BOARD MEETING STATE OF CALIFORNIA AIR RESOURCES BOARD CALIFORNIA ENVIRONMENTAL PROTECTION AGENCY CENTRAL VALLEY AUDITORIUM, SECOND FLOOR 1001 I STREET SACRAMENTO, CALIFORNIA THURSDAY, NOVEMBER 15, 2001 9:00 A.M. JAMES F. PETERS, CSR, RPR CERTIFIED SHORTHAND REPORTER LICENSE NUMBER 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 ii APPEARANCES BOARD MEMBERS Dr. Allan Lloyd, Chairperson Dr. William Burke Mr. Joseph Calhoun Mr. Hugh Friedman Dr. William Friedman Mrs. Barbara Riordan Ms. Dorene D'Adamo Supervisor Mark DeSaulnier Mr. Matthew McKinnon STAFF Mr. Mike Kenny, Executive Officer Mr. Tom Cackette, Deputy Executive Officer Mr. Mike Scheible, Deputy Executive Officer Ms. Lynn Terry, Deputy Executive Officer Mr. Steve Albu, Chief, Engineering Studies Branch Mr. Robert Barham, Assistant Chief Mr. Ranjit Bhullar, Manager, Investigation and Certification Section Ms. Sarah Carter, Air Resources Engineer Mr. Greg Chin, Air Resources Engineer Mr. Bob Cross, Chief, Mobile Source Control Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iii APPEARANCE CONTINIUED STAFF CONTINUED Mr. Paul Hughes, Manager, Low-Emmission Vehicle Implementation Section Mr. Tom Jennings, Senior Staff Counsel Mr. Leslie Krinsk, Senior Staff Counsel Mr. Bob Leonard, Chief, Surveillance Branch, Compliance Division Ms. Kitty Martin, Manager, Permit Assistance Center Mr. R. Neil Nipper, Air Resources Engineer Mr. George Poppic, Staff Counsel Ms. Marcelle Surovick, Air Pollution Specialist Mr. Mike Tollstrup, Chief, Project Assessment Branch Mr. Peter Venturini, Chief, Stationary Source Division PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 iv INDEX PAGE Pledge of Allegiance 1 Roll Call 1 Comments by Chairperson Lloyd 2 Item 01-9-1 2 Chairperson Lloyd 2 Executive Officer Kenny 5 Air Pollution Specialist Surovick 6 Questions and Answers 26 Air Resources Engineer Chin 38 Loren Kaye 49 Ralph Ordonez 51 Susannah Churchill 53 Stan Zwicker 61 Sheryl Carter 74 Todd Campbell 87 Bonnie Holmes-Gen 92 Valerie Gates 97 Eric Wesselman 103 Matha Arguello 109 S.N. Prakash 111 Tim French 118 Chuck Solt 134 Karl Stoffers 139 Joan Lee 141 Mohsen Nazemi 143 Bud Beebe 151 Discussion 163 Motion 168 Vote 168 Afternoon Session 170 Item 01-9-2 170 Executive Officer Kenny 170 Air Resources Engineer Carter 171 Discussion and Questions and Answers 182 Greg Dana 185 Pete Hardigan 193 Motion 199 Vote 199 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 v INDEX Item 01-9-3 199 Chairperson Lloyd 199 Executive Officer Kenny 200 Investigation and Certification Manager Bhullar 201 Rosa Salcedo 211 Donald Gilson 214 Maryann Gonzalez 216 Sandra Duval 219 Skip Orr 226 Motion 227 Vote 227 Item 01-9-4 228 Questions and Answers 228 Motion 232 Vote 233 Adjournment 233 Reporter's Certificate 234 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 1 1 PROCEEDINGS 2 CHAIRPERSON LLOYD: Good morning. November 15th, 3 2001 public meeting of the Air Resources Board will now 4 come to order. Ms. D'Adamo, will you please lead us in 5 the Pledge of Allegiance. 6 (Thereupon the Pledge of Allegiance was 7 recited in unison.) 8 CHAIRPERSON LLOYD: Will the Clerk of the Board 9 please call the roll. 10 BOARD CLERK KAVAN: Dr. Burke? 11 BOARD MEMBER BURKE: Here. 12 BOARD CLERK KAVAN: Mr. Calhoun? 13 BOARD MEMBER CALHOUN: Here. 14 BOARD CLERK KAVAN: Ms. D'adamo? 15 BOARD MEMBER D'ADAMO: Here. 16 BOARD CLERK KAVAN: Supervisor DeSaulnier? 17 BOARD MEMBER DeSAULNIER: Here. 18 BOARD CLERK KAVAN: Professor Friedman? 19 BOARD MEMBER HUGH FRIEDMAN: Here. 20 BOARD CLERK KAVAN: Dr. Friedman? 21 BOARD MEMBER WILLIAM FRIEDMAN: Here. 22 BOARD CLERK KAVAN: Mr. McKinnon? 23 Supervisor Patrick? 24 Mrs. Riordan? 25 BOARD MEMBER RIORDAN: Here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 2 1 BOARD CLERK KAVAN: Supervisor Roberts? 2 Chairman Lloyd. 3 CHAIRPERSON LLOYD: Here. 4 Just a few comments before we go into today's 5 board meeting. Apparently, we may be subject to some 6 power interruptions in this building. And if we do, 7 apparently, what make a sound like gunfire might come 8 through, cracking through, so people should remain calm. 9 Don't drop to the floor, but just be warned and so there's 10 a caveat upfront there. 11 I'd also draw -- most of the Board Members have 12 got a copy of the Health and Clean Air Newsletter. If you 13 haven't, this is now out. 14 The other one I would also like to acknowledge 15 and say I had the privilege last month of attending the 16 Clean Air Technologies Conference at the South Coast AQMD 17 under Dr. Burke's leadership and organization. And I will 18 say that I thought it was an excellent conference. And, 19 Dr. Burke, you are to be congratulated and your staff, 20 very good. 21 We'll go straight into the first item. I would 22 like to remind -- this is agenda Item 01-9-1. Again, as a 23 caveat, I would like to remind anyone in the audience who 24 wishes to testify on today's items, please sign up with 25 the Clerk of the Board. If you have a written statement PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 3 1 also, please give 30 copies to the Board Clerk. 2 The first Item is 01-9-1, Proposed Regulations 3 for Distributed Generation Power Units and Proposed 4 Guidelines for the District Permitting of Electrical 5 Generation Sources. 6 So just a reminder for people testifying and just 7 to the Board members, we actually have two items covered 8 hundred, one a guideline and one a regulatory item. So I 9 would appreciate when people testify to make clear what 10 aspect you're discussing, so that, in fact, it will help 11 us keep them separate. 12 The first matter concerns small power sources 13 located at one's home or office that generate electricity 14 for the direct use of those persons or facilities. 15 On-site distributed generation avoids the line loss 16 associated with transmission from central power stations, 17 and therefore has the potential to be highly efficient and 18 also reliable. When the waste heat captured and used to 19 make hot water the efficiency of DG goes up even more. 20 As my colleagues already know, there's huge 21 interest in DG as a power source in California nationally 22 and around the world. The California Energy Commission is 23 very enthusiastic about these technologies and will be 24 testifying later on this item. 25 Our job is to manage and control any air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 4 1 pollution that may be emitted from emerging DG 2 technologies. Accordingly, we are here to consider new 3 emission standards for distributed generation, plus a 4 certification program to allow the sale of DG units in 5 California. 6 There's a wide range of technology that can be 7 used for DG including photovoltaics, fuel cells, 8 microturbines and small engines. Some of these are zero 9 emitting, others are combustion based and need to be 10 controlled. 11 And added benefit also of distributed generation, 12 if the central power station goes down, in fact, you don't 13 lose power regionally, so this is -- in these times, 14 particularly, this is an added benefit. 15 The second matter before the Board is actually 16 something we started, and that's my first year on the job, 17 in June of 1999, this Board adopted guidelines for the 18 permitting of powerplants more man 50 megawatts in size. 19 Today, we are considering guidelines for small and 20 medium-sized powerplants below that threshold, everything 21 from zero to 50 megawatts. 22 For the past several months these small and 23 intermediate projects have been handled on a case-by-case 24 basis by local districts with lots of input from our 25 staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 5 1 Expanding our guidance to include powerplants in 2 this size range will make the whole process more 3 consistent and more efficient. 4 Again, before turning things over to our staff, I 5 would like to express my appreciation to the 6 representatives from the affected industries, 7 environmental groups, utilities and air pollution control 8 districts for the assistance they have provided us in the 9 development of the DG regulation and the new powerplant 10 guidelines. 11 At this point, I'd like to turn it over to Mr. 12 Kenny to begin the staff presentation. 13 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 14 and Members of the Board. The California distributed 15 generation and certification program was created by Senate 16 Bill 1298, by Senator Bowen. 17 SB 1298 focuses on electrical generation near the 18 place of use and defines those sources as distributed 19 generation. The proposed certification program affects 20 electrical generation technologies that are exempt from 21 air pollution control or air quality management district 22 permitting requirements. The statute also directs the Air 23 Resources Board to issue guidance to districts on the 24 permitting of electrical generation technologies under 25 their regulatory jurisdiction. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 6 1 This category includes certain DG units, peakers 2 and small- to medium-sized central station powerplants. 3 As Chairman Lloyd indicated, the Board has already issued 4 guidelines for the permitting of major powerplants, 5 meaning those that produce 50 megawatts or more. That was 6 done in June of 1999. 7 At this point, I'd like to turn it over to Ms. 8 Surovick and Mr. Chin who will present our proposals. Ms. 9 Surovick will begin with an overview of distributed 10 generation and followed with the proposed emission 11 standards and certification requirements. 12 Mr. Chin will then discuss the proposed guidance 13 for the district permitting of electrical generation 14 sources that are not to be certified by the Board. 15 Ms. Surovick. 16 AIR POLLUTION SPECIALIST SUROVICK: Thank you, 17 Mr. Kenny. Good morning, Chairman Lloyd and Members of 18 the Board. 19 (Thereupon an overhead presentation was 20 presented as follows.) 21 AIR POLLUTION SPECIALIST SUROVICK: Members of 22 the Board, Senate Bill 1298 authored by Senator Debra 23 Bowen and signed on September 25th, 2000 by Governor Gray 24 Davis requires the ARB to establish a certification 25 program for DG technologies that are not subject to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 7 1 district permitting. 2 BOARD MEMBER WILLIAM FRIEDMAN: Can we make it 3 louder, please. 4 AIR POLLUTION SPECIALIST SUROVICK: SB 1298 also 5 requires the ARB to develop a guidance document for the 6 districts to use in the permitting of electrical 7 generation technologies that are under their jurisdiction. 8 The remainder of my presentation will focus on SB 9 1298's first requirement, the certification program. My 10 presentation will be about 20 minutes long and then I'll 11 turn it over to Mr. Chin so that he can spend about ten 12 minutes discussing SB 1298's second requirement, the 13 proposed guidance document for districts. 14 --o0o-- 15 AIR POLLUTION SPECIALIST SUROVICK: In my 16 presentation today, I will summarize the purpose and 17 requirements of SB 1298 and explain what distributed 18 generation or DG is. I'll then explain how the staff 19 developed the proposed DG certification program and 20 summarized the requirements of the program. Next, I'll 21 discuss the environmental and economic impacts and the 22 staff's proposed modifications. 23 And finally, I'll conclude with a summary and 24 staff's recommendations. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 8 1 AIR POLLUTION SPECIALIST SUROVICK: I'll now 2 summarize the requirements of SB 1298. 3 --o0o-- 4 AIR POLLUTION SPECIALIST SUROVICK: The purpose 5 of SB 1298 was to encourage the employment of DG 6 technology in a way that has a positive effect on air 7 quality. On the energy production basis, that is on a 8 pound of emissions per kilowatt hour of electricity 9 produced emissions from some DG units can be as much as an 10 order of magnitude higher than emissions from central 11 station powerplants. 12 SB 1298 was created to ensure the deployment of 13 only the cleanest DG technology in California. 14 --o0o-- 15 AIR POLLUTION SPECIALIST SUROVICK: SB 1298 16 requires the ARB to adopt a certification program for DG 17 units that are not subject to district permitting 18 requirements. The program must include uniform emission 19 standards for these units. The ARB has the authority to 20 adopt these standards because the units do not fall under 21 district or U.S. EPA jurisdiction. The certification 22 program and emission standards must be adopted by January 23 1, 2003. I will address the details of the proposed 24 certification program a little bit later in my 25 presentation. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 9 1 SB 1298 requires two stages of emission standards 2 that must be expressed in pounds per megawatt hour. The 3 first stage of the standards must reflect the best 4 performance achieved and practiced by existing DG 5 technologies that are exempt from district permits. The 6 law also requires that by the earliest practicable date 7 the standards be made equivalent to the level determined 8 by the ARB to be the Best Available Control Technology or 9 BACT, for permitted central station powerplants in 10 California. 11 SB 1298 also requires the ARB to approve a 12 guidance document for the districts to use in the 13 permitting of electrical generation technologies that are 14 under their jurisdiction. As I mentioned in my 15 introduction, Grant Chin will discuss the district 16 guidance after I finish my presentation. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SUROVICK: Because 19 distributed generation is a relatively new concept to most 20 of us, I will now provide some detailed background 21 information on what DG is. 22 --o0o-- 23 AIR POLLUTION SPECIALIST SUROVICK: DG is 24 electricity near the source of use. It's likely that most 25 DG is being considered as a supplement to grid supplied PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 10 1 electricity. However, the increasing availability and 2 reliability of grid supplied electricity and DG's relative 3 newness and cost make it difficult to predict the extent 4 to which DG will be installed in California. 5 To date, only a few DG units that are not subject 6 to district permitting requirements are currently 7 operating in California. These units are primarily 8 demonstration projects and being evaluated at research 9 facilities and other sites. 10 The South Coast Air Quality Management District 11 is distributing 150 microturbines throughout its 12 jurisdiction. Eight stationary fuel cells are currently 13 operating in California. These units are located at US 14 Department of Defense facilities and are undergoing 15 evaluation by utility companies. 16 Often DG units are integrated with waste heat 17 recovery systems, also referred to as combining heat and 18 power or CHP. A DG unit with CHP can produce electricity 19 and recover the waste heat from the electrical generation 20 process. 21 For example, the recovered waste heat can be used 22 by a hotel or hospital to heat water for showers and 23 physical therapy spas. I'll briefly show you some 24 pictures of DG units so that you can get a better idea of 25 their size and typical applications. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 11 1 --o0o-- 2 AIR POLLUTION SPECIALIST SUROVICK: Here are 3 several pictures of 30 kilowatt microturbines as it is 4 undergoing independent testing by the staff of the ARB. 5 To put kilowatts into perspective, a Raley's Superstore 6 requires about 150 to 200 kilowatts. 7 This unit was placed at the Sacramento Municipal 8 Utility District SMUD office as part of a demonstration 9 program. To give you an idea of the physical size of this 10 unit, you can see a black laptop computer in the center 11 picture near the bottom of the microturbine. We wish to 12 thank Mr. Bud Beebe of SMUD and ARB's testing staff who 13 participated in the nighttime testing. 14 --o0o-- 15 AIR POLLUTION SPECIALIST SUROVICK: This is a 16 picture of a 200 kilowatt fuel cell that is located at the 17 South Coast Air Quality Management District's office in 18 Diamond Bar. This unit was placed at the district office 19 by the Southern California Gas Company as part of a 20 demonstration program. 21 --o0o-- 22 AIR POLLUTION SPECIALIST SUROVICK: As you can 23 see from the picture on the right, the roof of the 8th 24 floor of our CalEPA building has about 730 photovoltaic or 25 PV panels, a total generating capacity of 30 kilowatts. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 12 1 In addition to panels, PV can be incorporated 2 into roofing tiles. The picture on the left shows PV 3 tiles and might be installed on a roof. 4 --o0o-- 5 AIR POLLUTION SPECIALIST SUROVICK: This is a 6 picture of several wind units that are part of a 500 7 kilowatt installation located at San Clemente Island off 8 the shore of southern California. 9 --o0o-- 10 AIR POLLUTION SPECIALIST SUROVICK: The picture 11 on your left is a 25 kilowatt Sterling cycled external 12 combustion engine. Heat is provided outside this type of 13 engine to move a piston. The picture on the right shows 14 an external combustion engine integrated with PV. 15 --o0o-- 16 AIR POLLUTION SPECIALIST SUROVICK: DG sources 17 have the potential of being placed closer to residential 18 areas than central station powerplants. Consequently, the 19 noise level of DG technologies can be a consideration for 20 potential users. 21 As shown in the upper left during site visits and 22 source testing, ARB staff had to wear ear protection while 23 some DG units were operating. In the picture on the 24 right, you can see noise dampening materials that some 25 manufacturers can apply to their DG units. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 13 1 --o0o-- 2 AIR POLLUTION SPECIALIST SUROVICK: This table 3 provides a comparison of the noise emissions from DG 4 relative to the European noise standard for electrical 5 generation technologies and US noise ordinances. It is 6 important to point out that this noise emissions data was 7 not necessarily obtained according to a standardized 8 method. 9 However, to put some of these numbers into 10 perspective, a kitchen garbage disposal reading at three 11 feet is about 80 decibels. 12 --o0o-- 13 AIR POLLUTION SPECIALIST SUROVICK: In addition 14 to the typical emissions that are the subject of district 15 permitting requirements, DG units can also be a source of 16 greenhouse gases. 17 Greenhouse gas emissions including CO2 and 18 methane are generally higher than DG units, are generally 19 higher from DG units than from central station 20 powerplants. 21 The yellow line on this chart represents CO2 22 emissions from a new combined cycle central station 23 powerplants. You will hear us mention combined cycle many 24 times this morning. Simply defined, a combined cycle 25 turbine captures waste heat from the primary combuster to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 14 1 produce additional electricity. 2 CO2 emissions from engines, fuel cells and 3 microturbines with and without CHP are shown in the bars. 4 As can be seen, efficient CHP can reduce this CO2 5 emissions from DG units. 6 However, even with CHP, a microturbine still has 7 higher emissions than a central station powerplant. 8 --o0o-- 9 AIR POLLUTION SPECIALIST SUROVICK: A comparison 10 from methane emissions is presented here. The yellow line 11 in this bar chart represents methane emissions from a new 12 combined cycle central station powerplant. The bar on 13 your left is for fuel cells. The other is for 14 microturbines. An engine would have methane emissions 15 about 60 times higher than the microturbine use for this 16 illustration. 17 --o0o-- 18 AIR POLLUTION SPECIALIST SUROVICK: Another piece 19 of background information that we are presenting today 20 relates to the installed cost of DG. These costs do not 21 include site-specific fuel or electricity prices, tax 22 rebates and other incentives or incorporate consideration 23 of the useful life of the equipment. As you can see from 24 this slide, the installed costs per kilowatt for DG is 25 generally much higher than for central station PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 15 1 powerplants. 2 As was mentioned earlier, integrating CHP with DG 3 can increase its cost attractiveness by avoiding the need 4 to purchase water heaters that would otherwise provide the 5 hot water. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SUROVICK: I will now 8 provide and overview of the steps that the staff took to 9 develop the proposal that is before you today. 10 --o0o-- 11 AIR POLLUTION SPECIALIST SUROVICK: In developing 12 the proposed DG program, staff talked to potentially 13 affected manufacturers and others to gain an understanding 14 of the various uses of these technologies. Staff also 15 obtained information from manufacturers on the number of 16 units they have placed in California or expect to place in 17 the near future. Staff also elected and evaluated 18 available emissions data from manufacturers. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SUROVICK: In addition 21 to collecting emissions information from the 22 manufacturers, the ARB staff conducted an independent 23 source test of a microturbine. 24 The ombudsman will present to you a little later 25 this morning a detailed report addressing the public PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 16 1 outreach activities that the ARB staff has conducted in 2 the 14 months since SB 1298 was signed by Governor Davis. 3 --o0o-- 4 AIR POLLUTION SPECIALIST SUROVICK: SB 1298 5 requires that the emission standards for the certification 6 program ultimately be equivalent to BACT for central 7 station powerplants. As you may know, district BACT 8 determinations must adhere to U.S. EPA prescribed 9 procedures and criteria. 10 In order to develop this phase of the standards, 11 ARB staff used the 1999 board approved district guidance 12 document for central station powerplants sized 50 13 megawatts or larger. 14 Staff used the BACT determinations in this report 15 for new central station powerplants with combined cycle 16 gas turbines. In developing standards that reflect BACT 17 for powerplants, the ARB staff considered the actual 18 electricity provided to consumers. This included the 19 evaluation of the loss of electricity as it is transmitted 20 from a central station powerplant to the place of use. 21 The California Energy Commission or CEC advised 22 the ARB staff that the State's transmission and 23 distribution systems experience and average line loss of 24 ten percent. Line loss can be minimized when DG units are 25 located at or near the place of use. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 17 1 The staff also evaluated DG programs proposed by 2 other government agencies. 3 --o0o-- 4 AIR POLLUTION SPECIALIST SUROVICK: The staff 5 evaluated methods for recognizing the benefits of combined 6 heat and power or CHP. As I mentioned earlier, a DG unit 7 integrated with CHP produces electricity and captures 8 waste heat to create hot water. 9 Without CHP, hot water would be supplied by a 10 water heater or a boiler which would create additional air 11 emissions. With CHP a DG unit uses fuel more efficiently 12 and reduces the total air emissions from a facility 13 including greenhouse gases such as carbon dioxide. 14 --o0o-- 15 AIR POLLUTION SPECIALIST SUROVICK: I will now 16 provide and overview of the requirements of the DG 17 certification program that staff is proposing for the 18 Board's consideration. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SUROVICK: As was 21 mentioned earlier, the certification program applies to 22 manufacturers of DG units that are not subject to district 23 permitting requirements. ARB staff will assist 24 manufacturers in determining if their DG units would be 25 subject to district permitting requirements. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 18 1 Manufacturers must certify units that they plan to sell 2 after January 1, 2003. 3 Units that are operating before then will not be 4 required to be retrofitted. Units that would be eligible 5 for our certification program include engine size less 6 than 50 horsepower, microturbines less 300 kilowatts in 7 size, and fuel cells. 8 --o0o-- 9 AIR POLLUTION SPECIALIST SUROVICK: As required 10 by SB 1298, the first stage of the standards must reflect 11 best performance achieved in practice by existing DG 12 technologies. Staff is proposing standards for 2003 for 13 DG units with and without CHP. 14 The standards for units with CHP reflect the 15 benefits of avoiding emissions from boilers that would 16 otherwise be used to produce hot water. These CHP units 17 must be able to achieve a minimum efficiency of 60 percent 18 for conversion of fuel to usable energy. Provisions have 19 also been included to recognize the benefits of 20 integrating DG units with zero emission technologies, such 21 as wind turbines, PV and nonreformer based fuel cells. 22 --o0o-- 23 AIR POLLUTION SPECIALIST SUROVICK: DG units sold 24 after January 1, 2007 must be certified to the 2007 25 emission standards, which reflect BACT for central station PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 19 1 powerplants after an adjustment for line loss. DG units 2 operating before January 1, 2007 will not have to be 3 certified to the new limits nor will they have to be 4 retrofitted to meet the new standards. 5 Like the standards we are proposing for 2003, we 6 have also proposed provisions to recognize the benefits of 7 efficient CHP. 8 --o0o-- 9 AIR POLLUTION SPECIALIST SUROVICK: The 10 provisions include a simple calculation that the 11 manufacturer can use to obtain credit for the heat 12 recovered from a CHP application. 13 --o0o-- 14 AIR POLLUTION SPECIALIST SUROVICK: This slide 15 shows a comparison of the 2003 and 2007 standards for NOx 16 emissions. The red line on the top indicates the 2003 17 standard, and the yellow line indicates the 2007 standard. 18 The bar on the left represents new permitted 19 central station powerplant emissions. As was mentioned 20 earlier, the 2007 standard reflects central station 21 powerplant emissions with an adjustment for line loss. 22 The three bars on the right indicate that 23 microturbines reciprocating engines and fuel cells can 24 meet the 2003 standard. In order to meet the 2007 25 standards manufacturers will be required to add on air PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 20 1 pollution control equipment, perform combustion 2 modifications, increase overall efficiencies and/or 3 integrate efficient CHP. 4 However, fuel cells have demonstrated that they 5 can currently meet the 2007 standard. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SUROVICK: This slide 8 shows the variation of NOx emissions for different power 9 production loads for two different microturbines. The 10 yellow line represents the proposed 2003 emission 11 standard. The red line shows the emission levels for one 12 microturbine at 100 percent load, 75 percent load and 50 13 percent load. 14 The black line shows the emission levels for 15 another microturbine for the same loads. As can be seen, 16 the power load can effect NOx emissions and can vary among 17 models. For this reason the testing parameters for the 18 certification program require multiple load testing. 19 --o0o-- 20 AIR POLLUTION SPECIALIST SUROVICK: Manufacturers 21 seeking certification must submit an application package 22 that contains an emissions test report and information 23 demonstrating the ability of the DG unit to maintain 24 emission standards for 15,000 hours. Other requirements 25 include labeling and record keeping requirements for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 21 1 manufacturers and enforcement and penalty provisions. 2 SB 1298 allows the ARB to recover the cost of 3 administering this program. Thus, staff is proposing a 4 $2,500 application fee. Staff is proposing certifications 5 be valid for four years. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SUROVICK: During the 8 development of the DG program, staff identified several 9 ways to recognize the benefits of using clean and 10 efficient DG in California. Staff is proposing provisions 11 to allow manufacturers of zero emission technologies to 12 seek voluntary certification. Some of these manufacturers 13 may want to seek ARB certification for marketing purposes. 14 To provide and economic incentive for the cleanest 15 technologies, zero emission technologies that are seeking 16 voluntary certification will not be assessed a fee. 17 For the same reason that DG can meet the 2007 18 standards by 2003 will have the 2003 certification fee 19 waived. 20 --o0o-- 21 AIR POLLUTION SPECIALIST SUROVICK: Efficient DG 22 is encouraged indirectly by the fact that the proposed 23 emission standards are expressed on a pounds per megawatt 24 hour basis. 25 In addition, staff included provisions to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 22 1 recognize the benefits of efficient CHP for both the 2003 2 and 2007 standards. Provisions are also proposed to 3 recognize the benefits of integrating DG with zero 4 emission technologies. Encouraging the efficient 5 conversion of fuel to usable energy, recognizing the 6 benefits of CHP and facilitating the acceptance of zero 7 emission technologies assist in the efforts to reduce 8 emissions of greenhouse gases, particularly CO2. 9 --o0o-- 10 AIR POLLUTION SPECIALIST SUROVICK: Staff is 11 proposing to complete another technical review of DG 12 technologies and emissions data and report their findings 13 to the Board by July 2005. We are proposing this review 14 because DG is just beginning to enter the market and its 15 future operating conditions and uses are uncertain at this 16 time. 17 Staff will evaluate the testing procedures in the 18 regulation to determine if they should be refined, 19 evaluate the ability of DG technologies to maintain 20 emission standards over time and evaluate the methods used 21 to recognize CHP benefits for the 2007 standards. 22 Staff will also evaluate the 2007 standards in 23 light of any new BACT determinations for central station 24 powerplants, changes to DG technology designs and related 25 information that could have a bearing on the 2007 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 23 1 standards. 2 --o0o-- 3 AIR POLLUTION SPECIALIST SUROVICK: I will now 4 discuss the environmental and economic impacts of the 5 proposed DG certification program. 6 --o0o-- 7 AIR POLLUTION SPECIALIST SUROVICK: The 8 certification program and uniform emission standards will 9 ensure the deployment of the cleanest DG technology into 10 all communities of California. Setting standards for DG 11 before it enters the market will help protect all 12 California communities for these new sources of air 13 emissions. 14 Staff conducted an analysis of the potential 15 environmental impacts of the proposed DG Regulation and 16 determined that its requirements would have no significant 17 adverse environmental impacts. Staff evaluated the 18 economic impacts that the proposed DG program may have on 19 potentially affected businesses. Costs to a manufacturer 20 for developing a complete application package for one DG 21 unit model ranges from about $10,000 to $20,000, this 22 includes the $2,500 application fee, the cost for 23 preparing the application and the cost for source testing. 24 These costs, of course, would be spread over the 25 multiple sales of a particular DG model. Manufacturers PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 24 1 are expected to be able to meet the 2003 emission 2 standards with current designs or redesigns that are 3 currently underway. 4 However, to meet the 2007 standards, some 5 manufacturers of DG will have to redesign their product or 6 add on air pollution control equipment. The additional 7 cost to manufacturers for these modifications is unknown 8 at this time, and will be evaluated during the 2005 9 technical review when more information on DG becomes 10 available. 11 --o0o-- 12 AIR POLLUTION SPECIALIST SUROVICK: I will now 13 discuss the staff's proposed modifications to the DG 14 certification program. 15 --o0o-- 16 AIR POLLUTION SPECIALIST SUROVICK: Staff is 17 proposing some modifications. 18 CHAIRPERSON LLOYD: Mr. Kenny, can we just -- the 19 Board member have got some questions on this first -- 20 okay. No, sorry. Clarification after the discussion of 21 the DG, I think the Board members have some questions on 22 that aspect before we move into the guidelines. I realize 23 I jumped to soon, sorry. 24 AIR POLLUTION SPECIALIST SUROVICK: Staff is 25 proposing some modifications to the method for averaging PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 25 1 the emissions testing results. Staff is also recommending 2 that the proposed CHP provision for 2007 be modified to 3 reflect only a minimum 60 percent efficiency. 4 --o0o-- 5 AIR POLLUTION SPECIALIST SUROVICK: Finally, 6 staff is proposing a number of minor clarifications. 7 --o0o-- 8 AIR POLLUTION SPECIALIST SUROVICK: I will now 9 summarize the staff's proposed DG certification program 10 that we are recommending for your adoption. 11 --o0o-- 12 AIR POLLUTION SPECIALIST SUROVICK: SB 1298 13 requires the ARB to develop a DG certification program. 14 It requires effective DG technologies to meet near-term 15 emission standards that reflect emission levels achieved 16 by the cleanest DG technologies that are currently 17 available. 18 It requires these technologies to ultimately meet 19 longer term emission standards that reflect central 20 station powerplant BACT limits. Staff is proposing a DG 21 certification program that ensures only the cleanest 22 technologies are used in California. The requirements 23 provide flexibility to manufacturers from meeting the BACT 24 standards and provides economic incentives to 25 manufacturers interested in deploying their zero and near PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 26 1 zero emission technologies into the California market. 2 The program also provides for a technology review 3 in 2005 of electrical generation technologies that will 4 address the advances and uses of DG technologies in 5 California over the next four years. 6 AIR POLLUTION SPECIALIST SUROVICK: The staff 7 recommends that the Board adopt a proposed DG 8 certification program and emission standards for staff's 9 proposed modifications. 10 This concludes my presentation. 11 CHAIRPERSON LLOYD: Thank you very much. I think 12 Professor Friedman you had a question. 13 BOARD MEMBER HUGH FRIEDMAN: I had a couple of 14 questions. They relate to the letter of the California 15 Technology Trade and Commerce Agency with respect to these 16 proposed regulations. And I'm just wondering to what 17 extent the staff has taken these into account, and in its 18 proposed modifications made any specific response to these 19 rather specific comments. 20 The letter is marked number 18 in our file, and 21 it was a letter dated November 8th, and it's fairly short. 22 It basically comments on the contradictory cost impact 23 statements. And the incomplete -- according to them, the 24 incomplete cost impact assessments, and then it also 25 comments on the record keeping requirement. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 27 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The letter 2 calls for some clarifications that we will proceed and 3 make before we file the regulation with OAL when the final 4 statement of reasons -- 5 BOARD MEMBER HUGH FRIEDMAN: On the 15 day -- 6 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yeah, it 7 would be on the 15-day comment period, right. 8 The one comment I think that is fairly 9 problematic is we haven't assessed the cost of the 2007 10 standards and we ought to do so before we adopt them. The 11 law is fairly clear in that it requires eventually a move 12 to lower levels as represented by central station 13 powerplants. I don't think the industry knows what 14 ultimately the costs will be and it's very difficult to 15 quantify at this time. 16 So what we indicated in our report is that it 17 will be significant development costs and we'll have to 18 review that later. It would be very hard to do a 19 significant improvement in that in the short-term for the 20 information we have today. So I think we'd have to 21 respond in a similar manner that we can't fully perform 22 that task today. 23 BOARD MEMBER HUGH FRIEDMAN: So you feel that you 24 can satisfactorily comply with the apparent requirement of 25 the Board assessing the potential cost impact by saying we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 28 1 will do it in the future. 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yes. 3 BOARD MEMBER HUGH FRIEDMAN: Because as a 4 practical matter you can't do it now. 5 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right, and 6 delaying the date for implementation will not change -- 7 BOARD MEMBER HUGH FRIEDMAN: That won't change 8 anything, it makes it worse. 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: -- change the 10 cost. It just may spread out when they can occur. 11 BOARD MEMBER HUGH FRIEDMAN: But I am a little 12 troubled by the disparity in what they indicate will be 13 the realistic cost estimate for the 2003 impact. Their 14 letter says it will be a range from $11,000 to $21,500. 15 And the total cost to manufacturers to comply with these 16 2003 standards could run as high as $370,000. 17 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think 18 that's all dependent on the number of units that are 19 certified and have to go through the process and that's 20 unknown right now. So obviously if hundreds of units 21 get -- different technologies get certified, the cost 22 would be much higher than what's there. Maybe staff can 23 comment on that. 24 CHAIRPERSON LLOYD: But presumably based on the 25 limited number of manufacturers hundreds would be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 29 1 unlikely. 