFFERENTIAL ON THE 
 04  SPOT AND THE UNBRANDED STATIONS, THERE'S A REAL STORY 
 05  THERE.  
 06               AND AS A MATTER OF FACT, IN FRESNO, I CAN GO 
 07  GET FILLED UP FOR $1.38 A GALLON.  OF COURSE YOU GET LEAD 
 08  POISONING FROM THE BULLETS FLYING AROUND, BUT YOU CAN FIND 
 09  IT.  
 10               BUT THERE'S A 20 PERCENT DIFFERENTIAL FROM 
 11  ONE SIDE OF TOWN TO ANOTHER SIDE OF TOWN.  BUT MY FEAR IS 
 12  IF YOU DRIVE THOSE UNBRANDED STATIONS OUT OF THE 
 13  MARKETPLACE AND YOU HAVE NO OTHER INDEPENDENT COMPETITION 
 14  GOING ON WITH THE SPOT MARKET, YOU HAVE A REAL TENDANCY TO 
 15  GO BACK UP TO THAT LINE THAT WAS SHOWN AS THE SO-CALLED 
 16  BRANDED STATIONS.  
 17               AND MY FEAR IS:  ARE WE TRYING TO DRIVE THESE 
 18  PEOPLE OUT OF THE MARKETPLACE?  IT SEEMED ALMOST WHEN WE 
 19  HAD SOME TESTIMONY IN APRIL THERE WERE SOME INDEPENDENTS 
 20  THAT CAME FORWARD AND SAID I WAS APPROACHED BY SOME FOLKS 
 21  TO SAY YOU ARE PROBABLY NOT GOING TO GET GAS UNLESS YOU 
 22  JOIN US AND THAT KIND OF STUFF.  
 23               IS THAT STILL GOING ON?
 24         MS. SPEELMAN:  TO A CERTAIN EXTENT.  IN THE LAST 
 25  TWO YEARS, MOST OF MY DEALERS CAN NAME TWO OR THREE 
0155
 01  INDEPENDENTS THAT WERE AROUND THEM THAT ARE NO LONGER IN 
 02  BUSINESS THAT BRANDED UP, IF YOU WILL.  
 03               AND THAT'S WHAT WE ARE TALKING ABOUT.  THAT'S 
 04  ONE OF THE THINGS THAT WE NEED TO SOLVE THROUGH 
 05  LEGISLATION, WE BELIEVE.  AND THAT'S CREATE AN ENVIRONMENT 
 06  AT THE RETAIL END THAT ENCOURAGES THE INDEPENDENTS TO BE 
 07  THERE.  
 08               I THINK THAT'S A SIGNIFICANT PART OF THE 
 09  MARKETPLACE THAT BEGINNING IN THE EARLY '80'S HAS BEEN 
 10  DIMINISHED TO THE POINT WHERE WE NOW BELIEVE IT'S LESS 
 11  THAN TEN PERCENT OF THE MARKETPLACE, WHICH IS NOT A 
 12  SIGNIFICANT NUMBER OF PEOPLE BUYING AT THAT UNBRANDED RACK 
 13  AND THAT LOW SPOT TO TRULY HAVE AN IMPACT ON THE OVERALL 
 14  MARKET.
 15         MR. VAGIM:  BUT WE STILL NEED THEM.
 16         MS. SPEELMAN:  WE NEED MORE OF THEM, AND WE NEED TO 
 17  CREATE THE ENVIRONMENT THAT ENCOURAGES SOME OF THE SMALL 
 18  REFINERS, AGAIN, THE INDEPENDENT REFINERS WHICH WE NO 
 19  LONGER HAVE.  WE NEED ADDITIONAL COMPETITION IN THE 
 20  MARKETPLACE.  AND THAT ON ITS OWN WOULD CAUSE THAT DEALER 
 21  TANK WAGON OR THAT UNBRANDED TO START TO COME CLOSER AND 
 22  BRING THAT D.T.W. DOWN.  
 23               OUR CONCERN RIGHT NOW, SINCE MOST OF OUR 
 24  MEMBERS ARE BRANDED DEALERS, IS THEIR TANK WAGONS HAVEN'T 
 25  DROPPED MORE THAN TWO, FOUR, FIVE CENTS MAXIMUM.  AND NOW 
0156
 01  THEY ARE SITTING IN VERY UNCOMPETITIVE ENVIRONMENTS.  THEY 
 02  ARE NOT GETTING A BREAK FROM THE VERY SAME OIL COMPANIES 
 03  THAT THEY FLY THE FLAG OF THAT THE UNBRANDED CAN TAKE 
 04  ADVANTAGE OF.  
 05         MR. VAGIM:  HOPEFULLY THEY SURVIVE, BECAUSE THAT'S 
 06  THE ONLY WAY THE PRICES WILL STAY LOW, I THINK.
 07         MS. SPEELMAN:  AND WE NEED MORE OF THEM.  THEY ARE 
 08  NOT A SUFFICIENT PART OF THE MARKETPLACE TO TRULY GIVE US 
 09  THE CONTROLS WE NEED.  AND THAT'S WHAT WE HOPE TO HAVE.   
 10         MR. DUNLAP:  THANK YOU VERY MUCH FOR YOUR 
 11  TESTIMONY.  
 12               THANK YOU FOR JOINING US HERE IN SAN DIEGO.   
 13               SUPERVISOR ROBERTS.
 14         MR. ROBERTS:  THANK YOU, MR. CHAIRMAN.  
 15               I JUST HAVE A FEW QUESTIONS.  
 16               I GUESS I'LL START BY SAYING IT SOUNDS LIKE 
 17  THERE ARE SOME THINGS GOING ON IN NORTHERN CALIFORNIA THAT 
 18  AREN'T HAPPENING IN SOUTHERN CALIFORNIA.  I TRIED TO 
 19  CHECK.  WE ARE NOT GETTING ANYWHERE NEAR THE NUMBER OF 
 20  COMPLAINTS.  AND IN CHECKING THOSE OUT, I HAVEN'T FOUND 
 21  ANYTHING THAT'S FOUNDED ANY REAL CAUSES RELATED TO THE 
 22  FUELS.   
 23               I CONTINUE TO HEAR ABOUT SOME SLIGHT 
 24  DECREASES IN FUEL ECONOMY, BUT IT DOESN'T SEEM TO BE 
 25  TERRIBLY SIGNIFICANT.  
0157
 01               I GUESS ONE OF MY CONCERNS IS WE HAVE BEEN 
 02  TALKING A LOT ABOUT THE TESTING THAT WE HAVE BEEN DOING.  
 03  AND IT'S NOT CLEAR TO ME WHAT TESTING WE ARE DOING OR WHAT 
 04  TESTING WE WILL BE DOING TO ENSURE THAT THOSE FUEL 
 05  CONDITIONS REMAIN AND THAT WE ARE NOT GOING TO HAVE A 
 06  FALLOFF IN MILEAGE OR ANYTHING ELSE.  
 07               WHEN YOU TALKED THIS MORNING ABOUT THE 
 08  RETROFIT, WE TALKED ABOUT HOW IMPORTANT IT WAS AND SORT OF 
 09  THE REAL WORLD CONDITIONS.  MAYBE SOMEBODY CAN COMMENT ON 
 10  THAT.  THAT'S WHAT I WOULD LIKE TO SEE, IS DATA THAT'S 
 11  GOING TO COME OUT OF THE ACTUAL USE OF CARS ON THE ROADS 
 12  FROM HEREON OUT. 
 13         MR. SCHEIBLE:  IN TERMS OF FUEL ECONOMY, WE ARE 
 14  SELECTING EXTENSIVE DATA ON FUEL PROPERTIES OF THE GASSES 
 15  BEING MADE AND HAVE CONFIRMED TO DATE AND WILL CONTINUE TO 
 16  CONFIRM THAT IT HAS THE ENERGY CONTENT THAT WE BELIEVE.    
 17               SINCE THE RELATIONSHIP BETWEEN THE FUEL 
 18  ECONOMY LOSS AND ENERGY CONTENT LOSS IS VERY STRONG, THAT 
 19  WILL PROVE THAT POINT.  
 20               IN TERMS OF EMISSION TESTING, WE DO HAVE SOME 
 21  STUDIES GOING ON THIS YEAR TO LOOK AT WHAT'S IN THE 
 22  ATMOSPHERE AND HOW THAT PROFILE HAS CHANGED AND RELATE 
 23  THAT BACK TO THE EXPECTED CHANGES.  