2 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Yeah, that 3 would be my estimate also. Can staff provide anymore 4 info? 5 BOARD MEMBER HUGH FRIEDMAN: You understand, I'm 6 just trying to clarify the record here. 7 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Kitty 8 Martin. 9 The information we just presented to you in the 10 slide, I think if you recall is $10,000 to $20,000, and 11 that would be the cost for a manufacturer to certify each 12 model. And we made the comment that that obviously would 13 be spread over multiple sales of an individual model. And 14 if a manufacturer had multiple models that had different 15 emission profiles, then, yes, the cost would be greater 16 than the information you saw on the slide. 17 BOARD MEMBER HUGH FRIEDMAN: Okay, they use 18 $11,000 to $21,500. 19 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Yes. 20 And that was our cost for the purposes of the presentation 21 today, we did a bit of rounding for you. 22 BOARD MEMBER HUGH FRIEDMAN: You rounded. 23 PERMIT ASSISTANCE CENTER MANAGER MARTIN: But in 24 our staff report it does agree with the costs in the Trade 25 and Commerce letter. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 30 1 BOARD MEMBER HUGH FRIEDMAN: And then, finally, 2 there's a comment on record keeping requirements. And I 3 notice in the proposed modification we still have the same 4 language that manufacturers must keep records like 5 diamonds and love forever. 6 (Laughter.) 7 BOARD MEMBER HUGH FRIEDMAN: I mean there is no 8 -- it just says indefinitely or it doesn't even say it, it 9 just says shall keep them, retain them, and maybe some 10 thought should be given. If it's unduly burdensome, that 11 there ought to be a cutoff. 12 PERMIT ASSISTANCE CENTER MANAGER MARTIN: And, 13 again, based on our information today we felt that it was 14 appropriate for them to keep that information at least 15 through 2005 when we did the technology review and we 16 certainly can revisit -- 17 BOARD MEMBER HUGH FRIEDMAN: Somehow outside the 18 limit -- 19 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Yes. 20 BOARD MEMBER HUGH FRIEDMAN: -- so that at some 21 point they can calendar not having to worry about keeping 22 them forever. 23 Thank you. 24 CHAIRPERSON LLOYD: Dr. Burke. 25 BOARD MEMBER BURKE: Well, I've missed a couple PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 31 1 of meetings, because I wasn't feeling up to par, so I 2 guess I have some time coming. So I'll be talking for the 3 next hour. 4 (Laughter.) 5 BOARD MEMBER BURKE: I know you missed me in 6 Oakland and Santa Barbara, missed me at all the good ones. 7 You know, the South Coast is particularly 8 interested in microturbine technology. South Coast is the 9 largest purchaser of microturbine technology in the world, 10 and not by a little bit, but by a big margin. 11 In fact, yesterday we just acquired $5 million 12 more worth of microturbines. And so I was particularly 13 interested in how many different manufacturers of 14 microturbines did you analyze while doing this report? 15 PERMIT ASSISTANCE CENTER MANAGER MARTIN: During 16 the course of developing this measure, we talked to, in 17 the case of microturbine manufacturers, three 18 manufacturers that have a presence in California. 19 BOARD MEMBER BURKE: And those are? 20 PERMIT ASSISTANCE CENTER MANAGER MARTIN: 21 Capstone, Bowman and Honeywell. Honeywell has since 22 stepped out of the market. 23 BOARD MEMBER BURKE: Yes, so there's only two and 24 there's really only one that's viable. What really caught 25 my eye in these reports is where did you get your cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 32 1 figures on installation? 2 PERMIT ASSISTANCE CENTER MANAGER MARTIN: The 3 cost figures for both the microturbine as well as the 4 other equipment came from manufacturers. In the case of 5 DG that equipment is almost exclusively installed by the 6 manufacturers as opposed to a distributor. 7 BOARD MEMBER BURKE: Let me assure you that the 8 price for installation for microturbines is at least 700 9 percent more than you have in this report. At least on 10 the most simple installation, it is at least seven times 11 what you have here. 12 So that makes me wonder -- you know, it's kind of 13 like going to the fox and asking him how many chickens in 14 the coupe? 15 You know, if you go -- because I'm reading the 16 letter from Capstone. I'm a big Capstone supporter. In 17 fact, people were accusing me of having Capstone stock for 18 awhile. Then a big article came out and Capstone lost 30 19 percent of its stock value in one day. And that's the day 20 I said it sounds like a stock I would have, but I didn't 21 have. 22 But they had a number of questions in their 23 letter to you as it related not only to the definition, 24 but also to waste gas, and those issues, and I didn't hear 25 that addressed. But more important, when you tested for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 33 1 the emissions test that you used, what type of fuel did 2 you use in the microturbine? 3 PERMIT ASSISTANCE CENTER MANAGER MARTIN: The 4 tests that we conducted at the SMUD unit here in 5 Sacramento was based on natural gas episode, natural gas 6 fired unit. It was their 30 KW unit. 7 BOARD MEMBER BURKE: And I assume that was also 8 the same units that you tested for the noise level? 9 PERMIT ASSISTANCE CENTER MANAGER MARTIN: 10 Actually, as we mentioned in the slide presentation, the 11 noise information came from the manufacturers, and it may 12 reflect a variety of testing methodologies, so we have not 13 spent a lot of time doing individual -- 14 BOARD MEMBER BURKE: So we really don't know what 15 the noise level is, we just know what they told us it was. 16 PERMIT ASSISTANCE CENTER MANAGER MARTIN: We have 17 a range of numbers that have been provided to us. 18 BOARD MEMBER BURKE: By the manufacturer. 19 PERMIT ASSISTANCE CENTER MANAGER MARTIN: 20 Exactly. 21 BOARD MEMBER BURKE: So we don't know what the 22 real test numbers are as it relates to size. I've got to 23 tell you they're not really that noisy, but I'm always 24 concerned when a governmental agency asks the manufacturer 25 of a product for the specs. We are going to write a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 34 1 regulation and we're writing it based on information that 2 are provided by the manufacturer. 3 I had one other question. 4 CHAIRPERSON LLOYD: I think in that case, Dr. 5 Burke, noise was just put in the information. I think 6 we're focusing on emissions. 7 BOARD MEMBER BURKE: I understand that, but if 8 you present a package and it's presented to the Air 9 Resources Board, you assume that all the information is 10 correct. 11 CHAIRPERSON LLOYD: But I think in fairness to 12 staff in this case, we didn't do independent tests, that 13 was disclosed. Typically, manufacturers are not going to 14 underestimate their parameters, I would guess. If 15 anything, I don't think -- I would say that they're going 16 to be quieter than they are. 17 BOARD MEMBER BURKE: Well -- 18 CHAIRPERSON LLOYD: Anyway, that's -- 19 BOARD MEMBER BURKE: Yeah. Did you, at anytime, 20 talk to South Coast about any of our tests with this 21 equipment? 22 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Mr. 23 Grant Chin has talked to the South Coast at length about 24 the microturbines, I'll have him address that. 25 AIR RESOURCES ENGINEER CHIN: Grant Chin. We PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 35 1 have been in contact with South Coast about their program 2 for installing microturbines. We're also aware of some of 3 the testing activity that's been conducted by UC Irvine. 4 BOARD MEMBER BURKE: Thank you. 5 CHAIRPERSON LLOYD: Anybody else? 6 BOARD MEMBER BURKE: Last question. As it 7 relates in the Capstone letter on waste gases, what is 8 your answer to their objection or definition of waste 9 gases? 10 PERMIT ASSISTANCE CENTER MANAGER MARTIN: 11 Capstone's comment, my interpretation of their comment in 12 the letter, is that we have made some comments regarding 13 available control equipment for available controls for 14 equipment that's fired by waste gas. And as Grant will 15 discuss a little bit later, one of the challenges with 16 putting control equipment on waste gas fired units is the 17 contaminants in waste gas will foul or poison, if you 18 will, the catalysts. So a catalyst based unit cannot be 19 applied. 20 Capstone was referring to an emerging technology, 21 the xonon technology, as being a possible opportunity for 22 consideration for reducing emissions from waste gas. And 23 it certainly is a possible opportunity. It has not been 24 applied to that type of fuel. And certainly we will track 25 applications of xonon to that type of waste gas fired PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 36 1 unit. 2 CHAIRPERSON LLOYD: Any other questions from the 3 Board? 4 I had a question in terms of setting the 2005 5 mid-2005 technology and review. If you look at the time 6 between now and then, it's clearly much -- it's actually 7 very close to the 2007 new guidelines, new standard 8 setting. What's the basis for selection of July 2005? 9 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 10 Tollstrup. I guess the basis that we used for the 2005 11 date is that we believe this is an emerging market and we 12 wanted to give the market time to develop and for the 13 manufacturers to get going on the developing technologies, 14 and we felt that that was an adequate time frame between 15 the 2003 and the 2005 standard where we might see 16 something happen in the marketplace or not and we'd be 17 able to report those results back to the Board at that 18 time. 19 CHAIRPERSON LLOYD: Do you, at that time, if the 20 standards -- or if you like the technology for central 21 powerplants has advanced that, in fact, these numbers are 22 also significantly reduced, how does that affect the 23 guidelines for 2007? 24 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: On 25 the guidance side, the cert side, the limits are set by PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 37 1 the Board, but on the guidance side, the limits in that 2 reg are established to reflect advances in technology. We 3 have an initial standard in 2003, and staff has proposed 4 in the package before you today that we would come back 5 periodically as technology advances and update those 6 numbers when we felt it was necessary to do so. So we 7 would be following and there would be advances as they 8 occurred. 9 CHAIRPERSON LLOYD: But the cert for 2007 is .07. 10 DEPUTY EXECUTIVE OFFICER SCHEIBLE: The cert for 11 2007 wouldn't change, but if we find out that central 12 power is now far cleaner than we set it, then we'd have to 13 review that and say that we set an additional level and 14 what time frame would be appropriate for that additional 15 level. The legislation says the target is do what central 16 power can do from an emissions standpoint. 17 CHAIRPERSON LLOYD: And if that's changing also, 18 then we'd have to change the -- 19 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right, but 20 it's not an automatic, and we'd have to review the facts 21 and then the Board would have to make a decision on what 22 the best way to proceed is. 23 CHAIRPERSON LLOYD: Okay. Thank you very much. 24 I appreciate staff's indulgence to take care of that item. 25 (Thereupon an overhead presentation was PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 38 1 presented as follows.) 2 AIR RESOURCES ENGINEER CHIN: Okay. I'd like to 3 thank Marcelle. In addition to the DG certification 4 program that Marcelle just described, SB 1298 also 5 requires the ARB to develop a guidance document for 6 districts to use in the permitting of electrical 7 generation technologies that are under their jurisdiction. 8 The remainder of my presentation will focus on 9 the ARB's proposed guidance documentation. 10 --o0o-- 11 AIR RESOURCES ENGINEER CHIN: In my presentation 12 today, I will briefly mention the requirements of SB 1298 13 and explain what the DG guidance addresses. I'll then 14 summarize the recommendations in the DG guidance and 15 discuss the staff's proposed provisions for updating the 16 guidance as new information becomes available. 17 I'll also address the staff's proposed 18 modifications. And finally, I'll conclude with staff's 19 recommendations. 20 --o0o-- 21 AIR RESOURCES ENGINEER CHIN: I'll now briefly, 22 again, discuss what the SB 1298 requires. 23 --o0o-- 24 AIR RESOURCES ENGINEER CHIN: Marcelle just 25 described the ARB's staff proposal to respond to SB 1298's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 39 1 first requirement to adopt a certification program and 2 uniform emission standards for DG units that are not 3 subject to district permitting requirements. I will now 4 address SB 1298's requirement that by January 1, 2003 the 5 ARB developed a guidance document for the districts to use 6 in their permitting of electrical generation technologies 7 that are under their jurisdiction. 8 --o0o-- 9 AIR RESOURCES ENGINEER CHIN: I'll now explain 10 what the DG guidance addresses. 11 --o0o-- 12 AIR RESOURCES ENGINEER CHIN: The proposed 13 guidance for your consideration today is intended to 14 assist districts in making BACT determinations for 15 electrical generation technologies. The proposed guidance 16 is intended to be a companion document to the Board 17 approved 1999 powerplant guidance, which addressed central 18 station powerplants, that is turbines 50 megawatts and 19 larger that follow under the jurisdiction of the 20 California Energy Commission. 21 As SB 1298 requires, guidance addresses 22 information on Best Available Control Technology, or BACT, 23 determinations, attainment of central station powerplant 24 levels by all electrical generation technologies and 25 methods for streamlining the permitting of electrical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 40 1 generation technologies. 2 While these guidelines are recommendations rather 3 than regulations, districts have usually accepted an 4 implement guidance issued by the ARB. The 1999 powerplant 5 guidance is a good example and that all central station 6 powerplants permitted after its issuance have been 7 required to meet emission levels at least as stringent as 8 the levels recommended by the guidance. 9 --o0o-- 10 AIR RESOURCES ENGINEER CHIN: The following three 11 slides show examples of electrical generation technologies 12 that would be subject to the guidelines. This is a 13 schematic of a turbine with Combined Heat and Power or 14 CHP. The combuster is located in the circle on the left, 15 and the heat recovery unit is on the right side of the 16 picture. 17 --o0o-- 18 AIR RESOURCES ENGINEER CHIN: This is a five 19 megawatt turbine with CHP at a hospital. All equipment 20 shown in the previous slide is inside the large container. 21 --o0o-- 22 AIR RESOURCES ENGINEER CHIN: This is a picture 23 of a 230 kilowatt natural gas fired reciprocating engine 24 equipped with CHP. About 100 such units have been 25 permitted in California used at hospitals, hotels and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 41 1 other institutions that require hot water. 2 --o0o-- 3 AIR RESOURCES ENGINEER CHIN: Some landfills or 4 waste water treatment facilities use waste gas or on-site 5 electrical generation. On the right is a picture of three 6 large engines that use landfill gas to generate about 8.5 7 megawatts. If the waste gas is not used for electricity 8 by a landfill, then it is burned in a flare as shown in 9 the picture on the left. 10 --o0o-- 11 AIR RESOURCES ENGINEER CHIN: In a few instances 12 in California, landfill emissions are discharged and 13 control to the air. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: I will summarize 16 the recommendations in the DG guidance. This table 17 summarizes staff's recommendations for achieved in 18 practice levels for natural gas fired turbines. The ARB 19 staff proposed that the recommended BACT levels for 20 turbines be divided into three size categories to take 21 into account the insufficiencies that are inherent with 22 smaller turbines. 23 Like the certification program, emission levels 24 are expressed in terms of pounds per megawatt hour. It is 25 important to note that these BACT recommendations PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 42 1 represent achieved in practical levels for this source 2 category. Districts are required to make BACT 3 determinations on a case-by-case basis and may establish 4 more stringent BACT levels depending on the specific 5 parameters and conditions of each application. 6 --o0o-- 7 AIR RESOURCES ENGINEER CHIN: Although not shown 8 in this slide, recommended BACT levels for turbines fueled 9 by waste gas are somewhat higher, that reflect the lowest 10 levels that have been achieved in practice without 11 catalytic based controls. Contaminants and waste gas, 12 specifically styloxanes can poison catalytic control 13 equipment and thus prevent its noose. 14 --o0o-- 15 AIR RESOURCES ENGINEER CHIN: This slide presents 16 the recommended BACT levels for electrical generation 17 technologies that use reciprocating engines. These 18 recommendations reflect the lowest levels achieved in 19 practice by natural gas fueled engines equipped with 20 after-treatment controls. 21 As with turbines, engines using waste gas cannot 22 use catalytic based post-combustion treatment. Therefore, 23 the recommended levels for this category are somewhat 24 higher and reflect the use of the cleanest engines without 25 add-on controls. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 43 1 --o0o-- 2 AIR RESOURCES ENGINEER CHIN: With regard to 3 particulate matter or PM, the recommended levels for both 4 turbines and engines are essentially equivalent to using 5 pipeline quality natural gas. The use of natural gas as a 6 fuel is considered BACT for PM. 7 --o0o-- 8 AIR RESOURCES ENGINEER CHIN: As I mentioned 9 earlier, SB 1298 also directed the ARB to address methods 10 for streamlining the permitting and approval of the 11 electrical generation units. We've reviewed several 12 district permits streamlining programs and determined that 13 there are some opportunities to simplify the process. 14 These include specifying consistent BACT levels 15 for electrical generation technologies, minimizing the 16 reverification of emissions data for technologies that 17 have been certified by the ARB, and using standardized 18 permit conditions. 19 Staff recommends that districts evaluate their 20 permitting programs to identify opportunities to include 21 these recommendations. 22 --o0o-- 23 AIR RESOURCES ENGINEER CHIN: I'll now discuss 24 the staff's proposed provisions for updating the guidance 25 as new information becomes available. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 44 1 --o0o-- 2 AIR RESOURCES ENGINEER CHIN: The first bar on 3 this chart represents currently recommended BACT levels 4 for a combined cycle central station powerplant. 5 The second bar represents the level 4 turbine in 6 the 12 to 50 megawatt category, while the third bar 7 represents the level for an engine. 8 SB 1298 directs that at the earliest practicable 9 date, the BACT determinations that ARB addresses should be 10 made equivalent to that of central station powerplants. 11 As you can see, current BACT levels have been achieved in 12 practice for turbines and engines are not equivalent for 13 BACT level for central station powerplants. 14 Our guidance encourages in-use of efficient CHP 15 as one way of making progress toward achieving central 16 station powerplant BACT levels. 17 --o0o-- 18 AIR RESOURCES ENGINEER CHIN: As I mentioned, 19 just mentioned, SB 1298 directs that at the earliest 20 practicable date, BACT determinations for electrical 21 generation equipment should be made equivalent to that of 22 central station powerplants. The guidance for 23 consideration today reflects current BACT determinations 24 for electrical generation technology. 25 These determinations have been made by local PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 45 1 districts according to very specific procedures prescribed 2 under the federal Clean Air Act. Therefore, we believe 3 that the guidance will require periodic technical updates 4 to incorporate updated BACT determinations that reflect 5 progress toward the achievement of central station 6 powerplant levels by all electrical generation 7 technologies. 8 In recent months, a number of agencies including 9 the U.S. EPA have proposed various techniques and 10 assumptions to use for calculating CHP benefits. As CHP 11 applications penetrate the market, the ARB staff 12 anticipates that more detailed information will emerge 13 regarding the extent to which captured heat is actually 14 used by the facility. 15 Thus, the ARB staff anticipates that the 16 techniques and assumptions that we have recommended for 17 calculating for CHP benefits in the guidelines will 18 require updating. 19 Therefore, we are proposing today that the ARB 20 Executive Officer be allowed to direct staff to 21 periodically update the guidance to reflect newly 22 available information, specifically that relates to CHP 23 and BACT determinations that have been achieved in 24 practice. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 46 1 AIR RESOURCES ENGINEER CHIN: Staff is proposing 2 several minor technical clarifications. 3 --o0o-- 4 AIR RESOURCES ENGINEER CHIN: In conclusion, the 5 staff recommends that the Board approve the proposed 6 guidance for the permitting of electrical generation 7 technologies. 8 BOARD MEMBER RIORDAN: Mr. Chairman? 9 CHAIRPERSON LLOYD: Yes, Mrs. Riordan. 10 BOARD MEMBER RIORDAN: Can I just ask one 11 clarification and that was on your slide with the waste 12 gas flared engine, you gave some numbers. And quite 13 frankly, I don't have them down, and I would like to have 14 that. 15 AIR RESOURCES ENGINEER CHIN: There's three large 16 engines that generate about 8.5 megawatts of electricity, 17 and that's into the grid. 18 BOARD MEMBER RIORDAN: It was 8.5, thank you. 19 CHAIRPERSON LLOYD: Before we get into the 20 Board's questions, again, Madam Ombudsman, would you 21 please describe the public participation process that 22 occurred while this item was being developed and share 23 with us any concerns or comments you have with us at this 24 time. 25 OMBUDSMAN TSCHOGL: Can you hear me? Okay. I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 47 1 would be pleased to do that. The process began with a 2 workshop in Sacramento on the morning of November 8th, 3 2000. This workshop was announced to more than 2,000 4 people and organizations. These 2,000 recipients 5 represented community environmental organizations, energy 6 providers, equipment manufacturers and governmental 7 agencies with energy related interests. Thirty-nine 8 people attended the workshop. 9 Following the initial workshop, staff established 10 several working groups. These working groups discussed 11 technical and nontechnical issues related to the proposed 12 regulation before you now. The working group membership 13 consisted of 90 people and met six times between January 14 and June 2001. 15 Each meeting was attended by about 40 people 16 representing the environmental community, technology and 17 energy providers as well as government agencies. 18 Beginning in July of this year, staff continued 19 the workshop process by holding four additional 20 consultation meetings. This time staff took to the road 21 holding workshops at the South Coast, Bay Area and San 22 Joaquin Valley Air Districts. 23 The fourth workshop was held in Sacramento. 24 Attendance at these workshops ranged from less than ten in 25 the San Joaquin valley to approximately 30 in the South PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 48 1 Coast and 40 here in Sacramento. 2 Staff used these community meetings as well as 3 those held to discuss the SB 25 program and environmental 4 justice policy to distribute information on this proposal, 5 as well as on other stationary source division programs 6 and risk reduction activities. 7 To this end, staff developed several fact sheets 8 and brochures covering many of ARB's programs in both 9 Spanish and English. Throughout the process, staff met 10 and discussed the proposal with stakeholders as the need 11 arose. This included over 15 private meetings and five 12 conference calls with the local air districts. 13 In addition, staff conducted a half dozen site 14 visits to both manufacturing facilities, as well as 15 installation sites. On September 28th, staff released the 16 final proposed regulation and staff report. Also, on that 17 date, staff sent out the announcement for this hearing to 18 1,200 people via the U.S. Postal Service and an additional 19 760 people via Email. 20 Finally, on October 1st, staff sent a copy of the 21 report and the district guidance document to each of the 22 air districts. This concludes my comments on outreach 23 activities. 24 Thank you. 25 CHAIRPERSON LLOYD: Thank you very much. Any PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 49 1 additional questions from my colleagues on the Board? 2 Seeing none, I would like to call the first 3 witness signed to speak up here. Again, we have Loren 4 Kaye, Ralph Ordonez and Susannah Churchill. 5 Again, I would appreciate when you testify if you 6 could identify whether you're addressing both of these 7 items or whether it's the guidelines or the certification 8 program. 9 MR. KAYE: Thank you, Mr. Chairman. My name is 10 Loren Kaye. I'm with Kahl/Pownall Advocates here in 11 Sacramento and we represent Plug Power Incorporated. It's 12 a fuel cell manufacturer located in New York. 13 And I just wanted to briefly commend the staff 14 for their excellent work in developing this regulation. 15 I'm speaking, Mr. Chairman, to the certification 16 regulation that they produced not only an excellent 17 certification regulation, but the process that they 18 undertook that you just heard described was very open and 19 I think incorporated a wide variety of stakeholders and 20 opinions. So we just wanted to let you know that you did 21 a great job and we urge your adopting the regulation 22 today. 23 CHAIRPERSON LLOYD: A question, when do you 24 anticipate submitting your unit for certification, and 25 when do you anticipate the first of your units arriving in PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 50 1 California? 2 MR. KAYE: Well, the first of our units arrived 3 about a month ago at UC Irvine at the national fuel cell 4 center for them to -- 5 CHAIRPERSON LLOYD: A caveat, for commercial 6 operation. 7 MR. KAYE: For commercial operation, as soon as 8 we can sell them. 9 (Laughter.) 10 MR. KAYE: But I would put out for Dr. Burke's 11 information, in case it hasn't yet come to his attention, 12 that the South Coast Air District is in the middle of a 13 Request For Proposals to acquire and test a number of 14 small scale residential fuel cells. And that will be an 15 opportunity for when we help our company, but some fuel 16 cell purveyors in the country, to place them in 17 California, but we're open for business. And as soon as 18 this regulation is adopted, we'll begin to submit our 19 product for certification. 20 CHAIRPERSON LLOYD: You saw staff's estimate of 21 the price range for fuel cell power. Do you think those 22 are sound numbers? 23 MR. KAYE: I think that in a commercial -- once 24 we get into a commercial environment, those are sound 25 numbers, and we hope that, like 2007, certainly that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 51 1 they'll be far, far less expensive than what you saw. 2 We're obviously, I think, we're a little above 3 that right now because we're in a precommercial phase, but 4 I think those are appropriate for commercial deployment. 5 CHAIRPERSON LLOYD: Let the record state that 6 Loren is saying we'll have much cheaper fuel cells in 7 2007, and you can give us a good deal, I hope. 8 MR. KAYE: You bet. 9 CHAIRPERSON LLOYD: Thank you. 10 Ralph Ordonez, Susannah Churchill and Stan 11 Zwicker. 12 MR. ORDONEZ: Good morning. My name is Ralph 13 Ordonez. I work with Solar Turbines in San Diego 14 California. And I'd like to talk a little bit about our 15 operations. 16 We manufacturer power generation turbines 1 to 14 17 megawatts sited throughout the world, including 600 CHP 18 applications within the United States. The nice thing 19 about the solar turbine application is that there's a lot 20 of exhaust heat that we use for supplying heat or cooling 21 load to universities, hotels and industrial facilities. 22 But besides supplying turbine machinery, we also 23 have a construction services department in which we 24 actually develop and construct CHP projects. In addition, 25 we operate cogeneration facilities. So as you can tell, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 52 1 we have an interest in what's going on with the CHP 2 application. 3 We're encouraged by the fact that the regulatory 4 community is going to output based standard, pounds per 5 megawatt hours. There is some concern on our part as far 6 as the minimum efficiency requirements currently written 7 in the guidance document. 8 We think that the pounds per megawatt hour is a 9 good thing to have within the regulations, and there's no 10 need for actual minimum efficiency requirements. The 11 nature of the calculation allows efficiency be 12 incorporated into the standard. 13 Information has been submitted to staff showing 14 that the efficiencies of cogeneration operations are not 15 meeting the minimum requirements currently in the guidance 16 document. 17 One of the compelling cases is we have a unit 18 called the STAC unit, which stands for Steam Turbine 19 Assisted Cogeneration. This is a unit that, by design, 20 maximized use of exhaust heat, but the overall thermal 21 efficiency is way less than what is being proposed in the 22 guidance. 23 So we understand that the minimum requirements 24 for efficiency are being removed from the certification 25 documents. We also like that type of consideration within PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 53 1 the guidance document, whether it be through removal at 2 the beginning or through education on the efficiencies of 3 cogeneration projects. 4 That concludes my statement. 5 CHAIRPERSON LLOYD: Thank you very much. 6 Questions from the Board? 7 I know you make a statement here that you feel 8 it's unnecessary to put the minimum efficiency criteria in 9 the guidance document. I'd like to get a staff response 10 on that? 11 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 12 Tollstrup. The way that the guidance document is 13 currently set up it establishes a pounds per megawatt 14 level for the units to meet. The efficiency standard is 15 not a requirement in there. It provides an option to 16 folks that want to take advantage of that. There is 17 another issue on the guidance side that how would the 18 districts credit that CHP number. They have issues that 19 they have to deal with because of their new source review 20 programs and BACT and all, but it is currently an option. 21 There is a pounds per megawatt number in there currently. 22 CHAIRPERSON LLOYD: Okay, thank you. 23 Thank you very much. 24 Susannah Churchill, Stan Zwicker, Sheryl Carter. 25 MS. CHURCHILL: Hello and thank you very much, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 54 1 Chairman and Members of the Board. My name is Susannah 2 Churchill. I'm the energy advocate for the California 3 Public Industry Research Group, CALPIRG, and I'll be 4 speaking about both pieces of the proceeding today. 5 CALPIRG is a nonprofit nonpartisan advocate for 6 the public interest. And we respectfully submit these 7 comments on behalf of the 60,000 citizen members of 8 CALPIRG around the state, and CALPIRG charitable trusts, 9 which is the organization's research and policy arm. 10 CALPIRG would like to applaud the Air Resources 11 Board for its commitment to developing strong emissions 12 guidelines and certification standards for distributed 13 generation technologies. And as we showed with the 14 delivery to two days ago of over 5,300 public comments 15 from our members in support of clean distributed 16 generation, the public is behind our conviction that in 17 order to protect public health and air quality it's 18 imperative that the ARB support clean DG. 19 I would also like to submit as official testimony 20 the CALPIRG charitable trust recent report on the variety 21 of available distributed generation technologies entitled, 22 The Good, The Bad and The Other, Public Health and the 23 Future of Distributed Generation. 24 And as this report shows, diesel and dirty fossil 25 fuel distributed generation pose serious health threats to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 55 1 Californians when used for even a very limited number of 2 hours per year. 3 Fortunately, as our report also outlines, 4 alternatives to dirty fossil fuel technologies exist, such 5 as solar photovoltaic technologies, wind turbines, fuel 6 cells, and combined heat and power systems. And strong 7 standards and guidelines at this proceeding are going to 8 be critical to ensure that California consumers who are 9 buying DG technologies in the future are pointed in the 10 right direction towards these clean technologies and away 11 from the dirtier ones. 12 And while overall we believe that the ARB has 13 issued strong draft regulations and guidelines, we urge 14 the Board to adopt the modifications summarized below, 15 which I believe will also be echoed by other environmental 16 coalition members here today. 17 First, is that the guidance districts should 18 establish a single aggressive performance based emission 19 standards for 2003 and an output based equivalent of five 20 parts per million at 15 percent oxygen. 21 Second, the guidance to air districts should 22 clarify that the emission standards for distributed 23 generation will be equivalent to the new combined cycle of 24 a natural gas central station powerplant by 2007. 25 Third, the certification regulations should PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 56 1 include an interim standard to ensure progress towards the 2 2007 standards. 3 Fourth, both the certification regulation and the 4 guidance to districts should incorporate the combined heat 5 and power credit methodology proposed by NRDC in their 6 comments, and include greater recognition of the climate 7 change mitigation benefits of higher efficiencies. 8 Fifth, both the certification regulation and 9 guidance to districts should clarify the Board's intent to 10 exclude only true emergency generators and not all diesel 11 generators, and strengthen enforcement guidance to ensure 12 that outcome. 13 And then finally, if portable generators are to 14 be exempted from these proceedings, the Board should 15 direct staff to reevaluate the standards included in the 16 portable equipment registration program to make them 17 consistent with the standards adopted here today. 18 Those are all my comments and thank you very much 19 for your attention. 20 CHAIRPERSON LLOYD: Thank you. 21 Any questions? 22 Yes, Ms. D'Adamo. 23 BOARD MEMBER D'ADAMO: If staff could respond. 24 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 25 Tollstrup. The first comment was on the single standard PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 57 1 for '03. What staff is proposing is a variety of 2 standards based on technologies that are out there today. 3 One of our concerns was setting a single standard 4 of five parts per million would effectively knockout IC 5 engines and some of the other technologies that are 6 currently available out there, wouldn't give them an 7 opportunity to, in a short time frame, develop the 8 technologies to meet those limits. 9 CHAIRPERSON LLOYD: Although, we do have a letter 10 here saying that even at the numbers we choose, we're 11 going to knock out IC engines anyway. 12 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: It 13 will certainly have some impact on diesel fired units. 14 They have quite a bit to go to get to the levels we have. 15 There are natural gas engines that are available out there 16 that can meet the '03 standards. Certainly, the '07 17 standards are going to be a major hurdle for those types 18 of technologies. 19 On the '07 date for the guidance, the way that 20 we've drafted the guidance to date staff would be 21 periodically following advances in technology and updating 22 the guidance on an ongoing basis as it became available. 23 The BACT process is in place for those pieces of 24 equipment. The districts are required to do a 25 case-by-case evaluation as these units come in and as the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 58 1 technology becomes available. We worked closely with the 2 districts as we've done in the past, and certainly work 3 with them to make sure that the lowest achievable levels 4 are met on any of these units as they become available. 5 And we do think that there are certain 6 applications that will meet the '07 standards now, and the 7 turbines and other technologies, and we think that we'll 8 get there with other technologies as we get closer to '07. 9 On the interim standard for the certification 10 program, staff has established a fairly aggressive 11 schedule for meeting the central station powerplant 12 levels. It basically gives the manufacturers a four-year 13 window between '03, which is when the first set of 14 standards kick in in '07, to develop the technologies to 15 be able to compete by 2007. 16 So we don't think that it makes a lot of sense 17 from the development side to put the interim standard in 18 there. We've got a very short window in which they have 19 to comply and it will keep them on track without an 20 interim standard. 21 As far as the CHP issue goes, the proposal that 22 is recommended by NRDC -- the approach that staff took on 23 the CHP issue was basically to come up with a very simple 24 approach that gave credit providing you meet a certain 25 cutoff, which is the 60 percent efficiency. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 59 1 It's a factor or a process that can be met at the 2 manufacturers' level, and it doesn't need to have 3 site-specific evaluation. So the manufacturer could 4 design the equipment to meet the 60 percent efficiency, 5 and once they were certified, then they could sell the 6 units and there would be no further requirements after 7 that. 8 NRDC's methods is a more complicated method. We 9 feel it would require possibly some site-specific 10 information in order to implement that procedure. 11 Two other issues that were brought up, excluding 12 the backup generators, staff recognizes that there is a 13 need under certain circumstances to have emergency backup 14 equipment. And the only way to fill that void currently 15 are with technology such as diesel engines. It's staff's 16 goal to make sure that diesel engines are put back in to a 17 use or kept in a use where they're run only in emergency 18 situations. They're not used for load-shedding or other 19 purposes. And providing they're kept in that arena, 20 they're used for those true situations where they're 21 needed, it didn't make sense to bring them under guidance, 22 which would essentially have prohibited the use of those 23 units. 24 So we think that with that, in addition, backup 25 generators are being looked at under the effort that's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 60 1 being undertaken with the diesel risk management program. 2 We will be bringing recommendations back to the Board next 3 year some time for retrofiting and new standards for the 4 backup engines. 5 As far as the portable engines, this is the last 6 comment, I believe, the portable engines -- under the 7 portable equipment program right now, a portable engine is 8 a unit that would not operate at a site more than 12 9 months. If someone were to bring a unit in and operate it 10 for 12 months and then bring in another, they would fall 11 outside of our program. 12 In addition to that, we have supported the 13 districts and basically worked with the districts to make 14 sure that certain uses of portable engines are not 15 occurring. And we intend to bring when we come back with 16 a diesel PM update, we do intend to bring back some 17 recommendations for dealing with issues where portable 18 equipment may be misused for power generation, you know, 19 basically to get in the reg and to make sure it's firm and 20 people understand. But right now we are supporting 21 districts and making sure that portable equipment is not 22 misused. 23 So with that, I conclude. I think I've got all 24 the issues that were raised. 25 CHAIRPERSON LLOYD: Yes, the answer was longer PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 61 1 than the testimony. It's impressive. 2 (Laughter.) 3 CHAIRPERSON LLOYD: Any other questions from the 4 Board? 5 Thank you. 6 By the way, I understand you're going to be 7 getting a bill from staff because the 5,000 letters burned 8 up one of our fax machines. 9 (Laughter.) 10 MS. CHURCHILL: I'm sorry, they were -- 11 (Laughter.) 12 MS. CHURCHILL: I hope it wasn't a problem. 13 CHAIRPERSON LLOYD: Thank you. 14 Stan Zwicker, Sheryl Carter and Todd Campbell. 15 MR. ZWICKER: Good morning, Dr. Lloyd and Members 16 of the Board. I was just thinking on the way up here, 17 it's been about 28 years since I first appeared before the 18 Board on an issue, so I go back a long way as you know. 19 My name is Stan Zwicker. I'm an environmental 20 consultant and I have been retained by Bowman Power who 21 must be the only viable one, since Dr. Burke says there's 22 only one viable manufacturer. I hadn't realized Capstone 23 wasn't viable, Kevin. 24 Bowman Power systems is a manufacturer of 25 microturbines, small scale microturbine integrated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 62 1 cogeneration systems. And Mr. Tony Hines, who was the 2 Vice President of Operations was supposed to be here with 3 me today to talk about some of the business issues. 4 However, he got detained on the east coast and had some 5 difficulties. 6 Bowman appreciates the opportunity to participate 7 in both the public consultation meetings and work group 8 process that the proceed the issuance of the proposal, and 9 we wish to commend the staff for the efforts in support of 10 -- and are supportive for the Phase 1 standards. 11 Particularly, we fought long and hard for the 12 inclusion of the cogeneration or CHP credit, which we 13 think is very good, and we think it's even a crucial part 14 of the puzzle for the deployment of DG, because, you know, 15 the efficiencies that you get when you take a microturbine 16 and only electric goes into 20 maybe 30 percent. When you 17 get cogeneration, you're getting 80 percent efficiency and 18 we think that's where the viable economics for these 19 issues are. 20 We believe that this is consistent with the 21 intent and vision by the Legislature in enacting 1298 to 22 promote clean efficient energy, and we intend to offer 23 microturbine CHP systems which meet your standards, 24 whatever they are, for the certification testing program. 25 I have a couple of points I wanted to make, and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 63 1 the first one sort of is to look from a business aspect 2 I'm trying to do this on behalf of Tony, because obviously 3 dealing with the business aspect is not my cup of tea on 4 this. 5 But you're looking at a business climate where 6 end-users are going to either purchase something for 7 either backup or DG systems. And so you're looking at 8 microturbines, such as ours or Capstone in contrast to 9 backup diesel fire generators. They're only going to 10 purchase one unit. And so what's happening by imposing 11 and not treating them the same in terms of the emission 12 limits they have to meet, you're sort of putting the 13 microturbines or the cleaner fuel at a disadvantage. 14 And we really think you need to look at all these 15 from the same perspective in terms of emission 16 requirements. So we think that, however, you regulate the 17 emergency generators, they should pretty much apply to the 18 same systems as these, so we're on an even keel. 19 As indicated Bowman supports the emission limits 20 for 2003 with the inclusion of the emission credits for 21 cogen. We do have several concerns with certain aspects 22 of the regulations as proposed on September 28th, and I 23 just want to highlight them. 24 First of all, the selection of January 2001 as 25 the effective date and 2005 is a choice for the date. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 64 1 And secondly, we have some concerns regarding the 2 final number that you have for 2007 of .07. 3 Regarding the selection of the 2000 date, 2000 4 sounds good. As the earliest practical date, we don't 5 think it's real. We think it's maybe the earliest 6 possible date. We believe that it's going to necessitate 7 on our part significant technological breakthroughs in 8 order to meet the standard -- that standard in 2007. It's 9 about an order of magnitude lower than what you've got for 10 2003. 11 That's going to require considerable investment, 12 and most likely more time to accomplish it, if, in fact, 13 it is even achievable this technology, and I think it is, 14 but it's going to take awhile. 15 A major concern with your date, is there going to 16 be sufficient time for us to recover the costs from an 17 investment standpoint in meeting these units for 2003 and 18 at the same time not being able to sell that product 19 anymore, if they have to make substantial investments and 20 substantial changes. 21 Four year life cycle is minimal at best. So we 22 wanted to -- and remember that these units are going to be 23 sold in the hundreds maybe a couple of thousand. It's not 24 like you're selling automobiles in the millions, so the 25 cost recovery is a lot tougher for a product like this. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 65 1 The concept of the technology review as proposed 2 is a vital step and we're very pleased that that's going 3 to be there, and we endorse the need for it. We think, 4 however, that maybe a more appropriate approach for the 5 Board would be to defer adopting Phase 2 emission limits 6 until this technology review is conducted. 7 Their approach would provide all of us with more 8 time and the ability to get more information. Obviously, 9 we have limited manufacturers, limited cost information. 10 We have a standard going in place in the year 2003. We 11 have a plan to review it in 2005. And I think that 12 perhaps we can delay it till that point till we have some 13 of the data and some of the questions answered. There's 14 really no urgency. 15 The only urgency would be is if you really stick 16 to the 2007 date, which I think is the earliest possible 17 date not the earliest practical date. 18 And so, in essence, I think if you go and have 19 that review and gather all that information, I think it 20 should be -- what you should do is have that technology 21 report referred back to the Board, which it is, but have 22 it for reconsideration and consideration of what standard 23 you're going to adopt for the second level. 24 Moving on. 25 CHAIRPERSON LLOYD: Stan, I'm a little worried PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 66 1 that you're reading all your pages here. 2 MR. ZWICKER: I'm trying to skim through them. 3 CHAIRPERSON LLOYD: You haven't done very well so 4 far. 5 (Laughter.) 6 CHAIRPERSON LLOYD: Maybe you could just 7 highlight a couple of things there, because we do have the 8 written statement, and I think it would be helpful for us, 9 because I know you have some good points here, I don't 10 want those to get lost. 11 MR. ZWICKER: I wanted to go onto the .07 number 12 and I wanted to raise the issue of, when you go to talk 13 about central station powerplants, I like to make the 14 differentiation between equal and equivalent. And I think 15 that's something you need to consider. 16 When you look at the central station powerplant, 17 and I'll talk in parts per million, like two and a half 18 parts per million, and you go out there and say now we'll 19 have to make the small microturbines meet that central 20 station powerplant, I don't think that's what the 21 legislation said. 22 I think in essence the legislation used the word 23 equivalent not equal and that may be -- that's a 24 distinction, but what does equivalent mean? Microturbines 25 are not designed to have the -- will not have any of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 67 1 control technologies if they wouldn't be economic with 2 them. 3 So if we can meet numbers that are better than 4 nine, which we can without all that, we avoid issues such 5 as the ammonia issues and other things, and I think you 6 need to consider that in the equivalency. What isn't 7 appropriate for a small microturbine unit that, in our 8 case right now is an 80 kilowatt unit and how much total 9 emissions it puts -- total emissions it puts out versus a 10 rate that you're specifying that you have for a central 11 powerplant. 12 I think you need to be a more, at least to 13 consider the differences between equal and equivalent and 14 I've made that argument before, and, you know, and I know 15 everybody is aware of it, but I think it's something I 16 wanted to point out here. 17 Finally, the old argument about BACT is it in a 18 permit or is it achieved in practice, and I think we're 19 submitting that even though you've got things in a permit 20 and you're using that number, as the bay basis for setting 21 the standards hasn't really been achieved in practice yet 22 and can you really go with that. 23 And I think those are the key issues, and I know 24 you've got all details here. And, again, just to sum up, 25 we thank you for the opportunity to be in this process and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 68 1 we're going to be around. And I know Dr. Burke, you're 2 back, my comment was I didn't know Capstone wasn't viable 3 anymore? 4 BOARD MEMBER BURKE: What do you mean it's not 5 viable? 6 MR. ZWICKER: Well, you said there was only one 7 viable microturbine manufacturer, and since I'm 8 representing Bowman. 9 BOARD MEMBER BURKE: If I did say that, I didn't 10 mean to say that, I apologize. 11 MR. ZWICKER: That's okay, because I was sort of 12 making a joke out of it, because we feel we're viable, and 13 just we have some units for commercial application. 14 BOARD MEMBER BURKE: What were your gross sales 15 last year? 16 MR. ZWICKER: Don't talk about last year. I was 17 going to say we have units coming being shipped into 18 California right now. There will be by the end of the 19 year for some service. And we probably have several more 20 coming. 21 BOARD MEMBER BURKE: I didn't mean to insult your 22 company. 23 But over the historical period of the last four 24 or five there's only been one real viable microturbine. 25 Now, you may be the second. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 69 1 MR. ZWICKER: We think we are -- 2 BOARD MEMBER BURKE: I think they're the second 3 and they just dropped out. 4 MR. ZWICKER: We think we are the second and we 5 invite you down to see our unit any time. 6 BOARD MEMBER BURKE: I would move. 7 MR. ZWICKER: Thank you very much and that sort 8 of sums up the statement. I'll be happy to try and answer 9 any questions. 10 CHAIRPERSON LLOYD: Thank you, Stan. I 11 appreciate your cutting it short with the high points. 12 I'd like to ask, clearly Stan has made that 13 column and staff must have evaluated this and I don't know 14 if that's a legal or technical question there. 15 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Well, we're 16 trying to get emissions so that per kilowatt hour of 17 electricity produced the environment doesn't suffer. If 18 we use a small unit rather than produce it in the central 19 powerplant, that's our ultimate goal is equal, you know, 20 protection of the environment. 21 CHAIRPERSON LLOYD: So you feel -- 22 DEPUTY EXECUTIVE OFFICER SCHEIBLE: You know, the 23 consumer of the electricity has the option of getting it 24 many different ways. 25 CHAIRPERSON LLOYD: So you've pretty -- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 70 1 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And then 2 there are zero options that are involving such as solar 3 and others for on site for those that choose that, so that 4 we think the clear goal if you're going to use a 5 combustion source or a fuel cell is to get those emissions 6 so that the environment doesn't see any additional damage 7 over the alternative method. 8 CHAIRPERSON LLOYD: You'd be pretty confident if 9 you went to Senator Bowen and asked her what she intended, 10 that she would agree with staff. 11 DEPUTY DIRECTOR SCHEIBLE: I think we are. I 12 think we're interpreting the statute correctly. 13 CHAIRPERSON LLOYD: Questions from Professor 14 Friedman. 15 BOARD MEMBER HUGH FRIEDMAN: Well, just to 16 follow-up, I hope this is germane that last question, but 17 I think EMA raised a similar question about biomass fuel, 18 gas engines and whether these certification regulations 19 would apply to them, and suggested that it would not be 20 really very good public policy if our standards precluded 21 as a practical matter the manufacture of those kinds of 22 sources of energy. 23 DEPUTY EXECUTIVE OFFICER SCHEIBLE: Right. I 24 don't think we see distributed generation units that fall 25 under the certification reg going in and using biomass. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 71 1 That's going to be in a permitted application that is 2 covered by the guidance, where we do make an allowance for 3 recognizing that you can't control the emissions 4 associated with combusting the biogas as well as you can 5 pipeline natural gas. 6 BOARD MEMBER HUGH FRIEDMAN: Well, then more 7 broadly the whole issue of cost benefit and the problem of 8 the manufacturer of these small units complying with 9 standards. I understand the argument that it's got the 10 same impact on what we breathe, but maybe there needs to 11 be some flexibility under what's called the best available 12 technology and under what we treat as equal or equivalent. 13 I mean we want to be careful that we don't 14 unconsciously and unwittingly drive out of the marketplace 15 what otherwise might be useful and economic if the 16 difference is not significant. 17 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think 18 that's the type of issue that we'll readdress in 2005 when 19 we see, okay, much progress can be made, is the goal going 20 to be made, if not, is it close, and if it's close will 21 additional time or should we set an interim level. If 22 it's not even close, then I think we have to make the 23 decision is the technology ever going to make it or do we 24 say that that's not viable. 25 BOARD MEMBER HUGH FRIEDMAN: Well, my PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 72 1 understanding is that in 2005 there will be a review and 2 it will be before this Board, however it's constituted at 3 that time and there's ample opportunity at that time in 4 light of what's learned and in light of then existing best 5 available practices. 6 MR. ZWICKER: I just wanted to make certain -- 7 BOARD MEMBER HUGH FRIEDMAN: For these 8 proposed -- this is another example, it seems to me, of 9 engineering by rule. And we're glad that you're worried 10 about it, but we don't want you to lose a lot of sleep. 11 MR. ZWICKER: Don't worry, I wouldn't lose any 12 sleep. I just wanted to make sure that, you know, when we 13 have the technology review that all items are open. I 14 mean, I went into the state and said if you choose to 15 adopt the rule today, as it is with the numbers today, 16 then let's make sure we seriously consider what's really 17 there instead of having just a staff report validating 18 what we've done. 19 BOARD MEMBER HUGH FRIEDMAN: This is a clear 20 signal that is the staff. And if adopted, it's our goal, 21 this is what we want to achieve, and hopefully we could 22 achieve it by this time line, but with recognition that 23 we'll have to take another look beforehand. 24 MR. ZWICKER: Fine. 25 CHAIRPERSON LLOYD: Mr. Kenny I think has PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 73 1 something to say. 2 EXECUTIVE OFFICER KENNY: If I could just add a 3 couple of things. I went back and was looking at the 4 statute as the dialogue was going on, and the statute is 5 actually fairly clear and it really provides both a 6 challenge and an opportunity to the industry. 7 And the opportunity is essentially, you know, to 8 provide these small microturbines into the marketplace. 9 But the challenge is and it's provided by the Legislature, 10 is that the Legislature did direct that they be as clean 11 as central station powerplants. 12 And what the Legislature was directing us to do 13 was to really provide for standards that were equivalent 14 to central station powerplant standards and that's what we 15 tried to do. And that is the challenge for the industry 16 in this particular situation, and it will probably be a 17 very difficult challenge. 18 CHAIRPERSON LLOYD: Yeah. 19 Again, and reading from that, it does say that it 20 is in the public interest to encourage the deployment of 21 distributed generation in a way that has a positive effect 22 on air quality, so that's supporting what you're saying. 23 BOARD MEMBER BURKE: Mr. Chairman. 24 CHAIRPERSON LLOYD: Dr. Burke. 25 BOARD MEMBER BURKE: After September 11th, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 74 1 think there's been a reassessment of that. And adding 2 distributed generation throughout the United States may be 3 a national defense issue or a national security issue. 4 So, you know, as important as it is from the air quality 5 perspective, it is also a very crucial defense issue. 6 MR. ZWICKER: Just to sum up, this is a good 7 technology. It's an emerging technology, and it's going 8 to grow, and it's going to have a good impact on not only 9 air quality over what's out there today, but also in the 10 energy security area, and so we need not do anything 11 that's going to, you know, block it from emerging. And I 12 think we're on the right track. 13 CHAIRPERSON LLOYD: Yeah. And, again, I think 14 staff wants to have it both ways, we want to have units 15 out there, and we want to protect air quality. 16 Thank you very much. 17 And I guess we need the competition so we want to 18 keep you in business as well. 19 Next, we ever Sheryl Carter, Todd Campbell and 20 Bonnie Holmes-Gen. 21 MS. CARTER: Good morning. I'm Sheryl Carter. I 22 represent the Natural Resources Defense Council and our 23 nearly 100,000 members in California. We've been working 24 on energy and air quality related issues in California for 25 over two decades. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 75 1 I want to join those who came before me and I'm 2 positive those who will come after me in commending the 3 staff for the excellent work that they did on these 4 documents. 5 As we just covered, the legislation that directs 6 the ARB to develop both the certification program 7 regulations and the guidance to districts, which is SB 8 1298, recognizes, as do we, that distributed generation 9 can contribute to helping California meet the energy 10 requirements of its citizens and businesses. 11 It also declares, as Chairman Lloyd just 12 mentioned, that it is in the public interest to encourage 13 the deployment of distributed generation technology in a 14 way that has a positive impact on air quality. 15 It's the attempt to balance these two 16 considerations that led to the adoption of a phased 17 emissions standard approach that we're discussing here 18 today to reach the best available control technology 19 emission level for permitted central station powerplants 20 in California. 21 My comments are going to address both the 22 certification regulation and the guidance to districts, 23 and I'll try to be very clear on which applies to which 24 one as some of them apply to both. 25 I would love to, if we had more time, up here, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 76 1 I'd love to spend time discussing a lot of the things that 2 are right with the regulations and with the guidance 3 document. They certainly outweigh the issues from 4 modification that I'm going to suggest today, but we don't 5 have time for that. But I just wanted to note that there 6 are more things that are right with these documents than 7 not. 8 We strongly support the proposed regulation and 9 draft guidance and urge the Board to adopt them with some 10 very important modifications, which we believe will better 11 encourage appropriate distributed generation technologies 12 for California without adverse environmental impacts. 13 With these modifications, this regulation and 14 guidance could become national models for distributed 15 generation regulations. I have six modifications which 16 are detailed in our written comments that I'll just 17 briefly cover, and then I'd be happy to answer any 18 questions after that. 19 The first modification, the guidance to districts 20 we believe should establish a single aggressive 21 performance based emission standard or BACT level at an 22 output based equivalent of five parts per million NOx. 23 The draft proposes seven initial standards. We 24 urge the Board to adopt one performance based standard 25 here. There's no reason to allow different environmental PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 77 1 standards based on technology or size since the units 2 covered performed the same or substitutable functions. 3 Absent this modification by the Board, we urge 4 the Board to strongly state the intent that one 5 performance standard should be reached as soon as 6 possible. 7 The second modification, the guidance to 8 districts should clarify that the emission standard for 9 generation will be equivalent to best available control 10 technology emission levels for a central station 11 powerplant in California by at most 2007, which would be 12 consistent with the certification program for the smaller 13 DG units, if not sooner. 14 Only a clear, strong recommendation in the ARB 15 guidance to districts will incentivize manufacturers to 16 make the necessary technological advances. 17 The third modification, both the certification 18 regulation and the guidance to districts provide for a 19 combined heat and power credit. And NRDC strongly 20 supports such a credit. 21 However, we have proposed an alternative approach 22 to the two different credit calculation methodologies 23 proposed by staff, which provide a more effective 24 incentive to encourage improvement in efficiency without 25 compromising environmental protection. Our methodology PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 78 1 directly addresses the avoided emissions in a combined 2 heat and power system and will consistently estimate a 3 realistic emissions credit. 4 We urge the Board to modify both the 5 certification regulation and the guidance to districts to 6 include the credit methodology that we proposed in our 7 comments, and also include a greater recognition of the 8 climate change mitigation benefits of greater 9 efficiencies. 10 Absent adoption of our methodology for both the 11 certification and the guidance, we urge you to at least 12 adopt our methodology for the guidance document. Based on 13 the comments made by staff, our methodology is much more 14 easily used if you're looking on a site-by-site basis, 15 which would still apply to the guidance documents. 16 Our fourth modification that we proposed to the 17 Board is that both the certification regulation and 18 guidance to districts should clarify the Board's intent to 19 exclude only true emergency generators, not all diesel 20 generators, to strengthen enforcement guidance to ensure 21 this outcome. 22 The Board should recommend in the guidance that 23 districts adopt the strict ARB definition of the emergency 24 generation, which is generation that's used when power is 25 interrupted. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 79 1 The fifth modification, if portable generators 2 are to be exempted from the certification regulation and 3 the guidance to districts, the Board should direct staff 4 to reevaluate the standards included in the portable 5 equipment registration program to make them consistent 6 with the standards adopted by the certification regulation 7 and guidance as soon as practicable. 8 Portable generators perform the same or 9 substitutable functions as other distributed generation 10 and should be held to the same environmental standards. 11 And finally, we're concerned that with only 12 initial and final standard levels and dates established, 13 this is for the certification regulation, the technology 14 review at 2005, just two years after the program begins, 15 becomes not a check-in on advancing technology and 16 markets, but rather an almost automatic delay in the final 17 standards at 2007. 18 We believe that an interim standard would help 19 ensure progress toward the 2007 standard. Absent this 20 modification, we urge the Board to strengthen its intent 21 to hold to the 2007 standard. 22 Distributed generation, we believe, can play an 23 important role in meeting our energy needs and reducing 24 the environmental impacts of the current energy system. 25 But this can only happen if clear regulations are PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 80 1 established now to aim the market in the right direction. 2 And we urge the Board to adopt both these 3 documents with the modifications that we've suggested in 4 order to do this. 5 That's it. 6 Thanks. 7 CHAIRPERSON LLOYD: Thank you very much. And I 8 appreciate again your constructive suggestions, if we 9 don't adopt, exactly what you want. That was very be 10 helpful. 11 The comment, maybe staff could answer, in terms 12 of the guidance to districts to incorporate CHP, Sheryl 13 mentioned that the NRDC methodology, at least in that 14 case, would be easier for the districts to use. Does 15 staff concur? 16 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 17 Tollstrup. Again, one of the issues that we have with the 18 CHP on the district side is that under the proposal that 19 NRDC is offering, you're basically giving credit for 20 avoided emissions. There are some issues there with BACT 21 and how you credit those emissions. The proposal that we 22 have is a suggestion to the districts. We don't give any 23 specifics on how they're going to implement it or how 24 they're going to get through some of the federal hurdles 25 that exist. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 81 1 I think as far as CHP goes on that end, we'd like 2 to continue to work with folks, the districts and others 3 to see if there is someway that can be incorporated. But 4 to give them credit as suggested in that CHP calculation 5 method is problematic at this time. 6 CHAIRPERSON LLOYD: So was that a no? 7 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Yes. 8 Basically, I think that the suggestion that we have right 9 now is basically that -- 10 CHAIRPERSON LLOYD: Do you see merit, though, in 11 maybe working with the districts and CAPCOA, and maybe 12 NRDC and the Board to see if we can craft something which 13 would -- 14 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: 15 Absolutely. You know, EPA is under way right now to work 16 out a CHP policy. There are some issues with it, and I 17 think that it's just emerging and there's a lot of work 18 that needs to be done to see how this fits in. 19 CHAIRPERSON LLOYD: I think the comment you had 20 in terms of just true emergency generators, I don't think 21 that staff would object to that. 22 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: 23 Absolutely. 24 CHAIRPERSON LLOYD: Ms. D'Adamo. 25 BOARD MEMBER D'ADAMO: If what you just described PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 82 1 would take place, would there be enough flexibility within 2 the resolution to allow for that process? 3 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Kitty 4 Martin. One of the earlier slides in the guidance 5 document we asked that the Executive Officer be given the 6 authority to direct staff to update the guidance document 7 in two areas. 8 One was for BACT determination, the other was the 9 process for handling CHP. So as we are currently crafting 10 the resolution, yes, there is flexibility. 11 BOARD MEMBER D'ADAMO: Thank you. 12 CHAIRPERSON LLOYD: I had a question here. This 13 has come up several times and I guess to, if you like, 14 this is a case where, on the face of it, you would think 15 setting an interim standard in 2005 would make a lot of 16 sense and basically trying to make sure that we reach our 17 target in 2007 to show there's progress. 18 But I also have heard, which I think heard from 19 staff, is that that could actually be counter productive. 20 Maybe, you could just, for all of us, just educate up on 21 that point. 22 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Well, 23 I believe that, you know, the standard that we've set in 24 2007 to be equivalent to central station powerplant, 25 although there are some technologies now that will meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 83 1 those standards currently, there are significant hurdles 2 to be overcome for some of the fossil fuel fired units. 3 And to go through the design and the retooling 4 and marketing of this type of equipment, obviously, takes 5 time. With the first standard kicking in in 2003 and the 6 second standard following just a short four years later, 7 you know, we felt that that was adequate incentive, you 8 know, with that firm standard in 2007 to move towards 9 getting that standard in place. 10 In addition to that, you know, whoever can get 11 there first is basically going to, you know, have an 12 advantage marketwise. So we think there's some incentive 13 there in the marketplace to get this out there as soon as 14 possible. 15 CHAIRPERSON LLOYD: We understand that, if I hear 16 this correctly, and it certainly hurts us that in maybe 17 2006 Texas will have a tougher standard than we do. 18 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Texas 19 has -- they have adopted a distributed generation program. 20 Their standards, they do have an interim standard that 21 kicks in in 2005, and then they have the final standard. 22 CHAIRPERSON LLOYD: And what is that standard in 23 2005? 24 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: .14. 25 CHAIRPERSON LLOYD: And ours will be? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 84 1 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: .07. 2 CHAIRPERSON LLOYD: No, when is ours? 3 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: In 4 2007 ours will be .07. 5 CHAIRPERSON LLOYD: But in 2005 there's will be 6 .14 and ours will be .5. 7 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: .5 8 right now. 9 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We went back 10 and forth with this at the staff level. And so we know 11 what the ultimate goal is, which is to reach central 12 power. It looked like there's, it's at least possible, we 13 can't say for certain that will happen, but it's possible 14 it will happen. 15 We decided to go for the gold and do it in, what 16 we thought was the minimum time possible, which was four 17 years or five years from today, as opposed to the 18 alternative of setting an interim standard which would be 19 something of a goal setting without clear direction, and 20 then delaying time for a two-step process. 21 So we think that the time frame we've recommended 22 and with the one step, offers better prospect for getting 23 where we want to go as soon as possible. And quite 24 frankly, we'll have to watch this closely and come back 25 and see whether or not that was right, but it's clearly a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 85 1 judgment call over which way to go. 2 And it's not like there's some technology out 3 there we say we know in three years we can get this in 4 half. We don't know about the second half. We've got to 5 work solving the whole problem. 6 CHAIRPERSON LLOYD: I appreciate that. 7 Dr. Burke. 8 BOARD MEMBER BURKE: I'm going to support this 9 regulation. And, Ms. Carter, I don't want you to take 10 this personally, I support NRDC in a great number of their 11 efforts. 12 But something that has been troubling me for a 13 number of years, you get up and you say I represent 14 100,000 people. Do you know that for a fact? 15 MS. CARTER: I think yes. 16 BOARD MEMBER BURKE: Do you know that there are 17 100,000 people in NRDC? 18 MS. CARTER: We actually have 550,000 members in 19 the U.S. In California I said we have nearly 100,000 20 members. 21 BOARD MEMBER BURKE: That's great. Is it a 22 secret organization? 23 MS. CARTER: No, it is not. 24 BOARD MEMBER BURKE: Well, then why isn't your 25 membership list made available to the public? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 86 1 You see because every time NRDC testifies before 2 either South Coast or this Board, I'm not sure who you 3 really represent, because if you say we represent 500,000 4 people across the United States, but I can't tell you who 5 they are, then, you know, it's -- I mean, I'm just -- this 6 is not you personally. I'm going to be on this the rest 7 of my term here and at the South Coast, because I think 8 that when people -- we demand to know who industry is when 9 they come here, and the environmentalists we need to know 10 who they are, because there have been a lot of things in 11 this country we've been taking for granted, when people 12 come up to testify to make sure we say that they are who 13 they are on the face value. 14 But I'm going to be looking behind everybody. 15 NRDC is going to be one of them, too. I've asked your 16 lawyers enumerable times who are your members, who are 17 your contributors, and how do you formulate policy? 18 Nobody seems to be able to tell me that. 19 Some mythical thing out of New York City, which 20 puts out a brochure and lists about 12 board members and 21 then after that nothing. So I appreciate your testimony. 22 I agree with you on this issue today, but I really would 23 like to know who you and some of these other people really 24 represent. 25 So if you go back to your people, you can tell PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 87 1 them if they really want credibility as far as I'm 2 concerned, the rest of my board members may be totally 3 satisfied, but I'm not going to be totally satisfied 4 anymore till I know who really are your members. 5 CHAIRPERSON LLOYD: Thank you. 6 Thank you very much. 7 Todd Campbell. 8 And now you know the next question from Dr. 9 Burke, the Coalition for Clean Air. 10 MR. CAMPBELL: We represent 26 people that I know 11 of. 12 (Laughter.) 13 BOARD MEMBER BURKE: It really makes it tough. 14 MR. CAMPBELL: Twenty-six people, that would be 15 staff and Board. 16 (Laughter.) 17 MR. CAMPBELL: But we claim higher. My name is 18 Todd Campbell. I'm the policy director for the Coalition 19 for Clean Air. I'd like to wish a good morning to 20 everyone on the Board and good morning, Chairman Lloyd and 21 Members of the Board. 22 We strongly support this rule before you today. 23 The governing board has an opportunity, in our opinion, to 24 take a big bite out of the emissions apple by passing this 25 rule. There's been a lot of discussion on cost PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 88 1 effectiveness today. And one thing I'd like to remind the 2 Board is we're in 2001, and these regulations fall into 3 the 2003 and 2007. 