 24               ACTUALLY, MUCH OF THE CONFIRMATORY WORK THAT 
 25  ONE WOULD WANT TO DO IN TERMS OF THE ACTUAL SPECIFICATIONS 
0158
 01  OF THE CALIFORNIA FUEL AND HOW IT'S WORKING IN THE CURRENT 
 02  VEHICLES HAS BEEN DONE THROUGH A NUMBER OF THE STUDIES 
 03  THAT WE HAVE SEEN.  WE ARE NOW GETTING THE VEHICLES IN FOR 
 04  A NEW TEST TO GO HAVE A NEW FUEL.  WE WILL HAVE TO GO BACK 
 05  TO SEE IF THERE'S A WAY TO RELATE EMISSIONS WE ARE SEEING 
 06  TODAY FOR CARS THAT HAD COME IN WITH FUELS THAT COMPLY 
 07  WITH CLEANER BURNING GASOLINE VERSUS THE PAST CARS.  BUT 
 08  THAT MAY BE A SOMEWHAT DIFFICULT STUDY TO DO.
 09         MR. ROBERTS:  SO WITH RESPECT TO THE MILEAGE, YOU 
 10  ARE BASICALLY GOING TO DO THAT BY TESTING THE ENERGY 
 11  CONTENT?
 12         MR. SIMEROTH:  MILEAGE IS TOTALLY RELATED TO THE 
 13  ENERGY CONTENT.  IF YOU KNOW THE ENERGY CONTENT OF THE 
 14  FUEL AND IT COMES IN AT WHAT YOU BELIEVE IT IS SUPPOSED TO 
 15  BE --
 16         MR. ROBERTS:  AND THE EMISSIONS, THERE'S A COUPLE 
 17  THINGS GOING ON?
 18         MR. SIMEROTH:  YES.  MUCH OF THE WORK'S BEEN DONE, 
 19  INCLUDING THE OFF-SITE EMISSION STUDIES, BOTH OF WHICH 
 20  CONFIRM THAT THE BENEFITS ARE PRESERVES WHEN YOU HAVE 
 21  THOSE HIGH EMISSION MODES, EITHER OFF-CYCLE OPERATION OR 
 22  CARS THAT ARE INHERENTLY HIGH ADMITORS.
 23         MR. VAGIM:  WHAT DATE WILL WE GET DATA IN ON WHAT 
 24  YOU FIND AND MEASURE IN THE ATMOSPHERE, ENVIRONMENT IN 
 25  TERMS OF ANY CHANGES?  PROBABLY SINCE MARCH 1ST WE HAVE 
0159
 01  HAD A LARGE SCALE USE OF THIS FUEL. 
 02         MR. SIMEROTH:  YES, MARCH 1ST.  ACTUALLY, LATE 
 03  MARCH HAS BEEN VERY LARGE SCALE USE OF THE FUEL.  THE 
 04  QUESTION IS:  WHEN WILL WE GET THE AIR QUALITY DATA TO 
 05  HELP US LOOK AT THIS?  THAT STUDY IS BEING DONE THIS 
 06  SUMMER, AND SO WHATEVER TIME IT TAKES TO PRODUCE THE DATA 
 07  AND INTERPRET IT. 
 08         MR. ROBERTS:  SO MAYBE LATE FALL? 
 09         MR. SIMEROTH:  I WOULD NEED TO TALK TO OUR RESEARCH 
 10  DIVISION. 
 11         MR. DUNLAP:  ON THAT POINT, MR. BOYD, WE'D LIKE TO 
 12  HAVE THAT DATA AS SOON AS POSSIBLE.  SO LET'S DO WHAT WE 
 13  NEED TO DO TO INTERFACE WITH OUR RESEARCH DIVISION AND GET 
 14  THAT BACK.
 15         MR. BOYD:  CERTAINLY.  
 16               SOME DATA IS AVAILABLE TO US JUST AS A RESULT 
 17  OF THE VARIOUS TESTS WE ENGAGE IN, SUCH AS OUR LABORATORY 
 18  IN EL MONTE HAS BEEN CERTIFYING.  BUT THE RESEARCH 
 19  PROJECT, YES, THIS FALL, WE WILL MAKE SURE WE GET THAT 
 20  INFORMATION.  
 21               AND ANY OTHER INFORMATION THAT COMES OUR WAY, 
 22  THAT UNDER THE CURRENT CIRCUMSTANCES, WE WILL GO OUT OF 
 23  OUR WAY AND WE WILL MAKE IT AVAILABLE TO ALL OF YOU SO YOU 
 24  HAVE THE INFORMATION.
 25         MR. DUNLAP:  WITHIN A WEEK YOU CAN PROVIDE US WITH 
0160
 01  THE TIME FRAME SO THE BOARD WILL KNOW.
 02         MR. ROBERTS:  NOW, THE ONE THING THAT HAS BEEN A 
 03  CONSISTENT CONCERN IN THIS AREA IS THE COST.  ONE OF THOSE 
 04  CHARTS LOOKED LIKE A RELATIVELY HORIZONTAL LINE AND WAS 
 05  DESCRIBED AS A SLIGHT DECREASE.  I ASSUME THAT'S TRUE.  
 06               WE HAVEN'T SEEN ANY DECREASES HERE, AND IT 
 07  REMAINS A GREAT DEAL OF CONCERN.  I GUESS AFTER OUR LAST 
 08  MEETING, I WAS FIGURING WHEN THESE SHIPS CAME IN FROM THE 
 09  VIRGIN ISLANDS WE'D SEE SOME DIFFERENCES.  I THINK THE 
 10  NUMBER THAT WAS GIVEN WAS FOUR MILLION BARRELS.  
 11               OVER WHAT PERIOD OF TIME WERE THOSE 
 12  ADDITIONAL FOUR MILLION BARRELS BROUGHT IN?
 13         MR. SIMEROTH:  FROM MARCH 1ST UNTIL PRESENT. 
 14         MR. ROBERTS:  SO THAT REPRESENTS SOMETHING LESS 
 15  THAN FIVE PERCENT OF THE TOTAL SUPPLY DURING THAT PERIOD?
 16         MR. SIMEROTH:  IT WOULD BE EQUIVALENT TO ABOUT SIX 
 17  DAYS' SUPPLY OF THAT TIME PERIOD FOR THE ENTIRE STATE.     
 18         MR. BOYD:  I THINK THE ISSUE THAT WE ARE TRYING TO 
 19  RAISE IS THAT THEY WERE OF ADEQUATE SUPPLY TO MEET DEMAND 
 20  ON A DAILY BASIS.  AND I THINK, FROM THE DATA, YOU ARE 
 21  CORRECT, THAT WHAT WE'VE SEEN AS A WHOLESALE PRICE IS 
 22  DECLINING.  WE HAVE SEEN CRUDE OIL PRICES DECLINING.  WE 
 23  HAVE SEEN IT ESTABLISHED THAT CLEANER BURNING GASOLINE IS 
 24  NOT A SIGNIFICANT COST ELEMENT.  WE HAVE ABOUT EXHAUSTED 
 25  WHAT IS WITHIN THE PURVIEW OF OUR AGENCY, UNFORTUNATELY, 
0161
 01  WITH REGARD TO INFLUENCING PRICE.  
 02               WE DID LEAVE A DILEMMA ON THE BOARD, AND YOU 
 03  ARE 100 PERCENT CORRECT, AND YOU ARE BEGINNING TO ASK ME 
 04  WHAT INFLUENCE THE STAFF CAN HAVE ON THE DILEMMA.  WE ARE 
 05  SEEING SOME THINGS RETURN TO NORMAL, BUT PRICE ISN'T 
 06  FOLLOWING, AS YOU EXPECT.
 07         MR. ROBERTS:  WELL, THAT BOTHERS ME.  AND I WILL 
 08  TAKE THE INFORMATION AND NOT DISPUTE THE FACT THAT WE ARE 
 09  NOT THE MAJOR PART OF THAT PRICE.  BUT WE ARE SOME PART OF 
 10  THAT PRICE.  AND THAT PRICE OVERALL CONCERNS ME.  
 11               AND I GUESS IT BOTHERS ME TO SOME EXTENT TO 
 12  SAY WE THROW UP OUR HANDS.  WE CAN'T DO ANYTHING ABOUT 
 13  IT.  WE'RE REALLY NOT THE PROBLEM.  SOMEHOW I THINK THAT 
 14  PROBLEM IS A THREAT TO WHAT WE ARE TRYING TO ACHIEVE.  AND 
 15  I THINK WE OUGHT TO BE MORE AGGRESSIVE IN TRYING TO 
 16  PERHAPS BE PART OF THAT SOLUTION.  AND I GUESS THAT 
 17  CONCERNS ME.  