4 However, you know, most of all these 5 technologies, if not all, are actually in place today. 6 Certainly, fuel cells are out there and with the release 7 of our joint report with the California Public Interest 8 Research Group, the Good the Bad and the Other, we give 9 you several examples of what we consider to be very viable 10 technologies to meet, very aggressive standards. 11 I also have strong faith in the Air Resources 12 Board staff, and I think they do excellent work. They 13 also have the opportunity to utilize resources. One of 14 the biggest gems I believe is the South Coast Air Quality 15 Management District through the good work of Dr. 16 Wallerstein and Dr. Lu and the technology advancement 17 office. There are many districts out there, but the South 18 Coast in particular, that are advancing technology through 19 the technology advancement office. 20 And so I just want to remind the Board that we 21 are facing issues of increased density, increased growth, 22 and the State is failing to meet its air quality goals. 23 We're struggling to meet our air quality goals. So we 24 need to take the biggest bite of the apple and be 25 aggressive and evaluate our positions as we go along, but PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 89 1 certainly we've got to keep our eyes on zero, and this is 2 what this agency has stood for for quite some time, I 3 believe, at least the beginning of this millennium. 4 We also strongly support the comments submitted 5 by the Natural Resources Defense Council. And that has 6 been made known in the comments as well as the letter that 7 the Air Resources Board should have received. 8 We also believe it's -- and I don't want to go 9 through all the comments that the previous speakers have 10 gone through, because I have confidence that you've heard 11 them and I don't want to belabor the points. 12 But I want you to know that in our report, we 13 found in our own personal assessment that we released, you 14 know, in the beginning of October, that this category 15 alone releases 11,500 tons of NOx per year. It also 16 releases approximately 600 tons of PM per year, so those 17 are significant numbers. 18 We believe, therefore, it's very important to 19 adopt stringent rules, and we also believe we should adopt 20 one progressive standard not seven different standards. 21 We should have a performance based standard and we also 22 agree with the 5 PPM DD level for NOx across the Board, 23 even for lower than three megawatt hour -- I mean three 24 megawatt engines because of several things. 25 One, the Bay Area Air Quality Management District PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 90 1 believes it's cost effective and feasible using certain 2 technologies, such as SCR and oxidation catalysts. 3 There are also the XO, NOx strategies that showed 4 that that level is achievable in practice as well as other 5 documentation in the staff report. 6 We also believe that there is importance for an 7 interim standard. And if there isn't an interim standard 8 adopted today, we strongly encourage the Air Resources 9 Board or the governing board to adopt a very strict 10 adherence to the 2007 standards, so that those standards 11 don't slip. 12 We really need these ton reductions and we also 13 need a technology transfer. As you know, in a lot of our 14 programs, we're advancing technology, we're not just 15 advancing technology and distributed generation, but we're 16 also advancing technology for other applications. And SCR 17 and oxidation catalysts are also being used in our mobile 18 source side. 19 Although they're not directly related, they're 20 both trying to tackle the same problem, and that's the 21 reduction of smog forming chemicals in particulate matter, 22 some of which are known to be toxic. So I'd like you to 23 keep that in mind. 24 I also believe that the credit methodology 25 proposed by the Natural Resources Defense Council is one PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 91 1 that should be strongly considered. And because there's 2 not going to be actual implementation till 2003, there 3 seems to be some time that EPA, the Air Resources Board, 4 and the Natural Resources Defense Council can work out 5 some of the problems that staff may have with the 6 methodology, but I believe that the methodology that 7 they're proposing not only protects the environment while 8 encourages complying heat and power technologies, which we 9 so desperately need, because even in graduate school, I 10 know the importance of industrial ecology, using and 11 harnessing energy that we're losing to our benefit. 12 And that truly reduces emissions, and we need to 13 do more of that. And so I believe their strategy does 14 this as well, advances or encourages the market to develop 15 CHP. 16 Finally, I also want to jump on the band wagon of 17 saying that we really, truly need equivalent emissions 18 performance for generation that meets the combined natural 19 gas central station powerplant standard by 2007. We need 20 these standards. We're struggling to get into attainment, 21 and we absolutely need them. 22 So with that, I just want to thank you for your 23 time. If you have any questions, I'll be more than glad 24 to answer them. 25 Thank you. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 92 1 CHAIRPERSON LLOYD: Thank you, Todd. 2 Questions from the Board? 3 Thank you very much. 4 Bonnie Holmes-Gen, Valerie Gates, Eric Wesselman. 5 MS. HOLMES-GEN: Good morning. Bonnie Holmes-Gen 6 with the American Lung Association of California. 7 And I'm speaking at least on behalf of the over 8 100 individuals who wrote letters to you, and I believe 9 you have those letters in your packet from our 10 organization. 11 I speak on behalf of the American Lung 12 Association of California and the California Thoracic 13 Society. We are here, in addition to NRDC and Coalition 14 for Clean Air and some of the other groups here today, to 15 support the good staff work on this regulation. We are 16 involved in this issue because of our concern about the 17 public health impacts of the emissions from all types of 18 small and on-site generators, distributed generation, 19 emergency generators and portable generators. 20 I understand today you're just dealing with 21 distributed generation, but we are concerned that all of 22 these small and on-site generators are responsible for 23 significant air pollution emissions. And we have a deep 24 commitment to reducing those emissions and promoting clean 25 and renewable generation technologies. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 93 1 I wanted to just focus on two issues, in addition 2 to joining with the comments by NRDC and the Coalition for 3 Clean Air, and those issues are enforcement, number one, 4 and, number two, the need for rapid ARB action to address 5 diesel bugs and portable generators. 6 On enforcement, I want to urge the Air Board to 7 pay particular attention to the need for strong 8 enforcement programs to ensure that we don't have 9 opportunities for circumventing these DG regulations. For 10 example, you have excluded, of course, portable generators 11 and backup generators from the regulations, and we want to 12 make sure that those types of generators are not able to 13 circumvent the system and become used essentially as 14 distributed generation. 15 And we also want to make sure that the Board 16 determines that the those units that are certified DG 17 units only operate on the fuel they were certified to use. 18 There are some situations of fuel switching. For example, 19 combustion turbines could be switched to diesel or other 20 distillate fuels. And we want to make sure that kind of 21 situation does not occur, because obviously there would be 22 a huge increase in the emissions beyond what was 23 certified. 24 In addition to enforcement, again, we are 25 concerned about -- we remain extremely concerned about the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 94 1 impact of toxic emissions from diesel backup generators 2 and portable generators. I know that you plan to move 3 ahead quickly, and we want to urge you to please do move 4 ahead quickly and control emissions from those sources as 5 rapidly as possible. 6 We're very concerned about the comments that were 7 submit by Capstone and the potential scenario that acting 8 now on DG and delaying action on these other types of 9 technologies that are mainly diesel could tilt the 10 competitive playing field in favor of those higher 11 polluting technologies. We absolutely do not want that to 12 occur. And I know that you don't want that to occur 13 either. 14 But I think moving ahead quickly on regulations 15 to control diesel bugs and portable generators is 16 extremely important to ensure that we do have a level 17 playing field and emit strong emission controls to achieve 18 the central station standards for all types of on-site 19 technologies. 20 In closing, we urge you to move ahead, adopt the 21 stringent emission standards that you have before you 22 today and move forward quickly on diesel backup generators 23 and portable generators as your next step. 24 We believe that pursuing clean and renewable 25 sources for small power generators will be an incredible PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 95 1 improvement for air quality and public health. At the 2 same time, we'll be helping to promote low emitting and 3 renewable power technologies and improve our chances for 4 energy security. 5 CHAIRPERSON LLOYD: Thank you very much, Bonnie. 6 Any questions? 7 Yes, Mr. Calhoun. 8 BOARD MEMBER CALHOUN: I guess I'd like to hear 9 the staff's comment about her interest in an enforcement 10 program to be certain that portable and backup generators 11 don't circumvent the system. 12 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 13 Tollstrup. One of the staff's goals is to work closely 14 with the districts to make sure, and we have been all 15 along during the whole energy crisis, working with the 16 districts to make sure that equipment, such as the backup 17 generators, which have been minimal controls, portable 18 equipment, which we argue with some over its intended use, 19 they're all used in a fashion that they were intended to 20 be used. 21 We have worked on a number of cases with 22 districts to make sure that, you know, equipment under the 23 portable equipment program if it's misused it's taken out 24 of our program and sent back to the district for permits, 25 and then also working with them on what the restrictions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 96 1 should be for emergency generators and we will continue to 2 do so. 3 BOARD MEMBER CALHOUN: I guess I'd like to ask do 4 you have something specific in mind that you think that 5 should be done that isn't being done? 6 MS. HOLMES-GEN: Well, because there are so many 7 of these generators throughout the state, and obviously it 8 presents an enforcement challenge, and we're concerned 9 that in the cases where natural gas shortages or prices 10 spikes occur, there could be some operators that switch 11 fuels in order to avoid the cost of natural gas or avoid 12 using a fuel that's in short supply. 13 And we want to make sure that the Air Board is 14 working very closely with the districts to ensure that 15 their enforcement teams are looking for this sort of 16 misuse of certified equipment. 17 BOARD MEMBER CALHOUN: Well, I think we've heard 18 the staff's comment and it appears as though they 19 obviously have this in mind, and are working with the 20 local districts in an effort to try and accomplish this. 21 PERMIT ASSISTANCE CENTER MANAGER MARTIN: I'll 22 add one other comment. This is Kitty Martin. 23 We will have on our web site a list of all the 24 equipment that has been certified as meeting our 25 standards. It will allow districts to quickly in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 97 1 field double check to make sure that a device is, one, 2 certified and, two, is using the appropriate fuel. 3 CHAIRPERSON LLOYD: Thank you. 4 We'll take one more witness, Valerie Gates, and 5 then we're going to take a ten minute break for the 6 benefit of the court reporter. So we'll take Valerie, 7 then after the break we'll get Eric Wesselman. 8 MS. GATES: Good morning. I'm Valerie Gates and 9 I am a real person from the Sierra Club. I received a 10 letter in the mail regarding this issue, and signed my 11 name saying it sounded good to me, so they sent me an 12 email and asked me to come and here I am. 13 (Laughter.) 14 MS. GATES: I am a community leader concerned 15 with supporting a village environment in Fair Oaks, which 16 is 17 miles east of Sacramento. My husband and I bought 17 some subdivision land in Butte County, and so I took some 18 planning classes because I wanted to learn how to 19 ethically develop that land in Butte County. 20 As an aside, the air quality isn't good enough 21 for me to live up there, because of the rice burning. I 22 have some lung problems because I've -- I put fiberglass 23 insulation in my attic. Even though I wore a mask, I had 24 some severe problems after, but I didn't sue anybody. I 25 just try to live a healthy from now on. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 98 1 But anyway, my neighbors found out that I was 2 taking these planning classes and asked me to help with 3 concerns in our village where contractors are demolishing 4 the historic buildings and putting up subdivision quality 5 homes, so needless to say we have a community involved 6 with this preservation. 7 My direct air quality concern with air pollution 8 is caused by the asbestos fibers unleashed during the 9 demolition. But my husband and I are presently members of 10 the Sierra Club. I was at birth. My father a pathologist 11 and environmentalists studied causes of cancer in the 12 1950s and 1960s. 13 I met my husband, a landscape architect on a 14 Sierra Club trail maintenance trip in 1968. We are a 15 family who supports conservation of energy. We wear wool 16 sweaters in the winter, sip ice lemonade by a fan in the 17 hot summer. 18 However, blackouts are life threatening to my 19 paraplegic mother who requires a moderate temperature in 20 her environment. We must balance our energy needs with 21 our requirement for clean air. The Sierra Club has 22 recommended several modifications with respect to DG 23 technologies. 24 Briefly, the district guidance should strongly 25 recommend that all the distributed generation meet PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 99 1 emission standards that are equivalent to the cleanest 2 central station powerplants by 2007; that the proposed 3 certification regulation and draft guidance that exempts 4 distributed generation units that are registered under 5 CARB's portable equipment registration program, PERP, has 6 language that exempts -- the proposed certification has 7 language that exempts the distributed generation units. 8 And because units registered under PERP are held 9 to weaker emission standards, I'm concerned that 10 stationary units could be easily converted to portable 11 units and moved once a year to avoid the stronger 12 emissions reductions under the DG certification 13 regulation. 14 To avoid creating greater environmental and 15 public health problems, CARB should act to make the 16 emissions limits in the PERP consistent with the standards 17 in the certification regulation and guidance to districts 18 as soon as possible. 19 Finally, I urge the Board to strongly recommend 20 that the air districts adopt the definition of emergency 21 generation in the draft guidance, somebody already said 22 that okay. 23 Anyway, we need energy. However, air pollution 24 has life threatening consequences for some people. 25 Regarding concern for the cost to the manufacturers, the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 100 1 potential costs to the manufacturers, I think that this 2 process could also be considered to be economic 3 stimulation that the people who designed the new features 4 to make these things have better air quality, deserve to 5 make a living, too, that's about all I have to say. 6 CHAIRPERSON LLOYD: Preferably in California. 7 MS. GATES: Excuse me? 8 CHAIRPERSON LLOYD: Dr. Friedman. 9 BOARD MEMBER WILLIAM FRIEDMAN: Could staff just 10 comment about the potential misuse of the PERP approach. 11 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Well, 12 first of all, I will say that if anybody is aware of 13 someone using a piece of equipment registered under the 14 portable equipment program for a DG purpose, let us know, 15 and we'll work with the district to make sure that doesn't 16 happen, because that's an improper use of the equipment. 17 Second, we are intending when we do come back to 18 board -- 19 BOARD MEMBER WILLIAM FRIEDMAN: I appreciate 20 that, but what is the likelihood of that kind of whistle 21 blower activity, if you will? I mean, you know how -- I 22 mean I presume that this is going to be reasonably 23 clandestine uses. So is this a real -- could this be a 24 problem or real problem? 25 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: The PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 101 1 issue has been brought to our attention before. And it is 2 a potential problem. We have put people on notice that we 3 think it's an improper use of portable equipment under our 4 program. 5 And when we run across these individuals, we have 6 been taking action and making sure that they don't use it 7 that way. 8 CHAIRPERSON LLOYD: Professor Friedman. 9 BOARD MEMBER HUGH FRIEDMAN: How do you run 10 across it? How do we run across it? 11 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: 12 Usually, it's through either the districts in their 13 day-to-day activities inspecting. We don't go out and do 14 any inspections ourselves. We have been tipped off a few 15 times by anonymous people. But for the most part, it's 16 through district inspections where they run across this 17 activity. 18 CHAIRPERSON LLOYD: I think the concern is likely 19 to be a significant problem or is it isolated? 20 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: I 21 think it's probably an isolated problem. You know we have 22 quite a few pieces of equipment registered under our 23 program. And the program is designed, equipment can move 24 from source to source, point to point to operate. 25 The districts do a good job of, you know, they're PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 102 1 out there, they're doing the inspections. When they see 2 it, they do make sure it's a proper use. So we don't see 3 this as a widespread problem, but there may be individual 4 cases where it does occur. 5 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think we 6 had greater fears of what might happen during this last 7 summer. These units are very expensive to rent, but 8 during the prospects where certain businesses were facing 9 black outs at unknown times and the loss of their business 10 or their loss of production, quite a few of the units 11 won't go out as rental units and people were paying the 12 $5,000 a week or thereabouts what it cost. 13 And we did have fears that some of those that 14 once they had the unit on site might be tempted to say 15 during times when I'm paying high rates it's cheaper to 16 use this generator than not. 17 We gave them guidance and guidance to the 18 districts that putting the generator on site, using it 19 during a blackout at the facility was appropriate. Using 20 it as a way to mitigate high power bills was 21 inappropriate. 22 I think now we seem to be past that and blackouts 23 are no longer a major concern, that relatively few people 24 would be induced to want to bring one of these units and 25 pay that amount that way. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 103 1 ASSISTANT CHIEF BARHAM: This is Bob Barham with 2 the Stationary Source Division. I just want to also add 3 that in the longer term, I think the solution to this 4 problem will be through the diesel program, where we're 5 going to be mandating lower sulfur fuel catalysts on these 6 diesel engines, things that will make them much, much 7 cleaner than they currently are. 8 CHAIRPERSON LLOYD: Thank you, Mr. Barham. 9 Thank you very much. 10 We'll take a break. I make it about 17 minutes 11 past, why don't we reassemble at 11:30, since there's no 12 clock in this room, 11:30. 13 (Thereupon a brief recess was taken.) 14 CHAIRPERSON LLOYD: I'd like to recommence, 15 please. 16 As often is the case, we have more witnesses than 17 we had before, so we better move ahead. 18 I'll start with Eric Wesselman, Martha Arguello, 19 and S.N. Prakash. 20 MR. WESSELMAN: Good morning. My name is Eric 21 Wesselman. I'm with the Sierra Club. And I'm happy to be 22 here today to provide comments on the proposed distributed 23 generation certification program and the draft guidance. 24 The Sierra Club is also a membership based 25 organization with nearly 200,000 members in the state of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 104 1 California alone. Some of them actually are on the table 2 before you here. Nearly 3,000 of our members submitted 3 some comments regarding these proceedings, so I hope 4 you'll have the time to take a look at some of them. 5 This Sierra Club is generally very supportive of 6 the certification program and the draft guidance, that the 7 staff has come up with. And, again, we'd very much like 8 to congratulate the staff on a job well done. 9 There are some important modifications that we 10 would also like to recommend. We've heard a number of 11 them from other organizations, such as CALPIRG and NRDC 12 already. And so a lot of my comments will be reaffirming 13 of those comments, and so I'll be brief and to the point 14 with a little bit of some changes given what we've heard 15 so far here today. 16 Our primary goal, of course, is to ensure that DG 17 units are clean as the cleanest central station power 18 units out there. And that's something that the Sierra 19 Club feels could be stronger in the draft guidance, and 20 that there should be a clear statement that it should be 21 by 2007, so we're assured to get to the stated intent of 22 the legislation. 23 The second major recommendation for modifications 24 is along the lines of what NRDC had stated, the different 25 types of distributed generation that is covered in the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 105 1 draft guidance performs essentially the same or 2 substitutable functions, and therefore they should be held 3 to the same environmental standards, and that gets to the 4 different standards that are set for the different costs 5 and technologies in the documents in the regulations. 6 So we would urge that the standard for that 7 uniform standard of five parts per million volume be 8 adopted. And the standards are already set for units that 9 are between 3 and 50 megawatts, so it sets these other 10 turbines outside of those parameters, essentially you have 11 the same purpose. We would urge the adoption of the 12 uniform standard. 13 And barring that from happening today, we would 14 urge that the staff express an intent to get to a uniform 15 standard over time. I mean, we'd be happy to continue to 16 work with the staff and the Board to ensure that kind of 17 an outcome, obviously for environmental and public health 18 concerns. 19 Finally -- well, not quite finally, but thirdly 20 is the portable generation issue. The exemption we've 21 already heard a lot about that, and I appreciate the 22 questions and comments regarding that issue. The Sierra 23 Club is very concerned about that exemption for portable 24 units. While right now there may not be that many units 25 that would -- there might be a problem with that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 106 1 currently. I think that with the stricter emission 2 standards for 2007, we see an increasing incentive, as the 3 years go on, for the stationary units to become portable 4 units or to have some sort of problems with this 5 exemption. 6 Therefore, we really do feel that the PERP 7 standards need to be brought -- emission standards need to 8 be brought in line with the standards that are being set 9 here today as soon as possible. 10 And as I expressed at the outset, we would also 11 support the adoption of an interim standard and strong 12 enforcement to ensure that -- right now, of course, 13 emergency backup generators are not included in this 14 proceeding, but a concern is though that some of these 15 units could be used to reduce business costs or the costs 16 of buying power off the grid, generate yourself to save 17 some power. 18 Well, if that happens, then all of a sudden we 19 have a problem and enforcement could help to deal with 20 that to ensure that they're brought in to be covered by 21 the certification program. 22 And finally, I think the issue of natural 23 security is very valid with this issue of distributed 24 generation. And I think distributed generation technology 25 does have and can play a very important role in protecting PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 107 1 national security. 2 My brother happened to be in the Pentagon when it 3 was struck by the plane and so I was touched as millions 4 of other Americans were, of course, by this issue. But I 5 really do feel, though, that sense, emergency generators 6 are excluded from this proceeding, that those events, and 7 that issue and the issue of national security really 8 shouldn't be brought to bear on this proceeding. I don't 9 think this is the right place for that, since really the 10 issue there for national security would be to ensure that 11 in a situation of emergency that we have electricity. 12 And to wrap up, I just want to again thank the 13 Board for your efforts and the staff for an excellent job. 14 I'd be happy to take any questions. 15 CHAIRPERSON LLOYD: Thank you very much. 16 Dr. Burke. 17 BOARD MEMBER BURKE: I will make this very quick. 18 Now, Ms. Gates is a member of the Sierra Club, right, and 19 I found her testimony very powerful and she's the kind of 20 person that makes me getup in the morning and come to do 21 this, and I'm sure also my other fellow board members. 22 Now, you represent the organization is that true? 23 MR. WESSELMAN: Yes. 24 BOARD MEMBER BURKE: So how do you formulate your 25 policy for what you're going to testify to? PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 108 1 MR. WESSELMAN: Well -- 2 BOARD MEMBER BURKE: Is it by the national 3 organization, California organization, your office, three 4 guys in your office, how do you do that? 5 MR. WESSELMAN: Well, it varies actually 6 depending on the issue. 7 BOARD MEMBER BURKE: How did you do it for today? 8 MR. WESSELMAN: For today, since this is a state 9 issue, I had to clear my thoughts with the California 10 Sierra Club, with the staff that are involved in the 11 California Sierra Club. 12 BOARD MEMBER BURKE: And when you clear it with 13 the state organization, do they give you some kind of 14 resolution or authorization? 15 MR. WESSELMAN: No, it's verbal. There's an 16 energy committee that the Sierra Club has formed that has 17 the authority for the State of California to authorize 18 actions and -- 19 BOARD MEMBER BURKE: What prohibits you from 20 changing the testimony, other than losing your job, when 21 you come up to testify? 22 MR. WESSELMAN: I didn't change it, I just 23 changed my emphasis. 24 BOARD MEMBER BURKE: I see. Well, I just 25 wondered, you know, because you could change it. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 109 1 Thank you. 2 CHAIRPERSON LLOYD: Thank you. 3 Martha Arguello, S.N. Prakash and Tim French. 4 MS. ARGUELLO: Good morning and thank you. 5 My name is Martha Arguello. I am the coordinator 6 of the environment and health programs for Physicians For 7 Social Responsibility. We're also a national 8 organization. We have over a 35-year tradition of working 9 on public health issues, always guided by the principle 10 that it is better to prevent what we cannot cure. 11 We have been the conscience of American medicine 12 for those 35 years. We have promoted adoption of more 13 precautionary principles to protect human health and the 14 environment. And so today we applaud you and hope that 15 you adopt these strong rules on distributed generation. 16 Rules that will be protective of both health and 17 the environment. We hope you establish aggressive 18 distributed generation standards that will eliminate the 19 dirtiest DG. We also encourage the Board to recognize the 20 importance of reduction of CO2. And we are deeply 21 concerned that the current issues do not address existing 22 backup generators. These generators are, by and large, 23 diesel. 24 At some preliminary mapping that was conducted by 25 environmental defense and presented at a recent conference PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 110 1 that we had on energy and health co-sponsored between 2 Physicians For Social Responsibility and American Lung, we 3 found that many of these backup utility generators are 4 located in densely populated parts of the state, where we 5 imagine there will be considerable environmental justice 6 impacts and disproportionate impacts in some of 7 California's most vulnerable populations, children, the 8 elderly and the emergent majority groups that still have 9 not received equal protection by many of the laws and 10 rules. 11 PSR also encourages you to begin to look at the 12 ethical implications of using diesel backup generators in 13 health care settings and hope that you will work with us 14 to incentivize the switch to cleaner sources of energy, 15 particularly in health care settings, where they will have 16 disproportionate impacts on those who are ill and most 17 vulnerable. Again, we support the recommendations that's 18 been made by the NRDC and again we hope that you adopt the 19 strictest possible protections and rules on distributed 20 generation. 21 Thank you. 22 BOARD MEMBER HUGH FRIEDMAN: Are there any 23 questions from the Board? 24 Thank you very much. 25 The next speaker is Mr. Prakash and then Mr. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 111 1 French. 2 MR. PRAKASH: Chairman of the Board and members 3 of the Board, my name is Prakash. I'm representing STM 4 Power Incorporated, maker of Stirling engines. We power 5 up engines in the range of 25 kilowatts of electricity, 6 using various different -- various types of fuels. 7 Thank you for organizing this public meeting and 8 giving STM power the opportunity to present its views on 9 the proposed CARB rules. 10 We believe that STM is the world leader in 11 external combustion Sterling engine technology. Our first 12 product is a 25 kilowatt DG unit, that is truly multi-fuel 13 capable and can run on heat produced by different types of 14 fuels, conventional gasses, and liquid fuels, renewable 15 resources, such as biomass, solar energy, resource liquid 16 fuels such as landfill gas, flare gas and bio gas waste 17 heat from municipal processes. 18 As the nation's electric and gas networks are 19 reaching capacity, most people would agree that 20 utilization of modular, environmentally clean DG 21 technologies closer to the energy user can augment the 22 supply capacity reduced in this interest, improve 23 reliability and reduce the straining on the grids and 24 pipelines experienced recently in California and 25 elsewhere. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 112 1 Moreover, recent events have highlighted the one 2 liberty of large powerplants and transmission lines as 3 potential terrorist targets, liberating the energy 4 secretary on top of the national security agenda. 5 Multi-fuel capable DG technology, such as the STM 6 power units, are well suited to our nation's national 7 security and energy security. STM firmly believes that DG 8 technology should not be more polluting than central power 9 stations, after appropriate adjustments are made for 10 losses in transmission and distribution system. 11 According to these losses and intangible benefits 12 of DG, STM believes that a higher level, one pound per 13 megawatt of NOx is a reasonable, cost effective, regulated 14 standard for 2003 and beyond. 15 STM does not believe that the proposed 2007 NOx 16 standard applied to .05 pounds per megawatt however is 17 cost effectively achievable, but will nonetheless continue 18 its aggressive dial up of low NOx combustion system, so 19 that it can remain among the cleanest available DG 20 technologies. 21 STM will continue to work with regulators or 22 other organizations in crafting new rules that not only 23 protect the environment and public health but also provide 24 room for the DG industry to prosper and grow. We at STM 25 are committed to bringing efficient cost effective and PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 113 1 socially responsible products to market. 2 STM is committed to making our environmentally 3 friendly external heat engine technology as commonplace as 4 diesel engines are today. And we hope that the CARB 5 regulated actions will support the cause. 6 For this, STM suggests to CARB to reconsider its 7 proposed standards to allow for the development of the 8 nascent DG industry in California and throughout North 9 America. 10 Thank you for your attention. 11 I'm happy to answer any questions you have. 12 CHAIRPERSON LLOYD: Thank you very much. 13 Any questions? 14 So what you're saying is we should delay until 15 you catch up? 16 MR. PRAKASH: Things are technically feasible. 17 It doesn't mean that it is cost effective. It doesn't 18 mean that the marketplace will buy it at that price. So 19 until some technologies take root, you will not know what 20 is the cost impact on the generation. 21 For example, somebody generating 300 megawatts 22 can amortize the cost. What about guys developing 100 23 kilowatts and less, those are also DG units. Engines 24 cannot do the same thing. There are technological 25 limitations out there, and on top of that there are size PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 114 1 limitations too. 2 You cannot operate the best technology to 3 everything. The standards should also be based on sizes. 4 Size is an important factor. Combustion is not just a 5 chemical conversion, it is size dependent. I'm a chemical 6 engineer, so I'm talking like that. 7 CHAIRPERSON LLOYD: Does staff want to comment? 8 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Just 9 one comment on the proposed standard that STM is 10 mentioning that would be essentially for 2003 double the 11 number that staff is proposing. And, again, the directive 12 of SB 1298 was to set the first stage of the standard at a 13 level that reflected the cleanest technology out there. 14 And as you might remember, we mentioned a couple 15 of the size categories that would fall under our cert 16 program. And those would be, you know, relatively small 17 in the same category as the STM technology would be. 18 MR. PRAKASH: From what I understand by the 19 testimony, I think it was less than three megawatts will 20 have the same standard, but 100 kilowatts is a little 21 bit -- much small than three megawatts. 22 CHAIRPERSON LLOYD: Staff. 23 PERMIT ASSISTANCE CENTER MANAGER MARTIN: One 24 clarification. I think there may be some confusion on the 25 part of STM in that we've differentiated our BACT PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 115 1 recommendations. That would be for the guideline document 2 by size, and that's for that equipment which would fall 3 under district jurisdiction. 4 It is unlikely that the size that the STM product 5 currently as it's configured at, which I believe is 25 KW, 6 would fall under district permitting. But it's easy to 7 confuse the guidance recommendations with the cert 8 program. 9 MR. PRAKASH: Am I to understand that under three 10 megawatts it would be district property and there would be 11 some leeway because of the size? 12 AIR RESOURCES ENGINEER CHIN: This is Grant Chin. 13 The certification program applies to electrical generation 14 that's not in their district jurisdiction. In terms of 15 some of the size, you know, we've heard mentioned 16 reciprocating engines, less than 50 horsepower and then 17 for a gas or combustion turbine, typically they're exempt 18 if they're 300 KW or less. 19 CHAIRPERSON LLOYD: Okay. 20 MR. PRAKASH: Thank you. 21 CHAIRPERSON LLOYD: Professor Friedman. 22 BOARD MEMBER HUGH FRIEDMAN: But do you 23 understand 1298 in its requirement that we apply BACT, do 24 you understand that to preclude cost considerations? I 25 mean, best available control technology that's available PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 116 1 may not be salable, I guess is the point. 2 MR. PRAKASH: Correct. 3 BOARD MEMBER HUGH FRIEDMAN: At least a price 4 that people are willing to pay. And so I guess my 5 question is, is there any validity to that position or do 6 you even consider it? 7 I mean, I know we did cost it out and there is 8 some argument, I guess at least some have said it that 9 you've underestimated the costs of these units. 10 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Again, 11 for the equipment that would fall under our cert program, 12 we refer to that as the small stuff basically. The 13 directive in SB 1298 was to look at the cleanest 14 technology that was currently in operation out there. 15 There was no mention of BACT for that first stage of 16 standards. 17 So it was more of a directive to just look and 18 identify and craft our standard to reflect the cleanest 19 technologies. 20 BOARD MEMBER HUGH FRIEDMAN: Out there, 21 regardless of cost, but we do -- at least we've attempted 22 to make cost estimates. 23 PERMIT ASSISTANCE CENTER MANAGER MARTIN: We did 24 address cost estimates for both the manufacturers in the 25 field now out there selling units as well as those that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 117 1 anticipate it. 2 BOARD MEMBER HUGH FRIEDMAN: And you feel those 3 are underestimated? 4 MR. PRAKASH: The cost numbers are reasonable 5 from what I see, but does the -- 6 BOARD MEMBER HUGH FRIEDMAN: For 2003? 7 MR. PRAKASH: Yes. 8 BOARD MEMBER HUGH FRIEDMAN: But for 2007, we 9 understand that that's going to have to be reviewed. 10 MR. PRAKASH: But to comply with the 2003 11 standard, there are penalties in the technology, either in 12 efficiency or more gas consumption, things that. So at 13 that level will the people buy it? 14 CHAIRPERSON LLOYD: Mr. Prakash, are you based -- 15 where are you based? 16 MR. PRAKASH: Anarbor, Michigan. 17 CHAIRPERSON LLOYD: How much discussion have you 18 had with the staff on this item? 19 MR. PRAKASH: Not me personally, but I'm aware of 20 the discussions that have gone on earlier. We can taylor 21 the engine to meet different standards. 22 CHAIRPERSON LLOYD: It sounds as though, I think, 23 that you will probably benefit to having some more 24 discussions from staff, because I think mutual exchange of 25 information would be beneficial there. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 118 1 MR. PRAKASH: Okay, thank you, sir. 2 CHAIRPERSON LLOYD: We appreciate it very much. 3 Thank you. 4 Tim French, Chuck Solt, Karl Stoffers. 5 MR. FRENCH: Mr. Chairman, Members of the Board, 6 good morning. My name is Tim French. I'm counsel with 7 the Engine Manufacturers Association. EMA, among other 8 companies, represents the leading manufacturers of gaseous 9 fuel, natural gas fueled, reciprocating internal 10 combustion engines, what we sometimes call RICE. And some 11 of these engines are used in distributed generation or DG 12 applications. 13 And my comments today will go to the 14 certification proposal that's before you as opposed to the 15 guidelines. 16 Before I address EMA's principal concerns with 17 respect to the certification program, I, like the others, 18 on behalf of EMA do want to commend your staff for their 19 efforts in this matter. 20 At all times all of your staff exemplified 21 professionalism, in putting this rule-making together. 22 They ensured that all points of view were solicited and 23 fairly reconsidered and they provided many opportunities 24 for a truly open debate about these issues. And I want to 25 personally salute Grant, Kitty and Marcelle for all their PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 119 1 really good work that was done in this effort. 2 Now, that being said -- 3 (Laughter.) 4 MR. FRENCH: -- we do have some concerns about 5 where we ended up as we discussed. 6 CHAIRPERSON LLOYD: We're not surprised. 7 (Laughter.) 8 MR. FRENCH: In a nutshell our basic concern is 9 while the 2003 standards do properly reflect BACT, what 10 is, you know, best achievable in practice. And for 11 gaseous fueled RICE it already requires that 2003 12 standards that you apply either an SCR or a TWC type 13 catalyst system which can be very expensive. 14 That while those standards reflect BACT, the 2007 15 standards are frankly infeasible and cost prohibitive for 16 RICE applications, natural gas reciprocating engines. And 17 this result, in our view, is not reflective of sound 18 public policy, and is, in fact, in conflict with some of 19 the other initiatives that are going on. 20 You've heard of the ARICE program being 21 spearheaded by your California Energy Commission, the 22 DOE's ARES program. Both of these programs are trying to 23 look at ways to advance RICE technologies and efficiencies 24 and put out a product by 2010. 25 Now, some of the stretch goals that are being PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 120 1 considered there actually match the 2003 level. But the 2 point is that the 2007 standard, if you adopt it today, 3 recognizes that in all likelihood you are effectively 4 banning RICE engines, natural gas fueled RICE engines for 5 these applications. And I just think we need to be clear 6 about that. 7 And in light of our concerns, we're seeking two 8 basic changes to the proposal that's before you today and 9 ask you to consider them. 10 First, we would ask that you suspend the 2007 11 standards, and in their place have a more comprehensive 12 technology review as we'll discuss in more detail. We 13 think the technology review in 2005 may be, with respect 14 to RICE, be preordained to find unavailability of RICE 15 technology. 16 So, either, you know, suspend the 2007 standards 17 and in their place have a more comprehensive technology 18 review that can better align itself with the ARICE program 19 and the ARES program, take advantage of some of the 20 research that's being done there or alternatively defer 21 the 2007 standards to 2011. 22 Again, that will allow for full coordination with 23 some of these other programs that are going on at DOE and 24 CEC level. 25 Now, you may be asking yourself, well, we've got PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 121 1 an underlying statute to deal with and you absolutely do. 2 But as we've heard before, Senate Bill 1298 talks about 3 implementing standards equivalent to combined cycle 4 powerplants as early as practicable, not as early as 5 possible, as early as practicable. 6 And I think it's incumbent upon us to consider 7 all of the types of sources that are reasonably used in 8 this category and factor in what is practicable and not. 9 And we're saying that if you're considering or want to 10 hold open the door for RICE type natural gas engines 2007 11 is not practicable. 12 The remainder of my comments will just sort of go 13 to highlight some of the reasons behind changes that we're 14 suggesting. So if I'm belaboring a point or if it's 15 something you've already read in our written comments, let 16 me know and I'll move on, because I know you've got a busy 17 docket today. 18 CHAIRPERSON LLOYD: We're agreeing with you. 19 MR. FRENCH: Under the 2003 standards, understand 20 that we are already achieving BACT, and that requires for 21 natural gas RICE installation of catalytic advanced 22 after-treatment systems. Some of these system can cost 23 $30,000 to $50,000 a unit. And remember that in your 24 certification rule, in the certification program, you're 25 dealing with engines that are generally under 100 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 122 1 horsepower, those that already are, sort of, under the 2 radar for your district programs. 3 And these engines may cost as little as $5,000. 4 So you're already in a range where the after-treatment is 5 exceeding the cost of the underlying engine. Now, 2007 6 would go way beyond 2003. You'd have an 86 percent 7 compelled reduction in NOx, a 98 percent reduction in CO 8 emissions. 9 And that type of step for these types of engines 10 will require some, as of now, unforeseen advancements in 11 the cost efficiency and effectiveness of NOx catalysts and 12 other technologies, and we're just not confident we can 13 get there. 14 We would also say that that target is so 15 aggressive that given the overall market volume that we're 16 dealing with for DG, you may find some manufacturers 17 facing a disincentive to really see if they can get to 18 2007 thinking. It's a forgone conclusion that they can't, 19 which is why I said before the 2005 technology review, if 20 the 2007 is standards are set in stone, may become for 21 RICE engines, natural gas engines, somewhat of a wasted 22 exercise, because you may not find a lot of manufacturers 23 spending a lot of money to try to achieve a 98 percent 24 reduction over a four-year period. It just may not be 25 cost effective. From an economic perspective, it may not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 123 1 be feasible for manufacturers to spend those dollars in 2 that manner. 3 And, again, if that's what the effect of this is 4 to drive RICE out of this marketplace, aren't we setting 5 up a dynamic that's fundamentally inconsistent with the 6 ARICE program and the ARES program. And if we are, I 7 think we ought to double check whether or not that's sound 8 public policy for all the reasons that we've seen for 9 either over the course of the summer with respect to 10 energy concerns. 11 Bear in mind that the relative efficiency of a 12 turbine, not counting CHP, but a turbine is at about 20 to 13 25 percent energy efficient. A RICE engine is generally 14 in the range of 45 to 50 percent efficient, so there are 15 energy tradeoffs that you're concerned with when you're 16 ruling out RICE engines. 17 We've also seen the greenhouse gas factors for 18 some of these other technologies, where RICE engines are 19 very favorable on that front as well. 20 The proposal that's before you, in our view, does 21 not adequately address the cost issues to manufacturers. 22 In fact, there are no cost parameters considered with 23 respect to what happens in 2007, the types of expenditures 24 in R&D and result in product costs that would follow from 25 the implementation of 2007. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 124 1 People say, well, we'll just get to that when we 2 get to that. I'm not entirely sure that that's consistent 3 with your legal obligations to fully consider the cost 4 impacts of what you're voting on. But understand also for 5 2007, you're voting on something that you don't know what 6 the cost impacts are. And I would submit that they are 7 cost prohibitive impacts for natural gas RICE engines. 8 We have other more technical comments that we've 9 submitted in our writing to the Board. We would recommend 10 those to you. 11 And just in summary then, we would ask that you 12 give earnest consideration to either delaying the 2007 13 standards to 2011 to allow better coordination with some 14 of our other public policy initiatives or have a much more 15 comprehensive tech review in 2007 that will therefore 16 create the prospect that that can be a meaningful review 17 process. 18 And I might also add that bear in mind that the 19 emissions from this source, under a 100 horsepower DG 20 application, the aggregate emissions are not even in your 21 inventory right now according to your staff report. 22 So if you try to do a cost per ton benefit 23 analysis, you couldn't do it. It would be off the chart. 24 So that also weighs in terms of the cost effectiveness of 25 what's being discussed here today. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 125 1 That concludes my comments. Again, those 2 concerns, notwithstanding despite 2007, a process that 3 your staff undertook under an accelerated time frame was 4 admirable. And that's all I have. I'd be happy to try to 5 answer any questions you have. 6 CHAIRPERSON LLOYD: Professor Friedman. 7 BOARD MEMBER HUGH FRIEDMAN: In your summary you 8 said among other things that you urged a more 9 comprehensive assessment and review in '07. Did you mean 10 05? 11 MR. FRENCH: No. I mean ideally we'd like to see 12 the tech review in '07, because I think that affords more 13 opportunity for the research programs that are in ARICE 14 and ARES to come to the floor. Now, if you're going to 15 stick with a 2005 tech review, I would say that definitely 16 needs to be more comprehensive. Not just be a report to 17 the Board, but a full -- not adjudication, but a full 18 consideration of the merits of what those 2007 standards 19 are looking like at that point. 20 We've heard from other commenters on no, no, no, 21 make sure you set the 2007 standards in stone so that the 22 2005 tech review doesn't allow for any slippage. Well, 23 then what's the point of having the review. And, in fact, 24 we're saying that without a real opportunity to look at 25 where we are in 2005 the prospect of full reconsideration, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 126 1 I fear that our natural gas engine suppliers are going to 2 exit this marketplace. 3 BOARD MEMBER HUGH FRIEDMAN: Just a follow-up, 4 what does the staff understand the technological review 5 would consist of in 2005? 6 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Staff 7 anticipates that that review would be along the same lines 8 as what we did to get here today. So we'd talk about -- 9 BOARD MEMBER HUGH FRIEDMAN: Comprehensive, 10 reassessment, full discussion. 11 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Yes. 12 BOARD MEMBER HUGH FRIEDMAN: Whatever has been 13 chiseled in stone can be rechiseled? I mean, unless it's 14 in front of a burning bush, in which case -- 15 (Laughter.) 16 MR. FRENCH: If there's a burning bush talking, 17 we all go home, I stipulate to that. 18 (Laughter.) 19 PERMIT ASSISTANCE CENTER MANAGER MARTIN: You got 20 me earlier with the love and the diamonds thing, so the 21 burning bush, we'll include that if you want. 22 CHAIRPERSON LLOYD: Be careful of the bush. 23 (Laughter.) 24 CHAIRPERSON LLOYD: Your comment about ARICE, did 25 someone comment on that? I wasn't aware of this program PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 127 1 when it started. It sounds from your testimony that ARB 2 is not involved and I think is that true ARB is not -- is 3 ARB involved with that program? 4 PERMIT ASSISTANCE CENTER MANAGER MARTIN: I'd be 5 glad to comment on that. Peter Venturini is a member of 6 the ARICE Committee over at the CEC. Peter is our 7 Division Chief. We also have one of our managers in the 8 division in the diesel program as a member of that. 9 And in the course of developing this measure, we 10 were in close contact with the main staff person about the 11 levels we were considering. In fact, I got an Email as 12 recently as a couple of weeks ago. They wanted to double 13 check and make sure their targets for an RFP that they 14 were released were in line with what we were recommending. 15 So we intend to stay dialed into that. 16 CHAIRPERSON LLOYD: That program is already 17 underway? 18 DEPUTY EXECUTIVE OFFICER SCHEIBLE: And clearly 19 we need advances in the control level for internal 20 combustion engines that are used beyond for electricity 21 generation, whether or not the engine will be clean 22 enough, so that it's desirable relative to the other way 23 of generating electricity is independent of how it is used 24 in portable equipment, how is it used for backup emergency 25 generation, how is it used for all the other uses of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 128 1 internal combustion engine. 2 MR. FRENCH: And I understand that, but I just 3 want the Board to be aware from the manufacturers' 4 perspective that when you say aye to 2007, you're probably 5 saying so long to natural gas engines in this application. 6 CHAIRPERSON LLOYD: I guess you can turn that 7 around in saying when you're look at the business cycle 8 for business purposes at least you have some parameters 9 that you can evaluate in terms of that business decision. 10 MR. FRENCH: Right, but you know 86 percent and 11 98 percent off of a .15 gram standard over four years in 12 this market share is very, very tough. 13 Thank you very much. 14 CHAIRPERSON LLOYD: Thank you Tim. 15 Sorry, Mr. Calhoun. 16 BOARD MEMBER CALHOUN: Mr. French, you talked 17 about the 2003 standards and the 2007 standards, isn't it 18 somewhat premature to make a definitive statement about 19 the feasibility of the 2007 standards? 20 MR. FRENCH: All we can do is go on with what we 21 know about today in terms of relative cost for this size 22 engine. Now, if you're talking about a 4,200 horsepower 23 engine that is in some very large distributed generation 24 situations or pumping applications, there I agree, that if 25 we were talking about what's feasible in 2007, we'd have a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 129 1 lot more leeway in terms of what we could promise. 2 But this is a 100 horsepower or less where the 3 underlying cost of the engine might be $5,000, $7,000, 4 $10,000. And in that application, we feel pretty 5 confident that the cost prohibitiveness, even if you could 6 make technology breakthroughs is going to not keep us in 7 this marketplace. 8 BOARD MEMBER CALHOUN: Well, I'll now go ahead 9 and ask you the question I had intended to ask. 10 MR. FRENCH: Oh, I'm sorry. 11 BOARD MEMBER CALHOUN: No, that's fine. I said 12 are the standards of technology, are they technically 13 feasible is that the problem, or is it that the cost to do 14 that would be prohibitive? 15 MR. FRENCH: I think our principal concern right 16 now is that for this size category, given what we know 17 today about catalysts that can be used either lean burn or 18 rich burn natural gas engines is technologically 19 infeasible to think that we can get to those numbers in a 20 commercially viable way. 21 BOARD MEMBER CALHOUN: The staff has indicated 22 that -- 23 BOARD MEMBER HUGH FRIEDMAN: But he's combined 24 his answers, as I heard it. When you added it in a 25 commercially economic way or feasible way, you're -- is it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 130 1 not feasible technologically, regardless of cost? 2 MR. FRENCH: Right. 3 BOARD MEMBER HUGH FRIEDMAN: And then when you 4 consider, and take cost into account and what you think 5 the consumer will or won't pay, what the market will bear, 6 then does that render what is technologically, we're 7 capable of achieving, no longer viable economically? 8 MR. FRENCH: It's the first point is the crux of 9 our comment. 10 BOARD MEMBER HUGH FRIEDMAN: So it's back to the 11 drawing board. Technologically we can't do it. 12 MR. FRENCH: We can't do it. 13 BOARD MEMBER HUGH FRIEDMAN: No matter what the 14 cost is? 15 MR. FRENCH: As we sit here today, that's our 16 best assessment. 17 BOARD MEMBER HUGH FRIEDMAN: Yeah, that's your 18 estimate of what will happen several years from now? 19 MR. FRENCH: Yes. And, again, you just don't 20 have as much opportunity when the source and the package 21 is at this size range. 22 PERMIT ASSISTANCE CENTER MANAGER MARTIN: One 23 follow-up comment from staff. You might have noticed when 24 we did our presentation on the certification side of these 25 two items, you did not see an IC engine example given, a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 131 1 photograph. That's primarily because we're not aware of 2 any engines in that size category that are being used for 3 DG. 4 Larger IC engines would fall under the permit 5 program. And Mr. French mentioned earlier that the 6 inventory was limited for this category. To our 7 knowledge, we have not been able to identify an existing 8 unit. There are some manufacturers who have indicated an 9 interest and now have an IC engine based unit out there. 10 However, that would fall under district requirements. 11 CHAIRPERSON LLOYD: Ms. D'Adamo. 12 BOARD MEMBER D'ADAMO: I'm looking through the 13 material here, and I missed this morning's presentation by 14 staff, so I apologize if you went over this, but did staff 15 prepare a cost effectiveness analysis? 16 PERMIT ASSISTANCE CENTER MANAGER MARTIN: Staff 17 presented some cost information this morning. And 18 essentially what we estimated for the cost of complying 19 with the 2003 standard, the cost would be somewhere 20 between $10,000 and $20,000. That would include the cost 21 of doing a source test, pulling the application materials 22 together and paying the $2,500 application fee. 23 We noted that in the case of the 2007 standards, 24 it was not possible for us, at this time, to make an 25 estimate of what the cost of compliance is. There are a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 132 1 number of alternatives that the manufacturers can use to 2 reduce or can consider to reduce emissions including 3 redesign, increasing efficiency, adding on CHP or adding 4 on control equipment. But because there is a variety of 5 measures that they have at their hands, we didn't go into 6 a detailed cost analysis. We intend to revisit that in 7 2005 as part of our technical review. 8 BOARD MEMBER D'ADAMO: How does that analysis or 9 lack of an analysis when a regulation is technology 10 driven, how does that compare to other regulations? I 11 don't know if you'd be the proper person to answer that or 12 someone else on the mobile source side of things, where we 13 adopt a regulation and we realize upfront that the 14 technology is not yet present, do we normally defer cost 15 effective analysis for a later date? 16 EXECUTIVE OFFICER KENNY: Let me try to take a 17 stab at this. Normally, we do not defer. The difference 18 here is that we do have legislative direction that we 19 were, essentially, to put together standards for 20 distributed generation for 2007, so that's why we have 21 done this. 22 I would also, essentially, I think, add that with 23 regard to the answer you just heard, that I think there's 24 a kind of clarification that needs to be added to it. We 25 do have cost estimates with regard to a number of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 133 1 technologies, even before 2007 and those would be the 2 solar, the wind, the fuel cells things like that. 3 And the 2003 cost estimates that we provided to 4 you today would be essentially applicable also for 2007 5 with the anticipation also that with additional time, 6 those numbers would be potentially lower than we are 7 anticipating for 2003. 8 What we don't have is essentially the ability to 9 provide cost estimates in 2007 for the IC engine 10 technologies or for the microturbine technologies. And 11 the reason for that is that they are going to have to make 12 a substantial jump with regard to their emission controls 13 in order for them to be able to meet those particular 14 levels that are being established for 2007. 15 But, again, what we were trying to do is meet the 16 base line direction of the Legislature, which is that we 17 were to establish standards that matched up with central 18 station power plants, so that, in fact, the general power 19 that was provided throughout the state of California would 20 be as clean or cleaner than central station powerplants. 21 BOARD MEMBER D'ADAMO: Right, and the legislation 22 doesn't require cost effectiveness as part of the 23 analysis. 24 EXECUTIVE OFFICER KENNY: Correct, and I think 25 what we -- and part of the reason that we are trying to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 134 1 come back in 2005 is that we will have a better handle on 2 some of the technologies that have been developed for 3 microturbines and for IC engines and to provide you with 4 kind of numbers that can then be used for consideration. 5 I do think it's going to be a very, very tough 6 challenge for the microturbines or for the IC engines to 7 meet those particular numbers at lower costs. 8 BOARD MEMBER D'ADAMO: Thank you. 9 CHAIRPERSON LLOYD: Thank you very much. 10 Chuck Solt, Karl Stoffers and Mohsen Nazemi. 11 MR. SOLT: I only have one item I was going to 12 address today, and that's basically the same item that 13 Ralph Ordonez talked about earlier, the issue of the 14 recommended change by staff in the certification program 15 to drop the efficiency threshold and the recommendation 16 that that be carried over into the guidance documents 17 also. 18 I would like to suggest that consideration of the 19 heat recovery credit is not an option. The heat recovery 20 from large central gas turbines was considered in 21 establishment of the .07 pounds per megawatt hour number 22 which is the 2007 number. No existing large gas turbine 23 projects or any of the ones that are currently under 24 construction can meet the .07 without the heat recovery 25 consideration, and none of them meet 60 percent overall PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 135 1 average annual overall efficiency. 2 Distributed generation needs the same appropriate 3 consideration of the emission reductions associated with 4 the heat recovery in order to meet the .07. 5 At .07 with the heat recovery credit, any 6 distributed generation unit will be as clean or cleaner 7 than the alternative of purchasing electricity and using a 8 boiler to provide the heat requirements. Exclusion of a 9 heat credit by an efficiency threshold would kill many 10 clean distributed generation projects. 11 If the efficiency threshold is maintained, it 12 will have a negative impact on the environment. It will 13 impose economic hardship on many California companies and 14 on the State of California institutions. And accordingly, 15 it will have a significant impact on the California 16 economy and it will eliminate many distributed generation 17 projects that would have provided much needed electric 18 generation capacity in California. 19 That's all I have. 20 Thank you. 21 CHAIRPERSON LLOYD: A pretty strong statement in 22 there in terms of what impact that phrase would have. I'd 23 like to get staff's response on that. 24 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 25 Tollstrup, again. The .07 standard, Mr. Solt, is correct PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 136 1 that's based on what we believe is equivalent central 2 station powerplant 50 percent efficiency for that type of 3 a unit. It does use heat recovery. It does make that 4 consideration. 5 The CHP into that, which is an option that we 6 provided, again, we've asked that we be able to come back 7 with updates to not only the BACT numbers but the CHP 8 numbers as well and to work with others to establish the 9 proper procedure, at least on the certification side -- or 10 on the guidance side to see how that gets incorporated. 11 CHAIRPERSON LLOYD: Does that satisfy you? 12 MR. SOLT: If, in fact, there will be additional 13 consideration of what I presented, yes. 14 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Yeah, 15 we will. 16 CHAIRPERSON LLOYD: Thank you. 17 Professor Friedman. 18 BOARD MEMBER HUGH FRIEDMAN: This is not a 19 complete sentence, so I'm having trouble understanding 20 what it is. I mean, unless I'm missing something. The 21 phrase is out of context, and I didn't go back and read 22 its source. But that you agree with all of the 23 consequences that he's pointed out will ensue if that 24 phrase is not deleted? 25 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: I'm PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 137 1 sorry, what? 2 CHAIRPERSON LLOYD: This is referring to his 3 letter. 4 BOARD MEMBER HUGH FRIEDMAN: I'm referring to his 5 letter. I'm referring to his letter and I don't see -- 6 I'm sorry, I didn't make myself clear. I'm referring to a 7 letter that Mr. Solt submitted. 8 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Staff 9 does not agree that this will have a negative impact on 10 the environment. Obviously, I think that the program that 11 we have before you today will result in the cleanest 12 technologies available being put into use. That's 13 definitely a positive effect. 14 We think that, again, that the DG market is 15 emerging. And we are evaluating that and we will come 16 back in 2005 with an update as to where that is and the 17 impacts that that does have. So we have a mechanism in 18 there to deal with these issues. 19 BOARD MEMBER HUGH FRIEDMAN: Well, do you, first 20 of all, agree that the continued presence and inclusion of 21 this phrase in the sentence, whatever it is that contains 22 it, is necessary and that if it's retained it will -- you 23 said it will not have a negative effect on the 24 environment, in your opinion. 25 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 138 1 That's correct. 2 BOARD MEMBER HUGH FRIEDMAN: In deed, it's 3 presumably not counterproductive. It's intended to -- 4 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: To 5 provide and incentive or flexibility, yes. 6 BOARD MEMBER HUGH FRIEDMAN: Although, do you 7 agree that it will or will not have an economic -- 8 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: I 9 think, at this point in time, it's difficult to tell what 10 the economic impacts will be. 11 BOARD MEMBER HUGH FRIEDMAN: It could 12 potentially, that's part of this cost issue? 13 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: And 14 that's what staff has agreed to come back and address as 15 we get more information. 16 BOARD MEMBER HUGH FRIEDMAN: And you can't agree 17 that it absolutely for sure will eliminate a lot of 18 distributed generation projects? 19 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Well, 20 I think there is a number of technologies that are 21 available right now that can meet the standard. There are 22 some obviously in the market that can't. 23 CHAIRPERSON LLOYD: I think Mr. Solt's got our 24 attention, and I would suggest to staff that maybe given 25 the content of the letter and the distribution list, I PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 139 1 think, we should maybe -- it would prudent to respond? 2 MR. SOLT: You mean right now? 3 CHAIRPERSON LLOYD: No, no, no, for them to 4 respond. 5 Thank you. 6 MR. SOLT: Thank you. 7 Karl Stoffers, and also if you could identify the 8 person with you, Mohsen Nazemi and Joan Lee. 9 MR. STOFFERS: Good morning. Thank you for 10 allowing us to speak. My name is Karl Stoffers -- 11 CHAIRPERSON LLOYD: Can you speak closer to the 12 mic, we can't hear you. 13 MR. STOFFERS: My name is Karl Stoffers. I am a 14 retired faculty member from California State University, 15 Sacramento. I'm a member of Gray Panthers and Joan Lee, 16 who is with me, is our chairperson. 17 I am concerned about clean air, because clean air 18 affects our health, my health. I am concerned about clean 19 air, because of the long-range dangers of global warming. 20 I think you see presentations today have very much been 21 concerned with the balance of resources that use renewable 22 energy like solar and wind, and those that are based on 23 fossil fuels. 24 We all know about the fuel aspect. This one 25 thing with the renewable resources wind and sunshine is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 140 1 that once you have installed your system, the energy comes 2 for free. 3 With fossil fuel based resources month after 4 month, you pay a bill for your fuel and we have 5 experienced during the last year, year and a half what can 6 happen to the prices of fossil fuels. 7 Additionally, we have had recent bad experiences 8 with terrorism and therefore the possibility that your 9 fuel resources will be disrupted by an evil act should not 10 remain outside of our thinking of what we will do. 11 If this Board adopts tough requirements for 12 emissions, then a beneficial side effect is that for the 13 foreseeable future the balance between small powerplants 14 based on renewable resources and small powerplants based 15 on fossil fuels, will be shifted in the direction of the 16 renewable clean resources. 17 I think this consideration is an additional 18 reason why the Board should resolve to have tough 19 standards for emissions, pursue certification of 20 facilities and impose penalties for violations of those. 21 Thank you for listening to me. 22 CHAIRPERSON LLOYD: Thank you for pointing out 23 that I think you've emphasized something which we've not 24 heard in the testimony and that is the benefits of these 25 zero emission technologies and renewables which clearly is PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 141 1 considerable and will only get more important. 2 Thank you. 3 MS. LEE: Thank you for allowing me to speak just 4 a little out of order here since the two of us have come 5 together to speak for Gray Panthers. I'm not only the 6 local chairperson of Gray Panthers, but also the 7 legislative liaison for the entire state. 8 And some gentleman over here who spoke about our 9 priority setting and so on, I would like to point out that 10 we set our priorities nationally through a democratic 11 process in a convention. And that trickles down until the 12 local chapters meet and discuss these issues and set their 13 priorities. And so it's all done in a very democratic 14 fashion. 15 The Gray Panthers have been involved in the 16 issues of clean air for 20 some years now. I testified 17 early on with Lloyd Connolley's efforts to bring into 18 control rice straw burning. We've worked with the Spare 19 The Air Program. And currently I've served on the rice 20 alternative grant awards review team, and we strongly 21 support the adoption of these standards and urge you to 22 set the strongest standards possible for emission and 23 efficiency. 24 And we're well aware that you need to strike a 25 balance in siting those times frames to allow new PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 142 1 technologies and support the entrepreneurs from becoming 2 strongly discouraged to cooperate with the standards and 3 work toward our mutual goals. 4 Don't lose sightof the fact that you here on the 5 Board represent us, that you are speaking for us when you 6 set these standards. And we count on you to represent the 7 interests of real people out there in the communities when 8 certifying and monitoring power sources. 9 In weighing the efforts of this program, remember 10 the costs of health care, which are way out of control, 11 out of control for individual Californians who are, in the 12 past winter, have been stressed by the problem of deciding 13 between food, between pills, between their rent and their 14 energy bills. 15 We have commiserated with them. We have 16 cooperated with the CARES program which is trying to help 17 them pay their energy bills, even retroactively. And we 18 can't postpone the speedy movement toward containment of 19 air quality problems. 20 There are so many of us, myself included, who are 21 chronic asthmatics, who have emphysema, who have heart 22 problems. And these people deserve your maximum effort to 23 move and support these strong protections. 24 Thank you very much. 25 CHAIRPERSON LLOYD: Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 143 1 Mohsen Nazemi, Joan Lee and Bud Beebe. 2 MS. LEE: That's me Joan Lee. 3 CHAIRPERSON LLOYD: Oh, thank you. Sorry. 4 Mohsen, welcome. 5 MR. NAZEMI: Good afternoon. My name is Mohsen 6 Nazemi. I'm Assistant Deputy Executive Officer of the 7 South Coast Air Quality Management District. And I'm in 8 charge of Permitting and Compliance of both central power 9 generation as well as distributed generation in South 10 Coast. 11 First of all, I want to indicate upfront that I 12 am in support of both programs that ARB is voting on 13 today. And I want to commend ARB staff for the hard work 14 they've done. I think they've done an excellent job. 15 As we all learned, sort of, painfully the last 16 couple of years, the electric generation is of significant 17 growth to an unprecedented urgency in the last two years. 18 And individually or cumulatively, the emissions could have 19 a significant impact on the air quality. So the efforts 20 that you're talking today is going to go a long way. 21 As recommended by Dr. Lloyd, I'm going to break 22 up my comments into two, one, regarding certification and 23 one regarding the guidance document. 24 On the certification, South Coast strongly 25 supports the program. These are sources of electrical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 144 1 generation that are typically unregulated because of the 2 exemptions at the local districts. And again in 3 aggregate, the result in emissions could be significant 4 for the region and for localized areas. 5 We believe it's appropriate to recognize the 6 efficiency of fuel use and reduced greenhouse gases in the 7 certification program. And, in general, these sources do 8 not go through the regular permitting process where BACT 9 offsets and all the other stuff is looked at. So it is 10 appropriate to look at all of that. 11 My only two comments on the certification program 12 are, one, that enforcements should be a very integral part 13 of this program. I understand that ARB is responsible for 14 this program. And South Coast supports any effort that we 15 can do in terms of assistance and looking at random 16 testing of actual field units, because one particular 17 lesson that we have learned is that it's fine to have a 18 laboratory or a model unit certified, but once it goes out 19 in the field, especially if it has sophisticated control 20 systems associated with it, the actual operator could do a 21 lot of things with the unit that may not actually perform 22 in its intended performance level. So we urge you to have 23 a careful look at that. 24 And then, secondly, there are some requirements 25 that we use whenever we see a technology that hasn't PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 145 1 really been proven. And I just want to recommend that in 2 some cases you may need to look at tests from a couple of 3 models, the same model engines or whatever type of units 4 before the units are certified. 5 With respect to the guidance document, I, first 6 of all, recognize that this is just a guidance document. 7 So I understand that districts can do different things 8 with the guidance document as they go through their permit 9 process on a case-by-case basis. This was something that 10 the SB 1298 required and therefore it's there. 11 However, I want to point out that the guidance 12 document references what BACT is. And BACT is really a 13 program under new source review. It's generally 14 administered under the federal and state Clean Air Act and 15 the local new source review program. There are certain 16 requirements that we go through. 17 In general, what I want to point out is that, 18 first of all, the size of the units that are being 19 considered under this guidance document compared to the 20 previous guidance document that your board approved seems 21 to imply that if it's less than 50, it should be treated 22 differently than a central power generation. 