 18               WE HAVE SEEN CLEAR EVIDENCE OF WHOLESALE 
 19  PRICES COMING DOWN, CRUDE OIL PRICES COME DOWN.  EVERY 
 20  REASON THAT WE WERE GIVEN FOR THE PRICES GOING UP, NOW WE 
 21  HAVE SEEN SOME SIGNIFICANT EVIDENCE THAT THOSE HAVE BEEN 
 22  COMING DOWN FOR QUITE AWHILE, AND WE ARE NOT GETTING ANY 
 23  CHANGE.  
 24               THE TWO GAS STATIONS OUT ON THE CORNER HERE, 
 25  THEY ARE AT AS HIGH AS THEY HAVE BEEN, PERIOD.  I DON'T 
0162
 01  THINK THEY HAVE COME DOWN A PENNY.  AND I THINK THAT'S 
 02  PRETTY TYPICAL IN WHAT I AM SEEING IN SAN DIEGO COUNTY.    
 03               I'M READING NATIONALLY THINGS ARE GOING TO 
 04  COME DOWN.  AT THE LAST MEETING I HEARD WE WERE GOING TO 
 05  HAVE SOME SHIPS COME IN FROM THE VIRGIN ISLANDS.  WHEN 
 06  THEY COME IN, WE CAN EXPECT SOME DECREASE IN PRICES.  AND 
 07  THOSE SHIPS HAVE BEEN IN FOR QUITE A WHILE NOW, AND WE 
 08  HAVEN'T SEEN A DECREASE IN PRICES.  
 09               AND I AM JUST EXPRESSING TO YOU SOME 
 10  FRUSTRATION, BUT THAT FRUSTRATION CAN GROW TO BE A 
 11  POTENTIAL THREAT TO THE PROGRAM THAT WE THINK IS IMPORTANT 
 12  WE MAINTAIN IN PLACE.  AND YOU DO IT AND SAY, "WELL, 
 13  SOMEBODY ELSE'S PROBLEM," I DON'T THINK IS GOING FAR 
 14  ENOUGH, AND I THINK WE OUGHT TO DO WHAT WE CAN AND TAKE 
 15  MAYBE A STRONGER POSITION IN PURSUING THE REASONS WHY 
 16  THOSE PRICES ARE REMAINING UP.  
 17         MR. BOYD:  SUPERVISOR, I ASSURE YOU WE SHARE YOUR 
 18  CONCERN.  AS I SAID IN MY SUMMARY OF REMARKS, ONE OF THE 
 19  ISSUES THAT STILL REMAINED THAT CONCERNED US WAS THE PRICE 
 20  ISSUE.  AND I THINK I WAS EXHIBITING A LITTLE MORE OF MY 
 21  OWN FRUSTRATION.  WE ARE CONTINUING TO WORK WITH THE 
 22  ENERGY COMMISSION.  WE MET FACE TO FACE WITH EACH AND 
 23  EVERY OIL COMPANY, AND IN THOSE SESSIONS, WE EXPRESSED OUR 
 24  CONCERN.
 25         MR. ROBERTS:  IF ALL WE IMPORTED OVER THOSE 
0163
 01  120 DAYS WAS FOUR MILLION BARRELS, THAT'S NOT A VERY 
 02  SIGNIFICANT AMOUNT TO TRY TO AFFECT THE PRICE.  WE WERE 
 03  TALKING ABOUT EMERGENCY POWERS, AND IF WE CAN'T GET FUEL 
 04  INTO CALIFORNIA, MAYBE IN SOME LIMITED WAY, WE HAVE GOT TO 
 05  TALK ABOUT BRINGING IN SOME NON-CALIFORNIA FUEL TO SHAKE 
 06  THIS THING UP, AT LEAST ON AN INTERIM BASIS, BECAUSE THAT 
 07  TO ME SEEMS TO BE A CENTRAL ISSUE.  
 08               AND IF WE CAN'T PROVIDE FUEL, AND IF THE 
 09  REFINERS HERE HAVE US OVER ENOUGH OF A BARREL THAT WE 
 10  CAN'T DO ANYTHING ABOUT IT AND THE SUPPLY IS RESTRICTED, 
 11  IT SEEMS TO ME WE OUGHT TO BE LOOKING AT WAYS THAT MAYBE 
 12  WE CAN INCREASE THAT SUPPLY, MAYBE ALLOW UNBRANDED FUELS 
 13  IN OR SOMETHING THAT WOULD WORK IN THE SUPPORT OF SOME OF 
 14  THE OTHER THINGS THAT WE HAVE HEARD CONCERNS EXPRESSED 
 15  OVER.  
 16               BUT IT BOTHERS ME TO THE POINT THAT I DON'T 
 17  FEEL COMFORTABLE JUST ACCEPTING THAT WE CAN'T DO ANYTHING 
 18  ABOUT IT.  I'D LIKE TO START TO LOOK AT WHAT OPTIONS THERE 
 19  ARE.  WE TALKED ABOUT HAVING AN EMERGENCY MEETING IF THE 
 20  PRICE DIDN'T COME DOWN.  THE PRICE HAS NOT COME DOWN. 
 21         MR. DUNLAP:  SUPPLY. 
 22         MR. ROBERTS:  WE HAVE GOT TO AFFECT THE SUPPLY IN 
 23  SOME WAY, SHAPE OR FORM IF WE HAVE BEEN GUILTY OF CAUSING 
 24  A SITUATION THAT IS AT THE BASE OF WHY THERE'S A SMALLER 
 25  SUPPLY IN CALIFORNIA. 
0164
 01         MR. DUNLAP:  MS. BROWN FROM THE ENERGY COMMISSION 
 02  IS HERE.  I'D LIKE TO GIVE HER A MOMENT.  
 03               BUT I'D LIKE TO CLARIFY A POINT.  I THINK 
 04  THAT THERE IS CERTAINLY A CERTAIN ROLE THAT WE PLAY 
 05  RELATIVE TO REQUIRING THE CLEANER FUEL, AND I APPRECIATED 
 06  THE FACT THAT WE AS A BOARD HAVE THE FIRST HEARING IN THE 
 07  NATION TO TRY TO GET TO THE BOTTOM OF WHAT'S GOING ON WITH 
 08  THE FUEL SUPPLY AND TO TRY TO UNDERSTAND THE PRICE ISSUE.  
 09               BUT I THINK WHAT WE'VE HEARD FROM EACH OTHER 
 10  AND THOSE THAT HAVE TESTIFIED IS WHAT PART OF THE PROBLEM 
 11  THAT WE ARE RESPONSIBLE FOR.  IT'S FIVE TO EIGHT CENTS.  
 12  AND WE HAVE TAKEN RESPONSIBILITY FOR THAT.                
 13  AT THE SAME TIME, WHEN IT COMES TO AFFECTING OR 
 14  CONTROLLING A MARKET IN PRICING, WHILE WE ARE CONCERNED 
 15  AND WHILE WE ARE WORKING TO USE THE EMERGENCY POWERS OF 
 16  THE STATE THAT'S BEEN ENTRUSTED WITH THE ENERGY 
 17  COMMISSION, THERE HAS TO BE SOME MARKET RESPONSE THAT 
 18  REFLECTS WHAT'S GOING ON AT SOME POINT.  
 19               AND WE AS CONSUMERS, WE AS REGULATORS HAVE A 
 20  ROLE TO PLAY.  AND ONE OF THE ROLES THAT I RELISH IS THAT 
 21  WE HAVE RESPONSIBILITY TO HELP PROTECT THE ENVIRONMENT, 
 22  NOT TO CONTROL THE MARKET AND NOT TO WILLY-NILLY, PULL A 
 23  PROGRAM BACK THAT HAS A PROFOUND ENVIRONMENTAL BENEFIT 
 24  SOLELY BECAUSE OF WHAT'S GOING ON IN THE MARKETPLACE.  
 25               SO IF I MIGHT PROVIDE YOU WITH SOME COMFORT, 
0165
 01  AT LEAST FROM MY PERSPECTIVE, WE ARE DOING, I THINK, WHAT 
 02  WE CAN AND WHAT'S RESPONSIBLE IN TRYING TO FIND FACTS.  
 03               I DON'T LIKE THE IDEA THAT THIS PROGRAM CAN 
 04  BE USED AS SOME SORT OF A LEVER OR A TRIGGER TO ADJUST 
 05  PRICE IN THE MARKETPLACE, BECAUSE WE HAVE HAD EXPERTS, 
 06  ECONOMISTS HAVE COME HERE AND TOLD US THAT WE'RE NOT 
 07  LIKELY TO SEE THAT DIRECT RELATIONSHIP.  AND THAT HASN'T 