23 I just want to point out that just this year we 24 have permitted nine units in that three to 12 megawatt 25 range that are being used for central power generation, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 146 1 and another six or seven in the 12 to 50 megawatt, again 2 at central generation. We have similar numbers actually 3 in the process of being permitted now. 4 So I want to leave with you the impression that 5 you shouldn't really draw a big distinction between 6 central generation and less than 50 megawatts. There 7 really is one type of unit that should be regulated. 8 The other point that I want to make is the 9 requirements or the guidance suggests that these standards 10 be established in pounds per megawatt hour. And I just 11 want to tell you what the reality of it is and I think 12 staff has recognized that as part of the information in 13 the document that the local districts are establishing 14 BACT requirements in terms of emission concentrations, 15 PPM. And to imply that there will be a different standard 16 in the guidance document, where in reality the local 17 districts impose those requirements in PPM, I think, may 18 be confusing to some of the public and industry who look 19 at it. 20 However, we don't really have an objection in 21 looking at different ways of requiring BACT. I'm just 22 telling you that I don't want the Board to believe that 23 once this document is approved that tomorrow districts are 24 going to impose pounds per megawatt hour. That's a much 25 more difficult type of a requirement to monitor PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 147 1 continuously in the field. And for permitted equipment, 2 we do require continuous monitoring and several other 3 things. So PPM is really what we rely on for enforcement 4 purposes. 5 On that basis then our BACT requirements, and 6 I've checked this with several other districts, I believe 7 it's common throughout California, is, at this time at 8 least, five PPM for simple cycle and two and a half PPM 9 NOx for a combined cycle or cogeneration unit. 10 And I think the real message should be this is 11 what the BACT requirement is, this is what the guidance is 12 telling the districts to do, anything that implies, for 13 example, that if you have a combined cycle, you can 14 actually have a threshold higher than five PPM, I think is 15 not in reality the case. The districts do require two and 16 a half PPM for combined cycle and cogeneration units, and 17 five PPM for simple cycle. Now, having said that, I think 18 we still support what you're doing in the certification 19 program, which is efficient use of fuel, recovery of heat 20 or power and reduction of greenhouse gases. 21 But as late as yesterday at the CEC hearing, 22 there was a big discussion on simple cycle versus combined 23 cycle, and the State still believes that there is a need 24 for certain peaking power that can be brought on line 25 quickly. And those are generally typically simple cycle PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 148 1 turbines. They're not combined cycle. So that's why 2 there are these two standards. 3 And these two standards are what's in place 4 today. I don't want to also give the impression that in 5 2007 BACT for central power and for cogeneration or 6 distributed generation will still be two and a half and 7 five. By then things may change and that's what the state 8 and federal law actually requires us to do to move ahead 9 with advancement in technology. 10 So in a nutshell, I think my recommendation, as 11 stated in the letter by Barry Wallerstein to the Board, is 12 that the guidance should really state that BACT is 13 implemented through the districts, which is two and a half 14 and five today, and with a caveat that local districts can 15 make further BACT determinations, go forward with 16 additional case-by-case determinations and determine what, 17 in each cast BACT should or shouldn't be. 18 My only other comment on this is that we actually 19 support the permit streamlining provisions and 20 recommendations in this report. Actually, our district 21 was the first that came up with the precertification 22 streamline standard permits and expeditious processing. 23 And Dr. Burke is aware, just last Friday we gave a 24 presentation to the Board that this year alone we have 25 reduced -- or actually we have increased our permit PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 149 1 production by 50 percent and reduced our backlog by 37 2 percent. 3 So we are all with the recommendations and we 4 encourage that other districts also proceed with that. 5 With that, I'll be happy to answer any questions. 6 CHAIRPERSON LLOYD: Thirty-seven percent of what? 7 MR. NAZEMI: Of our backlog at the beginning of 8 the year. By the end of this year we'll be down 37 9 percent on permits that we process. 10 CHAIRPERSON LLOYD: Thirty percent of what 11 number? 12 MR. NAZEMI: Our starting number was around ten 13 thousand applications and we're going to be down to 6,500 14 by the end of the year. 15 CHAIRPERSON LLOYD: I'd like staff's comment on 16 the point that Dr. Wallerstein made vis a vis the BACT 17 numbers of five and 2.5. 18 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 19 Tollstrup. First of all, I fully agree with Mr. Nazemi's 20 comments. He certainly had some valid points. When staff 21 put together the guidance document our intent was to set 22 the ceiling for these smaller units that are less than 50 23 megawatts. We did not set BACT levels for combined cycled 24 and simple cycle. We basically set the ceiling with the 25 understanding that districts will go through their BACT PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 150 1 process and evaluate on a case-by-case basis, and where 2 the particular application merits, where they can use the 3 low temperature catalyst that they would be down at the 4 combined cycle limits. 5 And we fully support that and we would certainly 6 push the districts toward that level. It is not 7 specifically listed in the guidance. Again, we had a 8 single level that represents the upper end and would be 9 the simply cycle limits. 10 CHAIRPERSON LLOYD: What about the comment that 11 the concern here that the district's BACT guideline would 12 be challenged based on CARB's recommendation of five? 13 DEPUTY EXECUTIVE OFFICER SCHEIBLE: I think we 14 can go in and clarify in the guidance before we put it out 15 as a final that where someone is using a small turbine in 16 a combined cycle mode or where it's in a combined heat and 17 power, basically that reduces the temperature so that the 18 more efficient catalyst technology is feasible, then 19 that's BACT. 20 CHAIRPERSON LLOYD: Okay, good. 21 DEPUTY EXECUTIVE OFFICER SCHEIBLE: We don't see 22 too many applications like that. Most of the combined 23 cycles are large units. 24 CHAIRPERSON LLOYD: But this would help, yes. 25 Dr. Burke. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 151 1 BOARD MEMBER BURKE: Well, since I have a vested 2 interest in his testimony, I'd like to thank Mr. Nazemi 3 for coming and I'd like to thank the ARB for considering 4 our letter. We did have some concerns. We are obviously 5 going to support this, but you know, we just wanted you to 6 recognize some of our concerns. We appreciate it. 7 CHAIRPERSON LLOYD: We appreciate it coming. 8 Our last person to testify is Bud Beebe from 9 SMUD. 10 MR. BEEBE: Good morning, still, I think. My 11 name is Bud Beebe. I am a regulatory affairs coordinator 12 for the Renewable Generation Assets Group at SMUD. And 13 all of that means that I work with a lot of distributed 14 generation, particularly those that can add societal 15 benefit and robustness to the local electrical grid, and 16 certainly distributed generation is a part of that. 17 SMUD has a stake in distributed generation. We 18 have been active in the process in working with the staff 19 and helping bring some of the experience that we've had 20 with distributed generation to set before the other people 21 who are in the stakeholders process. 22 And I'd like to congratulate the staff really on 23 being able to put together what is not only a set of 24 regulations done in a short amount of time, but also a 25 very concise set that I think adds an accessibility that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 152 1 is often not in regulations. I think people can read 2 these things and understand what they say and develop 3 business plans and future actions based on them, and I 4 think that's a very important piece of this. 5 Certainly, at SMUD we support the output that you 6 have before you today, and hope that this becomes a part 7 of California's future. 8 I'd like to comment on what the gentleman from 9 Bowman mentioned and that is that equivalent and equal is 10 a big issue. And we shouldn't try to confuse the two. I 11 think we are on track to understanding that we want to do 12 equivalence an not equals. Equals are easy for staff to 13 do because you can just like set them up there and people 14 can't really shoot at you, but equivalents are much more 15 difficult. They take technical depth. They take an 16 understanding of processes and a number of things, and 17 that is a difficult point. 18 And let's start to look at just some of the 19 examples of characteristics of distributed generation that 20 either need or deserve the equivalency that is not equated 21 vis a vis to central station power. 22 And certainly central station power is the bogey 23 that we're looking at here. Central station power today 24 in California is very clean and provides electricity 25 efficiently and reliably to this great society. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 153 1 But when you look, for instance, at line losses, 2 central station power has line losses inherent in the 3 transformers and the distribution getting it down to where 4 the loads are actually applied. 5 Distributed generation can make great strides 6 there. And these regulations should recognize that, and, 7 in fact, they do. 8 Some of the criteria pollutants that we deal with 9 in central station power need to be dealt with differently 10 when you realize that this stuff is going to be in 11 somebody's backyard. CO, Carbon Monoxide, for instance is 12 a ground release from a combustion source to a distributed 13 generator, may well need to have a different equivalency 14 for distributed generation relative to central station 15 power. 16 So these things that the staff, from my view, has 17 adequately addressed given the other big problem, which is 18 we don't really know what the future is going to bring. 19 We know what we have as a present system using emergency 20 diesel backups, central station power, those are the known 21 things. Some of these other items are pretty obvious, 22 like line losses and maybe carbon monoxide as a local 23 ground release. 24 But what we see as a paradigm shift in the use of 25 distributed generation is really what's of concern here. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 154 1 If we're looking at tens of thousands, hundreds of 2 thousands of these perhaps combustion based devices, 3 deployed throughout the urban and suburban environments, 4 we can no longer continue to treat these things as de 5 minimis as they certainly are in the local implementation 6 plans today. 7 And, of course, what Senator Bowen's bill in SB 8 1298 did was to recognize the potential for this big 9 change, and give this Board the requirement to put 10 together adequate defense for the future should that all 11 come to pass. 12 Photovoltaics on every roof, a combustion based 13 generator in every basement, whether this is really going 14 to happen or not we can't say, but we do know that we 15 can't be held back from progress in the future as we see 16 it by our fears of what could possibly happen. 17 And to that extent, what we have is these concise 18 regulations and guidance and certification criteria here 19 are, in our belief, very -- we're very supportive of that 20 and we think that the process can go ahead in a practical 21 fashion based on these documents. 22 They are a reasonable starting point for the 23 process to go ahead, but really the challenge that I see 24 is to take these documents which should be accessible to 25 the general populous and for architects, mechanical PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 155 1 contractors, electrical contractors, local permitting 2 authorities that are not air permitting authorities, the 3 building owners, the building leasers, the people who rent 4 space, those are the people that have to begin to 5 understand that distributed generation is not emergency 6 generators and the central station normal distribution 7 system that we have today. 8 If it's going to give us the societal benefit for 9 the future, the people who use it and architects who 10 design it into their buildings are going to have to give 11 us projects that will allow us to understand how society 12 will use this so that this good start in the certification 13 and guidance procedures will have a practical foundation 14 in order to go from 2005 to 2007. 15 And so I call not only on this Board but on the 16 general population who could use this stuff to bring us 17 good projects that become good examples of how we can 18 overcome the difficulties of combustion technologies. 19 They're not particularly efficient in the distributed 20 domain, that have some other problems associated with them 21 and give us projects that show what can be done. 22 That's really the end of what I had intended to 23 say when I came into this building, but I want to take a 24 pot shot at the national security issue. 25 Distributed generation, as I've said, is not just PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 156 1 emergency generators in our present electrical supply. 2 Although, it's a very reliable supply, a very robust 3 supply as we've seen, for instance, in the disaster in New 4 York City. It's remarkable that we were able to look at 5 television cameras focusing on that stuff, even though the 6 electrical distribution system in New York City had been 7 greatly damaged at that point. 8 But for those of us who have been looking at 9 distributed generation, we see that with society's 10 changing needs, the way we use electricity, distributed 11 generation can bring with it a tremendous new robustness 12 to the electricity supply. And one of the things I would 13 be lost if we stayed in this present paradigm of thinking 14 of it only as an electrical emergency backup. 15 So we need to get beyond that. And if we do, 16 we'll certainly have a more robust -- I just cut myself 17 off I've done that before -- we will have a more robust 18 electric supply. And if we follow those processors and 19 certification procedures, we'll have an environmentally 20 superior electricity supply. 21 Thank you very much. 22 CHAIRPERSON LLOYD: Thank you very much. Any 23 questions, comments? 24 Dr. Burke. 25 BOARD MEMBER BURKE: I had two questions. One, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 157 1 how many units, microturbines, do you have at SMUD? 2 MR. BEEBE: I have one that's operational, 3 another that will be operational in three weeks. And 4 there's been an evolution there. Do you want to know 5 other distributed -- 6 BOARD MEMBER BURKE: What I was trying to 7 ascertain is when our staff gave us this presentation this 8 morning, they called on you as -- they used you as a basis 9 of authority and I just wondered if -- so they were basing 10 that on one unit. 11 MR. BEEBE: They tested one unit. It happened to 12 be ours. And I think that the advantage was that ours was 13 not a manufacturer's unit. It was a unit that was in the 14 field being tested in a grid connected environment. 15 BOARD MEMBER BURKE: Okay. But it was a 16 manufacturer that they had mentioned, because I recognized 17 it from the picture. 18 And on the national security issue, don't take 19 what I said too literally. My position is that if you 20 distribute the power and you're not based solely on the 21 grid as a source, it gives you a greater reliability 22 factor in certain areas, and I'm not talking about in the 23 standby generator capacity, I'm talking about the straight 24 power capacity. 25 You know, if a base has distributed generated PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 158 1 power, it can still operate if the main grid is out. So 2 you know, I don't want you to think that I'm talking about 3 the standby generator mode, I'm talking about an actual 4 sustainable reliable generation of distributed power mode. 5 MR. BEEBE: Dr. Burke, I'm very glad that you 6 made that so obvious to everyone here. That's really 7 good. And, as I said, SMUD is proud of our reliability. 8 We have a very liable distribution grid and we have 9 reliable resources coming in to it. 10 That's good. But if distributed generation can 11 make it more reliable, we want to see that for our 12 customers who own us. And if we can do all that and not 13 foul the air, that's even better. 14 CHAIRPERSON LLOYD: The unit that was tested at 15 SMUD, what manufacturer was that? 16 MR. BEEBE: That was a Capstone model 330. The 17 Capstone model 60 or the 60 kilowatt unit will go into 18 operation within about four weeks. 19 CHAIRPERSON LLOYD: I thought that was the case. 20 I just wanted to, again, point out that we have a letter 21 from Capstone but nobody was testifying on behalf of 22 Capstone today. And I gather from the comments of the 23 letter, they're supportive of our proposed staff 24 recommendations. 25 MR. BEEBE: I couldn't speak for them, but they PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 159 1 certainly have been an active participant. 2 CHAIRPERSON LLOYD: Thank you. 3 With that, Mr. Kenny, do you have anymore further 4 comments? 5 EXECUTIVE OFFICER KENNY: Two real short 6 comments. What we tried to do here is essentially carry 7 forward the Legislature's and Senator Bowen's intent with 8 regard to 1298. What we think we've presented to you is 9 something that actually does that. 10 And then secondly, I simply want to commend and 11 acknowledge ARB staff. I mean the objective and the 12 obligation that we actually had, and I'm talking 13 specifically about the people directly seated behind me, 14 was to bring this before you before January 1st, 2003. 15 And, in fact, the people behind me actually 16 brought this to you, you know, more than a year early. 17 And that was essentially a fairly daunting task and yet 18 they accomplished it. So I just simply wanted to really 19 kind of acknowledge them. 20 CHAIRPERSON LLOYD: I'm sure in that spirit, 21 you're going to let them coast between now and January 22 2003. 23 (Laughter.) 24 EXECUTIVE OFFICER KENNY: Unfortunately no good 25 deed goes unpunished. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 160 1 (Laughter.) 2 BOARD MEMBER RIORDAN: Mr. Chairman, might I 3 suggest that maybe, Mr. Kenny, you inform the author of 4 the bill that we were able to do that. I'm sure the staff 5 is probably tracking it, but that is commendable, and 6 normally government is never so efficient. 7 CHAIRPERSON LLOYD: I'd like to close the record 8 first, if you don't mind, Matt and then -- or do you want 9 to ask some questions? 10 Mr. McKinnon. 11 BOARD MEMBER McKINNON: Yeah, I really apologize 12 for missing the first part of the session today. In my 13 other world, we began to experience another waive of 14 layoffs in the airline industry and -- but there is one 15 little piece of this that I'm still trying to muddle 16 through. And that is the turbine efficiency question in 17 combined cycle settings where you're considering the use 18 of the heat and in some cases the reuse of the heat in the 19 turbine cycle. 20 And I think in raising this issue, first, is kind 21 of recognition that staff kind of was pretty innovative 22 here to start working through this area. What I'm 23 wondering is if our standard that we're setting in that 24 area is too far from what's really possible today, and if 25 we shouldn't think about getting it closer to what's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 161 1 possible today to encourage folks to develop in that area? 2 So it's kind of a two-part question, and I'm interested in 3 staff's opinion on that. 4 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: Mike 5 Tollstrup. Again, there certainly are some issues with 6 efficiency in meeting the standards that we try to 7 encourage the use of CHP, include efficiency numbers 8 there, recognizing that there were some hurdles to come. 9 We set a very high mark for folks to meet on that side. 10 On the other, well -- go back to 2003 standards. 11 The 2003 standards we set them. They were achievable 12 levels that we believe are out there now. There is an 13 option to consider CHP efficiency standards on the cert 14 side for that program. 15 On the 2007 side, again, we set the levels 16 comparable to central station powerplants as directed by 17 the legislation. And in addition to that, it wasn't a 18 requirement of 1298, but it was to provide what we thought 19 was some needed flexibility, the consideration of CHP as 20 an alternative to meeting that direct central station 21 powerplant level. 22 I'm not sure if I answered your question, but 23 that's kind of where staff went with the numbers and what 24 we think is achievable now for 2003. And then 2007 there 25 certainly are some issues in meeting those numbers. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 162 1 CHAIRPERSON LLOYD: Professor Friedman. 2 BOARD MEMBER HUGH FRIEDMAN: Matt, I just wanted 3 to -- I realize you missed some of this dialogue. I think 4 you came in after we had a fair amount of conversation on 5 that point. You're not the only that had concerns, I know 6 I did, about the cost and whether it was feasible, the 7 2007. 8 Apparently, they're satisfied that the 2003 9 standards are presently achievable. And we're in 2005 10 under this proposal going to have a pretty full blown 11 comprehensive review, technological review, which will 12 include what's now, or in 2005, one of the things that 13 would then be available are what the costs are and what 14 the problems are to move it forward and to attain these 15 set standards for 2007. 16 And then in light of what ever we learn then, 17 we're in a position or whoever our successors may be to 18 make appropriate adjustments, at least that was the 19 conversation, and the focus was largely on that. 20 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: I 21 might also add that we've had fairly extensive discussions 22 today on both sides from the environmental concerns and 23 then also from the industry side on the standard. And 24 staff has agreed to go back and look at the CHP to see if 25 there is a methodology we could use to enter in or bring PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 163 1 this consideration, provide some flexibility to the 2 manufacturers. And that will be part of the 2005 update 3 that we bring back to the Board. 4 BOARD MEMBER McKINNON: Okay. Well, I'm still a 5 little bit uncomfortable about it, but I think that it was 6 a pretty innovative piece to move in with this. And I 7 think, you know, you all did good with it. I'm just 8 wondering if we've left enough room there. And so I guess 9 we'll find out in 2005. I'm not overwhelmed with joy 10 about that approach to it, but I otherwise think that it's 11 very, very important that we do this regulation. 12 Thank you. 13 CHAIRPERSON LLOYD: We don't have to wait until 14 2005. 15 I guess what I'd like to do, I guess we'll have 16 some more discussion on this issue, but I'd like to close 17 the record on this agenda item. However, the record will 18 be reopened when the 15-day notice of public availability 19 is issued. Written or oral comments received after this 20 hearing date, but before the 15-day notice issue will not 21 be accepted as part of the official record on this agenda 22 item. 23 When the record is reopened for a 15-day comment 24 period, the public may submit written comments on the 25 proposed changes, which will be considered and responded PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 164 1 to in the final statement of reasons for the regulation. 2 And for my colleagues here, part of what we're 3 looking at here, we've got a two-part -- to issues that 4 we're going to be voting on. One part is regulatory, so 5 are there any ex parte communications? 6 Seeing none, again, I'd like to maybe have some 7 further discussion on the two aspects. Maybe the first 8 one we can do isw one of the things I think would be the 9 certification for distributed generation, and then we'll 10 follow up that with the guidelines. One of the things I 11 would like to just lead off with on the certification and 12 guidance I think for CHP, I think I was pleased to hear 13 Mike say that that will be looked at as part of the issue 14 there. 15 I think I'm compelled, I guess, I was initially 16 looking at an interim standard. I guess, I'll go with 17 staff's guidance there in terms of, at least I personally 18 feel that that seems to be a prudent approach. While I 19 listened to both sides of the argument there, clearly it 20 seems to me it may not be prudent. Although, I think 21 we've also heard today that we want to get down as soon as 22 possible to the low numbers in 2007. 23 Again, I was also very much reminded of part of 24 our job here when we had the testimony late on here, that 25 we should, in fact, be offering encouragement for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 165 1 renewables and really inherently clean technologies here, 2 and that's in our charter to provide that opportunity for 3 clean air, so to me that was a very good reminder. 4 I think we had some initial comments which the, I 5 think, staff was going to look at very carefully. And 6 that was some of the issues in terms of the portable 7 generators and to bring those in line, I think, making 8 sure that, in fact, we were only talking about some of the 9 true emergency generators. I don't know whether that's 10 reflected in the resolution, but I think those are 11 important issues there. 12 Those are some of the things that I thought of. 13 And, again, I would like to reinforce what my colleagues 14 were saying here. And, Mr. Kenny, I think staff has done 15 a tremendous job here with a very difficult -- but working 16 with all segments, I think it's really to be applauded. 17 Professor Friedman. 18 BOARD MEMBER HUGH FRIEDMAN: I would just like to 19 add that I think having heard all this that the proposal 20 from the staff, the recommendation on both, is very a 21 reasoned, appropriate response to the legislation. After 22 all that's what triggered it, and we're really responding 23 to a requirement. 24 And I understand the controversy over the time 25 line and I understand the, I think I hope I understand, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 166 1 the issues of cost concerns and whether the 2007 standards 2 can be achieved. But I think this is also not only a 3 reasonable and appropriate response to the legislative 4 mandate, but a very strategic one. Once again, the staff 5 has come up with, I think, a very strategic response in 6 the sense of what is a very goal oriented, and hopefully 7 it will have -- hopefully our concerns about whether it 8 will be any kind of a disincentive won't be met and 9 hopefully we'll monitor and be able to see by 2005 what 10 we've brought. 11 But I commend the staff, once again, on a good 12 piece of work apparently in the light of a lot of public 13 input and all constituencies having had their say. 14 CHAIRPERSON LLOYD: I'd like to add another 15 point, which is part of my earlier comments about 16 renewables. Again, we talked about some of the energy 17 security concerns there, but I think we are now having -- 18 we're providing a significant incentive for people to go 19 to renewables getting away from some of the other fossil 20 fuels here. 21 I think that's -- I think we're creating some 22 substantial opportunities which I think is going to be 23 very, very important, which ties into the health issues, 24 public health. And I think that's an important aspect, 25 which we haven't highlighted, but I think it's going to be PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 167 1 important. 2 Any other comments from the Board, before I 3 entertain a motion? 4 Dr. Burke. 5 I would concur if we can include the changes I 6 suggested on caveats, et cetera, et cetera, et cetera. 7 GENERAL COUNSEL WALSH: We can include that 8 language in the resolution based on the statement into the 9 record regarding the districts on making sure that the 10 program is properly implemented. 11 CHAIRPERSON LLOYD: And other things. 12 GENERAL COUNSEL WALSH: And the other things. 13 (Laughter.) 14 CHAIRPERSON LLOYD: I guess we'll get a chance to 15 look at that. Okay, we're voting on the distributed 16 guidelines. 17 BOARD MEMBER D'ADAMO: Mr. Chairman, I just think 18 it's probably a little bit vague. For those of us in the 19 future who may want to go back, could staff just briefly 20 recount the additional changes, just so we have a record 21 of it. 22 EXECUTIVE OFFICER KENNY: Actually, I think the 23 changes that we were talking about were essentially 24 incorporating into the resolution the issue of CHP and 25 making sure that we actually do a comprehensive review of PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 168 1 that in 2005. 2 Additionally, there was the question about 3 portable power and ensuring that, in fact, portable power 4 is not improperly utilized. 5 And then lastly there was the concern about 6 renewables -- or actually not a concern, but essentially 7 kind of an incentivization for renewables and making sure 8 that that's reflected in the resolution. And what we can 9 do is we can essentially incorporate those all into the 10 resolution, before it is finalized. 11 CHAIRPERSON LLOYD: The other one point, working 12 with the districts to make sure that, in fact, as we look 13 at these generators they're a true emergency. 14 EXECUTIVE OFFICER KENNY: That's correct. 15 PROJECT ASSESSMENT BRANCH CHIEF TOLLSTRUP: And 16 there was also the issue of emergency backup. 17 BOARD MEMBER BURKE: I'll move that motion. 18 BOARD MEMBER D'ADAMO: Second. 19 CHAIRPERSON LLOYD: All in favor say aye? 20 (Ayes.) 21 CHAIRPERSON LLOYD: Anybody against? 22 Thank you. 23 Now, we'll look at the issue of the guidelines. 24 Again, I guess we have some of the same comments in there 25 I think we've probably reflected it already. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 169 1 BOARD MEMBER McKINNON: Mr. Chairman, I'll move 2 it. 3 BOARD MEMBER RIORDAN: I'll second the motion. 4 CHAIRPERSON LLOYD: All in favor say aye? 5 (Ayes.) 6 CHAIRPERSON LLOYD: Anybody against, no? 7 Well, thank you very much indeed again. Thank 8 you, staff, and thank you for all the contributions from 9 the various stakeholders. I thought we were going to go 10 through lunch, but I keep forgetting we have a court 11 reporter who needs feeding, as well as staff and board 12 members, so we're going to take actually try -- do you 13 think you can eat in 15 minutes -- okay a 15-minute break 14 and then we will continue with agenda item 01-9-2, 15 low-emission vehicle regulations. 16 (Thereupon a lunch recess was taken.) 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 170 1 AFTERNOON SESSION 2 CHAIRPERSON LLOYD: The next item on the agenda 3 today is 01-9-2, proposed amendments to the low-emission 4 vehicle regulations. 5 Since this is a relatively straightforward item 6 and by specific request of my colleagues, I will go 7 directly to the staff's presentation. 8 Mr. Kenny. 9 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 10 and Members of the Board. As a staff we continuously seek 11 to improve California's vehicle regulations and test 12 procedures. Our goal is to improve clarity, increase 13 uniformity with the U.S. Environmental Protection Agency 14 of what is appropriate, minimize the cost wherever 15 possible and anticipate and resolve regulatory issues long 16 before they pose any serious problem for manufacturers. 17 In 1998, the Board adopted the second phase of 18 the low-emission vehicle program, the LEV II program, that 19 action extended the original LEV I Regulation through 20 2010, thereby increasing the overall benefits of the 21 program. 22 In December 2000, the LEV II regulations were 23 revised, oncee again, to take advantage of some elements 24 of the federal tier 2 emission standards. And the latter 25 action ensured that California has the benefit of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 171 1 cleanest vehicles possible. 2 Today the staff is proposing a number of minor 3 modifications to the LEV II regulations including the 4 addition of new emission standards for particulate matter. 5 As before, these changes will continue to facilitate the 6 certification of the cleanest possible vehicles in 7 California and to streamline the requirements for 8 manufacturers. 9 And with that, I would now like to turn it over 10 to Sara Carter who will make the presentation. 11 Sara. 12 AIR RESOURCES ENGINEER CARTER: Thank you, Mike. 13 Good morning, Chairman Lloyd and Members of the Board. 14 Today I will be presenting staff's proposal to adopt 15 particulate standards for gasoline vehicles and more 16 stringent requirements for multi-fuel vehicles that 17 receive partial zero emission vehicle credit, as well as a 18 number of administrative revisions to the low-emission 19 vehicle program. 20 (Thereupon an overhead presentation was 21 presented as follows.) 22 AIR RESOURCES ENGINEER CARTER: In 1990 the Air 23 Resources Board adopted the low-emission vehicle, or LEV I 24 program, which significantly reduced exhaust emissions 25 from the light- and medium-duty vehicle fleet between 1994 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 172 1 and 2003. 2 Both the LEV I regulations and the second phase 3 of these regulations, LEV II, adopted in November 1998 4 include three primary elements. The first consists of 5 tiers of exhaust emission standards for increasingly more 6 stringent categories of low-mission vehicles. The second 7 is a mechanism requiring each manufacturer to phase-in a 8 progressively cleaner mix of vehicles from year to year 9 with the option of credit banking and trading. And the 10 third is a requirement that a specified percentage of 11 passenger cars and trucks be ZEVs, vehicles with no 12 emissions. 13 --o0o-- 14 AIR RESOURCES ENGINEER CARTER: These are the 15 emission standards for passenger cars under LEV II. The 16 benefits of these new standards compared the LEV I range 17 from a 75 percent reduction in NOx emissions from 18 passenger cars to a 90 percent reduction in NOx emissions 19 from the largest sport utility vehicles and trucks. 20 The nonmethane organic gas or NMOG standards 21 remain unchanged from the already stringent LEV I 22 standards. The LEV II program also establishes a near 23 zero super ultra-low emission vehicle, or SULEV, emission 24 category. The transitional low emission, or T-LEV, 25 category has dropped for LEV II. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 173 1 --o0o-- 2 AIR RESOURCES ENGINEER CARTER: The ARB 3 continuously seeks to improve California regulations and 4 test procedures. Our goal is to ensure that California 5 continues to receive the cleanest vehicles possible, while 6 minimizing costs wherever possible. 7 Today's proposal supports these goals by 8 proposing a number of changes to the LEV II regulations, 9 including new emission standards and administrative 10 amendments. 11 --o0o-- 12 AIR RESOURCES ENGINEER CARTER: The new emission 13 standards being proposed today include establishment of 14 particulate matter standards for gasoline vehicles and 15 modifications to the partial zero emission vehicle or PZEV 16 requirements for bi-fuel, flexible fuel or dual-fuel 17 vehicles. 18 --o0o-- 19 AIR RESOURCES ENGINEER CARTER: Currently, 20 California only requires that diesel vehicles meet 21 particulate matter or PM standards. For LEV II vehicles 22 under 8,500 pounds, the standard is ten milligrams per 23 mile. Comparable federal regulations require both 24 gasoline and diesel vehicles to meet a PM standard of ten 25 milligrams per mile. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 174 1 Accordingly, staff is proposing to require that 2 gasoline LEV II vehicles also meet applicable PM 3 standards. The primary purpose of these standards would 4 be to ensure that manufacturers introducing direct 5 injection gasoline engines will continue to provide low PM 6 emissions. 7 Direct injection engines may offer improved fuel 8 economy compared to current engines, which makes them 9 attractive, but these engines tend to emit higher PM and 10 NOx emissions. 11 Therefore, staff feels it is appropriate to 12 require gasoline vehicles to meet applicable PM standards 13 in order to provide an additional measure of protection of 14 public health. Data indicate that current gasoline 15 vehicles can readily meet the proposed standards. 16 --o0o-- 17 AIR RESOURCES ENGINEER CARTER: Currently, a 18 natural gas or alcohol bi-fuel, flexible fuel, or dual 19 fuel vehicle may certify to two emission standards. The 20 lower standard when operating on the alternative fuel and 21 the next higher emission standard when operating on 22 gasoline. 23 The LEV regulations were structured to give 24 special consideration to these types of vehicles because 25 emissions from alternative fuel vehicles are likely to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 175 1 exhibit a lower ozone forming potential than emissions 2 from gasoline vehicles. 