 08  BEEN ANSWERED TO MY SATISFACTION.  
 09               MS. BROWN, IF YOU COULD TAKE A WORD OR TWO 
 10  AND MAYBE COVER THAT POINT AND OTHERS THAT THE SUPERVISOR 
 11  MENTIONED?
 12         MS. BROWN:  SUPERVISOR ROBERTS, THE ENERGY 
 13  COMMISSION SHARES YOUR CONCERN ABOUT THE PRICES.  THERE 
 14  HAS BEEN A SLIGHT DECREASE IN THE RETAIL PRICE OF BOTH 
 15  GASOLINE AND BOTH DIESEL IN THE LAST WEEK.  
 16               BUT I THINK WE HAVE TO REMEMBER THAT WE ARE 
 17  LOOKING NOT ONLY AT THE SUPPLY SIDE OF THE EQUATION, BUT 
 18  THE DEMAND SIDE OF THE EQUATION AS WELL.  
 19               WE ARE IN THE PEAK OF THE SUMMER DRIVING 
 20  SEASON.  HISTORICALLY, PRICES ARE ALWAYS HIGH IN THE 
 21  SUMMER MONTHS.  I DON'T EXPECT THIS YEAR TO BE ANY 
 22  DIFFERENT.  
 23               WE ARE ALSO JUST CLOSING OUT THE HIGH DEMAND 
 24  SEASON.  AGAIN, THE DEMAND SIDE OF THE EQUATION HAS A 
 25  SIGNIFICANT IMPACT ON THE PRICE.  THERE'S A DIRECT 
0166
 01  RELATIONSHIP.  
 02               SO I'M NOT TRYING TO DOWNPLAY YOUR CONCERNS, 
 03  ONLY TO SAY THAT SOME OF THE LOCAL MARKET CONDITIONS THAT 
 04  YOU ARE ESPECIALLY EXPERIENCING IN THE SAN DIEGO AREA ARE 
 05  TYPICAL OF WHAT'S HAPPENED IN THE PAST.  SAN DIEGO PRICES 
 06  FOR GASOLINE DO TEND TO BE A LITTLE HIGHER, BECAUSE THE 
 07  SAN DIEGO AREA IS NOT AS CLOSE TO THE REFINING CENTERS AS, 
 08  SAY, LOS ANGELES.  SO IT WOULDN'T SURPRISE ME, FOR 
 09  EXAMPLE, TO SEE SOME HIGHER PRICES IN SOME OF THE OUTER 
 10  LYING STATIONS HERE IN SAN DIEGO.
 11         MR. ROBERTS:  I GUESS WHAT'S BOTHERING ME IS THE 
 12  EXIST OF THE PRICES.  THEY ARE NOT CHANGING.
 13         MS. BROWN:  THEY ARE NOT COMING DOWN AS RAPIDLY AS 
 14  THE RISE.
 15         MR. ROBERTS:  WE HAVE SENT OUT A TYPE OF FUEL THAT 
 16  WE KNOW ONLY ADDS A FEW PENNIES TO THE COST, BUT WHAT IT 
 17  DOES IS IT RESTRICTS THE OPTIONS.  AND I THINK WE LARGELY 
 18  ARE AN ISLAND.  FOUR MILLION BARRELS DOESN'T SOUND 
 19  TERRIBLY SIGNIFICANT TO ME WHEN YOU ARE USING 800,000 A 
 20  DAY.  
 21               WE LARGELY ARE AN ISLAND, AND WE KNOW THAT 
 22  ABOUT 20 PERCENT OF OUR PRODUCTION IS GOING TO NEIGHBORING 
 23  STATES.  WHAT'S EVEN PRODUCED HERE, CAN'T BE USED HERE.  
 24  WHAT WOULD BE PRODUCED HERE, I GUARANTEE WOULD STAY HERE, 
 25  BECAUSE OF THE DISCREPANCY OF THE COST OF WHAT YOU ARE 
0167
 01  PAYING FOR FUEL IN THE NEIGHBORING STATES COMPARED TO 
 02  THIS.  AND IT WOULD CREATE A GAS WAR OF PROBABLY HIGHER 
 03  PRICES THERE, BUT MAYBE IT WOULD BREAK DOWN THE COST OF 
 04  WHAT'S GOING ON HERE.  
 05               I'M HAVING TROUBLE.  YOU KNOW, IT SEEMS LIKE 
 06  WE ARE COMING UP WITH ALL THE REASONS TO LET THE OIL 
 07  COMPANIES OFF THE HOOK.  AND THERE'S SOMETHING THAT NOBODY 
 08  REALLY IS EXPLAINING VERY WELL.
 09         MS. BROWN:  WELL, A COUPLE OF THINGS.  WE ARE NOT 
 10  LETTING THE OIL COMPANIES OFF THE HOOK.  I THINK 
 11  CHAIRMAN IMBRECT IN HIS TESTIMONY BEFORE YOU ON THE 25TH 
 12  OF APRIL TRIED TO INDICATE THERE ARE MANY THINGS THAT THE 
 13  STATE DOESN'T HAVE THE AUTHORITY TO CONTROL.  
 14               SINCE THE LAST HEARING, TWO THINGS HAVE 
 15  ENSUED.  THE ATTORNEY GENERALS OFFICE IS INVESTIGATING THE 
 16  UNDERLYING REASONS FOR THE PRICE INCREASES, AND CERTAINLY 
 17  WE HAVE BEEN ASKED TO PROVIDE DATA AND INFORMATION ON 
 18  THAT.  THE U.S. DEPARTMENT OF JUSTICE IS ALSO 
 19  INVESTIGATING THE UNDERLYING REASONS FOR THE PRICE 
 20  INCREASES.  THERE ARE JUST SOME THINGS THAT, AGAIN, WE 
 21  HAVE TO WAIT UNTIL THE OIL COMPANIES COULD EXPLAIN, 
 22  BECAUSE WE CANNOT.  WE DON'T HAVE THE ACCESS TO THE 
 23  RECORDS OF THE COMPANIES. 
 24         MR. LAGARIAS:  MR. CHAIRMAN, I AGREE WITH 
 25  SUPERVISOR ROBERTS ABOUT THE FACT THAT THERE'S SOMETHING 
0168
 01  THAT WE SHOULD BE DOING.  BUT I DON'T THINK WE SHOULD TRY 
 02  TO SET AN ENERGY POLICY THROUGH OUR EFFORTS TO CLEAN THE 
 03  AIR.  OF THAT 30 CENTS PER GALLON PRICE INCREASE, ROUGHLY 
 04  FIVE TO EIGHT CENTS WAS DUE TO ACTIONS THAT THIS BOARD 
 05  TOOK, AND FOR THAT WE GOT A BENEFIT.  
 06               AND THAT BENEFIT WAS IMPROVEMENT IN AIR 
 07  QUALITY.  NOW, THE REMAINDER OF THE PRICE INCREASE IS DUE 
 08  TO, AS THE CHAIRMAN SAID, TO INTERNATIONAL CONCERNS AND 
 09  SUPPLY AND DEMAND.  
 10               I DON'T THINK WE CAN DO MUCH ABOUT THE 
 11  SUPPLY.  WE MAY BE ABLE TO DO SOMETHING ABOUT DEMAND IN 
 12  OUR EDUCATIONAL PROGRAM AND IN NOT ONLY TELLING PEOPLE HOW 
 13  TO IMPROVE THEIR AIR QUALITY ACTIONS, BUT ALSO HOW TO 
 14  IMPROVE THE WAY THEY DRIVE MOTOR VEHICLES, AS YOU OUTLINED 
 15  EARLIER, TO REDUCE THE DEMAND.  
 16               IF WE EDUCATE PEOPLE TO REDUCE THE DEMAND, IT 
 17  HELPS US IN TWO WAYS, BOTH IN THE AMOUNT OF FUEL CONSUMED 
 18  AND THE POLLUTANTS GO DOWN.  BUT TO TRY TO TAKE ANY ACTION 
 19  TO CONTROL THE MARKET IS NOT ONLY INAPPROPRIATE, BUT 
 20  INADEQUATE. 
 21         MR. DUNLAP:  MS. EDGERTON?
 22         MS. EDGERTON:  IF I UNDERSTAND MR. ROBERTS' MAIN 
 23  THRUST, HOWEVER, IT IS THAT THE FAILURE OF THE PRICES TO 
 24  GO DOWN AS WE WERE TOLD THEY WOULD BASED ON A SERIES OF 
 25  EVENTS IS A THREAT TO OUR PROGRAM.  
0169
 01               AND I HAVE TO SAY THAT EVEN TODAY DISCUSSING 
 02  THE INCREASES IN PRICE COMBINED WITH PERFORMANCE AND ALL 
 03  THE CONCERNS THAT CALIFORNIANS ARE HAVING IS QUITE 
 04  CONSISTENT WITH WHAT YOU ARE SAYING.  I AM QUITE 
 05  INTERESTED IN WHY THE PRICES HAVE NOT COME DOWN.  
 06               AND IF I UNDERSTOOD WHAT THE OIL COMPANIES 
 07  WERE SAYING, I WAS UNDER THE IMPRESSION THEY WERE 
 08  REPRESENTING THAT THEY WOULD WHEN THIS CAME IN.  SO I'M 
 09  OPEN TO LISTENING TO WHAT YOU HAVE TO SAY ABOUT FINDING 
 10  OUT WHY THEY HAVEN'T.  
 11         MR. SCHEIBLE:  CHAIRMAN DUNLAP, MEMBERS, BACK IN 
 12  APRIL, WE ANTICIPATED THAT THE RETURN OF THE SHELL 
 13  REFINERY, WHICH WOULD INCREASE STATE PRODUCTION, AND THE 
 14  ARRIVAL OF SHIPS WHICH WERE ON THE WAY WOULD DRIVE PRICES 
 15  DOWN.  
 16               THEY DID DRIVE PRICES DOWN.  THEY DRIVE THE 
 17  PRICES DOWN AT THE SPOT PRICE, WHICH IS THE PRICE ONE 
 18  REFINER CHARGES ANOTHER OR ONE REFINER CHARGES A LARGE 
 19  TRADER.  THAT DROPPED BY OVER 30 CENTS WITHIN THREE 
 20  WEEKS.  THE SUPPLIES COMING IN BY IMPORTS AND SHELL 
 21  RETURNING TO A LARGE PORTION OF PRODUCTION, THAT IS THE 
 22  PART OF THE PRICE THAT THE SUPPLY OF BASICALLY CLEANER 
 23  BURNING GASOLINE CAN AFFECT.  
 24               WHAT WE HAVE NOW IS WHY DOES A 30 CENT 
 25  REDUCTION IN THE SPOT PRICE, THE SAME SPOT PRICE THAT 
0170
 01  DROVE THE MARKET UP AT RETAIL, NOT GET REFLECTED OVER A 
 02  FIVE OR SIX WEEK PERIOD IN THE RETAIL PRICES.  
 03               IT'S OUR ASSESSMENT THAT THE CHANGES OR 
 04  ALLOWING ADDITIONAL FUEL IN WILL NOT IMPACT THAT, BECAUSE 
 05  THE SPOT PRICE IS ALREADY DOWN, HAD THE REACTION THAT ONE 
 06  WOULD THINK.  
 07               WHAT WE HAVE IS SOMETHING IN THE MARKETPLACE, 
 08  EITHER DEMANDS OR A COMPETITIVE ISSUE.  IT DOESN'T PASS 
 09  THROUGH THAT VERY REAL AND VERY LARGE PRICE DECREASE, 
 10  WHICH IN OUR ASSESSMENT, IS LARGELY BEYOND THE IMPACT OF 
 11  THIS REGULATION.  IT'S NOT A CALIFORNIA PHENOMENA.  IT IS 
 12  A WEST COAST PHENOMENA.  
 13               THE PRICES THAT YOU SAID BEFORE AND THE SPOT 
 14  PRICES, WE HAD A PERIOD WHERE IT WAS TEN CENTS MORE TO BUY 
 15  FUEL IN THE PACIFIC NORTHWEST CONVENTIONAL FUEL THAN IT 
 16  WAS IN THE SPOT MARKET IN CALIFORNIA.  THERE WAS A WEEK 
 17  PERIOD OF TIME WHEN THE PHOENIX SPOT PRICE FOR 
 18  CONVENTIONAL GASOLINE WAS THE SAME AS THE CALIFORNIA SPOT 
 19  PRICE.  THOSE ARE THINGS THAT ARE INHERENT IN THE MARKET 
 20  AND THE COMPETITIVENESS IN THE MARKET AND NOT WITH OUR 
 21  REGULATORY AUTHORITY. 
 22         MR. DUNLAP:  MR. BOSTON?
 23         DR. BOSTON:  I'D LIKE TO JOIN IN AND SUPPORT 
 24  SUPERVISOR ROBERTS' CONCERNS.  
 25               AND JUST THINKING OUT LOUD, WHAT WOULD HAPPEN 
0171
 01  IF WE SUSPENDED OUR REGULATIONS FOR SIX MONTHS TO OPEN OUR 
 02  MARKETPLACE TO OUTSIDE GASOLINE, WHICH WOULD THEN CAUSE 
 03  THE OIL COMPANY TO SEE A THREAT TO THE RETURN OF THEIR 
 04  FOUR BILLION DOLLAR PROFIT INVESTMENT?  
 05               WOULDN'T THAT BE KIND OF AN INCENTIVE FOR 
 06  THEM TO LOWER THE PRICES SO THEY WOULDN'T LOSE THAT? 
 07         MR. SIMEROTH:  THE SUPPLY PROBABLY WOULDN'T BE 
 08  AFFECTED BY DOING THAT.  AND WHILE IT WOULD BE AN 
 09  INCENTIVE TO THEM TO PROTECT THEIR INVESTMENT, I'M NOT 
 10  SURE, BECAUSE THE SUPPLY DOESN'T CHANGE AND THE SPOT PRICE 
 11  IS ALREADY DOWN AND THE DEALER TANK WAGON AND THE BRANDED, 
 12  WHICH IS WHERE 80 PERCENT OF THE GASOLINE IS MARKETED 
 13  THROUGH, IS STAYING HORIZONTAL EVEN WITH THE SPOT PRICE 
 14  30 CENTS BELOW IT.  I'M NOT SURE IF WE'D SEE A CHANGE BY 
 15  DOING THAT. 
 16         MR. BOSTON:  I THINK IT WOULD CERTAINLY BE A BIG 
 17  THREAT TO THEM IF THEY WERE GOING TO LOSE THAT FOUR 
 18  BILLION DOLLAR INVESTMENT THAT THEY ARE TRYING TO 
 19  RECOVER.  
 20         MS. BROWN:  MAY I SPEAK TO THAT AS WELL?  
 21               I WOULD SAY THAT, UNFORTUNATELY, THE THREAT 
 22  OF THE SUSPENSION OF THE RULE WOULD ACTUALLY HAVE A 
 23  COUNTERPRODUCTIVE EFFECT IN THAT IT WOULD CREATE A GREAT 
 24  DEAL OF REGULATORY MARKET UNCERTAINTY, WHICH IS NOT LIKELY 
 25  TO DRAW SUPPLIES HERE.  
0172
 01               IN ORDER FOR SUPPLIES TO COME FROM 
 02  OUT-OF-STATE MARKETS INTO CALIFORNIA, THERE HAS TO BE A 
 03  PRICE INCENTIVE, A HIGHER PRICE INCENTIVE.  AND THAT HAS 
 04  TO BE SUSTAINED FOR A CERTAIN PERIOD OF TIME OR A REFINER, 
 05  AS WE HAVE SEEN IN THE LAST SIX WEEKS, WOULD NOT PUT ITS 
 06  MONEY ON THE LINE TO BUY A BARREL OF GASOLINE OR OIL AND 
 07  SHIP IT HERE.  
 08               SO, AGAIN, I JUST WANT TO CAUTION THE BOARD 
 09  TO NOT TAKE ANY ACTION WITHOUT CAREFULLY CONSIDERING THESE 
 10  FACTORS. 
 11         MR. DUNLAP:  SUPERVISOR RIORDAN? 
 12         MS. RIORDAN:  THANK YOU, MR. CHAIRMAN.  
 13               JUST A COMMENT:  AT LEAST IN SAN BERNARDINO 
 14  COUNTY WE ARE BEGINNING TO SEE THOSE PRICES DROP.  AND 
 15  ARCO IS THE BELLWETHER OF THAT.  
 16               AND WHAT I FIND FASCINATING IS THAT THE ARCO 
 17  STATIONS BASICALLY ARE HOVERING AROUND -- WELL, I GUESS 
 18  THERE'S ONE IN THE WEST PART OF MY COUNTY THAT'S ABOUT 
 19  $1.41.  I SEE ABOUT 1.43.  AND IT WILL MOVE JUST A LITTLE 
 20  BIT.  
 21               BUT WHAT'S FASCINATING TO ME IS THAT PEOPLE 
 22  ARE STILL DRIVING UP TO SOME OF THE OTHER STATIONS WITH 