3 --o0o-- 4 AIR RESOURCES ENGINEER CARTER: As part of the 5 LEV II rule-making, the ZEV requirement was modified to 6 allow a manufacturer to meet a portion of its ZEV 7 obligation using extremely clean vehicles. The new 8 emission category of partial zero emission vehicle or PZEV 9 basically reflects the SULEV emission standards with 10 additional strict requirements, such as having to meet 11 this standards at 150,000 miles instead of 120,000, 12 meeting zero evaporative emission requirements and 13 providing a 15-year, 150,000 mile emission warranty. 14 A manufacturer that meets these strict 15 requirements may qualify for partial ZEV credits that can 16 be used to offset the ZEV requirement. The granting of 17 partial ZEV credits for PZEVs is premised on the 18 assumption that the PZEVs provide emission benefits beyond 19 those achievable by a vehicle certifying to the SULEV 20 standard. 21 Within this context, staff is proposing that any 22 bi-fuel, flexible fuel or dual fuel vehicle that certifies 23 to PZEV standard must certify to the SULEV emission 24 standard on both gasoline and the cleaner fuel. 25 If a manufacturer does not wish to earn a partial PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 176 1 ZEV credit from a bi-fuel, flexible fuel or dual fuel 2 vehicle, then the manufacturer would still be allowed to 3 certify to a higher standard when operating on gasoline. 4 --o0o-- 5 AIR RESOURCES ENGINEER CARTER: In addition to 6 the proposed revisions just discussed, today's proposal 7 contains a number of administrative amendments. These 8 amendments include the adoption of a gasoline nonmethane 9 organic gas correction factor of 1.04. This factor would 10 allow manufacturers to reduce testing costs by not 11 measuring carbonates which are consistently low 12 percentages of gasoline exhaust and costly to measure. 13 This amendment would also align California and federal 14 testing requirements. 15 A second administrative amendment is extending 16 the applicability of generic reactivity adjustment factors 17 or RAFs indefinitely for alternative fuels. 18 Generic RAFs are also used to reduce testing 19 costs. These RAFs currently sunset after the 2003 model 20 year. It should be noted that the generic RAF of Phase 2 21 gasoline will not be similarly extended. The reason for 22 this is two-fold. 23 First, the Phase 2 gasoline RAF was established 24 using fuel containing Methyl Tertiary Butyl Ether or MTBE. 25 MTBE has been banned from use in California gasoline PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 177 1 starting December 31st, 2002. 2 Second, limited testing on production vehicles 3 indicate that current generic RAFs for Phase 2 gasoline 4 are too low. Therefore, it would be inappropriate to 5 extend their applicability beyond the 2003 time frame. 6 However, manufacturers would be allowed to 7 develop specific RAFs for individual groups of gasoline 8 vehicles after 2003. 9 A third administrative amendment is to update and 10 revise the AB 965 guidelines. These guidelines are 11 required by the California Health and Safety Code. They 12 allow limited numbers of federal vehicles that do not meet 13 California emission standards to be sold here, provided 14 their emissions are offset by cleaner California vehicles. 15 Currently, the AB 965 guidelines do not extend 16 beyond the period covered by the LEV I regulations that is 17 the 2003 model year. They also do not reflect the changes 18 to the vehicle enforcement procedures due to streamline 19 certification measures adopted in 2000 known as the Cap 20 2000 program. 21 Today's proposal would revise these guidelines to 22 better reflect Cap 2000, as well as the LEV II program and 23 extend their applicability through 2010. The fourth 24 administrative amendment being proposed today is the 25 result of a previous oversight on the part of staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 178 1 Overall, the LEV II regulations provide slightly 2 less stringent in-use standards for the first three years 3 that a new vehicle model is introduced that complies with 4 the LEV II program. However, intermediate in-use 5 standards were inadvertently omitted for light-duty trucks 6 engineered for heavier duty cycles. These vehicles have a 7 base pay load capacity of 2,300 pounds or higher. They 8 were also emitted for LEV II vehicles certifying to 9 150,000 mile standards. 10 Accordingly, staff is proposing intermediate 11 in-use standards for these emission categories. Finally, 12 a number of primarily technical revisions to the 13 nonmethane organic gas test procedures are being proposed. 14 The maximum incremental reactivity scale is also being 15 updated to reflect new values adopted as part of a recent 16 consumer products rule-making. 17 --o0o-- 18 AIR RESOURCES ENGINEER CARTER: Staff is also 19 proposing a couple of changes to the original 45-day 20 notice. These 15-day changes are available at the back 21 table. 22 The first of these involves the use of dual fired 23 heaters on ZEVs. Currently, fuel-fired heaters on ZEVs 24 are permitted to operate only below 40 degrees F, above 25 that temperature other heating systems must be used that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 179 1 emit no emissions. 2 At this time, fuel-fire heaters must meet the 3 ULEV emission levels when operating between 68 and 86 4 degrees F. For this rulemaking, staff had proposed that 5 fuel-fire heaters meet the cleanest possible standards, 6 meaning SULEV standards when operating at 40 degrees F to 7 ensure the lowest possible emissions from ZEVs and to 8 better reflect actual operating temperatures consistent 9 with the ZEV concept. 10 Prior to issuing the 45-day notice, staff 11 provided industry with a revised fuel fire heater proposed 12 requirements and requested their comments. At that time, 13 the only comment received was a request that the proposed 14 implementation date of 2003 be delayed until 2005. This 15 change is incorporated into the final proposal. 16 --o0o-- 17 AIR RESOURCES ENGINEER CARTER: Subsequent to the 18 45-day notice, however, industry informed staff that it 19 was neither technologically nor economically feasible to 20 meet the new requirements in that time frame. Since staff 21 had relied on industry's initial positive assessment, we 22 had not performed tests of our own. 23 Consequently, staff is proposing to drop this 24 proposal until we can perform additional tests and work 25 with suppliers to evaluate further emission reductions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 180 1 from these devices. Since these devices may be used in 2 other vehicles in the future, such as hybrids, fuel cells 3 and possibly very efficient diesels that will have little 4 waste heat but cabin heating, staff will revisit the 5 proposal at a later date. 6 Staff has coordinated with the northeast states 7 in this matter, since the climate would require the use of 8 fuel fire heaters more than in California. They concurred 9 that this issue should be dropped for the time being until 10 further studies are performed in order to facilitate a 11 smooth launch of ZEVs in their part of the country. 12 --o0o-- 13 AIR RESOURCES ENGINEER CARTER: The second 15-day 14 change being proposed today is to modify the nonmethane 15 organic gas fleet average requirement for independent 16 low-volume manufacturers. Independent low-volume 17 manufacturers produce between 4,500 and 10,000 vehicles 18 per year for California sales. A manufacturer in this 19 category will generally produce only a limited number of 20 test groups. 21 Therefore, it would be difficult to meet a 22 continually changing fleet average requirement. The 23 proposed 15-day modifications are intended to ease the 24 certification burden on these manufacturers. The proposed 25 nonmethane organic gas fleet average requirements for PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 181 1 independent low-volume manufacturers would be more 2 stringent than that required for small volume -- for a 3 small volume manufacturer, but it would be less stringent 4 than that applicable to a large volume manufacturer. 5 Providing special consideration for independent 6 low-volume manufacturers is consistent with the policy the 7 Board demonstrated were the ZEV regulations. 8 --o0o-- 9 AIR RESOURCES ENGINEER CARTER: To summarize 10 staff's proposal will help ensure California continues to 11 receive the cleanest vehicles available. It will help 12 facilitate the certification of clean vehicles in 13 California, and it will help eliminate unnecessary costs 14 to vehicle manufacturers. 15 For those reasons staff recommends the Board 16 adopt this proposal including the proposed 15-day changes. 17 CHAIRPERSON LLOYD: Thank you very much, Sara. 18 Madam Ombudsman, will you describe the public 19 participation the occurred while this time item was being 20 brought before the Board and express any comments or 21 concerns you may have to the Board at this time. 22 OMBUDSMAN TSCHOGL: Thank you. Mr. Chairman, and 23 Members of the Board, staff began their outreach process 24 in February of this year by sending out notification of 25 this proposal. The notification went to the affected PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 182 1 industries, the environmental community and to 2 governmental organizations. 3 Since this Regulation is largely amendments, 4 which align California regulations with those of the 5 federal government, staff did not schedule a formal 6 workshop. Staff did announce that a workshop would be 7 held if any of the constituents felt it was necessary. No 8 one indicated a workshop was necessary, so none was held. 9 In an effort to provide as much opportunity for 10 interested parties to comment, staff made themselves 11 available in person, over the phone and through Email. 12 They received many comments, many of which helped shape 13 the document before you now. 14 Finally, on September 28th, staff posted the 15 proposal and announced today's hearing. Staff sent the 16 announcement to over 400 people via the U.S. Postal 17 Service and Email. 18 Thank you. 19 CHAIRPERSON LLOYD: Thank you. 20 Any board members have any questions at this 21 time? 22 Mr. McKinnon. 23 BOARD MEMBER McKINNON: Yeah, I have no problem 24 with the proposal. There's just one, kind of, little 25 strand that was out there and that's the fuel heater PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 183 1 issue. And I guess in any event that some day that's 2 going to come back at us as something that we're going to 3 need to deal with. 4 I have a recollection that CALSTART and some 5 others were working on seats that heated the person rather 6 than heating the air. And I think when I talked to staff 7 about it earlier, the major issue left out there was like 8 defroster heat and that kind of thing. 9 And I guess I'm wondering if maybe we couldn't 10 kind of get out ahead of that and figure out where all of 11 that's at, and whether or not we need to support research 12 or some initiative in that area. 13 CHAIRPERSON LLOYD: I remember the same thing. I 14 wondered also what happened there. Tom, do you know what 15 happened? 16 DEPUTY EXECUTIVE OFFICER CACKETTE: I don't 17 believe that we've done any focus research on those 18 technologies, but those are both, you know, used on 19 actually some EVs now like a window, a front window type 20 defogger, for example. 21 So that's something we can certainly look at, but 22 just a bit of the history that may not have come through. 23 The reason we put this requirement in here was because the 24 northeast states asked for it, because we didn't think we 25 didn't want any fuel-fire heaters because most of the time PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 184 1 it rarely gets below 40 degrees, but they do. 2 And our motivation to change the standard was, in 3 fact, solely that these vehicles ought to have the 4 cleanest fuel-fire heater. We adopted a SULEV standard. 5 It used to be ULEV was the cleanest, so we thought let's 6 make it SULEV. It turned out that those who are pursuing 7 the heaters ran into some problems being able to get them 8 down to the SULEV level. 9 And so we talked to the northeast and asked, you 10 know what, do you want us to make the change or not or 11 back off? And they basically said, you know, since 12 they're just trying to get the ZEV program going in their 13 states, they would appreciate this being removed as an 14 issue. So that's kind of like why we did it in this, sort 15 of, clumsy way here today. 16 But I think, you know, that's a good point. We 17 can try to take a look at whether there are some 18 alternative technologies. I don't think we'd want to 19 spend a lot of our own money on it, because it really 20 doesn't affect us very much. Maybe, we can consult with 21 the northeast states and see what their degree of interest 22 is. 23 BOARD MEMBER McKINNON: Okay, thank you. 24 CHAIRPERSON LLOYD: Thank you. 25 Mr. Calhoun. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 185 1 BOARD MEMBER CALHOUN: This particular question 2 pertains to the particulate standards, of the particulate 3 emissions from direct injection gasoline power vehicles 4 such that it would warrant establishing emission 5 standards? 6 MOBILE SOURCE CONTROL DIVISION CHIEF CROSS: They 7 have the potential to be. And so I think, you know, it's 8 going to depend on how small the fuel droplets are and 9 what the combustion system in the engine is, but they have 10 the potential to be that more so than the current port 11 injected premixed engines, so it's a preventative. 12 BOARD MEMBER CALHOUN: Getting ahead of the game. 13 Thank you. 14 CHAIRPERSON LLOYD: Thank you. I'd like to now 15 call the first two witnesses for this item signed up to 16 speak are Greg Dana from the Alliance of Automobile 17 Manufacturers and Pete Hardigan from Ford. 18 MR. DANA: Good afternoon. My name is Greg Dana, 19 and I'm vice president of Environmental Affairs at the 20 Alliance of Automotive Manufacturers. 21 And Dr. Burke isn't here so I can't tell him who 22 my members are and how many there are. But we represent 23 13 manufacturers and I can name them for you if you'd 24 like, and represent about 90 percent of the sales here in 25 the United States. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 186 1 Now, I'm not here to complain about any of the 2 changes you've made. In fact, I'd like to thank the staff 3 and the Board for considering some of the revisions 4 they've made to align the California program more closer 5 with the federal program, because we're facing a lot of 6 requirements in the next few years, and anything we can do 7 to align the two programs to make things slightly less 8 costly and slightly less difficult to do is always 9 helpful, so we appreciate that activity. 10 The second point I wanted to raise today -- 11 you'll see my testimony. Unfortunately, it looks like 12 nobody got the letter we sent to the Board, or the staff 13 certainly hasn't seen it, but I would like to point out 14 that we really did send the Board a letter on October 26th 15 about this, and apparently it got lost somewhere. 16 Really, it's an issue of, again, further 17 streamlining or further making federal and California 18 consistent. 19 CHAIRPERSON LLOYD: In these days, we've got 20 heightened security based on where the letters were 21 received. 22 (Laughter.) 23 MR. DANA: But what this letter said was 24 basically that under the current federal and California 25 rules, we phase-in both Tier 2 and LEV II at 25, 50, 75 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 187 1 100 percent over four years. The federal evap emissions 2 also phase-in at that same schedule. 3 The only one that's odd is the California 4 evaporative emissions phase-in at 40, 80 and 100 percent, 5 which is a different schedule. 6 And what we're starting to look now at 2004 and 5 7 model years in terms of what we're going to do. And as we 8 look at that, we see that slightly odder phase-in for 9 evaporative emissions here in California is causing us 10 some problems in terms of trying to get all our models 11 lined up for, you know, over three year design cycles, and 12 trying to do it in the least amount of hassle and expense. 13 And having to deal with this slightly different 14 phase-in will, in fact, be a lot more costly for us as 15 manufacturers. And we'd like to see if the Board would 16 consider changing that phase-in to be the same as the 17 federal phase-in, which is 25, 50, 75 and 100. 18 CHAIRPERSON LLOYD: Do I interpret your request 19 and the outcome here was that you are most successful at 20 the federal level in getting a more relaxed phase-in than 21 you were in California? 22 (Laughter.) 23 MR. DANA: I can't remember what we talked about 24 at the federal level and California, to be honest with 25 you, Dr. Lloyd. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 188 1 That's the way the federal rule came out and I 2 don't remember the details of how that was debated or 3 discussed. 4 CHAIRPERSON LLOYD: Which came first? 5 MR. DANA: You guys were first. 6 CHAIRPERSON LLOYD: But apparently this is not to 7 do with today's item? 8 MR. DANA: No. You know, again we were concerned 9 that we're looking very closely now at the model year when 10 this takes place. And we'd like to somehow to get it 11 before the Board somehow to get you thinking about it, of 12 what's really an important issue for us in terms of trying 13 to phase-in all the changes to all the models over the 14 years. 15 CHAIRPERSON LLOYD: I see what you're saying, 16 Greg. It seems tough to say now we've got to slow down 17 because the feds have slowed down. And my original 18 comment was that you were clearly more successful at the 19 federal level in slowing things down than you were in 20 California where our need is greatest. 21 MR. DANA: Well, Tom suggested outside that we 22 might want to move the federal phase up to the same as 23 California's. 24 CHAIRPERSON LLOYD: That's right. That's 25 exactly -- I think we would support that, so if we can go PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 189 1 with you to the feds and actually suggest that, we'd be 2 very happy. 3 MR. DANA: But understand, too, that the exhaust 4 and evaporative have been interactions, so having even 5 exhaust emission standards phasing differently evap also 6 causes us some concerns. 7 And, again, we just would like to see if the 8 Board would be willing to consider this change, because it 9 does relax some of the burden. If you had seen our 10 letter, we did actually do an analysis looking at the air 11 quality impacts, and there is a slight negative impact on 12 ROG emissions on how to cover emissions, and that analysis 13 was attached to the letter to the Board, which I'm not 14 sure you saw. 15 CHAIRPERSON LLOYD: I'm open to suggestion from 16 my colleagues. One of the things I would like to suggest, 17 Greg, that since this wasn't on the agenda here for staff 18 to consider your letter, we get a chance to do that and 19 hear back from staff. That would seem to be more -- 20 BOARD MEMBER RIORDAN: Mr. Chairman, my question 21 was going to be to the speaker. Have you brought this to 22 the staff prior to this moment or through your letter? I 23 mean, have you had an opportunity to sit down and talk to 24 them about it? 25 MR. DANA: Well, we talked to them just briefly a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 190 1 little bit ago, but apparently they had never been aware 2 of this letter either and that's what started me wondering 3 if you folks ever saw the letter in the first place. So 4 we need to get back and do that and I'll be happy to leave 5 this copy with the clerk here so you can all get a copy of 6 it. 7 BOARD MEMBER RIORDAN: Because I think, Mr. 8 Chairman, it sort of comes up a little bit unexpectedly to 9 some of us. And I think the staff needs an opportunity to 10 look at it, and maybe have some dialogue with you. 11 MR. DANA: Well, we assumed that the letter I 12 sent on October 26th would have been seen by the Board and 13 the staff and it wouldn't have been a surprise, but 14 obviously that didn't happen. 15 CHAIRPERSON LLOYD: Mr. Calhoun, and then Ms. 16 D'Adamo. 17 BOARD MEMBER CALHOUN: I guess I can understand 18 why they would want to harmonize the evap with the 19 introduction of the other model. It seems to me it would 20 really make sense, because the evap system isn't 21 considered independent of the other parts of the overall 22 emissions control system. While I have not discussed this 23 with the staff, I don't think they would seriously object 24 to it, but that's me talking. 25 But that's not an issue today, of what it's PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 191 1 something that will have to come back at a later date. 2 CHAIRPERSON LLOYD: Yes, Ms. D'Adamo. 3 BOARD MEMBER D'ADAMO: Well, I don't have any 4 objection to a dialogue with staff, but I would just say 5 that flip slide would also hold true if your viewpoint is 6 that the federal standard is making it more difficult for 7 you to comply with the state standard. I would propose to 8 you that you look at it a little differently, that the 9 state standard is going to make a lot more ease for you to 10 comply with the federal standard. 11 If you can meet the state standard of course you 12 can meet the federal standard, correct? 13 MR. DANA: It's the fact that we have to run all 14 the different models at various time frames and looking at 15 the phase-ins we have. There's an interaction between 16 evaporative emission standards and jump-up emission 17 standards, so that the unique evaporative phase-in has 18 added substantial cost and complexity to our phase-in of 19 all the vehicles. That's the problem that we're going to 20 spend additional costs and additional manpower because of 21 that different phase-in, and an additional burden on us 22 trying to get in compliance with the regulations. 23 CHAIRPERSON LLOYD: One thing I would say, 24 though, we are at a disadvantage Greg, not having that 25 letter. I don't think we're being able to give due PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 192 1 justice to your viewpoint. I'm also concerned that I'm 2 going to lose a quorum at 3:00 o'clock. And so we have 3 this item and another regulatory item. So if you still 4 want to ask a question, Mr. McKinnon. 5 MR. DANA: Well, I apologize. 6 BOARD MEMBER McKINNON: I'll just make a short 7 and sweet statement. It seems that hearing after hearing 8 recently what we hear is that there is a lower federal 9 standard that we need to go meet. And over time we're 10 going to have a difficult time distinguishing when that's 11 really the case or when that's really the change in let's 12 just say the political orientation of the state and 13 federal government. 14 And I mean no offense to you or to this 15 particular issue, but we're hearing that now sort of over 16 and over again. And we're trying to clean up air to meet 17 federal standards. 18 So, anyway thanks. 19 CHAIRPERSON LLOYD: Thank you very much. 20 Thank you, Greg. 21 MR. DANA: Well, Dr. Lloyd, I apologize you 22 didn't get the letter. I'll leave it with the Clerk and 23 make sure that the copies get to you and the staff and 24 talk some more about it. 25 CHAIRPERSON LLOYD: Ms. Walsh. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 193 1 GENERAL COUNSEL WALSH: And Chairman Lloyd, if I 2 could just clarify for the -- of what is staff's position 3 that while this letter may have gone astray and we will 4 need to take a look at the issue, that today the concern 5 is that the requests contained in the letter are really 6 outside the scope of the notice for the matter that you're 7 considering today. 8 CHAIRPERSON LLOYD: Thank you. 9 Peter Hardigan of Ford. 10 MR. HARDIGAN: I'm Pete Hardigan. I work at Ford 11 Motor Company. I'm also going to take another run at you 12 guys on this federal California evap phase-in issue. 13 If you could put up the chart. 14 --o0o-- 15 MR. HARDIGAN: Before I start, I want to commend 16 staff on the changes they've already made. They worked 17 with manufacturers to resolve issues, and most importantly 18 these changes didn't impact air quality in a negative 19 manner. 20 Along those same lines, the phase-in for evap in 21 California, as you know or as Greg pointed out, is a three 22 year phase-in. Federally, the evap and tailpipe is 23 four-year phase-in. In California the exhaust phase-in is 24 over four years. 25 What that does it kind of stands out, and it PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 194 1 results in higher resource utilization, higher costs 2 because what happens, for example, in 2005 -- and if you'd 3 go to the next chart. 4 --o0o-- 5 MR. HARDIGAN: In 2005, what this chart shows is 6 the red are the percentage of vehicles that we're phasing 7 into the California evaporative systems, or California 8 evaporative standard. The blue are the vehicles we're 9 phasing into the exhaust standards. 10 And the red vehicles in this are the red vehicles 11 we have to touch twice. They are vehicles where in 2004, 12 for example, we would have to phase them into the 13 California evap standard and then a year or two later 14 phase them into the exhaust standard. 15 What that does is it forces us to touch the 16 vehicle twice, duplicate some of the engineering resources 17 and to have an exhaust evap interaction. 18 So not only in 2004 do we have to calibrate 19 evaporative systems we have to do some exhaust work to 20 account for that evaporative change. And, again, in 2006 21 or 7 when we phase-into the exhaust standards, we've got 22 to go back and do some evap work to account for the 23 exhaust interaction adjusting for the evap standard. 24 For example, suppose the Mustang is a 2004 model 25 year vehicle that weere phasing into the LEV II standards PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 195 1 for evap, we don't need it to me the 25 percent phase-in 2 for exhaust, but we need it to meet the 40 percent 3 phase-in for evap. 4 So we're going to put some resources toward that 5 vehicle to calibrate the evaporative system. And 2005 6 we've scheduled a quiet year for the vehicle. We're going 7 to pull those resources off. We don't need to phase it in 8 to exhaust until 2006, at which time we're going to have 9 to put the resources back on the vehicle program and 10 calibrate it to meet the exhaust standard. 11 I guess the real issue here is that it's much 12 easier to touch the vehicle once rather than twice. We've 13 got to touch them in 2004 and then again at some other 14 point, and it provides a much smoother phase-in if we can 15 do a four-year phase-in. 16 We did some math in looking at the pure cost of 17 what it's going to cost just Ford. And the three-year 18 phase-in is going to effect about 30 percent of our engine 19 families or our engine platforms. It's going to cost 20 about $5 million and it's going to increase our workload 21 by about 36 percent a year. 22 CHAIRPERSON LLOYD: When you testified to EPA on 23 their standard, did you make the case that if they'd align 24 with California, you'd be saving time and resources? 25 MR. HARDIGAN: No, because they have a four-year PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 196 1 phase-in. 2 CHAIRPERSON LLOYD: No, but they hadn't set that, 3 we had set it first. 4 MR. HARDIGAN: The issue isn't matching up with 5 the EPA standards. The issue is matching up with a 6 four-year exhaust phase-in. We've already committed to 7 doing the LEV II evaporative hardware. 8 CHAIRPERSON LLOYD: Am I missing something or is 9 it -- it seems to me that -- Mr. Cackette, maybe you can 10 help me out. 11 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, I can 12 try to help a little bit here, I guess. I think, 13 listening to this, that the issue is not so much federal 14 versus California, but that in California you have to 15 fully implement the evap standard in three years and the 16 tailpipe in four years. And to the extent there's some 17 interaction between the way that you calibrate a system 18 with the new evap versus the new tailpipe, there will be 19 some engines that they have to sort of recertify twice or 20 have to do work on twice, which will cost them some 21 resources. 22 I don't recall that this issue was brought up at 23 the LEV II hearing, which is where this was all done at 24 one time. So that differential at the time was not an 25 issue raised by the auto industry. We were probably given PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 197 1 more by the earlier, the better the more tons you get. 2 And as I understand what was in the letter, I didn't see, 3 but it was something like a seven-tenths of a ton per day 4 ROG loss by stretching it out one year. 5 I suppose the other option, I know they're being 6 pressed real hard, but the other option is they cannot do 7 their engine -- the tailpipe standards in three years 8 instead of four years. That would at least line them up 9 and they would have to trade off whether the additional 10 hardware costs versus the savings workload on doing things 11 twice. That's the only other option I can see other than 12 giving up the emission reductions. 13 MR. HARDIGAN: He did a very good job of 14 explaining what I was trying to explain. The 15 environmental impact is fairly small of going to a 16 four-year phase-in. And he's right this isn't a federal 17 versus California issue, and it's not a capability issue. 18 We know how to do LEV II evap. It's going to be 19 difficult, but we've had some breakthroughs. It's the 20 most stringent evaporative standard in the world, but we 21 know how to do it. 22 We're not asking for an additional year of 23 phase-in, because we need more time. What we're asking 24 for is an additional year so we can save resources and 25 money. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 198 1 CHAIRPERSON LLOYD: Well, as I said before, I 2 think we can't decide it here today. It's outside of the 3 scope. I think we know your comments Pete were 4 registered. And I think we'll go back to staff and we'd 5 look to staff into coming back to the Board if they feel 6 there's merit in this. 7 Thank you very much. 8 MR. HARDIGAN: Thank you. 9 CHAIRPERSON LLOYD: Mr. Kenny, do you have any 10 further comments? 11 EXECUTIVE OFFICER KENNY: No. 12 BOARD MEMBER D'ADAMO: I'll move the resolution. 13 CHAIRPERSON LLOYD: I will now close the record 14 on this agenda item. However, the record will be reopened 15 when the 15-day notice of public availability is issued. 16 Written or oral comments received after this hearing date 17 but before the 15-day notice is issued will not be 18 accepted as part of the official record on this agenda 19 item. 20 When the record is reopened for the 15-day 21 comment period, the public may submit written comments on 22 the proposed changes which will be considered and 23 responded to in the final statement of reasons for the 24 regulation. 25 Reminder, again, any ex parte communications on PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 199 1 this item? 2 Seeing none, we have a resolution before us. Do 3 I have a motion? 4 BOARD MEMBER D'ADAMO: So moved. 5 BOARD MEMBER CALHOUN: Second. 6 CHAIRPERSON LLOYD: All in favor say aye? 7 (Ayes.) 8 CHAIRPERSON LLOYD: Anyone against? 9 Thank you. 10 Thank you very much staff. And we look forward 11 to seeing you in El Monte next month. By the way, we have 12 been encouraged by Bill Valdez to come down more often, so 13 we'll try to do that. 14 The next agenda item is 01-9-3, proposed 15 amendments to Title 17 regarding the list of vapor 16 recovery equipment defects. 17 We've know for years that gasoline vapors from 18 dispensing facilities are a significant emissions source. 19 Accordingly, both we and the local air districts have 20 taken multiple steps to control those vapors. 21 Next year, this Board will be considering the 22 latest iteration of vapor control technology, fully 23 automated, self-diagnosing systems that provide realtime 24 information about how the vapor controls are performing. 25 Enhanced vehicle recovery is what staff is calling that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 200 1 effort. 2 In the meantime, we need to be diligent about 3 what's out there. Any control system is only as good as 4 the part it is made up of. That's why ARB maintains a 5 list of observed vapor recovery system defects that may 6 substantially impair the effectiveness of vapor control 7 systems. 8 At this point, I would like to ask Mr. Kenny to 9 introduce the team and begin staff's presentation. 10 EXECUTIVE OFFICER KENNY: Thank you, Mr. Chairman 11 and Members of the Board. State law requires ARB to list 12 the defects that substantially impair the effectiveness of 13 vapor recovery equipment used in vehicle fueling 14 operations. 15 We do this so that these can be targeted for 16 ongoing maintenance and repair and strict enforcement as 17 appropriate. Since the public uses fuel dispensers every 18 day, it's vital that the systems to protect their health 19 function correctly. 20 Initially, the Board identified vapor recovery 21 defects by regulation listing the 12 defects that were 22 common to every vapor recovery system. That was back in 23 the 1970s when the systems consisted of just two parts, 24 the bulky bevels on the gasoline nozzles and the awkward 25 dual hoses. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 201 1 However, starting in 1982, as these systems 2 became more sophisticated and more diverse, we began 3 certifying each vapor recovery system by executive order. 4 Those same orders identified the potential defects that 5 were specific to each system. 6 Since 1982 ARB has issued more than 175 executive 7 orders certifying these various systems. Today, we're 8 proposing an update to the original defects regulations so 9 that everyone can see the comprehensive list of defects 10 available, and that would be available industrywide. 11 Staff believes the comprehensive list will be 12 more effective as a compliance and enforcement tool. The 13 proposed list compiles defects from the 175 plus executive 14 orders and lists them by manufacturer, executive order 15 number and equipment type. 16 This list also describes each defect in detail 17 and how to identify them in the field. The original 12 18 defects are also included on the list. 19 With that, Ranjit Bhullar will make the staff 20 presentation. 21 (Thereupon an overhead presetation was 22 presented as follows.) 23 INVESTIGATION AND CERTIFICATION SECTION MANAGER 24 BHULLAR: Thank you, Mr. Kenny. Good afternoon, Chairman 25 Lloyd and Members of the Board. Today I will discuss, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 202 1 present our proposed amendments to the Title 17 vapor 2 recovery equipment defect list. In California there are 3 roughly 10,000 service stations, which dispense 14 billion 4 gallons of gasoline each year. With vapor recovery in 5 place, 410 tons of hydrocarbons are captured each day. 6 --o0o-- 7 INVESTIGATION AND CERTIFICATION SECTION MANAGER 8 BHULLAR: The excess emissions that result by the loss of 9 even one percent of the effectiveness of these systems is 10 significant. One of the unique features of the vapor 11 recovery control is that they're the only emissions source 12 that is routinely used by the public. 13 --o0o-- 14 INVESTIGATION AND CERTIFICATION SECTION MANAGER 15 BHULLAR: In California, the districts and ARB have 16 distinct roles in the vapor recovery program. The Air 17 Resources Board establishes the minimum efficiencies and 18 certifies systems which meet standards, while the 19 districts adopt rules requiring the installation and use 20 of the vapor recovery systems at the service stations and 21 permit those systems and conduct the compliance 22 inspections to ensure that they're operating as certified. 23 --o0o-- 24 INVESTIGATION AND CERTIFICATION SECTION MANAGER 25 BHULLAR: With regards to the identification of defects, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 203 1 the Air Resources Board is responsible for identifying 2 equipment defects in systems for the control of gasoline 3 vapors resulting from motor vehicle operations which 4 substantial impair the effectiveness of the systems in 5 reducing air contaminants. 6 --o0o-- 7 INVESTIGATION AND CERTIFICATION SECTION MANAGER 8 BHULLAR: The Board has met this mandate by compiling a 9 list of 12 equipment defects, which were incorporated into 10 Title 17 in 1982. Subsequently to this, we have also 11 identified defects in separate certification executive 12 orders. 13 So as it is today, we have a list of defects on 14 one page in Title 17, and then we also have the defects 15 contained in all the executive orders. 16 --o0o-- 17 INVESTIGATION AND CERTIFICATION SECTION MANAGER 18 BHULLAR: With regards to enforcement, the Health and 19 Safety Code requires that when a district determines that 20 a component contains a defect that that component shall be 21 marked out of order. 22 And this is the only case where the district has 23 the authority to remove a control equipment from service 24 due to a defect. 25 --o0o-- PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 204 1 INVESTIGATION AND CERTIFICATION SECTION MANAGER 2 BHULLAR: With the passage of AB 1164 in 1999, the Board 3 was directed to implement some changes to the 4 identification of defects. And this includes not only 5 identifying defects for vapor recovery equipment but also 6 listing them, while as well as conducting a public 7 workshop on or before January 1, 2001 to determine whether 8 an update of the list is necessary. 9 A workshop was held in December of 2000, and the 10 original list was discussed. And it was deemed necessary, 11 at that time, to go ahead and update the list as it is. 12 As well under the bill, we are also required to 13 complete an update no later than 12 months from the date 14 of the determination that the update is necessary, and 15 that the review process of the list is to be conducted at 16 least one every three years. 