 23  ARCOS IN A RELATIVE CLOSE PROXIMITY.  I'M TALKING ABOUT A 
 24  MILE.  AND THEY ARE STILL BUYING GASOLINE AT THESE VERY 
 25  HIGH PRICES.  
0173
 01               AND IT REALLY TAKES, IN MY OPINION, SOMEBODY 
 02  TO BEGIN TO SHOP THOSE PRICES TO DRIVE SOME OF THAT 
 03  PRICING DOWN.  AND WHEN THEY BEGIN TO DO THAT, I THINK WE 
 04  WILL SEE SOME PRICES COMING DOWN.  
 05               BUT I CAN SHOW YOU WHERE THEY ARE STILL 
 06  DRIVING INTO THOSE VERY HIGH-PRICE STATIONS AND BUYING 
 07  THEIR GASOLINE AND NOT LOOKING TO SOME OF THESE OTHER 
 08  LOCALS.  BUT WE ARE BEGINNING TO SEE IT DROP.
 09         DR. BOSTON:  THEY HAVE CREDIT CARDS AT THE OTHER 
 10  STATIONS, AND ARCO DOESN'T TAKE THEM. 
 11         MR. VAGIM:  MR. CHAIRMAN, THANK YOU.  I THINK 
 12  EARLIER MR. SIMEROTH BASICALLY CONFIRMED SOMETHING FOR ME 
 13  AND ALSO CONFIRMING ON THE GRAPH WE HAD UP THERE THE 
 14  DEALER TANK WAGON VERSES THE SPOT MARKET AND UNBRANDED.  
 15  WE DON'T HAVE A SUPPLY PROBLEM HERE ANY MORE AS MUCH AS WE 
 16  HAVE A DISTRIBUTION PROBLEM.  
 17               WE'RE ELIMINATING THE COMPETITION.  AND IT'S 
 18  INTERESTING TO FIND THAT ARCO BEING THE BRAND TREND SETTER 
 19  IN PRICING AND EVERYONE ELSE SERIALLY FALLING THEREAFTER, 
 20  THERE SEEMS TO BE A PATTERN BEING SET HERE.  I DON'T WANT 
 21  TO CALL IT COLLUSION.  WE WILL JUST CALL IT A SERIAL PRICE 
 22  FALLING EACH OTHER.  
 23               BUT, YET, WE HAVE THESE INDEPENDENTS SITTING 
 24  OUT THERE BUYING OFF THE SPOT MARKET FROM A LARGE 
 25  SUPPLIER, BUT YET WE'RE ELIMINATING THESE FOLKS.  
0174
 01               IT SEEMS WE SHOULD HAVE THE DEPARTMENT OF 
 02  COMMERCE IN HERE FIGURING OUT HOW TO INTRODUCE THESE 
 03  INDEPENDENT UNBRANDED FOLKS OUT THERE TO MAKE SURE WE HAVE 
 04  A COMPETITION OUT THERE.  
 05               IF ONE DAY WE GET RID OF UNBRANDED STATIONS 
 06  AND THERE'S NO SUCH THING, BECAUSE WE MADE IT SO 
 07  ENVIRONMENTALLY IMPOSSIBLE FOR THE INDEPENDENT GUY SELLING 
 08  JUST THE GASOLINE, BECAUSE THE SUPPLY PROBLEM IS NOW ONE 
 09  OF SUCH CONTROL, THAT THERE IS NOT ENOUGH MARGIN THERE 
 10  ANYWAY TO DO IT.  
 11               IF INDEED WE GOT RID OF ALL OF THOSE, WHERE 
 12  WOULD BE THE PRESSURE TO DRIVE THE PRICE DOWN?  IT DOESN'T 
 13  SEEM THEY ARE REALLY COMPETING WITH EACH OTHER THAT MUCH.  
 14  THEY ARE ALWAYS WITHIN THIS COMFORTABLE RANGE OF WHEREVER 
 15  THEY ARE.  AND THEY SEEM TO BE GEOGRAPHICALLY LOCATING 
 16  THEMSELVES AROUND CLUSTERS OF HIGH PRICES.  
 17               THERE'S A PATTERN BEING SET HERE.  I THINK 
 18  SUPERVISOR ROBERTS IS HITTING THE NAIL ON THE HEAD.  AND 
 19  THANK GOODNESS FOR THESE NONBRANDED STATIONS.  
 20               AND, INDEED, IF WE ALL STARTED PULLING INTO 
 21  THOSE FOLKS, I GUARANTEE YOU YOU'D SEE THE PRICES DROPPING 
 22  IN THE MARKETPLACE WITH THE BRANDED.  BUT THAT'S NOT 
 23  HAPPENING.  AND THEY ARE BEING ALLOWED TO SURVIVE IN AREAS 
 24  THAT MOST PEOPLE DON'T WANT TO DRIVE IN.  I'LL DRIVE 
 25  THERE, BUT A LOT OF PEOPLE DON'T.  MAYBE THAT'S THE 
0175
 01  SECRET, DRIVE IN AN AREA YOU NEVER WANT TO GO TO.  
 02               AND, MR. CHAIRMAN, LET ME QUICKLY STEP BACK 
 03  A MINUTE.  WE TALKED ABOUT THE OVERALL DISCUSSION.  WE ARE 
 04  ALL HERE LISTENING TO YOU TODAY.  AND IF YOU REMEMBER A 
 05  YEAR AGO, I WAS KIND OF LIKE THE BOARD'S SQUEAKY WHEEL FOR 
 06  THIS WHOLE R.F.G.  I PUT MY OWN CAR UP FOR A PILOT TYPE OF 
 07  A PROGRAM AND WENT TO THE FRESNO STATE FUELING SITE, WENT 
 08  TO SACRAMENTO AT THE PAC BELL SITE, FUELED UP BACK AND 
 09  FORTH.  
 10               AND I DID HAVE SOME QUESTIONS.  I DID FEEL 
 11  THAT I HAD SOME SERIOUS LOSSES OF FUEL ECONOMY.  BUT EVERY 
 12  ONE OF THE THINGS THAT I RAISED AS A POINT OF CONCERN HAVE 
 13  NOW TO DATE BEEN ANSWERED.  
 14               I HAVEN'T GOT THE SPECIFIC ANSWER ON THINGS 
 15  LIKE, WAS THE TEST FUEL THAT I USED THE ONE THAT WAS THE 
 16  FIRST TEST FUEL THAT HAD THE REAL HIGH R.V.P.?  AND I 
 17  UNDERSTAND THERE WAS SOME STUFF THAT HAD THAT OUT THERE ON 
 18  THE FIRST TEST FUEL AND ALSO HAD A VERY LOW ENERGY 
 19  CONTENT.  SO IF YOU TAKE THE HIGH READ PRESSURE -- AND 
 20  THIS TIME LAST YEAR, THE TEMPERATURES IN FRESNO, WE HAD A 
 21  REAL HEAT STREAK OF ABOUT 105 TO 108.  I FILLED UP WITH 
 22  THIS STUFF WITH HIGH R.V.P., AND SITTING EIGHT TO TEN DAYS 
 23  IN MY TANK, A LOT OF IT WENT UP IN THE AIR.  
 24               NOW YOU'VE BROUGHT IT DOWN TO EVEN LOWER THAN 
 25  WHAT I WAS BUYING IN NORMAL CONVENTIONAL GASOLINE.  AND I 
0176
 01  HAVE NOTICED THAT DIFFERENCE.  THE ENERGY CONTENT IS BACK 
 02  UP FOR STUFF YOU BUY IN THE MARKETPLACE, AND I CAN SEE 
 03  THAT DIFFERENCE.  
 04               SO BASICALLY, I FIGURE WHAT I MUST DO -- AND 
 05  I DON'T THINK THIS IS ANY DIFFERENT THAN WHAT WE ALL FACE 
 06  WHEN THE DISTILLERS OF SPIRITS DECIDED TO LOWER THEIR 
 07  PROOF AND BOTTLE SIZE AND UP THEIR PRICE, EXCEPT BY THE 
 08  TIME YOU GOT HALFWAY THROUGH THE BOTTLE, YOU DIDN'T CARE 
 09  ANY MORE WHAT YOU BUY.  BUT IN THIS CASE, YOU DO, BECAUSE 
 10  YOU ARE STILL SEEING THAT GAS TANK GO DOWN.  
 11               WHAT I DECIDED TO DO IS I WASN'T GOING TO 
 12  LOOK AT MY SPOT DRIVING.  I WAS GOING TO AVERAGE THE WHOLE 
 13  THING.  SO IF YOU TAKE THE TOTAL GALLONS THAT YOU USE AND 
 14  YOU KEEP TRACK OF THEM TO DATE AND YOU AVERAGE THE NUMBER 
 15  OF MILES YOU'VE DRIVEN IN THERE, YOU COME IN RIGHT IN THE 
 16  MIDDLE OF WHAT THAT STICKER SAYS ON YOUR WINDOW.  YOU 
 17  CAN'T TAKE A TRIP OR A DAY OR A PARTICULAR EVENT AND SAY, 
 18  HEY, I GOT REAL GOOD GAS MILEAGE TODAY.  I THINK YOU GOT 
 19  AVERAGE OVER A REAL LONG HALL TO MAKE THIS THING COME OUT 
 20  TO WHAT'S REALLY HAPPENING.  AND I DID THAT.  AND FRANKLY, 
 21  I'M VERY SATISFIED WITH IT.  
 22               BUT I DID GET MY ANSWERS TO MY QUESTIONS.  WE 
 23  HAD SOME ANOMALIES IN THE TEST FUEL.  AND THAT PLAYED 
 24  OUT.  
 25               SO, MR. CHAIRMAN, I DON'T EVEN KNOW IF YOU 
0177
 01  REMEMBER, BUT I WAS ONE OF THE ONES THAT WAS SPEAKING 
 02  PRETTY HIGH FROM A PLATFORM.  AND FRANKLY, I'M SATISFIED 
 03  NOW THAT WE HAVE A GOOD FUEL IN THE MARKETPLACE.  
 04               AND ONE THING WE CAN ALL BE HAPPY ABOUT IS WE 
 05  ARE NOT SITTING HERE TALKING ABOUT HOSES BEING EATEN UP OR 
 06  ANY OF THE FUEL SUPPLY PART OF OUR ENGINE.  SO I THINK 
 07  THAT'S A REAL POSITIVE THING. 
 08         MR. DUNLAP:  THANK YOU.  
 09               JUST IF I MIGHT, IN ATTEMPT TO WRAP UP SOME 
 10  OF THESE ISSUES, THE OIL COMPANIES IN MY VIEW HAVE SOME 
 11  EXPLAINING TO DO.  THEY CAME HERE TWO MONTHS AGO.  THEY 
 12  TOLD THIS BOARD WHAT THE REASONS WERE FOR THE PRICE 
 13  INCREASES, TALKED ABOUT SUPPLY.  AND I FEEL THAT OUR ANGER 
 14  NEEDS TO BE SUPPLIED, MAKING SURE THAT WE HAVE A PRODUCT 
 15  THAT WORKS, PRODUCT THAT ISN'T GOING TO DAMAGE ENGINES.    
 16               IF THERE ARE DRAWBACKS WITH IT, SUCH AS FUEL 
 17  ECONOMY, THAT WE NEED TO TELL THE PUBLIC ABOUT.  I BELIEVE 
 18  WE HAVE DONE THAT.  WE HAVE BEEN ABLE TO DETERMINE WHAT 
 19  THE COST IS.  
 20               MR. BOYD ALONG WITH THE EXECUTIVE OFFICER OF 
 21  THE ENERGY COMMISSION INTERVIEWED THESE OIL COMPANIES AND 
 22  ASKED ISSUES ON SUPPLY.  AND I AM MORE COMFORTABLE WITH 
 23  WHAT I HAVE HEARD.  IN FACT, I'M COMPLETELY SATISFIED.  
 24               I SHARE SUPERVISOR ROBERTS' CONCERN AND THE 
 25  OTHERS ON THIS BOARD ABOUT PRICE.  WE ARE TOLD THE REASONS 
0178
 01  THAT THE FUEL WENT UP.  THOSE ISSUES HAVE BEEN SEEMINGLY 
 02  TURNED AROUND DIRECTIONALLY, AND THERE SHOULD BE A PRICE 
 03  DECREASE REFLECTED AT THE PUMP THAT CONSUMERS CAN THEN 
 04  ENJOY.  THAT HASN'T HAPPENED AS QUICKLY.  
 05               AND JIM SAID IT QUITE WELL THAT IT GOES UP 
 06  LIKE A ROCKET, COMES DOWN LIKE A PARACHUTE.  I THINK 
 07  THAT'S WHAT'S GOING ON HERE.  
 08               HOWEVER, I WANT PEOPLE TO UNDERSTAND CLEARLY, 
 09  OUR ROLE ISN'T TO CONTROL MARKETS.  OUR ROLE ISN'T TO BE A 
 10  SHIELD FOR ANYONE WHO'S ABSORBING PROFITS.  AND I THINK WE 
 11  HAVE BEEN ABLE TO HAVE PEOPLE LOOK BEHIND THE CURTAIN AS 
 12  RELATES TO US BEING POINTED TO AS THE CAUSE OF THOSE FUEL 
 13  INCREASES REFLECTED AT THE PUMP.  
 14               BUT MAKE NO MISTAKE ABOUT IT, WE ARE 
 15  FRUSTRATED LIKE MANY CONSUMERS IN THE STATE.  OIL 
 16  COMPANIES HAVE SOME EXPLAINING TO DO, AND WE ARE GOING TO 
 17  BE VIGILANT IN ASSESSING WHAT'S GOING ON.  
 18               MR. BOYD, YOU HAVE AN ONGOING CHARGE.  IF YOU 
 19  THINK YOU DON'T HAVE IT, WE WILL GIVE IT TO YOU AGAIN, TO 
 20  WORK WITH COLLEAGUES AT THE ENERGY COMMISSION TO GET FACTS 
 21  BACK TO THIS BOARD.  AND IT'S MY HOPE THAT ONE MONTH FROM 
 22  NOW WHEN THIS BOARD CONVENES THAT WE WILL SEE THOSE ISSUES 
 23  SATISFIED RELATIVE TO PRICE, BECAUSE IF THEY ARE NOT, 
 24  THERE WILL LIKELY BE MORE QUESTIONS, NOT JUST BY THIS 
 25  BOARD, BUT BY OUR FRIENDS IN THE LEGISLATURE AND OTHERS 
0179
 01  THAT HAVE ASKED QUESTIONS.  
 02               AND THIS HAS BEEN THE TOPIC OF DISCUSSION, A 
 03  HIGH PRIORITY TOPIC AT THE FEDERAL LEVEL AND THE CONGRESS 
 04  AND THE STATE LEGISLATURE AS WELL.  I KNOW I'VE PERSONALLY 
 05  GONE OVER AND MET WITH MANY OF THE MEN AND WOMEN IN THE 
 06  STATE LEGISLATURE TO TRY TO ANSWER THOSE QUESTIONS.  
 07               SO WE ARE NOT ABOUT CONTROLLING MARKETS, BUT 
 08  WE ARE ABOUT GETTING ANSWERS, AND WE ARE ABOUT TAKING 
 09  RESPONSIBILITY FOR OUR IMPACT IN THIS NEW FUELS 
 10  INTRODUCTION AND ITS IMPACT ON PRICE.  
 11               SO IF THAT IS DONE AND IF I HAVE BEEN FAIR IN 
 12  REPRESENTING CONCERNS, I'D LIKE TO MOVE ON THIS ITEM.  
 13               BUT IF THERE ARE BURNING ISSUES THAT MY 
 14  COLLEAGUES ON THE BOARD WOULD LIKE TO COVER, I'D BE HAPPY 
 15  TO TAKE A LITTLE BIT MORE TIME.
 16         MR. VAGIM:  MR. CHAIRMAN, I'D LIKE TO ASK STAFF IF 
 17  THEY WOULD CONTINUE TO GIVE US INFORMATION ON THE PRICING 
 18  AND SUPPLY ISSUES.  I THINK IT'S VERY IMPORTANT.
 19         MR. BOYD:  MR. CHAIRMAN, IF I MIGHT, WE WILL 
 20  CONTINUE TO PROVIDE YOU DATA ON A REAL TIME BASIS.  WE, AS 
 21  I INDICATED IN THE OPENING OF THIS ITEM, CONTINUE TO WORK 
 22  WITH THE ENERGY COMMISSION TO FOLLOW THIS ITEM.  
 23               AND I WANT TO ASSURE SUPERVISOR ROBERTS THAT 
 24  I SHARE HIS FRUSTRATION THAT I, AS MUCH AS HE, IF NOT 
 25  MORE, AM WORRIED ABOUT IMPACTS ON THE PROGRAM AND THE 
0180
 01  VIABILITY OF THE PROGRAM.  AND THAT'S MY NUMBER ONE 
 02  PRIORITY.  AND THEREFORE, I AM CONCERNED THAT THE 