17 It can be conducted more often upon written 18 request and upon approval from the Executive Officer that 19 a review of the list is necessary. 20 --o0o-- 21 INVESTIGATION AND CERTIFICATION SECTION MANAGER 22 BHULLAR: In compiling the proposed list a set of criteria 23 was used for determining a substantially impaired defect. 24 And this includes that the defect did not exist when the 25 system was certified. There are excess emissions PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 205 1 associated with the defect, which degrades fueling point 2 or system efficiency by at least five percent. And that 3 also that a verification procedure exists to identify the 4 defect. 5 --o0o-- 6 INVESTIGATION AND CERTIFICATION SECTION MANAGER 7 BHULLAR: The proposed list is a combination of the 8 defects from the 1982 list, the defects that were 9 individually specified in the executive orders, as well as 10 those defects that have been determined from the field 11 work inspections by district and state personnel. 12 --o0o-- 13 INVESTIGATION AND CERTIFICATION SECTION MANAGER 14 BHULLAR: This slides illustrates an example of a defect 15 that may be observed in the field. In this case, the 16 defect is concerning a hose. The defective condition as 17 stated in our proposed list, "If any hose with a visible 18 opening," and the verification procedure in this case is 19 direct observation. 20 --o0o-- 21 INVESTIGATION AND CERTIFICATION SECTION MANAGER 22 BHULLAR: Another illustration of a possible defect would 23 be with a vapor valve on a nozzle. In this case, we 24 applied the bag test to check for leaks in nozzles. And 25 if the nozzle is leaking, the bag will collapse and that PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 206 1 would be deemed a defect. 2 --o0o-- 3 INVESTIGATION AND CERTIFICATION SECTION MANAGER 4 BHULLAR: There are a number of benefits from compiling 5 the list. One being that it provides a central reference 6 so it can be consulted very easily as to what defects are 7 for vapor recovery systems. 8 It establishes uniform State enforcement, between 9 the districts which are very clear as to what is a defect, 10 and what is to be tagged out. It supplies a preventative 11 maintenance guide for service station operators if they 12 choose to be proactive will have a reference that they can 13 consult and look for potential conditions, which may be a 14 defect and which could result in being tagged out if the 15 district were to come for an inspection. 16 And it also helps to reduce excess emissions by 17 recognizing what a defect is and having these remedied as 18 quickly as possible. 19 --o0o-- 20 INVESTIGATION AND CERTIFICATION SECTION MANAGER 21 BHULLAR: Issues with these proposed lists. One of the 22 issues that has come up regards the tagging out. And 23 particularly when would an entire station be subject to 24 being tagged out. In other words, when would all the 25 fueling points be tagged out so nobody could dispense PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 207 1 fuel? 2 In a response, we are proposing to specify three 3 defects which will shut down an entire fueling operation, 4 those being the failure of a leak decay test for vacuum 5 assist systems, the vapor processor unit inoperative and a 6 central vacuum entered inoperative. 7 --o0o-- 8 INVESTIGATION AND CERTIFICATION SECTION MANAGER 9 BHULLAR: Another issue with the list was the definition 10 of substantially impairs. We are proposing in the 11 resolution to include the definition as a set of criteria 12 that I listed earlier, the three criteria, being that the 13 defect was not present during certification of the system, 14 that there is at least a five percent degradation in the 15 system efficiency and that the defect can be verified in 16 the field. 17 With that, and having gone back and reviewed the 18 list, we're also proposing to eliminate three defects that 19 do not meet the substantially impairing criterion. Those 20 being a nozzle spout which exceeds the roundness 21 specification, the fill tight drop tube drain assembly, 22 which is not able to maintain pressure integrity and the 23 fill tight swivel adaptor, which does not rotate. 24 --o0o-- 25 INVESTIGATION AND CERTIFICATION SECTION MANAGER PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 208 1 BHULLAR: As well additional proposed 15-day changes 2 include replacing the date of the list, the August 21st 3 date of the list to read date of issuance and to be filled 4 in once the process is complete. 5 We're also proposing based upon a comment to 6 correct the language for a particular nozzle that was as 7 it was stated. 8 --o0o-- 9 INVESTIGATION AND CERTIFICATION SECTION MANAGER 10 BHULLAR: In summary, with this we are proposing to amend 11 the vapor recovery equipment defect list and incorporate 12 by reference into Title 17, as well as have future updates 13 to be implemented by the Executive Officer. 14 --o0o-- 15 INVESTIGATION AND CERTIFICATION SECTION MANAGER 16 BHULLAR: In closing, I would like to acknowledge the time 17 put in by a number of organizations in helping, you 18 know -- helping put together the list and providing 19 comments and suggestions, the air pollution control 20 districts, CAPCOA, the vapor recovery manufacturers, WSPA 21 and CIOMA. 22 Thank you. 23 CHAIRPERSON LLOYD: Thank you very much. 24 Madam Ombudsman, would you please describe the 25 public participation process that occurred while this item PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 209 1 was being developed and share any concerns or comments 2 that you may have with the Board at this time. 3 OMBUDSMAN TSCHOGL: Thank you. 4 Mr. Chairman and Members of the Board, as you 5 heard, staff began developing these amendments in December 6 of 2000 by holding a public workshop. The workshop's 7 purpose was to determine if amendments were even 8 necessary. Staff sent announcements for this workshop to 9 nearly 600 people by either U.S. mail or an Email list. 10 The workshop was held in Sacramento on December 11 13th with about 45 people in attendance representing the 12 vapor recovery industry, gas station owners, air 13 districts, staff petroleum suppliers and the general 14 public. 15 Staff conducted two additional public workshops 16 to further define the list of equipment listed -- included 17 on the defects list and to work out the amendments 18 language. These workshops were noticed in a similar 19 manner to the first one. They were both held in 20 Sacramento, one on May 22nd of this year and the other on 21 August 16th, roughly 45 people attended each of those 22 workshops. 23 Staff also participated in nine meetings of the 24 CAPCOA enforcement managers and vapor recovery committees. 25 These meetings were held beginning on January 25th of this PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 210 1 year and continuing through this month. 2 The meetings were held throughout California and 3 locations such as Monterey, Santa Barbara, Diamond Bar and 4 Lake Tahoe. 5 Committee participation included air districts 6 and industry representatives. To further refine these 7 amendments, staff convened a defects list committee, which 8 was made up of industry and government members. This 9 committee met twice in June of this year and the members 10 were invited to participate in many of the CAPCOA 11 committees. 12 Throughout the process, staff provided the 13 opportunity for public comment. Staff also fielded 14 countless calls from interested parties to collect input 15 and answer questions. Additionally, staff met or 16 teleconferenced with individual stakeholders on more than 17 50 different occasions. I should note that refinements to 18 this item have continued up to this very date. 19 Finally, the staff report and announcement for 20 today's hearing were released on the 28th of September. 21 Staff mailed a report to more than 450 people and posted 22 it on our web site for download. 23 This concludes my remarks. 24 Thank you. 25 CHAIRPERSON LLOYD: Thank you very much, Kathy. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 211 1 A very comprehensive report and I'd like to 2 extend my thanks for all the effort you put in on this 3 item too. 4 Thank you very much. 5 Do the board members have any questions at this 6 point? 7 With that, we'll move to the witnesses. I'd like 8 to call up the first three, Rosa Salcedo, Donald Gilson 9 and Maryann Gonzalez. 10 MR. SALCEDO: Good afternoon, Mr. Chairman and 11 Members of the Board. My name is Rosa Salcedo. I'm the 12 Chair of the CAPCOA. 13 CHAIRPERSON LLOYD: Sorry about that. 14 MS. SALCEDO: You've got it close enough, don't 15 worry about it. I'm the chair of the CAPCOA vapor 16 recovery committee, and today I am here on behalf of the 17 CAPCOA to support the proposed amendments of Section 94006 18 of Title 17 of the California Code of Regulations or vapor 19 recovery equipment defects listed as reflected in the 20 September 28th hearing notice. 21 ARB staff has worked with CAPCOA's vapor recovery 22 committee throughout the process of developing these 23 revisions and has considered and addressed many of the 24 Committee's concerns and requests. 25 This existing defects list is outdated and the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 212 1 proposed revisions will help districts and operators 2 improve ongoing compliance and gasoline fueling 3 facilities. ARB has worked with CAPCOA throughout the 4 past years workshops and meetings to develop the proposed 5 revisions and successfully reach consensus. 6 With a level of detail on the revised defects 7 lists, there have been conclusions that not everyone was 8 enthusiastic about it, but CAPCOA is satisfied that its 9 major concerns have been addressed. 10 The proposed revisions are also formatted for 11 easier use by inspectors and operators. This new format 12 will also make future revisions to a defects list simpler. 13 CAPCOA expects the list will be regularly updated 14 to reflect new equipment, new executive orders and 15 continued fuel compliance experience. CAPCOA therefore 16 supports the proposed revisions of September 28th. 17 In the interests of facilitating implementation 18 of the revised defects list, CAPCOA requests that the 19 following measures be taken: Number 1, that test 20 procedures listed as verification means on the defects 21 list be posted on the CARB web site. 22 Number two that an equipment list be made 23 available for nozzles where the insertion into the locked 24 mechanism can be verified visually and a test method be 25 provided for those that cannot be verified visually. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 213 1 Number three that CARB prepare an advisory. 2 Four, that CARB in conjunction with CAPCOA 3 committees prepare implementation guidelines. 4 Five, that CARB provide training to districts and 5 continue this on an ongoing basis as Title 17 defects list 6 is implemented and questions arise. 7 And finally, six, that the revised defects list 8 be effective immediately. 9 Now, I would like to clarify that the changes to 10 the defects list made today are short notice to us. 11 CAPCOA has not had the time to review, discuss and reach 12 agreement on these changes. 13 Therefore, CAPCOA requests that the Board take an 14 action today to approve the revised list. And if the list 15 is approved with the proposed 15-day changes that these be 16 deferred to a later date where CAPCOA has had the time to 17 review and discuss them. 18 And with that, I would like to thank the Board 19 and ARB staff for working with us throughout this process 20 and the Board for providing the direction. And we look 21 forward to the continuing effort. I would like to point 22 out that the written copy of my testimony that you may 23 have is not exactly what I just stated because of the last 24 minute changes, so we had to make last minute amends. 25 Thank you very much. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 214 1 CHAIRPERSON LLOYD: Thank you very much. 2 Donald Gilson. 3 MR. GILSON: Good afternoon. My name is Don 4 Gilson. I'm with Chevron Products Company in San Ramon. 5 And I wanted to say that I support the changes that have 6 been made this afternoon by the Staff. I appreciate the 7 hard work that everyone has put into this. I think they 8 really reflect the whole concept here of having a set of 9 rules, if you will, that not only -- that inspectors, but 10 also operators can follow and know what really needs to be 11 done to keep their systems in good condition. 12 I have two comments I do want to make about two 13 items that I'd like to bring up. One has to do with the 14 poppet valve, one of the items that's on the defect list, 15 it's on the first page. And this is the issue, and it's 16 addressed in the letter that I wrote to the Board, that 17 when you have a defective poppet valve it may or it may 18 not be working right, it doesn't close all the way. And 19 the concern is that there may be some emissions related to 20 this, that's the reason it's on the list. 21 It turns out of course, there's a cap that's over 22 the valve. This is on the connection that's made for the 23 vapor return. There are actually no emissions related to 24 that situation, as long as the cap is in place, and, of 25 course, when the cap is in good condition. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 215 1 The only time that there is a situation where 2 emissions could occur is when the cap is removed and 3 before the fitting is put on by the truck during delivery. 4 So this is a very short period of time that that occurs. 5 I don't feel that that potential for emissions 6 that it's only for certain systems is enough to warrant it 7 being considered a significant defect. 8 What I suggest is that staff look at the 9 situation and look at it from the standpoint and see which 10 systems really need to be included on the list, because it 11 makes a difference what kind of system it is, whether it's 12 under pressure or possibly not under pressure when it's in 13 use. 14 My second point is that I'd like to see that 15 there be some sort of inspection guidelines that are 16 issued that allows folks, not only the inspectors, but the 17 system operators to know exactly what the items that are 18 on the list mean, and help them to make a determination, 19 either as operators as they're inspecting their systems or 20 when there's a meeting between the inspector and the 21 operator when a defect is found to make sure everyone 22 agrees what is the problem and what needs to be done. 23 With that, I want to thank the staff for their 24 diligent work on this, and I'll take any questions if you 25 have any. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 216 1 Thank you. 2 CHAIRPERSON LLOYD: Thank you very much. Any 3 questions? 4 Thank you very much. 5 Maryann Gonzalez, Sandra Duval, and Skip Orr. 6 MS. GONZALEZ: Hello. My name is Maryann 7 Gonzalez. I'm here representing BP ARCO. First of all, 8 I'd like to thank you for giving us an opportunity to 9 provide comments. I, too, want to reiterate that we thank 10 the staff for working so diligently with us and we support 11 the last minute changes made. 12 We support the development and adoption of a 13 vapor recovery equipment defects list. However, we want 14 to maintain or we want to just qualify that. We believe 15 the items being included on this list should be determined 16 to substantially impair the effectiveness of the vapor 17 recovery system. 18 Now, we're not necessarily sure. I just have one 19 item really that I believe and feel that it doesn't meet 20 that definition. This is the Phase 1 inoperative poppet 21 item, we believe that definition is too broad and the 22 meaning of inoperative is not clear. 23 As Don just described, the vapor poppet is 24 normally covered by a dust cap and is only exposed at the 25 moment gasoline is being delivered into the underground PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 217 1 storage tank. So we believe the potential for emissions 2 to be released from an inoperative poppet is minimal and 3 may not meet the definition of substantially impairing the 4 effectiveness of the vapor recovery system. 5 There is a risk for tagging out and shutting down 6 underground storage tanks when they don't meet the 7 definition of the rule, and that is our concern. So we 8 respectfully request that this item be revised or removed 9 from the list. 10 My last comment is in regards to guidance or 11 enforcement guidelines. BP supports that ARB develop and 12 provide enforcement guidelines to the local air pollution 13 control districts regarding the interpretation and 14 implementation of the vapor recovery equipment defects 15 list. 16 We believe that guidance from ARB to the local 17 air pollution control districts will facilitate uniform 18 inspection and enforcement throughout California. 19 With that, that's the end of my comments, and 20 I'll take any questions if you have any for me. 21 CHAIRPERSON LLOYD: Thank you very much. I would 22 like to get staff's comment on the poppet issues. It's 23 the second speaker that's brought that up. 24 DEPUTY EXECUTIVE OFFICER CACKETTE: This was an 25 item that was on the original 1970s list. And we looked PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 218 1 at it a little bit differently from some of the other 2 items. If the valve itself fails, the argument is that 3 there is a secondary containment system, this dust cap 4 which has a gasket on it. 5 The reason we didn't take it off is that we don't 6 find -- I shouldn't say very high, but we find a number of 7 gaskets and caps that are not put back on or that are 8 faulty themselves. And so the secondary containment 9 system isn't always there in the field right now. So we 10 felt kind of as a system, we ought to leave that on in 11 order -- because without that secondary containment the 12 thing could leak all the time. 13 So that was our reason for leaving it on. And 14 clearly in that scenario you could have emissions that go 15 well above the criteria. If the dust cap is on and 16 sealed, then it's what the speakers say is the emissions 17 would probably be very small if that poppet valve did not 18 properly seal. 19 MS. GONZALEZ: If I could just make a comment 20 with that respect. In the, I believe, early August 21 version of the list there was some additional language. 22 It said, "Phase 1 vapor poppet inoperative and cap or 23 gasket missing or inoperative." 24 So there was more to the item. And so, I think 25 it helps just qualify, if you will, or narrow the scope. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 219 1 CHAIRPERSON LLOYD: Sounds as though that's 2 possible. 3 BOARD MEMBER RIORDAN: Is that possible? 4 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, I think 5 it addresses the concern. I'm not quite sure why it got 6 dropped out. 7 We can take a look at that and if it seems 8 appropriate to add that in, we'll add that back in. 9 CHAIRPERSON LLOYD: Thank you very much. 10 MS. GONZALEZ: Thank you. 11 CHAIRPERSON LLOYD: Sandra Duval and Skip Orr. 12 MS. DUVAL: Sandra Duval. I'm the government 13 relations director for the California Independent Oil 14 Marketers Association. I appreciate the chance to make 15 comments this afternoon. 16 We'd like to echo what the previous speakers have 17 said about the hard work of the staff and certainly 18 appreciate having the opportunity to have some input into 19 the list. 20 We do, however, still have some pretty strong 21 concerns about the list, and we would like to ask that the 22 Board not take action today, but rather have us go back 23 and work on this a little bit more. 24 That issue of substantial, while the five percent 25 that's going to be placed into the resolution does help us PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 220 1 a little bit with our concerns, we would like to see that 2 concept incorporated actually into the list, particularly 3 with regard to the first three items that are very broad. 4 Without a qualifier of those first three items 5 being substantial and having that incorporated into the 6 list, we feel that there could be items that would be 7 tagged out that are technically on the list but are not 8 substantial, and so we do have some concerns with that 9 regard. 10 We're concerned that this list is perhaps a 11 little bit too inclusive without that provision being 12 placed into or conceptualized either in the regulation 13 itself or on the list, and that items can be tagged out 14 that would not actually substantially impair the 15 effectiveness of the vapor recovery system that is 16 required in the Health and Safety Code. 17 And we're also concerned about some of the items 18 on the list including the now famous poppet valve issue, 19 that since that's been beat to death already, I'll reserve 20 my comment on that. 21 CHAIRPERSON LLOYD: Thank you very much indeed. 22 Any questions or comments from the Board? 23 Mr. McKinnon. 24 BOARD MEMBER McKINNON: Yeah, I think that this 25 is probably the biggest question on this, kind of, to PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 221 1 staff. I think several letters addressed this question of 2 kind of defining what's a substantial defect and what's 3 not. So where are we at on that? 4 DEPUTY EXECUTIVE OFFICER CACKETTE: Well, what 5 we're doing as part of the -- proposing as part of the 6 15-day changes is to add a definition of what is a 7 substantial -- in fact everybody has commented on that, I 8 think that's necessary. 9 We actually have used for 20 some years 10 definitions to identify what a defect is. And, in fact, 11 in the early years that was ten percent. A defect was 12 something that if it failed would cause a ten percent 13 increase in emissions and since 1982 it's been five 14 percent. And that's what was the basis of these being put 15 on the individual certifications or executive orders of 16 each piece of equipment. 17 So, essentially, what we're doing is 18 incorporating what we've used in the past into this 19 document, and saying this is the criteria by which an item 20 either goes on the list or doesn't go on the list. And 21 for all the items we have out there, we have either an 22 engineering analysis or some data and testing that was 23 done to identify the defect in the first place. So I 24 think that the comment that there could be items on the 25 list which are not substantial, I suppose that's possible, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 222 1 but if we've done our homework correctly like I think we 2 have, then we've either done the analysis or have data 3 that says it's over five percent to get on the list in the 4 first place. 5 MS. DUVAL: I think that my concern if I can 6 clarify that is with the first three items on the list 7 which are not specific items, but for example the first 8 item is, "Any equipment defect which is identified in an 9 executive order certifying a system pursuant to the 10 certification procedures incorporated in..." and the site 11 of the Regulation. 12 DEPUTY EXECUTIVE OFFICER CACKETTE: If we can 13 just maybe one at a time go to those, maybe it would be 14 helpful. 15 I think that just says that as part of certifying 16 a given piece of equipment or system, we identified the 17 defects, and then the defects in the past just stayed on 18 that document and were hard to find, et cetera. Now, they 19 would automatically essentially become an item of this 20 list. 21 And so the five percent criteria applies to 22 putting it on the executive order to start off with, so 23 the same criteria apply to the EO as does the list. 24 MS. DUVAL: That helps. 25 BOARD MEMBER D'ADAMO: Well a question to the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 223 1 witness. Does that help in your understanding of it, what 2 Mr. Cackette just described, as long as there that five 3 percent threshold? Do you have any remaining concerns? 4 MS. DUVAL: I would still have a concern that 5 there would be -- that, yes, there would be defects that 6 would appear on that list that don't meet the criteria, 7 but I think that's something that we would need to work 8 out in the EOs as opposed to in this regulation. 9 DEPUTY EXECUTIVE OFFICER CACKETTE: The next two 10 items basically say if somebody has tampered with the 11 system and doesn't look like what was certified, it's 12 automatically a defect. You can't have something missing, 13 you know, no catalytic converter on your car or putting on 14 a hot rod carburetor to replace what was on there when it 15 wasn't certified, those are automatic defects. 16 We find those and they are tagged out. You know, 17 on a car, if we find them, the person gets a fine. It's 18 the same principle, I think, if that's what you were 19 meaning by the next two. 20 MS. DUVAL: The next two items -- 21 DEPUTY EXECUTIVE OFFICER CACKETTE: I'm looking 22 at the list here. 23 MS. DUVAL: Yeah, your're right, and that is what 24 I mean by the next two items. 25 I guess my point is is that this list is not PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 224 1 intended to be a list with every defect with the system, 2 but only major defects. And while, yes, within the next 3 two items I'm going to concede that if any of these parts 4 are absent or disconnected or you've used an uncertified 5 component that there are regulations within the body of 6 regulation you have now that would cause a penalty to the 7 personal who owned it. You wouldn't be able to use that 8 system, but that does not necessarily mean that it rises 9 to the point of being a major defect. 10 So in other words, what we're doing is we're 11 creating a situation where you're penalized for not having 12 a certified component and having a major defect, when, in 13 fact, it may not actually -- while it may be uncertified, 14 that doesn't mean it doesn't work. It's just uncertified. 15 DEPUTY EXECUTIVE OFFICER CACKETTE: That puts us 16 in an impossible situation. I mean, how can we show that 17 the use of an inappropriate device that we don't even know 18 what it is increases emissions more than five percent? It 19 just seems to me that if you -- that there's a bit of a 20 blurr here in the line that if you've tampered with the 21 system there's got to be a remedy, and the remedy has to 22 be one that's, you know, fairly strong and that would rise 23 to the level of a major defect. 24 I mean, you use an uncertified nozzle we have no 25 idea if it works right or not, because I don't know what PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 225 1 an uncertified nozzle is until I see one. 2 MS. DUVAL: Well, and I guess my point is you 3 already have a remedy for that. If you see an uncertified 4 nozzle, then it can't be used, whether it's on the list or 5 not. 6 DEPUTY EXECUTIVE OFFICER CACKETTE: Yeah, but 7 that's exactly the same remedy of their being on the list. 8 So all this does is a clarify that if it's on the list you 9 ought to get a tag it out, which means that piece of 10 componentry cannot be used from that moment on, and then 11 it's up to the district what they actually do about that 12 whether they issue a notice of violation or penalty or 13 not. 14 MS. DUVAL: I guess I'm worried about their being 15 two penalties associated with one defect. 16 GENERAL COUNSEL WALSH: I would suggest that 17 that's very consistent with our normal enforcement 18 practice everywhere. Our expectation is if we find a 19 violation, the noncompliance has to be corrected 20 immediately, and typically there is a penalty attached as 21 well with that noncompliance, those two things, the 22 corrective action and the penalty together make up the 23 response to the violation. That's standard practice. 24 MS. DUVAL: And I'm not suggesting that it 25 shouldn't be. I'm suggesting that there shouldn't be a PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 226 1 penalty for both -- there shouldn't be two penalties for 2 the same defect, both for not having a certified component 3 and for being on the major defects list, and maybe that's 4 not a possibility. 5 CHAIRPERSON LLOYD: No. 6 GENERAL COUNSEL WALSH: There would not be two 7 penalties. The corrective action and a civil penalty, but 8 there would be only one of each. 9 CHAIRPERSON LLOYD: Thank you very much. 10 The last witness is Skip Orr, Husky Corporation. 11 MR. ORR: Mr. Chairman and Board, as a vapor 12 recovery equipment manufacturer, Husky is pleased with the 13 improvements being made in the vapor recovery defects and 14 verification procedure list. We've attended all the 15 workshops either in person or by conference phone. The 16 staff has been very interested in any input that would 17 make the list more effective and workable. 18 The results is a list that will allow a quick 19 identification and removal of vapor recovery equipment 20 that is no longer performing as certified and will also 21 prevent the hardships to the station owner and would 22 endure a properly performing equipment was unnecessarily 23 identified as defective. 24 And I'd like to thank the staff for the work 25 they've done and we're in total agreement. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 227 1 CHAIRPERSON LLOYD: Great to hear that support. 2 Thank you very much. 3 And a clear reflection of the great work staff 4 has done here. 5 Do the Board members have any additional 6 questions? 7 I guess this is a -- I'll now close the record on 8 this agenda item. However, the record will be reopened 9 when the 15-day notice of public availability is issued. 10 Written or oral comments received after this 11 hearing date but before the 15-day notice is issued will 12 not be accepted as part of the official record on this 13 agenda item. When the record is reopened for a 15-day 14 comment period, the public may submit written comments on 15 the proposed changes which will be considered and 16 responded to in the final statement of reasons for the 17 regulation. 18 Any ex parte communications? 19 So we'd entertain a motion on this item? 20 BOARD MEMBER D'ADAMO: So moved. 21 BOARD MEMBER RIORDAN: Second. 22 CHAIRPERSON LLOYD: All in favor say aye? 23 (Ayes.) 24 CHAIRPERSON LLOYD: No one against? 25 Thank you very much, staff. PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 228 1 We appreciate the efforts there. 2 So now we come to our last item which we have to 3 wrap up fairly quickly to get a quorum here. 4 The next item of business before the Board today 5 are two research proposals. 6 Does the Research Division staff have anything 7 they wish to say about the proposals? 8 MS. WELLER: Mr. Chairman, we have a brief 9 presentation, which we could give or we could just go 10 directly to questions, if you would like. 11 The two proposals that are before you are the 12 Development and Application of ambient aerosol 13 concentrators to conduct health studies in the Los Angeles 14 basin. Would you care for the presentation or -- 15 CHAIRPERSON LLOYD: Well, I think some of the 16 Board Members have been briefed on this item, and I think 17 maybe we could go to Board questions on these. 18 BOARD MEMBER RIORDAN: Mr. Chairman, that would 19 be fine with me. And I just have one brief question. 20 Obviously, there's a substantial investment that we're 21 making in this mobile facility, correct? 22 MS. WELLER: Yes. 23 BOARD MEMBER RIORDAN: Okay. At such a point in 24 time, what's the ownership of that facility? And if it 25 were to have some duration of use, do we still have a part PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 229 1 of it, if indeed we have some ownership in it? 2 MS. WELLER: Well, first of all, the super site 3 program is extremely correlated with that project. So 4 even though there is a substantial component that ARB is 5 contributing to that project, it's component is involved 6 in a $13 million program. 7 But I believe you're asking if the mobile 8 facility would belong to the Air Resources Board? 9 BOARD MEMBER RIORDAN: Well, would we have some 10 ownership? 11 MS. WELLER: Some ownership of that. 12 BOARD MEMBER RIORDAN: What happens there? Who 13 owns this thing? 14 RESEARCH DIVISION CHIEF CROES: For any equipment 15 that we buy as part of our project, we retain ownership, 16 but parts of this facility are bought with U.S. EPA funds 17 and we would not have ownership of that. 18 BOARD MEMBER RIORDAN: But we would have maybe a 19 joint ownership? 20 RESEARCH DIVISION CHIEF CROES: Yes. 21 EXECUTIVE OFFICER KENNY: Actually, if I might. 22 I think the general answer is going to be no. Generally, 23 what we're doing here is we are funding some research 24 that's being done at UCLA. And it essentially relates to 25 the PM. I mean there is equipment that's being purchased, PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 230 1 but it's a combination of a lot of dollars from a lot of 2 agencies. And it's going to be very hard to trace it and 3 be able to say that it's specifically our equipment and 4 our dollars. 5 CHAIRPERSON LLOYD: This trailer is not 6 self-propelled. 7 EXECUTIVE OFFICER KENNY: Correct. 8 BOARD MEMBER RIORDAN: It does not move? 9 CHAIRPERSON LLOYD: Well, unless you pull it. 10 (Laughter.) 11 MS. WELLER: The facilities are completely 12 mobile, but not self mobile. 13 BOARD MEMBER RIORDAN: What I'm leading up to is 14 I see potentially some, maybe at some point in time, you 15 could conceivably get some income from this, doing some 16 studies in the future. I'm not saying currently, but in 17 the future. 18 And I'm just wondering if we would derive any 19 benefit from that investment that we're making. 20 EXECUTIVE OFFICER KENNY: We will derive benefit 21 from the investment. And it's kind of along the lines of 22 kind of what we've been doing with the Children's Health 23 Study and all the information and additional research 24 that's being accomplished. What's happening here is that 25 there essentially is PM concentrated work that's being PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 231 1 done through UCLA, and it's also being done in conjunction 2 with the super site that the federal government is funding 3 at UCLA. 4 And so we're trying to tap into that and take 5 advantage of all the work that's being done there and then 6 at the same time sort of extend that with the contribution 7 that's being provided by ARB. 8 But in terms of, you know, some actual hardware 9 or something like that that we could actually point to 10 that we would probably see in the future, I doubt that 11 we'll get that. 12 CHAIRPERSON LLOYD: I guess no more questions on 13 that proposal. 14 The next one is on the chamber at Riverside. 15 MS. WELLER: Right. The next proposal is on 16 improved reactivity estimates for Volatile Organic 17 Compounds used in architectural coatings. 18 And again, similar to the concentrator proposal, 19 this proposal takes advantage of a $3 million smog chamber 20 that is being developed at the University of California, 21 Riverside for which there is outside EPA funding. And the 22 funding for that proposal from ARB would be $240,102. 23 And, again, I'd be glad to take any questions on 24 that proposal. 25 CHAIRPERSON LLOYD: I guess on the photograph we PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 232 1 have here, you show a person that's in front of the 2 chamber just to show the scale of the chamber. It's a 3 pretty big chamber. 4 MS. WELLER: Right, if you could bring up the 5 picture of the chamber. 6 The chamber is being constructed now. It's under 7 construction. 8 CHAIRPERSON LLOYD: And that was for about 80K a 9 year for three years. 10 MS. WELLER: That one is for $240,102. And, of 11 course, the advantage of that chamber is that it can use 12 lower NOx reaction components that are close to the 13 ambient components. So it's called the next generation 14 smog chamber. It's a great innovation in smog chambers. 15 CHAIRPERSON LLOYD: Thank you. I have no 16 questions. 17 Any board members have questions? 18 Do we have a vote on those research proposals? 19 BOARD MEMBER CALHOUN: I so move, Mr. Chairman. 20 BOARD MEMBER RIORDAN: Second. 21 CHAIRPERSON LLOYD: One questions just before we 22 have the vote. I know that Dr. Friedman was briefed on 23 the research proposals, did he have any concerns? 24 RESEARCH DIVISION CHIEF CROES: The only concern 25 he had was that the animal work that was part of the PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 233 1 concentrator project should include some heart end-points. 2 So they've included -- he had those discussions before we 3 got the final proposals, so they have a consult -- a 4 professor from the Cardiac Department at UCLA that's apart 5 of this project. 6 CHAIRPERSON LLOYD: Okay. 7 So all in favor say aye? 8 (Ayes.) 9 CHAIRPERSON LLOYD: Anyone against? 10 With that thank you very much. I guess seeing no 11 additional public items, I'd like to officially bring the 12 November 15th Air Resources Board Meeting to a close. 13 Thank you all very much. 14 (Thereupon the California Air Resources Board 15 meeting was adjourned at 3:00 p.m.) 16 17 18 19 20 21 22 23 24 25 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345 234 1 CERTIFICATE OF REPORTER 2 I, JAMES F. PETERS, a Certified Shorthand 3 Reporter of the State of California, and Registered 4 Professional Reporter, do hereby certify: 5 That I am a disinterested person herein; that the 6 foregoing California Air Resources Board meeting was 7 reported in shorthand by me, James F. Peters, a Certified 8 Shorthand Reporter of the State of California, and 9 thereafter transcribed into typewriting. 10 I further certify that I am not of counsel or 11 attorney for any of the parties to said meeting nor in any 12 way interested in the outcome of said meeting. 13 IN WITNESS WHEREOF, I have hereunto set my hand 14 this 26th day of November, 2001. 15 16 17 18 19 20 21 22 23 JAMES F. PETERS, CSR, RPR 24 Certified Shorthand Reporter 25 License No. 10063 PETERS SHORTHAND REPORTING CORPORATION (916) 362-2345