 03  FRUSTRATIONS OF THE PUBLIC RELATIVE TO PRICE GET 
 04  TRANSFERRED TO THIS PROGRAM.  
 05               I THINK WHAT WE TRIED TO POINT OUT AND MAYBE 
 06  TOO SUBTLY WAS WE ARE STRUGGLING TO EXPLAIN THE POINTS 
 07  THAT WERE MADE ABOUT PRICE STAYING UP AT THE RETAIL LEVEL 
 08  EVEN THOUGH THE HISTORICAL FACTORS HAVE GONE DOWN.  
 09               I DON'T WANT TO MAKE EXCUSES FOR ANY 
 10  COMPONENT OF THE SYSTEM.  YOU REMEMBER IN APRIL WE SHOWED 
 11  DEALERS WHO WERE TAKING IT IN THE NECK; THERE WAS A 
 12  NEGATIVE MARKET ON DEALERS.  AND I IMAGINE A FEW OF THEM 
 13  ARE TRYING TO MAKE THAT UP RIGHT NOW DURING THIS TIME.     
 14               BUT IT DOESN'T HELP ADMITTEDLY WHEN THE OIL 
 15  COMPANIES ANNOUNCE IN THE PAPER THAT THEY MADE MORE MONEY 
 16  IN THE FIRST QUARTER OF THIS YEAR THAN THEY DID ALL OF 
 17  LAST YEAR.  
 18               SO THERE'S ALL SORTS OF TUGGING AND HAULING 
 19  HERE, AND WE WILL CONTINUE TO DELVE INTO THIS.
 20         MR. DUNLAP:  DO THAT.  AND MAKE SURE AS YOU LEARN 
 21  NEW THINGS THAT YOU GET SOME MEMOS BACK TO THE BOARD 
 22  ADVISING THEM.  
 23               ALSO, MR. KENNY, I KNOW IT'S DIFFICULT TO 
 24  TALK ABOUT LEGAL MATTERS, BUT I WOULD ASK THAT YOU KEEP 
 25  THIS BOARD INFORMED RELATIVE TO WHAT'S GOING ON WITH THE 
0181
 01  ATTORNEY GENERAL'S REVIEW SO THAT WE CAN BE CURRENT IN 
 02  THAT REGARD.  
 03               BUT, MR. BOYD, I GUESS TWO FINAL THOUGHTS.  I 
 04  GUESS IN RESPONSE TO WHAT YOU SAID, NUMBER ONE BEING MAKE 
 05  NO MISTAKE ABOUT IT, THERE ARE ELECTED OFFICIALS AND 
 06  APPOINTED OFFICIALS ON THIS BOARD WHO HAVE THE 
 07  RESPONSIBILITY TO TELL THEM WHAT'S GOING ON.  AND SO I AM 
 08  SYMPATHETIC, PARTICULARLY TO THOSE ELECTED TO COUNTY 
 09  BOARDS AND CITY COUNSELS TO SERVE ON THIS BOARD TO HAVE 
 10  THE FACTS SO THEY CAN REPORT TO THEIR CONSTITUENTS.  
 11               ALSO, FOR THOSE IN THE MEDIA THAT ARE HERE, 
 12  WE WANT TO PLEDGE THAT WE'LL CONTINUE TO HAVE AN OPEN-DOOR 
 13  POLICY AS MR. BOYD OUTLINED ON THE OUTSET OF THIS ISSUE TO 
 14  GET YOU THE FACTS SO YOU MIGHT ACCURATELY PORTRAY THESE 
 15  ISSUES.  
 16               I DON'T WANT TO HAVE YOU LEAVE WITH THE 
 17  IMPRESSION THAT WE DON'T WANT YOU TO HAVE THE FACTS.  WE 
 18  DO.  YOU ARE A KEY PARTNER IN GETTING THE WORD OUT ABOUT 
 19  THIS PROGRAM, BOTH GOOD AND IT'S WARRANTED WHEN THERE ARE 
 20  PROBLEMS.  AND WE RESPECT THAT.  
 21               BUT WE DO NEED YOU AS A PARTNER, BECAUSE WE 
 22  CAN'T EDUCATE THE PUBLIC FROM THIS LITTLE BOARD, HUMBLE 
 23  BOARD OURSELVES.  WE NEED YOUR HELP AND YOUR ASSISTANCE.   
 24               WITH THAT, I'D LIKE TO MOVE ON THIS ITEM.  
 25  WE'VE COVERED IT FAIRLY COMPLETELY.  
0182
 01               IS THERE A CONSENSUS FROM THE BOARD TO MOVE 
 02  ON? 
 03               OKAY.  ONE ITEM REMAINING, THE FIFTH ITEM, 
 04  95-5-5, WHICH IS A RESEARCH PROPOSAL.  
 05               IF I MIGHT ATTEMPT TO RECAP A BIT, THERE'S 
 06  SOME CONCERN EXPRESSED BY SEVERAL OF MY COLLEAGUES ON THE 
 07  BOARD LAST MONTH ABOUT SOME OF THE TECHNICAL DETAILS 
 08  SURROUNDING THIS RESEARCH PROJECT.  
 09               MY UNDERSTANDING IS YOU HAVE A VERY BRIEF 
 10  COMMENTARY RELATIVE TO WHAT THE DISPOSITION OF THIS ITEM 
 11  MIGHT BE DOWN THE ROAD.  
 12               I'LL GIVE YOU THE TIME NOW TO COVER THAT, IF 
 13  YOU WOULD?
 14         MR. BOYD:  MR. CHAIRMAN, LAST MONTH THE BOARD DID 
 15  HAVE EXTENDED DISCUSSION ON THIS RESEARCH PROJECT, AND WE 
 16  CONTINUED IT TO THIS MONTH WHILE WE CONTINUE TO DISCUSS 
 17  THE ITEM WITH VARIOUS BOARD MEMBERS WHO HAD QUESTIONS.  IT 
 18  WAS AUTOMATICALLY CONTINUED TO THIS MONTH.  
 19               I WOULD REPORT TO YOU THAT, IN MY OPINION, WE 
 20  HAVE NOT EXHAUSTED THE OPPORTUNITIES WE HAVE HAD TO 
 21  DISCUSS THE ISSUE WITH SEVERAL BOARD MEMBERS.  THERE ARE 
 22  STILL A HOST OF QUESTIONS THAT REMAIN UNANSWERED.  
 23               THE LONG AND SHORT OF IT IS, WE HAVEN'T 
 24  FINISHED DISCUSSING THIS ITEM WITH THE BOARD MEMBERS, AND 
 25  I WOULD REQUEST THAT WE JUST CONTINUE THIS ITEM UNTIL NEXT 
0183
 01  MONTH'S AGENDA.  BUT WE CAN FINISH WITH THE DIALOGUE WITH 
 02  THE VARIOUS BOARD MEMBERS AND GET THE ANSWERS TO THE 
 03  REMAINING QUESTIONS THEY HAVE.
 04         MR. DUNLAP:  THAT WOULD BE FINE.  
 05               THANK YOU, MR. BOYD.  
 06               I WOULD ASK ONE THING, THOUGH:  IF YOU COULD, 
 07  MR. BOYD, CONVENE A MEETING WITH A COUPLE OF THE BOARD 
 08  MEMBERS THAT HAVE HAD ISSUES ON THIS ISSUE, PERHAPS WITH 
 09  SOME FROM INDUSTRY AND OTHER INFORMED PARTIES, SO THERE 
 10  MIGHT BE A BIT OF DIALOGUE THAT HAPPENS PRIOR TO US 
 11  EMBARKING ON THIS RESEARCH POLICY.
 12         MR. BOYD:  I'D BE GLAD TO DO THAT, MR. CHAIRMAN.
 13         MR. DUNLAP:  WITH THAT, ARE THERE ANY OTHER ITEMS 
 14  THAT NEED TO GO BEFORE THE AIR RESOURCES BOARD?
 15         MR. BOYD:  NO FURTHER BUSINESS FROM THE STAFF, 
 16  MR. CHAIRMAN.
 17         MR. DUNLAP:  DO MY COLLEAGUES HAVE ANY ISSUES?  
 18               ALL RIGHT.  THANK YOU.  
 19               WITH THAT, WE WILL ADJOURN THE JUNE MEETING 
 20  OF THE CALIFORNIA AIR RESOURCES BOARD.  
 21               (MEETING ADJOURNED AT 1:00 P.M.)
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